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Expeditors Reports Third Quarter 2016 EPS of $0.59

SEATTLE, Nov. 08, 2016 (GLOBE NEWSWIRE) -- Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced third quarter 2016 financial results including the following highlights compared to the same quarter of 2015:

  • Diluted Net Earnings Attributable to Shareholders per share (EPS1) decreased 5% to $0.59
  • Net Earnings Attributable to Shareholders decreased 9% to $108 million
  • Operating Income decreased 13% to $167 million
  • Revenues decreased 5% to $1.6 billion
  • Net Revenues2 decreased 4% to $545 million
  • Airfreight tonnage volume increased 7% and ocean container volume increased 3%

“We grew our business even as rates were rapidly adjusting to a very fluid marketplace and pressuring margins beyond what we would normally expect,” said Jeffrey S. Musser, President and Chief Executive Officer. “We've managed through similar cycles before and we know how to adapt. Typically, as in the most recent quarter, rates compress when volumes increase. In the year-ago third quarter, however, we grew volumes at the same time that our airfreight net revenue per ton was the highest in the company’s history. By comparison, in this most recent quarter of modest marketplace growth in volumes and a further slowdown in global trade, we shipped record volumes in both air and ocean. Not only did we move more freight this quarter, thanks to the hard work and dedication of our people, we continued to grow our business and gain market share in line with our strategic initiatives, which are focused on quality growth over the long term.”

Commenting further, Mr. Musser noted, “During the most recent third quarter, air carriers abruptly adjusted buy rates to align with spikes in demand, and ocean carriers modified pricing as the market endured a significant disruption with the bankruptcy of one of the world’s larger shipping companies. Because of those events, the current rate environment was more unpredictable than usual. While we always expect a certain level of rate volatility in our business, the current rate environment remains more volatile than it has been, prompting us to adapt accordingly.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Even with unpredictable pricing, our people continued to do what we do best at Expeditors, which is to relentlessly focus on driving incremental efficiencies in our processes. While we continue to invest in people and technology to execute our strategic initiatives, we maintained operating income as a percentage of net revenues - a key measure of operating efficiency - above 30%, a testament to our ability to control what we can control even during periods of unusual rate volatility.”

Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 186 full-service offices and numerous satellite 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 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.
Third Quarter 2016 Earnings Release, November 8, 2016
Financial Highlights for the Three and Nine months ended September 30, 2016 and 2015 (Unaudited)
(in 000's of US dollars except per share data)

Three months ended September 30, Nine months ended September 30,
2016 2015 % Change 2016 2015 % Change
Revenues$1,562,394 $1,651,332 (5)% $4,456,030 $5,020,411 (11)%
Net revenues1$545,259 $569,981 (4)% $1,615,445 $1,651,608 (2)%
Operating income$167,263 $191,893 (13)% $497,953 $543,492 (8)%
Net earnings attributable to shareholders$107,581 $118,310 (9)% $320,217 $342,774 (7)%
Diluted earnings attributable to shareholders per share$0.59 $0.62 (5)% $1.75 $1.79 (2)%
Basic earnings attributable to shareholders per share$0.59 $0.63 (6)% $1.76 $1.80 (2)%
Diluted weighted average shares outstanding182,692 189,642 182,958 191,448
Basic weighted average shares outstanding181,177 188,424 181,645 190,232

_______________________
1Non-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 and nine-month periods ended September 30, 2016 the Company repurchased 2.0 million and 5.4 million shares of common stock at an average price of $51.16 and $49.64 per share, respectively. During the three and nine-month periods ended September 30, 2015, the Company repurchased 4.3 million and 8.6 million shares of common stock at an average price of $48.58 and $48.10 per share, respectively.

Employee headcount as of September 30,
2016 2015
North America5,769 5,573
Europe2,846 2,664
North Asia2,498 2,465
Middle East, Africa and India1,494 1,388
South Asia1,364 1,311
Latin America758 797
Information Systems810 722
Corporate338 318
Total15,877 15,238


Year-over-year percentage increase
(decrease) in:
Airfreight kilos Ocean freight FEU
2016
July 7% (1)%
August 11% 4%
September 5% 6%
Quarter 7% 3%

_______________________
Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on November 11, 2016 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about November 18, 2016.

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 control what we can control even during periods of unusual rate volatility. 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)
September 30,
2016
December 31,
2015
Assets
Current Assets:
Cash and cash equivalents$1,042,700 $807,796
Accounts receivable, net1,108,516 1,112,260
Deferred Federal and state income taxes19,573 16,861
Other current assets64,897 56,453
Total current assets2,235,686 1,993,370
Property and equipment, net539,984 524,724
Goodwill7,927 7,927
Other assets, net30,200 56,417
$2,813,797 $2,582,438
Liabilities and Equity
Current Liabilities:
Accounts payable$698,620 $645,304
Accrued expenses, primarily salaries and related costs207,547 186,571
Federal, state and foreign income taxes21,437 29,498
Total current liabilities927,604 861,373
Deferred Federal and state income taxes32,260 26,389
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued
Common stock, par value $0.01 per share. Issued and outstanding 180,278 shares at September 30, 2016 and 182,067 shares at December 31, 20151,803 1,821
Additional paid-in capital475 31
Retained earnings1,929,449 1,771,379
Accumulated other comprehensive loss(81,644) (81,238)
Total shareholders’ equity1,850,083 1,691,993
Noncontrolling interest3,850 2,683
Total equity1,853,933 1,694,676
$2,813,797 $2,582,438


EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2016 2015 2016 2015
Revenues:
Airfreight services$621,566 $659,607 $1,764,512 $2,060,863
Ocean freight and ocean services495,460 559,976 1,414,344 1,702,465
Customs brokerage and other services445,368 431,749 1,277,174 1,257,083
Total revenues1,562,394 1,651,332 4,456,030 5,020,411
Operating Expenses:
Airfreight services444,359 464,161 1,236,555 1,484,150
Ocean freight and ocean services359,991 416,075 1,006,710 1,294,887
Customs brokerage and other services212,785 201,115 597,320 589,766
Salaries and related costs291,204 295,566 868,091 861,509
Rent and occupancy costs27,091 25,747 81,029 76,106
Depreciation and amortization11,882 11,475 34,853 34,424
Selling and promotion10,134 10,370 29,817 30,146
Other37,685 34,930 103,702 105,931
Total operating expenses1,395,131 1,459,439 3,958,077 4,476,919
Operating income167,263 191,893 497,953 543,492
Other Income (Expense):
Interest income2,924 2,666 8,593 8,034
Other, net925 (3,085) 3,407 753
Other income (expense), net3,849 (419) 12,000 8,787
Earnings before income taxes171,112 191,474 509,953 552,279
Income tax expense63,163 72,738 188,518 207,882
Net earnings107,949 118,736 321,435 344,397
Less net earnings attributable to the noncontrolling interest368 426 1,218 1,623
Net earnings attributable to shareholders$107,581 $118,310 $320,217 $342,774
Diluted earnings attributable to shareholders per share$0.59 $0.62 $1.75 $1.79
Basic earnings attributable to shareholders per share$0.59 $0.63 $1.76 $1.80
Dividends declared and paid per common share$ $ $0.40 $0.36
Weighted average diluted shares outstanding182,692 189,642 182,958 191,448
Weighted average basic shares outstanding181,177 188,424 181,645 190,232


EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2016 2015 2016 2015
Operating Activities:
Net earnings$107,949 $118,736 $321,435 $344,397
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable1,321 134 2,461 995
Deferred income tax (benefit) expense(1,439) (7,611) 2,342 13,312
Excess tax benefits from stock plans(107) (239) (1,846)
Stock compensation expense10,476 10,919 34,264 32,489
Depreciation and amortization11,882 11,475 34,853 34,424
Other11 2 41 115
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable(58,279) 2,466 6,087 18,910
Increase (decrease) in accounts payable and accrued expenses38,070 (19,622) 74,148 3,311
Increase (decrease) in income taxes payable, net7,197 19,978 (16,612) 4,110
Increase in other current assets(1,395) (3,801) (2,089) (1,419)
Net cash from operating activities115,686 132,676 456,691 448,798
Investing Activities:
Increase in short-term investments, net 38,788 (37) 32,076
Purchase of property and equipment(12,659) (9,546) (39,973) (31,903)
Other, net1,617 (2,666) 5,509 (2,482)
Net cash from investing activities(11,042) 26,576 (34,501) (2,309)
Financing Activities:
Proceeds from issuance of common stock57,522 54,606 147,645 114,701
Repurchases of common stock(101,690) (209,970) (268,097) (415,475)
Excess tax benefits from stock plans107 239 1,846
Dividends paid (73,000) (68,781)
Distribution to noncontrolling interest (857)
Net cash from financing activities(44,061) (155,364) (193,213) (368,566)
Effect of exchange rate changes on cash and cash equivalents1,853 (20,932) 5,927 (36,347)
Increase (decrease) in cash and cash equivalents62,436 (17,044) 234,904 41,576
Cash and cash equivalents at beginning of period980,264 985,727 807,796 927,107
Cash and cash equivalents at end of period$1,042,700 $968,683 $1,042,700 $968,683
Taxes paid:
Income taxes$58,696 $60,374 $205,049 $190,024


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 September 30, 2016:
Revenues from unaffiliated customers$423,362 56,747 21,592 590,622 154,156 228,256 87,659 1,562,394
Transfers between geographic areas24,610 2,770 3,724 5,368 6,206 9,938 5,551 (58,167)
Total revenues$447,972 59,517 25,316 595,990 160,362 238,194 93,210 (58,167) 1,562,394
Net revenues$229,773 30,211 14,063 124,251 42,711 74,888 29,363 (1) 545,259
Operating income$69,457 6,200 3,328 59,682 14,045 7,018 7,534 (1) 167,263
Identifiable assets$1,429,860 95,390 56,192 480,587 117,333 388,543 237,104 8,788 2,813,797
Capital expenditures$8,319 720 139 739 319 2,127 296 12,659
Depreciation and amortization$7,566 369 328 1,404 594 1,116 505 11,882
Equity$1,145,293 41,542 37,765 293,383 87,926 129,989 150,395 (32,360) 1,853,933
Three months ended September 30, 2015:
Revenues from unaffiliated customers$441,097 56,818 24,681 648,096 158,011 234,334 88,295 1,651,332
Transfers between geographic areas29,168 3,492 4,991 5,206 6,289 11,125 5,459 (65,730)
Total revenues$470,265 60,310 29,672 653,302 164,300 245,459 93,754 (65,730) 1,651,332
Net revenues$232,912 32,713 17,115 135,488 45,970 77,250 28,533 569,981
Operating income$65,389 11,905 5,007 69,690 18,574 14,188 7,140 191,893
Identifiable assets$1,385,157 108,644 56,987 472,189 140,206 427,053 229,670 7,112 2,827,018
Capital expenditures$6,196 658 222 711 291 1,223 245 9,546
Depreciation and amortization$7,439 363 268 1,336 531 1,120 418 11,475
Equity$1,144,466 64,384 35,890 250,362 103,457 148,287 126,321 (30,975) 1,842,192


UNITED
STATES
OTHER
NORTH
AMERICA
LATIN
AMERICA
NORTH ASIA SOUTH ASIA EUROPE MIDDLE
EAST, AFRICA
and
INDIA
ELIMI-
NATIONS
CONSOLI-
DATED
Nine months ended September 30, 2016:
Revenues from unaffiliated customers$1,248,923 165,527 62,825 1,605,343 442,464 680,035 250,913 4,456,030
Transfers between geographic areas79,617 8,141 11,512 15,849 18,338 30,396 16,452 (180,305)
Total revenues$1,328,540 173,668 74,337 1,621,192 460,802 710,431 267,365 (180,305) 4,456,030
Net revenues$683,331 88,404 42,264 357,159 128,486 227,068 88,745 (12) 1,615,445
Operating income$184,876 23,091 11,016 176,621 48,090 31,109 23,162 (12) 497,953
Identifiable assets$1,429,860 95,390 56,192 480,587 117,333 388,543 237,104 8,788 2,813,797
Capital expenditures$25,234 1,476 941 2,502 1,325 6,386 2,109 39,973
Depreciation and amortization$22,264 1,113 869 4,111 1,649 3,402 1,445 34,853
Equity$1,145,293 41,542 37,765 293,383 87,926 129,989 150,395 (32,360) 1,853,933
Nine months ended September 30, 2015:
Revenues from unaffiliated customers$1,334,900 170,351 73,076 1,943,441 524,254 716,373 258,016 5,020,411
Transfers between geographic areas89,329 9,991 15,171 16,330 18,677 31,478 15,638 (196,614)
Total revenues$1,424,229 180,342 88,247 1,959,771 542,931 747,851 273,654 (196,614) 5,020,411
Net revenues$681,868 93,967 51,159 377,384 135,114 229,745 82,371 1,651,608
Operating income$193,117 33,433 15,804 187,343 48,594 44,846 20,355 543,492
Identifiable assets$1,385,157 108,644 56,987 472,189 140,206 427,053 229,670 7,112 2,827,018
Capital expenditures$20,232 2,602 1,408 1,476 1,599 3,292 1,294 31,903
Depreciation and amortization$22,171 965 784 4,114 1,609 3,542 1,239 34,424
Equity$1,144,466 64,384 35,890 250,362 103,457 148,287 126,321 (30,975) 1,842,192


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 Nine months ended
September 30, September 30,
(in thousands)2016 2015 2016 2015
Total revenues$1,562,394 $1,651,332 $4,456,030 $5,020,411
Expenses:
Airfreight services444,359 464,161 1,236,555 1,484,150
Ocean freight and ocean services359,991 416,075 1,006,710 1,294,887
Customs brokerage and other services212,785 201,115 597,320 589,766
Net revenues$545,259 $569,981 $1,615,445 $1,651,608

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

Source:Expeditors International of Washington, Inc.