C.H. Robinson Reports Second Quarter Results Business Wire MINNEAPOLIS -- August 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, % % 2013 2012 change 2013 2012 change Total revenues $ 3,288,262 $ 2,955,714 11.3 % $ 6,282,529 $ 5,507,828 14.1 % Net revenues: Transportation Truckload $ 264,335 $ 256,193 3.2 % $ 532,939 $ 519,775 2.5 % LTL 60,711 56,445 7.6 % 119,202 108,272 10.1 % Intermodal 9,920 10,019 -1.0 % 19,021 19,730 -3.6 % Ocean 49,124 16,958 189.7 % 91,612 32,719 180.0 % Air 20,202 10,577 91.0 % 36,970 19,450 90.1 % Customs 9,769 3,934 148.3 % 18,375 7,334 150.5 % Other logistics 17,084 14,880 14.8 % 34,278 28,942 18.4 % services Total 431,145 369,006 16.8 % 852,397 736,222 15.8 % transportation Sourcing 38,752 40,205 -3.6 % 70,598 72,148 -2.1 % Payment 2,705 16,312 -83.4 % 5,329 31,899 -83.3 % services Total net 472,602 425,523 11.1 % 928,324 840,269 10.5 % revenues Operating 290,126 240,609 20.6 % 577,142 485,810 18.8 % expenses Operating 182,476 184,914 -1.3 % 351,182 354,459 -0.9 % income 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, 2013 2012 % 2013 2012 % Reported Pro Forma change Reported Pro Forma change Total net $ 472,602 $ 458,208 3.1 % $ 928,324 $ 897,060 3.5 % revenues Income from 182,476 188,700 -3.3 % 351,182 356,899 -1.6 % operations 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-Chek Phoenix Reported Operations Operations Pro Forma ^(1) ^(1) Total revenues $ 2,955,714 $ (13,354 ) $ 223,408 $ 3,165,768 Purchased transportation 2,107,799 - 177,369 2,285,168 and related services Purchased products sourced 422,392 - - 422,392 for resale Total purchased services and 2,530,191 - 177,369 2,707,560 products Net revenues 425,523 (13,354 ) 46,039 458,208 ^(2) Personnel 177,184 (3,601 ) 21,419 195,002 expenses Selling, general and 62,589 (2,938 ) 9,952 69,603 administrative expenses Amortization of acquisition 836 - 4,067 4,903 intangibles Total other operating 240,609 (6,539 ) 35,438 269,508 expenses Income from $ 184,914 $ (6,815 ) $ 10,601 $ 188,700 operations 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-Chek Phoenix Reported Operations Operations Pro Forma ^(1) ^(1) Total revenues $ 5,507,828 $ (26,129 ) $ 406,608 $ 5,888,307 Purchased transportation 3,917,380 - 323,688 4,241,068 and related services Purchased products sourced 750,179 - - 750,179 for resale Total purchased services and 4,667,559 - 323,688 4,991,247 products Net revenues 840,269 (26,129 ) 82,920 897,060 ^(2) Personnel 360,622 (7,706 ) 41,100 394,016 expenses Selling, general and 123,510 (5,926 ) 18,750 136,334 administrative expenses Amortization of acquisition 1,678 - 8,133 9,811 intangibles Total other operating 485,810 (13,632 ) 67,983 540,161 expenses Income from $ 354,459 $ (12,497 ) $ 14,937 $ 356,899 operations 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 ended Six months ended June 30, June 30, 2013 2012 2013 2012 Revenues: Transportation $ 2,818,077 $ 2,476,805 $ 5,421,259 $ 4,653,602 Sourcing 466,811 462,597 854,663 822,327 Payment 3,374 16,312 6,607 31,899 Services Total revenues 3,288,262 2,955,714 6,282,529 5,507,828 Costs and expenses: Purchased transportation 2,386,932 2,107,799 4,568,862 3,917,380 and related services Purchased products 428,059 422,392 784,065 750,179 sourced for resale Purchased payment 669 - 1,278 - services Personnel 206,009 177,184 418,654 360,622 expenses Other selling, general, and 84,117 63,425 158,488 125,188 administrative expenses Total costs 3,105,786 2,770,800 5,931,347 5,153,369 and expenses Income from 182,476 184,914 351,182 354,459 operations Investment, interest, and other (589 ) 686 (649 ) 900 (expense) income Income before provision for 181,887 185,600 350,533 355,359 income taxes Provision for 70,015 71,018 135,318 134,277 income taxes Net income $ 111,872 $ 114,582 $ 215,215 $ 221,082 Net income per $ 0.70 $ 0.71 $ 1.34 $ 1.36 share (basic) Net income per share $ 0.70 $ 0.71 $ 1.34 $ 1.36 (diluted) Weighted average shares 159,818 161,887 160,137 162,290 outstanding (basic) Weighted average shares 159,917 162,200 160,198 162,643 outstanding (diluted) CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands) June 30, December 31, 2013 2012 Assets Current assets: Cash and cash equivalents $ 150,017 $ 210,019 Receivables, net 1,570,886 1,412,136 Other current assets 62,065 50,135 Total current assets 1,782,968 1,672,290 Property and equipment, net 153,327 149,851 Intangible and other assets 985,250 982,084 Total Assets $ 2,921,545 $ 2,804,225 Liabilities and stockholders’ investment Current liabilities: Accounts payable and outstanding checks $ 807,972 $ 707,476 Accrued compensation 67,518 103,343 Accrued income taxes 51,919 121,581 Other accrued expenses 37,926 46,171 Current portion of debt 365,652 253,646 Total current liabilities 1,330,987 1,232,217 Noncurrent income taxes payable 20,621 20,590 Deferred tax liabilities 69,928 45,113 Other long term liabilities 944 1,933 Total liabilities 1,422,480 1,299,853 Total stockholders’ investment 1,499,065 1,504,372 Total liabilities and stockholders’ $ 2,921,545 $ 2,804,225 investment CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited, in thousands, except operational data) Six months ended June 30, 2013 2012 Operating activities: Net income $ 215,215 $ 221,082 Stock-based compensation 9,885 16,559 Depreciation and amortization 27,952 17,208 Provision for doubtful accounts 5,635 3,608 Deferred income taxes 25,993 3,543 Other 143 2,414 Changes in operating elements Receivables (198,669 ) (229,361 ) Prepaid expenses and other (12,146 ) (5,631 ) Accounts payable and outstanding checks 100,481 130,457 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 activities 58,271 110,028 Investing activities: Purchases of property and equipment (18,316 ) (17,403 ) Purchases and development of software (4,261 ) (7,567 ) Acquisitions, net of cash 19,126 - Other 107 192 Net cash used for investing activities (3,344 ) (24,778 ) Financing activities: Borrowings on line of credit 2,134,023 - 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 24,755 7,654 compensation 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 210,019 373,669 period Cash and cash equivalents, end of period $ 150,017 $ 240,627 As of June 30, 2013 2012 Operational Data: Employees 11,297 8,743 Branches 276 234 Contact: C.H. Robinson Worldwide, Inc. Chad Lindbloom, chief financial officer, 952-937-7779 or Tim Gagnon, director, investor relations, 952-683-5007
C.H. Robinson Reports Second Quarter Results
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