38 unchanged sentences
Our adjusted gross profits and adjusted gross profit margin are non-GAAP financial measures.
−Removed: Adjusted gross profits is calculated as gross profits excluding amortization of internally developed software utilized to directly serve our customers and contracted carriers.
+Added: Adjusted gross profits are calculated as gross profits excluding amortization of internally developed software utilized to directly serve our customers and contracted carriers.
Adjusted gross profit margin is calculated as adjusted gross profits divided by total revenues.
2 unchanged sentences
The reconciliation of gross profits to adjusted gross profits and gross profit margin to adjusted gross profit margin is presented below (dollars in thousands):
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
13 unchanged sentences
The reconciliation of operating margin to adjusted operating margin is presented below (dollars in thousands) :
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
6 unchanged sentences
MARKET TRENDS
−Removed: Carrier capacity in the North America surface transportation market has remained plentiful relative to demand which has resulted in suppressed transportation rates for much of the second quarter of 2023.
−Removed: As surface transportation spot rates continued to approximate the breakeven cost per mile to operate a truck, it is likely that the market is at, or near, the bottom of the industry cycle which typically results in capacity exiting the market.
−Removed: Conversely, the second quarter of 2022 exhibited elevated transportation rates, moderating consumer demand, and capacity entering the market.
−Removed: Industry freight volumes decreased in the second quarter of 2023 compared to the second quarter of 2022.
+Added: Carrier capacity during the third quarter of 2023 in the North America surface transportation market continued to exceed shipper demand which has resulted in a sustained market of suppressed transportation rates at, or near, the estimated cost to operate a truck.
+Added: These conditions are typically referred to as a soft market.
+Added: As recent elevated inventory levels have largely stabilized, many shippers continue to closely monitor consumer spending uncertainty and cautiously manage their inventory restocking activity, which is made easier when excess carrier capacity exists in the market.
+Added: Market conditions in the third quarter of 2022 had only started to soften as demand began to align with available capacity, which caused industry freight rates to decline.
One of the metrics we use to measure market conditions is the truckload routing guide depth from our Managed Services business.
Routing guide depth represents the average number of carriers contacted prior to acceptance when procuring a transportation provider.
−Removed: The average routing guide depth of tender in the second quarter of 2023 declined to 1.1, which is the lowest level we have seen since the pandemic impacted the second quarter of 2020, compared to a 1.4 average routing guide depth in the second quarter of 2022.
−Removed: The average routing guide depth in the second quarter of 2023 represents that on average, the first carrier in a shipper's routing guide is accepting the shipment most of the time.
−Removed: Ocean vessel and air freight capacity continues to trend higher than demand in the global forwarding market, which has kept ocean and air freight rates low during this period of significant decline that started in the second half of 2022 and into 2023.
−Removed: Several consecutive quarters of weak consumer demand have nearly eliminated the challenges from port congestion and transportation equipment shortages that were impacting the global forwarding market in recent years.
−Removed: Despite the weak demand, new vessel deliveries continue to add capacity to the market, which suggests excess capacity may persist for several periods despite steamship lines continuing to rationalize services by reducing capacity where possible with blank sailings and slow steaming.
−Removed: The air freight market has also seen an increase of capacity resulting from increased commercial flight activity to support elevated consumer travel.
−Removed: Although consumer demand showed a modest sign of improvement sequentially, the low price of ocean freight continues to result in less ocean freight converting to air freight and more than sufficient air freight capacity which has kept air freight rates suppressed.
+Added: The average routing guide depth of tender in the third quarter of 2023 remained low at 1.2 and was essentially in-line with the average routing guide depth of 1.1 in the second quarter of 2023.
+Added: This compared to average routing guide depth of 1.3 in the third quarter of 2022.
+Added: The average routing guide depth in the third quarter of 2023 represents that on average, the first carrier in a shipper's routing guide is accepting the shipment most of the time, resulting in a limited number of shipments reaching the spot market.
+Added: Similar to the North America surface transportation market, the global forwarding market continued to soften as ocean vessel capacity continued to expand relative to demand during the third quarter of 2023.
+Added: New vessel deliveries continue trending higher than vessel capacity leaving the market, which has furthered the recent trend of suppressed ocean freight rates in 2023 as demand has remained weak.
+Added: These softening market conditions began in the middle of 2022 and also impacted the third quarter of 2022.
+Added: Steamship lines continue to rationalize services through blank sailings and slow steaming, which will likely impact schedule reliability and transit times in future periods.
+Added: The low price of ocean freight continues to result in less ocean freight converting to air freight despite increasing transit times and degrading schedule reliability.
+Added: There continues to be more than sufficient air freight capacity in the market, which has kept air freight rates suppressed although capacity did tighten slightly following the end of the peak summer travel season.
BUSINESS TRENDS
−Removed: Our second quarter of 2023 surface transportation results were largely consistent with the trends discussed in the market trends section.
−Removed: The excess carrier capacity in the market led to significant declines in transportation rates versus the elevated levels experienced in the prior year.
−Removed: This resulted in declines in both our total revenues and adjusted gross profits in the second quarter of 2023 compared to the strong results achieved in the second quarter of 2022.
−Removed: The softening market conditions in the second quarter of 2022 resulted in an elevated adjusted gross profit per shipment as the cost of transportation decreased relative to our contractual rates.
−Removed: Conversely, the suppressed transportation rates in the second quarter of 2023 have resulted in a decline in adjusted gross profit per shipment and a higher percentage of contractual shipments as efficient routing guide performance has resulted in fewer loads moving on the transactional market.
−Removed: Industry freight volumes decreased in the second quarter of 2023 compared to the second quarter of 2022.
−Removed: Our combined NAST truckload and less than truckload (“LTL”) volume decreased 2.5 percent during the second quarter of 2023.
−Removed: Our average truckload linehaul cost per mile, excluding fuel surcharges, decreased approximately 19.0 percent during the second quarter of 2023.
−Removed: Our average truckload linehaul rate charged to our customers, excluding fuel surcharges, decreased approximately 23.0 percent during the second quarter of 2023.
−Removed: Our second quarter of 2023 global forwarding results were largely consistent with the trends discussed in the market trends section.
−Removed: We experienced a significant decline in both total revenues and adjusted gross profits in our ocean and air freight businesses compared to the strong results achieved in the second quarter of 2022.
+Added: Our third quarter of 2023 surface transportation results were largely consistent with the trends discussed in the market trends section.
+Added: The weak global freight demand and excess carrier capacity in the market resulted in most shipments moving under committed pricing agreements and suppressed freight rates on the limited number of shipments reaching the spot market.
+Added: This resulted in declines in both our total revenues and adjusted gross profits in the third quarter of 2023 compared to the third quarter of 2022.
+Added: The soft market conditions in the third quarter of 2023 resulted in reduced adjusted gross profit per shipment as our pricing strategies continue to reflect the competitive market conditions to ensure we are at, or near, the top of our customer’s routing guides while also aggressively pursuing the limited number of shipments reaching the spot market.
+Added: Industry freight volumes decreased in the third quarter of 2023 compared to the third quarter of 2022.
+Added: Our combined North American Surface Transportation (“NAST”) truckload and less than truckload (“LTL”) volume decreased 3.5 percent during the third quarter of 2023.
+Added: Our average truckload linehaul cost per mile, excluding fuel surcharges, decreased approximately 13.5 percent during the third quarter of 2023.
+Added: Our average truckload linehaul rate charged to our customers, excluding fuel surcharges, decreased approximately 16.5 percent during the third quarter of 2023.
+Added: Our third quarter of 2023 Global Forwarding results were largely consistent with the trends discussed in the market trends section.
+Added: We experienced a decline in both total revenues and adjusted gross profits in our ocean and air freight businesses compared to the third quarter of 2022.
Our ocean volumes decreased 0.5 percent while our air freight tonnage decreased 2.0 percent.
SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS
−Removed: The following summarizes select second quarter 2023 year-over-year operating comparisons to the second quarter 2022:
+Added: The following summarizes select third quarter 2023 year-over-year operating comparisons to the third quarter 2022:
• Total revenues decreased 27.8 percent to $4.3 billion, driven primarily by lower ocean and truckload pricing.
2 unchanged sentences
• Personnel expenses decreased 21.5 percent to $343.5 million, primarily due to cost optimization efforts and lower variable compensation, including lower average employee headcount, which decreased 13.7 percent.
−Removed: • Other selling, general, and administrative (“SG&A”) expenses increased 32.8 percent to $155.6 million, primarily due to the $23.5 million gain on the sale-leaseback of our Kansas City regional center recorded in the prior year and increased claims and higher warehouse expenses in the current year.
+Added: • Other selling, general, and administrative (“SG&A”) expenses increased 9.7 percent to $177.8 million, primarily due to $21.4 million of restructuring expenses, partially offset by decreased purchased and contracted services and decreased legal settlements.
• Income from operations decreased 60.5 percent to $113.5 million, driven by decreased adjusted gross profits, partially offset by the decline in operating expenses.
• Adjusted operating margin of 17.9 percent declined 1,450 basis points.
−Removed: • Interest and other income/expenses, net totaled $18.3 million, consisting primarily of $23.2 million of interest expense, which increased $6.3 million versus last year due primarily to higher variable interest rates.
−Removed: This was partially offset by a $3.5 million gain of foreign currency revaluation and realized foreign currency gains and losses, compared to a $10.3 million loss last year, both driven by foreign currency impacts on intercompany assets and liabilities.
−Removed: • The effective tax rate in the quarter was 14.9 percent compared to 21.3 percent in the second quarter last year.
+Added: • Interest and other income/expense, net totaled $20.7 million of expense, consisting primarily of $21.8 million of interest expense, which increased $1.0 million versus last year due primarily to higher variable interest rates.
+Added: The current year included a net $0.1 million gain from foreign currency revaluation and realized foreign currency gains and losses, compared to a net $5.2 million gain last year.
+Added: • The effective tax rate in the quarter was 11.7 percent compared to 16.9 percent in the third quarter last year.
• Net income totaled $81.9 million, down 63.7 percent from a year ago.
• Diluted earnings per share (EPS) decreased 61.8 percent to $0.68.
−Removed: • Cash flow from operations improved $228.0 million in the six months ended June 30, 2023, driven by changes in net operating working capital, offset in part by a decrease in net income.
+Added: • Cash flow from operations decreased $192.2 million in the nine months ended September 30, 2023, driven by a decrease in net income, offset in part by changes in net operating working capital.
CONSOLIDATED RESULTS OF OPERATIONS
The following table summarizes our results of operations (dollars in thousands, except per share data):
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 % change 2023 2022 % change
22 unchanged sentences
A reconciliation of our reportable segments to our consolidated results can be found in Note 8, Segment Reporting, in Part I, Financial Information of this Quarterly Report on Form 10-Q.
−Removed: Consolidated Results of Operations—Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022
+Added: Consolidated Results of Operations—Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022
Total revenues and direct costs.
−Removed: Total transportation revenues and direct costs decreased significantly primarily due to lower pricing and purchased transportation costs in ocean and truckload services, in addition to volume declines in nearly all service lines compared to the strong results in the prior year.
−Removed: The declines in pricing and purchased transportation costs were driven by the excess carrier capacity and continued weak consumer demand discussed in the market trends and business trends sections above.
−Removed: This compared to the elevated pricing and tight carrier capacity caused by driver availability challenges and the supply chain disruptions, including port congestion and equipment shortages, facing the industry in the prior year.
−Removed: Our sourcing total revenue and direct costs increased driven by increased case volume with foodservice customers, partially offset by lower average pricing per case with retail customers.
+Added: Total transportation revenues and direct costs decreased significantly primarily due to lower pricing and purchased transportation costs in ocean and truckload services, in addition to volume declines in most transportation service lines compared to the prior year.
+Added: The weak global freight demand and excess capacity in both the surface transportation and global forwarding markets has resulted in a sustained market of suppressed transportation rates.
+Added: Our sourcing total revenue and direct costs increased driven by increased case volume with foodservice and retail customers.
Gross profits and adjusted gross profits.
−Removed: Our transportation adjusted gross profits decreased driven by lower truckload and ocean adjusted gross profits per transaction in addition to volume declines in nearly all transportation service lines.
−Removed: The lower adjusted gross profit per transaction was driven by the excess capacity and weak demand in the surface transportation and global forwarding markets discussed in the market trends and business trends sections above, which have suppressed freight rates in the second quarter of 2023.
−Removed: The prior year period benefited from softening market conditions as the cost of purchased transportation decreased relative to our contractual rates resulting in elevated adjusted gross profits per transaction in the second quarter of 2022.
−Removed: Sourcing adjusted gross profits increased driven by integrated supply chain solutions for foodservice and wholesale customers.
+Added: Our transportation adjusted gross profits decreased driven by lower adjusted gross profits per transaction and volume declines in most transportation service lines, most notably our truckload and ocean service lines.
+Added: The lower adjusted gross profit per transaction was driven by the weak demand and excess capacity in both the surface transportation and global forwarding markets discussed in the market trends and business trends sections above, which have continued to suppress freight rates in the third quarter of 2023.
+Added: The prior year period benefited from market conditions beginning to soften as the cost of purchased transportation decreased relative to our contractual rates negotiated in prior quarters, resulting in elevated adjusted gross profits per transaction in the third quarter of 2022.
+Added: Sourcing adjusted gross profits increased driven by increased case volume with retail customers and an increase in integrated supply chain solutions for foodservice customers.
Operating expenses.
−Removed: Personnel expenses decreased primarily due to lower variable compensation reflecting the decline in results relative to the prior year and lower average employee headcount.
−Removed: Other SG&A expenses increased due to a $23.5 million gain on the sale-leaseback of our Kansas City regional center recorded in the prior year and increased claims, higher warehouse expenses, and higher depreciation and amortization in the current year, which was partially offset by lower contracted services, including temporary labor.
+Added: Personnel expenses decreased primarily due to cost optimization efforts and lower variable compensation reflecting the decline in results relative to the prior year and lower average employee headcount.
+Added: Other SG&A expenses increased primarily due to $21.4 million of restructuring expenses, partially offset by decreased purchased and contracted services and decreased legal settlements.
Interest and other income/expense, net.
−Removed: Interest and other income/expense, net primarily consisted of interest expense of $23.2 million and a $3.5 million favorable impact of foreign currency revaluation and realized foreign currency gains and losses primarily related to foreign currency impacts on intercompany assets and liabilities.
−Removed: Interest expense increased $6.3 million during the second quarter of 2023, driven by higher variable interest rates.
−Removed: The second quarter of 2022 included a $10.3 million unfavorable impact of foreign currency revaluation and realized foreign currency gains and losses.
+Added: Interest and other income/expense, net primarily consisted of interest expense of $21.8 million.
+Added: Interest expense increased $1.0 million during the third quarter of 2023, driven by higher variable interest rates.
+Added: The net impact of foreign currency revaluation and realized foreign currency gains and losses in the third quarter of 2023 was insignificant as foreign currency losses primarily related to the devaluation of the Argentine Peso were largely offset by gains related to other foreign currencies.
+Added: The third quarter of 2022 included a net $5.2 million favorable impact from foreign currency revaluation and realized foreign currency gains and losses primarily due to a strengthening of the U.S.
+Added: Dollar versus the Yuan.
Provision for income taxes.
−Removed: Our effective income tax rate was 14.9 percent for the second quarter of 2023 compared to 21.3 percent for the second quarter of 2022.
−Removed: The effective income tax rate for the second quarter of 2023 was lower than the statutory federal income tax rate primarily due to the tax impact of foreign tax credits and U.S.
−Removed: tax credits and incentives, which reduced the effective tax rate by 6.2 percentage points and 3.9 percentage points, respectively.
−Removed: These impacts were partially offset by a higher tax rate on state income taxes, net of federal benefit, which increased the effective income tax rate by 2.4 percentage points during the second quarter of 2023.
−Removed: The effective income tax rate for the second quarter of 2022 was slightly higher than the statutory federal income tax rate primarily due to state income taxes, net of federal benefit, which increased the effective income tax rate by 2.0 percentage points.
−Removed: This impact was partially offset by the tax impact of foreign tax credits, which reduced the effective tax rate by 1.4 percentage points.
−Removed: Consolidated Results of Operations—Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022
+Added: Our effective income tax rate was 11.7 percent for the third quarter of 2023 compared to 16.9 percent for the third quarter of 2022.
+Added: The effective income tax rate for the third quarter of 2023 was lower than the statutory federal income tax rate primarily due to the tax impact of foreign tax credits, U.S.
+Added: tax credits and incentives, and a South American restructuring program taxable basis difference, which reduced the effective tax rate by 9.0 percentage points, 6.1 percentage points, and 5.9 percentage points, respectively.
+Added: These impacts were partially offset by a higher tax rate on foreign earnings, which increased the effective income tax rate by 8.4 percentage points during the third quarter of 2023.
+Added: The effective income tax rate for the third quarter of 2022 was lower than the statutory federal income tax rate primarily due to U.S.
+Added: tax credits and incentives, which decreased the effective income tax rate by 6.2 percentage points.
+Added: This impact was partially offset by a higher tax rate on foreign earnings and state income taxes, net of federal benefit, which increased the effective income tax rate by 2.8 percentage points and 2.4 percentage points, respectively.
+Added: Consolidated Results of Operations—Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022
Total revenues and direct costs.
Total transportation revenues and direct costs decreased driven by lower pricing and purchased transportation costs in nearly all of our service lines, most notably in ocean and truckload services.
−Removed: In addition, volumes declined in nearly all transportation services compared to the strong results in the prior year.
−Removed: Our sourcing total revenue and direct costs increased driven by increased case volume with foodservice customers partially offset by lower average pricing per case with retail customers.
+Added: In addition, volumes declined in nearly all transportation services compared to the prior year.
+Added: The decline in pricing and purchased transportation costs has been driven by the soft market conditions in both the surface transportation and global forwarding markets in the nine months ended September 30, 2023.
+Added: Our sourcing total revenue and direct costs increased driven by increased case volume with foodservice customers.
Gross profits and adjusted gross profits.
−Removed: Our transportation adjusted gross profits decreased due to lower adjusted gross profit per transaction in truckload and ocean services, and to a lesser extent air and LTL services, in addition to decreased volumes in nearly all service lines.
−Removed: The lower adjusted gross profit per transaction was driven by the excess capacity and weak demand in the surface transportation and global forwarding markets discussed in the market trends and business trends sections above, which have suppressed freight rates in the six months ended June 30, 2023.
−Removed: The prior year period benefited from the softening market conditions as the cost of purchased transportation decreased relative to our contractual rates resulting in elevated adjusted gross profits per transaction in the six months ended June 30, 2022.
−Removed: Sourcing adjusted gross profits increased driven by integrated supply chain solutions for foodservice and wholesale customers.
+Added: Our transportation adjusted gross profits decreased due to lower adjusted gross profit per transaction in truckload and ocean services, in addition to decreased volumes in nearly all service lines.
+Added: The lower adjusted gross profit per transaction was driven by the excess capacity and weak demand in the surface transportation and global forwarding markets discussed in the market trends and business trends sections above, which have suppressed freight rates in the nine months ended September 30, 2023.
+Added: Our prior year surface transportation adjusted gross profit per transaction benefited from market conditions beginning to soften resulting in the declining cost of purchased transportation relative to our contractual rates negotiated in prior quarters.
+Added: Sourcing adjusted gross profits increased driven by integrated supply chain solutions for foodservice customers in addition to increased case volume with retail customers.
Operating expenses.
Personnel expenses decreased primarily due to cost optimization efforts including lower average employee headcount in addition to lower variable compensation reflecting the decline in results relative to the prior year.
−Removed: Other SG&A expenses increased due to a $23.5 million gain from a sale-leaseback of a facility in Kansas City in the prior year and increased depreciation and amortization, travel and warehouse expenses in the current year, which was partially offset by decreased contracted services, including temporary labor.
+Added: Other SG&A expenses increased due to a $23.5 million gain from a sale-leaseback of a facility in Kansas City in the prior year and $22.6 million of restructuring expenses in the current year, partially offset by decreased purchased and contracted services, including temporary labor.
Interest and other income/expense, net.
−Removed: Interest and other income/expense, net primarily consisted of interest expense of $46.8 million and a $6.0 million unfavorable impact of foreign currency revaluation and realized foreign currency gains and losses in the six months ended June 30, 2023, primarily due to foreign currency impacts on intercompany assets and liabilities.
−Removed: Interest expense increased $15.3 million driven by a higher variable interest rates compared to the prior year.
−Removed: The prior year included an $11.8 million unfavorable impact of foreign currency revaluation and realized foreign currency gains and losses due to the strengthening of the U.S.
−Removed: Dollar versus the Euro and Yuan.
+Added: Interest and other income/expense, net primarily consisted of interest expense of $68.6 million, which increased $16.3 million driven by higher variable interest rates compared to the prior year.
+Added: The nine months ended September 30, 2023, included a net $5.9 million unfavorable impact from foreign currency revaluation and realized foreign currency gains and losses primarily related to the devaluation of the Argentine Peso, which were partially offset by gains related to other foreign currencies.
+Added: The prior year included a net $6.6 million unfavorable impact from foreign currency revaluation and realized foreign currency gains and losses primarily due to the impact of the strengthening U.S.
+Added: Dollar versus the Euro and Australian Dollar, partially offset by a favorable impact from the strengthening U.S.
+Added: Dollar versus the Yuan.
Provision for income taxes.
−Removed: Our effective income tax rate was 14.1 percent for the six months ended June 30, 2023 and 20.0 percent for the six months ended June 30, 2022.
−Removed: The effective income tax rate for the six months ended June 30, 2023 was lower than the statutory federal income tax rate primarily due to U.S.
−Removed: tax credits and incentives, foreign tax credits, and the tax impact of share-based payment awards, which reduced the effective tax rate by 3.9 percentage points, 3.3 percentage points, and 3.1 percentage points, respectively.
−Removed: These impacts were partially offset by state income tax expense, net of federal benefit, which increased the effective income tax rate by 2.3 percentage points.
−Removed: The effective income tax rate for the six months ended June 30, 2022 was lower than the statutory federal income tax rate primarily due to foreign tax credits, U.S.
+Added: Our effective income tax rate was 13.5 percent for the nine months ended September 30, 2023, and 19.2 percent for the nine months ended September 30, 2022.
+Added: The effective income tax rate for the nine months ended September 30, 2023 was lower than the statutory federal income tax rate primarily due to the tax impact of foreign tax credits, U.S.
tax credits and incentives, and the tax impact of share-based payment awards, which reduced the effective tax rate by 4.8 percentage points, 4.5 percentage points, and 2.5 percentage points, respectively.
+Added: These impacts were partially offset by state income tax expense, net of federal benefit, and a lower tax rate on foreign earnings, which increased the effective income tax rate by 2.5 percentage points and 2.1 percentage points, respectively.
+Added: The effective income tax rate for the nine months ended September 30, 2022 was lower than the statutory federal income tax rate primarily due to U.S.
+Added: tax credits and incentives, the tax impact of share-based payment awards, and the tax impact of foreign tax credits, which reduced the effective tax rate by 2.3 percentage points, 1.1 percentage points, and 0.8 percentage points, respectively.
These impacts were partially offset by state income tax expense, net of federal benefit, which increased the effective income tax rate by 1.9 percentage points.
NAST Segment Results of Operations
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2023 2022 % change 2023 2022 % change
6 unchanged sentences
Income from operations $ 112,121 $ 211,899 (47.1) % $ 364,002 $ 670,752 (45.7) %
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 % change 2023 2022 % change
10 unchanged sentences
(1) Adjusted gross profit margin is a non-GAAP financial measure explained above.
−Removed: Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022
+Added: Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022
Total revenues and direct costs.
−Removed: NAST total revenues and direct costs decreased primarily due to significantly lower pricing and purchased transportation costs in truckload services, reflecting the excess carrier capacity and slowing economic growth discussed above in the market trends section.
−Removed: Our combined NAST truckload and LTL volume decreased 2.5 percent.
−Removed: These conditions resulted in significant declines in surface transportation rates versus the historically elevated levels of truckload pricing in the second quarter of 2022.
−Removed: The elevated pricing and purchased transportation cost environment in the prior year was due to the tight carrier capacity caused by driver availability challenges and the supply chain disruptions, including port congestion and equipment shortages, facing the industry in the second quarter of 2022.
+Added: NAST total revenues and direct costs decreased primarily due to significantly lower pricing and purchased transportation costs in truckload services as carrier capacity continues to exceed shipper demand, which has resulted in a sustained market of suppressed transportation rates at, or near, the estimated cost to operate a truck.
+Added: As shipper demand started to decline in the third quarter of 2022, it began to better align with the carrier capacity available in the market.
+Added: As the market became more balanced, it resulted in declining pricing and purchased transportation costs in the third quarter of 2022 although still at elevated levels in comparison to the third quarter of 2023.
+Added: Our combined NAST truckload and LTL volume decreased 3.5 percent driven by the weak global freight demand discussed in the market trends and business trends sections above.
Gross profits and adjusted gross profits.
−Removed: NAST adjusted gross profits decreased due to lower pricing in truckload services, resulting in lower adjusted gross profits per shipment most notably on transactional volume, in addition to a decline in truckload volumes.
−Removed: The lower adjusted gross profit per transaction was driven by the excess capacity and weak demand in the surface transportation market discussed in the market and business trends sections above which has suppressed freight rates in the second quarter of 2023.
−Removed: The prior year period benefited from softening market conditions as the cost of purchased transportation decreased relative to our contractual rates resulting in elevated adjusted gross profits per transaction in the second quarter of 2022.
−Removed: Our average truckload linehaul rate per mile charged to our customers, which excludes fuel surcharges, decreased approximately 23.0 percent in the second quarter of 2023 compared to the second quarter of 2022.
+Added: NAST adjusted gross profits decreased due to lower pricing in truckload services, resulting in lower adjusted gross profits per transaction.
+Added: The lower adjusted gross profit per transaction was driven by the soft market conditions discussed in the market trends and business trends sections above, resulting in lower pricing and limited spot market opportunities at attractive rates in the third quarter of 2023.
+Added: The prior year period benefited from market conditions starting to soften as the cost of purchased transportation decreased relative to our contractual rates resulting in elevated adjusted gross profits per transaction in the third quarter of 2022.
+Added: Our average truckload linehaul rate per mile charged to our customers, which excludes fuel surcharges, decreased approximately 16.5 percent in the third quarter of 2023 compared to the third quarter of 2022.
Our truckload linehaul cost per mile, excluding fuel surcharges, decreased approximately 13.5 percent.
−Removed: NAST LTL adjusted gross profits decreased due to lower adjusted gross profits per transaction.
−Removed: NAST LTL volumes were flat in the second quarter of 2023 compared to the second quarter of 2022.
−Removed: NAST other adjusted gross profits increased primarily driven by increased warehousing services.
+Added: NAST LTL adjusted gross profits decreased due to lower adjusted gross profits per transaction and lower volumes in the third quarter of 2023 compared to the third quarter of 2022.
+Added: NAST other adjusted gross profits decreased primarily driven by a decline in intermodal volumes.
Operating expenses.
−Removed: NAST personnel expenses decreased primarily due to lower variable compensation and lower average employee headcount.
−Removed: NAST other SG&A expenses decreased primarily due to lower allocated corporate expenses, partially offset by higher claims expense.
+Added: NAST personnel expenses decreased primarily due to cost optimization efforts, including lower average employee headcount, and lower variable compensation.
+Added: NAST other SG&A expenses decreased primarily due to lower allocated corporate expenses and the impact of elevated legal settlements in the prior year.
The operating expenses of NAST and all other segments include allocated corporate expenses.
1 unchanged sentence
Remaining corporate allocations, including corporate functions and technology related expenses, are primarily included within each segment’s other SG&A expenses, and are allocated based upon relevant segment operating metrics.
−Removed: Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022
+Added: Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022
Total revenues and direct costs.
NAST total revenues and direct costs decreased due to lower pricing and purchased transportation costs in truckload and LTL services compared to the prior year.
−Removed: Truckload pricing reached historic levels in the first half of 2022 due to tight carrier capacity caused by driver availability challenges and the supply chain disruptions that were facing the industry.
−Removed: In addition, truckload volume decreased during the six months ended June 30, 2023, compared to the six months ended June 30, 2022.
+Added: Truckload pricing reached historic levels early in 2022 due to tight carrier capacity caused by driver availability challenges and the supply chain disruptions that were facing the industry.
+Added: Truckload pricing and purchased transportation costs began to decline later in 2022 and into 2023 reaching transportation rates at, or near, the estimated cost to operate a truck during the nine months ended September 30, 2023.
+Added: Truckload and LTL volumes also decreased during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, driven by the weak global freight demand discussed in the market trends and business trends sections above.
Gross profits and adjusted gross profits.
−Removed: NAST adjusted gross profits decreased primarily due to lower adjusted gross profit per transaction in both truckload and LTL services in addition to a decrease in volume for both.
−Removed: The lower adjusted gross profit per transaction was driven by the excess capacity and weak demand in the surface transportation market discussed in the market trends and business trends sections above which has suppressed freight rates in the six months ended June 30, 2023.
−Removed: The prior year period benefited from the softening market conditions as the cost of purchased transportation decreased relative to our contractual rates resulting in elevated adjusted gross profits per transaction in the six months ended June 30, 2022.
+Added: NAST adjusted gross profits decreased primarily due to lower adjusted gross profit per transaction in truckload and LTL services in addition to a decrease in volume for both.
+Added: The lower adjusted gross profit per transaction was driven by the excess capacity and weak demand in the surface transportation market discussed in the market trends and business trends sections above, which has suppressed freight rates in the nine months ended September 30, 2023.
+Added: The prior year period benefited from market conditions starting to soften as the cost of purchased transportation decreased relative to our contractual rates negotiated in prior quarters resulting in elevated adjusted gross profits per transaction in the nine months ended September 30, 2022.
Our average truckload linehaul rate per mile charged to our customers, which excludes fuel surcharges, decreased approximately 22.5 percent.
Our truckload linehaul cost per mile, excluding fuel surcharges, decreased approximately 20.5 percent.
−Removed: NAST other adjusted gross profits increased driven by an increase in warehousing services and an increase in intermodal adjusted gross profits.
+Added: NAST other adjusted gross profits increased driven by an increase in warehousing services.
Operating expenses.
−Removed: NAST personnel expense decreased primarily due to decreased variable compensation and a decrease in average employee headcount.
−Removed: NAST other SG&A expenses decreased primarily due to lower allocated corporate expenses and a decrease in credit losses and lower contracted services, including temporary labor.
+Added: NAST personnel expense decreased primarily due to cost optimization efforts, including lower average employee headcount, and decreased variable compensation.
+Added: NAST other SG&A expenses decreased primarily due to lower allocated corporate expenses, advertising expenses and purchased and contracted services, including temporary labor, and decreased legal settlements.
Global Forwarding Segment Results of Operations
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2023 2022 % change 2023 2022 % change
6 unchanged sentences
Income from operations $ 3,491 $ 85,953 (95.9) % $ 63,254 $ 421,148 (85.0) %
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 % change 2023 2022 % change
12 unchanged sentences
(1) Adjusted gross profit margin is a non-GAAP financial measure explained above.
−Removed: Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022
+Added: Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022
Total revenues and direct costs.
−Removed: Global Forwarding total revenues and direct costs decreased driven by lower pricing and purchased transportation costs in ocean and air freight services, in addition to volume declines in both service lines compared to the strong results in the prior year.
−Removed: The declines in pricing and purchased transportation costs were driven by the excess carrier capacity and continued weak consumer demand discussed in the market trends and business trends sections above.
−Removed: The prior year was impacted by elevated pricing and cost of purchased transportation driven by the supply chain disruptions that impacted the global forwarding market in the second quarter of 2022.
+Added: Global Forwarding total revenues and direct costs decreased driven by lower pricing and purchased transportation costs in ocean and air freight services.
+Added: As ocean vessel capacity has continued to increase relative to the weak global freight demand, it has continued to suppress ocean freight rates.
+Added: The air freight market continues to have more than sufficient capacity which has continued to suppress air freight rates as well.
Gross profits and adjusted gross profits.
−Removed: Global Forwarding adjusted gross profits decreased due to lower ocean and air freight adjusted gross profits per transaction, in addition to volume decline in both service lines compared to the strong results in the prior year.
−Removed: The lower adjusted gross profit per transaction was driven by the excess capacity and weak demand in the global forwarding markets discussed in the market trends and business trends sections above, which have suppressed freight rates in the second quarter of 2023.
+Added: Global Forwarding adjusted gross profits decreased due to lower ocean and air freight adjusted gross profits per transaction in addition to volume declines in both service lines compared to the prior year.
+Added: The lower adjusted gross profit per transaction was driven by the excess capacity and weak demand in the global forwarding markets discussed in the market trends and business trends sections above, which have suppressed freight rates in the third quarter of 2023.
Customs adjusted gross profits decreased driven by a decrease in transaction volume.
Operating expenses.
−Removed: Personnel expenses decreased primarily due to lower variable compensation and a decrease in average employee headcount.
−Removed: Other SG&A expenses increased driven by higher credit losses.
−Removed: Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022
+Added: Personnel expenses decreased primarily due to cost optimization efforts, including lower average employee headcount, and lower variable compensation reflecting the decline in results relative to the prior year.
+Added: Other SG&A expenses increased driven by $21.0 million of restructuring expenses in the current year related to disposal and exit activities, including asset impairments for the planned divestiture of our operations in Argentina.
+Added: Refer to Note 13, Restructuring for additional detail on our South American restructuring program.
+Added: Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022
Total revenues and direct costs.
−Removed: Global Forwarding total revenues and direct costs decreased driven by lower pricing and purchased transportation costs in both ocean and air freight and, to a lesser extent, decreased volumes in both service lines.
−Removed: The cost of purchased transportation and pricing began to moderate within the second quarter of 2022 and continued to decline into 2023 driven by the excess carrier capacity and continued weak demand discussed in the market and business trends sections above.
−Removed: Purchased transportation costs and pricing have remained suppressed in 2023 due to the continued weak demand and excess carrier capacity in the market.
+Added: Global Forwarding total revenues and direct costs decreased driven by lower pricing and purchased transportation costs in both ocean and air freight and, to a lesser extent, volume declines in both service lines.
+Added: The cost of purchased transportation and pricing remained elevated compared to pre-pandemic levels through the first half of 2022 before falling rapidly in the second half of 2022.
+Added: The pricing and cost of purchased transportation has remained suppressed during the nine months ended September 30, 2023, driven by the excess carrier capacity and continued weak demand discussed in the market trends and business trends sections above.
Gross profits and adjusted gross profits.
−Removed: Global Forwarding adjusted gross profits decreased due to lower adjusted gross profits per transaction, and to a lesser extent, decreased volumes in ocean and air freight compared to the strong results in the prior year.
−Removed: The lower adjusted gross profit per transaction was driven by the excess capacity and weak demand in the global forwarding markets discussed in the market trends and business trends sections above, which have suppressed freight rates in the six months ended June 30, 2023.
+Added: Global Forwarding adjusted gross profits decreased due to lower adjusted gross profits per transaction, and to a lesser extent, volume declines in ocean and air freight compared to the prior year.
+Added: The lower adjusted gross profit per transaction was driven by the excess capacity and weak demand in the global forwarding markets discussed in the market trends and business trends sections above, which have suppressed freight rates in the nine months ended September 30, 2023.
Customs adjusted gross profits decreased driven by a decrease in transaction volume.
Operating expenses.
−Removed: Personnel expenses decreased primarily due to lower variable compensation and a decrease in average employee headcount.
−Removed: Other SG&A expenses increased due to increased investments in technology and other miscellaneous expenses.
−Removed: These increases were partially offset by a decrease in contracted services, including temporary labor and lower credit losses.
+Added: Personnel expenses decreased primarily due to cost optimization efforts, including lower average employee headcount, and lower variable compensation reflecting the decline in results relative to the prior year.
+Added: Other SG&A expenses increased driven by $21.0 million of restructuring expenses in the current year related to disposal and exit activities, including asset impairments for the planned divestiture of our operations in Argentina.
+Added: Refer to Note 13, Restructuring for additional detail on our South American restructuring program.
+Added: This increase was partially offset by lower expenditures for purchased and contracted services, including those for temporary labor.
All Other and Corporate Segment Results of Operations
−Removed: All Other and Corporate includes our Robinson Fresh and Managed Services segment, as well as Other Surface Transportation outside of North America and other miscellaneous revenues and unallocated corporate expenses.
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: 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.
+Added: Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2023 2022 % change 2023 2022 % change
Total revenues $ 535,015 $ 501,800 6.6 % $ 1,615,241 $ 1,566,706 3.1 %
−Removed: Income (loss) from operations (14,883) 25,609 N/M (17,988) 21,091 N/M
+Added: Income (loss) from operations (2,090) (10,243) 79.6 % (20,078) 10,848 N/M
Adjusted gross profits (1)
5 unchanged sentences
(1) Adjusted gross profit margin is a non-GAAP financial measure explained above.
−Removed: Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022
+Added: Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022
Total revenues and direct costs.
−Removed: Total revenues and direct costs increased driven by increased case volume with foodservice customers, partially offset by lower pricing with retail customers in our Robinson Fresh business.
+Added: Total revenues and direct costs increased driven by increased case volume with foodservice and retail customers in our Robinson Fresh business in addition to higher European truckload volumes in our Other Surface Transportation business.
Gross profits and adjusted gross profits.
−Removed: Robinson Fresh adjusted gross profits increased driven by an increase in case volume and integrated supply chain solutions for foodservice and wholesale customers.
−Removed: Managed Services adjusted gross profits increased due to growth with existing and new customers.
−Removed: Other Surface Transportation adjusted gross profits decreased driven by lower Europe truckload adjusted gross profits per transaction, partially offset by an increase in volumes.
−Removed: Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022
+Added: Robinson Fresh adjusted gross profits increased driven by increased case volume with retail customers and an increase in integrated supply chain solutions for foodservice customers.
+Added: Managed Services adjusted gross profits were essentially flat with the prior year.
+Added: Other Surface Transportation adjusted gross profits increased primarily due to an increase in European LTL adjusted gross profit s .
+Added: Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022
Total revenues and direct costs.
−Removed: Total revenues and direct costs increased driven by higher European truckload volume in our Other Surface Transportation business.
+Added: Total revenues and direct costs increased driven by increased case volume with foodservice customers in Robinson Fresh and higher European truckload volume in our Other Surface Transportation business.
Gross profits and adjusted gross profits.
−Removed: Robinson Fresh adjusted gross profits increased driven by integrated supply chain solutions for foodservice and wholesale customers.
+Added: Robinson Fresh adjusted gross profits increased driven by integrated supply chain solutions for foodservice customers in addition to increased case volume with retail customers.
Managed Services adjusted gross profits increased due to growth with existing and new customers.
−Removed: Other Surface Transportation adjusted gross profits increased due to an increase in European truckload volumes, partially offset by lower adjusted gross profits per transaction.
+Added: Other Surface Transportation adjusted gross profits increased primarily due to an increase in European LTL adjusted gross profit s .
LIQUIDITY AND CAPITAL RESOURCES
1 unchanged sentence
In addition, we maintain the following debt facilities as described in Note 4, Financing Arrangements (in thousands):
−Removed: Description Carrying Value as of June 30, 2023 Borrowing Capacity Maturity
+Added: Description Carrying Value as of September 30, 2023 Borrowing Capacity Maturity
Revolving credit facility $ 163,000 $ 1,000,000 November 2027
−Removed: Senior Notes, Series A 175,000 175,000 August 2023
Senior Notes, Series B 150,000 150,000 August 2028
8 unchanged sentences
We expect to use our current debt facilities and potentially other indebtedness incurred in the future to assist us in continuing to fund working capital, capital expenditures, possible acquisitions, dividends, and share repurchases.
−Removed: Cash and cash equivalents totaled $210.2 million as of June 30, 2023 and $217.5 million as of December 31, 2022.
−Removed: Cash and cash equivalents held outside the United States totaled $203.3 million as of June 30, 2023 and $204.7 million as of December 31, 2022.
+Added: Cash and cash equivalents totaled $174.7 million as of September 30, 2023, and $217.5 million as of December 31, 2022.
+Added: Cash and cash equivalents held outside the United States totaled $170.0 million as of September 30, 2023, and $204.7 million as of December 31, 2022.
+Added: We had $2.5 million of cash and cash equivalents classified as held for sale assets included in other assets in our condensed consolidated balance sheet as of September 30, 2023.
We prioritize our investments to grow the business as we require some working capital and a relatively small amount of capital expenditures to grow.
1 unchanged sentence
The following table summarizes our major sources and uses of cash and cash equivalents (dollars in thousands):
−Removed: Six Months Ended June 30,
+Added: Nine Months Ended September 30,
2023 2022 % change
3 unchanged sentences
Sale of property and equipment 1,324 63,208
−Removed: Cash used for investing activities (51,301) (6,195) N/M
+Added: Cash used for investing activities (66,651) (37,446) 78.0 %
Repurchase of common stock (63,884) (1,023,578)
4 unchanged sentences
Effect of exchange rates on cash and cash equivalents (6,708) (15,206)
−Removed: Net change in cash and cash equivalents $ (7,327) $ (18,488)
+Added: Net change in cash and cash equivalents, including cash and cash equivalents classified within assets held for sale $ (40,263) $ (69,881)
Cash flow from operating activities.
−Removed: Cash provided by operating activities increased in the six months ended June 30, 2023 compared to the six months ended June 30, 2022 due to a decrease in net operating working capital driven by declining freight rates, most notably in our ocean and truckload services in addition to lower volumes in nearly all service lines as discussed in the market and business trends sections.
−Removed: This impact was partially offset by a decline in net income in the six months ended June 30, 2023.
+Added: Cash provided by operating activities decreased in the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, due to a decline in our net income in the nine months ended September 30, 2023.
+Added: This decline was partially offset by a decrease in net operating working capital driven by declining freight rates, most notably in our ocean and truckload services in addition to volume declines in most of our transportation service lines as discussed in the market trends and business trends sections.
We continue to closely monitor credit and collections activities and the quality of our accounts receivable balance to minimize risk as well as work with our customers to facilitate the movement of goods across their supply chains while also ensuring timely payment.
1 unchanged sentence
Capital expenditures consisted primarily of investments in software, which are intended to develop and deliver scalable solutions by transforming our processes, accelerate the pace of development and prioritizing data integrity, improve our customer and carrier experience, and increase efficiency to help expand our adjusted operating margins and grow the business.
+Added: During the nine months ended September 30, 2022, we sold an office building in Kansas City, Missouri, for a sales price of $55 million and recognized a gain of $23.5 million on the sale of the building in the nine months ended September 30, 2022.
+Added: We simultaneously entered into an agreement to lease the office building for 10 years.
Cash used for financing activities.
−Removed: Net payments on debt in the six months ended June 30, 2023 were to reduce the current portion of our debt outstanding.
−Removed: Net borrowings in the six months ended June 30, 2022 were primarily to fund share repurchases and working capital needs.
−Removed: The decrease in cash used for share repurchases was primarily due to a decrease in the number of shares repurchased during the six months ended June 30, 2023.
+Added: Net payments on debt in the nine months ended September 30, 2023, were to reduce the current portion of our debt outstanding.
+Added: Net borrowings in the nine months ended September 30, 2022, were primarily to fund share repurchases and working capital needs.
+Added: The decrease in cash used for share repurchases was due to a decrease in the number of shares repurchased during the nine months ended September 30, 2023.
The number of shares we repurchase, if any, during future periods will vary based on our cash position, other potential uses of our cash, and market conditions.
−Removed: Our Senior Notes, Series A and Receivables Securitization Facility have maturity dates remaining in 2023.
−Removed: To the extent we reduce our outstanding debt on these facilities or our other debt facilities, it may reduce the number of shares we repurchase in 2023.
+Added: Our Receivables Securitization Facility has a maturity date remaining in 2023.
+Added: To the extent we reduce our outstanding debt on this facility or our other debt facilities, it may reduce the number of shares we repurchase in 2023.
Over the long term, we remain committed to our quarterly dividend and share repurchases to enhance shareholder value.
3 unchanged sentences
We also believe we could obtain funds under lines of credit or other forms of indebtedness on short notice, if needed.
−Removed: As of June 30, 2023, we were in compliance with all of the covenants under our debt agreements.
+Added: As of September 30, 2023, we were in compliance with all of the covenants under our debt agreements.
Recently Issued Accounting Pronouncements
2 unchanged sentences
Refer to the company's 2022 Annual Report on Form 10-K for a complete discussion regarding our critical accounting policies and estimates.
−Removed: As of June 30, 2023, there were no material changes to our critical accounting policies and estimates.
+Added: As of September 30, 2023, there were no material changes to our critical accounting policies and estimates.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to the company’s 2022 Annual Report on Form 10-K for a discussion on the company’s market risk.
−Removed: As of June 30, 2023, there were no material changes in market risk from those disclosed in the company’s 2022 Annual Report on Form 10-K.
+Added: As of September 30, 2023, there were no material changes in market risk from those disclosed in the company’s 2022 Annual Report on Form 10-K.
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.