Good morning, ladies and gentlemen, and welcome to the C.H. Robinson Fourth Quarter 2017 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, January 31, 2018. I will now turn the conference over to Tim Gagnon, Vice President.

Thank you, Donna, and good morning, everyone. On our call today will be John Wiehoff, Chief Executive Officer; and Andy Clarke, Chief Financial Officer. John and Andy will provide some prepared remarks on the highlights of our fourth quarter and full year results. We will follow that with a response to the pre-submitted questions we 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 Andy will be referring to these slides in their prepared comments. I’d like to remind you that comments made by John, Andy, 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 it over to John to begin his prepared comments on slide 3, with a review of our fourth quarter results.

Thanks, Tim, and good morning, everyone. Thank you for taking the time to listen to our call this morning. I'll start with the results. Total revenues increased 16% in the fourth quarter, driven by the increased pricing in truckload, volume growth across our other transportation service lines and higher fuel costs. Total company net revenues increased 12.5% in the quarter primarily driven by the increases in both NAST and Global Forwarding. Operating income was 211 million in the fourth quarter up 8.9% over the last year and net income was a 153 million up 24.7%. The quarter included non-recurring tax items that Andy will cover as he reviews the details of the financial results. Average headcount was up 6.8% versus last year's fourth quarter and our diluted earnings per share was a $1 rate in the fourth quarter up from $0.86 last year. The improved results in the quarter reflects the hard work of our teams across the network. Market conditions changed significantly from the first half of the year to the second half. The experience of our team and the ability to adapt to changes in the business climate is one of the strengths of Robinson. This capability was critical to our success in the fourth quarter. For the full-year we finish with approximately 15 billion of total revenues and our portfolio of services continues to be stronger and more diversified than at any time in our past. We served over 120,000 customers and 73,000 carriers and suppliers around the world in 2017. Prior to talking through the deck, I want to highlight some of the headline themes that you'll be hearing us talk about. Starting with pricing, there were significant price increases in many of our services during the fourth quarter. On our truck load pricing chart, the…

Thank you, John, and thank you, Tim and good morning, everyone. I would like to begin by recognizing our entire network for their efforts in the fourth quarter. We executed and helped our customers to navigate some of the most challenging circumstances and recent memory. And doing so, we achieved solid financial results in the fourth quarter with momentum moving into 2018. Now, onto the summarized income statement on slide four. Net revenues increased 12.5% to $632 million, the largest contributors for truck load services which is up $45 million, global forwarding services up $13 million and less than truck load services up $11 million. Fourth quarter personnel expenses increased 19.7% as a result of higher variable compensation and a 6.8% increase in headcount. We’ve mentioned in the past that our compensation plans are annual, but adjusted on a quarterly basis. The adjustments this quarter are increasing as a result improved in the quarter, while the results were declining in last year’s fourth quarter plus driving lower incentive compensation during that period. For the full year, personnel expense increased 10.8% on a 7.4% increase in headcount and a 19.5% increase in overall volume. SG&A expenses were relatively flat in the quarter at $109 million. The slight increase was due to higher warehousing, occupancy, equipment rental and depreciation partially offset by lower claims travel and entertainment and temporary labor. Operating income as a percent of net revenue was 33.4%, 110 basis points below last year’s fourth quarter and up 70 basis points sequentially. Our objective is to grow operating income at a rate equal to or greater than net revenue and while we narrow the gap we still have work to do. We will continue to manage expenses and strive for greater efficiencies as we move through 2018. As John mentioned,…

Thanks, Andy. Before we move onto the questions, I will take a couple of minutes to wrap things up with some final comments related to our month to date activity so far in January. Consistent with past quarters we have shared a couple of key metrics for our month to date activity. Through January we have seen global net revenues increase by approximately 5% for business day while truckload volumes have declined by approximately 7% per business day. We have one additional business day this January compared to last year. Our consistent practice is to share the per business day comparison of net revenue. In terms of our North American surface transportation business we saw the year start with significant weather events that displace capacity and cause shipping patterns to be disrupted. These events coupled with motor carriers working to understand and implement the impacts of the ELD mandate to their networks resulted in a disrupted market place with increased cost and rates and a constrained capacity tool. While we work to honor our commitments to our committed customers during this time of disruption we saw a volume drop double digit to start the month in our core North America truckload business, and down single digits in our LTL business. So far in January net revenue margins are remaining consistent sequentially when compared to the fourth quarter of 2017, and both truckload and LTL volumes have begun to recover in the second half of the month after a slow start. From a year-over-year comparison standpoint we had double digit volume growth last January that we are comparing to. As we discussed on our third quarter call we continue to be active and reprising business were appropriate across all our modes and services as we deal with an extremely fluid marketplace.…

Mr. Gagnon, the floor is yours for the question-and-answer session.

Thank you, Donna. And first I'd like to just take a minute to thank the many analysts and investors for taking the time to submit questions after the earnings release yesterday afternoon. I'll frame the question as they were submitted to us and then turn it over to John and Andy, for their response. And the first question would be to Andy. Andy how are you thinking about operating expense in 2018 relative to the pace of net revenue growth. Should we think of these two lines growing and sync with each other or is there an opportunity for expenses to grow these lower than net revenue and for us to see greater levels of operating leverage in 2018?

We talked at length over the past several years about our desire and our goals to show the leverage in our organization and if you look at the history of Robinson you can see that there is significant operating leverage within the business model so as we go forward we would expect overtime our net revenue to grow in excess of our expenses. Now within that period you have what we call investment cycles and so go back to 2015 where we had better operating margins and even today despite the fact that they are down in the fourth quarter slightly versus last year they were up 200 basis points from where we were in the second quarter. And so, we think about broadly the global investments that we make whether they would be via acquisition and the expenses that go along in acquiring companies we think about attracting new talent into the organization whether that would be here in North America, whether that would be in our NAST organization Global Forwarding our technology organizations. We as an organization have been around for 114 years, think about investing through cycles. And we will continue to do that because we believe that over the long-term it allows us to provide more services to our customers and overtime generate more value for our shareholders. We do expect continued leverage in 2018.

Thanks, Andy. Next question to John. As we’ve approach the 2018 bid season for your contractual North American truck load business, how do you intend to prioritize volume growth versus pricing gain?

This is a great question and I think something worth spending a few minutes on because it really gets to the core of our 3PL model and some of the ways that we would differ from an asset base network and thinking about pricing and yield and how we would go to market. We talk often about our account management practices and how we work hard to have the customized resources to make sure that we understand every shipper supply chain and what their unique needs are and interacting with them in a way to try to figure out how we can best serve them and where we’re going to -- what role we are going to play in the short-term and the long-term for them. So, the answer to the question is that we don’t really prioritize any outcomes when we’re going into those negotiations and relationships to renew the pricing and to renew the volume commitments with our customers. However, as we’ve talk often in the past there are sort of predictable outcomes that when you get into an accelerating pricing environment like this that several things will happen, first off will be managing our award volumes more closely so that some of that committed freight activity where maybe we were accepting more loads than we had committed too. That activity will tape off and accelerating price times and the whole market itself will move more to higher spot market activity. So, as we go into the pricing seasons and we’re working with our customers to figure out what role we can play for them and how we can serve them best, we’re always looking for both volume growth, market share gains as well as adapting our pricing to the market. So, we’ve seeing some volume deterioration and we would expect some of that to continue on our committed pricing during an accelerating price period like this, but we know that overtime we’ve had a great track record at gaining market share and increasing our volume activity in the market over the long-term as the cycles even out.

Thanks, John. Next question is for Andy. Could you please characterize the current spot versus contract pricing environment in truck load and LTL?

Yeah. Dovetailing on what John just mentioned, I would categorize all four of them spot both in the truck load and LTL and contractual in the truck load and LTL is robust and up. Following all what we’ve talked about in the fourth quarter, our overall pricing was up 15% and if you think about the volume changes between contractual and spot you can then clearly deduct that spot market was up while over the 15%. And the contractual business through a combination of reprising and through a combination as we mentioned the award managed that was up mid to single-digits in the fourth quarter. The LTL is a bit the same except it’s more contractually weighted with GRI. So, there is less in that particular market and as we talk about in our prepared remarks, our growth in that area and our ability to serve our customers is really been evidence over the last several years as we’re the – obviously the largest 3TL, LTL in North America. That market is up mid to high single-digits in terms of the pricing and we expect that to continue as well.

Thanks Andy. And next question is for John. Can you remind us the year-over-year net revenue comparisons you’re facing in the first quarter of 2018? Is there anything in particular that is driving the apparent slowing in net revenue growth trends in January, especially coming off 12.5% year-over-year growth in the fourth quarter of 2017.

A year ago, in the first quarter of '17 the net revenue growth was plus 2 for January and minus 2 for February and plus 2 for March. And if you go back and look at that we also talked about significant volume increases where I think the environment a year ago was that pricing was relatively stable but there was discussion already about the pending ELD and that maybe 2018 was going to look a lot different but the overall environment a year ago was that we were aggressively taking volume and as I discussed earlier matching those customers' expectations to increase our committed freight activity. So, the net revenue activity that we are comparing was fairly stable but we were taking on a fair amount of volume a year ago. The apparent slowing of net revenue in January we had some prepared comments that talk to that a little bit but we like to use these forms to give you a sense of what is happening currently and what we are seeing in the marketplace but as always with the caveat that until the month is over until the quarter is over its hard to know what's happening. The things we know for sure are that the year started slow. The first week of January with the weather that we discussed earlier and probably some adapting to the ELD compliance caused a very slow start. And we were a little bit confused as to what may -- all be contributing to that but as we commented earlier as the month worn on, the last couple of weeks the activity has been more consistent with what we saw in the fourth quarter. And we continue to see as Andy commented significant pricing increases in a very tight market that we are adapting to.

Thanks John, next question to Andy. Please discuss the negative float growth for truck North American truckload volumes during the quarter. Was just a function of handling less committed freight given elevated by rates during the quarter? When would you expect load growth to turn positive? And how does this impact your plans for head count growth?

Lot of questions there and I'll try to unpack them maybe one at a time, but let's first start with the whole concept of a negative load and if we were a pure stock market provider you certainly wouldn’t see that or if you did you wouldn’t have seen it to a large degree. Our brand promise and we go out to talk to our customers and commit to covering their loads inherent in that is a negative load. So, we will do better or worse just given market conditions. When we got into the fourth quarter and as we were talking about it in some of the earlier quarters of our award management we committed to our customers that we would cover the loads of the awarding to us throughout the previous year, and doing that we knew that those negative loads were going to increase. What we saw in the fourth quarter was a doubling of what you would normally see and not had a material and negative impact on our results. But we think it affirms and demonstrates to our customers our commitment in doing that. So that said the commentary around the negative loads in the fourth quarter, John just mentioned that we are stuck to the awards and so while you saw volume decreased that was more a function of us being very disciplined across the account management teams in the award management. So, we are pleased with the work that the team did there. As you talk about and John just mentioned, the trends and how they started, always difficult as you come off of a robust 2017 you go into the start of January where the first day is a holiday and it kind of bleeds into the rest of the week and you have weather that week and as John mentioned the ELDs so there is a lot of noise to start at the quarter. We had a robust January of '17. What we've seen is much better volume trends as the quarter has progressed, both in the truckload and LTL and when you couple that with the increase in pricing and the increase in the net revenue profile I think that's sets us up well for 2018. Final comment on the headcount it goes back to maybe one of my earlier statements around investing in our business, investing in our people and investing in our customers and the services throughout the cycle and so we wouldn’t say that -- we feel like the team is doing a great job of managing that we feel like the team is on top of it, across the entire organization and believe that the work that we are doing will continue to yield a benefit throughout all of 2018 despite the fact that as we mentioned we're starting little slow.

Thanks Andy, next question for John. Can you please discuss the impact you have seen thus far from the ELD mandate and what you would expect for 2018?

And for those who may not be completely familiar with the rules went into effect for the electronic logging on December '17 so it happened before year-end but this is the first quarter where it's really being implemented. In our year-end review when we talk with our teams about what we saw in the end of December and into January. We made the comment earlier that we haven't seen any deterioration or meaningful change in our carrier sign-up. there was discussion and concern that maybe an ELD requirement would eliminate capacity from the marketplace. we haven't seen any of that to date anecdotally or statistically in terms of our general access to capacity and the number of carriers that we were working with or interacting in the marketplace. What we have seen most significantly is that with more precise electronic logs and measurement of it there has been some reassessment of the desirability of certain types of rate and it gets into topics like the length of haul the mileage bands and what types of rate maybe would be more at risk to moving from one to two day transit times or different cut offs as well as multiple stop multiple pick-up type transactions where there is more risk around downtime or detention or any of those things that can make more precise measurement of compliance to challenge. So, what we've seen in the first month or so of implementation around this is that in a very tight capacity environment this is yet another secular change that is driving some reassessment of the desirability of certain types of rate and probably corresponding price increases that are being pushed through. So, like many of the other safety and hours of service type changes that have happened over the last eight to nine years the net results are some price adjustment that gets blended in with the cyclical changes and the seasonal changes that go into all of the other pricing but it came at a time when the market is very tight and the year is starting out with the implementation of those requirements as well.

Any onetime items in interest expense wanted to see why it would jump so much in Q4 relative to prior quarters given that debt balances didn’t change much?

There are two factors that it impacted that number in the fourth quarter and the first one is the debt. On year-over-year basis we do have slightly more debt and we do have the interest rate on our floating debt, our revolver was up over the quarter, but that was about a $2.5 million impact on a quarter-over-quarter basis. The biggest impact in the quarter was what I’ll call functional resource currency and certainly the US based and US dollar based organization and particularly in our Global Forwarding operations, our account receivables, our accounts payables and our cash tends to be conducted in USD, but when you get into the functional currency of a country last year let say China when the RMB was declining versus the dollar and the euro that was declining versus the dollar that positively benefited us to the tune of roughly $5 million. On a regular quarter-over-quarter basis, there generally is not a material impact, but in the fourth quarter of last year it positively impacted the other operating expense and then this quarter they wouldn’t be in the other direction and that’s primarily driven by the Mexican Peso and again we’re a functional USD organization, but we have accounts receivables and we have accounts payables and we have cash in some of those other areas. And at the end of every quarter, there is a revaluation of that and when that revaluation occurs accounting rules require that you run after the income statement. So, the delta of those two on a quarter-over-quarter basis negatively impacted us by $11 million. In previous quarters it usually has been $1 million to $2 million just have to be a unique quarter, where they went in opposite directions on a year-over-year basis.

Thanks, Andy. Next question is for John. What was your net revenue growth by month in the fourth quarter of 2017?

The total company net revenue growth per business day was consistent in all three of the months of that fourth quarter. There were some business day variances similar to the month of January when we look at our total month activity versus the per business activity. You can debate what is the most accurate calculation as Andy referenced depending upon holidays and the days of the week where there are more activities on certain dates, sometimes per business day as more helpful. But, in general was consistent throughout the fourth quarter.

Thanks John. Next question is for Andy in Global Forwarding. So, and Global Forwarding net revenues were up 12%, but operating income was down 31% year-over-year. Where there any specific cost that drove this, and do you expect forwarding to face challenging profit comparisons for the next three quarters. Or was this issue being specific to the fourth quarter of 2017?

All I talked about the fourth quarter where in the quarter growing organically growing the acquisitions, we have roughly a four of the increase in the total cost and the Global Forwarding business would be what we would consider more onetime in nature related to those issues. The Global Forwarding group has done a really nice job as we mentioned growing both organically and the acquisitions and they and we expect continued growth and profitability for that organization. So, that team is highly focused and highly incentivized as are the rest of us throughout the entire organization of growing our operating income in excess at a rate that is greater than our revenue, because there is leverage in that model. We’ll spend money as we did last year converting agent business with APC, we’re spending that right now converting agent business at Milgram. So, we will continue to invest in that business, but through the cycle we do expect Global Forwarding operating incomes to do very well.

Thanks Andy, next question for John, do you expect more shippers to move away from spot freight, with spot prices being so elevated to start the year?

Particularly the larger shippers in general the cycle is that there is a preference for committed pricing that you can plan around and that you can manage more predictably with your cost. When the market moves and prices accelerate more of the market and more of the freight will move to spot market pricing. But I think the general trend would be that as those adjustments get absorbed and the business gets resituated that the market and we will move back towards the higher blend of committed activity.

Thanks John, next question for Andy. What are the CHRW expectations for market conditions in airfreight and ocean freight forwarding in 2018?

If you think specifically about the work that we have been doing in that I think the team has done a wonderful job of growing both ocean and airfreight volumes that accessible at the market has boarding. We called out to 28% of our airfreight volume growth during the fourth quarter so those are all really good things. Over in the market conditions demand continues to be good and capacity to the degree has been more rationalized more specifically in the airfreight arena. And if you think about broadly speaking all the reports that are out there in the airfreight world volume grew rather nicely going into the fourth quarter driven by the e-commerce boom, and capacity was at an actually premium. I think our team has done a great job of securing that capacity of growing that business but we would expect to see both continued growth in our ocean and airfreight environment, and we would expect to see our capacity remain tight.

Thanks Andy, next question for John. Outside of Milgram, what's driving the headcount increases in global forwarding? Is it volume? Did you transition employees from NAST to forwarding?

In our global forwarding business through the acquisitions that we've been doing with APC and Milgram we get the workforces of those businesses but as we referenced a few times those were agent-based businesses where our opportunity is to go in and absorb that agent business into the other offices. So, in addition to the acquired business there is some staffing that is involved with absorbing the acquired business and taking over the agent part of transactions. We've also been investing aggressively in organic growth for airfreight services, so the hiring of sales and operational freight which tends -- the employees which tend to be more focused on airfreight. There were some minor transfers of people from the NAST division to global forwarding but that is not a material part of it and the transfers within the divisions would not be a common practice or something that would explain most of it, the NAST reduction in headcount is really more driving that network transformation relying on automation and adjusting to the volume and price activity that we have talked about within the NASS division.

Thanks John, next question Andy. Can you please provide what the fourth quarter '17 spot mix was in truckload versus what it was in the fourth quarter of 2016?

The fourth quarter of '17 as we referenced was split equally 50-50 between contractual and the spot. Last year's fourth quarter was two thirds contractual and one third spot.

Thanks Andy, next question for John on intermodal. I know intermodal is the small mix of net revenues but NAST intermodal net revenues were down 34% on a 7% volume and positive price increase. What was the key driver of what appears to be a massive margin compression in gross margins was it trade, rail, you see each still committed to intermodal.

The easy question is being still very committed intermodal were investing a lot in the technology and the process is to make sure that we can help our customers with that. The margins are reflective of us moving to more committed intermodal activity with less margins and some equipment repositioning cost in the quarter we are associated with the equipment that we do have as we've shared often in the past our challenge in that business is the capital requirements for significant equipment commitments that while we have some we haven't made large commitments to that and therefore the cost associated with managing the equipment are a lot more material to the level volume that we are having. But it's an important part of how we serve customers and we are investing in the people process and technology side of it to make sure that we are adding value.

Can you characterize the competitive environment post ELDs, especially the activity levels and competitiveness of new start-up tech entrants?

Well the short answer is as John reference and everybody knows that ELDs have only been in effect for the last month so there really hasn’t any change in the competitive environment particularly from start-up and tech entrants. During that time period we've often talked about and will continue to say that we are doing quite a bit of work in leading a lot of the technology work that's going on out there in the marketplace with our connectivity to our customers with our connectivity to our carriers and the ecosystem that we are building. We will and we've always had and we will continue to have competitors of the marketplace but we often talk about our people, our process and our technology and it's a combination of all three which differentiate us.

How are you thinking about year-over-year contractual rate increases in 2018 given the constraint truckload capacity environment and unknown impact from full ELD enforcement at this time? A large assets-based carrier spoke yesterday of high single to low double-digit contractual rate increases throughout 2018 is this in the ballpark of how you are thinking about it?

Yes, we would generally agree with that and you maybe to just add a little more color on the committed pricing I'll reference back to Slide 9 that Andy made some comments on the market is very fluid and there is a lot of spot market activity but it’s helpful to step back and look at it over a long period of time to which is why we've continue to share that 10-year chart around our pricing. While we had a 15% quarter-over-quarter increase that is a blend of both our committed and transactional pricing with the transactional pricing being higher than the committed pricing. I think I mentioned this last year but if you would take a sheet of paper and kind of hold it across the 3% increase on that chart which is what that 10-year average has been some of the interesting observations are that probably half of this period of time there has been activity price increases below that and price declines for a significant part of it. So, when you look at a double-digit price increase and try to put it into a longer-term context around it, it doesn’t look like it's too far out of context to think that you are going to need some significant increases if 3% is the right long-term price increase combining some secular changes around the ELD constrains and other things that have happened over that period of time. It’s not unbelievable that there would be high single-digit, low double-digit increases in some of the committed staff to correct for those longer-term adjustments.

Thanks, John. Next question for Andy. Please discuss areas of potential investment either organically or inorganically into 2018?

Following on with our commentary on the tax reform act and the impact that it’s going to have positively on both earnings and cash flows we will continue to look for ways of expanding our services and our capabilities with our customers across the globe and in doing so, in a way that generates long-term sustainable value for our shareholders. We have active M&A pipeline, we have an active investment pipeline particularly in the areas of technology. And broadly speaking business development across every part of our organization whether it be the NAST, Global Forwarding, managed services. I think one of the things that that’s unique to our organization is the non-asset base business model and our ability as John mentioned, to take 15,000 people in 42 countries and expand that even further in 2018 and beyond and with the ability to do so with a really strong balance sheet and the ability to have leverage both on the balance sheet as well as broadly speaking all parts of our organization. We can be very opportunistic and optimistic in both these areas.

Thanks, Andy. And with that we’re unfortunately we’re out of time. We apologize that we could not get to all of the questions today. Thank you for participating in our fourth quarter 2017 conference call. This call will be available for replay in the Investor Relations section of the C.H. Robinson website at www.chrobinson.com. It will also be available by dialling 1-877-660-6853 and entering the pass code 13674982#. The replay will be available at approximately 11:30 AM Eastern Time today. If you have any additional questions, please contact us via a phone or email and we’d be happy to follow up with you as soon as we possibly can. Thank you very everybody for listening. Have a great day.

Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. And have a wonderful day.