C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (NASDAQ: CHRW), today reported financial results for the quarter ended September 30, 2014. Summarized financial results for the quarter and nine months ended September 30 are as follows (dollars in thousands, except per share data):

   
Three months ended September 30, Nine months ended September 30,

2014

 

2013

 

%
change

2014

 

2013

 

%
change

       
Total revenues $ 3,467,362 $ 3,316,665 4.5 % $ 10,112,865 $ 9,599,194 5.4 %
 

Net revenues:

Transportation
Truckload $ 307,376 $ 265,509 15.8 % $ 882,774 $ 798,448 10.6 %
LTL 67,968 61,436 10.6 % 195,482 180,638 8.2 %
Intermodal 10,593 10,202 3.8 % 30,396 29,223 4.0 %
Ocean 57,380 49,692 15.5 % 151,478 141,304 7.2 %
Air 20,520 18,137 13.1 % 59,721 55,107 8.4 %
Customs 11,107 8,932 24.4 % 30,751 27,307 12.6 %
Other logistics services   19,043     16,070 18.5 %   54,816     50,348 8.9 %
Total transportation 493,987 429,978 14.9 % 1,405,418 1,282,375 9.6 %
Sourcing 29,801 30,553 -2.5 % 91,541 101,151 -9.5 %
Payment services   3,776     2,775 36.1 %   8,877     8,104 9.5 %
Total net revenues 527,564 463,306 13.9 % 1,505,836 1,391,630 8.2 %
 

Operating expenses

 

324,227

   

286,951

13.0

%

 

945,146

   

864,093

9.4

%

Operating income 203,337 176,355 15.3 % 560,690 527,537 6.3 %
Net income $ 124,981   $ 107,737 16.0 % $ 336,764   $ 322,952 4.3 %
Diluted EPS $ 0.85 $ 0.69 23.2 % $ 2.28 $ 2.03 12.3 %
 

Our truckload net revenues increased 15.8 percent in the third quarter of 2014 compared to the third quarter of 2013. Our North American truckload volumes increased approximately one percent. Our truckload net revenue margin increased in the third quarter of 2014 compared to the third quarter of 2013, due primarily to increased rate 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 ten percent in the third quarter of 2014 compared to the third quarter of 2013. In North America, our truckload transportation costs increased approximately eight percent, excluding the estimated impacts of the change in fuel. These increases were largely the result of market conditions and a change in the mix of our business.

Our less-than-truckload (“LTL”) net revenues increased 10.6 percent in the third quarter of 2014 compared to the third quarter of 2013. The increase was driven by a seven percent increase in total shipments and increased customer pricing, partially offset by higher costs.

Our intermodal net revenues increased 3.8 percent in the third quarter of 2014 compared to the third quarter of 2013. The increase in net revenues was primarily driven by increased operational efficiency and customer pricing.

Our ocean transportation net revenues increased 15.5 percent in the third quarter of 2014 compared to the third quarter of 2013. The increase in net revenues was primarily due to increased volumes and net revenue margin.

Our air transportation net revenues increased 13.1 percent in the third quarter of 2014 compared to the third quarter of 2013. The increase was primarily due to increased volumes and net revenue margin.

Our customs net revenues increased 24.4 percent in the third quarter of 2014 compared to the third quarter of 2013. The increase was due to increased rates and transaction volumes.

Our other logistics services revenues increased 18.5 percent in the third quarter of 2014 compared to the third quarter of 2013. The increase was primarily due to increases in transportation management services.

Sourcing net revenues decreased 2.5 percent in the third quarter of 2014 compared to the third quarter of 2013. We continued to experience volume and net revenue declines from a large customer.

Payment services net revenues increased 36.1 percent in the third quarter of 2014 compared to the third quarter of 2013. This was primarily due to a rate increase on our cash advance option in July 2014.

For the third quarter, operating expenses increased 13.0 percent to $324.2 million in 2014 from $287.0 million in 2013. Operating expenses as a percentage of net revenues decreased slightly to 61.5 percent in the third quarter of 2014 from 61.9 percent in the third quarter of 2013.

For the third quarter, personnel expenses increased 19.7 percent to $244.6 million in 2014 from $204.4 million in 2013. This was primarily due to an increase in the expenses related to incentive plans that are designed to keep expenses variable with changes in net revenues and profitability and an increase in our average headcount of 1.6 percent.

For the third quarter, other selling, general, and administrative expenses decreased 3.6 percent to $79.6 million in 2014 from $82.6 million in 2013. This was primarily due to a decrease in travel and claims expenses.

For the third quarter, interest and other expense was $6.2 million in 2014 compared to $2.6 million in the third quarter of 2013. This increase was primarily driven by the interest expense on our notes payable, issued during the third quarter of 2013 and used to fund share repurchases.

For the third quarter, our effective income tax rate was 36.6 percent in 2014 compared to 38.0 percent in the third quarter of 2013. The lower rate was primarily due to foreign tax credits, which increased earnings per share approximately $0.03 for the third quarter.

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 282 offices in North America, South America, Europe, and Asia. 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.

Conference Call Information:
C.H. Robinson Worldwide Third Quarter 2014 Earnings Conference Call
Wednesday, October 29, 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. 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: 888-523-1228
International callers dial +1-719-325-2455
Callers should reference the conference ID, which is 8557362
Webcast replay available through Investor Relations link at www.chrobinson.com
Telephone audio replay available until 11:30 a.m. Eastern Time on November 5: 800-203-1112;
passcode: 8557362#
International callers dial +1-719-457-0820

 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share data)
 
  Three months ended   Nine months ended
September 30, September 30,
2014   2013 2014   2013
 
Revenues:
Transportation $ 3,069,056 $ 2,880,901 $ 8,911,683 $ 8,302,160
Sourcing 393,980 432,373 1,190,604 1,287,036
Payment Services   4,326     3,391     10,578     9,998  
Total revenues   3,467,362     3,316,665     10,112,865     9,599,194  
Costs and expenses:
Purchased transportation and related services 2,575,069 2,450,923 7,506,265 7,019,785
Purchased products sourced for resale 364,179 401,820 1,099,063 1,185,885
Purchased payment services 550 616 1,701 1,894
Personnel expenses 244,621 204,388 703,904 623,042
Other selling, general, and administrative expenses   79,606     82,563     241,242     241,051  
Total costs and expenses   3,264,025     3,140,310     9,552,175     9,071,657  
 
Income from operations   203,337     176,355     560,690     527,537  
 
Interest and other expense   (6,204 )   (2,635 )   (18,587 )   (3,284 )
 
Income before provision for income taxes 197,133 173,720 542,103 524,253
Provision for income taxes   72,152     65,983     205,339     201,301  
Net income $ 124,981   $ 107,737   $ 336,764   $ 322,952  
 
Net income per share (basic) $ 0.85 $ 0.69 $ 2.28 $ 2.03
Net income per share (diluted) $ 0.85 $ 0.69 $ 2.28 $ 2.03
 
Weighted average shares outstanding (basic) 146,646 156,924 147,661 158,820
Weighted average shares outstanding (diluted) 146,856 157,044 147,819 158,884
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
  September 30,   December 31,
2014 2013
Assets
Current assets:
Cash and cash equivalents $ 127,716 $ 162,047
Receivables, net 1,640,634 1,449,581
Other current assets   56,366   52,857
Total current assets 1,824,716 1,664,485
 
Property and equipment, net 156,936 160,703
Intangible and other assets   960,132   977,630
Total Assets $ 2,941,784 $ 2,802,818
 
Liabilities and stockholders’ investment
Current liabilities:
Accounts payable and outstanding checks $ 822,129 $ 755,007
Accrued compensation 108,153 85,247
Accrued income taxes 13,961 11,681
Other accrued expenses 39,959 43,046
Current portion of debt   345,000   375,000
Total current liabilities 1,329,202 1,269,981
 
Noncurrent income taxes payable 21,994 21,584
Deferred tax liabilities 71,653 70,618
Long-term debt 500,000 500,000
Other long term liabilities   218   911
Total liabilities 1,923,067 1,863,094
 
Total stockholders’ investment   1,018,717   939,724
Total liabilities and stockholders’ investment $ 2,941,784 $ 2,802,818
 
 
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in thousands, except operational data)
 
  Nine months ended
September 30,
2014   2013
Operating activities:
Net income $ 336,764 $ 322,952
Stock-based compensation 33,561 10,856
Depreciation and amortization 43,442 42,052
Provision for doubtful accounts 15,917 10,323
Deferred income taxes 901 28,696
Other (1,280 ) 232
Changes in operating elements, net of acquisitions:
Receivables (206,970 ) (197,468 )
Prepaid expenses and other (4,081 ) (10,465 )
Other non-current assets 270 -
Accounts payable and outstanding checks 67,125 103,226
Accrued compensation and profit-sharing contribution 23,058 (23,023 )
Accrued income taxes 2,690 (94,027 )
Other accrued liabilities   (6,075 )   (10,425 )
Net cash provided by operating activities 305,322 182,929
 
Investing activities:
Purchases of property and equipment (19,291 ) (27,861 )
Purchases and development of software (5,845 ) (6,375 )
Acquisitions, net of cash - 19,126
Other   428     221  
Net cash used for investing activities (24,708 ) (14,889 )
 
Financing activities:
Borrowings on line of credit 3,498,000 3,054,023
Repayments on line of credit (3,528,000 ) (2,957,669 )
Borrowings of long-term debt - 500,000
Payment of contingent purchase price - (927 )
Net repurchases of common stock (127,106 ) (700,631 )
Excess tax benefit on stock-based compensation 6,202 26,180
Cash dividends   (157,590 )   (167,130 )
Net cash used for financing activities (308,494 ) (246,154 )
Effect of exchange rates on cash   (6,451 )   (2,182 )
 
Net change in cash and cash equivalents (34,331 ) (80,296 )
Cash and cash equivalents, beginning of period   162,047     210,019  
Cash and cash equivalents, end of period $ 127,716   $ 129,723  
 
As of September 30,
2014   2013
Operational Data:
Employees 11,542 11,533
Branches 282 285