<PAGE>
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.
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- - ---------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF C.H. ROBINSON WORLDWIDE, INC. AND
SUBSIDIARIES FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 63,519
<SECURITIES> 14,219
<RECEIVABLES> 222,214
<ALLOWANCES> 9,995
<INVENTORY> 3,355
<CURRENT-ASSETS> 308,186
<PP&E> 42,679
<DEPRECIATION> 20,262
<TOTAL-ASSETS> 339,381
<CURRENT-LIABILITIES> 195,473
<BONDS> 0
0
0
<COMMON> 4,122
<OTHER-SE> 139,786
<TOTAL-LIABILITY-AND-EQUITY> 339,381
<SALES> 0
<TOTAL-REVENUES> 468,189
<CGS> 0
<TOTAL-COSTS> 454,835
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,487
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,845
<INCOME-TAX> 5,471
<INCOME-CONTINUING> 8,374
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,374
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
