C.H. Robinson Worldwide, Inc. — FY 2010 Form 10-K
Reporting period: Fiscal year ended December 31, 2010. The filing also provides unaudited fourth-quarter results. C.H. Robinson is a third-party logistics provider, sourcing services company, and provider of fee-based information services. It handled approximately 9.2 million shipments for more than 36,000 customers through 231 branches. Management identifies net revenues, rather than gross revenues, as its primary performance measure.
Key financial metrics
| Metric | FY 2010 | FY 2009 | Change |
|---|---|---|---|
| Total revenues | $9.274 billion | $7.577 billion | +22.4% |
| Net revenues | $1.468 billion | $1.382 billion | +6.2% |
| Income from operations | $622.9 million | $584.8 million | +6.5% |
| Net income | $387.0 million | $360.8 million | +7.3% |
| Diluted EPS | $2.33 | $2.13 | +9.4% |
| Operating cash flow | $344.8 million | $372.6 million | -7.5% |
- Margins: Net revenue margin fell to 15.8% from 18.2%; transportation margin declined to 16.8% from 20.2%. Income from operations was 42.4% of net revenues versus 42.3%; net income was 26.4% versus 26.1%.
- Liquidity and debt: Cash and cash equivalents were $398.6 million, with $9.3 million in available-for-sale securities. Working capital was $710.2 million, up from $575.5 million. The company reported no long-term debt.
- Cash uses and obligations: Capital expenditures were $28.7 million. Cash dividends were $168.9 million and share repurchases were $151.1 million. Contractual obligations totaled $131.8 million, principally operating leases; the filing reports no off-balance-sheet arrangements.
- Fourth quarter: Total revenues were $2.325 billion versus $2.008 billion in Q4 2009; operating income was $164.1 million versus $142.8 million; net income was $103.2 million versus $87.7 million; diluted EPS was $0.62 versus $0.52.
Material changes versus prior periods
- Transportation net revenues rose 5.4%, while gross transportation revenues rose 26.8%. Higher shipment volumes and customer pricing drove gross growth, but higher carrier costs and fuel prices compressed margins.
- Truckload volumes increased 15.6%. Excluding estimated fuel effects, truckload customer rates rose about 5%, while capacity costs rose about 9%.
- Air net revenues grew 29.6%, ocean 12.1%, and other logistics services 27.8%; sourcing net revenues increased 8.4% and Information Services net revenues increased 21.1%.
- Receivables increased 17.0% to approximately $1.0 billion, primarily reflecting higher late-year volumes. The increase contributed to lower operating cash flow despite higher net income.
- Stock-based compensation expense increased 74.2% to $37.0 million. Average headcount was nearly flat; the company ended the year with 7,628 employees.
- The branch network declined by four locations to 231 following consolidations. In 2009, total revenues had fallen 11.7%, while net revenues increased only 0.5%.
Outlook, management commentary, and risks
- Management said net revenue growth momentum entering 2011 was better than in recent years and planned limited branch openings. No specific FY 2011 earnings or revenue guidance was provided.
- The company’s long-term objective is 15% annual compounded growth in net revenues, operating income, and EPS. Management said FY 2010 growth fell short of that objective, mainly because of net revenue margin compression.
- Key risks include economic and freight-demand cycles, competition and pricing pressure, fuel prices and transportation capacity, dependence on third-party carriers, customer credit and collections, employee retention, technology disruption, international operations, and produce supply and food-safety risks.
- A jury awarded $23.75 million against the company and a contracted carrier in a transportation accident case. The company was appealing; a decision was expected in 2011. It had not accrued a liability because management did not consider any potential outcome probable. Under the applicable insurance program, the company said it would bear the first $5.0 million plus post-judgment interest.
- Management stated that available cash and expected operating cash generation should be sufficient for anticipated working capital, capital expenditures, and dividends. The board had declared a $0.29-per-share quarterly dividend payable in April 2011; future dividends remained discretionary.
- The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded disclosure controls were effective.
Important facts for investors to verify
- Whether transportation margins recover or remain pressured as carrier capacity costs and fuel prices change.
- Whether receivables growth converts to cash and whether customer credit losses or working-capital needs rise.
- The appellate outcome and potential financial exposure from the $23.75 million verdict, including interest and insurance coverage.
- Whether 2011 performance supports management’s stated improvement in net revenue momentum; the filing provides no formal annual forecast.
- The sustainability of dividends and repurchases alongside acquisitions, investment needs, and cash-flow variability.