C.H. Robinson(US:CHRW)2024-08-02 17:06PART I. Financial Information This section presents the unaudited condensed consolidated financial statements and related management discussion and analysis for C.H. Robinson Worldwide, Inc Item 1. Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements including balance sheets, income statements, cash flows, and notes for Q2 and H1 2024 Condensed Consolidated Balance Sheets Total assets increased to $5.51 billion and total liabilities to $4.00 billion by June 30, 2024, driven by receivables and payables Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $3,179,174 | $2,880,694 | | Total assets | $5,512,346 | $5,225,280 | | Total current liabilities | $2,244,213 | $2,051,993 | | Total liabilities | $4,001,905 | $3,806,583 | | Total stockholders' investment | $1,510,441 | $1,418,697 | Condensed Consolidated Statements of Operations and Comprehensive Income Q2 2024 net income increased 29.7% to $126.3 million, with diluted EPS rising to $1.05, driven by a 34.3% increase in income from operations Q2 2024 vs Q2 2023 Performance (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total revenues | $4,483,348 | $4,421,856 | | Income from operations | $178,090 | $132,623 | | Net income | $126,251 | $97,316 | | Diluted net income per share | $1.05 | $0.81 | Six Months 2024 vs 2023 Performance (in thousands, except per share data) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total revenues | $8,895,659 | $9,033,526 | | Income from operations | $305,223 | $293,656 | | Net income | $219,155 | $212,207 | | Diluted net income per share | $1.83 | $1.77 | Condensed Consolidated Statements of Stockholders' Investment Stockholders' investment increased to $1.51 billion by June 30, 2024, driven by net income, partially offset by $148.1 million in dividends - Dividends of $0.61 per share were declared in both Q1 and Q2 2024, totaling $148.1 million for the six months10 - Total stockholders' investment grew by $91.7 million in the first six months of 2024, from $1,418.7 million to $1,510.4 million10 Condensed Consolidated Statements of Cash Flows Net cash from operations significantly decreased to $133.1 million in H1 2024, primarily due to increased receivables, while financing cash outflow decreased to $120.1 million Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $133,099 | $479,376 | | Net cash used for investing activities | ($41,811) | ($51,301) | | Net cash used for financing activities | ($120,065) | ($432,118) | | Net change in cash and cash equivalents | ($32,358) | ($7,327) | Notes to Condensed Consolidated Financial Statements Detailed notes cover accounting policies, segment reporting, goodwill impairment, financing, income taxes, restructuring, and the subsequent sale of the Europe Surface Transportation business - The company's reportable segments are North American Surface Transportation (NAST) and Global Forwarding, with others grouped into 'All Other and Corporate'16 - An interim impairment test was performed on the Europe Surface Transportation reporting unit's goodwill in Q2 2024, which determined its fair value exceeded its carrying value by less than 5%, but no impairment was recorded23 - Subsequent to Q2 2024, the company entered an agreement to sell its Europe Surface Transportation business, which is expected to close in Q4 2024 and result in a loss on sale85 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 and H1 2024 financial performance, highlighting market trends, segment results, and the impact of cost optimization on profitability, with Q2 income from operations up 34.3% - The North American surface transportation market remains in a prolonged stage of oversupplied carrier capacity, leading to soft market conditions and suppressed rates96 - The global forwarding market is experiencing rising ocean freight rates due to the Red Sea conflict, container shortages, and port congestion, with some shippers accelerating peak season volume97 Q2 2024 vs Q2 2023 Key Metrics | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $4.5 billion | $4.4 billion | +1.4% | | Adjusted Gross Profits | $687.4 million | $665.5 million | +3.3% | | Income from Operations | $178.1 million | $132.6 million | +34.3% | | Diluted EPS | $1.05 | $0.81 | +29.6% | | Adjusted Operating Margin | 25.9% | 19.9% | +600 bps | Consolidated Results of Operations Q2 2024 total revenues increased 1.4% to $4.5 billion, with income from operations up 34.3% to $178.1 million, driven by higher gross profits and lower personnel expenses - Q2 2024 personnel expenses decreased 4.3% to $361.2 million, mainly due to cost optimization and a 10.0% lower average employee headcount101103 - Q2 2024 personnel expenses included $9.5 million in severance costs from the 2024 Restructuring Program, while Q2 2023 included $13.1 million from the 2022 program107 North American Surface Transportation (NAST) Segment Results NAST segment Q2 2024 revenues decreased 2.9% to $3.0 billion, but income from operations increased 19.7% to $141.1 million, driven by higher adjusted gross profits NAST Q2 2024 vs Q2 2023 Performance (in thousands) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Total revenues | $2,989,909 | $3,079,268 | (2.9)% | | Income from operations | $141,102 | $117,859 | 19.7% | | Total adjusted gross profits | $419,657 | $400,532 | 4.8% | - Truckload adjusted gross profits grew 7.9% and LTL adjusted gross profits grew 6.5% in Q2 2024, driven by higher adjusted gross profit per transaction and a 1.5% volume increase in both service lines117119 Global Forwarding Segment Results Global Forwarding Q2 2024 revenues increased 18.1% to $921.2 million, with income from operations surging 38.2% to $41.0 million, driven by ocean pricing and volume Global Forwarding Q2 2024 vs Q2 2023 Performance (in thousands) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Total revenues | $921,223 | $779,867 | 18.1% | | Income from operations | $40,982 | $29,647 | 38.2% | | Total adjusted gross profits | $184,067 | $179,231 | 2.7% | - Q2 2024 volume statistics showed a 4.0% increase in ocean shipments, an 11.0% increase in air tonnage, and a 6.0% increase in customs transactions128 All Other and Corporate Segment Results All Other and Corporate segment Q2 2024 revenues increased 1.7%, with operating loss narrowing significantly to $4.0 million due to lower restructuring expenses All Other and Corporate Q2 2024 vs Q2 2023 Performance (in thousands) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Total revenues | $572,216 | $562,721 | 1.7% | | Loss from operations | ($3,994) | ($14,883) | (73.2)% | | Total adjusted gross profits | $83,685 | $85,733 | (2.4)% | Liquidity and Capital Resources Liquidity remains strong with $113.2 million cash; H1 2024 cash from operations decreased to $133.1 million due to increased working capital, with total debt at $1.61 billion - Cash flow from operations decreased by 72.2% in the first six months of 2024 compared to the same period in 2023, mainly due to an increase in net operating working capital148 - No common stock was repurchased in the first six months of 2024, compared to $62.8 million in the same period of 2023150 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the company's market risk profile compared to the 2023 Annual Report on Form 10-K - As of June 30, 2024, there were no material changes to the company's market risk profile154 Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2024156 - No material changes occurred in internal control over financial reporting during the second quarter of 2024157 PART II. Other Information This section provides additional information including legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings The company is subject to routine litigation not expected to materially impact its financial position, results, or cash flows - The company is not subject to any pending or threatened litigation other than routine litigation from ordinary business operations, which is not expected to have a material financial impact159 Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the 2023 Annual Report on Form 10-K160 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the program in Q2 2024, with 45,042 shares surrendered for tax obligations, leaving 6,763,445 shares authorized for future repurchase Q2 2024 Share Purchase Activity | Period | Total Shares Purchased | Average Price Paid | Shares Purchased Under Program | | :--- | :--- | :--- | :--- | | Second Quarter 2024 | 45,042 | $81.66 | 0 | - As of June 30, 2024, 6,763,445 shares remained available for repurchase under the company's authorized plan161 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None162 Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q2 2024 - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements in Q2 2024163 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including executive agreements and CEO/CFO certifications - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, and financial statements formatted in Inline XBRL165