filings.toolsC. H. Robinson Worldwide 10-Q 2024-09-30
Filed 2024-11-01. 8 sections, 184K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2024
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
Commission File Number: 000-23189
C.H. ROBINSON WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 41-1883630 | |||||||||||||||||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
14701 Charlson Road
Eden Prairie, MN 55347
(Address of principal executive offices, including zip code)
952-937-8500
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock, $0.10 par value | CHRW | Nasdaq Global Select Market |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | Emerging growth company | ☐ | ||||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 30, 2024, the number of shares outstanding of the registrant’s Common Stock, par value $0.10 per share, was 118,205,199.
C.H. ROBINSON WORLDWIDE, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except per share data)
| September 30, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 131,704 | $ | 145,524 | |||||||
| Receivables, net of allowance for credit loss of $14,973 and $14,229 | 2,630,350 | 2,381,963 | |||||||||
| Contract assets, net of allowance for credit loss | 273,251 | 189,900 | |||||||||
| Prepaid expenses and other | 137,871 | 163,307 | |||||||||
| Assets held for sale | 165,810 | — | |||||||||
| Total current assets | 3,338,986 | 2,880,694 | |||||||||
| Property and equipment, net of accumulated depreciation and amortization | 132,632 | 144,718 | |||||||||
| Goodwill | 1,446,695 | 1,473,600 | |||||||||
| Other intangible assets, net of accumulated amortization | 30,987 | 43,662 | |||||||||
| Right-of-use lease assets | 333,936 | 353,890 | |||||||||
| Deferred tax assets | 220,738 | 214,619 | |||||||||
| Other assets | 109,381 | 114,097 | |||||||||
| Total assets | $ | 5,613,355 | $ | 5,225,280 | |||||||
| LIABILITIES AND STOCKHOLDERS’ INVESTMENT | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 1,325,874 | $ | 1,303,951 | |||||||
| Outstanding checks | 46,933 | 66,383 | |||||||||
| Accrued expenses: | |||||||||||
| Compensation | 165,163 | 135,104 | |||||||||
| Transportation expense | 212,608 | 147,921 | |||||||||
| Income taxes | 7,178 | 4,748 | |||||||||
| Other accrued liabilities | 161,870 | 159,435 | |||||||||
| Current lease liabilities | 74,538 | 74,451 | |||||||||
| Current portion of debt | 150,000 | 160,000 | |||||||||
| Liabilities held for sale | 96,673 | — | |||||||||
| Total current liabilities | 2,240,837 | 2,051,993 | |||||||||
| Long-term debt | 1,411,356 | 1,420,487 | |||||||||
| Noncurrent lease liabilities | 281,015 | 297,563 | |||||||||
| Noncurrent income taxes payable | 24,215 | 21,289 | |||||||||
| Deferred tax liabilities | 11,714 | 13,177 | |||||||||
| Other long-term liabilities | 4,152 | 2,074 | |||||||||
| Total liabilities | 3,973,289 | 3,806,583 | |||||||||
| Stockholders’ investment: | |||||||||||
| Preferred stock, $0.10 par value, 20,000 shares authorized; no shares issued or outstanding | — | — | |||||||||
| Common stock, $0.10 par value, 480,000 shares authorized; 179,199 and 179,204 shares issued, 118,083 and 116,768 outstanding | 11,808 | 11,677 | |||||||||
| Additional paid-in capital | 771,485 | 754,093 | |||||||||
| Retained earnings | 5,713,207 | 5,620,790 | |||||||||
| Accumulated other comprehensive loss | (72,255) | (80,946) | |||||||||
| Treasury stock at cost (61,116 and 62,436 shares) | (4,784,179) | (4,886,917) | |||||||||
| Total stockholders’ investment | 1,640,066 | 1,418,697 | |||||||||
| Total liabilities and stockholders’ investment | $ | 5,613,355 | $ | 5,225,280 |
See accompanying notes to the condensed consolidated financial statements.
C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(unaudited, in thousands except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Transportation | $ | 4,278,300 | $ | 4,029,407 | $ | 12,482,818 | $ | 12,442,199 | |||||||||||||||
| Sourcing | 366,341 | 311,623 | 1,057,482 | 932,357 | |||||||||||||||||||
| Total revenues | 4,644,641 | 4,341,030 | 13,540,300 | 13,374,556 | |||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Purchased transportation and related services | 3,575,983 | 3,421,960 | 10,501,362 | 10,546,551 | |||||||||||||||||||
| Purchased products sourced for resale | 333,405 | 284,221 | 958,547 | 842,020 | |||||||||||||||||||
| Personnel expenses | 361,559 | 343,532 | 1,101,868 | 1,103,915 | |||||||||||||||||||
| Other selling, general, and administrative expenses | 193,575 | 177,795 | 493,181 | 474,892 | |||||||||||||||||||
| Total costs and expenses | 4,464,522 | 4,227,508 | 13,054,958 | 12,967,378 | |||||||||||||||||||
| Income from operations | 180,119 | 113,522 | 485,342 | 407,178 | |||||||||||||||||||
| Interest and other income/expense, net | (36,282) | (20,748) | (74,587) | (67,272) | |||||||||||||||||||
| Income before provision for income taxes | 143,837 | 92,774 | 410,755 | 339,906 | |||||||||||||||||||
| Provision for income taxes | 46,608 | 10,825 | 94,371 | 45,750 | |||||||||||||||||||
| Net income | 97,229 | 81,949 | 316,384 | 294,156 | |||||||||||||||||||
| Other comprehensive income (loss) | 29,494 | (14,891) | 8,691 | (18,950) | |||||||||||||||||||
| Comprehensive income | $ | 126,723 | $ | 67,058 | $ | 325,075 | $ | 275,206 | |||||||||||||||
| Basic net income per share | $ | 0.81 | $ | 0.69 | $ | 2.65 | $ | 2.48 | |||||||||||||||
| Diluted net income per share | $ | 0.80 | $ | 0.68 | $ | 2.63 | $ | 2.46 | |||||||||||||||
| Basic weighted average shares outstanding | 119,860 | 118,464 | 119,542 | 118,532 | |||||||||||||||||||
| Dilutive effect of outstanding stock awards | 1,319 | 1,287 | 613 | 1,230 | |||||||||||||||||||
| Diluted weighted average shares outstanding | 121,179 | 119,751 | 120,155 | 119,762 |
See accompanying notes to the condensed consolidated financial statements.
C.H. ROBINSON WORLDWIDE, INC.
Condensed Consolidated Statements of Stockholders’ Investment
(unaudited, in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes.
FORWARD-LOOKING INFORMATION
Our Quarterly Report on Form 10-Q, including this discussion and analysis of our financial condition and results of operations and our disclosures about market risk, contains certain “forward-looking statements.” These statements represent our expectations, beliefs, intentions, or strategies concerning future events that, by their nature, involve risks and uncertainties. Forward-looking statements represent our expectations, beliefs, intentions, or strategies concerning future events. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience or our present expectations, including, but not limited to, factors such as changes in economic conditions, including uncertain consumer demand; changes in market demand and pressures on the pricing for our services; fuel price increases or decreases, or fuel shortages; competition and growth rates within the global logistics industry that could adversely impact our profitability; freight levels and increasing costs and availability of truck capacity or alternative means of transporting freight; risks associated with seasonal changes or significant disruptions in the transportation industry; risks associated with identifying and completing suitable acquisitions; our dependence upon and changes in relationships with existing contracted truck, rail, ocean, and air carriers; risks associated with the loss of significant customers; risks associated with reliance on technology to operate our business; cyber-security related risks; our ability to staff and retain employees; risks associated with operations outside of the U.S.; our ability to successfully integrate the operations of acquired companies with our historic operations; climate change related risks; risks associated with our indebtedness; risks associated with interest rates; risks associated with litigation, including contingent auto liability and insurance coverage; risks associated with the potential impact of changes in government regulations including environmental-related regulations; risks associated with the changes to income tax regulations; risks associated with the produce industry, including food safety and contamination issues; the impact of changes in political and governmental conditions; changes to our capital structure; changes due to catastrophic events; risks associated with the usage of artificial intelligence technologies; and other risks and uncertainties detailed in our Annual and Quarterly Reports. Therefore, actual results may differ materially from our expectations based on these and other risks and uncertainties, including those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 16, 2024, as well as the updates to these risk factors included in Part II—“Item 1A, Risk Factors,” herein.
Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update such statement to reflect events or circumstances arising after such date.
OVERVIEW
C.H. Robinson Worldwide, Inc. (“C.H. Robinson,” “the company,” “we,” “us,” or “our”) is one of the original logistics leaders. Companies around the world look to us to reimagine supply chains, advance freight technology, and solve logistics challenges—from the simple to the most complex. Through our unmatched expertise, unrivaled scale, and tailored solutions, we ensure the seamless delivery of goods across industries and continents via truckload, less-than-truckload, ocean, air, and beyond. As a responsible global citizen, we make supply chains more sustainable and proudly contribute millions to the causes that matter most to our employees.
Our adjusted gross profits and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profits are calculated as gross profits excluding amortization of internally developed software utilized to directly serve our customers and contracted carriers. Adjusted gross profit margin is calculated as adjusted gross profits divided by total revenues. We believe adjusted gross profits and adjusted gross profit margin are useful measures of our ability to source, add value, and sell services and products that are provided by third parties, and we consider adjusted gross profits to be a primary performance measurement. Accordingly, the discussion of our results of operations often focuses on the changes in our adjusted gross profits and adjusted gross profit margin.
The reconciliation of gross profits to adjusted gross profits and gross profit margin to adjusted gross profit margin is presented below (dollars in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||
| Transportation | $ | 4,278,300 | $ | 4,029,407 | $ | 12,482,818 | $ | 12,442,199 | |||||||||||||||||||||||||||
| Sourcing | 366,341 | 311,623 | 1,057,482 | 932,357 | |||||||||||||||||||||||||||||||
| Total revenues | 4,644,641 | 4,341,030 | 13,540,300 | 13,374,556 | |||||||||||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||||||||
| Purchased transportation and related services | 3,575,983 | 3,421,960 | 10,501,362 | 10,546,551 | |||||||||||||||||||||||||||||||
| Purchased products sourced for resale | 333,405 | 284,221 | 958,547 | 842,020 | |||||||||||||||||||||||||||||||
| Direct internally developed software amortization | 11,441 | 8,233 | 32,546 | 24,299 | |||||||||||||||||||||||||||||||
| Total direct costs | 3,920,829 | 3,714,414 | 11,492,455 | 11,412,870 | |||||||||||||||||||||||||||||||
| Gross profits / Gross profit margin | 723,812 | 15.6% | 626,616 | 14.4% | 2,047,845 | 15.1% | 1,961,686 | 14.7% | |||||||||||||||||||||||||||
| Plus: Direct internally developed software amortization | 11,441 | 8,233 | 32,546 | 24,299 | |||||||||||||||||||||||||||||||
| Adjusted gross profits / Adjusted gross profit margin | $ | 735,253 | 15.8% | $ | 634,849 | 14.6% | $ | 2,080,391 | 15.4% | $ | 1,985,985 | 14.8% |
Our adjusted operating margin is a non-GAAP financial measure calculated as operating income divided by adjusted gross profits. We believe adjusted operating margin is a useful measure of our profitability in comparison to our adjusted gross profits, which we consider a primary performance
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to the company’s 2023 Annual Report on Form 10-K for a discussion on the company’s market risk. As of September 30, 2024, there were no material changes in market risk from those disclosed in the company’s 2023 Annual Report on Form 10-K.
Item 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.
Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2024. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2024.
(b) Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the three months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not subject to any pending or threatened litigation other than routine litigation arising in the ordinary course of our business operations, including certain contingent auto liability cases. For some legal proceedings, we have accrued an amount that reflects the aggregate liability deemed probable and estimable, but this amount is not material to our consolidated financial position, results of operations, or cash flows. Because of the preliminary nature of many of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the inconsistent treatment of claims made in many of these proceedings, and the difficulty of predicting the settlement value of many of these proceedings, we are often unable to estimate an amount or range of any reasonably possible additional losses. However, based upon our historical experience, the resolution of these proceedings is not expected to have a material effect on our consolidated financial position, results of operations, or cash flows.
Item 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors disclosed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023, which could materially affect our business, financial condition, or future results. There have not been material changes in our risk factors set forth in the company’s 2023 Annual Report on Form 10-K. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information about company purchases of common stock during the quarter ended September 30, 2024:
| Total Number of Shares (or Units) Purchased (1) | Average Price Paid Per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Number of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs (2) | ||||||||||||||||||||
| July 1, 2024 - July 31, 2024 | 20,330 | $ | 88.13 | — | 6,763,445 | ||||||||||||||||||
| August 1, 2024 - August 31, 2024 | 18,504 | 98.80 | — | 6,763,445 | |||||||||||||||||||
| September 1, 2024 - September 30, 2024 | 4,475 | 105.85 | — | 6,763,445 | |||||||||||||||||||
| Third Quarter 2024 | 43,309 | $ | 94.52 | — | 6,763,445 |
(1) The total number of shares purchased based on trade date includes: (i) no shares of common stock purchased under the authorization described below; and (ii) 43,309 shares of common stock surrendered to satisfy minimum statutory tax obligations under our stock incentive plans.
(2) In December 2021, the Board of Directors increased the number of shares authorized for repurchase by 20,000,000 shares. As of September 30, 2024, there were 6,763,445 shares remaining for future repurchases. Repurchases can be made in the open market or in privately negotiated transactions, including Rule 10b5-1 plans and accelerated repurchase programs.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. OTHER INFORMATION
During the three months ended September 30, 2024, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K, except as follows:
On August 9, 2024, Michael Castagnetto, the Company’s President of North America Surface Transportation, adopted a pre-arranged written stock sale plan in accordance with Rule 10b5-1 (the “Castagnetto Rule 10b5-1 Plan”) under the Exchange Act, for the sale of shares of the Company’s common stock. The Castagnetto Rule 10b5-1 Plan was entered into during an open trading window in accordance with the Company’s policies regarding transactions in the Company’s securities and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The Castagnetto Rule 10b5-1 Plan provides for the potential sale of up to 55,495 shares of the Company’s common stock, including upon the exercise of vested stock options for shares of the Company’s common stock, so long as the market price of the Company’s common stock is higher than the certain minimum threshold prices specified in the Castagnetto Rule 10b5-1 Plan, between November 11, 2024 and March 31, 2025.
On August 29, 2024, Ben Campbell, the Company’s Chief Legal Officer and Secretary, adopted a pre-arranged written stock sale plan in accordance with Rule 10b5-1 (the “Campbell Rule 10b5-1 Plan”) under the Exchange Act, for the sale of shares of the Company’s common stock. The Campbell Rule 10b5-1 Plan was entered into during an open trading window in accordance with the Company’s policies regarding transactions in the Company’s securities and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The Campbell Rule 10b5-1 Plan provides for the potential sale of up to 25,976 shares of the Company’s common stock, including upon the exercise of vested stock options for shares of the Company’s common stock, so long as the market price of the Company’s common stock is higher than the certain minimum threshold prices specified in the Campbell Rule 10b5-1 Plan, between November 27, 2024 and January 31, 2025.
Item 6. EXHIBITS
Exhibits filed with, or incorporated by reference into, this Quarterly Report:
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on November 1, 2024.
| C.H. ROBINSON WORLDWIDE, INC. | ||||||||
| By: | /s/ David P. Bozeman | |||||||
| David P. Bozeman | ||||||||
| Chief Executive Officer | ||||||||
| By: | /s/ Damon J. Lee | |||||||
| Damon J. Lee | ||||||||
| Chief Financial Officer |