C.H. Robinson Worldwide (CHRW) 8-K Results of Operations and Financial Condition

	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 Third Quarter Results

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

• Total revenues increased 13.4 percent to $4.3 billion

• Net revenues increased 16.9 percent to $694.0 million

• Income from operations increased 26.5 percent to $246.0 million

• Diluted earnings per share (EPS) increased 47.1 percent to $1.25

• Cash flow from operations increased 222.5 percent to $220.4 million

“Our strong third quarter financial performance reflects great execution by the employees across our global network. We delivered another quarter of double-digit increases in both net revenue and operating income and a 270 basis point increase in operating income margin. Truckload volume trends improved sequentially, and we delivered volume growth in many of our other service lines,” said John Wiehoff, Chairman and Chief Executive Officer of C.H. Robinson. “Our strong operating income performance, combined with improved working capital and the benefits of U.S. tax reform, enabled us to generate significant increases in cash flow from operations and cash returns to shareholders in the quarter.”

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Third Quarter Results Summary

• Total revenues increased 13.4 percent to $4.3 billion, driven by growth across all transportation service lines.

• Net revenues increased 16.9 percent to $694.0 million, driven primarily by growth in truckload, less than truckload (“LTL”), customs and air services.

• Operating expenses increased 12.2 percent to $448.1 million. Personnel expenses increased 14.4 percent to $335.3 million, driven primarily by higher variable compensation expense and a 2.6 percent increase in average headcount. Selling, general and administrative (“SG&A”) expenses increased 6.2 percent to $112.8 million, due primarily to increases in purchased services and occupancy, partially offset by decreases in equipment rental and maintenance and insurance expenses.

• Income from operations totaled $246.0 million, up 26.5 percent from last year due to growth in North American Surface Transportation (“NAST”) and Robinson Fresh, partially offset by declines in Global Forwarding and All Other and Corporate. Operating margin of 35.4 percent increased 270 basis points.

• Interest and other expenses decreased by $4.0 million, driven primarily by a $7 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 26.5 percent compared to 35.2 percent last year, driven primarily by a $16.9 million benefit from the Tax Cuts and Jobs Act of 2017.

• Net income totaled $175.9 million, up 47.6 percent from a year ago. Diluted EPS of $1.25 increased47.1 percent.

Year-to-Date Results Summary

• Total revenues increased 14.5 percent to $12.5 billion, driven by growth across all transportation service lines.

• Net revenues increased 14.7 percent to $2.0 billion, driven primarily by growth in truckload, LTL, air, ocean and customs services.

• Income from operations totaled $656.6 million, up 16.4 percent from last year due primarily to growth in NAST, partially offset by a decline in Global Forwarding. Operating margin of 33.0 percentincreased 50 basis points.

• The effective tax rate in the first nine months was 24.7 percent compared to 34.2 percent last year, driven primarily by a $55.0 million benefit from the Tax Cuts and Jobs Act of 2017.

• Net income totaled $477.4 million, up 35.5 percent from a year ago. Diluted EPS of $3.39 increased 36.1 percent.

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North American Surface Transportation Results

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017		% change		2018		2017		% change
Total revenues (1)	$	2,931,461	$	2,469,420	18.7	%	$	8,473,376	$	7,110,223	19.2	%
Net revenues	465,522		377,403		23.3	%	1,317,104		1,109,749		18.7	%
Income from operations	204,158		151,392		34.9	%	562,802		447,553		25.8	%
(1) Excludes intersegment revenues.

Third quarter total revenues for C.H. Robinson's NAST segment totaled $2.9 billion, an increase of 18.7 percent over the prior year, primarily driven by increased pricing. NAST net revenues increased 23.3 percent in the quarter to $465.5 million. Net revenues in truckload increased 25.5 percent, LTL net revenues increased 19.6 percent, and intermodal net revenues increased 10.8 percent, all primarily driven by higher pricing. Excluding the impact of the change in fuel prices, our average North America truckload rate per mile charged to customers increased approximately 14 percent in the quarter, while our truckload transportation cost per mile increased approximately 12 percent. Truckload volume declined 0.5 percent in the quarter. LTL volumes grew 4.5 percent, and intermodal volumes declined 6 percent versus the prior year. Operating expenses increased 15.6 percent, primarily due to increased variable compensation. Income from operations increased 34.9 percent to $204.2 million, and operating margin expanded 380 basis points to 43.9 percent in the quarter. NAST average headcount was approximately flat in the quarter.

Global Forwarding Results

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017		% change		2018		2017		% change
Total revenues (1)	$	639,268	$	552,134	15.8	%	$	1,810,619	$	1,549,742	16.8	%
Net revenues	134,101		129,842		3.3	%	401,169		357,411		12.2	%
Income from operations	23,835		31,125		(23.4	)%	61,844		75,006		(17.5	)%
(1) Excludes intersegment revenues.

Third quarter total revenues for the Global Forwarding segment increased 15.8 percent to $639.3 million driven by pricing and volume growth across all service lines. Net revenues increased 3.3 percent in the

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quarter to $134.1 million. Ocean net revenues decreased 7.9 percent driven by higher purchased transportation costs. Net revenues in air increased 17.7 percent, and customs net revenues increased 33.8 percent, both driven by higher volumes and pricing. The acquisition of Milgram & Company (“Milgram”) added approximately 3 percentage points to the net revenue growth in the quarter. Operating expenses increased 11.7 percent, primarily driven by an 8.9 percent increase in average headcount and higher variable compensation. Milgram added approximately 5 percentage points to the Global Forwarding average headcount. Income from operations decreased 23.4 percent to $23.8 million, and operating margin declined 620 basis points to 17.8 percent in the quarter.

Robinson Fresh Results

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017		% change		2018		2017		% change
Total revenues (1)	$	565,590	$	613,646	(7.8	)%	$	1,737,083	$	1,821,094	(4.6	)%
Net revenues	60,340		54,253		11.2	%	169,747		171,936		(1.3	)%
Income from operations	21,411		11,586		84.8	%	39,950		40,487		(1.3	)%
(1) Excludes intersegment revenues.

Third quarter total revenues for the Robinson Fresh segment declined 7.8 percent to $565.6 million. Segment net revenues expanded 11.2 percent to $60.3 million in the quarter. Sourcing net revenues decreased 15.4 percent. Case volumes declined 9.5 percent, driven by a strategic customer exiting the fresh produce business, lower levels of customer promotional activity at our retail customers and lower restaurant traffic at our foodservice customers. Transportation net revenues increased 43.6 percent, primarily driven by truckload pricing increases. Robinson Fresh operating expenses decreased 8.8 percent driven by a 5.8 percent reduction in average headcount and lower SG&A expenses. Income from operations increased 84.8 percent to $21.4 million, and operating margin expanded 1,410 basis points to 35.5 percent in the quarter.

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All Other and Corporate Results

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

	Three Months Ended September 30,						Nine Months Ended September 30,
Net revenues	2018		2017		% change		2018		2017		% change
Managed Services	$	20,080	$	18,487	8.6	%	$	58,471	$	53,844	8.6	%
Other Surface Transportation	14,001		13,861		1.0	%	44,961		43,261		3.9	%

Third quarter Managed Services net revenues increased 8.6 percent to $20.1 million, driven by a combination of selling additional service lines to existing customers and new customer wins. Third quarter Other Surface Transportation net revenues increased 1.0 percent to $14.0 million.

Other Income Statement Items

The third quarter effective tax rate was 26.5 percent, down from 35.2 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 for the full year.

Interest and other expenses decreased by $4.0 million in the quarter driven primarily by a $7 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 0.6 percent, as share repurchases were partially offset by activity in our equity compensation plans.

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Cash Flow Generation and Capital Distribution

Cash from operations totaled $220.4 million, up 222.5 percent versus the prior year, primarily due to improvements in working capital and increased earnings versus the year-ago period.

In the third quarter, $150.8 million was returned to shareholders, with $64.6 million in cash dividends and $86.2 million in share repurchases. This represents an increase of 18.7 percent over the prior year.

Capital expenditures totaled $19.5 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

“Regardless of the freight environment, we build long-term committed relationships with shippers and carriers around the world and also fulfill spot market opportunities when they become available,” said John Wiehoff. “At the same time, we also focus on operating cost efficiency, driving higher levels of productivity and increasing returns to our shareholders. We believe the strength of this business model is reflected in our strong third quarter financial performance.”

John added, “Moving forward, we will continue our investments in digital transformation to expand the supply chain expertise we provide to our customers and carriers and drive operating efficiencies in our business to increase returns to our employees and shareholders. I am confident that we have the right people, processes and technology to continue to win in the marketplace.”

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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; 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 Third Quarter 2018 Earnings Conference Call

Wednesday, October 31, 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 13683578

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.

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Summarized Financial Results

($ in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017		% change		2018		2017		% change
Total revenues	$	4,291,900	$	3,784,451	13.4	%	$	12,493,264	$	10,909,594	14.5	%
Net revenues:
Transportation
Truckload	$	378,572	$	301,025	25.8	%	$	1,050,305	$	887,865	18.3	%
LTL	122,616		101,870		20.4	%	353,949		301,706		17.3	%
Intermodal	8,361		7,478		11.8	%	23,874		23,278		2.6	%
Ocean	74,839		81,182		(7.8	)%	230,718		217,495		6.1	%
Air	29,991		25,529		17.5	%	89,779		73,166		22.7	%
Customs	23,305		17,421		33.8	%	64,754		49,810		30.0	%
Other logistics services	31,188		29,580		5.4	%	91,474		87,563		4.5	%
Total transportation	668,872		564,085		18.6	%	1,904,853		1,640,883		16.1	%
Sourcing	25,172		29,761		(15.4	)%	86,599		95,318		(9.1	)%
Total net revenues	694,044		593,846		16.9	%	1,991,452		1,736,201		14.7	%
Operating expenses	448,071		399,381		12.2	%	1,334,886		1,171,958		13.9	%
Income from operations	245,973		194,465		26.5	%	656,566		564,243		16.4	%
Net income	$	175,895	$	119,186	47.6	%	$	477,355	$	352,337	35.5	%
Diluted EPS	$	1.25	$	0.85	47.1	%	$	3.39	$	2.49	36.1	%

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.

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Condensed Consolidated Statements of Income

(unaudited, in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues:
Transportation	$	4,028,392		$	3,433,701		$	11,619,171		$	9,855,739
Sourcing	263,508			350,750			874,093			1,053,855
Total revenues	4,291,900			3,784,451			12,493,264			10,909,594
Costs and expenses:
Purchased transportation and related services	3,359,520			2,869,616			9,714,318			8,214,856
Purchased products sourced for resale	238,336			320,989			787,494			958,537
Personnel expenses	335,299			293,204			1,004,226			867,928
Other selling, general, and administrative expenses	112,772			106,177			330,660			304,030
Total costs and expenses	4,045,927			3,589,986			11,836,698			10,345,351
Income from operations	245,973			194,465			656,566			564,243
Interest and other expense	(6,526		)	(10,484		)	(22,354		)	(29,154		)
Income before provision for income taxes	239,447			183,981			634,212			535,089
Provisions for income taxes	63,552			64,795			156,857			182,752
Net income	$	175,895		$	119,186		$	477,355		$	352,337
Net income per share (basic)	$	1.27		$	0.85		$	3.42		$	2.50
Net income per share (diluted)	$	1.25		$	0.85		$	3.39		$	2.49
Weighted average shares outstanding (basic)	138,797			140,422			139,425			140,962
Weighted average shares outstanding (diluted)	140,160			141,022			140,720			141,403

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Business Segment Information

(unaudited, dollars in thousands)

	NAST		Global Forwarding		Robinson Fresh		All Other and Corporate			Eliminations			Consolidated
Three Months Ended September 30, 2018
Revenues	$	2,931,461	$	639,268	$	565,590	$	155,581		$	—		$	4,291,900
Intersegment revenues (1)	147,104		12,626		56,425		3,756			(219,911		)	—
Total revenues	3,078,565		651,894		622,015		159,337			(219,911		)	4,291,900
Net revenues	465,522		134,101		60,340		34,081			—			694,044
Income from operations	204,158		23,835		21,411		(3,431		)	—			245,973
Depreciation and amortization	6,096		8,735		1,092		8,000			—			23,923
Total Assets	2,515,823		944,928		411,309		620,662			—			4,492,722
Average headcount	7,007		4,684		914		2,686			—			15,291
	NAST		Global Forwarding		Robinson Fresh		All Other and Corporate			Eliminations			Consolidated
Three Months Ended September 30, 2017
Revenues	$	2,469,420	$	552,134	$	613,646	$	149,251		$	—		$	3,784,451
Intersegment revenues (1)	115,796		7,873		43,272		3,228			(170,169		)	—
Total revenues	2,585,216		560,007		656,918		152,479			(170,169		)	3,784,451
Net revenues	377,403		129,842		54,253		32,348			—			593,846
Income from operations	151,392		31,125		11,586		362			—			194,465
Depreciation and amortization	5,808		8,455		1,190		8,510			—			23,963
Total Assets	2,297,980		840,762		413,520		623,326			—			4,175,588
Average headcount	6,998		4,301		970		2,634			—			14,903

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

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Business Segment Information

(unaudited, dollars in thousands)

	NAST		Global Forwarding		Robinson Fresh		All Other and Corporate			Eliminations			Consolidated
Nine Months Ended September 30, 2018
Revenues	$	8,473,376	$	1,810,619	$	1,737,083	$	472,186		$	—		$	12,493,264
Intersegment revenues (1)	405,966		36,865		154,902		13,946			(611,679		)	—
Total revenues	8,879,342		1,847,484		1,891,985		486,132			(611,679		)	12,493,264
Net revenues	1,317,104		401,169		169,747		103,432			—			1,991,452
Income from operations	562,802		61,844		39,950		(8,030		)	—			656,566
Depreciation and amortization	18,314		26,397		3,409		24,282			—			72,402
Total Assets	2,515,823		944,928		411,309		620,662			—			4,492,722
Average headcount	6,931		4,725		910		2,623			—			15,189
	NAST		Global Forwarding		Robinson Fresh		All Other and Corporate			Eliminations			Consolidated
Nine Months Ended September 30, 2017
Revenues	$	7,110,223	$	1,549,742	$	1,821,094	$	428,535		$	—		$	10,909,594
Intersegment revenues (1)	329,193		23,456		116,281		13,776			(482,706		)	—
Total revenues	7,439,416		1,573,198		1,937,375		442,311			(482,706		)	10,909,594
Net revenues	1,109,749		357,411		171,936		97,105			—			1,736,201
Income from operations	447,553		75,006		40,487		1,197			—			564,243
Depreciation and amortization	17,104		24,574		3,534		24,128			—			69,340
Total Assets	2,297,980		840,762		413,520		623,326			—			4,175,588
Average headcount	6,921		4,113		966		2,590			—			14,590

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

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Condensed Consolidated Balance Sheets

(unaudited, in thousands)

	September 30, 2018		December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	297,801	$	333,890
Receivables, net	2,251,944		2,113,930
Contract assets	201,411		—
Other current assets	53,909		63,116
Total current assets	2,805,065		2,510,936
Property and equipment, net	231,962		230,326
Intangible and other assets	1,455,695		1,494,572
Total assets	$	4,492,722	$	4,235,834
Liabilities and stockholders’ investment
Current liabilities:
Accounts payable and outstanding checks	$	1,152,633	$	1,096,664
Accrued expenses:
Transportation expense	156,810		—
Compensation	121,813		105,316
Income taxes	15,213		12,240
Other accrued liabilities	68,863		58,229
Current portion of debt	—		715,000
Total current liabilities	1,515,332		1,987,449
Long term debt	1,341,303		750,000
Noncurrent income taxes payable	23,903		26,684
Deferred tax liability	44,555		45,355
Other long-term liabilities	1,026		601
Total liabilities	2,926,119		2,810,089
Total stockholders’ investment	1,566,603		1,425,745
Total liabilities and stockholders’ investment	$	4,492,722	$	4,235,834

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Condensed Consolidated Statements of Cash Flow

(unaudited, in thousands, except operational data)

	Nine Months Ended September 30,
	2018			2017
Operating activities:
Net income	$	477,355		$	352,337
Stock-based compensation	68,475			24,509
Depreciation and amortization	72,402			69,340
Provision for doubtful accounts	12,333			11,176
Deferred income taxes	(5,794		)	(6,779		)
Excess tax benefit on stock-based compensation	(9,345		)	(11,908		)
Other	1,350			1,352
Changes in operating elements, net of acquisitions:
Receivables	(268,252		)	(377,280		)
Contract assets	(53,647		)	—
Prepaid expenses and other	14,740			677
Other non-current assets and liabilities	2,105			(2,220		)
Accounts payable and outstanding checks	120,652			166,152
Accrued transportation expenses	62,165			—
Accrued compensation	15,153			(6,102		)
Accrued income taxes	9,247			7,873
Other accrued liabilities	9,944			(10,778		)
Net cash provided by operating activities	528,883			218,349
Investing activities:
Purchases of property and equipment	(35,794		)	(32,132		)
Purchases and development of software	(13,793		)	(14,286		)
Acquisitions, net of cash	(1,315		)	(48,446		)
Other	(1,605		)	204
Net cash used for investing activities	(52,507		)	(94,660		)
Financing activities:
Proceeds from long-term borrowings	591,012			250,000
Borrowings on line of credit	2,588,000			6,448,000
Repayments on line of credit	(3,303,000		)	(6,469,000		)
Net repurchases of common stock	(222,697		)	(150,737		)
Proceeds from stock issued for employee benefit plans	46,424			23,270
Cash dividends	(195,158		)	(192,765		)
Net cash used for financing activities	(495,419		)	(91,232		)
Effect of exchange rates on cash	(17,046		)	17,184
Net change in cash and cash equivalents	(36,089		)	49,641
Cash and cash equivalents, beginning of period	333,890			247,666
Cash and cash equivalents, end of period	$	297,801		$	297,307
	As of September 30,
Operational Data:	2018			2017
Employees	15,225			14,998

Source: C.H. Robinson

CHRW-IR

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