Chief Financial Officer at C.H. Robinson Worldwide
Thanks, Scott, and good afternoon, everyone. Our Q4 financial results reflect the price declines and slowing demand in the freight forwarding and surface transportation markets that Scott referenced earlier. Our fourth quarter total company adjusted gross profit or AGP was down $88 million or 10.3% compared to Q4 of 2021 driven by a 39% decline in Global Forwarding and partially offset by a 5.7% growth in NAST. The market softness was also prominent on a sequential basis, with total company AGP down 13%, including a 24% decline in Global Forwarding and an 11% decline in NAST. On a monthly basis, compared to Q4 of 2021, our total company AGP per business day was down 10% in October, down 7% in November and down 14% in December.
In our NAST truckload business, our volume declined on a year-over-year basis for the first time in seven quarters with shipments down 4%. Within the fourth quarter, monthly volume declined sequentially from October through December as freight demand weakened. Our AGP per truckload shipment increased 6.5% versus Q4 last year due to an increase in our contractual truckload AGP per shipment. On a sequential basis, however, our truckload AGP per shipment came down 6.5% but remained above our 10 year average.
During Q4, we had an approximate mix of 65% contractual volume and 35% transactional volume compared to a 55-45 mix in the same period a year ago. Routing guide depth of tender in our Managed Services business, which is a proxy for our overall market, declined from 1.3 in the third quarter to 1.2 in the fourth quarter, which is the lowest level we've seen since the pandemic impacted second quarter of 2020.
The sequential declines in our truckload linehaul cost price per mile that we experienced in Q1 through Q3 continued in Q4 as excess carrier capacity, combined with slowing demand, led to the softening market conditions. This resulted in an approximate 24% year-over-year decline in our average truckload linehaul cost paid to carriers, excluding fuel surcharges. Our average linehaul rate billed to our customers, excluding fuel surcharges, decreased year-over-year by approximately 21%. With the cost down 24% and price down 21%, we saw a 3% increase in our NAST truckload AGP per mile on a year-over-year basis.
In our Global Forwarding business, higher customer inventory levels, combined with softening demand, contributed to significantly reduced import prices for ocean and airfreight. In Q4, Global Forwarding generated AGP of $188.7 million, representing a year-over-year decrease of 39% versus the record high fourth quarter in 2021, which was up 72%. With these results, our ocean forwarding AGP declined $89 million or 43% year-over-year compared to an 86.5% growth in Q4 of 2021. The Q4 results were driven by a 36.5% decrease in AGP per shipment and a 9.5% decrease in shipments.
AGP in our airfreight business declined by $33 million or 51.5% year-over-year compared to a 92% growth in Q4 of 2021. This was driven by a 40% decline in AGP per metric ton and a 19.5% decrease in metric tons shipped. Despite the soft market, the forwarding team continues to add new customers and diversify our industry verticals and trade lanes. In Q4, approximately 50% of our AGP from new business was generated from trade lanes other than the trans-Pacific lane.
Now turning to expenses. Q4 personnel expenses were $427.3 million, up 1.7% compared to Q4 last year, including $21.5 million of severance and related charges driven by the restructuring that we initiated in November. The restructuring-related costs were partially offset by a decrease in equity compensation as we reversed some previously accrued expense due to financial results that came in lower than previously expected.
On a sequential basis, Q4 personnel expenses declined $10.2 million. Excluding the restructuring charges in Q4, personnel expenses declined $31.7 million sequentially due to lower incentive compensation and lower salaries and benefits associated with reduced headcount. Our Q4 average headcount declined 2% versus our Q3 average.
The workforce reduction initiated in November affected approximately 650 employees. While nearly 150 of those employees had left the company prior to December 31, over 600 had exited as of early January. As we continue to make progress on delivering a scalable operating model, we expect our headcount to decline throughout 2023 as productivity improves.
For 2023, we expect our personnel expenses to be $1.55 billion to $1.65 billion, down approximately 7% at the midpoint compared to our 2022 total of $1.72 billion, primarily due to reduced headcount. Excluding the restructuring charges in Q4 of 2022, the midpoint of our 2023 guidance for personnel expenses is down approximately 6% year-over-year.
Moving on to SG&A. Q4 expenses of $176.8 million were up $27.9 million compared to Q4 of 2021 driven primarily by $15.2 million of restructuring charges and a year-over-year increase in legal settlements, partially offset by a decrease in credit losses. The restructuring charges and SG&A primarily included an impairment to internally developed software related to the reprioritization of our technology investments that Arun will speak to shortly. Our approach to investments and investment prioritization is more data-driven and more focused on delivering a scalable operating model than in the past, which is improving the value of the benefits we are delivering and allowing us to pivot more quickly if investments are not delivering as expected.
For 2023, we expect our total SG&A expenses to be $575 million to $625 million compared to $603.4 million in 2022. The slight decrease at the midpoint includes an expected decrease in legal settlements in the absence of two one-time items that occurred in 2022. Those include the $15.2 million Q4 restructuring charge and the $25.3 million Q2 gain from the sale and leaseback of our Kansas City regional center. 2023 SG&A expenses are expected to include approximately $90 million to $100 million of depreciation and amortization expense compared to $93 million in 2022.
Q4 interest and other expense totaled $42.5 million, up $24.1 million versus Q4 of last year. Q4 of 2022 included $24.8 million of interest expense, up $10.7 million versus the prior year, primarily due to higher short-term average interest rates. Q4 results also include a $16.9 million loss on foreign currency revaluation, up $10.4 million compared to Q4 of last year driven by the relative weakness of the U.S. dollar.
As a reminder, the FX impacts are predominantly non-cash gains and losses on intercompany balances, which is why they are not hedged. Q4 tax rate came in at 20.9%, bringing our full year tax rate to 19.4%. We expect our 2023 full year effective tax rate to be 19% to 21%, assuming no meaningful changes to federal, state or international tax policy. Q4 net income was $96.2 million, and diluted earnings per share was $0.80. Adjusted or non-GAAP earnings per share, excluding the $36.7 million of restructuring charges, was $1.03, down 41% compared to Q4 of '21, which was up 61% versus the prior year.
Turning to cash flow. Q4 cash flow generated by operations was a record $773.4 million compared to $75.9 million in Q4 of 2021. As we have talked about in prior earnings calls, we were expecting an improvement in working capital when the cost and price of purchase transportation came down. The $698 million year-over-year improvement was driven by a $650 million sequential decrease in net operating working capital in Q4 due to the declining cost and price of ocean, air and truckload in our model. Conversely, Q4 of last year included a $200 million sequential increase in net operating working capital as costs and prices were rising.
If you look back at the period when cost and price of purchased transportation was rising from the end of 2019 to Q2 of 2022, our net operating working capital increased by approximately $1.5 billion. Between Q3 and Q4, as the cost and price of purchased transportation has come down, we have realized over $1 billion of benefit to working capital and operating cash flow. That benefit has come on a lag basis based on our DSO and DPO.
Driven by the increased free cash flow generation in Q4, we returned $507 million of cash to shareholders through $438 million of share repurchases and $69 million of cash dividends. The Q4 cash returned to shareholders significantly exceeded net income and was up by 128% versus Q4 last year driven by the record cash flow. Consistent with our capital allocation strategy, to the extent that we have excess cash after managing through our commitments, investments and holding to an investment-grade credit rating, we are committed to returning that cash to shareholders through share repurchases.
Capital expenditures were $27.8 million in Q4, bringing our full year capital spending to $128.5 million, up $58 million compared to 2021. The increase was primarily due to an increase in internally developed software. We expect our 2023 capital expenditures to be in the range of $90 million to $100 million.
Now on to the balance sheet highlights. We ended Q4 with approximately $1.34 billion of liquidity comprised of $1.12 billion of committed funding under our credit facilities and a cash balance of $218 million. Our debt balance at the end of Q4 was $1.97 billion, up $55 million versus Q4 last year, primarily driven by our expanded capacity to borrow given the strong EBITDA performance. Our net debt-to-EBITDA leverage at the end of Q4 was 1.29 times, down from 1.42 times at the end of Q4 last year.
As I mentioned, our capital allocation strategy is based on maintaining our investment-grade credit rating, which allows us to optimize our cost of capital. As we anticipate reduced earnings in 2023 given the strong results in the first half of 2022, we are planning for a lower level of debt to deliver our leverage targets. To the extent that we reduce our debt levels, this may reduce the amount of cash used for share repurchases.
In December, our Board authorized and declared a 10.9% increase in our regular quarterly dividend taking it to $0.61 beginning with the dividend that was paid in January. We have now distributed uninterrupted dividends without decline for more than 25 years. Over the long-term, we remain committed to growing our quarterly cash dividend in alignment with long-term EBITDA growth and using our share repurchase program as important levers to enhancing shareholder value.
With that, I'll turn the call over to Arun to walk through our strategy to deliver a scalable operating model and strengthen our customer and carrier experience.