Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

C.H. ROBINSON WORLDWIDE, INC.

Condensed Consolidated Balance Sheets

(unaudited, in thousands, except per share data)


	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	202,649	$	243,796
Receivables, net of allowance for credit loss of $37,114 and $38,113	3,721,571		2,449,577
Contract assets, net of allowance for credit loss	416,971		197,176
Prepaid expenses and other	89,472		51,152

Total current assets	4,430,663		2,941,701
Property and equipment, net of accumulated depreciation and amortization	177,418		178,949
Goodwill	1,486,199		1,487,187
Other intangible assets, net of accumulated amortization	96,025		113,910
Right-of-use lease assets	297,249		319,785
Deferred tax assets	26,244		18,640
Other assets	88,808		84,086
Total assets	$	6,602,606	$	5,144,258

LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$	1,797,441	$	1,195,099
Outstanding checks	66,748		88,265
Accrued expenses:
Compensation	173,353		138,460
Transportation expense	319,154		153,574
Income taxes	39,276		43,700
Other accrued liabilities	157,251		154,460
Current lease liabilities	66,470		66,174
Current portion of debt	632,000		—
Total current liabilities	3,251,693		1,839,732

Long-term debt	1,093,950		1,093,301
Noncurrent lease liabilities	245,902		268,572
Noncurrent income taxes payable	25,449		26,015
Deferred tax liabilities	20,259		22,182
Other long-term liabilities	14,553		14,523
Total liabilities	4,651,806		3,264,325
Stockholders’ investment:
Preferred stock, $0.10 par value, 20,000 shares authorized; no shares issued or outstanding	—		—
Common stock, $0.10 par value, 480,000 shares authorized; 179,206 and 179,232 shares issued, 130,376 and 134,298 outstanding	13,038		13,430
Additional paid-in capital	637,182		566,022
Retained earnings	4,779,964		4,372,833
Accumulated other comprehensive loss	(65,480)		(45,998)
Treasury stock at cost (48,830 and 44,934 shares)	(3,413,904)		(3,026,354)
Total stockholders’ investment	1,950,800		1,879,933
Total liabilities and stockholders’ investment	$	6,602,606	$	5,144,258

See accompanying notes to the condensed consolidated financial statements.

C.H. ROBINSON WORLDWIDE, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(unaudited, in thousands except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Transportation	$	5,999,901	$	3,944,981	$	15,800,576	$	10,835,710
Sourcing	263,794		279,819		799,714		821,944
Total revenues	6,263,695		4,224,800		16,600,290		11,657,654
Costs and expenses:
Purchased transportation and related services	5,180,390		3,378,651		13,580,980		9,141,354
Purchased products sourced for resale	239,113		256,876		723,562		744,621
Personnel expenses	399,880		302,904		1,123,616		933,607
Other selling, general, and administrative expenses	133,543		118,130		377,430		371,606
Total costs and expenses	5,952,926		4,056,561		15,805,588		11,191,188
Income from operations	310,769		168,239		794,702		466,466
Interest and other expense	(16,662)		(7,465)		(41,419)		(32,904)
Income before provision for income taxes	294,107		160,774		753,283		433,562
Provision for income taxes	47,054		24,245		139,136		74,948
Net income	247,053		136,529		614,147		358,614
Other comprehensive (loss) income, net of tax	(12,034)		13,236		(19,482)		5,294
Comprehensive income	$	235,019	$	149,765	$	594,665	$	363,908

Basic net income per share	$	1.87	$	1.01	$	4.61	$	2.65
Diluted net income per share	$	1.85	$	1.00	$	4.56	$	2.63

Basic weighted average shares outstanding	131,845		135,671		133,201		135,385
Dilutive effect of outstanding stock awards	1,591		1,457		1,460		752
Diluted weighted average shares outstanding	133,436		137,128		134,661		136,137

See accompanying notes to the condensed consolidated financial statements.

C.H. ROBINSON WORLDWIDE, INC.

Condensed Consolidated Statements of Stockholders’ Investment

(unaudited, 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, 2020	134,298	$	13,430	$	566,022	$	4,372,833	$	(45,998)	$	(3,026,354)	$	1,879,933
Net income						173,305						173,305
Foreign currency adjustments								(7,286)				(7,286)
Dividends declared, $0.51 per share						(69,606)						(69,606)
Stock issued for employee benefit plans	357	36		(21,805)						18,766		(3,003)
Issuance of restricted stock, net of forfeitures	(26)	(3)		3								—
Stock-based compensation expense	—	—		23,989						—		23,989
Repurchase of common stock	(1,386)	(139)								(129,006)		(129,145)
Balance March 31, 2021	133,243	13,324		568,209		4,476,532		(53,284)		(3,136,594)		1,868,187
Net income						193,789						193,789
Foreign currency adjustments								(162)				(162)
Dividends declared, $0.51 per share						(69,094)						(69,094)
Stock issued for employee benefit plans	250	25		418						16,151		16,594

Stock-based compensation expense	—	—		29,161						—		29,161
Repurchase of common stock	(1,358)	(136)								(132,169)		(132,305)
Balance June 30, 2021	132,135	$	13,213	$	597,788	$	4,601,227	$	(53,446)	$	(3,252,612)	$	1,906,170
Net income						247,053						247,053
Foreign currency adjustments								(12,034)				(12,034)
Dividends declared, $0.51 per share						(68,316)						(68,316)
Stock issued for employee benefit plans	91	9		(1,418)						5,755		4,346
Stock-based compensation expense	—	—		40,812						—		40,812
Repurchase of common stock	(1,850)	(184)								(167,047)		(167,231)
Balance September 30, 2021	130,376	$	13,038	$	637,182	$	4,779,964	$	(65,480)	$	(3,413,904)	$	1,950,800

C.H. ROBINSON WORLDWIDE, INC.

Condensed Consolidated Statements of Stockholders’ Investment, continued

(unaudited, in thousands, except per share data)


	Common Shares Outstanding	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Investment
Balance December 31, 2019	134,895	$	13,490	$	546,646	$	4,144,834	$	(76,149)	$	(2,958,091)	$	1,670,730
Net income						78,146						78,146
Foreign currency adjustments								(32,195)				(32,195)
Dividends declared, $0.51 per share						(69,871)						(69,871)
Stock issued for employee benefit plans	343	34		(24,192)						21,632		(2,526)
Issuance of restricted stock, net of forfeitures	321	32		(32)								—
Stock-based compensation expense	—	—		11,397						—		11,397
Repurchase of common stock	(973)	(97)								(68,466)		(68,563)
Balance March 31, 2020	134,586	13,459		533,819		4,153,109		(108,344)		(3,004,925)		1,587,118
Net income						143,939						143,939
Foreign currency adjustments								24,253				24,253
Dividends declared, $0.51 per share						(69,791)						(69,791)
Stock issued for employee benefit plans	138	13		(1,165)						9,007		7,855
Stock-based compensation expense	—	—		10,954						—		10,954
Balance June 30, 2020	134,724	$	13,472	$	543,608	$	4,227,257	$	(84,091)	$	(2,995,918)	$	1,704,328
Net income						136,529						136,529
Foreign currency adjustments								13,236				13,236
Dividends declared, $0.51 per share						(70,188)						(70,188)
Stock issued for employee benefit plans	1,176	118		1,032						77,528		78,678

Stock-based compensation expense	—	—		10,776						—		10,776

Balance September 30, 2020	135,900	$	13,590	$	555,416	$	4,293,598	$	(70,855)	$	(2,918,390)	$	1,873,359

See accompanying notes to the condensed consolidated financial statements.

C.H. ROBINSON WORLDWIDE, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)


	Nine Months Ended September 30,
	2021		2020
OPERATING ACTIVITIES
Net income	$	614,147	$	358,614
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization	68,621		77,067
Provision for credit losses	3,979		12,701
Stock-based compensation	93,962		33,127
Deferred income taxes	(11,683)		(9,468)
Excess tax benefit on stock-based compensation	(10,830)		(17,127)
Other operating activities	1,384		13,104
Changes in operating elements, net of acquisitions:
Receivables	(1,290,485)		(367,538)
Contract assets	(220,889)		(56,131)
Prepaid expenses and other	(38,525)		12,331
Accounts payable and outstanding checks	595,036		186,755
Accrued compensation	35,413		16,458
Accrued transportation expense	165,580		46,396
Accrued income taxes	6,400		17,125
Other accrued liabilities	4,947		8,907
Other assets and liabilities	2,043		4,728
Net cash provided by operating activities	19,100		337,049

INVESTING ACTIVITIES
Purchases of property and equipment	(26,503)		(17,446)
Purchases and development of software	(26,062)		(22,815)
Acquisitions, net of cash acquired	(14,749)		(223,230)

Other investing activities	—		5,525
Net cash used for investing activities	(67,314)		(257,966)

FINANCING ACTIVITIES
Proceeds from stock issued for employee benefit plans	43,183		100,542
Stock tendered for payment of withholding taxes	(25,246)		(16,535)
Repurchase of common stock	(428,801)		(68,563)
Cash dividends	(208,926)		(207,428)

Payments on long-term borrowings	(2,048)		—
Proceeds from short-term borrowings	2,768,000		1,043,600
Payments on short-term borrowings	(2,136,251)		(1,126,600)


Net cash provided by (used for) financing activities	9,911		(274,984)

Effect of exchange rates on cash and cash equivalents	(2,844)		612
Net change in cash and cash equivalents	(41,147)		(195,289)
Cash and cash equivalents, beginning of period	243,796		447,858
Cash and cash equivalents, end of period	$	202,649	$	252,569

See accompanying notes to the condensed consolidated financial statements.

C.H. ROBINSON WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

C.H. Robinson Worldwide, Inc., and our subsidiaries (“the company,” “we,” “us,” or “our”) are a global provider of transportation services and logistics solutions operating through a network of offices located in North America, Europe, Asia, Oceania, and South America. The consolidated financial statements include the accounts of C.H. Robinson Worldwide, Inc., and our majority owned and controlled subsidiaries. Our minority interests in subsidiaries are not significant. All intercompany transactions and balances have been eliminated in the consolidated financial statements.

Our reportable segments are NAST and Global Forwarding with all other segments included in All Other and Corporate. The All Other and Corporate reportable segment includes Robinson Fresh, Managed Services, Other Surface Transportation outside of North America, and other miscellaneous revenues and unallocated corporate expenses. For financial information concerning our reportable segments, refer to Note 9, Segment Reporting.

The condensed consolidated financial statements, which are unaudited, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

Consistent with SEC rules and regulations, we have condensed or omitted certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States. You should read the condensed consolidated financial statements and related notes in conjunction with the consolidated financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2020.

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional practical expedients to simplify accounting for reference rate reform. Amongst other practical expedients, the update allows for contract modifications due to reference rate reform for certain receivables and debt contracts to be accounted for by prospectively adjusting the effective interest rate. The amendments in this ASU are effective for all entities beginning on March 12, 2020, and companies may elect to apply the amendments prospectively through December 31, 2022. As of September 30, 2021, we have not utilized any of the expedients discussed within this ASU. We will continue to assess our agreements to determine if LIBOR is included and if the expedients will be utilized during the allowed period through December 31, 2022.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020, includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements.

NOTE 2. GOODWILL AND OTHER INTANGIBLE ASSETS

The change in carrying amount of goodwill is as follows (in thousands):


	NAST		Global Forwarding		All Other and Corporate		Total
Balance, December 31, 2020	$	1,203,972	$	213,982	$	69,233	$	1,487,187
Acquisitions	243		—		10,754		10,997
Foreign currency translation	(7,894)		(2,668)		(1,423)		(11,985)
Balance September 30, 2021	$	1,196,321	$	211,314	$	78,564	$	1,486,199

Goodwill is tested at least annually for impairment on November 30, or more frequently if events or changes in circumstances indicate that the asset might be impaired. We first perform a qualitative assessment to determine whether it is more likely than not that the fair value of our reporting units is less than their respective carrying value (“Step Zero Analysis”). If the Step Zero Analysis indicates it is more likely than not that the fair value of our reporting units is less than their respective carrying value, an additional impairment assessment is performed (“Step One Analysis”). We considered whether there were any changes in circumstances indicating that our goodwill might be impaired, including consideration of the ongoing impacts of the COVID-19

pandemic on financial markets and our business operations, and determined the more likely than not criteria had not been met, and therefore a Step One Analysis was not required as of September 30, 2021.

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


	September 30, 2021						December 31, 2020
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Finite-lived intangibles
Customer relationships	$	169,540	$	(82,115)	$	87,425	$	171,684	$	(67,312)	$	104,372
Trademarks	—		—		—		1,875		(937)		938
Total finite-lived intangibles	169,540		(82,115)		87,425		173,559		(68,249)		105,310
Indefinite-lived intangibles
Trademarks	8,600		—		8,600		8,600		—		8,600
Total intangibles	$	178,140	$	(82,115)	$	96,025	$	182,159	$	(68,249)	$	113,910

Amortization expense for other intangible assets is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Amortization expense	$	6,130	$	9,937	$	19,416	$	27,968

Finite-lived intangible assets, by reportable segment, as of September 30, 2021, will be amortized over their remaining lives as follows (in thousands):


	NAST		Global Forwarding		All Other and Corporate		Total
Remaining 2021	$	2,024	$	3,738	$	293	$	6,055
2022	8,096		14,953		1,171		24,220
2023	8,096		12,304		1,171		21,571
2024	7,991		3,778		1,171		12,940
2025	7,857		2,479		1,171		11,507
Thereafter	9,168		403		1,561		11,132
Total							$	87,425

NOTE 3. FAIR VALUE MEASUREMENT

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.
Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3 — Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.

We had no Level 3 assets or liabilities as of and during the periods ended September 30, 2021 and December 31, 2020. There were no transfers between levels during the period.

NOTE 4. FINANCING ARRANGEMENTS

The components of our short-term and long-term debt and the associated interest rates were as follows (dollars in thousands):


	Average interest rate as of					Carrying value as of
	September 30, 2021		December 31, 2020		Maturity	September 30, 2021		December 31, 2020
Revolving credit facility	1.20	%	—	%	October 2023	$	632,000	$	—
Senior Notes, Series A	3.97	%	3.97	%	August 2023	175,000		175,000
Senior Notes, Series B	4.26	%	4.26	%	August 2028	150,000		150,000
Senior Notes, Series C	4.60	%	4.60	%	August 2033	175,000		175,000

Senior Notes (1)	4.20	%	4.20	%	April 2028	593,950		593,301
Total debt						1,725,950		1,093,301
Less: Current maturities and short-term borrowing						(632,000)		—
Long-term debt						$	1,093,950	$	1,093,301

(1) Net of unamortized discounts and issuance costs.

SENIOR UNSECURED REVOLVING CREDIT FACILITY

We have a senior unsecured revolving credit facility (the "Credit Agreement") with a total availability of $1 billion and a maturity date of October 24, 2023. Borrowings under the Credit Agreement generally bear interest at a variable rate determined by a pricing schedule or the base rate (which is the highest of (a) the administrative agent's prime rate, (b) the federal funds rate plus 0.50 percent, or (c) the sum of applicable LIBOR plus 1.13 percent). In addition, there is a commitment fee on the average daily undrawn stated amount under each letter of credit issued under the facility ranging from 0.075 percent to 0.200 percent. The recorded amount of borrowings outstanding, if any, approximates fair value because of the short maturity period of the debt.

The Credit Agreement contains various restrictions and covenants that require us to maintain certain financial ratios, including a maximum leverage ratio of 3.50 to 1.00. The Credit Agreement also contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then the administrative agent may declare any outstanding obligations under the Credit Agreement to be immediately due and payable. In addition, if we become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency, or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable.

NOTE PURCHASE AGREEMENT

On August 23, 2013, we entered into a Note Purchase Agreement with certain institutional investors (the “Purchasers”). On August 27, 2013, the Purchasers purchased an aggregate principal amount of $500 million of our Senior Notes, Series A, Senior Notes Series B, and Senior Notes Series C (collectively the “Notes”). Interest on the Notes is payable semi-annually in arrears. The fair value of the Notes approximated $546.0 million at September 30, 2021.

The Note Purchase Agreement contains various restrictions and covenants that require us to maintain certain financial ratios, including a maximum leverage ratio of 3.00 to 1.00, a minimum interest coverage ratio of 2.00 to 1.00, and a maximum consolidated priority debt to consolidated total asset ratio of 15 percent.

The Note Purchase Agreement provides for customary events of default. The occurrence of an event of default would permit certain Purchasers to declare certain Notes then outstanding to be immediately due and payable. Under the terms of the Note Purchase Agreement, the Notes are redeemable, in whole or in part, at 100 percent of the principal amount being redeemed together with a “make-whole amount” (as defined in the Note Purchase Agreement), and accrued and unpaid interest with respect to each Note. The obligations of the company under the Note Purchase Agreement and the Notes are guaranteed by C.H. Robinson Company, a Delaware corporation and a wholly-owned subsidiary of the company, and by C.H. Robinson Company, Inc., a Minnesota corporation and an indirect wholly-owned subsidiary of the company.

COMBINEX CREDIT FACILITY

On June 3, 2021, we assumed a credit facility as part of our acquisition of Combinex Holding B.V. (“Combinex”) with total availability of approximately $3.6 million and a maturity date of January 18, 2027. We paid off the $2.2 million balance of this facility in September 2021. For more information regarding the Combinex acquisition, refer to Note 8, Acquisitions.

SENIOR NOTES

On April 9, 2018, we issued senior unsecured notes ("Senior Notes") through a public offering. The Senior Notes bear an annual interest rate of 4.20 percent payable semi-annually on April 15 and October 15, until maturity on April 15, 2028. Taking into effect the amortization of the original issue discount and all underwriting and issuance expenses, the Senior Notes have an effective yield to maturity of approximately 4.39 percent per annum. The fair value of the Senior Notes, excluding debt discounts and issuance costs, approximated $680.2 million as of September 30, 2021, based primarily on the market prices quoted from external sources. The carrying value of the Senior Notes was $594.0 million as of September 30, 2021.

We may redeem the Senior Notes, in whole or in part, at any time and from time to time prior to their maturity at the applicable redemption prices described in the Senior Notes. Upon the occurrence of a “change of control triggering event” as defined in the Senior Notes (generally, a change of control of us accompanied by a reduction in the credit rating for the Senior Notes), we will generally be required to make an offer to repurchase the Senior Notes from holders at 101 percent of their principal amount plus accrued and unpaid interest to the date of repurchase.

The Senior Notes were issued under an indenture that contains covenants imposing certain limitations on our ability to incur liens or enter into sale and leaseback transactions above certain limits; and consolidate, or merge or transfer substantially all of our assets and those of our subsidiaries on a consolidated basis. It also provides for customary events of default (subject in certain cases to customary grace and cure periods), which include among other things nonpayment, breach of covenants in the indenture, and certain events of bankruptcy and insolvency. If an event of default occurs and is continuing with respect to the Senior Notes, the trustee or holders of at least 25 percent in principal amount outstanding of the Senior Notes may declare the principal and the accrued and unpaid interest, if any, on all of the outstanding Senior Notes to be due and payable. These covenants and events of default are subject to a number of important qualifications, limitations, and exceptions that are described in the indenture. The indenture does not contain any financial ratios or specified levels of net worth or liquidity to which we must adhere.

In addition to the above financing agreements, we have a $15 million discretionary line of credit with US Bank of which $8 million is currently utilized for standby letters of credit related to insurance collateral as of September 30, 2021. These standby letters of credit are renewed annually and were undrawn as of September 30, 2021.

We estimate the fair value of our financing arrangements primarily using an expected present value technique, which is based on observable market inputs using interest rates currently available to companies of similar credit standing for similar terms and remaining maturities, and considering our risk. These are considered Level 2 financial liabilities.

U.S. TRADE ACCOUNTS RECEIVABLE SECURITIZATION

We had a receivables securitization facility (the “Receivables Securitization Facility”) that expired on December 17, 2020 and was not renewed. The Receivables Securitization Facility was based on the securitization of certain of our U.S. trade accounts receivable and provided funding of up to $250 million. The trade accounts receivable under the facility were owned by C.H. Robinson Receivables LLC and were not available to the creditors of C.H. Robinson Worldwide, Inc., and our subsidiaries. The interest rate on borrowings under the Receivables Securitization Facility was based on one-month LIBOR plus 0.65 percent. There was also a commitment fee we were required to pay on any unused portion of the facility.

NOTE 5. INCOME TAXES

A reconciliation of the provision for income taxes using the statutory federal income tax rate to our effective income tax rate for the three and nine months ended September 30, 2021and 2020, is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	0.6		2.0		1.5		2.4
Share based payment awards	0.4		(3.8)		(0.8)		(4.1)
Foreign tax credits	(0.1)		(5.2)		(0.3)		(3.1)
Foreign	(4.2)		0.3		(1.5)		1.2
Other	(1.7)		0.8		(1.4)		(0.1)
Effective income tax rate	16.0	%	15.1	%	18.5	%	17.3	%

We have asserted that the unremitted earnings of a limited number of our foreign subsidiaries are permanently reinvested to support expansion of our international business. If we repatriated all foreign earnings that are considered to be permanently reinvested, the estimated effect on income taxes payable would be an increase of approximately $2.0 million as of September 30, 2021.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in response to the COVID-19 pandemic. The CARES Act allowed for a deferral of the employer share of federal payroll taxes otherwise due through December 31, 2020. 50 percent of the deferred amount is due December 31, 2021 and the remaining 50 percent is due December 31, 2022. This provision allowed us to defer certain federal payroll deposits and invest this cash back into the business without any interest cost. The CARES Act also provided for a tax credit related to wages and health benefits provided to an employee whose work from March 17, 2020 through June 30, 2021 was impacted by COVID-19. The Consolidated Appropriations Act signed into law on December 27, 2020, extended the tax credit through June 30, 2021, and increased the maximum credit per employee from $5,000 per year in 2020 to $7,000 per quarter in 2021. Through September 30, 2021, we have recognized a payroll deferral and tax credit of $28.5 million and $0.7 million, respectively, under the CARES Act and The Consolidated Appropriations Act. We will continue evaluating the impact of both acts over the remainder of 2021.

As of September 30, 2021, we have $40.0 million of unrecognized tax benefits and related interest and penalties. It is possible the amount of unrecognized tax benefit could change in the next 12 months as a result of a lapse of the statute of limitations and settlements with taxing authorities. The total liability for unrecognized tax benefits is expected to decrease by approximately $5.6 million in the next 12 months due to the lapsing of statutes of limitations. With few exceptions, we are no longer subject to audits of U.S. federal, state and local, or non-U.S. income tax returns before 2014. We are currently under an Internal Revenue Service audit for 2015, 2016 and 2017 tax years.

NOTE 6. STOCK AWARD PLANS

Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense as it vests. A summary of our total compensation expense recognized in our condensed consolidated statements of operations and comprehensive income for stock-based compensation is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Stock options	$	4,070	$	5,081	$	12,064	$	15,119
Stock awards	36,012		5,042		79,361		15,736
Company expense on ESPP discount	730		653		2,537		2,272
Total stock-based compensation expense	$	40,812	$	10,776	$	93,962	$	33,127

On May 9, 2019, our shareholders approved an amendment and restatement of our 2013 Equity Incentive Plan (the “Plan”) to increase the number of shares authorized for award by 4,000,000 shares. The Plan allows us to grant certain stock awards, including stock options at fair market value and performance shares and restricted stock units, to our key employees and outside directors. A maximum of 17,041,803 shares can be granted under this plan following the amendment and restatement. Approximately 1,765,322 shares were available for stock awards under the plan as of September 30, 2021. Shares subject to

awards that expire or are canceled without delivery of shares or that are settled in cash generally become available again for issuance under the plan.

Stock Options - We have awarded stock options to certain key employees through 2020. The fair value of these options was established based on the market price on the date of grant calculated using the Black-Scholes option pricing model. Changes in measured stock price volatility and interest rates were the primary reasons for changes in the fair value. These grants are being expensed based on the terms of the awards. As of September 30, 2021, unrecognized compensation expense related to stock options was $30.6 million. The amount of future expense to be recognized will be based on the passage of time and the employees' continued employment.

Stock Awards - We have awarded performance-based restricted shares through 2020. We have also awarded performance-based restricted stock units and time-based restricted stock units to certain key employees and non-employee directors. Performance-based awards are subject to certain vesting requirements based on our earnings and adjusted gross profit growth. Time-based awards vest primarily based on the employee's continued employment. The awards also contain restrictions on the awardees’ ability to sell or transfer vested awards for a specified period of time. The fair value of these awards is established based on the market price on the date of grant, discounted for post-vesting holding restrictions. The discounts on outstanding grants vary from 12 percent to 24 percent and are calculated using the Black-Scholes option pricing model-protective put method. Differences in post-holding restrictions, measured stock price volatility and interest rates are the primary reasons for changes in the discount. These grants are being expensed based on the terms of the awards.

We granted 280,255 performance-based restricted stock units and 619,689 time-based restricted stock units on February 3, 2021. The performance-based and time-based awards had a weighted average grant date fair value of $74.76 and $71.28, respectively, and are eligible to vest over a three-year period with a first vesting date of December 31, 2021. The performance-based awards vest based on our earnings and adjusted gross profit growth and include an upside opportunity of 200 percent upon attaining established earnings and adjusted gross profit growth targets.

We have also issued restricted stock units to certain key employees and non-employee directors, which are fully vested upon issuance. These units contain restrictions on the awardees’ ability to sell or transfer vested units for a specified period of time. The fair value of these units is established using the same method discussed above. These grants have been expensed during the year they were earned.

As of September 30, 2021, there was unrecognized compensation expense of $99.9 million related to previously granted full value awards. The amount of future expense to be recognized will be based on the passage of time, the company’s earnings and adjusted gross profit growth, and certain other conditions.

Employee Stock Purchase Plan - Our 1997 Employee Stock Purchase Plan ("ESPP") allows our employees to contribute up to $10,000 of their annual cash compensation to purchase company stock. Purchase price is determined using the closing price on the last day of each quarter discounted by 15 percent. Shares vest immediately. The following is a summary of the employee stock purchase plan activity (dollars in thousands):


Three Months Ended September 30, 2021
Shares purchased by employees	Aggregate cost to employees		Expense recognized by the company
55,904	$	4,134	$	730

NOTE 7. LITIGATION

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

NOTE 8. ACQUISITIONS

Combinex Holding B.V.

On June 3, 2021 we acquired all of the outstanding shares of Combinex to strengthen our European road transportation presence. Total purchase consideration, net of cash acquired was $14.7 million, which was paid in cash.

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


			Estimated Life (years)
Customer relationships			7						$	3,942

There was $10.8 million of goodwill recorded related to the acquisition of Combinex. The Combinex goodwill is a result of acquiring and retaining the Combinex workforce and expected synergies from integrating its business into ours. Purchase accounting is considered preliminary. The goodwill will not be deductible for tax purposes. The results of operations of Combinex have been included as part of the All Other and Corporate segment in our consolidated financial statements since June 3, 2021.

Prime Distribution Services

On March 2, 2020, we acquired all of the outstanding shares of Prime Distribution Services (“Prime Distribution”), a leading provider of retail consolidation services in North America, for $222.7 million in cash. This acquisition adds scale and value-added warehouse capabilities to our retail consolidation platform, adding to our global suite of services.

The following is a summary of the allocation of purchase consideration to the estimated fair value of net assets for the acquisition of Prime Distribution.


Current assets	$	8,879
Property and equipment	7,356
Right-of-use lease assets	35,017
Other intangible assets	55,000
Goodwill	176,727
Total assets	282,979

Current liabilities	12,243
Lease liabilities	35,017
Deferred tax liabilities	13,001
Net assets acquired	$	222,718

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


			Estimated Life (years)
Customer relationships			7						$	55,000

There was $176.7 million of goodwill recorded related to the acquisition of Prime Distribution. The Prime Distribution goodwill is a result of acquiring and retaining the Prime Distribution workforce and expected synergies from integrating its business into ours. Purchase accounting is considered complete. The goodwill will not be deductible for tax purposes. The acquisition was effective as of February 29, 2020, and therefore the results of operations of Prime Distribution have been included as part of the North American Surface Transportation segment in our consolidated financial statements since March 1, 2020.

NOTE 9. SEGMENT REPORTING

Our reportable segments are based on our method of internal reporting, which generally segregates the segments by service line and the primary services they provide to our customers. We identify two reportable segments in addition to All Other and Corporate as summarized below:

North American Surface Transportation—**NAST provides freight transportation services across North America through a network of offices in the United States, Canada, and Mexico. The primary services provided by NAST include truckload and less than truckload (“LTL”) transportation services.
Global Forwarding—**Global Forwarding provides global logistics services through an international network of offices in North America, Asia, Europe, Oceania, and South America and also contracts with independent agents worldwide. The primary services provided by Global Forwarding include ocean freight services, air freight services, and customs brokerage.
All Other and Corporate—**All Other and Corporate includes our Robinson Fresh and Managed Services segments, as well as Other Surface Transportation outside of North America and other miscellaneous revenues and unallocated corporate expenses. Robinson Fresh provides sourcing services including the buying, selling, and marketing of fresh fruits, vegetables, and other perishable items. Managed Services provides Transportation Management Services, or Managed TMS®. Other Surface Transportation revenues are primarily earned by Europe Surface Transportation. Europe Surface Transportation provides transportation and logistics services including truckload and groupage services across Europe.

The internal reporting of segments is defined, based in part, on the reporting and review process used by our chief operating decision maker (“CODM”), our Chief Executive Officer. The accounting policies of our reportable segments are the same as those described in the summary of significant accounting policies. We do not report our intersegment revenues by reportable segment to our CODM and do not believe they are a meaningful metric for evaluating the performance of our reportable segments.

Reportable segment information as of, and for the three and nine months ended September 30, 2021 and 2020, is as follows (dollars in thousands):


	NAST		Global Forwarding		All Other and Corporate		Consolidated
Three Months Ended September 30, 2021
Total revenues	$	3,814,988	$	1,978,901	$	469,806	$	6,263,695
Income (loss) from operations	149,035		165,155		(3,421)		310,769
Depreciation and amortization	6,620		5,427		10,359		22,406
Total assets(1)	3,437,461		2,438,106		727,039		6,602,606
Average headcount	6,764		5,167		4,037		15,968

	NAST		Global Forwarding		All Other and Corporate		Consolidated
Three Months Ended September 30, 2020
Total revenues	$	2,923,842	$	831,957	$	469,001	$	4,224,800
Income (loss) from operations	122,526		46,299		(586)		168,239
Depreciation and amortization	7,095		9,385		10,436		26,916
Total assets(1)	3,041,974		1,148,118		884,746		5,074,838
Average headcount	6,702		4,607		3,595		14,904


	NAST		Global Forwarding		All Other and Corporate		Consolidated
Nine Months Ended September 30, 2021
Total revenues	$	10,611,892	$	4,585,734	$	1,402,664	$	16,600,290
Income (loss) from operations	436,911		363,956		(6,165)		794,702
Depreciation and amortization	19,779		17,352		31,490		68,621
Total assets(1)	3,437,461		2,438,106		727,039		6,602,606
Average headcount	6,650		4,951		3,881		15,482

	NAST		Global Forwarding		All Other and Corporate		Consolidated
Nine Months Ended September 30, 2020
Total revenues	$	8,222,879	$	2,070,161	$	1,364,614	$	11,657,654
Income (loss) from operations	357,898		117,033		(8,465)		466,466
Depreciation and amortization	19,550		27,740		29,777		77,067
Total assets(1)	3,041,974		1,148,118		884,746		5,074,838
Average headcount	6,870		4,716		3,591		15,177

(1) All cash and cash equivalents are included in All Other and Corporate.

NOTE 10. REVENUE FROM CONTRACTS WITH CUSTOMERS

A summary of our total revenues disaggregated by major service line and timing of revenue recognition is presented below for each of our reportable segments for the three and nine months ended September 30, 2021 and 2020 (in thousands):


	Three Months Ended September 30, 2021
	NAST		Global Forwarding		All Other and Corporate		Total
Major Service Lines
Transportation and logistics services(1)	$	3,814,988	$	1,978,901	$	206,012	$	5,999,901
Sourcing(2)	—		—		263,794		263,794
Total	$	3,814,988	$	1,978,901	$	469,806	$	6,263,695

	Three Months Ended September 30, 2020
	NAST		Global Forwarding		All Other and Corporate		Total
Major Service Lines
Transportation and logistics services(1)	$	2,923,842	$	831,957	$	189,182	$	3,944,981
Sourcing(2)	—		—		279,819		279,819
Total	$	2,923,842	$	831,957	$	469,001	$	4,224,800


	Nine Months Ended September 30, 2021
	NAST		Global Forwarding		All Other and Corporate		Total
Major Service Lines
Transportation and logistics services(1)	$	10,611,892	$	4,585,734	$	602,950	$	15,800,576
Sourcing(2)	—		—		799,714		799,714
Total	$	10,611,892	$	4,585,734	$	1,402,664	$	16,600,290

	Nine Months Ended September 30, 2020
	NAST		Global Forwarding		All Other and Corporate		Total
Major Service Lines
Transportation and logistics services(1)	$	8,222,879	$	2,070,161	$	542,670	$	10,835,710
Sourcing(2)	—		—		821,944		821,944
Total	$	8,222,879	$	2,070,161	$	1,364,614	$	11,657,654

(1) Transportation and logistics services performance obligations are completed over time.

(2) Sourcing performance obligations are completed at a point in time.

We typically do not receive consideration and amounts are not due from our customer prior to the completion of our performance obligation and as such contract liabilities, as of September 30, 2021, and revenue recognized in the three and nine months ended September 30, 2021 and 2020 resulting from contract liabilities, were not significant. Contract assets and accrued expenses-transportation expense fluctuate from period to period primarily based upon shipments in-transit at period end.

NOTE 11. LEASES

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

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

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

We do not have material lease agreements that have not yet commenced that are expected to create significant rights or obligations as of September 30, 2021.

Information regarding lease expense, remaining lease term, discount rate, and other select lease information is presented below as of September 30, 2021, and for the three and nine months ended September 30, 2021 (dollars in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
Lease Costs	2021		2020		2021		2020
Operating lease expense	$	21,220	$	22,373	$	64,241	$	63,855
Short-term lease expense	2,871		3,626		5,934		10,225
Total lease expense	$	24,091	$	25,999	$	70,175	$	74,080


	Nine Months Ended September 30,
Other Lease Information	2021		2020
Operating cash flows from operating leases	$	70,997	$	60,569
Right-of-use lease assets obtained in exchange for new lease liabilities	38,028		88,857


Lease Term and Discount Rate	As of September 30, 2021
Weighted average remaining lease term (in years)(1)	6.5
Weighted average discount rate	3.0	%

(1) The weighted average remaining lease term is significantly impacted by a 15-year lease related to office space in Chicago, IL, that commenced in 2018. Excluding this lease, the weighted average remaining lease term of our agreements is 4.4 years.

The maturities of lease liabilities as of September 30, 2021, were as follows (in thousands):


Maturity of Lease Liabilities	Operating Leases
Remaining 2021	$	14,165
2022	79,177
2023	65,008
2024	44,974
2025	33,834
Thereafter	112,063
Total lease payments	349,221
Less: Interest	(36,849)
Present value of lease liabilities	$	312,372

In addition to minimum lease payments, we are typically responsible under our lease agreements to pay our pro rata share of maintenance expenses, common charges, and real estate taxes of the buildings in which we lease space. Under ASC 842, we have elected to account for non-lease components such as common area maintenance and parking as a single lease component.

NOTE 12. ALLOWANCE FOR CREDIT LOSSES

Our allowance for credit losses is computed using a number of factors including our past credit loss experience, the aging of amounts due from our customers, and our customers' credit ratings, in addition to other customer specific factors. We have also assessed the current macroeconomic environment, including the impact of the COVID-19 pandemic, to determine our ending allowance for credit losses for both accounts receivable and contract assets. The allowance for credit losses on contract assets was not significant.

A rollforward of our allowance for credit losses on our accounts receivable balance is presented below for the nine months ended September 30, 2021:


Balance, December 31, 2020	$	38,113
Provision	2,885
Write-offs	(3,884)
Balance, September 30, 2021	$	37,114

Recoveries of amounts previously written off were not significant for the three and nine months ended September 30, 2021.

NOTE 13. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss is included in Stockholders' investment on our condensed consolidated balance sheets. The recorded balance at September 30, 2021 and December 31, 2020, was $65.5 million and $46.0 million, respectively. Accumulated other comprehensive loss is comprised solely of foreign currency adjustments at September 30, 2021 and December 31, 2020.

Other comprehensive loss was $12.0 million compared to other comprehensive income of $13.2 million for the three months ended September 30, 2021 and 2020, respectively. Other comprehensive loss was $19.5 million compared to other comprehensive income of $5.3 million for the nine months ended September 30, 2021 and 2020, respectively. Other comprehensive loss and income consisted of foreign currency adjustments, including foreign currency translation, for the three and nine months ended September 30, 2021 and 2020.

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