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Table of Contents


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
or
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-20191231_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, Minnesota 55347
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: 952-937-8500

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, par value $0.10 per shareCHRWThe Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐   No  ☒

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 emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth 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  ☒
The aggregate market value of voting stock held by non-affiliates of the registrant as of June 28, 2019, was approximately $11,391,890,865 (based upon the closing price of $84.35 per common share on that date as quoted on The Nasdaq Global Select Market).
As of February 14, 2020, the number of shares outstanding of the registrant’s common stock, par value $0.10 per share, was 134,892,810.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement relating to its Annual Meeting of Stockholders to be held May 7, 2020 (the “Proxy Statement”), are incorporated by reference in Part III.



Table of Contents
C.H. ROBINSON WORLDWIDE, INC.
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2019

TABLE OF CONTENTS
 
 
 PART IPage
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.


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PART I
ITEM 1. BUSINESS
Overview
C.H. Robinson Worldwide, Inc. (“C.H. Robinson,” “the company,” “we,” “us,” or “our”) is one of the largest third party logistics companies in the world with consolidated total revenues of $15.3 billion in 2019. We provide freight transportation services and logistics solutions to companies of all sizes in a wide variety of industries. During 2019, we handled approximately 18 million shipments and worked with more than 119,000 customers. We operate through a network of offices in North America, Europe, Asia, Oceania, and South America. We have developed global transportation and distribution networks to provide transportation and supply chain services worldwide. As a result, we have the capability of facilitating most aspects of the supply chain on behalf of our customers. We have two reportable segments: North American Surface Transportation (“NAST”) and Global Forwarding, with our remaining operating segments reported under All Other and Corporate. For financial information concerning our reportable segments and geographic regions, refer to Note 9, Segment Reporting, of our consolidated financial statements.
As a third party logistics provider, we enter into contractual relationships with a wide variety of transportation companies and utilize those relationships to efficiently and cost-effectively arrange the transport of our customers’ freight. We utilized approximately 78,000 contracted transportation companies, including contracted motor carriers, railroads (primarily intermodal service providers), and air and ocean carriers in 2019. Depending on the needs of our customers and their supply chain requirements, we select and hire the appropriate mode of transportation for each shipment. Our model enables us to be flexible and provide solutions that optimize service for our customers. As an integral part of our transportation services, we may also provide a wide range of value-added logistics services, such as freight consolidation, customs brokerage, supply chain consulting and analysis, optimization, and reporting.
In addition to transportation and logistics services, we provide sourcing services under the trade name Robinson Fresh® (“Robinson Fresh”). Our sourcing services consist primarily of the buying, selling, and/or marketing of fresh fruits, vegetables, and other value-added perishable items. This was our original business when we were founded in 1905. The foundation for much of our logistics expertise can be traced to our significant experience in handling produce and temperature controlled commodities. We supply fresh produce through a network of independent produce growers and suppliers. Our customers include grocery retailers, restaurants, foodservice distributors, and produce wholesalers. In many cases, we also arrange the logistics and transportation of the products we sell and provide related supply chain services, such as replenishment, category management, and managed procurement services. We have developed proprietary brands of produce and have exclusive licensing agreements to distribute fresh and value-added produce under recognized consumer brand names. The produce for these brands is sourced through a preferred grower network and packed to order through contract packing agreements. We have instituted quality assurance and monitoring procedures with each of these preferred growers.
Our flexible business model has been the main driver of our historical results, and we believe it has positioned us for continued growth. One of our competitive advantages is our network of offices. Our employees are in close proximity to both customers and transportation providers, which gives them broad knowledge of their local markets and enables them to respond quickly to customers’ and transportation providers’ changing needs. Employees act as a team in their sales efforts, customer service, and operations. A significant portion of most employees’ compensation is performance-oriented, based on profitability and their contributions to the success of the company. We believe this makes our employees more service-oriented and focused on driving growth and maximizing team productivity.
Our network of offices work together to meet our customers’ needs and cross-sell our services. For large, multi-location customers, we often coordinate our efforts in global account centers or in one office and rely on multiple offices to deliver specific geographic or modal needs. Most of our global network operates on a single global technology platform called Navisphere® that is used to match customer needs with supplier capabilities, to collaborate with other offices, and to utilize centralized support resources to complete all facets of the transaction.
We have grown primarily through internal growth by increasing market share through the addition of new customers and expanding relationships with our current customers, adding new services, expanding our market presence and operations globally, hiring additional employees, and leveraging our technology. We continually look to grow through selective acquisitions. In February 2019, we acquired The Space Cargo Group (“Space Cargo”), a provider of international freight forwarding, customs brokerage, and other logistics services to expand our offerings in Spain and Colombia. Space Cargo operates in our Global Forwarding operating segment.
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In January 2020, we entered into a definitive agreement to acquire Prime Distribution Services, a leading provider of retail consolidation services in North America, for approximately $225 million in cash. The agreement is subject to certain customary closing conditions, including regulatory approval.
In May 2019, we acquired Dema Service S.p.A. (“Dema Service”), a provider of European road transportation to expand our offerings primarily in Italy. Dema Service operates in our European Surface Transportation operating segment.
In August 2017, we acquired Milgram & Company Ltd. (“Milgram”), a provider of freight forwarding, customs brokerage, and surface transportation, to strengthen our freight forwarding and customs brokerage offerings in Canada. Milgram operates primarily in our Global Forwarding operating segment.
Transportation and Logistics Services
C.H. Robinson provides freight transportation and related logistics and supply chain services. Our services range from commitments on a specific shipment to much more comprehensive and integrated relationships. We execute these service commitments by investing in and retaining talented employees, developing innovative proprietary systems and processes, and utilizing a network of contracted transportation providers, including, but not limited to, contracted motor carriers, railroads, and air and ocean carriers. We make a profit driven by the value we provide our customers and the resulting difference between what we charge to our customers for the totality of services provided to them and what we pay to the transportation providers to handle or transport the freight. While industry definitions vary, given our extensive contracting to create a flexible network of solutions, we are generally referred to in the industry as a third party logistics company.
We provide the following transportation and logistics services:
Truckload: Through our contracts with motor carriers, we have access to dry vans, temperature controlled vans, flatbeds, and bulk capacity. We connect our customers with contracted motor carriers who specialize in their transportation lanes and product types, and we help contracted motor carriers optimize the usage of their equipment.
Less than Truckload (“LTL”): LTL transportation involves the shipment of single or multiple pallets of freight. We primarily focus on shipments of a single pallet or larger, although we handle any size shipment. Through our contracts with motor carriers and use of Navisphere, we consolidate freight and freight information to provide our customers with a single source of information on their freight. In many instances, we will consolidate partial shipments for several customers into full truckloads.
Intermodal: Our intermodal transportation service is the shipment of freight in trailers or containers by a combination of truck and rail. We have intermodal marketing agreements with container owners and all Class 1 railroads in North America, and we arrange local pickup and delivery (known as drayage) through local contracted motor carriers. In addition, we own approximately 1,500 and lease approximately 1,100 intermodal containers.
Ocean: As a non-vessel ocean common carrier (“NVOCC”) and freight forwarder, we consolidate shipments, determine routing, select ocean carriers, contract for ocean shipments, and/or provide for local pickup and delivery of shipments.
Air: As a certified Indirect Air Carrier (“IAC”) and freight forwarder, we organize air shipments and provide door-to-door service.
Customs: Our customs brokers are licensed and regulated by U.S. Customs and Border Protection and other authoritative governmental agencies to assist importers and exporters in meeting legal requirements governing imports and exports.
Other Logistics Services: We provide fee-based managed services, warehousing services, small parcel, and other services.
Customers communicate their freight needs, typically on an order-by-order basis, to the C.H. Robinson team responsible for their account. The team ensures that all necessary information regarding each shipment is available in Navisphere. This information is received electronically by Navisphere from the customers' system, entered by our employees into Navisphere, or by the customer through our web tools. We utilize the information from Navisphere and other available sources to select the best contracted carrier based upon factors such as their service score, equipment availability, freight rates, and other relevant factors.
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Once the contracted carrier is selected, we receive the contracted carrier’s commitment to provide the transportation. During the time when a shipment is executed, we connect frequently, either electronically or manually, with the contracted carrier to track the status of the shipment to meet the unique needs of our customers.
For most of our transportation and logistics services, we are a service provider. By accepting the customer’s order, we accept certain responsibilities for transportation of the shipment from origin to destination. The carrier’s contract is with us, not the customer, and we are responsible for prompt payment of freight charges. In the cases where we have agreed (either contractually or otherwise) to pay for claims for damage to freight while in transit, we pursue reimbursement from the contracted carrier for the claims. In our managed services business, we are acting as the shipper’s agent. In those cases, the carrier’s contract is typically with the customer, and we collect a fee for our services.
As a result of our logistics capabilities, some of our customers have us handle all, or a substantial portion, of their freight transportation requirements. Our employees price our services to provide a profit to us for the totality of services performed for the customer. Our services to the customer may be priced on a spot market, or transactional basis, or prearranged contractual rates. Most of our contractual rate commitments are for one year or less and allow for renegotiation. As is typical in the transportation industry, most of these contracts do not include specific volume commitments. When we enter into prearranged rate agreements for truckload services with our customers, we usually have fuel surcharge agreements which allow for fuel to primarily act as a pass-through cost, in addition to the underlying line-haul portion of the rate.
We purchase most of our truckload services from our contracted truckload carriers on a spot market, or transactional basis, even when we are working with the customer on a contractual basis. In a small number of cases, we may get advance commitments from one or more contracted motor carriers to transport contracted shipments for the length of our customer contract. In those cases, where we have prearranged rates with contracted motor carriers, there is a calculated fuel surcharge based on a mutually agreed-upon formula.
While providing day-to-day transportation services, our employees often identify opportunities for additional logistics services as they become more familiar with our customers’ daily operations and the nuances of our customers’ supply chains. We offer a wide range of logistics services on a global basis that reduce or eliminate supply chain inefficiencies. We analyze customers’ current transportation rate structures, modes of shipping, and carrier selection. We identify opportunities to consolidate shipments for cost savings. We suggest ways to improve operating and shipping procedures and manage claims. We help customers minimize storage through crossdocking and other flow-through operations. Many of these services are provided in connection with providing the transportation services based on the nature of the customer relationship. In addition to these transportation services, we may provide additional logistics services, such as contract warehousing, consulting, transportation management, and other services, for which we are usually paid separately.
We have broadened our relationship with many of our customers through an emphasis on integrated logistics solutions resulting in us managing a greater portion of their supply chains. We often serve our customers through specially created teams and through multiple locations. Our transportation and logistics services are provided to numerous international customers through our worldwide network.
Transportation services accounted for approximately 96 percent of net revenues in 2019 and 2018, respectively, and 95 percent in 2017. Net revenues are a non-GAAP financial measure calculated as total revenues less the total of purchased transportation and related services and the cost of purchased products sourced for resale. For additional information, see Item 7 of Part II, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The table below shows our net revenues by transportation mode, for the years ended December 31 (in thousands):
20192018201720162015
Truckload$1,348,878  $1,445,916  $1,229,999  $1,257,191  $1,316,533  
LTL477,348  471,275  407,012  381,817  360,706  
Intermodal27,670  32,469  29,145  33,482  41,054  
Ocean308,367  312,952  290,630  244,276  223,643  
Air106,777  120,540  100,761  82,167  79,096  
Customs91,828  88,515  70,952  50,509  43,929  
Other Logistics Services121,994  122,077  117,117  105,369  82,548  
Total$2,482,862  $2,593,744  $2,245,616  $2,154,811  $2,147,509  

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Sourcing
Since we were founded in 1905, we have been in the business of sourcing fresh produce. Much of our logistics expertise can be traced to our significant experience in handling produce and other perishable commodities. Because of its perishable nature, produce must be rapidly packaged; carefully transported within tight timetables, usually in temperature controlled equipment; and quickly distributed to replenish high-turnover inventories maintained by our customers. In many instances, we consolidate an individual customer’s produce orders into truckload quantities at the point of origin and arrange for transportation of the truckloads, often to multiple destinations.
Our sourcing customer base includes grocery retailers, restaurants, foodservice distributors, and produce wholesalers.
Our sourcing services include inventory forecasting and replenishment, brand management, and category development services. We have various national and regional branded produce programs, including both proprietary brands and nationally licensed brands. These programs contain a wide variety of high quality, fresh bulk, and value added fruits and vegetables. These brands have expanded our market presence and relationships with many of our retail customers. We have also instituted quality assurance and monitoring programs as part of our branded and preferred grower programs.
Sourcing accounted for approximately four percent of our net revenues in 2019 and 2018, respectively, and five percent in 2017. 
Organization
Segment information. We have two reportable segments: NAST and Global Forwarding with our remaining operating segments reported as All Other and Corporate. The All Other and Corporate segment includes Robinson Fresh, Managed Services, Other Surface Transportation outside of North America, and other miscellaneous revenues and unallocated corporate expenses. See additional disclosure in Note 9, Segment Reporting, to our consolidated financial statements.
NAST provides freight transportation services across North America through a network of offices in the United States, Canada, and Mexico. The primary services provided by NAST are truckload, LTL, and intermodal.
Global Forwarding provides global logistics services through an international network of offices in North America, Europe, Asia, 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.
All Other and Corporate primarily consists of Robinson Fresh, Managed Services and Other Surface Transportation outside of North America. Robinson Fresh provides sourcing services which primarily include the buying, selling, and marketing of fresh fruits, vegetables, and other perishable items. Robinson Fresh sources products from around the world.
Managed Services is primarily comprised of our TMC division which offers Managed TMS®. Managed TMS combines the use of Navisphere, logistics process expertise, and consulting services in relation to the use of motor carriers chosen by our customers. Customers can access Navisphere, logistics experts, and supply chain engineers to manage their day-to-day operations and optimize supply chain performance.
Other Surface Transportation revenues are primarily earned by our Europe Surface Transportation operating segment. Europe Surface Transportation provides services similar to NAST across Europe.
Office Network. To keep us close to our customers and markets, we operate through a network of offices in North America, Europe, Asia, Oceania, and South America.
Our employees are responsible for developing new business, negotiating and pricing services, receiving and processing service requests from customers, and negotiating with carriers to provide the transportation requested. In addition to routine transportation, employees are often called upon to handle customers’ unusual, seasonal, and emergency needs. We have developed complex proprietary pricing algorithms that guide our employees regarding establishing competitive pricing with our customers and contracted motor carriers based on the unique characteristics of each customer's shipment. Employees typically rely on expertise in other offices when contracting and executing truckload, LTL, intermodal, ocean and air shipments. Multiple network offices often also work together to service larger, global accounts where the expertise and resources of more than one office are required to meet the customer’s needs. Their efforts are usually coordinated by one “lead” office on the account.
Network Employees. Employees are generally specialized into roles on new customer sales opportunities, account managing existing customer relationships, managing contracted carrier/supplier relationships for procuring capacity, or ongoing service and operations of shipments. Customer sales opportunities are identified through our internal database, referrals from current customers, leads generated by people through knowledge of their local and regional markets, company marketing efforts, and
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access to transportation industry shipment databases. Employees who are responsible for recruiting new motor carriers refer them to our centralized carrier services group to confirm they are properly licensed and insured, have acceptable Federal Motor Carrier Safety Administration (“FMCSA”) issued safety ratings, and will enter into a contract for transportation services with C.H. Robinson.
Working with their regional or divisional leaders, each team makes hiring and staffing decisions, based on balancing business needs with personnel investment and meeting targeted productivity and profitability goals. Because the quality of our employees is essential to our success, we are highly selective in our recruiting and hiring. To support our hiring processes, we have a corporate talent acquisition team that develops a pipeline of qualified candidates that managers can draw from. Our applicants typically have college degrees, and may have some business experience, although not necessarily within the transportation industry.
Our employees go through centralized onboarding that emphasizes development of the skills necessary to become productive employees, including technology training on our proprietary systems and our customer service philosophy. Centralized training is followed by ongoing, on-the-job training.

Compensation programs include performance-based metrics and cash incentives directly tied to productivity and performance. A significant portion of network management compensation is dependent on the growth and profitability of their team. They are paid a performance-based bonus, which is measured based on balanced growth in top and bottom line performance of the team they represent for that calendar year. The percentage they can potentially earn is predetermined in an annual bonus contract and is based on their role and the overall success of the team.

All of our managers and certain other employees who have significant responsibilities are eligible to receive equity awards because we believe these awards are an effective tool for creating long-term ownership and alignment between employees and our shareholders. Generally, these awards are eligible to vest over five-year periods and may also include financial performance-based requirements for management employees.

Employees benefit both through the growth and profitability of their team and by achieving individual goals. They are motivated by the opportunity to advance in a variety of career paths, including management, corporate sales, and customer and carrier account management.
Shared Services. Our network offices are supported by our shared and centralized services. Approximately 12 percent of our employees provide shared services in centralized centers. Over 55 percent of these shared services employees are technology personnel who enhance and maintain our proprietary operating system software and our technology infrastructure.
Customer Relationships
We work to establish long-term relationships with our customers and to increase the amount of business done with each customer by providing them with a full range of logistics services. During 2019, we served over 119,000 customers worldwide, ranging from Fortune 100 companies to small businesses in a wide variety of industries.
During 2019, our largest customer accounted for approximately two percent of total revenues. In recent years, we have grown by adding new customers and by increasing our volumes with, and providing more services to, our existing customers.
We seek additional business from existing customers and pursue new customers based on our knowledge of the marketplace and the range of logistics services that we can provide. We believe that our account management disciplines, expertise and technology enable our employees to better serve our customers by combining a broad knowledge of logistics and market conditions with a deep understanding of the specific supply chain issues facing individual customers and certain vertical industries. With the guidance of our executive and shared services teams, offices are given significant latitude to pursue opportunities and to commit our resources to serve our customers.
Relationships with Transportation Providers
We continually work on establishing contractual relationships with qualified transportation providers that also meet both ours and our customers’ service requirements to provide dependable services, favorable pricing, and available capacity during periods when demand for transportation equipment is greater than the supply. We own very little transportation equipment and do not employ the people directly involved with the delivery of our customers’ freight, so these relationships are critical to our success.
In 2019, we worked with approximately 78,000 transportation providers worldwide, of which the vast majority are contracted motor carriers. To strengthen and maintain our relationships with contracted motor carriers, our employees regularly communicate with contracted motor carriers and try to assist them by increasing their equipment utilization, reducing their
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empty miles, and repositioning their equipment. To make it easier for contracted motor carriers to work with us, we have a policy of contracted motor carrier invoice payment upon receipt of proof of delivery in accordance with our standard payment terms. For those contracted motor carriers who would like a faster payment, we also offer expedited payment upon receipt of proof of delivery in exchange for a discount, along with offering in-trip cash advances.
Contracted motor carriers provide access to dry vans, temperature controlled vans, flatbeds, and bulk capacity. These contracted motor carriers are of all sizes, including owner-operators of a single truck, small and mid-size fleets, private fleets, and the largest national trucking companies. Consequently, we are not dependent on any one contracted motor carrier. Our largest truck transportation provider was less than two percent of our total cost of transportation in 2019. Contracted motor carriers that had fewer than 100 tractors transported approximately 81 percent of our truckload shipments in 2019. Every United States and Canadian motor carrier with which we do business with is required to execute a contract that establishes that the motor carrier is acting as an independent contractor. At the time the contract is executed, and thereafter, through subscriptions with a third party service, we confirm that each United States contracted motor carrier is properly licensed and insured, has the necessary federally-issued authority to provide transportation services, and can provide the necessary level of service on a dependable basis. Our motor carrier contracts require that the contracted motor carrier issue invoices only to and accept payment solely from us for the shipments that they transport under their contract with us and allow us to withhold payment to satisfy previous claims or shortages. Our standard contracts do not include volume commitments, and typically the initial contract rate is modified each time we confirm an individual shipment with a contracted motor carrier.
We also have intermodal marketing agreements with container owners and all Class 1 railroads in North America, giving us access to additional trailers and containers. Our contracts with railroads specify the transportation services and payment terms by which our intermodal shipments are transported by rail. Intermodal transportation rates are typically negotiated between us and the railroad on a customer-specific basis. We own approximately 1,500 53-foot containers and lease approximately 1,100 containers. We believe that these containers have helped us better serve our customers, and we will continue to analyze the strategy of controlling containers.
In our NVOCC ocean transportation business, we have contracts with most of the major ocean carriers, which support a variety of service and rate needs for our customers. We negotiate annual contracts that establish the predetermined rates we agree to pay the ocean carriers. The rates are negotiated based on expected volumes from our customers in specific trade lanes. These contracts are often amended throughout the year to reflect changes in market conditions for our business, such as additional trade lanes.
We operate both as a consolidator and as a transactional IAC in the United States and internationally. We select air carriers and provide for local pickup and delivery of shipments. We execute our air freight services through our relationships with air carriers, through charter services, block space agreements, capacity space agreements, and transactional spot market negotiations. Through charter services, we contract part or all of an airplane to meet customer requirements. Our block space agreements and capacity space agreements are contracts for a defined time period. The contracts include fixed allocations for predetermined flights at agreed upon rates that are reviewed periodically throughout the year. The transactional negotiations afford us the ability to capture excess capacity at prevailing market rates for a specific shipment.
Competition
The transportation services industry is highly competitive and fragmented. We compete against many logistics companies, including technology-based service companies, trucking companies, property freight brokers, carriers offering logistics services, NVOCCs, IACs, and freight forwarders. We also buy from and sell transportation services to companies that compete with us.
In our sourcing business, we compete with produce brokers, produce growers, produce marketing companies, produce wholesalers, and foodservice buying groups. We also buy from and sell produce to companies that compete with us.
We often compete with respect to price, scope of services, or a combination thereof, but believe that our most significant competitive advantages are:
People: Smart, dedicated, empowered people act as an extension of our customers’ teams to innovate and execute their supply chain strategies;
Process: Proven processes and solutions combine strategy with practical experience for customized action plans that succeed in the real world;
Technology: Navisphere, our proprietary technology, provides flexibility, global visibility, customized solutions, easy integration, broad connectivity, and advanced security;
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Network: Our customers gain local presence, regional expertise, and multiple global logistics options from one of the world’s largest providers of logistics services;
Relationships: A large number of unique, strong relationships provide global connections and valuable market knowledge;
Portfolio of Services: A wide selection of services and products help provide our customers with consistent capacity and service levels;
Scale: Our customers leverage our industry-leading capacity, broad procurement options, and substantial shipment volumes for better efficiency, service, and marketplace advantages; and
Stability: Our financial strength, discipline, and consistent track record of success for strategic support of our customers’ supply chains.
Seasonality
Our operating results have been subject to seasonal trends as a result of, or influenced by, numerous factors, including national holidays, weather patterns, consumer demand, economic conditions, and other similar and subtle forces. Although seasonal changes in the transportation industry have not had a significant impact on our cash flow or results of operations, we expect this trend to continue and we cannot guarantee that it will not adversely impact us in the future.
Proprietary Information Technology and Intellectual Property
We rely on a combination of cyber security, trademarks, copyrights, trade secrets, and nondisclosure and non-competition agreements to establish and protect our intellectual property and proprietary technology. Additionally, we have numerous registered trademarks, trade names, and logos in the United States and international locations.
Our software systems are essential to service our customers and contracted carriers, and manage our business. In 2019, we executed approximately 18 million shipments for more than 119,000 customers with more than 78,000 contracted carriers.
Our operational systems help our employees service customer orders, select the optimal mode of transportation, build and consolidate shipments, identify appropriate carriers and manage exceptions, all based on customer-specific service parameters. Our data estate provides our organization with the necessary business intelligence to allow for the necessary decision support in all areas of our business.
Our operations primarily use Navisphere, a global, multi modal transportation management system that allows customers to communicate worldwide with parties in their supply chain across languages, currencies, and continents. Navisphere offers sophisticated business analytics to help improve supply chain performance and meet increasing customer demands.
The Navisphere Vision product allows our customers to see their freight across all modes and services globally in a single view. Details of shipment contents, status of shipments based on milestones, disruptions to shipments, and resulting estimated time of arrival adjustment using artificial intelligence are provided for the customer to manage their supply chain exceptions. Collaboration, intelligent notifications, and performance score carding allow customers to manage their supply chain and identify inefficiencies.
The Navisphere Carrier platform provides contracted motor carriers access to the functionality necessary to manage their relationship with C.H. Robinson. Contracted motor carriers can access available freight, provide online status updates, keep track of receivables, and upload scanned documentation. Many of our contracted motor carriers’ favorite features from Navisphere Carrier are also available through our Navisphere Carrier mobile application available for Android and iOS mobile operating systems.
The Navisphere Driver mobile application provides contracted motor carriers’ drivers with load status automation capabilities. Drivers can elect to allow the application to automated location services and updates while in-transit. Drivers can also capture and upload bill of lading documentation to initiate payment processes. The track and trace capabilities give our systems and customers frequent load status information.
Freightquote by C.H. Robinson is a web-based, mobile-responsive offering designed to streamline the shipping process for small business customers allowing the booking of freight without any shipping knowledge or expertise. Freightquote's small business customers can go online with their phone, tablet, or computer to book their LTL or truckload freight, track shipments, get proactive notifications and pay for transportation services with a credit card.
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Government Regulation
Our operations may be regulated and licensed by various federal, state, and local transportation agencies in the United States and similar governmental agencies in foreign countries in which we operate.
We are subject to licensing and regulation as a property freight broker and are licensed by the U.S. Department of Transportation (“DOT”) to arrange for the transportation of property by motor vehicle. The DOT prescribes qualifications for acting in this capacity, including certain surety bonding requirements. We are also subject to regulation by the Federal Maritime Commission (“FMC”) as an ocean freight forwarder and a NVOCC and we maintain separate bonds and licenses for each. We operate as a Department of Homeland Security certified IAC, providing air freight services, subject to commercial standards set forth by the International Air Transport Association (“IATA”) and federal regulations issued by the Transportation Security Administration (“TSA”). We provide customs brokerage services as a customs broker under a license issued by the U.S. Customs and Border Protection and other authoritative governmental agencies. We also have and maintain other licenses as required by law.
Although Congress enacted legislation in 1994 that substantially preempts the authority of states to exercise economic regulation of motor carriers and brokers of freight, some intrastate shipments for which we arrange transportation may be subject to additional licensing, registration, or permit requirements. We contractually require and rely on the motor carrier transporting the shipment to ensure compliance with these types of requirements. We, along with the contracted motor carriers that we rely on in arranging transportation services for our customers, are also subject to a variety of federal and state safety and environmental regulations. Although compliance with the regulations governing licensees in these areas has not had a materially adverse effect on our operations or financial condition in the past, there can be no assurance that such regulations or changes thereto will not adversely impact our operations in the future. Violation of these regulations could also subject us to fines, as well as increased claims liability.
We buy and sell fresh produce under licenses issued by the U.S. Department of Agriculture (“USDA”) as required by the Perishable Agricultural Commodities Act (“PACA”). Other sourcing and distribution activities may be subject to various federal and state food and drug statutes and regulations.
We are subject to a variety of other U.S. and foreign laws and regulations including, but not limited to, the Foreign Corrupt Practices Act and other similar anti-bribery and anti-corruption statutes.
Risk Management and Insurance
We contractually require all motor carriers we work with to carry at least $750,000 in automobile liability insurance and $25,000 in cargo insurance. We also require all contracted motor carriers to maintain workers compensation and other insurance coverage as required by law. Most contracted motor carriers have insurance exceeding these minimum requirements. Railroads, which are generally self-insured, provide limited common carrier cargo loss or damage liability protection, generally up to $250,000 per shipment.
In North America, as a property freight broker, we are not legally liable for loss or damage to our customers’ cargo. In our customer contracts, we may agree to assume cargo liability up to a stated maximum. We typically do not assume cargo liability to our customers above minimum industry standards in our international freight forwarding, ocean transportation, or air freight businesses on international or domestic air shipments. With regards to international freight forwarding, certain ocean transportation, international domestic air freight shipments, and NAST LTL shipments, we offer our customers the option to purchase shippers’ interest insurance coverage to insure goods in transit. When we agree to store goods for our customers for longer terms, we provide limited warehouseman’s coverage to our customers and typically contract for warehousing services from companies that provide us the same degree of coverage.
We maintain a broad cargo liability insurance policy to help protect us against catastrophic losses that may not be recovered from the responsible contracted carrier. We also carry various liability insurance policies, including automobile and general liability, with a $200 million umbrella where we carry a $15 million retention. Our contingent automobile liability coverage has a primary retention of $5 million per incident.
As a seller of produce, we may, under certain circumstances, have legal responsibility arising from produce sales. We carry product liability coverage under our general liability and umbrella policies to cover tort claims. The deductible on our general liability coverage is $500,000 per incident. In addition, in the event of a recall, we may be required to bear the costs of repurchasing, transporting, and destroying any allegedly contaminated product, as well as potential consequential damages which were generally not insured. We carry product recall insurance coverage of $50 million. This policy has a retention of $5 million per incident.
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We maintain a cyber liability insurance policy with coverage of $10 million to help protect us against losses that may result from a cyber-related security breach or similar event. This policy has a retention of $1 million per incident.
Environmental, Social, and Governance (“ESG”)

We integrate ESG into our business, driven by our “EDGE” values of Evolving constantly, Delivering excellence, Growing together and Embracing integrity, to help to ensure we deliver value to our customers, employees, suppliers, shareholders and communities. We incorporate these principles into our business in a number of ways, including:

Environmental Sustainability: By leveraging our scope, size and scale, we work with customers to help optimize their supply chain, eliminate empty miles on the road, and reduce their carbon footprint. C.H. Robinson has been an active member of SmartWay,® a transportation program of the U.S. Environmental Protection Agency since 2005. In 2019, we announced a goal to reduce our Scope 1 and 2 carbon intensity 40% by 2025. Additionally, we joined the Sustainable Packaging Coalition in an effort to reduce waste in packaging for our fresh produce sourcing services.

Diversity and Inclusion: We are committed to fostering an inclusive workplace that attracts and retains high-performing diverse talent. This commitment is demonstrated by integrating diversity and inclusion initiatives into our talent strategies and across our business. Last year, this included integration into employee training programs and ensuring our employee benefit programs meet the needs of our diverse employee workforce.

Community Engagement: Through our company and the C.H. Robinson Foundation, we contributed to more than 800 charities operating around the globe and our employees donated more than 11,000 hours to nonprofits in their local communities in 2019. We proudly support organizations that matter most to our people through employee match programs, grantmaking, disaster relief efforts, employee hardship and scholarship fund programs. We also make a difference in our industry through our carrier scholarship program and our support of Truckers Against Trafficking, which works with the transportation industry to fight human trafficking.
Information about our Executive Officers
The Board of Directors designates the executive officers annually. Below are the names, ages, and positions of the executive officers as of February 19, 2020:
Name
  Age
Position
Robert C. Biesterfeld, Jr.44  President and Chief Executive Officer
Ben G. Campbell54  Chief Legal Officer and Secretary
Michael Castagnetto43  President of Robinson Fresh
Jeroen Eijsink47  President of C.H. Robinson Europe
Angela K. Freeman52  Chief Human Resources and ESG Officer
Jordan T. Kass47  President of Managed Services
Michael W. Neill49  Chief Technology Officer
Christopher J. O’Brien51  Chief Commercial Officer
Mac Pinkerton46  President of NAST
Michael J. Short49  President of Global Freight Forwarding
John P. Wiehoff58  Executive Chairman of the Board
Michael P. Zechmeister53  Chief Financial Officer

Robert C. Biesterfeld, Jr. was named Chief Executive Officer in May 2019. Prior to becoming CEO, he held the positions of Chief Operating Officer from February 2018 to May 2019, President of NAST from January 2016 to December 2018, Vice President of Truckload from January 2014 to December 2015, Vice President of Sourcing and Temperature Controlled Transportation from January 2013 to December 2014, and General Manager for the U.S. West Sourcing Region for the company’s Robinson Fresh division from 2003 to 2011. He began his career with C.H. Robinson in 1999 in the Corporate Procurement and Distribution Services office. Bob serves on the Board of Directors for the Transportation Intermediaries Association and is trustee of the Winona State University Foundation. Bob graduated from Winona State University with a Bachelor of Arts degree.
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Ben G. Campbell was named Chief Legal Officer and Secretary in January 2015. Previous positions with the company include Vice President, General Counsel and Secretary from January 2009 to December 2014 and Assistant General Counsel from February 2004 to December 2008. Ben joined C.H. Robinson in 2004. Before coming to C.H. Robinson, Ben was a partner at Rider Bennett, LLP, in Minneapolis, MN. Ben holds a Bachelor of Science degree from St. John’s University and a Juris Doctor from William Mitchell College of Law.
Michael Castagnetto was named President of Robinson Fresh in January 2020. Prior executive positions with the company include Vice President, General Manager, and Director of Sourcing from 2013 to 2019. Prior to his executive roles, Michael held various customer facing roles within the company. He began his career with C.H. Robinson through the acquisition of FoodSource, Inc. in 2005. He is a board member of the United Fresh Produce Association and the Pinky Swear Foundation. He holds a Bachelor of Arts from Saint Mary’s College of California.
Jeroen Eijsink was named President of C.H. Robinson Europe in September 2015. Jeroen previously served as Chief Executive Officer of DHL Freight Germany, where he was responsible for the road and rail transport activities for DHL in Germany from March 2013 to August 2015. He also served as Chief Executive Officer of DHL Freight Belgium, Netherlands, and United Kingdom from January 2011 to February 2013 and managing director of DHL Freight United Kingdom and Ireland from May 2006 to December 2010. Prior to joining Deutsche Post DHL, Jeroen held various management positions at Siemens in Germany.
Angela K. Freeman was named Chief Human Resources Officer in January 2015, and in October 2019 also became ESG Officer. Prior to becoming CHRO, she served as Vice President of Human Resources from August 2012 to December 2014. Previous positions with C.H. Robinson include Vice President of Investor Relations and Public Affairs from January 2009 to August 2012 and Director of Investor Relations, and Director of Marketing Communications. She also serves as the president of the C.H. Robinson Worldwide Foundation. In addition to her responsibilities at C.H. Robinson, Angie currently serves on the Board of Directors of Spartan Motors, Inc. (Nasdaq: SPAR) and on the Board of the University of North Dakota Alumni Association & Foundation. Prior to joining C.H. Robinson in 1998, Angela was with McDermott/O’Neill & Associates, a Boston-based public affairs firm. Angie holds a Bachelor of Arts degree and a Bachelor of Science degree from the University of North Dakota, and a Master of Science degree from the London School of Economics.
Jordan T. Kass was named President of Managed Services in January 2015. He previously served as Vice President of Management Services from January 2013 to January 2015. Previous positions with C.H. Robinson include Director of the TMC division. Jordan began his career in 1994 at American Backhaulers and subsequently joined C.H. Robinson in 2000 following our acquisition of American Backhaulers. Jordan holds a Bachelor of Arts degree from Indiana University.
Michael W. Neill was named Chief Technology Officer in June 2018. Previous positions with the company include IT Director, Application Development from 2010 to 2018, IT Director, Infrastructure and Security from 2005 to 2010, and Software Development Manager from 2002 to 2004. Prior to joining C.H. Robinson in 2002, Mike held IT management positions at ADC Telecommunications and Trans Consolidated Incorporated. Mike also serves as an industry advisory board member to the University of Minnesota, Duluth, Computer Science Department and on the Board of Advisors of AbeTech. Mike holds a Bachelor of Science degree from the University of Minnesota, Duluth and a Master of Science from the University of Minnesota.
Christopher J. O’Brien was named Chief Commercial Officer in January 2015. Prior to that, he served as a Senior Vice President from May 2012 to December 2014. He has served as a Vice President since May 2003. Additional previous positions with C.H. Robinson include President of the company’s European division and manager of the Raleigh, North Carolina, office. Christopher joined the company in 1993. He holds a Bachelor of Arts degree from Alma College in Michigan.
Mac Pinkerton was named President of NAST in January 2019. Prior executive positions with the company include Vice President, Service Lines from July 2017 to December 2018 and Vice President, Transportation from October 2010 to June 2017. Prior to his executive roles, Mac was General Manager in the Mobile, Alabama and Dallas, Texas offices. Mac began his career with C.H. Robinson in 1997 as a transportation representative. He holds a Bachelor of Science degree from Mississippi State University.
Michael J. Short was named President of Global Freight Forwarding in May 2015. He joined C.H. Robinson through the acquisition of Phoenix International ("Phoenix") in 2012 and is a 21-year veteran of the global forwarding industry. Prior to being named President, Mike served as Vice President, Global Forwarding - North America. Prior to joining C.H. Robinson, he held a number of roles at Phoenix, including Regional Manager, Sales Manager, and General Manager of the St. Louis office. He graduated from the University of Missouri in 1993 with a Bachelor of Science degree in Business.
John P. Wiehoff has served as Chairman of the Board since 2007, and intends to retire from the company, including as a director, on May 7, 2020. John served as Chief Executive Officer from May 2002 to May 2019, President of the Company since
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December 1999, a director since 2001, and became the chairman in January 2007. Previous positions with the company include Senior Vice President from October 1998, Chief Financial Officer from July 1998 to December 1999, Treasurer from August 1997 to June 1998, and Corporate Controller from 1992 to June 1998. Prior to joining C.H. Robinson, John was employed by Arthur Andersen LLP. John also serves on the Boards of Directors of Polaris Inc. (NYSE: PII) and Donaldson Company, Inc. (NYSE: DCI). He holds a Bachelor of Science degree from St. John’s University.
Michael P. Zechmeister was named Chief Financial Officer in August 2019. Before coming to C.H. Robinson, Mike served as Chief Financial Officer of United Natural Foods, Inc., a food wholesaler, from 2015 to August 2019. Prior to joining United Natural Foods, Inc., Mike spent 25 years at General Mills, Inc. holding a variety of leadership roles, including Vice President of Finance for the Pillsbury Division, Vice President of Finance for U.S. Retail Sales, and Treasurer. Mike holds a Bachelor of Science in Business degree from the Carlson School of Management at the University of Minnesota and earned a MBA in Finance, Marketing, and Strategy from the Kellogg School of Management at Northwestern University. Mike also serves on the Board of Overseers for the Carlson School of Management at the University of Minnesota.
Employees
As of December 31, 2019, we had a total of 15,427 employees, approximately 13,600 of whom were in our network offices. Our remaining employees centrally serve our network of offices in areas such as finance, information technology, legal, marketing, and human resources.
Investor Information
We were reincorporated in Delaware in 1997 as the successor to a business existing, in various legal forms, since 1905. Our corporate office is located at 14701 Charlson Road, Eden Prairie, Minnesota, 55347-5088, and our telephone number is (952) 937-8500. Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through our website (www.chrobinson.com) as soon as reasonably practicable after we electronically file the material with the Securities and Exchange Commission. Information contained on our website is not part of this report.
Cautionary Statement Relevant to Forward-Looking Information
This Annual Report on Form 10-K, including our financial statements, Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of Part II of this report, and other documents incorporated by reference, contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this Form 10-K and in our other filings with the Securities and Exchange Commission, in our press releases, presentations to securities analysts or investors, in oral statements made by or with the approval of any of our executive officers, the words or phrases “believes,” “may,” “could,” “will,” “expects,” “should,” “continue,” “anticipates,” “intends,” “will likely result,” “estimates,” “projects,” or similar expressions and variations thereof are intended to identify such forward-looking statements.
Except for the historical information contained in this Form 10-K, the matters set forth in this document may be deemed to be forward-looking statements that represent our expectations, beliefs, intentions, or strategies concerning future events. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience or our present expectations, including, but not limited to, such factors such as changes in economic conditions, including uncertain consumer demand; changes in market demand and pressures on the pricing for our services; competition and growth rates within the third party logistics industry; freight levels and increasing costs and availability of truck capacity or alternative means of transporting freight; changes in relationships with existing contracted truck, rail, ocean, and air carriers; changes in our customer base due to possible consolidation among our customers; our ability to successfully integrate the operations of acquired companies with our historic operations; risks associated with litigation, including contingent auto liability and insurance coverage; risks associated with operations outside of the United States; risks associated with the potential impact of changes in government regulations; risks associated with the produce industry, including food safety and contamination issues; fuel price increases or decreases, or fuel shortages; cyber-security related risks; the impact of war on the economy; changes to our capital structure; risks related to the elimination of LIBOR, and other risks and uncertainties, including those described below. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update these statements in light of subsequent events or developments.  
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ITEM 1A. RISK FACTORS
The following are important factors that could affect our financial performance and could cause actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this 10-K. We may also refer to this disclosure to identify factors that may cause actual results to differ from those expressed in other forward-looking statements, including those made in oral presentations such as telephone conferences and webcasts open to the public.
Economic recessions could have a significant, adverse impact on our business. The transportation industry historically has experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of our customers, interest rate fluctuations, currency fluctuations, and other economic factors beyond our control. Deterioration in the economic environment subjects our business to various risks, which may have a material and adverse impact on our operating results and cause us to not reach our long-term growth goals:
Decrease in volumes: A reduction in overall freight volumes in the marketplace reduces our opportunities for growth. A significant portion of our freight are transactional or “spot” market opportunities. The transactional market may be more impacted than the contractual freight market by overall economic conditions. In addition, if a downturn in our customers’ business cycles causes a reduction in the volume of freight shipped by those customers, particularly among certain national retailers or in the food, beverage, retail, manufacturing, paper, ecommerce, or printing industries, our operating results could be adversely affected.
Credit risk and working capital: Some of our customers may face economic difficulties and may not be able to pay us, and some may go out of business. In addition, some customers may not pay us as quickly as they have in the past, causing our working capital needs to increase.
Transportation provider failures: A significant number of our contracted transportation providers may go out of business and we may be unable to secure sufficient equipment or other transportation services to meet our commitments to our customers.
Expense management: We may not be able to appropriately adjust our expenses to changing market demands. In order to maintain high variability in our business model, it is necessary to adjust staffing levels to changing market demands. In periods of rapid change, it is more difficult to match our staffing levels to our business needs. In addition, we have other expenses that are fixed for a period of time, and we may not be able to adequately adjust them in a period of rapid change in market demand.
Higher carrier prices may result in decreased net revenue margin. Carriers can be expected to charge higher prices if market conditions warrant, or to cover higher operating expenses. Our net revenues and income from operations may decrease if we are unable to increase our pricing to our customers. Increased demand for over-the-road transportation services and changes in regulations may reduce available capacity and increase motor carrier pricing. In some instances where we have entered into contract freight rates with customers, in the event market conditions change and those contracted rates are below market rates, we may be required to provide transportation services at a net revenue loss.
Changing fuel costs and interruptions of fuel supplies may have an impact on our net revenue margins. In our truckload transportation business, which is the largest source of our net revenues, fluctuating fuel prices may result in decreased net revenue margin. While our different pricing arrangements with customers and contracted motor carriers make it very difficult to measure the precise impact, we believe that fuel costs essentially act as a pass-through cost to our truckload business. In times of fluctuating fuel prices, our net revenue margin may also fluctuate.
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Our dependence on third parties to provide equipment and services may impact the delivery and quality of our transportation and logistics services. We do not employ the people directly involved in delivering our customers’ freight. We depend on independent third parties to provide truck, rail, ocean, and air services and to report certain events to us, including, but not limited, to shipment status information and freight claims. These independent third parties may not fulfill their obligations to us, preventing us from meeting our commitments to our customers. This reliance also could cause delays in reporting certain events, including recognizing claims. In addition, if we are unable to secure sufficient equipment or other transportation services from third parties to meet our commitments to our customers, our operating results could be materially and adversely affected, and our customers could switch to our competitors temporarily or permanently. Many of these risks are beyond our control, including:
equipment shortages in the transportation industry, particularly among contracted motor carriers;
changes in regulations impacting transportation;
disruption in the supply or cost of fuel;
reduction or deterioration in rail service; and
unanticipated changes in freight markets.
We are subject to negative impacts of changes in political and governmental conditions. Our operations are subject to the influences of significant political, governmental, and similar changes and our ability to respond to them, including:
changes in political conditions and in governmental policies;
changes in and compliance with international and domestic laws and regulations; and
wars, civil unrest, acts of terrorism, and other conflicts.
We may be subject to negative impacts of catastrophic events. A disruption or failure of our systems or operations in the event of a major earthquake, weather event, cyber-attack, heightened security measures, actual or threatened terrorist attack, strike, civil unrest, pandemic, or other catastrophic event could cause delays in providing services or performing other critical functions. A catastrophic event that results in the destruction or disruption of any of our critical business or information systems could harm our ability to conduct normal business operations and adversely impact our operating results.

In addition, the ongoing coronavirus outbreak emanating from China at the beginning of 2020 has resulted in increased travel restrictions and extended shutdown of certain businesses in the region. These or any further political or governmental developments or health concerns in China or other countries in which we operate could adversely impact our operating results but at this point, the extent to which the coronavirus may impact our results is uncertain.
Our international operations subject us to operational and financial risks. We provide services within and between foreign countries on an increasing basis. Our business outside of the United States is subject to various risks, including:
changes in tariffs, trade restrictions, trade agreements, and taxations;
difficulties in managing, or overseeing foreign operations and agents;
limitations on the repatriation of funds because of foreign exchange controls;
different liability standards; and
intellectual property laws of countries that do not protect our rights in our intellectual property, including, but not limited to, our proprietary information systems, to the same extent as the laws of the United States.
The occurrence or consequences of any of these factors may restrict our ability to operate in the affected region and/or decrease the profitability of our operations in that region.
As we continue to expand our business internationally, we expose the company to increased risk of loss from foreign currency fluctuations and exchange controls, as well as longer accounts receivable payment cycles. Foreign currency fluctuations could result in currency exchange gains or losses or could affect the book value of our assets and liabilities. Furthermore, we may experience unanticipated changes to our income tax liabilities resulting from changes in geographical income mix and changing international tax legislation. We have limited control over these risks, and if we do not correctly anticipate changes in international economic and political conditions, we may not alter our business practices in time to avoid adverse effects.
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Our ability to appropriately staff and retain employees is important to our variable cost model. Our continued success depends upon our ability to attract and retain a large group of motivated salespeople and other logistics professionals. In order to maintain high variability in our business model, it is necessary to adjust staffing levels to changing market demands. In periods of rapid change, it is more difficult to match our staffing level to our business needs. We cannot guarantee that we will be able to continue to hire and retain a sufficient number of qualified personnel. Because of our comprehensive employee training program, our employees are attractive targets for new and existing competitors. Continued success depends in large part on our ability to develop successful employees into managers.
We face substantial industry competition. Competition in the transportation services industry is intense and broad-based. We compete against traditional and non-traditional logistics companies, including transportation providers that own equipment, third party freight brokers, technology matching services, internet freight brokers, carriers offering logistics services, and on-demand transportation service providers. We also compete against carriers’ internal sales forces. In addition, customers can bring in-house some of the services we provide to them. We often buy and sell transportation services from and to many of our competitors. Increased competition could reduce our market opportunity and create downward pressure on freight rates, and continued rate pressure may adversely affect our net revenue and income from operations. In some instances where we have entered into contract freight rates with customers, in the event market conditions change and those contracted rates are below market rates, we may be required to provide transportation services at a net revenue loss.
We rely on technology to operate our business. We have internally developed the majority of our operating systems. Our continued success is dependent on our systems continuing to operate and to meet the changing needs of our customers and users. We rely on our technology staff and vendors to successfully implement changes to and maintain our operating systems in an efficient manner. If we fail to maintain, protect, and enhance our operating systems, we may be at a competitive disadvantage and lose customers.
As demonstrated by recent material and high-profile data security breaches, computer malware, viruses, and computer hacking and phishing attacks have become more prevalent, have occurred on our operating systems in the past, and may occur on our operating systems in the future. Previous attacks on our operating systems have not had a material financial impact on our operations, but we cannot guarantee that future attacks will have little to no impact on our business. Furthermore, given the interconnected nature of the supply chain and our significant presence in the industry, we believe that we may be an attractive target for such attacks.
Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, a significant impact on the performance, reliability, security, and availability of our operating systems and technical infrastructure to the satisfaction of our users may harm our reputation, impair our ability to retain existing customers or attract new customers, and expose us to legal claims and government action, each of which could have a material adverse impact on our financial condition, results of operations, and growth prospects.
Our operations may be materially adversely affected by inconsistent management practices. We manage our business through a network of offices throughout North America, Europe, Asia, Oceania, and South America, supported by executives and shared and centralized services, with local management responsible for day-to-day operations, personnel decisions, and adherence to applicable local laws. Inconsistent management practices could materially and adversely affect our overall profitability and expose us to litigation.
Our earnings may be affected by seasonal changes in the transportation industry. Results of operations for our industry generally show a seasonal pattern as customers reduce shipments during and after the winter holiday season. Historically, income from operations and earnings are lower in the first quarter than in the other three quarters. We believe this historical pattern has been the result of, or influenced by, numerous factors, including national holidays, weather patterns, consumer demand, economic conditions, and other similar and subtle forces. Although seasonal changes in the transportation industry have not had a significant impact on our cash flow or results of operations, we expect this trend to continue and we cannot guarantee that it will not adversely impact us in the future.
We are subject to claims arising from our transportation operations. We use the services of thousands of transportation companies in connection with our transportation operations. From time to time, the drivers employed and engaged by the motor carriers we contract with are involved in accidents, which may result in serious personal injuries. The resulting types and/or amounts of damages may be excluded by or exceed the amount of insurance coverage maintained by the contracted motor carrier. Although these drivers are not our employees and all of these drivers are employees, owner-operators, or independent contractors working for motor carriers, from time to time, claims may be asserted against us for their actions, or for our actions in retaining them. Claims against us may exceed the amount of our insurance coverage or may not be covered by insurance at all. In addition, our automobile liability policy has a primary retention of $5 million per incident. A material increase in the frequency or severity of accidents, liability claims or workers’ compensation claims, or unfavorable resolutions of claims could materially and adversely affect our operating results. In addition, significant increases in insurance costs or the inability to
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purchase insurance as a result of these claims could reduce our profitability. Our involvement in the transportation of certain goods, including but not limited to hazardous materials, could also increase our exposure in the event one of our contracted motor carriers is involved in an accident resulting in injuries or contamination.
Our sourcing business is dependent upon the supply and price of fresh produce. The supply and price of fresh produce is affected by weather and growing conditions including but not limited to flood, drought, freeze, insects, disease and other conditions over which we have no control. Commodity prices can be affected by shortages or overproduction and are often highly volatile. If we are unable to secure fresh produce to meet our commitments to our customers, our operating results could be materially and adversely affected, and our customers could switch to our competitors temporarily or permanently. To assure access to certain commodities, we occasionally make monetary advances to growers to finance their operations. Repayment of these advances is dependent upon the growers’ ability to grow and harvest marketable crops.
Buying and reselling fresh produce exposes us to possible product liability. Agricultural chemicals used on fresh produce are subject to various approvals, and the commodities themselves are subject to regulations on cleanliness and contamination. Product recalls in the produce industry have been caused by concern about particular chemicals and alleged contamination, often leading to lawsuits brought by consumers of allegedly affected produce. We may face claims for a variety of damages arising from the sale of produce, which may include potentially uninsured consequential damages. While we are insured for up to $200 million for product liability claims subject to a $500,000 per incident deductible, settlement of class action claims is often costly, and we cannot guarantee that our coverage will be adequate and will continue to be available. If we have to recall produce, we may be required to bear the cost of repurchasing, transporting, and destroying any allegedly contaminated product, as well as associated consequential damages. We carry product recall insurance coverage of $50 million. This policy has a retention of $5 million per incident. Any recall or allegation of contamination could affect our reputation, particularly of our proprietary and/or licensed branded produce programs. Loss due to spoilage (including the need for disposal) is also a routine part of the sourcing business.
Our business depends upon compliance with numerous government regulations. Our operations may be regulated and licensed by various federal, state, and local transportation agencies in the United States and similar governmental agencies in foreign countries in which we operate.
We are subject to licensing and regulation as a property freight broker and are licensed by the DOT to arrange for the transportation of property by motor vehicle. The DOT prescribes qualifications for acting in this capacity, including certain surety bonding requirements. We are also subject to regulation by the FMC as an ocean freight forwarder and a NVOCC, and we maintain separate bonds and licenses for each. We operate as a Department of Homeland Security certified IAC, providing air freight services, subject to commercial standards set forth by the IATA and federal regulations issued by the TSA. We provide customs brokerage services as a customs broker under a license issued by the U.S. Customs and Border Protection and other authoritative governmental agencies. We also have and maintain other licenses as required by law.
We source fresh produce under a license issued by the USDA as required by PACA. We are also subject to various regulations and requirements promulgated by other international, domestic, state, and local agencies and port authorities. Our failure to comply with the laws and regulations applicable to entities holding these licenses could materially and adversely affect our results of operations or financial condition.
Legislative or regulatory changes can affect the economics of the transportation industry by requiring changes in operating practices or influencing the demand for, and the cost of providing, transportation services. As part of our logistics services, we operate owned or leased warehouse facilities. Our operations at these facilities include both warehousing and distribution services, and we are subject to various federal, state, and international environmental, work safety, and hazardous materials regulations. We may experience an increase in operating costs, such as security costs, as a result of governmental regulations that have been and will be adopted in response to terrorist activities and potential terrorist activities. No assurances can be given that we will be able to pass these increased costs on to our customers in the form of rate increases or surcharges, and our operations and profitability may suffer as a result.
Department of Homeland Security regulations applicable to our customers who import goods into the United States and our contracted ocean carriers can impact our ability to provide and/or receive services with and from these parties. Enforcement measures related to violations of these regulations can slow and/or prevent the delivery of shipments, which may negatively impact our operations.
We cannot predict what impact future regulations may have on our business. Our failure to maintain required permits or licenses, or to comply with applicable regulations, could result in substantial fines or revocation of our operating permits and licenses.
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Our contracted motor carriers are subject to increasingly stringent laws protecting the environment, including those relating to climate change, which could directly or indirectly have a material adverse effect on our business. Future and existing environmental regulatory requirements in the U.S. and abroad could adversely affect operations and increase operating expenses, which in turn could increase our purchased transportation costs. If we are unable to pass such costs along to our customers, our business could be materially and adversely affected. Even without any new legislation or regulation, increased public concern regarding greenhouse gases emitted by transportation carriers could harm the reputations of companies operating in the transportation logistics industries and shift consumer demand toward more locally sourced products and away from our services.
We derive a significant portion of our total revenues and net revenues from our largest customers. Our top 100 customers comprise approximately 32 percent of our consolidated total revenues and 24 percent of consolidated net revenues. Our largest customer comprises approximately two percent of our consolidated total revenues. The sudden loss of major customers could materially and adversely affect our operating results.
We may be unable to identify or complete suitable acquisitions and investments. We may acquire or make investments in complementary businesses, products, services, or technologies. We cannot guarantee that we will be able to identify suitable acquisitions or investment candidates. Even if we identify suitable candidates, we cannot guarantee that we will make acquisitions or investments on commercially acceptable terms, if at all. The timing and number of acquisitions we pursue may also cause volatility in our financial results. In addition, we may incur debt or be required to issue equity securities to pay for future acquisitions or investments. The issuance of any equity securities could be dilutive to our stockholders.
We may have difficulties integrating acquired companies. For acquisitions, success depends upon efficiently integrating the acquired business into our existing operations. These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time. We are required to integrate these businesses into our internal control environment, which may present challenges that are different than those presented by organic growth and that may be difficult to manage. If we are unable to successfully integrate and grow these acquisitions and to realize contemplated revenue synergies and cost savings, our business, prospects, results of operations, financial position, and cash flows could be materially and adversely affected.
Our growth and profitability may not continue, which may result in a decrease in our stock price. Our long-term growth objective is to grow earnings per share by 10 percent annually. Long-term growth targets represent an over time perspective and do not necessarily represent an expected annual growth rate. There can be no assurance that our long-term growth objective will be achieved or that we will be able to effectively adapt our management, administrative, and operational systems to respond to any future growth. Future changes in and expansion of our business, or changes in economic or political conditions, could adversely affect our operating margins. Slower or less profitable growth or losses could adversely affect our stock price. 
Changes in the method for determining LIBOR and the potential replacement of the LIBOR benchmark interest rate could increase our borrowing costs. A substantial portion of our borrowing capacity bears interest at a variable rate based on LIBOR. In July 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), a regulator of financial services firms and financial markets in the United Kingdom, stated that they will plan for a phase out of regulatory oversight of LIBOR interest rates indices. The FCA has indicated they will support the LIBOR indices through 2021, to allow for an orderly transition to an alternative reference rate. The Alternative Reference Rates Committee has proposed the Secured Overnight Financing Rate (“SOFR”) as its recommended alternative to LIBOR, and the Federal Reserve Bank of New York began publishing SOFR rates in April 2018. SOFR is intended to be a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities.
We are evaluating the potential impact of the eventual replacement of the LIBOR benchmark interest rate, including the possibility of SOFR as the dominant replacement. Introduction of an alternative rate also may introduce additional basis risk for market participants as an alternative index is utilized along with LIBOR. There can be no guarantee that SOFR will become widely used and that alternatives may or may not be developed with additional complications. We are not able to predict whether LIBOR will cease to be available after 2021, whether SOFR will become a widely accepted benchmark in place of LIBOR, or what the impact of such a possible transition to SOFR may be on our business, financial condition, and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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ITEM 2. PROPERTIES
Our corporate headquarters is in Eden Prairie, Minnesota. The total square footage of our five buildings, three of which we own, in Eden Prairie is 400,000. This total includes a data center of approximately 18,000 square feet.
We also own an office in Kansas City, MO of approximately 208,000 square feet and a data center in Oronoco, MN of approximately 32,000 square feet. We lease approximately 300 locations used for office space in approximately 265 cities around the world, most notably a fifteen year lease of approximately 207,000 square feet in Chicago, IL. In addition, we lease warehouse space totaling approximately 1.6 million square feet in 20 locations primarily within the United States.
Most of our offices and warehouses are leased from third parties under leases with initial terms ranging from three to fifteen years. Our office locations range in space from 1,000 to 208,000 square feet. Because we are a global enterprise characterized by substantial intersegment cooperation, properties are often used by multiple business segments.
We consider our current office spaces and warehouse facilities adequate for our current level of operations. We have not had difficulty in obtaining sufficient office space and believe we can renew existing leases or relocate to new offices as leases expire.

ITEM 3. LEGAL PROCEEDINGS
We are not subject to any pending or threatened litigation other than routine litigation arising in the ordinary course of our business operations. 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 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 not able 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 adverse effect on our consolidated financial position, results of operations, or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock began trading on The Nasdaq National Market on October 15, 1997, and currently trades on the Nasdaq Global Select Market under the symbol “CHRW”.
On February 14, 2020, the closing sales price per share of our common stock as quoted on the Nasdaq Global Select Market was $72.01 per share. On February 14, 2020, there were approximately 136 holders of record. On February 11, 2020, there were approximately 208,709 beneficial owners of our common stock.
Our declaration of dividends is subject to the discretion of the Board of Directors. Any determination as to the payment of dividends will depend upon our results of operations, capital requirements and financial condition, and such other factors as the Board of Directors may deem relevant. Accordingly, there can be no assurance that the Board of Directors will declare or continue to pay dividends on the shares of common stock in the future.
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The following table provides information about company purchases of common stock during the quarter ended December 31, 2019: 
Total Number
of Shares
Purchased (1)
Average Price
Paid Per
Share
Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs
Maximum Number of
Shares That May Yet Be Purchased Under the
Plans or Programs (2)
October 2019200,247  $84.96  194,622  10,652,792  
November 2019452,142  75.63  450,700  10,202,092  
December 2019210,707  76.77  208,409  9,993,683  
Fourth quarter 2019863,096  $78.07  853,731  9,993,683  
________________________________ 
(1) The total number of shares purchased includes: (i) 853,731 shares of common stock purchased under the authorization described below; and (ii) 9,365 shares of common stock surrendered to satisfy statutory tax withholding obligations under our stock incentive plans.
(2) In May 2018, the Board of Directors increased the number of shares authorized to be repurchased by 15,000,000 shares. As of December 31, 2019, there were 9,993,683 shares remaining for future repurchases under this authorization. Purchases can be made in the open market or in privately negotiated transactions, including Rule 10b5-1 plans and accelerated share repurchase programs.

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The graph below compares the cumulative 5-year total return of holders of C.H. Robinson Worldwide, Inc.’s common stock with the cumulative total returns of the S&P 500 index, the Nasdaq Transportation index, and the S&P Midcap 400 index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2014 to December 31, 2019.

chrw-20191231_g2.jpg

December 31,
201420152016201720182019
C.H. Robinson Worldwide, Inc.$100.00  84.78  102.58  127.74  123.12  117.32  
S&P 500$100.00  101.38  113.51  138.28  132.23  173.86  
S&P Midcap 400$100.00  97.82  118.11  137.30  122.08  154.07  
Nasdaq Transportation$100.00  86.61  104.22  128.89  117.83  137.84  
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
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ITEM 6. SELECTED FINANCIAL DATA
This table includes selected financial data for the last five years (amounts in thousands, except per share amounts and operating data for employees). This financial data should be read together with our consolidated financial statements and related notes, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other financial data appearing elsewhere in this report. 
STATEMENT OF OPERATIONS DATA

Year Ended December 31,
2019(1)
2018(1)
201720162015
Total revenues$15,309,508  $16,631,172  $14,869,380  $13,144,413  $13,476,084  
Net revenues2,586,310  2,705,235  2,368,050  2,277,528  2,268,480  
Income from operations789,976  912,083  775,119  837,531  858,310  
Net income576,968  664,505  504,893  513,384  509,699  
Net income per share
Basic$4.21  $4.78  $3.59  $3.60  $3.52  
Diluted$4.19  $4.73  $3.57  $3.59  $3.51  
Weighted average number of shares outstanding (in thousands)
Basic136,955  139,010  140,610  142,706  144,967  
Diluted137,735  140,405  141,382  142,991  145,349  
Dividends per share$2.01  $1.88  $1.81  $1.74  $1.57  
BALANCE SHEET DATA
As of December 31,
Working capital$1,084,080  $1,319,751  $523,487  $162,384  $282,101  
Total assets4,641,060  4,427,412  4,235,834  3,687,758  3,184,358  
Current portion of debt142,885  5,000  715,000  740,000  450,000  
Long-term debt1,092,448  1,341,352  750,000  500,000  500,000  
Total stockholders’ investment1,670,730  1,595,087  1,425,745  1,257,847  1,150,450  
OPERATING DATA
As of December 31,
Employees15,427  15,262  15,074  14,125  13,159  
________________________________ 
(1) We adopted ASU 2014-09, Revenue from Contracts with Customers, in 2018 which impacted the presentation and timing of revenue recognition. The comparative information for previous periods has not been restated and continues to be reported under the accounting standards in effect for those periods. Refer to Note 10, Revenue Recognition, for further information.


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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
C.H. Robinson Worldwide, Inc. (“C.H. Robinson,” “the company,” “we,” “us,” or “our”) is one of the largest third party logistics companies in the world. As a third party logistics provider, we enter into contractual relationships with a wide variety of transportation companies and utilize those relationships to efficiently and cost-effectively arrange the transport of our customers’ freight. We provide freight transportation services and logistics solutions to companies of all sizes, in a wide variety of industries. We operate through a network of offices in North America, Europe, Asia, Oceania, and South America. We have developed global transportation and distribution networks to provide transportation and supply chain services worldwide. As a result, we have the capability of facilitating most aspects of the supply chain on behalf of our customers.
Our net revenues are a non-GAAP financial measure calculated as total revenues less the cost of purchased transportation and related services and the cost of purchased products sourced for resale. We believe net revenues are a useful measure of our ability to source, add value, and sell services and products that are provided by third parties, and we consider net revenues to be our primary performance measurement. Accordingly, the discussion of our results of operations often focuses on the changes in our net revenues. The reconciliation of total revenues to net revenues is presented below (in thousands):
Twelve Months Ended December 31,
201920182017
Revenues:
Transportation$14,322,295  $15,515,921  $13,502,906  
Sourcing987,213  1,115,251  1,366,474  
Total Revenues15,309,508  16,631,172  14,869,380  
Costs and expenses:
Purchased transportation and related services11,839,433  12,922,177  11,257,290  
Purchased products sourced for resale883,765  1,003,760  1,244,040  
Total direct costs12,723,198  13,925,937  12,501,330  
Net revenues$2,586,310  $2,705,235  $2,368,050  

MARKET TRENDS
The North America truckload market has faced significant cyclical changes in the last year attributable to weakening demand and excess capacity resulting in pricing and volume declines during the second half of 2019. One of the metrics we use to measure market conditions is the truckload routing guide depth from our Managed Services business. Routing guide depth represents the number of carriers contacted prior to an acceptance when procuring a transportation provider. Routing guide depth is calculated as a simple average of all accepted shipments over all tender instances for any shipment facilitated by our Managed Services business. The average routing guide depth of tender was 1.2 during 2019, representing that on average, the first carrier in a shipper's routing guide was executing the shipment in most cases. This compared to an average depth of tender of 1.7 during 2018. The 2019 routing guide penetration is among the lowest levels we have experienced this decade and is a reflection of both softening demand and reduced pricing and costs over the course of 2019. The global forwarding market was negatively impacted for much of 2019 by excess capacity and reduced demand due to tariff activity and macroeconomic uncertainty especially in trade lanes between China and the United States. In addition, growth rates were negatively impacted by comparisons to 2018 which included shipments to build inventory ahead of tariffs enacted in early 2019. This reduced demand has also significantly reduced air freight volumes as there is inherently less demand for expedited and more expensive air freight.
BUSINESS TRENDS
Our 2019 results are largely consistent with the overall market trends summarized above. As a result of the softening freight environment over the course of 2019, our volumes shifted from spot-market pricing towards contractual business. In the first half of 2019, this shift resulted in margin expansion as contractual pricing decreased at a slower rate than spot-market driven carrier costs. In the second half of 2019, the continued shift to contractual business began to lead to margin compression as spot-market driven carrier pricing declines began to decelerate as compared to our contractual pricing declines. Given the soft freight environment, we continued to see competitive levels of pricing activity to reflect current market conditions which resulted in significant pricing declines in most of our transportation service lines compared to 2018. Our pricing strategies continue to reflect the current market conditions and our intention to be near the top of our customers' routing guide. In
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addition, the reduced pricing in truckload has resulted in a volume shift from intermodal to truckload while our sourcing revenues declined in 2019 driven by case volume declines with large retailers.
On February 28, 2019, we acquired The Space Cargo Group (“Space Cargo”) for the purpose of expanding our presence and capabilities in Spain and Colombia. Our consolidated results include the results of Space Cargo since March 1, 2019. On May 22, 2019, we acquired Dema Service S.p.A (“Dema Service”) to strengthen our existing footprint in Italy. Our consolidated results include the results of Dema Service since May 23, 2019.
SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS
The following summarizes select 2019 year-over-year operating comparisons to 2018:
Total revenues decreased 7.9 percent to $15.3 billion, driven by lower pricing and volumes across most transportation service lines and decreased sourcing revenue pricing and case volumes.
Net revenues decreased 4.4 percent to $2.6 billion, primarily driven by margin decline in truckload services.
Personnel expenses decreased 3.4 percent to $1.3 billion, driven primarily by declines in performance-based compensation, partially offset by a 2.3 percent increase in average headcount.
Selling, general, and administrative (“SG&A”) expenses increased 10.7 percent to $497.8 million, due primarily to increases in purchased services, particularly commercial off-the-shelf software, and occupancy, partially offset by a reduction in bad debt expense.
Income from operations totaled $790.0 million, down 13.4 percent due to declining net revenues and increased SG&A expense.
Operating margin of 30.5 percent decreased 320 basis points.
Diluted earnings per share (EPS) decreased 11.4 percent to $4.19.
Cash flow from operations increased 5.4 percent to $835.4 million.


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CONSOLIDATED RESULTS OF OPERATIONS
The following table summarizes our results of operations (dollars in thousands, except per share data):
Twelve Months Ended December 31,
20192018% change2017% change
Revenues:
Transportation$14,322,295  $15,515,921  (7.7)%$13,502,906  14.9 %
Sourcing987,213  1,115,251  (11.5)%1,366,474  (18.4)%
Total revenues15,309,508  16,631,172  (7.9)%14,869,380  11.8 %
Costs and expenses:
Purchased transportation and related services11,839,433  12,922,177  (8.4)%11,257,290  14.8 %
Purchased products sourced for resale883,765  1,003,760  (12.0)%1,244,040  (19.3)%
Personnel expenses1,298,528  1,343,542  (3.4)%1,179,527  13.9 %
Other selling, general, and administrative expenses497,806  449,610  10.7 %413,404  8.8 %
Total costs and expenses14,519,532  15,719,089  (7.6)%14,094,261  11.5 %
Income from operations789,976  912,083  (13.4)%775,119  17.7 %
Interest and other expense(47,719) (31,810) 50.0 %(46,656) (31.8)%
Income before provision for income taxes742,257  880,273  (15.7)%728,463  20.8 %
Provision for income taxes165,289  215,768  (23.4)%223,570  (3.5)%
Net income$576,968  $664,505  (13.2)%$504,893  31.6 %
Diluted net income per share$4.19  $4.73  (11.4)%$3.57  32.5 %
Net revenue margin percentage
Transportation17.3 %16.7 %0.6 pts16.6 %0.1 pts
Sourcing10.5 %10.0 %0.5 pts9.0 %1.0 pts
Total net revenue margin16.9 %16.3 %0.6 pts15.9 %0.4 pts
Average headcount15,551  15,204  2.3 %14,687  3.5 %

A reconciliation of our reportable segments to our consolidated results can be found in Note 9, Segment Reporting, in Part II, Financial Information of this Annual Report on Form 10-K.
Consolidated Results of Operations—Twelve Months Ended December 31, 2019 Compared to Twelve Months Ended December 31, 2018
Total revenues and direct costs. Total transportation revenues decreased driven by lower pricing and volumes in truckload and, to a lesser extent, decreased intermodal volumes and decreased pricing in our ocean and air service lines. Total purchased transportation and related services decreased due to decreased cost of transportation in most of our transportation services resulting from softening market demand over the course of 2019 and excess carrier capacity. Our sourcing total revenues and purchased products sourced for resale decreased due to lower pricing and costs per case in addition to lower case volume.
Net revenues. Our transportation net revenue margin increased driven by margin expansion in truckload services as we benefited from a shift to contractual volume in a falling cost market for the first half of 2019. The margin expansion in the first half of 2019 was largely offset by margin compression in the second half of 2019 as discussed above. Sourcing net revenue margin increased driven by the strategic decision to exit unprofitable business.
Operating expenses. Personnel expenses decreased primarily due to declines in performance-based compensation, partially offset by an increase in average headcount. Other SG&A expenses increased driven primarily by increases in purchased services, particularly commercial off-the-shelf software and occupancy, partially offset by a reduction in bad debt expense.
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Interest and other expense. Interest and other expense increased driven by a $4.2 million unfavorable impact of foreign currency revaluation and realized foreign currency gains and losses in 2019 compared to a $16.9 million favorable impact in 2018.
Provision for income taxes. Our effective income tax rate was 22.3 percent and 24.5 percent. The effective income tax rate for the twelve months ended December 31, 2019, was higher than the statutory federal income tax rate due to state income taxes, net of federal benefit, and foreign income taxes, but was partially offset by the tax impact of excess foreign tax credits and share-based payment awards. The effective income tax rate for the twelve months ended December 31, 2018, was higher than the statutory federal income tax rate due to state income taxes, net of federal benefit and foreign income taxes, but was partially offset by the tax impact of share-based payment awards.
Consolidated Results of Operations—Twelve Months Ended December 31, 2018 Compared to Twelve Months Ended December 31, 2017
Total revenues and direct costs. Total transportation revenues increased driven by increased pricing in most of our transportation services, most notably truckload and LTL. Total purchased transportation and related services increased due to increased truckload and LTL purchased transportation costs and higher ocean volumes, which were partially offset by the impact of decreased truckload volumes. Our sourcing total revenue and purchased products sourced for resale decreased $120.5 million as a result of our adoption of ASU 2014-09, Revenue from Contracts with Customers.
Net revenues. Our transportation net revenues increased primarily due to increases in customer pricing, including fuel. Sourcing net revenues decreased due to decreases in net revenue per case and a case volume decrease across a variety of commodities and services, most notably in our restaurant and food service customers. Sourcing net revenue margin increased 1.0 percentage point as a result of our adoption of ASU 2014-09.
Operating expenses. Personnel expenses increased primarily due to an increase in performance-based compensation due to our strong earnings growth and growth in our average headcount. Other SG&A expenses increased driven primarily by increases in occupancy and other professional services expenses, claims and the provision for bad debt.
Interest and other expense. Interest and other expense decreased driven by a $16.9 million favorable impact of foreign currency revaluation and realized foreign currency gains and losses in 2018 compared to a $9.4 million unfavorable impact in 2017. The impact of foreign currency revaluation and realized foreign currency gains was partially offset by increased interest expense due to a higher average debt balance and higher interest rates in 2018 compared to 2017.
Provision for income taxes. Our effective income tax rate was 24.5 percent in 2018 and 30.7 percent in 2017, driven primarily by an $83.1 million benefit from the Tax Act.

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NAST Segment Results of Operations
Twelve Months Ended December 31,
(dollars in thousands)20192018% change2017% change
Total revenues$11,283,692  $12,346,757  (8.6)%$10,728,835  15.1 %
Purchased transportation and related services9,486,323  10,440,496  (9.1)%9,102,661  14.7 %
Net revenues
Truckload1,275,199  1,375,361  (7.3)%1,168,721  17.7 %
LTL471,616  466,725  1.0 %402,609  15.9 %
Intermodal27,092  31,979  (15.3)%28,867  10.8 %
Other 23,462  32,196  (27.1)%25,977  23.9 %
Total net revenues1,797,369  1,906,261  (5.7)%1,626,174  17.2 %
Personnel expenses698,187  749,120  (6.8)%641,018  16.9 %
Other selling, general, and administrative expenses376,419  335,297  12.3 %324,048  3.5 %
Income from operations$722,763  $821,844  (12.1)%$661,108  24.3 %
Average headcount7,354  7,387  (0.4)%7,316  1.0 %
Service line volume statistics
Truckload(2.0)%(3.5)%
LTL3.5 %7.5 %
Intermodal(25.5)%1.0 %

Twelve Months Ended December 31, 2019 Compared to Twelve Months Ended December 31, 2018
Total revenues and direct costs. NAST revenues decreased due to lower pricing and volumes in truckload and, to a lesser extent, decreased intermodal volume. These decreases were partially offset by increased LTL volumes. NAST cost of transportation and related services decreased driven by lower cost per mile in truckload services.
Net revenues. NAST net revenues decreased driven primarily by lower net revenue per shipment and lower volumes in truckload services. Excluding the estimated impacts of the decrease in fuel costs, our average truckload rate per mile charged to our customers decreased approximately 10.0 percent due to pricing changes resulting from the marketplace conditions discussed above. Our truckload transportation costs per mile decreased approximately 10.5 percent, excluding the estimated decrease in fuel costs.
NAST LTL net revenues increased primarily due to increased volume partially offset by reduced margins.
NAST intermodal net revenues decreased primarily due to reduced volume driven by the impact of lower truckload pricing resulting in an industry volume shift from intermodal to lower priced truckload services.
Operating expenses. NAST personnel expense decreased primarily related to reduced performance-based compensation as average headcount was essentially flat. NAST SG&A expenses increased primarily due to continued investments in technology and higher occupancy costs.
Twelve Months Ended December 31, 2018 Compared to Twelve Months Ended December 31, 2017
Total revenues and direct costs. NAST revenues increased primarily due to increased pricing to our customers, including fuel, most notably in truckload and LTL services. This increase was partially offset by the impact of decreased truckload volumes. NAST cost of transportation and related services increased following the increase in total revenues.
Net revenues. NAST net revenues increased driven by double digit net revenue percentage increases from all services. NAST net revenue margin increased primarily due to transportation customer pricing growing faster than transportation costs in 2018 compared to 2017.
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Truckload net revenues increased driven by higher customer pricing and the impact of moderating freight costs. This increase was partially offset by decreased truckload volumes. Excluding the estimated impacts of the change in fuel prices, our average North America truckload rate per mile charged to our customers increased approximately 21.5 percent in 2018 compared to 2017. Our truckload transportation costs per mile increased approximately 21.0 percent in 2018 compared to 2017 excluding the estimated impacts of the change in fuel prices.
NAST LTL net revenues increased primarily due to increased volume. This increase was partially offset by reduced margins resulting from transportation costs increasing at a faster rate than customer pricing.
NAST intermodal net revenues increased as a result of the elevated repositioning costs included in the 2017 period.
Operating expenses. NAST personnel expense increased primarily related to performance-based compensation and increased average headcount.
Global Forwarding Segment Results of Operations
Twelve Months Ended December 31,
(dollars in thousands)20192018% change2017% change
Total revenues$2,327,913  $2,487,744  (6.4)%$2,140,987  16.2 %
Purchased transportation and related services1,793,937  1,943,838  (7.7)%1,655,707  17.4 %
Net revenues
Ocean308,068  312,327  (1.4)%290,837  7.4 %
Air101,991  111,038  (8.1)%94,518  17.5 %
Customs91,833  88,515  3.7 %70,949  24.8 %
Other 32,084  32,026  0.2 %28,976  10.5 %
Total net revenues533,976  543,906  (1.8)%485,280  12.1 %
Personnel expenses276,255  284,586  (2.9)%241,130  18.0 %
Other selling, general, and administrative expenses177,194  167,694  5.7 %152,308  10.1 %
Income from operations$80,527  $91,626  (12.1)%$91,842  15.0 %
Average headcount4,7664,7111.2 %4,3109.3 %
Service line volume statistics
Ocean— %10.0 %
Air(7.0)%8.5 %
Customs0.5 %39.5 %

Twelve Months Ended December 31, 2019 compared to Twelve Months Ended December 31, 2018
Total revenues and direct costs. Total revenues and direct costs decreased driven by reduced pricing in our ocean and air service lines and a decline in air freight volumes. These declines were driven by the tariff and macroeconomic uncertainty discussed above, in addition to the comparisons to 2018 which included shipments to build inventory ahead of tariffs enacted in early 2019. The reduced demand due to tariff and macroeconomic uncertainty has also significantly impacted air freight volumes as there is inherently less demand for expedited and more expensive air freight.
Net revenues. Ocean and air transportation net revenues decreased driven by reduced pricing and air freight volumes discussed above. These declines were partially offset by the acquisition of Space Cargo which contributed two percentage points of ocean net revenue growth and five percentage points of air net revenue growth for the twelve-month period of 2019. Customs net revenues increased driven by increased volumes, including a modest impact from Space Cargo.
Operating expenses. Personnel expenses decreased driven by reduced performance-based compensation but was partially offset by an increase in average headcount driven by the Space Cargo acquisition. SG&A expenses increased driven by increased investments in technology, partially offset by a reduction in bad debt expense.
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Twelve Months Ended December 31, 2018 compared to Twelve Months Ended December 31, 2017
Total revenues and direct costs. Total revenues and direct costs increased driven by increased volumes in all services and increased customer pricing in ocean and air.
Net revenues. Ocean transportation net revenues increased primarily due to increases in volumes, including those from acquisitions, partially offset by a decrease in net revenue margin. Air transportation net revenues increased driven by increases in volumes and an increase in net revenue margin. Customs net revenues increased primarily due to increased volumes including those from acquisitions. The acquisition of Milgram accounted for approximately 15 percentage points of customs net revenue growth.
Operating expenses. Personnel expenses increased driven by an increased average headcount, primarily due to the acquisition of Milgram. SG&A expenses increased driven by increased investments in technology, occupancy, and purchased services, including those from acquisitions.
All Other and Corporate Segment Results of Operations
All Other and Corporate includes our Robinson Fresh and Managed Services segment, as well as Other Surface Transportation outside of North America and other miscellaneous revenues and unallocated corporate expenses.
Twelve Months Ended December 31,
(dollars in thousands)20192018% change2017% change
Total revenues$1,697,903  $1,796,671  (5.5)%$1,999,558  (10.1)%
Net revenues
Robinson Fresh109,183  116,283  (6.1)%124,949  (6.9)%
Managed Services83,365  78,789  5.8 %72,166  9.2 %
Other Surface Transportation62,417  59,996  4.0 %59,481  0.9 %
Total net revenues$254,965  $255,068  — %$256,596  (0.6)%

Twelve Months Ended December 31, 2019 compared to Twelve Months Ended December 31, 2018
Total revenues decreased driven by Robinson Fresh due to strategic decisions to exit unprofitable business. This decrease was partially offset by an increase in total revenues in Other Surface Transportation related to the acquisition of Dema Service.
Robinson Fresh net revenues decreased driven by reduced case volumes due to strategic decisions to exit unprofitable business. Managed Services net revenues increased driven by a combination of new customer wins and selling additional services to existing customers. Other Surface Transportation net revenues increased primarily driven by the acquisition of Dema Service, which contributed six percentage points of growth in Other Surface Transportation.
Twelve Months Ended December 31, 2018 compared to Twelve Months Ended December 31, 2017
Total revenues decreased primarily due to a $120.5 million decrease in sourcing total revenue and purchased products sourced for resale as a result of our adoption of ASU 2014-09.
Robinson Fresh net revenues decreased driven by a decrease in net revenue per case and a decrease in case volumes. Managed Services net revenues increased primarily due to growth with existing customers. Other Surface Transportation net revenues were essentially flat.
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LIQUIDITY AND CAPITAL RESOURCES
We have historically generated substantial cash from operations, which has enabled us to fund our organic growth while paying cash dividends and repurchasing stock. In addition, we maintain the following debt facilities as described in Note 4, Financing Arrangements (dollars in thousands):
DescriptionCarrying Value as of December 31, 2019Borrowing CapacityMaturity
Revolving credit facility$—  $1,000,000  October 2023
Senior Notes, Series A175,000  175,000  August 2023
Senior Notes, Series B150,000  150,000  August 2028
Senior Notes, Series C175,000  175,000  August 2033
Receivables securitization facility (1)
142,885  250,000  December 2020
Senior Notes (1)
592,448  600,000  April 2028
Total debt$1,235,333  $2,350,000  
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(1) Net of unamortized discounts and issuance costs.
We expect to use our current debt facilities and potentially other indebtedness incurred in the future to assist us in continuing to fund working capital, capital expenditures, possible acquisitions, dividends, and share repurchases.
Cash and cash equivalents totaled $447.9 million as of December 31, 2019, and $378.6 million as of December 31, 2018. Cash and cash equivalents held outside the United States totaled $405.1 million as of December 31, 2019, and $320.0 million as of December 31, 2018. Working capital decreased from $1.3 billion at December 31, 2018, to $1.1 billion at December 31, 2019.
We prioritize our investments to grow the business, as we require some working capital and a relatively small amount of capital expenditures to grow. We are continually looking for acquisitions, but those acquisitions must fit our culture and enhance our growth opportunities. On January 28, 2020, we entered into a definitive agreement to acquire Prime Distribution Services, a leading provider of retail consolidation services in North America for approximately $225 million in cash. The agreement is subject to certain customary closing conditions, including regulatory approval. We anticipate financing the acquisition using cash and existing financing arrangements.
The following table summarizes our major sources and uses of cash and cash equivalents (dollars in thousands):
Twelve months ended December 31, 20192018% change2017% change
Sources of cash:
Cash provided by operating activities$835,419  $792,896  5.4 %$384,001  106.5 %
(Uses) / sources of cash:
Capital expenditures(70,465) (63,871) (57,945) 
Acquisitions(59,200) (5,315) (49,068) 
Other investing activities16,636  (3,622) (521) 
Cash used for investing activities(113,029) (72,808) 55.2 %(107,534) (32.3)%
Repurchase of common stock(309,444) (300,991) (185,485) 
Cash dividends(277,786) (265,219) (258,222) 
Net (payments) / borrowings on debt(112,000) (118,988) 225,000  
Other financing activities47,977  30,021  16,573  
Cash used for financing activities(651,253) (655,177) (0.6)%(202,134) 224.1 %
Effect of exchange rates on cash and cash equivalents(1,894) (20,186) 11,891  
Net change in cash and cash equivalents$69,243  $44,725  $86,224  

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Cash flow from operating activities. The increase in cash flow from operating activities in 2019 from 2018 was primarily driven by improved working capital performance and the impact of decreasing total transportation revenues and purchased transportation on our accounts receivable and accounts payable balances. The increase in cash flow from operations in 2018 from 2017 was primarily the result of increased earnings and improved working capital performance including improved collections of accounts receivable.
Cash used for investing activities. Our investing activities consist primarily of capital expenditures and cash paid for acquisitions. Capital expenditures consisted primarily of investments in information technology, which are intended to increase employee productivity, automate interactions with our customers and contracted carriers, and improve our internal workflows to help expand our operating margins and grow the business. During 2019, we sold a facility we owned in Chicago, Illinois for approximately $17.0 million.
In 2019, we used $45.0 million for the acquisition of Space Cargo and $14.2 million for the acquisition of Dema Service. In 2017, we used $47.3 million for the acquisition of Milgram.
We anticipate capital expenditures in 2020 to be approximately $60 million to $70 million.
Cash used for financing activities. We had net repayments on debt of $112.0 million in 2019, $119.0 million in 2018, and net borrowings of $225.0 million in 2017. The 2019 net repayments were primarily to reduce the outstanding amount on the receivables securitization facility while the 2018 net repayments primarily related to the revolving credit facility partially offset by long-term borrowings on the Senior Notes. The 2017 net borrowings were primarily related to the receivables securitization facility. There was no outstanding balance on the revolving credit facility as of December 31, 2019. As of December 31, 2018, the outstanding balance on the facility was $5.0 million. As of December 31, 2019, we were in compliance with, or have secured waivers of, all of the covenants under the Credit Agreement, Note Purchase Agreement, Receivables Securitization Facility, and Senior Notes.
The increases in cash dividends paid were the result of higher dividend rates, partially offset by fewer outstanding shares. The increase in share repurchases in 2019 was due to an increase in the number of shares repurchased, partially offset by a decrease in the average price paid per share compared to 2018. In 2018, the increase in shares repurchased was due to an increase in the number of shares repurchased and an increase in the average price paid per share compared to 2017. In May 2018, the Board of Directors increased the number of shares authorized to be repurchased by 15,000,000 shares. As of December 31, 2019, there were 9,993,683 shares remaining for future repurchases. The number of shares we repurchase, if any, during future periods will vary based on our cash position, potential alternative uses of our cash, and market conditions.
Assuming no change in our current business plan, management believes that our available cash, together with expected future cash generated from operations, the amount available under our credit facilities, and credit available in the market will be sufficient to satisfy our anticipated needs for working capital, capital expenditures, and cash dividends for at least the next 12 months. We also believe we could obtain funds under lines of credit or other forms of indebtedness on short notice, if needed.
Recently Issued Accounting Pronouncements. Refer to Note 13, Recently Issued Accounting Pronouncements, of the accompanying consolidated financial statements for a discussion of recently issued accounting pronouncements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Our significant accounting policies are discussed in Note 1, Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. We consider the following items in our consolidated financial statements to require significant estimation or judgment.
REVENUE RECOGNITION. 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. Our transportation and logistics service arrangements often require management to use judgment and make estimates that impact the amounts and timing of revenue recognition.
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Transportation and Logistics Services - As a third party logistics provider, our primary performance obligation under our customer contracts is to utilize our relationships with a wide variety of transportation companies to efficiently and cost-effectively transport our customers’ freight. Revenue is recognized for these performance obligations as they are satisfied over the contract term, which generally represents the transit period. The transit period can vary based upon the method of transport, generally a number of days for over the road, rail, and air transportation, or several weeks in the case of an ocean shipment.
Recognizing revenue for contracts where the transit period is partially complete or completed and not yet invoiced at period end requires management to make judgments that affect the amounts and timing of revenue recognized. At December 31, 2019 we recorded revenue of $132.9 million for services we have provided while a shipment was still in-transit but for which we had not yet completed our performance obligation or had not yet invoiced our customer. We utilize our historical knowledge of shipping lanes and estimated transit times to determine the transit period in cases where our customers’ freight has not reached its intended destination. In addition, we analyze contract data for the first few days following the reporting date combined with our historical experience of trends related to partially completed contracts as of the reporting date to determine our right to consideration for the services we have provided where the transit period is partially complete or completed and not yet invoiced at period end. Disruptions such as weather events or other delays could cause the actual transit period to differ from these estimates.
Total revenues represent the total dollar value of revenue recognized from contracts with customers for the goods and services we provide. Substantially all of our revenue is attributable to contracts with our customers. Our net revenues are our total revenues less purchased transportation and related services, including contracted motor carrier, rail, ocean, air, and other costs, and the purchase price and services related to the products we source. Most transactions in our transportation and sourcing businesses are recorded at the gross amount we charge our customers for the service we provide and goods we sell. In these transactions, we are primarily responsible for fulfilling the promise to provide the specified good or service to our customer 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. Customs brokerage, managed services, freight forwarding, and sourcing managed procurement transactions are recorded at the net amount we charge our customers for the service we provide because many of the factors stated above are not present. See also Note 1, Summary of Significant Accounting Policies, for further information regarding our revenue recognition policies.
GOODWILL. Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable tangible net assets and identifiable intangible assets purchased and liabilities assumed.
Goodwill is tested for impairment annually 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”). Based on our Step Zero Analysis, we determined that the more likely than not criteria had not been met, and therefore a Step One Analysis was not required.
When we perform a Step One Analysis, the fair value of each reporting unit is compared with the carrying amount of the reporting unit, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
In the Step One Analysis, the fair value of each reporting unit is determined using a discounted cash flow analysis and market approach. Projecting discounted future cash flows requires us to make significant estimates regarding future revenues and expenses, projected capital expenditures, changes in working capital, and the appropriate discount rate. Use of the market approach consists of comparisons to comparable publicly-traded companies that are similar in size and industry. Actual results may differ from those used in our valuations when a Step One Analysis is performed.
 
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DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL CONTINGENCIES
The following table aggregates all contractual commitments and commercial obligations, due by period, that affect our financial condition and liquidity position as of December 31, 2019 (dollars in thousands):
20202021202220232024ThereafterTotal
Borrowings under credit agreements$143,000  $—  $—  $—  $—  $—  $143,000  
Senior notes (1)
25,200  25,200  25,200  25,200  25,200  682,950  808,950  
Long-term notes payable(1)
21,388  21,388  21,388  196,388  14,440  423,008  698,000  
Maturity of lease liabilities(2)
70,995  60,839  49,717  36,722  25,457  125,163  368,893  
Purchase obligations(3)
105,420  31,278  15,718  17,833  26,133  182  196,564  
Total$366,003  $138,705  $112,023  $276,143  $91,230  $1,231,303  $2,215,407  
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(1)Amounts payable relate to the semi-annual interest due on the senior and long-term notes and the principal amount at maturity.
(2) We maintain operating leases for office space, warehouses, office equipment, and a small number of intermodal containers. See Note 11, Leases, for further information.
(3) Purchase obligations include agreements for services that are enforceable and legally binding and that specify all significant terms. As of December 31, 2019, such obligations primarily include ocean and air freight capacity, telecommunications services, maintenance contracts and information technology related capacity. In some instances our contractual commitments may be usage based or require estimates as to the timing of cash settlement.
We have no financing lease obligations. Long-term liabilities consist primarily of noncurrent income taxes payable and long-term notes payable. Due to the uncertainty with respect to the amounts or timing of future cash flows associated with our unrecognized tax benefits at December 31, 2019, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority. Therefore, $39.9 million of unrecognized tax benefits have been excluded from the contractual obligations table above. See Note 5, Income Taxes, to the consolidated financial statements for a discussion on income taxes. As of December 31, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We had $447.9 million of cash and cash equivalents on December 31, 2019. Substantially all of the cash equivalents are in demand accounts with financial institutions. The primary market risks associated with these investments are liquidity risks.
We are a party to a credit agreement with various lenders consisting of a $1 billion revolving loan facility. Interest accrues on the revolving loan at a variable rate determined by a pricing schedule or the base rate (which is the highest of (a) the administrative agent's prime rate, (b) the federal funds rate plus 0.50 percent, or (c) the sum of one-month LIBOR plus a specified margin). At December 31, 2019, there was no outstanding balance on the revolving loan.
We are a party to the Note Purchase Agreement, as amended, with various institutional investors with fixed rates consisting of: (i) $175 million of the company’s 3.97 percent Senior Notes, Series A, due August 27, 2023, (ii) $150 million of the company’s 4.26 percent Senior Notes, Series B, due August 27, 2028, and (iii) $175 million of the company’s 4.6 percent Senior Notes, Series C, due August 27, 2033. At December 31, 2019, there was $500 million outstanding on the notes.
We are a party to a Receivables Securitization Facility, as amended, with various lenders that provides funding of up to $250 million. Interest accrues on the facility at variable rates based on 30-day LIBOR plus a margin. At December 31, 2019, there was $142.9 million outstanding, net of unamortized issuance costs, on the securitization facility.
We issued Senior Notes through a public offering on April 9, 2018. The Senior Notes bear an annual interest rate of 4.2 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 $659.9 million as of December 31, 2019, based primarily on the market prices quoted from external sources. The carrying value of the Senior Notes was $592.4 million at December 31, 2019.
A hypothetical 100-basis-point change in the interest rate would not have a material effect on our earnings. We do not use derivative financial instruments to manage interest rate risk or to speculate on future changes in interest rates. A rise in interest rates could negatively affect the fair value of our debt facilities.

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Foreign Exchange Risk
We operate through a network of offices in North America, Europe, Asia, Oceania, and South America. As a result, we frequently transact using currencies other than the U.S. Dollar, primarily the Chinese Yuan, Euro, Canadian Dollar, and Mexican Peso. This often results in assets and liabilities, including intercompany balances, denominated in a currency other than the functional currency. In these instances, most commonly, we have balances denominated in U.S. Dollars in regions where the U.S. Dollar is not the functional currency. This results in foreign exchange risk.
Foreign exchange risk can be quantified by performing a sensitivity analysis assuming a hypothetical change in the value of the U.S. Dollar compared to other currencies in which we transact. Our primary foreign exchange risk is associated with balances denominated in U.S. Dollars held in China where the functional currency is the Chinese Yuan. All other things being equal, a hypothetical 10 percent weakening of the U.S. Dollar against the Chinese Yuan during the twelve months ended December 31, 2019, would have decreased our income from operations by approximately $17.9 million and a hypothetical 10 percent strengthening of the U.S. Dollar against the Chinese Yuan during the twelve months ended December 31, 2019, would have increased our income from operations by approximately $14.6 million. Our use of derivative financial instruments to manage foreign exchange risk is insignificant.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM