Expeditors Reports First Quarter 2017 EPS of $0.51

May 02, 2017

SEATTLE, May 02, 2017 (GLOBE NEWSWIRE) -- Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced first quarter 2017 financial results including the following highlights compared to the same quarter of 2016:

  • Diluted Net Earnings Attributable to Shareholders per share (EPS1) decreased 4% to $0.51
  • Net Earnings Attributable to Shareholders decreased 3% to $93 million
  • Operating Income decreased 4% to $146 million
  • Revenues increased 9% to $1.5 billion
  • Net Revenues2 increased 2% to $528 million
  • Airfreight tonnage volume increased 16% and ocean container volume increased 7%

“Similar to the past few quarters, our people continued to execute well and we again increased volumes and grew market share,” said Jeffrey S. Musser, President and Chief Executive Officer. “We were especially pleased with the performance of our Transcon and customs brokerage teams, as they increased business with existing customers and also brought on new customers, proving our investments in those areas are bearing fruit. We remain deeply committed to the strategy we have laid out that continues to develop and grow our core business, leading to the purposeful growth in market share that we have been seeing. At the same time, we understand that we must continue to make future investments to remain in the market leading position our customers expect from us in terms of execution and innovation. Technology continues to advance at a rapid pace and we expect to remain at the leading edge of those changes.

“As expected and previously noted, we continued to experience the rate pressure that we have seen in recent quarters. Over the long term, we expect this rate volatility to subside and that we will return to more historical pricing patterns. In the meantime, we continue to refine our processes and carefully execute against our strategy to position our company for further growth.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Operating income as a percentage of net revenue was 28%, which is below our 30% operating benchmark, largely due to volume increases being offset by lower average net rates. Employee headcount and operating expenses increased during the quarter, as we continued to invest in people to handle the increases in freight volumes and to develop and deliver improved technology and processes related to our global network. We will continue to make these important investments in people, processes and technology, as well as to invest in our strategic efforts to explore new areas for long-term profitable growth.”

Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 177 district offices and numerous branch locations located on six continents linked into a seamless worldwide network through an integrated information management system. Services include the consolidation or forwarding of air and ocean freight, customs brokerage, vendor consolidation, cargo insurance, time-definite transportation, order management, warehousing and distribution and customized logistics solutions.

_______________________

1 Diluted earnings attributable to shareholders per share.
2 Non-GAAP measure calculated as revenues less directly related operating expenses attributable to the Company's principal services. See reconciliation on the last page of this release.
NOTE:  See Disclaimer on Forward-Looking Statements on the following page of this release.

Expeditors International of Washington, Inc.
First Quarter 2017 Earnings Release, May 2, 2017
Financial Highlights for the Three months ended March 31, 2017 and 2016 (Unaudited)
(in 000's of US dollars except per share data)

Three months ended March 31,
    2017   2016   %
Change
Revenues   $1,545,132     $1,418,472     9%
Net revenues1 $527,605     $517,069     2%
Operating income   $146,114     $151,826     (4)%
Net earnings attributable to shareholders   $93,264     $96,584     (3)%
Diluted earnings attributable to shareholders per share   $0.51     $0.53     (4)%
Basic earnings attributable to shareholders per share   $0.52     $0.53     (2)%
Diluted weighted average shares outstanding   182,094     183,018      
Basic weighted average shares outstanding   180,062     182,010      

_______________________
1 Non-GAAP measure calculated as revenues less directly related operating expenses attributable to the Company's principal services. See reconciliation on the last page of this release.

During the three-month periods ended March 31, 2017 and 2016, we repurchased 1 million and 1.5 million shares of common stock at an average price of $56.49 and $47.79 per share, respectively.

Employee headcount as of March 31,
    2017   2016
North America   5,902     5,652  
Europe 2,887     2,731  
North Asia   2,503     2,457  
Middle East, Africa and India   1,503     1,479  
South Asia   1,414     1,327  
Latin America   777     775  
Information Systems   874     765  
Corporate   362     332  
Total   16,222     15,518  


  Year-over-year percentage increase
(decrease) in:
    Airfreight kilos   Ocean freight FEU
2017        
January   10%     15%  
February   17%     (1)%  
March   20%     6%  
Quarter   16%     7%  

_______________________
Investors may submit written questions via e-mail to: [email protected]. Questions received by the end of business on May 5, 2017 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about May 12, 2017.

Disclaimer on Forward-Looking Statements:

Certain portions of this release contain forward-looking statements which are based on certain assumptions and expectations of future events that are subject to risks and uncertainties, including comments on future margin expectations, ability to adapt to changing business cycles, ability to increase volumes and manage buy and sell rates, quality growth over the long term, expectations for rate volatility and the current rate environment, driving incremental efficiencies in our processes, investing in people and technology, executing our strategic initiatives, and our ability to remain at the forefront of technological innovation. Actual future results and trends may differ materially from historical results or those projected in any forward-looking statements depending on a variety of factors including, but not limited to, the future success of our business model, our ability to maintain consistent and stable operating results, our ability to perpetuate profits, changes in customer demand for Expeditors’ services caused by a general economic slow-down, changes in global trade volumes, customers’ inventory build-up, decreased consumer confidence, volatility in equity markets, energy and fuel prices, geopolitical changes, foreign exchange rates, regulatory actions or changes or the unpredictable acts of competitors and other risks, risk factors and uncertainties detailed in our Annual Report as updated by our reports on Form 10-Q, filed with the Securities and Exchange Commission.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
 
    March 31,
2017
  December 31,
2016
Assets        
Current Assets:        
Cash and cash equivalents   $1,156,043     $974,435  
Accounts receivable, net   1,126,488     1,190,130  
Other current assets   119,265     54,014  
Total current assets   2,401,796     2,218,579  
Property and equipment, net   463,604     536,572  
Goodwill   7,927     7,927  
Other assets, net   29,392     27,793  
    $2,902,719     $2,790,871  
Liabilities and Equity        
Current Liabilities:        
Accounts payable   $701,122     $726,571  
Accrued expenses, primarily salaries and related costs   205,255     185,502  
Federal, state and foreign income taxes   20,427     17,858  
Total current liabilities   926,804     929,931  
Deferred Federal and state income taxes   24,195     13,727  
         
Commitments and contingencies        
         
Shareholders’ Equity:        
Preferred stock; none issued        
Common stock, par value $0.01 per share. Issued and outstanding 179,924 shares at March 31,
2017 and 179,857 shares at December 31, 2016
  1,800     1,799  
Additional paid-in capital   4,721     2,642  
Retained earnings   2,038,053     1,944,789  
Accumulated other comprehensive loss   (95,678)   (104,592)
Total shareholders’ equity   1,948,896     1,844,638  
Noncontrolling interest   2,824     2,575  
Total equity   1,951,720     1,847,213  
    $2,902,719     $2,790,871  




EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
 
    Three months ended
    March 31,
    2017   2016
Revenues:        
Airfreight services   $615,545     $560,853  
Ocean freight and ocean services   493,759     454,192  
Customs brokerage and other services   435,828     403,427  
Total revenues   1,545,132     1,418,472  
Operating Expenses:        
Airfreight services   443,404     388,777  
Ocean freight and ocean services   366,063     323,020  
Customs brokerage and other services   208,060     189,606  
Salaries and related costs   292,580     283,355  
Rent and occupancy costs   28,130     26,859  
Depreciation and amortization   11,927     11,329  
Selling and promotion   10,915     9,432  
Other   37,939     34,268  
Total operating expenses   1,399,018     1,266,646  
Operating income   146,114     151,826  
Other Income (Expense):        
Interest income   2,741     2,779  
Other, net   298     879  
Other income (expense), net   3,039     3,658  
Earnings before income taxes   149,153     155,484  
Income tax expense   55,586     58,437  
Net earnings   93,567     97,047  
Less net earnings attributable to the noncontrolling interest   303     463  
Net earnings attributable to shareholders   $93,264     $96,584  
Diluted earnings attributable to shareholders per share   $0.51     $0.53  
Basic earnings attributable to shareholders per share   $0.52     $0.53  
Weighted average diluted shares outstanding   182,094     183,018  
Weighted average basic shares outstanding   180,062     182,010  



EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
    Three months ended
    March 31,
    2017   2016
Operating Activities:        
Net earnings   $93,567     $97,047  
Adjustments to reconcile net earnings to net cash from operating activities:        
Provision for losses on accounts receivable   931     578  
Deferred income tax expense   5,593     9,896  
Stock compensation expense   10,623     10,831  
Depreciation and amortization   11,927     11,329  
Other, net   (351)   36  
Changes in operating assets and liabilities:        
Decrease in accounts receivable   75,454     112,710  
Decrease in accounts payable and accrued expenses   (18,324)   (15,344)
Increase in income taxes payable, net   19,824     10,925  
Increase in other current assets   (3,565)   (2,055)
Net cash from operating activities   195,679     235,953  
Investing Activities:        
Purchase of property and equipment   (12,761)   (14,035)
Other, net   (671)   (559)
Net cash from investing activities   (13,432)   (14,594)
Financing Activities:        
Proceeds from issuance of common stock   45,365     41,635  
Repurchases of common stock   (53,908)   (70,292)
Net cash from financing activities   (8,543)   (28,657)
Effect of exchange rate changes on cash and cash equivalents   7,904     13,419  
Increase in cash and cash equivalents   181,608     206,121  
Cash and cash equivalents at beginning of period   974,435     807,796  
Cash and cash equivalents at end of period   $1,156,043     $1,013,917  
Taxes paid:        
Income taxes   $29,146     $37,984  



EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Business Segment Information
(In thousands)
(Unaudited)
 
    UNITED
STATES
  OTHER
NORTH
AMERICA
  LATIN
AMERICA
  NORTH
ASIA
  SOUTH
ASIA
  EUROPE   MIDDLE
EAST,
AFRICA

and
INDIA
  ELIMI-
NATIONS
  CONSOLI-
DATED
Three months ended March 31, 2017:                                    
Revenues from unaffiliated customers   $426,019     59,899     22,103     566,428     147,240     231,457     91,986         1,545,132  
Transfers between geographic areas   24,313     2,639     3,635     5,051     5,431     9,322     4,964     (55,355)    
Total revenues   $450,332     62,538     25,738     571,479     152,671     240,779     96,950     (55,355)   1,545,132  
Net revenues   $230,785     25,793     14,916     111,833     37,995     75,958     29,731     594     527,605  
Operating income   $52,346     5,051     3,451     53,352     13,224     11,646     7,043     1     146,114  
Identifiable assets   $1,536,520     106,068     50,344     514,509     122,765     379,853     188,098     4,562     2,902,719  
Capital expenditures   $5,242     234     255     1,240     373     5,078     339         12,761  
Depreciation and amortization   $7,753     372     320     1,320     531     1,171     460         11,927  
Equity   $1,192,601     51,812     27,248     371,152     105,726     118,211     119,627     (34,657)   1,951,720  
Three months ended March 31, 2016:                                    
Revenues from unaffiliated customers   $407,826     52,106     20,064     497,232     136,418     221,897     82,929         1,418,472  
Transfers between geographic areas   26,034     2,700     3,601     5,096     5,806     10,361     5,394     (58,992)    
Total revenues   $433,860     54,806     23,665     502,328     142,224     232,258     88,323     (58,992)   1,418,472  
Net revenues   $220,698     27,378     13,733     110,791     39,518     74,541     30,407     3     517,069  
Operating income   $48,205     7,291     3,852     55,218     15,691     12,253     9,313     3     151,826  
Identifiable assets   $1,236,896     119,258     56,334     455,973     133,940     438,711     216,576     3,852     2,661,540  
Capital expenditures   $8,137     311     485     1,085     655     2,119     1,243         14,035  
Depreciation and amortization   $7,332     364     253     1,319     512     1,098     451         11,329  
Equity   $978,426     79,312     37,325     300,188     115,606     167,726     137,112     (33,184)   1,782,511  

Net Revenues (Non-GAAP measure)

We commonly refer to the term “net revenues” when commenting about our Company and the results of its operations. Net revenues are a Non-GAAP measure calculated as revenues less directly related operations expenses attributable to the Company's principal services. We believe that net revenues are a better measure than are total revenues when analyzing and discussing our effectiveness in managing our principal services since total revenues earned as a freight consolidator must consider the carriers' charges to us for carrying the shipment, whereas revenues earned in other capacities include primarily the commissions and fees earned by us. Net revenue is one of our primary operational and financial measures and demonstrates our ability to concentrate and leverage purchasing power through effective consolidation of shipments from customers utilizing a variety of transportation carriers and optimal routings. Using net revenues also provides a commonality for comparison among various services. The following table presents the calculation of net revenues.

Three months ended March 31,
(in thousands)   2017   2016
Total revenues   $1,545,132     $1,418,472  
Expenses:        
Airfreight services   443,404     388,777  
Ocean freight and ocean services   366,063     323,020  
Customs brokerage and other services   208,060     189,606  
Net revenues   $527,605     $517,069  

 

CONTACTS:

Jeffrey S. Musser
President and Chief Executive Officer
(206) 674-3433

Bradley S. Powell
Senior Vice President and Chief Financial Officer
(206) 674-3412

Geoffrey Buscher
Director - Investor Relations
(206) 892-4510