C.H. Robinson(CHRW) - 2024 Q1 - Quarterly Report

PART I. Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2024, and 2023, including balance sheets, statements of operations, stockholders' investment, and cash flows, with notes on accounting policies and restructuring activities Condensed Consolidated Balance Sheets As of March 31, 2024, total assets increased to $5.47 billion from $5.23 billion at year-end 2023, primarily driven by a rise in receivables, while total liabilities grew to $4.04 billion from $3.81 billion, largely due to increased accounts payable and current debt, with total stockholders' investment remaining relatively stable at $1.43 billion | Account | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total current assets | $3,124,181 | $2,880,694 | | Total assets | $5,472,088 | $5,225,280 | | Total current liabilities | $2,274,286 | $2,051,993 | | Total liabilities | $4,042,094 | $3,806,583 | | Total stockholders' investment | $1,429,994 | $1,418,697 | Condensed Consolidated Statements of Operations and Comprehensive Income For the three months ended March 31, 2024, total revenues decreased to $4.41 billion from $4.61 billion in the prior-year period, with net income declining by 19.1% to $92.9 million and diluted earnings per share (EPS) falling to $0.78 from $0.96 year-over-year | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Total revenues | $4,412,311 | $4,611,670 | -4.3% | | Income from operations | $127,133 | $161,033 | -21.1% | | Net income | $92,904 | $114,891 | -19.1% | | Diluted EPS | $0.78 | $0.96 | -18.8% | Condensed Consolidated Statements of Cash Flows For the first quarter of 2024, net cash used for operating activities was $33.3 million, a significant shift from the $254.5 million provided in the prior year, primarily due to an increase in net operating working capital, while net cash provided by financing activities was $34.7 million, reflecting increased short-term borrowings | Cash Flow Activity | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash (used for) provided by operating activities | $(33,323) | $254,544 | | Net cash used for investing activities | $(22,474) | $(26,950) | | Net cash provided by (used for) financing activities | $34,695 | $(205,992) | | Net change in cash and cash equivalents | $(23,686) | $21,678 | Notes to Condensed Consolidated Financial Statements The notes provide detailed information on accounting policies, segment performance, financing arrangements, and restructuring activities, highlighting the performance of NAST and Global Forwarding segments, the company's $1.7 billion in total debt, and the initiation of a 2024 Restructuring Program which incurred $12.9 million in charges during the first quarter - The company's reportable segments are North American Surface Transportation (NAST), Global Forwarding, and All Other and Corporate[62][115] | Segment | Q1 2024 Total Revenues (in thousands) | Q1 2024 Income from Operations (in thousands) | | :--- | :--- | :--- | | NAST | $3,000,313 | $108,895 | | Global Forwarding | $858,637 | $31,552 | | All Other and Corporate | $553,361 | $(13,314) | - The company initiated a 2024 Restructuring Program in Q1 2024 to reduce costs, which included workforce reductions and impairment of internally developed software, resulting in $12.9 million in charges. Total expected charges for 2024 are approximately $25 million[125][100][127] | Debt Facility | Carrying Value (March 31, 2024, in thousands) | Maturity Date | | :--- | :--- | :--- | | Revolving credit facility | $280,000 | November 2027 | | Senior Notes, Series B | $150,000 | August 2028 | | Senior Notes, Series C | $175,000 | August 2033 | | Receivables Securitization Facility | $499,604 | November 2025 | | Senior Notes | $596,172 | April 2028 | | Total debt | $1,700,776 | | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for Q1 2024, highlighting the impact of market trends on performance, with consolidated revenues decreasing 4.3% to $4.4 billion and income from operations falling 21.1% to $127.1 million due to soft market conditions in surface transportation, while the Global Forwarding segment saw revenue growth due to market disruptions, and the company details its liquidity position and the ongoing 2024 Restructuring Program Market and Business Trends The North American surface transportation market continued to experience soft conditions with excess carrier capacity, suppressing freight rates, while the global forwarding market faced significant disruptions in major waterways, leading to increased re-routing, higher air freight conversion, and elevated costs in certain trade lanes - The North America surface transportation market remains soft due to excess carrier capacity, with the average routing guide depth of tender at a low 1.2 in Q1 2024, indicating limited spot market activity[162] - Global forwarding was impacted by waterway disruptions, increasing re-routing and degrading ocean schedule reliability. This led to a 23.0% increase in air freight tonnage due to ocean freight conversions[139][165] Consolidated Results of Operations In Q1 2024, total revenues decreased by 4.3% year-over-year, primarily due to lower pricing in truckload services, with adjusted gross profits falling 4.1% to $657.7 million, income from operations decreasing 21.1% to $127.1 million, and the adjusted operating margin declining 420 basis points to 19.3%, resulting in net income of $92.9 million, a 19.1% decrease from the prior year | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $4,400.0 | $4,600.0 | -4.3% | | Adjusted Gross Profits | $657.7 | $685.6 | -4.1% | | Income from Operations | $127.1 | $161.0 | -21.1% | | Adjusted Operating Margin | 19.3% | 23.5% | -420 bps | | Diluted EPS | $0.78 | $0.96 | -18.8% | - Personnel expenses decreased 1.0% due to an 11.3% lower average employee headcount, partially offset by higher restructuring charges[141] - Other SG&A expenses increased 7.1%, primarily due to favorable credit losses in the prior year and current year restructuring charges related to software impairment[141] Segment Results The North American Surface Transportation (NAST) segment's income from operations fell 18.7% due to lower truckload pricing, while the Global Forwarding segment saw a 4.8% increase in operating income, driven by higher ocean volumes and customs transactions, and the All Other and Corporate segment reported a wider operating loss of $13.3 million compared to a $3.1 million loss in the prior year - NAST: Total revenues decreased 9.2% to $3.0 billion, and income from operations fell 18.7% to $108.9 million, driven by a 9.9% decline in truckload adjusted gross profits due to lower pricing[147][148] - Global Forwarding: Total revenues grew 8.7% to $858.6 million, and income from operations increased 4.8% to $31.6 million. Performance was supported by a 7.0% increase in ocean volume and an 8.5% increase in customs transactions[201][202] - All Other and Corporate: Total revenues increased 6.9% to $553.4 million, but the operating loss widened to $13.3 million. Robinson Fresh adjusted gross profits grew 8.3%, while Other Surface Transportation adjusted gross profits declined 14.6%[179] Liquidity and Capital Resources The company's liquidity is supported by cash from operations and multiple debt facilities with a total capacity of $2.4 billion, with total debt at $1.7 billion as of March 31, 2024, and operating cash flow was negative $33.3 million for the quarter due to an increase in net operating working capital as ocean freight rates rose, while the company remains committed to its quarterly dividend and share repurchases - Cash flow from operations decreased by $287.9 million year-over-year, primarily due to an increase in net operating working capital as ocean freight rates increased[141][183] - No shares were repurchased during Q1 2024. The company paid $74.6 million in cash dividends[185][209] - The company believes its available cash, future cash from operations, and credit facilities are sufficient to meet its needs for at least the next 12 months[225] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes in the company's market risk from the disclosures provided in its 2023 Annual Report on Form 10-K - As of March 31, 2024, there were no material changes in market risk from those disclosed in the company's 2023 Annual Report on Form 10-K[213] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[188] - No changes occurred during the first quarter of 2024 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[215] PART II. Other Information Item 1. Legal Proceedings The company is not subject to any pending or threatened litigation outside of routine matters arising in the ordinary course of business, and management does not expect the resolution of these proceedings to have a material effect on the company's financial position, results of operations, or cash flows - The company faces routine litigation in the ordinary course of business, which is not expected to have a material effect on its financial condition or results[114][229] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - There have not been material changes in the company's risk factors as set forth in the 2023 Annual Report on Form 10-K[1] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2024, the company did not repurchase any shares as part of its publicly announced repurchase program, though 212,545 shares were surrendered by employees to satisfy tax obligations related to stock incentive plans, with 6,763,445 shares remaining available for future repurchase under the authorized program as of March 31, 2024 | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Program | Max Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | :--- | | Q1 2024 | 212,545 | $75.89 | — | 6,763,445 | - The shares purchased during the quarter were solely from employees surrendering stock to satisfy tax obligations and not from open market repurchases under the company's plan[230] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report, including certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002 and the financial statements formatted in Inline XBRL - Exhibits filed include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, and financial statements in Inline XBRL format[232]