C. H. ROBINSON WORLDWIDE, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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EX-99.2 - EXHIBIT 99.2 - C. H. ROBINSON WORLDWIDE, INC.	ex992earningsdeckq22018.htm
8-K - 8-K - C. H. ROBINSON WORLDWIDE, INC.	chrw63018earnings8-k.htm



	C.H. Robinson 14701 Charlson Rd. Eden Prairie, MN 55347 www.chrobinson.com
	FOR INQUIRIES, CONTACT: Robert Houghton, VP of Investor Relations and Treasury Email: robert.houghton@chrobinson.com

FOR IMMEDIATE RELEASE

C.H. Robinson Reports 2018 Second Quarter Results

MINNEAPOLIS, MN, July 31, 2018 - C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (NASDAQ: CHRW) today reported financial results for the quarter ended June 30, 2018.


•	Total revenues increased 15.3 percent to $4.3 billion


•	Net revenues increased 17.0 percent to $671.5 million


•	Income from operations increased 20.5 percent to $219.0 million


•	Diluted earnings per share (EPS) increased 44.9 percent to $1.13


•	Cash flow from operations increased 88.3 percent to $107.9 million

“We are pleased with our enterprise financial results this quarter. We delivered double-digit increases in both net revenue and operating income and a 90-basis point increase in operating margin. Both pricing and volume trends improved across most of our service lines in the second quarter,” said John Wiehoff, Chairman and Chief Executive Officer of C.H. Robinson. “Combined with the benefits of U.S. tax reform, our strong performance enabled us to increase our operating cash flow by nearly 90 percent and increase our cash returns to shareholders by nearly 30 percent in the quarter.”

Second Quarter Results Summary


•	Total revenues increased 15.3 percent to $4.3 billion, driven by growth across all transportation service lines.


•	Net revenues increased 17.0 percent to $671.5 million, driven primarily by growth in truckload, less than truckload (“LTL”), air, ocean and customs services.


•	Operating expenses increased 15.4 percent to $452.5 million. Personnel expenses increased 19.8 percent to $340.6 million, driven primarily by higher variable compensation expense and a 4.2 percent increase in average headcount. Selling, general and administrative ("SG&A") expenses increased

3.8 percent to $111.8 million, due primarily to increases in occupancy, purchased services and equipment rental and maintenance, partially offset by decreases in allowance for doubtful accounts and travel and entertainment expenses.


•	Income from operations totaled $219.0 million, up 20.5 percent from last year due to growth in North American Surface Transportation ("NAST") and Global Forwarding, partially offset by declines in Robinson Fresh and All Other and Corporate. Operating margin of 32.6 percent increased 90 basis points.


•	Interest and other expenses decreased by $4.2 million, driven primarily by an $8 million favorable impact from currency revaluation, partially offset by higher interest expense due to higher debt levels and an increase in variable interest rates.


•	The effective tax rate in the quarter was 25.6 percent compared to 35.6 percent last year, driven primarily by an $18.4 million benefit from the Tax Cuts and Jobs Act of 2017.


•	Net income totaled $159.2 million, up 43.3 percent from a year ago. Diluted EPS of $1.13 increased 44.9 percent.

Year-to-Date Results Summary


•	Total revenues increased 15.1 percent to $8.2 billion, driven by growth across all transportation service lines.


•	Net revenues increased 13.6 percent to $1.3 billion, driven primarily by growth in truckload, LTL, air, ocean and customs services.


•	Income from operations totaled $410.6 million, up 11.0 percent from last year due to growth in NAST, partially offset by declines in Global Forwarding and Robinson Fresh. Operating margin of 31.6 percent decreased 80 basis points.


•	The effective tax rate in the first six months was 23.6 percent compared to 33.6 percent last year, driven primarily by a $35.5 million impact from the Tax Cuts and Jobs Act of 2017.


•	Net income totaled $301.5 million, up 29.3 percent from a year ago. Diluted EPS of $2.14 increased 29.7 percent.

North American Surface Transportation ("NAST") Results

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2018		2017		% change		2018		2017		% change
Total revenues ⁽¹⁾	$	2,878,904	$	2,381,551	20.9	%	$	5,541,915	$	4,640,803	19.4	%
Net revenues	436,813		359,906		21.4	%	851,582		732,346		16.3	%
Income from operations	184,566		140,284		31.6	%	358,644		296,161		21.1	%

⁽¹⁾ Excludes intersegment revenues.

Second quarter total revenues for C.H. Robinson's NAST segment totaled $2.9 billion, an increase of 20.9 percent over the prior year, primarily driven by increased pricing. NAST net revenues increased 21.4 percent in the quarter to $436.8 million. Net revenues in truckload increased 22.9 percent driven by higher pricing. LTL net revenues increased 17.8 percent, and intermodal net revenues increased 17.3 percent, both driven by higher pricing and volumes. Excluding the impact of the change in fuel prices, our average North America truckload rate per mile charged to customers increased approximately 20.5 percent in the quarter, while our truckload transportation costs increased approximately 19.5 percent. Truckload volume declined 4.5 percent in the quarter. LTL and intermodal volumes grew 6 percent and 3.5 percent, respectively. Operating expenses increased 14.9 percent in the quarter, primarily due to increased variable compensation. Income from operations increased 31.6 percent in the quarter, and operating margin expanded 330 basis points to 42.3 percent. NAST average headcount was down 0.7 percent in the quarter.

Global Forwarding Results

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2018		2017		% change		2018		2017		% change
Total revenues ⁽¹⁾	$	617,597	$	528,820	16.8	%	$	1,171,351	$	997,608	17.4	%
Net revenues	144,031		121,023		19.0	%	267,068		227,569		17.4	%
Income from operations	29,788		27,675		7.6	%	38,009		43,881		(13.4	)%

⁽¹⁾ Excludes intersegment revenues.

Second quarter total revenues for the Global Forwarding segment increased 16.8 percent to $617.6 million driven primarily by volume growth across all service lines. Net revenues increased 19.0 percent in the

quarter to $144.0 million. Ocean net revenues increased 18.5 percent. Net revenues in air increased 17.4 percent. Customs net revenues increased 27.5 percent. The acquisition of Milgram & Company added approximately 4.5 percentage points to the net revenue growth in the quarter. Operating expenses increased 22.4 percent, primarily driven by a 17.8 percent increase in average headcount and higher variable compensation. Milgram added approximately 7.5 percentage points to the Global Forwarding average headcount. Income from operations increased 7.6 percent to $29.8 million, and operating margin declined 220 basis points to 20.7 percent in the quarter.

Robinson Fresh Results

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2018		2017		% change		2018		2017		% change
Total revenues⁽¹⁾	$	621,024	$	657,003	(5.5	)%	$	1,171,493	$	1,207,448	(3.0	)%
Net revenues	55,537		60,846		(8.7	)%	109,407		117,683		(7.0	)%
Income from operations	9,232		14,249		(35.2	)%	18,539		28,901		(35.9	)%

⁽¹⁾ Excludes intersegment revenues.

Second quarter total revenues for the Robinson Fresh segment declined 5.5 percent to $621.0 million. Segment net revenues declined 8.7 percent to $55.5 million in the quarter. Sourcing net revenues decreased 10.3 percent. Case volumes declined 6 percent, primarily driven by lower levels of customer promotional activity and higher purchased transportation costs. Transportation net revenues decreased 6.6 percent, primarily driven by truckload volume declines. Robinson Fresh operating expenses decreased 0.6 percent driven by a 7.2 percent reduction in average headcount, partially offset by increased variable compensation. Robinson Fresh second quarter results also include a contingent auto liability claim of $4 million. Income from operations declined 35.2 percent, and operating margin declined 680 basis points to 16.6 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 June 30,						Six Months Ended June 30,
Net revenues	2018		2017		% change		2018		2017		% change
Managed Services	$	20,074	$	18,164	10.5	%	$	38,391	$	35,357	8.6	%
Other Surface Transportation	15,028		13,850		8.5	%	30,960		29,400		5.3	%

Second quarter Managed Services net revenues increased 10.5 percent to $20.1 million, driven by a combination of selling additional service lines to existing customers and new customer wins. Other Surface Transportation net revenues increased 8.5 percent to $15.0 million, primarily due to increased pricing in Europe.

Other Income Statement Items

The second quarter effective tax rate was 25.6 percent, down from 35.6 percent last year. The lower tax rate was primarily driven by the impact of the Tax Cuts and Jobs Act passed in December 2017. We continue to expect our full year effective tax rate to be between 24 and 25 percent in 2018.

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. We do not expect this new policy to have a material impact on our overall operating results.

Interest and other expenses decreased approximately $4.2 million in the quarter driven primarily by an $8 million favorable impact from currency revaluation, partially offset by higher interest expense due to higher debt levels and an increase in variable interest rates.

Diluted weighted average shares outstanding in the quarter were down 0.7 percent, as share repurchases were partially offset by activity in our equity compensation plans.

Cash Flow Generation and Capital Distribution

Cash from operations totaled $107.9 million, up 88.3 percent from the prior year, primarily due to increased earnings from the year-ago period.

In the second quarter, $136.2 million was returned to shareholders, with $65.2 million in cash dividends and $71.0 million in share repurchases. This represents an increase of 29.8 percent over the prior year.

Capital expenditures totaled $14.6 million in the quarter. We continue to expect 2018 capital expenditures to be between $60 and $70 million, with the majority dedicated to technology.

Outlook

“While we did see a slight moderation in the rate of increase of both price to customers and cost to carriers in our North America truckload business this quarter, both price and cost increased sequentially for the fifth consecutive quarter,” said John Wiehoff. “We believe that the current freight market fundamentals will remain in place for the remainder of the year. With a healthy economy, demand for freight will remain strong.”

John continued, “We will leverage our digital transformation to provide our people with an expanding set of insights and capabilities to increase the value of the supply chain expertise we deliver to our customers and carriers. We will remain focused on operating cost efficiency, driving higher levels of service execution for our employees and increasing returns to our shareholders.”

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 120,000 customers and 73,000 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; 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; risks of unexpected or unanticipated events or opportunities that might require additional capital expenditures; 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 Second Quarter 2018 Earnings Conference Call

Wednesday, August 1, 2018; 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 13680838

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 June 30,						Six Months Ended June 30,
	2018		2017		% change		2018		2017		% change
Total revenues	$	4,276,037	$	3,710,018	15.3	%	$	8,201,364	$	7,125,143	15.1	%
Net revenues:
Transportation
Truckload	$	341,442	$	282,718	20.8	%	$	671,733	$	586,840	14.5	%
LTL	119,189		102,213		16.6	%	231,333		199,836		15.8	%
Intermodal	9,181		8,308		10.5	%	15,513		15,800		(1.8	)%
Ocean	87,035		73,438		18.5	%	155,879		136,313		14.4	%
Air	30,905		25,820		19.7	%	59,788		47,637		25.5	%
Customs	20,794		16,311		27.5	%	41,449		32,389		28.0	%
Other logistics services	31,397		29,832		5.2	%	60,286		57,983		4.0	%
Total transportation	639,943		538,640		18.8	%	1,235,981		1,076,798		14.8	%
Sourcing	31,540		35,149		(10.3	)%	61,427		65,557		(6.3	)%
Total net revenues	671,483		573,789		17.0	%	1,297,408		1,142,355		13.6	%

Operating expenses	452,475		391,969		15.4	%	886,815		772,577		14.8	%
Income from operations	219,008		181,820		20.5	%	410,593		369,778		11.0	%
Net income	$	159,163	$	111,071	43.3	%	$	301,460	$	233,151	29.3	%
Diluted EPS	$	1.13	$	0.78	44.9	%	$	2.14	$	1.65	29.7	%

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 June 30,						Six Months Ended June 30,
	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017

Revenues:
Transportation	$	3,953,139		$	3,319,995		$	7,590,779		$	6,422,038
Sourcing	322,898			390,023			610,585			703,105
Total revenues	4,276,037			3,710,018			8,201,364			7,125,143
Costs and expenses:
Purchased transportation and related services	3,313,196			2,781,355			6,354,798			5,345,240
Purchased products sourced for resale	291,358			354,874			549,158			637,548
Personnel expenses	340,630			284,220			668,927			574,724
Other selling, general, and administrative expenses	111,845			107,749			217,888			197,853
Total costs and expenses	4,057,029			3,528,198			7,790,771			6,755,365
Income from operations	219,008			181,820			410,593			369,778
Interest and other expense	(5,128		)	(9,368		)	(15,828		)	(18,670		)
Income before provision for income taxes	213,880			172,452			394,765			351,108
Provisions for income taxes	54,717			61,381			93,305			117,957
Net income	$	159,163		$	111,071		$	301,460		$	233,151

Net income per share (basic)	$	1.14		$	0.79		$	2.16		$	1.65
Net income per share (diluted)	$	1.13		$	0.78		$	2.14		$	1.65

Weighted average shares outstanding (basic)	139,464			141,061			139,745			141,229
Weighted average shares outstanding (diluted)	140,611			141,587			140,960			141,713

Business Segment Information

(unaudited, dollars in thousands)



	NAST		Global Forwarding		Robinson Fresh		All Other and Corporate			Eliminations			Consolidated
Three Months Ended June 30, 2018
Revenues	$	2,878,904	$	617,597	$	621,024	$	158,512		$	—		$	4,276,037
Intersegment revenues ⁽¹⁾	135,317		14,875		50,131		3,891			(204,214		)	—
Total revenues	3,014,221		632,472		671,155		162,403			(204,214		)	4,276,037
Net revenues	436,813		144,031		55,537		35,102			—			671,483
Income from operations	184,566		29,788		9,232		(4,578		)	—			219,008
Depreciation and amortization	6,085		8,753		1,144		8,256			—			24,238
Total Assets	2,470,743		861,080		445,926		675,535			—			4,453,284
Average headcount	6,957		4,736		909		2,627			—			15,229

	NAST		Global Forwarding		Robinson Fresh		All Other and Corporate			Eliminations			Consolidated
Three Months Ended June 30, 2017
Revenues	$	2,381,551	$	528,820	$	657,003	$	142,644		$	—		$	3,710,018
Intersegment revenues ⁽¹⁾	112,243		7,440		39,669		3,670			(163,022		)	—
Total revenues	2,493,794		536,260		696,672		146,314			(163,022		)	3,710,018
Net revenues	359,906		121,023		60,846		32,014			—			573,789
Income from operations	140,284		27,675		14,249		(388		)	—			181,820
Depreciation and amortization	5,706		8,099		1,198		7,943			—			22,946
Total Assets	2,189,711		741,443		455,214		579,521			—			3,965,889
Average headcount	7,003		4,021		980		2,616			—			14,620

(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
Six Months Ended June 30, 2018
Revenues	$	5,541,915	$	1,171,351	$	1,171,493	$	316,605		$	—		$	8,201,364
Intersegment revenues ⁽¹⁾	258,862		24,239		98,477		10,190			(391,768		)	—
Total revenues	5,800,777		1,195,590		1,269,970		326,795			(391,768		)	8,201,364
Net revenues	851,582		267,068		109,407		69,351			—			1,297,408
Income from operations	358,644		38,009		18,539		(4,599		)	—			410,593
Depreciation and amortization	12,218		17,662		2,317		16,282			—			48,479
Total Assets	2,470,743		861,080		445,926		675,535			—			4,453,284
Average headcount	6,921		4,743		913		2,600			—			15,177

	NAST		Global Forwarding		Robinson Fresh		All Other and Corporate			Eliminations			Consolidated
Six Months Ended June 30, 2017
Revenues	$	4,640,803	$	997,608	$	1,207,448	$	279,284		$	—		$	7,125,143
Intersegment revenues ⁽¹⁾	213,397		15,583		73,009		10,548			(312,537		)	—
Total revenues	4,854,200		1,013,191		1,280,457		289,832			(312,537		)	7,125,143
Net revenues	732,346		227,569		117,683		64,757			—			1,142,355
Income from operations	296,161		43,881		28,901		835			—			369,778
Depreciation and amortization	11,296		16,119		2,344		15,618			—			45,377
Total Assets	2,189,711		741,443		455,214		579,521			—			3,965,889
Average headcount	6,926		3,977		971		2,580			—			14,454

(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)



	June 30, 2018		December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	310,575	$	333,890
Receivables, net	2,202,460		2,113,930
Contract assets	182,247		—
Other current assets	63,374		63,116
Total current assets	2,758,656		2,510,936

Property and equipment, net	228,325		230,326
Intangible and other assets	1,466,303		1,494,572
Total assets	$	4,453,284	$	4,235,834

Liabilities and stockholders’ investment
Current liabilities:
Accounts payable and outstanding checks	$	1,133,837	$	1,096,664
Accrued expenses:
Transportation expense	140,231		—
Compensation	99,279		105,316
Income taxes	18,393		12,240
Other accrued liabilities	66,987		58,229
Current portion of debt	66,000		715,000
Total current liabilities	1,524,727		1,987,449

Long term debt	1,341,054		750,000
Noncurrent income taxes payable	25,364		26,684
Deferred tax liability	42,779		45,355
Other long-term liabilities	1,201		601
Total liabilities	2,935,125		2,810,089

Total stockholders’ investment	1,518,159		1,425,745
Total liabilities and stockholders’ investment	$	4,453,284	$	4,235,834

Condensed Consolidated Statements of Cash Flow

(unaudited, in thousands, except operational data)



	Six Months Ended June 30,
	2018			2017
Operating activities:
Net income	$	301,460		$	233,151
Stock-based compensation	44,704			16,842
Depreciation and amortization	48,479			45,377
Provision for doubtful accounts	9,055			7,669
Deferred income taxes	(9,014		)	(4,988		)
Excess tax benefit on stock-based compensation	(7,502		)	(10,583		)
Other	668			536
Changes in operating elements, net of acquisitions:
Receivables	(214,620		)	(244,682		)
Contract assets	(34,483		)	—
Prepaid expenses and other	5,326			(9,646		)
Other non-current assets and liabilities	3,243			(1,016		)
Accounts payable and outstanding checks	101,770			135,130
Accrued transportation expenses	45,420			—
Accrued compensation	(7,381		)	(23,353		)
Accrued income taxes	12,068			10,185
Other accrued liabilities	9,277			(4,611		)
Net cash provided by operating activities	308,470			150,011

Investing activities:
Purchases of property and equipment	(20,569		)	(24,105		)
Purchases and development of software	(9,514		)	(8,865		)
Acquisitions, net of cash	(1,315		)	(1,780		)
Other	(1,546		)	(1,095		)
Net cash used for investing activities	(32,944		)	(35,845		)

Financing activities:
Proceeds from long-term borrowings	591,012			250,000
Borrowings on line of credit	2,418,000			4,282,000
Repayments on line of credit	(3,067,000		)	(4,430,000		)
Net repurchases of common stock	(138,390		)	(90,120		)
Proceeds from stock issued for employee benefit plans	35,846			19,814
Cash dividends	(130,559		)	(128,806		)
Net cash used for financing activities	(291,091		)	(97,112		)
Effect of exchange rates on cash	(7,750		)	8,462

Net change in cash and cash equivalents	(23,315		)	25,516
Cash and cash equivalents, beginning of period	333,890			247,666
Cash and cash equivalents, end of period	$	310,575		$	273,182

	As of June 30,
Operational Data:	2018			2017
Employees	15,357			14,807

Source: C.H. Robinson

CHRW-IR

C. H. ROBINSON WORLDWIDE, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 31, 2018

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C. H. ROBINSON WORLDWIDE, INC. Reports