C.H. Robinson(US:CHRW)2023-11-02 16:00PART I. Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the periods ended September 30, 2023, and 2022, along with detailed notes on accounting policies and financial items Condensed Consolidated Balance Sheets The balance sheet as of September 30, 2023, shows a decrease in total assets to $5.32 billion from $5.95 billion at year-end 2022, primarily driven by a reduction in receivables, while total stockholders' investment increased slightly to $1.40 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $2,959,243 | $3,589,238 | | Total assets | $5,317,667 | $5,954,564 | | Total current liabilities | $2,649,543 | $3,322,852 | | Total liabilities | $3,913,083 | $4,601,142 | | Total stockholders' investment | $1,404,584 | $1,353,422 | Condensed Consolidated Statements of Operations and Comprehensive Income For the third quarter of 2023, total revenues fell 27.8% to $4.34 billion, and net income dropped 63.7% to $81.9 million, reflecting significant year-over-year declines in performance Q3 and Nine Months Performance Comparison (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $4,341,030 | $6,015,376 | $13,374,556 | $19,629,804 | | Income from operations | $113,522 | $287,609 | $407,178 | $1,102,748 | | Net income | $81,949 | $225,798 | $294,156 | $844,331 | | Diluted net income per share | $0.68 | $1.78 | $2.46 | $6.50 | Condensed Consolidated Statements of Stockholders' Investment This statement details changes in stockholders' investment, including net income, foreign currency adjustments, dividends, stock-based compensation, and share repurchases, leading to a net increase in total stockholders' investment to $1.40 billion for the nine months ended September 30, 2023 - Dividends of $0.61 per share were declared in each of the first three quarters of 202348 - The company repurchased common stock, reducing shares outstanding and treasury stock value during the period48 Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2023, net cash from operating activities decreased to $684.6 million from $876.8 million in the prior year, primarily due to lower net income, with cash used for investing and financing activities Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $684,615 | $876,789 | | Net cash used for investing activities | ($66,651) | ($37,446) | | Net cash used for financing activities | ($651,519) | ($894,018) | | Net change in cash and cash equivalents | ($40,263) | ($69,881) | Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations of accounting policies and specific financial items, including goodwill, financing arrangements totaling $1.58 billion, segment performance declines, and significant restructuring charges - As of September 30, 2023, total debt outstanding was approximately $1.58 billion, composed of a revolving credit facility, various Senior Notes, and a Receivables Securitization Facility8 - In Q3 2023, the company initiated a restructuring program to divest its operations in Argentina, recognizing a $21.1 million loss on the disposal group94168 - The company continued its 2022 restructuring program, recognizing an additional $17.7 million in charges in 2023, primarily for workforce reductions to align with digital transformation and market conditions145 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the significant year-over-year decline in financial performance to a soft freight market with excess carrier capacity and weak demand, leading to suppressed transportation rates and cost optimization efforts Market and Business Trends The North American surface transportation and global forwarding markets softened in Q3 2023 due to excess carrier capacity and weak demand, suppressing freight rates and impacting company revenues - The North America surface transportation market is characterized by excess carrier capacity exceeding shipper demand, leading to suppressed transportation rates near the cost of operating a truck276 - The global forwarding market also softened as expanding ocean vessel capacity relative to weak demand suppressed ocean freight rates, resulting in less freight converting to air despite declining ocean schedule reliability158 Consolidated Results of Operations For Q3 2023, consolidated total revenues decreased 27.8% to $4.3 billion, and income from operations fell 60.5% to $113.5 million, driven by lower pricing and partially offset by reduced personnel expenses Q3 2023 vs. Q3 2022 Consolidated Results Summary | Metric | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $4.3B | $6.0B | (27.8)% | | Adjusted Gross Profits | $634.8M | $887.2M | (28.4)% | | Income from Operations | $113.5M | $287.6M | (60.5)% | | Diluted EPS | $0.68 | $1.78 | (61.8)% | - Personnel expenses decreased by 21.5% in Q3 2023, primarily due to cost optimization efforts, lower variable compensation, and a 13.7% reduction in average employee headcount203 - Other SG&A expenses increased 9.7% in Q3 2023, mainly due to $21.4 million in restructuring expenses178 Segment Results Both major segments experienced significant profit declines in Q3 2023, with North American Surface Transportation income from operations falling 47.1% and Global Forwarding plummeting 95.9% due to market conditions and restructuring Q3 2023 vs. Q3 2022 Income from Operations by Segment (in thousands) | Segment | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | NAST | $112,121 | $211,899 | (47.1)% | | Global Forwarding | $3,491 | $85,953 | (95.9)% | | All Other and Corporate | ($2,090) | ($10,243) | 79.6% | Liquidity and Capital Resources As of September 30, 2023, the company held $174.7 million in cash, with total debt at $1.58 billion, and believes existing liquidity is sufficient to fund operations and investments for the next 12 months - Cash and cash equivalents totaled $174.7 million as of September 30, 2023, down from $217.5 million at year-end 2022226 Debt Facilities Summary (as of Sep 30, 2023, in thousands) | Facility | Carrying Value | Borrowing Capacity | | :--- | :--- | :--- | | Revolving credit facility | $163,000 | $1,000,000 | | Receivables Securitization | $499,966 | $500,000 | | Senior Notes (various) | $920,720 | $925,000 | | Total debt | $1,583,686 | $2,425,000 | - Cash flow from operating activities decreased by 21.9% in the first nine months of 2023 compared to the same period in 2022, driven by a decline in net income228246 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reported no material changes to its market risk exposures as of September 30, 2023, compared to its 2022 Annual Report on Form 10-K disclosures - No material changes in market risk were reported as of September 30, 2023, compared to the disclosures in the 2022 Annual Report on Form 10-K252 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during Q3 - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2023231 - There were no material changes in internal control over financial reporting during the third quarter of 2023232 PART II. Other Information Item 1. Legal Proceedings The company is not subject to any pending or threatened litigation expected to have a material effect on its financial position, results of operations, or cash flows, only routine litigation - The company reports no pending litigation that is expected to have a material financial impact, only routine litigation from ordinary business operations261130 Item 1A. Risk Factors The company directs readers to its 2022 Annual Report for risk factors and discloses a new risk related to the use of machine learning and artificial intelligence, highlighting potential competitive and regulatory challenges - A new risk factor was added concerning the use of machine learning and artificial intelligence (AI), which could create competitive, regulatory, compliance, and security risks263 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities During Q3 2023, the company did not repurchase shares under its public program but acquired 20,270 shares from employees for tax obligations, with 6,763,445 shares remaining for future repurchase Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2023 | 7,981 | $95.72 | | August 2023 | 5,751 | $96.25 | | September 2023 | 6,538 | $89.36 | | Total Q3 2023 | 20,270 | $93.82 | - As of September 30, 2023, 6,763,445 shares remained authorized for future repurchases under the company's plans256265 Item 5. Other Information The company reports that no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during Q3 2023 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended September 30, 2023258 Item 6. Exhibits This section lists the exhibits filed with the quarterly report, including CEO and CFO certifications and financial statements formatted in Inline XBRL - Exhibits filed include CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and financial data in Inline XBRL format268298