C. H. Robinson Worldwide (CHRW) 10-K risk factor changes: FY2019 vs FY2018

[added: Economic recessions could have a significant, adverse impact on our business.] The transportation industry historically has experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of our customers, interest rate fluctuations, currency fluctuations, and other economic factors beyond our control.

[removed: | • | Decrease in volumes: A reduction in overall freight volumes in the marketplace reduces our opportunities for growth. A significant portion of our freight are transactional or “spot” market opportunities. The transactional market may be more impacted than the freight market by overall economic conditions.] In addition, if a downturn in our customers’ business cycles causes a reduction in the volume of freight shipped by those customers, particularly among certain national retailers or in the food, beverage, retail, manufacturing, paper, ecommerce, or printing industries, our operating results could be adversely affected. [removed: |]

[removed: | • |] [added: -] Credit risk and working capital: Some of our customers may face economic difficulties and may not be able to pay us, and some may go out of business. [removed: In addition, some customers may not pay us as quickly as they have in the past, causing our working capital needs to increase. |]

[removed: | • |] [added: -] Transportation provider failures: A significant number of our [added: contracted] transportation providers may go out of business and we may be unable to secure sufficient equipment or other transportation services to meet our commitments to our customers. [removed: |]

[removed: | • | Expense management: We may not be able to appropriately adjust our expenses to changing market demands.] In [removed: order to maintain high variability in our business model, it is necessary to adjust staffing levels to changing market demands. In periods of rapid change, it is more difficult to match our staffing levels to our business needs. In] addition, we have other expenses that are fixed for a period of time, and we may not be able to adequately adjust them in a period of rapid change in market demand. [removed: |]

[removed: Higher] [added: Higher] carrier prices may result in decreased net revenue [removed: margin.][added: margin. Carriers can be expected to charge higher prices if market conditions warrant, or to cover higher operating expenses.]

Increased demand for [removed: truckload] [added: over-the-road transportation] services and changes in regulations may reduce available capacity and increase [added: motor] carrier pricing.

[removed: Changing] [added: Changing] fuel costs and interruptions of fuel supplies may have an impact on our net revenue [removed: margins.][added: margins. In our truckload transportation business, which is the largest source of our net revenues, fluctuating fuel prices may result in decreased net revenue margin.]

While our different pricing arrangements with customers and contracted [added: motor] carriers make it very difficult to measure the precise impact, we believe that fuel costs essentially act as a pass-through cost to our truckload business.

[removed: Our] [added: Our] dependence on third parties to provide equipment and services may impact the delivery and quality of our transportation and logistics [removed: services.][added: services. We do not employ the people directly involved in delivering our customers’ freight.]

We depend on independent third parties to provide truck, rail, ocean, and air services and to report certain events to us, [removed: including delivery] [added: including, but not limited, to shipment status] information and freight claims.

This reliance also could cause delays in reporting certain events, including recognizing [removed: revenue and] claims.

[removed: | • |] [added: -] equipment shortages in the transportation industry, particularly among contracted [removed: truckload] [added: motor] carriers; [removed: |]

[removed: | • |] [added: -] changes in regulations impacting transportation; [removed: |]

[removed: | • |] [added: -] disruption in the supply or cost of fuel; [removed: |]

[removed: | • |] [added: -] reduction or deterioration in rail service; and [removed: |]

[removed: We] [added: We] are subject to negative impacts of changes in political and governmental [removed: conditions.][added: conditions. Our operations are subject to the influences of significant political, governmental, and similar changes and our ability to respond to them, including:]

[removed: | • |] [added: -] changes in political conditions and in governmental policies; [removed: |]

[removed: | • |] [added: -] changes in and compliance with international and domestic laws and regulations; and [removed: |]

[removed: | • |] [added: -] wars, civil unrest, acts of terrorism, and other conflicts. [removed: |]

[removed: We] [added: We] may be subject to negative impacts of catastrophic [removed: events.][added: events.]

A disruption or failure of our systems or operations in the event of a major earthquake, weather event, cyber-attack, heightened security measures, actual or [removed: threatened,] [added: threatened] terrorist attack, strike, civil unrest, pandemic, or other catastrophic event could cause delays in providing services or performing other critical functions.

[removed: Our] [added: Our] international operations subject us to operational and financial [removed: risks.][added: risks. We provide services within and between foreign countries on an increasing basis.]

[removed: | • |] [added: -] changes in tariffs, trade restrictions, trade agreements, and taxations; [removed: |]

[removed: | • |] [added: -] difficulties in [removed: managing] [added: managing,] or overseeing foreign operations and agents; [removed: |]

[removed: | • |] [added: -] limitations on the repatriation of funds because of foreign exchange controls; [removed: |]

[removed: | • |] [added: -] different liability standards; and [removed: |]

[removed: | • |] [added: -] intellectual property laws of countries that do not protect our rights in our intellectual property, including, but not limited to, our proprietary information systems, to the same extent as the laws of the United States. [removed: |]

[removed: Our] [added: Our] ability to appropriately staff and retain employees is important to our variable cost [removed: model.][added: model. Our continued success depends upon our ability to attract and retain a large group of motivated salespeople and other logistics professionals.]

[added: We face substantial industry competition.] Competition in the transportation services industry is intense and broad-based.

[removed: We] [added: We] rely on technology to operate our [removed: business.][added: business. We have internally developed the majority of our operating systems.]

If we fail to [removed: maintain] [added: maintain, protect,] and enhance our operating systems, we may be at a competitive disadvantage and lose customers.

As demonstrated by recent material and high-profile data security breaches, computer malware, viruses, and computer hacking and phishing attacks have become more prevalent, have occurred on our [added: operating] systems in the past, and may occur on our [added: operating] systems in the future.

Previous attacks on our [added: operating] systems have not had a material financial impact on our operations, but we cannot guarantee that future attacks will have little to no impact on our business.

Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, a significant impact on the performance, reliability, security, and availability of our [added: operating] systems and technical infrastructure to the satisfaction of our users may harm our reputation, impair our ability to retain existing customers or attract new customers, and expose us to legal claims and government action, each of which could have a material adverse impact on our financial condition, results of operations, and growth prospects.

[added: Our operations may be materially adversely affected by inconsistent management practices.] We manage our business [removed: on a decentralized basis] through a network of offices throughout North America, Europe, Asia, Oceania, and South America, supported by executives and shared and centralized services, with local management responsible for day-to-day operations, [removed: profitability,] personnel decisions, [removed: the growth of the business,] and adherence to applicable local laws.

[removed: Our decentralized operating strategy could result in inconsistent] [added: Inconsistent] management practices [removed: and] [added: could] materially and adversely affect our overall profitability and expose us to litigation.

[added: Our earnings may be affected by seasonal changes in the transportation industry.] Results of operations for our industry generally show a seasonal pattern as customers reduce shipments during and after the winter holiday season.

[removed: We] [added: We] are subject to claims arising from our transportation [added: operations. We use the services of thousands of transportation companies in connection with our transportation] operations.

From time to time, the drivers employed and engaged by the [added: motor] carriers we contract with are involved in accidents, which may result in serious personal injuries.

- Decrease in volumes: A reduction in overall freight volumes in the marketplace reduces our opportunities for growth.

A significant portion of our freight are transactional or “spot” market opportunities.

The transactional market may be more impacted than the contractual freight market by overall economic conditions.

In addition, some customers may not pay us as quickly as they have in the past, causing our working capital needs to increase.

- Expense management: We may not be able to appropriately adjust our expenses to changing market demands.

In periods of rapid change, it is more difficult to match our staffing levels to our business needs.

- unanticipated changes in freight markets.

In addition, the ongoing coronavirus outbreak emanating from China at the beginning of 2020 has resulted in increased travel restrictions and extended shutdown of certain businesses in the region.

These or any further political or governmental developments or health concerns in China or other countries in which we operate could adversely impact our operating results but at this point, the extent to which the coronavirus may impact our results is uncertain.

In order to maintain high variability in our business model, it is necessary to adjust staffing levels to changing market demands.

In addition, significant increases in insurance costs or the inability to

Economic recessions could have a significant, adverse impact on our business.

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

Carriers can be expected to charge higher prices if market conditions warrant, or to cover higher operating expenses.

In our truckload transportation business, which is the largest source of our net revenues, fluctuating fuel prices may result in decreased net revenue margin.

We do not employ the people directly involved in delivering our customers’ freight.

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| • | unanticipated changes in transportation rates. |

Our operations are subject to the influences of significant political, governmental, and similar changes and our ability to respond to them, including:

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

We provide services within and between foreign countries on an increasing basis.

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

[removed: OVERVIEW][added: OVERVIEW]

[removed: Our consolidated total] [added: Total] revenues [removed: increased 11.8 percent to $16.6 billion in 2018 from $14.9 billion in 2017 due to an increase in] [added: and direct costs. Total] transportation revenues [added: increased] driven by increased pricing in most of our transportation services, most notably truckload and LTL.

[removed: This increase was partially offset by a decrease in] [added: Our] sourcing total [removed: revenues of] [added: revenue and purchased products sourced for resale decreased] $120.5 million as a result of our adoption of ASU 2014-09, [removed: Revenue] [added: *Revenue] from Contracts with [removed: Customers.][added: Customers*.]

[removed: The] [added: Provision for income taxes. Our] effective [added: income] tax rate [removed: for 2018] was 24.5 percent [removed: compared to] [added: in 2018 and] 30.7 percent in [removed: 2017] [added: 2017,] driven primarily by an $83.1 million benefit from the Tax [removed: Cuts and Jobs Act of 2017 (the “Tax Act”).][added: Act.]

[removed: CONSOLIDATED] [added: CONSOLIDATED] RESULTS OF [removed: OPERATIONS][added: OPERATIONS]

The following table summarizes our [removed: total revenues] [added: results of operations] (dollars in [removed: thousands):][added: thousands, except per share data):]

| [removed: For the years] [added: Twelve months] ended December [removed: 31,] [added: 31,] | [removed: 2018] | | [added: 2019] | | [removed: 2017] | | | | [removed: Change] [added: 2018] | | | [removed: 2016] | | | [added: % change] | [removed: Change] | | [added: | | | 2017 | | | | | | % change | | | | | | | | | | | | | | |]

| Transportation | [added: | | | | |] $ | [added: 14,322,295 | | | | | $ |] 15,515,921 | | | [added: | | (7.7) | | % | | | |] $ | 13,502,906 | | | [added: | |] 14.9 | [added: |] % | | [removed: $] | [removed: 11,704,745] | | | [removed: 15.4] | [removed: %] | [added: | | | | | | | | | | | | | | | | |]

| Sourcing | [added: | | | | | 987,213 | | | | | |] 1,115,251 | | | | [added: | | (11.5) | | % | | | |] 1,366,474 | | | | [removed: (18.4] | [removed: )%] | [added: (18.4)] | [removed: 1,439,668] | [added: %] | | | [removed: (5.1] | [removed: )%] | [added: | | | | | | | | | | | | | | | | | | | |]

| [removed: Total] [added: Total revenues] | [removed: $] | [added: | | | | 15,309,508 | | | | | |] 16,631,172 | | | [removed: $] | [added: | | (7.9) | | % | | | |] 14,869,380 | | | [added: | | |] 11.8 | [added: |] % | | [removed: $] | [removed: 13,144,413] | | | [removed: 13.1] | [removed: %] | [added: | | | | | | | | | | | | | | | | |]

[removed: Net] [added: Our net] revenues are a non-GAAP financial measure calculated as total revenues less the [removed: total] [added: cost] of purchased transportation and related services and the cost of purchased products sourced for resale.

Accordingly, the discussion of our results of operations often focuses on the [removed: change] [added: changes] in our net revenues.

| | [removed: Twelve] [added: | | Twelve] Months Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | [added: | | | | | | | | | | | | | | | |]

| | [removed: 2018] | | [added: 2019] | | [removed: 2017] | | | | [removed: 2016] [added: 2018] | | | [added: | | | 2017 | | | | | | | | | | | | | | |]

| Revenues: | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | |]

| Transportation | [added: | |] $ | [added: 14,322,295 | | | | | $ |] 15,515,921 | | | [added: | |] $ | 13,502,906 | | | [removed: $] | [removed: 11,704,745] | | [added: | | | | | | | |]

| Sourcing | [added: | | 987,213 | | | | | |] 1,115,251 | | | | [added: | |] 1,366,474 | | | | [removed: 1,439,668] | | | [added: | | | | | | | |]

| Total [removed: revenues] [added: Revenues] | [added: | | 15,309,508 | | | | | |] 16,631,172 | | | | [added: | |] 14,869,380 | | | | [removed: 13,144,413] | | | [added: | | | | | | | |]

| Costs and expenses: | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | |]

| Purchased transportation and related services | [added: | | 11,839,433 | | | | | |] 12,922,177 | | | | [added: | |] 11,257,290 | | | | [removed: 9,549,934] | | | [added: | | | | | | | |]

| Purchased products sourced for resale | [added: | | 883,765 | | | | | |] 1,003,760 | | | | [added: | |] 1,244,040 | | | | [removed: 1,316,951] | | | [added: | | | | | | | |]

| Total [added: direct] costs [removed: and expenses] | [added: | | 12,723,198 | | | | | |] 13,925,937 | | | | [added: | |] 12,501,330 | | | | [removed: 10,866,885] | | | [added: | | | | | | | |]

| Net revenues | [added: | |] $ | [added: 2,586,310 | | | | | $ |] 2,705,235 | | | [added: | |] $ | 2,368,050 | | | [removed: $] | [removed: 2,277,528] | | [added: | | | | | | | |]

| Net [removed: revenues:] [added: revenues] | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Net revenues | [removed: 100.0] | [removed: %] | | [removed: 100.0] | [removed: %] | | [removed: 100.0] | [removed: %] | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

The following table summarizes our [removed: results by reportable segment] [added: major sources and uses of cash and cash equivalents] (dollars in thousands):

| [removed: Twelve months ended] [added: | | | | | | Twelve Months Ended] December [removed: 31, 2018] [added: 31,] | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: Twelve months ended] [added: | | | Twelve Months Ended] December [removed: 31, 2017] [added: 31,] | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: Twelve months ended] [added: | | | Twelve Months Ended] December [removed: 31, 2016] [added: 31,] | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | |]

[removed: CONSOLIDATED RESULTS OF OPERATIONS –] [added: Consolidated Results of Operations—Twelve Months Ended December 31,] 2018 [removed: COMPARED TO 2017][added: Compared to Twelve Months Ended December 31, 2017]

[removed: This increase was] [added: Total purchased transportation and related services increased] due to increased truckload and LTL purchased transportation costs and higher ocean volumes, which were partially offset by the impact of decreased truckload volumes.

[removed: Sourcing total] [added: Total] revenues [added: decreased primarily due to a $120.5 million decrease in sourcing total revenue] and purchased products [added: sourced] for resale [removed: decreased $120.5 million] as a result of our adoption of ASU [removed: 2014-09, Revenue from Contracts with Customers.][added: 2014-09.]

[removed: This decrease was primarily] [added: Sourcing net revenues decreased] due to decreases in net revenue per case and a case volume decrease across a variety of commodities and services, most notably in our restaurant and [removed: foodservice] [added: food service] customers.

Sourcing net revenue margin increased [removed: to 10.0 percent in 2018 from 9.0 percent in 2017, driven by the impact] [added: 1.0 percentage point as a result] of our adoption of ASU 2014-09.

[removed: Our personnel] [added: Operating expenses. Personnel] expenses [removed: are driven] [added: increased] primarily [removed: by] [added: due to an increase in performance-based compensation due to our strong] earnings growth and [added: growth in our average] headcount.

[removed: This increase in selling, general, and administrative] [added: Other SG&A] expenses [removed: was] [added: increased driven] primarily [removed: due to] [added: by] increases in occupancy and other professional services expenses, [removed: claims,] [added: claims] and the provision for bad debt.

[removed: The decrease was primarily due to] [added: Interest and other expense. Interest and other expense decreased driven by] a $16.9 million favorable impact [removed: from] [added: of] foreign currency revaluation and realized foreign currency gains [added: and losses] in 2018 compared to a $9.4 million unfavorable impact in 2017.

[added: Provision for income taxes.] Our effective income tax rate was [removed: 24.5] [added: 22.3] percent [removed: for 2018] and [removed: 30.7 percent for 2017, driven primarily by an $83.1 million benefit from the Tax Act.][added: 24.5 percent.]

[removed: SEGMENT RESULTS OF OPERATIONS – 2018 COMPARED TO 2017][added: NAST Segment Results of Operations]

[added: Total revenues and direct costs.] NAST [removed: total] revenues increased [removed: 15.6 percent to $11.2 billion in 2018 compared to $9.7 billion in 2017,] primarily due to increased pricing to our customers, including fuel, most notably in truckload and LTL services.

C.H. Robinson Worldwide, Inc. (“C.H. Robinson,” “the company,” “we,” “us,” or “our”) is one of the largest third party logistics companies in the world.

As a third party logistics provider, we enter into contractual relationships with a wide variety of transportation companies and utilize those relationships to efficiently and cost-effectively arrange the transport of our customers’ freight.

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 have developed global transportation and distribution networks to provide transportation and supply chain services worldwide.

As a result, we have the capability of facilitating most aspects of the supply chain on behalf of our customers.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

MARKET TRENDS

The North America truckload market has faced significant cyclical changes in the last year attributable to weakening demand and excess capacity resulting in pricing and volume declines during the second half of 2019.

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 an acceptance when procuring a transportation provider.

Routing guide depth is calculated as a simple average of all accepted shipments over all tender instances for any shipment facilitated by our Managed Services business.

The average routing guide depth of tender was 1.2 during 2019, representing that on average, the first carrier in a shipper's routing guide was executing the shipment in most cases.

This compared to an average depth of tender of 1.7 during 2018.

The 2019 routing guide penetration is among the lowest levels we have experienced this decade and is a reflection of both softening demand and reduced pricing and costs over the course of 2019.

The global forwarding market was negatively impacted for much of 2019 by excess capacity and reduced demand due to tariff activity and macroeconomic uncertainty especially in trade lanes between China and the United States.

In addition, growth rates were negatively impacted by comparisons to 2018 which included shipments to build inventory ahead of tariffs enacted in early 2019.

This reduced demand has also significantly reduced air freight volumes as there is inherently less demand for expedited and more expensive air freight.

BUSINESS TRENDS

Our 2019 results are largely consistent with the overall market trends summarized above.

As a result of the softening freight environment over the course of 2019, our volumes shifted from spot-market pricing towards contractual business.

In the first half of 2019, this shift resulted in margin expansion as contractual pricing decreased at a slower rate than spot-market driven carrier costs.

In the second half of 2019, the continued shift to contractual business began to lead to margin compression as spot-market driven carrier pricing declines began to decelerate as compared to our contractual pricing declines.

Given the soft freight environment, we continued to see competitive levels of pricing activity to reflect current market conditions which resulted in significant pricing declines in most of our transportation service lines compared to 2018.

Our pricing strategies continue to reflect the current market conditions and our intention to be near the top of our customers' routing guide.

In

addition, the reduced pricing in truckload has resulted in a volume shift from intermodal to truckload while our sourcing revenues declined in 2019 driven by case volume declines with large retailers.

On February 28, 2019, we acquired The Space Cargo Group (“Space Cargo”) for the purpose of expanding our presence and capabilities in Spain and Colombia.

Our consolidated results include the results of Space Cargo since March 1, 2019.

On May 22, 2019, we acquired Dema Service S.p.A (“Dema Service”) to strengthen our existing footprint in Italy.

Our consolidated results include the results of Dema Service since May 23, 2019.

SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS

The following summarizes select 2019 year-over-year operating comparisons to 2018:

- Total revenues decreased 7.9 percent to $15.3 billion, driven by lower pricing and volumes across most transportation service lines and decreased sourcing revenue pricing and case volumes.

- Net revenues decreased 4.4 percent to $2.6 billion, primarily driven by margin decline in truckload services.

- Personnel expenses decreased 3.4 percent to $1.3 billion, driven primarily by declines in performance-based compensation, partially offset by a 2.3 percent increase in average headcount.

- Selling, general, and administrative (“SG&A”) expenses increased 10.7 percent to $497.8 million, due primarily to increases in purchased services, particularly commercial off-the-shelf software, and occupancy, partially offset by a reduction in bad debt expense.

- Income from operations totaled $790.0 million, down 13.4 percent due to declining net revenues and increased SG&A expense.

- Operating margin of 30.5 percent decreased 320 basis points.

We achieved record levels of net revenues and income from operations driven by the strong performance of our NAST reportable segment.

Net revenues is a Non-GAAP financial measure defined below.

Net revenues increased 14.2 percent to $2.7 billion in 2018 from $2.4 billion in 2017.

Income from operations increased 17.7 percent to $912.1 million in 2018 from $775.1 million in 2017.

Our cash flow from operations increased 106.5 percent to $792.9 million in 2018 from $384.0 million in 2017 driven by the growth in income from operations and improved working capital performance.

Diluted net income per share increased 32.5 percent to $4.73 in 2018 from $3.57 in 2017.

Our total revenues represent the total dollar value of services and goods we sell to our customers.

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

The following table illustrates our net revenue margins by services and products:

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | |

| For the years ended December 31, | 2018 | | | 2017 | | | 2016 | |

| Transportation | 16.7 | % | | 16.6 | % | | 18.4 | % |

| Sourcing | 10.0 | % | | 9.0 | % | | 8.5 | % |

| Total | 16.3 | % | | 15.9 | % | | 17.3 | % |

The following table summarizes our net revenues by service line.

The service line net revenues in the table differ from the segment service line revenues discussed below as our segments have revenues from multiple service lines (dollars in thousands):

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | |

| For the years ended December 31, | 2018 | | | | 2017 | | | | Change | | | 2016 | | | | Change | |

| Transportation | | | | | | | | | | | | | | | | | |

| Truckload | $ | 1,445,916 | | | $ | 1,229,999 | | | 17.6 | % | | $ | 1,257,191 | | | (2.2 | )% |

| LTL (1) | 471,275 | | | | 407,012 | | | | 15.8 | % | | 381,817 | | | | 6.6 | % |

| Intermodal | 32,469 | | | | 29,145 | | | | 11.4 | % | | 33,482 | | | | (13.0 | )% |

| Ocean | 312,952 | | | | 290,630 | | | | 7.7 | % | | 244,276 | | | | 19.0 | % |

| Air | 120,540 | | | | 100,761 | | | | 19.6 | % | | 82,167 | | | | 22.6 | % |

| Customs | 88,515 | | | | 70,952 | | | | 24.8 | % | | 50,509 | | | | 40.5 | % |

| Other Logistics Services | 122,077 | | | | 117,117 | | | | 4.2 | % | | 105,369 | | | | 11.1 | % |

| Total Transportation | 2,593,744 | | | | 2,245,616 | | | | 15.5 | % | | 2,154,811 | | | | 4.2 | % |

| Sourcing | 111,491 | | | | 122,434 | | | | (8.9 | )% | | 122,717 | | | | (0.2 | )% |

| Total | $ | 2,705,235 | | | $ | 2,368,050 | | | 14.2 | % | | $ | 2,277,528 | | | 4.0 | % |

__________________________

(1) Less than truckload (“LTL”).

We had [removed: $378.6] [added: $447.9] million of cash and cash equivalents on December 31, [removed: 2018.][added: 2019.]

At December 31, [removed: 2018,] [added: 2019,] there was [removed: $5 million] [added: no] outstanding [added: balance] on the revolving loan.

We are a party to the Note Purchase Agreement, as amended, with various institutional investors with fixed rates consisting of: (i) $175 million of the company’s 3.97 percent Senior Notes, Series A, due August 27, 2023, (ii) $150 million of the company’s 4.26 percent Senior Notes, Series B, due August 27, 2028, and (iii) $175 million of the company’s [removed: 4.60] [added: 4.6] percent Senior Notes, Series C, due August 27, 2033.

At December 31, [removed: 2018,] [added: 2019,] there was $500 million outstanding on the notes.

At December 31, [removed: 2018,] [added: 2019,] there was [removed: $250] [added: $142.9] million [removed: outstanding] [added: outstanding, net of unamortized issuance costs,] on the securitization facility.

The Senior Notes bear an annual interest rate of [removed: 4.20] [added: 4.2] percent payable semi-annually on April 15 and October 15, until maturity on April 15, 2028.

The fair value of the Senior Notes, excluding debt discounts and issuance costs, approximated [removed: $587.2] [added: $659.9] million as of December 31, [removed: 2018,] [added: 2019,] based primarily on the market prices quoted from external sources.

The carrying value of the Senior Notes was [removed: $591.6] [added: $592.4] million at December 31, [removed: 2018.][added: 2019.]

A rise in interest rates could negatively affect the fair value of our [removed: investments.][added: debt facilities.]

[removed: Foreign] [added: Foreign] Exchange [removed: Risk][added: Risk]

This often results in assets and liabilities, including intercompany balances, denominated in a currency other than the [removed: local] functional currency.

All other things being equal, a hypothetical 10 percent weakening of the U.S. [removed: dollar] [added: Dollar against the Chinese Yuan] during the twelve months ended December 31, [removed: 2018,] [added: 2019,] would have [removed: a decrease to] [added: decreased our] income from operations [removed: of] [added: by] approximately [removed: $32] [added: $17.9] million and a hypothetical 10 percent strengthening of the U.S. [removed: dollar] [added: Dollar against the Chinese Yuan] during the twelve months ended December 31, [removed: 2018,] [added: 2019,] would have [removed: an increase to] [added: increased our] income from operations [removed: of] [added: by] approximately [removed: $26] [added: $14.6] million.

Our primary foreign exchange risk is associated with balances denominated in U.S. Dollars held in China where the functional currency is the Chinese Yuan.

| | |

| --- | --- |

| | |

[removed: Overview][added: Overview]

C.H. Robinson Worldwide, Inc. (“C.H. Robinson,” “the company,” “we,” “us,” or “our”) is one of the largest third party logistics companies in the world with consolidated total revenues of [removed: $16.6] [added: $15.3] billion in [removed: 2018.][added: 2019.]

We provide freight transportation services and logistics solutions to companies of all [removed: sizes,] [added: sizes] in a wide variety of industries.

During [removed: 2018,] [added: 2019,] we handled approximately 18 million shipments and worked with more than [removed: 124,000] [added: 119,000] customers.

We have [removed: three] [added: two] reportable segments: North American Surface Transportation [removed: (“NAST”),] [added: (“NAST”) and] Global Forwarding, [removed: and Robinson Fresh,] with our remaining operating segments reported [removed: as] [added: under] All Other and Corporate.

For financial information concerning our reportable segments and geographic regions, refer to Note 9, [removed: Segment Reporting,] [added: *Segment Reporting*,] of our consolidated financial statements.

We utilized approximately [removed: 76,000] [added: 78,000] contracted transportation companies, including [added: contracted] motor carriers, railroads (primarily intermodal service providers), and air and ocean carriers in [removed: 2018.][added: 2019.]

Depending on the needs of our [removed: customer] [added: customers] and their supply chain requirements, we select and hire the appropriate mode of transportation for each shipment.

As an integral part of our transportation services, we may also provide a wide range of value-added logistics services, such as freight consolidation, [added: customs brokerage,] supply chain consulting and analysis, optimization, and reporting.

Our flexible business model has been the main driver of our historical [removed: results] [added: results,] and [added: we believe it] has positioned us for continued growth.

We believe this makes our employees more service-oriented and focused on driving growth and maximizing [removed: office] [added: team] productivity.

We have grown primarily through internal [removed: growth,] [added: growth] by increasing market share through the addition of new customers and expanding relationships with our current customers, adding new services, expanding our market presence and operations globally, [removed: and] hiring additional [removed: employees.][added: employees, and leveraging our technology.]

In August 2017, we acquired Milgram & Company Ltd. (“Milgram”), a provider of freight forwarding, customs brokerage, and surface [removed: transportation primarily] [added: transportation, to strengthen our freight forwarding and customs brokerage offerings] in Canada.

Milgram operates primarily in our Global Forwarding [added: operating] segment.

[removed: APC] [added: Space Cargo] operates in our Global Forwarding [added: operating] segment.

[removed: Transportation] [added: Transportation] and Logistics [removed: Services][added: Services]

We execute these service commitments by investing in and retaining talented employees, developing [removed: cutting edge] [added: innovative] proprietary systems and processes, and utilizing a network of contracted transportation providers, including, but not limited to, [removed: contract] [added: contracted] motor carriers, railroads, and air and ocean carriers.

We make a profit [removed: on] [added: driven by] the [added: value we provide our customers and the resulting] difference between what we charge to our customers for the totality of services provided to them and what we pay to the transportation providers to handle or transport the freight.

[removed: | • | Truckload: Through our contracts with motor carriers, we have access to dry vans, temperature controlled vans, flatbeds, and bulk capacity.] We connect our customers with [added: contracted motor] carriers who specialize in their transportation lanes and product types, and we help [added: contracted motor] carriers optimize the usage of their equipment. [removed: |]

[removed: | • | Intermodal: Our intermodal transportation service is the shipment of freight in trailers or containers by a combination of truck and rail.] We have intermodal marketing agreements with container owners and all Class 1 railroads in North America, and we arrange local pickup and delivery (known as drayage) through local contracted motor carriers. [removed: In addition, we own approximately 1,500 intermodal containers and lease approximately 1,100 containers. |]

[removed: | • |] [added: -] Ocean: As a non-vessel ocean common carrier (“NVOCC”) [removed: or] [added: and] freight forwarder, we consolidate shipments, determine routing, select ocean carriers, contract for ocean shipments, and/or provide for local pickup and delivery of shipments. [removed: |]

[removed: | • |] [added: -] Air: As a certified Indirect Air Carrier (“IAC”) [removed: or] [added: and] freight forwarder, we organize air shipments and provide door-to-door service. [removed: |]

[removed: | • |] [added: -] Customs: Our customs brokers are licensed and regulated by U.S. Customs and Border Protection and other authoritative governmental agencies to assist importers and exporters in meeting legal requirements governing imports and exports. [removed: |]

[removed: | • |] [added: -] Other Logistics Services: We provide fee-based managed services, warehousing services, small parcel, and other services. [removed: |]

The team ensures that all necessary information [removed: about] [added: regarding] each shipment is available in Navisphere.

This information is [added: received electronically by Navisphere from the customers' system,] entered by our employees into Navisphere, [added: or] by the customer through our web [removed: tools, or received electronically by Navisphere from the customers’ systems.][added: tools.]

Once the contracted carrier is selected, we receive the [removed: contract] [added: contracted] carrier’s commitment to provide the transportation.

During the time when a shipment is executed, we connect [removed: frequently] [added: frequently, either electronically or manually,] with the [removed: contract] [added: contracted] carrier to track the status of the shipment to meet the unique needs of our customers.

In the cases where we have agreed (either contractually or otherwise) to pay for claims for damage to freight while in transit, we pursue reimbursement from the [added: contracted carrier for the claims.]

Our services to the customer may be priced on a spot market, or transactional [removed: basis] [added: basis,] or prearranged contractual rates.

When we enter into prearranged rate agreements for truckload services with our customers, we usually have fuel surcharge [removed: agreements,] [added: agreements which allow for fuel to primarily act as a pass-through cost,] in addition to the underlying line-haul portion of the rate.

We purchase most of our truckload services from our [removed: contract] [added: contracted] truckload carriers on a spot market, or transactional basis, even when we are working with the customer on a contractual basis.

In a small number of cases, we may get advance commitments from one or more [removed: contract] [added: contracted motor] carriers to transport contracted shipments for the length of our customer contract.

In those cases, where we have prearranged rates with [removed: contract] [added: contracted motor] carriers, there is a calculated fuel surcharge based on a mutually agreed-upon formula.

We offer a wide range of logistics services on a [removed: worldwide] [added: global] basis that reduce or eliminate supply chain inefficiencies.

We [removed: will] analyze customers’ current transportation rate structures, modes of shipping, and carrier selection.

We [removed: can] identify opportunities to consolidate shipments for cost savings.

We [removed: will] suggest ways to improve operating and shipping procedures and manage claims.

We [removed: can] help customers minimize storage through crossdocking and other flow-through operations.

| | [removed: 2018] | | [added: 2019] | | [removed: 2017] | | | | [removed: 2016] [added: 2018] | | | | [removed: 2015] | | [added: 2017] | | [removed: 2014] | | | [added: | 2016 | | | | | | 2015 | | |]

In February 2019, we acquired The Space Cargo Group (“Space Cargo”), a provider of international freight forwarding, customs brokerage, and other logistics services to expand our offerings in Spain and Colombia.

In January 2020, we entered into a definitive agreement to acquire Prime Distribution Services, a leading provider of retail consolidation services in North America, for approximately $225 million in cash.

The agreement is subject to certain customary closing conditions, including regulatory approval.

In May 2019, we acquired Dema Service S.p.A.

(“Dema Service”), a provider of European road transportation to expand our offerings primarily in Italy.

Dema Service operates in our European Surface Transportation operating segment.

- Truckload: Through our contracts with motor carriers, we have access to dry vans, temperature controlled vans, flatbeds, and bulk capacity.

- Less than Truckload (“LTL”): LTL transportation involves the shipment of single or multiple pallets of freight.

We primarily focus on shipments of a single pallet or larger, although we handle any size shipment.

Through our contracts with motor carriers and use of Navisphere, we consolidate freight and freight information to provide our customers with a single source of information on their freight.

In many instances, we will consolidate partial shipments for several customers into full truckloads.

- Intermodal: Our intermodal transportation service is the shipment of freight in trailers or containers by a combination of truck and rail.

In addition, we own approximately 1,500 and lease approximately 1,100 intermodal containers.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

access to transportation industry shipment databases.

Working with their regional or divisional leaders, each team makes hiring and staffing decisions, based on balancing business needs with personnel investment and meeting targeted productivity and profitability goals.

empty miles, and repositioning their equipment.

The Navisphere Carrier platform provides contracted motor carriers access to the functionality necessary to manage their relationship with C.H. Robinson.

Freightquote by C.H. Robinson is a web-based, mobile-responsive offering designed to streamline the shipping process for small business customers allowing the booking of freight without any shipping knowledge or expertise.

Freightquote's small business customers can go online with their phone, tablet, or computer to book their LTL or truckload freight, track shipments, get proactive notifications and pay for transportation services with a credit card.

Environmental, Social, and Governance (“ESG”)

We integrate ESG into our business, driven by our “EDGE” values of Evolving constantly, Delivering excellence, Growing together and Embracing integrity, to help to ensure we deliver value to our customers, employees, suppliers, shareholders and communities.

We incorporate these principles into our business in a number of ways, including:

- Environmental Sustainability: By leveraging our scope, size and scale, we work with customers to help optimize their supply chain, eliminate empty miles on the road, and reduce their carbon footprint.

C.H. Robinson has been an active member of SmartWay,® a transportation program of the U.S. Environmental Protection Agency since 2005.

In 2019, we announced a goal to reduce our Scope 1 and 2 carbon intensity 40% by 2025.

Additionally, we joined the Sustainable Packaging Coalition in an effort to reduce waste in packaging for our fresh produce sourcing services.

- Diversity and Inclusion: We are committed to fostering an inclusive workplace that attracts and retains high-performing diverse talent.

This commitment is demonstrated by integrating diversity and inclusion initiatives into our talent strategies and across our business.

Last year, this included integration into employee training programs and ensuring our employee benefit programs meet the needs of our diverse employee workforce.

- Community Engagement: Through our company and the C.H. Robinson Foundation, we contributed to more than 800 charities operating around the globe and our employees donated more than 11,000 hours to nonprofits in their local communities in 2019.

We proudly support organizations that matter most to our people through employee match programs, grantmaking, disaster relief efforts, employee hardship and scholarship fund programs.

We also make a difference in our industry through our carrier scholarship program and our support of Truckers Against Trafficking, which works with the transportation industry to fight human trafficking.

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Michael Castagnetto | | | | | | 43 | | | | | | President of Robinson Fresh | | |

Biesterfeld, Jr. was named Chief Executive Officer in May 2019.

Bob serves on the Board of Directors for the Transportation Intermediaries Association and is trustee of the Winona State University Foundation.

Michael Castagnetto was named President of Robinson Fresh in January 2020.

The acquisition strengthens our freight forwarding and customs brokerage offerings in Canada.

In September 2016, we completed the acquisition of APC Logistics (“APC”), a privately held company based in Australia, to expand our global presence and bring additional capabilities and expertise to our portfolio.

APC provides international freight forwarding and customs brokerage services in Australia and New Zealand.

| | |

| --- | --- |

| | |

| --- | --- |

| • | Less than Truckload: (“LTL”) transportation involves the shipment of single or multiple pallets of freight. We focus on shipments of a single pallet or larger, although we handle any size shipment. Through our contracts with motor carriers and use of Navisphere, we consolidate freight and freight information to provide our customers with a single source of information on their freight. In many instances, we will consolidate partial shipments for several customers into full truckloads. |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

contracted carrier for the claims.

| | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | |

Segment information.

This segment often provides the logistics and transportation of the products they buy, sell, or market, in addition to temperature controlled transportation services for its customers.

Office Network.

Each office is responsible for its own growth and profitability.

Network Employees.

Each office is responsible for its hiring and staffing decisions, based on the needs of their office and to balance personnel resources with business requirements, subject to the office maintaining targeted productivity levels.

Our

Shared Services.

do business is required to execute a contract that establishes that the carrier is acting as an independent contractor.

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| | |

| --- | --- |

| | |

[removed: UNITED] [added: UNITED] STATES SECURITIES AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

[added: ☒] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934][added: 1934]

[removed: For] [added: For] the fiscal year ended December 31, [removed: 2018][added: 2019]

[removed: Commission] [added: Commission] File Number: [removed: 000-23189][added: 000-23189]

[removed: C.H.] [added: C.H.] ROBINSON WORLDWIDE, [removed: INC.][added: INC.]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Delaware] [added: Delaware] | | [removed: 41-1883630] | [added: | | | 41-1883630 | | |]

| [removed: (State] [added: (State] or other jurisdiction of incorporation or [removed: organization)] [added: organization)] | | [removed: (I.R.S.] [added: | | | | (I.R.S.] Employer Identification [removed: No.)] [added: No.)] | [added: | |]

[removed: | 14701 Charlson Road, Eden] [added: Eden] Prairie, Minnesota [removed: | | 55347-5088 |][added: 55347]

[removed: | (Address] [added: (Address] of principal executive [removed: offices) | | (Zip Code) |][added: offices, including zip code)]

[removed: Registrant’s] [added: Registrant’s] telephone number, including area code: [removed: 952-937-8500][added: 952-937-8500]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | | [removed: Name] [added: | Trading Symbol(s) | | | Name] of each exchange on which [removed: registered] [added: registered] | [added: | |]

| Common Stock, par value $0.10 per share | | [added: | CHRW | | |] The Nasdaq Global Select Market | [added: | |]

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

Yes [removed: ý] [added: ☒] No [removed: ¨][added: ☐]

Yes [removed: ¨] [added: ☐] No [removed: ý][added: ☒]

Yes [removed: ý] [added: ☒] No [removed: ¨][added: ☐]

Yes [removed: ý] [added: ☒] No [removed: ¨][added: ☐]

| Large accelerated filer | [removed: ý] | [added: | ☒ | | |] Accelerated filer | [removed: ¨] | [added: | ☐ | | |] Non-accelerated filer | [removed: ¨] | [added: | ☐ | | |] Smaller reporting company | [removed: ¨] | [added: | ☐ | | | Emerging growth 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 [removed: Act.¨][added: Act.]

Yes [removed: ¨] [added: ☐] No [removed: ý][added: ☒]

The aggregate market value of voting stock held by non-affiliates of the registrant as of June [removed: 29, 2018,] [added: 28, 2019,] was approximately [removed: $11,532,777,361] [added: $11,391,890,865] (based upon the closing price of [removed: $83.66] [added: $84.35] per common share on that date as quoted on The Nasdaq Global Select Market).

As of February [removed: 20, 2019,] [added: 14, 2020,] the number of shares outstanding of the registrant’s common stock, par value $0.10 per share, was [removed: 136,853,710.][added: 134,892,810.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the Registrant’s Proxy Statement relating to its Annual Meeting of Stockholders to be held May [removed: 9, 2019] [added: 7, 2020] (the “Proxy Statement”), are incorporated by reference in Part III.

[removed: C.H.] [added: C.H.] ROBINSON WORLDWIDE, [removed: INC.][added: INC.]

[removed: ANNUAL] [added: ANNUAL] REPORT ON FORM [removed: 10-K][added: 10-K]

[removed: For] [added: For] the Year Ended December 31, [removed: 2018][added: 2019]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| | [removed: PART I] | [removed: Page] | [added: PART I | | | Page | | |]

| Item 1. | [removed: [Business](#s67B9652D5952580784FBFF64AFF82F43)] | [removed: [3](#s67B9652D5952580784FBFF64AFF82F43)] | [added: [Business](#i_0_13) | | | [3](#i_0_13) | | |]

| Item 1A. | [added: | |] [Risk [removed: Factors](#sEED8378159E455FCA1966E59F965242B)] [added: Factors](#i_0_19)] | [removed: [14](#sEED8378159E455FCA1966E59F965242B)] | [added: | [14](#i_0_19) | | |]

| Item 1B. | [added: | |] [Unresolved Staff [removed: Comments](#s2A52D144C07E59E297ADD74E8AD3BF55)] [added: Comments](#i_0_22)] | [removed: [19](#s2A52D144C07E59E297ADD74E8AD3BF55)] | [added: | [18](#i_0_22) | | |]

| Item 2. | [removed: [Properties](#sE300A2AF596D56B8BB979F081AD3C0C8)] | [removed: [20](#sE300A2AF596D56B8BB979F081AD3C0C8)] | [added: [Properties](#i_0_25) | | | [19](#i_0_25) | | |]

| Item 3. | [added: | |] [Legal [removed: Proceedings](#s568116D0C3E650D9B7AABF678CC347FB)] [added: Proceedings](#i_0_28)] | [removed: [21](#s568116D0C3E650D9B7AABF678CC347FB)] | [added: | [19](#i_0_28) | | |]

| Item 4. | [added: | |] [Mine Safety [removed: Disclosures](#s81C0EC76145F54229AE969AAE8DFDF52)] [added: Disclosures](#i_0_31)] | [removed: [21](#s81C0EC76145F54229AE969AAE8DFDF52)] | [added: | [19](#i_0_31) | | |]

| | [removed: PART II] | | [added: PART II | | | | | |]

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to _____


| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

14701 Charlson Road

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | |

| | | | | | | | | |

| | | | | | | | | |

| | | | | | | | | |

| | | | [Signatures](#i_0_190) | | | [71](#i_0_190) | | |

10-K 1 chrw10-k2018.htm 10-K

| | | |

| --- | --- | --- |

| | | |

| | | |

| | | |

| --- | --- | --- |

| | | |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | |

| | | | | | | | |

| Emerging growth company | ¨ | | | | | | |

| | | |

| --- | --- | --- |

| | | |

| | | |

| | | |

| | | |

| | | |

| | [Signatures](#s6F38762C608B532F8D0D07EFD1650C2B) | [71](#s6F38762C608B532F8D0D07EFD1650C2B) |

| | |

| --- | --- |

| | |

| | |

| --- | --- |

| | |

The total square footage of our [removed: four buildings] [added: five buildings, three of which we own,] in Eden Prairie is [removed: 357,000.][added: 400,000.]

Most of our offices [added: and warehouses] are leased from third parties under leases with initial terms ranging from three to fifteen years.

This total includes a data center of approximately 18,000 square feet.

We also own an office in Kansas City, MO of approximately 208,000 square feet and a data center in Oronoco, MN of approximately 32,000 square feet.

We lease approximately 300 locations used for office space in approximately 265 cities around the world, most notably a fifteen year lease of approximately 207,000 square feet in Chicago, IL.

In addition, we lease warehouse space totaling approximately 1.6 million square feet in 20 locations primarily within the United States.

This total includes approximately 221,000 square feet used for our corporate and shared services, our data center of approximately 18,000 square feet, and 118,000 square feet used for office operations.

The following table lists our office locations of greater than 20,000 square feet:

| | | |

| --- | --- | --- |

| | | |

| Location | Approximate Square Feet | |

| Kansas City, MO(1) | 208,000 | |

| Chicago, IL | 207,000 | |

| Eden Prairie, MN | 153,000 | |

| Eden Prairie, MN(1) | 105,000 | |

| Eden Prairie, MN(1) | 81,000 | |

| Chicago, IL(1) | 80,000 | |

| Wood Dale, IL | 72,000 | |

| Chicago, IL | 57,000 | |

| Shanghai, China | 43,000 | |

| Auburn Hills, MI | 41,000 | |

| Montreal, Canada | 35,000 | |

| Oronoco, MN(1) | 32,000 | |

| Amsterdam, Netherlands | 25,000 | |

| Woodridge, IL | 22,000 | |

| Minneapolis, MN | 21,000 | |

____________________________

| | |

| --- | --- |

| (1) | These properties are owned. All other properties in the table above are leased from third parties. |

We also own or lease warehouses totaling approximately 1.4 million square feet of space in over 30 cities around the world.

The following table lists our warehouses over 50,000 square feet:

| | | |

| --- | --- | --- |

| | | |

| Location | Approximate Square Feet | |

| Carson, CA | 228,000 | |

| Des Plaines, IL | 219,000 | |

| Rancho Dominguez, CA | 130,000 | |

| San Bernardino, CA | 105,000 | |

| Bethlehem, PA | 85,000 | |

| Vancouver, WA | 79,000 | |

| Edinburg, TX | 72,000 | |

| East Midlands, Great Britain | 64,000 | |

| Miramar, FL | 55,000 | |

[removed: PART II][added: PART II]

| | |

| --- | --- |

| | |

On February [removed: 20, 2019,] [added: 14, 2020,] the closing sales price per share of our common stock as quoted on the Nasdaq Global Select Market was [removed: $92.02] [added: $72.01] per share.

On February [removed: 20, 2019,] [added: 11, 2020,] there were approximately [removed: 136 holders of record and approximately 128,401] [added: 208,709] beneficial owners of our common stock.

The following table provides information about company purchases of common stock during the quarter ended December 31, [removed: 2018:][added: 2019:]

| | [removed: Total Number of Shares Purchased (a)] | | [added: Total Number of Shares Purchased (1)] | [removed: Average] [added: | | | | | Average] Price Paid Per [removed: Share] [added: Share] | | | | [removed: Total] [added: | | Total] Number of Shares Purchased as Part of Publicly [removed: Announced Plans] [added: Announced Plans] or [removed: Programs (1)] [added: Programs] | | | [removed: Maximum] [added: | | | Maximum] Number [removed: of Shares] [added: of Shares] That May Yet Be Purchased Under [removed: the Plans] [added: the Plans] or [removed: Programs] [added: Programs] (2) | | [added: |]

(1) The total number of shares purchased includes: (i) [removed: 1,087,185] [added: 853,731] shares of common stock purchased under the authorization described below; and (ii) [removed: 7,239] [added: 9,365] shares of common stock surrendered to satisfy statutory tax withholding obligations under our stock incentive plans.

As of December 31, [removed: 2018,] [added: 2019,] there were [removed: 13,673,080] [added: 9,993,683] shares remaining for future repurchases under this authorization.

The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, [removed: 2013] [added: 2014] to December 31, [removed: 2018.][added: 2019.]

[removed: ][added: ]

| | [removed: December 31,] | | [added: December 31,] | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| | [removed: 2013] | | [added: 2014] | | [removed: 2014] | | | [removed: 2015] | [added: 2015] | | [removed: 2016] | | | [removed: 2017] | [added: 2016] | | [removed: 2018] | | [added: | | 2017 | | | | | | 2018 | | | | | | 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

[removed: The] [added: *The] stock price performance included in this graph is not necessarily indicative of future stock price [removed: performance.][added: performance.*]

On February 14, 2020, there were approximately 136 holders of record.

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| October 2019 | | | 200,247 | | | | | | $ | 84.96 | | | | | 194,622 | | | | | | 10,652,792 | | |

| November 2019 | | | 452,142 | | | | | | 75.63 | | | | | | 450,700 | | | | | | 10,202,092 | | |

| December 2019 | | | 210,707 | | | | | | 76.77 | | | | | | 208,409 | | | | | | 9,993,683 | | |

| Fourth quarter 2019 | | | 863,096 | | | | | | $ | 78.07 | | | | | 853,731 | | | | | | 9,993,683 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| C.H. Robinson Worldwide, Inc. | | | $ | 100.00 | | | | | 84.78 | | | | | | 102.58 | | | | | | 127.74 | | | | | | 123.12 | | | | | | 117.32 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| S&P 500 | | | $ | 100.00 | | | | | 101.38 | | | | | | 113.51 | | | | | | 138.28 | | | | | | 132.23 | | | | | | 173.86 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| S&P Midcap 400 | | | $ | 100.00 | | | | | 97.82 | | | | | | 118.11 | | | | | | 137.30 | | | | | | 122.08 | | | | | | 154.07 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Nasdaq Transportation | | | $ | 100.00 | | | | | 86.61 | | | | | | 104.22 | | | | | | 128.89 | | | | | | 117.83 | | | | | | 137.84 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | |

| October 2018 | 500,568 | | | $ | 92.66 | | | 496,579 | | | 14,263,686 | |

| November 2018 | 257,629 | | | 89.99 | | | | 256,690 | | | 14,006,996 | |

| December 2018 | 336,227 | | | 85.34 | | | | 333,916 | | | 13,673,080 | |

| Fourth quarter 2018 | 1,094,424 | | | $ | 89.78 | | | 1,087,185 | | | 13,673,080 | |

| | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | |

| C.H. Robinson Worldwide, Inc. | $ | 100.00 | | | 131.34 | | | 111.35 | | | 134.73 | | | 167.77 | | | 161.71 | |

| S&P 500 | $ | 100.00 | | | 113.69 | | | 115.26 | | | 129.05 | | | 157.22 | | | 150.33 | |

| S&P Midcap 400 | $ | 100.00 | | | 109.77 | | | 107.38 | | | 129.65 | | | 150.71 | | | 134.01 | |

| Nasdaq Transportation | $ | 100.00 | | | 144.06 | | | 124.46 | | | 149.57 | | | 185.07 | | | 169.26 | |

| | |

| --- | --- |

| | |

| [removed: STATEMENT] [added: STATEMENT] OF OPERATIONS [removed: DATA] [added: DATA] | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| [removed: Year] [added: Year] Ended December [removed: 31,] [added: 31,] | [removed: 2018(1)] | | [added: 2019(1)] | | [removed: 2017] | | | | [removed: 2016] [added: 2018(1)] | | | | [removed: 2015] | | [added: 2017] | | [removed: 2014] | | | [added: | 2016 | | | | | | 2015 | | |]

| Total revenues | [added: | |] $ | [removed: 16,631,172] [added: 15,309,508] | | | [added: | |] $ | [removed: 14,869,380] [added: 16,631,172] | | | [added: | |] $ | [removed: 13,144,413] [added: 14,869,380] | | | [added: | |] $ | [removed: 13,476,084] [added: 13,144,413] | | | [added: | |] $ | [removed: 13,470,067] [added: 13,476,084] | |

| Net revenues | [added: | | 2,586,310 | | | | | |] 2,705,235 | | | | [added: | |] 2,368,050 | | | | [removed: 2,277,528] | | [added: 2,277,528] | | [removed: 2,268,480] | | | | [removed: 2,007,652] [added: 2,268,480] | | |

| Income from operations | [added: | | 789,976 | | | | | |] 912,083 | | | | [added: | |] 775,119 | | | | [removed: 837,531] | | [added: 837,531] | | [removed: 858,310] | | | | [removed: 748,418] [added: 858,310] | | |

| Net income | [added: | | 576,968 | | | | | |] 664,505 | | | | [added: | |] 504,893 | | | | [removed: 513,384] | | [added: 513,384] | | [removed: 509,699] | | | | [removed: 449,711] [added: 509,699] | | |

| Net income per share | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Basic | [added: | |] $ | [removed: 4.78] [added: 4.21] | | | [added: | |] $ | [removed: 3.59] [added: 4.78] | | | [added: | |] $ | [removed: 3.60] [added: 3.59] | | | [added: | |] $ | [removed: 3.52] [added: 3.60] | | | [added: | |] $ | [removed: 3.06] [added: 3.52] | |

| Diluted | [added: | |] $ | [removed: 4.73] [added: 4.19] | | | [added: | |] $ | [removed: 3.57] [added: 4.73] | | | [added: | |] $ | [removed: 3.59] [added: 3.57] | | | [added: | |] $ | [removed: 3.51] [added: 3.59] | | | [added: | |] $ | [removed: 3.05] [added: 3.51] | |

| Weighted average number of shares outstanding (in thousands) | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Basic | [added: | | 136,955 | | | | | |] 139,010 | | | | [added: | |] 140,610 | | | | [removed: 142,706] | | [added: 142,706] | | [removed: 144,967] | | | | [removed: 147,202] [added: 144,967] | | |

| Diluted | [added: | | 137,735 | | | | | |] 140,405 | | | | [added: | |] 141,382 | | | | [removed: 142,991] | | [added: 142,991] | | [removed: 145,349] | | | | [removed: 147,542] [added: 145,349] | | |

| Dividends per share | [added: | |] $ | [removed: 1.88] [added: 2.01] | | | [added: | |] $ | [removed: 1.81] [added: 1.88] | | | [added: | |] $ | [removed: 1.74] [added: 1.81] | | | [added: | |] $ | [removed: 1.57] [added: 1.74] | | | [added: | |] $ | [removed: 1.43] [added: 1.57] | |

| [removed: BALANCE] [added: BALANCE] SHEET [removed: DATA] [added: DATA] | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| [removed: As] [added: As] of December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Working capital | [added: | |] $ | [removed: 1,319,751] [added: 1,084,080] | | | [added: | |] $ | [removed: 523,487] [added: 1,319,751] | | | [added: | |] $ | [removed: 162,384] [added: 523,487] | | | [added: | |] $ | [removed: 282,101] [added: 162,384] | | | [added: | |] $ | [removed: 529,599] [added: 282,101] | |

| Total assets | [added: | | 4,641,060 | | | | | |] 4,427,412 | | | | [added: | |] 4,235,834 | | | | [removed: 3,687,758] | | [added: 3,687,758] | | [removed: 3,184,358] | | | | [removed: 3,214,338] [added: 3,184,358] | | |

| Current portion of debt | [added: | | 142,885 | | | | | |] 5,000 | | | | [added: | |] 715,000 | | | | [removed: 740,000] | | [added: 740,000] | | [removed: 450,000] | | | | [removed: 605,000] [added: 450,000] | | |

| Long-term debt | [added: | | 1,092,448 | | | | | |] 1,341,352 | | | | [removed: 750,000] | | [added: 750,000] | | [removed: 500,000] | | | | 500,000 | | | | [added: | |] 500,000 | | |

| Total stockholders’ investment | [added: | | 1,670,730 | | | | | |] 1,595,087 | | | | [added: | |] 1,425,745 | | | | [removed: 1,257,847] | | [added: 1,257,847] | | [removed: 1,150,450] | | | | [removed: 1,047,015] [added: 1,150,450] | | |

| [removed: OPERATING DATA] [added: OPERATING DATA] | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| [removed: As] [added: As] of December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Employees | [added: | | 15,427 | | | | | |] 15,262 | | | | [added: | |] 15,074 | | | | [removed: 14,125] | | [added: 14,125] | | [removed: 13,159] | | | | [removed: 11,521] [added: 13,159] | | |

(1) We adopted ASU 2014-09, [removed: Revenue] [added: *Revenue] from Contracts with [removed: Customers,] [added: Customers*,] in 2018 which impacted the presentation and timing of revenue recognition.

Refer to Note 10, [removed: Revenue Recognition,] [added: *Revenue Recognition*,] for further information.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

________________________________

| | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | |

| | |

| --- | --- |

| | |

[removed: REPORT] [added: REPORT] OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM]

[removed: Opinion] [added: Opinion] on the Financial [removed: Statements][added: Statements]

We have audited the accompanying consolidated balance sheets of C.H. Robinson Worldwide, Inc. and subsidiaries (the [removed: "Company")] [added: “Company”)] as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] 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, [removed: 2018,] [added: 2019,] and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the [removed: "financial statements").][added: “financial statements”).]

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the [removed: Company's] [added: Company’s] internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal Control - Integrated] [added: *Internal Control—Integrated] Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February [removed: 25, 2019,] [added: 19, 2020,] expressed an unqualified opinion on the [removed: Company's] [added: Company’s] internal control over financial reporting.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

Those standards require that we plan and perform the [removed: audit] [added: audits] to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

[removed: REPORT] [added: REPORT] OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM]

[removed: Opinion] [added: Opinion] on Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited the internal control over financial reporting of C.H. Robinson Worldwide, Inc. and subsidiaries (the “Company”) as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control [removed: -] [added: —] Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control [removed: -] [added: —] Integrated Framework [removed: (2013)] [added: (2013)*] issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the fiscal year ended December 31, [removed: 2018,] [added: 2019,] of the Company and our report dated February [removed: 25, 2019,] [added: 19, 2020,] expressed an unqualified opinion on those consolidated financial statements and financial statement [removed: schedule.][added: schedule and included an explanatory paragraph regarding the Company’s adoption of the FASB Accounting Standards Update No. 2016-02, *Leases (Topic 842)*.]

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: Definition] [added: Definition] and Limitations of Internal Control over Financial [removed: Reporting][added: Reporting]

[removed: C.H.] [added: C.H.] ROBINSON WORLDWIDE, [removed: INC.][added: INC.]

[removed: CONSOLIDATED] [added: CONSOLIDATED] BALANCE [removed: SHEETS][added: SHEETS]

[removed: (In] [added: (In] thousands, except per share [removed: data)][added: data)]

| | [removed: December 31,] | | [added: December 31,] | | | | | [added: | | | | | | | | | |]

| | [removed: 2018] | | [added: 2019] | | [removed: 2017] | | | [added: | 2018 | | | | | | 2017 | | | | | | | | | | | | | | |]

| [removed: ASSETS] [added: ASSETS] | | | | | | | | [added: | | | | | | | | | |]

| [removed: Current assets:] [added: Current assets:] | | | | | | | | [added: | | | | | | | | | |]

| [removed: Cash] [added: Cash] and cash [removed: equivalents] [added: equivalents, beginning of year] | [removed: $] | [added: |] 378,615 | | | [removed: $] | [added: | |] 333,890 | | [added: | | | | 247,666 | | | | | | | | | | | | | | |]

| Receivables, net of allowance for doubtful accounts of [removed: $41,131] [added: $32,838] and [removed: $42,409] [added: $41,131] | [added: | | 1,974,381 | | | | | |] 2,162,438 | | | | [removed: 2,113,930] | | | [added: | |]

| Contract assets | [added: | | 132,874 | | | | | |] 159,635 | | | | [removed: —] | | | [added: | |]

| Prepaid expenses and other | [added: | | 85,005 | | | | | |] 52,386 | | | | [removed: 63,116] | | | [added: | |]

| [removed: Total] [added: Total] current [removed: assets] [added: assets] | [added: | | 2,640,118 | | | | | |] 2,753,074 | | | | [removed: 2,510,936] | | | [added: | |]

| Property and equipment | [added: | | 489,976 | | | | | |] 498,847 | | | | [removed: 497,909] | | | [added: | |]

| Accumulated depreciation and amortization | [removed: (270,546] | | [removed: )] [added: (281,553)] | | [removed: (267,583] | | [removed: )] | [added: | (270,546) | | | | | | | | |]

| Net property and equipment | [added: | | 208,423 | | | | | |] 228,301 | | | | [removed: 230,326] | | | [added: | |]

| Goodwill | [added: | | 1,291,760 | | | | | |] 1,258,922 | | | | [removed: 1,275,816] | | | [added: | |]

| Other intangible assets, net of accumulated amortization of [removed: $156,246] [added: $156,879] and [removed: $122,283] [added: $156,246] | [added: | | 90,931 | | | | | |] 108,822 | | | | [removed: 151,585] | | | [added: | |]

| Deferred tax assets | [added: | | 13,485 | | | | | |] 9,993 | | | | [removed: 6,870] | | | [added: | |]

| Other assets | [added: | | 85,483 | | | | | |] 68,300 | | | | [removed: 60,301] | | | [added: | |]

| [removed: Total assets] [added: Total assets] | [added: | |] $ | [removed: 4,427,412] [added: 4,641,060] | | | [added: | |] $ | [removed: 4,235,834] [added: 4,427,412] | | [added: | | | | | |]

| [removed: LIABILITIES] [added: LIABILITIES] AND STOCKHOLDERS’ [removed: INVESTMENT] [added: INVESTMENT] | | | | | | | | [added: | | | | | | | | | |]

| [removed: Current liabilities:] [added: Current liabilities:] | | | | | | | | [added: | | | | | | | | | |]

| Accounts payable | [added: | |] $ | [removed: 971,023] [added: 984,604] | | | [added: | |] $ | [removed: 1,000,305] [added: 971,023] | | [added: | | | | | |]

| Outstanding checks | [added: | | 78,231 | | | | | |] 92,084 | | | | [removed: 96,359] | | | [added: | |]

| Accrued expenses– | | | | | | | | [added: | | | | | | | | | |]

| Compensation | [added: | | 112,784 | | | | | |] 153,626 | | | | [removed: 105,316] | | | [added: | |]

Change in Accounting Principle

As discussed in Note 13 to the financial statements, effective January 1, 2019, the Company adopted the FASB Accounting Standards Update No. 2016-02, *Leases (Topic 842)*, using the modified retrospective approach.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition—Refer to Notes 1 and 10 to the financial statements

*Critical Audit Matter Description*

Transportation and Logistics revenue is recognized for performance obligations identified in the customer contract as they are satisfied over the contract term, which generally represents the transit period.

Recognizing revenue at period-end for contracts where the transit period is partially complete at period-end or completed and not yet invoiced, requires management to make judgments that affect the amounts and timing of revenue recognized.

At December 31, 2019, the Company recorded revenue of $132.9 million for services it provided while a shipment was still in transit, but for which it had not yet completed its performance obligation or had not yet invoiced the customer.

Auditing the estimate of the Company’s revenue recorded for contracts where the transit period is partially complete or completed and not yet invoiced as of the reporting date required a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

*How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to management’s estimate of the revenue recorded for contracts where the transit period is partially complete or completed and not yet invoiced as of the reporting date included the following, among others:

- We tested the effectiveness of controls over revenue recognized over time, including management’s controls over the identification of shipments in transit, the portion of the transit period completed, and the estimate of contracts completed but not yet invoiced.

- We evaluated management’s ability to identify the shipments in transit and to estimate the revenue to be recorded for contracts where the transit period is partially complete or completed and not yet invoiced at the reporting date by:

–Performing a retrospective review of management’s estimate for prior reporting periods

–Testing the accuracy and completeness of the data in the system-generated report utilized in management’s revenue cutoff estimate with the assistance of our information technology specialists

–Assessing the estimate methodology for reasonableness, in light of recent market events or changes within the Company’s operating environment

–Testing the mathematical accuracy of management’s estimate

/s/ DELOITTE & TOUCHE LLP

February 19, 2020

/s/ DELOITTE & TOUCHE LLP

February 19, 2020

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | 2019 | | | | | | 2018 | | | | | | | | |

| Cash and cash equivalents | | | $ | 447,858 | | | | | $ | 378,615 | | | | | | | |

| | | | | | | | | | | | | | | | | | |

| Right-of-use lease assets | | | 310,860 | | | | | | — | | | | | | | | |

| | | | | | | | | | | | | | | | | | |

| Current lease liabilities | | | 61,280 | | | | | | — | | | | | | | | |

| | | | | | | | | | | | | | | | | | |

| Noncurrent lease liabilities | | | 259,444 | | | | | | — | | | | | | | | |

| | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |


February 25, 2019


February 25, 2019

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | |

| | | | | | | | |

| | | | | | | | |

| | | | | | | | |

| | | | | | | | |

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| | | | | | | | | | | | |

| | | | | | | | | | | | |

| 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 | | |

| 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 | | ) |

| | | | | | | | | | | | |

| | | | | | | | | | | | |

| | | | | | | | | | | | |

| | | | | | | | | | | | |

| Excess tax benefit on stock-based compensation | — | | | | — | | | | 18,462 | | |

| Cash and cash equivalents, beginning of year | 333,890 | | | | 247,666 | | | | 168,229 | | |

| | | | | | | | | | | | |

BASIS OF PRESENTATION.

USE OF ESTIMATES.

REVENUE RECOGNITION.

Additionally, in our sourcing business, in some

CONTRACT ASSETS.

ACCRUED TRANSPORTATION EXPENSE.

ALLOWANCE FOR DOUBTFUL ACCOUNTS.

FOREIGN CURRENCY.

We have asserted that we will indefinitely reinvest earnings of foreign subsidiaries to support expansion of our international businesses and accordingly translation adjustments are recorded gross of any related income tax effects.

CASH AND CASH EQUIVALENTS.

Property and equipment are recorded at cost.

| | | | | |

| --- | --- | --- | --- | --- |

| | |

| --- | --- |

| | |

[added: Evaluation of] Disclosure Controls and [removed: Procedures][added: Procedures]

As of December 31, [removed: 2018, under the supervision and] [added: 2019, our management,] with the participation of our [removed: management, including our] Chief Executive Officer and Chief Financial Officer, [removed: we] evaluated the effectiveness of [removed: the design and operation of] our disclosure controls and procedures (as defined in [removed: Rule] [added: Rules] 13a-15(e) [added: and 15d-15(e)] under the [removed: Securities] Exchange [removed: Act of 1934 (the “Exchange Act”)).][added: Act).]

[removed: Based upon that evaluation, the] [added: Our] Chief Executive Officer and Chief Financial Officer [added: have] concluded [removed: that] [added: based upon the evaluation described above that, as of December 31, 2019,] our disclosure controls and procedures [removed: as of December 31, 2018,] were [removed: effective.][added: effective at the reasonable assurance level.]

[removed: Management’s] [added: Management’s] Report on Internal Control Over Financial [removed: Reporting][added: Reporting]

Our management is responsible for establishing and maintaining adequate internal control over financial reporting [removed: as such term is] [added: (as] defined in [removed: Rule] [added: Rules] 13a-15(f) [added: and 15d-15(f)] under the Exchange [removed: Act.][added: Act).]

[removed: Under] [added: Management, under] the supervision and with the participation of our [removed: management, including our] Chief Executive Officer and Chief Financial Officer, [removed: we conducted an evaluation of] [added: assessed] the effectiveness of our internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019 and concluded that it was effective] based on [removed: the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.][added: those criteria.]

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is included in Item 8.

[removed: Changes] [added: Changes] in Internal Control Over Financial [removed: Reporting][added: Reporting]