10-Q 1 chrw-20220930.htm 10-Q chrw-20220930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2022
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From         to        

Commission File Number: 000-23189
chrw-20220930_g1.jpg
C.H. ROBINSON WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1883630
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
14701 Charlson Road
Eden Prairie, MN 55347
(Address of principal executive offices, including zip code)

952-937-8500
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.10 par valueCHRWNasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerEmerging growth company
Non-accelerated filerSmaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of November 2, 2022, the number of shares outstanding of the registrant’s Common Stock, par value $0.10 per share, was 117,709,468.


C.H. ROBINSON WORLDWIDE, INC.
TABLE OF CONTENTS
 
 
 PART I. Financial Information 
Item 1.
Item 2.
Item 3.
Item 4.
PART II. Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



2

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except per share data)
 September 30, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$187,532 $257,413 
Receivables, net of allowance for credit loss of $33,480 and $41,542
3,802,160 3,963,487 
Contract assets, net of allowance for credit loss363,697 453,660 
Prepaid expenses and other79,977 129,593 
Total current assets4,433,366 4,804,153 
Property and equipment, net of accumulated depreciation and amortization158,706 139,831 
Goodwill1,458,303 1,484,754 
Other intangible assets, net of accumulated amortization68,122 89,606 
Right-of-use lease assets349,386 292,559 
Deferred tax assets207,452 124,900 
Other assets120,195 92,309 
Total assets$6,795,530 $7,028,112 
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable$1,662,606 $1,813,473 
Outstanding checks93,163 105,828 
Accrued expenses:
Compensation204,661 201,421 
Transportation expense280,500 342,778 
Income taxes62,912 100,265 
Other accrued liabilities205,034 171,266 
Current lease liabilities71,002 66,311 
Current portion of debt779,000 525,000 
Total current liabilities3,358,878 3,326,342 
Long-term debt1,419,380 1,393,649 
Noncurrent lease liabilities293,325 241,369 
Noncurrent income taxes payable26,865 28,390 
Deferred tax liabilities18,041 16,113 
Other long-term liabilities1,480 315 
Total liabilities5,117,969 5,006,178 
Stockholders’ investment:
Preferred stock, $0.10 par value, 20,000 shares authorized; no shares issued or outstanding
  
Common stock, $0.10 par value, 480,000 shares authorized; 179,204 and 179,206 shares issued, 120,594 and 129,186 outstanding
12,059 12,919 
Additional paid-in capital731,496 673,628 
Retained earnings5,567,592 4,936,861 
Accumulated other comprehensive loss(137,650)(61,134)
Treasury stock at cost (58,610 and 50,020 shares)
(4,495,936)(3,540,340)
Total stockholders’ investment1,677,561 2,021,934 
Total liabilities and stockholders’ investment$6,795,530 $7,028,112 
See accompanying notes to the condensed consolidated financial statements.
3

C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(unaudited, in thousands except per share data)
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Revenues:
Transportation$5,724,364 $5,999,901 $18,718,357 $15,800,576 
Sourcing291,012 263,794 911,447 799,714 
Total revenues6,015,376 6,263,695 19,629,804 16,600,290 
Costs and expenses:
Purchased transportation and related services4,862,541 5,180,390 15,979,639 13,580,980 
Purchased products sourced for resale265,641 239,113 825,162 723,562 
Personnel expenses437,545 399,880 1,295,670 1,123,616 
Other selling, general, and administrative expenses162,040 133,543 426,585 377,430 
Total costs and expenses5,727,767 5,952,926 18,527,056 15,805,588 
Income from operations287,609 310,769 1,102,748 794,702 
Interest and other income/expense, net(15,972)(16,662)(57,541)(41,419)
Income before provision for income taxes271,637 294,107 1,045,207 753,283 
Provision for income taxes45,839 47,054 200,876 139,136 
Net income225,798 247,053 844,331 614,147 
Other comprehensive loss(49,790)(12,034)(76,516)(19,482)
Comprehensive income$176,008 $235,019 $767,815 $594,665 
Basic net income per share$1.81 $1.87 $6.60 $4.61 
Diluted net income per share$1.78 $1.85 $6.50 $4.56 
Basic weighted average shares outstanding124,980 131,845 127,944 133,201 
Dilutive effect of outstanding stock awards2,210 1,591 1,895 1,460 
Diluted weighted average shares outstanding127,190 133,436 129,839 134,661 
See accompanying notes to the condensed consolidated financial statements.


4

C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Stockholders’ Investment
(unaudited, in thousands, except per share data)
Common
Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Stockholders’
Investment
Balance December 31, 2021129,186 $12,919 $673,628 $4,936,861 $(61,134)$(3,540,340)$2,021,934 
Net income270,348 270,348 
Foreign currency adjustments6,870 6,870 
Dividends declared, $0.55 per share
(72,542)(72,542)
Stock issued for employee benefit plans418 42 (17,377)26,239 8,904 
Stock-based compensation expense  24,606  24,606 
Repurchase of common stock(1,593)(160)(164,458)(164,618)
Balance March 31, 2022128,011 12,801 680,857 5,134,667 (54,264)(3,678,559)2,095,502 
Net income348,185 348,185 
Foreign currency adjustments(33,596)(33,596)
Dividends declared, $0.55 per share
(71,506)(71,506)
Stock issued for employee benefit plans316 31 377 20,478 20,886 
Stock-based compensation expense  27,929  27,929 
Repurchase of common stock(3,211)(320)(334,665)(334,985)
Balance June 30, 2022125,116 12,512 709,163 5,411,346 (87,860)(3,992,746)2,052,415 
Net income225,798 225,798 
Foreign currency adjustments(49,790)(49,790)
Dividends declared, $0.55 per share
(69,552)(69,552)
Stock issued for employee benefit plans555 56 (3,478)40,450 37,028 
Stock-based compensation expense  25,811  25,811 
Repurchase of common stock(5,077)(509)(543,640)(544,149)
Balance September 30, 2022120,594 $12,059 $731,496 $5,567,592 $(137,650)$(4,495,936)$1,677,561 
5

Common
Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive LossTreasury
Stock
Total
Stockholders’
Investment
Balance December 31, 2020134,298 $13,430 $566,022 $4,372,833 $(45,998)$(3,026,354)$1,879,933 
Net income173,305 173,305 
Foreign currency adjustments(7,286)(7,286)
Dividends declared, $0.51 per share
(69,606)(69,606)
Stock issued for employee benefit plans357 36 (21,805)18,766 (3,003)
Issuance of restricted stock, net of forfeitures(26)(3)3  
Stock-based compensation expense  23,989  23,989 
Repurchase of common stock(1,386)(139)(129,006)(129,145)
Balance March 31, 2021133,243 13,324 568,209 4,476,532 (53,284)(3,136,594)1,868,187 
Net income193,789 193,789 
Foreign currency adjustments(162)(162)
Dividends declared, $0.51 per share
(69,094)(69,094)
Stock issued for employee benefit plans250 25 418 16,151 16,594 
Stock-based compensation expense  29,161  29,161 
Repurchase of common stock(1,358)(136)(132,169)(132,305)
Balance June 30, 2021132,135 13,213 597,788 4,601,227 (53,446)(3,252,612)1,906,170 
Net income247,053 247,053 
Foreign currency adjustments(12,034)(12,034)
Dividends declared, $0.51 per share
(68,316)(68,316)
Stock issued for employee benefit plans91 9 (1,418)5,755 4,346 
Stock-based compensation expense  40,812  40,812 
Repurchase of common stock(1,850)(184)(167,047)(167,231)
Balance September 30, 2021130,376 $13,038 $637,182 $4,779,964 $(65,480)$(3,413,904)$1,950,800 
See accompanying notes to the condensed consolidated financial statements.
6

C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
 
 Nine Months Ended September 30,
20222021
OPERATING ACTIVITIES
Net income$844,331 $614,147 
Adjustments to reconcile net income to net cash used for operating activities:
Depreciation and amortization68,723 68,621 
Provision for credit losses(2,407)3,979 
Stock-based compensation78,346 93,962 
Deferred income taxes(76,362)(11,683)
Excess tax benefit on stock-based compensation(12,440)(10,830)
Other operating activities(24,011)1,384 
Changes in operating elements, net of acquisitions:
Receivables66,536 (1,290,485)
Contract assets90,481 (220,889)
Prepaid expenses and other13,437 (38,525)
Accounts payable and outstanding checks(109,493)595,036 
Accrued compensation6,701 35,413 
Accrued transportation expense(62,278)165,580 
Accrued income taxes(24,202)6,400 
Other accrued liabilities22,209 4,947 
Other assets and liabilities(2,782)2,043 
Net cash provided by operating activities876,789 19,100 
INVESTING ACTIVITIES
Purchases of property and equipment(50,719)(26,503)
Purchases and development of software(49,935)(26,062)
Acquisitions, net of cash acquired (14,749)
Proceeds from sale of property and equipment63,208  
Net cash used for investing activities(37,446)(67,314)
FINANCING ACTIVITIES
Proceeds from stock issued for employee benefit plans93,415 43,183 
Stock tendered for payment of withholding taxes(26,597)(25,246)
Repurchase of common stock(1,023,578)(428,801)
Cash dividends(216,258)(208,926)
Proceeds from long-term borrowings200,000  
Payments on long-term borrowings (2,048)
Proceeds from short-term borrowings3,674,000 2,768,000 
Payments on short-term borrowings(3,595,000)(2,136,251)
Net cash (used for) provided by financing activities(894,018)9,911 
Effect of exchange rates on cash and cash equivalents(15,206)(2,844)
Net change in cash and cash equivalents(69,881)(41,147)
Cash and cash equivalents, beginning of period257,413 243,796 
Cash and cash equivalents, end of period$187,532 $202,649 
See accompanying notes to the condensed consolidated financial statements.
7

C.H. ROBINSON WORLDWIDE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
C.H. Robinson Worldwide, Inc., and our subsidiaries (“the company,” “we,” “us,” or “our”) are a global provider of transportation services and logistics solutions operating through a network of offices located in North America, Europe, Asia, Oceania, and South America. The consolidated financial statements include the accounts of C.H. Robinson Worldwide, Inc., and our majority owned and controlled subsidiaries. Our minority interests in subsidiaries are not significant. All intercompany transactions and balances have been eliminated in the consolidated financial statements.
Our reportable segments are North American Surface Transportation (“NAST”) and Global Forwarding, with all other segments included in All Other and Corporate. The All Other and Corporate reportable segment includes Robinson Fresh, Managed Services, Other Surface Transportation outside of North America, and other miscellaneous revenues and unallocated corporate expenses. For financial information concerning our reportable segments, refer to Note 9, Segment Reporting.
The condensed consolidated financial statements, which are unaudited, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
Consistent with SEC rules and regulations, we have condensed or omitted certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States. You should read the condensed consolidated financial statements and related notes in conjunction with the consolidated financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2021.
PROPERTY AND EQUIPMENT
During the second quarter of 2022, we sold an office building in Kansas City, Missouri, which had been previously classified as held-for-sale assets, 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. We simultaneously entered into an agreement to lease the office building for 10 years.
RECENTLY ISSUED ACCOUNTING STANDARDS
For the nine months ended September 30, 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.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021, includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements.
NOTE 2. GOODWILL AND OTHER INTANGIBLE ASSETS
The change in carrying amount of goodwill is as follows (in thousands):
NASTGlobal ForwardingAll Other and CorporateTotal
Balance, December 31, 2021$1,196,333 $210,391 $78,030 $1,484,754 
Foreign currency translation(15,180)(7,839)(3,432)(26,451)
Balance, September 30, 2022$1,181,153 $202,552 $74,598 $1,458,303 

Goodwill is tested at least annually for impairment on November 30, or more frequently if events or changes in circumstances indicate that the asset might be impaired. We first perform a qualitative assessment to determine whether it is more likely than not that the fair value of our reporting units is less than their respective carrying value (“Step Zero Analysis”). If the Step Zero Analysis indicates it is more likely than not that the fair value of our reporting units is less than their respective carrying value, an additional impairment assessment is performed (“Step One Analysis”). As part of our Step Zero Analysis, we determined that more likely than not criteria had not been met, and therefore a Step One Analysis was not required as of September 30, 2022.
8

Identifiable intangible assets consisted of the following (in thousands):
September 30, 2022December 31, 2021
CostAccumulated AmortizationNetCostAccumulated AmortizationNet
Finite-lived intangibles
Customer relationships$156,619 $(97,097)$59,522 $169,308 $(88,302)$81,006 
Indefinite-lived intangibles
Trademarks8,600 — 8,600 8,600 — 8,600 
Total intangibles$165,219 $(97,097)$68,122 $177,908 $(88,302)$89,606 
Amortization expense for other intangible assets is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Amortization expense$5,782 $6,130 $17,773 $19,416 
Finite-lived intangible assets, by reportable segment, as of September 30, 2022, will be amortized over their remaining lives as follows (in thousands):
NASTGlobal ForwardingAll Other and CorporateTotal
Remaining 2022$2,021 $3,326 $243 $5,590 
20238,084 10,929 974 19,987 
20248,008 3,266 974 12,248 
20257,857 2,066 974 10,897 
20267,857 335 666 8,858 
Thereafter1,310  632 1,942 
Total$59,522 

NOTE 3. FAIR VALUE MEASUREMENT
Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:
Level 1 — Quoted market prices in active markets for identical assets or liabilities.
Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3 — Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.
We had no Level 3 assets or liabilities as of and during the periods ended September 30, 2022 and December 31, 2021. There were no transfers between levels during the period.

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NOTE 4. FINANCING ARRANGEMENTS
The components of our short-term and long-term debt and the associated interest rates were as follows (dollars in thousands):
Average interest rate as ofCarrying value as of
September 30, 2022December 31, 2021MaturitySeptember 30, 2022December 31, 2021
Revolving credit facility4.27 %1.23 %October 2023$104,000 $525,000 
364-day revolving credit facility3.50 % May 2023500,000  
Senior Notes, Series A3.97 %3.97 %August 2023175,000 175,000 
Senior Notes, Series B4.26 %4.26 %August 2028150,000 150,000 
Senior Notes, Series C4.60 %4.60 %August 2033175,000 175,000 
Receivables Securitization Facility (1)
3.74 %0.73 %November 2023499,552 299,481 
Senior Notes (1)
4.20 %4.20 %April 2028594,828 594,168 
Total debt2,198,380 1,918,649 
Less: Current maturities and short-term borrowing(779,000)(525,000)
Long-term debt$1,419,380 $1,393,649 
____________________________________________
(1) Net of unamortized discounts and issuance costs.

SENIOR UNSECURED REVOLVING CREDIT FACILITY
We have a senior unsecured revolving credit facility (the “Credit Agreement”) with a total availability of $1 billion and a maturity date of October 24, 2023. Borrowings under the Credit Agreement generally bear interest at a variable rate determined by a pricing schedule or the base rate (which is the highest of (a) the administrative agent's prime rate, (b) the federal funds rate plus 0.50 percent, or (c) the sum of applicable LIBOR plus 1.13 percent). In addition, there is a commitment fee on the average daily undrawn stated amount under each letter of credit issued under the facility ranging from 0.075 percent to 0.200 percent. The recorded amount of borrowings outstanding, if any, approximates fair value because of the short maturity period of the debt.
The Credit 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. The Credit Agreement also contains customary events of default. On November 19, 2021, we amended the Credit Agreement to among other things, facilitate the terms of the Receivables Securitization Facility and include provisions for benchmark replacements to LIBOR.
364-DAY UNSECURED REVOLVING CREDIT FACILITY
On May 6, 2022, we entered into an unsecured revolving credit facility (the “364-day Credit Agreement”) with a total availability of $500 million and a maturity date of May 5, 2023. Borrowings under the 364-day Credit Agreement generally bear interest at an alternate base rate plus a margin or a term SOFR-based rate plus a margin of 0.625 percent to 1.25 percent. The alternate base rate is determined by a pricing schedule (which is the highest of (a) 0 percent, (b) U.S. Bank’s prime rate, (c) the federal funds effective rate plus 0.50 percent, or (d) a term SOFR-based rate plus 1.00 percent). In addition, there is a commitment fee on the aggregate unused commitments under the 364-day Credit Agreement ranging from 0.05 percent to 0.175 percent per annum. The recorded amount of borrowings outstanding, if any, 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.
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NOTE PURCHASE AGREEMENT
On August 23, 2013, we entered into a Note Purchase Agreement with certain institutional investors (the “Purchasers”). On August 27, 2013, the Purchasers purchased an aggregate principal amount of $500 million of our Senior Notes Series A, Senior Notes Series B, and Senior Notes Series C (collectively, the “Notes”). Interest on the Notes is payable semi-annually in arrears. The fair value of the Notes approximated $459.5 million on September 30, 2022. We estimate the fair value of the Notes primarily using an expected present value technique, which is based on observable market inputs using interest rates currently available to companies of similar credit standing for similar terms and remaining maturities and considering our own risk. If the Notes were recorded at fair value, they would be classified as Level 2. Series A matures in August 2023 and is classified as current portion of debt in our Condensed Consolidated Balance Sheets as of September 30, 2022.
The Note Purchase Agreement contains various restrictions and covenants that require us to maintain certain financial ratios, including a maximum leverage ratio of 3.00 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 20 percent.
The Note Purchase Agreement provides for customary events of default. The occurrence of an event of default would permit certain Purchasers to declare certain Notes then outstanding to be immediately due and payable. Under the terms of the Note Purchase Agreement, the Notes are redeemable, in whole or in part, at 100 percent of the principal amount being redeemed together with a “make-whole amount” (as defined in the Note Purchase Agreement), and accrued and unpaid interest with respect to each Note. The obligations of the company under the Note Purchase Agreement and the Notes are guaranteed by C.H. Robinson Company, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the company, and by C.H. Robinson Company, Inc., a Minnesota corporation and an indirect wholly-owned subsidiary of the company. On November 19, 2021, we amended the Note Purchase Agreement to among other things, facilitate the terms of the Receivables Securitization Facility.
U.S. TRADE ACCOUNTS RECEIVABLE SECURITIZATION
On November 19, 2021, we entered into a receivables purchase agreement and related transaction documents with Bank of America, N.A. and Wells Fargo Bank, N.A. to provide a receivables securitization facility (the “Receivables Securitization Facility”). The Receivables Securitization Facility is based on the securitization of our U.S. trade accounts receivable with a total availability of $500 million as of September 30, 2022. The interest rate on borrowings under the Receivables Securitization Facility is based on Bloomberg Short Term Bank Yield Index (“BSBY”) plus a margin. There is also a commitment fee we are required to pay on any unused portion of the facility. The Receivables Securitization Facility expires on November 17, 2023, unless extended by the parties and is recorded as a noncurrent liability as of September 30, 2022. 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 long-term borrowings on the consolidated statement of cash flows.
The Receivables Securitization Facility contains various customary affirmative and negative covenants, and it also contains customary default and termination provisions, which provide for acceleration of amounts owed under the Receivables Securitization Facility upon the occurrence of certain specified events.
On February 1, 2022, we amended the Receivables Securitization Facility primarily to increase the total availability from $300 million to $500 million pursuant to the provisions of the existing agreement. On July 7, 2022, we amended the Receivables Securitization Facility to effectively increase the receivables pool available with respect to the Receivables Securitization Facility.

SENIOR NOTES
On April 9, 2018, we issued senior unsecured notes (“Senior Notes”) through a public offering. The Senior Notes bear an annual interest rate of 4.20 percent payable semi-annually on April 15 and October 15, until maturity on April 15, 2028. Taking into effect the amortization of the original issue discount and all underwriting and issuance expenses, the Senior Notes have an effective yield to maturity of approximately 4.39 percent per annum. The fair value of the Senior Notes, excluding debt discounts and issuance costs, approximated $558.5 million as of September 30, 2022, based primarily on the market prices quoted from external sources. The carrying value of the Senior Notes was $594.8 million as of September 30, 2022.
We may redeem the Senior Notes, in whole or in part, at any time and from time to time prior to their maturity at the applicable redemption prices described in the Senior Notes. Upon the occurrence of a “change of control triggering event” as defined in the Senior Notes (generally, a change of control of us accompanied by a reduction in the credit rating for the Senior Notes), we
11

will generally be required to make an offer to repurchase the Senior Notes from holders at 101 percent of their principal amount plus accrued and unpaid interest to the date of repurchase.
The Senior Notes were issued under an indenture that contains covenants imposing certain limitations on our ability to incur liens or enter into sale and leaseback transactions above certain limits; and consolidate, or merge or transfer substantially all of our assets and those of our subsidiaries on a consolidated basis. It also provides for customary events of default (subject in certain cases to customary grace and cure periods), which include, among other things nonpayment, breach of covenants in the indenture, and certain events of bankruptcy and insolvency. If an event of default occurs and is continuing with respect to the Senior Notes, the trustee or holders of at least 25 percent in principal amount outstanding of the Senior Notes may declare the principal and the accrued and unpaid interest, if any, on all of the outstanding Senior Notes to be due and payable. These covenants and events of default are subject to a number of important qualifications, limitations, and exceptions that are described in the indenture. The indenture does not contain any financial ratios or specified levels of net worth or liquidity to which we must adhere.
In addition to the above financing agreements, we have a $15 million discretionary line of credit with U.S. Bank of which $7.9 million is currently utilized for standby letters of credit related to insurance collateral as of September 30, 2022. These standby letters of credit are renewed annually and were undrawn as of September 30, 2022.
NOTE 5. INCOME TAXES
A reconciliation of the provision for income taxes using the statutory federal income tax rate to our effective income tax rate for the three and nine months ended September 30, 2022 and 2021, is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Federal statutory rate21.0 %21.0 %21.0 %21.0 %
State income taxes, net of federal benefit2.4 0.6 1.9 1.5 
Share based payment awards(1.6)0.4 (1.1)(0.8)
Foreign tax credits0.2 (0.1)(0.8)(0.3)
Other U.S. tax credits and incentives(6.2)(3.0)(2.3)(1.7)
Foreign2.8 (4.2)0.3 (1.5)
Other(1.7)1.3 0.2 0.3 
Effective income tax rate16.9 %16.0 %19.2 %18.5 %

We have asserted that the unremitted earnings of a limited number of our foreign subsidiaries are permanently reinvested to support expansion of our international business. If we repatriated all foreign earnings that are considered to be permanently reinvested, the estimated effect on income taxes payable would be an increase of approximately $2.0 million as of September 30, 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 have recognized a payroll deferral of $14.7 million under the CARES Act, which is due on December 31, 2022.

As of September 30, 2022, we have $41.6 million of unrecognized tax benefits and related interest and penalties. It is possible the amount of unrecognized tax benefit could change in the next 12 months as a result of a lapse of the statute of limitations and settlements with taxing authorities. The total liability for unrecognized tax benefits is expected to decrease by approximately $1.7 million in the next 12 months due to the lapsing of statutes of limitations. With few exceptions, we are no longer subject to audits of U.S. federal, state and local, or non-U.S. income tax returns before 2015. We are currently under an Internal Revenue Service audit for 2015, 2016 and 2017 tax years.
12

NOTE 6. STOCK AWARD PLANS
Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense as it vests. A summary of our total compensation expense recognized in our condensed consolidated statements of operations and comprehensive income for stock-based compensation is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Stock options$3,262 $4,070 $9,744 $12,064 
Stock awards21,788 36,012 65,738 79,361 
Company expense on ESPP discount761 730 2,864 2,537 
Total stock-based compensation expense$25,811 $40,812 $78,346 $93,962 

On May 5, 2022, our shareholders approved a 2022 Equity Incentive Plan (the “Plan”) and authorized an initial 4,261,884 shares for issuance of awards thereunder. Upon approval of the Plan, no new awards may be made under our 2013 Equity Incentive Plan. The Plan allows us to grant certain stock awards, including stock options at fair market value, performance-based restricted stock units and shares, and time-based restricted stock units, to our key employees and non-employee directors. There were 4,432,184 shares available for stock awards under the Plan as of September 30, 2022. Shares subject to awards under the Plan or certain of our prior plans that expire or are canceled without delivery of shares or that are settled in cash generally become available again for issuance under the Plan.
Stock Options - We have awarded stock options to certain key employees through 2020. The fair value of these options was established based on the market price on the date of grant calculated using the Black-Scholes option pricing model. Changes in measured stock price volatility and interest rates were the primary reasons for changes in the fair value. These grants are being expensed based on the terms of the awards. As of September 30, 2022, unrecognized compensation expense related to stock options was $16.7 million. The amount of future expense to be recognized will be based on the passage of time and the employees' continued employment.
Stock Awards - We have awarded performance-based restricted shares, performance-based restricted stock units (“PSUs”), and time-based restricted stock units. Nearly all of our awards contain restrictions on the awardees’ ability to sell or transfer vested awards for a specified period of time. The fair value of these awards is established based on the market price on the date of grant, discounted for any post-vesting holding restrictions. The discounts on outstanding grants with post-vesting holding restrictions vary from 12 percent to 24 percent and are calculated using the Black-Scholes option pricing model-protective put method. The duration of the restriction period to sell or transfer vested awards, changes in the measured stock price volatility and changes in interest rates are the primary reasons for changes in the discounts. These grants are being expensed based on the terms of the awards.
Performance-based Awards
We have awarded performance-based restricted shares through 2020 to certain key employees. These awards vest over a five-year period based on the company’s earnings growth. 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 earnings per share growth and annual adjusted gross profit growth. These PSUs contain an upside opportunity of up to 200 percent of target contingent upon obtaining certain earnings per share and adjusted gross profit growth targets.
Time-based Awards
We award time-based restricted stock units to certain key employees. Time-based awards granted through 2020 vest over a five-year period. Beginning in 2021, we have granted annually time-based awards that vest over a three-year period. These awards vest primarily based on the passage of time and the employee’s continued employment. These grants are being expensed based on the terms of the awards.
We granted 330,072 PSUs and 634,118 time-based restricted stock units on February 9, 2022. The PSUs and time-based restricted stock unit awards had a weighted average grant date fair value of $76.74 and $74.67, respectively. Time-based awards are eligible to vest over a three-year period with a first vesting date of December 31, 2022.
We have also issued restricted stock units to certain key employees and non-employee directors, which are fully vested upon issuance. These units contain restrictions on the awardees’ ability to sell or transfer vested units for a specified period of time. The fair value of these units is established using the same method discussed above. These grants have been expensed during the year they were earned.
13

As of September 30, 2022, there was unrecognized compensation expense of $122.7 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 earnings and adjusted gross profit growth, and certain other conditions.
Employee Stock Purchase Plan - Our 1997 Employee Stock Purchase Plan (“ESPP”) allows our employees to contribute up to $10,000 of their annual cash compensation to purchase company stock. The purchase price is determined using the closing price on the last day of each quarter discounted by 15 percent. Shares vest immediately. The following is a summary of the employee stock purchase plan activity (dollars in thousands): 
Three Months Ended September 30, 2022
Shares purchased
by employees
Aggregate cost
to employees
Expense recognized
by the company
52,660 $4,311 $761 

NOTE 7. LITIGATION
We are not subject to any pending or threatened litigation other than routine litigation arising in the ordinary course of our business operations, including certain contingent auto liability cases. For some legal proceedings, we have accrued an amount that reflects the aggregate liability deemed probable and estimable, but this amount is not material to our condensed consolidated financial position, results of operations, or cash flows. Because of the preliminary nature of many of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the inconsistent treatment of claims made in many of these proceedings, and the difficulty of predicting the settlement value of many of these proceedings, we are often unable to estimate an amount or range of any reasonably possible additional losses. However, based upon our historical experience, the resolution of these proceedings is not expected to have a material effect on our consolidated financial position, results of operations, or cash flows.
NOTE 8. ACQUISITIONS
Combinex Holding B.V.
On June 3, 2021, we acquired all of the outstanding shares of Combinex to strengthen our European road transportation presence. Total purchase consideration, net of cash acquired was $14.7 million, which was paid in cash.
Identifiable intangible assets and estimated useful lives are as follows (dollars in thousands):
Estimated Life (years)
Customer relationships7$3,942 
There was $10.8 million of goodwill recorded related to the acquisition of Combinex. The Combinex goodwill is a result of acquiring and retaining the Combinex 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 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.
NOTE 9. SEGMENT REPORTING
Our reportable segments are based on our method of internal reporting, which generally segregates the segments by service line and the primary services they provide to our customers. We identify two reportable segments in addition to All Other and Corporate as summarized below:
North American Surface Transportation—NAST provides freight transportation services across North America through a network of offices in the United States, Canada, and Mexico. The primary services provided by NAST include truckload and less than truckload (“LTL”) transportation services.
Global Forwarding—Global Forwarding provides global logistics services through an international network of offices in North America, Asia, Europe, Oceania, and South America and also contracts with independent agents worldwide. The primary services provided by Global Forwarding include ocean freight services, air freight services, and customs brokerage.
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All Other and Corporate—All Other and Corporate includes our Robinson Fresh and Managed Services segments, as well as Other Surface Transportation outside of North America and other miscellaneous revenues and unallocated corporate expenses. Robinson Fresh provides sourcing services including the buying, selling, and marketing of fresh fruits, vegetables, and other perishable items. Managed Services provides Transportation Management Services, or Managed TMS®. Other Surface Transportation revenues are primarily earned by Europe Surface Transportation. Europe Surface Transportation provides transportation and logistics services including truckload and groupage services across Europe.
The internal reporting of segments is defined, based in part, on the reporting and review process used by our chief operating decision maker (“CODM”), our Chief Executive Officer. The accounting policies of our reportable segments are the same as those described in the summary of significant accounting policies located in Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021. We do not report our intersegment revenues by reportable segment to our CODM and do not believe they are a meaningful metric for evaluating the performance of our reportable segments. Reportable segment information as of, and for the three and nine months ended September 30, 2022 and 2021, is as follows (dollars in thousands):
NASTGlobal ForwardingAll Other and CorporateConsolidated
Three Months Ended September 30, 2022
Total revenues$4,002,461 $1,511,115 $501,800 $6,015,376 
Income (loss) from operations211,899 85,953 (10,243)287,609 
Depreciation and amortization5,739 5,368 11,868 22,975 
Total assets(1)
3,624,333 2,266,923 904,274 6,795,530 
Average employee headcount7,493 5,861 4,691 18,045 
NASTGlobal ForwardingAll Other and CorporateConsolidated
Three Months Ended September 30, 2021
Total revenues$3,814,988 $1,978,901 $469,806 $6,263,695 
Income (loss) from operations149,035 165,155 (3,421)310,769 
Depreciation and amortization6,620 5,427 10,359 22,406 
Total assets(1)
3,437,461 2,438,106 727,039 6,602,606 
Average employee headcount6,764 5,167 4,037 15,968 
NASTGlobal ForwardingAll Other and CorporateConsolidated
Nine Months Ended September 30, 2022
Total revenues$12,264,396 $5,798,702 $1,566,706 $19,629,804 
Income from operations670,752 421,148