OVERVIEW
C.H. Robinson Worldwide, Inc. ("C.H. Robinson," "the company," "we," "us," or "our") is one of the world's largest logistics platforms. Our mission is to improve the world's supply chains through our people, processes, and technology by delivering exceptional value to our customers and suppliers. 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 inNorth America ,Europe ,Asia ,Oceania , andSouth America . We offer a global suite of services using tailored, market-leading differentiated technology built by and for our global network of supply chain experts working with our customers to drive better outcomes by leveraging our experience, data, technology, and scale. Our global network of supply chain experts works with our customers to drive better supply chain outcomes by leveraging our experience, data, technology, and scale. Our adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit is calculated as gross profit excluding amortization of internally developed software utilized to directly serve our customers and contracted carriers. Adjusted gross profit margin is calculated as adjusted gross profit divided by total revenues. We believe adjusted gross profit and adjusted gross profit margin are useful measures of our ability to source, add value, and sell services and products that are provided by third parties, and we consider adjusted gross profit to be a primary performance measurement. Accordingly, the discussion of our results of operations often focuses on the changes in our adjusted gross profit and adjusted gross profit margin. The reconciliation of gross profit to adjusted gross profit and gross profit margin to adjusted gross profit margin is presented below (dollars in thousands):
Twelve Months Ended
2021 2020 2019 Revenues: Transportation$ 22,046,574 $ 15,147,562 $ 14,322,295 Sourcing 1,055,564 1,059,544 987,213 Total revenues 23,102,138 16,207,106 15,309,508 Costs and expenses: Purchased transportation and related services 18,994,574 12,834,608 11,839,433 Purchased products sourced for resale 955,475 960,241 883,765 Direct internally developed software amortization 20,208 16,634 11,492 Total direct costs 19,970,257 13,811,483 12,734,690 Gross profit / Gross profit margin 3,131,881 13.6 % 2,395,623 14.8 % 2,574,818 16.8 % Plus: Direct internally developed software amortization 20,208 16,634 11,492 Adjusted gross profit / Adjusted gross profit margin$ 3,152,089 13.6 %$ 2,412,257 14.9 %$ 2,586,310 16.9 % Our adjusted operating margin is a non-GAAP financial measure calculated as operating income divided by adjusted gross profit. We believe adjusted operating margin is a useful measure of our profitability in comparison to our adjusted gross profit, which we consider a primary performance metric as discussed above. The reconciliation of operating margin to adjusted operating margin is presented below (dollars in thousands): Twelve Months Ended December 31, 2021 2020 2019 Total revenues$ 23,102,138 $ 16,207,106 $ 15,309,508 Operating income 1,082,108 673,268 789,976 Operating margin 4.7 % 4.2 % 5.2 % Adjusted gross profit$ 3,152,089 $ 2,412,257 $ 2,586,310 Operating income 1,082,108 673,268 789,976 Adjusted operating margin 34.3 % 27.9 % 30.5 % 25
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MARKET TRENDS
The North American surface transportation market experienced extremely tight carrier capacity in 2021 as strong demand combined with ongoing driver availability and supply chain disruptions caused by port congestion and weather events drove purchased transportation to historic levels. This compared to an extremely volatile market in 2020 resulting from the early stages of the COVID-19 pandemic and restrictions implemented to control the outbreak, which drove significant volatility in customer demand and carrier capacity. Industry freight volumes, as measured by the Cass Freight Index, increased approximately 13 percent in 2021 compared to 2020 and experienced growth in each quarter of 2021 compared to 2020. This compared to a decline of approximately eight percent in 2020 compared to 2019 with significant volatility over the course of 2020. One of the metrics we use to measure market conditions is the truckload routing guide depth from our Managed Services business. 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 was 1.7 in 2021 compared to 1.4 in 2020. The average routing guide depth increased steadily during the second half of 2020 and finished in line with those seen over the duration of 2021. The global forwarding market has also been significantly impacted by supply chain disruptions caused by ongoing port congestion along with equipment and labor shortages in 2021. These disruptions combined with strong demand have continued to drive purchased transportation costs for both ocean and air freight to historic levels. As with the North American surface transportation market, this compared to the significant volatility seen in 2020 resulting from the COVID-19 pandemic. In 2020, the COVID-19 pandemic resulted in a sharp decline in commercial air freight capacity and periods of significantly reduced ocean freight demand due to factory closures followed by a rapid surge of demand in the second half of 2020 when production resumed and companies began to replenish low inventory levels amidst the market uncertainty.
BUSINESS TRENDS
Our 2021 surface transportation results were impacted by the rising cost and price environment summarized in the market trends section above. We did not, however, experience the significant year over year volume volatility seen in the industry as measured by the Cass Freight Index. Industry freight volumes increased approximately 13 percent in 2021 compared to a decline of eight percent in 2020. Our combined NAST truckload and LTL volume increased 5.5 percent in both 2021 and 2020. The COVID-19 pandemic had a significant impact on our small business customers in 2020 as our customer count decreased nearly 12 percent, driven almost entirely by small and emerging market customers. Throughout the COVID-19 pandemic we have continued to work with our customers to meet our contractual commitments, which has resulted in a higher than normal percentage of shipments with negative adjusted gross profit margins and less volatility in our combined NAST truckload and LTL volumes as compared to the Cass Freight Index. We have continued to reshape our portfolio by adapting our pricing to reflect the rising cost environment and participating to a greater extent in the spot market. The strong demand and tight carrier capacity conditions in 2021 resulted in our average truckload linehaul cost per mile, excluding fuel costs, increasing 30.5 percent. Our average truckload linehaul rate charged to our customers, excluding fuel surcharges, increased approximately 29.0 percent in 2021. In our global forwarding business, we continued to experience significant increases in purchased transportation costs for both ocean and air freight due to the disruption caused by port congestion in addition to the equipment and labor shortages impacting the global forwarding market. This along with increased volumes has resulted in strong growth in both total revenues and cost of transportation for our ocean and air freight services. Ocean volumes increased 17.0 percent in 2021 with strong growth in nearly all regions we serve, driven by higher award sizes from existing customers and new customer growth in addition to the adverse impact to 2020 results from factory closures during the early stages of the COVID-19 pandemic. Throughout 2021 and 2020, we have augmented our air freight capacity with charter flights due to the significant commercial capacity shortages in the market, which have resulted in larger than normal shipment sizes as compared to our pre-pandemic operations. OnJune 3, 2021 , we acquiredCombinex Holding B.V. ("Combinex") to strengthen our European road transportation presence, for$14.7 million in cash. OnMarch 2, 2020 , we acquiredPrime Distribution Services ("Prime Distribution" or "Prime"), a leading provider of retail consolidation services inNorth America , for$222.7 million in cash. The acquisition was effective as ofFebruary 29, 2020 , and therefore the results of operations of Prime Distribution have been included as part of the NAST segment in our consolidated financial statements sinceMarch 1, 2020 . 26
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SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS
The following summarizes select 2021 year-over-year operating comparisons to
2020:
•Total revenues increased 42.5 percent to
higher pricing and higher volume across most of our services.
•Gross profits increased 30.7 percent to
increased 30.7 percent to
gross profit per transaction and higher volume across most of our services.
•Personnel expenses increased 24.2 percent to$1.5 billion , primarily due to higher incentive compensation costs and a 4.2 percent increase in average headcount, and also due to the benefit realized in 2020 from our short-term, pandemic-related cost reduction initiatives. •Selling, general, and administrative ("SG&A") expenses increased 6.1 percent to$526.4 million , primarily due to the increases in purchased services and warehouse expenses, partially offset by decreases in amortization and bad debt expenses and by an$11.5 million loss on the sale-leaseback of a company-owned data center in 2020. •Income from operations totaled$1.1 billion , up 60.7 percent from last year due to an increase in adjusted gross profits, partially offset by the increase in operating expenses. Adjusted operating margin of 34.3 percent increased 640 basis points. •Interest and other expenses totaled$59.8 million , which primarily consisted of$52.1 million of interest expense, which increased$3.0 million versus last year due to a higher average debt balance. The current year also included a$15.1 million unfavorable impact from foreign currency revaluation and realized foreign currency gains and losses. These expenses were partially offset by a$2.9 million local government subsidy inAsia for achieving specified performance criteria that was almost entirely offset by a reduction in foreign tax credits within the provision for income taxes. •The effective tax rate for 2021 was 17.4 percent compared to 19.4 percent in 2020. The rate decrease was due primarily to a favorable mix of foreign earnings and an increased benefit related toU.S. tax credits and incentives.
•Net income totaled
earnings per share increased 69.6 percent to
•Cash flow from operations decreased 81.0 percent to
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CONSOLIDATED RESULTS OF OPERATIONS
The following table summarizes our results of operations (dollars in thousands,
except per share data):
Twelve Months Ended
2021 2020 % change 2019 % change Revenues: Transportation$ 22,046,574 $ 15,147,562 45.5 %$ 14,322,295 5.8 % Sourcing 1,055,564 1,059,544 (0.4) % 987,213 7.3 % Total revenues 23,102,138 16,207,106 42.5 % 15,309,508 5.9 % Costs and expenses: Purchased transportation and related services$ 18,994,574 $ 12,834,608 48.0 %$ 11,839,433 8.4 % Purchased products sourced for resale 955,475 960,241 (0.5) % 883,765 8.7 % Personnel expenses 1,543,610 1,242,867 24.2 % 1,298,528 (4.3) % Other selling, general, and administrative expenses 526,371 496,122 6.1 % 497,806 (0.3) % Total costs and expenses 22,020,030 15,533,838 41.8 % 14,519,532 7.0 % Income from operations 1,082,108 673,268 60.7 % 789,976 (14.8) % Interest and other expense (59,817) (44,937) 33.1 % (47,719) (5.8) % Income before provision for income taxes 1,022,291 628,331 62.7 % 742,257 (15.3) % Provision for income taxes 178,046 121,910 46.0 % 165,289 (26.2) % Net income$ 844,245 $ 506,421 66.7 %$ 576,968 (12.2) % Diluted net income per share$ 6.31 $ 3.72 69.6 %$ 4.19 (11.2) % Average headcount 15,761 15,119 4.2 % 15,551 (2.8) % Adjusted gross profit margin percentage(1) Transportation 13.8% 15.3% (150 bps) 17.3% (200 bps) Sourcing 9.5% 9.4% 10 bps 10.5% (110 bps) Total adjusted gross profit margin 13.6% 14.9% (130 bps) 16.9% (200 bps)
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(1) Adjusted gross profit margin is a non-GAAP financial measure explained
above.
The following discussion and analysis of our Results of Operations and Liquidity and Capital Resources includes a comparison of the twelve months endedDecember 31, 2021 , to the twelve months endedDecember 31, 2020 . A similar discussion and analysis that compares the twelve months endedDecember 31, 2020 , to the twelve months endedDecember 31, 2019 , can be found in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of our 2020 Annual Report on Form 10-K filed with theSEC onFebruary 19, 2021 . 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
Compared to Twelve Months Ended
Total revenues and related costs. Total transportation revenues and purchased
transportation and related services increased significantly driven by higher
pricing and volumes in most service lines, most notably ocean and truckload
services. The higher pricing was driven by the continued supply chain
disruptions impacting both the global forwarding and surface transportation
market discussed above in the market and business trends sections. The prior
year period was also impacted by the early stages of the COVID-19 pandemic,
which resulted in significant volatility to both pricing and volumes. Much of
this volatility was the result of restrictions in place to control the outbreak,
which resulted in the sharp decline in commercial air freight capacity and
periods of significantly reduced ocean freight demand due to factory closures.
This was followed by periods of rapid demand increases when production resumed
and companies began to replenish low inventory levels amidst the market
uncertainty and elevated demand for essential products.
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Our sourcing total revenues and purchased products sourced for resale decreased due to lower pricing and costs per case, which was partially offset by higher case volume most notably in the foodservice industry, which was significantly impacted by the COVID-19 pandemic in the prior year. Gross profits and adjusted gross profits. Our transportation adjusted gross profit increased driven by increased pricing and volumes in nearly all service lines, most notably ocean and truckload services, resulting in higher adjusted gross profits per transaction. Our transportation adjusted gross profit margin decreased driven by the significant increase in the cost of purchased transportation and related services in nearly all service lines. The prior year period also included significant volatility in both volumes and the cost of purchased transportation due to the impact of the COVID-19 pandemic. We have continued to meet our customer commitments since the early stages of the COVID-19 pandemic, which has resulted in adjusted gross profit margin compression especially during periods of extreme volatility in the cost of capacity relative to our contractual customer pricing. Sourcing adjusted gross profits increased driven by an increase in case volume from sourcing managed procurement customers in the foodservice industry as the prior year period experienced a significant decrease in demand resulting from the COVID-19 pandemic. This increase was partially offset by a decrease in case volume with retail customers. Operating expenses. Personnel expenses increased primarily due to incentive compensation increases reflecting the strong results in the current year, an increase in average headcount, and the impact of steps taken to reduce costs in response to the COVID-19 pandemic in the prior year, including furloughs, reduced work hours, and the temporary suspension of the company match to retirement plans forU.S. and Canadian employees in addition to increased health insurance costs. Stock-based compensation expense recognized on performance-based equity awards granted prior to 2021 totaled$62.0 million in the current year compared to none in the prior year. There is no remaining stock-based compensation expense to recognize on our 2017 and 2018 performance-based equity awards while 20 percent remains on our 2019 and 2020 performance-based equity awards. Refer to Note 6, Capital Stock and Stock Award Plans, for further discussion related to our stock-based compensation plan. Other SG&A expenses increased due to increased purchased services and warehouse expenses, partially offset by decreases in amortization due to the completion of amortization related to intangible assets from a prior acquisition and bad debt expenses and the impact of an$11.5 million loss on the sale-leaseback of a company-owned data center in the prior year period. Interest and other expense. Interest and other expense of$59.8 million primarily consisted of$52.1 million of interest expense and a$15.1 million unfavorable impact of foreign currency revaluation and realized foreign currency gains and losses in 2021. These expenses were partially offset by a$2.9 million local government subsidy inAsia for achieving specified performance criteria that was almost entirely offset by a reduction in foreign tax credits within the provision for income taxes. Interest expense increased driven by a higher average debt balance compared to the prior year period. The prior year period included a$3.3 million favorable impact of foreign currency revaluation and realized foreign currency gains and losses. Provision for income taxes. Our effective income tax rate was 17.4 percent in 2021 and 19.4 percent in 2020. The effective income tax rate for the twelve months endedDecember 31, 2021 , was lower than the statutory federal income tax rate primarily due to the tax benefit fromU.S. tax credits and incentives, and a lower tax rate on foreign earnings. These impacts were partially offset by state income taxes, net of federal benefits. The effective income tax rate for the twelve months endedDecember 31, 2020 , was lower than the statutory federal income tax rate primarily due to the tax impact of share-based payment awards, including the tax benefit from the delivery of a one-time deferred stock award that was granted to our prior Chief Executive Officer in 2000 and excess foreign tax credits. These impacts were partially offset by state income taxes, net of federal benefits and foreign income taxes. 29
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NAST Segment Results of Operations
Twelve Months Ended December 31,
(dollars in thousands) 2021 2020 % change 2019 % change
Total revenues $ 14,507,917 $ 11,312,553 28.2 % $ 11,283,692 0.3 %
Costs and expenses:
Purchased transportation and related
services 12,714,964 9,795,462 29.8 % 9,486,323 3.3 %
Personnel expenses 779,435 624,358 24.8 % 698,187 (10.6) %
Other selling, general, and
administrative expenses 428,167 384,258 11.4 % 376,419 2.1 %
Total costs and expenses 13,922,566 10,804,078 28.9 % 10,560,929 2.3 %
Income from operations $ 585,351 $ 508,475 15.1 % $ 722,763 (29.6) %
Twelve Months Ended
2021 2020 % change 2019 % change
Average headcount 6,764 6,811 (0.7) % 7,354 (7.4) %
Service line volume statistics
Truckload 2.5 % - %
LTL 8.0 % 9.5 %
Adjusted gross profits(1)
Truckload $ 1,192,644 $ 981,420 21.5 % $ 1,275,199 (23.0) %
LTL 517,500 452,033 14.5 % 471,616 (4.2) %
Other 82,809 83,638 (1.0) % 50,554 65.4 %
Total adjusted gross profits $ 1,792,953 $ 1,517,091 18.2 % $ 1,797,369 (15.6) %
________________________________
(1) Adjusted gross profits is a non-GAAP financial measure explained above.
Twelve Months Ended
31, 2020
Total revenues and related costs. NAST total revenues increased due to higher pricing in truckload and, to a lesser extent, higher pricing in LTL services in addition to volume increases in both LTL and truckload services. The increased pricing in truckload was driven by tight carrier capacity caused by driver availability challenges and the supply chain disruptions facing the industry as discussed above in the market and business trends sections. The prior year was adversely impacted by weakening demand during the early stages of the COVID-19 pandemic, which resulted in industry volume decreases. Total purchased transportation and related services increased, driven by higher average truckload linehaul costs per mile in addition to higher purchased transportation costs per transaction in LTL services and volume increases in both LTL and truckload services. Gross profits and adjusted gross profits. NAST adjusted gross profits increased, driven by increased adjusted gross profits per transaction due to the higher pricing and increased volume discussed above. Our average truckload linehaul rate per mile charged to our customers increased approximately 29.0 percent. Our truckload transportation costs, excluding fuel surcharges, increased approximately 30.5 percent. NAST LTL adjusted gross profits increased due to increased volumes and increased adjusted gross profits per transaction. NAST other adjusted gross profits decreased slightly as lower adjusted gross profits per transaction and lower volume in intermodal were partially offset by incremental warehousing services related to the acquisition of Prime Distribution. Operating expenses. NAST personnel expense increased primarily due to incentive compensation increases reflecting the strong results for the year and the impact of steps taken to reduce costs in response to the COVID-19 pandemic in the prior year, including furloughs, reduced work hours, and the temporary suspension of the company match to retirement plans forU.S. and Canadian employees. NAST SG&A expenses increased, driven by increased investments in technology, warehouse expenses, and purchased services, partially offset by lower credit losses. The operating expenses of NAST and all other segments include allocated corporate expenses. Allocated personnel expenses consist primarily of stock-based compensation allocated based upon segment participation levels in our equity plans. Remaining corporate allocations, including corporate functions and technology related expenses, are primarily included within each segment's other selling and administrative expenses and allocated based upon relevant segment operating metrics. 30
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Global Forwarding Segment Results of Operations
Twelve Months Ended December 31,
(dollars in thousands) 2021 2020 % change 2019 % change
Total revenues $ 6,729,790 $ 3,100,525 117.1 % $ 2,327,913 33.2 %
Costs and expenses:
Purchased transportation and related
services 5,656,249 2,471,537 128.9 % 1,793,937 37.8 %
Personnel expenses 368,563 281,048 31.1 % 276,255 1.7 %
Other selling, general, and
administrative expenses 194,222 172,427 12.6 % 177,194 (2.7) %
Total costs and expenses 6,219,034 2,925,012 112.6 % 2,247,386 30.2 %
Income from operations $ 510,756 $ 175,513 191.0 % $ 80,527 118.0 %
Twelve Months Ended
2021 2020 % change 2019 % change
Average headcount 5,071 4,708 7.7 % 4,766 (1.2) %
Service line volume statistics
Ocean 17.0 % 0.5 %
Air(1) 45.5 % 11.0 %
Customs 13.5 % (3.5) %
Adjusted gross profits(2)
Ocean $ 710,845 $ 349,868 103.2 % $ 308,068 13.6 %
Air 221,906 146,056 51.9 % 101,991 43.2 %
Customs 100,540 87,092 15.4 % 91,833 (5.2) %
Other 40,250 45,972 (12.4) % 32,084 43.3 %
Total adjusted gross profits $ 1,073,541 $ 628,988 70.7 % $ 533,976 17.8 %
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(1) In 2021, reported air volumes represent metric tons shipped. Previously
reported statistics were based on transactional volumes and have been restated
to conform with the current period presentation.
(2)Adjusted gross profits is a non-GAAP financial measure explained above.
Twelve Months Ended
31, 2020
Total revenues and related costs. Total revenues and purchased transportation
and related services increased due to higher pricing in our ocean services and,
to a lesser extent, higher pricing in our air freight services, in addition to
volume increases in both ocean and air services. The higher ocean and air
freight pricing was driven by the unprecedented supply chain disruptions
impacting the global forwarding market combined with strong demand as discussed
in the market and business trends sections. Increased air freight volumes were
driven by ocean freight conversion resulting from the significant disruptions
experienced in the industry and the continued increase in charter flights and
larger than normal shipment sizes as traditional air freight capacity remains
strained by a reduction of commercial flights. The first half of 2020 was also
severely impacted by reduced demand and production due to the early stages of
the COVID-19 pandemic, which led to significant volume declines in all services
in the prior year.
Gross profits and adjusted gross profits. Ocean and air freight adjusted gross
profits increased driven by higher pricing resulting in higher adjusted gross
profits per transaction, in addition to increased volumes. Customs adjusted
gross profits increased, driven by increased volumes.
Operating expenses. Personnel expenses increased primarily due to an increase in
average headcount and incentive compensation reflecting the strong results in
the year. The prior year included the impact of steps taken to reduce costs in
response to the COVID-19 pandemic, including furloughs and reduced work hours.
SG&A expenses increased driven by increased investments in technology and
increased purchased services, partially offset by a reduction of
amortization expense due to the completion of amortization related to intangible
assets from a prior acquisition.
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All Other and Corporate Segment Results of Operations
All Other and Corporate includes our
segment, as well as Other Surface Transportation outside of
other miscellaneous revenues and unallocated corporate expenses.
Twelve Months Ended December 31,
(dollars in thousands) 2021 2020 % change 2019 % change
Total revenues $ 1,864,431 $ 1,794,028 3.9 % $ 1,697,903 5.7 %
Income from operations (13,999) (10,720) N/M (13,314) N/M
Adjusted gross profits(1)
Robinson Fresh 107,543 105,700 1.7 % 109,183 (3.2) %
Managed Services 105,064 94,828 10.8 % 83,365 13.8 %
Other Surface Transportation 72,988 65,650 11.2 % 62,417 5.2 %
Total adjusted gross profits $ 285,595 $ 266,178 7.3 %
________________________________
(1) Adjusted gross profits is a non-GAAP financial measure explained above.
Twelve Months Ended
31, 2020
Total revenues and related costs. Total revenues and related costs increased driven by higher truckload pricing and volumes in Other Surface Transportation, including a 6.0 percentage point increase from the acquisition of Combinex.Robinson Fresh total revenues and related costs decreased due to lower pricing and costs per case, which was partially offset by higher case volume most notably in the foodservice industry, which was significantly impacted by the COVID-19 pandemic in the prior year. Gross profits and adjusted gross profits.Robinson Fresh adjusted gross profits increased, driven by an increase in case volume from sourcing managed procurement customers in the food service industry as the prior year period experienced a significant decrease in demand resulting from the COVID-19 pandemic. This increase was partially offset by a decrease in case volume with retail customers. Managed Services adjusted gross profits increased, driven by increased transaction volumes resulting from an increase in freight under management. Other Surface Transportation adjusted gross profits increased primarily due to a 6.5 percentage point increase from the acquisition of Combinex and a modest increase in truckload volumes.
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):
Carrying Value as
of December 31, Borrowing
Description 2021 Capacity Maturity
Revolving credit facility $ 525,000 $ 1,000,000 October 2023
Receivables securitization facility(1)(2) 299,481 500,000 November 2023
Senior Notes, Series A 175,000 175,000 August 2023
Senior Notes, Series B 150,000 150,000 August 2028
Senior Notes, Series C 175,000 175,000 August 2033
Senior Notes (1) 594,168 600,000 April 2028
Total debt $ 1,918,649 $ 2,600,000
________________________________
(1) Net of unamortized discounts and issuance costs.
(2) On
primarily to increase the total availability from
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$257.4 million as ofDecember 31, 2021 , and$243.8 million as ofDecember 31, 2020 . Cash and cash equivalents held outsidethe United States totaled$217.1 million as ofDecember 31, 2021 , and$230.9 million as of 32
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2020
We prioritize our investments to grow the business, as we require some working capital and a relatively small amount of capital expenditures to grow. We are continually looking for acquisitions, but those acquisitions must fit our culture and enhance our growth opportunities.
The following table summarizes our major sources and uses of cash and cash
equivalents (dollars in thousands):
Twelve months ended
2021 2020 % change 2019 % change Sources (uses) of cash: Cash provided by operating activities$ 94,955 $ 499,191 (81.0) %$ 835,419 (40.2) % Capital expenditures (70,922) (54,009) (70,465) Acquisitions (14,750) (223,230) (59,200) Other investing activities - 5,525 16,636 Cash used for investing activities (85,672) (271,714) (68.5) % (113,029) 140.4 % Repurchase of common stock (581,756) (177,514) (309,444) Cash dividends (277,321) (209,956) (277,786) Net borrowings (repayments) on debt 822,701 (143,000) (112,000) Other financing activities 43,949 89,803 47,977 Net cash provided by (used for) financing activities 7,573 (440,667) N/M (651,253) (32.3) % Effect of exchange rates on cash and cash equivalents (3,239) 9,128 (1,894)
Net change in cash and cash equivalents
$ 69,243 Cash flow from operating activities. The significant decrease in cash flow from operating activities in 2021 from 2020 was due to unfavorable changes in working capital. These changes in working capital were primarily related to a sequential increase in accounts receivable and contract assets, partially offset by a related increase in accounts payable and accrued transportation expense. Both increases were driven by a significant increase in pricing for most of our transportation services in addition to increased volumes in nearly all services during 2021. The increase in accounts receivable was also impacted by a change in business mix from the significant growth of our global forwarding business where our days sales outstanding ratio is approximately double that of our NAST business. Despite the increase in accounts receivable, we are not experiencing a deterioration in the quality of our accounts receivable balance. Additionally, since the early stages of the COVID-19 pandemic, we have been closely monitoring credit and collections activities to minimize risk as well as working with our customers to facilitate the movement of goods across their supply chains while also ensuring timely payment. 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 hardware and software, which are intended to increase employee productivity, automate interactions with our customers and contracted carriers, and improve our internal workflows to help expand our adjusted operating margins and grow the business. During 2019, we sold a facility we owned inChicago, Illinois , for approximately$17.0 million . In 2021, we used$14.7 million for the acquisition of Combinex. In 2020, we used$222.7 million for the acquisition of Prime. In 2019, we used$45.0 million for the acquisition ofThe Space Cargo Group and$14.2 million for the acquisition of Dema Service S.p.A.
We anticipate capital expenditures in 2022 to be approximately
Cash used for financing activities. We had net borrowings on debt of$822.7 million in 2021 and net repayments of$143.0 million in 2020. The 2021 net borrowings were primarily to provide cash for operations, as our working capital needs continued to increase throughout the year as mentioned above. The 2020 net repayments were primarily to reduce the outstanding balance of the receivables securitization facility. This receivables securitization facility expired inDecember 2020 and was not renewed; however, we entered into a new receivables securitization facility inNovember 2021 . There was a$525 million outstanding balance on our senior unsecured revolving credit facility (the "Credit Agreement") as ofDecember 31, 2021 , compared to no outstanding balance as ofDecember 31, 2020 . As ofDecember 31, 2021 , we were in compliance with 33
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all of the covenants under the Credit Agreement, the Accounts Receivable
Securitization, note purchase agreement, and senior unsecured notes.
The increase in cash dividends paid was the result of our fourth quarter 2020 dividend being paid onJanuary 4, 2021 . Near the end of the first quarter of 2020, we temporarily suspended our share repurchase activity as we assessed the impacts of the COVID-19 pandemic. We resumed our share repurchase activity in the fourth quarter of 2020 and throughout 2021, which resulted in the increase in share repurchases in 2021. InDecember 2021 , the Board of Directors increased the number of shares authorized to be repurchased by 20,000,000 shares. As ofDecember 31, 2021 , there were 21,635,388 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. We may seek to retire or purchase our outstanding Senior Notes through open market cash purchases, privately negotiated transactions, or otherwise. Although there continues to be uncertainty related to the anticipated impact of the COVID-19 pandemic on our future results, we believe that, assuming no change in our current business plan, 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 and the foreseeable future. We also believe we could obtain funds under lines of credit or other forms of indebtedness on short notice, if needed.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted inthe 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. Transportation and Logistics Services - As a global logistics provider, our primary performance obligation under our customer contracts is to utilize our relationships with a wide variety of transportation companies to efficiently and cost-effectively transport our customers' freight. 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 period end. AtDecember 31, 2021 , we recorded revenue of$453.7 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 compared to$197.2 million atDecember 31, 2020 . 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. Differences in contract data for the first few days following the reporting date compared with our historical experience or disruptions such as weather events, port congestion, or other delays could cause the actual amount of revenue earned at period end 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. 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. 34
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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.
the net of the fair value of identifiable tangible assets and identifiable
intangible assets purchased and liabilities assumed.
Goodwill is tested for impairment annually onNovember 30 , or more frequently if events or changes in circumstances indicate that the asset might be impaired. We first perform a qualitative assessment to determine whether it is more likely than not that the fair value of our reporting units is less than their respective carrying value ("Step Zero Analysis"). If the Step Zero Analysis indicates it is more likely than not that the fair value of our reporting units is less than their respective carrying value, an additional impairment assessment is performed ("Step One Analysis"). As part of our Step Zero Analysis we determined that 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. INCOME TAX RESERVES. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are likely to be challenged and that we may or may not prevail in full or in part. UnderU.S. GAAP, if we determine that a tax position, more likely than not, will be sustained upon audit based solely on the technical merits of the position, we recognize the benefit. We measure the benefit by determining the amount that is greater than 50 percent likely of being realized upon resolution. We presume that all tax positions will be examined by a taxing authority with full knowledge of all relevant information. We regularly monitor our tax positions and tax liabilities. We reevaluate the technical merits of our tax positions and recognize an uncertain tax benefit, or derecognize a previously recorded tax benefit, when there is (i) a completion of a tax audit, (ii) effective settlement of an issue, (iii) litigation of the issue, including appeals, (iv) a change in applicable tax law including a tax case or legislative guidance, or (v) the expiration of the applicable statute of limitations. Significant judgment is required in accounting for tax reserves. Although we believe that we have adequately provided for liabilities resulting from tax assessments by taxing authorities, positions taken by these tax authorities could have a material impact on our effective tax rate, consolidated earnings, financial position and/or cash flows. Uncertain income tax positions are included in "Accrued income taxes" or "Noncurrent income taxes payable" in the consolidated balance sheet. 35
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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
2022 2023 2024 2025 2026 Thereafter Total Borrowings under credit agreements$ 525,000 $ 300,000 $ - $ - $ - $ -$ 825,000 Senior notes (1) 25,200 25,200 25,200 25,200 25,200 632,550 758,550 Long-term notes payable(1) 21,388 196,388 14,440 14,440 14,440 394,130 655,226 Maturity of lease liabilities(2) 74,600 69,277 48,819 36,461 26,678 86,859 342,694 Purchase obligations(3) 163,758 51,781 28,691 1,996 330 - 246,556 Total$ 809,946 $ 642,646 $ 117,150 $ 78,097 $ 66,648 $ 1,113,539 $ 2,828,026
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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 ofDecember 31, 2021 , 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 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 atDecember 31, 2021 , we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority. Therefore,$42.9 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 ofDecember 31, 2021 , we do not have significant off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
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