Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

C.H. Robinson Worldwide, Inc.

Eden Prairie, Minnesota

We have audited the accompanying consolidated balance sheets of C.H. Robinson Worldwide, Inc. and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive income, stockholders’ investment, and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of C.H. Robinson Worldwide, Inc. and subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2017 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Minneapolis, Minnesota

March 1, 2017

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

C.H. Robinson Worldwide, Inc.

Eden Prairie, Minnesota

We have audited the internal control over financial reporting of C.H. Robinson Worldwide, Inc. and subsidiaries (the "Company") as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2016 of the Company and our report dated March 1, 2017 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.

Minneapolis, Minnesota

March 1, 2017

C.H. ROBINSON WORLDWIDE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	December 31,
	2016				2015
ASSETS
Current assets:
Cash and cash equivalents	$	247,666			$	168,229
Receivables, net of allowance for doubtful accounts of $39,543 and $43,455	1,711,191				1,505,620
Deferred tax asset	—				16,788
Prepaid expenses and other	49,245				40,061
Total current assets	2,008,102				1,730,698
Property and equipment	450,045				379,139
Accumulated depreciation and amortization	(217,092		)		(188,265		)
Net property and equipment	232,953				190,874
Goodwill	1,232,796				1,108,337
Other intangible assets, net of accumulated amortization of $87,486 and $61,405	167,525				120,242
Deferred tax asset	2,250				—
Other assets	44,132				34,207
Total assets	$	3,687,758			$	3,184,358
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$	839,736			$	697,585
Outstanding checks	82,052				86,298
Accrued expenses–
Compensation	98,107				146,666
Income taxes	15,472				12,573
Other accrued liabilities	70,351				55,475
Current portion of debt	740,000				450,000
Total current liabilities	1,845,718				1,448,597
Long-term debt	500,000				500,000
Noncurrent income taxes payable	18,849				19,634
Deferred tax liabilities	65,122				65,460
Other long-term liabilities	222				217
Total liabilities	2,429,911				2,033,908
Commitments and contingencies
Stockholders’ investment:
Preferred stock, $.10 par value, 20,000 shares authorized; no shares issued or outstanding	—				—
Common stock, $.10 par value, 480,000 shares authorized; 179,006 and 178,784 shares issued, 141,258 and 143,455 outstanding	14,126				14,345
Additional paid-in capital	419,280				379,444
Retained earnings	3,190,578				2,922,620
Accumulated other comprehensive loss	(61,442		)		(37,946		)
Treasury stock at cost (37,748 and 35,329 shares)	(2,304,695		)		(2,128,013		)
Total stockholders’ investment	1,257,847				1,150,450
Total liabilities and stockholders’ investment	$	3,687,758			$	3,184,358

See accompanying notes to the consolidated financial statements.

C.H. ROBINSON WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share data)

	For the years ended December 31,
	2016				2015				2014
Revenues:
Transportation	$	11,704,745			$	11,989,780			$	11,936,512
Sourcing	1,439,668				1,486,304				1,533,555
Total revenues	13,144,413				13,476,084				13,470,067
Costs and expenses:
Purchased transportation and related services	9,549,934				9,842,271				10,044,406
Purchased products sourced for resale	1,316,951				1,365,333				1,418,009
Personnel expenses	1,064,936				1,051,410				939,021
Other selling, general, and administrative expenses	375,061				358,760				320,213
Total costs and expenses	12,306,882				12,617,774				12,721,649
Income from operations	837,531				858,310				748,418
Interest and other expense	(25,581		)		(35,529		)		(24,987		)
Income before provision for income taxes	811,950				822,781				723,431
Provision for income taxes	298,566				313,082				273,720
Net income	513,384				509,699				449,711
Other comprehensive loss	(23,496		)		(9,336		)		(17,990		)
Comprehensive income	$	489,888			$	500,363			$	431,721
Basic net income per share	$	3.60			$	3.52			$	3.06
Diluted net income per share	$	3.59			$	3.51			$	3.05
Basic weighted average shares outstanding	142,706				144,967				147,202
Dilutive effect of outstanding stock awards	285				382				340
Diluted weighted average shares outstanding	142,991				145,349				147,542

See accompanying notes to the consolidated financial statements.

C.H. ROBINSON WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ INVESTMENT

(In thousands, except per share data)

	Common Shares Outstanding			Amount				Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Loss				Treasury Stock				Total Stockholders’ Investment
Balance December 31, 2013	150,197			$	15,020			$	217,894			$	2,413,833			$	(10,620	)		$	(1,696,403	)		$	939,724
Net income												449,711												449,711
Foreign currency translation adjustment																(17,990		)						(17,990		)
Dividends declared, $1.43 per share												(215,005		)										(215,005		)
Stock issued for employee benefit plans	405			40				(24,644		)										23,937				(667		)
Issuance of restricted stock	(410	)		(41		)		41																—
Stock-based compensation expense	30			3				46,119												1,599				47,721
Excess tax benefit on deferred compensation and employee stock plans								7,558																7,558
Repurchase of common stock	(3,764	)		(376		)		75,000												(238,661		)		(164,037		)
Balance December 31, 2014	146,458			14,646				321,968				2,648,539				(28,610		)		(1,909,528		)		1,047,015
Net income												509,699												509,699
Foreign currency translation adjustment																(9,336		)						(9,336		)
Dividends declared, $1.57 per share												(235,618		)										(235,618		)
Stock issued for employee benefit plans	254			25				(9,095		)										13,258				4,188
Issuance of restricted stock	164			16				(16		)														—
Stock-based compensation expense								58,039												28				58,067
Excess tax benefit on deferred compensation and employee stock plans								8,548																8,548
Repurchase of common stock	(3,421	)		(342		)														(231,771		)		(232,113		)
Balance December 31, 2015	143,455			14,345				379,444				2,922,620				(37,946		)		(2,128,013		)		1,150,450
Net income												513,384												513,384
Foreign currency translation adjustment																(23,496		)						(23,496		)
Dividends declared, $1.74 per share												(245,426		)										(245,426		)
Stock issued for employee benefit plans	32			3				(16,121		)										(1,287		)		(17,405		)
Issuance of restricted stock	221			22				(22		)														—
Stock-based compensation expense	17			3				37,517												1,034				38,554
Excess tax benefit on deferred compensation and employee stock plans								18,462																18,462
Repurchase of common stock	(2,467	)		(247		)														(176,429		)		(176,676		)
Balance December 31, 2016	141,258			$	14,126			$	419,280			$	3,190,578			$	(61,442	)		$	(2,304,695	)		$	1,257,847

See accompanying notes to the consolidated financial statements.

C.H. ROBINSON WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	For the year ended December 31,
	2016				2015				2014
OPERATING ACTIVITIES
Net income	$	513,384			$	509,699			$	449,711
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	74,669				66,409				57,009
Provision for doubtful accounts	5,136				11,538				15,092
Stock-based compensation	37,565				57,661				47,861
Gain on divestiture	—				—				(1,848		)
Deferred income taxes	15,009				(17,095		)		(3,117		)
Other	1,907				7,409				710
Changes in operating elements, net of effects of acquisitions:
Receivables	(173,211		)		107,560				(137,102		)
Prepaid expenses and other	(6,378		)		(228		)		6,294
Other non-current assets	(3,934		)		741				380
Accounts payable and outstanding checks	115,917				(53,272		)		40,251
Accrued compensation	(47,570		)		18,580				40,236
Accrued income taxes	1,459				5,178				(4,370		)
Other accrued liabilities	(4,545		)		4,156				2,319
Net cash provided by operating activities	529,408				718,336				513,426
INVESTING ACTIVITIES
Purchases of property and equipment	(73,452		)		(28,115		)		(22,364		)
Purchases and development of software	(17,985		)		(16,527		)		(7,138		)
Acquisitions, net of cash acquired	(220,203		)		(369,833		)		—
Restricted cash	—				359,388				(359,388		)
Other	(1,348		)		641				(6		)
Net cash used for investing activities	(312,988		)		(54,446		)		(388,896		)
FINANCING ACTIVITIES
Proceeds from stock issued for employee benefit plans	19,271				15,557				11,942
Stock tendered for payment of withholding taxes	(36,678		)		(11,368		)		(12,604		)
Repurchase of common stock	(172,925		)		(229,863		)		(164,041		)
Cash dividends	(245,430		)		(235,615		)		(215,008		)
Excess tax benefit on stock-based compensation	18,462				8,548				7,558
Proceeds from short-term borrowings	6,600,000				6,833,000				4,823,000
Payments on short-term borrowings	(6,310,000		)		(6,988,000		)		(4,593,000		)
Debt issuance costs	—				—				(1,484		)
Net cash used for financing activities	(127,300		)		(607,741		)		(143,637		)
Effect of exchange rates on cash	(9,683		)		(16,860		)		(14,000		)
Net change in cash and cash equivalents	79,437				39,289				(33,107		)
Cash and cash equivalents, beginning of year	168,229				128,940				162,047
Cash and cash equivalents, end of year	$	247,666			$	168,229			$	128,940
Supplemental cash flow disclosures
Cash paid for income taxes	$	269,187			$	311,800			$	271,979
Cash paid for interest	$	28,908			$	28,537			$	27,066
Accrued share repurchases held in other accrued liabilities	$	5,988			$	2,250			—

See accompanying notes to the consolidated financial statements.

C.H. ROBINSON WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 through a network of offices operating in North America, Europe, Asia, Australia, New Zealand, 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. Prior to 2015 we reported payment services revenues separately from transportation revenues. Amounts prior to 2015 have been combined to conform to the current period presentation. This change in presentation had no effect on our prior year consolidated results of operations, financial condition, or cash flows.

USE OF ESTIMATES. The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. We are also required to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best information, and our actual results could differ materially from those estimates.

REVENUE RECOGNITION. Total revenues consist of the total dollar value of goods and services purchased from us by customers. Our net revenues are our total revenues less purchased transportation and related services, including contracted motor carrier, rail, ocean, air, and other costs, and the purchase price and services related to the products we source. We act principally as the service provider for these transactions and recognize revenue as these services are rendered or goods are delivered. At that time, our obligations to the transactions are completed and collection of receivables is reasonably assured. Most transactions in our transportation and sourcing businesses are recorded at the gross amount we charge our customers for the service we provide and goods we sell. In these transactions, we are the primary obligor, we have credit risk, we have discretion to select the supplier, and we have latitude in pricing decisions. Additionally, in our sourcing business, we take loss of inventory risk during shipment and have general inventory risk. Certain transactions in customs brokerage, managed services, freight forwarding, and sourcing are recorded at the net amount we charge our customers for the service we provide because many of the factors stated above are not present.

ALLOWANCE FOR DOUBTFUL ACCOUNTS. Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. We continuously monitor payments from our customers and maintain a provision for uncollectible accounts based upon our customer aging trends, historical loss experience, and any specific customer collection issues that we have identified.

FOREIGN CURRENCY. Most balance sheet accounts of foreign subsidiaries are translated or remeasured at the current exchange rate as of the end of the year. Statement of operations items are translated at average exchange rates during the year. The resulting translation adjustment is recorded net of tax as a separate component of comprehensive income in our statements of operations and comprehensive income in 2014 and 2015. In 2016, we asserted that we will indefinitely reinvest earnings of foreign subsidiaries to support expansion of our international businesses and now the translation adjustment is recorded gross of related income tax benefits.

CASH AND CASH EQUIVALENTS. Cash and cash equivalents consist of bank deposits.

PREPAID EXPENSES AND OTHER. Prepaid expenses and other include such items as prepaid rent, software maintenance contracts, insurance premiums, other prepaid operating expenses, and inventories, consisting primarily of produce and related products held for resale.

PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost. Maintenance and repair expenditures are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated lives of the assets. Amortization of leasehold improvements is computed over the shorter of the lease term or the estimated useful lives of the improvements.

We recognized the following depreciation expense (in thousands):

2016	$	36,212
2015	32,412
2014	29,340

A summary of our property and equipment as of December 31 is as follows (in thousands):

	Useful Lives (in years)		2016				2015
Furniture, fixtures, and equipment	3 to 12		$	236,180			$	200,215
Buildings	3 to 30		130,050				110,056
Corporate aircraft	10		11,334				11,334
Leasehold improvements	3 to 15		40,312				28,178
Land			23,635				23,759
Construction in progress			8,534				5,597
Less accumulated depreciation			(217,092		)		(188,265		)
Net property and equipment			$	232,953			$	190,874

GOODWILL. Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable tangible net assets and identifiable intangible assets purchased and liabilities assumed. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (November 30 for us) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. See Note 2.

OTHER INTANGIBLE ASSETS. Other intangible assets include definite-lived customer lists, non-competition agreements, and indefinite-lived trademarks. The definite-lived intangible assets are being amortized using the straight-line method over their estimated lives, ranging from 5 to 8 years. Definite-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The indefinite-lived trademarks are not amortized. Indefinite-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, or annually, at a minimum. See Note 2.

OTHER ASSETS. Other assets include such items as purchased and internally developed software, and the investments related to our nonqualified deferred compensation plan. We amortize software using the straight-line method over 3 years. We recognized the following amortization expense of purchased and internally developed software (in thousands):

2016		$	11,404
2015		9,624
2014		8,921

A summary of our purchased and internally developed software as of December 31 is as follows (in thousands):

	2016				2015
Purchased software	$	23,753			$	23,569
Internally developed software	51,507				40,796
Less accumulated amortization	(47,957		)		(42,930		)
Net software	$	27,303			$	21,435

INCOME TAXES. Income taxes are accounted for using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted rates.

Annual tax provisions include amounts considered sufficient to pay assessments that may result from examination of prior year tax returns; however, the amount ultimately paid upon resolution of issues raised may differ from the amounts accrued.

The financial statement benefits of an uncertain income tax position are recognized when more likely than not, based on the technical merits, the position will be sustained upon examination. Unrecognized tax benefits are, more likely than not, owed to a taxing authority, and the amount of the contingency can be reasonably estimated. Uncertain income tax positions are included in “Noncurrent income taxes payable” in the consolidated balance sheets.

COMPREHENSIVE INCOME. Comprehensive income includes any changes in the equity of an enterprise from transactions and other events and circumstances from non-owner sources. Our only component of other comprehensive income is foreign currency translation adjustment. It is presented on our consolidated statements of operations and comprehensive income gross of related income tax effects for 2016, net of related income tax effects for 2015 and 2014. See Note 5.

STOCK-BASED COMPENSATION. We issue stock awards, including stock options, performance shares, and restricted stock units, to key employees and outside directors. In general, the awards vest over five years, either based on the company’s earnings growth or the passage of time. The related compensation expense for each award is recognized over the appropriate vesting period. The fair value of each share-based payment award is established on the date of grant. For grants of performance shares and restricted stock units, the fair value is established based on the market price on the date of the grant, discounted for post-vesting holding restrictions. The discounts on outstanding grants vary from 15 percent to 22 percent and are calculated using the Black-Scholes option pricing model. Changes in measured stock volatility and interest rates are the primary reason for changes in the discount.

For grants of options, we use the Black-Scholes option pricing model to estimate the fair value of share-based payment awards. The determination of the fair value of share-based awards is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate, and expected dividends.

NOTE 2: GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill was allocated to each segment based on the relative fair value at November 30, 2016. The change in the carrying amount of goodwill is as follows (in thousands):

		NAST				Global Forwarding				Robinson Fresh				All Other and Corporate				Total
December 31, 2014 balance		$	607,156			$	106,443			$	93,398			$	18,041			$	825,038
Acquisitions		211,369				37,056				32,515				6,280				287,220
Translation		(2,886		)		(506		)		(444		)		(85		)		(3,921		)
December 31, 2015 balance		815,639				142,993				125,469				24,236				1,108,337
Acquisitions		97,727				17,133				15,033				2,904				132,797
Translation		(6,136		)		(1,076		)		(944		)		(182		)		(8,338		)
December 31, 2016 balance		$	907,230			$	159,050			$	139,558			$	26,958			$	1,232,796

We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. We evaluate our reporting units on a continual basis and, if necessary, reassign goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.

During the quarter ended December 31, 2016, due to the reorganization of our reporting structure, we concluded that we had seven reporting units. As a result of this change in reporting units, we allocated goodwill to our reporting units based on each reporting unit’s fair value using a discounted cash flow analysis and market approach. Additionally at this time, we changed our annual quantitative goodwill impairment testing date from December 31 to November 30 of each year. The change in the goodwill impairment test date better aligns the impairment testing procedures with the timing of our long-term planning

process, which is a significant input to the testing. We performed a goodwill impairment assessment both prior to and after the change in reporting units at November 30. This change in testing date did not delay, accelerate, or avoid a goodwill impairment charge.

Goodwill is tested at least annually for impairment and is tested for impairment more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test is performed using a two-step process. In the first step, the fair value of each reporting unit is compared with the carrying amount of the reporting unit, including goodwill. If the estimated fair value is less than the carrying amount of the reporting unit, there is an indication that goodwill impairment exists, and a second step must be completed in order to determine the amount of the goodwill impairment, if any, that should be recorded. In the second step, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation.

The fair value of each reporting unit is determined using a discounted cash flow analysis and market approach. Projecting discounted future cash flows requires us to make significant estimates regarding future revenues and expenses, projected capital expenditures, changes in working capital and the appropriate discount rate. Use of the market approach consists of comparisons to comparable publicly-traded companies that are similar in size and industry. Actual results may differ from those used in our valuations.

Based on our step one goodwill impairment analysis, no impairments of goodwill were deemed to have occurred, and the fair value of all of reporting units was in excess of their carrying value. No events occurred from November 30, 2016 to December 31, 2016, to indicate any changes to our impairment conclusions at November 30, 2016.

Identifiable intangible assets consisted of the following at December 31 (in thousands):

	2016												2015
	Cost				Accumulated Amortization				Net				Cost				Accumulated Amortization				Net
Finite-lived intangibles
Customer relationships	$	244,036			$	(87,199	)		$	156,837			$	170,472			$	(61,050	)		$	109,422
Non-competition agreements	500				(287		)		213				550				(227		)		323
Vendor lists	—				—				—				150				(128		)		22
Total finite-lived intangibles	244,536				(87,486		)		157,050				171,172				(61,405		)		109,767
Indefinite-lived intangibles
Trademarks	10,475				—				10,475				10,475				—				10,475
Total intangibles	$	255,011			$	(87,486	)		$	167,525			$	181,647			$	(61,405	)		$	120,242

Amortization expense for other intangible assets was (in thousands):

2016	$	27,053
2015	24,373
2014	18,748

Definite-lived intangible assets, by reportable segment, as of December 31, 2016, will be amortized over their remaining lives as follows (in thousands):

	NAST				Global Forwarding				Robinson Fresh				All Other and Corporate				Total
2017	$	7,560			$	26,873			$	—			$	490			$	34,923
2018	7,560				26,840				—				—				34,400
2019	7,560				26,840				—				—				34,400
2020	—				24,136				—				—				24,136
2021	—				10,615				—				—				10,615
Thereafter	—				18,576				—				—				18,576
Total																	$	157,050

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 December 31, 2016, or December 31, 2015. There were no transfers between levels during the period.

NOTE 4: FINANCING ARRANGEMENTS

On October 29, 2012, we entered into a senior unsecured revolving credit facility for up to $500 million with a $500 million accordion feature (the “Credit Agreement”), with a syndicate of financial institutions led by U.S. Bank. The purpose of this facility was to partially fund the acquisition of Phoenix International Freight Services, Ltd. (“Phoenix”) and to allow us to continue to fund working capital, capital expenditures, dividends, and share repurchases. In December 2014, we amended the credit facility to increase the amount available from $500 million to $900 million and to extend the expiration date from October 2017 to December 2019.

As of December 31, 2016 and 2015, we had $740.0 million and $450.0 million in borrowings outstanding under the Credit Agreement, which is classified as a current liability on the consolidated balance sheets. At December 31, 2016, we had borrowing availability of $160.0 million. The recorded amount of borrowings outstanding approximates fair value because of the short maturity period of the debt; therefore, we consider these borrowings to be a Level 2 financial liability.

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 one-month LIBOR plus a specified margin). As of December 31, 2016, the variable rate equaled 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. The weighted average interest rate incurred on borrowings during 2016 was approximately 1.5 percent and at December 31, 2016, was approximately 1.9 percent. The weighted average interest rate incurred on borrowings during 2015 was approximately 1.3 percent and at December 31, 2015, was approximately 1.6 percent.

The Credit Agreement contains various restrictions and covenants. Among other requirements, we may not permit our leverage ratio, as of the end of each of our fiscal quarters, of (i) Consolidated Funded Indebtedness to (ii) Consolidated Total Capitalization to be greater than 0.65 to 1.00. Additionally, as a result of amending the Note Purchase Agreement in February 2015, the ratio of (i) Consolidated Funded Indebtedness to (ii) EBITDA (earnings before interest, taxes, depreciation, and amortization), as of the end of each of our fiscal quarters, may not exceed 3.00 to 1.00. We were in compliance with the financial debt covenants as of December 31, 2016.

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.

On August 23, 2013, we entered into a Note Purchase Agreement with certain institutional investors (the “Purchasers”) named therein (the “Note Purchase Agreement”). Pursuant to the Note Purchase Agreement, the Purchasers purchased, on August 27, 2013, (i) $175,000,000 aggregate principal amount of the company’s 3.97 percent Senior Notes, Series A, due August 27, 2023 (the “Series A Notes”), (ii) $150,000,000 aggregate principal amount of the company’s 4.26 percent Senior Notes, Series B, due August 27, 2028 (the “Series B Notes”), and (iii) $175,000,000 aggregate principal amount of the company’s 4.60 percent Senior Notes, Series C, due August 27, 2033 (the “Series C Notes” and, together with the Series A Notes and the Series B Notes, the “Notes”). Interest on the fixed-rate Notes is payable semi-annually in arrears. We applied the proceeds of the sale of the Notes for share repurchases. See Note 9.

The Note Purchase Agreement contains customary provisions for transactions of this type, including representations and warranties regarding the company and its subsidiaries and various covenants, including covenants that require us to maintain specified financial ratios. The Note Purchase Agreement includes the following financial covenants: we will not permit our leverage ratio, as of the end of each of our fiscal quarters, of (i) Consolidated Funded Indebtedness to (ii) Consolidated Total Capitalization to be greater than 0.65 to 1.00; we will not permit the interest coverage ratio, as of the end of each of our fiscal quarters and for the twelve-month period ending, of (i) Consolidated EBIT (earnings before income taxes) to (ii) Consolidated Interest Expense to be less than 2.00 to 1.00; we will not permit, as of the end of each of our fiscal quarters, Consolidated Priority Debt to exceed 15% of Consolidated Total Assets. The Note Purchase Agreement was amended in February 2015 to conform its financial covenants to be consistent with the amended Credit Agreement. As a result of amending the Note Purchase Agreement in February 2015, the ratio of (i) Consolidated Funded Indebtedness to (ii) EBITDA (earnings before interest, taxes, depreciation, and amortization), as of the end of each of our fiscal quarters, may not exceed 3.00 to 1.00. We were in compliance with the financial debt covenants as of December 31, 2016.

The Note Purchase Agreement provides for customary events of default, generally with corresponding grace periods, including, without limitation, payment defaults with respect to the Notes, covenant defaults, cross-defaults to other agreements evidencing indebtedness of the company or its subsidiaries, certain judgments against the company or its subsidiaries, and events of bankruptcy involving the company or its material subsidiaries. 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% of the principal amount being redeemed together with a “make-whole amount,” and accrued and unpaid interest (as defined in the Note Purchase Agreement) 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.

The Notes were issued by the company to such initial Purchasers in a private placement in reliance on Section 4(2) of the Securities Act of 1933, as amended. The Notes will not be and have not been registered under the Securities Act and may not be offered or sold in the United States, absent registration or an applicable exemption from registration requirements.

The fair value of long-term debt was approximately $528.0 million at December 31, 2016, and $522.2 million at December 31, 2015. We estimate the fair value of our debt 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 credit risk. If our long-term debt was recorded at fair value, it would be classified as Level 2.

NOTE 5: INCOME TAXES

C.H. Robinson Worldwide, Inc. and its 80 percent (or more) owned U.S. subsidiaries file a consolidated federal income tax return. We file unitary or separate state returns based on state filing requirements. During the first quarter of 2016, we asserted that we will indefinitely reinvest earnings of foreign subsidiaries to support expansion of our international business. In 2016, our indefinite reinvestment strategy, with respect to unremitted earnings of our foreign subsidiaries provided an approximate $5.1 million benefit to our provision for income taxes related to current year earnings. If we repatriated all foreign earnings, the estimated effect on income taxes payable would be an increase of approximately $16.6 million as of December 31, 2016. 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 2009.

Income before provision for income taxes consisted of (in thousands):

		2016				2015				2014
Domestic		$	710,931			$	729,390			$	659,996
Foreign		101,019				93,391				63,435
Total		$	811,950			$	822,781			$	723,431

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):

	2016				2015				2014
Unrecognized tax benefits, beginning of period	$	13,271			$	18,274			$	16,897
Additions based on tax positions related to the current year	—				1,520				2,002
Additions for tax positions of prior years	55				—				839
Reductions for tax positions of prior years	(211		)		(810		)		(183		)
Lapse in statute of limitations	(847		)		(5,188		)		(1,281		)
Settlements	—				(525		)		—
Unrecognized tax benefits, end of the period	$	12,268			$	13,271			$	18,274

As of December 31, 2016, we had $18.9 million of unrecognized tax benefits and related interest and penalties, all of which would affect our effective tax rate if recognized. We are not aware of any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefit will significantly increase or decrease in the next 12 months.

Income tax expense considers amounts which may be needed to cover exposures for open tax years. We do not expect any material impact related to open tax years; however, actual settlements may differ from amounts accrued.

We recognize interest and penalties related to uncertain tax positions in the provision for income taxes. During the years ended December 31, 2016, 2015, and 2014, we recognized approximately $0.9 million, $1.2 million, and $1.5 million in interest and penalties. We had approximately $6.6 million and $6.4 million for the payment of interest and penalties accrued within noncurrent income taxes payable as of December 31, 2016 and 2015. These amounts are not included in the reconciliation above.

The components of the provision for income taxes consist of the following for the years ended December 31 (in thousands):

	2016				2015				2014
Tax provision:
Federal	$	222,685			$	259,793			$	224,468
State	31,786				37,129				32,110
Foreign	29,086				33,255				20,259
	283,557				330,177				276,837
Deferred provision (benefit):
Federal	13,936				(14,559		)		(5,302		)
State	1,986				(2,074		)		(755		)
Foreign	(913		)		(462		)		2,940
	15,009				(17,095		)		(3,117		)
Total provision	$	298,566			$	313,082			$	273,720

A reconciliation of the provision for income taxes using the statutory federal income tax rate to our effective income tax rate for the years ended December 31 is as follows:

	2016			2015			2014
Federal statutory rate	35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit	2.7			2.8			2.8
Other	(0.9	)		0.3			—
	36.8	%		38.1	%		37.8	%

Deferred tax assets (liabilities) are comprised of the following at December 31 (in thousands):

	2016				2015
Deferred tax assets:
Compensation	$	80,338			$	91,729
Receivables	13,471				16,243
Other	11,433				9,242
Deferred tax liabilities:
Intangible assets	(131,698		)		(133,375		)
Prepaid assets	(14,540		)		(13,418		)
Long-lived assets	(21,268		)		(18,666		)
Other	(608		)		(427		)
Net deferred tax (liabilities) assets	$	(62,872	)		$	(48,672	)

We had foreign net operating loss carryforwards with a tax effect of $9.0 million as of December 31, 2016, and $8.0 million as of December 31, 2015. The net operating loss carryforwards will expire at various dates from 2018 to 2025, with certain jurisdictions having indefinite carryforward terms. A full valuation allowance has been established for these net operating loss carryforwards due to the uncertainty of the use of the tax benefit in future periods.

NOTE 6: CAPITAL STOCK AND STOCK AWARD PLANS

PREFERRED STOCK. Our Certificate of Incorporation authorizes the issuance of 20,000,000 shares of preferred stock, par value $0.10 per share. There are no shares of preferred stock outstanding. The preferred stock may be issued by resolution of our Board of Directors at any time without any action of the stockholders. The Board of Directors may issue the preferred stock in one or more series and fix the designation and relative powers. These include voting powers, preferences, rights, qualifications, limitations, and restrictions of each series. The issuance of any such series may have an adverse effect on the rights of holders of common stock and may impede the completion of a merger, tender offer, or other takeover attempt.

COMMON STOCK. Our Certificate of Incorporation authorizes 480,000,000 shares of common stock, par value $.10 per share. Subject to the rights of preferred stock which may from time to time be outstanding, holders of common stock are entitled to receive dividends out of funds legally available, when and if declared by the Board of Directors, and to receive their share of the net assets of the company legally available for distribution upon liquidation or dissolution.

For each share of common stock held, stockholders are entitled to one vote on each matter to be voted on by the stockholders, including the election of directors. Holders of common stock are not entitled to cumulative voting. The stockholders do not have preemptive rights. All outstanding shares of common stock are fully paid and nonassessable.

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 consolidated statements of operations and comprehensive income for stock-based compensation is as follows (in thousands):

	2016				2015				2014
Stock options	$	9,178			$	14,607			$	9,243
Stock awards	25,912				40,785				36,510
Company expense on ESPP discount	2,475				2,269				2,108
Total stock-based compensation expense	$	37,565			$	57,661			$	47,861

On May 12, 2016, our shareholders approved an amendment to and restatement of our 2013 Equity Incentive Plan, which 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 13,041,803 shares can be granted under this plan. Approximately 4,851,473 shares were available for stock awards under this plan as of December 31, 2016. 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.

We have awarded performance-based stock options to certain key employees. These options are subject to certain vesting requirements over a five-year period, based on the company’s earnings growth. Any options remaining unvested at the end of the five-year vesting period are forfeited to the company. Although participants can exercise options via a stock swap exercise, we do not issue reloads (restoration options) on the grants.

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 December 31, 2016, unrecognized compensation expense related to stock options was $56.8 million. The amount of future expense to be recognized will be based on the company’s earnings growth and certain other conditions.

The following schedule summarizes stock option activity in the plans. All outstanding unvested options as of December 31, 2016, relate to the performance-based grants from 2011 through 2016.

	Options			Weighted Average Exercise Price				Aggregate Intrinsic Value (in thousands)				Average Remaining Life (years)
Outstanding at December 31, 2015	6,150,861			$	65.03			$	—			8.1
Grants	1,250,154			76.72
Exercised	(86,840	)		61.82
Terminated	(306,252	)		68.81
Outstanding at December 31, 2016	7,007,923			$	67.00			$	43,875			7.7
Vested at December 31, 2016	2,646,205			$	64.63							6.7
Exercisable at December 31, 2016	2,646,205			$	64.63							6.7

Additional potential dilutive stock options totaling 233,446 for 2016 and 125,797 for 2015 have been excluded from our diluted net income per share calculations because these securities’ exercise prices were anti-dilutive (e.g., greater than the average market price of our common stock).

Information on the intrinsic value of options exercised is as follows (in thousands):

2016	$	981
2015	400
2014	4

The following table summarizes performance-based options by year of grant:

Year of Grant		First Vesting Date		Last Vesting Date		Options Granted, Net of Forfeitures			Weighted Average Grant Date Fair Value				Unvested Options
2012		December 31, 2013		December 31, 2017		1,149,441			$	13.15			666,676
2013		December 31, 2014		December 31, 2018		1,425,529			11.83				541,701
2014		December 31, 2015		December 31, 2019		1,277,409			14.17				804,595
						3,852,379			$	13.00			2,012,972

We issued no performance-based options in 2015 or 2016. We have awarded stock options to certain key employees that vest primarily based on their continued employment. The value of these awards is established by the market price on the date of the grant and is being expensed over the vesting period of the award. The following table summarizes these unvested stock option grants as of December 31, 2016:

Year of Grant		First Vesting Date		Last Vesting Date		Options Granted, Net of Forfeitures			Weighted Average Grant Date Fair Value				Unvested Options
2015		December 31, 2016		December 31, 2020		1,428,531			$	12.66			1,142,825
2016		December 31, 2017		December 31, 2021		1,250,154			12.60				1,250,154
						2,678,685			$	12.63			2,392,979

Determining Fair Value

We estimated the fair value of stock options granted using the Black-Scholes option pricing model. We estimate the fair value of restricted shares and units using the Black-Scholes option pricing model-protective put method. A description of significant assumptions used to estimate the expected volatility, risk-free interest rate, and expected terms is as follows:

Expected Volatility-Expected volatility was determined based on implied volatility of our traded options and historical volatility of our stock price.

Risk-Free Interest Rate-The risk-free interest rate was based on the implied yield available on U.S. Treasury zero-coupon issues at the date of grant with a term equal to the expected term.

Expected Term-Expected term represents the period that our stock-based awards are expected to be outstanding and was determined based on historical experience and anticipated future exercise patterns, giving consideration to the contractual terms of unexercised stock-based awards.

The fair value per option was estimated using the Black-Scholes option pricing model with the following assumptions:

	2016 Grants				2015 Grants				2014 Grants
Risk-free interest rate	2.13-2.14%				1.95-1.96%				1.93-1.96%
Dividend per share (quarterly amounts)	$0.43-0.45				$0.38-0.43				$0.35-0.38
Expected volatility factor	20.0-21.5%				22.0-24.0%				22.0-25.0%
Expected option term	6.26 years				6.29 years				6.3 years
Weighted average fair value per option	$	12.60			$	12.68			$	14.23

FULL VALUE AWARDS. We have awarded performance shares and restricted stock units to certain key employees and non-employee directors. These awards are subject to certain vesting requirements over a five-year period, based on the company’s earnings growth. 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 15 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.

The following table summarizes our unvested performance shares and restricted stock unit grants as of December 31, 2016:

	Number of Performance Shares and Restricted Stock Units			Weighted Average Grant Date Fair Value
Unvested at December 31, 2015	1,272,040			$	52.56
Granted	350,937			64.91
Vested	(175,413	)		52.40
Forfeitures	(202,389	)		53.61
Unvested at December 31, 2016	1,245,175			$	55.90

The following table summarizes performance shares and restricted stock units by year of grant:

Year of grant		First vesting date		Last vesting date		Performance Shares and Stock Units Granted, Net of Forfeitures			Weighted Average Grant Date Fair Value (1)				Unvested Performance Shares and Restricted Stock Units
2012		December 31, 2013		December 31, 2017		325,536			$	48.65			188,811
2013		December 31, 2014		December 31, 2018		394,672			46.50				149,975
2014		December 31, 2015		December 31, 2019		336,683			60.57				212,110
2015		December 31, 2016		December 31, 2020		390,163			51.88				343,342
2016		December 31, 2017		December 31, 2021		350,937			64.91				350,937
						1,797,991			$	54.29			1,245,175

---

(1)	Amount shown is the weighted average grant date fair value of performance shares and restricted stock units granted, net of forfeitures.

We have also awarded restricted shares and restricted stock units to certain key employees that vest primarily based on their continued employment. The value of these awards is established by the market price on the date of the grant and is being expensed over the vesting period of the award. The following table summarizes these unvested restricted share and restricted stock unit grants as of December 31, 2016:

	Number of Restricted Shares and Stock Units			Weighted Average Grant Date Fair Value
Unvested at December 31, 2015	1,127,522			$	52.69
Granted	464,823			63.02
Vested	(291,525	)		52.01
Forfeitures	(60,664	)		53.06
Unvested at December 31, 2016	1,240,156			$	56.70

We have also issued to certain key employees and non-employee directors restricted stock units 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.

A summary of the fair value of full value awards vested (in thousands):

2016	$	25,912
2015	40,785
2014	36,510

As of December 31, 2016, there was unrecognized compensation expense of $140.3 million related to previously granted full value awards. The amount of future expense to be recognized will be based on the company’s earnings growth and certain other conditions.

EMPLOYEE STOCK PURCHASE PLAN. Our 1997 Employee Stock Purchase Plan 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 the quarter discounted by 15 percent. Shares are vested immediately. The following is a summary of the employee stock purchase plan activity (dollar amounts in thousands):

		Shares Purchased By Employees			Aggregate Cost to Employees				Expense Recognized By the Company
2016		225,241			$	14,032			$	2,475
2015		228,103			13,045				2,269
2014		231,564			11,943				2,108

SHARE REPURCHASE PROGRAMS. During 2013, our Board of Directors increased the number of shares authorized to be repurchased by 15,000,000 shares. The activity under this authorization is as follows (dollar amounts in thousands):

		Shares Repurchased			Total Value of Shares Repurchased
2013 Program
2013 Purchases		930,075			$	57,689
2014 Purchases		3,763,583			239,037
2015 Purchases		3,420,681			232,113
2016 Purchases		2,467,097			176,676

As of December 31, 2016, there were 4,418,564 shares remaining for repurchase under the 2013 authorization.

NOTE 7: COMMITMENTS AND CONTINGENCIES

EMPLOYEE BENEFIT PLANS. We offer a defined contribution plan, which qualifies under section 401(k) of the Internal Revenue Code and covers all eligible U.S. employees. We can also elect to make matching contributions to the plan. Annual discretionary contributions may also be made to the plan. Defined contribution plan expense, including matching contributions, was approximately (in thousands):

2016	$	25,740
2015	46,507
2014	30,112

We have committed to a defined contribution match of four percent of eligible compensation in 2017. We contributed a defined contribution match of four percent in 2016, 2015, and 2014.

NONQUALIFIED DEFERRED COMPENSATION PLAN. All restricted shares vested but not yet delivered, as well as a deferred share award granted to our CEO, are held within this plan.

LEASE COMMITMENTS. We lease certain facilities and equipment under operating leases. Information regarding our lease expense is as follows (in thousands):

2016	$	55,170
2015	56,210
2014	56,871

Minimum future lease commitments under noncancelable lease agreements in excess of one year as of December 31, 2016, are as follows (in thousands):

2017	$	47,034
2018	38,531
2019	32,249
2020	29,716
2021	24,393
Thereafter	113,786
Total	$	285,709

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.

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 18 contingent auto liability cases as of December 31, 2016. 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 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 not able to estimate an amount or range of any reasonably possible additional 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.

In February 2017, we resolved an outstanding legal claim. The outcome of the resolution will be an $8.75 million increase in operating income in the first quarter of 2017.

NOTE 8: ACQUISITIONS

On September 30, 2016, we acquired all of the outstanding stock of APC Logistics (“APC”) for the purpose of expanding our global presence and bringing additional capabilities and expertise to the company’s portfolio. Total purchase consideration was $229.4 million, which was paid in cash. We used advances under the Credit Agreement to fund part of the cash consideration. The following is a preliminary summary of the allocation of purchase price consideration to the estimated fair value of net assets for the acquisition of APC (in thousands):

Cash	$	10,181
Receivables	37,190
Inventory and other current assets	2,609
Property and equipment	1,696
Identifiable intangible assets	78,842
Goodwill	132,797
Other noncurrent assets	70
Long term deferred tax asset	814
Total assets	264,199
Accounts payable	(22,147		)
Accrued expenses	(12,700		)
Estimated net assets acquired	$	229,352

Identifiable intangible assets and estimated useful lives are as follows (dollars in thousands):

	Estimated Life (years)
Customer relationships	7		$	78,842

During the quarter ended December 31, 2016, we finalized our valuation of the customer relationship intangible asset, resulting in an increase of the intangible asset and decrease to goodwill of approximately $30.8 million, compared to the preliminary provisional value that was recorded at September 30, 2016. The APC goodwill is a result of acquiring and retaining the APC existing workforce and expected synergies from integrating their business into ours. Purchase accounting is considered preliminary, subject to revision primarily related to certain potential post-closing and working capital adjustments, as final information was not available as of December 31, 2016. The goodwill will not be deductible for tax purposes. The results of operations of APC have been included in our consolidated financial statements since October 1, 2016. Pro forma financial information for prior periods is not presented because we believe the acquisition to be not material to our consolidated results.

On January 1, 2015, we acquired all of the outstanding stock of Freightquote.com, Inc., (“Freightquote”) for the purpose of enhancing our less than truckload (“LTL”) and truckload businesses and expanding our ecommerce capabilities. Total purchase consideration was $398.6 million, which was paid in cash. We used advances under the Credit Agreement to fund part of the cash consideration. The following is a summary of the allocation of purchase consideration to the estimated fair value of net assets for the acquisition of Freightquote (in thousands):

Cash and cash equivalents	$	29,302
Receivables	56,228
Other current assets	2,395
Property and equipment	43,687
Identifiable intangible assets	37,800
Goodwill	287,220
Trademarks	8,600
Other noncurrent assets	3,421
Total assets	468,653
Accounts payable	(44,622		)
Accrued expenses	(5,485		)
Other liabilities	(19,939		)
Net assets acquired	$	398,607

Following are the details of the purchase price allocated to the intangible assets acquired (dollars in thousands):

	Estimated Life (years)
Customer relationships	5		$	37,500
Noncompete agreements	5		300
Total identifiable intangible assets			$	37,800

We also acquired a trademark valued at $8.6 million, which has been determined to be indefinite-lived. The Freightquote goodwill is a result of acquiring and retaining the Freightquote existing workforce and expected synergies from integrating their business in C.H. Robinson. Purchase accounting is considered final. The goodwill will not be deductible for tax purposes.

On an unaudited pro forma basis, assuming the Freightquote acquisition had closed on January 1, 2014, the results of C.H. Robinson including Freightquote, would have resulted in the following (in thousands):

	Twelve Months Ended December 31, 2014
	C.H. Robinson as Reported				Freightquote Operations				Combined Pro Forma
Total revenues	$	13,470,067			$	623,245			$	14,093,312
Income from operations	748,418				24,131				772,549

Freightquote pro forma financial information includes the following adjustments for the twelve months ended December 31, 2014 (in thousands):

Additional amortization expense on identifiable intangible assets	$	(7,560	)
Contractual changes in compensation	1,973
Additional compensation paid by sellers	2,627
Accounting policy changes	1,303
Third party advisory fees paid by sellers	5,355
Other	2,196

The pro forma consolidated information was prepared for comparative purposes only and includes certain adjustments, as noted above. The adjustments are estimates based on currently available information, and actual amounts may have differed from these estimates. They do not reflect the effect of costs or synergies that would have been expected to result from the integration of the acquisition. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred at the beginning of each period presented or of future results of the consolidated entity. The results of operations and financial condition of Freightquote have been included in our consolidated financial statements since the acquisition date of January 1, 2015.

NOTE 9: ACCELERATED SHARE REPURCHASE

On August 24, 2013, we entered into two letter agreements with unrelated third party financial institutions to repurchase an aggregate of $500.0 million of our outstanding common stock (the “ASR agreements”). The total aggregate number of shares repurchased pursuant to these agreements was determined based on the volume-weighted average price of our common stock during the purchase period, less a fixed discount of 0.94 percent. Under the ASR agreements, we paid $500.0 million to the financial institutions and received 6.1 million shares of common stock with a fair value of $350.0 million during the third quarter of 2013, which represented approximately 70 percent of the total shares expected to be repurchased under the agreements. One of the two financial institutions terminated their ASR agreement and delivered 1.2 million shares on December 13, 2013. We recorded this transaction as an increase in treasury stock of $425.0 million, and recorded the remaining $75.0 million as a decrease to additional paid in capital on our consolidated balance sheet as of December 31, 2013. In accordance with the terms of the other ASR agreement, we had the option to settle our delivery obligation, if any, in cash or shares, and we may be required to settle in cash in very limited circumstances. We accounted for the variable component of shares to be delivered under the ASR agreements as a forward contract indexed to our common stock, which met all of the applicable criteria for equity classification, and therefore, was not accounted for as a derivative instrument, but instead was also accounted for as a component of equity. The remaining ASR agreement continued to meet those requirements for equity classification as of December 31, 2013. In February 2014, the remaining ASR agreement was terminated. Approximately 1.2 million shares were delivered as final settlement of the remaining agreement. We reclassified the $75.0 million recorded in additional paid in capital to treasury stock during the first quarter of 2014.

The delivery of 7.3 million shares of our common stock reduced our outstanding shares used to determine our weighted average shares outstanding for purposes of calculating basic and diluted earnings per share for the twelve months ended December 31, 2014, and December 31, 2013. These shares, along with the 1.2 million shares received in February 2014, reduced our outstanding shares used to determine our weighted average shares outstanding for the purposes of calculating basic and diluted earnings per share for the twelve months ended December 31, 2014. We evaluated the ASR agreement for the potential dilutive effects of any shares remaining to be received upon settlement and determined that the additional shares would be anti-dilutive, and therefore were not included in our EPS calculation for the twelve months ended December 31, 2013.

NOTE 10: 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. Beginning with the fourth quarter of 2016, based on certain internal reporting changes, we identified three reportable segments as follows:

•	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, LTL, and intermodal.

•	Global Forwarding-Global Forwarding provides global logistics services through an international network of offices in North America, Asia, Europe, Australia, New Zealand, 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.

•

Robinson Fresh-Robinson Fresh provides sourcing services under the trade name of Robinson Fresh. Our sourcing services primarily include the buying, selling, and marketing of fresh fruits, vegetables, and other perishable items. Robinson Fresh sources products from around the world and has a physical presence in North America, Europe, Asia, and South America. This segment often provides the logistics and transportation of the products they sell, in addition to temperature controlled transportation services for its customers.

•

All Other and Corporate-All Other and Corporate includes our Managed Services segment, as well as Other Surface Transportation outside of North America and other miscellaneous revenues and unallocated corporate expenses. 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, our Chief Executive Officer. The accounting policies of our reporting segments are the same as those described in the summary of significant accounting policies. Segment information for prior years has been retroactively recast to align with current year presentation. Segment information as of, and for the years ended, December 31, 2016, 2015, and 2014 is as follows (dollars in thousands):

Twelve months ended December 31, 2016
	NAST				Global Forwarding				Robinson Fresh				All Other and Corporate				Eliminations				Consolidated
Revenues	$	8,737,716			$	1,574,686			$	2,344,131			$	487,880			$	—			$	13,144,413
Intersegment revenues	298,438				30,311				119,403				2,211				(450,363		)		—
Total Revenues	$	9,036,154			$	1,604,997			$	2,463,534			$	490,091			$	(450,363	)		$	13,144,413
Net Revenues	$	1,524,355			$	397,537			$	234,794			$	120,842			$	—			$	2,277,528
Operating Income	674,436				80,931				75,757				6,407				—				837,531
Depreciation and amortization	22,126				23,099				3,782				25,662				—				74,669
Total assets(1)	2,088,611				703,741				376,654				518,752				—				3,687,758
Average headcount	6,773				3,673				942				2,282				—				13,670
Twelve months ended December 31, 2015
	NAST				Global Forwarding				Robinson Fresh				All Other and Corporate				Eliminations				Consolidated
Revenues	$	8,968,349			$	1,639,944			$	2,395,440			$	472,351			$	—			$	13,476,084
Intersegment revenues	271,557				19,102				89,033				2,107				(381,799		)		—
Total Revenues	$	9,239,906			$	1,659,046			$	2,484,473			$	474,458			$	(381,799	)		$	13,476,084
Net Revenues	$	1,564,917			$	365,467			$	235,334			$	102,762			$	—			$	2,268,480
Operating Income/(Loss)	718,329				76,081				81,332				(17,432		)		—				858,310
Depreciation and amortization	21,846				20,790				2,927				20,846				—				66,409
Total assets(1)	1,878,203				556,606				346,728				402,821				—				3,184,358
Average headcount	6,575				3,381				892				2,054				—				12,902
Twelve months ended December 31, 2014
	NAST				Global Forwarding				Robinson Fresh				All Other and Corporate				Eliminations				Consolidated
Revenues	$	8,738,747			$	1,708,789			$	2,483,163			$	539,368			$	—			$	13,470,067
Intersegment revenues	254,821				22,492				62,575				1,294				(341,182		)		—
Total Revenues	$	8,993,568			$	1,731,281			$	2,545,738			$	540,662			$	(341,182	)		$	13,470,067
Net Revenues	$	1,351,335			$	350,193			$	203,591			$	102,533			$	—			$	2,007,652
Operating Income/(Loss)	644,708				55,591				62,395				(14,276		)		—				748,418
Depreciation and amortization	10,141				21,657				2,393				22,818				—				57,009
Total assets(1)	1,610,929				562,029				320,680				720,700				—				3,214,338
Average headcount	5,447				3,202				912				2,056				—				11,617

(1) All cash and cash equivalents and debt are included in All Other and Corporate. Goodwill was allocated to each segment based on relative fair value at November 30, 2016.

The following table presents our total revenues (based on location of the customer) and long-lived assets (including intangible and other assets) by geographic regions (in thousands):

	For the year ended December 31,
	2016				2015				2014
Total revenues
United States	$	11,749,602			$	12,097,633			$	11,800,140
Other locations	1,394,811				1,378,451				1,669,927
Total revenues	$	13,144,413			$	13,476,084			$	13,470,067

	December 31,
	2016				2015				2014
Long-lived assets
United States	$	348,299			$	320,445			$	257,587
Other locations	96,311				24,878				26,254
Total long-lived assets	$	444,610			$	345,323			$	283,841

NOTE 11: CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss is included in the Stockholders’ investment on our consolidated balance sheets. The recorded balance at December 31, 2016, and December 31, 2015, was $61.4 million and $37.9 million, respectively. Accumulated other comprehensive loss is comprised solely of foreign currency translation adjustment as of December 31, 2016 and 2015, and are reported net of tax impact of $0 and $12.6 million, respectively.

NOTE 12: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, and in August 2015 issued ASU No. 2015-14, which amended the standard as to effective date. The new comprehensive revenue recognition standard will supersede all existing revenue recognition guidance under U.S. GAAP. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to a customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. For the majority of our revenue arrangements, no significant impacts are expected as these transactions are not accounted for under industry-specific guidance that will be superseded by the ASU and generally consist of a single performance obligation to transfer promised goods or services. This standard is effective for us effective January 1, 2018, and permits the use of either a retrospective or a cumulative effect transition method. In preparation for our adoption of the new standard in the quarter beginning January 1, 2018, management assembled a project management team, which has obtained representative samples of contracts and other forms of agreements with our customers and is evaluating the provisions contained within those documents based on the new guidance. We do not expect this change to have a material impact on our results of operations, financial position, and cash flows once implemented. We are still evaluating the disclosure requirements under these standards. As we complete our overall evaluation, we are also identifying and preparing to implement changes to our accounting policies, practices, and controls to support the new standards.

In November 2015, FASB issued Accounting Standards Update (“ASU”) 2015-17, “Balance Sheet Classification of Deferred Taxes.” ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. We have adopted this standard on a prospective basis as of December 31, 2016.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update requires a lessee to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset. The guidance also requires certain qualitative and quantitative disclosures about the amount, timing, and uncertainty of cash flows arising from leases. This update is effective for annual and interim periods beginning after December 15, 2018, which will require us to adopt these provisions in the first quarter of 2019 using a modified retrospective approach. Early adoption is permitted, although we do not plan to adopt early. We have obligations under lease agreements for facilities and equipment, which are classified as operating leases under the existing lease standard. While we are still evaluating the impact ASU 2016-02 will have on our consolidated results of operations, financial condition, and cash flows, our financial statements will reflect an increase in both assets and liabilities due to the requirement to recognize right-of-use assets and lease liabilities on the consolidated balance sheets for our facility and equipment leases. Note 7 to our consolidated financial statements presents our operating lease commitments as of December 31, 2016.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718). This update was issued as part of the FASB’s simplification initiative and affects all entities that issue share-based payment awards to their employees. The amendments in this update cover such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, and accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification, and the classification of those taxes paid on the statement of cash flows. This update is effective for annual and interim periods beginning after December 15, 2016. The adoption of ASU 2016-09 is expected to prospectively impact the recording of income taxes related to share-based payment awards in our consolidated statement of financial position and results of operations, as well as the operating and financing cash flows on the consolidated statements of cash flows. The magnitude of such impacts are dependent on our future grants of stock-based compensation, our future stock price in relation to the fair value of awards on grant date, and the exercise behavior of our option holders. We will prospectively adopt these provisions in the first quarter of 2017.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This update simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, and impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The ASU is effective for annual and any interim impairment tests for periods beginning after December 15, 2019. We have not yet selected a transition date nor have we determined the effect of the standard on our ongoing financial reporting.

NOTE 13: SUPPLEMENTARY DATA (UNAUDITED)

Our unaudited results of operations for each of the quarters in the years ended December 31, 2016 and 2015, are summarized below (in thousands, except per share data).

2016		March 31				June 30				September 30				December 31
Revenues:
Transportation		$	2,713,688			$	2,881,496			$	2,998,583			$	3,110,978
Sourcing		360,255				418,245				357,171				303,997
Total revenues		3,073,943				3,299,741				3,355,754				3,414,975
Costs and expenses:
Purchased transportation and related services		2,179,622				2,324,995				2,469,939				2,575,378
Purchased products sourced for resale		330,986				380,531				327,353				278,081
Personnel expenses		277,497				270,251				256,883				260,305
Other selling, general, and administrative expenses		86,886				90,217				90,312				107,646
Total costs and expenses		2,874,991				3,065,994				3,144,487				3,221,410
Income from operations		198,952				233,747				211,267				193,565
Net income		$	118,963			$	143,090			$	129,028			$	122,303
Basic net income per share		$	0.83			$	1.00			$	0.90			$	0.86
Diluted net income per share		$	0.83			$	1.00			$	0.90			$	0.86
Basic weighted average shares outstanding		143,525				142,998				142,611				141,711
Dilutive effect of outstanding stock awards		133				218				272				453
Diluted weighted average shares outstanding		143,658				143,216				142,883				142,164
Market price range of common stock:
High		$	75.11			$	76.10			$	75.69			$	77.89
Low		$	60.31			$	69.84			$	66.62			$	65.57

2015		March 31				June 30				September 30				December 31
Revenues:
Transportation		$	2,947,257			$	3,130,722			$	3,044,500			$	2,867,301
Sourcing		353,633				414,366				374,753				343,552
Total revenues		3,300,890				3,545,088				3,419,253				3,210,853
Costs and expenses:
Purchased transportation and related services		2,452,112				2,582,374				2,484,409				2,323,376
Purchased products sourced for resale		323,668				378,696				346,269				316,700
Personnel expenses		255,144				263,999				264,077				268,190
Other selling, general, and administrative expenses		88,041				90,924				91,787				88,008
Total costs and expenses		3,118,965				3,315,993				3,186,542				2,996,274
Income from operations		181,925				229,095				232,711				214,579
Net income		$	106,476			$	137,208			$	139,432			$	126,583
Basic net income per share		$	0.73			$	0.94			$	0.96			$	0.88
Diluted net income per share		$	0.73			$	0.94			$	0.96			$	0.88
Basic weighted average shares outstanding		146,204				145,515				144,578				143,484
Dilutive effect of outstanding stock awards		179				164				204				660
Diluted weighted average shares outstanding		146,383				145,679				144,782				144,144
Market price range of common stock:
High		$	76.18			$	73.09			$	71.50			$	73.34
Low		$	67.11			$	61.46			$	61.64			$	59.71