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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2020
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From         to        

Commission File Number: 000-23189
chrw-20200930_g1.jpg
C.H. ROBINSON WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1883630
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
14701 Charlson Road
Eden Prairie, MN 55347
(Address of principal executive officers, including zip code)

952-937-8500
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.10 par valueCHRWNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerEmerging Growth Company
Non-accelerated filerSmaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of October 28, 2020, the number of shares outstanding of the registrant’s Common Stock, par value $0.10 per share, was 135,946,127.


Table of Contents
C.H. ROBINSON WORLDWIDE, INC.
TABLE OF CONTENTS
 
 
 PART I. Financial Information 
Item 1.
Item 2.
Item 3.
Item 4.
PART II. Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



2

Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except per share data)
 September 30, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents$252,569 $447,858 
Receivables, net of allowance for credit loss of $36,086 and $32,838
2,346,384 1,974,381 
Contract assets, net of allowance for credit loss187,973 132,874 
Prepaid expenses and other65,773 85,005 
Total current assets2,852,699 2,640,118 
Property and equipment, net183,244 208,423 
Goodwill1,473,440 1,291,760 
Other intangible assets, net118,741 90,931 
Right-of-use lease assets339,819 310,860 
Deferred tax assets16,631 13,485 
Other assets90,264 85,483 
Total assets$5,074,838 $4,641,060 
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable$1,196,797 $984,604 
Outstanding checks72,108 78,231 
Accrued expenses:
Compensation130,958 112,784 
Transportation expense147,590 101,194 
Income taxes12,074 12,354 
Other accrued liabilities74,781 62,706 
Current lease liabilities66,692 61,280 
Current portion of debt59,979 142,885 
Total current liabilities1,760,979 1,556,038 
Long-term debt1,093,087 1,092,448 
Noncurrent lease liabilities279,212 259,444 
Noncurrent income taxes payable22,981 22,354 
Deferred tax liabilities44,942 39,776 
Other long-term liabilities278 270 
Total liabilities3,201,479 2,970,330 
Stockholders’ investment:
Preferred stock, $0.10 par value, 20,000 shares authorized; no shares issued or outstanding
  
Common stock, $0.10 par value, 480,000 shares authorized; 179,700 and 179,380 shares issued, 135,900 and 134,895 outstanding
13,590 13,490 
Additional paid-in capital555,416 546,646 
Retained earnings4,293,598 4,144,834 
Accumulated other comprehensive loss(70,855)(76,149)
Treasury stock at cost (43,800 and 44,485 shares)
(2,918,390)(2,958,091)
Total stockholders’ investment1,873,359 1,670,730 
Total liabilities and stockholders’ investment$5,074,838 $4,641,060 
See accompanying notes to the condensed consolidated financial statements.
3

Table of Contents
C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(unaudited, in thousands except per share data)
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Revenues:
Transportation$3,944,981 $3,608,346 $10,835,710 $10,751,890 
Sourcing279,819 247,786 821,944 764,292 
Total revenues4,224,800 3,856,132 11,657,654 11,516,182 
Costs and expenses:
Purchased transportation and related services3,378,651 2,999,979 9,141,354 8,826,233 
Purchased products sourced for resale256,876 222,722 744,621 682,502 
Personnel expenses302,904 320,563 933,607 999,547 
Other selling, general, and administrative expenses118,130 111,783 371,606 354,730 
Total costs and expenses4,056,561 3,655,047 11,191,188 10,863,012 
Income from operations168,239 201,085 466,466 653,170 
Interest and other expense(7,465)(13,180)(32,904)(36,935)
Income before provision for income taxes160,774 187,905 433,562 616,235 
Provision for income taxes24,245 41,011 74,948 138,373 
Net income136,529 146,894 358,614 477,862 
Other comprehensive income (loss), net of tax13,236 (18,576)5,294 (18,967)
Comprehensive income$149,765 $128,318 $363,908 $458,895 
Basic net income per share$1.01 $1.08 $2.65 $3.48 
Diluted net income per share$1.00 $1.07 $2.63 $3.45 
Basic weighted average shares outstanding135,671 136,380 135,385 137,274 
Dilutive effect of outstanding stock awards1,457 1,096 752 1,099 
Diluted weighted average shares outstanding137,128 137,476 136,137 138,373 
See accompanying notes to the condensed consolidated financial statements.


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C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Stockholders’ Investment
(unaudited, in thousands, except per share data)

Common
Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Stockholders’
Investment
Balance December 31, 2019134,895 $13,490 $546,646 $4,144,834 $(76,149)$(2,958,091)$1,670,730 
Net income78,146 78,146 
Foreign currency adjustments, net of tax(32,195)(32,195)
Dividends declared, $0.51 per share
(69,871)(69,871)
Stock issued for employee benefit plans343 34 (24,192)21,632 (2,526)
Issuance of restricted stock, net of forfeitures321 32 (32) 
Stock-based compensation expense  11,397  11,397 
Repurchase of common stock(973)(97)(68,466)(68,563)
Balance March 31, 2020134,586 13,459 533,819 4,153,109 (108,344)(3,004,925)1,587,118 
Net income143,939 143,939 
Foreign currency translation, net of tax24,253 24,253 
Dividends declared, $0.51 per share
(69,791)(69,791)
Stock issued for employee benefit plans138 13 (1,165)9,007 7,855 
Stock-based compensation expense  10,954  10,954 
Balance June 30, 2020134,724 13,472 543,608 4,227,257 (84,091)(2,995,918)1,704,328 
Net income136,529 136,529 
Foreign currency translation, net of tax13,236 13,236 
Dividends declared, $0.51 per share
(70,188)(70,188)
Stock issued for employee benefit plans1,176 118 1,032 77,528 78,678 
Stock-based compensation expense  10,776  10,776 
Balance September 30, 2020135,900 $13,590 $555,416 $4,293,598 $(70,855)$(2,918,390)$1,873,359 
See accompanying notes to the condensed consolidated financial statements.
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C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Stockholders’ Investment, continued
(unaudited, in thousands, except per share data)
Common
Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive Income (Loss)
Treasury
Stock
Total
Stockholders’
Investment
Balance December 31, 2018137,284 $13,728 $521,486 $3,845,593 $(71,935)$(2,713,785)$1,595,087 
Net income161,788 161,788 
Foreign currency adjustments5,297 5,297 
Dividends declared, $0.50 per share
(69,683)(69,683)
Stock issued for employee benefit plans342 34 (11,520)19,059 7,573 
Issuance of restricted stock, net of forfeitures(3)   
Stock-based compensation expense  17,123  17,123 
Repurchase of common stock(734)(73)(64,551)(64,624)
Balance March 31, 2019136,889 13,689 527,089 3,937,698 (66,638)(2,759,277)1,652,561 
Net income169,180 169,180 
Foreign currency translation(5,688)(5,688)
Dividends declared, $0.50 per share
(69,268)(69,268)
Stock issued for employee benefit plans129 13 (681)8,367 7,699 
Issuance of restricted stock, net of forfeitures23 2 (2) 
Stock-based compensation expense  14,684  14,684 
Repurchase of common stock(1,310)(131)(109,726)(109,857)
Balance June 30, 2019135,731 13,573 541,090 4,037,610 (72,326)(2,860,636)1,659,311 
Net income146,894 146,894 
Foreign currency translation(18,576)(18,576)
Dividends declared, $0.50 per share
(68,855)(68,855)
Stock issued for employee benefit plans194 20 (561)11,359 10,818 
Issuance of restricted stock, net of forfeitures9 1 (1) 
Stock-based compensation expense  8,850  8,850 
Repurchase of common stock(782)(79)(65,267)(65,346)
Balance September 30, 2019135,152 $13,515 $549,378 $4,115,649 $(90,902)$(2,914,544)$1,673,096 
See accompanying notes to the condensed consolidated financial statements.
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C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
 
 Nine Months Ended September 30,
20202019
OPERATING ACTIVITIES
Net income$358,614 $477,862 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization77,067 75,122 
Provision for credit losses12,701 642 
Stock-based compensation33,127 40,657 
Deferred income taxes(9,468)(3,360)
Excess tax benefit on stock-based compensation(17,127)(6,908)
Other operating activities13,104 (4,471)
Changes in operating elements, net of acquisitions:
Receivables(367,538)104,108 
Contract assets(56,131)9,067 
Prepaid expenses and other12,331 (18,940)
Accounts payable and outstanding checks186,755 3,871 
Accrued compensation16,458 (45,319)
Accrued transportation expense46,396 (5,323)
Accrued income taxes17,125 (7,042)
Other accrued liabilities8,907 5,210 
Other assets and liabilities4,728 (1,318)
Net cash provided by operating activities337,049 623,858 
INVESTING ACTIVITIES
Purchases of property and equipment(17,446)(26,661)
Purchases and development of software(22,815)(24,282)
Acquisitions, net of cash acquired(223,230)(59,188)
Other investing activities5,525 16,625 
Net cash used for investing activities(257,966)(93,506)
FINANCING ACTIVITIES
Proceeds from stock issued for employee benefit plans100,542 40,442 
Stock tendered for payment of withholding taxes(16,535)(14,352)
Repurchase of common stock(68,563)(241,303)
Cash dividends(207,428)(207,865)
Proceeds from long-term borrowings 929,000 
Payments on long-term borrowings (1,018,000)
Proceeds from short-term borrowings1,043,600 14,000 
Payments on short-term borrowings(1,126,600)(19,000)
Net cash used for financing activities(274,984)(517,078)
Effect of exchange rates on cash and cash equivalents612 (7,465)
Net change in cash and cash equivalents(195,289)5,809 
Cash and cash equivalents, beginning of period447,858 378,615 
Cash and cash equivalents, end of period$252,569 $384,424 
See accompanying notes to the condensed consolidated financial statements.
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C.H. ROBINSON WORLDWIDE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
C.H. Robinson Worldwide, Inc., and our subsidiaries (“the company,” “we,” “us,” or “our”) are a global provider of transportation services and logistics solutions operating through a network of offices located in North America, Europe, Asia, Oceania, and South America. The consolidated financial statements include the accounts of C.H. Robinson Worldwide, Inc., and our majority owned and controlled subsidiaries. Our minority interests in subsidiaries are not significant. All intercompany transactions and balances have been eliminated in the consolidated financial statements.
Our reportable segments are NAST and Global Forwarding with all other segments included in All Other and Corporate. The All Other and Corporate reportable segment includes Robinson Fresh, Managed Services, Other Surface Transportation outside of North America, and other miscellaneous revenues and unallocated corporate expenses. For financial information concerning our reportable segments, refer to Note 9, Segment Reporting.
The condensed consolidated financial statements, which are unaudited, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
Consistent with SEC rules and regulations, we have condensed or omitted certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States. You should read the condensed consolidated financial statements and related notes in conjunction with the consolidated financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2019.
RECENTLY ADOPTED ACCOUNTING STANDARDS
In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and in November 2018 issued a subsequent amendment, ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. This update changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The update replaces the historical “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. The update affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that have the contractual right to receive cash. We adopted this standard on January 1, 2020. We have updated our allowance for credit losses, formerly described as our allowance for doubtful accounts, significant accounting policy below as a result of adopting the new standard. The impact of adoption was not material to our consolidated financial position, results of operations, or cash flows.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional practical expedients to simplify accounting for reference rate reform. Amongst other practical expedients, the update allows for contract modifications due to reference rate reform for certain receivables and debt contracts to be accounted for by prospectively adjusting the effective interest rate. The amendments in this ASU are effective for all entities beginning on March 12, 2020, and companies may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the effects that adoption of this guidance will have on the consolidated financial statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2019, includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. We have updated these policies below to give effect to the adoption of Accounting Standards Codification (“ASC”) 326 in the first quarter of 2020.
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ALLOWANCE FOR CREDIT LOSSES. Accounts receivable and contract assets are reduced by an allowance for expected credit losses. We determine our allowance for expected credit losses by evaluating two approaches that consider our past credit loss experience, our customers' credit ratings, and other customer-specific and macroeconomic factors. The first approach is pooling our customers by credit rating and applying an expected loss ratio based upon credit rating and number of days the receivable has been outstanding, (i.e. aging approach). The second approach is to compute an expected loss ratio for each credit rating pool based upon our historical write-off experience and apply it to our accounts receivable, (i.e. loss ratio approach). These two approaches are evaluated in consideration of other known information and customer specific and macroeconomic factors, including the price of diesel fuel, for purposes of determining the expected credit loss allowance.
NOTE 2. GOODWILL AND OTHER INTANGIBLE ASSETS
The change in carrying amount of goodwill is as follows (in thousands):
NASTGlobal ForwardingAll Other and CorporateTotal
Balance, December 31, 2019$1,015,570 $208,420 $67,770 $1,291,760 
Acquisitions176,840 507  177,347 
Translation2,689 1,096 548 4,333 
Balance, September 30, 2020$1,195,099 $210,023 $68,318 $1,473,440 

Goodwill is tested at least annually for impairment on November 30, or more frequently if events or changes in circumstances indicate that the asset might be impaired. We first perform a qualitative assessment to determine whether it is more likely than not that the fair value of our reporting units is less than their respective carrying value (“Step Zero Analysis”). If the Step Zero Analysis indicates it is more likely than not that the fair value of our reporting units is less than their respective carrying value, an additional impairment assessment is performed (“Step One Analysis”). We considered whether there were any changes in circumstances indicating that our goodwill might be impaired, including consideration of the impacts of the novel coronavirus (“COVID-19”) on financial markets and our business operations, and determined the more likely than not criteria had not been met, and therefore a Step One Analysis was not required as of September 30, 2020.
Identifiable intangible assets consisted of the following (in thousands):
September 30, 2020December 31, 2019
CostAccumulated AmortizationNetCostAccumulated AmortizationNet
Finite-lived intangibles
Customer relationships$294,200 $(185,934)$108,266 $237,335 $(156,879)$80,456 
Indefinite-lived intangibles
Trademarks10,475 — 10,475 10,475 — 10,475 
Total intangibles$304,675 $(185,934)$118,741 $247,810 $(156,879)$90,931 
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Amortization expense for other intangible assets is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Amortization expense$9,937 $9,731 $27,968 $28,699 
Finite-lived intangible assets, by reportable segment, as of September 30, 2020, will be amortized over their remaining lives as follows (in thousands):
NASTGlobal ForwardingAll Other and CorporateTotal
Remaining 2020$2,026 $5,056 $161 $7,243 
20218,105 14,603 638 23,346 
20228,105 14,603 638 23,346 
20238,105 11,977 638 20,720 
20247,984 4,174 638 12,796 
Thereafter17,024 2,891 900 20,815 
Total$108,266 

NOTE 3. FAIR VALUE MEASUREMENT
Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:
Level 1 — Quoted market prices in active markets for identical assets or liabilities.
Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3 — Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.
We had no Level 3 assets or liabilities as of and during the periods ended September 30, 2020 and December 31, 2019. There were no transfers between levels during the period.

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NOTE 4. FINANCING ARRANGEMENTS
The components of our short-term and long-term debt and the associated interest rates were as follows (dollars in thousands):
Average interest rate as ofCarrying value as of
September 30, 2020December 31, 2019MaturitySeptember 30, 2020December 31, 2019
Revolving credit facility % %October 2023$ $ 
Senior Notes, Series A3.97 %3.97 %August 2023175,000 175,000 
Senior Notes, Series B4.26 %4.26 %August 2028150,000 150,000 
Senior Notes, Series C4.60 %4.60 %August 2033175,000 175,000 
Receivables securitization facility (1)
0.80 %2.41 %December 202059,979 142,885 
Senior Notes (1)
4.20 %4.20 %April 2028593,087 592,448 
Total debt1,153,066 1,235,333 
Less: Current maturities and short-term borrowing(59,979)(142,885)
Long-term debt$1,093,087 $1,092,448 
____________________________________________
(1) Net of unamortized discounts and issuance costs.

SENIOR UNSECURED REVOLVING CREDIT FACILITY
We have a senior unsecured revolving credit facility (the "Credit Agreement") with a total availability of $1 billion and a maturity date of October 24, 2023. Borrowings under the Credit Agreement generally bear interest at a variable rate determined by a pricing schedule or the base rate (which is the highest of (a) the administrative agent's prime rate, (b) the federal funds rate plus 0.50 percent, or (c) the sum of applicable LIBOR plus 1.125 percent). In addition, there is a commitment fee on the average daily undrawn stated amount under each letter of credit issued under the facility ranging from 0.075 percent to 0.200 percent. The recorded amount of borrowings outstanding, if any, approximates fair value because of the short maturity period of the debt; therefore, we would consider these borrowings to be a Level 2 financial liability.
The Credit Agreement contains various restrictions and covenants that require us to maintain certain financial ratios, including a maximum leverage ratio of 3.50 to 1.00. The Credit Agreement also contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then the administrative agent may declare any outstanding obligations under the Credit Agreement to be immediately due and payable. In addition, if we become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency, or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable.
NOTE PURCHASE AGREEMENT
On August 23, 2013, we entered into a Note Purchase Agreement with certain institutional investors (the “Purchasers”). On August 27, 2013, the Purchasers purchased an aggregate principal amount of $500 million of our Senior Notes, Series A, Senior Notes Series B, and Senior Notes Series C (collectively the “Notes”). Interest on the Notes is payable semi-annually in arrears. The fair value of the Notes approximated $549.7 million at September 30, 2020. We estimate the fair value of the Notes primarily using an expected present value technique, which is based on observable market inputs using interest rates currently available to companies of similar credit standing for similar terms and remaining maturities, and considering our own risk. If the Notes were recorded at fair value, they would be classified as a Level 2 financial liability.
The Note Purchase Agreement contains various restrictions and covenants that require us to maintain certain financial ratios, including a maximum leverage ratio of 3.00 to 1.00, a minimum interest coverage ratio of 2.00 to 1.00, and a maximum consolidated priority debt to consolidated total asset ratio of 15 percent.
The Note Purchase Agreement provides for customary events of default. The occurrence of an event of default would permit certain Purchasers to declare certain Notes then outstanding to be immediately due and payable. Under the terms of the Note Purchase Agreement, the Notes are redeemable, in whole or in part, at 100 percent of the principal amount being redeemed together with a “make-whole amount” (as defined in the Note Purchase Agreement), and accrued and unpaid interest with respect to each Note. The obligations of the company under the Note Purchase Agreement and the Notes are guaranteed by C.H. Robinson Company, a Delaware corporation and a wholly-owned subsidiary of the company, and by C.H. Robinson Company, Inc., a Minnesota corporation and an indirect wholly-owned subsidiary of the company.
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U.S. TRADE ACCOUNTS RECEIVABLE SECURITIZATION
We have a receivables securitization facility (the “Receivables Securitization Facility”) that currently expires on December 17, 2020, unless extended by the parties. The Receivables Securitization Facility is based on the securitization of certain of our U.S. trade accounts receivable and provides funding of up to $250 million. The trade accounts receivable under the facility are owned by C.H. Robinson Receivables LLC and are not available to the creditors of C.H. Robinson Worldwide, Inc., and our subsidiaries. The interest rate on borrowings under the Receivables Securitization Facility is based on one-month LIBOR plus 0.65 percent. There is also a commitment fee we are required to pay on any unused portion of the facility. The recorded amount of borrowings outstanding on the Receivables Securitization Facility approximates fair value because it can be redeemed on short notice and the interest rate floats, therefore, we consider these borrowings to be a Level 2 financial liability.
The Receivables Securitization Facility contains various customary affirmative and negative covenants, and it also contains customary default and termination provisions which provide for acceleration of amounts owed under the Receivables Securitization Facility upon the occurrence of certain specified events.
SENIOR NOTES
On April 9, 2018, we issued senior unsecured notes ("Senior Notes") through a public offering. The Senior Notes bear an annual interest rate of 4.20 percent payable semi-annually on April 15 and October 15, until maturity on April 15, 2028. Taking into effect the amortization of the original issue discount and all underwriting and issuance expenses, the Senior Notes have an effective yield to maturity of approximately 4.39 percent per annum. The fair value of the Senior Notes, excluding debt discounts and issuance costs, approximated $703.0 million as of September 30, 2020, based primarily on the market prices quoted from external sources. The carrying value of the Senior Notes was $593.1 million as of September 30, 2020. If the Senior Notes were measured at fair value in the financial statements, they would be classified as a Level 2 financial liability in the fair value hierarchy.
We may redeem the Senior Notes, in whole or in part, at any time and from time to time prior to their maturity at the applicable redemption prices described in the Senior Notes. Upon the occurrence of a “change of control triggering event” as defined in the Senior Notes (generally, a change of control of us accompanied by a reduction in the credit rating for the Senior Notes), we will generally be required to make an offer to repurchase the Senior Notes from holders at 101 percent of their principal amount plus accrued and unpaid interest to the date of repurchase.
The Senior Notes were issued under an indenture that contains covenants imposing certain limitations on our ability to incur liens or enter into sales and leaseback transactions above certain limits; and consolidate, or merge or transfer substantially all of our assets and those of our subsidiaries on a consolidated basis. It also provides for customary events of default (subject in certain cases to customary grace and cure periods), which include among other things nonpayment, breach of covenants in the indenture, and certain events of bankruptcy and insolvency. If an event of default occurs and is continuing with respect to the Senior Notes, the trustee or holders of at least 25 percent in principal amount outstanding of the Senior Notes may declare the principal and the accrued and unpaid interest, if any, on all of the outstanding Senior Notes to be due and payable. These covenants and events of default are subject to a number of important qualifications, limitations, and exceptions that are described in the indenture. The indenture does not contain any financial ratios or specified levels of net worth or liquidity to which we must adhere.
As of September 30, 2020, we were in compliance with all of the covenants under the Credit Agreement, Note Purchase Agreement, Receivables Securitization Facility, and Senior Notes.
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NOTE 5. INCOME TAXES
Our effective tax rate for the three months ended September 30, 2020 and 2019 was 15.1 percent and 21.8 percent, respectively, and our effective tax rate for the nine months ended September 30, 2020 and 2019 was 17.3 percent and 22.5 percent, respectively. The effective income tax rate for the three and nine months ended September 30, 2020 was lower than the statutory federal income tax rate primarily due to the tax impact of share-based payment awards, which reduced the effective tax rate by 3.8 percentage points and 4.1 percentage points, respectively. Foreign tax impacts also contributed to a lower federal income tax rate, reducing our effective tax rate in the three and nine months ended September 30, 2020 by 5.2 percentage points and 3.1 percentage points, respectively. This impact on the tax rate was partially offset by state income tax expense, which increased the effective income tax rate. The effective income tax rate for the three and nine months ended September 30, 2019 was higher than the statutory federal income tax rate due to state income taxes, net of federal benefit, and foreign income taxes, but was partially offset by the tax impact of share-based payment awards and the combined tax impact of Global Intangible Low-tax Income ("GILTI") and Foreign Derived Intangible Income ("FDII").

In 2019, we removed our assertion that the unremitted earnings of foreign subsidiaries were permanently reinvested with limited exceptions. If we repatriated all foreign earnings that are still considered to be permanently reinvested, the estimated effect on income taxes payable would be an increase of approximately $2.3 million as of September 30, 2020.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in response to the COVID-19 pandemic. The CARES Act allows for a deferral of the employer share of federal payroll taxes otherwise due through December 31, 2020. 50 percent of the deferred amount is due December 31, 2021 and the remaining 50 percent is due December 31, 2022. This provision allows us to defer certain federal payroll deposits and invest this cash back into the business without any interest cost. The CARES Act also provides for a tax credit of up to $5,000 related to wages and health benefits provided to an employee whose work from March 17, 2020 through December 31, 2020 was impacted by COVID-19. Through September 30, 2020, we have recognized a payroll deferral and tax credit of $19.3 million and $0.7 million, respectively, under the CARES Act. We will continue evaluating the impact of the CARES Act over the remainder of 2020.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including but not limited to, reducing the U.S. federal corporate tax rate from 35 percent to 21 percent and adding new rules for GILTI and FDII. We have included the tax impact of both GILTI and FDII in our income tax expense for the three and nine months ended September 30, 2020, and 2019. The Treasury Department issued final regulatory guidance related to both GILTI and FDII on July 15, 2020. The effective date of these regulations is generally January 1, 2021, absent an election to apply these rules retroactively to a 2018 effective date. We are reviewing these regulations and the potential to elect a 2018 effective date. The impact of this new guidance is not expected to have a material impact on full-year 2020 results.

On September 29, 2020, the Treasury Department issued final and proposed regulations on determining the foreign tax credit, and allocating and apportioning deductions, under the Internal Revenue Code. We are still completing our review of these regulations, but they did not have a material impact on the third quarter of 2020 and we do not expect them to have a material impact on full-year 2020 results.

As of September 30, 2020, we have $39.0 million of unrecognized tax benefits and related interest and penalties. It is possible the amount of unrecognized tax benefit could change in the next 12 months as a result of a lapse of the statute of limitations and settlements with taxing authorities. The total liability for unrecognized tax benefits is expected to decrease by approximately $2.1 million in the next 12 months due to the lapsing of statutes of limitations. With few exceptions, we are no longer subject to audits of U.S. federal, state and local, or non-U.S. income tax returns before 2013. We are currently under an Internal Revenue Service audit for 2015, 2016 and 2017 tax years.
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NOTE 6. STOCK AWARD PLANS
Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense as it vests. A summary of our total compensation expense recognized in our condensed consolidated statements of operations and comprehensive income for stock-based compensation is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Stock options$5,081 $4,829 $15,119 $13,539 
Stock awards5,042 3,470 15,736 24,798 
Company expense on ESPP discount653 551 2,272 2,320 
Total stock-based compensation expense$10,776 $8,850 $33,127 $40,657 

On May 9, 2019, our shareholders approved an amendment and restatement of our 2013 Equity Incentive Plan (the “Plan”) to increase the number of shares authorized for award by 4,000,000 shares. The Plan allows us to grant certain stock awards, including stock options at fair market value and performance shares and restricted stock units, to our key employees and outside directors. A maximum of 17,041,803 shares can be granted under this plan following the amendment and restatement. Approximately 2,974,170 shares were available for stock awards under the plan as of September 30, 2020. Shares subject to awards that expire or are canceled without delivery of shares or that are settled in cash generally become available again for issuance under the plan.
Stock Options - We have awarded stock options to certain key employees. The fair value of these options is established based on the market price on the date of grant, discounted for post-vesting holding restrictions, calculated using the Black-Scholes option pricing model. Changes in measured stock price volatility and interest rates are the primary reasons for changes in the discount. These grants are being expensed based on the terms of the awards. As of September 30, 2020, unrecognized compensation expense related to stock options was $48.0 million. The amount of future expense to be recognized will be based on the passage of time and the employees' continued employment.
We granted 1,660,548 stock options on February 5, 2020. These awards had a weighted average exercise price of $72.74 and a weighted average grant date fair value of $13.88. These awards are eligible to vest over a five-year period with a first vesting date of December 31, 2020.
Stock Awards - We have awarded performance-based restricted shares and restricted stock units and time-based restricted stock units to certain key employees and non-employee directors. Performance-based awards are subject to certain vesting requirements over a five-year period, based on our earnings growth. Time-based awards vest primarily based on the employee's continued employment. The awards also contain restrictions on the awardees’ ability to sell or transfer vested awards for a specified period of time. The fair value of these awards is established based on the market price on the date of grant, discounted for post-vesting holding restrictions. The discounts on outstanding grants vary from 12 percent to 22 percent and are calculated using the Black-Scholes option pricing model-protective put method. Changes in measured stock price volatility and interest rates are the primary reasons for changes in the discount. These grants are being expensed based on the terms of the awards.
We granted 405,776 performance-based restricted shares and restricted stock units and 329,586 time-based restricted shares and restricted stock units on February 5, 2020. These awards had a weighted average grant date fair value of $59.34 and are eligible to vest over a five-year period with a first vesting date of December 31, 2020.
We have also issued restricted stock units to certain key employees and non-employee directors, which are fully vested upon issuance. These units contain restrictions on the awardees’ ability to sell or transfer vested units for a specified period of time. The fair value of these units is established using the same method discussed above. These grants have been expensed during the year they were earned.
As of September 30, 2020, there was unrecognized compensation expense of $125.3 million related to previously granted full value awards. The amount of future expense to be recognized will be based on the passage of time, the company’s earnings growth, and certain other conditions.
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Employee Stock Purchase Plan - Our 1997 Employee Stock Purchase Plan ("ESPP") allows our employees to contribute up to $10,000 of their annual cash compensation to purchase company stock. Purchase price is determined using the closing price on the last day of each quarter discounted by 15 percent. Shares vest immediately. The following is a summary of the employee stock purchase plan activity: 
Three Months Ended September 30, 2020
Shares purchased
by employees
Aggregate cost
to employees
Expense recognized
by the company
42,445 $3,699,626 $652,875 

NOTE 7. LITIGATION
We are not subject to any pending or threatened litigation other than routine litigation arising in the ordinary course of our business operations, including certain contingent auto liability cases. For some legal proceedings, we have accrued an amount that reflects the aggregate liability deemed probable and estimable, but this amount is not material to our condensed consolidated financial position, results of operations, or cash flows. Because of the preliminary nature of many of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the inconsistent treatment of claims made in many of these proceedings, and the difficulty of predicting the settlement value of many of these proceedings, we are often unable to estimate an amount or range of any reasonably possible losses. However, based upon our historical experience, the resolution of these proceedings is not expected to have a material effect on our consolidated financial position, results of operations, or cash flows.

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NOTE 8. ACQUISITIONS
Prime Distribution Services
On March 2, 2020, we acquired all of the outstanding shares of Prime Distribution Services (“Prime Distribution”), a leading provider of retail consolidation services in North America, for $222.7 million in cash. This acquisition adds scale and value-added warehouse capabilities to our retail consolidation platform, adding to our global suite of services.
The following is a summary of the allocation of purchase consideration to the estimated fair value of net assets for the acquisition of Prime Distribution.
Current assets$8,879 
Property and equipment7,356 
Right-of-use lease assets35,017 
Other intangible assets55,000 
Goodwill176,840 
Total assets283,092 
Current liabilities12,243 
Lease liabilities35,017 
Deferred tax liabilities13,114 
Net assets acquired$222,718 

Identifiable intangible assets and estimated useful lives are as follows (dollars in thousands):
Estimated Life (years)
Customer relationships7$55,000 
There was $176.8 million of goodwill recorded related to the acquisition of Prime Distribution. The Prime Distribution goodwill is a result of acquiring and retaining the Prime Distribution workforce and expected synergies from integrating its business into ours. Purchase accounting is considered substantially complete. The goodwill will not be deductible for tax purposes. The acquisition was effective as of February 29, 2020, and therefore the results of operations of Prime Distribution have been included as part of the North American Surface Transportation segment in our consolidated financial statements since March 1, 2020.
Dema Service S.p.A
On May 22, 2019, we acquired all of the outstanding shares of Dema Service S.p.A. (“Dema Service”) to strengthen our existing footprint in Italy. Total purchase consideration, net of cash acquired was $14.2 million, which was paid in cash.
Identifiable intangible assets and estimated useful lives are as follows (dollars in thousands):
Estimated Life (years)
Customer relationships7$4,252 
There was $7.8 million of goodwill recorded related to the acquisition of Dema Service. The Dema Service goodwill is a result of acquiring and retaining the Dema Service workforce and expected synergies from integrating its business into ours. Purchase accounting is considered complete. No goodwill was recognized for Italian tax purposes from the acquisition. The results of operations of Dema Service have been included as part of the All Other and Corporate segment in our consolidated financial statements since May 23, 2019.



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The Space Cargo Group
On February 28, 2019, we acquired all of the outstanding shares of The Space Cargo Group (“Space Cargo”) for the purpose of expanding our presence and capabilities in Spain and Colombia. Total purchase consideration, net of cash acquired, was $45.5 million, which was paid in cash.
Identifiable intangible assets and estimated useful lives are as follows (dollars in thousands):
Estimated Life (years)
Customer relationships7$16,439 
There was $26.4 million of goodwill recorded related to the acquisition of Space Cargo. The Space Cargo goodwill is a result of acquiring and retaining the Space Cargo workforce and expected synergies from integrating its business into ours. Purchase accounting is considered complete. No goodwill was recognized for Spanish tax purposes from the acquisition. The results of operations of Space Cargo have been included as part of the Global Forwarding segment in our consolidated financial statements since March 1, 2019.
NOTE 9. SEGMENT REPORTING
Our reportable segments are based on our method of internal reporting, which generally segregates the segments by service line and the primary services they provide to our customers. We identify two reportable segments in addition to All Other and Corporate as summarized below:
North American Surface Transportation—NAST provides freight transportation services across North America through a network of offices in the United States, Canada, and Mexico. The primary services provided by NAST include truckload, less than truckload (“LTL”), and intermodal.
Global Forwarding—Global Forwarding provides global logistics services through an international network of offices in North America, Asia, Europe, Oceania, and South America and also contracts with independent agents worldwide. The primary services provided by Global Forwarding include ocean freight services, airfreight services, and customs brokerage.
All Other and Corporate—All Other and Corporate includes our Robinson Fresh and Managed Services segments, as well as Other Surface Transportation outside of North America and other miscellaneous revenues and unallocated corporate expenses. Robinson Fresh provides sourcing services including the buying, selling, and marketing of fresh fruits, vegetables, and other perishable items. Managed Services provides Transportation Management Services, or Managed TMS®. Other Surface Transportation revenues are primarily earned by Europe Surface Transportation. Europe Surface Transportation provides services similar to NAST across Europe.
The internal reporting of segments is defined, based in part, on the reporting and review process used by our chief operating decision maker (“CODM”), our Chief Executive Officer. The accounting policies of our reportable segments are the same as those described in the summary of significant accounting policies. We do not report our intersegment revenues by reportable segment to our CODM and do not believe they are a meaningful metric for evaluating the performance of our reportable segments.
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Reportable segment information as of, and for the three and nine months ended September 30, 2020 and 2019, is as follows (dollars in thousands):
NASTGlobal ForwardingAll Other and CorporateConsolidated
Three Months Ended September 30, 2020
Total revenues$2,923,842 $831,957 $469,001 $4,224,800 
Net revenues367,943 157,657 63,673 589,273 
Income (loss) from operations122,526 46,299 (586)168,239 
Depreciation and amortization7,095 9,385 10,436 26,916 
Total assets(1)
3,041,974 1,148,118 884,746 5,074,838 
Average headcount6,702 4,607 3,595 14,904 
NASTGlobal ForwardingAll Other and CorporateConsolidated
Three Months Ended September 30, 2019
Total revenues$2,826,308 $597,695 $432,129 $3,856,132 
Net revenues433,760 135,815 63,856 633,431 
Income from operations176,200 24,676 209 201,085 
Depreciation and amortization5,734 9,186 10,560 25,480 
Total assets(1)
2,649,259 995,137 992,153 4,636,549 
Average headcount7,448 4,790 3,544 15,782 

NASTGlobal ForwardingAll Other and CorporateConsolidated
Nine Months Ended September 30, 2020
Total Revenues$8,222,879 $2,070,161 $1,364,614 $11,657,654 
Net Revenues1,120,277 448,931 202,471 1,771,679 
Income (loss) from operations357,898 117,033 (8,465)466,466 
Depreciation and amortization19,550 27,740 29,777 77,067 
Total assets(1)
3,041,974 1,148,118 884,746