8-6-13 4:15 PM EDT | Email Article

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 services   17,084       14,880 14.8 %   34,278       28,942 18.4 %
Total transportation 431,145 369,006 16.8 % 852,397 736,222 15.8 %
Sourcing 38,752 40,205 -3.6 % 70,598 72,148 -2.1 %
Payment services   2,705       16,312 -83.4 %   5,329       31,899 -83.3 %
Total net revenues 472,602 425,523 11.1 % 928,324 840,269 10.5 %
 

Operating expenses

 

290,126

     

240,609

20.6

%

 

577,142

     

485,810

18.8

%

Operating income 182,476 184,914 -1.3 % 351,182 354,459 -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,
2013     2012     % 2013     2012     %
      Reported     Pro Forma     change Reported     Pro Forma     change
Total net revenues $ 472,602 $ 458,208 3.1 % $ 928,324 $ 897,060 3.5 %
Income from operations 182,476 188,700 -3.3 % 351,182 356,899 -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-Chek Phoenix
Reported

Operations (1)

Operations (1)

Pro Forma
Total revenues $ 2,955,714 $ (13,354 ) $ 223,408 $ 3,165,768
 
Purchased transportation and related services 2,107,799 - 177,369 2,285,168
Purchased products sourced for resale   422,392   -     -     422,392
Total purchased services and products   2,530,191   -     177,369     2,707,560

Net revenues (2)

425,523 (13,354 ) 46,039 458,208
 
Personnel expenses 177,184 (3,601 ) 21,419 195,002
Selling, general and administrative expenses 62,589 (2,938 ) 9,952 69,603
Amortization of acquisition intangibles   836   -     4,067     4,903
Total other operating expenses   240,609   (6,539 )   35,438     269,508
 
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-Chek   Phoenix  
Reported

Operations (1)

Operations (1)

Pro Forma
Total revenues $ 5,507,828 $ (26,129 ) $ 406,608 $ 5,888,307
 
Purchased transportation and related services 3,917,380 - 323,688 4,241,068
Purchased products sourced for resale   750,179   -     -     750,179
Total purchased services and products   4,667,559   -     323,688     4,991,247

Net revenues (2)

840,269 (26,129 ) 82,920 897,060
 
Personnel expenses 360,622 (7,706 ) 41,100 394,016
Selling, general and administrative expenses 123,510 (5,926 ) 18,750 136,334
Amortization of acquisition intangibles   1,678   -     8,133     9,811
Total other operating expenses   485,810   (13,632 )   67,983     540,161
 
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 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 Services   3,374     16,312     6,607     31,899  
Total revenues   3,288,262     2,955,714     6,282,529     5,507,828  
Costs and expenses:
Purchased transportation and related services 2,386,932 2,107,799 4,568,862 3,917,380
Purchased products sourced for resale 428,059 422,392 784,065 750,179
Purchased payment services 669 - 1,278 -
Personnel expenses 206,009 177,184 418,654 360,622
Other selling, general, and administrative expenses   84,117     63,425     158,488     125,188  
Total costs and expenses   3,105,786     2,770,800     5,931,347     5,153,369  
 
Income from operations   182,476     184,914     351,182     354,459  
 
Investment, interest, and other (expense) income   (589 )   686     (649 )   900  
 
Income before provision for income taxes 181,887 185,600 350,533 355,359
Provision for income taxes   70,015     71,018     135,318     134,277  
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) 159,818 161,887 160,137 162,290
Weighted average shares outstanding (diluted) 159,917 162,200 160,198 162,643
 
 
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’ investment $ 2,921,545   $ 2,804,225  
 
 
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 compensation 24,755 7,654
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 period   210,019     373,669  
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
 

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

Copyright Business Wire 2013
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