EX-13 4 dex13.txt ANNUAL REPORT TO STOCKHOLDERS Exhibit 13 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA C.H. Robinson Worldwide, Inc. and Subsidiaries
(Dollars in thousands, except per share data) 2000 1999 1998 1997 1997 1996 as adjusted /(2)/ (unaudited) Statement of Operations Data (For the years ended December 31) ------------------------------------------------------------------------------------------------------------------------------- Gross revenues $2,882,175 $2,261,027 $2,038,139 $1,790,785 $1,790,785 $1,605,905 Net revenues/(1)/ 419,343 293,283 245,666 206,020 206,020 179,069 Income from operations 117,008 83,828 68,443 32,079 56,735 50,029 Net income 71,242 53,349 43,015 11,492 36,148 32,442 Net income per share/(3)/ Basic $ .84 $ .65 $ .52 $ .14 $ .44 $ .39 Diluted $ .83 $ .64 $ .52 $ .14 $ .44 $ .39 Weighted average number of shares outstanding/(3)/ (in thousands) Basic 84,529 82,456 82,432 82,570 82,570 83,598 Diluted 85,717 83,006 82,618 82,604 82,604 83,598 Dividends and distributions per share/(3)/ $ .170 $ .145 $ .125 $ 1.265 $ .105 $ .093 ==================================================================================================================================== Balance Sheet Data (as of December 31) ------------------------------------------------------------------------------------------------------------------------------------ Working capital $ 113,988 $ 67,158 $ 135,245 $ 109,042 $ 109,042 $ 114,070 Total assets 644,207 522,661 409,116 340,628 340,628 320,780 Total long-term debt - - - - - - Stockholders' investment 297,016 246,767 169,518 138,981 138,981 154,428 ==================================================================================================================================== Operating Data (as of December 31) ------------------------------------------------------------------------------------------------------------------------------------ Branches 137 131 120 119 119 108 Employees 3,677 3,125 2,205 1,925 1,925 1,665 Average net revenues per employee $ 122 $ 120 $ 119 $ 115 $ 115 $ 115 ====================================================================================================================================
/(1)/ Net revenues are determined by deducting cost of transportation and products from gross revenues. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." /(2)/ Excludes unusual charges and expenses of $24,656 related to our initial public offering and special dividends and distributions related to our initial public offering in October 1997. /(3)/ On October 24, 2000, the Company's Board of Directors declared a two-for- one stock split effected in the form of a 100% stock dividend distributed on December 1, 2000 to shareholders of record as of November 10, 2000. All share and per share amounts have been restated to reflect the retroactive effect of the stock split. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Gross revenues represent the total dollar value of services and goods we sell to our customers. Our costs of transportation and products include the contracted direct costs of transportation, including motor carrier, rail, ocean, air, and other costs, and the purchase price of the products we source. We act principally as a service provider to add value and expertise in the execution and procurement of these services for our customers. Our net revenues (gross revenues less cost of transportation and products) are the primary indicator of our ability to source, add value and resell services and products that are provided by third parties, and are considered by management to be our primary measurement of growth. Accordingly, the discussion of results of operations below focuses on the changes in our net revenues. In the transportation industry, results of operations generally show a seasonal pattern as customers reduce shipments during and after the winter holiday season. In recent years, our operating income and income from continuing operations have been lower in the first quarter than in the other three quarters. Seasonality in the transportation industry has not had a significant impact on our results of operations or our cash flows in recent years. Also, inflation has not materially affected our operations due to the short-term, transactional basis of our business. However, we cannot fully predict the impact seasonality and inflation may have in the future.
Results of Operations The following table summarizes our net revenues by service line: For the years ended December 31, (Dollars in thousands) 2000 1999 Change 1998 Change ----------------------------------------------------------------------------------------------- Net revenues Transportation $355,141 $233,848 51.9% $189,797 23.2% Sourcing 43,793 42,759 2.4 44,229 (3.3) Information services 20,409 16,676 22.4 11,640 43.3 ----------------------------------------------------------------------------------------------- Total $419,343 $293,283 43.0% $245,666 19.4% ===============================================================================================
The following table represents certain statement of operations data shown as percentages of our net revenues:
For the years ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------------------------- Net revenues 100.0% 100.0% 100.0% Selling, general and administrative expenses 72.1 71.4 72.1 ----------------------------------------------------------------------------------------------- Income from operations 27.9 28.6 27.9 Investment and other income 0.2 1.6 1.1 ----------------------------------------------------------------------------------------------- Income from operations before provision for income taxes 28.1 30.2 29.0 Provision for income taxes 11.1 12.0 11.5 ----------------------------------------------------------------------------------------------- Net income 17.0% 18.2% 17.5% ===============================================================================================
2000 Compared to 1999 Revenues. Gross revenues for 2000 were $2.88 billion, an increase of 27.5% over $2.26 billion for 1999. Net revenues for 2000 were $419.3 million, an increase of 43.0% over $293.3 million for 1999, resulting from an increase in transportation services net revenues of 51.9% to $355.1 million, an increase in sourcing net revenues of 2.4% to $43.8 million, and an increase in information services net revenues of 22.4% to $20.4 million. Our net revenues increased at a faster rate than our gross revenues primarily due to the different growth rates of our service lines. Our information services net revenues as a percentage of gross revenues is highest of our three lines, followed by our transportation business and finally our sourcing business. The increase in transportation services net revenues of 51.9% resulted from internal growth of approximately 22% and growth from acquisitions which added approximately 30%. Net revenue margin on the truck business increased slightly during the year, primarily due to the mix of services provided. Our international air and ocean business grew from both adding new customers and expanding business with existing customers. Sourcing net revenues increased 2.4%. We continued to expand our sourcing business with large retailers, but this was offset by a decline in business with produce wholesalers because of industry consolidation. 13 Information services net revenues increased 22.4%. T-Chek related revenues, which represented approximately 90% of the information services business, had year-to-date growth of approximately 29%. Other non-T-Chek information services business had declining net revenues for the year ended December 31, 2000. Selling, General and Administrative Expenses. Selling, general and administrative expenses for 2000 were $302.3 million, an increase of 44.3% over $209.5 million for 1999. Selling, general and administrative expenses as a percentage of net revenues were 72.1% and 71.4% in 2000 and 1999. This increase was primarily due to increased costs associated with our growth and our acquisitions. Income from Operations. Income from operations was $117.0 million for 2000, an increase of 39.6% over $83.8 million for 1999. Income from operations as a percentage of net revenues was 27.9% and 28.6% for 2000 and 1999. Investment and Other Income. Investment and other income was $0.8 million for 2000, a decrease of 83.9% from $4.6 million for 1999. This decrease was the result of lower cash and investment balances in 2000 compared to 1999. In December 1999, we used $100 million in cash and investments for the purchase of American Backhaulers, Inc. Provision for Income Taxes. The effective income tax rate was 39.5% for 2000 and 39.7% for 1999. The effective income tax rate for both periods is greater than the statutory federal income tax rate primarily due to state income taxes, net of federal benefit. Net Income. Net income was $71.2 million for 2000, an increase of 33.5% over $53.3 million for 1999. Basic net income per share increased by 29.2% to $0.84 for 2000 compared to $0.65 for 1999. Diluted net income per share increased by 29.7% to $0.83 for 2000 compared to $0.64 for 1999. 1999 Compared to 1998 Revenues. Gross revenues for 1999 were $2.26 billion, an increase of 10.9% over $2.04 billion for 1998. Net revenues for 1999 were $293.3 million, an increase of 19.4% over $245.7 million for 1998, resulting from an increase in transportation services net revenues of 23.2% to $233.8 million, a decrease in sourcing net revenues of 3.3% to $42.8 million, and an increase in information services net revenues of 43.3% to $16.7 million. Our net revenues increased at a faster rate than our gross revenues due to the different growth rates of our service lines. Our information services net revenues as a percentage of gross revenues was highest of our three lines, followed by our transportation business and finally our sourcing business. The increase in transportation services net revenues of 23.2% resulted from internal growth of approximately 18% and growth from 1999 acquisitions of approximately 5%. Revenue per transaction remained consistent from 1998 to 1999. This increase in transaction volume and net revenues was driven by significant expansion of business with current customers and from new domestic and international customers. Sourcing net revenues decreased by 3.3% due principally to difficult comparisons caused by abnormal net revenue growth of 16.2% during 1998 compared to 1997, which was created by adverse weather conditions in major produce growing areas during 1998. We continued to expand our sourcing business with large retailers, but this was offset by a decline in business with produce wholesalers because of industry consolidation. The increase in information services net revenue was the result of significant growth in transaction volume from new and existing customers and growth in market share due to consolidation of our competitors in the information services industry. As consolidation has occurred among our competitors, we have been able to add customers that were seeking new service providers. Selling, General and Administrative Expenses. Selling, general and administrative expenses for 1999 were $209.5 million, an increase of 18.2% over $177.2 million for 1998. Selling, general and administrative expenses as a percentage of net revenues were 71.4% and 72.1% in 1999 and 1998. The decrease in selling, general and administrative expenses as a percentage of net revenues was due primarily to cost containment efforts in fixed cost areas while growing net revenue at 19.4%. Income from Operations. Income from operations was $83.8 million for 1999, an increase of 22.5% over $68.4 million for 1998. Income from operations as a percentage of net revenues was 28.6% and 27.9% for 1999 and 1998. Investment and Other Income. Investment and other income was $4.6 million for 1999, an increase of 63.5% from $2.8 million for 1998. This increase was the result of the growth in cash and investments throughout the year. In December 1999, we used $100 million in cash and investments for the purchase of American Backhaulers, Inc. Provision for Income Taxes. The effective income tax rate was 39.7% for both 1999 and 1998. The effective income tax rate for both periods is greater than the statutory federal income tax rate primarily due to state income taxes, net of federal benefit. 14 Net Income. Net income was $53.3 million for 1999, an increase of 24.0% over $43.0 million for 1998. Basic net income per share increased by 25.0% to $0.65 for 1999 compared to $0.52 for 1998. Diluted net income per share increased by 23.1% to $0.64 for 1999 compared to $0.52 for 1998. Liquidity and Capital Resources We have historically generated substantial cash from operations which has enabled us to fund our growth while paying cash dividends and repurchasing stock. Cash and cash equivalents totaled $79.9 million and $49.6 million as of December 31, 2000 and 1999. In conjunction with our December 1999 acquisition of American Backhaulers, Inc. (ABH), we used $100.0 million of our cash and cash equivalents on hand. In addition, we entered into a debt facility to fund our expected short-term cash needs. Working capital at December 31, 2000 and 1999 was $114.0 million and $67.2 million. We have had no long-term debt for the last five years and have no material commitments for future capital expenditures. We have not experienced a material business or financial impact with the conversion to the Euro. We generated $74.5 million, $51.9 million and $77.6 million of cash flow from operations in 2000, 1999 and 1998. This was due to net income generated, adjusted primarily for depreciation and amortization and the net change in accounts receivable and accounts payable. Our net cash provided by operating activities was highest in 1998 due partially to the timing of federal income tax payments. We had a $17.3 million income tax receivable as of December 31, 1997, which was collected in 1998. We used $24.1 million, $88.8 million and $31.6 million of cash flow for investing activities in 2000, 1999 and 1998. In 2000, we spent approximately $15.5 million to fund capital expenditures. The cash used in 1999 was primarily due to $112.2 million spent for acquisitions and $9.4 million to fund capital expenditures necessary for continued growth, offset by $30.5 million generated by sales and maturities of available-for-sale securities (net of purchases). We also used $20.1 million, $12.7 million and $9.2 million of cash flow for financing activities in 2000, 1999 and 1998. This was due primarily to quarterly cash dividends and share repurchases for our employee stock plans. We have declared a $0.05 per share dividend payable on April 2, 2001 to shareholders of record as of March 9, 2001. We have $40.0 million available under an existing line of credit at an interest rate of LIBOR plus 60 basis points (6.60% as of December 31, 2000). During 2000, we had gross borrowings on this facility of $210.5 million, all of which was repaid by June 2000. The maximum outstanding balance during the 12 months was $14.0 million. There were no borrowings during 1999 or 1998. Our credit agreement contains certain financial covenants, but does not restrict the payment of dividends. We were in compliance with all covenants of the agreement as of December 31, 2000. The line of credit expires on December 16, 2002 and we expect to be able to renew the line of credit in the future. We also have 20 million French francs available under a line of credit at an interest rate of Euribor plus 90 basis points (5.76% at December 31, 2000). This discretionary line of credit has no expiration date. As of December 31, 2000, the outstanding balance was 13.0 million French francs or $1.8 million, which is included in income taxes and other current liabilities. Our credit agreement contains certain financial covenants, but does not restrict the payment of dividends. We were in compliance with all covenants of this agreement as of December 31, 2000. Assuming no change in our current business plan, management believes that our available cash, together with expected future cash generated from operations and the amounts available under our lines of credit, are expected to be sufficient to satisfy our anticipated needs for working capital, capital expenditures and cash dividends for all future periods. Market Risk We had approximately $79.9 million of cash and investments on December 31, 2000, all of which were cash and cash equivalents. Substantially all of the cash equivalents are money market securities from domestic issuers. Because of the credit risk criteria of our investment policies, the primary market risk associated with these investments is interest rate risk. We do not use derivative financial instruments to manage interest rate risk or to speculate on future changes in interest rates. A rise in interest rates could negatively affect the fair value of our investments. We believe a reasonable near-term change in interest rates would not have a material impact on our future investment earnings due to the short-term nature of our investing practices. Our discussion and analysis of our financial condition and results of operations, including our market risk discussions, contain forward-looking statements, including our current assumptions about future financial performance, anticipated problems and our plans for future operations, which are subject to various risks and uncertainties. Our actual results may differ significantly. Further discussion of factors that may cause a difference may be found in an exhibit to the Company's Form 10-K filed with the Securities and Exchange Commission. 15 CONSOLIDATED BALANCE SHEETS C.H. Robinson Worldwide, Inc. and Subsidiaries
(In thousands, except per share data) As of December 31, 2000 1999 Assets ---------------------------------------------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 79,912 $ 49,637 Receivables, net of allowance for doubtful accounts of $22,712 and $18,280 354,953 270,296 Deferred tax asset 21,219 18,480 Prepaid expenses and other 2,296 2,854 Inventories 1,859 1,785 ---------------------------------------------------------------------------------------------------------------------- Total current assets 460,239 343,052 Property and equipment 58,827 51,387 Accumulated depreciation and amortization (29,425) (26,640) ---------------------------------------------------------------------------------------------------------------------- Net property and equipment 29,402 24,747 Goodwill, net of accumulated amortization of $7,701 and $1,729 145,604 144,625 Other intangible assets, net of accumulated amortization of $5,084 and $4,396 8,570 8,951 Other assets 392 1,286 ---------------------------------------------------------------------------------------------------------------------- $644,207 $522,661 ====================================================================================================================== Liabilities and Stockholders' Investment ---------------------------------------------------------------------------------------------------------------------- Current liabilities: Accounts payable $285,932 $231,592 Accrued expenses - Compensation and profit-sharing contribution 33,456 28,115 Income taxes and other 26,863 16,187 ---------------------------------------------------------------------------------------------------------------------- Total current liabilities 346,251 275,894 Deferred tax liabilities 940 - ---------------------------------------------------------------------------------------------------------------------- Total liabilities 347,191 275,894 ---------------------------------------------------------------------------------------------------------------------- Commitments and contingencies (Notes 4 and 7) Stockholders' investment: Preferred stock, $.10 par value, 20,000 shares authorized; no shares issued or outstanding - - Common stock, $.10 par value, 130,000 shares authorized; 85,008 and 84,772 shares issued, 84,621 and 84,568 outstanding 8,462 4,228 Additional paid-in-capital 101,571 98,958 Retained earnings 204,463 147,586 Deferred compensation (6,980) - Cumulative other comprehensive loss (1,049) (1,053) Treasury stock at cost (387 and 204 shares) (9,451) (2,952) ---------------------------------------------------------------------------------------------------------------------- Total stockholders' investment 297,016 246,767 ---------------------------------------------------------------------------------------------------------------------- $644,207 $522,661 ======================================================================================================================
The accompanying notes are an integral part of these consolidated balance sheets. 16 CONSOLIDATED STATEMENTS OF OPERATIONS C.H. Robinson Worldwide, Inc. and Subsidiaries
(In thousands, except per share data) For the years ended December 31, 2000 1999 1998 ------------------------------------------------------------------------------------------------------------ Gross revenues $2,882,175 $2,261,027 $2,038,139 Cost of transportation and products 2,462,832 1,967,744 1,792,473 ------------------------------------------------------------------------------------------------------------ Net revenues 419,343 293,283 245,666 Selling, general and administrative expenses 302,335 209,455 177,223 ------------------------------------------------------------------------------------------------------------ Income from operations 117,008 83,828 68,443 Investment and other income 750 4,649 2,844 ------------------------------------------------------------------------------------------------------------ Income before provision for income taxes 117,758 88,477 71,287 Provision for income taxes 46,516 35,128 28,272 ------------------------------------------------------------------------------------------------------------ Net income $ 71,242 $ 53,349 $ 43,015 ============================================================================================================ Basic net income per share $ .84 $ .65 $ .52 Diluted net income per share $ .83 $ .64 $ .52 Basic weighted average shares outstanding 84,529 82,456 82,432 Dilutive effect of outstanding stock awards 1,188 550 186 ------------------------------------------------------------------------------------------------------------ Diluted weighted average shares outstanding 85,717 83,006 82,618 ============================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 17 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT AND COMPREHENSIVE INCOME C.H. Robinson Worldwide, Inc. and Subsidiaries
(In thousands, except per share data) For the years ended December 31, 2000, 1999 and 1998 Cumulative Common Additional Deferred Other Com- Total Shares Paid-in Retained Compen- prehensive Treasury Stockholders' Outstanding Amount Capital Earnings sation Loss Stock Investment ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1997 41,265 $ 4,126 $ 62,108 $ 73,465 $ - $ (718) $ - $ 138,981 Net income - - - 43,015 - - - 43,015 Other comprehensive income: Foreign currency translation adjustment - - - - - (427) - (427) ---------- Comprehensive income - - - - - - - 42,588 ========== Cash dividends, $.125 per share - - - (10,302) - - - (10,302) Stock issued for employee benefit plans 63 6 (115) - - - 1,430 1,321 Tax benefit on deferred compensation plans - - 61 - - - - 61 Repurchase of common stock (138) (13) - - - - (3,118) (3,131) ==================================================================================================================================== Balance, December 31, 1998 41,190 4,119 62,054 106,178 - (1,145) (1,688) 169,518 Net income - - - 53,349 - - - 53,349 Other comprehensive income: Foreign currency translation adjustment - - - - - 92 - 92 ---------- Comprehensive income - - - - - - - 53,441 ========== Cash dividends, $.145 per share - - - (11,941) - - - (11,941) Stock issued for employee benefit plans 58 6 51 - - - 1,472 1,529 Stock issued in acquisition (Note 2) 1,121 112 36,813 - - - - 36,925 Tax benefit on deferred compensation plans - - 40 - - - - 40 Repurchase of common stock (85) (9) - - - - (2,736) (2,745) ==================================================================================================================================== Balance, December 31, 1999 42,284 4,228 98,958 147,586 - (1,053) (2,952) 246,767 Net income - - - 71,242 - - - 71,242 Other comprehensive income: Foreign currency translation adjustment - - - - - 4 - 4 ---------- Comprehensive income - - - - - - - 71,246 ========== Cash dividends, $.170 per share - - - (14,365) - - - (14,365) Stock dividend (Note 1) 42,284 4,228 (4,228) - - - - - Stock issued for employee benefit plans 181 18 (168) - - - 3,400 3,250 Issuance of restricted stock (Note 6) 237 24 6,976 - (7,000) - - - Reduction of deferred compensation (Note 6) - - - - 20 - - 20 Tax benefit on deferred compensation plans - - 33 - - - - 33 Repurchase of common stock (365) (36) - - - - (9,899) (9,935) ==================================================================================================================================== Balance, December 31, 2000 84,621 $ 8,462 $101,571 $204,463 $ (6,980) $ (1,049) $ (9,451) $ 297,016 ====================================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 18 CONSOLIDATED STATEMENTS OF CASH FLOWS C.H. Robinson Worldwide, Inc. and Subsidiaries
(In thousands) For the years ended December 31, 2000 1999 1998 Operating Activities ------------------------------------------------------------------------------------------------------------------------- Net income $ 71,242 $ 53,349 $ 43,015 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 17,318 10,133 8,521 Deferred compensation expense 20 - - Deferred income taxes (513) (4,822) (9,272) (Gain) loss on sale of assets 298 (178) 141 Changes in operating elements, net of effects of acquisitions - Receivables (82,196) (35,196) (11,056) Prepaid expenses and other 570 3,907 (1,379) Inventories (74) 1,703 (374) Accounts payable 52,875 25,748 20,027 Accrued compensation and profit-sharing contribution 5,286 339 5,275 Accrued income taxes and other 9,664 (3,105) 22,750 ------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 74,490 51,878 77,648 ------------------------------------------------------------------------------------------------------------------------- Investing Activities ------------------------------------------------------------------------------------------------------------------------- Purchases of property and equipment (15,491) (9,433) (5,071) Sales of property and equipment 360 430 1,981 Cash paid for acquisitions, net of cash acquired (5,898) (112,216) (6,799) Sales of long-term investments - 1,300 - Sales/maturities of available-for-sale securities - 44,172 37,594 Purchases of available-for-sale securities - (13,643) (57,900) Change in other assets, net (3,063) 553 (1,380) ------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (24,092) (88,837) (31,575) ------------------------------------------------------------------------------------------------------------------------- Financing Activities ------------------------------------------------------------------------------------------------------------------------- Stock issued for employee benefit plans 3,250 1,529 1,321 Repurchase of common stock (9,935) (2,745) (3,131) Cash dividends and distributions (13,438) (11,529) (7,419) ------------------------------------------------------------------------------------------------------------------------- Net cash used for financing activities (20,123) (12,745) (9,229) ------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 30,275 (49,704) 36,844 Cash and cash equivalents, beginning of year 49,637 99,341 62,497 ------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 79,912 $ 49,637 $ 99,341 ========================================================================================================================= Cash paid for income taxes $ 39,096 $ 42,348 $ 34,848 ========================================================================================================================= Cash paid for interest $ 151 $ - $ - ========================================================================================================================= Supplemental disclosure of noncash activities: Stock issued in acquisition (Note 2) $ - $ 36,925 $ - Restricted stock awarded (Note 6) $ 7,000 $ - $ - =========================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS C.H. Robinson Worldwide, Inc. and Subsidiaries 1. Summary of Significant Accounting Policies Basis of Presentation - C.H. Robinson Worldwide, Inc. and its Subsidiaries ("the Company," "we," "us," or "our") is a global provider of multimodal transportation services and logistics solutions through a network of 137 branch offices in 40 states throughout the United States, along with offices in Canada, Mexico, South America and Europe. The consolidated financial statements include the accounts of C.H. Robinson Worldwide, Inc. and its majority owned and controlled subsidiaries. Minority interests in subsidiaries are not significant. All significant intercompany transactions and balances have been eliminated in the consolidated financial statements. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate results could differ from those estimates. Revenue Recognition - Gross revenues consist of the total dollar value of goods and services purchased by customers. We act principally as the service provider for these transactions and recognize revenue as these services are rendered and goods are delivered. Common Stock Split - On October 24, 2000, the Company's board of directors declared a two-for-one stock split effected in the form of a 100% stock dividend distributed on December 1, 2000 to shareholders of record as of November 10, 2000. As a result of the stock split, the accompanying consolidated financial statements reflect an increase in the number of outstanding shares of common stock. All share and per share amounts have been restated to reflect the retroactive effect of the stock split. Foreign Currency - All balance sheet accounts of foreign subsidiaries are translated at the current exchange rate as of the end of the year. Statement of operations items are translated at average exchange rates during the year. The resulting translation adjustment is recorded as a separate component of comprehensive income in our statement of stockholders' investment and comprehensive income. Segment Reporting and Geographic Information - We have adopted the provisions of Statement of Financial Accounting Standards No. 131, "Disclosure About Segments of an Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 establishes accounting standards for segment reporting. We operate in a single segment. The following table presents our gross revenues (based on location of the customer) for the years ended December 31 and our long-lived assets as of December 31 by geographic regions (in thousands): 2000 1999 1998 ------------------------------------------------------------------------ Gross revenues United States $2,754,292 $2,144,386 $1,935,191 Other locations 127,883 116,641 102,948 ------------------------------------------------------------------------ $2,882,175 $2,261,027 $2,038,139 ======================================================================== 2000 1999 ------------------------------------------------------------------------ Long-lived assets United States $ 37,204 $ 33,882 Other locations 1,160 1,102 ------------------------------------------------------------------------ $ 38,364 $ 34,984 ======================================================================== Cash and Cash Equivalents - Cash and cash equivalents consist primarily of highly liquid investments with an original maturity of three months or less. The carrying amount approximates fair value due to the short maturity of the instruments. Inventories - Inventories consist primarily of produce, fruit concentrates and related products held for resale and are stated at the lower of cost or market. Property and Equipment - Property and equipment additions are recorded at cost. Maintenance and repair expenditures are charged to expense as incurred. Depreciation is computed using straight-line and accelerated methods over the estimated lives of the assets of three to 10 years. Amortization of leasehold improvements is computed over the shorter of the lease term or the estimated useful lives of the improvements. 20 Intangible Assets - Goodwill and other identifiable intangible assets are being amortized over their estimated economic lives, ranging from three to 40 years. We periodically evaluate whether events and circumstances have occurred that indicate the remaining balance of intangible assets may not be recoverable. Income Per Share - Basic net income per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share is computed under the treasury stock method and is calculated to compute the dilutive effect of outstanding options and other securities. Comprehensive Income - Comprehensive income includes any changes in the equity of an enterprise from transactions and other events and circumstances from nonowner sources. Our foreign currency translation adjustment is currently our only component of other comprehensive income and is presented on our consolidated statements of stockholders' investment and comprehensive income. Recently Issued Accounting Pronouncements - Effective January 1, 2001, we have adopted the provisions of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133)" and Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 (SFAS No. 137)." SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments imbedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires changes in the derivatives' fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No. 133 did not have any impact on our consolidated statements of operations or balance sheets. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101, as amended, summarizes some of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. We have adopted SAB 101 and determined it was not material. 2. Acquisition of American Backhaulers, Inc. On December 16, 1999, we acquired all of the operations and certain assets and liabilities of American Backhaulers, Inc. (ABH). ABH was a privately held, non-asset-based third-party transportation provider, located primarily in Chicago, Illinois. The purchase price of the assets was $136,925,000, including $100,000,000 in cash and 2,241,430 newly issued shares of our common stock. We accounted for the acquisition using the purchase method of accounting, with assets acquired including primarily goodwill and other identifiable intangible assets. We are amortizing the goodwill associated with the acquisition over 40 years, and all other intangible assets over periods ranging from three to seven years. Our results of operations include the operations of ABH from the closing date through December 31, 2000. Pro forma operating results of the combined enterprise assuming this transaction had occurred on January 1, 1998 are as follows for the years ended December 31 (unaudited, in thousands, except per share data): 1999 1998 --------------------------------------------------------------------------- Net revenues Pro forma $345,706 $286,185 Income before income taxes Pro forma $ 91,264 $ 67,824 Net income Pro forma $ 55,032 $ 40,898 Basic net income per share Pro forma $ .65 $ .49 Diluted net income per share Pro forma $ .64 $ .48 =========================================================================== 3. Marketable Securities In December 1999, we liquidated our portfolio of marketable securities to fund the acquisition of ABH. We have historically classified all of our marketable securities as available-for-sale. Available-for-sale securities are carried at amortized cost, which approximates market value. The unrealized gains and losses were not material as the fair value approximates amortized cost. The gross realized gains and losses on sales of available-for-sale securities were not material for the years ended December 31, 1999 or 1998. 21 4. Lines of Credit We have $40.0 million available under an existing line of credit at an interest rate of LIBOR plus 60 basis points (6.60% as of December 31, 2000). During 2000, we had gross borrowings on this facility of $210.5 million, all of which was repaid by June 2000. The maximum outstanding balance during the 12 months was $14.0 million. There were no borrowings during 1999 or 1998. Our credit agreement contains certain financial covenants, but does not restrict the payment of dividends. We were in compliance with all covenants of the agreement as of December 31, 2000. The line of credit expires on December 16, 2002 and we expect to be able to renew the line of credit in the future. We also have 20 million French francs available under a line of credit at an interest rate of Euribor plus 90 basis points (5.76% at December 31, 2000). This discretionary line of credit has no expiration date. As of December 31, 2000, the outstanding balance was 13.0 million French francs or $1.8 million, which is included in income taxes and other current liabilities. Our credit agreement contains certain financial covenants, but does not restrict the payment of dividends. We were in compliance with all covenants of this agreement as of December 31, 2000. 5. Income Taxes C.H. Robinson Worldwide, Inc. and its 80% (or more) owned U.S. subsidiaries file a consolidated federal income tax return. We file unitary or separate state returns based on state filing requirements. The components of the provision for income taxes consist of the following at December 31 (in thousands): 2000 1999 1998 --------------------------------------------------------------------------- Tax provision: Federal $38,744 $33,207 $29,974 State 7,114 5,649 5,862 Foreign 1,171 1,094 1,708 --------------------------------------------------------------------------- 47,029 39,950 37,544 Deferred provision (benefit) (513) (4,822) (9,272) --------------------------------------------------------------------------- Total provision $46,516 $35,128 $28,272 =========================================================================== A reconciliation from the provision for income taxes using the statutory federal income tax rate to our effective income tax rate at December 31 is as follows: 2000 1999 1998 --------------------------------------------------------------------------- Federal statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal benefit 3.1 2.7 4.1 Foreign and other 1.4 2.0 .6 --------------------------------------------------------------------------- 39.5% 39.7% 39.7% =========================================================================== Deferred tax assets (liabilities) are comprised of the following at December 31 (in thousands): 2000 1999 --------------------------------------------------------------------------- Deferred tax assets: Receivables $ 6,929 $ 6,735 Accrued expenses 7,291 7,092 Amortization - 1,303 Accrued compensation 3,995 1,409 Other 4,264 5,396 Deferred tax liabilities: Long-lived assets (1,577) (2,169) Amortization (623) - --------------------------------------------------------------------------- Net deferred taxes $20,279 $19,766 =========================================================================== 6. Capital Stock and Stock Award Plans Preferred Stock - Our Certificate of Incorporation (Certificate) authorizes the issuance of 20,000,000 shares of Preferred Stock, $.10 per share, none of which is outstanding. The Preferred Stock may be issued by resolution of our board of directors from time to time without any action of the stockholders. The Preferred Stock may be issued in one or more series and the board of directors may fix the designation and relative powers, including voting powers, preferences, rights, qualifications, limitations and restrictions of each series, so authorized. The issuance of any such series may have an adverse effect on the rights of holders of Common Stock or impede the completion of a merger, tender offer or other takeover attempt. 22 Common Stock - Our Certificate authorizes 130,000,000 shares of Common Stock, par value $.10 per share. Subject to the prior rights of any series of Preferred Stock which may from time to time be authorized and outstanding, holders of Common Stock are entitled to receive dividends out of funds legally available when, and if declared by the board of directors and to receive pro rata the net assets of the Company legally available for distribution upon liquidation or dissolution. Holders of Common Stock are entitled to one vote for each share of Common Stock held on each matter to be voted on by the holders of Common Stock, including the election of directors. Holders of Common Stock are not entitled to cumulative voting, which means that the holders of more than 50% of the outstanding Common Stock can elect all of any class of directors if they choose to do so. The stockholders do not have preemptive rights. All outstanding shares of Common Stock are fully paid and nonassessable. Share Repurchase Program - In conjunction with our initial public offering, our board of directors authorized a stock repurchase plan which allows management to repurchase 2,000,000 common shares for reissuance upon the exercise of employee stock options and other stock plans. During 1999, the board of directors also authorized a second stock repurchase plan, allowing for the repurchase of 4,000,000 shares. We purchased approximately 364,600, 170,000 and 276,000 shares of our common stock for the treasury at an aggregate cost of $9,935,000, $2,745,000 and $3,131,000 in 2000, 1999 and 1998 under the initial stock repurchase plan. No shares have been repurchased under the 1999 stock repurchase plan. Stock Award Plans - We have a 1997 Omnibus Stock Plan to grant certain stock awards, including stock options at fair market value and restricted shares, to our key employees and outside directors. A maximum of 4,000,000 shares can be granted under this plan; 892,680 shares were available for stock awards as of December 31, 2000. The contractual lives of all options granted are 10 years. The following schedule summarizes activity in the plans: Stock Options Weighted Average Shares Exercise Price ----------------------------------------------------------------------------- Outstanding at December 31, 1997 951,334 $ 9.00 Granted - - Exercised - - Terminated (87,242) 9.00 ----------------------------------------------------------------------------- Outstanding at December 31, 1998 864,092 9.00 ----------------------------------------------------------------------------- Granted 977,090 12.59 Exercised (2,500) 9.00 Terminated (77,620) 11.27 ----------------------------------------------------------------------------- Outstanding at December 31, 1999 1,761,062 10.90 ----------------------------------------------------------------------------- Granted 1,166,400 20.35 Exercised (37,260) 9.00 Terminated (59,934) 14.12 ----------------------------------------------------------------------------- Outstanding at December 31, 2000 2,830,268 14.75 ----------------------------------------------------------------------------- Exercisable at December 31, 1998 - - Exercisable at December 31, 1999 225,698 9.00 Exercisable at December 31, 2000 396,993 $ 9.00 ============================================================================= We follow the provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123) which encourages, but does not require, a fair value based method of accounting for employee stock options or similar equity instruments. As permitted under SFAS No. 123, we have continued to account for employee stock options using the intrinsic value method outlined in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." 23 Accordingly, we have not recognized any compensation expense for our stock options. Had compensation expense for our stock-based compensations plans been determined based on the fair value at the grant dates consistent with the method of SFAS No. 123, our net income and net income per share would have been as follows (in thousands, except per share amounts): 2000 1999 ----------------------------------------------------------------------------- Net income As reported $71,242 $53,349 Adjusted $69,448 $52,540 ----------------------------------------------------------------------------- Basic income per share As reported $ .84 $ .65 Adjusted $ .82 $ .64 Diluted income per share As reported $ .83 $ .64 Adjusted $ .81 $ .63 ============================================================================= The adjusted effects to net income presented reflect compensation costs for all outstanding options, which were granted during 1997, 1999 and 2000. The compensation cost is being reflected over the options' vesting period of five years. Therefore, the full impact of calculating compensation costs of options under SFAS No. 123 is not reflected. The fair value per option was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: 2000 Grant 1999 Grant 1997 Grant ---------------------------------------------------------------------------- Risk-free interest rate 6.79% 5.10% 5.72% Expected dividend yield 1.00% 1.00% 1.00% Expected volatility factor 30.21% 30.00% 25.00% Expected option term 7 years 7 years 7 years ---------------------------------------------------------------------------- Fair value per option $7.94 $4.66 $3.05 ============================================================================ Restricted Share Award - During 2000, the Company awarded to certain key employees 237,292 restricted shares which were granted under the 1997 Omnibus Stock Plan. The shares are subject to certain vesting requirements. The value of such stock was established by the market price on the date of grant and was recorded as deferred compensation within stockholders' investment in the accompanying financial statements and is being amortized ratably over the applicable restricted stock vesting period. During 2000, $20,000 was charged to expense related to the restricted shares. 7. Commitments and Contingencies Employee Benefit Plans - We participate in a defined contribution profit-sharing and savings plan which qualifies under section 401(k) of the Internal Revenue Code and covers all full-time employees with one or more years of continuous service. Annual profit-sharing contributions are determined by each company's board of directors, in accordance with the provisions of the plan. We can also elect to make matching contributions to the plan at the discretion of our board of directors. We contributed a 4% match in 2000 and a 3% match in 1999. Profit-sharing plan expense, including matching contributions, was approximately $8,838,000 in 2000, $5,928,000 in 1999 and $4,560,000 in 1998. Non-Qualified Deferred Compensation Plan - During 2000, the Company adopted the Robinson Companies Nonqualified Deferred Compensation Plan that provides to a select group of management and highly compensated employees the opportunity to defer a specified percentage or dollar amount of their cash compensation. Participants may elect to defer up to 100% of their cash compensation. The plan also permits participants to defer the delivery of shares of Company Common Stock representing the gain on the exercise of incentive stock options and nonqualified stock options. The Company's obligations under this plan are unfunded, and they are unsecured general obligations of the Company. Lease Commitments - We lease certain facilities, equipment and automobiles under operating leases. Lease expense was $18,191,000 for 2000, $16,072,000 for 1999 and $14,376,000 for 1998. Minimum future lease commitments under noncancelable lease agreements in excess of one year as of December 31, 2000 are as follows (in thousands): -------------------------------------------------------------------------- 2001 $12,803 2002 9,725 2003 5,921 2004 4,053 2005 1,151 Thereafter 496 -------------------------------------------------------------------------- $34,149 ========================================================================== Litigation - We are currently not subject to any pending or threatened litigation, other than routine litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on our financial condition or results of operations. 24 8. Supplementary Data (unaudited) Our results of operations for each of the quarters in the years ended December 31, 2000 and 1999 are summarized below (in thousands, except per share data).
Quarters Ended 2000 March 31 June 30 September 30 December 31 ------------------------------------------------------------------------------------------------------------------------------- Gross revenues $650,091 $750,994 $747,615 $733,475 Cost of transportation and products 551,716 644,596 640,461 626,059 ------------------------------------------------------------------------------------------------------------------------------- Net revenues 98,375 106,398 107,154 107,416 Income from operations 25,089 31,436 30,150 30,333 ------------------------------------------------------------------------------------------------------------------------------- Net income $ 15,209 $ 18,944 $ 18,460 $ 18,629 =============================================================================================================================== Basic net income per share $ .18 $ .22 $ .22 $ .22 =============================================================================================================================== Diluted net income per share $ .18 $ .22 $ .21 $ .22 =============================================================================================================================== Basic weighted average shares outstanding 84,562 84,582 84,518 84,457 Dilutive effect of outstanding stock awards 912 1,044 1,404 1,387 ------------------------------------------------------------------------------------------------------------------------------- Diluted weighted average shares outstanding 85,474 85,626 85,922 85,844 =============================================================================================================================== Quarters Ended 1999 March 31 June 30 September 30 December 31 ------------------------------------------------------------------------------------------------------------------------------- Gross revenues $509,275 $579,423 $593,354 $578,975 Cost of transportation and products 442,256 506,027 518,351 501,110 ------------------------------------------------------------------------------------------------------------------------------- Net revenues 67,019 73,396 75,003 77,865 Income from operations 16,911 22,060 22,193 22,664 ------------------------------------------------------------------------------------------------------------------------------- Net income $ 10,772 $ 13,982 $ 14,042 $ 14,553 =============================================================================================================================== Basic net income per share $ .13 $ .17 $ .17 $ .18 =============================================================================================================================== Diluted net income per share $ .13 $ .17 $ .17 $ .17 =============================================================================================================================== Basic weighted average shares outstanding 82,372 82,390 82,362 82,702 Dilutive effect of outstanding stock awards 314 566 662 654 ------------------------------------------------------------------------------------------------------------------------------- Diluted weighted average shares outstanding 82,686 82,956 83,024 83,356 ===============================================================================================================================
25 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS C.H. Robinson Worldwide, Inc. and Subsidiaries To C.H. Robinson Worldwide, Inc.: We have audited the accompanying consolidated balance sheets of C.H. Robinson Worldwide, Inc. (a Delaware corporation) and Subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' investment and comprehensive income and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of C.H. Robinson Worldwide, Inc. and Subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP Minneapolis, Minnesota January 29, 2001 REPORT OF MANAGEMENT The management of C.H. Robinson Worldwide, Inc., is responsible for the integrity and objectivity of the consolidated financial statements and other financial information contained in this annual report. The consolidated financial statements and related information were prepared in accordance with accounting principles generally accepted in the United States and include some amounts that are based on management's best estimates and judgments. To meet its responsibility, management depends on its accounting systems and related internal accounting controls. These systems are designed to provide reasonable assurance, at an appropriate cost, that financial records are reliable for use in preparing financial statements and that assets are safe-guarded. Qualified personnel throughout the organization maintain and monitor these internal accounting controls on an ongoing basis. The Audit Committee of the Board of Directors, composed entirely of directors who are not employees of the Company, meets periodically and privately with the Company's independent public accountants as well as management to review accounting, auditing, internal control, financial reporting and other matters. /s/ John P. Wiehoff John P. Wiehoff President /s/ Chad M. Lindbloom Chad M. Lindbloom Vice President and Chief Financial Officer 26