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C.H. Robinson Reports Fourth Quarter Results

MINNEAPOLIS--(BUSINESS WIRE)--Feb. 5, 2013-- C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (NASDAQ: CHRW), today reported financial results for the quarter ended December 31, 2012.

Summarized financial results for the quarter ended December 31 are as follows (dollars in thousands, except per share data):

  Three months ended   Twelve months ended
December 31, December 31,
    %     %
2012   2011   change 2012   2011   change
 
Total revenues $ 2,970,876 $ 2,568,284 15.7 % $ 11,359,113 $ 10,336,346 9.9 %

Net revenues:

Transportation
Truck $ 328,273 $ 306,443 7.1 % $ 1,284,280 $ 1,236,611 3.9 %
Intermodal 9,011 10,189 -11.6 % 38,815 41,189 -5.8 %
Ocean 33,707 17,022 98.0 % 84,924 66,873 27.0 %
Air 15,948 8,811 81.0 % 44,444 39,371 12.9 %
Other logistics services   22,202     16,207 37.0 %   75,674     59,872 26.4 %
Total transportation 409,141 358,672 14.1 % 1,528,137 1,443,916 5.8 %
Sourcing 30,543 27,431 11.3 % 136,438 128,448 6.2 %
Payment Services   4,948     15,282 -67.6 %   52,996     60,294 -12.1 %
Total net revenues 444,632 401,385 10.8 % 1,717,571 1,632,658 5.2 %
 

Operating expenses

 

311,028

   

229,430

35.6

%

 

1,042,251

   

939,928

10.9

%

Income from operations 133,604 171,955 -22.3 % 675,320 692,730 -2.5 %
Investment and other income 282,166 1,373 20451.1 % 283,142 1,974 14243.6 %
Net income $ 256,392   $ 109,214 134.8 % $ 593,804   $ 431,612 37.6 %
Diluted EPS $ 1.58 $ 0.67 135.8 % $ 3.67 $ 2.62 40.1 %
 
Adjusted Results Excluding Non-Recurring Transaction Impacts (a reconciliation of these adjusted Non-GAAP measures is described in detail in Note 1 to the condensed consolidated financial information attached hereto)

Adjusted

  2011 (GAAP)

Adjusted

  2011 (GAAP)
Income from operations $ 177,311 $ 171,955 3.1 % $ 720,516 $ 692,730 4.0 %
Net income   108,571     109,214 -0.6 %   447,007     431,612 3.6 %
Diluted EPS $ 0.68 $ 0.67 1.5 % $ 2.76 $ 2.62 5.3 %
 

On October 1, 2012, we completed the acquisition of Apreo Logistics S.A. (“Apreo”), a freight forwarder based in Warsaw, Poland. On November 1, 2012, we completed the acquisition of Phoenix International Freight Services, Ltd. (“Phoenix”), an international freight forwarder based in Chicago, Illinois. The Phoenix acquisition was reported on a Form 8-K filed on November 1, 2012, as amended on Form 8-K/A filed on January 14, 2013. The purchase price allocations for both acquisitions, as reflected in the attached condensed consolidated financial information, are considered preliminary and subject to revision. On October 16, 2012, we completed the divestiture of substantially all of our T-Chek Systems Payment Services business (“T-Chek”). The Form 8-K, announcing this transaction, filed on October 17, 2012, includes historical net revenues and income from operations for T-Chek. In the fourth quarter of 2011, T-Chek had net revenues of $12.5 million and income from operations of $6.4 million.

Our truck net revenues, which consist of truckload and less-than-truckload (“LTL”) services, increased 7.1 percent in the fourth quarter of 2012. Our truckload volumes increased approximately 12 percent in the fourth quarter of 2012 compared to the fourth quarter of 2011. Our North American truckload volumes increased eight percent. We estimate that our acquisition of Apreo contributed approximately four percent to our volume growth in the fourth quarter of 2012. The Apreo business has a large number of short haul shipments in Poland. Our truckload net revenue margin decreased in the fourth quarter of 2012 compared to the fourth quarter of 2011, due 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 one percent in the fourth quarter of 2012 compared to the fourth quarter of 2011. In North America, our truckload transportation costs increased approximately two percent, excluding the estimated impacts of the change in fuel. Our LTL net revenues increased approximately 15 percent. The increase was driven by an increase in total shipments of approximately 16 percent, partially offset by decreased net revenue margin.

Our intermodal net revenues decreased 11.6 percent in the fourth quarter of 2012. This was due to decreased net revenue margin, offset partially by volume growth. 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 98.0 percent in the fourth quarter of 2012. Excluding the estimated impact of two months of Phoenix operations, our ocean transportation net revenues increased approximately three percent in the fourth quarter of 2012. This increase, excluding Phoenix, was due to increased pricing, partially offset by decreased volumes.

Our air transportation net revenues increased 81.0 percent in the fourth quarter of 2012. Excluding the estimated impact of two months of Phoenix operations, we estimate that air transportation net revenues increased 19 percent in the fourth quarter of 2012. This increase, excluding Phoenix, was due to decreased cost of capacity and increased pricing, partially offset by decreased volumes.

Other logistics services net revenues, which include transportation management services, customs, warehousing, and small parcel, increased 37.0 percent in the fourth quarter of 2012. Excluding Phoenix, we estimate that other logistics services net revenues increased approximately 15 percent in the fourth quarter of 2012. This was primarily due to transaction increases in our transportation management and customs services.

Sourcing net revenues increased 11.3 percent in the fourth quarter of 2012. This was due to increased net revenue margin.

Our payment services net revenues decreased 67.6 percent in the fourth quarter of 2012 due to the T-Chek divestiture. We have recorded a gain of $281.6 million related to this divestiture in the fourth quarter.

For the fourth quarter, operating expenses increased 35.6 percent to $311.0 million in 2012 from $229.4 million in 2011. This was due to an increase of 37.8 percent in personnel expense and an increase of 30.0 percent in other selling, general, and administrative expenses. For the fourth quarter, operating expenses as a percentage of net revenues increased to 70.0 percent in 2012 from 57.2 percent in 2011. During the fourth quarter of 2012, operating expenses grew faster than net revenues due to the increased performance-based stock vesting expense as a result of the sale of T-Chek.

Excluding certain non-recurring items from acquisitions and divestitures, adjusted operating expenses increased 16.5 percent in the fourth quarter of 2012 compared to the fourth quarter of 2011. This includes an increase in adjusted personnel expenses of 16.7 percent and an increase in adjusted selling, general and administrative expenses of 16.1 percent. During the fourth quarter of 2012, adjusted operating expenses grew faster than net revenues primarily as a result of the acquisition of Phoenix. Phoenix has a higher operating expense to net revenue ratio than C.H. Robinson. Our adjusted personnel expense increase was driven by an increase in our average headcount of approximately 20 percent, partially offset by declines in various incentive plans that are designed to keep expenses variable based on growth in earnings. Adjusted other operating expense growth was driven primarily by an increase in amortization of intangible assets acquired, travel, and warehouse expenses.

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 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 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, including non-GAAP operating expenses, non-GAAP income from operations, non-GAAP net income and non-GAAP diluted net income per share. We believe that these non-GAAP measures provide meaningful insight into our operating performance excluding certain event-specific charges, and provide an alternative perspective of our results of operations. 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. A reconciliation of adjusted results, reflecting the exclusion of certain non-recurring transaction impacts, to our GAAP results is set forth in Note 1 to the attached Condensed Consolidated Financial Information.

Conference Call Information:
C.H. Robinson Worldwide Fourth Quarter 2012 Earnings Conference Call
Tuesday February 5, 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: 877-941-6010
Callers should reference the conference ID, which is 4594691
Webcast replay available through Investor Relations link at www.chrobinson.com
Telephone audio replay available until 12:59 a.m. Eastern Time on February 8: 800-406-7325; passcode: 4594691#

 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share data)
 
  Three months ended   Twelve months ended
December 31, December 31,
2012   2011 2012   2011
 
Revenues:
Transportation $ 2,585,930 $ 2,200,258 $ 9,685,415 $ 8,740,524
Sourcing 379,479 352,744 1,620,183 1,535,528
Payment Services   5,467   15,282   53,515   60,294
Total revenues   2,970,876   2,568,284   11,359,113   10,336,346
Costs and expenses:
Purchased transportation and related services 2,176,789 1,841,586 8,157,278 7,296,608
Purchased products sourced for resale 348,936 325,313 1,483,745 1,407,080
Purchased payment services 519 - 519 -
Personnel expenses 226,042 164,062 766,006 696,233
Other selling, general, and administrative expenses   84,986   65,368   276,245   243,695
Total costs and expenses   2,837,272   2,396,329   10,683,793   9,643,616
 
Income from operations   133,604   171,955   675,320   692,730
 
Investment and other income   282,166   1,373   283,142   1,974
 
Income before provision for income taxes 415,770 173,328 958,462 694,704
Provision for income taxes   159,378   64,114   364,658   263,092
Net income $ 256,392 $ 109,214 $ 593,804 $ 431,612
 
Net income per share (basic) $ 1.59 $ 0.67 $ 3.68 $ 2.63
Net income per share (diluted) $ 1.58 $ 0.67 $ 3.67 $ 2.62
Weighted average shares outstanding (basic) 160,880 162,919 161,557 164,114
Weighted average shares outstanding (diluted) 161,799 163,825 161,946 164,741
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
  December 31,   December 31,
2012 2011
Assets
Current assets:
Cash and cash equivalents $ 210,019 $ 373,669
Receivables, net 1,412,136 1,189,637
Other current assets   50,135   48,237
Total current assets 1,672,290 1,611,543
 
Property and equipment, net 149,851 126,830
Intangible and other assets   982,084   399,668
Total Assets $ 2,804,225 $ 2,138,041
 
Liabilities and stockholders’ investment
Current liabilities:
Accounts payable and outstanding checks $ 707,476 $ 704,734
Accrued compensation 103,343 117,541
Other accrued expenses 167,752 54,357
Current portion of debt   253,646   -
Total current liabilities 1,232,217 876,632
 
Long term liabilities   67,636   12,935
Total liabilities 1,299,853 889,567
 
Total stockholders’ investment   1,504,372   1,248,474
Total liabilities and stockholders’ investment $ 2,804,225 $ 2,138,041
 
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in thousands, except operational data)
 
  Twelve months ended
December 31,
2012   2011
Operating activities:
Net income $ 593,804 $ 431,612
Stock-based compensation 59,381 38,601
Depreciation and amortization 38,090 32,498
Provision for doubtful accounts 10,459 9,052
Gain on divestiture of T-Chek (281,551 ) -
Other non-cash expenses, net (10,721 ) 7,363
Net changes in operating elements   50,880     (89,414 )
Net cash provided by operating activities 460,342 429,712
 
Investing activities:
Purchases of property and equipment (36,096 ) (35,932 )
Purchases and development of software (14,560 ) (16,874 )
Sale of T-Chek, net of cash sold 274,802 -
Cash paid for acquisitions, net of cash acquired (583,631 ) -
Sales/maturities of available-for-sale securities - 9,311
Restricted cash - 5,000
Other   419     182  
Net cash used for investing activities (359,066 ) (38,313 )
 
Financing activities:
Borrowings on line of credit 738,051 -
Repayments on line of credit (489,688 ) -
Payment of contingent purchase price (12,661 ) (4,318 )
Net repurchases of common stock (236,981 ) (231,338 )
Excess tax benefit on stock-based compensation 12,294 15,255
Cash dividends   (275,353 )   (194,697 )
Net cash used for financing activities (264,338 ) (415,098 )
Effect of exchange rates on cash   (588 )   (1,239 )
 
Net change in cash and cash equivalents (163,650 ) (24,938 )
Cash and cash equivalents, beginning of period   373,669     398,607  
Cash and cash equivalents, end of period $ 210,019   $ 373,669  
 
 
As of December 31,
2012   2011
Operational Data:
Employees 10,929 8,353
 

Note 1. Use of Non-GAAP Financial Measures
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 exclude the effects of certain non-recurring items related to recent acquisition and divestiture activities. Throughout this release, the term “Reported” refers to information prepared in accordance with GAAP, the term “Non-Recurring Acquisition Impact” refers to items related to the acquisitions of Phoenix and Apreo, the term “Non-Recurring Divestiture Impact” refers to items related to the divestiture of T-Chek, and the term “Adjusted” refers to non-GAAP financial information, adjusted to exclude the Non-Recurring Acquisition Impact and the Non-Recurring Divestiture Impact.

A reconciliation of our reported results to adjusted results for the quarter and year ended December 31 are as follows (dollars in thousands, except per share data):

 
Three months ended December 31, 2012
    Non-   Non-  
Recurring Recurring
Acquisition Divestiture
Reported Impact Impact Adjusted
Net revenues $ 444,632 $ 444,632
 
Operating expenses
Personnel expenses (1) 226,042 (385 ) (34,207 ) 191,450
Other selling, general and administrative expenses (2)   84,986   (8,736 )   (379 )   75,871
Total operating expenses 311,028 (9,121 ) (34,586 ) 267,321
 
Income from operations 133,604 9,121 34,586 177,311
 
Investment and other income (3)   282,166     (281,551 )   615
Income before provision for income taxes 415,770 9,121 (246,965 ) 177,926
 
Provision for income taxes   159,378   2,280     (92,303 )   69,355
Net income $ 256,392 $ 6,841   $ (154,662 ) $ 108,571
Net income per share (diluted) $ 1.58 $ 0.68
 
Weighted average shares outstanding (diluted) 161,799

(735) (4)

 

(455) (5)

 

160,609
 
Twelve months ended December 31, 2012
    Non   Non  
Recurring Recurring
Acquisition Divestiture
Reported Impact Impact Adjusted
Net revenues $ 1,717,571 $ 1,717,571
 
Operating expenses
Personnel expenses (1) 766,006 (385 ) (34,207 ) 731,414
Other selling, general and administrative expenses (2)   276,245   (10,225 )   (379 )   265,641
Total operating expenses 1,042,251 (10,610 ) (34,586 ) 997,055
 
Operating income 675,320 10,610 34,586 720,516
 
Investment and other income (3)   283,142     (281,551 )   1,591
Income before provision for income taxes 958,462 10,610 (246,965 ) 722,107
 
Provision for income taxes   364,658   2,745     (92,303 )   275,100
Net income $ 593,804 $ 7,865   $ (154,662 ) $ 447,007
Net income per share (diluted) $ 3.67 $ 2.76
 
Weighted average shares outstanding (diluted) 161,946

(185) (4)

 

(92) (5)

 

161,669
 
1.   The adjustment to personnel consists of $33 million of incremental vesting expense of our equity awards triggered by the gain on the divestiture of T-Chek. The balance consists of transaction- related bonuses.
2. The adjustments to other operating expenses reflect fees paid to third parties for:
a. Investment banking fees related to the acquisition of Phoenix
b. External legal and accounting fees related to the acquisitions of Apreo and Phoenix and the divestiture of T-Chek.
3. The adjustment to investment and other income reflects the gain from the divestiture of T-Chek.
4. The adjustment to diluted weighted average shares outstanding relates to the shares of C.H. Robinson stock issued as consideration paid to the sellers in the acquisition of Phoenix.
5. The adjustment to diluted weighted average shares outstanding relates to the additional vesting of performance-based restricted stock as a result of the gain on sale recognized from the divestiture of T-Chek.

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

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding C.H. Robinson Worldwide Inc's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.