C. H. ROBINSON WORLDWIDE, INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS C.H. ROBINSON WORLDWIDE, INC. Condensed Consolidated Balance Sheets (unaudited, in thousands, except per share data) March 31, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 239,160 $ 217,482 Receivables, net of allowance for credit loss of $ 18,567 and $ 28,749 2,681,580 2,991,753 Contract assets, net of allowance for credit loss 191,711 257,597 Prepaid expenses and other 122,195 122,406 Total current assets 3,234,646 3,589,238 Property and equipment, net of accumulated depreciation and amortization 160,864 159,432 Goodwill 1,470,686 1,470,813 Other intangible assets, net of accumulated amortization 58,397 64,026 Right-of-use lease assets 357,044 372,141 Deferred tax assets 190,919 181,602 Other assets 123,028 117,312 Total assets $ 5,595,584 $ 5,954,564 LIABILITIES AND STOCKHOLDERS’ INVESTMENT Current liabilities: Accounts payable $ 1,411,371 $ 1,466,998 Outstanding checks 71,876 103,561 Accrued expenses: Compensation 108,069 242,605 Transportation expense 145,210 199,092 Income taxes 9,333 15,210 Other accrued liabilities 176,292 168,009 Current lease liabilities 72,958 73,722 Current portion of debt 952,759 1,053,655 Total current liabilities 2,947,868 3,322,852 Long-term debt 920,272 920,049 Noncurrent lease liabilities 301,168 313,742 Noncurrent income taxes payable 27,009 28,317 Deferred tax liabilities 15,330 14,256 Other long-term liabilities 2,549 1,926 Total liabilities 4,214,196 4,601,142 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; 179,204 and 179,204 shares issued, 116,437 and 116,323 outstanding 11,644 11,632 Additional paid-in capital 730,363 743,288 Retained earnings 5,631,750 5,590,440 Accumulated other comprehensive loss ( 86,383 ) ( 88,860 ) Treasury stock at cost ( 62,767 and 62,881 shares) ( 4,905,986 ) ( 4,903,078 ) Total stockholders’ investment 1,381,388 1,353,422 Total liabilities and stockholders’ investment $ 5,595,584 $ 5,954,564 See accompanying notes to the condensed consolidated financial statements. 3 Table of Contents C.H. ROBINSON WORLDWIDE, INC. Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited, in thousands except per share data) Three Months Ended March 31, 2023 2022 Revenues: Transportation $ 4,327,965 $ 6,528,351 Sourcing 283,705 287,602 Total revenues 4,611,670 6,815,953 Costs and expenses: Purchased transportation and related services 3,671,031 5,650,224 Purchased products sourced for resale 254,999 259,533 Personnel expenses 383,106 413,361 Other selling, general, and administrative expenses 141,501 147,361 Total costs and expenses 4,450,637 6,470,479 Income from operations 161,033 345,474 Interest and other income/expense, net ( 28,265 ) ( 14,174 ) Income before provision for income taxes 132,768 331,300 Provision for income taxes 17,877 60,952 Net income 114,891 270,348 Other comprehensive income 2,477 6,870 Comprehensive income $ 117,368 $ 277,218 Basic net income per share $ 0.97 $ 2.07 Diluted net income per share $ 0.96 $ 2.05 Basic weighted average shares outstanding 118,636 130,499 Dilutive effect of outstanding stock awards 1,273 1,656 Diluted weighted average shares outstanding 119,909 132,155 See accompanying notes to the condensed consolidated financial statements. 4 Table of Contents 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, 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 Common Shares Outstanding Amount Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders’ Investment Balance December 31, 2021 129,186 $ 12,919 $ 673,628 $ 4,936,861 $ ( 61,134 ) $ ( 3,540,340 ) $ 2,021,934 Net income 270,348 270,348 Foreign currency adjustments 6,870 6,870 Dividends declared, $ 0.55 per share ( 72,542 ) ( 72,542 ) Stock issued for employee benefit plans 418 42 ( 17,377 ) 26,239 8,904 Stock-based compensation expense — — 24,606 — 24,606 Repurchase of common stock ( 1,593 ) ( 160 ) ( 164,458 ) ( 164,618 ) Balance March 31, 2022 128,011 $ 12,801 $ 680,857 $ 5,134,667 $ ( 54,264 ) $ ( 3,678,559 ) $ 2,095,502 See accompanying notes to the condensed consolidated financial statements. 5 Table of Contents C.H. ROBINSON WORLDWIDE, INC. Condensed Consolidated Statements of Cash Flows (unaudited, in thousands) Three Months Ended March 31, 2023 2022 OPERATING ACTIVITIES Net income $ 114,891 $ 270,348 Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization 24,380 22,486 Provision for credit losses ( 6,637 ) 1,672 Stock-based compensation 15,607 24,606 Deferred income taxes ( 10,272 ) ( 2,916 ) Excess tax benefit on stock-based compensation ( 7,011 ) ( 4,965 ) Other operating activities 942 42 Changes in operating elements, net of acquisitions: Receivables 326,244 ( 424,025 ) Contract assets 66,124 ( 51,439 ) Prepaid expenses and other 433 ( 11,924 ) Accounts payable and outstanding checks ( 90,724 ) 143,980 Accrued compensation ( 134,795 ) ( 79,885 ) Accrued transportation expense ( 53,882 ) 42,825 Accrued income taxes ( 40 ) 48,502 Other accrued liabilities 8,169 8,099 Other assets and liabilities 1,115 ( 1,334 ) Net cash provided by (used for) operating activities 254,544 ( 13,928 ) INVESTING ACTIVITIES Purchases of property and equipment ( 11,371 ) ( 10,046 ) Purchases and development of software ( 15,579 ) ( 16,183 ) Proceeds from sale of property and equipment — 2,250 Net cash used for investing activities ( 26,950 ) ( 23,979 ) FINANCING ACTIVITIES Proceeds from stock issued for employee benefit plans 19,673 25,366 Stock tendered for payment of withholding taxes ( 20,048 ) ( 16,462 ) Repurchase of common stock ( 31,182 ) ( 161,279 ) Cash dividends ( 73,435 ) ( 72,855 ) Proceeds from long-term borrowings — 200,000 Proceeds from short-term borrowings 739,000 1,062,000 Payments on short-term borrowings ( 840,000 ) ( 1,015,000 ) Net cash (used for) provided by financing activities ( 205,992 ) 21,770 Effect of exchange rates on cash and cash equivalents 76 1,533 Net change in cash and cash equivalents 21,678 ( 14,604 ) Cash and cash equivalents, beginning of period 217,482 257,413 Cash and cash equivalents, end of period $ 239,160 $ 242,809 See accompanying notes to the condensed consolidated financial statements. 6 Table of Contents 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, 2022. RECENTLY ISSUED ACCOUNTING STANDARDS For the three months ended March 31, 2023, there were no recently issued or newly adopted accounting pronouncements that had, or are expected to have, a material impact to 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, 2022 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, 2022 $ 1,188,076 $ 206,189 $ 76,548 $ 1,470,813 Foreign currency translation ( 865 ) 408 330 ( 127 ) Balance, March 31, 2023 $ 1,187,211 $ 206,597 $ 76,878 $ 1,470,686 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 Step Zero Analysis, we determined that more likely than not criteria had not been met, and therefore a Step One Analysis was not required as of March 31, 2023. 7 Table of Contents Identifiable intangible assets consisted of the following (in thousands): March 31, 2023 December 31, 2022 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Finite-lived intangibles Customer relationships $ 161,844 $ ( 112,047 ) $ 49,797 $ 162,358 $ ( 106,932 ) $ 55,426 Indefinite-lived intangibles Trademarks 8,600 — 8,600 8,600 — 8,600 Total intangibles $ 170,444 $ ( 112,047 ) $ 58,397 $ 170,958 $ ( 106,932 ) $ 64,026 Amortization expense for other intangible assets is as follows (in thousands): Three Months Ended March 31, 2023 2022 Amortization expense $ 5,815 $ 6,034 Finite-lived intangible assets, by reportable segment, as of March 31, 2023, will be amortized over their remaining lives as follows (in thousands): NAST Global Forwarding All Other and Corporate Total Remainder of 2023 $ 6,063 $ 7,986 $ 823 $ 14,872 2024 8,008 3,539 1,097 12,644 2025 7,857 2,322 1,097 11,276 2026 7,857 377 751 8,985 2027 1,310 — 503 1,813 Thereafter — — 207 207 Total $ 49,797 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 March 31, 2023 and December 31, 2022. There were no transfers between levels during the period. 8 Table of Contents 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 March 31, 2023 December 31, 2022 Maturity March 31, 2023 December 31, 2022 Revolving credit facility 5.97 % — % November 2027 $ 4,000 $ — 364-day revolving credit facility 5.62 % 5.12 % May 2023 274,000 379,000 Senior Notes, Series A 3.97 % 3.97 % August 2023 175,000 175,000 Senior Notes, Series B 4.26 % 4.26 % August 2028 150,000 150,000 Senior Notes, Series C 4.60 % 4.60 % August 2033 175,000 175,000 Receivables Securitization Facility (1) 5.57 % 5.01 % November 2023 499,759 499,655 Senior Notes (1) 4.20 % 4.20 % April 2028 595,272 595,049 Total debt 1,873,031 1,973,704 Less: Current maturities and short-term borrowing ( 952,759 ) ( 1,053,655 ) Long-term debt $ 920,272 $ 920,049 ____________________________________________ (1) Net of unamortized discounts and issuance costs. SENIOR UNSECURED REVOLVING CREDIT FACILITY We have a senior unsecured revolving credit facility (the “Credit Agreement”) with a total availability of $ 1 billion and a maturity date of 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 March 31, 2023, the variable rate equaled SOFR and a Credit Spread Adjustment of 0.10 percent plus 1.0 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. 364-DAY UNSECURED REVOLVING CREDIT FACILITY On May 6, 2022, we entered into an unsecured revolving credit facility (the “364-day Credit Agreement”) with a total availability of $ 500 million and a maturity date of May 5, 2023. Borrowings under the 364-day Credit Agreement generally bear interest at an alternate base rate plus a margin or a term SOFR-based rate plus a margin of 0.625 percent to 1.25 percent. The alternate base rate is determined by a pricing schedule (which is the highest of (a) 0 percent , (b) U.S. Bank’s prime rate, (c) the federal funds effective rate plus 0.50 percent, or (d) a term SOFR-based rate plus 1.00 percent). In addition, there is a commitment fee on the aggregate unused commitments under the 364-day Credit Agreement ranging from 0.05 percent to 0.175 percent per annum. The recorded amount of borrowings outstanding approximates fair value because of the short maturity period of the debt. The 364-day Credit Agreement contains various restrictions and covenants that require us to maintain certain financial ratios, including an initial maximum leverage ratio of 3.00 to 1.00. The 364-day Credit Agreement also contains customary events of default. 9 Table of Contents 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 $ 476.5 million on March 31, 2023. 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 Level 2. Series A matures in August 2023 and is classified as current portion of debt in our Condensed Consolidated Balance Sheets as of March 31, 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 our U.S. trade accounts receivable with a total availability of $ 500 million as of March 31, 2023. The interest rate on borrowings under the Receivables Securitization Facility is based on Bloomberg Short Term Bank Yield Index (“BSBY”) 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 November 17, 2023, unless extended by the parties. 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. Borrowings on the Receivables Securitization Facility are included within proceeds on current borrowings on the consolidated statement of cash flows. 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 February 1, 2022, we amended the Receivables Securitization Facility primarily to increase the total availability from $ 300 million to $ 500 million pursuant to the provisions of the existing agreement. On July 7, 2022, we amended the Receivables Securitization Facility to effectively increase the receivables pool available with respect to the Receivables Securitization Facility. 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 $ 578.0 million as of March 31, 2023, based primarily on the market prices quoted from external sources. The carrying value of the Senior Notes was $ 595.3 million as of March 31, 2023. 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. 10 Table of Contents The Senior Notes were issued under an indenture that contains covenants imposing certain limitations on our ability to incur liens or enter into sale and leaseback transactions above certain limits; and consolidate, or merge or transfer substantially all of our assets and those of our subsidiaries on a consolidated basis. It also provides for customary events of default (subject in certain cases to customary grace and cure periods), which include, among other things nonpayment, breach of covenants in the indenture, and certain events of bankruptcy and insolvency. If an event of default occurs and is continuing with respect to the Senior Notes, the trustee or holders of at least 25 percent in principal amount outstanding of the Senior Notes may declare the principal and the accrued and unpaid interest, if any, on all of the outstanding Senior Notes to be due and payable. These covenants and events of default are subject to a number of important qualifications, limitations, and exceptions that are described in the indenture. The indenture does not contain any financial ratios or specified levels of net worth or liquidity to which we must adhere. In addition to the above financing agreements, we have a $ 15 million discretionary line of credit with U.S. Bank of which $ 9.9 million is currently utilized for standby letters of credit related to insurance collateral as of March 31, 2023. These standby letters of credit are renewed annually and were undrawn as of March 31, 2023. 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: Three Months Ended March 31, 2023 2022 Federal statutory rate 21.0 % 21.0 % State income taxes, net of federal benefit 2.3 1.2 Share based payment awards ( 5.0 ) ( 1.3 ) Foreign tax credits ( 0.7 ) ( 0.8 ) Other U.S. tax credits and incentives ( 3.8 ) ( 1.9 ) Foreign ( 1.0 ) ( 0.6 ) Other 0.7 0.8 Effective income tax rate 13.5 % 18.4 % In the quarter ended March 31, 2023, management made the determination that it is no longer indefinitely reinvested with regard to the unremitted earnings of any foreign subsidiaries although it remains indefinitely reinvested related to other taxable differences that may exist with regard to these subsidiaries. The change results in a one-time increase to tax expense of approximately $ 2.0 million. As of March 31, 2023, we have $ 42.0 million of unrecognized tax benefits and related interest and penalties. It is possible the amount of unrecognized tax benefit could change in the next 12 months as a result of a lapse of the statute of limitations and settlements with taxing authorities. The total liability for unrecognized tax benefits is expected to decrease by approximately $ 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 2015. We are currently under a limited Internal Revenue Service audit for the 2015 to 2017 tax years, while the 2018 U.S. Federal statute of limitations is closed. 11 Table of Contents 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 March 31, 2023 2022 Stock options $ 2,218 $ 3,219 Stock awards 12,012 20,063 Company expense on ESPP discount 1,377 1,324 Total stock-based compensation expense $ 15,607 $ 24,606 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 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 3,227,872 shares available for stock awards under the Plan as of March 31, 2023. 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 March 31, 2023, unrecognized compensation expense related to stock options was $ 11.2 million. Stock Awards - We have awarded performance-based restricted shares, performance-based restricted stock units (“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 24 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 We have awarded performance-based restricted shares through 2020 to certain key employees. These awards vest over a five-year period based on the company’s dilutive earnings per share growth. Beginning in 2021, we have awarded annually PSUs to certain key employees. These PSUs vest over a three-year period based achieving 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 annually time-based awards that vest over a three-year period. These awards vest primarily based on the passage of time and the employee’s continued employment. We granted 272,455 PSUs at target and 688,341 time-based restricted stock units in February 2023. The PSUs and time-based restricted stock unit awards had a weighted average grant date fair value of $ 92.15 and $ 92.74 , respectively, and vest over a three-year period as described above. 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 March 31, 2023, there was unrecognized compensation expense of $ 226.3 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 12 Table of Contents on the passage of time, and contingent upon obtaining certain dilutive earnings per share, adjusted gross profits, and adjusted operating margin targets, and certain other conditions. Employee Stock Purchase Plan - Our 1997 Employee Stock Purchase Plan (“ESPP”) allows our employees to contribute up to $ 10,000 of their annual cash compensation to purchase company stock. 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 March 31, 2023 Shares purchased by employees Aggregate cost to employees Expense recognized by the company 92,373 $ 7,802 $ 1,377 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. • 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. • 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 groupage services across Europe. The internal reporting of segments is defined, based in part, on the reporting and review process used by our chief operating decision maker (“CODM”), our Interim 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, 2022. 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): 13 Table of Contents NAST Global Forwarding All Other and Corporate Consolidated Three Months Ended March 31, 2023 Total revenues $ 3,304,187 $ 789,978 $ 517,505 $ 4,611,670 Income (loss) from operations 134,022 30,116 ( 3,105 ) 161,033 Depreciation and amortization 5,651 5,480 13,249 24,380 Total assets (1) 3,240,898 1,194,575 1,160,111 5,595,584 Average employee headcount 6,870 5,471 4,561 16,902 NAST Global Forwarding All Other and Corporate Consolidated Three Months Ended March 31, 2022 Total revenues $ 4,114,889 $ 2,194,397 $ 506,667 $ 6,815,953 Income (loss) from operations 182,354 167,638 ( 4,518 ) 345,474 Depreciation and amortization 6,239 5,555 10,692 22,486 Total assets (1) 3,701,164 2,940,486 879,688 7,521,338 Average employee headcount 7,348 5,610 4,300 17,258 _________________________________________ (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 March 31, 2023 NAST Global Forwarding All Other and Corporate Total Major Service Lines Transportation and logistics services (1) $ 3,304,187 $ 789,978 $ 233,800 $ 4,327,965 Sourcing (2) — — 283,705 283,705 Total $ 3,304,187 $ 789,978 $ 517,505 $ 4,611,670 Three Months Ended March 31, 2022 NAST Global Forwarding All Other and Corporate Total Major Service Lines Transportation and logistics services (1) $ 4,114,889 $ 2,194,397 $ 219,065 $ 6,528,351 Sourcing (2) — — 287,602 287,602 Total $ 4,114,889 $ 2,194,397 $ 506,667 $ 6,815,953 ____________________________________________ (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 March 31, 2023, and revenue recognized in the three months ended March 31, 2023 and 2022 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. 14 Table of Contents 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, trailers, and a small number of intermodal containers. We do not have material financing leases. Frequently, we enter into contractual relationships with a wide variety of transportation companies for freight capacity and utilize those relationships to efficiently and cost-effectively arrange the transport of our customers’ freight. These contracts typically have a term of 12 months or less and do not allow us to direct the use or obtain substantially all of the economic benefits of a specifically identified asset. Accordingly, these agreements are not considered leases. 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 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 the 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 that we will exercise that option although these occurrences are seldom. We have lease agreements with lease components (e.g., payments for rent) and non-lease components (e.g., payments for common area maintenance and parking), which are all accounted for as a single lease component. We do not have material lease agreements that have not yet commenced that are expected to create significant rights or obligations as of March 31, 2023. Information regarding lease expense, remaining lease term, discount rate, and other select lease information is presented below as of March 31, 2023 and December 31, 2022, and for the three months ended March 31, 2023 and 2022, is as follows (dollars in thousands): Three Months Ended March 31, Lease Costs 2023 2022 Operating lease expense $ 24,653 $ 21,645 Short-term lease expense 1,414 2,460 Total lease expense $ 26,067 $ 24,105 Three Months Ended March 31, Other Lease Information 2023 2022 Operating cash flows from operating leases $ 24,815 $ 21,381 Right-of-use lease assets obtained in exchange for new lease liabilities 6,739 23,646 Lease Term and Discount Rate As of March 31, 2023 As of December 31, 2022 Weighted average remaining lease term (in years) 6.3 6.4 Weighted average discount rate 3.5 % 3.5 % 15 Table of Contents The maturities of lease liabilities as of March 31, 2023, were as follows (in thousands): Maturity of Lease Liabilities Operating Leases Remaining 2023 $ 63,212 2024 80,204 2025 65,986 2026 54,217 2027 43,301 Thereafter 115,175 Total lease payments 422,095 Less: Interest ( 47,969 ) Present value of lease liabilities $ 374,126 NOTE 11. ALLOWANCE FOR CREDIT LOSSES Our allowance for credit losses is computed using a number of factors including our past credit loss experience, the aging of amounts due from our customers, and our customers' credit ratings, in addition to other customer-specific factors. We have also 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 March 31, 2023. A rollforward of our allowance for credit losses on our accounts receivable balance is presented below (in thousands): Balance, December 31, 2022 $ 28,749 Provision ( 6,400 ) Write-offs ( 3,782 ) Balance, March 31, 2023 $ 18,567 Recoveries of amounts previously written off were not significant for the three months ended March 31, 2023. 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 March 31, 2023 and December 31, 2022, was $ 86.4 million and $ 88.9 million, respectively. The recorded balance on March 31, 2023 and December 31, 2022 is comprised solely of foreign currency adjustments, including foreign currency translation. Other comprehensive income was $ 2.5 million for the three months ended March 31, 2023, primarily driven by fluctuations in the Euro. Other comprehensive income was $ 6.9 million for the three months ended March 31, 2022, primarily driven by fluctuations in the Australian Dollar and Singapore Dollar. NOTE 13: RESTRUCTURING In 2022, we announced organizational changes to support our enterprise strategy of accelerating our digital transformation and productivity initiatives. We continued to execute upon these digital transformation and productivity initiatives in 2023, which resulted in further restructuring charges to better align our workforce as a result of these initiatives and in consideration of the changing freight transportation market. We recognized additional restructuring charges of $ 3.7 million in the first quarter of 2023 primarily related to workforce reductions. We expect to complete our restructuring actions by the end of 2023. For severance and other operating expenses related to restructuring activities, we paid $ 15.2 million in cash in the first quarter of 2023 with the majority of the remaining $ 7.5 million accrued as of March 31, 2023 expected to be paid by the end of 2023. 16 Table of Contents A summary of the restructuring charges recognized is presented below (in thousands): Three Months Ended March 31, 2023 Severance (1) $ 3,138 Other personnel expenses (1) 460 Other selling, general, and administrative expenses (2) 124 Total $ 3,722 ________________________________ (1) Amounts are included within personnel expenses in our consolidated statements of operations. (2) Amounts are included within other selling, general, and administrative expenses in our consolidated statements of operations. The following table summarizes restructuring charges by reportable segment for the three months ended March 31, 2023 (dollars in thousands): NAST Global Forwarding All Other and Corporate Consolidated Personnel expenses $ 829 $ 1,538 $ 1,231 $ 3,598 Other selling, general, and administrative expenses — 124 — 124 The following table summarizes activity related to our restructuring initiatives and reserves included in our consolidated balance sheets as of December 31, 2022 and March 31, 2023: Accrued Severance and Other Personnel Expenses Accrued Other Selling, General, and Administrative Expenses Total Balance, December 31, 2022 $ 18,976 $ — $ 18,976 Restructuring charges 3,598 124 3,722 Cash payments ( 15,178 ) — ( 15,178 ) Accrual adjustments (1) 5 — 5 Balance, March 31, 2023 $ 7,401 $ 124 $ 7,525 ________________________________ (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. 17 Table of Contents