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Expeditors Reports Fourth Quarter 2016 EPS of $0.61

SEATTLE, Feb. 21, 2017 (GLOBE NEWSWIRE) -- Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced fourth quarter 2016 financial results including the following highlights compared to the same quarter of 2015:

  • Diluted Net Earnings Attributable to Shareholders per share (EPS1) remained constant at $0.61
  • Net Earnings Attributable to Shareholders decreased 3% to $111 million
  • Operating Income decreased 3% to $172 million
  • Revenues increased 3% to $1.64 billion
  • Net Revenues2 increased 2% to $549 million
  • Airfreight tonnage and ocean container volumes both increased 12% to record levels

“Through the hard work and dedication of our people, we shipped the most freight in our Company’s history and gained market share in the fourth quarter, as we did throughout 2016,” said Jeffrey S. Musser, President and Chief Executive Officer. “We are especially pleased with the growth in our customs brokerage and other services, particularly in the U.S. through our Transcon business. Rates remained highly unpredictable in the quarter, as they were throughout much of 2016, again putting unusual pressure on our margins. While experience has shown us that margin pressure is cyclical, in light of such truly unprecedented rate volatility, we are improving processes to better address the rapid changes in buy and sell rates, which we expect to continue.

“We continue to execute our strategic initiatives and remain focused on expanding our business and exploring opportunities for growth. At the same time, given the uncertainties for global trade, we are also working hard to expand our presence in markets that are less uncertain. In addition, we recently appointed one of our most senior executives, Phil Coughlin, to the new position of Chief Strategy Officer to form a team that will explore additional opportunities for growth. As a market leader, we recognize that in order to maintain our leadership position and remain at the forefront of innovation, we must continuously invest in people, processes and technology. We believe the additional investments we’re making will enhance our market position.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “We shipped record volumes and again maintained operating income as a percentage of net revenues - a key measure of operating efficiency - above 30%. We believe the additional investments we have made in people and technology are delivering enhanced growth and market share. In 2017, we will continue to make additional important investments in technology and in our strategic efforts to explore new areas for 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, domestic time-definite transportation services, purchase order management, warehousing and distribution and customized logistics solutions.

________________________
1Diluted 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.
4th Quarter 2016 Earnings Release, February 21, 2017

Financial Highlights for the Three months and Years ended
December 31, 2016 and 2015 (Unaudited)

(in 000's of US dollars except per share data)

Three months ended
December 31,
Years ended
December 31,
2016 2015 % Change 2016 2015 % Change
Revenues$1,642,007 $1,596,221 3% $6,098,037 $6,616,632 (8)%
Net revenues3$548,591 $536,169 2% $2,164,036 $2,187,777 (1)%
Operating income4$172,210 $177,992 (3)% $670,163 $721,484 (7)%
Net earnings attributable to shareholders$110,590 $114,449 (3)% $430,807 $457,223 (6)%
Diluted earnings attributable to shareholders$0.61 $0.61 % $2.36 $2.40 (2)%
Basic earnings attributable to shareholders$0.61 $0.62 (2)% $2.38 $2.42 (2)%
Diluted weighted average shares outstanding181,887 186,519 182,704 190,223
Basic weighted average shares outstanding180,201 185,111 181,282 188,941

_______________________
3 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.
4 Operating Income in the fourth quarter of 2016 includes a $6 million foreign exchange gain recorded in customs brokerage and other services expenses that resulted from the devaluation of the Egyptian pound. Operating Income in the fourth quarter of 2015 includes a $6 million recovery of legal and related fees.

During the three and twelve-month periods ended December 31, 2016, the Company repurchased 1.3 million and 6.7 million shares of common stock at an average price of $54.31 and $50.53 per share, respectively. During the three and twelve-month periods ended December 31, 2015, the Company repurchased 4.5 million and 13.1 million shares of common stock at an average price of $47.66 and $47.95 per share, respectively.

Employee headcount as of December 31,
2016 2015
North America5,868 5,655
Europe2,904 2,685
North Asia2,509 2,464
South Asia1,370 1,323
Middle East, Africa and India1,510 1,417
Latin America765 796
Information Systems825 741
Corporate338 316
Total16,089 15,397


Year-over-year percentage increase in:
Airfreight kilos Ocean freight FEU
2016
October 3% 13%
November 14% 13%
December 18% 9%
Quarter 12% 12%

_______________________

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on February 24, 2017 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about March 3, 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 uncertainties and challenges with the global economy and global trade, ability to adapt to a rapidly changing environment, availability of ocean and air carrier capacity, favorable spot market buying opportunities, rate volatility, benefits from our strategic and innovation plans, and ability to improve efficiency, expand margins and gain market share. 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, our ability to better address the rapid changes in buy and sell rates, expand our business and explore opportunities for growth, maintain our leadership position and remain at the forefront of innovation, enhance our market position, deliver enhanced growth and market share, and make successful investments in technology and strategies that result in new areas for profitable growth; volatility in equity markets; energy and fuel prices; political changes; foreign exchange rates; regulatory actions or changes or the unpredictable acts of competitors and other risks; 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)
December 31,
2016
December 31,
2015
Assets
Current Assets:
Cash and cash equivalents$974,435 $807,796
Accounts receivable, net1,190,130 1,112,260
Other current assets54,014 56,453
Total current assets2,218,579 1,976,509
Property and equipment, net536,572 524,724
Goodwill7,927 7,927
Other assets, net27,793 56,417
$2,790,871 $2,565,577
Liabilities and Equity
Current Liabilities:
Accounts payable$726,571 $645,304
Accrued expenses, primarily salaries and related costs185,502 186,571
Federal, state and foreign income taxes17,858 29,498
Total current liabilities929,931 861,373
Deferred Federal and state income taxes13,727 9,528
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued
Common stock, par value $0.01 per share; issued and outstanding 179,857 shares at December 31, 2016 and 182,067 shares at December 31, 20151,799 1,821
Additional paid-in capital2,642 31
Retained earnings1,944,789 1,771,379
Accumulated other comprehensive loss(104,592) (81,238)
Total shareholders’ equity1,844,638 1,691,993
Noncontrolling interest2,575 2,683
Total equity1,847,213 1,694,676
$2,790,871 $2,565,577



EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
2016 2015 2016 2015
Revenues:
Airfreight services$688,835 $679,720 $2,453,347 $2,740,583
Ocean freight and ocean services503,150 491,539 1,917,494 2,194,004
Customs brokerage and other services450,022 424,962 1,727,196 1,682,045
Total revenues1,642,007 1,596,221 6,098,037 6,616,632
Operating Expenses:
Airfreight services515,612 503,540 1,752,167 1,987,690
Ocean freight and ocean services371,989 354,106 1,378,699 1,648,993
Customs brokerage and other services205,815 202,406 803,135 792,172
Salaries and related costs289,544 282,002 1,157,635 1,143,511
Rent and occupancy costs27,783 26,364 108,812 102,470
Depreciation and amortization11,943 11,588 46,796 46,012
Selling and promotion11,946 11,844 41,763 41,990
Other35,165 26,379 138,867 132,310
Total operating expenses1,469,797 1,418,229 5,427,874 5,895,148
Operating income172,210 177,992 670,163 721,484
Interest income2,987 2,387 11,580 10,421
Other, net1,706 4,031 5,113 4,784
Other income, net4,693 6,418 16,693 15,205
Earnings before income taxes176,903 184,410 686,856 736,689
Income tax expense65,805 69,310 254,323 277,192
Net earnings111,098 115,100 432,533 459,497
Less net earnings attributable to the noncontrolling interest508 651 1,726 2,274
Net earnings attributable to shareholders$110,590 $114,449 $430,807 $457,223
Diluted earnings attributable to shareholders per share$0.61 $0.61 $2.36 $2.40
Basic earnings attributable to shareholders per share$0.61 $0.62 $2.38 $2.42
Dividends declared and paid per common share$0.40 $0.36 $0.80 $0.72
Weighted average diluted shares outstanding181,887 186,519 182,704 190,223
Weighted average basic shares outstanding180,201 185,111 181,282 188,941


EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
Three months ended Twelve months ended
December 31, December 31,
2016 2015 2016 2015
Operating Activities:
Net earnings$111,098 $115,100 $432,533 $459,497
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable146 1,178 2,607 2,173
Deferred income tax expense13,493 4,687 15,835 17,999
Excess tax benefits from stock plans(147) (4) (386) (1,850)
Stock compensation expense10,953 10,926 45,217 43,415
Depreciation and amortization11,943 11,588 46,796 46,012
Other(3,581) (139) (3,540) (24)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable(108,384) 43,709 (102,297) 62,619
Increase (decrease) in accounts payable and accrued expenses28,568 (87,475) 102,716 (84,164)
Increase (decrease) in income taxes payable, net4,242 14,272 (12,370) 18,382
Decrease in other current assets4,077 2,072 1,988 653
Net cash from operating activities72,408 115,914 529,099 564,712
Investing Activities:
Decrease (increase) in short-term investments, net 8,218 (37) 40,294
Purchase of property and equipment(19,343) (12,480) (59,316) (44,383)
Other, net648 (855) 6,157 (3,337)
Net cash from investing activities(18,695) (5,117) (53,196) (7,426)
Financing Activities:
Proceeds from issuance of common stock37,668 16,263 185,313 130,964
Repurchases of common stock(69,561) (214,516) (337,658) (629,991)
Excess tax benefits from stock plans147 4 386 1,850
Dividends paid(72,123) (66,892) (145,123) (135,673)
Distribution to noncontrolling interest(1,335) (1,265) (1,335) (2,122)
Net cash from financing activities(105,204) (266,406) (298,417) (634,972)
Effect of exchange rate changes on cash and cash equivalents(16,774) (5,278) (10,847) (41,625)
(Decrease) increase in cash and cash equivalents(68,265) (160,887) 166,639 (119,311)
Cash and cash equivalents at beginning of period1,042,700 968,683 807,796 927,107
Cash and cash equivalents at end of period$974,435 $807,796 $974,435 $807,796
Taxes paid:
Income taxes$49,263 $49,343 $254,312 $239,367



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 December 31, 2016:
Revenues from unaffiliated customers$434,083 61,034 21,840 637,327 161,516 238,526 87,681 1,642,007
Transfers between geographic areas26,459 2,637 3,525 5,363 5,913 10,706 5,424 (60,027)
Total revenues$460,542 63,671 25,365 642,690 167,429 249,232 93,105 (60,027) 1,642,007
Net revenues$234,779 31,088 13,802 114,116 42,547 77,361 34,590 308 548,591
Operating income$65,839 9,439 2,305 54,156 16,877 11,086 12,510 (2) 172,210
Identifiable assets$1,455,722 104,804 49,231 511,851 120,300 351,960 190,902 6,101 2,790,871
Capital expenditures$14,297 251 97 1,387 1,713 1,168 430 19,343
Depreciation and amortization$7,675 366 318 1,344 528 1,174 538 11,943
Equity$1,166,582 46,448 27,164 327,672 91,983 108,430 112,633 (33,699) 1,847,213
Three months ended December 31, 2015:
Revenues from unaffiliated customers$428,461 55,933 21,153 613,957 153,374 242,454 80,889 1,596,221
Transfers between geographic areas29,555 3,392 3,987 5,392 6,341 11,309 5,684 (65,660)
Total revenues$458,016 59,325 25,140 619,349 159,715 253,763 86,573 (65,660) 1,596,221
Net revenues$224,912 30,414 13,858 115,851 43,996 78,556 28,582 536,169
Operating income$52,140 13,413 3,852 58,511 21,049 20,178 8,849 177,992
Identifiable assets$1,185,671 111,549 48,678 446,914 127,014 421,590 221,835 2,326 2,565,577
Capital expenditures$6,575 1,313 348 727 784 1,930 803 12,480
Depreciation and amortization$7,361 366 257 1,311 501 1,389 403 11,588
Equity$986,330 70,932 33,161 253,097 99,220 154,174 130,105 (32,343) 1,694,676


UNITED
STATES
OTHER
NORTH
AMERICA
LATIN
AMERICA
NORTH
ASIA
SOUTH
ASIA
EUROPE MIDDLE
EAST,
AFRICA

and
INDIA
ELIMI-
NATIONS
CONSOLI-
DATED
Twelve months ended December 31, 2016:
Revenues from unaffiliated customers$1,683,006 226,561 84,665 2,242,670 603,980 918,561 338,594 6,098,037
Transfers between geographic areas106,076 10,778 15,037 21,212 24,251 41,102 21,876 (240,332)
Total revenues$1,789,082 237,339 99,702 2,263,882 628,231 959,663 360,470 (240,332) 6,098,037
Net revenues$918,110 119,492 56,066 471,275 171,033 304,429 123,335 296 2,164,036
Operating income$250,715 32,530 13,321 230,777 64,967 42,195 35,672 (14) 670,163
Identifiable assets$1,455,722 104,804 49,231 511,851 120,300 351,960 190,902 6,101 2,790,871
Capital expenditures$39,531 1,727 1,038 3,889 3,038 7,554 2,539 59,316
Depreciation and amortization$29,939 1,479 1,187 5,455 2,177 4,576 1,983 46,796
Equity$1,166,582 46,448 27,164 327,672 91,983 108,430 112,633 (33,699) 1,847,213
Twelve months ended December 31, 2015:
Revenues from unaffiliated customers$1,763,361 226,284 94,229 2,557,398 677,628 958,827 338,905 6,616,632
Transfers between geographic areas118,884 13,383 19,158 21,722 25,018 42,787 21,322 (262,274)
Total revenues$1,882,245 239,667 113,387 2,579,120 702,646 1,001,614 360,227 (262,274) 6,616,632
Net revenues$906,780 124,381 65,017 493,235 179,110 308,301 110,953 2,187,777
Operating income$245,257 46,846 19,656 245,854 69,643 65,024 29,204 721,484
Identifiable assets$1,185,671 111,549 48,678 446,914 127,014 421,590 221,835 2,326 2,565,577
Capital expenditures$26,807 3,915 1,756 2,203 2,383 5,222 2,097 44,383
Depreciation and amortization$29,532 1,331 1,041 5,425 2,110 4,931 1,642 46,012
Equity$986,330 70,932 33,161 253,097 99,220 154,174 130,105 (32,343) 1,694,676

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 operating 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 include 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 Twelve months ended
December 31, December 31,
(in thousands)2016 2015 2016 2015
Total revenues$1,642,007 $1,596,221 $6,098,037 $6,616,632
Expenses:
Airfreight services515,612 503,540 1,752,167 1,987,690
Ocean freight and ocean services371,989 354,106 1,378,699 1,648,993
Customs brokerage and other services205,815 202,406 803,135 792,172
Net revenues$548,591 $536,169 $2,164,036 $2,187,777


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.