Exhibit 99
CAUTIONARY STATEMENT
Forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "PSLRA") are included in our Form 10-K. The
words or phrases "believes," "may," "will," "expects," "should," "continue,"
"anticipates," "intends," "will likely result," "estimates," "projects" or
similar expressions identify forward-looking statements in our Form 10-K and in
our future filings with the Securities and Exchange Commission, in our press
releases, in our presentations to securities analysts or investors, and in oral
statements made by or approved by an executive officer of Robinson.
Forward-looking statements involve risks and uncertainties that may materially
and adversely affect our business, results of operation, financial condition or
prospects, and may cause our actual results to differ materially from historical
results or the results discussed in the forward-looking statements.
You should consider carefully the following cautionary statements if you
own our common stock or are planning to buy our common stock. We intend to take
advantage of the "safe harbor" provisions of the PSLRA by providing this
discussion. We are not undertaking to address or update each factor in future
filings or communications regarding our business or results except to the extent
required by law.
Demand for our services may decrease during an economic recession.
The transportation industry historically has experienced cyclical financial
results as a result of economic recession, the business cycles of customers,
price hikes by carriers, interest rate fluctuations, and other economic factors
beyond our control. Carriers can be expected to charge higher prices to cover
higher operating expenses, and our net revenues and income from operations may
decrease if we are unable to pass through to our customers the full amount of
higher transportation costs. If economic recession or a downturn in our
customers' business cycles causes a reduction in the volume of freight shipped
by those customers, particularly among certain national retailers or in the
food, beverage or printing industries, our operating results could also be
adversely affected.
We depend upon available equipment and services.
We do not own trucks or other transportation equipment, and we depend in
part on independent third parties to provide truck, rail, ocean and air
services. Equipment shortages in the transportation industry have occasionally
occurred, particularly among truckload carriers. If we are unable to secure
sufficient equipment or other transportation services to meet our customers'
needs, our operating results could be materially and adversely affected, and our
customers could switch to our competitors temporarily or permanently.
Our international business raises additional difficulties.
We provide services within and between continents on an increasing basis.
Our business outside of the United States is subject to various risks,
including:
o changing local economic and market conditions,
o political and economic instability,
o fluctuations in currency exchange rates,
o armed conflicts, and
o unexpected changes in United States and foreign laws relating to
tariffs, trade restrictions, transportation regulations, foreign
investments and taxation.
As we expand our business in foreign countries we will expose the Company
to increased risk of loss from foreign currency fluctuations and exchange
controls as well as longer accounts receivable payment cycles. We have no
control over these risks, and if we do not correctly anticipate changes in
international economic and political conditions, we may not alter our business
practices in time to avoid adverse effects.
Our management and internal systems may be inadequate to handle continued
growth of our business.
Our continued success depends upon our ability to attract and retain a
large group of motivated salespersons and other logistics professionals. If we
cannot recruit and retain a sufficient number of personnel, we may be forced to
limit our growth. We cannot assure you that we will be able to continue to hire
and retain a sufficient number of qualified personnel. Our rapid expansion of
operations has placed added demands on our management and operating systems.
Continued expansion depends in large part on our ability to develop successful
salespersons into managers and to implement enhancements to our information
systems that are adaptable to the changes in our business and the requirements
of our customers.
We face substantial industry competition.
Competition in the transportation services industry is intense and broad
based. We compete against other non-asset based logistics companies as well as
logistics companies that own their own equipment, third-party freight brokers
and carriers offering logistics services. We also compete against carriers'
internal sales forces and shippers' transportation departments. We often buy and
sell transportation services from and to many of our competitors. Historically,
competition has created downward pressure on freight rates, and continued rate
pressure may adversely affect our net revenues and income from operations.
Our earnings may be affected by seasonal changes in the transportation
industry.
Results of operations for our industry generally show a seasonal pattern as
customers reduce shipments during and after the winter holiday season. In recent
years, our operating income and earnings have been higher in the second and
third quarters than in the first and fourth quarters. Although seasonal changes
in the transportation industry have not had a significant impact on our cash
flow or results of operations, we expect this trend to continue and we cannot
assure you that it will not adversely impact us in the future.
Our sourcing business is dependent upon the supply and price of fresh produce.
The supply and price of fresh produce is affected by government food
safety regulation, growing conditions (such as drought, insects and disease),
and other conditions over which we have no control. Shortages or overproduction
of fresh produce affect commodity prices, which are often highly volatile.
Sourcing and reselling fresh produce exposes us to possible product liability.
Agricultural chemicals used on fresh produce are subject to various
approvals, and the commodities themselves are subject to regulations on
cleanliness and contamination. Product recalls in the produce industry have been
caused by concern about particular chemicals and alleged contamination, often
leading to lawsuits brought by consumers of allegedly affected produce. Because
we sell produce, we may have legal responsibility arising from the sale. While
we are insured for up to $75 million for product liability claims, settlement of
class action claims is often costly, and we cannot assure you that our liability
coverage will be adequate and will continue to be available. If we have to
recall produce, we may be required to bear the cost of repurchasing,
transporting and destroying any allegedly contaminated product, which our
insurance does not cover. Any recall or allegation of contamination could affect
our reputation, particularly of our produce brand: The Fresh 1(R). Loss due to
spoilage (including the need for disposal) is also a routine part of the
sourcing business.
Our business depends upon compliance with numerous government regulations.
We are licensed by the Department of Transportation as a broker authorized
to arrange for the transportation of general commodities by motor vehicle. We
must comply with certain insurance and surety bond requirements to act in this
capacity. We are also licensed by the Federal Maritime Commission as an ocean
freight forwarder, which requires us to maintain a non-vessel operating common
carrier bond. We are also licensed by the United States Customs Service of the
Department of the Treasury. We source fresh produce under a license issued by
the Department of Agriculture. Our failure to comply with the laws and
regulations applicable to entities holding these licenses could materially and
adversely affect our results of operations or financial condition. Legislative
or regulatory changes can affect the economics of the transportation industry by
requiring changes in operating practices or influencing the demand for, and the
cost of providing, transportation services.
We increasingly derive a significant portion of our gross revenues from our
largest clients.
The sudden loss of a number of our major clients could materially and
adversely affect our operating results.
Our change to public company status may have a detrimental effect on our
corporate culture.
Prior to our initial public offering, more than 700 employees owned
substantially all of our outstanding common stock. Consequently, our employees
considered themselves the owners of C.H. Robinson. As a result of our
establishing a public market for the trading of shares of our common stock, a
larger portion of common stock may rest in the hands of the general public, and
our employee stockholders will have significant liquid assets. This change in
structure and liquidity may adversely affect employee motivation. We had also
issued restricted stock as an incentive, and employees owning common stock
before going public profited from the growth in the book value of the common
stock. We have replaced our previous stock program with new stock-based
programs, but we cannot predict whether the new plans will be perceived as being
a less valuable form of compensation. If we find that we must initiate new
incentive programs to improve employee performance in the future, our results of
operations could be adversely affected.
Our systems and services may be subject to Year 2000 problems.
We have completed an assessment of our compliance with Year 2000 issues and
will modify or replace portions of our hardware and software so that our
computer systems will function properly with respect to dates after December 31,
1999. Although we believe we have internally addressed our risks and have not
discovered any material exposure with any customer, transportation carrier or
produce supplier, we cannot assure you that we will meet our objectives by
December 31, 1999 or that unforeseen circumstances will not arise. We could
experience business interruption in the event our systems would be unable to
process information or would process information incorrectly. Additionally, we
could suffer loss of business if a number of our customers and suppliers, taken
together, would have similar problems. It is impossible to fully assess the
potential consequences in the event there are disruptions in such infrastructure
areas as utilities, communications, transportation, banking and government. Any
such business interruption could have a material and adverse effect on our
results of operations, liquidity, and financial condition depending on the
severity and duration of the interruption. We are developing contingency plans
in the event we are unable to complete remediation efforts or unidentified
problems develop. We expect to have these plans in place by June 30, 1999.