Tim Gagnon - Director of Investor Relations and Analytics John Wiehoff - Chairman of the Board, President, Chief Executive Officer Chad Lindbloom - Chief Financial Officer, Senior Vice President.

Analysts:.

Good morning, ladies and gentlemen, and welcome to the C.H. Robinson First Quarter 2014 Conference Call. At this time, all participants are in a listen-only mode. Following today's presentation, Tim Gagnon will facilitate a review of previously submitted questions.

(Operator Instructions) As a reminder, this conference is being recorded, Wednesday, April 30, 2014. I would now like to turn the conference over to Tim Gagnon, the Director of Investor Relations. Please go ahead, sir..

Thank you and good morning everyone. On our call this morning will be John Wiehoff, Chief Executive Officer; and Chad Lindbloom, Chief Financial Officer.

John and Chad will provide some prepared comments on the highlights of our first quarter and will follow that with a response to pre-submitted questions we have received after our earnings release yesterday. Please note that there are presentation slides that accompany our call to facilitate the discussion.

The slides can be accessed in the Investor Relations section of our website, which is located at chrobinson.com. John and Chad will be referring to these slides in their prepared comments. I'd like to remind you that comments made by John, Chad or others representing C.H.

Robinson may contain forward-looking statements, which are subject to risks and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations.

With that, I'll turn the call over to John to begin his prepared comments on Slide 3, with a review of our first quarter 2014 results..

Thank you, Tim, and thanks to everybody who is taking the time to listen to our first quarter call. A special thanks to all of those who pre-submitted questions.

We over a hundred good questions and it really does help us prepare and modify our prepared comments to address many of them as possible, and as Tim said, we will have some specific Q&A follow-up to really make certain that our messages are clear.

On that Side 3, with our overall Q1 results for 2014, I guess the introductory comments that I would like to make is for those of you who have been following our story, I think the first thing you probably recognize compared to last year is that our financial statements are much cleaner and we do not have necessary a pro forma financial information for this period.

As you probably know, last year with the sale of T-Chek and the acquisition of Phoenix and Apreo, for the year we presented the pro forma information to try to be very transparent and show what we felt is the right standard to hold ourselves accountable to around the pro forma or comparable growth for the combined businesses that made explaining and understanding things a lot more complex last year and we don't have to deal with that this time around, so it's hopefully going to be a cleaner, simpler set of explanations in our numbers quarter-over-quarter should be comparable.

Second topic I would like to address as I know that the word for the quarter is whether, and if you see the word whether our first bullet point as well too.

Culturally in the past, we have tried to avoid talking about the weather and using that as the explanation for a lot of the variances and looking at our first quarter and really managing through it, it just became clear that it really did impact us in a lot of different ways.

Unfortunately, based on our business model, it's not possible to quantify precisely what the impact of that weather was.

We know it had some significant impacts, some challenges and then probably some rebound or opportunity from it, so as we talk through the various parts of it, we will try to do the best that we can to share what we believe the impact of weather was, but it's not possible for us to quantify or even really give a reasonable estimate of what the overall whether impact for the quarter was.

Last point, I would like to make from an overall standpoint is that when we think about the amount of transition that happened in the marketplace during the quarter, particularly in the North America Truckload, our largest source of revenue.

There is no doubt that this was the most significant amount of marketplace change and challenge that occurred in quite a period of time and I really do feel it's important to point out just how proud we are of our team and the value that we believe we added to the marketplace during the quarter.

Our results haven't always been the best ever over the last couple of years because of some of the changes and challenges that we have had, but I really do believe that our team is as good as it's ever been and we were very proud about how we adapted to some very aggressive changes in the marketplace and when you think about the weather conditions in the market, there were many days and many periods of time where everybody involved is feeling the stress.

You have the truckers and the capacity providers, frozen and a truck stops and not getting as many miles as they should be and not be able to achieve what they need to do.

You have our people working as hard as ever and in many cases getting less rewards, because of the pressures and changes that are going on and you have got shippers who are trying to deal with price increases and absorb them in business models they were planning on them, so really it is hard on everybody when the market moves that aggressively and I think it just represents a period of time where our team can help and help our customers get through it help it after market conditions and we do feel very good about how we did that during the quarter.

Those introductory comments on Page 3 for those Q1 results is just to make sure that I highlight those key metrics that we look at. Our total revenues grew 5% in the first quarter, with net revenue being essentially flat with last year. Income from operations was down 7% and net interest income decreased 9.8%.

You see the earnings per share of $0.63 versus $0.64 a year ago. Obviously the earnings per share was held by the share repurchase activity and changing capital structure that Chad will touch a little bit more on later.

Lastly, our bullet point on Slide 1, talks about results improving significantly in March, and during our year-end call I mentioned that we were seeing continued margin compression throughout January and elsewhere in our deck it talks about results improving into March, but that our first quarter overall remained impacted by the fact that our costs rose faster than our ability to pass those along in net revenue margin compression.

We talked a lot about try to how to share the best visibility to the improvement during the quarter and typically for us net revenue is probably the best gauge of that, so we wanted to share that for the month of January and February, that from enterprise standpoint, we did have a mid single-digit decrease in our net revenues offset by a low double-digit increase in net revenues for the month of March that got us roughly flat for the quarter.

As we have talked about in the past, whenever you look at monthly information there's probably other things that you should consider. For certain, the impact of the weather was probably more detrimental in January and February and probably some rebound in March.

You can see shipping days that were less in activity when weather storms went through different areas, volumes got better in March, how much of that was a rebound of the weather, it's is impossible for us to tell in our network, but there was probably some of that impact.

You've got timing of holidays, Chinese New Year and Easter moving around that can make an impact in our business as we have talked in the past. Monday is typically our bigger revenue days.

There were five in the month of March, so there's a lot of things that you can adjust for that may not make those trends precisely accurate, but no matter how you adjust for the first quarter, there was significant improvement that that happened throughout the quarter and the month of March was much better and we want to make sure that we were clear about that.

Moving to Page 4, summarized income statement, really just has a couple of additional data points to touch on. Breaking out some of the operating expenses with personnel being segregated here, so personnel expenses increasing 3.6% for the quarter. That resulted from an average headcount year-over-year of 6.1% offset by variable pay reductions.

We have talked a lot in the past about our variable compensation models and how when we make investments of additional personnel costs that were accountable our teams are accountable for generating a return on that, so the variable incentives will be penalized by the additional costs that comes in until we get the return on that.

We talked last year about adding headcount throughout the year and investing in our network.

We talked last call and at the beginning of 2014, about leveraging our currently sources and trying to generate the return on the investment that we had made, so what you see sequentially is that our headcount was virtually flat during the quarter, so from the beginning of 2014 till the end of the first quarter, but year-over-year the average headcount was up about 6%.

Additionally in the SG&A category the 7.5% increase, as the comments suggest, was driven largely by an increase in the bad debt provision. Chad will make some comments about that later, but aggregate results reflect our total operating expense increased to 4.5% and income from operations down 7%.

The other metrics that we talk about a lot and really monitoring in our business is that operating income as a percent of net revenue what you see was 34.3% for the first quarter of 2014.

Moving on then to Slide 5, and starting to get into our various service line comments, we start with on Page 5, the slide that aggregates all of our transportation results for the first quarter. Total revenues for transportation increased 7.7% for the quarter, with net revenues being of 1.6%.

Net revenue margin for total transportation decreased 90 basis points for the quarter to 15.3%, which you the in the upper right-hand box of the lower chart at 15.3%. As I mentioned earlier that net revenue margin did compressed for the quarter compared to 2013, but improved throughout the quarter and was stable year-over-year in the month of March.

When we look at the total transportation margin, there's obviously a lot going on at this level. There are mix issues and there are a lot of changes that can impact it, like we have talked about in the past.

At one level, I think this is very helpful data, because it is really showing in aggregate what's happening with our total transportation services and many of our services are related to each other around air and ocean or truck and rail tradeoff and integrated management services, but on the other hand, it's very helpful to kind of get into the individual services to really understand what's happening with regards to volume and margin for each of those, so this is the enterprise transportation results in the margin compression that you see at that level.

Moving then to our Truckload results on Slide 6, which is our largest source of revenue in the area of the business that has the most change, so I have the most prepared comments on this area of our deck to try to help you understand what happened during the quarter.

First off, in terms of data points, the net revenue for Truckload increased 0.5% 0.5 for the quarter with volume increasing 4%, North America truckload volume growing at 3%.

In the upper right-hand corner of the chart shows one of the key metrics that we often talk to, which is the average cost per mile and average price per mile for the quarter in our Truckload services and that is showing that our average pricing or average cost charge to the customer went up 10% for the quarter, average cost paid to the carrier went up 12% for the quarter.

Those are some pretty important metrics and I wanted to walk you through some reminders and some additional data points around that information to try to help explain some of the questions that were submitted and to make sure that you understand what we do about our business.

For starters, what I want to remind you of is that our business is decentralized and we have a decentralized network, we have decentralized account management and pricing practices. Those practices are supported more and more by corporate resources around benchmarking and automated tools and its more and more collaborative process.

However those account management decisions are made uniquely and are made differently for each relationship that we have in the field. We do not have a standard or enterprise definition of a committed freight relationship or a standard committed contract. There's a lot of commonality across them.

Most of our longer term customer contracts have an annual expectation.

Most of them have a 30-day out by either party and most of our large top-500 customer relationships will have some element both, of awarded freight or promised freight as well as other freight which can be expected, it can be transactional and unexpected, it can be a whole bunch of different things, but I think it's important to remind yourself that during a period of rapid change like this we have a network that is acting very local in some respects, but is being controlled in other respects by some common processes across the top of them.

When you look at our first quarter results and take more than a $2 billion of freight, what we try to do it the end of it is aggregate that data and slice and dice it and understand it better and share the metrics that we think are most relevant to understanding our business and help adjust our management processes and do what we need to do to run the business better.

In the Truckload part of it, one advantage that we have is, there is a common denominator around rate per mile, which can be very helpful to look at and that's what we are disclosing here. You don't have that in LTL and other parts of the business, which is easy to do, so we share that because we think it's a pretty meaningful metric.

However it can also be confusing in some other respects too or not send the right message, we want to make sure that you understand what the computations are and what the pieces for that, so first off, it is an average rate per mile that is charged to our customers, an average rate per mile that are paid to our carriers.

When we start to analyze it, there are some really significant variances across the types of freight in terms of how those price increases or cost increases would apply.

For instance, when we look at a sample of those larger accounts and those more committed or contracted rates, the typical rate charged to the customer increase is in the low to mid single digits, much more what you would typically see in the marketplace or expect based on some of the other companies that you're working with.

When we looked across that database, you also see some very significant price increases from the transactional or spot market-type relationships that we have, some obviously much more significant than 10%.

Even within a given relationship, as I mentioned earlier, most of our customers will have a combination of awarded and committed freight that we will be honoring at historic prices, generally for a year and there will be additional spot bid that many of them run or transactional opportunities that can occur as much different pricing, at much different margins, so it gets very complex in terms of categorizing and understanding exactly what's going on, but the 10% and 12% is relevant and does come across the entire database as the average charge to the customer and the average part paid to the customer.

As I mentioned earlier, I want to repeat that in March and to-date in April, our net revenue margin has been flat, so while the 10% and 12% were the quarter numbers, it did level off in March, and year-to-date in April, for the Truckload portion of it. The actual price increases vary significantly.

The other part that's important to understand which there is a bullet point that's addressing is how mix can impact the average rate per mile in this. The most important impact of mixed in the quarter really deals with short-haul freight. There has been a trend in the marketplace towards more short-haul freight and less longer haul freight.

We saw in Q1 an even greater shift. We generally consider short-haul freight to be less than 500 miles. We are not completely certain why it's shifting greater for us than the rest of the market.

We do have a focused emphasis on that in terms of adding value with outsourced customers and other things and there's a broad marketplace trend that would support that, but we do feel like our business mix is perhaps shifting a little bit more than the market toward short-haul freight.

As those of you who follow the industry know, that short-haul freight can have a much higher rate per mile just based on the economics of short-haul freight, so when we are blending together again more than $2 billion worth of freight and we saw a significant increase in the short-haul piece of it, that mix issue can impact and did impact in Q1 those averages that were sharing with you.

There could be other mix-type things around the cost of service expedited or refrigerated or other things, there wasn't a lot of variance that we could quantify or explain for Q1 with that, but mix can impact those average numbers.

The last metric that we think is relevant to pull a lot of that analysis and share with you is around the negative loads as the bullet point shares there. That really gets to the point of the committed relationships and honoring our customer commitments when the market moves dramatically like this.

We've shared with you in the past that we always have a certain element of negative loads in every quarter regardless of the market conditions. In some cases, it's bundled freight. In other cases, it's just pricing decisions or investments that are made in different parts of the business.

That number moves around and it's not a metric that we want to share regularly or quantify, but we have shared with you often in the past that it typically is in the mid-single digits of our freight mix and I do think it's important to understand that we want to share that for the last couple of quarters and in Q1 that number has moved up and for Q1 was roughly double of what our normal averages have been, so it's an important metric that we look at.

It's really reflective of the fact that we do honor those annual customer contracts that when the market moves like this, we have talked often about how we will continue to honor those contracts even if they requires us to invest or lose money on those relationships until the opportunity is appropriate to re-price the contract and move forward, so that's one data point that we look at in terms of analyzing our pricing and determining what's appropriate to do with each customer and how to go forward in the marketplace.

There's a lot here, I know it's the most important part of the business and we could analyze it forever and talk about it the rest of the day. There is some Q&A addressing it. I think those are kind of the highlights that we think are the most important part of the truckload services that we wanted to get out to you.

Moving on then to Slide 7, in our LTL services, net revenue increased 2.8% for the quarter, while volumes decreased 2%. Weather did also appear to impact shipment activity in January and February, so a similar pattern with not the same level of recovery or net revenue growth.

Cost increases also are occurring in the LTL area and we continue to work with evolving that pricing and adjusting is appropriate similar to the Truckload side of it.

As I mentioned earlier, given the variances of tariffs and classes of freight and all the difference, it's really hard to get down to a common denominator that's helpful to understand exactly or quantify some of those aggregated price increases, but the phenomenas for LTL are generally similar to what we talked about in the Truckload area.

Moving on then to Slide Eight in our intermodal services, intermodal net revenue decreased 1.8% for the quarter. Intermodal volume decreased 6% for the quarter.

As those of you who follow the industry know this is the area of transportation or perhaps you can quantify some of the metrics that are best around the impact of weather with slower trains speeds and lesser utilization of the equipment, we did see that in our limited owned equipment where there was less sufficient use of it and the inability to generate the same level of volume around that equipment.

As we have talked in the past, while we have less asset density and less of our own committed network there, that's a disadvantage from a scaling and efficiency standpoint, but probably a little bit of an advantage with less idle time and inefficient use when weather impacts the negativity around that.

Moving on then to Slide 9, our global forwarding results for the quarter, Ocean net revenues increased 2.6% for the quarter while Air increased 4.1% and Customs Services up 8.4% in net revenue for the quarter.

The ocean market continues to be volatile and competitive with all of the changes that are going on, so we did have some net revenue margin compression, but it was more than offset by volume gains.

We had good results in our air business with margins being up in a large part, due to the benefits from consolidating and integrating our global forwarding businesses and creating better margin opportunities.

We have also seen steady growth in our customs brokerage services with increases in both, the net revenues and the transactions associated with that. Side Nine is where you see the greatest example of the simplicity in our financial statements, and going forward, we will be talking about the C.H.

Robinson global forwarding business and less and less about the integration of Phoenix International, but just to kind of touch briefly on that the bottom slide talks, it talks about systems initiatives ongoing in 2014, and that probably being the most significant component of the overall integration plan that we anticipated lasting more than a year and going on throughout 2014, so we are still on track as we expected but have some remaining cleanup to do under the integration umbrella.

Then that will evolve into just like every other area of service or business line that we have, where there will be quarterly releases and ongoing metrics to improve our operations and streamline the transaction flow of our processes.

The other point I wanted to make about our global forwarding business, you know, when we acquired Phoenix International at the end of 2012, I talked earlier about the changes and the complexity that we are involved with understanding and integrating the business.

One of the things that we do feel very proud about is that if you look at that pro forma information from last year and the first quarter of this year, that every quarter last year and the first quarter of this year we have had a net revenue increase in the combined businesses of our global forwarding, so while we been working very hard to create one network and have made tremendous progress on that, we really like are offering today and frankly are just getting started at more aggressively cross-selling and going after some of the consolidation and operational efficiencies that that will come with it because we spend a lot of time and money laying the foundation and making sure that we had one combined business.

Despite all of that focus and attention that had to go into that and all of the competitive pressures that result from a transaction like this, we are pretty proud of the fact that we grew our pro forma revenues for every one of those quarters during that period of time. It wasn't just growing the net revenues by acquiring down.

It was growing that combined pro forma base and really building a stronger foundation to hopefully go after those opportunities in the market. By the way, the market conditions during this period of time have not been all that strong. There have been some challenges in there.

As you know, our biggest source is ocean and Trans-Pacific Eastbound is our corridor and we do continue to look at that and hope that at some periods of time in the future that the underlying market activity will have greater growth and really even support our growth in a better way there.

Moving on then to Slide 10, the prepared comments on our other logistic services are very similar to previous periods. This represents the non-transportation portion of what we do; the net revenues increased 8.8% for the quarter compared to last year.

As a reminder again, this service category includes primarily transportation management services and also some warehousing and small parcel revenues.

As a constant reminder, while this is an important source and growth of revenue for us, it's also more important in the standpoint that the services are primarily offered to transportation customers and they are integrated in with those account management relationships and are key part of how we bring a combined value to many of these customer relationships.

Our last service line is sourcing. You see sourcing activity, our net revenues for the quarter decreased 15.7%.

We have talked in the past periods about some of the challenges in our sourcing business around loss of some of the dedicated business from a large customer relationship, sourcing is another area where we definitely have some weather-related challenges in managing the business.

There were freezes during this period of time that impacted some of the citrus categories that we are a part of. There are routs in California that we are concerned about with regards to some of the commodities and the volume that will be associated with those in the coming quarters.

I can assure you that we are doing everything to manage the business and adapt to market conditions in the sourcing area as aggressively as we are in any other part of Robinson, and we still have long-term confidence in our ability to grow this, but the lost dedicated business and the weather impacts on some of the crops just have a longer cycle time to normalize, so we do expect some continued challenges and headwinds in terms of working through some of these issues, but we do feel that long-term, the fundamentals of the business are good and by the end of the year we will be back into more normal conditions hopefully weather permitting with our sourcing business.

I will pause there and turn it over to Chad for some comments on our financial information..

Thanks, John. I am going to cover some information on our cash flow and our balance sheet and then we will turn it back to John for the look ahead slide. During the first quarter of 2014, our cash provided by operations was $14.4 million. You can see that last year, there was actually cash used by operations of $58 million.

John mentioned that most of the comparability issues of the transactions of selling T-Check and acquiring Phoenix are behind us.

There was one lingering impact in the first quarter 2013, which is actually the payment of the income taxes related to the gain on sale of the divestiture in 2012, so that had approximately a negative impact to the first quarter of 2013's cash flow of about $100 million.

You can see if you adjust for that $100 million of cash flow from operations was actually down in the first quarter of 2014 compared to 2013.

The driver of that decrease in cash flow compared to last year's quarter, was primarily investments in working capital as we had accelerating revenue during the quarter which increases both, our receivables and our accounts payable, but as those of you have been following us know our accounts payable is always lower than accounts receivable, so we did invest significant amounts in working capital.

This incremental investment in working capital impacted the amount of cash we had available to repurchase shares. While remain committed to our strategy of returning approximately 90% of our annual earnings to shareholders through dividends and share repurchases, the first quarters tend to be lower.

The reason is in addition to the growing working capital, we also have our bonus payments which happen at the end of January. Moving onto share repurchase activity, in February our ASR was terminated by the remaining bank and we were delivered approximately 1.2 million additional shares.

In addition, we used only about $8.2 million net for share repurchases during the quarter. The bulk of that was shares withheld on delivery of restricted stock to recipients.

Our capital expenditures during the quarter including software were $12.3 million and are in line with the expectations that we laid out last call for $40 million to $45 million of capital expenditures during 2013. We ended the quarter with $142 million in cash and $910 million in debt. We are comfortable with our current liquidity position.

With that, I will turn it back to John for our look ahead slide..

Okay. Thanks Chad, the last, Slide 13, around a look ahead just to share some thoughts and comments on what we are seeing in the marketplace and how we are managing. I think, the first bullet point is an important one around truckload market conditions remain difficult to predict.

When we have talked about our business in the past, we've talked about the fact that it is very difficult to forecast. It's very difficult, almost impossible to give accurate guidance.

The core of that is the fact that we are sourcing that truckload capacity on a daily basis and are exposed to market movements that can move very aggressively and we predicted Q1 in the middle of Q1, we probably would not have predicted it accurately and I think it's very difficult to know exactly how markets are going to move in the future.

Over the last three or four years, when we have talked about the balanced market conditions and what was happening in the North American in truckload sector, we and others talked often about the possibility that at some point in time you could see significant price increases based upon a reduction of capacity and a balanced market that really probably wasn't well positioned to accommodate significant demand increases if and when they occurred.

Not a lot of people or maybe nobody anticipated a weather-driven tipping point in January and February that created some of the most significant price increases and market changes that we've seen in a while. There's uncertainty as to where we go from here around that.

I would say the most popular question internally in interacting with customers during Q1 was, how much of this was whether and how much of it was the change in market conditions and it's clear that nobody really knows that.

It's impossible to determine I think from an overall standpoint in terms of what exactly it's doing to the pricing and the market conditions, but it does feel like, the way the market has evolved over the last three or four years with the tightening of supply chains and information by shippers and the limited capacity additions by carriers that we do have a very tight market that maybe is as difficult to predict or a volatile as it's been in a long time..

That's the first thing that we are understanding and trying to manage to internally and with all of our customer relationships.

I commented earlier that North America truckload net revenue margins in March, and thus in April are flat with last year, so what that means for the month of April, when we have talked about in the past about sharing what we do know.

What we do know is thus far in April, our net revenue growth on a daily basis has been around 10% in North America Truckload. It can bounce around quite a bit day-by-day and month ends and quarter ends can have a significant impact.

It's also important to remember that we are talking about North American Truckload here that we do have headwinds in other parts of our business and most other services are not growing at that sort of place so we do see the recovery in the Truckload margins for the last couple of months, which we haven't seen in a while, but in a very unpredictable environment.

Talking a little bit about our team, I commented earlier about our pride in and how we manage through and serve our customers during the quarter. I talked at the beginning of the year about the investments we've made in the past and how we are thinking about as a leadership team and how were making these decisions collectively.

They really are bottom-up made, very similar to talk I about with account management and pricing.

There is more and more collaboration in top-down input around the productivity metrics and the hiring processes within our company, but it still is a very collaborative process to make sure that we are adjusting to each part of the business in each market opportunity in the best way.

If you connect a bunch of the previously shared comments around the fact that for the last several years, we were investing pretty heavily in hires in North American surface transportation, we do feel that in these sort of market conditions relying on our experienced people to adapt and serve our customers and honor those contracts and adapt the market conditions makes a lot more sense than trying to bring in a lot of new team members and aggressively go after market share in a capacity constrained environment.

For last quarter and this quarter and the foreseeable short-term future, we are managing that business with the current resources that we have and feel we can execute our go-to-market strategies and grow the business with the investments that we've made over the last couple of years.

We talked in the global forwarding integration about the fact that we were going to try to keep all of our team members, and over a period of time try to harness the top line and bottom-line synergies of productivity and cross-selling and all the rest of that, so in our global forwarding business, we feel like there is capacity and the network to continue to grow and pursue with the combined team and capture those synergies going forward.

In our sourcing business, we have some resource redeployment opportunities from the business that's in transition there and we always manage our shared services and overhead functions to kind of correlate with the business, so it's not a simple top-down edict to just not add people.

We also have turnover in our business that we have talked about in the past, so that at any point in time we are constantly refreshing the pipeline and looking at where can we add the right sorts of people and evolve the workforce into the right types of jobs to move with the business, so talent planning and our people are still our most important asset and we are putting more energy into it than ever, but at the same time we do feel like for the foreseeable short-term future, at least the next couple of quarters, we can continue to work on harnessing the return on some of the investments that we like and have made over the past couple of years from our team standpoint.

Then the last point is really pretty straightforward, that our business has always been about adapting to market conditions and helping our customers and carriers adapt to market conditions as well too and it's more important that we do that and we will continue to monitor the market activity, the pricing, our team and adjust very quickly as things progress in the market.

That includes the prepared comments. From there, I will turn it back to Tim to moderate some of the prepared Q&A..

Thanks John. As John stated, I personally thank all the analysts and investors that have submitted questions, a lot of great questions.

John has [read] as many responses to some of those questions into his prepared comments that's including Chad as well, but there were over 100 questions as mentioned, so we have a lot of unique topics to get to and I'll jump right into it here and I'll ask the question and then I'll turn it to John or Chad to respond.

The first question is for Chad, and I will read it verbatim here. The $220 million in personnel expense in the first quarter was fairly meaningful step up versus the second quarter '13 to fourth quarter '13 run rate.

Was this increase primarily headcount-related and is it a good quarterly run rate to use for 2014?.

Okay. My comments will really compare first quarter to the fourth quarter of 2013, because that's where most of the people asked the question was Q4 to Q1.

Although, our headcount was only up slightly compared to year end, at the end of the first quarter our average headcount, when you compare quarter four to quarter one was actually up slightly over 100 heads, so during the fourth quarter we were adding heads to get to that ending number.

During the first quarter of this year, we kept headcounts roughly flat, so therefore in effect there were more heads than that. It's definitely part of the increase. Every year we have phenomenon in quarter one, where our payroll taxes go up significantly compared to quarter four.

By the end of the year, many of our people are over their social security limits therefore there is no expense for the FICA expenses of those employees. During the first quarter, many of our employees actually maxed out because of the payment of their bonuses, so payroll taxes were up.

I think it was an increase of over $7 million compared to Q4 in Q1. Restricted stock expense, we talked about this is during our fourth quarter call.

We actually had a credit in restricted stock expense in Q4, because we ended up having 0% vesting one by the end of the third quarter of last year look like we would have some performance days in vesting, so we had to reverse the accumulated expense from the first three quarters and we did have some vesting expense on unrestricted stock and options during Q1.

Those two are by far the biggest variances between Q4 and Q1. In addition to the headcount increase, I think, our average salaries grew less than 2% on a quarter-over-quarter basis..

Okay. Thanks. Chad. Then the next question is again for Chad, and it's related to personnel again. You talked talk about wanting to leverage the investment you made in personnel and operating expenses in 2014, but we didn't see that in the first quarter year-over-year results.

Should that be more evident in the second quarter results or is it something you expect later in the year?.

My response to the previous question as well as something John said in prepared remarks kind of address, but just to be abundantly clear, our stated goal was to leverage our year-end headcount. Our headcount grew significantly during 2013. We're still online what the target. Our headcount is roughly flat.

I think it's up 27 heads compared to the end of the year, so comparing to our goal was not have flat headcount with the first quarter, but to leverage the heads that we had at the end of the year.

Actually, even if we don't add significant headcount, our expenses might grow as the year continues, if growth continues, because we will have increases in cash incentive pay as well as restricted stock vesting..

Okay. Next question related to bad debt and for Chad again.

Can you give us some more color on the increase in bad debt expense? Has there been any change in your strategy to pursue a different customer segments or was this just an isolated event?.

Unfortunately this is the second or third quarter in a row where we talked about isolated events, but basically they were. Rather than just looking at the increase, I will talk about what made up the $6.3 million provision. In quarter one, as we mentioned earlier, our receivable portfolio grew significantly.

We do some calculated risk analysis to establish a reserve. The increase in our gross receivable portfolio made up about $2.4 million of the $6.3 million total provision.

In addition, we had two different significant specific reserves booked during the quarter, which totaled approximately $4 million, so it is not a change in going after different market segments.

The variance was really driven by those two significant customers, one of which is a customer who was a moderate credit risk, who suddenly had a deterioration in their business and another customer was one were closely monitoring and also had some changes in their business that made it prudent for us to reserve the receivable..

Okay. Next question, again for Chad, before I turn it back over to John, is the number of offices held by three in the quarter to 282 from 285 at year end.

Will there be further closings and what are the savings?.

That particular reduction was based to one move we made a Minneapolis. We had four operating branches that were already shared and already consolidated in more sharing office space and we consolidated the management of that to be led by one general manager to try to leverage and scale some of the efficiencies within there.

There might be late changes from that combination, but really there were no significant headcount reductions or no significant changes in the staff, so hopefully we are going to be able to grow that business faster and leverage some expenses going forward, but nothing significant in immediate term..

Okay. Thanks, Chad. The next question is a Truckload question for John about capacity. As freight flows normalized post the weather, any sense that carriers are actually not that busy or has capacity remained tight in van reefer flat bed..

I started to touch on this in the prepared comments, but we have seen in the month of April some softening of what we would characterize as supply and demand relationship in April relative to the first quarter, so for that, what that would mean from us is that we are not seeing a lot of the extreme spot market activity or extreme difficulties in truck deficits and sourcing capacity.

It has not however softened to the earlier market conditions of a balanced market with adequate supply and demand in all markets like we have been talking about for a number of years, so I think it's really sort of fits the pattern of what I talked about earlier that while there were some whether-provoked extremes during the first quarter, that probably precipitated a bit of a tipping point attitude around pricing and tightness in the marketplace and while a lot of that whether impact has subsided, there does remain a different market conditions today that we see versus the past couple of years..

Okay. Thanks John. The next one again for John in the area of truckload, Organic truckload volume growth of 4% seems a bit low given the market dislocation. Can you expand on why CHRW was unable to take advantage of this to drive better volume growth..

We don't have great metrics yet on what the market probably did for Q1, but we do acknowledge that that 4% growth was probably more in line with market or that we didn't take a lot of market share during the first quarter.

If you connect some of the previous comments that I have made around how we honor our customer contracts and how over the last three or four years, our business has move towards a much greater mix of committed and contracted freight, we knew coming into the year that in the fourth quarter and early first quarter as the pricing started to change aggressively and we started to think about our customer relationships and how best to serve them in a very capacity-constrained market that going after a lot of volume growth in Q1 didn't feel like it would be the right answer for us to balance the combination of honoring those existing customer commitments with trying to grow our business and pursue the additional opportunities in the market.

While we did that, and do that every quarter in terms of selling and looking for new business opportunities, we did not have as higher volume growth as we have had in quarters or would hope to have in some of the future.

Other comment that I would make is, there have been periods of time in the past where markets have tightened and we have had greater volume growth, we have talked in the past about the uniqueness around these tight market conditions maybe being more driven by supply constraints rather than an increase in the demand from shippers.

If you think through the dynamics on that, when there is incremental freight in the marketplace that just hasn't been bid or planned, but there is ample capacity to rerouting and go extra miles.

It does create a more favorable environment for going after volume, when capacity constrained environment like this with a lot of existing customer commitments it doesn't bode well to both, serve your customers and go after a lot of volume increases..

Okay. Thanks, John. Next question, again, for John. It's more related to some of the look ahead comments.

What's more important for 2014? Volume growth and sustaining market share or price to improve margins?.

Based on the last quarter and on this question there were a number of follow-ups around, you know, has our strategy changed to focus more on price or what's more important around price and volume.

I think that the thing that's important about that is, in our long range plan, we talk about the foundation of making Robinson a bigger, better company to create value and to serve our customers.

It's about gaining market share and expanding our footprint and expanding our services, so market share gains are the long-term objective and we will never stop pursuing those. We have a lot of different go-to-market and sales initiatives that we are pursuing.

When the market is moving as aggressively as it did towards the end of the fourth quarter of '13 in the first quarter of '14, simultaneously aggressively pursuing market share and adding a lot to the team like I said a couple times is not the best way to manage the business for our customers or for our long-term profitability, so it's always a blend of the two of those.

It's not a change in strategy. It's an adaptation to the current environment and the market conditions.

We will continue to focus on serving our customers, honoring our contracts and adjusting to the pricing changes in the marketplace in the short-term future with some foundation of pursuing continued market share gains and will adapt to a different mix of those initiatives when the market tells us it's time to do that..

Thanks, John. Moving on to the next question related to net revenue margin. You indicated in March and April that transportation net revenue margins have been flat year-over-year.

Do you think we passed through the trough for net revenue margin?.

Last fall, when we talked about our long-term growth targets and managing our business we said that we manage the company and those long-term guidance goals were based upon margin stabilization. We understand that because of our business model and because of the industry that margins are going to fluctuate.

We expect them to fluctuate just based on supply and demand and how things work in the marketplace, but our long-term business planning and those long-range goals that we set out do assume margin stabilization, so we have had margin stabilization in our largest service for the months of March and so far the April, that feels positive.

Have we passed the trough? I think, there's too much uncertainty and too much volatility in the market today to state definitively that we passed the trough for that things couldn't go one way or the other for the remainder of the year.

It's is possible I think that margins could go up or down based on what we see in the market and how we are managing our business today, so we pride ourselves on how we adapt to the changes and being prepared for either scenario and hopefully we will continue to see some sustained margin stabilization for the remainder of the year, but we are not predicting that.

We are managing our business based on the certainty of that happening..

Thanks. John. The next question relates to spot market versus contract business.

What was your mix of contractual versus spot business in the quarter? How did this compare with the year ago?.

It's a common question and tried to set the stage for that in the prepared comments around the truckload services that without a standard definition and an enterprise framework for applying that, it's not that we know those percentages and are being cute by not wanting to share them, because we simply don't have a standard definition of that, but when you slice and dice that database of our activity for the quarter, what we do know as we have shared many times over the past couple of years is that a higher and higher percentage, much more than half was tending towards awarded freight and more committed freight, particularly with larger customers who do the bids and look for those longer-term commitments.

When the market starts to move like it has, a lot less freight will move under those awards and there will be less freight that is rebid, so it will naturally sort of shift to a little bit greater mix of spot market or transactional freight just based upon the pricing in the supply and demand dynamics in the marketplace.

Where it goes from here, we will see.

I think, a lot of the business changes that we made around integrated services and automated processes, it is our goal to keep that contracted or committed freight percentage fairly high, because we like the long-term growth and the stability of the relationships that come with it, but we also hope that there are opportunities in the future with hopefully more supply coming into the marketplace that greater growth on the demand side that we could pursue a greater spot market opportunities as well..

Thanks, John. The next question goes back to Chad related to earnings.

Given the rapid rise in spot rates and increased volatility are you more or less confident in your net revenue and earnings per share guidance for the next couple of years?.

Thanks. As you know, we haven't given short-term specific guidance. We have set our long-term EPS growth rate at 7%, 12%. We agree that the market is extremely volatile. As we have mentioned earlier, we also believe it's still very difficult to predict.

That said, volatile markets are better than prolonged weak freight environments like we have been experienced for the last multiple quarters. Based on what we saw in March and so far in April, we believe the market is better for us to achieve greater earnings growth than it has been in quite some time. However, that market could change at any time..

Okay. Thanks, Chad. The next question back to John here and it relates to less-than-truckload.

Could you provide more detail of the decline in LTL volume? What caused the decline and is it expected to rebound in the second quarter?.

I commented earlier that similar to the truckload, there were volume declines in January and February that, we believe, correlated with some of the severe whether days and disrupted some of the networks, the fact that our volumes didn't recover to the same degree in the LTL area is probably a combination of less success on our part in terms of selling and that baseline of market share gains.

It is a very competitive market. There is always a constant churn of some other customer activity, particularly the more transactional stuff, so a combination of less success on our part and some weather-driven volatility of gaining market share. It is absolutely our goal to grow volume and to gain share in future periods.

Again, it's a competitive market and who knows what the future will bring us, but that it is our hope to continue to grow the volumes in that area..

Thanks, John. The next question is again for John, and on the topic of intermodal.

Intermodal growth expectations are still pretty strong and we have seen some announcement of container adds by larger intermodal company, so I am wondering if there has been a change in your strategy, any plans to become more asset-intensive to better compete in this business, especially as it looks like demand and pricing power is improving as the truck market tightened and not having your own assets was a hindrance this past quarter..

We have said and I would repeat again that intermodal is a very important part of our service offerings and we are committed to doing whatever it takes in order to make sure that we are relevant to our customers and a part of that marketplace going forward.

As many of you probably know, in the past we have had greater asset ownership in that intermodal area phased out of it and now we have some containers and are constantly exploring what are the right types of investments to increase that capital commitment that the density of our network to better serve the customers.

It's a complex circle of talking with customers, talking with our rail partners and looking at the opportunities in the marketplace to figure out when and how to do that most appropriately, but we are definitely open-minded to it and looking at how to successfully grow our intermodal business in the future..

Okay. Thanks, John. The next question, again, to you and related to the Europe, and [question] here.

Are you eyeing growth in Europe?.

We talked in our Investor Day and I have mentioned it, I think, since then several times that Europe is one of our key growth initiatives from two points.

One is, our European surface transportation that one of our executive leaders (Inaudible) for the last couple of years has really been driving an expansion of our European surface transportation truckload and less-than-truckload with some office openings and driving some sales investments around expanding that network, so Europe is a strategic commitments for us and we are investing in having higher growth expectations for the future on the European continent.

The other part of our European business is, our global forwarding business, where we are underrepresented relative to our presence in Asia and North America, but are also looking at investing in additional human capital and locations in the future to try to strengthen that part of the network.

When you put together the regional shared services will support the global forwarding and surface transportation opportunities as well as some additional management services and outsourcing-type things that we can build off of that.

Europe is an important strategic commitment for us that we are investing disproportionately into the last couple of years..

Thanks, John. Just the basis of time here, this will be our last question and the question is for Chad. It's related to share count. Could you provide the end of the quarter basic share count? Just trying to get the starting point for 2Q..

Sure. The ending basic share count was approximately 148.1 million shares. The ending diluted count was approximately 148.6 million shares..

Okay. Thanks, Chad. Unfortunately, we are out of time. We got too many questions, but certainly not all. We apologize that we could not get all the questions today. Thank you for participating in our first quarter 2014 conference call. The call will be available for replay in the Investor Relations section of our website at www.chrobinson.com.

It will be available by dialing 800-406-7325, and entering the passcode 4676571 pound. The replay will be available at approximately 7 O'clock Eastern Time. That's evening, actually sooner. If you have any additional questions, please feel free to call me or email me. My direct line is 952-683-5007. Thank you and have a great day..