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Item 8. Financial Statements and Supplementary Data

2024-02-16 compared with 2023-02-17 · 186 added, 132 removed, 866 unchanged (27% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF IND EPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

24 unchanged sentences

Recognizing revenue at period end for contracts where the transit period is partially complete at period end or completed and not yet invoiced, requires management to make judgments that affect the amounts and timing of revenue recognized.

At December 31, 2022, the Company recorded revenue of $257.6 million for services it provided while a shipment was still in-transit but for which it had not yet completed its performance obligation or had not yet invoiced the customer.

At December 31, 2023, the Company recorded revenue of $189.9 million for services it provided while a shipment was still in-transit but for which the Company had not yet completed its performance obligation or had not yet invoiced the customer.

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

118 unchanged sentences

Net income 325,129 940,524 844,245

Other comprehensive (loss) income ( 27,726 ) ( 15,136 ) 30,151

Other comprehensive income (loss) 7,914 ( 27,726 ) ( 15,136 )

Comprehensive income

38 unchanged sentences

Stock issued for employee benefit plans 1,364 136 ( 21,017 ) 92,552 71,671

Issuance of restricted stock ( 26 ) ( 3 ) 3 —

Stock-based compensation expense — — 90,677 — 90,677

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Excess tax benefit on stock-based compensation ( 11,319 ) ( 13,662 ) ( 13,101 )

Loss on disposal group held for sale 17,698 — —

Other operating activities 5,541 ( 6,627 ) 1,915

3 unchanged sentences

Prepaid expenses and other ( 39,048 ) ( 28,495 ) ( 43,819 )

Right of use asset 19,255 ( 82,754 ) 25,498

Accounts payable and outstanding checks ( 200,843 ) ( 307,266 ) 660,028

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Other accrued liabilities ( 11,991 ) 2,371 1,607

Lease liability ( 16,500 ) 83,084 ( 25,221 )

Other assets and liabilities 16,902 ( 6,799 ) 1,598

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Accrued share repurchases held in other accrued liabilities — 1,106 4,293

(1) The years ended December 31, 2022 and 2021 have been adjusted to conform to current year presentation.

See accompanying notes to the consolidated financial statements.

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BASIS OF PRESENTATION.

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

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

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At contract inception, we assess the goods and services promised in our contracts with customers and identify our performance obligations to provide distinct goods and services to our customers.

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

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

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

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

Pricing under these contracts is generally a fixed amount and is typically due within 20 to 30 days upon completion of our performance obligation, but can vary based on the nature of the service provided and certain other factors.

Pricing under these contracts is generally a fixed amount and is typically due within 20 to 30 days of completion of our performance obligation, but can vary based on the nature of the service provided and certain other factors.

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

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In these transactions, we are primarily responsible for fulfilling the promise to provide the specified good or service to our customers and we have discretion in establishing the price for the specified good or service.

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

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

Additionally, in our sourcing

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

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

CONTRACT ASSETS.

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

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

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

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

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

We determine our allowance for expected credit losses based on our past credit loss experience, our customers' credit risk ratings, and other customer specific and macroeconomic factors.

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

loss ratio approach).

This approach is then supplemented by the professional judgment of management primarily in consideration of recent developments, write-off experience, and risk concentrations, for purposes of determining the expected credit loss allowance.

FOREIGN CURRENCY.

Most balance sheet accounts of foreign subsidiaries are remeasured at the current exchange rate as of the end of the year and translated to our U.S.

Monetary assets and liabilities denominated in foreign currency are remeasured to the functional currency of our foreign subsidiaries, which is generally their local currency, at the current exchange rate as of the end of each period.

Foreign exchange gains and losses on these balances are recognized in interest and other income/expense, net in our consolidated statement of operations and comprehensive income.

The functional currency accounts of our foreign subsidiaries are translated to our U.S.

Dollar reporting currency at the end of each period.

Translation adjustments are recorded in other comprehensive income (loss) in our consolidated statement of operations and comprehensive income (loss).

Consolidated statement of operations and comprehensive income items are translated at the average exchange rate during the period.

In cases where our foreign subsidiaries operate in a highly inflationary economy, their functional currency is considered to be our U.S.

Dollar reporting currency.

Translation adjustments are recorded in other comprehensive (loss) income.

Statement of operations items are translated at the average exchange rate during the year.

CASH AND CASH EQUIVALENTS.

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Buildings 58,586 60,766

60,766 60,059

Corporate aircraft 23,760 23,760

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Net property and equipment $ 144,718 $ 159,432

________________________________

(1) Our corporate aircraft and an office building in Kansas City, Missouri, were reclassified as held-for-sale assets as of December 31, 2021.

These held-for-sale assets of $ 35.0 million were sold in 2022 and were included within Prepaid expenses and other current assets in our Consolidated Balance Sheets as of December 31, 2021.

The fair value of the assets that were held for sale was $ 64.0 million.

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

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

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

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

The indefinite-lived trademarks are not amortized.

Indefinite-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, or annually, at a minimum.

Indefinite-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable, or annually, at a minimum.

See Note 2, Goodwill and Other Intangible Assets .

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The financial statement benefits of an uncertain income tax position are recognized when more likely than not, based on the technical merits, the position will be sustained upon examination.

Unrecognized tax benefits are, more likely than not, owed to a taxing authority, and the amount of the contingency can be reasonably estimated.

Unrecognized tax benefits are, more likely than not, owed to a taxing authority, and the amount of the contingency that is greater than 50 percent likely to be realized can be reasonably estimated.

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

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STOCK-BASED COMPENSATION.

We have issued stock awards, including stock options, performance-based restricted shares, performance-based restricted stock units, and time-based restricted stock units to certain key employees.

The awards vest over three to five years , either based on the company’s earnings or adjusted gross profits growth or the passage of time.

We have issued stock awards, including stock options, performance-based restricted stock units and shares, and time-based restricted stock units, to our key employees and non-employee directors.

The awards vest over three to five years , either based on the achievement of certain dilutive earnings per share, adjusted gross profits, adjusted operating margin targets, or the passage of time.

The related compensation expense for each award is recognized over the appropriate vesting period.

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For grants of restricted shares and restricted stock units, the fair value is established based on the market price on the date of the grant, discounted for post-vesting holding restrictions.

The discounts on outstanding grants vary from 12 percent to 24 percent and are calculated using the Black-Scholes option pricing model-protective put method.

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.

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

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December 31, 2021 balance $ 1,196,333 $ 210,391 $ 78,030 $ 1,484,754

Acquisitions 243 — 10,754 10,997

Foreign currency translation ( 8,257 ) ( 4,202 ) ( 1,482 ) ( 13,941 )

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December 31, 2023 balance $ 1,188,813 $ 207,599 $ 77,188 $ 1,473,600

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 annual Step Zero Analysis performed in 2022, we determined that due to certain qualitative factors and the recent performance of our Europe Surface Transportation reporting unit that the more likely than not criteria had been met, and therefore a Step One Analysis was completed for this reporting unit.

Our Step Zero Analysis did not indicate that the more likely than not criteria was met for any other reporting units and therefore a Step One Analysis was not completed for those reporting units.

As a result of our Step One Analysis for Europe Surface Transportation, we determined that the fair value was greater than the reporting unit's respective carrying value and as such the goodwill balance was not impaired.

Goodwill is tested at least annually for impairment on November 30, or more frequently if events or changes in circumstances indicate the asset might be impaired.

We first perform a qualitative assessment to determine whether it is more likely than not 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 the fair value of our reporting units is less than their respective carrying value, an additional impairment assessment is performed (“Step One Analysis”).

As part of our 2023 annual impairment testing performed, we elected to bypass the Step Zero Analysis and perform a Step One Analysis on all of our reporting units.

There were not factors present for any reporting units, other than Europe Surface Transportation, indicating it was more likely than not the fair value of our reporting unit was less than its respective carrying value.

Consistent with our 2022 annual impairment test, certain qualitative factors were present and the performance of our Europe Surface Transportation unit indicated the fair value may not exceed its carrying value requiring a Step One Analysis.

The results of our Step One Analysis indicated the fair value of our NAST, Global Forwarding, Robinson Fresh, and Managed Services reporting units significantly exceeded their respective carrying values and the risk of goodwill impairment was remote.

The fair value of our Europe Surface Transportation reporting unit also exceeded its carrying value with greater than 30 percent cushion, and as such, the goodwill balance was not impaired.

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

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Customer relationships $ 93,499 $ ( 58,437 ) $ 35,062 $ 162,358 $ ( 106,932 ) $ 55,426

Total finite-lived intangibles 162,358 ( 106,932 ) 55,426 169,308 ( 88,302 ) 81,006

Indefinite-lived intangibles

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2028 — — 211 211

Thereafter — — 205 205

Total $ 35,062

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:

Accounting guidance on fair value measurements for certain financial assets and liabilities requires 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.

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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.

The interest rate on borrowings under the 364-day Credit Agreement was based on an alternate base rate plus a margin or term SOFR-based rate plus a margin.

There was also a commitment fee on the aggregate unused commitments under the facility.

The facility expired on May 5, 2023, and it was not renewed.

NOTE PURCHASE AGREEMENT

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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.

Senior Notes, Series A mature in August 2023 and are classified as current portion of debt in our Consolidated Balance Sheets as of December 31, 2022.

If the Notes were recorded at fair value, they would be classified as Level 2 financial liability.

Senior Notes Series A matured in August 2023.

The Note Purchase Agreement contains various restrictions and covenants that require us to maintain certain financial ratios, including a maximum leverage ratio of 3.50 to 1.00, a minimum interest coverage ratio of 2.00 to 1.00, and a maximum consolidated priority debt to consolidated total asset ratio of 10 percent.

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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.

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.

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trade accounts receivable with a total availability of $ 500 million as of December 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.

The interest rate on borrowings under the Receivables Securitization Facility is based on SOFR 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.

Borrowings on the Receivables Securitization Facility, if any, 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.

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On July 7, 2022, we amended the Receivables Securitization Facility to effectively increase the receivables pool available with respect to the Receivables Securitization Facility.

On November 7, 2023, we amended the Receivables Securitization Facility to extend the termination date of the facility to November 7, 2025.

The total available remains $ 500 million, and we have the option to utilize an accordion feature, if needed, of an additional $ 250 million pursuant to the provisions of the Receivables Purchase Agreement, as amended by the Receivables Purchase Agreement Amendment.

As of December 31, 2023, the variable rate equaled SOFR and a Credit Spread Adjustment of 0.10 percent plus 0.80 percent.

In addition, there is a commitment fee on the average daily undrawn stated amount under the facility of 0.20 percent.

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

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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.

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.

Upon the occurrence of a “change of control triggering event” as defined in the Senior Notes (generally, a change of control of us accompanied by a reduction in the credit rating for the Senior Notes), we will generally be required to make an offer to repurchase the Senior Notes from holders at 101 percent of their principal amount plus accrued and unpaid interest to the date of repurchase.

The Senior Notes were issued under an indenture that contains covenants imposing certain limitations on our ability to incur liens;

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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.

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.

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income tax returns before 2019.

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

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

If we repatriated all foreign earnings that are still considered to be permanently reinvested, the estimated effect on income taxes payable would be an increase of approximately $ 2.0 million as of December 31, 2022.

On March 27, 2020, the U.S.

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

The CARES Act allowed for a deferral of the employer share of federal payroll taxes.

We recognized a payroll deferral of $ 14.7 million under the CARES Act as of December 31, 2021, which has been paid as of December 31, 2022.

In 2023, we came to an agreement with IRS Independent Office of Appeals on a tax position related to Section 199 for the tax years of 2014 through 2017.

The Section 199 domestic production activities deduction was eliminated from the tax code as part of the Tax Cuts and Jobs Act in 2017, effective for tax years starting in 2018.

Although we maintain our position was appropriate and supportable, we determined it was in our best interest to settle the issue when factoring in litigation costs.

Therefore, we have recognized $ 19.2 million of additional tax expense in 2023, in excess of the existing tax reserve including the impacts of interest, related to the settlement of the matter.

In 2023, management made the determination that the company is no longer indefinitely reinvested with regard to the unremitted earnings of any foreign subsidiaries.

The change resulted in a one-time increase to tax expense of approximately $ 2.0 million in the year ended December 31, 2023.

The company remains indefinitely reinvested related to other taxable differences that may exist with regard to these subsidiaries.

In 2021, the Organization for Economic Cooperation and Development (“OECD”) announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15 percent.

Subsequently, multiple sets of administrative guidance have been issued.

Many non-U.S.

tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years.

We are continuing to evaluate the impact of enacted legislation and pending legislation to enact Pillar Two Model Rules in the tax jurisdictions we operate in.

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

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State income taxes, net of federal benefit 2.1 2.1 1.7

Section 199 deduction 4.7 — —

Share-based payment awards ( 2.2 ) ( 1.1 ) ( 0.6 )

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Accrued expenses 33,720 52,416

Tax credit carryforward 14,485 —

Foreign affiliate prepayment — 1,901

Foreign net operating loss carryforwards (1)

67,816 64,434

Long-lived assets 104,005 94,268

Other 23,990 22,925

22,220 16,364

Total deferred tax assets (before valuation allowance)

381,529 378,090

valuation allowance (1)

( 62,183 ) ( 56,808 )

Total deferred tax assets 319,346 321,282

Deferred tax liabilities:

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Intangible assets ( 25,773 ) ( 53,580 )

Accrued revenue — ( 47,255 )

Prepaid assets ( 4,405 ) ( 6,657 )

Long-lived assets — ( 10,387 )

Foreign withholding tax ( 10,313 ) ( 9,709 )

Other ( 8,649 ) ( 9,483 )

Total deferred tax liabilities ( 117,904 ) ( 153,936 )

Net deferred tax assets $ 201,442 $ 167,346

________________________________

(1) The amounts as of December 31, 2022 have been adjusted to conform to current year presentation.

We had foreign net operating loss carryforwards with a tax effect of $ 67.8 million as of December 31, 2023, and $ 64.4 million as of December 31, 2022.

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

As of December 31, 2022 and 2021, we have recorded a valuation allowance of $ 1.4 million and $ 2.5 million, respectively, against the deferred tax asset related to the foreign operating loss carryforwards.

As of December 31, 2023 and 2022, we have recorded a valuation allowance of $ 62.2 million and $ 56.8 million, respectively, against the deferred tax asset related to the foreign operating loss carryforwards that are primarily in Luxembourg.

CAPITAL STOCK AND STOCK AWARD PLANS

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The following schedule summarizes stock option activity in the plans.

All outstanding unvested options as of December 31, 2022, relate to time-based grants from 2018 through 2020.

All outstanding unvested options as of December 31, 2023, relate to time-based grants from 2020.

Options Weighted

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December 31, 2020 December 31, 2024 1,626,101 13.87 315,432

December 31, 2020 December 31, 2024 1,632,187 13.87 643,077

________________________________

(1) Amount shown is the weighted average grant date fair value of options granted, net of forfeitures.

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

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

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

The grant date fair value per option was estimated using the Black-Scholes option pricing model with the following assumptions:

2020 Grants 2019 Grants

Weighted-average risk-free interest rate 1.6 %

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

On June 26, 2023, we granted 142,584 time-based restricted stock units and 91,016 PSUs at target upon the appointment of our President and Chief Executive Officer.

The time-based restricted stock units vest over a three-year period with a weighted average grant date fair value of $ 92.09 .

The PSUs vest over a three-year period based on the achievement of certain dilutive earnings per share, adjusted gross profits, and adjusted operating margin targets with a weighted average grant date fair value of $ 92.09 .

Performance-Based Awards

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Beginning in 2021, we have awarded annually PSUs to certain key employees.

These PSUs vest over a three-year period based on the company's cumulative three-year dilutive earnings per share growth and annual adjusted gross profits growth.

These PSUs contain an upside opportunity of 200 percent of target contingent upon obtaining certain dilutive earnings per share and adjusted gross profits growth targets.

These PSUs vest over a three-year period based on the achievement of certain dilutive earnings per share, adjusted gross profits, and adjusted operating margin targets.

These PSUs contain an upside opportunity of up to 200 percent of target contingent upon obtaining certain targets mentioned above over their respective performance period.

The following table summarizes activity related to our performance-based restricted shares and PSUs as of December 31, 2023:

3 unchanged sentences

423,677 92.14

Performance-based grant adjustment (2)

Vested ( 266,651 ) 68.86

Forfeitures ( 369,158 ) 80.68

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(1) Amount represents PSU grants at target.

(2) Amount represents incremental shares issuable for achieving 200 percent upside upon meeting certain adjusted gross profits targets in 2022.

The following table summarizes unvested PSUs by vesting period at target:

The following table summarizes PSUs by vesting period at target:

First Vesting Date Last Vesting Date Performance Shares and Stock Units

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(1) Amount shown is the weighted average grant date fair value of PSUs granted, net of forfeitures.

We granted an additional 272,455 performance-based restricted stock units at target in February 2023.

These awards have a weighted average grant date fair value of $ 92.15 and will vest over a three-year period based upon achieving certain cumulative three-year dilutive earnings per share, adjusted gross profits, and adjusted operating margin percentage targets.

We granted an additional 318,801 PSUs at target in February 2024.

These awards have a weighted average grant date fair value of $ 73.66 and will vest over a three-year period and contain an upside opportunity of up to 200 percent based upon achieving cumulative three-year dilutive earnings per share targets.

Time-Based Awards

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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 primarily based on the passage of time and the employee's continued employment.

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

Beginning in 2021, we have granted annually time-based awards that vest over a three-year period.

In 2023, we also granted retention awards which vest over a one -year to three -year period.

These awards vest primarily based on the passage of time and the employee's continued employment and are being expensed based on the terms of the awards.

The following table summarizes our unvested time-based restricted share and restricted stock unit grants as of December 31, 2023:

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2023 $ 53,868

As of December 31, 2022, there was unrecognized compensation expense of $ 119.0 million related to previously granted stock awards assuming maximum achievement is obtained on our performance-based awards.

The amount of future expense to be recognized will be based on the passage of time, the company’s dilutive earnings per share and adjusted gross profits growth, and certain other conditions.

As of December 31, 2023, there was unrecognized compensation expense of $ 164.8 million related to previously granted stock awards assuming maximum achievement is obtained on our PSUs.

The amount of future expense to be recognized will be based on the passage of time and contingent upon obtaining certain targets mentioned above over their respective performance period.

EMPLOYEE STOCK PURCHASE PLAN.

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We contributed a defined contribution match of six percent in 2023, 2022, and 2021.

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

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

LEASE COMMITMENTS.

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The results of operations of Combinex have been included as part of the All Other and Corporate segment in our consolidated financial statements since June 3, 2021.

Prime Distribution Services

On March 2, 2020, we acquired all of the outstanding shares of Prime Distribution Services (“Prime Distribution”), a leading provider of retail consolidation services in North America, for $ 222.7 million in cash.

This acquisition adds scale and value-added warehouse capabilities to our retail consolidation platform, adding to our global suite of services.

The following is a summary of the allocation of purchase consideration to the estimated fair value of net assets for the acquisition of Prime Distribution (dollars in thousands):

Current assets $ 8,879

Property and equipment 7,356

Right-of-use lease assets 35,017

Other intangible assets 55,000

Goodwill 176,727

Total assets 282,979

Current liabilities 12,243

Lease liabilities 35,017

Deferred tax liabilities 13,001

Net assets acquired $ 222,718

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

Estimated Life (years)

Customer relationships 7 $ 55,000

There was $ 176.7 million of goodwill recorded related to the acquisition of Prime Distribution.

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

Purchase accounting is considered complete.

The goodwill will not be deductible for tax purposes.

The acquisition was effective as of February 29, 2020, and therefore the results of operations of Prime Distribution have been included as part of the North American Surface Transportation (“NAST”) segment in our consolidated financial statements since March 1, 2020.

SEGMENT REPORTING

Our segments are based on our method of internal reporting, which generally segregates the segments by service line and the primary services they provide to our customers.

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

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

The accounting policies of our reportable segments are the same as those described in the summary of significant accounting policies.

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• Global Forwarding:

Global Forwarding provides global logistics services through an international network of offices in North America, Asia, Europe, Oceania, and South America and also contracts with independent agents worldwide.

Global Forwarding provides global logistics services through an international network of offices in North America, Asia, Europe, Oceania, South America, and the Middle East and also contracts with independent agents worldwide.

The primary services provided by Global Forwarding include ocean freight services, air freight services, and customs brokerage.

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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.

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

Reportable segment information as of, and for the years ended, December 31, 2023, 2022, and 2021, is as follows (dollars in thousands):

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

The following table presents our total revenues (based on location of the customer) and long-lived assets (including intangible and other assets) by geographic regions (in thousands):

The following table presents our total revenues (based on location of the customer) and long-lived assets (including other intangible assets and other assets) by geographic regions (in thousands):

For the year ended December 31,

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We typically do not receive consideration and amounts are not due from our customer prior to the completion of our performance obligations and as such contract liabilities as of December 31, 2023 and 2022, and revenue recognized in the twelve months ended December 31, 2023, 2022, and 2021, 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.

Contract assets and accrued expenses—transportation expense fluctuate from period to period primarily based upon shipments in-transit at period end.

Approximately 90 percent, 93 percent, and 93 percent of our total revenues for the twelve months ended December 31, 2023, 2022, and 2021, respectively, are attributable to arranging for the transportation of our customers’ freight for which we transfer control and satisfy our performance obligation over the requisite transit period.

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

Approximately five percent, five percent, and seven percent of our total revenues for the twelve months ended December 31, 2022, 2021, and 2020, respectively, are attributable to buying, selling, and/or marketing of produce including fresh fruits, vegetables, and other value-added perishable items.

Approximately seven percent, five percent, and five percent of our total revenues for the twelve months ended December 31, 2023, 2022, and 2021, respectively, are attributable to buying, selling, and/or marketing of produce including fresh fruits, vegetables, and other value-added perishable items.

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

Approximately two percent of our total revenues for the twelve months ended December 31, 2022, 2021, and 2020, respectively, are attributable to value-added logistics services, such as customs brokerage, fee-based managed services, warehousing services, small parcel, and supply chain consulting and optimization services.

Approximately three percent, two percent, and two percent of our total revenues for the twelve months ended December 31, 2023, 2022, and 2021, respectively, are attributable to value-added logistics services, such as customs brokerage, fee-based

managed services, warehousing services, small parcel, and supply chain consulting and optimization services.

Total revenues for these services are recognized over time as we complete our performance obligation.

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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.

Our lease agreements consist primarily of operating leases for office space, warehouses, office equipment, and trailers.

We do not have material financing leases.

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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.

The term of our leases may include the option to renew when it is reasonably certain we will exercise that option although these occurrences are seldom.

We have lease agreements with lease components (e.g., payments for rent) and non-lease components (e.g., payments for common area maintenance and parking), which are all accounted for as a single lease component.

We do not have material lease agreements that have not yet commenced that are expected to create significant rights or obligations as of December 31, 2023.

Information regarding lease expense, remaining lease term, discount rate, and other select lease information is presented below as of December 31, 2022 and 2021, and for the twelve months ended December 31, 2022 and 2021 (dollars in thousands):

Information regarding lease costs, other lease information, remaining lease term, and discount rate are presented below for the twelve months ended December 31, 2023, 2022, and 2021 and as of December 31, 2023 and 2022 (dollars in thousands):

Twelve Months Ended December 31,

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Right-of-use lease assets obtained in exchange for new lease liabilities 66,473 161,886 52,931

161,886 52,931 95,005

As of December 31,

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Weighted average discount rate 3.9 % 3.5 %

________________________________

(1) The weighted average remaining lease term is significantly impacted by a 15 -year lease related to office space in Chicago, IL, which commenced in 2018.

Excluding this lease, the weighted average remaining lease term of our agreements is 5.3 years.

The maturity of lease liabilities as of December 31, 2023, were as follows (in thousands):

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ALLOWANCE FOR CREDIT LOSSES

Our allowance for credit losses is computed using a number of factors including our historical credit loss experience, customer aging trends, our customers' credit ratings, in addition to other customer-specific factors.

Our allowance for credit losses is computed using a number of factors including our past credit loss experience and our customers’ credit ratings, in addition to other customer-specific factors.

We have also considered recent trends and developments related to the current macroeconomic environment in determining our ending allowance for credit losses for both accounts receivable and contract assets.

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The recorded balance as of December 31, 2023 and 2022, was $ 80.9 million and $ 88.9 million, respectively, and is comprised solely of foreign currency adjustments, including foreign currency translation.

Other comprehensive income was $ 7.9 million for the twelve months ended December 31, 2023, driven primarily by fluctuations in the Euro and Polish Zloty.

Other comprehensive loss was $ 27.7 million for the twelve months ended December 31, 2022, driven primarily by fluctuations in the Yuan, Singapore Dollar, and Australian Dollar.

Other comprehensive loss was $ 15.1 million for the twelve months ended December 31, 2021, driven primarily by fluctuations in the Singapore Dollar and Australian Dollar.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

For the twelve months ended December 31, 2022, 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.

Recently Adopted Accounting Standards:

For the twelve months ended December 31, 2023, there were no newly adopted accounting standards that had, or are expected to have, a material impact to our consolidated financial statements.

Recently Issued Accounting Standards:

In November 2023, the FASB issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses regularly provided to the CODM.

The guidance in this ASU is effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

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

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The guidance in this ASU expands the disclosure requirements for income taxes by requiring greater disaggregation of information in the income tax rate reconciliation and disaggregation of income taxes paid by jurisdiction.

The guidance in this ASU is effective for all public entities for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

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

RESTRUCTURING

In 2022, we announced organizational changes to support our enterprise strategy of accelerating our digital transformation and productivity initiatives.

We recognized restructuring charges of $ 36.7 million related to cost saving initiatives including workforce reductions and reprioritizing our investments in technology.

For severance and other operating expenses related to restructuring activities, we paid $ 2.7 million in cash in 2022 with nearly all the remaining $ 19.0 million expected to be paid in 2023.

A summary of the restructuring charges recognized is presented below (in thousands):

2022 Restructuring Program :

In 2022, we announced organizational changes to support our enterprise strategy of accelerating our digital transformation and productivity initiatives (the “2022 Restructuring Program”).

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.

In 2023, we recognized additional restructuring charges of $ 17.5 million, primarily related to workforce reductions.

Our 2022 Restructuring Program was completed in 2023 other than $ 3.8 million of severance installment payments accrued as of as December 31, 2023, expected to be paid in 2024.

A summary of the restructuring charges recognized related to the 2022 Restructuring Program is presented below (in thousands):

Twelve Months Ended December 31,

Severance (1)

Other selling, general, and administrative expenses (2)

$ 14,358 $ 18,872

Other personnel expenses (1)

Other selling, general, and administrative expenses (2)

Total $ 17,476 $ 36,684

________________________________

(1) Amounts are included within personnel expenses in our consolidated statement of operations.

(2) We recognized expense of $ 14.8 million related to the impairment of certain capitalized internally developed software projects and $ 0.4 million related other miscellaneous exit costs within other selling, general, and administrative expenses in our consolidated statement of operations.

The following table summarizes restructuring charges by reportable segment for the twelve months ended December 31, 2022 ($ in thousands):

NAST Global Forwarding All Other and Corporate Consolidated

(1) Amounts are included within personnel expenses in our consolidated statement of operations and comprehensive income.

(2) Amounts include impairment of certain capitalized internally developed software projects and other miscellaneous exit costs, which are included within other selling, general, and administrative expenses in our consolidated statement of operations and comprehensive income.

The following table summarizes restructuring charges by reportable segment related to the 2022 Restructuring Program for the twelve months ended December 31, 2023 and December 31, 2022 (in thousands):

Twelve Months Ended December 31, 2023 NAST Global Forwarding All Other and Corporate Consolidated

Personnel expenses $ 1,083 $ 2,176 $ 12,913 $ 16,172

Other selling, general, and administrative expenses 8 197 1,099 1,304

The following table summarizes restructuring reserves included in our consolidated balance sheet as of December 31, 2022:

Twelve Months Ended December 31, 2022 NAST Global Forwarding All Other and Corporate Consolidated

Personnel expenses $ 6,323 $ 3,831 $ 11,380 $ 21,534

Other selling, general, and administrative expenses 3,175 3,174 8,801 15,150

The following table summarizes the activity related to our 2022 Restructuring Program and reserves included in our consolidated balance sheets (in thousands):

Accrued Severance and Other Personnel Expenses Other Selling, General, and Administrative Expenses Total

3 unchanged sentences

Settled non-cash — ( 907 ) ( 907 )

Accrual adjustments (1)

( 888 ) 18 ( 870 )

Balance, December 31, 2023 $ 3,783 $ — $ 3,783

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(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.

South American Restructuring Program:

In 2023, we announced a restructuring program (the “South American Restructuring Program”) to divest our operations in Argentina to mitigate our exposure to the deteriorating economic conditions and increasing political instability there.

The Central Bank of Argentina maintains certain currency controls that limit our ability to access U.S.

dollars in Argentina and remit cash from our Argentine operations.

We have identified a local independent agent to continue serving our customers in the region.

As a result of these actions, we recognized restructuring charges primarily related to disposal and exit activities including asset impairments and workforce reductions.

We have determined this divestiture does not represent a strategic shift that will have a major effect on our consolidated results of operations, and therefore the results of operations in Argentina are not reported as discontinued operations.

The divestiture was completed near the end of 2023 for nominal consideration and our restructuring program is expected to be completed by the end of the first quarter of 2024.

We recognized $ 21.2 million of net restructuring charges related to our South American Restructuring Program as presented below (in thousands):

Twelve Months Ended December 31,

Severance and other personnel expenses (1)

Loss on disposal and exit activities including asset impairments (2)

Other miscellaneous expenses (3)

Income tax benefits (4)

Total $ 21,190

________________________________

(1) Amounts are included within personnel expenses in our condensed consolidated statements of operations and comprehensive income.

(2) Amounts are included within other selling, general, and administrative expenses in our condensed consolidated statements of operations and comprehensive income.

(3) Amounts are included within interest and other expenses in our condensed consolidated statements of operations and comprehensive income.

(4) Amounts are included within provision for income taxes in our condensed consolidated statements of operations and comprehensive income.

The following table summarizes restructuring charges related to our South American Restructuring Program by reportable segment (in thousands):

Twelve Months Ended December 31, 2023

NAST Global Forwarding All Other and Corporate Consolidated

Severance and other personnel expenses (1)

$ — $ 1,641 $ 596 $ 2,237

Loss on disposal and exit activities including asset impairments (2)

— 17,961 367 18,328

Other miscellaneous expenses (3)

— 1,420 — 1,420

Income tax benefits (4)

— ( 795 ) — ( 795 )

________________________________

(1) Amounts are included within personnel expenses in our condensed consolidated statements of operations and comprehensive income.

(2) Amounts are included within other selling, general, and administrative expenses in our condensed consolidated statements of operations and comprehensive income.

(3) Amounts are included within interest and other expenses in our condensed consolidated statements of operations and comprehensive income.

(4) Amounts are included within provision for income taxes in our condensed consolidated statements of operations and comprehensive income.

The following table summarizes activity related to our South American Restructuring Program and reserves included in our consolidated balance sheets (in thousands):

Accrued Severance and Other Personnel Expenses Accrued Other Selling, General, and Administrative Expenses Total

Balance, December 31, 2022 $ — $ — $ —

Restructuring charges 2,237 18,328 20,565

Cash payments ( 2,237 ) — ( 2,237 )

Divestiture of Argentine operations ( 18,328 ) ( 18,328 )

Balance, December 31, 2023 $ — $ — $ —

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data