C.H. Robinson's Q4 total revenues increased 19.9% to $4.5 billion
C.H. Robinson Worldwide Inc has reported financial results for the quarter ended December 31, 2020.
“Our fourth quarter was marked by solid performance across our broad service portfolio, continued progress on repricing our truckload business to reflect the changing market conditions, and further advancements in our technology and transformation efforts that are providing meaningful improvements,” said Bob Biesterfeld, chief executive officer of C.H. Robinson. He added, "Our enterprise portfolio that allows us to offer end-to-end solutions for our customers is unique to the logistics industry, and shippers continue to rely on Robinson's global supply chain expertise and our data and scale advantages to ensure critical goods are moved as quickly and as inexpensively as possible."
Fourth quarter results summary
Total revenues increased 19.9 per cent to $4.5 billion, driven primarily by higher pricing and higher volume across most of our service lines. Gross profits increased 10.5 per cent to $636.1 million. Adjusted gross profits increased 10.7 per cent to $640.6 million, primarily driven by higher pricing and higher volume in our Global Forwarding business segment and contributions from the acquisition of Prime Distribution Services (Prime).
Operating expenses decreased 1.9 per cent to $433.8 million, primarily due to cost savings initiatives. Personnel expenses increased 3.4 per cent to $309.3 million, compared to the fourth quarter of 2019, which included a reduction in incentive compensation. Average headcount decreased 4.8 per cent, despite headcount additions from Prime that added approximately 2.0 percentage points.
Selling, general and administrative (“SG&A”) expenses of $124.5 million decreased 13.0 per cent, primarily due to cost savings initiatives including lower travel expenses. Income from operations totaled $206.8 million, up 51.2 per cent due to the increase in adjusted gross profits. Adjusted operating margin of 32.3 per cent increased 870 basis points. Interest and other expenses totaled $12.0 million, consisting primarily of $12.3 million of interest expense, which decreased $0.1 million versus last year due to a lower average debt balance.
The fourth quarter also included a $1.1 million favourable impact from foreign currency revaluation and realised foreign currency gains and losses. The effective tax rate in the quarter was 24.1 per cent compared to 21.4 per cent in the fourth quarter last year. The increase was primarily due to one-time items related to the tax provision in Mexico, which were favourable in the fourth quarter of 2019 and unfavorable in the fourth quarter of 2020. Net income totaled $147.8 million, up 49.1 per cent from a year ago. Diluted EPS of $1.08 increased 47.9 percent.
Full year results summary
Total revenues increased 5.9 per cent to $16.2 billion, driven primarily by higher pricing in ocean and air services and contributions from the Prime acquisition. Gross profits decreased 7.0 per cent to $2.4 billion. Adjusted gross profits decreased 6.7 per cent to $2.4 billion, primarily driven by lower adjusted gross profit margins in truckload services, partially offset by contributions from the Prime acquisition and higher adjusted gross profits in air and ocean services.
Operating expenses decreased 3.2 per cent to $1.7 billion. Personnel expenses decreased 4.3 per cent to $1.2 billion, driven primarily by cost savings initiatives, including a 2.8 percent decrease in average headcount, and a decline in benefits expenses and incentive compensation. SG&A expenses decreased 0.3 percent to $496.1 million, primarily due to significantly lower travel expenses, partially offset by the ongoing expenses from the Prime acquisition.
Income from operations totaled $673.3 million, down 14.8 per cent from last year due to a decline in adjusted gross profits. Adjusted operating margin of 27.9 per cent decreased 260 basis points. Interest and other expenses totaled $44.9 million, which primarily consists of $49.1 million of interest expense. The twelve-month period also included a $3.3 million favorable impact from foreign currency revaluation and realized foreign currency gains and losses.
The effective tax rate for the full year was 19.4 per cent compared to 22.3 per cent in the year-ago period. The lower effective tax rate was due primarily to the tax benefit related to stock-based compensation, including delivery of a one-time deferred stock award that was granted to the company's prior chief executive officer in 2000, and due to tax planning initiatives. Net income totaled $506.4 million, down 12.2 percent from a year ago. Diluted EPS of $3.72 decreased 11.2 per cent.
North American Surface Transportation results
Fourth quarter total revenues for C.H. Robinson's NAST segment totaled $3.1 billion, an increase of 10.8 per cent over the prior year, primarily driven by higher truckload pricing and an increase in less than truckload (LTL) shipments. NAST adjusted gross profits increased 1.6 per cent in the quarter to $396.8 million, with the March 2020 acquisition of Prime contributing 4.0 percentage points of adjusted gross profit growth in the quarter. Adjusted gross profits in truckload decreased 2.1 percent and LTL adjusted gross profits increased 4.0 per cent versus the year-ago period. Our average truckload linehaul rate per mile charged to our customers, which excludes fuel surcharges, increased approximately 29 per cent in the quarter, while truckload linehaul cost per mile, excluding fuel surcharges, increased approximately 32.5 per cent. Truckload volume declined 3.5 per cent in the quarter, and LTL volumes grew 20.0 per cent, representing an overall market share gain for NAST in the quarter when compared to a 4 per cent increase in industry volumes, as measured by the Cass Freight Index. Operating expenses decreased 5.3 per cent primarily due to cost savings initiatives. Income from operations increased 15.3 per cent to $150.6 million, and adjusted operating margin expanded 450 basis points to 37.9 per cent. NAST average headcount was down 8.4 per cent in the quarter, with Prime contributing 4.0 percentage points of growth.
Global Forwarding Results
Fourth quarter total revenues for the Global Forwarding segment increased 71.7 per cent to $1.0 billion, primarily driven by higher pricing in ocean across the industry driven by higher demand and higher pricing in air due to reduced air cargo capacity, increased charter flights and larger shipment sizes.
Adjusted gross profits increased 39.6 per cent in the quarter to $180.1 million. Ocean adjusted gross profits increased 53.1 per cent, driven by higher pricing and a 12.0 percent increase in volumes. Adjusted gross profits in air increased 38.3 per cent driven by higher pricing, partially offset by a 7.5 per cent decline in shipments. Customs adjusted gross profits increased 4.5 per cent, primarily driven by an 8.0 per cent increase in transaction volume. Operating expenses increased 6.7 per cent, primarily driven by increased incentive compensation in personnel expenses and partially offset by cost savings initiatives.
Fourth quarter average headcount decreased 4.1 per cent. Income from operations increased 289.1 per cent to $58.5 million, and adjusted operating margin expanded 2,080 basis points to 32.5 per cent in the quarter.
All other and corporate Results
Total revenues and adjusted gross profits for Robinson Fresh, Managed Services and Other Surface Transportation are summarized (dollars in thousands): Fourth quarter Robinson Fresh adjusted gross profits increased 3.0 per cent to $23.6 million, primarily due to volume growth and margin expansion in our retail vertical. Managed Services adjusted gross profits increased 15.7 per cent in the quarter, primarily due to a 27.0 per cent increase in volume. Other Surface Transportation adjusted gross profits increased 2.9 per cent to $15.4 million. Europe truckload adjusted gross profit was up 1.7 percent in the quarter due to a 7.0 percent volume increase and strength of the Euro.
“Due to several factors, including shortages in the number of drivers and available carrier capacity, freight markets remain tight, and we anticipate this will continue for much of 2021. We're committed to creating better outcomes for our customers and carriers, by delivering industry leading technology that is built by and for supply chain experts and by leveraging our broad service portfolio and our unmatched combination of experience, scale and information advantage to meet their ever-changing needs,” Biesterfeld stated. "We're also firmly committed to the focus areas of our investors, including profitable market share growth, investing in technology to unlock growth and efficiency, being a responsible corporate citizen, and driving the transformation of C.H. Robinson, so that we can deliver industry-leading margins and enhance shareholder value."