Thursday, May 4, 2017

EXPEDITORS FIRST QUARTER RESULTS

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 
Europe2,887  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: investor@expeditors.com. 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