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C.H. Robinson Reports 2018 Fourth Quarter and Full-Year Results

MINNEAPOLIS--(BUSINESS WIRE)--

C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (CHRW) today reported financial results for the quarter and fiscal year ended December 31, 2018.

Fourth Quarter Highlights:

  • Total revenues increased 4.5 percent to $4.1 billion
  • Net revenues increased 13.0 percent to $713.8 million
  • Income from operations increased 21.2 percent to $255.5 million
  • Diluted earnings per share (EPS) increased 24.0 percent to $1.34
  • Cash flow from operations increased 59.4 percent to $264.0 million

Full-Year Highlights:

  • Total revenues increased 11.8 percent to $16.6 billion
  • Net revenues increased 14.2 percent to $2.7 billion
  • Income from operations increased 17.7 percent to $912.1 million
  • Diluted EPS increased 32.5 percent to $4.73
  • Cash flow from operations increased 106.5 percent to $792.9 million

“We are pleased with our financial results in 2018. We achieved record levels of net revenues and operating income and a 100 basis point increase in operating income margin. Led by our strong operating performance, we more than doubled our cash flow from operations and returned nearly $600 million to shareholders in 2018,” said John Wiehoff, Chairman and Chief Executive Officer of C.H. Robinson. “Our strong 2018 financial results reflect the strength and hard work of our global network.”

Fourth Quarter Results Summary

  • Total revenues increased 4.5 percent to $4.1 billion, driven by growth across most transportation service lines.
  • Net revenues increased 13.0 percent to $713.8 million, driven by growth across all transportation service lines.
  • Operating expenses increased 8.9 percent to $458.3 million. Personnel expenses increased 8.9 percent to $339.3 million, driven primarily by higher variable compensation expense and a 1.4 percent increase in average headcount. Selling, general and administrative (“SG&A”) expenses increased 8.8 percent to $119.0 million, due primarily to increases in purchased services, occupancy and travel and entertainment.
  • Income from operations totaled $255.5 million, up 21.2 percent from last year due to growth in North American Surface Transportation (“NAST”), Global Forwarding and Robinson Fresh, partially offset by a decline in All Other and Corporate. Operating margin of 35.8 percent increased 240 basis points.
  • Interest and other expenses decreased by $8.0 million, driven primarily by a $2.4 million favorable impact from currency revaluation in the fourth quarter of 2018, versus a $6.2 million unfavorable impact in the year-ago period. This was partially offset by higher interest expense due to an increase in interest rates.
  • The effective tax rate in the quarter was 23.9 percent compared to 21.1 percent last year. The higher tax rate was driven primarily by one-time tax benefits that totaled $31.8 million in the year-ago period, partially offset by a $28.4 million benefit in the current period from the Tax Cuts and Jobs Act of 2017.
  • Net income totaled $187.2 million, up 22.7 percent from a year ago. Diluted EPS of $1.34 increased 24.0 percent.

Full-Year Results Summary

  • Total revenues increased 11.8 percent to $16.6 billion, driven by growth across all transportation service lines.
  • Net revenues increased 14.2 percent to $2.7 billion, driven by growth across all transportation service lines.
  • Income from operations totaled $912.1 million, up 17.7 percent from last year due primarily to growth in NAST and Robinson Fresh, partially offset by a decline in All Other and Corporate. Operating margin of 33.7 percent increased 100 basis points.
  • The effective tax rate for the full year was 24.5 percent compared to 30.7 percent last year, driven primarily by an $83.1 million benefit from the Tax Cuts and Jobs Act of 2017.
  • Net income totaled $664.5 million, up 31.6 percent from a year ago. Diluted EPS of $4.73 increased 32.5 percent.

North American Surface Transportation Results

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

       
Three Months Ended December 31, Twelve Months Ended December 31,
2018     2017     % change 2018     2017     % change
Total revenues (1) $ 2,774,524 $ 2,618,587 6.0 % $ 11,247,900 $ 9,728,810 15.6 %
Net revenues 471,394 415,315 13.5 % 1,788,498 1,525,064 17.3 %
Income from operations 211,044 180,557 16.9 % 773,846 628,110 23.2 %
 

(1) Excludes intersegment revenues.

 

Fourth quarter total revenues for C.H. Robinson's NAST segment totaled $2.8 billion, an increase of 6.0 percent over the prior year, primarily driven by increased pricing. NAST net revenues increased 13.5 percent in the quarter to $471.4 million. Net revenues in truckload increased 13.0 percent, less than truckload (“LTL”) net revenues increased 11.5 percent, and intermodal net revenues increased 76.4 percent versus the year ago period, which included elevated repositioning charges. Excluding the impact of the change in fuel prices, our average North America truckload rate per mile charged to customers increased approximately 1.5 percent in the quarter, while our truckload transportation cost per mile decreased approximately 1 percent. Truckload volume declined 1.5 percent in the quarter. LTL volumes grew 2 percent, and intermodal volumes declined 13 percent versus the prior year. Operating expenses increased 10.9 percent, primarily due to increased variable compensation. Income from operations increased 16.9 percent to $211.0 million, and operating margin expanded 130 basis points to 44.8 percent in the quarter. NAST average headcount was up 1.3 percent in the quarter.

Global Forwarding Results

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

       
Three Months Ended December 31, Twelve Months Ended December 31,
2018     2017     % change 2018     2017     % change
Total revenues (1) $ 677,125 $ 591,245 14.5 % $ 2,487,744 $ 2,140,987 16.2 %
Net revenues 142,737 127,869 11.6 % 543,906 485,280 12.1 %
Income from operations 29,782 16,836 76.9 % 91,626 91,842 (0.2 )%
 
(1) Excludes intersegment revenues.
 

Fourth quarter total revenues for the Global Forwarding segment increased 14.5 percent to $677.1 million, driven by improved pricing across all service lines and volume growth in ocean and customs. Net revenues increased 11.6 percent in the quarter to $142.7 million. Ocean net revenues increased 12.4 percent driven by higher volumes and pricing. Net revenues in air increased 9.3 percent, as the air service line benefited from a decreasing cost environment. Customs net revenues increased 12.4 percent, driven by higher volumes and pricing. Operating expenses increased 1.7 percent, primarily driven by higher variable compensation that was partially offset by a 0.4 percent decrease in average headcount. Income from operations increased 76.9 percent to $29.8 million, and operating margin expanded 770 basis points to 20.9 percent in the quarter.

Robinson Fresh Results

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

       
Three Months Ended December 31, Twelve Months Ended December 31,
2018     2017     % change 2018     2017     % change
Total revenues (1) $ 531,817 $ 594,646 (10.6 )% $ 2,268,900 $ 2,415,740 (6.1 )%
Net revenues 64,299 54,123 18.8 % 234,046 226,059 3.5 %
Income from operations 19,785 12,887 53.5 % 59,735 53,374 11.9 %
 
(1) Excludes intersegment revenues.
 

Fourth quarter total revenues for the Robinson Fresh segment declined 10.6 percent to $531.8 million. Segment net revenues expanded 18.8 percent to $64.3 million in the quarter. Sourcing net revenues decreased 8.2 percent. Case volumes declined 6.5 percent, driven by lower restaurant traffic at our foodservice customers. Transportation net revenues increased 45.9 percent, primarily driven by truckload pricing increases. Robinson Fresh operating expenses increased 7.9 percent, driven by increased variable compensation expense, partially offset by a 5.1 percent reduction in average headcount. Income from operations increased 53.5 percent to $19.8 million, and operating margin expanded 700 basis points to 30.8 percent in the quarter.

All Other and Corporate Results

Net revenues for Managed Services and Other Surface Transportation are summarized as follows (dollars in thousands):

       
Three Months Ended December 31, Twelve Months Ended December 31,
Net revenues 2018     2017     % change 2018     2017     % change
Managed Services $ 20,318 $ 18,322 10.9 % $ 78,789 $ 72,166 9.2 %
Other Surface Transportation 15,035 16,220 (7.3 )% 59,996 59,481 0.9 %
 

Fourth quarter Managed Services net revenues increased 10.9 percent to $20.3 million, driven by a combination of selling additional service lines to existing customers and new customer wins. Other Surface Transportation net revenues decreased 7.3 percent to $15.0 million, driven by pricing declines in Europe.

Other Income Statement Items

The fourth quarter effective tax rate was 23.9 percent, up from 21.1 percent last year. The higher tax rate was driven primarily by one-time tax benefits that totaled $31.8 million in the year-ago period and was partially offset by a $28.4 million benefit in the current period from the Tax Cuts and Jobs Act of 2017. We expect our full-year effective tax rate to be between 24 and 25 percent in 2019.

Due to the adoption of ASU 2014-09 (“Revenue from Contracts with Customers”), in-transit shipments are now included in our financial results as of January 1, 2018. This new policy did not have a material impact on our overall operating results for the full year.

Interest and other expenses decreased by $8.0 million in the quarter driven primarily by a $2.4 million favorable impact from currency revaluation in the fourth quarter of 2018, versus a $6.2 million unfavorable impact in the year-ago period. This was partially offset by higher interest expense due to an increase in interest rates.

Diluted weighted average shares outstanding in the quarter were down 1.1 percent, as share repurchases were partially offset by activity in our equity compensation plans.

Cash Flow Generation and Capital Distribution

Fourth quarter cash from operations totaled $264.0 million, up 59.4 percent versus the prior year, primarily due to increased earnings and improved working capital performance versus the year-ago period.

In the fourth quarter, $168.4 million was returned to shareholders, with $70.0 million in cash dividends and $98.4 million in share repurchases. This represents an increase of 42.4 percent over the prior year.

Capital expenditures totaled $14.3 million in the quarter. We expect 2019 capital expenditures to be between $80 and $90 million, with the majority dedicated to technology.

Outlook

“As we turn to 2019, we are remain focused on top-line growth and operating margin expansion and believe our continued investments in technology will help enable us to achieve these objectives,” said John Wiehoff. “We are also committed to strong cash returns to shareholders.”

John added, “A critical part of our strategy is to make investments that add value for our customers and carriers and drive growth for our business, regardless of where we are in the freight cycle. I remain as confident as ever that we have the right people, processes and technology to continue to win in the marketplace.”

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 124,000 customers and 76,000 active contract carriers through our integrated network of offices and more than 15,000 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 since 1997. For more information, visit www.chrobinson.com.

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; economic recessions; changes in market demand and pressures on the pricing for our services; fuel prices and availability; changes in the availability of equipment and services from third party providers, including the availability of contracted truckload carriers and changes in prices; changes in political and governmental conditions domestically and internationally; catastrophic events such as environmental events or terrorist attacks; failure to retain employees; failure of any of our technology or operating systems, including due to data security breaches or hacking; competition and growth rates within the third party logistics industry; risks associated with our decentralized operations; seasonality in the transportation industry; risks associated with litigation and insurance coverage; risks associated with operations outside of the U.S.; risks associated with the produce industry, including food safety and contamination issues; risk of unexpected or unanticipated events or opportunities that might require additional capital expenditures; our dependence on our largest customers; risks associated with identifying suitable acquisitions and investments and with integrating acquired companies; risks associated with our long-term growth and profitability; 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 Fourth Quarter 2018 Earnings Conference Call
Wednesday, January 30, 2019; 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
Callers should reference the conference ID, which is 13685936

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)

       
Three Months Ended December 31, Twelve Months Ended December 31,
2018     2017     % change 2018     2017     % change
Total revenues $ 4,137,908 $ 3,959,786 4.5 % $ 16,631,172 $ 14,869,380 11.8 %
 
Net revenues:
Transportation
Truckload $ 395,611 $ 342,134 15.6 % $ 1,445,916 $ 1,229,999 17.6 %
LTL 117,326 105,306 11.4 % 471,275 407,012 15.8 %
Intermodal 8,595 5,867 46.5 % 32,469 29,145 11.4 %
Ocean 82,234 73,135 12.4 % 312,952 290,630 7.7 %
Air 30,761 27,595 11.5 % 120,540 100,761 19.6 %
Customs 23,761 21,142 12.4 % 88,515 70,952 24.8 %
Other logistics services   30,603   29,554 3.5 %   122,077   117,117 4.2 %
Total transportation 688,891 604,733 13.9 % 2,593,744 2,245,616 15.5 %
Sourcing   24,892   27,116 (8.2 )%   111,491   122,434 (8.9 )%
Total net revenues 713,783 631,849 13.0 % 2,705,235 2,368,050 14.2 %
 
Operating expenses   458,266   420,973 8.9 %   1,793,152   1,592,931 12.6 %
Income from operations 255,517 210,876 21.2 % 912,083 775,119 17.7 %
Net income $ 187,150 $ 152,556 22.7 % $ 664,505 $ 504,893 31.6 %
Diluted EPS $ 1.34 $ 1.08 24.0 % $ 4.73 $ 3.57 32.5 %
 

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.

 
Condensed Consolidated Statements of Income

(unaudited, in thousands, except per share data)

 
   

Three Months Ended
December 31,

   

Twelve Months Ended
December 31,

2018     2017 2018     2017
 
Revenues:
Transportation $ 3,896,750 $ 3,647,167 $ 15,515,921 $ 13,502,906
Sourcing   241,158     312,619     1,115,251     1,366,474  
Total revenues   4,137,908     3,959,786     16,631,172     14,869,380  
Costs and expenses:
Purchased transportation and related services 3,207,859 3,042,434 12,922,177 11,257,290
Purchased products sourced for resale 216,266 285,503 1,003,760 1,244,040
Personnel expenses 339,316 311,599 1,343,542 1,179,527
Other selling, general, and administrative expenses   118,950     109,374     449,610     413,404  
Total costs and expenses   3,882,391     3,748,910     15,719,089     14,094,261  
Income from operations 255,517 210,876 912,083 775,119
Interest and other expense   (9,456 )   (17,502 )   (31,810 )   (46,656 )
Income before provision for income taxes 246,061 193,374 880,273 728,463
Provisions for income taxes   58,911     40,818     215,768     223,570  
Net income $ 187,150   $ 152,556   $ 664,505   $ 504,893  
 
Net income per share (basic) $ 1.36 $ 1.09 $ 4.78 $ 3.59
Net income per share (diluted) $ 1.34 $ 1.08 $ 4.73 $ 3.57
 
Weighted average shares outstanding (basic) 137,797 139,572 139,010 140,610
Weighted average shares outstanding (diluted) 139,182 140,724 140,405 141,382
 
 
Business Segment Information

(unaudited, dollars in thousands)

                       
NAST

Global
Forwarding

Robinson
Fresh

All
Other and
Corporate

Eliminations Consolidated
Three Months Ended December 31, 2018
Revenues $ 2,774,524 $ 677,125 $ 531,817 $ 154,442 $ $ 4,137,908
Intersegment revenues (1)   139,211   11,478   56,384   7,005     (214,078 )  
Total revenues   2,913,735   688,603   588,201   161,447     (214,078 )   4,137,908
Net revenues 471,394 142,737 64,299 35,353 713,783
Income from operations 211,044 29,782 19,785 (5,094 ) 255,517
Depreciation and amortization 6,196 8,751 1,097 8,283 24,327
Total assets 2,345,455 969,736 401,561 710,660 4,427,412
Average headcount 6,964 4,664 887 2,728 15,243
 
NAST

Global
Forwarding

Robinson
Fresh

All
Other and
Corporate

Eliminations Consolidated
Three Months Ended December 31, 2017
Revenues $ 2,618,587 $ 591,245 $ 594,646 $ 155,308 $ $ 3,959,786
Intersegment revenues (1)   133,197   6,742   51,011   4,398     (195,348 )  
Total revenues   2,751,784   597,987   645,657   159,706     (195,348 )   3,959,786
Net revenues 415,315 127,869 54,123 34,542 631,849
Income from operations 180,557 16,836 12,887 596 210,876
Depreciation and amortization 6,126 8,734 1,196 7,581 23,637
Total assets 2,277,252 821,182 434,080 703,320 4,235,834
Average headcount 6,878 4,683 935 2,540 15,036
 

(1) Intersegment revenues represent the sales between our segments and are eliminated to reconcile to our consolidated results.

 
 
Business Segment Information

(unaudited, dollars in thousands)

                       
NAST

Global
Forwarding

Robinson
Fresh

All
Other and
Corporate

Eliminations Consolidated
Twelve Months Ended December 31, 2018
Revenues $ 11,247,900 $ 2,487,744 $ 2,268,900 $ 626,628 $ $ 16,631,172
Intersegment revenues (1)   545,177   48,343   211,286   20,951     (825,757 )  
Total revenues   11,793,077   2,536,087   2,480,186   647,579     (825,757 )   16,631,172
Net revenues 1,788,498 543,906 234,046 138,785 2,705,235
Income from operations 773,846 91,626 59,735 (13,124 ) 912,083
Depreciation and amortization 24,510 35,148 4,506 32,565 96,729
Total assets 2,345,455 969,736 401,561 710,660 4,427,412
Average headcount 6,938 4,711 903 2,652 15,204
 
NAST

Global
Forwarding

Robinson
Fresh

All
Other and
Corporate

Eliminations Consolidated
Twelve Months Ended December 31, 2017
Revenues $ 9,728,810 $ 2,140,987 $ 2,415,740 $ 583,843 $ $ 14,869,380
Intersegment revenues (1)   462,390   30,198   167,292   18,174     (678,054 )  
Total revenues   10,191,200   2,171,185   2,583,032   602,017     (678,054 )   14,869,380
Net revenues 1,525,064 485,280 226,059 131,647 2,368,050
Income from operations 628,110 91,842 53,374 1,793 775,119
Depreciation and amortization 23,230 33,308 4,730 31,709 92,977
Total assets 2,277,252 821,182 434,080 703,320 4,235,834
Average headcount 6,907 4,310 957 2,513 14,687
 

(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)

       
December 31, 2018 December 31, 2017
Assets
Current assets:
Cash and cash equivalents $ 378,615 $ 333,890
Receivables, net 2,162,438 2,113,930
Contract assets 159,635
Other current assets   52,386   63,116
Total current assets   2,753,074   2,510,936
 
Property and equipment, net 228,301 230,326
Intangible and other assets   1,446,037   1,494,572
Total assets $ 4,427,412 $ 4,235,834
 
Liabilities and stockholders’ investment
Current liabilities:
Accounts payable and outstanding checks $ 1,063,107 $ 1,096,664
Accrued expenses:
Compensation 153,626 105,316
Transportation expense 119,820
Income taxes 28,360 12,240
Other accrued liabilities 63,410 58,229
Current portion of debt   5,000   715,000
Total current liabilities   1,433,323   1,987,449
 
Long term debt 1,341,352 750,000
Noncurrent income taxes payable 21,463 26,684
Deferred tax liability 35,757 45,355
Other long-term liabilities   430   601
Total liabilities   2,832,325   2,810,089
 
Total stockholders’ investment   1,595,087   1,425,745
Total liabilities and stockholders’ investment $ 4,427,412 $ 4,235,834
 
 
Condensed Consolidated Statements of Cash Flow

(unaudited, in thousands, except operational data)

   
Twelve Months Ended December 31,
2018     2017
Operating activities:
Net income $ 664,505 $ 504,893
Depreciation and amortization 96,729 92,977
Provision for doubtful accounts 15,634 13,489
Stock-based compensation 87,791 41,805
Deferred income taxes (15,315 ) (28,096 )
Excess tax benefit on stock-based compensation (10,388 ) (13,657 )
Other 1,815 4,491
Changes in operating elements, net of acquisitions:
Receivables (190,048 ) (364,181 )
Contract assets (11,871 )
Prepaid expenses and other 16,029 (9,173 )
Other non-current assets and liabilities 1,370 (19,099 )
Accounts payable and outstanding checks 36,083 144,041
Accrued compensation 47,011 7,209
Accrued transportation expenses 25,175
Accrued income taxes 21,176 18,817
Other accrued liabilities   7,200     (9,515 )
Net cash provided by operating activities 792,896 384,001
 
Investing activities:
Purchases of property and equipment (45,000 ) (40,122 )
Purchases and development of software (18,871 ) (17,823 )
Acquisitions, net of cash acquired (5,315 ) (49,068 )
Other   (3,622 )   (521 )
Net cash used for investing activities (72,808 ) (107,534 )
 
Financing activities:
Proceeds from stock issued for employee benefit plans 51,285 38,130
Net repurchases of common stock (322,255 ) (207,042 )
Cash dividends (265,219 ) (258,222 )
Proceeds from long-term borrowings 591,012 250,000
Proceeds from short-term borrowings 2,674,000 8,784,000
Payments on short-term borrowings   (3,384,000 )   (8,809,000 )
Net cash used for financing activities (655,177 ) (202,134 )
Effect of exchange rates on cash   (20,186 )   11,891  
 
Net change in cash and cash equivalents 44,725 86,224
Cash and cash equivalents, beginning of period   333,890     247,666  
Cash and cash equivalents, end of period $ 378,615   $ 333,890  
 
As of December 31,
Operational Data: 2018 2017
Employees 15,262 15,074
 

Source: C.H. Robinson

CHRW-IR

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