10-K 1 chrw-10k2015.htm 10-K
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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, 2015
Commission File Number: 000-23189

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 |  | 55347-5088
(Address of principal executive offices) |  | (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 class |  | Name of each exchange on which registered
Common Stock, par value $.10 per share Preferred Share Purchase Rights |  | The NASDAQ National 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 ý 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 ý
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 ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Date File required to be submitted and posted 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 and post such files). Yes ý No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer |  | ý |  | Accelerated filer |  | ¨
Non-accelerated filer |  | ¨ |  | Smaller reporting company |  | ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2015 was approximately $9,031,044,026 (based upon the closing price of $62.39 per common share on that date as quoted on The NASDAQ Global Select Market).
As of February 24, 2016, the number of shares outstanding of the registrant’s common stock, par value $.10 per share, was 143,242,681.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement relating to its Annual Meeting of Stockholders to be held May 12, 2016 (the “Proxy Statement”), are incorporated by reference in Part III.

C.H. ROBINSON WORLDWIDE, INC.
ANNUAL REPORT ON FORM 10-K
For the year ended December 31, 2015
TABLE OF CONTENTS

| PART I | Page
Item 1. | Business | 3
Item 1A. | Risk Factors | 13
Item 1B. | Unresolved Staff Comments | 17
Item 2. | Properties | 18
Item 3. | Legal Proceedings | 19
Item 4. | Mine Safety Disclosures | 19
| PART II |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities | 20
Item 6. | Selected Financial Data | 22
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | 32
Item 8. | Financial Statements and Supplementary Data | 33
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 55
Item 9A. | Controls and Procedures | 55
Item 9B. | Other Information | 55
| PART III |
Item 10. | Directors, Executive Officers, and Corporate Governance | 56
Item 11. | Executive Compensation | 56
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 56
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 56
Item 14. | Principal Accounting Fees and Services | 57
| PART IV |
Item 15. | Exhibits, Financial Statement Schedules | 58
| Signatures | 59

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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 2015 consolidated total revenues of $13.5 billion. We are a service company. We provide freight transportation services and logistics solutions to companies of all sizes, in a wide variety of industries. During 2015, we handled approximately 16.9 million shipments and worked with more than 110,000 active customers. We operate through a network of offices in North America, Europe, Asia, 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.
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 transport our customers’ freight. We have contractual relationships with approximately 68,000 transportation companies, including motor carriers, railroads (primarily intermodal service providers), and air freight and ocean carriers. Depending on the needs of our customer and their supply chain requirements, we select and hire the appropriate transportation for each shipment. Our model enables us to be flexible, provide solutions that optimize service for our customers, and minimize our asset utilization risk. As an integral part of our transportation services, we provide a wide range of value-added logistics services, such as freight consolidation, supply chain consulting and analysis, optimization, and reporting.
In addition to transportation, we provide sourcing services (“Sourcing”) under the brand name Robinson Fresh (“Robinson Fresh”). Our Sourcing business is primarily the buying, selling, and/or marketing of fresh fruits, vegetables, and other value-added perishable items. It 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 our 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, value-added produce under recognized consumer brand names. The produce for these brands is sourced through our 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 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 the 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 office productivity.
Our network offices work together to complete transactions and collectively meet the needs of our customers. For large, multi-location customers, we often coordinate our efforts in Global Account Centers or in one office and rely on multiple locations to deliver specific geographic or modal needs. As an example, approximately 49 percent of our truckload shipments are shared transactions between offices. The majority of our global network operates on a common technology platform 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.
Historically, 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, and hiring additional employees. We have augmented our growth through selective acquisitions. In January 2015, we completed our acquisition of Freightquote.com, Inc. (“Freightquote”), a privately held freight broker based in Kansas City, Missouri. Freightquote provides services throughout North America. The acquisition enhances and brings synergies to our less-than-truckload and truckload businesses, and expands our eCommerce capabilities.
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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 sell. Our net revenues are the primary indicator of our ability to source, add value, and sell services and products that are provided by third parties, and we consider them to be our primary performance measurement. Accordingly, the discussion of our results of operations focuses on the changes in our net revenues.
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 hiring and training people, developing proprietary systems and processes, and utilizing our network of contracted transportation providers, including, but not limited to, contract motor carriers, railroads, air freight, and ocean carriers. We make a profit on the 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 all of 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 also offer time-definite and expedited truck transportation.

• | Less Than Truckload (“LTL”)-LTL transportation involves the shipment of single or multiple pallets of freight. We focus on shipments of a single pallet or larger, although we handle any size shipment. Through our contracts with motor carriers and our operating system, 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 1,000 intermodal containers.

• | Ocean-As a non-vessel ocean common carrier (“NVOCC”) or freight forwarder, we consolidate shipments, determine routing, select ocean carriers, contract for ocean shipments, and provide for local pickup and delivery of shipments.

• | Air-As a certified indirect air carrier (“Indirect Air Carrier”) or 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 to assist importers and exporters in meeting federal 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 a shipment-by-shipment basis, to the C.H. Robinson team responsible for their account. The team ensures that all appropriate information about each shipment is available in our proprietary operating system. This information is entered by our employees, by the customer through our web tools, or received electronically from the customers’ systems. With the help of information provided by our operating system, employees then select a contracted carrier or carriers, based upon his or her knowledge of the carrier’s service capability, equipment availability, freight rates, and other relevant factors. Based on the information he or she has about the market and rates, the employee may either determine an appropriate price at that point or wait to communicate with a contracted carrier directly before setting a price. In many cases, employees from different offices within our network collaborate to hire the appropriate contracted carrier for our customers’ freight, and the offices agree to an internal profit split.
Once the contracted carrier is selected, the employee communicates with the contract carrier to agree on the cost for the transportation and the contract carrier’s commitment to provide the transportation. We are in contact with the contract carrier through numerous means of communication to meet our customers’ requirements as well as track the status of the shipment from origin to delivery.
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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. In some cases, our services to the customer are priced on a spot market, or transactional, basis. In a number of instances, we have contracts with the customer in which we agree to handle an estimated number of shipments, usually to specified destinations, such as from the customer’s plant to a distribution center. Our commitments to handle the shipments are usually at pre-determined rates. Most of our 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, in addition to the underlying line-haul portion of the rate.
We purchase the majority of our truckload services from our contract truckload carriers on a spot market or transactional basis, even when we are working with the customer on a contractual basis. When we enter into spot transactions with contract motor carriers, we generally negotiate a mutually agreed-upon total market rate that includes all costs, including any applicable fuel expense. However, if requested by the contract carrier, we will estimate and report fuel separately. In a small number of cases, we may get advance commitments from one or more contract carriers to transport contracted shipments for the length of our customer contract. In those cases, where we have prearranged rates with contract carriers, there is a calculated fuel surcharge based on a mutually agreed-upon formula.
In the course of 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 worldwide basis that reduce or eliminate supply chain inefficiencies. We will analyze the customers’ current transportation rate structures, modes of shipping, and carrier selection. We can identify opportunities to consolidate shipments for cost savings. We will suggest ways to improve operating and shipping procedures and manage claims. We can help customers minimize storage through crossdocking and other flow-through operations. Many of these services are bundled with underlying transportation services and are not typically priced separately. They are usually included as a part of the cost of transportation services provided by us, 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.
As we have emphasized integrated logistics solutions, our relationships with many customers have broadened, and we have become a key provider to them by managing a greater portion of their supply chains. We may serve our customers through specially created teams and through several locations. Our transportation services are provided to numerous international customers through our worldwide network. See Note 1 to our 2015 consolidated financial statements included in Part II, Item 8 of this report for an allocation of our total revenues from domestic and foreign customers for the years ended December 31, 2015, 2014, and 2013 and our long-lived assets as of December 31, 2015, 2014, and 2013 in the United States and in foreign locations.
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The table below shows our net revenues by transportation mode for the periods indicated:

Year Ended December 31, |
(in thousands) | 2015 |  | 2014 |  | 2013 |  | 2012 |  | 2011
Truckload (1) | $ | 1,316,533 |  |  | $ | 1,190,372 |  |  | $ | 1,065,315 |  |  | $ | 1,113,116 |  |  | $ | 1,098,170 |
LTL | 360,706 |  |  | 258,884 |  |  | 239,477 |  |  | 224,160 |  |  | 198,735 |
Intermodal | 41,054 |  |  | 40,631 |  |  | 39,084 |  |  | 38,815 |  |  | 41,189 |
Ocean | 223,643 |  |  | 208,422 |  |  | 187,671 |  |  | 84,924 |  |  | 66,873 |
Air | 79,096 |  |  | 79,125 |  |  | 73,089 |  |  | 44,444 |  |  | 39,371 |
Customs | 43,929 |  |  | 41,575 |  |  | 36,578 |  |  | 18,225 |  |  | 13,100 |
Other Logistics Services | 82,548 |  |  | 73,097 |  |  | 67,931 |  |  | 57,449 |  |  | 46,772 |
Total | $ | 2,147,509 |  |  | $ | 1,892,106 |  |  | $ | 1,709,145 |  |  | $ | 1,581,133 |  |  | $ | 1,504,210 |

(1) We previously reported revenues from the fees we earn from our cash advance option offered to our contract carriers separately from Transportation revenues. Starting in the first quarter of 2015, on a retrospective basis, we are reporting these payment services revenues as a part of Transportation total and net revenues.
Transportation services accounted for approximately 95 percent of net revenues in 2015, 94 percent of our net revenues in 2014, and 93 percent in 2013. The increase in LTL in 2015 was primarily due to the acquisition of Freightquote on January 1, 2015. The increases in ocean, air, and customs revenues in 2012 and 2013 were primarily related to our acquisition of Phoenix International Freight Services, Ltd., (“Phoenix”), on November 1, 2012. For additional information, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of Part II of this report.
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 grocery retailers, restaurants, foodservice distributors, and produce wholesalers. In many instances, we consolidate individual customers’ 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 and restaurants, produce wholesalers, and foodservice distributors.
Our Sourcing services have expanded to include forecasting and replenishment, brand management, and category development services. We have various national and regional branded produce programs, including both proprietary brands and national 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 five percent of our net revenues in 2015, six percent of our net revenues in 2014, and seven percent of our net revenues in 2013.
Organization
Office Network. To keep us close to our customers and markets, we operate through a network of offices in North America, Europe, Asia, and South America. In 2015, we derived approximately 90 percent of our total revenues from customers in the United States.
Each office is responsible for its own growth and profitability. 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. Shipments to be transported by truck are priced at the local level, and offices cooperate with each other to hire contract carriers to provide transportation. Employees often rely on expertise in other offices when contracting 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.
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Employees both sell to and service their customers. Sales opportunities are identified through our internal database, referrals from current customers, leads generated by people through knowledge of their local and regional markets, and company marketing efforts. Employees are also responsible for recruiting new over the road contract carriers, who are referred to our centralized carrier services group to confirm they are properly licensed and insured and have acceptable Federal Motor Carrier Safety Administration (“FMCSA”) issued safety ratings.
Network Employees. Each office is responsible for its hiring and headcount decisions, based on the needs of their office and to balance personnel resources with business requirements. 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 recruiting group that develops a pipeline of qualified candidates that managers can draw from. Our applicants typically have college degrees, and some have business experience, although not necessarily within the transportation industry.
Early in their tenure, most newly-hired employees go through centralized training that emphasizes development of the skills necessary to become productive members of a team, including technology training on our proprietary systems and our customer service philosophy. Centralized training is followed by ongoing, on-the-job training. We expect most new employees to start contributing in a matter of weeks.
Employees operate and are compensated in large part on a team basis. The team structure is motivated by our performance-based compensation system, in which a significant portion of the cash compensation of most network office managers and many other employees is dependent on the profitability of their particular office. They are paid a performance-based bonus, which is a portion of the office’s earnings for that calendar year. The percentage they can potentially earn is predetermined in an annual bonus contract and is based on their productivity and contributions to the overall success of the office. Within our 401(k) plan, employees can also receive profit sharing contributions that depend on our overall profitability and other factors.
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 individual offices 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. We have a “promote from within” philosophy and fill nearly all management positions with current employees.
Shared Services. Our network offices are supported by our shared and centralized services. Approximately ten percent of our employees provide shared services in centralized centers. Approximately 44 percent of these shared services employees are information technology personnel who develop and maintain our proprietary operating system software and our wide area network.
Executive Officers
The Board of Directors designates the executive officers annually. Below are the names, ages, and positions of the executive officers:

Name |  | Age |  | Position
John P. Wiehoff |  | 54 |  | Chief Executive Officer, President, and Chairman of the Board
Robert C. Biesterfeld |  | 40 |  | President of North American Surface Transportation
Ben G. Campbell |  | 50 |  | Chief Legal Officer and Secretary
Andrew C. Clarke |  | 45 |  | Chief Financial Officer
Jeroen Eijsink |  | 43 |  | President of C.H. Robinson Europe
Angela K. Freeman |  | 48 |  | Chief Human Resources Officer
Jordan Kass |  | 43 |  | President of Managed Services
James P. Lemke |  | 48 |  | President of Robinson Fresh
Chad M. Lindbloom |  | 51 |  | Chief Information Officer
Christopher J. O’Brien |  | 48 |  | Chief Commercial Officer
Michael J. Short |  | 45 |  | President of Global Freight Forwarding

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John P. Wiehoff has been chief executive officer of C.H. Robinson since May 2002, president of the company since 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 that, John was employed by Arthur Andersen LLP. John also serves on the Boards of Directors of Polaris Industries Inc. (NYSE: PII), a provider of off-road vehicles, snowmobiles, motorcycles, and on-road electric/hybrid powered vehicles, and Donaldson Company, Inc. (NYSE: DCI), a provider of filtration systems. He holds a Bachelor of Science degree from St. John’s University.
Robert C. Biesterfeld was named president of North American Surface Transportation in 2016. Prior to that, Bob served as 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. Southwest Region for the company’s sourcing division from 2003 to 2011. He began his career with the company in 1999 as a key account manager in the Corporate Procurement and Distribution Services office. Bob graduated from Winona State University with a Bachelor of Arts.
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.
Andrew C. Clarke was named chief financial officer in June 2015. Prior to joining C.H. Robinson, Andrew was an industry consultant from February 2013 to May 2015. From July 2006 to February 2013, Andrew served as president and chief executive officer of Panther Expedited Services, now a wholly owned subsidiary of Arkansas Best Corporation. Prior to that, Andrew served as chief financial officer of Forward Air Corporation from 2001 to 2006. Currently, Andrew serves on the board of directors for Blount International, Inc. (NYSE: BLT), in Portland, Oregon. He holds a Bachelor of Science degree from Washington University in Missouri, and a Master of Business Administration from the University of Chicago Booth School of Business.
Jeroen Eijsink was named president of C.H. Robinson Europe in September 2015. Jeroen served as chief executive officer of DHL Freight Germany from March 2013 to August 2015. He also served as chief executive officer of DHL Freight Benelux and United Kingdom from January 2011 to February 2013 and managing director of DHL Freight United Kingdom and Ireland from May 2006 to December 2011.
Angela K. Freeman was named chief human resources officer in January 2015. Prior to that, she served as vice president of human resources from August 2012 to December 2014. Additional 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. Prior to joining C.H. Robinson in 1998, Angela was with McDermott/O’Neill & Associates, a Boston-based public affairs firm. She holds a Bachelor of Arts degree and a Bachelor of Science degree from the University of North Dakota, and a Master of Science from the London School of Economics. Angela also serves on the Board of Directors and Executive Committee of LeadersUp, a national non-profit organization.
Jordan 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. Additional positions with C.H. Robinson include director of TMC. 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.
James P. Lemke was named president of Robinson Fresh in January 2015. Prior to that, he served as senior vice president from December 2007 to December 2014, having previously served as vice president, Sourcing since 2003. Prior to that time, he served as the vice president and manager of C.H. Robinson’s Corporate Procurement and Distribution Services office. Jim joined the company in 1989. Jim holds a Bachelor of Arts degree in International Relations from the University of Minnesota. Jim is also the chairman of the Foundation Board of the United Fresh Produce Association. He also serves as a director for the Children’s Theatre Company in Minneapolis, Minnesota.
Chad M. Lindbloom was named chief information officer in January 2015. He served as chief financial officer from 1999 until June 2015. From June 1998 until December 1999, he served as corporate controller. Chad joined the company in 1990. Chad holds a Bachelor of Science degree and a Masters of Business Administration from the Carlson School of Management at the University of Minnesota.
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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 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. Christopher also serves on the Board of Trustees of the University of Minnesota’s Landscape Arboretum.
Michael J. Short was named president of global freight forwarding in May 2015. Prior to being named president, Mike served as vice president, global forwarding North America. Mike began his career in 1998 at Phoenix and subsequently joined C.H. Robinson in 2012 following our acquisition of Phoenix. Mike held a number of roles at Phoenix, including Regional Manager of the Midwest region from May 2007 to January 2010, General Manager of the St. Louis office from January 2000 to May 2007, and Sales Manager of the St. Louis office from August 1998 to January 2000. He graduated from the University of Missouri in 1993 with a Bachelor of Arts in Business.
Employees
As of December 31, 2015, we had a total of 13,159 employees, 11,800 of whom were located 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.
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 2015, we served over 110,000 active customers worldwide, ranging from Fortune 100 companies to small businesses in a wide variety of industries.
During 2015, 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 and decentralized structure 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.
In 2015, we continued to expand our corporate sales, account management, and marketing support to enhance sales capabilities. The network also calls on our executives and our corporate sales staff to support them in the pursuit of new business with companies that have more complex logistics requirements.
Relationships with Transportation Providers
We continually work on establishing contractual relationships with qualified transportation providers that also meet our service requirements to provide dependable services, favorable pricing, and contract carrier availability during periods when demand for transportation equipment is greater than the supply. Because we own very little transportation equipment and do not employ the people directly involved with the delivery of our customers’ freight, these relationships are critical to our success.
In 2015, we worked with approximately 68,000 transportation providers worldwide, of which the vast majority are contracted motor carriers. To strengthen and maintain our relationships with motor carriers, our employees regularly communicate with carriers and try to assist them by increasing their equipment utilization, reducing their empty miles, and repositioning their equipment. To make it easier for contract carriers to work with us, we have a policy of payment upon receipt of proof of delivery. For those contract carriers who would like a faster payment, we also offer payment within 48 hours of 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, and flatbeds. These contract carriers are of all sizes, including owner-operators of a single truck, small and midsize fleets, private fleets, and the largest national trucking companies. Consequently, we are not dependent on any one contract carrier. Our largest truck transportation provider was less than two percent of our total cost of transportation in 2015. Motor carriers that had fewer than 100 tractors transported approximately 83 percent of our truckload shipments in 2015. Every motor carrier with which we do business is required to execute a contract that establishes that the carrier is acting as an independent contractor. At the time the contract is executed, and daily, through subscriptions with a third party service, we confirm that each motor carrier is properly licensed and insured,
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has the necessary federally-issued authority to provide transportation services, and has the ability to provide the necessary level of service on a dependable basis. Our motor carrier contracts require that the 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 the initial contract rate is modified each time we confirm an individual shipment with a 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 1,000 53-foot 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 Indirect Air Carrier (“IAC”) internationally and in North America. 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 a large number of logistics 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;

• | 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.

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Seasonality
Historically, our operating results have been subject to seasonal trends. In recent years, including 2015 and 2014, operating income and earnings have been lower in the first quarter than in the other three quarters. However, this was not our experience in 2013. We believe this 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.
Proprietary Information Technology and Intellectual Property
Our information systems are essential to efficiently communicate, service our customers and contracted carriers, and manage our business. In 2015, we executed approximately 16.9 million shipments for more than 110,000 active customers with more than 68,000 contract carriers.
We rely on a combination of 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 operations use Navisphere®, a single platform that allows customers to communicate worldwide with every party 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 CHRWTrucks® web-based platform provides contracted carriers additional access to our systems. Contract carriers can access available freight, perform online check calls, keep track of receivables, and upload scanned documentation. Many of our carriers’ favorite features from CHRWTrucks® are also available through our CHRWTrucks® mobile application available for Android and IOS mobile operating systems.
Our systems help our employees service customer orders, select the optimal mode of transportation, build and consolidate shipments, and identify appropriate carriers, all based on customer-specific service parameters. Our systems provide our vast organization the necessary business intelligence to allow for near real time scorecards and necessary decision support in all areas of our business.
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 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 Indirect Air Carrier, providing air freight services, subject to commercial standards set forth by the International Air Transport Association and federal regulations issued by the Transportation Security Administration. We provide customs brokerage services as a customs broker under a license issued by the Bureau of U.S. Customs and Border Protection. 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 generally contractually require and/or rely on the carrier transporting the shipment to ensure compliance with these types of requirements. We, along with the contracted 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 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.
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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 motor carriers to maintain workers compensation and other insurance coverage as required by law. Many carriers have insurance exceeding these minimum requirements. Railroads, which are generally self-insured, provide limited common carrier liability protection, generally up to $250,000 per shipment.
As a property freight broker, we are not legally liable for 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, air freight businesses on international shipments, and domestic air shipments. With regards to international freight forwarding, ocean transportation, international and domestic air freight shipments, and shipments transacted by Freightquote, we offer our customers the option to purchase shippers interest 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. Our contingent automobile liability coverage has a 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 $250,000 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. Beginning in 2012, we carry product recall insurance coverage of $50 million. This policy has a retention of $5 million per incident.
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.
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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 U.S.; risks associated with the potential impacts 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, 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.

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, 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 is transactional or “spot” market opportunities. The transactional market may be more impacted than the 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, 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 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. Personnel expenses are our largest expense. 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 truckload services and pending changes in regulations may reduce available capacity and increase carrier pricing.
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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 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.
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 delivery 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 revenue and 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 truckload carriers;

• | changes in regulations impacting transportation;

• | disruption in the supply or cost of fuel;

• | reduction or deterioration in rail service; and

• | unanticipated changes in transportation rates.

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.
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.
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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 translation 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.
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 logistics companies, as well as transportation providers that own equipment, third party freight brokers, internet matching services, internet freight brokers, and carriers offering logistics services. 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.
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 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 systems in the past, and may occur on our systems in the future. Previous attacks on our 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 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.
Because we manage our business on a decentralized basis, our operations may be materially adversely affected by inconsistent management practices. We manage our business on a decentralized basis through a network of offices throughout North America, Europe, Asia, and South America, supported by executives and shared and centralized services, with local management responsible for day-to-day operations, profitability, personnel decisions, the growth of the business, and adherence to applicable local laws. Our decentralized operating strategy can make it difficult for us to implement strategic decisions and coordinated procedures throughout our global operations. In addition, some of our offices operate with management, sales, and support personnel that may be insufficient to support growth in their respective location without significant central oversight and coordination. Our decentralized operating strategy could result in inconsistent management practices and 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. In recent years, including 2015 and 2014, our operating income and earnings have been lower in the first quarter than in the other three quarters. However, this was not our experience in 2013. 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.
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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 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 carrier. Although these drivers are not our employees and all of these drivers are employees, owner-operators, or independent contractors working for 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 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 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 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 (such as drought, insects, and 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 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 $201 million for product liability claims, settlement of class action claims, subject to a $250,000 deductible, is often costly, and we cannot guarantee that our liability 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 consequential damages, which our insurance did not cover prior to 2012. Since 2012, we have carried 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 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 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 Indirect Air Carrier, providing air freight services, subject to commercial standards set forth by the International Air Transport Association and federal regulations issued by the Transportation Security Administration. We provide customs brokerage services as a customs broker under a license issued by the Bureau of U.S. Customs and Border Protection. We also have and maintain other licenses as required by law.
We source fresh produce under a license issued by the U.S. Department of Agriculture. 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 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
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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.
Our freight 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 29 percent of our consolidated total revenues and 25 percent of consolidated net revenues. Our largest customer comprises approximately two percent of our consolidated total revenues. The sudden loss of many of our major clients 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. 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.

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 four buildings in Eden Prairie is 357,000. This total includes approximately 221,000 square feet used for our corporate and shared services, our data center of approximately 18,000 square feet, and 118,000 square feet used for office operations.
Most of our offices 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. The following table lists our office locations of greater than 20,000 square feet:

Location | Approximate Square Feet
Kansas City, MO(1) | 208,000 |
Eden Prairie, MN | 153,000 |
Eden Prairie, MN(1) | 105,000 |
Eden Prairie, MN(1) | 81,000 |
Chicago, IL(1) | 80,000 |
Wood Dale, IL | 72,000 |
Chicago, IL | 48,000 |
Atlanta, GA | 40,000 |
Shanghai, CN | 29,000 |
Amsterdam, NL | 25,000 |
Elk Grove Village, IL | 25,000 |
Woodridge, IL | 22,000 |
Chicago, IL | 21,000 |
Minneapolis, MN | 21,000 |

____________________________

(1) | These properties are owned. All other properties in the table above are leased from third parties.

We also own or lease warehouses totaling approximately 1.6 million square feet of space in over 40 cities around the world. The following table lists our warehouses over 50,000 square feet:

Location | Approximate Square Feet
Long Beach, CA | 228,000 |
Des Plaines, IL | 219,000 |
Elk Grove Village, IL | 107,000 |
Atlanta, GA | 95,000 |
Bethlehem, PA | 85,000 |
Vancouver, OR | 79,000 |
Miramar, FL | 75,000 |
Edinburg, TX | 72,000 |
Plant City, FL(1) | 65,000 |
Doral, FL | 59,000 |
Bydgoszcz, PL | 52,000 |
Cobden, IL(1) | 52,000 |

____________________________

(1) | These properties are owned. All other properties in the table above are leased from third parties.

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. We have entered into a lease for a portion of a building to be built in Chicago, Illinois, with a substantial completion date in 2018. The lease of approximately 200,000 square feet will replace certain current space in Chicago that we own. Additionally, construction has commenced on a second data recovery center in southeastern Minnesota that will be 32,000 square feet, with a substantial completion date in 2016.
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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.
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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 under the symbol “CHRW” on October 15, 1997, and currently trades on the NASDAQ Global Select Market.
Quarterly market information can be found in Part II, Item 8. Financial Statements and Supplementary Data, Note 12.
On February 24, 2016, the closing sales price per share of our common stock as quoted on the NASDAQ Global Select Market was $70.23 per share. On February 24, 2016, there were approximately 151 holders of record and approximately 112,586 beneficial owners of our common stock.
We declared quarterly dividends during 2014 for an aggregate of $1.43 per share and quarterly dividends during 2015 for an aggregate of $1.57 per share. We have declared a quarterly dividend of $0.43 per share payable to shareholders of record as of March 4, 2016, payable on March 31, 2016. 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.
The following table provides information about company purchases of common stock during the quarter ended December 31, 2015:

| Total Number of Shares Purchased (a) |  | Average Price Paid Per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a) |  | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (b)
October 1, 2015-October 31, 2015 | 468,335 |  |  | $ | 70.74 |  |  | 466,460 |  |  | 7,397,472 |
November 1, 2015-November 30, 2015 | 251,313 |  |  | 68.24 |  |  | 249,123 |  |  | 7,148,349 |
December 1, 2015-December 31, 2015 | 264,164 |  |  | 62.81 |  |  | 262,688 |  |  | 6,885,661 |
Fourth quarter 2015 | 983,812 |  |  | $ | 67.97 |  |  | 978,271 |  |  | 6,885,661 |

________________________________
(a) The total number of shares purchased includes: (i) 978,271 shares of common stock purchased under the authorization described below; and (ii) 5,541 shares of common stock surrendered to satisfy minimum statutory tax obligations under our stock incentive plans.
(b) In August 2013, the Board of Directors increased the number of shares authorized to be repurchased by 15,000,000 shares. As of December 31, 2015, there were 6,885,661 shares remaining for future repurchases. 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, 2010 to December 31, 2015.

| December 31,
| 2010 |  | 2011 |  | 2012 |  | 2013 |  | 2014 |  | 2015
C.H. Robinson Worldwide, Inc. | $ | 100.00 |  |  | 88.49 |  |  | 81.96 |  |  | 77.53 |  |  | 101.83 |  |  | 86.33 |
S&P 500 | $ | 100.00 |  |  | 102.11 |  |  | 118.45 |  |  | 156.82 |  |  | 178.29 |  |  | 180.75 |
S&P Midcap 400 | $ | 100.00 |  |  | 98.27 |  |  | 115.84 |  |  | 154.64 |  |  | 169.75 |  |  | 166.05 |
NASDAQ Transportation | $ | 100.00 |  |  | 90.09 |  |  | 95.46 |  |  | 130.08 |  |  | 181.38 |  |  | 153.54 |

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, | 2015 |  | 2014 |  | 2013 |  | 2012 (1) |  | 2011
Total revenues | $ | 13,476,084 |  |  | $ | 13,470,067 |  |  | $ | 12,752,076 |  |  | $ | 11,359,113 |  |  | $ | 10,336,346 |
Net revenues | 2,268,480 |  |  | 2,007,652 |  |  | 1,836,095 |  |  | 1,717,571 |  |  | 1,632,658 |
Income from operations | 858,310 |  |  | 748,418 |  |  | 682,650 |  |  | 675,320 |  |  | 692,730 |
Net income | 509,699 |  |  | 449,711 |  |  | 415,904 |  |  | 593,804 |  |  | 431,612 |
Net income per share |  |  |  |  |  |  |  |  |
Basic | $ | 3.52 |  |  | $ | 3.06 |  |  | $ | 2.65 |  |  | $ | 3.68 |  |  | $ | 2.63 |
Diluted | $ | 3.51 |  |  | $ | 3.05 |  |  | $ | 2.65 |  |  | $ | 3.67 |  |  | $ | 2.62 |
Weighted average number of shares outstanding (in thousands) |  |  |  |  |  |  |  |  |
Basic | 144,967 |  |  | 147,202 |  |  | 156,915 |  |  | 161,557 |  |  | 164,114 |
Diluted | 145,349 |  |  | 147,542 |  |  | 157,080 |  |  | 161,946 |  |  | 164,741 |
Dividends per share | $ | 1.57 |  |  | $ | 1.43 |  |  | $ | 1.40 |  |  | $ | 1.34 |  |  | $ | 1.20 |
BALANCE SHEET DATA |  |  |  |  |  |  |  |  |
As of December 31, |  |  |  |  |  |  |  |  |
Working capital | $ | 282,101 |  |  | $ | 529,599 |  |  | $ | 394,504 |  |  | $ | 440,073 |  |  | $ | 734,911 |
Total assets | 3,184,358 |  |  | 3,214,338 |  |  | 2,802,818 |  |  | 2,804,225 |  |  | 2,138,041 |
Current portion of debt | 450,000 |  |  | 605,000 |  |  | 375,000 |  |  | 253,646 |  |  | — |
Long-term notes payable | 500,000 |  |  | 500,000 |  |  | 500,000 |  |  | — |  |  | — |
Stockholders’ investment | 1,150,450 |  |  | 1,047,015 |  |  | 939,724 |  |  | 1,504,372 |  |  | 1,248,474 |
OPERATING DATA |  |  |  |  |  |  |  |  |
As of December 31, |  |  |  |  |  |  |  |  |
Employees | 13,159 |  |  | 11,521 |  |  | 11,676 |  |  | 10,929 |  |  | 8,353 |

_________________________

(1) | The company’s results for 2012 were effected by certain significant event-specific charges or credits related to our acquisitions and divestitures. See “Reported to Adjusted Statements of Operations Data” on the following page and Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of Part II of this report.

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Non-GAAP Data Reconciliation
To assist readers in understanding our financial performance and the impact of certain significant charges or credits related to our acquisitions and divestitures in 2012, we supplement the financial results that are generated in accordance with the accounting principles generally accepted in the United States, or GAAP, with non-GAAP financial measures. These measures include non-GAAP income from operations, non-GAAP net income, and non-GAAP basic and diluted net income per share. We believe that these non-GAAP measures provide meaningful insight into our operating performance excluding certain event-specific charges, and provide an alternative perspective of our results of operations. We use non-GAAP measures, including those set forth in the table below, to assess our operating performance for the year. Management believes that these non-GAAP financial measures reflect an additional way of analyzing aspects of our ongoing operations that, when viewed with our GAAP results, provides a more complete understanding of the factors and trends affecting our business. A reconciliation of adjusted results reflecting the exclusion of certain non-recurring transaction impacts to our GAAP results is set forth below.
Reported to Adjusted Statements of Operations Data (in thousands, except per share amounts)

Non-GAAP Financial Measures | 2015 |  | 2014 |  | 2013 |  | 2012 |  | 2011
Income from operations | $ | 858,310 |  |  | $ | 748,418 |  |  | $ | 682,650 |  |  | $ | 675,320 |  |  | $ | 692,730 |
Adjustments to income from operations (1) | — |  |  | — |  |  | — |  |  | 45,196 |  |  | — |
Income from operations-adjusted | $ | 858,310 |  |  | $ | 748,418 |  |  | $ | 682,650 |  |  | $ | 720,516 |  |  | $ | 692,730 |
Interest and other (expense) income | $ | (35,529 | ) |  | $ | (24,987 | ) |  | $ | (9,289 | ) |  | $ | 283,142 |  |  | $ | 1,974 |
Adjustments to interest and other (expense) income (2) | — |  |  | — |  |  | — |  |  | (281,551 | ) |  | — |
Interest and other (expense) income-adjusted | $ | (35,529 | ) |  | $ | (24,987 | ) |  | $ | (9,289 | ) |  | $ | 1,591 |  |  | $ | 1,974 |
Income before income taxes | $ | 822,781 |  |  | $ | 723,431 |  |  | $ | 673,361 |  |  | $ | 958,462 |  |  | $ | 694,704 |
Adjustments to income before income taxes | — |  |  | — |  |  | — |  |  | (236,355 | ) |  | — |
Income before income taxes-adjusted | $ | 822,781 |  |  | $ | 723,431 |  |  | $ | 673,361 |  |  | $ | 722,107 |  |  | $ | 694,704 |
Net income | $ | 509,699 |  |  | $ | 449,711 |  |  | $ | 415,904 |  |  | $ | 593,804 |  |  | $ | 431,612 |
Adjustments to net income | — |  |  | — |  |  | — |  |  | (146,797 | ) |  | — |
Net income-adjusted | $ | 509,699 |  |  | $ | 449,711 |  |  | $ | 415,904 |  |  | $ | 447,007 |  |  | $ | 431,612 |
Net income per share (basic)-adjusted | $ | 3.52 |  |  | $ | 3.06 |  |  | $ | 2.65 |  |  | $ | 2.77 |  |  | $ | 2.63 |
Net income per share (diluted)-adjusted | $ | 3.51 |  |  | $ | 3.05 |  |  | $ | 2.65 |  |  | $ | 2.76 |  |  | $ | 2.62 |

_________________________

(1) | The adjustment to income from operations includes $34.6 million of personnel expense and $10.6 million of other selling, general, and administrative expenses. Adjustments to personnel expense include $33.0 million in incremental vesting expense of our equity awards triggered by the gain on the divestiture of T-Chek Systems, Inc., (“T-Chek”) and $1.4 million of transaction-related bonuses. Adjustments to other selling, general, and administrative expenses include amounts paid to third parties for investment banking, legal, and accounting fees related to acquisitions and divestitures.

(2) | The adjustment to interest and other (expense) income reflects the gain from the divestiture of T-Chek.

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ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
The following table summarizes our total revenues by service line (dollars in thousands):

For the years ended December 31, | 2015 |  | 2014 |  | Change |  | 2013 |  | Change
Transportation | $ | 11,989,780 |  |  | $ | 11,936,512 |  |  | 0.4 | % |  | $ | 11,082,942 |  |  | 7.7 | %
Sourcing | 1,486,304 |  |  | 1,533,555 |  |  | (3.1 | )% |  | 1,669,134 |  |  | (8.1 | )%
Total | $ | 13,476,084 |  |  | $ | 13,470,067 |  |  | — | % |  | $ | 12,752,076 |  |  | 5.6 | %

The following table illustrates our net revenue margins by service line:

For the years ended December 31, | 2015 |  | 2014 |  | 2013
Transportation | 17.9 | % |  | 15.9 | % |  | 15.4 | %
Sourcing | 8.1 | % |  | 7.5 | % |  | 7.6 | %
Total | 16.8 | % |  | 14.9 | % |  | 14.4 | %

The following table summarizes our net revenues by service line (dollars in thousands):

For the years ended December 31, | 2015 |  | 2014 |  | Change |  | 2013 |  | Change
Net revenues: |  |  |  |  |  |  |  |  |
Transportation |  |  |  |  |  |  |  |  |
Truckload (1) | $ | 1,316,533 |  |  | $ | 1,190,372 |  |  | 10.6 | % |  | $ | 1,065,315 |  |  | 11.7 | %
LTL (2) | 360,706 |  |  | 258,884 |  |  | 39.3 | % |  | 239,477 |  |  | 8.1 | %
Intermodal | 41,054 |  |  | 40,631 |  |  | 1.0 | % |  | 39,084 |  |  | 4.0 | %
Ocean | 223,643 |  |  | 208,422 |  |  | 7.3 | % |  | 187,671 |  |  | 11.1 | %
Air | 79,096 |  |  | 79,125 |  |  | — | % |  | 73,089 |  |  | 8.3 | %
Customs | 43,929 |  |  | 41,575 |  |  | 5.7 | % |  | 36,578 |  |  | 13.7 | %
Other Logistics Services | 82,548 |  |  | 73,097 |  |  | 12.9 | % |  | 67,931 |  |  | 7.6 | %
Total Transportation | 2,147,509 |  |  | 1,892,106 |  |  | 13.5 | % |  | 1,709,145 |  |  | 10.7 | %
Sourcing | 120,971 |  |  | 115,546 |  |  | 4.7 | % |  | 126,950 |  |  | (9.0 | )%
Total | $ | 2,268,480 |  |  | $ | 2,007,652 |  |  | 13.0 | % |  | $ | 1,836,095 |  |  | 9.3 | %

__________________________
(1) We previously reported revenues from the fees we earn from our cash advance option offered to our contract carriers separately from Transportation revenues. Starting in the first quarter of 2015, on a retrospective basis, we report these payment services revenues as a part of Transportation total and net revenues.
(2) Less than truckload (“LTL”)
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The following table represents certain statements of operations data, shown as percentages of our net revenues:

For the years ended December 31, | 2015 |  | 2014 |  | 2013
Net revenues | 100.0 | % |  | 100.0 | % |  | 100.0 | %
Operating expenses: |  |  |  |  |
Personnel expenses | 46.3 | % |  | 46.8 | % |  | 45.0 | %
Other selling, general, and administrative expenses | 15.8 | % |  | 15.9 | % |  | 17.8 | %
Total operating expenses | 62.2 | % |  | 62.7 | % |  | 62.8 | %
Income from operations | 37.8 | % |  | 37.3 | % |  | 37.2 | %
Interest and other expense | (1.6 | )% |  | (1.2 | )% |  | (0.5 | )%
Income before provision for income taxes | 36.3 | % |  | 36.0 | % |  | 36.7 | %
Provision for income taxes | 13.8 | % |  | 13.6 | % |  | 14.0 | %
Net income | 22.5 | % |  | 22.4 | % |  | 22.7 | %

OVERVIEW
Our company. We are a global provider of transportation services and logistics solutions, operating through a network of offices in North America, Europe, Asia, and South America. 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 transport our customers’ freight. We have contractual relationships with approximately 68,000 transportation companies, including motor carriers, railroads (primarily intermodal service providers), air freight, and ocean carriers. Depending on the needs of our customer and their supply chain requirements, we select and hire the appropriate transportation for each shipment. Our model enables us to be flexible, provide solutions that optimize service for our customers, and minimize our asset utilization risk.
In addition to transportation and logistics services, we also buy and sell fresh produce. Our Sourcing business is the buying, selling, and marketing of fresh produce. We purchase fresh produce through our network of produce suppliers and sell it to retail grocers, restaurant chains, produce wholesalers, and foodservice providers. In some cases, we also arrange the transportation of the produce we sell through our relationships with specialized transportation companies. Those revenues are reported as Transportation revenues.
Our business model. We are primarily a service company. We add value and expertise in the procurement and execution of transportation and logistics, including sourcing of produce products for our customers. Our total revenues represent the total dollar value of services and goods we sell to 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. Our net revenues are the primary indicator of our ability to source, add value, and sell services and products that are provided by third parties, and we consider them to be our primary performance measurement. Accordingly, the discussion of our results of operations below focuses on the changes in our net revenues.
We keep our business model as variable as possible to allow us to be flexible and adapt to changing economic and industry conditions. We sell transportation services and produce to our customers with varied pricing arrangements. Some prices are committed to for a period of time, subject to certain terms and conditions, and some prices are set on a spot market basis. We buy most of our truckload transportation capacity and produce on a spot market basis. Because of this, our net revenue per transaction tends to increase in times when there is excess supply and decrease in times when demand is strong relative to supply.
In 2015, changing market conditions impacted our results. Fuel prices declined throughout 2015, which contributed to slower growth of our total revenues and an increase in our transportation net revenue margins. In 2015, we completed the acquisition of Freightquote.com, Inc. (“Freightquote”). This acquisition contributed approximately 6.5 percentage points to our consolidated net revenue growth in 2015, primarily in our LTL service line.
In 2014, market conditions were very different than in 2013. There were capacity constraints in nearly all of our transportation services. Additionally, we experienced a decrease in the length of haul in our North American truckload business in 2014 compared to 2013, which contributed to increased net revenue margin in our truckload transportation business. In general, a shorter length of haul can result in higher customer rates and transportation costs per mile.
We keep our personnel and other operating expenses as variable as possible. Compensation is performance-oriented and, for most employees in the office network, based on the profitability of their individual office.
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Our personnel decisions are decentralized. Our office managers determine the appropriate number of employees for their offices, within productivity guidelines, based on their volume of business. This helps keep our personnel expense as variable as possible with the business.
Our office network. Our office network is a competitive advantage. Building local customer and contract carrier relationships has been an important part of our success, and our worldwide network of offices supports our core strategy of serving customers locally, nationally, and globally. Our network offices help us penetrate local markets, provide face-to-face service when needed, and recruit contract carriers. Our network also gives us knowledge of local market conditions, which is important in the transportation industry because it is market driven and very dynamic.
In January 2015, we completed our acquisition of Freightquote, a privately held freight broker based in Kansas City, Missouri. Freightquote provides services throughout North America. The acquisition enhances and brings synergies to our LTL and truckload businesses, and expands our eCommerce capabilities.
Our people. Because we are a service company, our continued success is dependent on our ability to continue to hire and retain talented, productive people, and to properly align our headcount and personnel expense with our business. Our headcount increased by 1,638 employees during 2015. Approximately 60 percent of this increase is a result of our acquisition of Freightquote. Employees act as a team in their sales efforts, customer service, and operations. A significant portion of many of our employees’ compensation is performance-oriented, based on individual performance and the profitability of their office. We believe this makes our employees more service-oriented and focused on driving growth and maximizing office productivity. 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.
Our customers. In 2015, we worked with more than 110,000 active customers. We work with a wide variety of companies, ranging in size from Fortune 100 companies to small family businesses, in many different industries. Our customer base is very diverse and unconcentrated. In 2015, our top 100 customers represented approximately 29 percent of our total revenues and approximately 25 percent of our net revenues. Our largest customer was approximately two percent of our total revenues.
Our contracted carriers. Our contracted carrier base includes motor carriers, railroads (primarily intermodal service providers), air freight, and ocean carriers. In 2015, our carrier base was approximately 68,000, up from approximately 63,000 in 2014. Motor carriers that had fewer than 100 tractors transported approximately 83 percent of our truckload shipments in 2015. In our Transportation business, no single contracted carrier represents more than approximately two percent of our contracted carrier capacity.
2015 COMPARED TO 2014
Total revenues and direct costs. Total Transportation revenues increased 0.4 percent to $12.0 billion in 2015 from $11.9 billion in 2014. This increase in Transportation revenues was driven by our acquisition of Freightquote and higher volumes in nearly all of our transportation modes. These increases were partially offset by decreased pricing to our customers primarily related to the declining cost of fuel. Total purchased transportation and related services decreased 2.0 percent in 2015 to $9.8 billion from $10.0 billion in 2014. This decrease was due to decreased transportation costs, primarily related to the declining cost of fuel, partially offset by the acquisition of Freightquote and higher volumes in nearly all of our transportation modes. Our Sourcing revenue decreased 3.1 percent to $1.49 billion in 2015 from $1.53 billion in 2014. Purchased products sourced for resale decreased 3.7 percent in 2015 to $1.37 billion from $1.42 billion in 2014. These decreases were primarily due to decreased revenue and cost per case, partially offset by increased case volumes.
Net revenues. Total Transportation net revenues increased 13.5 percent to $2.1 billion in 2015 from $1.9 billion in 2014. Our Transportation net revenue margin increased to 17.9 percent in 2015 from 15.9 percent in 2014. This increase in net revenue margin was driven by a decrease in transportation costs, including fuel, and a change in the mix of business due to growth in shorter length of haul freight and the addition of Freightquote.
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Our truckload net revenues increased 10.6 percent to $1.3 billion in 2015 from $1.2 billion in 2014. Truckload volumes increased approximately six percent in 2015. Organic truckload net revenues increased approximately seven percent in 2015. Our acquisition of Freightquote contributed approximately 3.5 percentage points to our truckload net revenue growth in 2015. North American truckload volumes increased approximately six percent in 2015. North American truckload volumes, excluding Freightquote, increased approximately three percent in 2015. Truckload net revenue margin increased in 2015 due the declining cost of fuel. In our truckload business, the cost of fuel is generally a pass through to our customers. Therefore, in periods of declining fuel prices, we tend to experience higher net revenue margin. Excluding the estimated impact of the change in fuel, on average, our truckload rates increased approximately one percent in 2015. Our truckload transportation costs were relatively unchanged, excluding the estimated impacts of the change in fuel.
LTL net revenues increased 39.3 percent to $360.7 million in 2015 from $258.9 million in 2014. Freightquote contributed approximately 33 percentage points to our LTL net revenue growth in 2015. Net revenue margin increased in 2015 as the result of a change in our freight mix with more small customers from the higher margin Freightquote business. LTL volumes increased approximately 32 percent in 2015.
Our intermodal net revenue increased 1.0 percent to $41.1 million in 2015 from $40.6 million in 2014. Freightquote contributed approximately $3.4 million to our intermodal net revenues in 2015. Conversion to truckload from intermodal negatively impacted intermodal volumes and net revenues throughout 2015. Our intermodal net revenues declined throughout 2015 and that trend has continued into 2016.
Our ocean transportation net revenues increased 7.3 percent to $223.6 million in 2015 from $208.4 million in 2014. The increase in net revenues was primarily due to increased net revenue margin and volumes.
Our air transportation net revenues were unchanged at $79.1 million in 2015 from $79.1 million in 2014. This was the result of higher volumes offset by pricing declines.
Our customs net revenues increased 5.7 percent to $43.9 million in 2015 from $41.6 million in 2014. The increase was due to increased transaction volumes.
Other logistics services net revenues, which include managed services, warehousing, and small parcel, increased 12.9 percent to $82.5 million in 2015 from $73.1 million in 2014. The increase in 2015 was primarily due to growth in managed services as a result of adding new customers. Freightquote contributed approximately two percentage points to our other logistics services net revenue growth in 2015.
Sourcing net revenues increased 4.7 percent to $121.0 million in 2015 from $115.5 million in 2014. This increase was primarily due to an increase in case volumes, slightly offset by a decrease in net revenue per case. Our net revenue margin increased to 8.1 percent in 2015 compared to 7.5 percent in 2014.
Operating expenses. Operating expenses increased 12.0 percent to $1.4 billion in 2015 from $1.3 billion in 2014. This was due to an increase of 12.0 percent in personnel expenses and an increase of 12.0 percent in other selling, general, and administrative expenses. As a percentage of net revenues, operating expenses decreased to 62.2 percent in 2015 from 62.7 percent in 2014.
Our personnel expenses are driven by headcount and earnings growth. In 2015, personnel expenses increased to $1.1 billion from $0.9 billion in 2014. Our personnel expenses as a percentage of net revenue decreased in 2015 to 46.3 percent from 46.8 percent in 2014. The increase in personnel expense was due primarily to an increase in average headcount growth of approximately 14 percent in 2015. Freightquote contributed approximately eight percentage points of the growth in average headcount during 2015. In addition, we experienced growth in expenses related to incentive plans that are designed to keep expenses variable with changes in net revenues and profitability.
Other selling, general, and administrative expenses increased 12.0 percent to $358.8 million in 2015 from $320.2 million in 2014. The increase in our selling, general, and administrative expenses is primarily due to our acquisition of Freightquote, including amortization expense of $7.6 million, and an increase in travel expenses.
Income from operations. Income from operations increased 14.7 percent to $858.3 million in 2015 from $748.4 million in 2014. Income from operations as a percentage of net revenues increased to 37.8 percent in 2015 from 37.3 percent in 2014. This increase was due to our net revenues growing more than our operating expenses.
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Interest and other expense. Interest and other expense was $35.5 million in 2015 compared to $25.0 million in 2014. During the fourth quarter, we wrote off an indemnification asset of $7.2 million related to the acquisition of Phoenix as the indemnification obligations of the sellers expired. The impact of this write off was partially offset within the provision for income taxes by related tax liabilities that expired under applicable statute of limitations. In addition, we had a higher average outstanding balance on our short-term borrowings throughout 2015 compared to 2014, primarily due to the acquisition of Freightquote.
Provision for income taxes. Our effective income tax rate was 38.1 percent for 2015 and 37.8 percent for 2014. The effective income tax rate for both periods is greater than the statutory federal income tax rate, primarily due to state income taxes, net of federal benefit.
Net income. Net income increased 13.3 percent to $509.7 million in 2015 from $449.7 million in 2014. Basic net income per share increased 15.0 percent to $3.52 from $3.06 in 2014. Diluted net income per share increased 15.1 percent to $3.51 from $3.05 in 2014.
2014 COMPARED TO 2013
Total revenues and direct costs. Our consolidated total revenues increased 5.6 percent in 2014 compared to 2013. Total Transportation revenues increased 7.7 percent to $11.9 billion in 2014 from $11.1 billion in 2013. This increase in Transportation revenues was driven by higher volumes in nearly all of our transportation modes and increased pricing to our customers. Total purchased transportation and related services increased 7.2 percent in 2014 to $10.0 billion from $9.4 billion in 2013. This increase was due to higher volumes in nearly all of our transportation modes and higher transportation costs. Our Sourcing revenue decreased 8.1 percent to $1.5 billion in 2014 from $1.7 billion in 2013. Purchased products sourced for resale decreased 8.1 percent in 2014 to $1.4 billion from $1.5 billion in 2013. These decreases were primarily due to decreased case volumes and a change in customer, product, and service mix.
Net revenues. Total Transportation net revenues increased 10.7 percent to $1.9 billion in 2014 from $1.7 billion in 2013. Our Transportation net revenue margin increased to 15.9 percent in 2014 from 15.4 percent in 2013, largely driven by an increase in transportation rates charged to our customers, partially offset by higher transportation costs.
Our truckload net revenues increased 11.7 percent to $1.2 billion in 2014 from $1.1 billion in 2013. Truckload volumes increased approximately 3 percent in 2014. Truckload net revenue margin increased in 2014 due to increased rates charged to our customers, partially offset by increased cost of capacity. Excluding the estimated impact of the change in fuel, on average, our truckload rates increased approximately 11 percent in 2014. Our truckload transportation costs increased approximately 10 percent, excluding the estimated impacts of the change in fuel.
LTL net revenues increased 8.1 percent to $258.9 million in 2014 from $239.5 million in 2013. The increase in net revenues was driven by an increase in total shipments of approximately seven percent and increased customer pricing, partially offset by decreased net revenue margin.
Our intermodal net revenue increase of 4.0 percent to $40.6 million in 2014 from $39.1 million in 2013 was driven largely by a change in the mix of business and improved customer pricing, partially offset by volume declines.
Our ocean transportation net revenues increased 11.1 percent to $208.4 million in 2014 from $187.7 million in 2013. The increase in net revenues was primarily due to increased volumes and net revenue margin.
Our air transportation net revenues increased 8.3 percent to $79.1 million in 2014 from $73.1 million in 2013. The increase was primarily due to increased net revenue margin and volumes.
Our customs net revenues increased 13.7 percent to $41.6 million in 2014 from $36.6 million in 2013. The increase was due to increased transaction volumes.
Other logistics services net revenues, which include managed services, warehousing, and small parcel, increased 7.6 percent to $73.1 million in 2014 from $67.9 million in 2013. The increase in 2014 was primarily due to growth in managed services as a result of adding new customers.
Sourcing net revenues decreased 9.0 percent to $115.5 million in 2014 from $127.0 million in 2013. This decrease was primarily due to a change in customer, product, and service mix. Our net revenue margin decreased to 7.5 percent in 2014 compared to 7.6 percent in 2013.
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Operating expenses. Operating expenses increased 9.2 percent to $1.3 billion in 2014 from $1.2 billion in 2013. This was due to an increase of 13.6 percent in personnel expenses and a decrease of 2.0 percent in other selling, general, and administrative expenses. As a percentage of net revenues, operating expenses decreased to 62.7 percent in 2014 from 62.8 percent in 2013.
Our personnel expenses are driven by headcount and earnings growth. In 2014, personnel expenses increased to $939.0 million from $826.7 million in 2013. Our personnel expenses as a percentage of net revenue increased in 2014 to 46.8 percent from 45.0 percent in 2013. The increase in personnel expense was due primarily to an increase in expenses related to incentive plans that are designed to keep expenses variable with changes in net revenues and profitability, in addition to average headcount growth of 2.7 percent in 2014.
Other selling, general, and administrative expenses decreased 2.0 percent to $320.2 million in 2014 from $326.8 million in 2013. The decrease in our selling, general, and administrative expenses is primarily related to decreases in claims and travel expenses.
Income from operations. Income from operations increased 9.6 percent to $748.4 million in 2014 from $682.7 million in 2013. Income from operations as a percentage of net revenues increased to 37.3 percent in 2014 from 37.2 percent in 2013. This increase was due to our net revenues growing more than our operating expenses.
Interest and other expense. Interest and other expense was $25.0 million in 2014 compared to $9.3 million in 2013. The increase was due primarily to the interest expense related the long-term notes issued during the third quarter of 2013.
Provision for income taxes. Our effective income tax rate was 37.8 percent for 2014 and 38.2 percent for 2013. The effective income tax rate for both periods is greater than the statutory federal income tax rate, primarily due to state income taxes, net of federal benefit.
Net income. Net income increased 8.1 percent to $449.7 million in 2014 from $415.9 million in 2013. Basic net income per share increased 15.5 percent to $3.06 from $2.65 in 2013. Diluted net income per share increased 15.1 percent to $3.05 from $2.65 in 2013. Our weighted average basic and diluted shares outstanding decreased 6.2 percent and 6.1 percent respectively in 2014 compared to 2013, primarily due to the 8.5 million shares repurchased as part of accelerated share (“ASR”) repurchase program initiated in 2013.
LIQUIDITY AND CAPITAL RESOURCES
We have historically generated substantial cash from operations, which has enabled us to fund our growth while paying cash dividends and repurchasing stock. In December 2014, we amended our revolving credit facility to increase the amount available from $500 million to $900 million, to extend the expiration date from October 2017 to December 2019, and to revise a covenant ratio. In 2013, we entered into a Note Purchase Agreement to fund the accelerated share repurchase agreements to repurchase $500 million worth of our common stock. The Note Purchase Agreement was amended in February 2015 to conform its financial covenants to be consistent with the amended revolving credit facility. We also expect to use the revolving credit facility, 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 $168.2 million and $128.9 million as of December 31, 2015 and 2014. Cash and cash equivalents held outside the United States totaled $114.3 million and $80.6 million as of December 31, 2015 and 2014. Working capital at December 31, 2015, was $282.1 million. Working capital at December 31, 2014, was $529.6 million.
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.
Cash flow from operating activities. We generated $718.3 million, $513.4 million, and $347.8 million of cash flow from operations in 2015, 2014, and 2013. The increase of $204.9 million in cash flow from operations in 2015 is primarily the result of a decrease in accounts receivable and an increase in net income, partially offset by a decrease in accounts payable. The decreases in accounts receivable and accounts payable are primarily the result of declining fuel prices.
Cash used for investing activities. We used $54.4 million of cash in 2015, $388.9 million of cash in 2014, and $28.9 million of cash in 2013 for investing activities. Our investing activities consist primarily of capital expenditures and cash paid for acquisitions. On December 31, 2014, we funded $359.4 million of the purchase price for the acquisition of Freightquote into escrow accounts pursuant to the purchase agreement and for completion of the acquisition in January 2015.
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We used $44.6 million, $29.5 million, and $48.2 million of cash for capital expenditures in 2015, 2014, and 2013. We spent $26.0 million, $24.0 million,and $35.9 million in 2015, 2014, and 2013 primarily for annual investments in information technology equipment to support our operating systems, including the purchase and development of software. These information technology investments are intended to improve efficiencies and help grow the business. Additionally, in 2014, we completed a new office building on our corporate campus in Eden Prairie, Minnesota. This building was completed in the first quarter of 2014 and it replaced space we previously leased in Eden Prairie. The cost of the building was approximately $18.5 million, and the majority was funded in 2013.
We anticipate capital expenditures in 2016 to be approximately $70 million to $80 million. The increase is primarily the result of the planned construction of an additional data center, which is expected to be completed in 2016.
Cash used for financing activities. We used $607.7 million, $143.6 million, and $364.9 million of cash flow for financing activities in 2015, 2014, and 2013.
We had net short-term repayments of $155.0 million in 2015 and net short-term borrowings of $230.0 million in 2014. On October 29, 2012, we entered into a senior unsecured revolving credit facility for up to $500 million with a $500 million accordion feature. In December of 2014, we amended this facility to increase the amount available from $500 million to $900 million, extended the expiration of the facility from October 2017 to December 2019, and revise a covenant ratio. This facility had $450.0 million outstanding as of December 31, 2015. The original purpose of this facility was to partially fund the acquisition of Phoenix and will assist us in continuing to fund working capital, capital expenditures, possible acquisitions, dividends, and share repurchases. Advances under the facility carry an interest rate based on our total funded debt to total capitalization, as measured at the end of each quarter, and are based on a spread over LIBOR for outstanding balances. In addition, there is a commitment fee on the average daily undrawn stated amount under each letter of credit issued under the facility. The credit agreement contains certain financial covenants that require us to maintain a minimum fixed leverage ratio and minimum liquidity. We were in compliance with all of the credit facility’s debt covenants as of December 31, 2015.
On August 23, 2013, we entered into a Note Purchase Agreement for $500.0 million, of which the entire balance was outstanding as of December 31, 2015, and December 31, 2014. The primary purpose of this agreement was to fund the ASR agreements that were entered into on August 24, 2013. The agreement contains certain financial covenants that require us to maintain a minimum leverage ratio, an interest coverage ratio, and minimum liquidity. We were in compliance with all the covenants in the Notes as of December 31, 2015. The Note Purchase Agreement was amended in February 2015 to conform its financial covenants to be consistent with the amended revolving credit facility.
We used $235.6 million, $215.0 million, and $220.3 million to pay cash dividends in 2015, 2014, and 2013. The increase in 2015 was primarily the result of higher dividends paid compared to 2014. The decrease in 2014 was due to a decrease in the number of shares outstanding compared to 2013, primarily as a result of the accelerated share repurchases made in 2013.
We also used $229.9 million, $164.0 million, and $757.3 million on share repurchases in 2015, 2014, and 2013. In August 2013, the Board of Directors increased the number of shares authorized to be repurchased by 15,000,000 shares. As of December 31, 2015, there were 6,885,661 shares remaining for future repurchases. The number of shares we repurchase, if any, during future periods will vary based on our cash position, potential 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 facility, and credit available in the market, will be sufficient to satisfy our anticipated needs for working capital, capital expenditures, and cash dividends in future periods. 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 include accounts of the company and all majority-owned subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. In certain circumstances, those estimates and assumptions can affect amounts reported in the accompanying consolidated financial statements and related footnotes. In preparing our financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Note 1 of the Notes to consolidated financial statements includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. The following is a brief discussion of our critical accounting policies and estimates.
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Revenue recognition. Total revenues consist of the total dollar value of goods and services purchased from us by customers. Net revenues are total revenues less the direct costs of transportation, products, and handling. We act principally as the service provider for these transactions and recognize revenue as these services are rendered or goods are delivered. At that time, our obligations to the transactions are completed and collection of receivables is reasonably assured. 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 the primary obligor, we have credit risk, we have discretion to select the supplier, and we have latitude in pricing decisions.
Additionally, in our Sourcing business, we take loss of inventory risk during shipment and have general inventory risk. Certain transactions in customs brokerage, managed services, freight forwarding, and sourcing 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.
Valuations for accounts receivable. Our allowance for doubtful accounts is calculated based upon the aging of our receivables, our historical experience of uncollectible accounts, and any specific customer collection issues that we have identified. The allowance of $43.5 million as of December 31, 2015, increased compared to the allowance of $41.1 million as of December 31, 2014. This increase was primarily due to changes in the risk level of our accounts receivable portfolio. We believe that the recorded allowance is sufficient and appropriate based on our customer aging trends, the exposures we have identified, and our historical loss experience.
Goodwill. We manage and report our operations as one operating segment. Our network of offices represent a series of components that are aggregated for the purpose of evaluating goodwill for impairment on an enterprise-wide basis. The fair value of the enterprise-wide reporting unit substantially exceeds the book value; therefore we have determined that there is no goodwill impairment as of December 31, 2015.
Stock-based compensation. We issue stock awards, including stock options, performance shares, and restricted stock units, to key employees and outside directors. In general, the awards vest over five years, either based on the company’s earnings growth or the passage of time. The fair value of each share-based payment award is established on the date of grant. For grants of restricted shares and restricted units, the fair value is established based on the market price on the date of the grant, discounted for post-vesting holding restrictions. The discounts on outstanding grants vary from 17 percent to 22 percent and are calculated using the Black-Scholes option pricing model. Changes in the measured stock price volatility and interest rates are the primary reason for changes in the discount. For grants of options, we use the Black-Scholes option pricing model to estimate the fair value of the awards. The determination of the fair value is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate, and expected dividends.
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, 2015 (dollars in thousands):

| 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | Thereafter |  | Total
Borrowings under credit agreements | $ | 450,000 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 450,000 |
Long-term notes payable(1) | 21,388 |  |  | 21,388 |  |  | 21,388 |  |  | 21,388 |  |  | 21,388 |  |  | 676,612 |  |  | 783,552 |
Operating leases(2) | 43,888 |  |  | 39,108 |  |  | 31,349 |  |  | 27,842 |  |  | 22,437 |  |  | 108,845 |  |  | 273,469 |
Purchase obligations(3) | 64,753 |  |  | 11,221 |  |  | 10,111 |  |  | 8,093 |  |  | 7,730 |  |  | — |  |  | 101,908 |
Total | $ | 580,029 |  |  | $ | 71,717 |  |  | $ | 62,848 |  |  | $ | 57,323 |  |  | $ | 51,555 |  |  | $ | 785,457 |  |  | $ | 1,608,929 |

_______________________

(1) | Amounts payable relate to the semi-annual interest due on the long-term notes and the principal amount at maturity.

(2) | We have certain facilities and equipment under operating leases.

(3) | Purchase obligations include agreements for services that are enforceable and legally binding and that specify all significant terms. As of December 31, 2015, such obligations include ocean and air freight capacity, telecommunications services, and maintenance contracts.

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We have no capital lease obligations. Long-term liabilities consist of noncurrent income taxes payable, long-term notes payable, and the obligation under our non-qualified deferred compensation plan. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at December 31, 2015, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority. Therefore, $19.6 million of unrecognized tax benefits have been excluded from the contractual obligations table above. See Note 5 to the consolidated financial statements for a discussion on income taxes. The obligation under our non-qualified deferred compensation plan has also been excluded from the above table as the timing of cash payment is uncertain. As of December 31, 2015, 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 $168.2 million of cash and cash equivalents on December 31, 2015. 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 $900 million revolving loan facility. Interest accrues on the revolving loan at variable rates based on LIBOR or “prime” plus the applicable add-on percentage as defined. At December 31, 2015, there was $450.0 million outstanding 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) $175,000,000 of the company’s 3.97 percent Senior Notes, Series A, due August 27, 2023, (ii) $150,000,000 of the company’s 4.26 percent Senior Notes, Series B, due August 27, 2028, and (iii) $175,000,000 of the company’s 4.60 percent Senior Notes, Series C, due August 27, 2033. At December 31, 2015, there was $500.0 million outstanding on the notes.
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 investments. Market risk arising from changes in foreign currency exchange rates are not material due to the size of our international operations.
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ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
C.H. Robinson Worldwide, Inc.
Eden Prairie, MN
We have audited the accompanying consolidated balance sheets of C.H. Robinson Worldwide, Inc. and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive income, stockholders’ investment, and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of C.H. Robinson Worldwide, Inc. and subsidiaries at December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2016, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Minneapolis, Minnesota
February 29, 2016
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
C.H. Robinson Worldwide, Inc.
Eden Prairie, MN
We have audited the internal control over financial reporting of C.H Robinson Worldwide, Inc. and subsidiaries (the “Company”) as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2015 of the Company and our report dated February 29, 2016 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.
Minneapolis, Minnesota
February 29, 2016
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C.H. ROBINSON WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS

| December 31,
(In thousands, except per share data) | 2015 |  | 2014
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 168,229 |  |  | $ | 128,940 |
Restricted cash | — |  |  | 359,388 |
Receivables, net of allowance for doubtful accounts of $43,455 and $41,051 | 1,505,620 |  |  | 1,571,591 |
Deferred tax asset | 16,788 |  |  | 7,746 |
Prepaid expenses and other | 40,061 |  |  | 37,794 |
Total current assets | 1,730,698 |  |  | 2,105,459 |
Property and equipment | 379,139 |  |  | 313,688 |
Accumulated depreciation and amortization | (188,265 | ) |  | (161,217 | )
Net property and equipment | 190,874 |  |  | 152,471 |
Goodwill | 1,108,337 |  |  | 825,038 |
Other intangible assets, net of accumulated amortization of $61,405 and $36,917 | 120,242 |  |  | 98,330 |
Other assets | 34,207 |  |  | 33,040 |
Total assets | $ | 3,184,358 |  |  | $ | 3,214,338 |
LIABILITIES AND STOCKHOLDERS’ INVESTMENT |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 697,585 |  |  | $ | 716,654 |
Outstanding checks | 86,298 |  |  | 78,601 |
Accrued expenses– |  |  |
Compensation and profit-sharing contribution | 146,666 |  |  | 125,624 |
Income taxes | 12,573 |  |  | 4,616 |
Other accrued liabilities | 55,475 |  |  | 45,365 |
Current portion of debt | 450,000 |  |  | 605,000 |
Total current liabilities | 1,448,597 |  |  | 1,575,860 |
Long-term debt | 500,000 |  |  | 500,000 |
Noncurrent income taxes payable | 19,634 |  |  | 24,279 |
Deferred tax liabilities | 65,460 |  |  | 66,961 |
Other long-term liabilities | 217 |  |  | 223 |
Total liabilities | 2,033,908 |  |  | 2,167,323 |
Commitments and contingencies |  |  |
Stockholders’ investment: |  |  |
Preferred stock, $ .10 par value, 20,000 shares authorized; no shares issued or outstanding | — |  |  | — |
Common stock, $ .10 par value, 480,000 shares authorized; 178,784 and 178,621 shares issued, 143,455 and 146,458 outstanding | 14,345 |  |  | 14,646 |
Additional paid-in capital | 379,444 |  |  | 321,968 |
Retained earnings | 2,922,620 |  |  | 2,648,539 |
Accumulated other comprehensive loss | (37,946 | ) |  | (28,610 | )
Treasury stock at cost (35,329 and 32,163 shares) | (2,128,013 | ) |  | (1,909,528 | )
Total stockholders’ investment | 1,150,450 |  |  | 1,047,015 |
Total liabilities and stockholders’ investment | $ | 3,184,358 |  |  | $ | 3,214,338 |

See accompanying notes to the consolidated financial statements.
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C.H. ROBINSON WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

| For the years ended December 31,
(In thousands, except per share data) | 2015 |  | 2014 |  | 2013
Revenues: |  |  |  |  |
Transportation | $ | 11,989,780 |  |  | $ | 11,936,512 |  |  | $ | 11,082,942 |
Sourcing | 1,486,304 |  |  | 1,533,555 |  |  | 1,669,134 |
Total revenues | 13,476,084 |  |  | 13,470,067 |  |  | 12,752,076 |
Costs and expenses: |  |  |  |  |
Purchased transportation and related services | 9,842,271 |  |  | 10,044,406 |  |  | 9,373,797 |
Purchased products sourced for resale | 1,365,333 |  |  | 1,418,009 |  |  | 1,542,184 |
Personnel expenses | 1,051,410 |  |  | 939,021 |  |  | 826,661 |
Other selling, general, and administrative expenses | 358,760 |  |  | 320,213 |  |  | 326,784 |
Total costs and expenses | 12,617,774 |  |  | 12,721,649 |  |  | 12,069,426 |
Income from operations | 858,310 |  |  | 748,418 |  |  | 682,650 |
Interest and other expense | (35,529 | ) |  | (24,987 | ) |  | (9,289 | )
Income before provision for income taxes | 822,781 |  |  | 723,431 |  |  | 673,361 |
Provision for income taxes | 313,082 |  |  | 273,720 |  |  | 257,457 |
Net income | 509,699 |  |  | 449,711 |  |  | 415,904 |
Other comprehensive loss | (9,336 | ) |  | (17,990 | ) |  | (1,275 | )
Comprehensive income | $ | 500,363 |  |  | $ | 431,721 |  |  | $ | 414,629 |
Basic net income per share | $ | 3.52 |  |  | $ | 3.06 |  |  | $ | 2.65 |
Diluted net income per share | $ | 3.51 |  |  | $ | 3.05 |  |  | $ | 2.65 |
Basic weighted average shares outstanding | 144,967 |  |  | 147,202 |  |  | 156,915 |
Dilutive effect of outstanding stock awards | 382 |  |  | 340 |  |  | 165 |
Diluted weighted average shares outstanding | 145,349 |  |  | 147,542 |  |  | 157,080 |

See accompanying notes to the consolidated financial statements.
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C.H. ROBINSON WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ INVESTMENT

(In thousands, except per share data) | Common Shares Outstanding |  | Amount |  | Additional Paid-in Capital |  | Retained Earnings |  | Accumulated Other Comprehensive Loss |  | Treasury Stock |  | Total Stockholders’ Investment
Balance December 31, 2012 | 161,327 |  |  | $ | 16,133 |  |  | $ | 303,479 |  |  | $ | 2,218,229 |  |  | $ | (9,345 | ) |  | $ | (1,024,124 | ) |  | $ | 1,504,372 |
Net income |  |  |  |  |  |  | 415,904 |  |  |  |  |  |  | 415,904 |
Foreign currency translation adjustment |  |  |  |  |  |  |  |  | (1,275 | ) |  |  |  | (1,275 | )
Dividends declared, $1.40 per share |  |  |  |  |  |  | (220,300 | ) |  |  |  |  |  | (220,300 | )
Stock issued for employee benefit plans | 263 |  |  | 26 |  |  | (45,106 | ) |  |  |  |  |  | 10,102 |  |  | (34,978 | )
Issuance of restricted stock | 335 |  |  | 34 |  |  | (34 | ) |  |  |  |  |  |  |  |  | — |
Stock-based compensation expense | 30 |  |  | 3 |  |  | 7,346 |  |  |  |  |  |  |  | 1,747 |  |  | 9,096 |
Excess tax benefit on deferred compensation and employee stock plans |  |  |  |  | 27,209 |  |  |  |  |  |  |  |  | 27,209 |
Repurchase of common stock | (11,758 | ) |  | (1,176 | ) |  | (75,000 | ) |  |  |  |  |  | (684,128 | ) |  | (760,304 | )
Balance December 31, 2013 | 150,197 |  |  | 15,020 |  |  | 217,894 |  |  | 2,413,833 |  |  | (10,620 | ) |  | (1,696,403 | ) |  | 939,724 |
Net income |  |  |  |  |  |  |  |  |  | 449,711 |  |  |  |  |  |  |  |  | 449,711 |
Foreign currency translation adjustment |  |  |  |  |  |  |  |  | (17,990 | ) |  |  |  | (17,990 | )
Dividends declared, $1.43 per share |  |  |  |  |  |  | (215,005 | ) |  |  |  |  |  |  | (215,005 | )
Stock issued for employee benefit plans | 405 |  |  | 40 |  |  | (24,644 | ) |  |  |  |  |  |  | 23,937 |  |  | (667 | )
Issuance of restricted stock | (410 | ) |  | (41 | ) |  | 41 |  |  |  |  |  |  |  |  |  | — |
Stock-based compensation expense | 30 |  |  | 3 |  |  | 46,119 |  |  |  |  |  |  |  | 1,599 |  |  | 47,721 |
Excess tax benefit on deferred compensation and employee stock plans |  |  |  |  | 7,558 |  |  |  |  |  |  |  |  |  | 7,558 |
Repurchase of common stock | (3,764 | ) |  | (376 | ) |  | 75,000 |  |  |  |  |  |  |  | (238,661 | ) |  | (164,037 | )
Balance December 31, 2014 | 146,458 |  |  | 14,646 |  |  | 321,968 |  |  | 2,648,539 |  |  | (28,610 | ) |  | (1,909,528 | ) |  | 1,047,015 |
Net income |  |  |  |  |  |  | 509,699 |  |  |  |  |  |  | 509,699 |
Foreign currency translation adjustment |  |  |  |  |  |  |  |  | (9,336 | ) |  |  |  | (9,336 | )
Dividends declared, $1.57 per share |  |  |  |  |  |  | (235,618 | ) |  |  |  |  |  | (235,618 | )
Stock issued for employee benefit plans | 254 |  |  | 25 |  |  | (9,095 | ) |  |  |  |  |  | 13,258 |  |  | 4,188 |
Issuance of restricted stock | 164 |  |  | 16 |  |  | (16 | ) |  |  |  |  |  |  |  |  | — |
Stock-based compensation expense |  |  |  |  |  |  | 58,039 |  |  |  |  |  |  |  | 28 |  |  | 58,067 |
Excess tax benefit on deferred compensation and employee stock plans |  |  |  |  | 8,548 |  |  |  |  |  |  |  |  | 8,548 |
Repurchase of common stock | (3,421 | ) |  | (342 | ) |  |  |  |  |  |  |  | (231,771 | ) |  | (232,113 | )
Balance December 31, 2015 | 143,455 |  |  | $ | 14,345 |  |  | $ | 379,444 |  |  | $ | 2,922,620 |  |  | $ | (37,946 | ) |  | $ | (2,128,013 | ) |  | $ | 1,150,450 |

See accompanying notes to the consolidated financial statements.
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C.H. ROBINSON WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

| For the year ended December 31,
(In thousands) | 2015 |  | 2014 |  | 2013
OPERATING ACTIVITIES |  |  |  |  |
Net income | $ | 509,699 |  |  | $ | 449,711 |  |  | $ | 415,904 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Depreciation and amortization | 66,409 |  |  | 57,009 |  |  | 56,882 |
Provision for doubtful accounts | 11,538 |  |  | 15,092 |  |  | 15,587 |
Stock-based compensation | 57,661 |  |  | 47,861 |  |  | 9,094 |
Gain on divestiture | — |  |  | (1,848 | ) |  | — |
Deferred income taxes | (17,095 | ) |  | (3,117 | ) |  | 25,226 |
Other | 7,409 |  |  | 710 |  |  | 314 |
Other long-term liabilities | — |  |  | — |  |  | 5 |
Changes in operating elements, net of effects of acquisitions: |  |  |  |  |
Receivables | 107,560 |  |  | (137,102 | ) |  | (87,316 | )
Prepaid expenses and other | (228 | ) |  | 6,294 |  |  | (5,254 | )
Other non-current assets | 741 |  |  | 380 |  |  | — |
Accounts payable and outstanding checks | (53,272 | ) |  | 40,251 |  |  | 47,488 |
Accrued compensation and profit-sharing contribution | 18,580 |  |  | 40,236 |  |  | (15,097 | )
Accrued income taxes | 5,178 |  |  | (4,370 | ) |  | (105,857 | )
Other accrued liabilities | 4,156 |  |  | 2,319 |  |  | (9,199 | )
Net cash provided by operating activities | 718,336 |  |  | 513,426 |  |  | 347,777 |
INVESTING ACTIVITIES |  |  |  |  |
Purchases of property and equipment | (28,115 | ) |  | (22,364 | ) |  | (40,354 | )
Purchases and development of software | (16,527 | ) |  | (7,138 | ) |  | (7,852 | )
Acquisitions, net of cash acquired | (369,833 | ) |  | — |  |  | 19,126 |
Restricted cash | 359,388 |  |  | (359,388 | ) |  | — |
Other | 641 |  |  | (6 | ) |  | 221 |
Net cash used for investing activities | (54,446 | ) |  | (388,896 | ) |  | (28,859 | )
FINANCING ACTIVITIES |  |  |  |  |
Proceeds from stock issued for employee benefit plans | 15,557 |  |  | 11,942 |  |  | 15,166 |
Stock tendered for payment of withholding taxes | (11,368 | ) |  | (12,604 | ) |  | (50,144 | )
Payment of contingent purchase price | — |  |  | — |  |  | (927 | )
Repurchase of common stock | (229,863 | ) |  | (164,041 | ) |  | (757,305 | )
Cash dividends | (235,615 | ) |  | (215,008 | ) |  | (220,257 | )
Excess tax benefit on stock-based compensation | 8,548 |  |  | 7,558 |  |  | 27,209 |
Proceeds from short-term borrowings | 6,833,000 |  |  | 4,823,000 |  |  | 4,165,023 |
Payments on short-term borrowings | (6,988,000 | ) |  | (4,593,000 | ) |  | (4,043,669 | )
Debt issuance costs | — |  |  | (1,484 | ) |  | — |
Proceeds from long-term borrowings | — |  |  | — |  |  | 500,000 |
Net cash used for financing activities | (607,741 | ) |  | (143,637 | ) |  | (364,904 | )
Effect of exchange rates on cash | (16,860 | ) |  | (14,000 | ) |  | (1,986 | )
Net change in cash and cash equivalents | 39,289 |  |  | (33,107 | ) |  | (47,972 | )
Cash and cash equivalents, beginning of year | 128,940 |  |  | 162,047 |  |  | 210,019 |
Cash and cash equivalents, end of year | $ | 168,229 |  |  | $ | 128,940 |  |  | $ | 162,047 |
Cash paid for income taxes | $ | 311,800 |  |  | $ | 271,979 |  |  | $ | 313,799 |
Cash paid for interest | $ | 28,537 |  |  | $ | 27,066 |  |  | $ | 3,875 |

See accompanying notes to the consolidated financial statements.
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C.H. ROBINSON WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. C.H. Robinson Worldwide, Inc. and our subsidiaries (“the company,” “we,” “us,” or “our”) are a global provider of transportation services and logistics solutions through a network of offices operating in North America, Europe, Asia, and South America. The consolidated financial statements include the accounts of C.H. Robinson Worldwide, Inc. and our majority owned and controlled subsidiaries. Our minority interests in subsidiaries are not significant. All intercompany transactions and balances have been eliminated in the consolidated financial statements. We had previously reported Payment Services revenues separately from Transportation revenues. The prior year amounts have been combined to conform with the current period presentation. This change in presentation had no effect on our prior year consolidated results of operations, financial condition, or cash flows.
USE OF ESTIMATES. The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. We are also required to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our ultimate results could differ from those estimates.
REVENUE RECOGNITION. Total revenues consist of the total dollar value of goods and services purchased from us by 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. We act principally as the service provider for these transactions and recognize revenue as these services are rendered or goods are delivered. At that time, our obligations to the transactions are completed and collection of receivables is reasonably assured. 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 the primary obligor, we have credit risk, we have discretion to select the supplier, and we have latitude in pricing decisions. Additionally, in our Sourcing business, we take loss of inventory risk during shipment and have general inventory risk. Certain transactions in customs brokerage, managed services, freight forwarding, and sourcing 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.
ALLOWANCE FOR DOUBTFUL ACCOUNTS. Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. We continuously monitor payments from our customers and maintain a provision for uncollectible accounts based upon our customer aging trends, historical loss experience, and any specific customer collection issues that we have identified.
FOREIGN CURRENCY. Most balance sheet accounts of foreign subsidiaries are translated or remeasured at the current exchange rate as of the end of the year. Statement of operations items are translated at average exchange rates during the year. The resulting translation adjustment is recorded net of tax as a separate component of comprehensive income in our statements of operations and comprehensive income.
SEGMENT REPORTING AND GEOGRAPHIC INFORMATION. We operate in the transportation and logistics industry. We provide a wide range of products and services to our customers and contract carriers, including transportation services, produce sourcing, freight consolidation, contract warehousing, and information services. Each of these is a significant component to optimizing logistics solutions for our customers.
These services are performed throughout our network of offices, as an integrated offering for which our customers are typically provided a single invoice. Our network of offices work together to complete transactions and collectively meet the needs of our customers. For large multi-location customers, we often coordinate our efforts in one location and rely on multiple locations to deliver specific geographic or modal needs. As an example, approximately 49 percent of our truckload transactions are shared transactions between offices. In addition, our methodology of providing services is very similar across all locations. The majority of our global network operates on a common technology platform that is used to match customer needs with supplier capabilities, to collaborate with other locations, and to utilize centralized support resources to complete all facets of the transaction. Accordingly, our chief operating decision maker analyzes our business as a single segment, relying on net revenues and operating income across our network of offices as the primary performance measures.
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The following table presents our total revenues (based on location of the customer) and long-lived assets (including intangible and other assets) by geographic regions (in thousands):

| For the year ended December 31,
| 2015 |  | 2014 |  | 2013
Total revenues |  |  |  |  |
United States | $ | 12,097,633 |  |  | $ | 11,800,140 |  |  | $ | 11,140,163 |
Other locations | 1,378,451 |  |  | 1,669,927 |  |  | 1,611,913 |
Total revenues | $ | 13,476,084 |  |  | $ | 13,470,067 |  |  | $ | 12,752,076 |

| December 31,
| 2015 |  | 2014 |  | 2013
Long-lived assets |  |  |  |  |
United States | $ | 320,445 |  |  | $ | 257,587 |  |  | $ | 284,693 |
Other locations | 24,878 |  |  | 26,254 |  |  | 24,567 |
Total long-lived assets | $ | 345,323 |  |  | $ | 283,841 |  |  | $ | 309,260 |

CASH AND CASH EQUIVALENTS. Cash and cash equivalents consist of bank deposits.
RESTRICTED CASH. On December 31, 2014, we funded $359.4 million of the purchase price for the acquisition of Freightquote into an escrow account pursuant to the purchase agreement, pending the effective date of closing of the acquisition, which occurred on January 1, 2015.
PREPAID EXPENSES AND OTHER. Prepaid expenses and other include such items as prepaid rent, software maintenance contracts, insurance premiums, other prepaid operating expenses, and inventories, consisting primarily of produce and related products held for resale.
PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost. Maintenance and repair expenditures are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated lives of the assets of 3 to 30 years. Amortization of leasehold improvements is computed over the shorter of the lease term or the estimated useful lives of the improvements.
We recognized the following depreciation expense (in thousands):

2015 | $ | 32,412 |
2014 | 29,340 |
2013 | 27,757 |

A summary of our property and equipment as of December 31 is as follows (in thousands):

| 2015 |  | 2014
Furniture, fixtures, and equipment | $ | 200,215 |  |  | $ | 180,233 |
Buildings | 110,056 |  |  | 79,981 |
Corporate aircraft | 11,334 |  |  | 11,334 |
Leasehold improvements | 28,178 |  |  | 25,545 |
Land | 23,759 |  |  | 14,983 |
Construction in progress | 5,597 |  |  | 1,612 |
Less accumulated depreciation | (188,265 | ) |  | (161,217 | )
Net property and equipment | $ | 190,874 |  |  | $ | 152,471 |

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GOODWILL AND OTHER INTANGIBLE ASSETS. Goodwill is the difference between the purchase price of a company and the fair market value of the acquired company’s net identifiable assets. Other intangible assets include definite-lived customer lists, contract carrier lists, and non-competition agreements and indefinite-lived trademarks. The definite-lived intangible assets are being amortized using the straight-line method over their estimated lives, ranging from 3 to 8 years. The indefinite-lived trademarks are not amortized. Goodwill is not amortized, but is tested for impairment using a fair value approach. Goodwill is tested for impairment annually or more frequently if events warrant. Intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. See Note 2.
OTHER ASSETS. Other assets include such items as purchased and internally developed software, and the investments related to our nonqualified deferred compensation plan. We amortize software using the straight-line method over 3 years. We recognized the following amortization expense of purchased and internally developed software (in thousands):

2015 |  | $ | 9,624 |
2014 |  | 8,921 |
2013 |  | 8,759 |

A summary of our purchased and internally developed software as of December 31 is as follows (in thousands):

| 2015 |  | 2014
Purchased software | $ | 23,569 |  |  | $ | 21,872 |
Internally developed software | 40,796 |  |  | 27,429 |
Less accumulated amortization | (42,930 | ) |  | (35,369 | )
Net software | $ | 21,435 |  |  | $ | 13,932 |

INCOME TAXES. Income taxes are accounted for using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted rates.
Annual tax provisions include amounts considered sufficient to pay assessments that may result from examination of prior year tax returns; however, the amount ultimately paid upon resolution of issues raised may differ from the amounts accrued.
The financial statement benefits of an uncertain income tax position are recognized when more likely than not, based on the technical merits, the position will be sustained upon examination. Unrecognized tax benefits are, more likely than not, owed to a taxing authority, and the amount of the contingency can be reasonably estimated. Uncertain income tax positions are included in “Noncurrent income taxes payable” in the consolidated balance sheets.
Provisions are made for U.S. taxes on undistributed earnings of foreign subsidiaries and related companies.
COMPREHENSIVE INCOME. Comprehensive income includes any changes in the equity of an enterprise from transactions and other events and circumstances from non-owner sources. Our only component of other comprehensive income is foreign currency translation adjustment. It is presented on our consolidated statements of operations and comprehensive income.
STOCK-BASED COMPENSATION. We issue stock awards, including stock options, performance shares, and restricted stock units, to key employees and outside directors. In general, the awards vest over five years, either based on the company’s earnings growth or the passage of time. The fair value of each share-based payment award is established on the date of grant. For grants of performance shares and restricted stock units, the fair value is established based on the market price on the date of the grant, discounted for post-vesting holding restrictions. The discounts on outstanding grants vary from 17 percent to 22 percent and are calculated using the Black-Scholes option pricing model. Changes in measured stock volatility and interest rates are the primary reason for changes in the discount.
For grants of options, we use the Black-Scholes option pricing model to estimate the fair value of share-based payment awards. The determination of the fair value of share-based awards is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate, and expected dividends.
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NOTE 2: GOODWILL AND OTHER INTANGIBLE ASSETS
The change in the carrying amount of goodwill is as follows (in thousands):

| 2015 |  | 2014
Balance, beginning of year | $ | 825,038 |  |  | $ | 829,073 |
Acquisitions | 287,220 |  |  | — |
Translation | (3,921 | ) |  | (4,035 | )
Balance, end of year | $ | 1,108,337 |  |  | $ | 825,038 |

We complete an impairment test on goodwill annually. The fair value of the enterprise-wide reporting unit substantially exceeds the book value; therefore we have determined that there is no goodwill impairment as of December 31, 2015 or any previous periods presented.
A summary of our other intangible assets, with finite lives, which include primarily customer relationships and non-competition agreements, as of December 31 is as follows (in thousands):

| 2015 |  | 2014
Gross | $ | 171,172 |  |  | $ | 133,372 |
Accumulated amortization | (61,405 | ) |  | (36,917 | )
Net | $ | 109,767 |  |  | $ | 96,455 |

Other intangible assets, with indefinite lives, as of December 31 is as follows (in thousands):

| 2015 |  | 2014
Trademarks | $ | 10,475 |  |  | $ | 1,875 |

Amortization expense for other intangible assets was (in thousands):

2015 | $ | 24,373 |
2014 | 18,748 |
2013 | 20,128 |

Intangible assets at December 31, 2015, will be amortized over the next five years, and that expense is as follows (in thousands):

2016 | $ | 24,368 |
2017 | 24,309 |
2018 | 23,785 |
2019 | 23,785 |
2020 | 13,520 |
Thereafter | — |
Total | $ | 109,767 |

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NOTE 3: FAIR VALUE MEASUREMENT
Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

• | Level 1-Quoted market prices in active markets for identical assets or liabilities.

• | Level 2-Observable market-based inputs or unobservable inputs that are corroborated by market data.

• | Level 3-Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.
We had no Level 3 assets or liabilities as of December 31, 2015 or December 31, 2014.
NOTE 4: FINANCING ARRANGEMENTS
On October 29, 2012, we entered into a senior unsecured revolving credit facility for up to $500 million with a $500 million accordion feature (the “Credit Agreement”), with a syndicate of financial institutions led by U.S. Bank. The purpose of this facility was to partially fund the acquisition of Phoenix International Freight Services, Ltd. (“Phoenix”) and to allow us to continue to fund working capital, capital expenditures, dividends, and share repurchases. In December 2014, we amended the credit facility to increase the amount available from $500 million to $900 million and to extend the expiration date from October 2017 to December 2019.
As of December 31, 2015 and 2014, we had $450.0 million and $605.0 million in borrowings outstanding under the Credit Agreement, which is classified as a current liability on the consolidated balance sheets. The recorded amount of borrowings outstanding approximates fair value because of the short maturity period of the debt; therefore, we consider these borrowings to be a Level 2 financial liability.
Borrowings under the Credit Agreement generally bear interest at a variable rate determined by a pricing schedule or the base rate (which is the highest of (a) the administrative agent’s prime rate, (b) the federal funds rate plus 0.50 percent, or (c) the sum of one-month LIBOR plus a specified margin). As of December 31, 2015, the variable rate equaled LIBOR plus 1.13 percent. In addition, there is a commitment fee on the average daily undrawn stated amount under each letter of credit issued under the facility. The weighted average interest rate incurred on borrowings during 2015 was approximately 1.3 percent and at December 31, 2015, was approximately 1.6 percent. The weighted average interest rate incurred on borrowings during 2014 was approximately 1.7 percent and at December 31, 2014, was approximately 1.3 percent.
The Credit Agreement contains various restrictions and covenants. Among other requirements, we may not permit our leverage ratio, as of the end of each of our fiscal quarters, of (i) Consolidated Funded Indebtedness to (ii) Consolidated Total Capitalization to be greater than 0.65 to 1.00. As a result of amending the Note Purchase Agreement in February, 2015, the ratio of (i) Consolidated Funded Indebtedness to (ii) EBITDA (earnings before interest, taxes, depreciation and amortization), as of the end of each of our fiscal quarters, may not exceed 3.00 to 1.00. We were in compliance with the financial debt covenants as of December 31, 2015.
The Credit Agreement also contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then the administrative agent may declare any outstanding obligations under the Credit Agreement to be immediately due and payable. In addition, if we become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency, or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable.
On August 23, 2013, we entered into a Note Purchase Agreement with certain institutional investors (the “Purchasers”) named therein (the “Note Purchase Agreement”). Pursuant to the Note Purchase Agreement, the Purchasers purchased, on August 27, 2013, (i) $175,000,000 aggregate principal amount of the company’s 3.97 percent Senior Notes, Series A, due August 27, 2023 (the “Series A Notes”), (ii) $150,000,000 aggregate principal amount of the company’s 4.26 percent Senior Notes, Series B, due August 27, 2028 (the “Series B Notes”), and (iii) $175,000,000 aggregate principal amount of the company’s 4.60 percent Senior Notes, Series C, due August 27, 2033 (the “Series C Notes” and, together with the Series A Notes and the Series B Notes, the “Notes”). Interest on the fixed-rate Notes is payable semi-annually in arrears. We applied the proceeds of the sale of the Notes for share repurchases. See Note 9.
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The Note Purchase Agreement contains customary provisions for transactions of this type, including representations and warranties regarding the company and its subsidiaries and various covenants, including covenants that require us to maintain specified financial ratios. The Note Purchase Agreement includes the following financial covenants: we will not permit our leverage ratio, as of the end of each of our fiscal quarters, of (i) Consolidated Funded Indebtedness to (ii) Consolidated Total Capitalization to be greater than 0.65 to 1.00; we will not permit the interest coverage ratio, as of the end of each of our fiscal quarters and for the twelve-month period ending, of (i) Consolidated EBIT (earnings before income taxes) to (ii) Consolidated Interest Expense to be less than 2.00 to 1.00; we will not permit, as of the end of each of our fiscal quarters, Consolidated Priority Debt to exceed 15% of Consolidated Total Assets. The Note Purchase Agreement was amended in February 2015 to conform its financial covenants to be consistent with the amended revolving credit facility. As a result of amending the Note Purchase Agreement in February 2015, the ratio of (i) Consolidated Funded Indebtedness to (ii) EBITDA (earnings before interest, taxes, depreciation and amortization), as of the end of each of our fiscal quarters, may not exceed 3.00 to 1.00. We were in compliance with all of the financial debt covenants as of December 31, 2015.
The Note Purchase Agreement provides for customary events of default, generally with corresponding grace periods, including, without limitation, payment defaults with respect to the Notes, covenant defaults, cross-defaults to other agreements evidencing indebtedness of the company or its subsidiaries, certain judgments against the company or its subsidiaries, and events of bankruptcy involving the company or its material subsidiaries. The occurrence of an event of default would permit certain Purchasers to declare certain Notes then outstanding to be immediately due and payable.
Under the terms of the Note Purchase Agreement, the Notes are redeemable, in whole or in part, at 100% of the principal amount being redeemed together with a “make-whole amount,” and accrued and unpaid interest (as defined in the Note Purchase Agreement) with respect to each Note. The obligations of the company under the Note Purchase Agreement and the Notes are guaranteed by C.H. Robinson Company, a Delaware corporation and a wholly-owned subsidiary of the company, and by C.H. Robinson Company, Inc., a Minnesota corporation and an indirect wholly-owned subsidiary of the company.
The Notes were issued by the company to such initial Purchasers in a private placement in reliance on Section 4(2) of the Securities Act of 1933, as amended. The Notes will not be and have not been registered under the Securities Act and may not be offered or sold in the United States, absent registration or an applicable exemption from registration requirements.
The fair value of long-term debt approximated carrying value of $522.2 million at December 31, 2015, and $500.0 million at December 31, 2014. We estimate the fair value of our debt primarily using an expected present value technique, which is based on observable market inputs using interest rates currently available to companies of similar credit standing for similar terms and remaining maturities, and considering our own credit risk. If our long-term debt was recorded at fair value, it would be classified as Level 2.
NOTE 5: INCOME TAXES
C.H. Robinson Worldwide, Inc. and its 80 percent (or more) owned U.S. subsidiaries file a consolidated federal income tax return. We file unitary or separate state returns based on state filing requirements. With few exceptions, we are no longer subject to audits of U.S. federal, state and local, or non-U.S. income tax returns before 2009.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):

| 2015 |  | 2014 |  | 2013
Unrecognized tax benefits, beginning of period | $ | 18,274 |  |  | $ | 16,897 |  |  | $ | 16,788 |
Additions based on tax positions related to the current year | 1,520 |  |  | 2,002 |  |  | 1,572 |
Additions for tax positions of prior years | — |  |  | 839 |  |  | 1,105 |
Reductions for tax positions of prior years | (810 | ) |  | (183 | ) |  | (1,464 | )
Lapse in statute of limitations | (5,188 | ) |  | (1,281 | ) |  | (238 | )
Settlements | (525 | ) |  | — |  |  | (866 | )
Unrecognized tax benefits, end of the period | $ | 13,271 |  |  | $ | 18,274 |  |  | $ | 16,897 |

As of December 31, 2015, we had $19.6 million of unrecognized tax benefits and related interest and penalties, all of which would affect our effective tax rate if recognized. We are not aware of any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefit will significantly increase or decrease in the next 12 months.
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Income tax expense considers amounts which may be needed to cover exposures for open tax years. We do not expect any material impact related to open tax years; however, actual settlements may differ from amounts accrued.
We recognize interest and penalties related to uncertain tax positions in the provision for income taxes. During the years ended December 31, 2015, 2014, and 2013, we recognized approximately $1.2 million, $1.5 million, and $1.2 million in interest and penalties. We had approximately $6.4 million and $5.7 million for the payment of interest and penalties accrued within noncurrent income taxes payable as of December 31, 2015 and 2014. These amounts are not included in the reconciliation above.
The components of the provision for income taxes consist of the following for the years ended December 31 (in thousands):

| 2015 |  | 2014 |  | 2013
Tax provision: |  |  |  |  |
Federal | $ | 259,793 |  |  | $ | 224,468 |  |  | $ | 180,351 |
State | 37,129 |  |  | 32,110 |  |  | 26,351 |
Foreign | 33,255 |  |  | 20,259 |  |  | 25,529 |
| 330,177 |  |  | 276,837 |  |  | 232,231 |
Deferred provision (benefit): |  |  |  |  |
Federal | (14,559 | ) |  | (5,302 | ) |  | 24,877 |
State | (2,074 | ) |  | (755 | ) |  | 3,623 |
Foreign | (462 | ) |  | 2,940 |  |  | (3,274 | )
| (17,095 | ) |  | (3,117 | ) |  | 25,226 |
Total provision | $ | 313,082 |  |  | $ | 273,720 |  |  | $ | 257,457 |

A reconciliation of the provision for income taxes using the statutory federal income tax rate to our effective income tax rate for the years ended December 31 is as follows:

| 2015 |  | 2014 |  | 2013
Federal statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of federal benefit | 2.8 |  |  | 2.8 |  |  | 2.9 |
Other | 0.3 |  |  | — |  |  | 0.3 |
| 38.1 | % |  | 37.8 | % |  | 38.2 | %

Deferred tax assets (liabilities) are comprised of the following at December 31 (in thousands):

| 2015 |  | 2014
Deferred tax assets: |  |  |
Compensation | $ | 91,729 |  |  | $ | 78,516 |
Receivables | 16,243 |  |  | 13,397 |
Other | 9,242 |  |  | 8,103 |
Deferred tax liabilities: |  |  |
Intangible assets | (133,375 | ) |  | (115,761 | )
Prepaid assets | (13,418 | ) |  | (10,808 | )
Long-lived assets | (18,666 | ) |  | (19,018 | )
Undistributed earnings of foreign subsidiaries | — |  |  | (13,616 | )
Other | (427 | ) |  | (28 | )
Net deferred tax (liabilities) assets | $ | (48,672 | ) |  | $ | (59,215 | )

We had foreign net operating loss carryforwards with a tax effect of $8.0 million as of December 31, 2015 and $8.3 million as of December 31, 2014. A full valuation allowance has been established for these net operating loss carryforwards due to the uncertainty of the use of the tax benefit in future periods.
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NOTE 6: CAPITAL STOCK AND STOCK AWARD PLANS
PREFERRED STOCK. Our Certificate of Incorporation authorizes the issuance of 20,000,000 shares of preferred stock, par value $0.10 per share. There are no shares of preferred stock outstanding. The preferred stock may be issued by resolution of our Board of Directors at any time without any action of the stockholders. The Board of Directors may issue the preferred stock in one or more series and fix the designation and relative powers. These include voting powers, preferences, rights, qualifications, limitations, and restrictions of each series. The issuance of any such series may have an adverse effect on the rights of holders of common stock and may impede the completion of a merger, tender offer, or other takeover attempt.
COMMON STOCK. Our Certificate of Incorporation authorizes 480,000,000 shares of common stock, par value $.10 per share. Subject to the rights of preferred stock which may from time to time be outstanding, holders of common stock are entitled to receive dividends out of funds legally available, when and if declared by the Board of Directors, and to receive their share of the net assets of the company legally available for distribution upon liquidation or dissolution.
For each share of common stock held, stockholders are entitled to one vote on each matter to be voted on by the stockholders, including the election of directors. Holders of common stock are not entitled to cumulative voting. The stockholders do not have preemptive rights. All outstanding shares of common stock are fully paid and nonassessable.
STOCK AWARD PLANS. Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense as it vests. A summary of our total compensation expense recognized in our consolidated statements of operations and comprehensive income for stock-based compensation is as follows (in thousands):

| 2015 |  | 2014 |  | 2013
Stock options | $ | 14,607 |  |  | $ | 9,243 |  |  | $ | 5 |
Stock awards | 40,785 |  |  | 36,510 |  |  | 6,808 |
Company expense on ESPP discount | 2,269 |  |  | 2,108 |  |  | 2,281 |
Total stock-based compensation expense | $ | 57,661 |  |  | $ | 47,861 |  |  | $ | 9,094 |

On May 9, 2013, our shareholders approved our 2013 Equity Incentive Plan, which allows us to grant certain stock awards, including stock options at fair market value and performance shares and restricted stock units, to our key employees and outside directors. A maximum of 3,400,000 shares, plus the shares remaining available for future grants under the 1997 Plan as of May 9, 2013, can be granted under this plan. Approximately 715,064 shares were available for stock awards as of December 31, 2015. Shares subject to awards that expire or are canceled without delivery of shares or that are settled in cash, generally become available again for issuance under the plan.
We have awarded performance-based stock options to certain key employees. These options are subject to certain vesting requirements over a five-year period, based on the company’s earnings growth. Any options remaining unvested at the end of the five year vesting period are forfeited to the company. Although participants can exercise options via a stock swap exercise, we do not issue reloads (restoration options) on the grants made after 2003.
The fair value of these options is established based on the market price on the date of grant, discounted for post-vesting holding restrictions, calculated using the Black-Scholes option pricing model. Changes in measured stock price volatility and interest rates are the primary reasons for changes in the discount. These grants are being expensed based on the terms of the awards. As of December 31, 2015, unrecognized compensation expense related to stock options was $55.1 million. The amount of future expense to be recognized will be based on the company’s earnings growth and certain other conditions.
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The following schedule summarizes stock option activity in the plans. All outstanding unvested options as of December 31, 2015, relate to the performance-based grants from 2011 through 2015.

| Options |  | Weighted Average Exercise Price |  | Aggregate Intrinsic Value (in thousands) |  | Average Remaining Life (years)
Outstanding at December 31, 2014 | 4,704,620 |  |  | $ | 65.40 |  |  | $ | 44,644 |  |  | 8.1
Grants | 1,493,388 |  |  | 63.80 |  |  |  |  |  |
Exercised | (40,337 | ) |  | 62.30 |  |  |  |  |  |
Terminated | (6,810 | ) |  | 66.99 |  |  |  |  |  |
Outstanding at December 31, 2015 | 6,150,861 |  |  | $ | 65.03 |  |  | $ | — |  |  | 8.1
Vested at December 31, 2015 | 1,991,263 |  |  | $ | 64.49 |  |  | $ | — |  |  | 7.3
Exercisable at December 31, 2015 | 1,991,263 |  |  | $ | 64.49 |  |  | $ | — |  |  | 7.3

Additional potential dilutive stock options totaling 125,797 for 2015 and 218,932 for 2013 have been excluded from our diluted net income per share calculations because these securities’ exercise prices were anti-dilutive (e.g., greater than the average market price of our common stock).
Information on the intrinsic value of options exercised is as follows (in thousands):

2015 | $ | 400 |
2014 | 4 |
2013 | 7,640 |

The following table summarizes performance-based options by year of grant:

Year of grant |  | First vesting date |  | Last vesting date |  | Options granted, net of forfeitures |  | Weighted average grant date fair value |  | Unvested options
2011 |  | December 31, 2012 |  | December 31, 2016 |  | 894,254 |  |  | $ | 15.72 |  |  | 352,850 |
2012 |  | December 31, 2013 |  | December 31, 2017 |  | 1,143,939 |  |  | 13.15 |  |  | 725,564 |
2013 |  | December 31, 2014 |  | December 31, 2018 |  | 1,405,906 |  |  | 11.83 |  |  | 702,953 |
2014 |  | December 31, 2015 |  | December 31, 2019 |  | 1,278,231 |  |  | 14.17 |  |  | 958,674 |
|  |  |  |  |  | 4,722,330 |  |  | $ | 13.52 |  |  | 2,740,041 |

We issued no performance-based options in 2015. We have awarded stock options to certain key employees that vest primarily based on their continued employment. The value of these awards is established by the market price on the date of the grant and is being expensed over the vesting period of the award. The following table summarizes these unvested stock option grants as of December 31, 2015:

Year of grant |  | First vesting date |  | Last vesting date |  | Options granted, net of forfeitures |  | Weighted average grant date fair value |  | Unvested options
2015 |  | December 31, 2016 |  | December 31, 2020 |  | 1,428,531 |  |  | $ | 12.66 |  |  | 1,428,531 |

Determining Fair Value
We estimated the fair value of stock options granted using the Black-Scholes option pricing model. We estimate the fair value of restricted shares and units using the Black-Scholes option pricing model-protective put method. A description of significant assumptions used to estimate the expected volatility, risk-free interest rate, and expected terms is as follows:
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Expected Volatility-Expected volatility was determined based on implied volatility of our traded options and historical volatility of our stock price.
Risk-Free Interest Rate-The risk-free interest rate was based on the implied yield available on U.S. Treasury zero-coupon issues at the date of grant with a term equal to the expected term.
Expected Term-Expected term represents the period that our stock-based awards are expected to be outstanding and was determined based on historical experience and anticipated future exercise patterns, giving consideration to the contractual terms of unexercised stock-based awards.
The fair value per option was estimated using the Black-Scholes option pricing model with the following assumptions:

| 2015 Grants |  | 2014 Grants |  | 2013 Grants
Risk-free interest rate | 1.95-1.96% |  |  | 1.93-1.96% |  |  | .18-1.94% |
Dividend per share (quarterly amounts) | $0.38-0.43 |  |  | $0.35-0.38 |  |  | $0.35 |
Expected volatility factor | 22.0-24.0% |  |  | 22.0-25.0% |  |  | 25.0-27.5% |
Expected option term | 6.29 years |  |  | 6.3 years |  |  | .01-6.3 years |
Weighted average fair value per option | $ | 12.68 |  |  | $ | 14.23 |  |  | $ | 11.73 |

FULL VALUE AWARDS. We have awarded performance shares and restricted stock units to certain key employees and non-employee directors. These awards are subject to certain vesting requirements over a five-year period, based on the company’s earnings growth. The awards also contain restrictions on the awardees’ ability to sell or transfer vested awards for a specified period of time. The fair value of these awards is established based on the market price on the date of grant, discounted for post-vesting holding restrictions. The discounts on outstanding grants vary from 17 percent to 22 percent and are calculated using the Black-Scholes option pricing model-protective put method. Changes in measured stock price volatility and interest rates are the primary reasons for changes in the discount. These grants are being expensed based on the terms of the awards.
The following table summarizes our unvested performance shares and restricted stock unit grants as of December 31, 2015:

| Number of Performance Shares and Restricted Stock Units |  | Weighted Average Grant Date Fair Value
Unvested at December 31, 2014 | 1,536,154 |  |  | $ | 54.67 |
Granted | 407,019 |  |  | 52.08 |
Vested | (492,129 | ) |  | 55.27 |
Forfeitures | (179,004 | ) |  | 62.13 |
Unvested at December 31, 2015 | 1,272,040 |  |  | $ | 52.56 |

The following table summarizes performance shares and restricted stock units by year of grant:

Year of grant |  | First vesting date |  | Last vesting date |  | Performance shares and stock units granted, net of forfeitures |  | Weighted average grant date fair value (1) |  | Unvested performance shares and restricted stock units
2011 |  | December 31, 2012 |  | December 31, 2016 |  | 569,854 |  |  | $ | 53.72 |  |  | 222,243 |
2012 |  | December 31, 2013 |  | December 31, 2017 |  | 331,780 |  |  | 48.65 |  |  | 209,022 |
2013 |  | December 31, 2014 |  | December 31, 2018 |  | 395,016 |  |  | 46.45 |  |  | 197,510 |
2014 |  | December 31, 2015 |  | December 31, 2019 |  | 337,154 |  |  | 60.56 |  |  | 252,866 |
2015 |  | December 31, 2016 |  | December 31, 2020 |  | 390,400 |  |  | 51.88 |  |  | 390,400 |
|  |  |  |  |  | 2,024,204 |  |  | $ | 52.56 |  |  | 1,272,041 |

________________________

(1) | Amount shown is the weighted average grant date fair value of performance shares and restricted stock units granted, net of forfeitures.

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We have also awarded restricted shares and restricted stock units to certain key employees that vest primarily based on their continued employment. The value of these awards is established by the market price on the date of the grant and is being expensed over the vesting period of the award. The following table summarizes these unvested restricted share and restricted stock unit grants as of December 31, 2015:

| Number of Restricted Shares and Stock Units |  | Weighted Average Grant Date Fair Value
Unvested at December 31, 2014 | 954,124 |  |  | $ | 52.12 |
Granted | 482,222 |  |  | 51.93 |
Vested | (237,563 | ) |  | 48.87 |
Forfeitures | (71,261 | ) |  | 52.62 |
Unvested at December 31, 2015 | 1,127,522 |  |  | $ | 52.69 |

We have also issued to certain key employees and non-employee directors restricted stock units which are fully vested upon issuance. These units contain restrictions on the awardees’ ability to sell or transfer vested units for a specified period of time. The fair value of these units is established using the same method discussed above. These grants have been expensed during the year they were earned.
A summary of the fair value of full value awards vested (in thousands):

2015 | $ | 40,785 |
2014 | 36,510 |
2013 | 6,808 |

As of December 31, 2015, there was unrecognized compensation expense of $127.4 million related to previously granted full value awards. The amount of future expense to be recognized will be based on the company’s earnings growth and certain other conditions.
EMPLOYEE STOCK PURCHASE PLAN. Our 1997 Employee Stock Purchase Plan allows our employees to contribute up to $10,000 of their annual cash compensation to purchase company stock. Purchase price is determined using the closing price on the last day of the quarter discounted by 15 percent. Shares are vested immediately. The following is a summary of the employee stock purchase plan activity (dollar amounts in thousands):

|  | Shares purchased by employees |  | Aggregate cost to employees |  | Expense recognized by the company
2015 |  | 228,103 |  |  | $ | 13,045 |  |  | $ | 2,269 |
2014 |  | 231,564 |  |  | 11,943 |  |  | 2,108 |
2013 |  | 259,730 |  |  | 12,928 |  |  | 2,281 |

SHARE REPURCHASE PROGRAMS. During 2012, our Board of Directors authorized a stock repurchase program that allowed management to repurchase up to 10,000,000 shares. The activity under that program for each of the periods reported is as follows (dollar amounts in thousands):

|  | Shares repurchased |  | Total value of shares repurchased
2012 Program |  |  |  |
2013 Purchases |  | 10,000,000 |  |  | $ | 579,853 |

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As of December 31, 2013, there were no shares remaining for repurchase under the 2012 authorization. During 2013, our Board of Directors increased the number of shares authorized to be repurchased by 15,000,000 shares. The activity under this authorization is as follows (dollar amounts in thousands):

|  | Shares repurchased |  | Total value of shares repurchased
2013 Program |  |  |  |
2013 Purchases |  | 930,075 |  |  | $ | 57,689 |
2014 Purchases |  | 3,763,583 |  |  | 239,037 |
2015 Purchases |  | 3,420,681 |  |  | 232,113 |

As of December 31, 2015, there were 6,885,661 shares remaining for repurchase under the 2013 authorization.
NOTE 7: COMMITMENTS AND CONTINGENCIES
EMPLOYEE BENEFIT PLANS. We offer a defined contribution plan, which qualifies under section 401(k) of the Internal Revenue Code and covers all eligible U.S. employees. Annual profit-sharing contributions are determined by us, in accordance with the provisions of the plan. We can also elect to make matching contributions to the plan. Defined contribution plan expense, including matching contributions, was approximately (in thousands):

2015 | $ | 46,507 |
2014 | 30,112 |
2013 | 19,907 |

We have committed to a defined contribution match of four percent of eligible compensation in 2016.
NONQUALIFIED DEFERRED COMPENSATION PLAN. All restricted shares vested but not yet delivered, as well as a deferred share award granted to our CEO, are held within this plan.
LEASE COMMITMENTS. We lease certain facilities and equipment under operating leases. Information regarding our lease expense is as follows (in thousands):

2015 | $ | 56,210 |
2014 | 56,871 |
2013 | 54,753 |

Minimum future lease commitments under noncancelable lease agreements in excess of one year as of December 31, 2015, are as follows (in thousands):

2016 | $ | 43,888 |
2017 | 39,108 |
2018 | 31,349 |
2019 | 27,842 |
2020 | 22,437 |
Thereafter | 108,845 |
Total | $ | 273,469 |

In addition to minimum lease payments, we are typically responsible under our lease agreements to pay our pro rata share of maintenance expenses, common charges, and real estate taxes of the buildings in which we lease space.
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LITIGATION. We are not subject to any pending or threatened litigation other than routine litigation arising in the ordinary course of our business operations, including 26 contingent auto liability cases as of December 31, 2015. 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 effect on our consolidated financial position, results of operations, or cash flows.
NOTE 8: ACQUISITIONS
On January 1, 2015, we acquired all of the outstanding stock of Freightquote.com, Inc. (“Freightquote”) for the purpose of enhancing our less than truckload and truckload businesses and expanding our eCommerce capabilities. Total purchase consideration was, $398.6 million which was paid in cash. We used advances under the Credit Agreement to fund part of the cash consideration. The following is a summary of the allocation of purchase consideration to the estimated fair value of net assets for the acquisition of Freightquote (in thousands):

Cash and cash equivalents | $ | 29,302 |
Receivables | 56,228 |
Other current assets | 2,395 |
Property and equipment | 43,687 |
Identifiable intangible assets | 37,800 |
Goodwill | 287,220 |
Trademarks | 8,600 |
Other noncurrent assets | 3,421 |
Total assets | 468,653 |
Accounts payable | (44,622 | )
Accrued expenses | (5,485 | )
Other liabilities | (19,939 | )
Net assets acquired | $ | 398,607 |

Following are the details of the purchase price allocated to the intangible assets acquired (dollars in thousands):

| Estimated Life (years) |  |
Customer relationships | 5 |  | $ | 37,500 |
Noncompete agreements | 5 |  | 300 |
Total identifiable intangible assets |  |  | $ | 37,800 |

We also acquired a trademark valued at $8.6 million which has been determined to be indefinite-lived. The Freightquote goodwill is a result of acquiring and retaining the Freightquote existing workforce and expected synergies from integrating their business in C.H. Robinson. Purchase accounting is considered final. The goodwill will not be deductible for tax purposes.
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On an unaudited pro forma basis, assuming the Freightquote acquisition had closed on January 1, 2014, the results of C.H. Robinson including Freightquote, would have resulted in the following (in thousands):

| Twelve Months Ended December 31, 2014
| C.H. Robinson |  | Freightquote |  | Combined
| As Reported |  | Operations |  | Pro Forma
Total revenues | $ | 13,470,067 |  |  | $ | 623,245 |  |  | $ | 14,093,312 |
Income from operations | 748,418 |  |  | 24,131 |  |  | 772,549 |

Freightquote pro forma financial information includes the following adjustments for the twelve months ended December 31, 2014 (in thousands):

Additional amortization expense on identifiable intangible assets | $ | (7,560 | )
Contractual changes in compensation | 1,973 |
Additional compensation paid by sellers | 2,627 |
Accounting policy changes | 1,303 |
Third party advisory fees paid by sellers | 5,355 |
Other | 2,196 |

The pro forma consolidated information was prepared for comparative purposes only and includes certain adjustments, as noted above. The adjustments are estimates based on currently available information, and actual amounts may have differed from these estimates. They do not reflect the effect of costs or synergies that would have been expected to result from the integration of the acquisition. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred at the beginning of each period presented or of future results of the consolidated entity. The results of operations and financial condition of Freightquote have been included in our consolidated financial statements since the acquisition date of January 1, 2015.
NOTE 9: ACCELERATED SHARE REPURCHASE
On August 24, 2013, we entered into two letter agreements with unrelated third party financial institutions to repurchase an aggregate of $500.0 million of our outstanding common stock (the “ASR agreements”). The total aggregate number of shares repurchased pursuant to these agreements was determined based on the volume-weighted average price of our common stock during the purchase period, less a fixed discount of 0.94%. Under the ASR agreements, we paid $500.0 million to the financial institutions and received 6.1 million shares of common stock with a fair value of $350.0 million during the third quarter of 2013, which represented approximately 70 percent of the total shares expected to be repurchased under the agreements. One of the two financial institutions terminated their ASR agreement and delivered 1.2 million shares on December 13, 2013. We recorded this transaction as an increase in treasury stock of $425.0 million, and recorded the remaining $75.0 million as a decrease to additional paid in capital on our consolidated balance sheet as of December 31, 2013. In accordance with the terms of the other ASR agreement, we had the option to settle our delivery obligation, if any, in cash or shares and we may be required to settle in cash in very limited circumstances. We accounted for the variable component of shares to be delivered under the ASR agreements as a forward contract indexed to our common stock, which met all of the applicable criteria for equity classification, and therefore, was not accounted for as a derivative instrument, but instead was also accounted for as a component of equity. The remaining ASR agreement continued to meet those requirements for equity classification as of December 31, 2013. In February 2014, the remaining ASR agreement was terminated. Approximately 1.2 million shares were delivered as final settlement of the remaining agreement. We reclassified the $75.0 million recorded in additional paid in capital to treasury stock during the first quarter of 2014.
The delivery of 7.3 million shares of our common stock reduced our outstanding shares used to determine our weighted average shares outstanding for purposes of calculating basic and diluted earnings per share for the 12 months ended December 31, 2014 and December 31, 2013. These shares, along with the 1.2 million shares received in February 2014, reduced our outstanding shares used to determine our weighted average shares outstanding for the purposes of calculating basic and diluted earnings per share for the 12 months ended December 31, 2014. We evaluated the ASR agreement for the potential dilutive effects of any shares remaining to be received upon settlement and determined that the additional shares would be anti-dilutive, and therefore were not included in our EPS calculation for the twelve months ended December 31, 2013.
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NOTE 10: CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss is included in the Stockholders’ investment on our consolidated balance sheets. The recorded balance at December 31, 2015 and December 31, 2014, was $37.9 million and $28.6 million, respectively. Accumulated other comprehensive loss is comprised solely of foreign currency translation adjustment net of tax at December 31, 2015 and 2014.
NOTE 11: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board (“FASB”) issued a final standard on revenue recognition from contracts with customers. The new standard sets forth a single comprehensive model for recognizing and reporting revenue. The new standard is effective for annual reporting periods after December 15, 2017, and permits the use of either a retrospective or a cumulative effect transition method. We are evaluating the effect of the new standard on our consolidated financial statements and related disclosures, and have not yet selected a transition method or determined the impact of this standard on our consolidated financial statements.
In November 2015, FASB issued Accounting Standards Update (“ASU”) 2015-17, “Balance Sheet Classification of Deferred Taxes.” ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. We are evaluating the effect of the new standard on our consolidated financial statements and related disclosures, and have not yet selected a transition method or determined the impact of this standard on our consolidated financial statements.
NOTE 12: SUPPLEMENTARY DATA (UNAUDITED)
Our unaudited results of operations for each of the quarters in the years ended December 31, 2015 and 2014, are summarized below (in thousands, except per share data).

2015 |  | March 31 |  | June 30 |  | September 30 |  | December 31
Revenues: |  |  |  |  |  |  |  |
Transportation (1) |  | $ | 2,947,257 |  |  | $ | 3,130,722 |  |  | $ | 3,044,500 |  |  | $ | 2,867,301 |
Sourcing |  | 353,633 |  |  | 414,366 |  |  | 374,753 |  |  | 343,552 |
Total revenues |  | 3,300,890 |  |  | 3,545,088 |  |  | 3,419,253 |  |  | 3,210,853 |
Costs and expenses: |  |  |  |  |  |  |  |
Purchased transportation and related services (1) |  | 2,452,112 |  |  | 2,582,374 |  |  | 2,484,409 |  |  | 2,323,376 |
Purchased products sourced for resale |  | 323,668 |  |  | 378,696 |  |  | 346,269 |  |  | 316,700 |
Personnel expenses |  | 255,144 |  |  | 263,999 |  |  | 264,077 |  |  | 268,190 |
Other selling, general, and administrative expenses |  | 88,041 |  |  | 90,924 |  |  | 91,787 |  |  | 88,008 |
Total costs and expenses |  | 3,118,965 |  |  | 3,315,993 |  |  | 3,186,542 |  |  | 2,996,274 |
Income from operations |  | 181,925 |  |  | 229,095 |  |  | 232,711 |  |  | 214,579 |
Net income |  | $ | 106,476 |  |  | $ | 137,208 |  |  | $ | 139,432 |  |  | $ | 126,583 |
Basic net income per share |  | $ | 0.73 |  |  | $ | 0.94 |  |  | $ | 0.96 |  |  | $ | 0.88 |
Diluted net income per share |  | $ | 0.73 |  |  | $ | 0.94 |  |  | $ | 0.96 |  |  | $ | 0.88 |
Basic weighted average shares outstanding |  | 146,204 |  |  | 145,515 |  |  | 144,578 |  |  | 143,484 |
Dilutive effect of outstanding stock awards |  | 179 |  |  | 164 |  |  | 204 |  |  | 660 |
Diluted weighted average shares outstanding |  | 146,383 |  |  | 145,679 |  |  | 144,782 |  |  | 144,144 |
Market price range of common stock: |  |  |  |  |  |  |  |
High |  | $ | 76.18 |  |  | $ | 73.09 |  |  | $ | 71.50 |  |  | $ | 73.34 |
Low |  | $ | 67.11 |  |  | $ | 61.46 |  |  | $ | 61.64 |  |  | $ | 59.71 |

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2014 |  | March 31 |  | June 30 |  | September 30 |  | December 31
Revenues: |  |  |  |  |  |  |  |
Transportation (1) |  | $ | 2,806,777 |  |  | $ | 3,042,102 |  |  | $ | 3,073,382 |  |  | $ | 3,014,251 |
Sourcing |  | 335,808 |  |  | 460,816 |  |  | 393,980 |  |  | 342,951 |
Total revenues |  | 3,142,585 |  |  | 3,502,918 |  |  | 3,467,362 |  |  | 3,357,202 |
Costs and expenses: |  |  |  |  |  |  |  |
Purchased transportation and related services (1) |  | 2,376,388 |  |  | 2,555,959 |  |  | 2,575,619 |  |  | 2,536,440 |
Purchased products sourced for resale |  | 308,962 |  |  | 425,922 |  |  | 364,179 |  |  | 318,946 |
Personnel expenses |  | 220,297 |  |  | 238,986 |  |  | 244,621 |  |  | 235,117 |
Other selling, general, and administrative expenses |  | 79,967 |  |  | 81,669 |  |  | 79,606 |  |  | 78,971 |
Total costs and expenses |  | 2,985,614 |  |  | 3,302,536 |  |  | 3,264,025 |  |  | 3,169,474 |
Income from operations |  | 156,971 |  |  | 200,382 |  |  | 203,337 |  |  | 187,728 |
Net income |  | $ | 93,187 |  |  | $ | 118,596 |  |  | $ | 124,981 |  |  | $ | 112,947 |
Basic net income per share |  | $ | 0.63 |  |  | $ | 0.80 |  |  | $ | 0.85 |  |  | $ | 0.77 |
Diluted net income per share |  | $ | 0.63 |  |  | $ | 0.80 |  |  | $ | 0.85 |  |  | $ | 0.77 |
Basic weighted average shares outstanding |  | 148,517 |  |  | 147,826 |  |  | 146,646 |  |  | 145,856 |
Dilutive effect of outstanding stock awards |  | 491 |  |  | 148 |  |  | 210 |  |  | 794 |
Diluted weighted average shares outstanding |  | 149,008 |  |  | 147,974 |  |  | 146,856 |  |  | 146,650 |
Market price range of common stock: |  |  |  |  |  |  |  |
High |  | $ | 60.31 |  |  | $ | 64.09 |  |  | $ | 69.50 |  |  | $ | 77.49 |
Low |  | $ | 50.21 |  |  | $ | 51.10 |  |  | $ | 63.09 |  |  | $ | 63.42 |

(1) We previously reported revenues and costs from the fees we earn from our cash advance option offered to our contract carriers separately from Transportation revenues. Starting in the first quarter of 2015, on a retrospective basis, we report these payment services revenues and costs as a part of Transportation total revenues and costs.
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ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. | CONTROLS AND PROCEDURES

Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.
Management’s Report on Internal Controls Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control-Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2015.
The effectiveness of our internal control over financial reporting as of December 31, 2015, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is included in Item 8.
Changes in Internal Controls Over Financial Reporting
There have not been any changes to the company’s internal control over financial reporting during the fourth quarter, to which this report relates, that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

ITEM 9B. | OTHER INFORMATION

None.
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PART III

ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Information with respect to our Board of Directors contained under the heading “Proposal One: Election of Directors,” and information contained under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement, are incorporated in this Form 10-K by reference. Information with respect to our executive officers is provided in Part I, Item 1 of this Form 10-K.
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, directors, and all other company employees performing similar functions. This code of ethics, which is part of our corporate compliance program, is posted on the Investors page of our website at www.chrobinson.com under the caption “Code of Ethics.”
We intend to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, at the web address specified above.

ITEM 11. | EXECUTIVE COMPENSATION

The information contained under the heading “Named Executive Compensation” in the Proxy Statement (except for the information set forth under the subcaption “Compensation Committee Report on Executive Compensation”) is incorporated in this Form 10-K by reference.

ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a) Equity Compensation Plans
The following table summarizes share and exercise price information about our equity compensation plans as of December 31, 2015:

Plan Category |  | Number of securities to be issued upon exercise of outstanding options, warrants and rights |  | Weighted average exercise price of outstanding options, warrants and rights |  | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders (1) |  | 9,809,847 |  |  | $ | 65.03 |  |  | 715,064 |
Equity compensation plans not approved by security holders |  | — |  |  | — |  |  | — |
Total |  | 9,809,847 |  |  | $ | 65.03 |  |  | 715,064 |

________________________________
(1) Includes stock available for issuance under our Employee Stock Purchase Plan, as well as options, restricted stock granted, and shares that may become subject to future awards under our 2013 Equity Incentive Plan. Specifically, 3,658,986 shares remain available under our Employee Stock Purchase Plan, and 6,150,861 options remain outstanding for future exercise. Under our 2013 Equity Incentive Plan, 715,064 shares may become subject to future awards in the form of stock option grants or the issuance of restricted stock.
(b) Security Ownership
The information contained under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated in this Form 10-K by reference.

ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information contained under the heading “Related Party Transactions” in the Proxy Statement is incorporated in this Form 10-K by reference.
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ITEM 14. | PRINCIPAL ACCOUNTANTING FEES AND SERVICES

The information contained under the heading “Proposal Four: Ratification of Independent Auditors” in the Proxy Statement is incorporated in this Form 10-K by reference.
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PART IV

ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) | The following documents are filed as part of this report:

(1) The company’s 2015 Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm are included in Part II, Item 8. Financial Statements and Supplementary Data.
(2) Financial Statement Schedules-The following Financial Statement Schedule should be read in conjunction with the Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm included in Part II, Item 8 of this Annual report on Form 10-K:
Schedule II Valuation and Qualifying Accounts
Schedules other than the one listed above are omitted due to the absence of conditions under which they are required or because the information called for is included in Consolidated Financial Statements or the Notes to the Consolidated Financial Statements.
(b) Index to Exhibits-See Exhibit Index for a description of the documents that are filed as Exhibits to this report on Form 10-K or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical referencing the SEC filing which included the document. We will furnish a copy of any Exhibit at no cost to a security holder upon request.
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts
The transactions in the allowance for doubtful accounts for the years ended December 31 were as follows (in thousands):

| 2015 |  | 2014 |  | 2013
Balance, beginning of year | $ | 41,051 |  |  | $ | 39,292 |  |  | $ | 34,560 |
Provision | 11,538 |  |  | 15,092 |  |  | 15,587 |
Write-offs | (9,134 | ) |  | (13,333 | ) |  | (10,855 | )
Balance, end of year | $ | 43,455 |  |  | $ | 41,051 |  |  | $ | 39,292 |

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SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Eden Prairie, State of Minnesota, on February 29, 2016.

C.H. ROBINSON WORLDWIDE, INC.
By: |  | /s/ BEN G. CAMPBELL
|  | Ben G. Campbell
|  | Chief Legal Officer and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 29, 2016.

Signature |  | Title
/s/ JOHN P. WIEHOFF |  | Chief Executive Officer, President, and Chairman of the Board (Principal Executive Officer)
John P. Wiehoff |
/s/ ANDREW C. CLARKE |  | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
Andrew C. Clarke |
* |  | Director
Scott P. Anderson |
* |  | Director
Robert Ezrilov |
* |  | Director
Wayne M. Fortun |
* |  | Director
Mary J. Steele Guilfoile |
* |  | Director
Jodee Kozlak |  |
* |  | Director
ReBecca Koenig Roloff |
* |  | Director
Brian P. Short |
* |  | Director
James B. Stake |

*By: |  | /s/ BEN G. CAMPBELL
|  | Ben G. Campbell
|  | Attorney-in-Fact

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INDEX TO EXHIBITS

Number |  | Description
2.1 |  | Asset Purchase Agreement by and among C.H. Robinson Worldwide, Inc., T-Chek Systems, Inc., and Electronic Funds Source LLC, dated as of October 16, 2012 (Incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K filed on October 17, 2012)
2.2 |  | Purchase Agreement dated as of September 24, 2012, among Phoenix International Freight Services, Ltd., the Selling Shareholders thereto, James William McInerney and Emil Sanchez, solely in their respective capacities as Selling Shareholder Representatives, and C.H. Robinson Worldwide, Inc. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, filed on November 1, 2012)
2.3 |  | Agreement and Plan of Merger dated December 1, 2014 among C.H. Robinson Company Inc., Jayhawk Merger Subsidiary, Inc., Freightquote.com, Inc., and the Stockholders’ Representative named therein (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated December 2, 2014)
3.1 |  | Certificate of Incorporation of the Company (as amended on May 19, 2012 and incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed May 15, 2012)
3.2 |  | Bylaws of the Company (Incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1 filed on August 15, 1997, Registration No. 333-33731)
3.3 |  | Certificate of Designation of Series A Junior Participating Preferred Stock of the Company (Incorporated by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form S-1 filed on October 9, 1997, Registration No. 333-33731)
4.1 |  | Form of Certificate for Common Stock (Incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 filed on October 9, 1997, Registration No. 333-33731, file no. 000-23189)
4.2 |  | Amended and Restated Rights Agreement between the Company and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, dated September 10, 2007, file no. 000-23189)
†10.1 |  | 1997 Omnibus Stock Plan (as amended May 18, 2006) (Incorporated by reference to Appendix A to the Proxy Statement on Form DEF 14A, filed on April 6, 2006, file no. 000-23189)
†10.2 |  | C.H. Robinson Worldwide, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 14, 2013)
10.3 |  | Credit Agreement dated as of October 29, 2012, among C.H. Robinson Worldwide, Inc., the lenders party thereto, and U.S. Bank National Association, as Administrative Agent for the Lenders, as Swing Line Lender and as LC Issuer (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed November 1, 2012)
10.4 |  | Omnibus Amendment dated December 31, 2014 among C.H. Robinson Worldwide, Inc., the guarantors and lenders party thereto and U.S. Bank National Association, as LC Issuer, Swing Line Lender and Administrative Agent for the lenders, to that certain Credit Agreement dated, as of October 29, 2012, by and among the C.H. Robinson Company, Inc., the lenders, and U.S. Bank National Association, as LC Issuer Swing Line Lender and Administrative Agent for the Lenders (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 6, 2015)
10.5 |  | Letter Agreement dated as of August 24, 2013, by and between C.H. Robinson Worldwide, Inc. and J.P. Morgan Securities LLC, as agent for JP Morgan Chase Bank, National Association (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 26, 2013)
10.6 |  | Letter Agreement dated as of August 24, 2013, by and between C.H. Robinson Worldwide, Inc. and Morgan Stanley & Co. LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 26, 2013)
10.7 |  | Note Purchase Agreement dated as of August 23, 2013, by and among the Company and the Purchasers (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on August 26, 2013)
10.8 |  | First Amendment to Note Purchase Agreement dated February 20, 2015, by and among the Company and the Purchasers (incorporated by reference to Exhibit 10.8 tp the Registrant Annual Report on Form 10-K for the year ended December 31, 2014)
†10.9 |  | Form of Management-Employee Agreement (Key Employee) (Incorporated by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007, file no. 000-23189)
†10.10 |  | Form of Management Confidentiality and Noncompetition Agreement (Incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007, file no. 000-23189)
†10.11 |  | C.H. Robinson Worldwide, Inc. 2010 Non-Equity Incentive Plan (Incorporated by reference to Appendix A to the Proxy Statement on Form DEF 14A, filed on March 26, 2010, file no. 000-23189)
†10.12 |  | Robinson Companies Nonqualified Deferred Compensation Plan (Incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on 10-K for the year ended December 31, 2012)
†10.13 |  | Award of Deferred Shares into the Robinson Companies Nonqualified Deferred Compensation Plan, dated December 21, 2000, by and between C.H. Robinson Worldwide, Inc. and John P. Wiehoff (Incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000, file no. 000-23189)

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Number |  | Description
†10.14 |  | Form of Restricted Stock Award for U.S. Managerial Employees (Incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, file no. 000-23189)
†10.15 |  | Form of Restricted Unit Award for U.S. Managerial Employees (Incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, file no. 000-23189)
†10.16 |  | 2012 Form of Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, file no. 000-23189)
†10.17 |  | 2012 Form of Restricted Stock Award for U.S. Managerial Employees (Incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011)
†10.18 |  | 2012 Form of Restricted Stock Award for Officers (Incorporated by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011)
†10.19 |  | 2012 Form of Time-Based Restricted Stock Unit Award (Incorporated by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012)
†10.20 |  | Form of Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014)
†10.21 |  | Form of Performance Share Award for Officers (Incorporated by reference to Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014)
†10.22 |  | Form of Performance Share Award for U.S. Managerial Employees (Incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014)
†10.23 |  | Form of Time-Based Restricted Stock Unit Award (Incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014)
*†10.24 |  | Form of Incentive Stock Option (Time-Based U.S.) Agreement
†10.25 |  | Key Employee Agreement (Incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013)
†10.26 |  | Employee Confidentiality and Protection of Business Agreement (Incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013)
*21 |  | Subsidiaries of the Company
*23.1 |  | Consent of Deloitte & Touche LLP
*24 |  | Powers of Attorney
*31.1 |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2 |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1 |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*32.2 |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*101 |  | The following financial statements from our Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 29, 2016, formatted in XBRL: (i) Consolidated Statement of Operations for the years ended December 31, 2015, 2014, and 2013, (ii) Consolidated Balance Sheets as of December 31, 2015 and 2014, (iii) Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014, (iv) Consolidated Statements of Stockholders’ Investment for the years ended 2015, 2014, and 2013, and (v) the Notes to the Consolidated Financial Statements, tagged as blocks of text

* | Filed herewith

† | Management contract or compensatory plan or arrangement required to be filed as an exhibit to Form 10-K pursuant to Item 15(c) of the Form 10-K Report

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