Market Overview

Expeditors Reports Second Quarter 2018 EPS of $0.79

Share:

SEATTLE, Aug. 07, 2018 (GLOBE NEWSWIRE) -- Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced second quarter 2018 financial results including the following highlights compared to the same quarter of 2017:

  • Diluted Net Earnings Attributable to Shareholders per share (EPS1) increased 32% to $0.79
  • Net Earnings Attributable to Shareholders increased 29% to $141 million
  • Operating Income increased 9% to $184 million
  • Revenues increased 17% to $2.0 billion
  • Net Revenues2 increased 14% to $643 million
  • Airfreight tonnage volume increased 4% and ocean container volume increased 1%

"We continued to add profitable growth from new and existing customers during the quarter, particularly in air and some of our differentiated, best-in-class services, such as brokerage, Transcon, and order management," said Jeffrey S. Musser, President and Chief Executive Officer. "Similar to the first quarter of this year, we remained disciplined on pricing in this strong economy. We experienced strong performance in our ocean forwarding and order management businesses, but ocean freight net revenues were down 5% on a 1% increase in volumes, as carriers took steps to mitigate the impact of volatile pricing, excess capacity, and higher fuel costs.

"We are continuing to invest in people and assets in the development and support of profitable revenue growth, most notably during Q2 in Europe and North America. While we have yet to see changes to supply chains as a result of possible trade wars, we are confident in the capabilities of our people throughout our global network to help our customers navigate the potential impact of new tariffs."

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added that the Company's effective tax rate for the quarter was 25.8%, compared to 37.4% a year ago. The lower effective tax rate in the most recent quarter was principally due to the lower U.S. federal tax rate that resulted from the 2017 Tax Act, coupled with significant share-based compensation deductions from stock option exercises during the quarter. Mr. Powell emphasized that the Company's effective tax rate in future periods will largely depend on the mix of pretax earnings that are generated in its U.S. versus foreign operations, as well as further interpretation of, and guidance to be issued on, the new tax law.

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.

_______________________
1Diluted earnings attributable to shareholders per share.
2Non-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.
Second Quarter 2018 Earnings Release, August 7, 2018
Financial Highlights for the Six months ended June 30, 2018 and 2017 (Unaudited)
(in 000's of US dollars except per share data)

  Three months ended June 30,   Six months ended June 30,
  2018   2017   % Change   2018   2017   % Change
Revenues1 $ 1,957,559     $ 1,672,279     17 %   $ 3,811,821     $ 3,217,411     18 %
Net revenues2 $ 642,546     $ 563,633     14 %   $ 1,278,384     $ 1,091,238     17 %
Operating income3 $ 183,584     $ 168,240     9 %   $ 376,402     $ 314,354     20 %
Net earnings attributable to shareholders $ 140,605     $ 108,851     29 %   $ 276,297     $ 202,115     37 %
Diluted earnings attributable to shareholders per share $ 0.79     $ 0.60     32 %   $ 1.54     $ 1.11     39 %
Basic earnings attributable to shareholders per share $ 0.80     $ 0.60     33 %   $ 1.58     $ 1.12     41 %
Diluted weighted average shares outstanding 178,603     182,033         179,120     182,091      
Basic weighted average shares outstanding 174,754     180,012         175,324     180,037      

_______________________
1Effective January 1, 2018, the Company adopted required new revenue recognition guidance, resulting in a $22 million net reduction to the opening balance of retained earnings. In addition, in conjunction with the adoption of new revenue recognition guidance, the Company also changed the presentation of certain warehouse and distribution revenues from a net to a gross basis, which increased both revenues and operating expenses in  customs brokerage and other services by approximately $50 million in both the first and second quarters of 2018. Comparative prior year revenues (and the related volume information in the table below) has not been adjusted and continue to be reported under the Company's historical policies. 2018 reported revenues (and the related volume information) are reported under the Company's new revenue recognition accounting policies.

2Non-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.

3The quarter and year-to-date periods ended June 30, 2017 include the recovery of certain legal and related fees totaling $8 million and the favorable resolution of an indirect tax contingency of $6 million.

During the three and six-month periods ended June 30, 2018, we repurchased 3.1 million and 5.8 million shares of common stock at an average price of $76.22 and $70.92 per share, respectively. During the three and six-month periods ended June 30, 2017, we repurchased 1.5 million and 2.5 million shares of common stock at an average price of $55.02 and $55.58 per share, respectively.

  Employee Full-
time Equivalents
as of June 30,
  2018   2017
North America 6,414     6,009  
Europe 3,205     2,847  
North Asia 2,616     2,698  
South Asia 1,604     1,602  
Middle East, Africa and India 1,466     1,531  
Latin America 801     791  
Information Systems 892     881  
Corporate 351     390  
Total 17,349     16,749  


    Second quarter year-over-year
percentage increase (decrease) in:
    Airfreight kilos   Ocean freight FEU
2018        
April   1%   (2)%
May   6%   5%
June   6%   —%
Quarter   4%   1%

_______________________
Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 10, 2018 will be considered in management's 8-K "Responses to Selected Questions" expected to be filed on or about August 24, 2018.

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 our ability to generate profitable market growth; our ability to help our customers navigate the potential impact of new tariffs; the impact of the 2017 Tax Act on our effective tax rate; energy and fuel prices; political changes; changes and uncertainties in governmental policies and inter-governmental disputes; foreign exchange rates; regulatory actions or changes; and 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)

  June 30, 2018   December 31, 2017
Assets      
Current Assets:      
Cash and cash equivalents $ 1,020,854     $ 1,051,099  
Accounts receivable, net 1,337,716     1,414,741  
Deferred contract costs 136,133      
Other current assets 69,438     75,612  
Total current assets 2,564,141     2,541,452  
Property and equipment, net 515,547     525,203  
Goodwill 7,927     7,927  
Deferred Federal and state income taxes, net 16,779     13,207  
Other assets, net 28,438     29,219  
  $ 3,132,832     $ 3,117,008  
Liabilities and Equity      
Current Liabilities:      
Accounts payable $ 832,011     $ 866,305  
Accrued expenses, primarily salaries and related costs 227,148     206,320  
Contract liabilities 161,870      
Federal, state and foreign income taxes 19,244     20,494  
Total current liabilities 1,240,273     1,093,119  
Noncurrent Federal income taxes payable     29,516  
       
Commitments and contingencies      
       
Shareholders' Equity:      
Preferred stock; none issued      
Common stock, par value $0.01 per share. Issued and outstanding 173,577 shares at June 30, 2018 and 176,374 shares at December 31, 2017 1,736     1,764  
Additional paid-in capital 1,607     546  
Retained earnings 1,977,121     2,063,512  
Accumulated other comprehensive loss (90,712 )   (73,964 )
Total shareholders' equity 1,889,752     1,991,858  
Noncontrolling interest 2,807     2,515  
Total equity 1,892,559     1,994,373  
  $ 3,132,832     $ 3,117,008  



EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)

  Three months ended   Six months ended
  June 30,   June 30,
  2018   2017   2018   2017
Revenues:              
Airfreight services $ 801,761     $ 671,868     $ 1,532,988     $ 1,287,413  
Ocean freight and ocean services 530,008     528,585     1,050,891     1,022,344  
Customs brokerage and other services 625,790     471,826     1,227,942     907,654  
Total revenues 1,957,559     1,672,279     3,811,821     3,217,411  
Operating Expenses:              
Airfreight services 593,325     499,418     1,106,829     942,822  
Ocean freight and ocean services 385,156     385,927     764,574     751,990  
Customs brokerage and other services 336,532     223,301     662,034     431,361  
Salaries and related costs 350,948     318,529     690,843     611,109  
Rent and occupancy costs 38,071     29,163     74,984     57,293  
Depreciation and amortization 13,576     12,042     27,498     23,969  
Selling and promotion 10,788     10,953     21,753     21,868  
Other 45,579     24,706     86,904     62,645  
Total operating expenses 1,773,975     1,504,039     3,435,419     2,903,057  
Operating income 183,584     168,240     376,402     314,354  
Other Income (Expense):              
Interest income 5,153     3,380     9,467     6,121  
Other, net 1,167     2,190     1,791     2,488  
Other income (expense), net 6,320     5,570     11,258     8,609  
Earnings before income taxes 189,904     173,810     387,660     322,963  
Income tax expense 48,958     65,055     110,514     120,641  
Net earnings 140,946     108,755     277,146     202,322  
Less net earnings (loss) attributable to the noncontrolling interest 341     (96 )   849     207  
Net earnings attributable to shareholders $ 140,605     $ 108,851     $ 276,297     $ 202,115  
Diluted earnings attributable to shareholders per share $ 0.79     $ 0.60     $ 1.54     $ 1.11  
Basic earnings attributable to shareholders per share $ 0.80     $ 0.60     $ 1.58     $ 1.12  
Dividends declared and paid per common share $ 0.45     $ 0.42     $ 0.45     $ 0.42  
Weighted average diluted shares outstanding 178,603     182,033     179,120     182,091  
Weighted average basic shares outstanding 174,754     180,012     175,324     180,037  


EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

  Three months ended   Six months ended
  June 30,   June 30,
  2018   2017   2018   2017
Operating Activities:              
Net earnings $ 140,946     $ 108,755     $ 277,146     $ 202,322  
Adjustments to reconcile net earnings to net cash from operating activities:              
Provision for losses on accounts receivable 528     515     263     1,446  
Deferred income tax expense 3,235     7,261     6,088     12,854  
Stock compensation expense 18,002     17,203     29,269     27,826  
Depreciation and amortization 13,576     12,042     27,498     23,969  
Other, net 56     (174 )   104     (525 )
Changes in operating assets and liabilities:              
(Increase) decrease in accounts receivable (46,876 )   (73,142 )   53,771     2,312  
Decrease in accounts payable and accrued expenses 58,075     52,623     12,231     34,299  
Increase in deferred contract costs (20,019 )       (16,612 )    
Decrease in contract liabilities 20,294         12,893      
Decrease in income taxes payable, net (38,059 )   (47,159 )   (18,550 )   (27,335 )
(Increase) decrease in other current assets (1,202 )   3,290     (68 )   (275 )
Net cash from operating activities 148,556     81,214     384,033     276,893  
Investing Activities:              
Purchase of property and equipment (12,113 )   (20,380 )   (25,909 )   (33,141 )
Other, net (1,564 )   40     (1,995 )   (631 )
Net cash from investing activities (13,677 )   (20,340 )   (27,904 )   (33,772 )
Financing Activities:              
Proceeds from issuance of common stock 95,363     51,501     121,760     96,866  
Repurchases of common stock (235,572 )   (84,052 )   (407,932 )   (137,960 )
Dividends paid (79,180 )   (75,726 )   (79,180 )   (75,726 )
Payments for taxes related to net share settlements (3,215 )       (3,215 )    
Net cash from financing activities (222,604 )   (108,277 )   (368,567 )   (116,820 )
Effect of exchange rate changes on cash and cash equivalents (24,322 )   6,270     (17,807 )   14,174  
(Decrease) increase in cash and cash equivalents (112,047 )   (41,133 )   (30,245 )   140,475  
Cash and cash equivalents at beginning of period 1,132,901     1,156,043     1,051,099     974,435  
Cash and cash equivalents at end of period $ 1,020,854     $ 1,114,910     $ 1,020,854     $ 1,114,910  
Taxes paid:              
Income taxes $ 85,612     $ 103,508     $ 124,131     $ 132,654  


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 June 30, 2018:                                  
Revenues from unaffiliated customers $ 567,271     80,268     38,697     674,101     172,696     315,950     108,576         1,957,559  
Transfers between geographic areas 30,805     3,976     3,921     6,126     6,832     14,825     5,429     (71,914 )    
Total revenues $ 598,076     84,244     42,618     680,227     179,528     330,775     114,005     (71,914 )   1,957,559  
Net revenues $ 271,880     34,749     15,923     140,583     44,886     102,371     33,125     (971 )   642,546  
Operating income $ 63,628     10,077     2,701     70,359     13,374     16,958     6,490     (3 )   183,584  
Identifiable assets $ 1,488,060     153,827     54,186     540,954     157,479     526,607     217,716     (5,997 )   3,132,832  
Capital expenditures $ 6,032     2,191     167     559     695     1,225     1,244         12,113  
Depreciation and amortization $ 8,447     473     395     1,303     542     1,955     461         13,576  
Equity $ 1,196,226     56,702     26,625     250,513     112,259     157,493     127,032     (34,291 )   1,892,559  
Three months ended June 30, 2017:                                  
Revenues from unaffiliated customers $ 452,217     62,554     23,463     620,050     157,698     259,533     96,764         1,672,279  
Transfers between geographic areas 28,155     2,825     3,759     4,835     5,408     9,664     5,034     (59,680 )    
Total revenues $ 480,372     65,379     27,222     624,885     163,106     269,197     101,798     (59,680 )   1,672,279  
Net revenues $ 250,027     28,173     14,008     120,959     38,228     80,896     30,286     1,056     563,633  
Operating income $ 64,265     12,317     2,246     58,093     12,513     13,419     5,390     (3 )   168,240  
Identifiable assets $ 1,487,582     129,830     48,064     576,655     129,002     437,628     207,191     6,804     3,022,756  
Capital expenditures $ 6,852     569     957     663     409     10,501     429         20,380  
Depreciation and amortization $ 7,731     386     300     1,362     556     1,227     480         12,042  
Equity $ 1,147,962     61,957     24,320     402,211     117,077     135,726     124,628     (35,244 )   1,978,637  


  UNITED
STATES
  OTHER
NORTH
AMERICA
  LATIN
AMERICA
  NORTH ASIA   SOUTH ASIA   EUROPE   MIDDLE
EAST,
AFRICA
AND INDIA
  ELIMI-
NATIONS
  CONSOLI-
DATED
Six months ended June 30, 2018:                                  
Revenues from unaffiliated customers $ 1,102,140     156,793     71,419     1,304,673     341,296     621,742     213,758         3,811,821  
Transfers between geographic areas 59,686     7,538     7,308     12,143     13,382     29,013     10,784     (139,854 )    
Total revenues $ 1,161,826     164,331     78,727     1,316,816     354,678     650,755     224,542     (139,854 )   3,811,821  
Net revenues $ 549,065     65,196     30,668     277,791     89,292     201,006     66,326     (960 )   1,278,384  
Operating income $ 133,276     19,095     5,071     140,282     28,506     36,236     13,928     8     376,402  
Identifiable assets at period end $ 1,488,060     153,827     54,186     540,954     157,479     526,607     217,716     (5,997 )   3,132,832  
Capital expenditures $ 9,203     3,719     672     1,343     1,024     8,416     1,532         25,909  
Depreciation and amortization $ 17,212     871     763     2,679     1,125     3,931     917         27,498  
Equity $ 1,196,226     56,702     26,625     250,513     112,259     157,493     127,032     (34,291 )   1,892,559  
Six months ended June 30, 2017:                                  
Revenues from unaffiliated customers $ 878,236     122,453     45,566     1,186,478     304,938     490,990     188,750         3,217,411  
Transfers between geographic areas 52,468     5,464     7,394     9,886     10,839     18,986     9,998     (115,035 )    
Total revenues $ 930,704     127,917     52,960     1,196,364     315,777     509,976     198,748     (115,035 )   3,217,411  
Net revenues $ 480,812     53,966     28,924     232,792     76,223     156,854     60,017     1,650     1,091,238  
Operating income $ 116,611     17,368     5,697     111,445     25,737     25,065     12,433     (2 )   314,354  
Identifiable assets at period end $ 1,487,582     129,830     48,064     576,655     129,002     437,628     207,191     6,804     3,022,756  
Capital expenditures $ 12,094     803     1,212     1,903     782     15,579     768         33,141  
Depreciation and amortization $ 15,484     758     620     2,682     1,087     2,398     940         23,969  
Equity $ 1,147,962     61,957     24,320     402,211     117,077     135,726     124,628     (35,244 )   1,978,637  

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 revenues are 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   Six months ended
  June 30,   June 30,
(in thousands) 2018   2017   2018   2017
Total revenues $ 1,957,559     $ 1,672,279     $ 3,811,821     $ 3,217,411  
Expenses:              
Airfreight services 593,325     499,418     1,106,829     942,822  
Ocean freight and ocean services 385,156     385,927     764,574     751,990  
Customs brokerage and other services 336,532     223,301     662,034     431,361  
Net revenues $ 642,546     $ 563,633     $ 1,278,384     $ 1,091,238  


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

Primary Logo

View Comments and Join the Discussion!