Exhibit 13
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
C.H. Robinson Worldwide, Inc. and Subsidiaries
(Dollars in thousands, except per share data) 2000 1999 1998 1997 1997 1996
as adjusted /(2)/
(unaudited)
Statement of Operations Data
(For the years ended December 31)
- -------------------------------------------------------------------------------------------------------------------------------
Gross revenues $2,882,175 $2,261,027 $2,038,139 $1,790,785 $1,790,785 $1,605,905
Net revenues/(1)/ 419,343 293,283 245,666 206,020 206,020 179,069
Income from operations 117,008 83,828 68,443 32,079 56,735 50,029
Net income 71,242 53,349 43,015 11,492 36,148 32,442
Net income per share/(3)/
Basic $ .84 $ .65 $ .52 $ .14 $ .44 $ .39
Diluted $ .83 $ .64 $ .52 $ .14 $ .44 $ .39
Weighted average number of
shares outstanding/(3)/ (in thousands)
Basic 84,529 82,456 82,432 82,570 82,570 83,598
Diluted 85,717 83,006 82,618 82,604 82,604 83,598
Dividends and distributions per share/(3)/ $ .170 $ .145 $ .125 $ 1.265 $ .105 $ .093
====================================================================================================================================
Balance Sheet Data
(as of December 31)
- ------------------------------------------------------------------------------------------------------------------------------------
Working capital $ 113,988 $ 67,158 $ 135,245 $ 109,042 $ 109,042 $ 114,070
Total assets 644,207 522,661 409,116 340,628 340,628 320,780
Total long-term debt - - - - - -
Stockholders' investment 297,016 246,767 169,518 138,981 138,981 154,428
====================================================================================================================================
Operating Data
(as of December 31)
- ------------------------------------------------------------------------------------------------------------------------------------
Branches 137 131 120 119 119 108
Employees 3,677 3,125 2,205 1,925 1,925 1,665
Average net revenues per employee $ 122 $ 120 $ 119 $ 115 $ 115 $ 115
====================================================================================================================================
/(1)/ Net revenues are determined by deducting cost of transportation and
products from gross revenues. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
/(2)/ Excludes unusual charges and expenses of $24,656 related to our initial
public offering and special dividends and distributions related to our
initial public offering in October 1997.
/(3)/ On October 24, 2000, the Company's Board of Directors declared a two-for-
one stock split effected in the form of a 100% stock dividend distributed
on December 1, 2000 to shareholders of record as of November 10, 2000.
All share and per share amounts have been restated to reflect the
retroactive effect of the stock split.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
Gross revenues represent the total dollar value of services and goods we sell to
our customers. Our costs of transportation and products include the contracted
direct costs of transportation, including motor carrier, rail, ocean, air, and
other costs, and the purchase price of the products we source. We act
principally as a service provider to add value and expertise in the execution
and procurement of these services for our customers. Our net revenues (gross
revenues less cost of transportation and products) are the primary indicator of
our ability to source, add value and resell services and products that are
provided by third parties, and are considered by management to be our primary
measurement of growth. Accordingly, the discussion of results of operations
below focuses on the changes in our net revenues.
In the transportation industry, results of operations generally show a seasonal
pattern as customers reduce shipments during and after the winter holiday
season. In recent years, our operating income and income from continuing
operations have been lower in the first quarter than in the other three
quarters. Seasonality in the transportation industry has not had a significant
impact on our results of operations or our cash flows in recent years. Also,
inflation has not materially affected our operations due to the short-term,
transactional basis of our business. However, we cannot fully predict the impact
seasonality and inflation may have in the future.
Results of Operations
The following table summarizes our net revenues by service line:
For the years ended December 31,
(Dollars in thousands) 2000 1999 Change 1998 Change
- -----------------------------------------------------------------------------------------------
Net revenues
Transportation $355,141 $233,848 51.9% $189,797 23.2%
Sourcing 43,793 42,759 2.4 44,229 (3.3)
Information services 20,409 16,676 22.4 11,640 43.3
- -----------------------------------------------------------------------------------------------
Total $419,343 $293,283 43.0% $245,666 19.4%
===============================================================================================
The following table represents certain statement of operations data shown as
percentages of our net revenues:
For the years ended December 31, 2000 1999 1998
- -----------------------------------------------------------------------------------------------
Net revenues 100.0% 100.0% 100.0%
Selling, general and administrative expenses 72.1 71.4 72.1
- -----------------------------------------------------------------------------------------------
Income from operations 27.9 28.6 27.9
Investment and other income 0.2 1.6 1.1
- -----------------------------------------------------------------------------------------------
Income from operations before provision for income taxes 28.1 30.2 29.0
Provision for income taxes 11.1 12.0 11.5
- -----------------------------------------------------------------------------------------------
Net income 17.0% 18.2% 17.5%
===============================================================================================
2000 Compared to 1999
Revenues. Gross revenues for 2000 were $2.88 billion, an increase of 27.5% over
$2.26 billion for 1999. Net revenues for 2000 were $419.3 million, an increase
of 43.0% over $293.3 million for 1999, resulting from an increase in
transportation services net revenues of 51.9% to $355.1 million, an increase in
sourcing net revenues of 2.4% to $43.8 million, and an increase in information
services net revenues of 22.4% to $20.4 million. Our net revenues increased at a
faster rate than our gross revenues primarily due to the different growth rates
of our service lines. Our information services net revenues as a percentage of
gross revenues is highest of our three lines, followed by our transportation
business and finally our sourcing business.
The increase in transportation services net revenues of 51.9% resulted from
internal growth of approximately 22% and growth from acquisitions which added
approximately 30%. Net revenue margin on the truck business increased slightly
during the year, primarily due to the mix of services provided. Our
international air and ocean business grew from both adding new customers and
expanding business with existing customers.
Sourcing net revenues increased 2.4%. We continued to expand our sourcing
business with large retailers, but this was offset by a decline in business with
produce wholesalers because of industry consolidation.
13
Information services net revenues increased 22.4%. T-Chek related revenues,
which represented approximately 90% of the information services business, had
year-to-date growth of approximately 29%. Other non-T-Chek information services
business had declining net revenues for the year ended December 31, 2000.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 2000 were $302.3 million, an increase of 44.3% over
$209.5 million for 1999. Selling, general and administrative expenses as a
percentage of net revenues were 72.1% and 71.4% in 2000 and 1999. This increase
was primarily due to increased costs associated with our growth and our
acquisitions.
Income from Operations. Income from operations was $117.0 million for 2000, an
increase of 39.6% over $83.8 million for 1999. Income from operations as a
percentage of net revenues was 27.9% and 28.6% for 2000 and 1999.
Investment and Other Income. Investment and other income was $0.8 million for
2000, a decrease of 83.9% from $4.6 million for 1999. This decrease was the
result of lower cash and investment balances in 2000 compared to 1999. In
December 1999, we used $100 million in cash and investments for the purchase of
American Backhaulers, Inc.
Provision for Income Taxes. The effective income tax rate was 39.5% for 2000 and
39.7% for 1999. 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. Net income was $71.2 million for 2000, an increase of 33.5% over
$53.3 million for 1999. Basic net income per share increased by 29.2% to $0.84
for 2000 compared to $0.65 for 1999. Diluted net income per share increased by
29.7% to $0.83 for 2000 compared to $0.64 for 1999.
1999 Compared to 1998
Revenues. Gross revenues for 1999 were $2.26 billion, an increase of 10.9% over
$2.04 billion for 1998. Net revenues for 1999 were $293.3 million, an increase
of 19.4% over $245.7 million for 1998, resulting from an increase in
transportation services net revenues of 23.2% to $233.8 million, a decrease in
sourcing net revenues of 3.3% to $42.8 million, and an increase in information
services net revenues of 43.3% to $16.7 million. Our net revenues increased at a
faster rate than our gross revenues due to the different growth rates of our
service lines. Our information services net revenues as a percentage of gross
revenues was highest of our three lines, followed by our transportation business
and finally our sourcing business.
The increase in transportation services net revenues of 23.2% resulted from
internal growth of approximately 18% and growth from 1999 acquisitions of
approximately 5%. Revenue per transaction remained consistent from 1998 to 1999.
This increase in transaction volume and net revenues was driven by significant
expansion of business with current customers and from new domestic and
international customers.
Sourcing net revenues decreased by 3.3% due principally to difficult comparisons
caused by abnormal net revenue growth of 16.2% during 1998 compared to 1997,
which was created by adverse weather conditions in major produce growing areas
during 1998. We continued to expand our sourcing business with large retailers,
but this was offset by a decline in business with produce wholesalers because of
industry consolidation.
The increase in information services net revenue was the result of significant
growth in transaction volume from new and existing customers and growth in
market share due to consolidation of our competitors in the information services
industry. As consolidation has occurred among our competitors, we have been able
to add customers that were seeking new service providers.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 1999 were $209.5 million, an increase of 18.2% over
$177.2 million for 1998. Selling, general and administrative expenses as a
percentage of net revenues were 71.4% and 72.1% in 1999 and 1998. The decrease
in selling, general and administrative expenses as a percentage of net revenues
was due primarily to cost containment efforts in fixed cost areas while growing
net revenue at 19.4%.
Income from Operations. Income from operations was $83.8 million for 1999, an
increase of 22.5% over $68.4 million for 1998. Income from operations as a
percentage of net revenues was 28.6% and 27.9% for 1999 and 1998.
Investment and Other Income. Investment and other income was $4.6 million for
1999, an increase of 63.5% from $2.8 million for 1998. This increase was the
result of the growth in cash and investments throughout the year. In December
1999, we used $100 million in cash and investments for the purchase of American
Backhaulers, Inc.
Provision for Income Taxes. The effective income tax rate was 39.7% for both
1999 and 1998. 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.
14
Net Income. Net income was $53.3 million for 1999, an increase of 24.0% over
$43.0 million for 1998. Basic net income per share increased by 25.0% to $0.65
for 1999 compared to $0.52 for 1998. Diluted net income per share increased by
23.1% to $0.64 for 1999 compared to $0.52 for 1998.
Liquidity and Capital Resources
We have historically generated substantial cash from operations which has
enabled us to fund our growth while paying cash dividends and repurchasing
stock. Cash and cash equivalents totaled $79.9 million and $49.6 million as of
December 31, 2000 and 1999. In conjunction with our December 1999 acquisition of
American Backhaulers, Inc. (ABH), we used $100.0 million of our cash and cash
equivalents on hand. In addition, we entered into a debt facility to fund our
expected short-term cash needs. Working capital at December 31, 2000 and 1999
was $114.0 million and $67.2 million. We have had no long-term debt for the last
five years and have no material commitments for future capital expenditures. We
have not experienced a material business or financial impact with the conversion
to the Euro.
We generated $74.5 million, $51.9 million and $77.6 million of cash flow from
operations in 2000, 1999 and 1998. This was due to net income generated,
adjusted primarily for depreciation and amortization and the net change in
accounts receivable and accounts payable. Our net cash provided by operating
activities was highest in 1998 due partially to the timing of federal income tax
payments. We had a $17.3 million income tax receivable as of December 31, 1997,
which was collected in 1998.
We used $24.1 million, $88.8 million and $31.6 million of cash flow for
investing activities in 2000, 1999 and 1998. In 2000, we spent approximately
$15.5 million to fund capital expenditures. The cash used in 1999 was primarily
due to $112.2 million spent for acquisitions and $9.4 million to fund capital
expenditures necessary for continued growth, offset by $30.5 million generated
by sales and maturities of available-for-sale securities (net of purchases).
We also used $20.1 million, $12.7 million and $9.2 million of cash flow for
financing activities in 2000, 1999 and 1998. This was due primarily to quarterly
cash dividends and share repurchases for our employee stock plans. We have
declared a $0.05 per share dividend payable on April 2, 2001 to shareholders of
record as of March 9, 2001.
We have $40.0 million available under an existing line of credit
at an interest rate of LIBOR plus 60 basis points (6.60% as of December 31,
2000). During 2000, we had gross borrowings on this facility of $210.5 million,
all of which was repaid by June 2000. The maximum outstanding balance during the
12 months was $14.0 million. There were no borrowings during 1999 or 1998. Our
credit agreement contains certain financial covenants, but does not restrict the
payment of dividends. We were in compliance with all covenants of the agreement
as of December 31, 2000. The line of credit expires on December 16, 2002 and we
expect to be able to renew the line of credit in the future.
We also have 20 million French francs available under a line of credit at an
interest rate of Euribor plus 90 basis points (5.76% at December 31, 2000). This
discretionary line of credit has no expiration date. As of December 31, 2000,
the outstanding balance was 13.0 million French francs or $1.8 million, which is
included in income taxes and other current liabilities. Our credit agreement
contains certain financial covenants, but does not restrict the payment of
dividends. We were in compliance with all covenants of this agreement as of
December 31, 2000.
Assuming no change in our current business plan, management believes that our
available cash, together with expected future cash generated from operations and
the amounts available under our lines of credit, are expected to be sufficient
to satisfy our anticipated needs for working capital, capital expenditures and
cash dividends for all future periods.
Market Risk
We had approximately $79.9 million of cash and investments on December 31, 2000,
all of which were cash and cash equivalents. Substantially all of the cash
equivalents are money market securities from domestic issuers. Because of the
credit risk criteria of our investment policies, the primary market risk
associated with these investments is interest rate risk. We do not use
derivative financial instruments to manage interest rate risk or to speculate on
future changes in interest rates. A rise in interest rates could negatively
affect the fair value of our investments. We believe a reasonable near-term
change in interest rates would not have a material impact on our future
investment earnings due to the short-term nature of our investing practices.
Our discussion and analysis of our financial condition and results of
operations, including our market risk discussions, contain forward-looking
statements, including our current assumptions about future financial
performance, anticipated problems and our plans for future operations, which are
subject to various risks and uncertainties. Our actual results may differ
significantly. Further discussion of factors that may cause a difference may be
found in an exhibit to the Company's Form 10-K filed with the Securities and
Exchange Commission.
15
CONSOLIDATED BALANCE SHEETS
C.H. Robinson Worldwide, Inc. and Subsidiaries
(In thousands, except per share data)
As of December 31, 2000 1999
Assets
- ----------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 79,912 $ 49,637
Receivables, net of allowance for doubtful accounts of $22,712 and $18,280 354,953 270,296
Deferred tax asset 21,219 18,480
Prepaid expenses and other 2,296 2,854
Inventories 1,859 1,785
- ----------------------------------------------------------------------------------------------------------------------
Total current assets 460,239 343,052
Property and equipment 58,827 51,387
Accumulated depreciation and amortization (29,425) (26,640)
- ----------------------------------------------------------------------------------------------------------------------
Net property and equipment 29,402 24,747
Goodwill, net of accumulated amortization of $7,701 and $1,729 145,604 144,625
Other intangible assets, net of accumulated amortization of $5,084 and $4,396 8,570 8,951
Other assets 392 1,286
- ----------------------------------------------------------------------------------------------------------------------
$644,207 $522,661
======================================================================================================================
Liabilities and Stockholders' Investment
- ----------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $285,932 $231,592
Accrued expenses -
Compensation and profit-sharing contribution 33,456 28,115
Income taxes and other 26,863 16,187
- ----------------------------------------------------------------------------------------------------------------------
Total current liabilities 346,251 275,894
Deferred tax liabilities 940 -
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 347,191 275,894
- ----------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 4 and 7)
Stockholders' investment:
Preferred stock, $.10 par value, 20,000 shares authorized;
no shares issued or outstanding - -
Common stock, $.10 par value, 130,000 shares authorized;
85,008 and 84,772 shares issued, 84,621 and 84,568 outstanding 8,462 4,228
Additional paid-in-capital 101,571 98,958
Retained earnings 204,463 147,586
Deferred compensation (6,980) -
Cumulative other comprehensive loss (1,049) (1,053)
Treasury stock at cost (387 and 204 shares) (9,451) (2,952)
- ----------------------------------------------------------------------------------------------------------------------
Total stockholders' investment 297,016 246,767
- ----------------------------------------------------------------------------------------------------------------------
$644,207 $522,661
======================================================================================================================
The accompanying notes are an integral part of these consolidated balance
sheets.
16
CONSOLIDATED STATEMENTS OF OPERATIONS
C.H. Robinson Worldwide, Inc. and Subsidiaries
(In thousands, except per share data)
For the years ended December 31, 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------
Gross revenues $2,882,175 $2,261,027 $2,038,139
Cost of transportation and products 2,462,832 1,967,744 1,792,473
- ------------------------------------------------------------------------------------------------------------
Net revenues 419,343 293,283 245,666
Selling, general and administrative expenses 302,335 209,455 177,223
- ------------------------------------------------------------------------------------------------------------
Income from operations 117,008 83,828 68,443
Investment and other income 750 4,649 2,844
- ------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 117,758 88,477 71,287
Provision for income taxes 46,516 35,128 28,272
- ------------------------------------------------------------------------------------------------------------
Net income $ 71,242 $ 53,349 $ 43,015
============================================================================================================
Basic net income per share $ .84 $ .65 $ .52
Diluted net income per share $ .83 $ .64 $ .52
Basic weighted average shares outstanding 84,529 82,456 82,432
Dilutive effect of outstanding stock awards 1,188 550 186
- ------------------------------------------------------------------------------------------------------------
Diluted weighted average shares outstanding 85,717 83,006 82,618
============================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
17
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
AND COMPREHENSIVE INCOME
C.H. Robinson Worldwide, Inc. and Subsidiaries
(In thousands, except per share data)
For the years ended December 31, 2000, 1999 and 1998
Cumulative
Common Additional Deferred Other Com- Total
Shares Paid-in Retained Compen- prehensive Treasury Stockholders'
Outstanding Amount Capital Earnings sation Loss Stock Investment
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 41,265 $ 4,126 $ 62,108 $ 73,465 $ - $ (718) $ - $ 138,981
Net income - - - 43,015 - - - 43,015
Other comprehensive income:
Foreign currency translation adjustment - - - - - (427) - (427)
----------
Comprehensive income - - - - - - - 42,588
==========
Cash dividends, $.125 per share - - - (10,302) - - - (10,302)
Stock issued for employee benefit plans 63 6 (115) - - - 1,430 1,321
Tax benefit on deferred
compensation plans - - 61 - - - - 61
Repurchase of common stock (138) (13) - - - - (3,118) (3,131)
====================================================================================================================================
Balance, December 31, 1998 41,190 4,119 62,054 106,178 - (1,145) (1,688) 169,518
Net income - - - 53,349 - - - 53,349
Other comprehensive income:
Foreign currency translation adjustment - - - - - 92 - 92
----------
Comprehensive income - - - - - - - 53,441
==========
Cash dividends, $.145 per share - - - (11,941) - - - (11,941)
Stock issued for employee benefit plans 58 6 51 - - - 1,472 1,529
Stock issued in acquisition (Note 2) 1,121 112 36,813 - - - - 36,925
Tax benefit on deferred
compensation plans - - 40 - - - - 40
Repurchase of common stock (85) (9) - - - - (2,736) (2,745)
====================================================================================================================================
Balance, December 31, 1999 42,284 4,228 98,958 147,586 - (1,053) (2,952) 246,767
Net income - - - 71,242 - - - 71,242
Other comprehensive income:
Foreign currency translation adjustment - - - - - 4 - 4
----------
Comprehensive income - - - - - - - 71,246
==========
Cash dividends, $.170 per share - - - (14,365) - - - (14,365)
Stock dividend (Note 1) 42,284 4,228 (4,228) - - - - -
Stock issued for employee benefit plans 181 18 (168) - - - 3,400 3,250
Issuance of restricted stock (Note 6) 237 24 6,976 - (7,000) - - -
Reduction of deferred compensation
(Note 6) - - - - 20 - - 20
Tax benefit on deferred
compensation plans - - 33 - - - - 33
Repurchase of common stock (365) (36) - - - - (9,899) (9,935)
====================================================================================================================================
Balance, December 31, 2000 84,621 $ 8,462 $101,571 $204,463 $ (6,980) $ (1,049) $ (9,451) $ 297,016
====================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
18
CONSOLIDATED STATEMENTS OF CASH FLOWS
C.H. Robinson Worldwide, Inc. and Subsidiaries
(In thousands)
For the years ended December 31, 2000 1999 1998
Operating Activities
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 71,242 $ 53,349 $ 43,015
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization 17,318 10,133 8,521
Deferred compensation expense 20 - -
Deferred income taxes (513) (4,822) (9,272)
(Gain) loss on sale of assets 298 (178) 141
Changes in operating elements, net of effects of acquisitions -
Receivables (82,196) (35,196) (11,056)
Prepaid expenses and other 570 3,907 (1,379)
Inventories (74) 1,703 (374)
Accounts payable 52,875 25,748 20,027
Accrued compensation and profit-sharing contribution 5,286 339 5,275
Accrued income taxes and other 9,664 (3,105) 22,750
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 74,490 51,878 77,648
- -------------------------------------------------------------------------------------------------------------------------
Investing Activities
- -------------------------------------------------------------------------------------------------------------------------
Purchases of property and equipment (15,491) (9,433) (5,071)
Sales of property and equipment 360 430 1,981
Cash paid for acquisitions, net of cash acquired (5,898) (112,216) (6,799)
Sales of long-term investments - 1,300 -
Sales/maturities of available-for-sale securities - 44,172 37,594
Purchases of available-for-sale securities - (13,643) (57,900)
Change in other assets, net (3,063) 553 (1,380)
- -------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (24,092) (88,837) (31,575)
- -------------------------------------------------------------------------------------------------------------------------
Financing Activities
- -------------------------------------------------------------------------------------------------------------------------
Stock issued for employee benefit plans 3,250 1,529 1,321
Repurchase of common stock (9,935) (2,745) (3,131)
Cash dividends and distributions (13,438) (11,529) (7,419)
- -------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (20,123) (12,745) (9,229)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 30,275 (49,704) 36,844
Cash and cash equivalents, beginning of year 49,637 99,341 62,497
- -------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 79,912 $ 49,637 $ 99,341
=========================================================================================================================
Cash paid for income taxes $ 39,096 $ 42,348 $ 34,848
=========================================================================================================================
Cash paid for interest $ 151 $ - $ -
=========================================================================================================================
Supplemental disclosure of noncash activities:
Stock issued in acquisition (Note 2) $ - $ 36,925 $ -
Restricted stock awarded (Note 6) $ 7,000 $ - $ -
=========================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
C.H. Robinson Worldwide, Inc. and Subsidiaries
1. Summary of Significant Accounting Policies
Basis of Presentation - C.H. Robinson Worldwide, Inc. and its Subsidiaries ("the
Company," "we," "us," or "our") is a global provider of multimodal
transportation services and logistics solutions through a network of 137 branch
offices in 40 states throughout the United States, along with offices in Canada,
Mexico, South America and Europe. The consolidated financial statements include
the accounts of C.H. Robinson Worldwide, Inc. and its majority owned and
controlled subsidiaries. Minority interests in subsidiaries are not significant.
All significant intercompany transactions and balances have been eliminated in
the consolidated financial statements.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Ultimate results could differ from those estimates.
Revenue Recognition - Gross revenues consist of the total dollar value of goods
and services purchased by customers. We act principally as the service provider
for these transactions and recognize revenue as these services are rendered and
goods are delivered.
Common Stock Split - On October 24, 2000, the Company's board of directors
declared a two-for-one stock split effected in the form of a 100% stock dividend
distributed on December 1, 2000 to shareholders of record as of November 10,
2000. As a result of the stock split, the accompanying consolidated financial
statements reflect an increase in the number of outstanding shares of common
stock. All share and per share amounts have been restated to reflect the
retroactive effect of the stock split.
Foreign Currency - All balance sheet accounts of foreign subsidiaries are
translated at the current exchange rate as of the end of the year. Statement of
operations items are translated at average exchange rates during the year. The
resulting translation adjustment is recorded as a separate component of
comprehensive income in our statement of stockholders' investment and
comprehensive income.
Segment Reporting and Geographic Information - We have adopted the provisions of
Statement of Financial Accounting Standards No. 131, "Disclosure About Segments
of an Enterprise and Related Information" (SFAS No. 131). SFAS No. 131
establishes accounting standards for segment reporting. We operate in a single
segment.
The following table presents our gross revenues (based on location of the
customer) for the years ended December 31 and our long-lived assets as of
December 31 by geographic regions (in thousands):
2000 1999 1998
- ------------------------------------------------------------------------
Gross revenues
United States $2,754,292 $2,144,386 $1,935,191
Other locations 127,883 116,641 102,948
- ------------------------------------------------------------------------
$2,882,175 $2,261,027 $2,038,139
========================================================================
2000 1999
- ------------------------------------------------------------------------
Long-lived assets
United States $ 37,204 $ 33,882
Other locations 1,160 1,102
- ------------------------------------------------------------------------
$ 38,364 $ 34,984
========================================================================
Cash and Cash Equivalents - Cash and cash equivalents consist primarily of
highly liquid investments with an original maturity of three months or less. The
carrying amount approximates fair value due to the short maturity of the
instruments.
Inventories - Inventories consist primarily of produce, fruit concentrates and
related products held for resale and are stated at the lower of cost or market.
Property and Equipment - Property and equipment additions are recorded at cost.
Maintenance and repair expenditures are charged to expense as incurred.
Depreciation is computed using straight-line and accelerated methods over the
estimated lives of the assets of three to 10 years. Amortization of leasehold
improvements is computed over the shorter of the lease term or the estimated
useful lives of the improvements.
20
Intangible Assets - Goodwill and other identifiable intangible assets are being
amortized over their estimated economic lives, ranging from three to 40 years.
We periodically evaluate whether events and circumstances have occurred that
indicate the remaining balance of intangible assets may not be recoverable.
Income Per Share - Basic net income per common share is computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the period. Diluted net income per common share is computed under the
treasury stock method and is calculated to compute the dilutive effect of
outstanding options and other securities.
Comprehensive Income - Comprehensive income includes any changes in the equity
of an enterprise from transactions and other events and circumstances from
nonowner sources. Our foreign currency translation adjustment is currently our
only component of other comprehensive income and is presented on our
consolidated statements of stockholders' investment and comprehensive income.
Recently Issued Accounting Pronouncements - Effective January 1, 2001, we have
adopted the provisions of Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133)"
and Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133 (SFAS No. 137)." SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments imbedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires changes in the derivatives' fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. SFAS No. 133 did
not have any impact on our consolidated statements of operations or balance
sheets.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101, as amended, summarizes some of the SEC's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. We have adopted SAB 101 and determined it was not material.
2. Acquisition of American Backhaulers, Inc.
On December 16, 1999, we acquired all of the operations and certain assets and
liabilities of American Backhaulers, Inc. (ABH). ABH was a privately held,
non-asset-based third-party transportation provider, located primarily in
Chicago, Illinois. The purchase price of the assets was $136,925,000, including
$100,000,000 in cash and 2,241,430 newly issued shares of our common stock. We
accounted for the acquisition using the purchase method of accounting, with
assets acquired including primarily goodwill and other identifiable intangible
assets. We are amortizing the goodwill associated with the acquisition over 40
years, and all other intangible assets over periods ranging from three to seven
years. Our results of operations include the operations of ABH from the closing
date through December 31, 2000. Pro forma operating results of the combined
enterprise assuming this transaction had occurred on January 1, 1998 are as
follows for the years ended December 31 (unaudited, in thousands, except per
share data):
1999 1998
- ---------------------------------------------------------------------------
Net revenues
Pro forma $345,706 $286,185
Income before income taxes
Pro forma $ 91,264 $ 67,824
Net income
Pro forma $ 55,032 $ 40,898
Basic net income per share
Pro forma $ .65 $ .49
Diluted net income per share
Pro forma $ .64 $ .48
===========================================================================
3. Marketable Securities
In December 1999, we liquidated our portfolio of marketable securities to fund
the acquisition of ABH. We have historically classified all of our marketable
securities as available-for-sale. Available-for-sale securities are carried at
amortized cost, which approximates market value. The unrealized gains and losses
were not material as the fair value approximates amortized cost. The gross
realized gains and losses on sales of available-for-sale securities were not
material for the years ended December 31, 1999 or 1998.
21
4. Lines of Credit
We have $40.0 million available under an existing line of credit
at an interest rate of LIBOR plus 60 basis points (6.60% as of December 31,
2000). During 2000, we had gross borrowings on this facility of $210.5 million,
all of which was repaid by June 2000. The maximum outstanding balance during the
12 months was $14.0 million. There were no borrowings during 1999 or 1998. Our
credit agreement contains certain financial covenants, but does not restrict the
payment of dividends. We were in compliance with all covenants of the agreement
as of December 31, 2000. The line of credit expires on December 16, 2002 and we
expect to be able to renew the line of credit in the future.
We also have 20 million French francs available under a line of credit at an
interest rate of Euribor plus 90 basis points (5.76% at December 31, 2000). This
discretionary line of credit has no expiration date. As of December 31, 2000,
the outstanding balance was 13.0 million French francs or $1.8 million, which is
included in income taxes and other current liabilities. Our credit agreement
contains certain financial covenants, but does not restrict the payment of
dividends. We were in compliance with all covenants of this agreement as of
December 31, 2000.
5. Income Taxes
C.H. Robinson Worldwide, Inc. and its 80% (or more) owned U.S. subsidiaries file
a consolidated federal income tax return. We file unitary or separate state
returns based on state filing requirements.
The components of the provision for income taxes consist of the following at
December 31 (in thousands):
2000 1999 1998
- ---------------------------------------------------------------------------
Tax provision:
Federal $38,744 $33,207 $29,974
State 7,114 5,649 5,862
Foreign 1,171 1,094 1,708
- ---------------------------------------------------------------------------
47,029 39,950 37,544
Deferred provision (benefit) (513) (4,822) (9,272)
- ---------------------------------------------------------------------------
Total provision $46,516 $35,128 $28,272
===========================================================================
A reconciliation from the provision for income taxes using the statutory federal
income tax rate to our effective income tax rate at December 31 is as follows:
2000 1999 1998
- ---------------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes,
net of federal benefit 3.1 2.7 4.1
Foreign and other 1.4 2.0 .6
- ---------------------------------------------------------------------------
39.5% 39.7% 39.7%
===========================================================================
Deferred tax assets (liabilities) are comprised of the following at December 31
(in thousands):
2000 1999
- ---------------------------------------------------------------------------
Deferred tax assets:
Receivables $ 6,929 $ 6,735
Accrued expenses 7,291 7,092
Amortization - 1,303
Accrued compensation 3,995 1,409
Other 4,264 5,396
Deferred tax liabilities:
Long-lived assets (1,577) (2,169)
Amortization (623) -
- ---------------------------------------------------------------------------
Net deferred taxes $20,279 $19,766
===========================================================================
6. Capital Stock and Stock Award Plans
Preferred Stock - Our Certificate of Incorporation (Certificate) authorizes the
issuance of 20,000,000 shares of Preferred Stock, $.10 per share, none of which
is outstanding. The Preferred Stock may be issued by resolution of our board of
directors from time to time without any action of the stockholders. The
Preferred Stock may be issued in one or more series and the board of directors
may fix the designation and relative powers, including voting powers,
preferences, rights, qualifications, limitations and restrictions of each
series, so authorized. The issuance of any such series may have an adverse
effect on the rights of holders of Common Stock or impede the completion of a
merger, tender offer or other takeover attempt.
22
Common Stock - Our Certificate authorizes 130,000,000 shares of Common Stock,
par value $.10 per share. Subject to the prior rights of any series of Preferred
Stock which may from time to time be authorized and outstanding, holders of
Common Stock are entitled to receive dividends out of funds legally available
when, and if declared by the board of directors and to receive pro rata the net
assets of the Company legally available for distribution upon liquidation or
dissolution.
Holders of Common Stock are entitled to one vote for each share of Common Stock
held on each matter to be voted on by the holders of Common Stock, including the
election of directors. Holders of Common Stock are not entitled to cumulative
voting, which means that the holders of more than 50% of the outstanding Common
Stock can elect all of any class of directors if they choose to do so. The
stockholders do not have preemptive rights. All outstanding shares of Common
Stock are fully paid and nonassessable.
Share Repurchase Program - In conjunction with our initial public offering, our
board of directors authorized a stock repurchase plan which allows management to
repurchase 2,000,000 common shares for reissuance upon the exercise of employee
stock options and other stock plans. During 1999, the board of directors also
authorized a second stock repurchase plan, allowing for the repurchase of
4,000,000 shares. We purchased approximately 364,600, 170,000 and 276,000 shares
of our common stock for the treasury at an aggregate cost of $9,935,000,
$2,745,000 and $3,131,000 in 2000, 1999 and 1998 under the initial stock
repurchase plan. No shares have been repurchased under the 1999 stock repurchase
plan.
Stock Award Plans - We have a 1997 Omnibus Stock Plan to grant certain stock
awards, including stock options at fair market value and restricted shares, to
our key employees and outside directors. A maximum of 4,000,000 shares can be
granted under this plan; 892,680 shares were available for stock awards as of
December 31, 2000. The contractual lives of all options granted are 10 years.
The following schedule summarizes activity in the plans:
Stock Options
Weighted
Average
Shares Exercise Price
- -----------------------------------------------------------------------------
Outstanding at
December 31, 1997 951,334 $ 9.00
Granted - -
Exercised - -
Terminated (87,242) 9.00
- -----------------------------------------------------------------------------
Outstanding at
December 31, 1998 864,092 9.00
- -----------------------------------------------------------------------------
Granted 977,090 12.59
Exercised (2,500) 9.00
Terminated (77,620) 11.27
- -----------------------------------------------------------------------------
Outstanding at
December 31, 1999 1,761,062 10.90
- -----------------------------------------------------------------------------
Granted 1,166,400 20.35
Exercised (37,260) 9.00
Terminated (59,934) 14.12
- -----------------------------------------------------------------------------
Outstanding at
December 31, 2000 2,830,268 14.75
- -----------------------------------------------------------------------------
Exercisable at
December 31, 1998 - -
Exercisable at
December 31, 1999 225,698 9.00
Exercisable at
December 31, 2000 396,993 $ 9.00
=============================================================================
We follow the provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS No. 123) which encourages, but
does not require, a fair value based method of accounting for employee stock
options or similar equity instruments. As permitted under SFAS No. 123, we have
continued to account for employee stock options using the intrinsic value method
outlined in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees."
23
Accordingly, we have not recognized any compensation expense for our stock
options. Had compensation expense for our stock-based compensations plans been
determined based on the fair value at the grant dates consistent with the method
of SFAS No. 123, our net income and net income per share would have been as
follows (in thousands, except per share amounts):
2000 1999
- -----------------------------------------------------------------------------
Net income As reported $71,242 $53,349
Adjusted $69,448 $52,540
- -----------------------------------------------------------------------------
Basic income per share As reported $ .84 $ .65
Adjusted $ .82 $ .64
Diluted income per share As reported $ .83 $ .64
Adjusted $ .81 $ .63
=============================================================================
The adjusted effects to net income presented reflect compensation costs for all
outstanding options, which were granted during 1997, 1999 and 2000. The
compensation cost is being reflected over the options' vesting period of five
years. Therefore, the full impact of calculating compensation costs of options
under SFAS No. 123 is not reflected.
The fair value per option was estimated using the Black-Scholes option pricing
model with the following weighted average assumptions:
2000 Grant 1999 Grant 1997 Grant
- ----------------------------------------------------------------------------
Risk-free interest rate 6.79% 5.10% 5.72%
Expected dividend yield 1.00% 1.00% 1.00%
Expected volatility factor 30.21% 30.00% 25.00%
Expected option term 7 years 7 years 7 years
- ----------------------------------------------------------------------------
Fair value per option $7.94 $4.66 $3.05
============================================================================
Restricted Share Award - During 2000, the Company awarded to certain key
employees 237,292 restricted shares which were granted under the 1997 Omnibus
Stock Plan. The shares are subject to certain vesting requirements. The value of
such stock was established by the market price on the date of grant and was
recorded as deferred compensation within stockholders' investment in the
accompanying financial statements and is being amortized ratably over the
applicable restricted stock vesting period. During 2000, $20,000 was charged to
expense related to the restricted shares.
7. Commitments and Contingencies
Employee Benefit Plans - We participate in a defined contribution profit-sharing
and savings plan which qualifies under section 401(k) of the Internal Revenue
Code and covers all full-time employees with one or more years of continuous
service. Annual profit-sharing contributions are determined by each company's
board of directors, in accordance with the provisions of the plan. We can also
elect to make matching contributions to the plan at the discretion of our board
of directors. We contributed a 4% match in 2000 and a 3% match in 1999.
Profit-sharing plan expense, including matching contributions, was approximately
$8,838,000 in 2000, $5,928,000 in 1999 and $4,560,000 in 1998.
Non-Qualified Deferred Compensation Plan - During 2000, the Company adopted the
Robinson Companies Nonqualified Deferred Compensation Plan that provides to a
select group of management and highly compensated employees the opportunity to
defer a specified percentage or dollar amount of their cash compensation.
Participants may elect to defer up to 100% of their cash compensation. The plan
also permits participants to defer the delivery of shares of Company Common
Stock representing the gain on the exercise of incentive stock options and
nonqualified stock options. The Company's obligations under this plan are
unfunded, and they are unsecured general obligations of the Company.
Lease Commitments - We lease certain facilities, equipment and automobiles under
operating leases. Lease expense was $18,191,000 for 2000, $16,072,000 for 1999
and $14,376,000 for 1998.
Minimum future lease commitments under noncancelable lease agreements in excess
of one year as of December 31, 2000 are as follows (in thousands):
- --------------------------------------------------------------------------
2001 $12,803
2002 9,725
2003 5,921
2004 4,053
2005 1,151
Thereafter 496
- --------------------------------------------------------------------------
$34,149
==========================================================================
Litigation - We are currently not subject to any pending or threatened
litigation, other than routine litigation arising in the ordinary course of
business, none of which is expected to have a material adverse effect on our
financial condition or results of operations.
24
8. Supplementary Data (unaudited)
Our results of operations for each of the quarters in the years ended
December 31, 2000 and 1999 are summarized below (in thousands, except per
share data).
Quarters Ended
2000 March 31 June 30 September 30 December 31
- -------------------------------------------------------------------------------------------------------------------------------
Gross revenues $650,091 $750,994 $747,615 $733,475
Cost of transportation and products 551,716 644,596 640,461 626,059
- -------------------------------------------------------------------------------------------------------------------------------
Net revenues 98,375 106,398 107,154 107,416
Income from operations 25,089 31,436 30,150 30,333
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 15,209 $ 18,944 $ 18,460 $ 18,629
===============================================================================================================================
Basic net income per share $ .18 $ .22 $ .22 $ .22
===============================================================================================================================
Diluted net income per share $ .18 $ .22 $ .21 $ .22
===============================================================================================================================
Basic weighted average shares outstanding 84,562 84,582 84,518 84,457
Dilutive effect of outstanding stock awards 912 1,044 1,404 1,387
- -------------------------------------------------------------------------------------------------------------------------------
Diluted weighted average shares outstanding 85,474 85,626 85,922 85,844
===============================================================================================================================
Quarters Ended
1999 March 31 June 30 September 30 December 31
- -------------------------------------------------------------------------------------------------------------------------------
Gross revenues $509,275 $579,423 $593,354 $578,975
Cost of transportation and products 442,256 506,027 518,351 501,110
- -------------------------------------------------------------------------------------------------------------------------------
Net revenues 67,019 73,396 75,003 77,865
Income from operations 16,911 22,060 22,193 22,664
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 10,772 $ 13,982 $ 14,042 $ 14,553
===============================================================================================================================
Basic net income per share $ .13 $ .17 $ .17 $ .18
===============================================================================================================================
Diluted net income per share $ .13 $ .17 $ .17 $ .17
===============================================================================================================================
Basic weighted average shares outstanding 82,372 82,390 82,362 82,702
Dilutive effect of outstanding stock awards 314 566 662 654
- -------------------------------------------------------------------------------------------------------------------------------
Diluted weighted average shares outstanding 82,686 82,956 83,024 83,356
===============================================================================================================================
25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
C.H. Robinson Worldwide, Inc. and Subsidiaries
To C.H. Robinson Worldwide, Inc.:
We have audited the accompanying consolidated balance sheets of C.H. Robinson
Worldwide, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
2000 and 1999, and the related consolidated statements of operations,
stockholders' investment and comprehensive income and cash flows for each of the
three years in the period ended December 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of C.H. Robinson
Worldwide, Inc. and Subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
January 29, 2001
REPORT OF MANAGEMENT
The management of C.H. Robinson Worldwide, Inc., is responsible for the
integrity and objectivity of the consolidated financial statements and other
financial information contained in this annual report. The consolidated
financial statements and related information were prepared in accordance with
accounting principles generally accepted in the United States and include some
amounts that are based on management's best estimates and judgments.
To meet its responsibility, management depends on its accounting systems and
related internal accounting controls. These systems are designed to provide
reasonable assurance, at an appropriate cost, that financial records are
reliable for use in preparing financial statements and that assets are
safe-guarded. Qualified personnel throughout the organization maintain and
monitor these internal accounting controls on an ongoing basis.
The Audit Committee of the Board of Directors, composed entirely of directors
who are not employees of the Company, meets periodically and privately with the
Company's independent public accountants as well as management to review
accounting, auditing, internal control, financial reporting and other matters.
/s/ John P. Wiehoff
John P. Wiehoff
President
/s/ Chad M. Lindbloom
Chad M. Lindbloom
Vice President and Chief Financial Officer
26