C.H. Robinson's Q4 earnings fell to US$93M from US$256.4M a year ago as revenues rose 6% to US$3.15B; for full year, earnings fell to US$415.9M from US$593.8M, revenues climbed 12.3% to US$12.75B

MINNEAPOLIS , February 5, 2014 (press release) –

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

    Three months ended December 31,   Twelve months ended December 31,
    2013   2012   % change   2013   2012   % change
                         
Total revenues   $ 3,152,882     $ 2,970,876   6.1 %   $ 12,752,076     $ 11,359,113   12.3 %
Net revenues:                        
Transportation                        
Truckload   $ 256,117     $ 271,248   -5.6 %   $ 1,054,565     $ 1,060,120   -0.5 %
LTL     58,839       57,025   3.2 %     239,477       224,160   6.8 %
Intermodal     9,861       9,011   9.4 %     39,084       38,815   0.7 %
Ocean     46,367       33,707   37.6 %     187,671       84,924   121.0 %
Air     17,982       15,948   12.8 %     73,089       44,444   64.5 %
Customs     9,271       6,782   36.7 %     36,578       18,225   100.7 %
Other logistics services     17,583       15,420   14.0 %     67,931       57,449   18.2 %
Total transportation     416,020       409,141   1.7 %     1,698,395       1,528,137   11.1 %
Sourcing     25,799       30,543   -15.5 %     126,950       136,438   -7.0 %
Payment services     2,646       4,948   -46.5 %     10,750       52,996   -79.7 %
Total net revenues     444,465       444,632   0.0 %     1,836,095       1,717,571   6.9 %
                                         

Operating expenses

   

289,352

     

311,028

 

-7.0

%

   

1,153,445

     

1,042,251

 

10.7

%

Income from operations     155,113       133,604   16.1 %     682,650       675,320   1.1 %
Investment and other (expense) income     (6,005 )     282,166   -102.1 %     (9,289 )     283,142   -103.3 %
                                         

Net income

 

$

92,952

   

$

256,392

 

-63.7

%

 

$

415,904

   

$

593,804

 

-30.0

%

Diluted earnings per share   $ 0.62     $ 1.58   -60.8 %   $ 2.65     $ 3.67   -27.8 %
                         

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 3.

    Three months ended December 31,   Twelve months ended December 31,
    2013   2012 Pro   %   2013   2012 Pro   %
    Reported   Forma   change   Reported   Forma   change
Total net revenues   $ 444,465   $ 453,782   -2.1 %   $ 1,836,095   $ 1,812,631   1.3 %
Personnel expenses     203,619     198,307   2.7 %     826,661     788,959   4.8 %
Selling, general, and administrative expenses     80,718     75,006   7.6 %     306,656     279,744   9.6 %
Amortization of acquisition intangibles     5,015     5,022   -0.1 %     20,128     19,859   1.4 %
Total operating expenses     289,352     278,335   4.0 %     1,153,445     1,088,562   6.0 %
Income from operations     155,113     175,447   -11.6 %     682,650     724,069   -5.7 %
Net income   $ 92,952   $ 106,567   -12.8 %   $ 415,904   $ 466,179   -10.8 %
Diluted earnings per share   $ 0.62   $ 0.66   -6.1 %   $ 2.65   $ 2.74   -3.3 %
                         
Discussion of Fourth Quarter 2013 Results

Our truckload net revenues decreased 5.6 percent in the fourth quarter of 2013 compared to the fourth quarter of 2012. Our truckload volumes increased approximately seven percent in the fourth quarter of 2013 compared to the fourth quarter of 2012. Our North American truckload volumes increased approximately six percent. Our truckload net revenue margin decreased in the fourth quarter of 2013 compared to the fourth 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 3.5 percent in the fourth quarter of 2013 compared to the fourth quarter of 2012. In North America, our truckload transportation costs increased approximately five percent, excluding the estimated impacts of the change in fuel.

Our less-than-truckload (“LTL”) net revenues increased 3.2 percent in the fourth quarter of 2013 compared to the fourth quarter of 2012. The increase was driven by an increase in total shipments of approximately four percent, partially offset by decreased net revenue margin.

Our intermodal net revenues increased 9.4 percent in the fourth quarter of 2013 compared to the fourth quarter of 2012. This was due to increased net revenue margin, partially offset by decreased volumes. Our net revenue margin increase was due to a change in our mix of business and improved customer pricing.

Our ocean transportation net revenues increased 37.6 percent, our air transportation net revenues increased 12.8 percent, and our customs net revenues increased 36.7 percent in the fourth quarter of 2013 compared to the fourth quarter of 2012. These increases were primarily due to our acquisition of Phoenix in November 2012.

Sourcing net revenues decreased 15.5 percent in the fourth quarter of 2013 compared to the fourth quarter of 2012. We continued to experience volume and net revenue declines from a large customer and expect this to continue throughout 2014. Sourcing net revenue margins declined due to weather and changes in our commodity and service mix. Case volumes decreased approximately two percent in the fourth quarter of 2013 compared to the fourth quarter of 2012.

Our Payment Services net revenues decreased 46.5 percent in the fourth quarter of 2013 compared to the fourth quarter of 2012 due to the T-Chek divestiture in the fourth quarter of 2012.

For the fourth quarter, operating expenses decreased 7.0 percent to $289.4 million in 2013 from $311.0 million in 2012. This was due to a decrease of 9.9 percent in personnel expense and an increase of 0.9 percent in other selling, general, and administrative expenses. Operating expenses as a percentage of net revenues decreased to 65.1 percent in the fourth quarter of 2013 from 70.0 percent in 2012. During the fourth quarter of 2012, operating expenses were a higher percentage of net revenues primarily due to $33.0 million of incremental performance-based stock vesting expense as a result of the sale of T-Chek.

For the fourth quarter, personnel expenses decreased 9.9 percent to $203.6 million in 2013 from $226.0 million in 2012. This decrease was primarily due to the performance-based stock vesting expense as a result of sale of T-Chek in 2012. On a pro forma basis, personnel expense increased 2.7 percent in the fourth quarter of 2013 compared to the fourth quarter of 2012. This increase was due to growth in our average headcount of approximately 32 percent, related primarily to the acquisitions of the Phoenix in the fourth quarter of 2012. We estimate that our average headcount, excluding acquisitions and divestitures, increased approximately eight percent in the fourth quarter of 2013 compared to 2012. The increase in personnel expense from headcount growth was partially offset by declines in expenses related to incentive plans that are designed to keep expenses variable with changes in net revenues and profitability.

For the fourth quarter, other selling, general, and administrative expenses increased 0.9 percent to $85.7 million in 2013 from $85.0 million in 2012. In the fourth quarter of 2012, we had approximately $9.1 million of non-recurring acquisition and divestiture expenses. On a pro forma basis, selling, general, and administrative expense increased 7.1 percent in the fourth quarter of 2013 compared to the fourth quarter of 2012. This increase was primarily due to Phoenix operations and a higher provision for bad debt.

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 46,000 active customers through a network of 285 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 63,000 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 December 31, 2012 is as follows (dollars in thousands):

        Non-            
        Recurring            
        Acquisition   T-Chek   Phoenix    
    Reported  

Impact (1)

 

Operations (2)

 

Operations (2)

  Pro Forma
Total revenues   $ 2,970,876   $ -     $ (2,290 )   $ 70,009     $ 3,038,595  
                     
Purchased transportation and related services    

2,176,789

   

-

     

-

     

58,569

     

2,235,358

 
Purchased products sourced for resale     348,936     -       -       -       348,936  
Purchased payment services     519     -       -       -       519  
Total purchased services and products     2,526,244     -       -       58,569       2,584,813  
Net revenues (3)     444,632     -       (2,290 )     11,440       453,782  
                     
Personnel expenses     226,042     (34,592 )     (609 )     7,466       198,307  
Selling, general and administrative expenses    

81,319

   

(9,115

)

   

(479

)

   

3,281

     

75,006

 
Amortization of acquisition intangibles     3,667     -       -       1,355       5,022  
Total other operating expenses     311,028     (43,707 )     (1,088 )     12,102       278,335  
                     
Income from operations     133,604     43,707       (1,202 )     (662 )     175,447  
                     
Investment and other income     282,166     (281,551 )     1       (1,369 )     (753 )
Income before provision for income taxes     415,770     (237,844 )     (1,201 )     (2,031 )     174,694  
Provision for income taxes     159,378     (90,023 )     (480 )     (748 )     68,127  
Net income   $ 256,392   $ (147,821 )   $ (721 )   $ (1,283 )   $ 106,567  
                     
Net income per share (diluted)   $ 1.58               $ 0.66  
Weighted average shares outstanding     161,799     (1,190 )     -       1,108       161,717  
                                       
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. The adjustments to other operating expenses reflect fees paid to third parties for investment banking fees related to the acquisition of Phoenix and external legal and accounting fees related to the acquisitions of Apreo Logistics S.A. (“Apreo”) and Phoenix International Freight Services, Ltd. (“Phoenix”) and the divestiture of T-Chek. The adjustment to investment and other income reflects the gain from the divestiture of T-Chek. 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 and the additional vesting of performance-based restricted stock as a result of the gain on sale recognized from the divestiture of T-Chek.
 
2.   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 ($1.4 million), rent expense for lease agreements entered into in connection with the acquisition ($28 thousand), depreciation on a building acquired in the acquisition ($12 thousand), and incremental interest expense on the borrowings associated with the acquisition ($213 thousand). Adjustments have been made for the elimination of additional bonuses ($1.4 million) and third party advisory fees ($582 thousand) paid by Phoenix. An adjustment has also been made to reduce purchased transportation and related services ($2.5 million) and other selling, general, and administrative expenses ($5.0 million) and to increase personnel expenses ($7.5 million) to conform to C.H. Robinson’s historical financial reporting presentation. 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. There were no pro forma adjustments to the T-Chek historical results.
 
3.   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 twelve months ended December 31, 2012 is as follows (dollars in thousands):

        Non-            
        Recurring  

 

 

 

   
        Acquisition  

T-Chek

 

Phoenix

   
    Reported  

Impact (1)

 

Operations (2)

 

Operations (2)

  Pro Forma
Total revenues   $ 11,359,113   $ -     $ (41,623 )   $ 692,836     $ 12,010,326  
                     
Purchased transportation and related services    

8,157,278

   

-

     

-

     

556,153

     

8,713,431

 
Purchased products sourced for resale     1,483,745     -       -       -       1,483,745  
Purchased payment services     519     -       -       -       519  
Total purchased services and products     9,641,542     -       -       556,153       10,197,695  
Net revenues (3)     1,717,571     -       (41,623 )     136,683       1,812,631  
                     
Personnel expenses     766,006     (34,592 )     (11,819 )     69,364       788,959  
Selling, general and administrative expenses    

269,941

   

(10,604

)

   

(9,226

)

   

29,633

     

279,744

 
Amortization of acquisition intangibles     6,304     -       -       13,555       19,859  
Total other operating expenses     1,042,251     (45,196 )     (21,045 )     112,552       1,088,562  
                     
Income from operations     675,320     45,196       (20,578 )     24,131       724,069  
                     
Investment and other income     283,142     (281,551 )     (67 )     (5,348 )     (3,824 )
Income before provision for income taxes     958,462     (236,355 )     (20,645 )     18,783       720,245  
Provision for income taxes     364,658     (89,558 )     (7,841 )     6,807       274,066  
Net income   $ 593,804   $ (146,797 )   $ (12,804 )   $ 11,976     $ 446,179  
                     
Net income per share (diluted)   $ 3.67               $ 2.74  
Weighted average shares outstanding     161,946     (277 )     -       1,108       162,777  
                     
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. The adjustments to other operating expenses reflect fees paid to third parties for investment banking fees related to the acquisition of Phoenix and external legal and accounting fees related to the acquisitions of Apreo and Phoenix and the divestiture of T-Chek. The adjustment to investment and other income reflects the gain from the divestiture of T-Chek. 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 and the additional vesting of performance-based restricted stock as a result of the gain on sale recognized from the divestiture of T-Chek.
 
2.   Adjustments have been made to historical Phoenix operations for addition of amortization expense of finite-lived intangible assets recorded in connection with the acquisition ($13.6 million), rent expense for lease agreements entered into in connection with the acquisition ($280 thousand), depreciation on a building acquired in the acquisition ($123 thousand), and incremental interest expense on the borrowings associated with the acquisition ($2.1 million). Adjustments have been made for the elimination of contractual changes in compensation ($5.1 million), and additional bonuses ($1.4 million) and third party advisory fees ($582 thousand) paid by Phoenix. An adjustment has also been made to reduce purchased transportation and related services ($24.4 million) and other selling, general, and administrative expenses ($50.1 million) and to increase personnel expenses ($74.5 million) to conform to C.H. Robinson’s historical financial reporting presentation. 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. There were no pro forma adjustments to the T-Chek historical results.
 
3.   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 Fourth Quarter 2013 Earnings Conference Call
Wednesday February 5, 2014 8:30 a.m. Eastern Time
The call will be limited to 60 minutes, including questions and answers. We invite call participants to submit questions in advance of the conference call and we will respond to as many of the questions as we can in the time allowed. If time permits, we will accept live questions. To submit your question(s) in advance of the call, please email tim.gagnon@chrobinson.com.

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: 877-941-0844
Callers should reference the conference ID, which is 4660962#
Webcast replay available through Investor Relations link at www.chrobinson.com
Telephone audio replay available until 12:59 a.m. Eastern Time on February 7: 800-406-7325; passcode: 4660962#

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share data)
 
    Three months ended   Twelve months ended
    December 31,   December 31,
    2013   2012   2013   2012
                 
Revenues:                
Transportation   $ 2,767,550     $ 2,585,930   $ 11,069,710     $ 9,685,415
Sourcing     382,098       379,479     1,669,134       1,620,183
Payment Services     3,234       5,467     13,232       53,515
Total revenues     3,152,882       2,970,876     12,752,076       11,359,113
Costs and expenses:                
Purchased transportation and related services     2,351,530       2,176,789     9,371,315       8,157,278
Purchased products sourced for resale     356,299       348,936     1,542,184       1,483,745
Purchased payment services     588       519     2,482       519
Personnel expenses     203,619       226,042     826,661       766,006
Other selling, general, and administrative expenses     85,733       84,986     326,784       276,245
Total costs and expenses     2,997,769       2,837,272     12,069,426       10,683,793
                 
Income from operations     155,113       133,604     682,650       675,320
                 
Investment, interest, and other (expense) income     (6,005 )     282,166     (9,289 )     283,142
                 
Income before provision for income taxes     149,108       415,770     673,361       958,462
Provision for income taxes     56,156       159,378     257,457       364,658
Net income   $ 92,952     $ 256,392   $ 415,904     $ 593,804
                 
Net income per share (basic)   $ 0.62     $ 1.59   $ 2.65     $ 3.68
Net income per share (diluted)   $ 0.62     $ 1.58   $ 2.65     $ 3.67
Weighted average shares outstanding (basic)     150,856       160,880     156,915       161,557
Weighted average shares outstanding (diluted)     151,130       161,799     157,080       161,946
                 
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
    December 31,   December 31,
    2013   2012
Assets        
Current assets:        
Cash and cash equivalents   $ 162,047   $ 210,019
Receivables, net     1,449,581     1,412,136
Other current assets     52,857     50,135
Total current assets     1,664,485     1,672,290
         
Property and equipment, net     160,703     149,851
Intangible and other assets     977,630     982,084
Total assets   $ 2,802,818   $ 2,804,225
         
Liabilities and stockholders’ investment        
Current liabilities:        
Accounts payable and outstanding checks   $ 755,007   $ 707,476
Accrued compensation     85,247     103,343
Accrued income taxes     11,681     121,581
Other accrued expenses     43,046     46,171
Current portion of debt     375,000     253,646
Total current liabilities     1,269,981     1,232,217
         
Noncurrent income taxes payable     21,584     20,590
Deferred tax liabilities     70,618     45,113
Long-term debt     500,000     -
Other long term liabilities     911     1,933
Total liabilities     1,863,094     1,299,853
         
Total stockholders’ investment     939,724     1,504,372
Total liabilities and stockholders’ investment   $ 2,802,818   $ 2,804,225
             
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in thousands, except operational data)
 
    Twelve months ended
    December 31,
    2013   2012
Operating activities:        
Net income   $ 415,904     $ 593,804  
Stock-based compensation     9,094       59,381  
Depreciation and amortization     56,882       38,090  
Provision for doubtful accounts     15,587       10,459  
Gain on divestiture     -       (281,551 )
Deferred income taxes     25,226       (14,442 )
Other     319       3,721  
Changes in operating elements        
Receivables     (87,316 )     (88,107 )
Prepaid expenses and other     (5,254 )     5,260  
Accounts payable and outstanding checks     47,488       61,732  
Accrued compensation     (15,097 )     (19,064 )
Accrued income taxes     (105,857 )     104,542  
Other accrued liabilities     (9,199 )     (13,483 )
Net cash provided by operating activities     347,777       460,342  
         
Investing activities:        
Purchases of property and equipment     (40,354 )     (36,096 )
Purchases and development of software     (7,852 )     (14,560 )
Sale of T-Chek, net of cash sold     -       274,802  
Cash paid for acquisitions, net of cash acquired     19,126       (583,631 )
Other     221       419  
Net cash used for investing activities     (28,859 )     (359,066 )
         
Financing activities:        
Borrowings on line of credit     4,165,023       324,051  
Repayments on line of credit     (4,043,669 )     (75,688 )
Borrowings of long-term debt     500,000       -  
Payment of contingent purchase price     (927 )     (12,661 )
Net repurchases of common stock     (792,283 )     (236,981 )
Excess tax benefit on stock-based compensation     27,209       12,294  
Cash dividends     (220,257 )     (275,353 )
Net cash used for financing activities     (364,904 )     (264,338 )
Effect of exchange rates on cash     (1,986 )     (588 )
         
Net change in cash and cash equivalents     (47,972 )     (163,650 )
Cash and cash equivalents, beginning of period     210,019       373,669  
Cash and cash equivalents, end of period   $ 162,047     $ 210,019  
         
    As of December 31,
    2013   2012
Operational Data:        
Employees     11,676       10,929  
Branches     285       276  

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