C. H. ROBINSON WORLDWIDE, INC. - FORM 8-K - EX-99.2 - EXHIBIT

Attached files

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8-K - 8-K - C. H. ROBINSON WORLDWIDE, INC.	phoenixproformadocument.htm
EX-99.1 - EXHIBIT - C. H. ROBINSON WORLDWIDE, INC.	exhibit9918-ka.htm
EX-23.1 - EXHIBIT - C. H. ROBINSON WORLDWIDE, INC.	exhibit2318-ka.htm

Exhibit 99.2

Unaudited Pro Forma Condensed Combined Financial Statements

On November 1, 2012, C.H. Robinson Worldwide, Inc. ("C.H. Robinson") completed the acquisition of all of the issued and outstanding shares of Phoenix International Freight Services, Ltd. ("Phoenix") for $571.5 million in cash and approximately $60.2 million in newly-issued shares of common stock of C.H. Robinson, plus an additional $45.6 million in cash representing the closing date preliminary Phoenix cash and working capital adjustment, in accordance with the purchase agreement.

The following Unaudited Pro Forma Condensed Combined Financial Information should be read in conjunction with the historical financial statements and accompanying notes of C.H. Robinson included in its Annual Report on Form 10-K for the year ended December 31, 2011 and Form 10-Q for the six months ended June 30, 2012, the historical audited financial statements and accompanying notes of Phoenix for the twelve months ended June 30, 2012 included in this Form 8-K/A, and the Current Report on Form 8-K dated October 16, 2012 regarding the disposition of T-Chek Systems, Inc. ("T-Chek"), a wholly owned subsidiary of C.H. Robinson, as amended by Amendment No. 1 thereto on Form 8-K/A filed on April 18, 2013.

The Unaudited Pro Forma Condensed Combined Balance Sheet combines historical balance sheets, giving effect to the acquisition as if it had occurred on June 30, 2012. The unaudited Pro Forma Combined Statements of Operations reflect the combined results of operations as if the disposition of T-Chek and acquisition of Phoenix had occurred at the beginning of C.H. Robinson's 2011 fiscal year.

The allocation of acquisition purchase price used to prepare the unaudited pro forma financial information is based on a preliminary valuation of assets acquired and liabilities assumed. Accordingly, the pro forma purchase price adjustments are preliminary, mainly with respect to certain working capital accounts, taxes and goodwill, and are subject to further adjustments as additional information becomes available and as additional analysis is performed. The preliminary pro forma purchase price adjustments have been made for the purposes of providing the Unaudited Pro Forma Financial Statements included herewith. A final determination of these fair values will include management's consideration of a valuation prepared by an independent valuation specialist. This valuation is based on the actual net tangible and intangible assets of Phoenix that exist as of the closing date of the transaction. We do not expect any revisions to the preliminary allocation of purchase price to have a material impact on the pro forma financial statements. In addition, the Unaudited Pro Forma Condensed Combined Financial Statements do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the acquisition.

The Unaudited Pro Forma Condensed Combined Financial Statements are provided for informational purposes only and are not necessarily indicative of results that would have occurred had the acquisition been completed as of the dates indicated. In addition, the Unaudited Pro Forma Financial Information does not purport to be indicative of the future financial position or operating results of the combined operations. There were no material transactions between C.H. Robinson and Phoenix during the periods presented in the Unaudited Pro Forma Condensed Combined Financial Statements that would need to be eliminated.

C.H. Robinson Worldwide, Inc.

Pro Forma Condensed Combined Balance Sheet

(Unaudited, in thousands)

As of June 30, 2012



	Historical										Historical
	C.H. Robinson			T-Chek Adjustments				Sub-total			Phoenix		Phoenix Adjustments				Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	240,627		$	263,952		3r	$	504,579		$	67,706	$	(444,122	)	3a	$	127,982
													(181		)	3h
Receivables, net	1,415,390			(51,406		)	3s	1,363,984			119,716		—				1,483,700
Deferred tax asset	6,743			—				6,743			978		—				7,721
Prepaid expenses and other	44,841			(1,430		)	3s	43,411			1,275		—				44,686
Total current assets	1,707,601			211,116				1,918,717			189,675		(444,303		)		1,664,089
Property and equipment, net	132,255			(2,431		)	3s	129,824			13,235		(1,911		)	3h	145,648
													4,500			3e
Goodwill	359,372			—				359,372			5,776		431,945			3c	797,093
Intangible and other assets, net	40,771			(16,871		)	3s	23,900			2,363		130,000			3d	166,795
													10,552			3j
													(20		)	3h
Total assets	$	2,239,999		$	191,814			$	2,431,813		$	211,049	$	130,763			$	2,773,625

LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable and outstanding checks	$	834,692		$	(89,354	)	3s	$	745,338		$	37,376	$	(3	)	3h	$	782,711
Current maturities of Long-term debt	—			—				—			891		173,000			3a	173,087
													(804		)	3g
Accrued expenses	114,649			(7,839		)	3s	214,165			12,133		8,000			3f	234,298
				379			3t
				106,976			3u
Total current liabilities	949,341			10,162				959,503			50,400		180,193				1,190,096

Long term liabilities	12,468			—				12,468			1,010		(664		)	3g	71,536
													48,170			3i
													10,552			3j
Total liabilities	961,809			10,162				971,971			51,410		238,251				1,261,632

Stockholders’ investment:
Common stock	16,217			—				16,217			39		111			3b	16,328
													(39		)	3g
Retained earnings	1,957,462			181,652			3v	2,139,114			144,817		(144,817		)	3g	2,131,114
													(8,000		)	3f
Additional paid-in capital	206,846			—				206,846			10,100		(10,100		)	3g	266,886
													60,040			3b
Accumulated other comprehensive (loss) income	(11,745		)	—				(11,745		)	2,193		(2,193		)	3g	(11,745		)
Treasury stock	(890,590		)	—				(890,590		)	—		—				(890,590		)
Non-controlling interest	—			—				—			2,490		(2,490		)	3h	—
Total Stockholders’ investment	1,278,190			181,652				1,459,842			159,639		(107,488		)		1,511,993
Total liabilities and stockholders’ investment	$	2,239,999		$	191,814			$	2,431,813		$	211,049	$	130,763			$	2,773,625

C.H. Robinson Worldwide, Inc.

Pro Forma Condensed Combined Statements of Operations (Unaudited)

For the Sixth Months Ended June 30, 2012

(in thousands, except for per share amounts)



	Historical								Historical
	C.H. Robinson		T-Chek Adjustments				Sub-total		Phoenix			Phoenix Adjustments				Pro Forma Combined
REVENUES:
Transportation	$	4,653,602	$	—			$	4,653,602	$	406,608		$	—			$	5,060,210
Sourcing	822,327		—				822,327		—			—				822,327
Payment Services	31,899		(26,129		)	3w	5,770		—			—				5,770
Total revenues	5,507,828		(26,129		)		5,481,699		406,608			—				5,888,307
COSTS AND EXPENSES:
Purchased transportation and related services	3,917,380		—				3,917,380		338,300			(14,612		)	3q	4,241,068
Purchased products sourced for resale	750,179		—				750,179		—			—				750,179
Personnel expenses	360,622		(7,706		)	3w	352,916		—			(5,080		)	3l	394,016
												46,180			3q
Other selling, general, and administrative expenses	125,188		(5,926		)	3w	119,262		50,075			8,133			3k	146,145
												168			3o
												75			3e
												(31,568		)	3q
Total costs and expenses	5,153,369		(13,632		)		5,139,737		388,375			3,296				5,531,408
Income from operations	354,459		(12,497		)		341,962		18,233			(3,296		)		356,899
Investment and other income (expense)	900		(22		)	3w	878		(1,662		)	(1,275		)	3m	(1,945		)
												114			3h
Income before provision for income taxes	355,359		(12,519		)		342,840		16,571			(4,457		)		354,954
Provision for income taxes	134,277		(4,707		)	3x	129,570		4,909			(523		)	3p	133,956
Net income	$	221,082	$	(7,812	)		$	213,270	$	11,662		$	(3,934	)		$	220,998
Basic net income per share	$	1.36					$	1.31								$	1.35
Diluted net income per share	$	1.36					$	1.31								$	1.35
Basic weighted average shares outstanding	162,290						162,290					1,108			3n	163,398
Dilutive effect of outstanding stock awards	353						353					—				353
Diluted weighted average shares outstanding	162,643						162,643					1,108				163,751

C.H. Robinson Worldwide, Inc.

Pro Forma Condensed Combined Statements of Operations (Unaudited)

For the Year Ended December 31, 2011

(in thousands, except for per share amounts)



	Historical								Historical
	C.H. Robinson		T-Chek Adjustments				Sub-total		Phoenix		Phoenix Adjustments				Pro Forma Combined
REVENUES:
Transportation	$	8,740,524	$	—			$	8,740,524	$	803,358	$	—			$	9,543,882
Sourcing	1,535,528		—				1,535,528		—		—				1,535,528
Payment Services	60,294		(49,260		)	3w	11,034		—		—				11,034
Total revenues	10,336,346		(49,260		)		10,287,086		803,358		—				11,090,444
COSTS AND EXPENSES:
Purchased transportation and related services	7,296,608		—				7,296,608		666,697		(29,028		)	3q	7,934,277
Purchased products sourced for resale	1,407,080		—				1,407,080		—		—				1,407,080
Personnel expenses	696,233		(13,829		)	3w	682,404		—		(4,060		)	3l	761,581
											83,237			3q
Other selling, general, and administrative expenses	243,695		(10,862		)	3w	232,833		87,071		16,265			3k	282,439
											329			3o
											150			3e
											(54,209		)	3q
Total costs and expenses	9,643,616		(24,691		)		9,618,925		753,768		12,684				10,385,377
Income from operations	692,730		(24,569		)		668,161		49,590		(12,684		)		705,067
Investment and other income (expense)	1,974		(25		)	3w	1,949		3,473		(2,574		)	3m	3,068
											220			3h
Income before provision for income taxes	694,704		(24,594		)		670,110		53,063		(15,038		)		708,135
Provision for income taxes	263,092		(9,295		)	3x	253,797		15,717		(1,842		)	3p	267,672
Net income	$	431,612	$	(15,299	)		$	416,313	$	37,346	$	(13,196	)		$	440,463
Basic net income per share	$	2.63					$	2.54							$	2.67
Diluted net income per share	$	2.62					$	2.53							$	2.66
Basic weighted average shares outstanding	164,114						164,114				1,108			3n	165,222
Dilutive effect of outstanding stock awards	627						627				—				627
Diluted weighted average shares outstanding	164,741						164,741				1,108				165,849

C.H. Robinson Worldwide, Inc.

Notes to Pro Forma Condensed Combined Financial Statements

(Unaudited)

Note 1. Basis of Presentation

The unaudited Pro Forma Condensed Combined Balance Sheet combines historical balance sheets, giving effect to the disposition of T-Chek Systems, Inc. (“T-Chek”) and acquisition of Phoenix International Freight Services, Ltd. ("Phoenix") as if they had occurred on June 30, 2012. The unaudited Pro Forma Condensed Combined Statements of Operations reflects the combined results of operations as if the disposition and acquisition had occurred at the beginning of C.H. Robinson Worldwide, Inc.'s ("C.H. Robinson") 2011 fiscal year. Certain items in the historical financial statements of Phoenix have been reclassified to conform to C.H. Robinson's financial reporting presentation. There have been no changes in historical operating income or historical net income for any period as a result of these conforming changes.

The historical results of Phoenix for the six months ended June 30, 2012 and for the twelve months ended December 31, 2011 are adjusted to conform the Phoenix June 30 year-end basis to C.H. Robinson's December 31 year-end basis and for certain accounting classification conformity adjustments. Phoenix’s historical operating results have been derived from the combination of Phoenix’s quarterly historical operating results for the periods presented as follows:



	Quarter Ended		Quarter Ended		Quarter Ended		Quarter Ended		12 Months Ended		Quarter Ended		Quarter Ended		6 Months Ended
	3/31/2011		6/30/2011		9/30/2011		12/31/2011		12/31/2011		3/31/2012		6/30/2012		6/30/2012
REVENUES	$	160,141	$	252,061	$	197,198	$	193,958	$	803,358	$	183,200	$	223,408	$	406,608
COSTS AND EXPENSES:
Purchased transportation and related services	125,844		201,528		155,596		154,701		637,669		146,319		177,369		323,688
Personnel expenses	18,794		24,630		19,798		20,015		83,237		19,681		26,499		46,180
Other selling, general, and administrative expenses	7,673		8,958		8,031		8,200		32,862		8,676		9,831		18,507
Total costs and expenses	152,311		235,116		183,425		182,916		753,768		174,676		213,699		388,375
Income from operations	$	7,830	$	16,945	$	13,773	$	11,042	$	49,590	$	8,524	$	9,709	$	18,233

The allocation of purchase price used to prepare the unaudited pro forma financial information is based on a preliminary valuation of assets acquired and liabilities assumed. Accordingly, the pro forma purchase price adjustments are preliminary, mainly with respect to certain working capital accounts, taxes and goodwill, and are subject to further adjustments as additional information becomes available and as additional analysis is performed. The preliminary pro forma purchase price adjustments have been made for the purposes of providing the Unaudited Pro Forma Financial Statements presented above. A final determination of these fair values will include management's consideration of a valuation prepared by an independent valuation specialist. This valuation is based on the actual net tangible and intangible assets of Phoenix that exist as of the closing date of the transaction. We do not expect any revisions to the preliminary allocation of purchase price to have a material impact on the pro forma financial statements. In addition, the Unaudited Pro Forma Condensed Combined Financial Statements do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the acquisition.

Note 2. Purchase Price Allocation

The Unaudited Pro Forma Condensed Combined Balance Sheet has been adjusted to reflect the allocation of the preliminary purchase price to identifiable net assets acquired with the excess recorded as goodwill. The purchase price allocation in these Unaudited Pro Forma Combined Financial Statements is based upon a purchase price of $571.5 million in cash and approximately $60.2 million in newly-issued shares of common stock of C.H. Robinson, plus an additional $45.6 million in cash representing the closing date preliminary estimated Phoenix cash and working capital adjustment, in accordance with the purchase agreement. The preliminary purchase price was allocated based on preliminary estimated fair values as of June 30, 2012 (in thousands):



Cash & cash equivalents	$	67,525
Receivables, net of allowance for doubtful accounts	119,716
Deferred tax asset	978
Prepaid expenses and other	1,275
Property and equipment, net	15,824
Intangible and other assets	12,895
Identifiable intangible assets	130,000
Goodwill	437,721
Total assets	785,934

Accounts payable	(37,373		)
Long-term debt	(87		)
Accrued expenses	(12,133		)
Long term liabilities	(59,068		)
Net assets acquired	$	677,273

Preliminary identifiable intangible assets and estimated useful lives are as follows (dollars in thousands):



	Life (years)	Amount
Customer relationships	8	$	129,800
Noncompete agreements	5	200
Total identifiable intangible assets		$	130,000

Note 3. Adjustments


a.	Represents cash adjustment as follows (in millions):



Cash paid for acquisition	$	571.5
Preliminary Phoenix cash and working capital adjustment	45.6
Borrowing from new credit agreement	(173.0		)
Total	$	444.1


b.	Stockholders' investment is adjusted to reflect approximately $60.2 million in newly-issued C.H. Robinson common stock, which represents approximately 1.1 million shares ($ .10 par value).


c.	Represents eliminating goodwill of $5.8 million on the historical, pre-acquisition books of Phoenix and adding $437.7 million reflecting an estimate of the excess of the purchase price paid over the estimated fair value of Phoenix assets and liabilities as of June 30, 2012.


d.	Represents estimated identifiable intangible assets of $130.0 million reflecting preliminary valuation of customer relationships and noncompete agreements related to the Phoenix business.

Represents an increase of $4.5 million to reflect the preliminary valuation of estimated fair value of the Phoenix property and equipment and is expected to be depreciated over a weighted average life of approximately 30 years. Adjustment to other selling, general and administrative expenses of $0.1 million for the six months ended June 30, 2012 and $0.2 million for the year ended December 31, 2011 reflects additional depreciation.


f.	Represents estimated transaction costs of $8.0 million for one-time investment banking, legal, and professional fees as a result of the acquisition for C.H. Robinson. Certain costs are presented net of tax as they are believed to be deductible. Additionally, these estimated costs are not reflected in the pro-forma condensed combined statement of operations as they are nonrecurring charges.


g.	Represents the elimination of the Phoenix equity accounts and certain long-term debt not included in the acquisition.


h.	Represents the elimination of the Phoenix variable interest entities not included in the acquisition.


i.	Represents deferred tax liabilities established for book and tax basis differences of the finite-lived intangible assets of $46.8 million and the revaluation of property and equipment of $1.6 million, which are amortizable for book purposes but not for tax. These are off-set by a reversal of deferred taxes associated with Phoenix goodwill of $0.2 million.


j.	Represents an indemnification asset and related liability resulting from the acquisition of Phoenix in accordance with the purchase agreement.


k.	Represents estimated amortization expense of $8.1 million for the six months ended June 30, 2012 and $16.3 million for the year ended December 31, 2011 for identifiable intangible assets.


l.	Represents reduction in personnel expenses for contractual changes in compensation for Phoenix executives, whereas the founder / executive chairman retired and three other executives entered into new employment arrangements with C.H. Robinson as part of the purchase agreement.

Represents incremental interest expense on borrowings used to complete the acquisition of $1.3 million for the six months ended June 30, 2012 and $2.6 million for the year ended December 31, 2011, using a weighted average rate of 1.25 percent. A one-fourth percentage point increase in the interest rate on variable rate borrowings would increase the pro forma interest adjustment by $0.2 million and $0.4 million, respectively.


n.	Represents an increase of weighted average shares outstanding based on 1.1 million of newly-issued shares of common stock of C.H. Robinson included as part of purchase price consideration.


o.	Represents additional rent expense as a result of entering into lease arrangements with entities excluded from the acquisition.


p.	Represents the pro forma tax effect of the Phoenix acquisition pro forma adjustments based upon the C.H. Robinson historical consolidated effective tax rate. This does not reflect the Phoenix effective tax rate and does not take into account any historical or possible future tax events that may have an impact.


q.	Represents an adjustment to conform with C.H. Robinson's historical financial reporting presentation of all personnel expenses on a separate line item.


r.	Represents cash adjustment as follows (in millions):



T-Chek cash sold at June 30, 2012	$	(38.5	)
Cash received from disposition	302.5
Total	$	264.0


s.	Represents the elimination of assets and liabilities transferred to EFS in the disposition of T-Chek as if the T-Chek sale had occurred on June 30, 2012.


t.	Represents transaction costs for one-time legal and professional fees as a result of the disposition of T-Chek. The costs are not reflected in the pro forma condensed combined statement of operations as they are nonrecurring charges.


u.	Represents estimated taxes on the gain from disposition of T-Chek based upon the C.H. Robinson historical consolidated effective tax rate.


v.	Represents estimated gain on the disposition of T-Chek, which is reflective of estimated income taxes to be incurred on the transaction.

Represents the elimination of the financial results of operations amounts associated with the disposition of T-Chek as if it occurred on January 1, 2011. The remaining Payment Services revenue of $5.8 million and $11.0 million for the six months ended June 30, 2012 and twelve months ended December 31, 2011, respectively, are retained in the pro forma financial statements as we expect to generate payment services revenues from the cash advance option we continue to offer our contracted carriers at a rate of approximately $3.0 million per quarter.


x.	Represents the pro forma tax effect of the T-Chek disposition pro forma adjustments based upon the C.H. Robinson historical consolidated effective tax rate.

C. H. ROBINSON WORLDWIDE, INC. - FORM 8-K - EX-99.2 - EXHIBIT - August 14, 2013

Attached files

C. H. ROBINSON WORLDWIDE, INC. Reports