C.H. Robinson Reports First Quarter Results

MINNEAPOLIS--()--C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (NASDAQ: CHRW), today reported financial results for the quarter ended March 31, 2017. This table of summary results presents our service line net revenues consistent with our historical presentation and is on an enterprise basis. The service line net revenues in the table differ from the segment service line net revenues discussed below as our segments have revenues from multiple service lines. Summarized financial results are set forth in the following table (dollars in thousands, except per share data).

 
Three months ended March 31,

2017

 

2016

 

%
change

   
Total revenues $ 3,415,125 $ 3,073,943 11.1 %

Net revenues:

Transportation
Truckload $ 304,122 $ 321,684 -5.5 %
LTL 97,623 91,293 6.9 %
Intermodal 7,492 9,264 -19.1 %
Ocean 62,875 58,669 7.2 %
Air 21,817 18,409 18.5 %
Customs 16,078 10,724 49.9 %
Other logistics services   28,151   24,023 17.2 %
Total transportation 538,158 534,066 0.8 %
Sourcing   30,408   29,269 3.9 %
Total net revenues 568,566 563,335 0.9 %
 

Operating expenses

 

380,608

 

364,383

4.5

%

Income from operations 187,958 198,952 -5.5 %
Net income $ 122,080 $ 118,963 2.6 %
Diluted EPS $ 0.86 $ 0.83 3.6 %
 

Our total revenues increased 11.1 percent in the first quarter of 2017 compared to the first quarter of 2016. The increase in total revenues was driven by volume growth across all of our transportation services. Our total net revenues increased 0.9 percent in the first quarter of 2017 compared to the first quarter of 2016. APC Logistics (“APC”), which was acquired at the close of business on September 30, 2016, represented approximately two percent of our total net revenues in the first quarter of 2017.

For the first quarter, our total operating expenses increased 4.5 percent. Personnel expenses increased 4.7 percent in the first quarter of 2017 compared to the first quarter of 2016. The increase in personnel expense was the result of an increase in average headcount of 7.8 percent in the first quarter of 2017 compared to the first quarter of 2016, partially offset by decreased expenses related to incentive plans that are designed to keep expenses variable with changes in net revenues and profitability. Selling, general, and administrative expenses increased 3.7 percent. This increase was driven by increases in costs related to the APC acquisition, the provision for bad debt, and warehouse costs, partially offset by the collection of a previously resolved legal claim of $8.75 million.

Interest and other expenses increased approximately $0.5 million, or 6.0 percent, in the first quarter of 2017 compared to the first quarter of 2016. Interest expense increased due to higher average short term debt balance and higher interest on the outstanding balance of those borrowings. This was partially offset by decreased revaluation impact related to foreign currency.

The provision for income taxes decreased 20.6 percent in the first quarter of 2017 compared to the first quarter of 2016. During the first quarter of 2017, we adopted ASU 2016-09, Compensation – Stock Compensation (Topic 718). The adoption of ASU 2016-09 prospectively impacts the recording of income taxes related to share-based payment awards in our consolidated statement of financial position and results of operations, as well as the operating and financing cash flows on the consolidated statements of cash flows. This adoption resulted in a decrease in our provision for income taxes of $9.3 million in the first quarter of 2017.

Results by Segment

Our three reportable segments are: North American Surface Transportation (“NAST”), Global Forwarding, and Robinson Fresh. The balance of our business is reported as “All Other and Corporate.” All Other and Corporate includes our non-reportable segments, including Managed Services and Other Surface Transportation.

NAST provides freight transportation services across North America through a network of offices in the United States, Canada, and Mexico. The primary services provided by NAST include truckload, less than truckload (“LTL”), and intermodal. Summarized financial results of our NAST segment are as follows (dollars in thousands):

 
Three months ended March 31,

2017

 

2016

 

%
change

   
Total revenues(1) $ 2,259,252 $ 2,045,479 10.5 %
Net revenues 372,440 383,798 -3.0 %
Income from operations 155,877 162,351 -4.0 %

(1) Excludes intersegment revenues.

 

NAST total revenues increased 10.5 percent to $2.3 billion in the first quarter of 2017 from $2.0 billion in the first quarter of 2016. This increase was driven by volume increases in all services. NAST net revenues decreased 3.0 percent to $372.4 million in the first quarter of 2017 compared to $383.8 million in the first quarter of 2016, primarily from a decline in truckload net revenues.

NAST truckload net revenues decreased 5.7 percent to $267.6 million in the first quarter of 2017 compared to $283.7 million in the first quarter of 2016, while truckload volumes increased approximately 11 percent. NAST truckload net revenue margin decreased in the first quarter of 2017 compared to the first quarter of 2016, due primarily to lower customer pricing.

NAST accounted for approximately 92 percent of our total North America truckload net revenues in both the first quarter of 2017 and 2016. The majority of the remaining North American truckload net revenues is included in Robinson Fresh. Excluding the estimated impacts of the change in fuel prices, our average North America truckload rate per mile charged to our customers decreased approximately four percent in the first quarter of 2017 compared to the first quarter of 2016. Our truckload transportation costs decreased approximately two percent, excluding the estimated impacts of the change in fuel prices.

NAST LTL net revenues increased 7.1 percent to $93.5 million in the first quarter of 2017 compared to $87.3 million in the first quarter of 2016. NAST LTL volumes increased approximately 8.5 percent in the first quarter of 2017 compared to the first quarter of 2016, and net revenue margin decreased slightly.

NAST intermodal net revenues decreased 17.3 percent to $7.2 million in the first quarter of 2017 compared to $8.7 million in the first quarter of 2016. This was primarily due to net revenue margin declines, partially offset by increased volumes. During the first quarter of 2017, intermodal opportunities were negatively impacted by the alternative lower cost truck market.

NAST operating expenses decreased 2.2 percent in the first quarter of 2017 to $216.6 million compared to $221.4 million in the first quarter of 2016. This decrease was due to the collection of a previously resolved legal claim of $8.75 million as well as decreases in personnel expenses. The decrease in personnel expense is related to incentive plans that are designed to keep expenses variable with changes in net revenues and profitability, partially offset by an increase in average headcount of 2.7 percent. The operating expenses of NAST and all other segments include allocated corporate expenses.

Global Forwarding provides global logistics services through an international network of offices in North America, Asia, Europe, Australia, and South America and also contracts with independent agents worldwide. The primary services provided by Global Forwarding include ocean freight services, airfreight services, and customs brokerage. Summarized financial results of our Global Forwarding segment are as follows (dollars in thousands):

 
Three months ended March 31,

2017

 

2016

 

%
Change

   
Total revenues(1) $ 468,788 $ 351,112 33.5 %
Net revenues 106,546 92,866 14.7 %
Income from operations 16,206 16,857 -3.9 %

(1) Excludes intersegment revenues.

 

Global Forwarding total revenues increased 33.5 percent in the first quarter of 2017 to $468.8 million from $351.1 million in the first quarter of 2016. Global Forwarding net revenues increased 14.7 percent to $106.5 million in the first quarter of 2017 compared to $92.9 million in the first quarter of 2016.

Ocean net revenues increased 8.3 percent to $63.4 million in the first quarter of 2017 compared to $58.6 million in the first quarter of 2016. Ocean net revenues were negatively impacted by margin compression on contractual business with fixed pricing. Air net revenues increased 17.2 percent to $20.4 million in the first quarter of 2017 compared to $17.4 million in the first quarter of 2016. Customs net revenues increased 50.0 percent to $16.1 million in the first quarter of 2017 compared to $10.7 million in the first quarter of 2016. These increases were primarily due to volume increases, including those from APC.

Global Forwarding operating expenses increased 18.9 percent in the first quarter of 2017 to $90.3 million from $76.0 million in the first quarter of 2016. These increases were driven by an average headcount increase of 12.6 percent and the acquisition amortization related to the acquisition of APC.

Robinson Fresh provides sourcing services under the name of Robinson Fresh. Our sourcing services primarily include the buying, selling, and marketing of fresh fruits, vegetables, and other perishable items. Robinson Fresh sources products from around the world and has a physical presence in North America, Europe, Asia, and South America. This segment often provides the logistics and transportation of the products they sell, in addition to temperature controlled transportation services for its customers. Summarized financial results of our Robinson Fresh segment are as follows (dollars in thousands):

 
Three months ended March 31,

2017

 

2016

 

%
change

   
Total revenues(1) $ 550,445 $ 564,093 -2.4 %
Net revenues 56,837 58,185 -2.3 %
Income from operations 14,652 17,733 -17.4 %

(1) Excludes intersegment revenues.

 

Robinson Fresh total revenues decreased 2.4 percent to $550.4 million in the first quarter of 2017 from $564.1 million in the first quarter of 2016. Robinson Fresh net revenues decreased 2.3 percent to $56.8 million in the first quarter of 2017 compared to $58.2 million in the first quarter of 2016 as a result of declines in transportation net revenues, partially offset by increases in sourcing net revenues.

Robinson Fresh sourcing net revenues increased 3.9 percent to $30.4 million in the first quarter of 2017 compared to $29.3 million in the first quarter of 2016. This was primarily the result of higher net revenue margin due to lower product costs, partially offset by a decrease in case volumes.

Robinson Fresh transportation net revenues decreased 8.6 percent to $26.4 million in the first quarter of 2017 compared to $28.9 million in the first quarter of 2016, primarily due to decreases in truckload revenue, partially offset by increases in their other transportation services net revenues. Robinson Fresh transportation net revenue margin decreased in the first quarter of 2017 compared to the first quarter of 2016, due primarily to lower customer pricing.

Robinson Fresh operating expenses increased 4.3 percent in the first quarter of 2017 to $42.2 million from $40.5 million in the first quarter of 2016. This was primarily due to an increase in warehousing expenses related to expanding facilities and an increase in average headcount.

All Other and Corporate includes our Managed Services segment, as well as Other Surface Transportation outside of North America and other miscellaneous revenues. It also includes any unallocated corporate expenses. Managed Services provides Transportation Management Service, or Managed TMS. Our Europe Surface Transportation business accounted for approximately 90 percent of total Other Surface Transportation revenues. Europe Surface Transportation provides services similar to NAST across the European continent. Summarized financial results are as follows:

 
Three months ended March 31,

Net revenues

2017

 

2016

 

%
change

 
Managed Services $ 17,193 $ 14,579 17.9 %
Other Surface Transportation 15,550 13,907 11.8 %
 

Managed Services net revenues increased 17.9 percent in the first quarter of 2017 to $17.2 million compared to $14.6 million the first quarter of 2016. This increase was a result of growth from both new and existing customers. Other surface transportation increased 11.8 percent in the first quarter of 2017 to $15.6 million compared to $13.9 million in the first quarter of 2016, primarily the result of growth in Europe Surface Transportation.

About C.H. Robinson

At C.H. Robinson, we believe in accelerating global trade to seamlessly deliver the products and goods that drive the world’s economy. Using the strengths of our knowledgeable people, proven processes, and global technology, we help our customers work smarter, not harder. As one of the world’s largest third-party logistics providers (3PL), we provide a broad portfolio of logistics services, fresh produce sourcing and managed services for more than 113,000 customers and 107,000 contract carriers through our integrated network of offices and more than 14,000 employees. In addition, the company, our Foundation and our employees contribute millions of dollars annually to a variety of organizations. Headquartered in Eden Prairie, Minnesota, C.H. Robinson (CHRW) has been publicly traded on the NASDAQ since 1997. For more information, visit http://www.chrobinson.com or view our company video.

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 successfully integrate the operations of acquired companies with our historic operations; 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; risks of unexpected or unanticipated events or opportunities that might require additional capital expenditures; 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.

Conference Call Information:
C.H. Robinson Worldwide First Quarter 2017 Earnings Conference Call
Wednesday, April 26, 2017; 8:30 a.m. Eastern Time
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. To submit your question(s) in advance of the call, please email adrienne.brausen@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: 877-269-7756
International callers dial +1-201-689-7817
Callers should reference the conference ID, which is 13657306
Webcast replay available through Investor Relations link at www.chrobinson.com
Telephone audio replay available until 11:30 a.m. Eastern Time on May 3, 2017: 877-660-6853;
passcode: 13657306#
International callers dial +1-201-612-7415

 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share data)
 
 

Three months ended
March 31,

2017   2016
 
Revenues:
Transportation $ 3,102,043 $ 2,713,688
Sourcing   313,082     360,255  
Total revenues   3,415,125     3,073,943  
 
Costs and expenses:
Purchased transportation and related services 2,563,885 2,179,622
Purchased products sourced for resale 282,674 330,986
Personnel expenses 290,504 277,497
Other selling, general, and administrative expenses   90,104     86,886  
Total costs and expenses   3,227,167     2,874,991  
 
Income from operations 187,958 198,952
 
Interest and other expense   (9,302 )   (8,772 )
 
Income before provision for income taxes 178,656 190,180
Provisions for income taxes   56,576     71,217  
Net income $ 122,080   $ 118,963  
 
Net income per share (basic) $ 0.86 $ 0.83
Net income per share (diluted) $ 0.86 $ 0.83
 
Weighted average shares outstanding (basic) 141,484 143,525
Weighted average shares outstanding (diluted) 141,858 143,658
 
 
BUSINESS SEGMENT INFORMATION
(unaudited, dollars in thousands)
 
 

NAST

 

Global
Forwarding

 

Robinson
Fresh

 

All
Other and
Corporate

 

Eliminations

 

Consolidated

Three months ended March 31, 2017
 
Revenues $ 2,259,252 $ 468,788 $ 550,445 $ 136,640 $ - $ 3,415,125
Intersegment revenues (1)   101,154   8,143   33,340   6,878   (149,515 )   -
Total revenues $ 2,360,406 $ 476,931 $ 583,785 $ 143,518 $ (149,515 ) $ 3,415,125
 
Net revenues $ 372,440 $ 106,546 $ 56,837 $ 32,743 - $ 568,566
 
Operating income $ 155,877 $ 16,206 $ 14,652 $ 1,223 - $ 187,958
 
Depreciation and amortization $ 5,590 $ 8,020 $ 1,146 $ 7,675 - $ 22,431
 
Total Assets $ 2,126,900 $ 699,139 $ 409,972 $ 539,733 - $ 3,775,744
 
Average headcount 6,844 3,926 961 2,548 14,279
 
 

NAST

Global
Forwarding

Robinson
Fresh

All
Other and
Corporate

Eliminations

Consolidated

Three months ended March 31, 2016
 
Revenues $ 2,045,479 $ 351,112 $ 564,093 $ 113,259 $ - $ 3,073,943
Intersegment revenues(1)   60,269   6,080   23,896   313   (90,558 )   -
Total revenues $ 2,105,748 $ 357,192 $ 587,989 $ 113,572 $ (90,558 ) $ 3,073,943
 
Net revenues $ 383,798 $ 92,866 $ 58,185 $ 28,486 - $ 563,335
 
Operating income $ 162,351 $ 16,857 $ 17,733 $ 2,011 - $ 198,952
 
Depreciation and amortization $ 5,502 $ 5,079 $ 768 $ 5,526 - $ 16,875
 
Total Assets $ 1,854,240 $ 514,958 $ 370,319 $ 422,728 - $ 3,162,245
 
Average headcount 6,666 3,488 922 2,175 - 13,251
 
(1) Intersegment revenues represent the sales between our segments and are eliminated to reconcile to our consolidated results.
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
 

March 31,
2017

 

December 31,
2016

Assets
Current assets:
Cash and cash equivalents $ 229,794 $ 247,666
Receivables, net 1,802,777 1,711,191
Other current assets   60,039   49,245
Total current assets   2,092,610   2,008,102
 
Property and equipment, net 235,059 232,953
Intangible and other assets   1,448,075   1,446,703
Total assets $ 3,775,744 $ 3,687,758
 
Liabilities and stockholders’ investment
Current liabilities:
Accounts payable and outstanding checks $ 967,257 $ 921,788
Accrued compensation 60,243 98,107
Accrued income taxes 59,007 15,472
Other accrued expenses 50,860 70,351
Current portion of debt   740,000   740,000
Total current liabilities   1,877,367   1,845,718
 
Noncurrent income taxes payable 17,919 18,849
Deferred tax liabilities 64,351 65,122
Long term debt 500,000 500,000
Other long-term liabilities   233   222
Total liabilities   2,459,870   2,429,911
 
Total stockholders’ investment   1,315,874   1,257,847
Total liabilities and stockholders’ investment $ 3,775,744 $ 3,687,758
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands, except operational data)
 
 

Three months ended
March 31,

2017   2016
Operating activities:
Net income $ 122,080 $ 118,963
Stock-based compensation 12,318 15,179
Depreciation and amortization 22,431 16,875
Provision for doubtful accounts 3,618 85
Deferred income taxes (2,048 ) 15,350
Excess tax benefit on stock-based compensation (9,344 ) (13,827 )
Other 485 180
Changes in operating elements, net of acquisitions:
Receivables (95,204 ) 42,295
Prepaid expenses and other (6,049 ) (7,378 )
Other non-current assets (1,016 ) -
Accounts payable and outstanding checks 47,201 (22,783 )
Accrued compensation and profit-sharing contribution (37,864 ) (84,431 )
Accrued income taxes 51,949 32,732
Other accrued liabilities   (15,861 )   (9,090 )
Net cash provided by operating activities 92,696 104,150
 
Investing activities:
Purchases of property and equipment (13,537 ) (13,121 )
Purchases and development of software (3,183 ) (4,704 )
Acquisitions, net of cash (1,780 ) -
Other   56     (770 )
Net cash used for investing activities (18,444 ) (18,595 )
 
Financing activities:
Borrowings on line of credit 2,450,000 1,480,000
Repayments on line of credit (2,450,000 ) (1,460,000 )
Net repurchases of common stock (32,131 ) (46,529 )
Excess tax benefit on stock-based compensation - 13,827
Cash dividends   (64,597 )   (63,888 )
Net cash used for financing activities (96,728 ) (76,590 )
Effect of exchange rates on cash   4,604     2,212  
 
Net change in cash and cash equivalents (17,872 ) 11,177
Cash and cash equivalents, beginning of period   247,666     168,229  
Cash and cash equivalents, end of period $ 229,794   $ 179,406  
 
As of March 31,
2017 2016
Operational Data:
Employees 14,432 13,343
 

CHRW-IR

Contacts

C.H. Robinson Worldwide, Inc.
Andrew Clarke, 952-683-3474
Chief Financial Officer
or
Tim Gagnon, 952-683-5007
Director, Investor Relations

Release Summary

C.H. Robinson Reports First Quarter Results

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Contacts

C.H. Robinson Worldwide, Inc.
Andrew Clarke, 952-683-3474
Chief Financial Officer
or
Tim Gagnon, 952-683-5007
Director, Investor Relations