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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 March 31, 2021
    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
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 April 28, 2021, the number of shares outstanding of the registrant’s Common Stock, par value $0.10 per share, was 132,988,670.


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.



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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except per share data)
 March 31, 2021December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$217,611 $243,796 
Receivables, net of allowance for credit loss of $35,103 and $38,113
2,874,463 2,449,577 
Contract assets, net of allowance for credit loss240,488 197,176 
Prepaid expenses and other77,547 51,152 
Total current assets3,410,109 2,941,701 
Property and equipment, net of accumulated depreciation and amortization174,119 178,949 
Goodwill1,483,560 1,487,187 
Other intangible assets, net of accumulated amortization105,969 113,910 
Right-of-use lease assets313,463 319,785 
Deferred tax assets24,572 18,640 
Other assets84,831 84,086 
Total assets$5,596,623 $5,144,258 
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable$1,399,464 $1,195,099 
Outstanding checks76,241 88,265 
Accrued expenses:
Compensation110,003 138,460 
Transportation expense177,618 153,574 
Income taxes71,056 43,700 
Other accrued liabilities150,337 154,460 
Current lease liabilities66,188 66,174 
Current portion of debt250,000  
Total current liabilities2,300,907 1,839,732 
Long-term debt1,093,517 1,093,301 
Noncurrent lease liabilities262,559 268,572 
Noncurrent income taxes payable24,682 26,015 
Deferred tax liabilities32,236 22,182 
Other long-term liabilities14,535 14,523 
Total liabilities3,728,436 3,264,325 
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; 179,206 and 179,232 shares issued, 133,243 and 134,298 outstanding
13,324 13,430 
Additional paid-in capital568,209 566,022 
Retained earnings4,476,532 4,372,833 
Accumulated other comprehensive loss(53,284)(45,998)
Treasury stock at cost (45,963 and 44,934 shares)
(3,136,594)(3,026,354)
Total stockholders’ investment1,868,187 1,879,933 
Total liabilities and stockholders’ investment$5,596,623 $5,144,258 
See accompanying notes to the condensed consolidated financial statements.
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C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(unaudited, in thousands except per share data)
 
 Three Months Ended March 31,
 20212020
Revenues:
Transportation$4,560,227 $3,542,118 
Sourcing243,642 262,890 
Total revenues4,803,869 3,805,008 
Costs and expenses:
Purchased transportation and related services3,881,285 3,000,113 
Purchased products sourced for resale220,204 236,942 
Personnel expenses360,835 330,220 
Other selling, general, and administrative expenses118,216 128,293 
Total costs and expenses4,580,540 3,695,568 
Income from operations223,329 109,440 
Interest and other expense(11,260)(15,228)
Income before provision for income taxes212,069 94,212 
Provision for income taxes38,764 16,066 
Net income173,305 78,146 
Other comprehensive loss, net of tax(7,286)(32,195)
Comprehensive income$166,019 $45,951 
Basic net income per share$1.29 $0.58 
Diluted net income per share$1.28 $0.57 
Basic weighted average shares outstanding134,508 135,474 
Dilutive effect of outstanding stock awards1,237 495 
Diluted weighted average shares outstanding135,745 135,969 
See accompanying notes to the condensed consolidated financial statements.


4

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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
Loss
Treasury
Stock
Total
Stockholders’
Investment
Balance December 31, 2020134,298 $13,430 $566,022 $4,372,833 $(45,998)$(3,026,354)$1,879,933 
Net income173,305 173,305 
Foreign currency adjustments, net of tax(7,286)(7,286)
Dividends declared, $0.51 per share
(69,606)(69,606)
Stock issued for employee benefit plans357 36 (21,805)18,766 (3,003)
Issuance of restricted stock, net of forfeitures(26)(3)3  
Stock-based compensation expense  23,989  23,989 
Repurchase of common stock(1,386)(139)(129,006)(129,145)
Balance March 31, 2021133,243 13,324 568,209 4,476,532 (53,284)(3,136,594)1,868,187 

Common
Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive LossTreasury
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 
See accompanying notes to the condensed consolidated financial statements.
5

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C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
 
 Three Months Ended March 31,
20212020
OPERATING ACTIVITIES
Net income$173,305 $78,146 
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization23,278 24,393 
Provision for credit losses(1,250)5,675 
Stock-based compensation23,989 11,397 
Deferred income taxes3,869 1,622 
Excess tax benefit on stock-based compensation(7,853)(3,737)
Other operating activities488 788 
Changes in operating elements, net of acquisitions:
Receivables(437,862)(133,142)
Contract assets(43,495)8,713 
Prepaid expenses and other(26,692)(11,038)
Accounts payable and outstanding checks206,237 98,946 
Accrued compensation(27,977)(23,879)
Accrued transportation expense24,044 (7,294)
Accrued income taxes34,087 5,196 
Other accrued liabilities(1,959)1,829 
Other assets and liabilities1,099 884 
Net cash (used for) provided by operating activities(56,692)58,499 
INVESTING ACTIVITIES
Purchases of property and equipment(5,435)(7,841)
Purchases and development of software(8,071)(6,862)
Acquisitions, net of cash acquired (223,617)
Net cash used for investing activities(13,506)(238,320)
FINANCING ACTIVITIES
Proceeds from stock issued for employee benefit plans17,709 11,269 
Stock tendered for payment of withholding taxes(20,712)(13,795)
Repurchase of common stock(130,204)(68,563)
Cash dividends(70,030)(69,871)
Proceeds from short-term borrowings816,000 765,600 
Payments on short-term borrowings(566,000)(587,600)
Net cash provided by financing activities46,763 37,040 
Effect of exchange rates on cash and cash equivalents(2,750)(10,505)
Net change in cash and cash equivalents(26,185)(153,286)
Cash and cash equivalents, beginning of period243,796 447,858 
Cash and cash equivalents, end of period$217,611 $294,572 
See accompanying notes to the condensed consolidated financial statements.
6

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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, 2020.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("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. As of March 31, 2021 the Company has not utilized any of the expedients discussed within this ASU. We will continue to assess our agreements to determine if LIBOR is included and if the expedients will be utilized during the allowed period through December 31, 2022.
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, 2020, includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements.
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, 2020$1,203,972 $213,982 $69,233 $1,487,187 
Acquisitions243   243 
Translation(1,974)(1,386)(510)(3,870)
Balance March 31, 2021$1,202,241 $212,596 $68,723 $1,483,560 

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
7

Table of Contents
(“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 March 31, 2021.
Identifiable intangible assets consisted of the following (in thousands):
March 31, 2021December 31, 2020
CostAccumulated AmortizationNetCostAccumulated AmortizationNet
Finite-lived intangibles
Customer relationships$170,223 $(72,854)$97,369 $171,684 $(67,312)$104,372 
Trademarks   1,875 (937)938 
Total finite-lived intangibles170,223 (72,854)97,369 173,559 (68,249)105,310 
Indefinite-lived intangibles
Trademarks8,600 — 8,600 8,600 — 8,600 
Total intangibles$178,823 $(72,854)$105,969 $182,159 $(68,249)$113,910 
Amortization expense for other intangible assets is as follows (in thousands):
Three Months Ended March 31,
20212020
Amortization expense$7,086 $8,376 
Finite-lived intangible assets, by reportable segment, as of March 31, 2021, will be amortized over their remaining lives as follows (in thousands):
NASTGlobal ForwardingAll Other and CorporateTotal
Remaining 2021$6,132 $11,687 $479 $18,298 
20228,096 15,582 639 24,317 
20238,096 12,787 639 21,522 
20247,944 3,815 639 12,398 
20257,857 2,500 639 10,996 
Thereafter9,167 406 265 9,838 
Total$97,369 

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 March 31, 2021 and December 31, 2020. 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
March 31, 2021December 31, 2020MaturityMarch 31, 2021December 31, 2020
Revolving credit facility1.21 % %October 2023$250,000 $ 
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 
Senior Notes (1)
4.20 %4.20 %April 2028593,517 593,301 
Total debt1,343,517 1,093,301 
Less: Current maturities and short-term borrowing(250,000) 
Long-term debt$1,093,517 $1,093,301 
____________________________________________
(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 1.13 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.
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 $544.6 million at March 31, 2021.
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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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 $677.3 million as of March 31, 2021, based primarily on the market prices quoted from external sources. The carrying value of the Senior Notes was $593.5 million as of March 31, 2021.
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 sale 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.
In addition to the above financing agreements, we have a $15 million discretionary line of credit with US Bank of which $8 million is currently utilized for standby letters of credit related to insurance collateral as of March 31, 2021. These standby letters of credit are renewed annually and were undrawn as of March 31, 2021.
We estimate the fair value of our financing arrangements 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 risk. These are considered Level 2 financial liabilities.
U.S. TRADE ACCOUNTS RECEIVABLE SECURITIZATION
We had a receivables securitization facility (the “Receivables Securitization Facility”) that expired on December 17, 2020 and was not renewed. The Receivables Securitization Facility was based on the securitization of certain of our U.S. trade accounts receivable and provided funding of up to $250 million. The trade accounts receivable under the facility were owned by C.H. Robinson Receivables LLC and were not available to the creditors of C.H. Robinson Worldwide, Inc., and our subsidiaries. The interest rate on borrowings under the Receivables Securitization Facility was based on one-month LIBOR plus 0.65 percent. There was also a commitment fee we were required to pay on any unused portion of the facility.
NOTE 5. INCOME TAXES
Our effective tax rate for the three months ended March 31, 2021 and 2020 was 18.3 percent and 17.1 percent, respectively. The effective income tax rate for the three months ended March 31, 2021 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 3.2 percentage points. Taxes on foreign earnings also contributed to a lower federal income tax rate, reducing our effective tax rate in the three months ended March 31, 2021 by 1.7 percentage points. These impacts were partially offset by state income tax expense, which increased the effective income tax rate. For the three months ended March 31, 2020, our effective tax rate 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 3.6 percentage points, and foreign tax impacts but were partially offset by state income tax expense, which increased the effective tax rate.

We have asserted that the unremitted earnings of a limited number of our foreign subsidiaries are permanently reinvested to support expansion of our international business. If we repatriated all foreign earnings that are considered to be permanently reinvested, the estimated effect on income taxes payable would be an increase of approximately $2.0 million as of March 31, 2021.

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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 related to wages and health benefits provided to an employee whose work from March 17, 2020 through June 30, 2021 was impacted by COVID-19. The Consolidated Appropriations Act signed into law on December 27, 2020, extended the tax credit through June 30, 2021, and increased the maximum credit per employee from $5,000 per year in 2020 to $7,000 per quarter in 2021. Through March 31, 2021, we have recognized a payroll deferral and tax credit of $28.5 million and $0.7 million, respectively, under the CARES Act and The Consolidated Appropriations Act. We will continue evaluating the impact of both acts over the remainder of 2021.

As of March 31, 2021, we have $41.8 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 $2.6 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 2014. We are currently under an Internal Revenue Service audit for 2015, 2016 and 2017 tax years.
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 March 31,
20212020
Stock options$3,967 $5,013 
Stock awards18,948 5,403 
Company expense on ESPP discount1,074 981 
Total stock-based compensation expense$23,989 $11,397 

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 1,782,168 shares were available for stock awards under the plan as of March 31, 2021. 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 through 2020. The fair value of these options was established based on the market price on the date of grant calculated using the Black-Scholes option pricing model. Changes in measured stock price volatility and interest rates were the primary reasons for changes in the fair value. These grants are being expensed based on the terms of the awards. As of March 31, 2021, unrecognized compensation expense related to stock options was $38.8 million. The amount of future expense to be recognized will be based on the passage of time and the employees' continued employment.
Stock Awards - We have awarded performance-based restricted shares through 2020. We have also awarded performance-based 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 based on our earnings and adjusted gross profit 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 23 percent and are calculated using the Black-Scholes option pricing model-protective put method. Differences in post-holding restrictions, 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.
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We granted 280,255 performance-based restricted stock units and 619,689 time-based restricted stock units on February 3, 2021. The performance-based and time-based awards had a weighted average grant date fair value of $74.76 and $71.28, respectively, and are eligible to vest over a three-year period with a first vesting date of December 31, 2021. The performance-based awards vest based on our earnings and adjusted gross profit growth and include an upside opportunity of 200% upon attaining established earnings and adjusted gross profit growth targets.
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 March 31, 2021, there was unrecognized compensation expense of $157.0 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 and adjusted gross profit growth, and certain other conditions.
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 (dollars in thousands): 
Three Months Ended March 31, 2021
Shares purchased
by employees
Aggregate cost
to employees
Expense recognized
by the company
75,029 $6,086 $1,074 

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.

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.
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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 
Goodwill176,727 
Total assets282,979 
Current liabilities12,243 
Lease liabilities35,017 
Deferred tax liabilities13,001 
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 $176.7 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 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.
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 and less than truckload (“LTL”) transportation services.
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, air freight 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 transportation and logistics services including truckload and groupage services 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 months ended March 31, 2021 and 2020, is as follows (dollars in thousands):
NASTGlobal ForwardingAll Other and CorporateConsolidated
Three Months Ended March 31, 2021
Total revenues$3,211,423 $1,156,039 $436,407 $4,803,869 
Income (loss) from operations136,784 90,589 (4,044)223,329 
Depreciation and amortization6,625 5,649 11,004 23,278 
Total assets(1)
3,218,084 1,582,967 795,572 5,596,623 
Average headcount6,537 4,735 3,725 14,997 
NASTGlobal ForwardingAll Other and CorporateConsolidated
Three Months Ended March 31, 2020
Total revenues$2,823,745 $530,384 $450,879 $3,805,008 
Income (loss) from operations98,526 11,959 (1,045)109,440 
Depreciation and amortization5,254 9,149 9,990 24,393 
Total assets(1)
2,942,719 934,625 970,976 4,848,320 
Average headcount7,038 4,824 3,588 15,450 
_________________________________________
(1) All cash and cash equivalents are included in All Other and Corporate.

NOTE 10. REVENUE FROM CONTRACTS WITH CUSTOMERS

A summary of our total revenues disaggregated by major service line and timing of revenue recognition is presented below for each of our reportable segments for the three months ended March 31, 2021 and 2020 (in thousands):
Three Months Ended March 31, 2021
NASTGlobal ForwardingAll Other and CorporateTotal
Major Service Lines
Transportation and logistics services(1)
$3,211,423 $1,156,039 $192,765 $4,560,227 
Sourcing(2)
  243,642 243,642 
Total$3,211,423 $1,156,039 $436,407 $4,803,869 
Three Months Ended March 31, 2020
NASTGlobal ForwardingAll Other and CorporateTotal
Major Service Lines
Transportation and logistics services(1)
$2,823,745 $530,384 $187,989 $3,542,118 
Sourcing(2)
  262,890 262,890 
Total$2,823,745 $530,384 $450,879 $3,805,008 
____________________________________________
(1) Transportation and logistics services performance obligations are completed over time.
(2) Sourcing performance obligations are completed at a point in time.
We typically do not receive consideration and amounts are not due from our customer prior to the completion of our performance obligation and as such contract liabilities, as of March 31, 2021, and revenue recognized in the three months ended March 31, 2021 and 2020 resulting from contract liabilities, were not significant. Contract assets and accrued expenses-transportation expense fluctuate from period to period primarily based upon shipments in-transit at period end.
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NOTE 11. LEASES

We determine if our contractual agreements contain a lease at inception. A lease is identified when a contract allows us the right to control an identified asset for a period of time in exchange for consideration. Our lease agreements consist primarily of operating leases for office space, warehouses, office equipment, and a small number of intermodal containers. We do not have material financing leases. Frequently, we enter into contractual relationships with a wide variety of transportation companies for freight capacity, and utilize those relationships to efficiently and cost-effectively arrange the transport of our customers’ freight. These contracts typically have a term of 12 months or less and do not allow us to direct the use or obtain substantially all of the economic benefits of a specifically identified asset. Accordingly, these agreements are not considered leases. In addition, we have made a policy election to not apply the guidance of ASC 842 to leases with a term of 12 months or less as allowed by the standard. These leases are recognized as expense on a straight-line basis over the lease term.

Our operating leases are included on the consolidated balance sheets as right-of-use lease assets and lease liabilities. A right-of-use lease asset represents our right to use an underlying asset over the term of a lease while a lease liability represents our obligation to make lease payments arising from the lease. Current and noncurrent lease liabilities are recognized at commencement date at the present value of lease payments, including non-lease components, which consist primarily of common area maintenance charges. Right-of-use lease assets are also recognized at commencement date as the total lease liability plus prepaid rents and less any deferred rent liability that existed under ASC 840, Leases, upon transition. As most of our leases do not provide an implicit rate, we use our fully collateralized incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is influenced by our credit rating and lease term and as such may differ for individual leases.

Our lease agreements typically do not contain variable lease payments, residual value guarantees, purchase options, or restrictive covenants. Many of our leases include the option to renew for a period of months to several years. The term of our leases may include the option to renew when it is reasonably certain that we will exercise that option although these occurrences are seldom. We have lease agreements with lease components (e.g., payments for rent) and non-lease components (e.g., payments for common area maintenance and parking), which are all accounted for as a single lease component.

We do not have material lease agreements that have not yet commenced that are expected to create significant rights or obligations as of March 31, 2021.

Information regarding lease expense, remaining lease term, discount rate, and other select lease information is presented below as of March 31, 2021, and for the three months ended March 31, 2021 (dollars in thousands):

Three Months Ended March 31,
Lease Costs20212020
Operating lease expense$21,562 $19,974 
Short-term lease expense1,601 2,572 
Total lease expense$23,163 $22,546 

Three Months Ended March 31,
Other Lease Information20212020
Operating cash flows from operating leases$21,114 $19,112 
Right-of-use lease assets obtained in exchange for new lease liabilities15,253 60,281 

Lease Term and Discount RateAs of March 31, 2021
Weighted average remaining lease term (in years)(1)
6.7
Weighted average discount rate3.1 %
____________________________________________
(1) The weighted average remaining lease term is significantly impacted by a 15-year lease related to office space in Chicago, IL, that commenced in 2018. Excluding this lease, the weighted average remaining lease term of our agreements is 4.6 years.

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The maturities of lease liabilities as of March 31, 2021, were as follows (in thousands):
Maturity of Lease LiabilitiesOperating Leases
Remaining 2021$55,864 
202273,152 
202360,689 
202441,169 
202531,071 
Thereafter107,345 
Total lease payments369,290 
Less: Interest(40,543)
Present value of lease liabilities$328,747 

In addition to minimum lease payments, we are typically responsible under our lease agreements to pay our pro rata share of maintenance expenses, common charges, and real estate taxes of the buildings in which we lease space. Under ASC 842, we have elected to account for non-lease components such as common area maintenance and parking as a single lease component.
NOTE 12. ALLOWANCE FOR CREDIT LOSSES
Our allowance for credit losses is computed using a number of factors including our past credit loss experience, the aging of amounts due from our customers, and our customers' credit ratings, in addition to other customer specific factors. We have also assessed the current macroeconomic environment, including the impact of COVID-19, to determine our ending allowance for credit losses for both accounts receivable and contract assets. The allowance for credit losses on contract assets was not significant.
A rollforward of our allowance for credit losses on our accounts receivable balance is presented below for the three months ended March 31, 2021:
Balance, December 31, 2020$38,113 
Provision(1,434)
Write-offs(1,576)
Balance, March 31, 2021$35,103 

Recoveries of amounts previously written off were not significant for the three months ended March 31, 2021.
NOTE 13. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss is included in Stockholders' investment on our condensed consolidated balance sheets. The recorded balance at March 31, 2021 and December 31, 2020, was $53.3 million and $46.0 million, respectively. Accumulated other comprehensive loss is comprised solely of foreign currency adjustments, net of related income tax effects at March 31, 2021 and December 31, 2020. Other comprehensive loss was $7.3 million and $32.2 million for the three months ended March 31, 2021 and 2020, respectively. Other comprehensive loss consisted of foreign currency adjustments, including foreign currency translation, net of related income tax effects of $1.0 million and $1.5 million for the three months ended March 31, 2021 and 2020, respectively.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes.
FORWARD-LOOKING INFORMATION
Our quarterly report on Form 10-Q, including this discussion and analysis of our financial condition and results of operations and our disclosures about market risk, contains certain “forward-looking statements.” These statements represent our expectations, beliefs, intentions, or strategies concerning future events that, by their nature, involve risks and uncertainties. Forward-looking statements include, among others, statements about our future performance, the continuation of historical trends, the sufficiency of our sources of capital for future needs, the effects of acquisitions or dispositions, the expected impact of recently issued accounting pronouncements, and the outcome or effects of litigation. Risks that could cause actual results to differ materially from our current expectations include, but are not limited to, changes in economic conditions, including uncertain consumer demand; changes in market demand and pressures on the pricing for our services; fuel price increases or decreases, or fuel shortages; competition and growth rates within the global logistics industry; freight levels and increasing costs and availability of truck capacity or alternative means of transporting freight; changes in relationships with existing contracted truck, rail, ocean, and air carriers; changes in our customer base due to possible consolidation among our customers; cyber-security related risks; risks associated with operations outside of the United States; our ability to successfully integrate the operations of acquired companies with our historic operations; risks associated with litigation, including contingent auto liability and insurance coverage; risks related to the elimination of LIBOR; risks associated with the potential impact of changes in government regulations; risks associated with the produce industry, including food safety and contamination issues; the impact of war on the economy; changes to our capital structure; changes due to catastrophic events including pandemics such as COVID-19, and other risks and uncertainties, detailed in our Annual and Quarterly Reports. Therefore, actual results may differ materially from our expectations based on these and other risks and uncertainties, including those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on February 19, 2021 as well as the updates to these risk factors included in Part II—“Item 1A, Risk Factors,” herein.
Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update such statement to reflect events or circumstances arising after such date.
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OVERVIEW
C.H. Robinson Worldwide, Inc. (“C.H. Robinson,” “the company,” “we,” “us,” or “our”) is one of the world's largest logistics platforms. Our mission is to improve the world's supply chains through our people, processes, and technology by delivering exceptional value to our customers and suppliers. We provide freight transportation services and logistics solutions to companies of all sizes in a wide variety of industries. We operate through a network of offices in North America, Europe, Asia, Oceania, and South America. We offer a global suite of services using tailored, market-leading technology built by and for supply chain experts. Our global network of supply chain experts work with our customers to drive better supply chain outcomes by leveraging our experience, data, technology, and scale.
Our adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit is calculated as gross profit excluding amortization of internally developed software utilized to directly serve our customers and contracted carriers. Adjusted gross profit margin is calculated as adjusted gross profit divided by total revenues. We believe adjusted gross profit and adjusted gross profit margin are useful measures of our ability to source, add value, and sell services and products that are provided by third parties, and we consider adjusted gross profit to be a primary performance measurement. Accordingly, the discussion of our results of operations often focuses on the changes in our adjusted gross profit and adjusted gross profit margin. The reconciliation of gross profit to adjusted gross profit and gross profit margin to adjusted gross profit margin is presented below (dollars in thousands):
Three Months Ended March 31,
20212020
Revenues:
Transportation$4,560,227 $3,542,118 
Sourcing243,642 262,890 
Total revenues4,803,869 3,805,008 
Costs and expenses:
Purchased transportation and related services3,881,285 3,000,113 
Purchased products sourced for resale220,204 236,942 
Direct internally developed software amortization4,647 3,745 
Total direct costs4,106,136 3,240,800 
Gross profit / Gross profit margin697,733 14.5 %564,208 14.8 %
Plus: Direct internally developed software amortization4,647 3,745 
Adjusted gross profit / Adjusted gross profit margin$702,380 14.6 %$567,953 14.9 %

Our adjusted operating margin is a non-GAAP financial measure calculated as operating income divided by adjusted gross profit. We believe adjusted operating margin is a useful measure of our profitability in comparison to our adjusted gross profit, which we consider a primary performance metric as discussed above. The reconciliation of operating margin to adjusted operating margin is presented below (dollars in thousands):
Three Months Ended March 31,
20212020
Total revenues$4,803,869 $3,805,008 
Operating income223,329 109,440 
Operating margin4.6 %2.9 %
Adjusted gross profit$702,380 $567,953 
Operating income223,329 109,440 
Adjusted operating margin31.8 %19.3 %

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MARKET TRENDS
The North American surface transportation market continues to be impacted by tightening carrier capacity driven by an ongoing shortage of long-haul drivers. The demand for transportation has continued to improve as businesses attempt to replenish low inventory levels to meet rising consumer demand fueled by the re-opening of the economy and additional fiscal stimulus. These conditions have resulted in historically high pricing for purchased transportation. Industry freight volumes, as measured by the Cass Freight Index, increased approximately 7.5 percent during the first quarter of 2021 compared to the first quarter of 2020. One of the metrics we use to measure market conditions is the truckload routing guide depth from our Managed Services business. Routing guide depth represents the number of carriers contacted prior to acceptance when procuring a transportation provider. The average routing guide depth of tender in the first quarter of 2021 was 1.7, representing that on average, the first or second carrier in a shipper's routing guide was executing the shipment in most cases. This routing guide penetration compares to 1.2 in the first quarter of 2020 and is reflective of the increasingly tight carrier capacity in the first quarter of 2021. As capacity continues to tighten and routing guides continue to degrade more loads move to the spot market driving sharp increases in purchased transportation costs.
The global forwarding market continues to face unprecedented disruptions due to port congestion, shipping container shortages, and the ongoing air freight capacity shortage caused by a reduction of commercial flights resulting from the COVID-19 pandemic. These disruptions combined with strong demand across most industries, most notably retail, have resulted in significant increases in purchased transportation costs for both ocean and air freight. In addition, the ongoing air freight capacity shortage has continued to result in an increase in charter flights and larger than normal shipment sizes.
BUSINESS TRENDS
Our first quarter of 2021 surface transportation results are largely consistent with the overall market trends summarized above, although we did experience volume increases slightly below the industry trends as measured by the Cass Freight Index. Industry freight volumes increased approximately 7.5 percent compared to our combined NAST truckload and less than truckload ("LTL") volume increase of 7.0 percent per business day. We continued to work with our customers to meet our contractual commitments during the first quarter of 2021 while adapting our pricing to reflect the rising cost environment. The improving demand and tight carrier capacity conditions resulted in our average truckload linehaul cost per mile, excluding fuel costs, increasing 33.5 percent in the first quarter of 2021. Our average truckload linehaul rate charged to our customers, excluding fuel surcharges, increased approximately 33.0 percent in the first quarter of 2021.
In our global forwarding business, we continued to experience significant increases in purchased transportation costs for both ocean and air freight due to the disruptions and capacity shortages impacting the global forwarding market. This along with increased volumes has resulted in triple digit percentage growth in both total revenue and cost of transportation for our ocean and air freight service lines. Ocean volumes increased 27.0 percent with strong growth in all regions we serve driven by higher award sizes from existing customers, new customer growth, and the adverse impact the COVID-19 pandemic had on ocean volumes in the first quarter of 2020.
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 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.
SIGNIFICANT DEVELOPMENTS
During the three months ended March 31, 2021, our financial results and operations were impacted by the COVID-19 pandemic described above and discussed throughout Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations.” The extent to which the COVID-19 pandemic impacts our financial results and operations for the remainder of 2021 and going forward will depend on future developments which are highly uncertain and cannot be predicted, including fluctuations in the severity of the outbreak and the actions being taken to contain and treat it.
We have taken a variety of measures to ensure the availability, continuity, and security of our critical infrastructure, ensure the health and safety of our employees around the globe, and provide service and supply chain continuity to our customers and contracted carriers in order to deliver critical and essential goods and services. We continue to follow public and private sector policies and initiatives to reduce the transmission of COVID-19, such as requiring social distancing, wearing a mask, and limiting the number of employees to less than 50 percent capacity when in the office, in addition to the elimination of all non-essential travel. We have also adopted work-from-home arrangements, and as of March 31, 2021, over 80 percent of our employees were working remotely executing their duties and responsibilities. We do not believe these policies and initiatives will adversely impact our operations.
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Due to the ongoing uncertainty around the severity and duration of the outbreak, we are not able at this time to estimate the impact COVID-19 may have on our financial results and operations for the remainder of 2021 and going forward. However, the impact could be material in all business segments and could be material during any future period affected either directly or indirectly by this pandemic. Many businesses continue to experience reduced production and output which could result in a decrease in freight volumes across a number of industries which may reduce our contractual and spot-market opportunities. In addition, a significant number of our contracted carriers may reduce their capacity or charge higher prices in light of the volatile market conditions which may reduce our adjusted gross profit margins as we honor our contractual freight rates.
SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS
The following summarizes select first quarter 2021 year-over-year operating comparisons to first quarter 2020:
Total revenues increased 26.3 percent to $4.8 billion, driven primarily by higher pricing and higher volume across most of our service lines.
Gross profits increased 23.7 percent to $697.7 million. Adjusted gross profits increased 23.7 percent to $702.4 million, primarily driven by higher pricing in our truckload, ocean and air service lines, higher volume in our ocean, LTL and air service lines and contributions from the acquisition of Prime Distribution.
Personnel expenses increased 9.3 percent to $360.8 million, primarily driven by higher incentive compensation costs. Average headcount decreased 2.9 percent, despite the Prime acquisition contributing approximately one percentage point of growth.
Other selling, general, and administrative (“SG&A”) expenses decreased 7.9 percent to $118.2 million primarily due to lower travel expenses and credit losses.
Income from operations totaled $223.3 million, up 104.1 percent due to the increase in adjusted gross profits.
Adjusted operating margin of 31.8 percent increased 1,250 basis points.
Interest and other expenses totaled $11.3 million, consisting primarily of $12.2 million of interest expense, which decreased $0.4 million versus last year due to a lower average debt balance and a lower average interest rate. The first quarter also included a $2.9 million unfavorable impact from foreign currency revaluation and realized foreign currency gains and losses.
The effective tax rate in the quarter was 18.3 percent compared to 17.1 percent in the first quarter last year. This increase was primarily due to higher profits.
Diluted earnings per share (EPS) increased 124.6 percent to $1.28.
Cash flow from operations decreased $115.2 million driven by a large increase in working capital during the three months ended March 31, 2021.
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CONSOLIDATED RESULTS OF OPERATIONS
The following table summarizes our results of operations (dollars in thousands, except per share data):
Three Months Ended March 31,
20212020% change
Revenues:
Transportation$4,560,227$3,542,11828.7 %
Sourcing243,642262,890(7.3)%
Total revenues4,803,8693,805,00826.3 %
Costs and expenses:
Purchased transportation and related services3,881,2853,000,11329.4 %
Purchased products sourced for resale220,204236,942(7.1)%
Personnel expenses360,835330,2209.3 %
Other selling, general, and administrative expenses118,216128,293(7.9)%
Total costs and expenses4,580,5403,695,56823.9 %
Income from operations223,329109,440104.1 %
Interest and other expense(11,260)(15,228)(26.1)%
Income before provision for income taxes212,06994,212125.1 %
Provision for income taxes38,76416,066141.3 %
Net income$173,305$78,146121.8 %
Diluted net income per share$1.28 $0.57 124.6 %
Average headcount14,997 15,450 (2.9)%
Adjusted gross profit margin percentage(1)
Transportation14.9 %15.3 %(0.4) pts
Sourcing9.6 %9.9 %(0.3) pts
Total adjusted gross profit margin14.6 %14.9 %(0.3) pts
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(1) Adjusted gross profit margin is a non-GAAP financial measure explained above.

A reconciliation of our reportable segments to our consolidated results can be found in Note 9, Segment Reporting, in Part I, Financial Information of this Quarterly Report on Form 10-Q.

Consolidated Results of Operations—Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020
Total revenues and direct costs. Total transportation revenues increased driven by increased pricing in our truckload, ocean, and air freight service lines in addition to increased volumes in our ocean and LTL service lines. The increased pricing in truckload, ocean and air freight was driven by tightening carrier capacity as discussed above in the market trends section. These increases were partially offset by a decrease in truckload volumes. Total purchased transportation and related services increased, driven by higher average truckload linehaul costs per mile and higher costs of capacity in the ocean and air freight service lines, in addition to higher volumes in the ocean and LTL service lines. Our sourcing total revenue and purchased products sourced for resale decreased due to lower pricing and costs per case and a decline in volume.
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Gross profits and adjusted gross profits. Our transportation adjusted gross profit increased due to improved pricing in truckload and the strong performance of our ocean and air freight service lines in addition to volume increases in LTL. Our transportation adjusted gross profit margin decreased driven by declines across most service lines but was partially offset by improved adjusted gross profit margin in truckload. Sourcing adjusted gross profit decreased due to a decrease in case volumes and lower adjusted gross profit per case in the retail industry.
Operating expenses. Personnel expenses increased primarily due to increases in incentive compensation which was partially offset by a decrease in average headcount. Average headcount decreased 2.9 percent, despite the Prime Distribution acquisition contributing approximately one percentage point of growth. SG&A expenses decreased due to lower travel expenses and credit losses.
Interest and other expense. Interest and other expense primarily consisted of interest expense of $12.2 million in the first quarter of 2021 and a $2.9 million unfavorable impact of foreign currency revaluation and realized foreign currency gains and losses. These expenses were partially offset by a $2.9 million local government subsidy in Asia for achieving specified performance criteria that was almost entirely offset by a reduction in foreign tax credits within the provision for income taxes. Interest expense decreased modestly driven by a lower average debt balance and a lower average interest rate in the first quarter of 2021 compared to the first quarter of 2020. The first quarter of 2020 included a $2.9 million unfavorable impact of foreign currency revaluation and realized foreign currency gains and losses.
Provision for income taxes. Our effective income tax rate was 18.3 percent for the first quarter of 2021 compared to 17.1 percent for the first quarter of 2020. The effective income tax rate for the first quarter ended March 31, 2021, 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 3.2 percentage points. Taxes on foreign earnings also contributed to a lower federal income tax rate, reducing our effective tax rate in the three months ended March 31, 2021 by 1.7 percentage points. These impacts were partially offset by state income tax expense, which increased the effective income tax rate. The effective income tax rate for the first quarter of 2020 was lower than the statutory federal income tax rate due to the tax impact of share-based payment awards, which reduced the effective tax rate by 3.6 percentage points, and foreign tax benefits recorded in the three months ended March 31, 2020 but were partially offset by state income taxes, net of federal benefit and foreign income taxes.

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NAST Segment Results of Operations
Three Months Ended March 31,
(dollars in thousands)20212020% change
Total revenues$3,211,423 $2,823,745 13.7 %
Costs and expenses:
Purchased transportation and related services2,790,315 2,450,967 13.8 %
Personnel expenses183,929 172,832 6.4 %
Other selling, general, and administrative expenses100,395 101,420 (1.0)%
Total costs and expenses3,074,639 2,725,219 12.8 %
Income from operations$136,784 $98,526 38.8 %
Three Months Ended March 31,
20212020% change
Average headcount6,537 7,038 (7.1)%
Service line volume statistics
Truckload(6.5)%
LTL15.0 %
Adjusted gross profits(1)
Truckload$280,304 $243,686 15.0 %
LTL120,117 112,330 6.9 %
Other 20,687 16,762 23.4 %
Total adjusted gross profits$421,108 $372,778 13.0 %
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(1) Adjusted gross profit margin is a non-GAAP financial measure explained above.
Three Months Ended March 31, 2021 compared to Three Months Ended March 31, 2020
Total revenues and direct costs. NAST total revenues and direct costs increased due to increased pricing in truckload and increased volumes in our LTL service line. The increased pricing in truckload was driven by tightening carrier capacity as discussed above in the market trends section. These increases were partially offset by a decrease in truckload volumes. Total purchased transportation and related services increased, driven by higher average truckload linehaul costs per mile in addition to higher volumes in the LTL service line.
Gross profits and adjusted gross profits. NAST truckload adjusted gross profits increased driven primarily by improved pricing in truckload and volume increases in LTL. The improved pricing in truckload was the result of an increase in spot market opportunities and continued progress repricing our contractual truckload business to reflect the rising cost environment. Our average truckload linehaul rate per mile charged to our customers, which excludes fuel surcharges, increased approximately 33.0 percent in the first quarter of 2021 compared to the first quarter of 2020. Our truckload transportation costs, excluding fuel surcharges, increased approximately 33.5 percent.
NAST LTL adjusted gross profits increased due to increased volumes including those due to acquisition, partially offset by lower adjusted gross profit per transaction. The acquisition of Prime Distribution contributed 3.0 percentage points to LTL adjusted gross profit growth in the first quarter of 2021.
NAST other adjusted gross profits increased primarily due to incremental warehousing services related to the acquisition of Prime Distribution.
Operating expenses. NAST personnel expense increased primarily due to increases in incentive compensation which were partially offset by a decrease in average headcount. The acquisition of Prime Distribution contributed 2.5 percentage points of growth to NAST average headcount. NAST SG&A expenses decreased slightly due to a reduction in the reserve for credit loss, decreases in other purchased services, and reduced travel expenses. These decreases were largely offset by an increase from the ongoing expenses of Prime Distribution. The operating expenses of NAST and all other segments include allocated corporate expenses.
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Global Forwarding Segment Results of Operations
Three Months Ended March 31,
(dollars in thousands)20212020% change
Total revenues$1,156,039 $530,384 118.0 %
Costs and expenses:
Purchased transportation and related services941,739 402,070 134.2 %
Personnel expenses81,009 70,893 14.3 %
Other selling, general, and administrative expenses42,702 45,462 (6.1)%
Total costs and expenses1,065,450 518,425 105.5 %
Income from operations$90,589 $11,959 657.5 %
Three Months Ended March 31,
20212020% change
Average headcount4,7354,824(1.8)%
Service line volume statistics
Ocean27.0 %
Air7.0 %
Customs13.5 %
Adjusted gross profits(1)
Ocean$135,396 $69,810 93.9 %
Air45,247 26,877 68.3 %
Customs24,223 21,193 14.3 %
Other 9,434 10,434 (9.6)%
Total adjusted gross profits