Expeditors Reports First Quarter 2017 EPS of $0.51
May 02, 2017
“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.
_______________________
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.
_______________________
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.
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.
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
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%
“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)
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: 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 |
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
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