C.H. Robinson Reports 2019 Q1 Results

Total revenues decreased 4.4 percent to $3.8 billion. Net revenues increased 8.4 percent to $678.8 million

 “During the first quarter, we achieved high single-digit net revenue growth and double-digit growth in both operating income and earnings per share. Operating margin improved 250 basis points in the quarter. Our North American Surface Transportation business generated double-digit net revenue growth in the quarter, and we delivered significant operating margin expansion in both our NAST and Global Forwarding businesses,” said John Wiehoff, Chairman and Chief Executive Officer of C.H. Robinson. “We continued to make improvements in working capital, which combined with increased earnings, allowed us to generate over $250 million in cash flow from operations and increase cash returns to our shareholders. These strong first quarter results reflect the strength and hard work of our global network.”

First Quarter Results Summary

• Total revenues decreased 4.4 percent to $3.8 billion, driven by lower pricing across most transportation service lines.
• Net revenues increased 8.4 percent to $678.8 million, primarily driven by margin improvement in truckload services.
• Operating expenses increased 4.6 percent to $454.3 million. Personnel expenses increased 3.6 percent to $340.1 million, driven primarily by a 1.9 percent increase in average headcount, partially offset by declines in performance-based equity compensation. Selling, general and administrative (“SG&A”) expenses increased 7.6 percent to $114.2 million, due primarily to increases in purchased services, particularly commercial off-the-shelf software, in addition to claims and occupancy, partially offset by a reduction in bad debt expense.
• Income from operations totaled $224.6 million, up 17.2 percent from last year due to growth in North American Surface Transportation (“NAST”) and Global Forwarding, partially offset by a decline in All Other and Corporate.Operating margin of 33.1 percent increased 250 basis points.
• Interest and other expenses totaled $17.1 million, which primarily consists of interest expense. The first quarter also included a $5.0 million unfavorable impact from currency revaluation.
• The effective tax rate in the quarter was 22.0 percent compared to 21.3 percent last year.
• Net income totaled $161.8 million, up 13.7 percent from a year ago. Diluted EPS of $1.16 increased 14.9 percent.

North American Surface Transportation Results

First quarter total revenues for C.H. Robinson’s NAST segment totaled $2.8 billion, a decrease of 3.8 percent over the prior year, primarily driven by decreased pricing. NAST net revenues increased 11.0 percent in the quarter to $486.6 million. Net revenues in truckload increased 14.7 percent, less than truckload (“LTL”) net revenues increased 3.6 percent, and intermodal net revenues decreased 3.9 percent versus the year ago period. Excluding the impact of the change in fuel prices, average North America truckload rate per mile charged to customers decreased approximately 5.5 percent in the quarter, while truckload transportation cost per mile decreased approximately 8.5 percent. Truckload volumes increased 0.5 percent in the quarter. LTL volumes grew 1.0 percent, and intermodal volumes declined 33 percent versus the prior year. Operating expenses increased 6.4 percent, primarily due to increased cash compensation. Income from operations increased 17.6 percent to $211.3 million, and operating margin expanded 240 basis points to 43.4 percent. NAST average headcount was up 1.7 percent in the quarter. As a reminder, first quarter NAST results include Robinson Fresh transportation, which was previously reported under the Robinson Fresh segment.

First quarter total revenues for the Global Forwarding segment decreased 2.9 percent to $537.6 million, primarily driven by lower pricing in ocean and air. Net revenues increased 3.4 percent in the quarter to $127.2 million. Ocean net revenues increased 4.0 percent driven by margin expansion. Ocean volumes were approximately flat in the quarter. Net revenues in air increased 0.4 percent, as margin expansion was largely offset by a decline in shipments. Customs net revenues increased 5.9 percent, primarily driven by volume growth. Operating expenses decreased 1.6 percent, primarily driven by a 1.3 percent decrease in average headcount. Income from operations increased 72.8 percent to $14.2 million, and operating margin expanded 450 basis points to 11.2 percent in the quarter.

First quarter Robinson Fresh net revenues decreased 5.2 percent to $28.7 million, as weather-related crop reductions drove case volume declines. Managed Services net revenues increased 10.9 percent to $20.3 million, driven by a combination of selling additional service lines to existing customers and new customer wins. Other Surface Transportation net revenues increased 0.7 percent to $16.0 million, primarily driven by mid-single-digit volume growth in Europe truckload.

Other Income Statement Items
The first quarter effective tax rate was 22.0 percent, up from 21.3 percent last year. We continue to expect our full-year effective tax rate to be between 24 and 25 percent in 2019.

Interest and other expenses totaled $17.1 million, which primarily consists of interest expense. The first quarter also included a $5.0 million unfavorable impact from currency revaluation.

Diluted weighted average shares outstanding in the quarter were down 1.6 percent, as share repurchases were partially offset by activity in our equity compensation plans.

Cash Flow Generation and Capital Distribution
First quarter cash from operations totaled $256.9 million, up 28.1 percent versus the prior year, primarily due to improved working capital performance and increased earnings versus the year-ago period.

In the first quarter, $146.4 million was returned to shareholders, with $69.7 million in cash dividends and $76.7 million in share repurchases. This represents an increase of 8.7 percent over the prior year.

Capital expenditures totaled $13.9 million in the quarter. We continue to expect 2019 capital expenditures to be between $80 and $90 million, with the majority dedicated to technology.

Outlook
“We expect to continue to expand market share in 2019 and beyond, and we will continue to automate core processes and reduce our cost to sell and cost to serve, while also providing excellent service to our customers and carriers,” Bob Biesterfeld, Chief Operating Officer, stated. “We are firmly dedicated to operating margin expansion and believe our continued investments in technology will help enable us to achieve this objective. We are also committed to strong cash returns to shareholders and expect to deliver annual double-digit growth in earnings per share over the l

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