filings.toolsItem 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)
| June 30, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 113,166 | $ | 145,524 | |||||||
| Receivables, net of allowance for credit loss of $16,845 and $14,229 | 2,650,800 | 2,381,963 | |||||||||
| Contract assets, net of allowance for credit loss | 260,401 | 189,900 | |||||||||
| Prepaid expenses and other | 154,807 | 163,307 | |||||||||
| Total current assets | 3,179,174 | 2,880,694 | |||||||||
| Property and equipment, net of accumulated depreciation and amortization | 139,636 | 144,718 | |||||||||
| Goodwill | 1,468,605 | 1,473,600 | |||||||||
| Other intangible assets, net of accumulated amortization | 36,763 | 43,662 | |||||||||
| Right-of-use lease assets | 351,823 | 353,890 | |||||||||
| Deferred tax assets | 226,396 | 214,619 | |||||||||
| Other assets | 109,949 | 114,097 | |||||||||
| Total assets | $ | 5,512,346 | $ | 5,225,280 | |||||||
| LIABILITIES AND STOCKHOLDERS’ INVESTMENT | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 1,431,662 | $ | 1,303,951 | |||||||
| Outstanding checks | 56,970 | 66,383 | |||||||||
| Accrued expenses: | |||||||||||
| Compensation | 120,819 | 135,104 | |||||||||
| Transportation expense | 211,310 | 147,921 | |||||||||
| Income taxes | 2,483 | 4,748 | |||||||||
| Other accrued liabilities | 158,846 | 159,435 | |||||||||
| Current lease liabilities | 74,123 | 74,451 | |||||||||
| Current portion of debt | 188,000 | 160,000 | |||||||||
| Total current liabilities | 2,244,213 | 2,051,993 | |||||||||
| Long-term debt | 1,421,066 | 1,420,487 | |||||||||
| Noncurrent lease liabilities | 299,564 | 297,563 | |||||||||
| Noncurrent income taxes payable | 21,611 | 21,289 | |||||||||
| Deferred tax liabilities | 11,929 | 13,177 | |||||||||
| Other long-term liabilities | 3,522 | 2,074 | |||||||||
| Total liabilities | 4,001,905 | 3,806,583 | |||||||||
| 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; 179,199 and 179,204 shares issued, 117,262 and 116,768 outstanding | 11,726 | 11,677 | |||||||||
| Additional paid-in capital | 756,135 | 754,093 | |||||||||
| Retained earnings | 5,691,874 | 5,620,790 | |||||||||
| Accumulated other comprehensive loss | (101,749) | (80,946) | |||||||||
| Treasury stock at cost (61,937 and 62,436 shares) | (4,847,545) | (4,886,917) | |||||||||
| Total stockholders’ investment | 1,510,441 | 1,418,697 | |||||||||
| Total liabilities and stockholders’ investment | $ | 5,512,346 | $ | 5,225,280 |
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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Transportation | $ | 4,121,930 | $ | 4,084,827 | $ | 8,204,518 | $ | 8,412,792 | |||||||||||||||
| Sourcing | 361,418 | 337,029 | 691,141 | 620,734 | |||||||||||||||||||
| Total revenues | 4,483,348 | 4,421,856 | 8,895,659 | 9,033,526 | |||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Purchased transportation and related services | 3,470,383 | 3,453,560 | 6,925,379 | 7,124,591 | |||||||||||||||||||
| Purchased products sourced for resale | 325,556 | 302,800 | 625,142 | 557,799 | |||||||||||||||||||
| Personnel expenses | 361,222 | 377,277 | 740,309 | 760,383 | |||||||||||||||||||
| Other selling, general, and administrative expenses | 148,097 | 155,596 | 299,606 | 297,097 | |||||||||||||||||||
| Total costs and expenses | 4,305,258 | 4,289,233 | 8,590,436 | 8,739,870 | |||||||||||||||||||
| Income from operations | 178,090 | 132,623 | 305,223 | 293,656 | |||||||||||||||||||
| Interest and other income/expense, net | (21,525) | (18,259) | (38,305) | (46,524) | |||||||||||||||||||
| Income before provision for income taxes | 156,565 | 114,364 | 266,918 | 247,132 | |||||||||||||||||||
| Provision for income taxes | 30,314 | 17,048 | 47,763 | 34,925 | |||||||||||||||||||
| Net income | 126,251 | 97,316 | 219,155 | 212,207 | |||||||||||||||||||
| Other comprehensive loss | (1,313) | (6,536) | (20,803) | (4,059) | |||||||||||||||||||
| Comprehensive income | $ | 124,938 | $ | 90,780 | $ | 198,352 | $ | 208,148 | |||||||||||||||
| Basic net income per share | $ | 1.06 | $ | 0.82 | $ | 1.84 | $ | 1.79 | |||||||||||||||
| Diluted net income per share | $ | 1.05 | $ | 0.81 | $ | 1.83 | $ | 1.77 | |||||||||||||||
| Basic weighted average shares outstanding | 119,418 | 118,500 | 119,381 | 118,567 | |||||||||||||||||||
| Dilutive effect of outstanding stock awards | 502 | 1,307 | 351 | 1,253 | |||||||||||||||||||
| Diluted weighted average shares outstanding | 119,920 | 119,807 | 119,732 | 119,820 |
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, 2023 | 116,768 | $ | 11,677 | $ | 754,093 | $ | 5,620,790 | $ | (80,946) | $ | (4,886,917) | $ | 1,418,697 | ||||||||||||||||||||||||||||
| Net income | 92,904 | 92,904 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustments | (19,490) | (19,490) | |||||||||||||||||||||||||||||||||||||||
| Dividends declared, $0.61 per share | (74,065) | (74,065) | |||||||||||||||||||||||||||||||||||||||
| Stock issued for employee benefit plans | 232 | 23 | (29,768) | 19,020 | (10,725) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 22,673 | — | 22,673 | ||||||||||||||||||||||||||||||||||||
| Balance March 31, 2024 | 117,000 | 11,700 | 746,998 | 5,639,629 | (100,436) | (4,867,897) | 1,429,994 | ||||||||||||||||||||||||||||||||||
| Net income | 126,251 | 126,251 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustments | (1,313) | (1,313) | |||||||||||||||||||||||||||||||||||||||
| Dividends declared, $0.61 per share | (74,006) | (74,006) | |||||||||||||||||||||||||||||||||||||||
| Stock issued for employee benefit plans | 262 | 26 | (10,435) | 20,352 | 9,943 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 19,572 | — | 19,572 | ||||||||||||||||||||||||||||||||||||
| Balance June 30, 2024 | 117,262 | $ | 11,726 | $ | 756,135 | $ | 5,691,874 | $ | (101,749) | $ | (4,847,545) | $ | 1,510,441 | ||||||||||||||||||||||||||||
| Common Shares Outstanding | Amount | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total Stockholders’ Investment | |||||||||||||||||||||||||||||||||||
| Balance December 31, 2022 | 116,323 | $ | 11,632 | $ | 743,288 | $ | 5,590,440 | $ | (88,860) | $ | (4,903,078) | $ | 1,353,422 | ||||||||||||||||||||||||||||
| Net income | 114,891 | 114,891 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustments | 2,477 | 2,477 | |||||||||||||||||||||||||||||||||||||||
| Dividends declared, $0.61 per share | (73,581) | (73,581) | |||||||||||||||||||||||||||||||||||||||
| Stock issued for employee benefit plans | 430 | 44 | (28,532) | 28,113 | (375) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 15,607 | — | 15,607 | ||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (316) | (32) | (31,021) | (31,053) | |||||||||||||||||||||||||||||||||||||
| Balance March 31, 2023 | 116,437 | 11,644 | 730,363 | 5,631,750 | (86,383) | (4,905,986) | 1,381,388 | ||||||||||||||||||||||||||||||||||
| Net income | 97,316 | 97,316 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustments | (6,536) | (6,536) | |||||||||||||||||||||||||||||||||||||||
| Dividends declared, $0.61 per share | (73,577) | (73,577) | |||||||||||||||||||||||||||||||||||||||
| Stock issued for employee benefit plans | 228 | 22 | (2,154) | 17,338 | 15,206 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 6,035 | — | 6,035 | ||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (330) | (33) | (31,692) | (31,725) | |||||||||||||||||||||||||||||||||||||
| Balance June 30, 2023 | 116,335 | $ | 11,633 | $ | 734,244 | $ | 5,655,489 | $ | (92,919) | $ | (4,920,340) | $ | 1,388,107 | ||||||||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023**(1)** | ||||||||||
| OPERATING ACTIVITIES | |||||||||||
| Net income | $ | 219,155 | $ | 212,207 | |||||||
| Adjustments to reconcile net income to net cash (used for) provided by operating activities: | |||||||||||
| Depreciation and amortization | 48,932 | 50,355 | |||||||||
| Provision for credit losses | 4,298 | (8,397) | |||||||||
| Stock-based compensation | 42,245 | 21,642 | |||||||||
| Deferred income taxes | (13,392) | (21,825) | |||||||||
| Excess tax benefit on stock-based compensation | (2,274) | (8,645) | |||||||||
| Other operating activities | 10,841 | 3,080 | |||||||||
| Changes in operating elements: | |||||||||||
| Receivables | (290,042) | 501,210 | |||||||||
| Contract assets | (70,514) | 69,662 | |||||||||
| Prepaid expenses and other | 8,034 | (23,834) | |||||||||
| Right of use asset | (3,093) | 28,728 | |||||||||
| Accounts payable and outstanding checks | 122,404 | (125,090) | |||||||||
| Accrued compensation | (13,276) | (130,197) | |||||||||
| Accrued transportation expense | 63,389 | (56,524) | |||||||||
| Accrued income taxes | (60) | 3,308 | |||||||||
| Other accrued liabilities | 1,108 | (9,611) | |||||||||
| Lease liability | 3,248 | (26,663) | |||||||||
| Other assets and liabilities | 2,096 | (30) | |||||||||
| Net cash provided by operating activities | 133,099 | 479,376 | |||||||||
| INVESTING ACTIVITIES | |||||||||||
| Purchases of property and equipment | (15,238) | (21,679) | |||||||||
| Purchases and development of software | (26,573) | (29,622) | |||||||||
| Net cash used for investing activities | (41,811) | (51,301) | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Proceeds from stock issued for employee benefit plans | 19,026 | 36,684 | |||||||||
| Stock tendered for payment of withholding taxes | (19,808) | (21,853) | |||||||||
| Repurchase of common stock | — | (62,754) | |||||||||
| Cash dividends | (147,283) | (146,195) | |||||||||
| Proceeds from short-term borrowings | 1,653,000 | 1,861,750 | |||||||||
| Payments on short-term borrowings | (1,625,000) | (2,099,750) | |||||||||
| Net cash used for financing activities | (120,065) | (432,118) | |||||||||
| Effect of exchange rates on cash and cash equivalents | (3,581) | (3,284) | |||||||||
| Net change in cash and cash equivalents | (32,358) | (7,327) | |||||||||
| Cash and cash equivalents, beginning of period | 145,524 | 217,482 | |||||||||
| Cash and cash equivalents, end of period | $ | 113,166 | $ | 210,155 | |||||||
(1) The six months ended June 30, 2023 have been adjusted to conform to current year presentation.
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, South America, and the Middle East. 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 North American Surface Transportation (“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 8, 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, 2023.
RECENTLY ISSUED ACCOUNTING STANDARDS
In November 2023, the FASB issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker. The guidance in this ASU is effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the effects adoption of this guidance will have on our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance in this ASU expands the disclosure requirements for income taxes by requiring greater disaggregation of information in the income tax rate reconciliation and disaggregation of income taxes paid by jurisdiction. The guidance in this ASU is effective for all public entities for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the effects adoption of this guidance will have on our consolidated financial statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2023, 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, 2023 | $ | 1,188,813 | $ | 207,599 | $ | 77,188 | $ | 1,473,600 | |||||||||||||||
| Foreign currency translation | (2,486) | (1,830) | (679) | (4,995) | |||||||||||||||||||
| Balance, June 30, 2024 | $ | 1,186,327 | $ | 205,769 | $ | 76,509 | $ | 1,468,605 |
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”). As part of our 2023 annual impairment test, we determined that the fair value of our reporting units exceeded their respective carrying values and our goodwill balance was not impaired.
In the second quarter of 2024, we identified qualitative and quantitative factors indicating that the fair value of our Europe Surface Transportation reporting unit may not exceed its carrying value requiring an interim Step One Analysis. As a result of our interim Step One Analysis, we determined that the fair value of our Europe Surface Transportation reporting unit exceeded its carrying value by less than 5 percent and its $29.2 million goodwill balance was not impaired.
Our interim Step One Analysis was completed using a combination of the market approach and a discounted cash flow analysis. The market approach was completed to determine the fair value of the Europe Surface Transportation business, excluding its proprietary technology platform, and was based upon available third-party offers to acquire the business at the measurement date. As the offers to acquire the business did not include the sale of a technology platform necessary to run the business, a discounted cash flow analysis was completed to determine the fair value of the Europe Surface Transportation proprietary technology platform. The computed fair value of the reporting unit exceeded its carrying value by less than 5 percent and therefore the judgments, key assumptions, and third-party offers to acquire the business are inherently sensitive inputs to our interim Step One Analysis. A negative change to the Europe Surface Transportation market could have negatively impacted the third-party offers to acquire the business used in our interim Step One Analysis although as noted in Note 14, Subsequent Events, the Company has entered into an agreement to sell the business excluding its proprietary technology platform. A change to the timing or cash outflows needed for a market participant to implement a comparable technology platform and changes to our computed discount rate are the primary factors that could reasonably be expected to negatively affect the fair value determined by our discounted cash flow analysis. We will continue to monitor any changes to the assumptions included in our discounted cash flow analysis in future periods as needed.
There were no changes in circumstances or events identified in the second quarter of 2024 indicating that an interim impairment analysis was required for any other reporting units as of June 30, 2024.
Identifiable intangible assets consisted of the following (in thousands):
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Cost | Accumulated Amortization | Net | Cost | Accumulated Amortization | Net | ||||||||||||||||||||||||||||||
| Finite-lived intangibles | |||||||||||||||||||||||||||||||||||
| Customer relationships | $ | 92,366 | $ | (64,203) | $ | 28,163 | $ | 93,499 | $ | (58,437) | $ | 35,062 | |||||||||||||||||||||||
| Indefinite-lived intangibles | |||||||||||||||||||||||||||||||||||
| Trademarks | 8,600 | — | 8,600 | 8,600 | — | 8,600 | |||||||||||||||||||||||||||||
| Total intangibles | $ | 100,966 | $ | (64,203) | $ | 36,763 | $ | 102,099 | $ | (58,437) | $ | 43,662 |
Amortization expense for other intangible assets is as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Amortization expense | $ | 3,303 | $ | 5,773 | $ | 6,616 | $ | 11,588 |
Finite-lived intangible assets, by reportable segment, as of June 30, 2024, will be amortized over their remaining lives as follows (in thousands):
| NAST | Global Forwarding | All Other and Corporate | Total | ||||||||||||||||||||
| Remainder of 2024 | $ | 3,966 | $ | 1,473 | $ | 538 | $ | 5,977 | |||||||||||||||
| 2025 | 7,857 | 2,279 | 1,076 | 11,212 | |||||||||||||||||||
| 2026 | 7,857 | 372 | 736 | 8,965 | |||||||||||||||||||
| 2027 | 1,310 | — | 493 | 1,803 | |||||||||||||||||||
| 2028 | — | — | 206 | 206 | |||||||||||||||||||
| Total | $ | 28,163 |
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 June 30, 2024, and December 31, 2023. 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 | |||||||||||||||||||||||||||||||
| June 30, 2024 | December 31, 2023 | Maturity | June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||
| Revolving credit facility | 6.57 | % | 6.45 | % | November 2027 | $ | 188,000 | $ | 160,000 | |||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||
| Receivables Securitization Facility (1) | 6.24 | % | 6.25 | % | November 2025 | 499,667 | 499,542 | |||||||||||||||||||||||||
| Senior Notes (1) | 4.20 | % | 4.20 | % | April 2028 | 596,399 | 595,945 | |||||||||||||||||||||||||
| Total debt | 1,609,066 | 1,580,487 | ||||||||||||||||||||||||||||||
| Less: Current maturities and short-term borrowing | (188,000) | (160,000) | ||||||||||||||||||||||||||||||
| Long-term debt | $ | 1,421,066 | $ | 1,420,487 |
(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, which may be reduced by standby letters of credit. The Credit Agreement has a maturity date of November 19, 2027. Borrowings under the Credit Agreement generally bear interest at a variable rate determined by a pricing schedule or the base rate (which is the highest of (a) the administrative agent's prime rate, (b) the federal funds rate plus 0.50 percent, or (c) the sum of one-month SOFR plus a specified margin). As of June 30, 2024, the variable rate equaled SOFR and a credit spread adjustment of 0.10 percent plus 1.13 percent. In addition, there is a commitment fee on the average daily undrawn stated amount under the facility ranging from 0.07 percent to 0.15 percent. The recorded amount of borrowings outstanding, if any, approximates fair value because of the short maturity period of the debt; therefore, we consider these borrowings to be a Level 2 financial liability.
The Credit Agreement contains various restrictions and covenants that require us to maintain certain financial ratios, including a maximum leverage ratio of 3.75 to 1.00. The Credit Agreement also contains customary events of default.
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 $294.1 million on June 30, 2024. We estimate the fair value of the Notes primarily using an expected present value technique, which is based on observable market inputs using interest rates currently available to companies of similar credit standing for similar terms and remaining maturities and considering our own risk. If the Notes were recorded at fair value, they would be classified as a Level 2 financial liability. Senior Notes Series A matured in August 2023.
The Note Purchase 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, a minimum interest coverage ratio of 2.00 to 1.00, and a maximum consolidated priority debt to consolidated total asset ratio of 10 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. On November 21, 2022, we executed a third amendment to the Note Purchase Agreement to, among other things, facilitate the terms of the Credit Agreement.
U.S. TRADE ACCOUNTS RECEIVABLE SECURITIZATION
On November 19, 2021, we entered into a receivables purchase agreement and related transaction documents with Bank of America, N.A. and Wells Fargo Bank, N.A. to provide a receivables securitization facility (the “Receivables Securitization Facility”). The Receivables Securitization Facility is based on the securitization of a portion of our U.S. trade accounts receivable with a total availability of $500 million as of June 30, 2024. The interest rate on borrowings under the Receivables Securitization Facility is based on SOFR plus a credit spread adjustment of 0.10 percent plus 0.80 percent. In addition, there is a commitment fee on the average daily undrawn stated amount under the facility of 0.20 percent.
The recorded amount of borrowings outstanding under the Receivables Securitization Facility approximates fair value because it can be redeemed on short notice and the interest rate floats. We consider these borrowings to be a Level 2 financial liability.
The Receivables Securitization Facility contains various customary affirmative and negative covenants, and it also contains customary default and termination provisions, which provide for acceleration of amounts owed under the Receivables Securitization Facility upon the occurrence of certain specified events.
On November 7, 2023, we amended the Receivables Securitization Facility to extend the termination date of the facility to November 7, 2025. The total available remains $500 million, and we have the option to utilize an accordion feature, if needed, of an additional $250 million pursuant to the provisions of the Receivables Purchase Agreement, amended by the Receivables Purchase Amendment.
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 $581.7 million as of June 30, 2024, based primarily on the market prices quoted from external sources. The carrying value of the Senior Notes was $596.4 million as of June 30, 2024.
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 $20 million discretionary line of credit with U.S. Bank of which $16.9 million is utilized for standby letters of credit related to insurance collateral as of June 30, 2024. These standby letters of credit are renewed annually and were undrawn as of June 30, 2024.
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 is as follows below. The three and six months ended June 30, 2023, have been adjusted to conform to the current year presentation.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||||||
| State income taxes, net of federal benefit | 2.0 | 2.4 | 2.3 | 2.3 | |||||||||||||||||||
| Share based payment awards | (0.5) | (1.0) | (0.7) | (3.5) | |||||||||||||||||||
| Foreign tax credits | (1.4) | (6.2) | (1.6) | (3.3) | |||||||||||||||||||
| Other U.S. tax credits and incentives | (5.0) | (3.9) | (6.2) | (3.9) | |||||||||||||||||||
| Foreign tax rate differential | 2.7 | 0.6 | 1.8 | (0.3) | |||||||||||||||||||
| Section 162(m) limitation on compensation | 0.8 | 0.7 | 1.0 | 0.9 | |||||||||||||||||||
| Other | (0.2) | 1.3 | 0.3 | 0.9 | |||||||||||||||||||
| Effective income tax rate | 19.4 | % | 14.9 | % | 17.9 | % | 14.1 | % |
In 2021, the Organization for Economic Cooperation and Development (“OECD”) announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15 percent. Subsequently, multiple sets of administrative guidance have been issued. Many non-U.S. tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. We are continuing to evaluate the impact of enacted legislation and pending legislation to enact Pillar Two Model Rules in the tax jurisdictions we operate in.
As of June 30, 2024, we have $21.6 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, new information, or settlements with taxing authorities. The total liability for unrecognized tax benefits is expected to decrease by approximately $1.3 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 2019.
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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Stock options | $ | 1,082 | $ | 2,242 | $ | 2,164 | $ | 4,460 | |||||||||||||||
| Stock awards | 17,681 | 2,980 | 38,200 | 14,992 | |||||||||||||||||||
| Company expense on ESPP discount | 809 | 813 | 1,881 | 2,190 | |||||||||||||||||||
| Total stock-based compensation expense | $ | 19,572 | $ | 6,035 | $ | 42,245 | $ | 21,642 |
On May 5, 2022, our shareholders approved a 2022 Equity Incentive Plan (the “Plan”) and authorized an initial 4,261,884 shares for issuance of awards thereunder. The Plan allows us to grant certain stock awards, including stock options at fair market value, performance-based restricted stock units (“PSUs”) and shares, and time-based restricted stock units, to our key employees and non-employee directors. Shares subject to awards under the Plan or certain of our prior plans that expire or are canceled without delivery of shares or that are settled in cash generally become available again for issuance under the Plan. There were 2,734,585 shares available for stock awards under the Plan as of June 30, 2024.
Stock Options - We have awarded stock options to certain key employees that vest primarily based on their continued employment. 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 June 30, 2024, unrecognized compensation expense related to stock options was $2.2 million.
Stock Awards - We have awarded performance-based restricted shares, PSUs, and time-based restricted stock units. Nearly all of our awards 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 any post-vesting holding restrictions. The discounts on outstanding grants with post-vesting holding restrictions vary from 11 percent to 23 percent and are calculated using the Black-Scholes option pricing model-protective put method. The duration of the restriction period to sell or transfer vested awards, changes in the measured stock price volatility and changes in interest rates are the primary reasons for changes in the discount. These grants are being expensed based on the terms of the awards.
Performance-based Awards
Beginning in 2021, we have awarded PSUs on an annual basis to certain key employees. These PSUs vest over a three-year period based on the achievement of certain dilutive earnings per share, adjusted gross profits, and adjusted operating margin targets. These PSUs contain an upside opportunity of up to 200 percent of target contingent upon obtaining certain targets mentioned above over their respective performance period.
Time-based Awards
We award time-based restricted stock units to certain key employees. Time-based awards granted through 2020 vest over a five-year period. Beginning in 2021, we have granted time-based awards on an annual basis which vest over a three-year period. These awards vest primarily based on the passage of time and the employee’s continued employment.
We granted 318,801 PSUs at target and 604,468 time-based restricted stock units in February 2024 that vest over a three-year period. The PSUs will vest upon achieving cumulative three-year dilutive earnings per share targets and contain an upside opportunity of up to 200 percent. The PSUs and time-based restricted stock unit awards had a weighted average grant date fair value of $73.66 and provide for two-years of post-termination vesting upon a qualified retirement.
We have also awarded restricted stock units to certain key employees and non-employee directors which are fully vested upon date of grant. 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 awards have been expensed on the date of grant.
As of June 30, 2024, there was unrecognized compensation expense of $211.1 million related to previously granted stock awards assuming maximum achievement is obtained on our PSUs. The amount of future expense to be recognized will be based on the passage of time and contingent upon obtaining certain targets mentioned above over their respective performance period.
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. The 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 June 30, 2024 | ||||||||||||||
| Shares purchased by employees | Aggregate cost to employees | Expense recognized by the company | ||||||||||||
| 61,224 | $ | 4,586 | $ | 809 |
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 additional losses. However, based upon our historical experience, the resolution of these proceedings is not expected to have a material effect on our consolidated financial position, results of operations, or cash flows.
NOTE 8. 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.
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Global Forwarding—**Global Forwarding provides global logistics services through an international network of offices in North America, Europe, Asia, Oceania, South America, and the Middle East and also contracts with independent agents worldwide. The primary services provided by Global Forwarding include ocean freight services, air freight services, and customs brokerage.
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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 our Europe Surface Transportation segment. Europe Surface Transportation provides transportation and logistics services including truckload and LTL 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 located in Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2023. 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 is as follows (dollars in thousands):
| NAST | Global Forwarding | All Other and Corporate | Consolidated | ||||||||||||||||||||
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||
| Total revenues | $ | 2,989,909 | $ | 921,223 | $ | 572,216 | $ | 4,483,348 | |||||||||||||||
| Income (loss) from operations | 141,102 | 40,982 | (3,994) | 178,090 | |||||||||||||||||||
| Depreciation and amortization | 5,525 | 2,793 | 16,736 | 25,054 | |||||||||||||||||||
| Total assets(1) | 3,053,769 | 1,306,075 | 1,152,502 | 5,512,346 | |||||||||||||||||||
| Average employee headcount | 5,868 | 4,652 | 3,954 | 14,474 | |||||||||||||||||||
| NAST | Global Forwarding | All Other and Corporate | Consolidated | ||||||||||||||||||||
| Three Months Ended June 30, 2023 | |||||||||||||||||||||||
| Total revenues | $ | 3,079,268 | $ | 779,867 | $ | 562,721 | $ | 4,421,856 | |||||||||||||||
| Income (loss) from operations | 117,859 | 29,647 | (14,883) | 132,623 | |||||||||||||||||||
| Depreciation and amortization | 5,856 | 5,484 | 14,635 | 25,975 | |||||||||||||||||||
| Total assets(1) | 3,106,092 | 1,149,091 | 1,150,078 | 5,405,261 | |||||||||||||||||||
| Average employee headcount | 6,497 | 5,225 | 4,363 | 16,085 |
(1) All cash and cash equivalents are included in All Other and Corporate.
| NAST | Global Forwarding | All Other and Corporate | Consolidated | ||||||||||||||||||||
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||
| Total revenues | $ | 5,990,222 | $ | 1,779,860 | $ | 1,125,577 | $ | 8,895,659 | |||||||||||||||
| Income (loss) from operations | 249,997 | 72,534 | (17,308) | 305,223 | |||||||||||||||||||
| Depreciation and amortization | 10,875 | 5,637 | 32,420 | 48,932 | |||||||||||||||||||
| Total assets(1) | 3,053,769 | 1,306,075 | 1,152,502 | 5,512,346 | |||||||||||||||||||
| Average employee headcount | 5,929 | 4,770 | 4,032 | 14,731 | |||||||||||||||||||
| NAST | Global Forwarding | All Other and Corporate | Consolidated | ||||||||||||||||||||
| Six Months Ended June 30, 2023 | |||||||||||||||||||||||
| Total revenues | $ | 6,383,455 | $ | 1,569,845 | $ | 1,080,226 | $ | 9,033,526 | |||||||||||||||
| Income (loss) from operations | 251,881 | 59,763 | (17,988) | 293,656 | |||||||||||||||||||
| Depreciation and amortization | 11,507 | 10,964 | 27,884 | 50,355 | |||||||||||||||||||
| Total assets(1) | 3,106,092 | 1,149,091 | 1,150,078 | 5,405,261 | |||||||||||||||||||
| Average employee headcount | 6,713 | 5,356 | 4,454 | 16,523 |
(1) All cash and cash equivalents are included in All Other and Corporate.
NOTE 9. 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 (in thousands):
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||
| NAST | Global Forwarding | All Other and Corporate | Total | ||||||||||||||||||||
| Major Service Lines | |||||||||||||||||||||||
| Transportation and logistics services(1) | $ | 2,989,909 | $ | 921,223 | $ | 210,798 | $ | 4,121,930 | |||||||||||||||
| Sourcing(2) | — | — | 361,418 | 361,418 | |||||||||||||||||||
| Total revenues | $ | 2,989,909 | $ | 921,223 | $ | 572,216 | $ | 4,483,348 | |||||||||||||||
| Three Months Ended June 30, 2023 | |||||||||||||||||||||||
| NAST | Global Forwarding | All Other and Corporate | Total | ||||||||||||||||||||
| Major Service Lines | |||||||||||||||||||||||
| Transportation and logistics services(1) | $ | 3,079,268 | $ | 779,867 | $ | 225,692 | $ | 4,084,827 | |||||||||||||||
| Sourcing(2) | — | — | 337,029 | 337,029 | |||||||||||||||||||
| Total revenues | $ | 3,079,268 | $ | 779,867 | $ | 562,721 | $ | 4,421,856 |
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||
| NAST | Global Forwarding | All Other and Corporate | Total | ||||||||||||||||||||
| Major Service Lines | |||||||||||||||||||||||
| Transportation and logistics services(1) | $ | 5,990,222 | $ | 1,779,860 | $ | 434,436 | $ | 8,204,518 | |||||||||||||||
| Sourcing(2) | — | — | 691,141 | 691,141 | |||||||||||||||||||
| Total revenues | $ | 5,990,222 | $ | 1,779,860 | $ | 1,125,577 | $ | 8,895,659 | |||||||||||||||
| Six Months Ended June 30, 2023 | |||||||||||||||||||||||
| NAST | Global Forwarding | All Other and Corporate | Total | ||||||||||||||||||||
| Major Service Lines | |||||||||||||||||||||||
| Transportation and logistics services(1) | $ | 6,383,455 | $ | 1,569,845 | $ | 459,492 | $ | 8,412,792 | |||||||||||||||
| Sourcing(2) | — | — | 620,734 | 620,734 | |||||||||||||||||||
| Total revenues | $ | 6,383,455 | $ | 1,569,845 | $ | 1,080,226 | $ | 9,033,526 |
(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 customers prior to the completion of our performance obligation and as such contract liabilities, as of June 30, 2024, and revenue recognized in the three and six months ended June 30, 2024, and 2023 resulting from contract liabilities, were not significant. Contract assets and accrued expenses-transportation expense fluctuate from period to period primarily based upon changes in transportation pricing and costs and shipments in-transit at period end.
NOTE 10. 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 trailers. 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 twelve 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.
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 on the commencement date at the present value of lease payments, including non-lease components, which consist primarily of common area maintenance and parking charges. Right-of-use lease assets are also recognized on commencement date as the total lease liability plus prepaid rents. As our leases typically 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 market interest rates, 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 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 June 30, 2024.
Information regarding lease expense, remaining lease term, discount rate, and other select lease information are presented below (dollars in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| Lease Costs | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Operating lease expense(1) | $ | 26,793 | $ | 24,773 | $ | 52,430 | $ | 49,426 | |||||||||||||||
| Short-term lease expense | 1,521 | 1,486 | 2,683 | 2,900 | |||||||||||||||||||
| Total lease expense | $ | 28,314 | $ | 26,259 | $ | 55,113 | $ | 52,326 |
(1) Operating lease expense for the three and six months ended June 30, 2024, includes $3.9 million of restructuring charges related to rationalization of our facilities footprint including the early termination or abandonment of select office buildings under operating leases. Refer to Note 13, Restructuring, for further discussion related to our 2024 Restructuring Program.
| Six Months Ended June 30, | |||||||||||
| Other Lease Information | 2024 | 2023 | |||||||||
| Operating cash flows from operating leases | $ | 48,649 | $ | 47,360 | |||||||
| Right-of-use lease assets obtained in exchange for new lease liabilities | 46,526 | 14,204 |
| Lease Term and Discount Rate | As of June 30, 2024 | As of December 31, 2023 | |||||||||
| Weighted average remaining lease term (in years) | 5.8 | 5.9 | |||||||||
| Weighted average discount rate | 4.1 | % | 3.9 | % |
The maturities of lease liabilities as of June 30, 2024, were as follows (in thousands):
| Maturity of Lease Liabilities | Operating Leases | |||||||
| Remaining 2024 | $ | 40,854 | ||||||
| 2025 | 90,514 | |||||||
| 2026 | 77,195 | |||||||
| 2027 | 61,100 | |||||||
| 2028 | 45,774 | |||||||
| Thereafter | 107,249 | |||||||
| Total lease payments | 422,686 | |||||||
| Less: Interest | (48,999) | |||||||
| Present value of lease liabilities | $ | 373,687 |
NOTE 11. ALLOWANCE FOR CREDIT LOSSES
Our allowance for credit losses is computed using a number of factors including our past credit loss experience and our customers' credit ratings, in addition to other customer-specific factors. We have also considered recent trends and developments related to the current macroeconomic environment in determining our ending allowance for credit losses for both accounts receivable and contract assets. The allowance for credit losses on contract assets was not significant as of June 30, 2024.
A rollforward of our allowance for credit losses on our accounts receivable balance is presented below (in thousands):
| Balance, December 31, 2023 | $ | 14,229 | |||
| Provision | 4,285 | ||||
| Write-offs | (1,669) | ||||
| Balance, June 30, 2024 | $ | 16,845 |
Recoveries of amounts previously written off were not significant for the three and six months ended June 30, 2024.
NOTE 12. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss is included in Stockholders' Investment on our condensed consolidated balance sheets. The recorded balance on June 30, 2024, and December 31, 2023, was $101.7 million and $80.9 million, respectively. The recorded balance on June 30, 2024, and December 31, 2023, is comprised solely of foreign currency adjustments, including foreign currency translation.
Other comprehensive loss was $1.3 million for the three months ended June 30, 2024, primarily driven by fluctuations in the Euro, Mexican Peso and Brazilian Real mostly offset by the Australian Dollar and Singapore Dollar. Other comprehensive loss was $6.5 million for the three months ended June 30, 2023, primarily driven by fluctuations in the Yuan and Singapore Dollar.
Other comprehensive loss was $20.8 million for the six months ended June 30, 2024, primarily driven by fluctuations in the Euro, Singapore Dollar, and Australian Dollar. Other comprehensive loss was $4.1 million for the six months ended June 30, 2023, primarily driven by fluctuations in the Singapore Dollar, Yuan, and Australian Dollar partially offset by the Euro.
NOTE 13: RESTRUCTURING
2024 Restructuring Program: In 2024, the Company began a restructuring program (the “2024 Restructuring Program”) to drive our enterprise strategy and reduce our cost structure. The 2024 Restructuring Program will be executed in phases, focusing on waste reduction, reprioritizing our product and technology teams on fewer strategic initiatives, driving synergies across our portfolio of services, and unifying the go to market strategy of our divisions.
The major initiatives of the first phase, which commenced in the first quarter of 2024, include: 1) optimizing our management hierarchy, which includes a reduction in workforce; and 2) reprioritizing the efforts of our product and technology teams, resulting in the impairment of certain internally developed software projects. We have realigned our product and technology
teams on fewer strategic initiatives to accelerate the capabilities of our platform to deliver market-leading outcomes for our customers, carriers, and employees.
The primary initiatives of the second phase commenced in the second quarter of 2024. These initiatives include the rationalization of our facilities footprint including the consolidation, early termination, or abandonment of office buildings under operating leases. The 2024 Restructuring Program may also include other initiatives yet to be identified that will drive our enterprise strategy and improve our cost structure. We expect all activities under the 2024 Restructuring program to be completed by the end of 2024.
We recognized restructuring charges of $15.2 million in the second quarter of 2024 primarily related to workforce reductions and charges to reduce our facilities footprint including early termination or abandonment of office buildings under operating leases. Based upon the initiatives identified to date, we anticipate recognizing $30 million to $35 million of restructuring charges related to the 2024 Restructuring Program in 2024. The amount of restructuring charges we recognize, and the timing of recognition, will depend upon the nature and scope of initiatives we identify and our ability to enact changes to our real estate footprint under existing operating leases. We paid $10.7 million of cash related to the 2024 Restructuring Program in the six months ended June 30, 2024.
A summary of charges related to our 2024 Restructuring Program are presented below (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2024 | 2024 | |||||||||||||
| Severance(1) | $ | 8,799 | $ | 16,213 | ||||||||||
| Other personnel expenses(1) | 670 | 1,198 | ||||||||||||
| Other selling, general, and administrative expenses(2) | 5,740 | 10,709 | ||||||||||||
| Total | $ | 15,209 | $ | 28,120 |
(1) Amounts are included within personnel expenses in our condensed consolidated statements of operations and comprehensive income.
(2) Amounts are included within other selling, general, and administrative expenses in our condensed consolidated statements of operations and comprehensive income. The charges recognized in the three months ended June 30, 2024, primarily resulted from the second phase of the 2024 Restructuring Program while the charges recognized in the six months ended June 30, 2024, also include initiatives under the first phase of the 2024 Restructuring Program as discussed above.
The following table summarizes restructuring charges by reportable segment (in thousands):
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||
| NAST | Global Forwarding | All Other and Corporate | Consolidated | ||||||||||||||||||||
| Personnel expenses | $ | 4,758 | $ | 2,203 | $ | 2,508 | $ | 9,469 | |||||||||||||||
| Other selling, general, and administrative expenses | 3,776 | 1,327 | 637 | 5,740 |
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||
| NAST | Global Forwarding | All Other and Corporate | Consolidated | ||||||||||||||||||||
| Personnel expenses | $ | 7,784 | $ | 5,395 | $ | 4,232 | $ | 17,411 | |||||||||||||||
| Other selling, general, and administrative expenses | 5,654 | 1,559 | 3,496 | 10,709 |
The following table summarizes activity related to our 2024 Restructuring Program and reserves included in our consolidated balance sheets (in thousands):
| Accrued Severance and Other Personnel Expenses | Accrued Other Selling, General, and Administrative Expenses | Total | ||||||||||||||||||
| Balance, December 31, 2023 | $ | — | $ | — | $ | — | ||||||||||||||
| Restructuring charges | 17,411 | 10,709 | 28,120 | |||||||||||||||||
| Cash payments | (10,300) | (394) | (10,694) | |||||||||||||||||
| Settled non-cash | — | (10,030) | (10,030) | |||||||||||||||||
| Accrual adjustments(1) | (449) | — | (449) | |||||||||||||||||
| Balance, June 30, 2024 | $ | 6,662 | $ | 285 | $ | 6,947 |
(1) Accrual adjustments primarily relate to changes in estimates for certain employee termination costs, including those settling for an amount different than originally estimated and foreign currency adjustments.
2022 Restructuring Program: In 2022, we announced organizational changes to support our enterprise strategy of accelerating our digital transformation and productivity initiatives. The initiatives under our 2022 Restructuring Program were completed in 2023. We paid $3.0 million of cash related to the 2022 Restructuring Program in the six months ended June 30, 2024. There is no further activity expected related to the 2022 Restructuring Program other than settling the remaining $0.7 million of accrued severance and other personnel expenses as of June 30, 2024.
A summary of charges related to our 2022 Restructuring Program are presented below (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2023 | 2023 | |||||||||||||
| Severance(1) | $ | 11,681 | $ | 14,819 | ||||||||||
| Other personnel expenses(1) | 1,446 | 1,906 | ||||||||||||
| Other selling, general, and administrative expenses(2) | 1,005 | 1,129 | ||||||||||||
| Total | $ | 14,132 | $ | 17,854 |
(1) Amounts are included within personnel expenses in our condensed consolidated statements of operations and comprehensive income.
(2) Amounts are included within other selling, general, and administrative expenses in our condensed consolidated statements of operations and comprehensive income.
The following table summarizes restructuring charges by reportable segment (in thousands):
| Three Months Ended June 30, 2023 | |||||||||||||||||||||||
| NAST | Global Forwarding | All Other and Corporate | Consolidated | ||||||||||||||||||||
| Personnel expenses | $ | 327 | $ | 691 | $ | 12,109 | $ | 13,127 | |||||||||||||||
| Other selling, general, and administrative expenses | 4 | 39 | 962 | 1,005 | |||||||||||||||||||
| Six Months Ended June 30, 2023 | |||||||||||||||||||||||
| NAST | Global Forwarding | All Other and Corporate | Consolidated | ||||||||||||||||||||
| Personnel expenses | $ | 1,156 | $ | 2,229 | $ | 13,340 | $ | 16,725 | |||||||||||||||
| Other selling, general, and administrative expenses | 4 | 163 | 962 | 1,129 | |||||||||||||||||||
The following table summarizes activity related to our 2022 Restructuring Program and reserves included in our consolidated balance sheets (in thousands):
| Accrued Severance and Other Personnel Expenses | ||||||||||||||||||||
| Balance, December 31, 2023 | $ | 3,783 | ||||||||||||||||||
| Restructuring charges | 12 | |||||||||||||||||||
| Cash payments | (2,970) | |||||||||||||||||||
| Accrual adjustments(1) | (173) | |||||||||||||||||||
| Balance, June 30, 2024 | $ | 652 |
(1) Accrual adjustments primarily relate to changes in estimates for certain employee termination costs, including those settling for an amount different than originally estimated and foreign currency adjustments.
NOTE 14: SUBSEQUENT EVENTS
Subsequent to June 30, 2024, we entered into an agreement to sell our Europe Surface Transportation business. The sale is part of our enterprise strategy to drive focus on profitable growth in our four core modes—North American truckload and LTL and global ocean and air—as engines to ignite growth and create the most value for our stakeholders. The sale will include all assets and liabilities of the business other than our proprietary technology platform (the “disposal group”). The sale is expected to close in the fourth quarter of 2024, subject to certain customary conditions and regulatory approvals.
The Europe Surface Transportation disposal group will be presented as held for sale beginning in the third quarter of 2024 and adjusted to fair market value, less costs to sell, which will result in a loss on sale compared to carrying value in the third quarter of 2024. As of June 30, 2024, we had not committed to a plan to sell the business and significant uncertainty remained as to whether a sale would take place. The carrying value of the disposal group was approximately $115 million as of June 30, 2024, consisting primarily of $75 million of net operating working capital and $32 million of goodwill and other intangible assets.
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