SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ____________ Commission File Number 000-23189 C.H. ROBINSON WORLDWIDE, INC. (Exact name of registrant as specified in its charter) Delaware 41-1883630 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8100 South Mitchell Road, Suite 200, Eden Prairie, Minnesota 55344-2248 (Address of principal executive offices) (Zip Code) (612) 937-8500 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No As of April 30, 1998, the number of outstanding shares of the registrant's common stock was 41,264,621.
PART I -- FINANCIAL INFORMATION ITEM 1. Financial Statements C.H. ROBINSON WORLDWIDE, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In Thousands, except per share amounts) <TABLE> <CAPTION> ASSETS March 31, December 31, 1998 1997 (Unaudited) ----------- ------------ <S> <C> <C> CURRENT ASSETS: Cash and Cash Equivalents $ 63,519 $ 62,497 Available-for-sale securities 14,219 10,428 Receivables, net of allowance for doubtful accounts of $9,995 and $8,936 212,219 206,743 Inventories 3,355 3,109 Deferred tax benefit 4,203 4,781 Prepaid expenses and other 3,493 5,797 Income taxes receivable 7,178 17,334 -------- -------- Total current assets 308,186 310,689 PROPERTY AND EQUIPMENT, net 22,417 22,226 INTANGIBLE & OTHER ASSETS, net 8,778 7,713 -------- -------- $339,381 $340,628 ======== ======== </TABLE> LIABILITIES AND STOCKHOLDERS' INVESTMENT <TABLE> <CAPTION> CURRENT LIABILITIES: <S> <C> <C> Accounts Payable $176,346 $166,789 Accrued Expenses -- -- Compensation and profit-sharing contribution 7,195 22,107 Income taxes & other 11,932 12,751 -------- -------- Total current liabilities 195,473 201,647 STOCKHOLDERS' INVESTMENT Preferred stock, $0.10 par value, 20,000 shares authorized; none outstanding -- -- Common stock, $0.10 par value; 130,000 shares authorized, 41,265 issued, 41,223 and 41,265 outstanding 4,122 4,126 Additional paid-in capital 61,139 62,108 Foreign currency translation adjustment (763) (718) Retained Earnings 79,410 73,465 -------- -------- Total stockholders' investment 143,908 138,981 -------- -------- $339,381 $340,628 ======== ======== </TABLE> The accompanying notes are an integral part of these condensed consolidated balance sheets. -2-
C.H. ROBINSON WORLDWIDE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (In Thousands, except per share data) (unaudited) <TABLE> <CAPTION> Three Months Ended March 31, ------------------ 1998 1997 -------- -------- <S> <C> <C> GROSS REVENUES $468,189 $403,705 COST OF TRANSPORTATION AND PRODUCTS 412,968 356,819 -------- -------- NET REVENUES 55,221 46,886 SELLING GENERAL AND ADMINISTRATIVE EXPENSES 41,867 35,471 -------- -------- INCOME FROM OPERATIONS 13,354 11,415 INVESTMENT AND OTHER INCOME 491 851 -------- -------- INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES 13,845 12,266 PROVISION FOR INCOME TAXES 5,471 4,840 -------- -------- NET INCOME FROM CONTINUING OPERATIONS 8,374 7,426 NET INCOME FROM DISCONTINUED OPERATIONS, net of income taxes -- 439 -------- -------- NET INCOME $ 8,374 $ 7,865 ======== ======== BASIC NET INCOME PER SHARE: From continuing operations $ 0.20 $ 0.18 From discontinued operations -- 0.01 -------- -------- Net income $ 0.20 $ 0.19 ======== ======== DILUTED NET INCOME PER SHARE: From continuing operations $ 0.20 $ 0.18 From discontinued operations -- 0.01 -------- -------- Net income $ 0.20 $ 0.19 ======== ======== BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 41,251 41,359 DILUTIVE EFFECT OF OUTSTANDING STOCK OPTIONS 101 -- -------- -------- DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 41,352 41,359 ======== ======== </TABLE> The accompanying notes are an integral part of these condensed consolidated statement. -3-
C.H. ROBINSON WORLDWIDE, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (In Thousands) (unaudited) <TABLE> <CAPTION> Three Months Ended March 31, --------------- 1998 1997 ------ ------ <S> <C> <C> NET INCOME $8,374 $7,865 OTHER COMPREHENSIVE INCOME: Foreign currency translation adjustment (45) -- ------ ------ COMPREHENSIVE INCOME $8,329 $7,865 ====== ====== </TABLE> The accompanying notes are an integral part of these condensed consolidated statements. -4-
C.H. ROBINSON WORLDWIDE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In Thousands) (unaudited) <TABLE> <CAPTION> Three Months Ended March 31, ------------------- 1998 1997 -------- -------- <S> <C> <C> OPERATING ACTIVITIES: Net income $ 8,374 $ 7,865 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 1,938 1,885 Deferred income taxes 201 (817) Changes in operating elements - Receivables (5,476) (7,212) Inventories (246) 962 Prepaid expenses and other current assets 2,304 (62) Accounts payable 10,154 7,162 Accrued compensation and profit sharing (14,912) (12,934) Accrued income taxes and other 9,337 5,656 -------- -------- Net cash provided by operating activities 11,674 2,505 INVESTING ACTIVITIES: Additions of property and equipment (1,621) (1,337) Disposals of property and equipment 22 7 Sales of long-term investments -- 5 Purchases of long-term investments (250) -- Sale of available-for-sale 8,336 20,739 Purchase of available-for-sale (12,127) (14,252) Cash used by discontinued operations -- (1,825) Other, net (968) (1,090) -------- -------- Net cash provided by (used for) investing activities (6,608) 2,247 FINANCING ACTIVITIES: Repurchase of common stock (1,570) (458) Cash dividends (2,474) (402) -------- -------- Net cash used for financing activities (4,044) (860) -------- -------- Net increase in cash and cash equivalents 1,022 3,892 CASH AND CASH EQUIVALENTS, beginning of period 62,497 42,567 -------- -------- CASH AND CASH EQUIVALENTS, end of period $ 63,519 $ 46,459 ======== ======== </TABLE> The accompanying notes are an integral part of these condensed consolidated statements. -5-
C.H. ROBINSON WORLDWIDE INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) GENERAL: C.H. Robinson Worldwide, Inc. and Subsidiaries (the "Company") is a global provider of multimodal transportation services and logistic solutions through a network of branch offices throughout the United States, Canada, Mexico and Europe. The condensed consolidated financial statements include the accounts of C.H. Robinson Worldwide, Inc. and its majority owned and controlled subsidiaries. The Company's financial services segment is presented in the accompanying consolidated financial statements as discontinued operations. Minority interest in subsidiaries are not significant. All significant intercompany transactions and balances have been eliminated in the condensed consolidated financial statements. The condensed consolidated financial statements which are unaudited have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In management's opinion, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods presented. The results of operations for the three months ended March 31, 1998 and 1997 are not necessarily indicative of results to be expected for the entire year. Pursuant to SEC rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements. The condensed consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT: The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131) in June 1997. SFAS No. 131 establishes accounting standards for segment reporting and is effective for fiscal years beginning after December 15, 1997. The adoption of SFAS No. 131 is not expected to affect the Company's financial statements or the disclosures contained therein. -6-
ITEM 2. Managements' Discussion and Analysis of Financial Condition and Results of Operations The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto. GENERAL Gross revenues represent the total amount of services and goods sold by the Company to its customers. Costs of transportation and products include direct costs of transportation contracted by the Company, including motor carrier, intermodal, ocean, air, and other costs, and the purchase price of products sourced by the Company. The Company acts principally as a service provider to add value and expertise in the execution and procurement of these services for its customers. The net revenues of the Company (gross revenues less costs of transportation and products) are the primary indicator of the Company's ability to source, add value and resell services and products that are provided by third parties, and are considered by management to be the primary measurement of growth for the Company. Accordingly, the discussion of results of operations below focuses on the changes in the Company's net revenues. In the transportation industry generally, results of operations show a seasonal pattern as customers reduce shipments during and after the winter holiday season. In recent years, the Company's operating income and earnings from continuing operations have been higher in the second and third quarters than in the first and fourth quarters. Although seasonality in the transportation industry has not had a significant impact on the Company's cash flow or results of operations in recent years, the Company cannot fully predict the impact it may have in the future. Inflation has not materially affected the Company's operations due to the short-term, transactional basis of its business. RESULTS OF OPERATIONS The following table summarizes net revenue by service line: <TABLE> <CAPTION> Three Months Ended March 31, ---------------------------- 1998 1997 change -------- -------- ------- <S> <C> <C> <C> Net Revenue (in thousands) Transportation $41,740 $35,975 16.0% Sourcing 11,097 9,098 22.0 Information services 2,384 1,813 31.5 -------- -------- Total $55,221 $46,886 17.8 ======== ======== </TABLE> -7-
The following table represents certain income statement data shown as percentages of the Company's net revenues: <TABLE> <CAPTION> Three Months Ended March 31, --------------- 1998 1997 ------- ------- <S> <C> <C> Net revenues 100.0% 100.0% Selling, general and administrative expenses 75.8 75.7 ------- ------- Income from operations 24.2 24.3 Investment and other income 0.9 1.8 ------- ------- Income from continuing operations before provision for income taxes 25.1 26.1 Provision for income taxes 9.9 10.3 ------- ------- Net income from continuing operations 15.2% 15.8% ======= ======= </TABLE> Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997 Revenues. Gross revenues for the three months ended March 31, 1998 were $468.2 million, an increase of 16.0% over gross revenues of $403.7 million for the three months ended March 31, 1997. Net revenues for the three months ended March 31, 1998 were $55.2 million, an increase of 17.8% over net revenues of $46.9 million for the three months ended March 31, 1997 resulting from an increase in transportation services net revenues of 16.0% to $41.7 million, an increase in sourcing net revenues of 22.0% to $11.1 million, and an increase in information services net revenues of 31.5% to $2.4 million. The increase in transportation net revenue resulted primarily from an increase in transaction volume. The increase in transaction volume was driven by significant expansion of business with current customers and from new domestic and international customers. Sourcing net revenues increased by 22.0% due principally to net revenue growth from sourcing produce for the Company's large retail chain customers and temporary opportunities created by adverse weather conditions in major produce growing areas. The Company's branch network and relationships with produce growers worldwide provided the Company with sources of produce in this challenging market and provided growth to both the number of transactions and the profit per transaction. The increase in information services net revenue was the result of significant growth in transaction volume. Net revenue per transaction decreased slightly due to the increase in less expensive electronic transactions which have been growing faster than manual transactions. Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended March 31, 1998 were $41.9 million, an increase of 18.0% over $35.5 million for the three months ended March 31, 1997. This increase was primarily due to increased costs associated with the Company's growth. Selling, general and administrative expenses as a percent of net revenue increased to 75.8% for the three months ended March 31, 1998 compared to 75.7% for the three months ended March 31,1997. This slight increase is due in part to new expenses associated with being a publicly held company and increased communications costs, offset partly by a reduction in personnel expenses as a percent of net revenue. Income from Operations. Income from operations was $13.4 million for the three months ended March 31, 1998, an increase of 17.0% over $11.4 million for the three months ended March 31, 1997. Income from operations as percent of net revenue were 24.2% and 24.3% for the three months ended March 31, 1998 and for the three months ended March 31, 1997, respectively. -8-
Investment and Other Income. Investment and other income was $491,000 for the three months ended March 31, 1998, a decrease of 42.3% from $851,000 for the three months ended March 31, 1997. This decrease was the result of a special dividend paid on October 10, 1997 which lowered the amount of cash available for investments. Provision for Income Taxes. The effective income tax rates for continuing operations were 39.5% for the three months ended March 31, 1998 and for the three months ended March 31, 1997. The effective income tax rate for both periods is greater than the statutory federal income tax rate primarily due to state income taxes, net of federal benefit. Net Income from Continuing Operations. Net income from continuing operations was $8.4 million for the three months ended March 31, 1998, an increase of 12.8% over $7.4 million for the three months ended March 31, 1997. Net income from continuing operations per share increased by 11.1% to $0.20 (basic and diluted) for the three months ended March 31, 1998 compared to $0.18 (basic and diluted) for the three months ended March 31, 1997. LIQUIDITY AND CAPITAL RESOURCES The Company has historically generated substantial cash from operations which has enabled it to fund its growth while paying cash dividends and repurchasing stock. Cash and cash equivalents totaled $63.5 million and available-for-sale securities totaled $14.2 million as of March 31, 1998. Working capital at March 31, 1998 totaled $112.7 million. The Company has had no long-term debt for the last five years. Management believes that the Company's available cash, together with expected future cash generated from operations, is expected to be sufficient to satisfy its anticipated needs for working capital, capital expenditures, cash dividends and stock repurchases. In addition, the Company has $17.5 million available under its two existing lines of credit at interest rates of 6.7% and 6.6%, respectively, as of March 31, 1998. The lines of credit do not restrict the payment of dividends. There were no borrowings under the lines of credit during 1997 or the three months ended March 31, 1998. The Company continues to assess what impact the year 2000 will have on its current information systems. A plan is underway to complete necessary programming using primarily internal resources. The cost of this programming is not expected to be material to the Company's overall financial position and is being expensed as incurred. The Company believes that failure by its customers or suppliers to address this issue in a timely manner will not have a significant impact on the company or its operations. CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION The foregoing Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward- looking statements represent the Company's expectations or beliefs, including, but not limited to, statements concerning the Company's operations and financial performance and condition. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, certain of which are beyond the Company's control, and actual results may differ materially depending on a variety of important factors, including those described in Exhibit 99 to the Company's Form 10-K filed with the Securities and Exchange Commission with respect to the Company's fiscal year ended December 31, 1997. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. -9-
PART II -- OTHER INFORMATION ITEM 1. Legal Proceedings In accordance with reporting requirements promulgated by the Securities and Exchange Commission, the Company has no new information to report regarding legal proceedings for this Quarterly Report on Form 10-Q. ITEM 2. Changes in Securities and Use of Proceeds None. ITEM 3. Defaults Upon Senior Securities None. ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 5. Other Information None. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1998. -10-
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 14, 1998 C.H.ROBINSON WORLDWIDE, INC. By /s/ D.R. Verdoorn ----------------------------- D.R. Verdoorn Chief Executive Officer By /s/ John Wiehoff ----------------------------- John Wiehoff Controller (principal accounting officer)
EXHIBIT INDEX Exhibit No. Description - - ---------- ----------- 27 Financial Data Schedule