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Item 8. Financial Statements and Supplementary Data

2021-02-19 compared with 2020-02-19 · 217 added, 244 removed, 815 unchanged (36% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of C.H.

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Robinson Worldwide, Inc.

and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive income, stockholders’ investment, and cash flows, for each of the three years in the period ended December 31, 2019, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income, stockholders’ investment, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

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Change in Accounting Principle

As discussed in Note 13 to the financial statements, effective January 1, 2019, the Company adopted the FASB Accounting Standards Update No.

2016-02, Leases (Topic 842) , using the modified retrospective approach.

As discussed in Note 11 to the financial statements, effective January 1, 2019, the Company adopted the FASB Accounting Standards Update 2016-02, Leases (Topic 842), using the modified retrospective approach.

Basis for Opinion

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We conducted our audits in accordance with the standards of the PCAOB.

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

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

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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At December 31, 2020 the Company recorded revenue of $197.2 million for services it provided while a shipment was still in-transit but for which it had not yet completed its performance obligation or had not yet invoiced the customer.

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

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We have served as the Company's auditor since 2002.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

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

2016-02, Leases (Topic 842) .

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statements as of and for the fiscal year ended December 31, 2020, of the Company and our report dated February 19, 2021, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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February 19, 2021

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ROBINSON WORLDWIDE, INC.

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Cash and cash equivalents $ 243,796 $ 447,858

Receivables, net of allowance for doubtful accounts of $ 32,838 and $ 41,131

Receivables, net of allowance for credit loss of $ 38,113 and $ 32,838

2,449,577 1,974,381

Contract assets 132,874 159,635

Contract assets, net of allowance for credit loss 197,176 132,874

Prepaid expenses and other 51,152 85,005

Total current assets

2,941,701 2,640,118

Property and equipment 478,982 489,976

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Other assets 84,086 85,483

Total assets $ 4,641,060 $ 4,427,412

$ 5,144,258 $ 4,641,060

LIABILITIES AND STOCKHOLDERS’ INVESTMENT

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Total current liabilities

1,839,732 1,556,038

Long-term debt 1,093,301 1,092,448

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Total liabilities

3,264,325 2,970,330

Commitments and contingencies

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Total stockholders’ investment

1,879,933 1,670,730

Total liabilities and stockholders’ investment

$ 5,144,258 $ 4,641,060

See accompanying notes to the consolidated financial statements.

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ROBINSON WORLDWIDE, INC.

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Total revenues

16,207,106 15,309,508 16,631,172

Costs and expenses:

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Total costs and expenses

15,533,838 14,519,532 15,719,089

Income from operations 673,268 789,976 912,083

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Net income 506,421 576,968 664,505

Other comprehensive (loss) income ( 4,214 ) ( 53,475 ) 42,982

Other comprehensive income (loss) 30,151 ( 4,214 ) ( 53,475 )

Comprehensive income

$ 536,572 $ 572,754 $ 611,030

Basic net income per share

$ 3.74 $ 4.21 $ 4.78

Diluted net income per share

$ 3.72 $ 4.19 $ 4.73

Basic weighted average shares outstanding

135,532 136,955 139,010

Dilutive effect of outstanding stock awards

641 780 1,395

Diluted weighted average shares outstanding

136,173 137,735 140,405

See accompanying notes to the consolidated financial statements.

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ROBINSON WORLDWIDE, INC.

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Net income 664,505 664,505

Cumulative Effect Change - ASU 2014-09 9,239 9,239

Foreign currency translation

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Net income 576,968 576,968

Cumulative Effect Change - ASU 2014-09 9,239 9,239

Foreign currency translation ( 4,214 ) ( 4,214 )

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See accompanying notes to the consolidated financial statements.

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ROBINSON WORLDWIDE, INC.

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Depreciation and amortization 101,727 100,449 96,729

Provision for doubtful accounts 5,853 15,634 13,489

Provision for credit losses 17,281 5,853 15,634

Stock-based compensation 43,995 39,083 87,791

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Net cash provided by operating activities

499,191 835,419 792,896

INVESTING ACTIVITIES

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Net cash used for investing activities

( 271,714 ) ( 113,029 ) ( 72,808 )

FINANCING ACTIVITIES

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Net cash used for financing activities

( 440,667 ) ( 651,253 ) ( 655,177 )

Effect of exchange rates on cash and cash equivalents 9,128 ( 1,894 ) ( 20,186 )

Net change in cash and cash equivalents

( 204,062 ) 69,243 44,725

Cash and cash equivalents, beginning of year

447,858 378,615 333,890

Cash and cash equivalents, end of year

$ 243,796 $ 447,858 $ 378,615

Supplemental cash flow disclosures

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See accompanying notes to the consolidated financial statements.

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ROBINSON WORLDWIDE, INC.

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BASIS OF PRESENTATION.

Robinson Worldwide, Inc.

and our subsidiaries (“the company,” “we,” “us,” or “our”) are a global provider of transportation services and logistics solutions through a network of offices operating in North America, Europe, Asia, Oceania, and South America.

Robinson Worldwide, Inc., and our subsidiaries (“the company,” “we,” “us,” or “our”) are a global provider of transportation services and logistics solutions through a network of offices operating in North America, Europe, Asia, Oceania, and South America.

The consolidated financial statements include the accounts of C.H.

Robinson Worldwide, Inc.

and our majority owned and controlled subsidiaries.

Robinson Worldwide, Inc., and our majority owned and controlled subsidiaries.

Our minority interests in subsidiaries are not significant.

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The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Estimates have been prepared on the basis of the most current and best information, and our actual results could differ materially from those estimates.

Estimates have been prepared on the basis of the most current and best information available, and our actual results could differ materially from those estimates.

REVENUE RECOGNITION.

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We have determined that the following distinct goods and services represent our primary performance obligations.

Transportation and Logistics Services - As a third party logistics provider, our primary performance obligation under our customer contracts is to utilize our relationships with a wide variety of transportation companies to efficiently and cost-effectively transport our customers’ freight.

Transportation and Logistics Services - As a global logistics provider, our primary performance obligation under our customer contracts is to utilize our relationships with a wide variety of transportation companies to efficiently and cost-effectively transport our customers’ freight.

Revenue is recognized for these performance obligations as they are satisfied over the contract term, which generally represents the transit period.

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Revenue is recognized when our performance obligations under these contracts is satisfied at a point in time, generally when the produce is received by our customer.

Pricing under these contracts is generally a fixed amount and is typically due within 30 days upon completion of our performance obligation.

Pricing under these contracts is generally a fixed amount and is typically due within 20 to 30 days upon completion of our performance obligation.

In many cases, as additional performance obligations, we contract to arrange logistics and transportation of the products we buy, sell, and/or market.

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Substantially all of our revenue is attributable to contracts with our customers.

Our net revenues are our total revenues less purchased transportation and related services, including contracted motor carrier, rail, ocean, air, and other costs, and the purchase price and services related to the products we source.

Our adjusted gross profits are our total revenues less purchased transportation and related services, including contracted motor carrier, rail, ocean, air, and other costs, and the purchase price and services related to the products we source.

Most transactions in our transportation and sourcing businesses are recorded at the gross amount we charge our customers for the service we provide and goods we sell.

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Additionally, in our sourcing business, in some cases we take inventory risk before the specified good has been transferred to our customer.

Customs brokerage, managed

services, freight forwarding, and sourcing managed procurement transactions are recorded at the net amount we charge our customers for the service we provide because many of the factors stated above are not present.

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brokerage, managed services, freight forwarding, and sourcing managed procurement transactions are recorded at the net amount we charge our customers for the service we provide because many of the factors stated above are not present.

CONTRACT ASSETS.

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Accrued transportation expense represents amounts we owe to vendors, primarily transportation providers, for the services they have provided while a shipment is still in-transit as of the reporting date.

ALLOWANCE FOR DOUBTFUL ACCOUNTS.

Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future.

We continuously monitor payments from our customers and maintain a provision for uncollectible accounts based upon our customer aging trends, historical loss experience, and any specific customer collection issues that we have identified.

ALLOWANCE FOR CREDIT LOSSES.

Accounts receivable and contract assets are reduced by an allowance for expected credit losses.

We determine our allowance for expected credit losses by evaluating two approaches that consider our past credit loss experience, our customers' credit ratings, and other customer-specific and macroeconomic factors.

The first approach is pooling our customers by credit rating and applying an expected loss ratio based upon credit rating and number of days the receivable has been outstanding, (i.e., aging approach).

The second approach is to compute an expected loss ratio for each credit rating pool based upon our historical write-off experience and apply it to our accounts receivable, (i.e., loss ratio approach).

These two approaches are evaluated in consideration of other known information and customer specific and macroeconomic factors, including the price of diesel fuel, for purposes of determining the expected credit loss allowance.

FOREIGN CURRENCY.

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2020 $ 42,890

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

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Net property and equipment $ 178,949 $ 208,423

Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable tangible net assets and identifiable intangible assets purchased and liabilities assumed.

Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable tangible assets and identifiable intangible assets purchased and liabilities assumed.

Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (November 30 for us) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

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OTHER INTANGIBLE ASSETS.

Other intangible assets include definite-lived customer lists, non-competition agreements, and indefinite-lived trademarks.

The definite-lived intangible assets are being amortized using the straight-line method over their estimated lives, ranging from five to eight years .

Other intangible assets include definite-lived customer lists, trademarks, non-competition agreements, and indefinite-lived trademarks.

The definite-lived intangible assets are being amortized using the straight-line method over their estimated lives.

Definite-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

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Uncertain income tax positions are included in “Accrued income taxes” or “Noncurrent income taxes payable” in the consolidated balance sheets.

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COMPREHENSIVE INCOME (LOSS).

Comprehensive income (loss) consists primarily of foreign currency translation adjustments.

It is presented on our consolidated statements of operations and comprehensive income gross of related income tax effects.

It is presented on our consolidated statements of operations and comprehensive income net of related income tax effects.

STOCK-BASED COMPENSATION.

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The discounts on outstanding grants vary from 12 percent to 22 percent and are calculated using the Black-Scholes option pricing model-protective put method.

Changes in measured stock volatility and interest rates are the primary reason for changes in the discount.

Changes in expected volatility and risk-free interest rates are the primary reason for changes in the discount.

For grants of options, we use the Black-Scholes option pricing model to estimate the fair value of share-based payment awards.

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

Global Forwarding All Other and Corporate (1)

NAST Global Forwarding All Other and Corporate Total

December 31, 2018 balance

$ 1,016,784 $ 182,029 $ 60,109 $ 1,258,922

Acquisitions — 25,892 7,771 33,663

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December 31, 2019 balance

1,015,570 208,420 67,770 1,291,760

Acquisitions 176,484 780 — 177,264

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$ 1,203,972 $ 213,982 $ 69,233 $ 1,487,187

(1) Goodwill was reallocated between the NAST and Robinson Fresh segments due to the reorganization discussed in Note 9, Segment Reporting .

Prior period amounts have been reclassified to conform with the current year presentation.

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.

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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”).

Based on our Step Zero Analysis, we determined that the more likely than not criteria had not been met, and therefore a Step One Analysis was not required.

No goodwill or intangible asset impairment has been recorded in any period presented.

As part of our Step Zero Analysis, we considered the impacts of the novel coronavirus (“COVID-19”) pandemic on financial markets and our business operations and determined that the more likely than not criteria had not been met, and therefore a Step One Analysis was not required.

No goodwill or intangible asset impairment has been recorded in any previous or current period presented.

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

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Customer relationships $ 171,684 $ ( 67,312 ) $ 104,372 $ 237,335 $ ( 156,879 ) $ 80,456

Non-competition agreements — — — 300 ( 240 ) 60

Trademarks 1,875 ( 937 ) 938 — — —

Total finite-lived intangibles 173,559 ( 68,249 ) 105,310 237,335 ( 156,879 ) 80,456

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Total intangibles $ 182,159 $ ( 68,249 ) $ 113,910 $ 247,810 $ ( 156,879 ) $ 90,931

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

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There were no transfers between levels during the period.

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FINANCING ARRANGEMENTS

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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

The obligations of the company under the Note Purchase Agreement and the Notes are guaranteed by C.H.

Robinson Company, a Delaware corporation and a wholly-owned subsidiary of the company, and by C.H.

Robinson Company, Inc., a Minnesota corporation and an indirect wholly-owned subsidiary of the company.

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TRADE ACCOUNTS RECEIVABLE SECURITIZATION

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and extended the maturity date from April 26, 2019, to December 17, 2020.

The Receivables Securitization Facility is based on the securitization of our U.S.

trade accounts receivable and provides funding of up to $ 250 million.

The interest rate on borrowings under the Receivables Securitization Facility is based on 30 day LIBOR plus a margin.

There is also a commitment fee we are required to pay on any unused portion of the facility.

The Receivables Securitization Facility expires on December 17, 2020, unless extended by the parties and is recorded as a current liability as of December 31, 2019.

The recorded amount of borrowings outstanding on 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.

The Receivables Securitization Facility was based on the securitization of our U.S.

trade accounts receivable and provided funding of up to $ 250 million.

The interest rate on borrowings under the Receivables Securitization Facility were based on 30 day LIBOR plus a margin.

There was also a commitment fee we were required to pay on any unused portion of the facility.

The Receivables Securitization Facility expired on December 17, 2020, and it was not renewed.

On April 9, 2018, we issued senior unsecured notes (“Senior Notes”) through a public offering.

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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, enter into sales and leaseback transactions and consolidate, merge or transfer substantial all of our assets and those of our subsidiaries on a consolidated basis.

The Senior Notes were issued under an indenture that contains covenants imposing certain limitations on our ability to incur liens, enter into sales and leaseback transactions above certain limits;

and consolidate, 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.

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The indenture does not contain any financial ratios or specified levels of net worth or liquidity to which we must adhere.

As of December 31, 2019, we were in compliance with, or have secured waivers of, all of the covenants under the Credit Agreement, Note Purchase Agreement, Receivables Securitization Facility, and Senior Notes.

Robinson Worldwide, Inc.

and its 80 percent (or more) owned U.S.

I n addition to the above financing agreements we have a $ 15 million discretionary line of credit with US Bank of which $ 8.0 million is currently utilized for standby letters of credit related to insurance collateral as of December 31, 2020.

These standby letters of credit are renewed annually and were undrawn as of December 31, 2020.

As of December 31, 2020, we were in compliance with all of the covenants under the Credit Agreement, Note Purchase Agreement, and Senior Notes.

Robinson Worldwide, Inc., and its 80 percent (or more) owned U.S.

subsidiaries file a consolidated federal income tax return.

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We are currently under an Internal Revenue Service audit for the 2015-2017 tax years.

In 2019 we removed our assertion that the unremitted earnings of our foreign subsidiaries were permanently reinvested with limited exceptions.

If we repatriated all foreign earnings that are still considered to be permanently reinvested, the estimated effect on income taxes payable would be an increase of approximately $ 2.0 million as of December 31, 2020.

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On March 27, 2020, the U.S.

government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in response to the COVID-19 pandemic.

The CARES Act allows for a deferral of the employer share of federal payroll taxes otherwise due through December 31, 2020.

Under the act, 50 percent of the deferred amount is due December 31, 2021, and the remaining 50 percent is due December 31, 2022.

This provision allows us to defer certain federal payroll deposits and invest this cash back into the business without any interest cost.

The CARES Act also provides for a tax credit of up to $5,000 related to wages and health benefits provided to an employee whose work from March 17, 2020, through December 31, 2020, was impacted by COVID-19.

Through December 31, 2020, we have recognized a payroll deferral and tax credit of $ 28.5 million and $ 0.7 million, respectively, under the CARES Act.

On December 22, 2017, the U.S.

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tax code, including but not limited to, reducing the U.S.

federal corporate tax rate from 35 percent to 21 percent and requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries and adding new rules for Global Intangible Low-tax Income (“GILTI”) and Foreign Derived Intangible Income (“FDII”).

Although enacted more than two years ago, regulatory guidance on the application of FDII has not been finalized.

We have included the tax impact of both GILTI and FDII in our income tax expense for the twelve months ended December 31, 2019, based on our understanding of the rules available at the time of this filing.

However, our calculations could be impacted by future regulations as guidance is finalized.

We will continue to monitor any new guidance related to FDII and determine any impact it may have on our calculations.

In 2019 we removed our assertion, except for regarding the working capital of our largest China subsidiary, that the unremitted earnings of our foreign subsidiaries were permanently reinvested.

Following the removal of that assertion, we recorded tax expense of $ 13.9 million related to foreign withholding taxes paid and accrued during the fourth quarter of 2019.

That expense was partially offset by tax benefits of $ 11.1 million related to excess foreign tax credits, and a tax benefit of $ 1.8 million related to foreign exchange losses on previously taxed income.

federal corporate tax rate from 35 percent to 21 percent and adding new rules for Global Intangible Low-tax Income (“GILTI”) and Foreign Derived Intangible Income (“FDII”).

We have included the tax impact of both GILTI and FDII in our income tax expense for the twelve months ended December 31, 2020 and 2019.

The Treasury Department issued final regulatory guidance related to both GILTI and FDII on July 15, 2020.

The effective date of these regulations is generally January 1, 2021, absent an election to apply these rules retroactively to a 2018 effective date.

We are reviewing these regulations and the potential to elect a 2018 effective date.

The impact of this new guidance is not expected to have a material impact on full-year 2020 results.

On September 29, 2020, the Treasury Department issued final and proposed regulations on determining the foreign tax credit, and allocating and apportioning deductions, under the Internal Revenue Code.

We are still completing our review of these regulations, but the impact of this new guidance is not expected to have a material impact on our results.

On December 27, 2020, the U.S.

government enacted the Consolidated Appropriations Act, 2021.

The bill extends several CARES Act provisions, including the employee retention tax credit.

It also contains miscellaneous tax provisions effective for tax years beginning after December 31, 2020.

The impact of this new guidance does not have a material impact on full-year 2020 results.

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

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Unrecognized tax benefits, end of the period $ 36,216 $ 33,938 $ 31,515

Income tax expense considers amounts which may be needed to cover exposures for open tax years.

Income tax expense considers amounts that may be needed to cover exposures for open tax years.

We do not expect any material impact related to open tax years;

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The total liability for unrecognized tax benefits is expected to decrease by approximately $ 1.8 million in the next 12 months due to lapsing of statutes.

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We recognize interest and penalties related to uncertain tax positions in the provision for income taxes.

During the years ended December 31, 2019, 2018, and 2017, we recognized approximately $ 1.0 million, $ 1.0 million, and $ 0.7 million, respectively, in interest and penalties.

We had approximately $ 6.0 million and $ 6.5 million for the payment of interest and penalties related to uncertain tax positions accrued within noncurrent income taxes payable as of December 31, 2019 and 2018.

During the years ended December 31, 2020, 2019, and 2018, we recognized approximately $ 1.0 million in interest and penalties.

We had approximately $ 6.1 million and $ 6.0 million for the payment of interest and penalties related to uncertain tax positions accrued within noncurrent income taxes payable as of December 31, 2020 and 2019, respectively.

These amounts are not included in the reconciliation above.

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Tax Act impact — — 0.4

Section 199 deduction — — ( 2.8 )

Share-based payment awards ( 2.8 ) ( 0.9 ) ( 0.7 )

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Effective income tax rate 19.4 % 22.3 % 24.5 %

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

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Receivables 7,810 5,086

Tax credit carryforward 10,464 —

Other 8,574 7,417

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Long-lived assets ( 12,722 ) ( 15,134 )

Foreign withholding tax ( 10,222 ) ( 9,259 )

Other ( 7,142 ) ( 1,614 )

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We continually monitor and review the foreign net operating loss carryforwards to determine the ability to realize the deferred tax assets associated with the foreign net operating loss carryforwards.

As of December 31, 2019, and 2018, we have recorded a valuation allowance of $ 8.5 million and $ 6.4 million against the deferred tax asset related to the foreign operating loss carryforwards.

As of December 31, 2020 and 2019, we have recorded a valuation allowance of $ 7.6 million and $ 8.5 million, respectively, against the deferred tax asset related to the foreign operating loss carryforwards.

CAPITAL STOCK AND STOCK AWARD PLANS

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All outstanding shares of common stock are fully paid and nonassessable.

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STOCK AWARD PLANS.

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

We awarded performance-based stock options to certain key employees during years prior to 2015.

These options were subject to certain vesting requirements over a five -year period, based on the company’s earnings growth.

These awards are no longer eligible for incremental vesting after 2019.

Any options remaining unvested at the end of the five -year vesting period are forfeited to the company.

We have awarded stock options to certain key employees that vest primarily based on their continued employment.

The value of these awards is established by the market price on the date of the grant, discounted for post-vesting holding restrictions, calculated using the Black-Scholes option pricing model and is being expensed over the vesting period of the award.

Although participants can exercise options via a stock swap exercise, we do not issue reloads (restoration options) on the grants.

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2020 $ 38,551

We have awarded stock options to certain key employees that vest primarily based on their continued employment.

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The following table summarizes these unvested stock option grants as of December 31, 2020:

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5,479,828 $ 14.99 2,791,175

We granted an additional 1,660,548 options on February 5, 2020.

These awards had a weighted average exercise price of $ 72.74 and a weighted average grant date fair value of $ 13.88 .

These awards will vest over a five -year period with a first vesting date of December 31, 2020.

Determining Fair Value

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Dividend Yield- The dividend yield assumption is based on our history of dividend payouts.

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

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

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

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These grants are being expensed based on the terms of the awards.

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The following table summarizes our unvested performance-based restricted shares and restricted stock unit grants as of December 31, 2020:

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

We granted an additional 405,776 performance-based restricted shares and restricted stock units on February 5, 2020.

These awards had a weighted average grant date fair value of $ 59.34 and will vest over a five -year period with a first vesting date of December 31, 2020.

We granted an additional 280,255 performance-based restricted stock units on February 3, 2021.

These awards had a weighted average grant date fair value of $ 74.76 and will vest over a three-year period with a first vesting date of December 31, 2021.

The following table summarizes our unvested time-based restricted share and restricted stock unit grants as of December 31, 2020:

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Unvested at December 31, 2020 598,039 $ 60.24

We granted an additional 329,586 time-based restricted shares and restricted stock units on February 5, 2020.

These awards had a weighted average grant date fair value of $ 59.34 and will vest over a five -year period with a first vesting date of December 31, 2020.

We granted an additional 619,689 time-based restricted stock units on February 3, 2021.

These awards had a weighted average grant date fair value of $ 71.28 and will vest over a three-year period with a first vesting date of December 31, 2021.

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

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The amount of future expense to be recognized will be based on the company’s earnings growth and the continued employment of certain key employees.

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EMPLOYEE STOCK PURCHASE PLAN.

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2020 $ 18,827

We have committed to a defined contribution match of six percent of eligible compensation in 2020.

We contributed a defined contribution match of six percent in 2019 and four percent in both 2018 and 2017.

We contributed a defined contribution match of six percent in 2019 and four percent in 2018.

Effective May 22, 2020, we temporarily suspended the employer-matching contribution due to the impacts of the COVID-19 pandemic.

The employer-matching contribution was reinstated effective January 1, 2021.

We made a discretionary profit-sharing contribution of two percent of total recognized compensation for eligible participants in 2018.

Following the 2018 contribution, we amended the plan and terminated the discretionary profit-sharing program.

No discretionary profit-sharing contributions were made subsequent to the 2018 contribution.

LEASE COMMITMENTS.

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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.

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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 (dollars in thousands):

Current assets $ 8,879

Property and equipment 7,356

Right-of-use lease assets 35,017

Other intangible assets 55,000

Goodwill 176,484

Total assets 282,736

Current liabilities 12,243

Lease liabilities 35,017

Deferred tax liabilities 12,758

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 $ 176.5 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 substantially 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 (“NAST”) segment in our consolidated financial statements since March 1, 2020.

Dema Service S.p.A

On May 22, 2019, we acquired all of the outstanding shares of Dema Service S.p.A.

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The Dema Service goodwill is a result of acquiring and retaining the Dema Service workforce and expected synergies from integrating its business into ours.

Purchase accounting is considered substantially complete.

Purchase accounting is considered final.

No goodwill was recognized for Italian tax purposes from the acquisition.

Th e results of operations of Dema Service have been included as part of the All Other and Corporate segment in our consolidated financial statements since May 23, 2019.

The Space Cargo Group

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

Total purchase consideration, net of cash acquired, was $ 45.5 million, which was paid in cash.

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

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The Space Cargo goodwill is a result of acquiring and retaining the Space Cargo workforce and expected synergies from integrating its business into ours.

Purchase accounting is considered substantially complete.

Purchase accounting is considered final.

No goodwill was recognized for Spanish tax purposes from the acquisition.

The results of operations of Space Cargo have been included as part of the Global Forwarding segment in our consolidated financial statements since March 1, 2019.

On August 31, 2017, we acquired all of the outstanding shares of Milgram & Company Ltd.

("Milgram") for the purpose of expanding our global presence and bringing additional capabilities and expertise to our portfolio.

Total purchase consideration, net of cash acquired, was $ 47.3 million, which was paid in cash.

We used advances under the Credit Agreement to fund part of the cash consideration.

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

Estimated Life (years)

Customer relationships 7 $ 14,004

There was $ 28.3 million of goodwill recorded related to the acquisition of Milgram.

The Milgram goodwill is a result of acquiring and retaining the Milgram existing workforce and expected synergies from integrating its business into ours.

Purchase accounting is considered final.

No goodwill was recognized for Canadian tax purposes from the acquisition.

The results of operations of Milgram have been included primarily within our Global Forwarding segment in our consolidated financial statements since September 1, 2017.

On January 28, 2020, we entered into a definitive agreement to acquire Prime Distribution Services, a leading provider of retail consolidation services in North America for approximately $ 225 million in cash.

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

SEGMENT REPORTING

On January 1, 2019, we reorganized our enterprise transportation services structure to combine our NAST and Robinson Fresh transportation networks.

The newly combined transportation network will be managed by and reported under the NAST reportable segment.

We have determined that the remaining Robinson Fresh segment no longer meets the requirements of a reportable segment and will be included in the All Other and Corporate reportable segment.

Prior period information has been reclassified to conform with this presentation.

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.

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 reporting 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.

We identify two reportable segments as follows:

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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 are truckload, less than truckload ("LTL"), and intermodal.

The primary services provided by NAST are truckload and less than truckload ("LTL") transportation services.

• Global Forwarding:

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Other Surface Transportation revenues are primarily earned by our Europe Surface Transportation segment.

Europe Surface Transportation provides services similar to NAST across Europe.

The internal reporting of segments is defined, based in part, on the reporting and review process used by our chief operating decision maker ("CODM"), our Chief Executive Officer.

The accounting policies of our reporting 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.

Europe Surface Transportation provides transportation and logistics services including truckload and groupage services across Europe.

Reportable segment information as of, and for the years ended, December 31, 2020, 2019, and 2018 is as follows (dollars in thousands):

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Total revenues $ 11,312,553 $ 3,100,525 $ 1,794,028 $ 16,207,106

Net Revenues 1,797,369 533,976 254,965 2,586,310

Income (loss) from operations 508,475 175,513 ( 10,720 ) 673,268

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

Global Forwarding All Other and Corporate (1)

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NAST Global Forwarding All Other and Corporate Consolidated

Twelve Months Ended December 31, 2019

Total revenues $ 11,283,692 $ 2,327,913 $ 1,697,903 $ 15,309,508

Net Revenues 1,906,261 543,906 255,068 2,705,235

Income (loss) from operations 722,763 80,527 ( 13,314 ) 789,976

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Average headcount 7,354 4,766 3,431 15,551

________________________________

(1) Amounts have been reclassified to reflect the segment reorganization announced in the first quarter of 2019.

(2) All cash and cash equivalents and certain owned properties are included in All Other and Corporate.

Global Forwarding All Other and Corporate (1)

NAST Global Forwarding All Other and Corporate Consolidated

Twelve Months Ended December 31, 2018

Total revenues $ 12,346,757 $ 2,487,744 $ 1,796,671 $ 16,631,172

Net Revenues 1,626,174 485,280 256,596 2,368,050

Income from operations 661,108 91,842 22,169 775,119

Income (loss) from operations 821,844 91,626 ( 1,387 ) 912,083

Depreciation and amortization 25,290 35,148 36,291 96,729

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________________________________

(1) Amounts have been reclassified to reflect the segment reorganization announced in the first quarter of 2019.

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

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(1) Includes $ 253.4 million and $ 66.4 million of right-of-use lease assets within the United States and other locations, respectively.

(2) Includes $ 216.4 million and $ 94.4 million of right-of-use lease assets within the United States and other locations, respectively.

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REVENUE FROM CONTRACTS WITH CUSTOMERS

We adopted Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers , as of January 1, 2018 using the modified retrospective transition method.

The standard outlines a five-step model whereby revenue is recognized as performance obligations within a customer contract are satisfied which changed the timing of revenue recognition for our transportation business from at delivery to over the transit period as our performance obligations are completed.

The comparative information for the year ended December 31, 2017 has not been restated and continues to be reported under ASC 605, Revenue Recognition .

The impact of adoption of ASU 2014-09 on our consolidated statements of operations for the years ended December 31, 2019 and 2018, was as follows (dollars in thousands).

Twelve Months Ended December 31, 2019

As reported Balances without adoption of ASU 2014-09 Effect of change

higher / (lower)

Income Statement

Transportation $ 14,322,295 $ 14,336,820 $ ( 14,525 )

987,213 1,128,208 ( 140,995 )

Total revenues 15,309,508 15,465,028 ( 155,520 )

Costs and expenses:

Purchased transportation and related services 11,839,433 11,848,665 ( 9,232 )

Purchased products sourced for resale (1)

883,765 1,024,760 ( 140,995 )

Personnel expenses 1,298,528 1,299,087 ( 559 )

Other selling, general, and administrative expenses 497,806 497,806 —

Total costs and expenses 14,519,532 14,670,318 ( 150,786 )

Income from operations 789,976 794,710 ( 4,734 )

Interest and other expense ( 47,719 ) ( 47,719 ) —

Income before provision for income taxes 742,257 746,991 ( 4,734 )

Provision for income taxes 165,289 166,502 ( 1,213 )

Net income $ 576,968 $ 580,489 $ ( 3,521 )

________________________________

(1) We have identified certain customer contracts in our sourcing managed procurement business that changed from a principal to an agent relationship under the new standard.

This change resulted in these contracts being recognized at the net amount we charge our customers but had no impact on income from operations.

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 twelve months ended December 31, 2020, 2019, and 2018, as follows (dollars in thousands):

Twelve Months Ended December 31, 2020

As reported Balances without adoption of ASU 2014-09 Effect of change

higher / (lower)

Income Statement

Transportation $ 15,515,921 $ 15,462,328 $ 53,593

NAST Global Forwarding All Other and Corporate Total

Major service lines:

Transportation and logistics services (1)

$ 11,312,553 $ 3,100,525 $ 734,484 $ 15,147,562

Total revenues 16,631,172 16,698,041 ( 66,869 )

Costs and expenses:

Purchased transportation and related services 12,922,177 12,875,875 46,302

Purchased products sourced for resale (1)

— — 1,059,544 1,059,544

Personnel expenses 1,343,542 1,343,159 383

Other selling, general, and administrative expenses 449,610 449,610 —

Total costs and expenses 15,719,089 15,792,866 ( 73,777 )

Income from operations 912,083 905,175 6,908

Interest and other expense ( 31,810 ) ( 31,810 ) —

Income before provision for income taxes 880,273 873,365 6,908

Provision for income taxes 215,768 213,882 1,886

Net income $ 664,505 $ 659,483 $ 5,022

$ 11,312,553 $ 3,100,525 $ 1,794,028 $ 16,207,106

(1) We have identified certain customer contracts in our sourcing managed procurement business that changed from a principal to an agent relationship under the new standard.

This change resulted in these contracts being recognized at the net amount we charge our customers but had no impact on income from operations.

We typically do not receive consideration and amounts are not due from our customer prior to the completion of our performance obligations and as such contract liabilities as of December 31, 2019 and 2018, and revenue recognized in the twelve months ended December 31, 2019 and 2018, 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 and the timing of customer invoicing.

Twelve Months Ended December 31, 2019

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— — 987,213 987,213

Total $ 11,283,692 $ 2,327,913 $ 1,697,903 $ 15,309,508

$ 11,283,692 $ 2,327,913 $ 1,697,903 $ 15,309,508

Twelve Months Ended December 31, 2018

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— — 1,115,251 1,115,251

Total $ 12,346,757 $ 2,487,744 $ 1,796,671 $ 16,631,172

$ 12,346,757 $ 2,487,744 $ 1,796,671 $ 16,631,172

________________________________

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

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

Approximately 92 percent and 91 percent of our total revenues for the twelve months ended December 31, 2019 and 2018, respectively, are attributable to arranging for the transportation of our customers’ freight for which we transfer control and satisfy our performance obligation over the requisite transit period.

We typically do not receive consideration and amounts are not due from our customer prior to the completion of our performance obligations and as such contract liabilities as of December 31, 2020 and 2019, and revenue recognized in the twelve months ended December 31, 2020, 2019, and 2018, 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 and the timing of customer invoicing.

Approximately 91 percent, 92 percent, and 91 percent of our total revenues for the twelve months ended December 31, 2020, 2019, and 2018, respectively, are attributable to arranging for the transportation of our customers’ freight for which we transfer control and satisfy our performance obligation over the requisite transit period.

A days in transit output method is used to measure the progress of our performance as of the reporting date.

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The transaction price for our performance obligation under these arrangements is generally fixed and readily determinable upon contract inception and is not contingent upon the occurrence or non-occurrence of another event.

Approximately six percent and seven percent of our total revenues for the twelve months ended December 31, 2019 and 2018, respectively, are attributable to buying, selling, and/or marketing of produce including fresh fruits, vegetables, and other value-added perishable items.

Approximately seven percent, six percent, and seven percent of our total revenues for the twelve months ended December 31, 2020, 2019, and 2018, respectively, are attributable to buying, selling, and/or marketing of produce including fresh fruits, vegetables, and other value-added perishable items.

Total revenues for these transactions are recognized at a point in time upon completion of our performance obligation, which is generally when the produce is received by our customer.

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Approximately two percent of our total revenues for the twelve months ended December 31, 2020, 2019, and 2018, respectively, are attributable to value-added logistics services, such as customs brokerage, fee-based managed services, warehousing services, small parcel, and supply chain consulting and optimization services.

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Transaction price is determined and allocated to these performance obligations at their fixed fee or agreed upon rate multiplied by their associated measure of progress, which may be transactional volumes, labor hours, or time elapsed.

Practical Expedients - Upon the adoption of ASU 2014-09, we have determined that we qualify for certain practical expedients to facilitate the adoption of the standard.

We have elected to expense incremental costs of obtaining customer contracts (i.e., sales commissions) due to the short duration of our arrangements as the amortization period of such amounts is expected to be less than one year.

We expense incremental costs of obtaining customer contracts (i.e., sales commissions) due to the short duration of our arrangements as the amortization period of such amounts is expected to be less than one year.

These amounts are included within personnel expenses in our consolidated statements of operations and comprehensive income.

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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.

Current and noncurrent lease liabilities are recognized on 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 on the 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 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.

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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.

In February 2020, we entered into a lease for warehouse space in Los Angeles, California which commences in February 2020 and is expected to result in a right-of-use lease asset and lease liability of approximately $ 38.7 million.

There were no other material lease agreements that have not yet commenced that are expected to create significant rights or obligations as of December 31, 2019.

Information regarding lease expense, remaining lease term, discount rate, and other select lease information is presented below as of December 31, 2019, and for the twelve months ended December 31, 2019 (dollars in thousands):

Lease Costs Twelve Months Ended December 31, 2019

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Information regarding lease expense, remaining lease term, discount rate, and other select lease information is presented below as of December 31, 2020 and 2019, and for the twelve months ended December 31, 2020 and 2019 (dollars in thousands):

Twelve Months Ended December 31,

Lease Costs 2020 2019

Operating lease expense $ 86,451 $ 68,489

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Total lease expense $ 101,581 $ 79,929

Other Lease Information Twelve Months Ended December 31, 2019

Twelve Months Ended December 31,

Other Lease Information 2020 2019

Operating cash outflows from operating leases $ 74,177 $ 66,489

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95,005 101,966

(1) The company obtained approximately $ 35.5 million of right-of-use lease assets in exchange for new lease liabilities related to a warehouse lease in Australia in the fourth quarter of 2019.

Lease Term and Discount Rate As of December 31, 2019

As of December 31,

Lease Term and Discount Rate 2020 2019

Weighted average remaining lease term (in years) (1)

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Present value of lease liabilities

Minimum future lease commitments under noncancelable lease agreements in excess of one year as of December 31, 2018, are as follows (in thousands):

2019 $ 53,675

Thereafter 81,465

Total lease payments $ 266,702

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.

ALLOWANCE FOR CREDIT LOSSES

We adopted ASU 2016-13, Financial Instruments (Topic 326), as of January 1, 2020.

Prior period information was not restated and continues to be presented under guidance effective for those periods.

This ASU changes how entities measure credit losses for certain financial assets including accounts receivable by replacing the historical “incurred loss” approach with an “expected loss” model.

We have updated our significant accounting policy for allowance for credit losses as described in Note 1, Summary of Significant Accounting Policies.

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.

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A rollforward of our allowance for credit losses on our accounts receivable balance is presented below for the twelve months ended December 31, 2020:

Balance, December 31, 2019 $ 32,838

Provision 16,130

Write-offs ( 10,855 )

Balance, December 31, 2020 $ 38,113

Recoveries of amounts previously written off were not significant for the twelve months ended December 31, 2020.

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss is included in the Stockholders’ investment on our consolidated balance sheets.

The recorded balance at December 31, 2019, and December 31, 2018, was $ 76.1 million and $ 71.9 million, respectively, and is comprised solely of foreign currency adjustments.

The recorded balance at December 31, 2020 and 2019, was $ 46.0 million and $ 76.1 million, respectively, and is comprised solely of foreign currency adjustments, net of related income tax effects.

Other comprehensive income was $ 30.2 million for the twelve months ended December 31, 2020, driven primarily by fluctuations in the Australian Dollar and Singapore Dollar, net of related income tax effects of $ 2.5 million.

Other comprehensive loss was $ 4.2 million for the twelve months ended December 31, 2019, driven primarily by fluctuations in the Chinese Yuan.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

RECENTLY ADOPTED ACCOUNTING STANDARDS

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) .

This update requires a lessee to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset.

The guidance also requires certain qualitative and quantitative disclosures about the amount, timing, and uncertainty of cash flows arising from leases.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements , which provides another transition method no longer requiring application to previously reported periods.

Therefore, prior period balances were not restated.

We adopted Topic 842 during 2019 using the modified retrospective approach and recognizing right-of-use assets and lease liabilities of $ 265.4 million and $ 273.3 million, respectively, on January 1, 2019.

The adoption of this standard did not have a significant impact on our consolidated results of operations or consolidated statements of cash flows.

Refer to Note 11, Leases , for further information.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income , which amends existing guidance for reporting comprehensive income to reflect changes resulting from the Tax Act.

The amendment provides the option to reclassify stranded tax effects resulting from the Tax Act within accumulated other comprehensive income (AOCI) to retained earnings.

This amendment became effective for us on January 1, 2019.

The adoption of this standard did not have a material impact on our consolidated financial statements and disclosures.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , and in November 2018 issued a subsequent amendment, ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses .

This update significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The update will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost.

The update will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that have the contractual right to receive cash.

We adopted this standard effective January 1, 2020.

Prior period balances will not be restated.

The adoption of this standard will impact our accounting policy for the allowance for doubtful accounts, which is a significant accounting policy, but the impact of adoption is not expected to have a material impact to our consolidated financial position, results of operations, or cash flows.

SUPPLEMENTARY DATA (UNAUDITED)

Our unaudited results of operations for each of the quarters in the years ended December 31, 2019 and 2018, are summarized below (in thousands, except per share data).

2019 March 31

Transportation

$ 3,504,932 $ 3,638,612 $ 3,608,346 $ 3,570,405

Sourcing 246,278 270,228 247,786 222,921

Total revenues 3,751,210 3,908,840 3,856,132 3,793,326

Costs and expenses:

Purchased transportation and related services 2,853,256 2,972,998 2,999,979 3,013,200

Purchased products sourced for resale 219,154 240,626 222,722 201,263

Personnel expenses 340,098 338,886 320,563 298,981

Other selling, general, and administrative expenses 114,152 128,795 111,783 143,076

Total costs and expenses 3,526,660 3,681,305 3,655,047 3,656,520

Income from operations 224,550 227,535 201,085 136,806

Net income $ 161,788 $ 169,180 $ 146,894 $ 99,106

Basic net income per share $ 1.17 $ 1.23 $ 1.08 $ 0.73

Diluted net income per share $ 1.16 $ 1.22 $ 1.07 $ 0.73

Basic weighted average shares outstanding 137,854 137,185 136,380 135,997

Dilutive effect of outstanding stock awards 1,101 1,071 1,096 624

Diluted weighted average shares outstanding 138,955 138,256 137,476 136,621

2018 March 31

Transportation

$ 3,637,640 $ 3,953,139 $ 4,028,392 $ 3,896,750

Sourcing 287,687 322,898 263,508 241,158

Total revenues 3,925,327 4,276,037 4,291,900 4,137,908

Costs and expenses:

Purchased transportation and related services 3,041,602 3,313,196 3,359,520 3,207,859

Purchased products sourced for resale 257,800 291,358 238,336 216,266

Personnel expenses 328,297 340,630 335,299 339,316

Other selling, general, and administrative expenses 106,043 111,845 112,772 118,950

Total costs and expenses 3,733,742 4,057,029 4,045,927 3,882,391

Income from operations 191,585 219,008 245,973 255,517

Net income $ 142,297 $ 159,163 $ 175,895 $ 187,150

Basic net income per share $ 1.02 $ 1.14 $ 1.27 $ 1.36

Diluted net income per share $ 1.01 $ 1.13 $ 1.25 $ 1.34

Basic weighted average shares outstanding 140,032 139,464 138,797 137,797

Dilutive effect of outstanding stock awards 1,238 1,147 1,363 1,385

Diluted weighted average shares outstanding 141,270 140,611 140,160 139,182

This update changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The update replaces the historical “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost.

The update affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that have the contractual right to receive cash.

We adopted this standard on January 1, 2020.

We have updated our allowance for credit losses, formerly described as our allowance for doubtful accounts, significant accounting policy as a result of adopting the new standard.

For additional information, see Note 1, Summary of Significant Accounting Policies .

The impact of adoption was not material to our consolidated financial position, results of operations, or cash flows.

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 2020, the FASB issued 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.

The Company is currently evaluating the effects that adoption of this guidance will have on our consolidated financial statements .

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data