C.H. Robinson Reports 2018 Second Quarter Results
Jul. 31, 2018
MINNEAPOLIS--(BUSINESS WIRE)--Jul 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 SummaryTotal 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 SummaryTotal 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):
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):
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):
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):
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.
“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 CallWednesday, August 1, 2018; 8:30 a.m. Eastern TimePresentation 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.To participate in the conference call by telephone, please call ten minutes early by dialing: 877-269-7756International callers dial +1-201-689-7817Callers 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 .
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