C.H. Robinson Worldwide, Inc.
8100 Mitchell Road, Suite 200
Eden Prairie, Minnesota 55344
Chad Lindbloom, vice president and chief financial officer (952) 937-7779
Angie Freeman, investor relations (952) 937-7847
FOR IMMEDIATE RELEASE
C.H. ROBINSON REPORTS THIRD QUARTER RESULTS
MINNEAPOLIS, October 24, 2006 -- C.H. Robinson Worldwide, Inc. ("C.H. Robinson") (NASDAQ: CHRW), today reported financial results for the three months and nine months ended September 30, 2006. As previously reported, all share and per share data is reflective of a two-for-one stock split, effective October 14, 2005.
Summarized financial results for the quarter and nine months ended September 30 are as follows (dollars in thousands, except per share data):
| Three months ended September 30, | | Nine months ended September 30, |
| 2006 | 2005 | % Change | | 2006 | 2005 | % Change |
| | | | | | | |
Gross profits | $ 278,346 | $ 228,874 | 21.6 % | | $ 804,022 | $ 643,668 | 24.9 % |
Operating income | 111,118 | 85,618 | 29.8 % | | 307,470 | 233,739 | 31.5 % |
Net income | 70,390 | 54,089 | 30.1 % | | 195,098 | 145,212 | 34.4 % |
Diluted EPS | $ 0.40 | $ 0.31 | 29.0 % | | $ 1.11 | $ 0.83 | 33.7 % |
Total Transportation gross profits increased 23.2 percent to $243.9 million in the third quarter of 2006 from $198.0 million in the third quarter of 2005. Our Transportation gross profit margin increased to 17.5 percent in 2006 from 16.3 percent in 2005.
The increase in our Transportation gross profit margin is due to the mix of services that make up this business line. We had faster growth in our air freight and miscellaneous transportation management services business lines, which have a higher gross profit margin than our overall Transportation business line.
Our truck transportation gross profits increased 23.5 percent in the third quarter of 2006. Approximately half of the growth was driven by increased volumes, with the remainder of the growth due to an increase in gross profit margins and increased truck transportation rates compared to 2005. Our growth in truck net revenues slowed as the quarter progressed. While gross profit margins were consistent throughout the quarter, volume growth slowed. A significant amount of the volume in the second half of 2005 was driven by a robust spot market. In the third quarter and through the first three weeks of October 2006, we have not seen the same level of spot market demand.
Our intermodal gross profit increase of 6.9 percent in the third quarter of 2006 resulted from an increase in gross profit margins, offset by a slight decrease in volume.
In our international freight forwarding business, our ocean gross profits increased 17.4 percent and our air gross profits increased 25.0 percent in the third quarter of 2006.Excluding the impact of the acquisitions of Bussini Transport S.r.l.('Bussini') and Hirdes Group Worldwide ('Hirdes'), announced in the third quarter of 2005, we estimate our ocean gross profits would have increased approximately10percent and our air gross profits would have decreased approximately10 percent in the third quarter of 2006. In the third quarter of 2005 we had project-related airfreight business with a few large customers that did not recur in the third quarter of 2006.
Miscellaneous transportation gross profits consist primarily of transportation management fees, customs brokerage fees, and warehouse and cross-dock services.The increase of 48.5 percent in the third quarter was driven by increases in our transportation management fees and customs brokerage business.
For the third quarter, Sourcing gross profits increased 11.1 percent to $23.3 million in 2006 from $21.0 million in 2005. This increase was due to higher volumes with retail and foodservice customers through integrated programs. Our Sourcing gross profit margin decreased from 8.1% to 7.6%, due to weather-related growing conditions that increased our costs of some commodities.
Information Services gross profits increased 12.0 percent to $11.1 million in the third quarter of 2006 from $9.9 million in the third quarter of 2005, due to transaction volume growth and an increase in pricing related to certain truck stop services.
For the third quarter, operating expenses increased 16.7 percent to $167.2 million in 2006 from $143.3 million in 2005. This was due to an increase of 17.5 percent in personnel expenses and an increase of 14.0 percent in selling, general and administrative expenses.
As a percentage of gross profits, operating expenses decreased to 60.1 percent in 2006 from 62.6 percent in 2005. This decrease was due to a decline in personnel expenses as a percentage of gross profits from 48.3 percent to 46.7 percent and a decrease in selling, general and administrative expenses as a percentage of gross profits from 14.3 percent to 13.4 percent. We gain leverage in periods of strong gross profit growth in our personnel expenses and also in several categories of our selling, general and administrative expenses.
Founded in 1905, C.H. Robinson Worldwide, Inc., is one of the largest non-asset based third party logistics companies in the world. C.H. Robinson is a global provider of multimodal transportation services and logistics solutions, currently serving over 20,500 customers through a network of 210 offices in North America, South America, Europe, and Asia. C.H. Robinson maintains one of the largest networks of motor carrier capacity in North America and works with approximately 40,000 carriers worldwide.
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 market demand and pressures on the pricing for our services; competition and growth rates within the third-party logistics industry; freight levels 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 integrate the operations of acquired companies with our historic operations successfully; risks associated with litigation and insurance coverage; risks associ ated with operations outside of the U.S.; risks associated with the produce industry, including food safety and contamination issues; changing economic conditions such as general economic slowdown, decreased consumer confidence, fuel shortages and the impact of war on the economy; and other risks and uncertainties detailed in our Annual and Quarterly Reports.
Conference Call Information:
C.H. Robinson Worldwide Third Quarter 2006 Earnings Conference Call
Wednesday, October 25, 2006 10:00 a.m. Eastern time
Live webcast available through Investor Relations link atwww.chrobinson.com
Telephone access:800-257-2101
Webcast replay available through November 8, 2006; Investor Relations link atwww.chrobinson.com
Telephone audio replay available until 12:59 a.m. Eastern Time on October 28, 2006: 800-405-2236; passcode:11073232#
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
(unaudited) |
(In thousands, except per share data) |
| | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2006 | | 2005 | | 2006 | | 2005 |
Gross Revenues: | | | | | | | |
Transportation | $ 1,394,979 | | $1,218,026 | | $ 3,974,134 | | $ 3,340,267 |
Sourcing | 307,384 | | 257,409 | | 907,659 | | 737,067 |
Information Services | 11,128 | | 9,934 | | 31,810 | | 28,117 |
Total gross revenues | 1,713,491 | | 1,485,369 | | 4,913,603 | | 4,105,451 |
Gross Profits: | | | | | | | |
Transportation | | | | | | | |
Truck | 213,015 | | 172,435 | | 609,579 | | 488,438 |
Intermodal | 9,053 | | 8,469 | | 26,556 | | 22,737 |
Ocean | 10,144 | | 8,638 | | 27,563 | | 20,412 |
Air | 4,370 | | 3,495 | | 15,847 | | 8,481 |
Miscellaneous | 7,334 | | 4,938 | | 20,260 | | 14,321 |
Total transportation | 243,916 | | 197,975 | | 699,805 | | 554,389 |
Sourcing | 23,302 | | 20,965 | | 72,407 | | 61,162 |
Information Services | 11,128 | | 9,934 | | 31,810 | | 28,117 |
Total gross profits | 278,346 | | 228,874 | | 804,022 | | 643,668 |
| | | | | | | |
Operating costs and expenses: | | | | | | | |
Personnel expenses | 129,981 | | 110,595 | | 386,801 | | 317,662 |
Selling, general, and administrative expenses | 37,247 | | 32,661 | | 109,751 | | 92,267 |
Total operating expenses | 167,228 | | 143,256 | | 496,552 | | 409,929 |
Income from operations | 111,118 | | 85,618 | | 307,470 | | 233,739 |
| | | | | | | |
Investment and other income | 2,971 | | 1,865 | | 8,513 | | 4,283 |
| | | | | | | |
Income before provision for income taxes | 114,089 | | 87,483 | | 315,983 | | 238,022 |
Provision for income taxes | 43,699 | | 33,394 | | 120,885 | | 92,810 |
Net income | $ 70,390 | | $ 54,089 | | $ 195,098 | | $ 145,212 |
| | | | | | | |
Net income per share (basic) | $ 0.41 | | $ 0.32 | | $ 1.14 | | $ 0.85 |
Net income per share (diluted) | $ 0.40 | | $ 0.31 | | $ 1.11 | | $ 0.83 |
Weighted average shares outstanding (basic) | 170,925 | | 170,105 | | 171,001 | | 170,072 |
Weighted average shares outstanding (diluted) | 174,776 | | 174,533 | | 174,989 | | 174,357 |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(unaudited) |
(In thousands) |
|
| | September 30, 2006 | | December 31, 2005 |
| | |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ 285,388 | | $ 230,628 |
Available-for-sale securities | | 129,031 | | 122,551 |
Receivables, net | | 786,405 | | 716,725 |
Other current assets | | 18,551 | | 14,877 |
Total current assets | | 1,219,375 | | 1,084,781 |
| | | | |
Property and equipment, net | | 78,924 | | 60,721 |
Intangible and other assets | | 289,402 | | 249,566 |
| | $ 1,587,701 | | $ 1,395,068 |
| | | | |
Liabilities and stockholders' investment | | | | |
Current liabilities: | | | | |
Accounts payable and outstanding checks | | $ 542,594 | | $ 473,882 |
Accrued compensation | | 77,557 | | 94,333 |
Other accrued expenses | | 49,346 | | 44,268 |
Total current liabilities | | 669,497 | | 612,483 |
| | | | |
Long term liabilities | | 1,231 | | 2,548 |
Total liabilities | | 670,728 | | 615,031 |
| | | | |
Total stockholders' investment | | 916,973 | | 780,037 |
| | $ 1,587,701 | | $ 1,395,068 |
| | | | |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) (In thousands, except operational data) |
| Nine months ended September 30, |
|
| 2006 | | 2005 |
Operating activities: | | | |
Net income | $ 195,098 | | $ 145,212 |
Stock-based compensation | 38,048 | | 28,324 |
Depreciation and amortization | 17,742 | | 13,326 |
Other non-cash expenses, net | (712) | | 8,786 |
Net changes in operating elements | (19,265) | | (41,750) |
Net cash provided by operating activities | 230,911 | | 153,898 |
| | | |
Investing activities: | | | |
Net property additions | (32,951) | | (16,151) |
Cash paid for acquisitions | (36,174) | | (60,124) |
Purchases of available-for-sale securities | (83,956) | | (99,791) |
Sales/maturities of available-for-sale securities | 78,203 | | 98,225 |
Other assets, net | (2,017) | | (1,891) |
Net cash used for investing activities | (76,895) | | (79,732) |
| | | |
Financing activities: | | | |
Net repurchases of common stock | (43,622) | | (12,720) |
Excess tax benefit from stock based compensation plans | 11,378 | | 2,734 |
Cash dividends | (68,046) | | (38,578) |
Net cash used for financing activities | (100,290) | | (48,564) |
Effect of exchange rates on cash | 1,034 | | (135) |
| | | |
Net increase in cash and cash equivalents | 54,760 | | 25,467 |
Cash and cash equivalents, beginning of period | 230,628 | | 166,476 |
Cash and cash equivalents, end of period | $ 285,388 | | $ 191,943 |
| | | |
| | | |
| As of September 30, |
| 2006 | | 2005 |
Operational Data: | | | |
Employees | 6,590 | | 5,605 |
Branches | 210 | | 195 |
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