-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fzord4A5SnALxko/BzazN3UF+O8X+xcK6GVDznvktKofbS1pk0F20/9Da3pCPl/t gRu1DOkGiCfJHFHT4iAoXA== 0001045969-98-000808.txt : 19981116 0001045969-98-000808.hdr.sgml : 19981116 ACCESSION NUMBER: 0001045969-98-000808 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: C H ROBINSON WORLDWIDE INC CENTRAL INDEX KEY: 0001043277 STANDARD INDUSTRIAL CLASSIFICATION: ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO [4731] IRS NUMBER: 411883630 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23189 FILM NUMBER: 98747778 BUSINESS ADDRESS: STREET 1: 8100 MITCHELL ROAD STREET 2: #200 CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 6129378500 MAIL ADDRESS: STREET 1: 8100 MITCHEL ROAD STREET 2: #200 CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ____________ Commission File Number 000-23189 C.H. ROBINSON WORLDWIDE, INC. (Exact name of registrant as specified in its charter) Delaware 41-1883630 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 8100 South Mitchell Road, Suite 200, Eden Prairie, Minnesota 55344-2248 (Address of principal executive offices) (Zip Code) (612) 937-8500 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No As of October 31, 1998, the number of outstanding shares of the registrant's common stock was 41,200,819. PART I -- FINANCIAL INFORMATION ITEM 1. Financial Statements C.H. ROBINSON WORLDWIDE, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In Thousands, except per share amounts)
SEPTEMBER 30, DECEMBER 31, 1998 1997 --------- --------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents .................................................. $ 101,258 $ 62,497 Available-for-sale securities .............................................. 20,723 10,428 Receivables, net of allowance for doubtful accounts of $12,279 and $8,936 .. 237,805 206,743 Inventories ................................................................ 3,302 3,109 Deferred tax benefit ....................................................... 6,761 4,781 Prepaid expenses and other ................................................. 5,462 5,797 Income taxes receivable .................................................... -- 17,334 --------- --------- Total current assets ..................................................... 375,311 310,689 PROPERTY AND EQUIPMENT, net ................................................... 20,223 22,226 INTANGIBLE & OTHER ASSETS, net ................................................ 10,550 7,713 --------- --------- $ 406,084 $ 340,628 ========= ========= LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES: Accounts payable ........................................................... $ 202,084 $ 166,789 Accrued expenses- Compensation and profit-sharing contribution ............................. 20,931 22,107 Income taxes & other ..................................................... 21,384 12,751 --------- --------- Total current liabilities .............................................. 244,399 201,647 STOCKHOLDERS' INVESTMENT Preferred stock, $0.10 par value, 20,000 shares authorized; none outstanding -- -- Common stock, $0.10 par value; 130,000 shares authorized; 41,265 issued, 41,203 and 41,265 outstanding ............................. 4,126 4,126 Additional paid-in capital ................................................. 62,000 62,108 Retained earnings .......................................................... 97,988 73,465 Foreign currency translation adjustment .................................... (1,052) (718) Treasury stock at cost (62 and 0 shares).................................... (1,377) -- --------- --------- Total stockholders' investment ......................................... 161,685 138,981 --------- --------- $ 406,084 $ 340,628 ========= =========
The accompanying notes are an integral part of these condensed consolidated balance sheets. 2 C.H. ROBINSON WORLDWIDE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations and Comprehensive Income (In Thousands, except per share data) (unaudited)
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, -------------------------- -------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- GROSS REVENUES ........................ $ 516,181 $ 466,408 $ 1,531,042 $ 1,321,560 COST OF TRANSPORTATION AND PRODUCTS ....................... 452,422 412,944 1,348,770 1,168,940 ----------- ----------- ----------- ----------- NET REVENUES .......................... 63,759 53,464 182,272 152,620 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ............ 44,826 38,146 131,364 110,611 ----------- ----------- ----------- ----------- INCOME FROM OPERATIONS ................ 18,933 15,318 50,908 42,009 INVESTMENT AND OTHER INCOME ........... 831 936 1,961 2,817 ----------- ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES .. 19,764 16,254 52,869 44,826 PROVISION FOR INCOME TAXES ............ 7,853 6,369 20,972 17,708 ----------- ----------- ----------- ----------- NET INCOME FROM CONTINUING OPERATIONS ......................... 11,911 9,885 31,897 27,118 NET INCOME FROM DISCONTINUED OPERATIONS, net of income taxes .... -- 550 -- 1,450 ----------- ----------- ----------- ----------- NET INCOME ............................ $ 11,911 $ 10,435 $ 31,897 $ 28,568 ----------- ----------- ----------- ----------- OTHER COMPREHENSIVE INCOME: Foreign currency translation adjustment.......................... (88) -- (335) -- ----------- ----------- ----------- ----------- COMPREHENSIVE INCOME .................. $ 11,823 $ 10,435 $ 31,562 $ 28,568 =========== =========== =========== =========== BASIC NET INCOME PER SHARE: From continuing operations ......... $ 0.29 $ 0.24 $ 0.77 $ 0.66 From discontinued operations ....... -- 0.01 -- 0.03 ----------- ----------- ----------- ----------- Net income ......................... $ 0.29 $ 0.25 $ 0.77 $ 0.69 =========== =========== =========== =========== DILUTED NET INCOME PER SHARE: From continuing operations ......... $ 0.29 $ 0.24 $ 0.77 $ 0.66 From discontinued operations ....... -- 0.01 -- 0.03 ----------- ----------- ----------- ----------- Net income ......................... $ 0.29 $ 0.25 $ 0.77 $ 0.69 =========== =========== =========== =========== BASIC WEIGHTED AVERAGE SHARES OUTSTANDING ........................ 41,203 41,265 41,223 41,292 DILUTIVE EFFECT OF OUTSTANDING STOCK OPTIONS ............................ 89 -- 97 -- ----------- ----------- ----------- ----------- DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING ........................ 41,292 41,265 41,320 41,292 =========== =========== =========== ===========
The accompanying notes are an integral part of these condensed consolidated statements. 3 C.H. ROBINSON WORLDWIDE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In Thousands) (unaudited)
NINE MONTHS ENDED SEPTEMBER 30, ---------------------- 1998 1997 --------- --------- OPERATING ACTIVITIES: Net income .......................................................... $ 31,897 $ 28,568 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization ..................................... 6,274 6,293 Loss on sale of assets ............................................ 32 -- Deferred income taxes ............................................. (2,692) (992) Changes in operating elements- Receivables ..................................................... (28,669) (30,960) Inventories ..................................................... (193) 1,938 Prepaid expenses and other current assets ....................... 491 (4,612) Accounts payable ................................................ 29,969 23,118 Accrued compensation and profit sharing ......................... (1,230) 663 Accrued income taxes and other .................................. 25,323 12,249 --------- --------- Net cash provided by operating activities ..................... 61,202 36,265 INVESTING ACTIVITIES: Additions of property and equipment ................................. (4,007) (4,078) Disposals of property and equipment ................................. 1,857 1,311 Sales of long term investments ...................................... -- 4,349 Sales/maturities of available-for-sale securities ................... 22,285 78,670 Purchases of available-for-sale securities .......................... (32,578) (48,903) Cash used by discontinued operations ................................ -- (3,935) Other, net .......................................................... (3,538) 577 --------- --------- Net cash provided by (used for) investing activities .......... (15,981) 27,991 FINANCING ACTIVITIES: Sales of common stock ............................................... 1,062 103 Repurchases of common stock ......................................... (2,575) (1,416) Cash dividends ...................................................... (4,947) (825) --------- --------- Net cash used for financing activities ........................ (6,460) (2,138) --------- --------- Net increase in cash and cash equivalents ..................... 38,761 62,118 CASH AND CASH EQUIVALENTS, beginning of period ......................... 62,497 42,567 --------- --------- CASH AND CASH EQUIVALENTS, end of period ............................... $ 101,258 $ 104,685 ========= =========
The accompanying notes are an integral part of these condensed consolidated statements. 4 C.H. ROBINSON WORLDWIDE INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) GENERAL: Unless the context otherwise requires, the use of the terms "Company," "we," "us," and "our" in the following refers to C.H. Robinson Worldwide, Inc. and its Subsidiaries. We are a global provider of multimodal transportation services and logistic solutions through a network of branch offices throughout the United States, along with offices in Canada, Mexico, Belgium, the United Kingdom, France, Italy, Poland, Brazil and South Africa. The condensed consolidated financial statements include the accounts of C.H. Robinson Worldwide, Inc. and its majority owned and controlled subsidiaries. Our financial services segment, which was sold in the fourth quarter of 1997, is presented in the accompanying consolidated financial statements as discontinued operations. Minority interests in subsidiaries are not significant. All significant intercompany transactions and balances have been eliminated in the condensed consolidated financial statements. The condensed consolidated financial statements which are unaudited have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In management's opinion, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods presented. The results of operations for the nine months ended September 30, 1998 and 1997 are not necessarily indicative of results to be expected for the entire year. Pursuant to SEC rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements. The condensed consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT: The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131) in June 1997. SFAS No. 131 establishes accounting standards for segment reporting and is effective for fiscal years beginning after December 15, 1997. We believe the adoption of SFAS No. 131 will not affect our financial statements or the disclosures contained therein. 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the Company's Condensed Consolidated Financial Statements and Notes thereto. GENERAL Gross revenues represent the total amount of services and goods we have sold to our customers. Costs of transportation and products include our direct costs of transportation contracted, including motor carrier, intermodal, ocean, air, and other costs, and our purchase price of products sourced. 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 costs 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 generally, results of operations 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 higher in the second and third quarters than in the first and fourth quarters. Although seasonality in the transportation industry has not had a significant impact on the Company's cash flow or results of operations in recent years, we cannot fully predict the impact it may have in the future. Inflation has not materially affected our operations due to the short-term, transactional basis of our business. RESULTS OF OPERATIONS The following table summarizes net revenue by service line:
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 1998 1997 % change 1998 1997 % change --------------------------- --------------------------- Net Revenue (in thousands) Transportation $ 49,036 $ 41,205 19.0% $139,261 $116,887 19.1% Sourcing 11,451 9,997 14.5 34,734 29,659 17.1 Information services 3,272 2,262 44.7 8,277 6,074 36.3 -------------------------- -------------------------- Total $ 63,759 $ 53,464 19.3% $182,272 $152,620 19.4% ========================== ==========================
The following table represents certain income statement data shown as percentages of the Company's net revenues:
Three Months Ended Nine Months Ended September 30, September 30, -------------- -------------- 1998 1997 1998 1997 ----- ----- ----- ----- Net revenues 100.0% 100.0% 100.0% 100.0% Selling, general and administrative expenses 70.3 71.3 72.1 72.5 ----- ----- ----- ----- Income from operations 29.7 28.7 27.9 27.5 Investment and other income 1.3 1.8 1.1 1.9 ----- ----- ----- ----- Income from continuing operations before provision for income taxes 31.0 30.4 29.0 29.4 Provision for income taxes 12.3 11.9 11.5 11.6 ----- ----- ----- ----- Net income from continuing operations 18.7% 18.5% 17.5% 17.8% ===== ===== ===== =====
6 THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1997 Revenues. Gross revenues for the three months ended September 30, 1998 were $516.2 million, an increase of 10.7% over gross revenues of $466.4 million for the three months ended September 30, 1997. Net revenues for the three months ended September 30, 1998 were $63.8 million, an increase of 19.3% over net revenues of $53.5 million for the three months ended September 30, 1997, resulting from an increase in transportation services net revenues of 19.0% to $49.0 million, an increase in sourcing net revenues of 14.5% to $11.5 million, and an increase in information services net revenues of 44.7% to $3.3 million. Our net revenue growth is increasing at a faster rate than our gross revenue growth due to the different growth rates in the mix 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. As our transportation and information services lines have been growing faster than our sourcing line, our net revenues are growing faster than gross revenues and are becoming a larger percentage of gross revenues than in previous periods. The increase in transportation net revenue resulted primarily from an increase in transaction volume. The increase in transaction volume was driven by significant expansion of business with current customers and from new domestic and international customers. Sourcing net revenues increased by 14.5% due principally to net revenue growth from sourcing produce for our large retail chain customers and a new program with an international produce exporter. The increase in information services net revenue was the result of significant growth in transaction volume. We continue to add customers and expand services with existing customers. We also acquired a non-asset based LTL carrier with an information services line in the third quarter of 1998. This addition of net revenue accounted for approximately one fourth of our third quarter growth in information services net revenue. Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended September 30, 1998 were $44.8 million, an increase of 17.5% over $38.1 million for the three months ended September 30, 1997. Selling, general and administrative expenses as a percent of net revenue decreased to 70.3% for the three months ended September 30, 1998 compared to 71.3% for the three months ended September 30, 1997. This reduction was due primarily to the elimination and consolidation of warehouse facilities. Income from Operations. Income from operations was $18.9 million for the three months ended September 30, 1998, an increase of 23.6% over $15.3 million for the three months ended September 30, 1997. Income from operations as a percent of net revenue were 29.7% and 28.7% for the three months ended September 30, 1998 and for the three months ended September 30, 1997, respectively. Investment and Other Income. Investment and other income was $831,000 for the three months ended September 30, 1998, a decrease of 11.2% from $936,000 for the three months ended September 30, 1997. This decrease was the result of a special dividend paid on October 10, 1997 in conjunction with the initial public offering, which lowered the amount of cash available for investments. Provision for Income Taxes. The effective income tax rates for continuing operations were 39.7% and 39.2% for the three months ended September 30, 1998 and for the three months ended September 30, 1997. 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 their federal benefit. Net Income from Continuing Operations. Net income from continuing operations was $11.9 million for the three months ended September 30, 1998, an increase of 20.5% over $9.9 million for the three months ended September 30, 1997. Net income from continuing operations per share increased by 20.8% to $0.29 (basic and diluted) for the three months ended September 30, 1998 compared to $0.24 (basic and diluted) for the three months ended September 30, 1997. 7 NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997 Revenues. Gross revenues for the nine months ended September 30, 1998 were $1.53 billion, an increase of 15.9% over gross revenues of $1.32 billion for the nine months ended September 30, 1997. Net revenues for the nine months ended September 30, 1998 were $182.3 million, an increase of 19.4% over net revenues of $152.6 million for the nine months ended September 30, 1997, resulting from an increase in transportation services net revenues of 19.1% to $139.3 million, an increase in sourcing net revenues of 17.1% to $34.7 million, and an increase in information services net revenues of 36.3% to $8.3 million. Our net revenue growth is increasing at a faster rate than our gross revenue growth due to the different growth rates in the mix 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. As our transportation and information services lines have been growing faster than our sourcing line, our net revenues are growing faster than gross revenues and are becoming a larger percentage of gross revenues than in previous periods. The increase in transportation net revenue resulted primarily from an increase in transaction volume. The increase in transaction volume was driven by significant expansion of business with current customers and from new domestic and international customers. Sourcing net revenues increased by 17.1% due principally to net revenue growth from sourcing produce for our large retail chain customers, a new program with an international produce exporter and temporary opportunities created by adverse weather conditions in major produce growing areas. Our branch network and relationships with produce growers worldwide provided us with sources of produce in this challenging market. The increase in information services net revenue was the result of significant growth in transaction volume. We continue to add customers and expand services with existing customers. We also acquired a non-asset based LTL carrier with an information services line in the third quarter of 1998. This addition of net revenue accounted for approximately one tenth of our year to date growth in information services net revenue. Selling, General and Administrative Expenses. Selling, general and administrative expenses for the nine months ended September 30, 1998 were $131.4 million, an increase of 18.8% over $110.6 million for the nine months ended September 30, 1997. Selling, general and administrative expenses as a percent of net revenue decreased slightly to 72.1% for the nine months ended September 30, 1998 compared to 72.5% for the nine months ended September 30, 1997 due primarily to the elimination and consolidation of warehouse facilities. Income from Operations. Income from operations was $50.9 million for the nine months ended September 30, 1998, an increase of 21.2% over $42.0 million for the nine months ended September 30, 1997. Income from operations as a percent of net revenue were 27.9% and 27.5% for the nine months ended September 30, 1998 and for the nine months ended September 30, 1997, respectively. Investment and Other Income. Investment and other income was $2.0 million for the nine months ended September 30, 1998, a decrease of 30.4% from $2.8 million for the nine months ended September 30, 1997. This decrease was the result of a special dividend paid on October 10, 1997 in conjunction with the initial public offering, which lowered the amount of cash available for investments. Provision for Income Taxes. The effective income tax rates for continuing operations were 39.7% and 39.5% for the nine months ended September 30, 1998 and for the nine months ended September 30, 1997. 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 their federal benefit. Net Income from Continuing Operations. Net income from continuing operations was $31.9 million for the nine months ended September 30, 1998, an increase of 17.6% over $27.1 million for the nine months ended September 30, 1997. Net income from continuing operations per share increased by 16.7% to $0.77 (basic and diluted) for the nine months ended September 30, 1998 compared to $0.66 (basic and diluted) for the nine months ended September 30, 1997. 8 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 $101.3 million and $62.5 million and available-for-sale securities totaled $20.7 million and $10.4 million as of September 30, 1998 and December 31, 1997, respectively. Working capital at September 30, 1998 and December 31, 1997 totaled $130.9 million and $109.0 million, respectively. We have had no long-term debt for the last five years and have no material commitments for future capital expenditures. We generated $61.2 million of positive cash flow from operations for the nine months ended September 30, 1998. We used $16.0 million of cash and cash equivalents for investing activities, including $10.3 million for net purchases of available-for-sale securities and $4.0 million to fund capital expenditures necessary for continued growth. We also used $6.5 million of cash and cash equivalents for financing activities, primarily to pay quarterly cash dividends. Assuming no change in our current business plan, management believes that our available cash, together with expected future cash generated from operations, is expected to be sufficient to satisfy its anticipated needs for working capital, capital expenditures and cash dividends for all future periods. In addition, we have $17.5 million available under two existing lines of credit at interest rates of 6.4% and 6.2%, respectively, as of September 30, 1998. The lines of credit renew annually and do not restrict the payment of dividends. There were no borrowings under the lines of credit during 1997 or the nine months ended September 30, 1998. We expect to be able to renew these lines of credit in the future. IMPACT OF YEAR 2000 The Company is addressing issues associated with computing difficulties that may affect existing computer systems as a result of malfunctions in programming codes written using two digits rather than four to define the applicable year. We have completed an assessment of our compliance with Year 2000 issues and will modify or replace portions of our hardware and software so that our computer systems will function properly with respect to dates after December 31, 1999. We have completed a majority of the modifications and are currently in the testing phase of our Year 2000 compliance process. This testing includes running test transactions with dates beyond December 31, 1999 through our systems to ensure our daily and monthly processing of transactions accepts the transactions, processes and stores them, and allows for extraction of the transaction data as needed to operate our business and generate our internal and external financial information. We expect to complete all such testing on our systems by December 31, 1998, with the exception of some testing efforts on our information services line, which we expect to complete by March 31, 1999. We have also determined that our general ledger system, fixed assets system and our payroll system are not compliant with Year 2000 requirements and are in process of replacing these systems. Our new general ledger system and fixed assets system are operational and are currently running parallel to our existing systems, with expected full conversion to occur before December 31, 1998. Our expected completion date for having our payroll system operational is June 30, 1999. Our information services line also has a commercial application from the Federal Reserve which is not Year 2000 compliant. Management expects a new version will be available by June 30, 1999. We do not anticipate any disruptions to be caused by embedded circuitry in our operational systems. In addition, we do not believe any material relationships exist with any customer, produce supplier or transportation carrier that would have a material impact on our business, results of operations or financial condition in the instance that these third parties would have material systems interruptions as a result of the Year 2000 situation. We have no single third party relationship that accounts for more than 5% of our business. Although we believe we have internally addressed our risks and have not discovered any material exposure with our third party relationships, there are inherent risks that we may not meet our objectives by December 31, 1999. In the event our systems are unable to process information or process information incorrectly, business interruption could result. Additionally, we could suffer loss of business if a number of our third party relationships, taken together, have similar problems. It is impossible to fully assess the potential consequences in the event there are disruptions in such infrastructure areas as utilities, communications, transportation, banking and government. 9 Any such business interruption could have a material adverse effect on our results of operations, liquidity, and financial condition depending on the duration of the interruption. We are developing contingency plans in the event we are unable to complete remediation efforts or unidentified problems develop. We expect to have these plans in place by June 30, 1999, but there can be no assurance that unexpected difficulties will not arise. We are using primarily internal resources for system modifications and testing. Total costs we have incurred, plus costs we plan to incur for programming, testing, purchase of Year 2000 testing software, and outside consultant costs are expected to be in the range of $300,000 to $400,000. We have incurred and expensed approximately $200,000 as of September 30, 1998. The actual cost could exceed this estimate. These costs, however, are not expected to have a material effect on our financial condition, results of operations, or cash flows. Our costs to replace the noncompliant systems mentioned above are not included in the range, as these replacements were planned to occur and we have not accelerated the replacement due to Year 2000 requirements. All other costs are being expensed as incurred. CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION The foregoing Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent the Company's expectations or beliefs, including, but not limited to, statements concerning the Company's operations and financial performance and condition, and the Company's assumptions about anticipated problems and estimated costs associated with Year 2000 issues. When used in this Form 10-Q and in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases, presentations to securities analysts or investors, in oral statements made by or with the approval of an executive officer of the Company, the words or phrases "believes," "may," "will," "expects," "should," "continue," "anticipates," "intends," "will likely result," "estimates," "projects" or similar expressions and variations thereof are intended to identify such forward-looking statements. However, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, certain of which are beyond the Company's control, and actual results may differ materially depending on a variety of important factors, including those described in Exhibit 99 to the Company's Form 10-K filed with the Securities and Exchange Commission with respect to the Company's fiscal year ended December 31, 1997. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. 10 PART II -- OTHER INFORMATION ITEM 1. Legal Proceedings In accordance with reporting requirements promulgated by the Securities and Exchange Commission, the Company has no new information to report regarding legal proceedings for this Quarterly Report on Form 10-Q. ITEM 2. Changes in Securities and Use of Proceeds None. ITEM 3. Defaults Upon Senior Securities None. ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 5. Other Information None. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1998. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 12, 1998 C.H. ROBINSON WORLDWIDE, INC. By /s/ D.R. Verdoorn ------------------------------- D.R. Verdoorn Chief Executive Officer By /s/ Chad Lindbloom ------------------------------- Chad Lindbloom Controller (principal accounting officer) 12 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF C.H. ROBINSON WORLDWIDE, INC. AND SUBSIDIARIES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q REPORT. 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 101,258 20,723 250,084 12,279 3,302 375,311 42,372 22,149 406,084 244,399 0 0 0 4,120 157,565 406,084 0 1,531,042 0 1,480,134 0 5,054 0 52,869 20,972 31,897 0 0 0 31,897 0.77 0.77
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