SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
C.H. Robinson Worldwide, Inc. and Subsidiaries
(Dollars in thousands, except per share data) 2001 2000 1999 1998 1997 1997
as adjusted/(2)/
(unaudited)
STATEMENT OF OPERATIONS DATA
(For the years ended December 31)
- --------------------------------------------------------------------------------------------------------------------------------
Gross revenues $3,090,072 $2,882,175 $2,261,027 $2,038,139 $1,790,785 $1,790,785
Gross profits/(1)/ 456,572 419,343 293,283 245,666 206,020 206,020
Income from operations 134,274 117,008 83,828 68,443 32,079 56,735
Net income 83,992 71,242 53,349 43,015 11,492 36,148
Net income per share/(3)/
Basic $ 1.00 $ .84 $ .65 $ .52 $ .14 $ .44
Diluted $ .98 $ .83 $ .64 $ .52 $ .14 $ .44
Weighted average number of
shares outstanding/(3)/ (in thousands)
Basic 84,374 84,529 82,456 82,432 82,570 82,570
Diluted 85,774 85,717 83,006 82,618 82,604 82,604
Dividends and distributions per share/(3)/ $ .210 $ .170 $ .145 $ .125 $ 1.265 $ .105
================================================================================================================================
BALANCE SHEET DATA
(as of December 31)
- --------------------------------------------------------------------------------------------------------------------------------
Working capital $ 179,687 $ 113,988 $ 67,158 $ 135,245 $ 109,042 $ 109,042
Total assets 683,490 644,207 522,661 409,116 340,628 340,628
Total long-term debt - - - - - -
Stockholders' investment 355,815 297,016 246,767 169,518 138,981 138,981
================================================================================================================================
OPERATING DATA
(as of December 31)
- --------------------------------------------------------------------------------------------------------------------------------
Branches 139 137 131 120 119 119
Employees 3,770 3,677 3,125 2,205 1,925 1,925
Average gross profits per employee $ 123 $ 122 $ 120 $ 119 $ 115 $ 115
================================================================================================================================
/(1)/ Gross profits are determined by deducting the direct costs of
transportation, products, and handling from gross revenues. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations." Previously, gross profits were referred to as net revenues
in our consolidated financial statements, our company materials, and
reports filed with the Securities and Exchange Commission.
/(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.
5
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 gross profits (gross
revenues less the direct costs of transportation, products, and handling) 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 performance measurement. Accordingly, the
discussion of results of operations below focuses on the changes in our gross
profits. Previously, gross profits were referred to as net revenues in the
Company's consolidated financial statements, our company materials, and reports
filed with the Securities and Exchange Commission.
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 income from operations has 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.
2001 COMPARED TO 2000
REVENUES. Gross revenues for 2001 were $3.09 billion, an increase of 7.2% over
$2.88 billion for 2000. Gross profits for 2001 were $456.6 million, an increase
of 8.9% over $419.3 million for 2000, resulting from an increase in
transportation services gross profits of 9.9% to $390.4 million, an increase in
sourcing gross profits of 3.1% to $45.2 million, and an increase in information
services gross profits of 2.8% to $21.0 million. Our gross profits increased at
a faster rate than our gross revenues due to the mix of business. The gross
profit margin, or gross profits as a percentage of gross revenues, varies by
service line. Information services has the highest gross profit margin, followed
by transportation, and finally sourcing.
Transportation gross profits were 85.5% of our total gross profits for the year.
Our transportation gross profits grew at 9.9%.
Truck gross profits, including less-than-truckload (LTL), grew 10.9% due to
transaction volume increases. Our gross profit per transaction, however, was
flat for the year. Gross profit margin on the truck business increased slightly
for the year, primarily due to the mix of services provided. Our
less-than-truckload business and short-haul business typically has a higher
gross profit margin than our truckload business.
Intermodal gross profits grew 11.8%. Our intermodal gross profit growth was
driven by shippers' focus on cost savings and their increased trust in railroad
service levels.
RESULTS OF OPERATIONS
The following table summarizes our gross profits by service line:
For the years ended December 31,
(Dollars in thousands) 2001 2000 Change 1999 Change
- -------------------------------------------------------------------------------------------------------------------
Gross profits
Transportation $ 390,440 $ 355,141 9.9% $ 233,848 51.9%
Sourcing 45,154 43,793 3.1 42,759 2.4
Information services 20,978 20,409 2.8 16,676 22.4
- -------------------------------------------------------------------------------------------------------------------
Total $ 456,572 $ 419,343 8.9% $ 293,283 43.0%
===================================================================================================================
The following table represents certain statement of operations data shown as
percentages of our gross profits:
For the years ended December 31, 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Gross profits 100.0% 100.0% 100.0%
Selling, general, and administrative expenses:
Personnel expenses 49.3 48.9 46.4
Other selling, general, and administrative expenses 21.3 23.2 25.0
- --------------------------------------------------------------------------------------------------------------------
Total selling, general, and administrative expenses 70.6 72.1 71.4
Income from operations 29.4 27.9 28.6
Investment and other income 0.9 0.2 1.6
- --------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 30.3 28.1 30.2
Provision for income taxes 11.9 11.1 12.0
- --------------------------------------------------------------------------------------------------------------------
Net income 18.4% 17.0% 18.2%
====================================================================================================================
6
Gross profits in air, ocean, and miscellaneous (primarily customs brokerage)
decreased a total of 2.7% for the year. Our business with many of our large
international clients was down due to their decreased volumes in the lanes we
handled for them.
Sourcing gross profits increased 3.1%. We continue to see the trend of reduced
volumes with our traditional business with produce wholesalers, which is offset
by increases in volumes and gross profits with large retailers.
Information services gross profits increased 2.8%. By the end of 2001, T-Chek
Systems-related revenues made up 100% of our information services gross profits.
T-Chek gross profits increased 12.1% for the year. T-Chek's growth has been
negatively impacted by the slowdown in the U.S. truckload market because it
generates fees when its customers buy fuel, and many carriers are having
difficult times financially. Through the first half of 2001, our subsidiary
Payment & Logistics Services, Inc. provided freight payment services to
shippers. We completed a one-year phase-out of this business in June 2001.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Many of our selling, general, and
administrative expenses vary with the amount of business we do, and therefore we
analyze them in relation to gross profits. Personnel expenses accounted for
69.8% of total selling, general, and administrative expenses in 2001, so we
report and analyze them separately.
Personnel expenses were $225.0 million for 2001, an increase of 9.7% over $205.1
million for 2000. Personnel expenses as a percentage of gross profits increased
to 49.3% for 2001 compared to 48.9% for 2000. The bulk of our variable
compensation is bonuses that are based on pre-tax, pre-bonus profit, not gross
profits. This year's bonus expense as a percentage of pre-tax, pre-bonus profit
remained relatively consistent with 2000; however, our pre-tax, pre-bonus profit
increased as a percentage of gross profit, which contributed to the increase of
personnel expenses as a percentage of gross profit.
Other selling, general, and administrative expenses for 2001 were $97.3 million,
an increase of 0.1% over $97.2 million for 2000. As a percentage of gross
profits, other selling, general, and administrative expenses decreased to 21.3%
for 2001 compared to 23.2% for 2000. In 2001, we had notable declines as a
percentage of gross profit in communications costs, travel expenses, and
contractor costs. Our communications costs decreased partially due to usage
levels and partially due to lower rates. The events of September 11 and our
emphasis on expense control contributed to a reduction in travel spending.
Additionally, contractor costs for IT development related to the integration of
systems from acquisitions continued to decline.
INCOME FROM OPERATIONS. Income from operations was $134.3 million for 2001, an
increase of 14.8% over $117.0 million for 2000. Income from operations as a
percentage of gross profits was 29.4% and 27.9% for 2001 and 2000.
INVESTMENT AND OTHER INCOME. Investment and other income was $4.1 million for
2001, an increase of 446.5% from $0.8 million for 2000. This increase partially
was the result of higher cash and investment balances in 2001 compared to 2000.
In addition, we realized $1.9 million from unusual items comprised of $1.5
million from a gain on sale of a corporate aircraft to a related party (see Note
7 to the consolidated financial statements) and approximately $400,000 from
interest income related to settlement of IRS matters.
PROVISION FOR INCOME TAXES. The effective income tax rate was 39.3% for 2001 and
39.5% for 2000. 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 $84.0 million for 2001, an increase of 17.9% over
$71.2 million for 2000. Basic net income per share increased by 19.0% to $1.00
for 2001 compared to $0.84 for 2000. Diluted net income per share increased by
18.1% to $0.98 compared to $0.83 for 2000.
2000 COMPARED TO 1999
REVENUES. Gross revenues for 2000 were $2.88 billion, an increase of 27.5% over
$2.26 billion for 1999. Gross profits for 2000 were $419.3 million, an increase
of 43.0% over $293.3 million for 1999, resulting from an increase in
transportation services gross profits of 51.9% to $355.1 million, an increase in
sourcing gross profits of 2.4% to $43.8 million, and an increase in information
services gross profits of 22.4% to $20.4 million. Our gross profits increased at
a faster rate than our gross revenues due to the mix of business. The gross
profit margin, or gross profits as a percentage of gross revenues, varies by
service line. Information services has the highest gross profit margin, followed
by transportation, and finally sourcing.
The increase in transportation services gross profits of 51.9% resulted from
internal growth of approximately 22%, and growth from acquisitions which added
approximately 30%. Gross profit 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 gross profits increased 2.4%. We continue to see the trend of less
volume with our traditional business with produce wholesalers, which is offset
by increases in volumes and gross profits with large retailers.
Information services gross profits 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 gross profits for the year 2000.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Many of our selling, general, and
administrative expenses vary with the amount of business we do and therefore, we
analyze them in relation to gross profits. Personnel expenses accounted for
67.8% of total selling, general, and administrative expenses in 2000, so we
report and analyze them separately.
7
Personnel expenses were $205.1 million for 2000, an increase of 50.7% over
$136.1 million for 1999. Personnel expenses as a percentage of gross profits
increased to 48.9% for 2000 compared to 46.4% for 1999. This was primarily due
to the acquisition of American Backhaulers, Inc., as well as headcount growth in
our information technology department. The cost structure of American
Backhaulers, Inc. has a higher percentage of personnel to gross profits than the
remainder of our business. As the acquisition has been integrated, this impact
has been decreasing. The growth in our information technology department in 2000
was a result of the integration of acquisitions, as well as additional
investments to improve our existing operating systems.
Other selling, general, and administrative expenses for 2000 were $97.2 million,
an increase of 32.5% over $73.4 million for 1999. As a percentage of gross
profits, other selling, general, and administrative expenses decreased to 23.2%
for 2000 compared to 25.0% for 1999. The majority of this decrease was due to
the acquisition of American Backhaulers, Inc. and our internal gross profits
growth of 20%. The cost structure of American Backhaulers, Inc. has a lower
percentage of other selling, general, and administrative expenses to gross
profits than the remainder of our business due primarily to the fact that it is
centralized in one location. Some of our other selling, general, and
administrative expenses, such as occupancy and travel, grew at a slower rate
than gross profits.
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 gross profits 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.
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 $115.7 million and $79.9 million as of
December 31, 2001 and 2000. Working capital at December 31, 2001 and 2000 was
$179.7 million and $114.0 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, $74.5 million, and $51.9 million of cash flow from
operations in 2001, 2000, and 1999. This was due to net income generated,
adjusted primarily for depreciation and amortization and the net change in
accounts receivable and accounts payable. We completed a one-year phase-out of
our freight payment services subsidiary in June 2001, which had a negative $23.2
million impact on our operating cash flow during 2001. At December 31, 2000,
this business had $25.4 million in payables and $2.2 million in receivables.
We used $13.2 million, $24.1 million, and $88.8 million of cash flow for
investing activities in 2001, 2000, and 1999. In 2001, we had $17.1 million of
capital expenditures. In August 2001, we acquired a new corporate aircraft for
$9.0 million and sold our existing aircraft to our Chairman and CEO D.R.
Verdoorn and another party for $5.0 million. We believe the terms were no less
favorable than what we could have received from an unaffiliated third party, as
measured by comparable sales transactions around the date of the sale. Our gain
on the sale was $1.5 million. At December 31, 2001, we had no ongoing
contractual or other outstanding commitments related to this transaction. In
2000, we had $15.5 million of capital expenditures. The cash used in 1999 was
primarily due to $112.2 million spent for acquisitions and $9.4 million of
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 $25.4 million, $20.1 million, and $12.7 million of cash flow for
financing activities in 2001, 2000, and 1999. This was primarily quarterly cash
dividends and share repurchases for our employee stock plans. We declared a
$0.06 per share dividend payable on April 1, 2002, to shareholders of record as
of March 8, 2002.
We had a $40.0 million line of credit at an interest rate of LIBOR plus 60 basis
points, which we terminated during the third quarter of 2001. In April, 2001, we
borrowed $9.0 million, all of which was repaid the following business day.
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 2001 was
$9.0 million and during 2000 was $14.0 million. We believe we could obtain a
similar line of credit on short notice if needed.
We also have 20 million French francs available under a line of credit at an
interest rate of Euribor plus 45 basis points (3.78% at December 31, 2001). This
discretionary line of credit has no expiration date. As of December 31, 2001,
the outstanding balance was 6.8 million French francs or $923,000, which is
included in income taxes and other accrued expenses. As of December 31, 2000,
the outstanding balance was 13.0 million French francs or $1.8 million. 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, 2001.
8
We have certain facilities, equipment, and automobiles under operating leases.
Lease expense was $17.5 million for 2001, $18.2 million for 2000, and $16.1
million for 1999. Minimum future lease commitments under noncancelable lease
agreements in excess of one year as of December 31, 2001 were as follows: $11.5
million in 2002, $8.2 million in 2003, $5.9 million in 2004, $3.0 million in
2005, $1.1 million in 2006, and $746,000 thereafter.
Assuming no change in our current business plan, management believes that our
available cash, together with expected future cash generated from operations and
the amount available under our line of credit, will be sufficient to satisfy our
anticipated needs for working capital, capital expenditures, and cash dividends
for all future periods.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements include accounts of the company and all
majority-owned subsidiaries. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions in certain circumstances
that affect amounts reported in the accompanying consolidated financial
statements and related footnotes. In preparing our financial statements,
management has made its best estimates and judgments of certain amounts included
in the financial statements, giving due consideration to materiality. We do not
believe there is a great likelihood that materially different amounts would be
reported related to the accounting policies described below. However,
application of these accounting policies involves the exercise of judgment and
use of assumptions as to future uncertainties and, as a result, actual results
could differ from these estimates. Note 1 of the notes to the consolidated
financial statements includes a summary of the significant accounting policies
and methods used in the preparation of our consolidated financial statements.
The following is a brief discussion of the more significant accounting policies
and methods we use.
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 services are rendered and goods
are delivered. Upon delivery, our obligations are completed and collection of
receivables is reasonably assured.
The Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No.
101, "Revenue Recognition" provides guidance on the application of generally
accepted accounting principles to selected revenue recognition issues. The
Company has concluded that its revenue recognition policy is appropriate and in
accordance with generally accepted accounting principles and SAB No. 101.
ALLOWANCE FOR DOUBTFUL ACCOUNTS. Accounts receivable are reduced by an allowance
for amounts that may become uncollectible in the future. We continuously monitor
payments from our customers and maintain a provision for uncollectible accounts
based upon our historical experience and any specific customer collection issues
that we have identified.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets," effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill (and intangible
assets deemed to have indefinite lives) will no longer be amortized but will be
subject to annual impairment tests in accordance with SFAS No. 142. Other
intangible assets will continue to be amortized over their useful lives.
We will apply the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of 2002. As of December 31, 2001, we had
unamortized goodwill and other intangible assets of $143.6 million that will be
subject to the provisions of SFAS No. 142. We are in the process of completing
an impairment test to determine the impact of adopting SFAS No. 142 on our
earnings and financial position, and believe that the results of the initial
impairment test of goodwill will not result in any transitional impairment
losses as a cumulative effect of a change in accounting principle. We had $5.3
million of amortization expense in 2001 that will no longer be recognized with
the application of the non-amortization provisions of SFAS No. 142. Application
of these provisions is expected to result in an increase in pre-tax income of
approximately $5.3 million in 2002.
MARKET RISK
We had $115.7 million of cash and investments on December 31, 2001, 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. Those forward-looking statements, including our current assumptions
about future operations, 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.
9
CONSOLIDATED BALANCE SHEETS
C.H.Robinson Worldwide,Inc. and Subsidiaries
(In thousands, except per share data)
As of December 31, 2001 2000
ASSETS
- ----------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 115,741 $ 79,912
Receivables, net of allowance for doubtful accounts of $23,011 and $22,712 370,378 354,953
Deferred tax asset 12,164 21,219
Prepaid expenses and other 2,272 2,296
Inventories 2,660 1,859
- ----------------------------------------------------------------------------------------------------------
Total current assets 503,215 460,239
Property and equipment 66,387 58,827
Accumulated depreciation and amortization (35,467) (29,425)
- ----------------------------------------------------------------------------------------------------------
Net property and equipment 30,920 29,402
Goodwill, net of accumulated amortization of $10,703 and $7,701 140,751 145,604
Other intangible assets, net of accumulated amortization of $7,818 and $ 5,084 7,395 8,570
Other assets 1,209 392
- ----------------------------------------------------------------------------------------------------------
Total assets $ 683,490 $ 644,20
==========================================================================================================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 267,708 $ 285,932
Accrued expenses -
Compensation and profit-sharing contribution 32,098 33,456
Income taxes and other 23,722 26,863
- ----------------------------------------------------------------------------------------------------------
Total current liabilities 323,528 346,251
Deferred tax liability 3,241 940
Non-qualified deferred compensation obligation 906 -
- ----------------------------------------------------------------------------------------------------------
Total liabilities 327,675 347,191
- ----------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 4 and 8)
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 85,008 shares issued, 84,457 and 84,621 outstanding 8,446 8,462
Additional paid-in-capital 99,551 101,571
Retained earnings 270,711 204,463
Deferred compensation (6,247) (6,980)
Cumulative other comprehensive loss (1,592) (1,049)
Treasury stock at cost (551 and 387 shares) (15,054) (9,451)
- ----------------------------------------------------------------------------------------------------------
Total stockholders' investment 355,815 297,016
- ----------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' investment $ 683,490 $ 644,207
==========================================================================================================
The accompanying notes are an integral part of these consolidated balance
sheets.
10
CONSOLIDATED STATEMENTS OF OPERATIONS
C.H. Robinson Worldwide, Inc. and Subsidiaries
(In thousands, except per share data)
For the years ended December 31, 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------
Gross revenues $3,090,072 $2,882,175 $2,261,027
Cost of transportation and products 2,633,500 2,462,832 1,967,744
- ------------------------------------------------------------------------------------------------------------------
Gross profits 456,572 419,343 293,283
Selling, general, and administrative expenses:
Personnel expenses 224,997 205,111 136,091
Other selling, general, and administrative expenses 97,301 97,224 73,364
- ------------------------------------------------------------------------------------------------------------------
Total selling, general, and administrative expenses 322,298 302,335 209,455
- ------------------------------------------------------------------------------------------------------------------
Income from operations 134,274 117,008 83,828
Investment and other income 4,099 750 4,649
- ------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 138,373 117,758 88,477
Provision for income taxes 54,381 46,516 35,128
- ------------------------------------------------------------------------------------------------------------------
Net income $ 83,992 $ 71,242 $ 53,349
==================================================================================================================
Basic net income per share $ 1.00 $ .84 $ .65
Diluted net income per share $ .98 $ .83 $ .64
Basic weighted average shares outstanding 84,374 84,529 82,456
Dilutive effect of outstanding stock awards 1,400 1,188 550
- ------------------------------------------------------------------------------------------------------------------
Diluted weighted average shares outstanding 85,774 85,717 83,006
==================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
11
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, 2001, 2000, and 1999
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, 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 and employee stock 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 6) 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 and employee stock 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
Net income - - - 83,992 - - - 83,992
Other comprehensive income:
Foreign currency translation adjustment - - - - - (543) - (543)
---------
Comprehensive income - - - - - - - 83,449
=========
Cash dividends, $.210 per share - - - (17,744) - - - (17,744)
Stock issued for employee benefit plans 310 31 (2,887) - - - 8,059 5,203
Reduction of deferred compensation
(Note 6) - - - - 733 - - 733
Tax benefit on deferred
compensation and employee stock plans - - 867 - - - - 867
Repurchase of common stock (474) (47) - - - - (13,662) (13,709)
==================================================================================================================================
Balance, December 31, 2001 84,457 $ 8,446 $ 99,551 $ 270,711 $ (6,247) $(1,592) $(15,054) $ 355,815
==================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
12
CONSOLIDATED STATEMENTS OF CASH FLOWS
C.H. Robinson Worldwide, Inc. and Subsidiaries
(In thousands)
For the years ended December 31, 2001 2000 1999
OPERATING ACTIVITIES
- --------------------------------------------------------------------------------------------------------------------
Net income $ 83,992 $ 71,242 $ 53,349
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 19,136 17,318 10,133
Deferred compensation expense 733 20 -
Deferred income taxes 11,356 (513) (4,822)
(Gain) loss on sale of assets (997) 298 (178)
Changes in operating elements, net of effects of acquisitions -
Receivables (15,425) (82,196) (35,196)
Prepaid expenses and other 24 570 3,907
Inventories (801) (74) 1,703
Accounts payable (19,067) 52,875 25,748
Accrued compensation and profit-sharing contribution (1,358) 5,286 339
Accrued income taxes and other (3,141) 9,664 (3,105)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 74,452 74,490 51,878
====================================================================================================================
INVESTING ACTIVITIES
- --------------------------------------------------------------------------------------------------------------------
Purchases of property and equipment (17,101) (15,491) (9,433)
Sales of property and equipment 5,000 360 430
Cash paid for acquisitions, net of cash acquired - (5,898) (112,216)
Sales of long-term investments - - 1,300
Sales/maturities of available-for-sale securities - - 44,172
Purchases of available-for-sale securities - - (13,643)
Change in other assets/liabilities, net (1,116) (3,063) 553
- --------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (13,217) (24,092) (88,837)
====================================================================================================================
FINANCING ACTIVITIES
- --------------------------------------------------------------------------------------------------------------------
Stock issued for employee benefit plans 5,203 3,250 1,529
Repurchase of common stock (13,709) (9,935) (2,745)
Cash dividends and distributions (16,900) (13,438) (11,529)
- --------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (25,406) (20,123) (12,745)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 35,829 30,275 (49,704)
Cash and cash equivalents, beginning of year 79,912 49,637 99,341
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 115,741 $ 79,912 $ 49,637
====================================================================================================================
Cash paid for income taxes $ 45,653 $ 39,096 $ 42,348
- --------------------------------------------------------------------------------------------------------------------
Cash paid for interest $ 160 $ 151 $ -
====================================================================================================================
Supplemental disclosure of noncash activities:
Stock issued in acquisition (Note 2) $ - $ - $ 36,925
Restricted stock awarded (Note 6) $ - $ 7,000 $ -
Accrued and unpaid dividends $ 5,064 $ 4,220 $ 3,293
====================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
13
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 139
branch offices in 40 states throughout North America, 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
accounting principles generally accepted in the United States 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. Gross profits are gross revenues
less the direct costs of transportation, products, and handling costs. We act
principally as the service provider for these transactions and recognize
revenue as these services are rendered and goods are delivered. At that time,
our obligations to the transactions are completed and collection of
receivables is reasonably assured. Our gross profits are considered by
management to be our primary performance measurement. Previously, gross
profits were referred to as net revenues in our consolidated financial
statements, our company materials, and reports filed with the Securities and
Exchange Commission.
ALLOWANCE FOR DOUBTFUL ACCOUNTS - Accounts receivable are reduced by an
allowance for amounts that may become uncollectible in the future. We
continuously monitor payments from our customers and maintain a provision for
uncollectible accounts based upon our historical experience and any specific
customer collection issues that we have identified.
IMPAIRMENT OF LONG-LIVED ASSETS - We periodically evaluate whether events and
circumstances have occurred that indicate the remaining balance of long-lived
assets may not be recoverable. This assessment includes performing an
undiscounted cash flow analysis to measure for potential asset impairment of
each long-lived asset. We evaluate the fair value and record any impairment
when appropriate.
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 the third party logistics industry. We provide a wide range of
products and services to our customers and carriers including transportation
services, product sourcing, freight consolidation, contract warehousing, and
information services. Each of these is a significant component to optimizing
the logistics solution for our customers.
These services are performed throughout our branch offices by the same people,
as an integrated offering for which our customers are provided a single
invoice. As a result, discrete selling, general, and administrative expenses
associated with the gross profits of each service line are not available.
Accordingly, our chief operating decision makers analyze our business as a
single segment relying on gross profits and operating income for each of our
branch offices as the primary performance measures.
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):
2001 2000 1999
----------------------------------------------------------------------
Gross revenues
United States $2,960,241 $2,754,292 $2,144,386
Other locations 129,831 127,883 116,641
----------------------------------------------------------------------
$3,090,072 $2,882,175 $2,261,027
======================================================================
2001 2000
----------------------------------------------------------------------
Long-lived assets
United States $ 38,136 $ 37,204
Other locations 1,388 1,160
----------------------------------------------------------------------
$ 39,524 $ 38,364
======================================================================
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.
14
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 methods over the estimated lives of
the assets of three to 15 years. Amortization of leasehold improvements is
computed over the shorter of the lease term or the estimated useful lives of the
improvements. We recognized depreciation expense of $11,578,000 in 2001,
$9,864,000 in 2000, and $7,140,000 in 1999.
INTANGIBLE ASSETS - Goodwill represents the excess of the cost over the fair
value of net assets of acquired businesses, while other intangible assets
consist primarily of purchased and internally developed software and other
assets purchased through acquisitions. Goodwill is being amortized using the
straight-line method over its estimated economic lives ranging from five to 40
years. Intangible assets are being amortized using the straight-line method over
their estimated useful lives, ranging from three to five years. We recognized
amortization expense of $7,558,000 in 2001, $7,454,000 in 2000, and $2,993,000
in 1999.
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. At December 31, 2001, 23,000 stock
options were not included as common stock equivalents because the exercise
prices exceeded the average market value.
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 June 2001, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards (SFAS) No. 141, "Business Combinations", and
SFAS No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill (and intangible
assets deemed to have indefinite lives) will no longer be amortized but will be
subject to annual impairment tests in accordance with SFAS No. 142. Other
intangible assets will continue to be amortized over their useful lives.
We will apply the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of 2002. As of December 31, 2001, we had
unamortized goodwill and other intangible assets of $143.6 million that will be
subject to the provisions of SFAS No. 142. We are in the process of completing
an impairment test to determine the impact of adopting SFAS No. 142 on our
earnings and financial position, and believe that the results of the initial
impairment test of goodwill will not result in any transitional impairment
losses as a cumulative effect of a change in accounting principle. We had $5.3
million of amortization expense in 2001 that will no longer be recognized with
the application of the non-amortization provisions of SFAS No. 142. Application
of these provisions is expected to result in an increase in pre-tax income of
approximately $5.3 million in 2002.
In 2001, the FASB also issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which requires legal obligations associated with the retirement of
long-lived assets to be recorded as increases in costs of the related assets. In
2001, the FASB also issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement retains the previous cash flow
test for impairment and broadens the presentation of discontinued operations.
Except for the discontinuance of the amortization goodwill and certain
intangible assets, we do not expect the adoption of these statements to have a
material effect on our financial position or net income.
15
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, 2001. Pro
forma operating results of the combined enterprise assuming this transaction
had occurred on January 1, 1999, are as follows for the year ended December
31, 1999 (unaudited, in thousands, except per share data):
----------------------------------------------------------------------------
Pro forma gross profits $ 345,706
Pro forma income before income taxes $ 91,264
Pro forma net income $ 55,032
Pro forma basic net income per share $ .65
Pro forma diluted net income per share $ .64
============================================================================
3. MARKETABLE SECURITIES
In December 1999, we liquidated our portfolio of marketable securities to
help 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 year ended December
31, 1999.
4. LINES OF CREDIT
We had a $40.0 million line of credit at an interest rate of LIBOR plus 60
basis points, which we terminated during the third quarter of 2001. In April
2001, we borrowed $9.0 million, all of which was repaid the following
business day. 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 was $9.0 million during 2001 and $14.0 million during
2000. We believe we could obtain a similar line of credit on short notice if
needed.
We also have 20 million French francs available under a line of credit at an
interest rate of Euribor plus 45 basis points (3.78% at December 31, 2001).
This discretionary line of credit has no expiration date. As of December 31,
2001, the outstanding balance was 6.8 million French francs or $923,000,
which is included in income taxes and other accrued expenses. As of December
31, 2000, the outstanding balance was 13.0 million French francs or $1.8
million. 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, 2001.
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):
2001 2000 1999
----------------------------------------------------------------------------
Tax provision:
Federal $ 35,029 $ 38,744 $ 33,207
State 6,471 7,114 5,649
Foreign 1,525 1,171 1,094
----------------------------------------------------------------------------
43,025 47,029 39,950
Deferred provision (benefit) 11,356 (513) (4,822)
Total provision $ 54,381 $ 46,516 $ 35,128
============================================================================
A reconciliation of the provision for income taxes using the statutory
federal income tax rate to our effective income tax rate for the years ended
December 31 is as follows:
2001 2000 1999
----------------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes,
net of federal benefit 3.7 3.1 2.7
Foreign and other 0.6 1.4 2.0
----------------------------------------------------------------------------
39.3% 39.5% 39.7%
============================================================================
Deferred tax assets (liabilities) are comprised of the following at December
31 (in thousands):
2001 2000
----------------------------------------------------------------------------
Deferred tax assets:
Receivables $ 8,119 $ 6,929
Accrued expenses 2,328 7,291
Accrued compensation 2,594 3,995
Other 67 4,264
Deferred tax liabilities:
Long-lived assets (1,718) (1,577)
Amortization (2,467) (623)
----------------------------------------------------------------------------
Net deferred taxes $ 8,923 $ 20,279
============================================================================
16
6. CAPITAL STOCK AND STOCK AWARD PLANS
PREFERRED STOCK - Our Certificate of Incorporation authorizes the issuance of
20,000,000 shares of Preferred Stock, par value $.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.
COMMON STOCK - Our Certificate of Incorporation authorizes 130,000,000 shares
of Common Stock, par value $.10 per share. Subject to the rights of Preferred
Stock which may from time to time be 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 their share of 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 shareholders, 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.
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.
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 474,000,
364,600, and 170,000 shares of our common stock for the treasury at an
aggregate cost of $13,709,000, $9,935,000, and $2,745,000 in 2001, 2000, and
1999 under the initial stock repurchase plan. No shares have been repurchased
under the 1999 stock repurchase plan. We reissued shares totaling 310,000,
181,000, and 116,000 in 2001, 2000, and 1999 for employee benefit plans.
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 9,000,000 shares can
be granted under this plan; 5,146,033 shares were available for stock awards
as of December 31, 2001. 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, 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
- ----------------------------------------------------------
Granted 819,000 28.08
Exercised (160,395) 9.87
Terminated (52,396) 19.47
- ----------------------------------------------------------
Outstanding at
December 31, 2001 3,436,477 $18.03
==========================================================
Exercisable at
December 31, 1999 225,698 $ 9.00
Exercisable at
December 31, 2000 396,993 $ 9.00
Exercisable at
December 31, 2001 757,620 $11.97
==========================================================
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."
17
Accordingly, we have not recognized any compensation expense for our stock
options. Had compensation expense for our stock-based compensation 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):
2001 2000
-----------------------------------------------------------------------------
Net income As reported $ 83,992 $ 71,242
Adjusted $ 81,002 $ 69,448
-----------------------------------------------------------------------------
Basic income per share As reported $ 1.00 $ .84
Adjusted $ .96 $ .82
Diluted income per share As reported 98 $ .83
Adjusted $ .94 $ .81
=============================================================================
The adjusted effects to net income presented reflect compensation costs for
all outstanding options, which were granted during 1997, 1999, 2000, and
2001. 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:
2001 Grants 2000 Grant 1999 Grant
-----------------------------------------------------------------------------
Risk-free interest rate 4.8-5.1% 6.8% 5.1%
Expected dividend yield 1.0% 1.0% 1.0%
Expected volatility factor 39.8%-42.4% 30.2% 30.0%
Expected option term 7 years 7 years 7 years
-----------------------------------------------------------------------------
Fair value per option $13.31-$14.01 $7.94 $4.66
=============================================================================
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. Expense related to the restricted
shares was $733,000 and $20,000 in 2001 and 2000.
7. RELATED PARTY TRANSACTIONS
In August 2001, we acquired a new corporate aircraft and sold our existing
aircraft to our Chairman and CEO D.R. Verdoorn and another party for $5.0
million. We believe the terms were no less favorable than what we could have
received from an unaffiliated third party, as measured by comparable sales
transactions around the date of the sale. Our gain on the sale was $1.5
million. At December 31, 2001, we had no ongoing contractual or other
outstanding commitments related to this transaction.
8. 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 2001, a 4% match in 2000, and a 3% match in 1999. Profit-sharing
plan expense, including matching contributions, was approximately $8,530,000
in 2001, $8,838,000 in 2000, and $5,928,000 in 1999.
NON-QUALIFIED DEFERRED COMPENSATION PLAN - The Robinson Companies
Nonqualified Deferred Compensation Plan provides management and certain
employees the opportunity to defer a specified percentage or dollar amount of
their cash and stock compensation. Participants may elect to defer up to 100%
of their cash and gains on stock option exercises. The accumulated benefit
obligation of $906,000 as of December 31, 2001 is included in long-term
liabilities. We have purchased investments to fund the future liability. The
investments had an aggregate market value of $906,000 as of December 31, 2001
and are included in other assets in the accompanying consolidated balance
sheets.
LEASE COMMITMENTS - We lease certain facilities, equipment, and automobiles
under operating leases. Lease expense was $17,468,000 for 2001, $18,191,000
for 2000, and $16,072,000 for 1999.
Minimum future lease commitments under noncancelable lease agreements in
excess of one year as of December 31, 2001, are as follows (in thousands):
-----------------------------------------------------------------------------
2002 $ 11,478
2003 8,174
2004 5,934
2005 3,023
2006 1,060
Thereafter 746
-----------------------------------------------------------------------------
$ 30,415
=============================================================================
LITIGATION - Currently we are 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.
18
9. SUPPLEMENTARY DATA (UNAUDITED)
Our results of operations for each of the quarters in the years ended December
31, 2001 and 2000 are summarized below (in thousands, except per share data).
Quarters Ended
2001 March 31 June 30 September 30 December 31
- -----------------------------------------------------------------------------------------------------
Gross revenues $ 732,484 $ 796,694 $ 784,517 $ 776,377
Cost of transportation and products 619,175 678,691 671,325 664,309
- -----------------------------------------------------------------------------------------------------
Gross profits 113,309 118,003 113,192 112,068
Income from operations 29,374 36,557 34,770 33,573
- -----------------------------------------------------------------------------------------------------
Net income $ 18,134 $ 22,642 $ 22,628 $ 20,588
=====================================================================================================
Basic net income per share $ .21 $ .27 $ .27 $ .24
=====================================================================================================
Diluted net income per share $ .21 $ .26 $ .26 $ .24
=====================================================================================================
Basic weighted average shares outstanding 84,372 84,353 84,294 84,478
Dilutive effect of outstanding stock awards 1,383 1,529 1,400 1,289
- -----------------------------------------------------------------------------------------------------
Diluted weighted average shares outstanding 85,755 85,882 85,694 85,767
=====================================================================================================
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
- -----------------------------------------------------------------------------------------------------
Gross profits 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
=====================================================================================================
19
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) as of December 31, 2001 and 2000, 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, 2001. 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. as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
/s/ Arthur Andersen LLP
Minneapolis, Minnesota
February 4, 2002
REPORT OF MANAGEMENT
C.H. Robinson Worldwide, Inc. and Subsidiaries
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 Wiehoff /s/ Chad Lindbloom
John P. Wiehoff Chad M. Lindbloom
President Vice President and Chief Financial Officer
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