Market Overview

C.H. Robinson Reports 2020 First Quarter Results

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C.H. Robinson Worldwide, Inc. ("C.H. Robinson") (NASDAQ:CHRW) today reported financial results for the quarter ended March 31, 2020.

First Quarter Key Metrics:

  • Total revenues increased 1.4 percent to $3.8 billion
  • Net revenues decreased 16.3 percent to $568.0 million
  • Income from operations decreased 51.3 percent to $109.4 million
  • Operating margin decreased 1,380 basis points to 19.3 percent
  • Diluted earnings per share (EPS) decreased 50.9 percent to $0.57
  • Cash flow from operations decreased 77.2 percent to $58.5 million

"Since the beginning of the COVID-19 pandemic, C.H. Robinson has focused on three key pillars as guideposts for our decision making: ensuring the health and safety of our employees, providing supply chain continuity for our customers and carriers, and protecting the economic security of our people to the greatest extent possible," said Bob Biesterfeld, Chief Executive Officer of C.H. Robinson.

Biesterfeld continued, "We continue to have a strong balance sheet and exited the first quarter with over $1.2 billion of liquidity. We remain committed to maintaining our quarterly dividend, and we believe we are well positioned to weather the economic uncertainty in the months ahead."

First Quarter Results Summary

  • Total revenues increased 1.4 percent to $3.8 billion, driven primarily by higher volume in truckload and less than truckload ("LTL"), mostly offset by lower pricing in truckload.
  • Net revenues decreased 16.3 percent to $568.0 million, primarily driven by lower margin in truckload services.
  • Operating expenses increased 0.9 percent to $458.5 million. Personnel expenses decreased 2.9 percent to $330.2 million, driven primarily by declines in performance-based compensation. Average headcount increased 0.4 percent, with acquisitions contributing approximately 2.0 percentage points of growth. Selling, general and administrative ("SG&A") expenses increased 12.4 percent to $128.3 million. The largest contributors to the higher SG&A expense increase were increased technology spending and purchased services related to accelerating our growth and cost savings initiatives.
  • Income from operations totaled $109.4 million, down 51.3 percent from last year due to declining net revenues and increased SG&A expenses. Operating margin of 19.3 percent declined 1,380 basis points.
  • Interest and other expenses totaled $15.2 million, which primarily consists of interest expense. Interest expense decreased by $1.1 million versus last year. The first quarter also included a $2.9 million unfavorable impact from currency revaluation.
  • The effective tax rate in the quarter was 17.1 percent compared to 22.0 percent last year. The lower effective tax rate was due primarily to the tax benefit related to stock-based compensation.
  • Net income totaled $78.1 million, down 51.7 percent from a year ago. Diluted EPS of $0.57 decreased 50.9 percent.

North American Surface Transportation Results

Summarized financial results of our NAST segment are as follows (dollars in thousands):

 

Three Months Ended March 31,

 

2020

 

2019

 

% change

Total revenues

$

2,823,745

 

 

$

2,796,784

 

 

1.0

%

Net revenues

372,778

 

 

486,550

 

 

(23.4

)%

Income from operations

98,526

 

 

211,283

 

 

(53.4

)%

 

 

 

 

 

 

First quarter total revenues for C.H. Robinson's NAST segment totaled $2.8 billion, an increase of 1.0 percent over the prior year, primarily driven by increased truckload and LTL volumes. NAST net revenues decreased 23.4 percent in the quarter to $372.8 million, with the March 2020 acquisition of Prime Distribution Services ("Prime") contributing 1.0 percentage point of net revenue growth in the quarter. Net revenues in truckload decreased 32.1 percent, less than truckload net revenues decreased 2.3 percent, and intermodal net revenues increased 22.4 percent versus the year-ago period. Excluding the impact of the change in fuel prices, average North America truckload rate per mile charged to customers decreased approximately 8.5 percent in the quarter, while truckload transportation cost per mile decreased approximately 2.5 percent. Truckload volume increased 7.5 percent in the quarter, and LTL volumes grew 7.5 percent, both representing market share gains in the quarter. Intermodal volumes grew 8 percent versus the prior year. Operating expenses decreased 0.4 percent due to decreased personnel expenses, mostly offset by increased SG&A expenses. Income from operations decreased 53.4 percent to $98.5 million, and operating margin declined 1,700 basis points to 26.4 percent. NAST average headcount was down 5.2 percent in the quarter, with Prime contributing 2.0 percentage points of growth.

Global Forwarding Results

Summarized financial results of our Global Forwarding segment are as follows (dollars in thousands):

 

Three Months Ended March 31,

 

2020

 

2019

 

% change

Total revenues

$

530,384

 

 

$

537,567

 

 

(1.3

)%

Net revenues

128,314

 

 

127,236

 

 

0.8

%

Income from operations

11,959

 

 

14,203

 

 

(15.8

)%

 

 

 

 

 

 

First quarter total revenues for the Global Forwarding segment decreased 1.3 percent to $530.4 million, primarily driven by lower volumes in ocean and air. Net revenues increased 0.8 percent in the quarter to $128.3 million, with the 2019 acquisition of The Space Cargo Group ("Space Cargo") contributing 2 percentage points of net revenue growth. Ocean net revenues decreased 2.3 percent driven primarily by a 3.0 percent decline in volumes. Net revenues in air increased 2.8 percent driven by higher pricing, partially offset by an 8.0 percent decline in shipments. Customs net revenues decreased 3.1 percent, primarily driven by a 2.5 percent reduction in transaction volume. Operating expenses increased 2.9 percent, primarily driven by increased SG&A expenses. First quarter average headcount increased 2.5 percent, with Space Cargo contributing 2.0 percentage points to the growth. Income from operations decreased 15.8 percent to $12.0 million, and operating margin declined 190 basis points to 9.3 percent in the quarter.

All Other and Corporate Results

Total revenues and net revenues for Robinson Fresh, Managed Services and Other Surface Transportation are summarized as follows (dollars in thousands):

 

Three Months Ended March 31,

 

2020

 

2019

 

% change

Total revenues

$

450,879

 

 

$

416,859

 

 

8.2

%

Net revenues:

 

 

 

 

 

Robinson Fresh

27,458

 

 

28,658

 

 

(4.2

)%

Managed Services

22,527

 

 

20,312

 

 

10.9

%

Other Surface Transportation

16,876

 

 

16,044

 

 

5.2

%

 

 

 

 

 

 

First quarter Robinson Fresh net revenues decreased 4.2 percent to $27.5 million, primarily due to a 2.5 percent decrease in case volume and a decline in margin. Managed Services net revenues increased 10.9 percent in the quarter. Other Surface Transportation net revenues increased 5.2 percent to $16.9 million, with the 2019 acquisition of Dema Service contributing 8.5 percentage points of net revenue growth. Europe truckload volume was up 13 percent in the quarter.

Other Income Statement Items

The first quarter effective tax rate was 17.1 percent, down from 22.0 percent last year. The lower effective tax rate was due primarily to the tax benefit related to stock-based compensation. We expect our 2020 full-year effective tax rate to be on the lower end of the 22 to 24 percent range that we provided in late January.

Interest and other expenses totaled $15.2 million, which primarily consists of interest expense. Interest expense decreased by $1.1 million versus last year driven by a lower average debt balance. The first quarter also included a $2.9 million unfavorable impact from currency revaluation.

Diluted weighted average shares outstanding in the quarter were down 2.1 percent due primarily to share repurchases.

Cash Flow Generation and Capital Distribution

Cash from operations totaled $58.5 million in the first quarter, down 77.2 percent versus the prior year, due to unfavorable changes in working capital and decreased earnings.

In the first quarter, $152.2 million was returned to shareholders, with $69.9 million in cash dividends and $82.4 million in share repurchases.

Capital expenditures totaled $14.7 million in the quarter. We continue to expect full-year 2020 capital expenditures to be between $60 and $70 million, with the majority dedicated to technology.

Outlook

"While the situation remains fluid, one thing is certain: we are committed to our vital role in the global supply chain by delivering critical and essential goods and services – especially in this time of crisis. We will continue to make measured and thoughtful decisions that are in the best interest of our employees, customers, contract carriers, our company and the communities where we live and work while remaining true to the values and pillars that guide all of our business decisions," Biesterfeld stated.

About C.H. Robinson

C.H. Robinson solves logistics problems for companies across the globe and across industries, from the simple to the most complex. With nearly $20 billion in freight under management and 18 million shipments annually, we are one of the world's largest logistics platforms. Our global suite of services accelerates trade to seamlessly deliver the products and goods that drive the world's economy. With the combination of our multimodal transportation management system and expertise, we use our information advantage to deliver smarter solutions for our more than 119,000 customers and 78,000 contract carriers. Our technology is built by and for supply chain experts to bring faster, more meaningful improvements to our customers' businesses. As a responsible global citizen, we are also proud to contribute millions of dollars to support causes that matter to our company, our Foundation and our employees. For more information, visit us at www.chrobinson.com (NASDAQ:CHRW).

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 such 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; changes in relationships with existing contracted 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, including contingent auto liability and insurance coverage; risks associated with operations outside of the United States; risks associated with the potential impact of changes in government regulations; risks associated with the produce industry, including food safety and contamination issues; fuel price increases or decreases, or fuel shortages; cyber-security related risks; the impact of war on the economy; changes to our capital structure; risks related to the elimination of LIBOR; changes due to catastrophic events including pandemics such as COVID-19; 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 2020 Earnings Conference Call

Wednesday, April 29, 2020; 8:30 a.m. Eastern Time

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

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.

Summarized Financial Results

($ in thousands, except per share data)

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 service line net revenues discussed within the segments as our segments have revenues from multiple service lines.

 

Three Months Ended March 31,

 

2020

 

2019

 

% change

Total revenues

$

3,805,008

 

 

$

3,751,210

 

 

1.4

%

Net revenues:

 

 

 

 

 

Transportation

 

 

 

 

 

Truckload

$

264,926

 

 

$

377,993

 

 

(29.9

)%

LTL

113,909

 

 

116,229

 

 

(2.0

)%

Intermodal

7,553

 

 

6,076

 

 

24.3

%

Ocean

69,902

 

 

71,533

 

 

(2.3

)%

Air

28,338

 

 

27,582

 

 

2.7

%

Customs

21,193

 

 

21,878

 

 

(3.1

)%

Other logistics services

36,184

 

 

30,385

 

 

19.1

%

Total transportation

542,005

 

 

651,676

 

 

(16.8

)%

Sourcing

25,948

 

 

27,124

 

 

(4.3

)%

Total net revenues

567,953

 

 

678,800

 

 

(16.3

)%

 

 

 

 

 

 

Operating expenses

458,513

 

 

454,250

 

 

0.9

%

Income from operations

109,440

 

 

224,550

 

 

(51.3

)%

Net income

$

78,146

 

 

$

161,788

 

 

(51.7

)%

Diluted EPS

$

0.57

 

 

$

1.16

 

 

(50.9

)%

Our total revenues represent the total dollar value of services and goods we sell to our customers. Net revenues are a non-GAAP financial measure calculated as total revenues less the cost of purchased transportation and related services and the cost of purchased products sourced for resale. We believe net revenues are a useful measure of our ability to source, add value, and sell services and products that are provided by third parties, and we consider net revenues to be our primary performance measurement. Accordingly, the discussion of our results of operations often focuses on the changes in our net revenues. The reconciliation of total revenues to net revenues is presented below (in thousands):

 

Three Months Ended March 31,

 

2020

 

2019

Revenues:

 

 

 

Transportation

$

3,542,118

 

 

$

3,504,932

 

Sourcing

262,890

 

 

246,278

 

Total revenues

3,805,008

 

 

3,751,210

 

Costs and expenses:

 

 

 

Purchased transportation and related services

3,000,113

 

 

2,853,256

 

Purchased products sourced for resale

236,942

 

 

219,154

 

Total costs and expenses

3,237,055

 

 

3,072,410

 

Net revenues

$

567,953

 

 

$

678,800

 

Condensed Consolidated Statements of Income

(unaudited, in thousands, except per share data)

 

 

 

Three Months Ended March 31,

 

2020

 

2019

 

 

 

 

Revenues:

 

 

 

Transportation

$

3,542,118

 

 

$

3,504,932

 

Sourcing

262,890

 

 

246,278

 

Total revenues

3,805,008

 

 

3,751,210

 

Costs and expenses:

 

 

 

Purchased transportation and related services

3,000,113

 

 

2,853,256

 

Purchased products sourced for resale

236,942

 

 

219,154

 

Personnel expenses

330,220

 

 

340,098

 

Other selling, general, and administrative expenses

128,293

 

 

114,152

 

Total costs and expenses

3,695,568

 

 

3,526,660

 

Income from operations

109,440

 

 

224,550

 

Interest and other expense

(15,228

)

 

(17,140

)

Income before provision for income taxes

94,212

 

 

207,410

 

Provision for income taxes

16,066

 

 

45,622

 

Net income

$

78,146

 

 

$

161,788

 

 

 

 

 

Net income per share (basic)

$

0.58

 

 

$

1.17

 

Net income per share (diluted)

$

0.57

 

 

$

1.16

 

 

 

 

 

Weighted average shares outstanding (basic)

135,474

 

 

137,854

 

Weighted average shares outstanding (diluted)

135,969

 

 

138,955

 

Business Segment Information

(unaudited, dollars in thousands)

 

 

 

NAST

 

Global

Forwarding

 

All

Other and

Corporate

 

Consolidated

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

Total revenues

 

$

2,823,745

 

 

$

530,384

 

 

$

450,879

 

 

$

3,805,008

 

Net revenues

 

372,778

 

 

128,314

 

 

66,861

 

 

567,953

 

Income (loss) from operations

 

98,526

 

 

11,959

 

 

(1,045

)

 

109,440

 

Depreciation and amortization

 

5,254

 

 

9,149

 

 

9,990

 

 

24,393

 

Total assets (1)

 

2,942,719

 

 

934,625

 

 

970,976

 

 

4,848,320

 

Average headcount

 

7,038

 

 

4,824

 

 

3,588

 

 

15,450

 

 

 

 

 

 

 

 

 

 

 

 

NAST

 

Global

Forwarding

 

All

Other and

Corporate

 

Consolidated

Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

Total revenues

 

$

2,796,784

 

 

$

537,567

 

 

$

416,859

 

 

$

3,751,210

 

Net revenues

 

486,550

 

 

127,236

 

 

65,014

 

 

678,800

 

Income (loss) from operations

 

211,283

 

 

14,203

 

 

(936

)

 

224,550

 

Depreciation and amortization

 

6,259

 

 

8,926

 

 

9,375

 

 

24,560

 

Total assets (1)

 

2,693,668

 

 

1,001,881

 

 

1,001,895

 

 

4,697,444

 

Average headcount

 

7,424

 

 

4,707

 

 

3,250

 

 

15,381

 

 
 

(1) All cash and cash equivalents are included in All Other and Corporate.

Condensed Consolidated Balance Sheets

(unaudited, in thousands)

 

 

March 31, 2020

 

December 31, 2019

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

294,572

 

 

$

447,858

 

Receivables, net of allowance for credit loss

2,092,613

 

 

1,974,381

 

Contract assets, net of allowance for credit loss

123,558

 

 

132,874

 

Prepaid expenses and other

95,896

 

 

85,005

 

Total current assets

2,606,639

 

 

2,640,118

 

 

 

 

 

Property and equipment, net

211,799

 

 

208,423

 

Right-of-use lease assets

345,908

 

 

310,860

 

Intangible and other assets

1,683,974

 

 

1,481,659

 

Total assets

$

4,848,320

 

 

$

4,641,060

 

 

 

 

 

Liabilities and stockholders' investment

 

 

 

Current liabilities:

 

 

 

Accounts payable and outstanding checks

$

1,150,554

 

 

$

1,062,835

 

Accrued expenses:

 

 

 

Compensation

88,528

 

 

112,784

 

Transportation expense

93,900

 

 

101,194

 

Income taxes

14,473

 

 

12,354

 

Other accrued liabilities

65,930

 

 

62,706

 

Current lease liabilities

70,423

 

 

61,280

 

Current portion of debt

320,917

 

 

142,885

 

Total current liabilities

1,804,725

 

 

1,556,038

 

 

 

 

 

Long-term debt

1,092,660

 

 

1,092,448

 

Noncurrent lease liabilities

286,210

 

 

259,444

 

Noncurrent income taxes payable

21,576

 

 

22,354

 

Deferred tax liabilities

55,766

 

 

39,776

 

Other long-term liabilities

265

 

 

270

 

Total liabilities

3,261,202

 

 

2,970,330

 

 

 

 

 

Total stockholders' investment

1,587,118

 

 

1,670,730

 

Total liabilities and stockholders' investment

$

4,848,320

 

 

$

4,641,060

 

Condensed Consolidated Statements of Cash Flow

(unaudited, in thousands, except operational data)

 

 

Three Months Ended March 31,

 

2020

 

2019

Operating activities:

 

 

 

Net income

$

78,146

 

 

$

161,788

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

24,393

 

 

24,560

 

Provision for credit losses

5,675

 

 

1,774

 

Stock-based compensation

11,397

 

 

17,123

 

Deferred income taxes

1,622

 

 

(364

)

Excess tax benefit on stock-based compensation

(3,737

)

 

(4,458

)

Other operating activities

788

 

 

576

 

Changes in operating elements, net of acquisitions:

 

 

 

Receivables

(133,142

)

 

117,720

 

Contract assets

8,713

 

 

(5,921

)

Prepaid expenses and other

(11,038

)

 

(6,367

)

Accounts payable and outstanding checks

98,946

 

 

(10,742

)

Accrued compensation

(23,879

)

 

(87,259

)

Accrued transportation expenses

(7,294

)

 

7,331

 

Accrued income taxes

5,196

 

 

39,078

 

Other accrued liabilities

1,829

 

 

1,801

 

Other assets and liabilities

884

 

 

291

 

Net cash provided by operating activities

58,499

 

 

256,931

 

 

 

 

 

Investing activities:

 

 

 

Purchases of property and equipment

(7,841

)

 

(8,619

)

Purchases and development of software

(6,862

)

 

(5,246

)

Acquisitions, net of cash acquired

(223,617

)

 

(44,143

)

Other investing activities

 

 

8

 

Net cash used for investing activities

(238,320

)

 

(58,000

)

 

 

 

 

Financing activities:

 

 

 

Proceeds from stock issued for employee benefit plans

11,269

 

 

19,615

 

Net repurchases of common stock

(82,358

)

 

(79,666

)

Cash dividends

(69,871

)

 

(69,742

)

Proceeds from short-term borrowings

765,600

 

 

14,000

 

Payments on short-term borrowings

(587,600

)

 

(19,000

)

Net cash used for financing activities

37,040

 

 

(134,793

)

Effect of exchange rates on cash

(10,505

)

 

2,720

 

 

 

 

 

Net change in cash and cash equivalents

(153,286

)

 

66,858

 

Cash and cash equivalents, beginning of period

447,858

 

 

378,615

 

Cash and cash equivalents, end of period

$

294,572

 

 

$

445,473

 

 

 

 

 

 

As of March 31,

Operational Data:

2020

 

2019

Employees

15,474

 

 

15,514

 

Source: C.H. Robinson

CHRW-IR

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