C.H. Robinson Reports Second Quarter Results

CHROBINSON125MINNEAPOLIS–(BUSINESS WIRE)–Aug. 6, 2013– C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (NASDAQ: CHRW), today reported financial results for the quarter ended June 30, 2013. Summarized financial results for the quarter ended June 30 are as follows (dollars in thousands, except per share data):

Three months ended June 30,Six months ended June 30,
%%
20132012change20132012change
Total revenues$3,288,262$2,955,71411.3%$6,282,529$5,507,82814.1%
Net revenues:
Transportation
Truckload$264,335$256,1933.2%$532,939$519,7752.5%
LTL60,71156,4457.6%119,202108,27210.1%
Intermodal9,92010,019-1.0%19,02119,730-3.6%
Ocean49,12416,958189.7%91,61232,719180.0%
Air20,20210,57791.0%36,97019,45090.1%
Customs9,7693,934148.3%18,3757,334150.5%
Other logistics services17,08414,88014.8%34,27828,94218.4%
Total transportation431,145369,00616.8%852,397736,22215.8%
Sourcing38,75240,205-3.6%70,59872,148-2.1%
Payment services2,70516,312-83.4%5,32931,899-83.3%
Total net revenues472,602425,52311.1%928,324840,26910.5%
Operating expenses290,126240,60920.6%577,142485,81018.8%
Operating income182,476184,914-1.3%351,182354,459-0.9%
Net income$111,872$114,582-2.4%$215,215$221,082-2.7%
Diluted EPS$0.70$0.71-1.4%$1.34$1.36-1.5%

Pro Forma Comparison – The following shows the effects of the disposition of the Company’s T-Chek Payment Services business (“T-Chek”), which was completed in October 2012, and the acquisition of Phoenix International Freight Services, Ltd. (“Phoenix”), which was completed in November 2012, as if these transactions had occurred at the beginning of 2012. A reconciliation of these pro forma measures is described on page 4.

Three months ended June 30,Six months ended June 30,
20132012%20132012%
ReportedPro FormachangeReportedPro Formachange
Total net revenues$472,602$458,2083.1%$928,324$897,0603.5%
Income from operations182,476188,700-3.3%351,182356,899-1.6%

Discussion of Second Quarter 2013 Results

Our truckload net revenues increased 3.2 percent in the second quarter of 2013 compared to the second quarter of 2012. Our truckload volumes increased approximately nine percent in the second quarter of 2013 compared to the second quarter of 2012. Our North American truckload volumes increased approximately five percent. We estimate that our acquisition of Apreo Logistics S.A. (“Apreo”), which was completed in October 2012, contributed approximately four percent to our volume growth in the second quarter of 2013. Our truckload net revenue margin decreased in the second quarter of 2013 compared to the second quarter of 2012, due primarily to the net revenue margin decline of our European truckload business. In North America, our truckload net revenue margin was relatively flat as rates charged to our customers and truckload transportation costs increased approximately one percent.

Our less-than-truckload (“LTL”) net revenues increased 7.6 percent in the second quarter of 2013 compared to the second quarter of 2012. The increase was driven by an increase in total shipments of approximately eight percent, partially offset by decreased net revenue margin.

Our intermodal net revenues decreased 1.0 percent in the second quarter of 2013 compared to the second quarter of 2012. This was due to decreased volumes, partially offset by increased net revenue margin. Our net revenue margin increase was due to a change in our mix of business.

Our ocean transportation net revenues increased 189.7 percent, our air transportation net revenues increased 91.0 percent, and our customs net revenues increased 148.3 percent in the second quarter of 2013 compared to the second quarter of 2012. These increases were primarily due to our acquisition of Phoenix in November 2012.

Sourcing net revenues decreased 3.6 percent in the second quarter of 2013 compared to the second quarter of 2012. This was due to decreased net revenue margin as a result of a change in our commodity and service mix due to weather.

Our Payment Services net revenues decreased 83.4 percent in the second quarter of 2013 compared to the second quarter of 2012 due to the T-Chek divestiture in the fourth quarter of 2012.

For the second quarter, operating expenses increased 20.6 percent to $290.1 million in 2013 from $240.6 million in 2012. Operating expenses as a percentage of net revenues increased to 61.4 percent in the second quarter of 2013 from 56.5 percent in 2012. During the second quarter of 2013, operating expenses grew faster than net revenues primarily as a result of the impact of Phoenix acquisition, including amortization of acquisition-related intangible assets. Phoenix has a higher expense to net revenue ratio than C.H. Robinson has historically experienced.

For the second quarter, personnel expenses increased 16.3 percent to $206.0 million in 2013 from $177.2 million in 2012. This was due to an increase in our average headcount of approximately 30 percent, related primarily to the acquisitions of the Phoenix and Apreo in the fourth quarter of 2012, partially offset by declines in the expenses related to incentive plans that are designed to keep expenses variable with changes in net revenues and profitability. The increase in personnel expenses was also partially offset by the divestiture of T-Chek in October 2012.

For the second quarter, other selling, general, and administrative expenses increased 32.6 percent to $84.1 million in 2013 from $63.4 million in 2012. This increase was driven primarily by Phoenix operations, partially offset by the divestiture of T-Chek. For the second quarter, acquisition amortization expense increased to $5.0 million in 2013 from $0.8 million in 2012 primarily as a result of the finite-lived intangible assets recorded in connection with the acquisition of Phoenix.

During the quarter we also recorded a $5.0 million charge related to the settlement of a contingent auto liability claim. The $5.0 million represents the amount of our retained risk under the terms of our contingent auto liability insurance policy. Although we remain a party to several contingent auto liability cases, it should be noted that this is only the fourth case in the last ten years in which we have been required to contribute in excess of $1.0 million in settlement or satisfaction of a contingent auto liability claim.

Founded in 1905, C.H. Robinson Worldwide, Inc., is one of the largest non-asset based third party logistics companies in the world. C.H. Robinson is a global provider of multimodal transportation services and logistics solutions, currently serving over 42,000 active customers through a network of 276 offices in North America, South America, Europe, Asia, and Australia. C.H. Robinson maintains one of the largest networks of motor carrier capacity in North America and works with approximately 56,000 transportation providers worldwide.

Except for the historical information contained herein, the matters set forth in this release are forward-looking statements that represent our expectations, beliefs, intentions or strategies concerning future events. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience or our present expectations, including, but not limited to such factors as changes in economic conditions, including uncertain consumer demand; changes in market demand and pressures on the pricing for our services; competition and growth rates within the third party logistics industry; freight levels and increasing costs and availability of truck capacity or alternative means of transporting freight, and changes in relationships with existing truck, rail, ocean and air carriers; changes in our customer base due to possible consolidation among our customers; our ability to integrate the operations of acquired companies with our historic operations successfully; risks associated with litigation and insurance coverage; risks associated with operations outside of the U.S.; risks associated with the potential impacts of changes in government regulations; risks associated with the produce industry, including food safety and contamination issues; fuel prices and availability; the impact of war on the economy; and other risks and uncertainties detailed in our Annual and Quarterly Reports.

Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update such statement to reflect events or circumstances arising after such date. All remarks made during our financial results conference call will be current at the time of the call and we undertake no obligation to update the replay.

Non-GAAP vs. GAAP Financial and Pro Forma Financial Measures
To assist investors in understanding our financial performance, we supplement the financial results that are generated in accordance with the accounting principles generally accepted in the United States, or GAAP, with non-GAAP financial measures from time to time. We use non-GAAP measures, including those set forth in this release, to assess our operating performance for the quarter. Management believes that these non-GAAP financial measures reflect an additional way of analyzing aspects of our ongoing operations that, when viewed with our GAAP results, provides a more complete understanding of the factors and trends affecting our business. However, non-GAAP results should not be regarded as a substitute for corresponding GAAP measures, and should be viewed in conjunction with our consolidated financial statements prepared in accordance with GAAP. To provide investors with information to assist them in assessing our financial results on a comparable basis with historical results, we have provided certain non-GAAP financial measures in this press release that include the effects of the disposition of T-Chek and the acquisition of Phoenix as if they had occurred at the beginning of our 2012 fiscal year.

A reconciliation of our reported results to pro forma financial measures for the quarter ended June 30, 2012 is as follows (dollars in thousands):

T-ChekPhoenix
ReportedOperations (1)Operations (1)Pro Forma
Total revenues$2,955,714$(13,354)$223,408$3,165,768
Purchased transportation and related services2,107,799177,3692,285,168
Purchased products sourced for resale422,392422,392
Total purchased services and products2,530,191177,3692,707,560
Net revenues (2)425,523(13,354)46,039458,208
Personnel expenses177,184(3,601)21,419195,002
Selling, general and administrative expenses62,589(2,938)9,95269,603
Amortization of acquisition intangibles8364,0674,903
Total other operating expenses240,609(6,539)35,438269,508
Income from operations$184,914$(6,815)$10,601$188,700
  1. Adjustments have been made to historical Phoenix operations for the addition of amortization expense of finite-lived intangible assets recorded in connection with the acquisition ($4.1 million), rent expense for lease agreements entered into in connection with the acquisition ($84 thousand), and depreciation on a building acquired in the acquisition ($37 thousand). An adjustment has also been made for the elimination of contractual changes in compensation ($5.1 million). There were no pro forma adjustments to the T-Chek historical results.
  2. Net revenues are our total revenues less purchased transportation and related services, including contracted motor carrier, rail, ocean, air, and other costs, and the purchased price and services related to the products we source.

A reconciliation of our reported results to pro forma financial measures for the six months ended June 30, 2012 is as follows (dollars in thousands):

T-ChekPhoenix
ReportedOperations (1)Operations (1)Pro Forma
Total revenues$5,507,828$(26,129)$406,608$5,888,307
Purchased transportation and related services3,917,380323,6884,241,068
Purchased products sourced for resale750,179750,179
Total purchased services and products4,667,559323,6884,991,247
Net revenues (2)840,269(26,129)82,920897,060
Personnel expenses360,622(7,706)41,100394,016
Selling, general and administrative expenses123,510(5,926)18,750136,334
Amortization of acquisition intangibles1,6788,1339,811
Total other operating expenses485,810(13,632)67,983540,161
Income from operations$354,459$(12,497)$14,937$356,899
  1. Adjustments have been made to historical Phoenix operations for addition of amortization expense of finite-lived intangible assets recorded in connection with the acquisition ($8.1 million), rent expense for lease agreements entered into in connection with the acquisition ($168 thousand), and depreciation on a building acquired in the acquisition ($75 thousand). An adjustment has also been made for the elimination of contractual changes in compensation ($5.1 million). There were no pro forma adjustments to the T-Chek historical results.
  2. Net revenues are our total revenues less purchased transportation and related services, including contracted motor carrier, rail, ocean, air, and other costs, and the purchased price and services related to the products we source.

Conference Call Information:
C.H. Robinson Worldwide Second Quarter 2013 Earnings Conference Call
Tuesday August 6, 2013 6:00 p.m. Eastern Time
The call will be limited to 60 minutes, including questions and answers.

Presentation slides and a simultaneous live audio webcast of the conference call may be accessed through the Investor Relations link on C.H. Robinson’s website at www.chrobinson.com
To participate in the conference call by telephone, please call ten minutes early by dialing: 888-549-7750
Callers should reference the conference ID, which is 4630440
Webcast replay available through Investor Relations link at www.chrobinson.com
Telephone audio replay available until 12:59 a.m. Eastern Time on August 9: 800-406-7325; passcode: 4630440#

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share data)
Three months endedSix months ended
June 30,June 30,
2013201220132012
Revenues:
Transportation$2,818,077$2,476,805$5,421,259$4,653,602
Sourcing466,811462,597854,663822,327
Payment Services3,37416,3126,60731,899
Total revenues3,288,2622,955,7146,282,5295,507,828
Costs and expenses:
Purchased transportation and related services2,386,9322,107,7994,568,8623,917,380
Purchased products sourced for resale428,059422,392784,065750,179
Purchased payment services6691,278
Personnel expenses206,009177,184418,654360,622
Other selling, general, and administrative expenses84,11763,425158,488125,188
Total costs and expenses3,105,7862,770,8005,931,3475,153,369
Income from operations182,476184,914351,182354,459
Investment, interest, and other (expense) income(589)686(649)900
Income before provision for income taxes181,887185,600350,533355,359
Provision for income taxes70,01571,018135,318134,277
Net income$111,872$114,582$215,215$221,082
Net income per share (basic)$0.70$0.71$1.34$1.36
Net income per share (diluted)$0.70$0.71$1.34$1.36
Weighted average shares outstanding (basic)159,818161,887160,137162,290
Weighted average shares outstanding (diluted)159,917162,200160,198162,643
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
June 30,December 31,
20132012
Assets 
Current assets:
Cash and cash equivalents$150,017$210,019
Receivables, net1,570,8861,412,136
Other current assets62,06550,135
Total current assets1,782,9681,672,290
Property and equipment, net153,327149,851
Intangible and other assets985,250982,084
Total Assets$2,921,545$2,804,225
Liabilities and stockholders’ investment
Current liabilities:
Accounts payable and outstanding checks$807,972$707,476
Accrued compensation67,518103,343
Accrued income taxes51,919121,581
Other accrued expenses37,92646,171
Current portion of debt365,652253,646
Total current liabilities1,330,9871,232,217
Noncurrent income taxes payable20,62120,590
Deferred tax liabilities69,92845,113
Other long term liabilities9441,933
Total liabilities1,422,4801,299,853
Total stockholders’ investment1,499,0651,504,372
Total liabilities and stockholders’ investment$2,921,545$2,804,225
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in thousands, except operational data)
Six months ended
June 30,
20132012
Operating activities:
Net income$215,215$221,082
Stock-based compensation9,88516,559
Depreciation and amortization27,95217,208
Provision for doubtful accounts5,6353,608
Deferred income taxes25,9933,543
Other1432,414
Changes in operating elements
Receivables(198,669)(229,361)
Prepaid expenses and other(12,146)(5,631)
Accounts payable and outstanding checks100,481130,457
Accrued compensation(35,277)(51,556)
Accrued income taxes(69,631)9,058
Other accrued liabilities(11,310)(7,353)
Net cash provided by operating activities58,271110,028
Investing activities:
Purchases of property and equipment(18,316)(17,403)
Purchases and development of software(4,261)(7,567)
Acquisitions, net of cash19,126
Other107192
Net cash used for investing activities(3,344)(24,778)
Financing activities:
Borrowings on line of credit2,134,023
Repayments on line of credit(2,022,017)
Payment of contingent purchase price(927)(11,613)
Net repurchases of common stock(134,043)(102,767)
Excess tax benefit on stock-based compensation24,7557,654
Cash dividends(113,031)(109,151)
Net cash used for financing activities(111,240)(215,877)
Effect of exchange rates on cash(3,689)(2,415)
Net change in cash and cash equivalents(60,002)(133,042)
Cash and cash equivalents, beginning of period210,019373,669
Cash and cash equivalents, end of period$150,017$240,627
As of June 30,
20132012
Operational Data:
Employees11,2978,743
Branches276234

 

Source: C.H. Robinson Worldwide, Inc.

C.H. Robinson Worldwide, Inc.
Chad Lindbloom, chief financial officer, 952-937-7779
or
Tim Gagnon, director, investor relations, 952-683-5007

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