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Press release from Business Wire

C.H. Robinson Reports First Quarter Results

Tuesday, May 07, 2013

C.H. Robinson Reports First Quarter Results

16:15 EDT Tuesday, May 07, 2013

MINNEAPOLIS (Business Wire) -- C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (NASDAQ: CHRW), today reported financial results for the quarter ended March 31, 2013. Summarized financial results for the quarter ended March 31 are as follows (dollars in thousands, except per share data):

  Three months ended
March 31,
    %
2013   2012   change
 
Total revenues $ 2,994,267 $ 2,552,114 17.3 %
 

Net revenues:

Transportation
Truckload $ 268,604 $ 263,582 1.9 %
LTL 58,491 51,827 12.9 %
Intermodal 9,101 9,711 -6.3 %
Ocean 42,488 15,761 169.6 %
Air 16,768 8,873 89.0 %
Customs 8,606 3,400 153.1 %
Other logistics services   17,194     14,062 22.3 %
Total transportation 421,252 367,216 14.7 %
Sourcing 31,846 31,943 -0.3 %
Payment Services   2,624     15,587 -83.2 %
Total net revenues 455,722 414,746 9.9 %
 

Operating expenses

 

287,016

   

245,201

17.1

%

Income from operations 168,706 169,545 -0.5 %
Net income $ 103,343   $ 106,500 -3.0 %
Diluted EPS $ 0.64 $ 0.65 -1.5 %
 

Pro Forma Comparison - The following shows the effects of the disposition of the Company's T-Chek Payment Services business, 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 for the first quarter of 2012 is described on page 4.

  2013   2012   %
    Reported   Pro Forma   change

Total net revenues (2)

$

455,722

$ 438,852 3.8 %
Income from operations 168,706 168,199 0.3 %
 

Discussion of First Quarter 2013 Results

“Our results for the first quarter of 2013 reflect the slower growth and continued margin contraction that we have seen in the markets we serve. They also reflect our continued investments in our future and adjusting to the changes we see. We remain positive in our long term performance outlook. Our investments, including the acquisitions executed last year, continue to drive our revenue growth and ability to service the global supply chain needs of our customers,” said John P. Wiehoff, chairman and chief executive officer of C.H. Robinson.

Our truckload net revenues increased 1.9 percent in the first quarter of 2013 compared to the first quarter of 2012. Our truckload volumes increased approximately nine percent in the first quarter of 2013 compared to the first 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 first quarter of 2013. The Apreo business has a large number of short haul shipments in Poland. Our truckload net revenue margin decreased in the first quarter of 2013 compared to the first quarter of 2012, due primarily to increased cost per mile. In North America, excluding the estimated impacts of the change in fuel, our average truckload rate per mile charged to our customers increased approximately 1.5 percent in the first quarter of 2013 compared to the first quarter of 2012. In North America, our truckload transportation costs increased approximately 2.5 percent, excluding the estimated impacts of the change in fuel.

Our less-than-truckload (“LTL”) net revenues increased 12.9 percent in the first quarter of 2013 compared to the first quarter of 2012. The increase was driven by an increase in total shipments of approximately 12 percent.

Our intermodal net revenues decreased 6.3 percent in the first quarter of 2013 compared to the first quarter of 2012. This was primarily due to decreased net revenue margin and slight decline in volume. Our net revenue margin decline was due to a change in our mix of business and increased cost of capacity.

Our ocean transportation net revenues increased 169.6 percent in the first quarter of 2013 compared to the first quarter of 2012. This increase was primarily due to our acquisition of Phoenix in November 2012.

Our air transportation net revenues increased 89.0 percent in the first quarter of 2013 compared to the first quarter of 2012. This increase was primarily due to our acquisition of Phoenix.

Our customs net revenues increased 153.1 percent in the first quarter of 2013 compared to the first quarter of 2012. This increase was primarily due to our acquisition of Phoenix.

Other logistics services net revenues, which include transportation management services, warehousing, and small parcel, increased 22.3 percent in the first quarter of 2013 compared to the first quarter of 2012. This was primarily due to transaction increases in our transportation management services.

Sourcing net revenues decreased 0.3 percent in the first quarter of 2013 compared to the first quarter of 2012. This was due to decreased net revenue margin, partially offset by increased volumes.

Our payment services net revenues decreased 83.2 percent in the first quarter of 2013 due to the T-Chek divestiture in the fourth quarter of 2012.

For the first quarter, operating expenses increased 17.1 percent to $287.0 million in 2013 from $245.2 million in 2012. Operating expenses as a percentage of net revenues increased to 63.0 percent in 2013 from 59.1 percent in 2012. During the first quarter of 2013, operating expenses grew faster than net revenues primarily as a result of the impact of Phoenix operations. Phoenix has a higher operating expense to net revenue ratio than C.H. Robinson has historically experienced.

For the first quarter, personnel expenses increased 15.9 percent to $212.6 million in 2013 from $183.4 million in 2012. This was due to an increase in our average headcount of approximately 31 percent, related primarily to the acquisitions of Phoenix and Apreo in the fourth quarter of 2012, partially offset by declines in 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 first quarter, other selling, general, and administrative expenses increased 20.4 percent to $74.4 million in 2013 from $61.8 million in 2012. This increase was driven primarily by Phoenix operations, partially offset by the divestiture of T-Chek. For the first quarter, acquisition amortization expense increased to $5.0 million in 2013 from $0.8 million in 2012 primarily as a result of the definite-lived intangible assets recorded in connection with the acquisition of Phoenix.

For the first quarter, we used cash of $111.8 million to fund income taxes primarily related to the gain on the divestiture of T-Chek.

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 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 March 31, 2012 is as follows (dollars in thousands):

   

T-Chek

  Phoenix  
Reported

Operations (1)

Operations (1)

Pro Forma
Total revenues $ 2,552,114 $ (12,775 ) $ 187,192 $ 2,726,531
 
Purchased transportation and related services 1,809,581 - 150,311 1,959,892
Purchased products sourced for resale   327,787   -     -   327,787
Total purchased services and products   2,137,368   -     150,311   2,287,679
Net revenues (2) 414,746 (12,775 ) 36,881 438,852
 
Personnel expenses 183,438 (4,105 ) 19,681 199,014
Selling, general and administrative expenses 60,921 (2,988 ) 8,798 66,731
Amortization of acquisition intangibles   842   -     4,066   4,908
Total other operating expenses   245,201   (7,093 )   32,545   270,653
 
Income from operations $ 169,545 $ (5,682 ) $ 4,336 $ 168,199
 
  1. Adjustments have been made to historical Phoenix operations for the 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). 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 First Quarter 2013 Earnings Conference Call
Tuesday May 7, 2013 5:00 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: 877-941-6009
Callers should reference the conference ID, which is 4613551
Webcast replay available through Investor Relations link at www.chrobinson.com
Telephone audio replay available until 12:59 a.m. Eastern Time on May 10: 800-406-7325; passcode: 4613551#

 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share data)
 
  Three months ended
March 31,
2013   2012
 
Revenues:
Transportation $ 2,603,182 $ 2,176,797
Sourcing 387,852 359,730
Payment Services   3,233     15,587
Total revenues   2,994,267     2,552,114
Costs and expenses:
Purchased transportation and related services 2,181,930 1,809,581
Purchased products sourced for resale 356,006 327,787
Purchased payment services 609 -
Personnel expenses 212,645 183,438
Other selling, general, and administrative expenses   74,371     61,763
Total costs and expenses   2,825,561     2,382,569
 
Income from operations   168,706     169,545
 
Investment and other (expense) income   (60 )   214
 
Income before provision for income taxes 168,646 169,759
Provision for income taxes   65,303     63,259
Net income $ 103,343   $ 106,500
 
Net income per share (basic) $ 0.64 $ 0.65
Net income per share (diluted) $ 0.64 $ 0.65
 
Weighted average shares outstanding (basic) 160,637 162,693
Weighted average shares outstanding (diluted) 160,690 163,023
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
  March 31,   December 31,
2013 2012
Assets
Current assets:
Cash and cash equivalents $ 159,900 $ 210,019
Receivables, net 1,469,826 1,412,136
Other current assets   60,853   50,135
Total current assets 1,690,579 1,672,290
 
Property and equipment, net 150,896 149,851
Intangible and other assets   989,085   982,084
Total Assets $ 2,830,560 $ 2,804,225
 
Liabilities and stockholders' investment
Current liabilities:
Accounts payable and outstanding checks $ 758,729 $ 707,476
Accrued compensation 52,400 103,343
Income taxes 9,964 121,581
Other accrued expenses 37,705 46,171
Current portion of debt   390,629   253,646
Total current liabilities 1,249,427 1,232,217
 
Noncurrent income taxes payable 20,402 20,590
Deferred tax liabilities 70,101 45,113
Other long term liabilities   945   1,933
Total liabilities 1,340,875 1,299,853
 
Total stockholders' investment   1,489,685   1,504,372
Total liabilities and stockholders' investment $ 2,830,560 $ 2,804,225
 
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in thousands, except operational data)
 
  Three months ended
March 31,
2013   2012
Operating activities:
Net income $ 103,343 $ 106,500
Stock-based compensation 5,115 9,766
Depreciation and amortization 13,807 8,417
Provision for doubtful accounts 2,293 4,846
Deferred income taxes 27,303 4,152
Other 40 210
Changes in operating elements, net of effects of acquisitions:
Receivables (74,267 ) (60,588 )
Prepaid expenses and other (12,158 ) 800
Accounts payable and outstanding checks 51,238 43,138
Accrued compensation and profit-sharing contribution (49,920 ) (69,664 )
Accrued income taxes (111,805 ) 37,936
Other accrued liabilities   (13,039 )   (8,429 )
Net cash (used in) provided by operating activities (58,050 ) 77,084
 
Investing activities:
Purchases of property and equipment (8,745 ) (9,888 )
Purchases and development of software (1,432 ) (3,932 )
Other   43     4  
Net cash used for investing activities (10,134 ) (13,816 )
 
Financing activities:
Borrowings on line of credit 1,008,000 -
Repayments on line of credit (871,017 ) -
Payment of contingent purchase price (927 ) (11,613 )
Net repurchases of common stock (84,510 ) (64,991 )
Excess tax benefit on stock-based compensation 23,554 5,999
Cash dividends   (56,473 )   (54,725 )
Net cash provided by (used for) financing activities 18,627 (125,330 )
Effect of exchange rates on cash   (562 )   (242 )
 
Net change in cash and cash equivalents (50,119 ) (62,304 )
Cash and cash equivalents, beginning of period   210,019     373,669  
Cash and cash equivalents, end of period $ 159,900   $ 311,365  
 
As of March 31,
2013   2012
Operational Data:
Employees 11,144 8,491
Branches 276 235

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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