Expeditors Reports Fourth Quarter 2017 EPS of $0.92

SEATTLE, Feb. 20, 2018 (GLOBE NEWSWIRE) -- Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced fourth quarter 2017 financial results including the following highlights compared to the same quarter of 2016:

  • Diluted Net Earnings Attributable to Shareholders per share (EPS1) increased 51% to $0.92 (includes a net income tax benefit from U.S. tax reform of $0.21)
  • Net Earnings Attributable to Shareholders increased 51% to $167 million (includes a net income tax benefit from U.S. tax reform of $39 million)
  • Operating Income increased 16% to $199 million
  • Revenues increased 16% to $1.90 billion
  • Net Revenues2 increased 15% to $629 million
  • Airfreight tonnage volumes increased 6% and ocean container volumes increased 1%

“We executed well across all of our businesses in the fourth quarter, with improved performance throughout the second half of 2017,” said Jeffrey S. Musser, President and Chief Executive Officer. “The global freight industry is stronger than it was a year ago, particularly in certain key lanes and especially for shipments by air. In response to that continued robust demand, and combined with tight capacity and unpredictable rates, we continued to grow profitably by delivering outstanding services and solutions to our customers.

“I credit our strong results to the hard work and discipline of everyone throughout our talented organization, as we continue to move higher volumes in all services with greater efficiency per-shipment. The vast majority of our dedicated employees work in the field at one of our many District operations, where they are close to our customers and greatly attuned to their individual supply chain needs. Because each District is responsible for its own P&L, we are all highly motivated to drive efficiency and growth in support of profitable business.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “We continued to improve operational performance on many levels, pushing operating efficiency (operating income as a percentage of net revenue) to nearly 32% in Q4 and above 30% for the full year. We are managing our pricing well in a volatile rate environment, and we are controlling expenses by making the best of our investments in people, processes, and core technologies. We will continue to invest in people and systems to support profitable growth, while working to further hone our performance at the District level to move more freight and to move it more efficiently.”

Mr. Powell also noted, “We were positively impacted by the implementation of U.S. tax law changes in Q4, which resulted in recognizing a $39 million net income tax benefit. The impact on our effective tax rate in future periods will largely depend on the mix of pretax earnings that we generate in our U.S. and foreign operations, as well as further interpretation of and guidance to be issued on the new tax law. At this time, we expect our effective tax rate in 2018 will be between 31% and 34% of pretax earnings.”

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 services, 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 2017 Earnings Release, February 20, 2018
Financial Highlights for the Three months and Years ended
December 31, 2017 and 2016 (Unaudited)
(in 000's of US dollars except per share data)
Three months ended
December 31,
Years ended
December 31,
2017 2016 % Change 2017 2016 % Change
Revenues$1,901,371 $1,642,007 16% $6,920,948 $6,098,037 13%
Net revenues3$628,809 $548,591 15% $2,319,189 $2,164,036 7%
Operating income4$199,011 $172,210 16% $700,260 $670,163 4%
Net earnings attributable to shareholders5$166,967 $110,590 51% $489,345 $430,807 14%
Diluted earnings attributable to shareholders$0.92 $0.61 51% $2.69 $2.36 14%
Basic earnings attributable to shareholders$0.94 $0.61 54% $2.73 $2.38 15%
Diluted weighted average shares outstanding180,635 181,887 181,666 182,704
Basic weighted average shares outstanding177,523 180,201 179,247 181,282

_______________________
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.
5Net earnings in the fourth quarter of 2017 include a $39 million net income tax benefit that resulted from the effect of the 2017 Tax Cut and Jobs Act. This amount is composed of the remeasurement of net deferred tax liabilities and assets, based on the new lower U.S. corporate tax rate, the recording of a provisional estimate of the one-time mandatory tax on the undistributed earnings of the Company's non-U.S. subsidiaries, and the effects of the transition to a territorial tax system in the U.S.

During the three and twelve-month periods ended December 31, 2017, the Company repurchased 2.1 million and 8.2 million shares of common stock at an average price of $64.52 and $58.16 per share, respectively. 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.

Employee Full-time Equivalents
as of December 31,
2017 2016
North America6,091 5,835
Europe3,050 2,887
North Asia2,593 2,597
South Asia1,623 1,506
Middle East, Africa and India1,503 1,562
Latin America814 778
Information Systems884 877
Corporate386 376
Total16,944 16,418


Year-over-year percentage
increase/(decrease) in:
Airfreight kilos Ocean freight FEU
2017
October 8% (1)%
November 7% 1%
December 2% 2%
Quarter 6% 1%

_______________________

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on February 23, 2018 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about March 5, 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 the strength of the global freight industry and continued robust demand, tight capacity and unpredictable rates. 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 move increased volumes with greater efficiency, employee motivation to drive efficiency and growth in support of profitability, our ability to manage pricing in a volatile environment, our ability to control expenses and optimize our investments to support profitable growth, and our ability to predict our effective tax rate in 2018; 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,
2017
December 31,
2016
Assets
Current Assets:
Cash and cash equivalents$1,051,099 $974,435
Accounts receivable, net1,414,741 1,190,130
Other current assets75,612 54,014
Total current assets2,541,452 2,218,579
Property and equipment, net525,203 536,572
Goodwill7,927 7,927
Deferred Federal and state taxes, net13,207
Other assets, net29,219 27,793
$3,117,008 $2,790,871
Liabilities and Equity
Current Liabilities:
Accounts payable$866,305 $726,571
Accrued expenses, primarily salaries and related costs206,320 185,502
Federal, state and foreign income taxes20,494 17,858
Total current liabilities1,093,119 929,931
Noncurrent Federal income tax payable29,516
Deferred Federal and state income taxes 13,727
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued
Common stock, par value $0.01 per share; issued and outstanding 176,374 shares at December 31, 2017 and 179,857 shares at December 31, 20161,764 1,799
Additional paid-in capital546 2,642
Retained earnings2,063,512 1,944,789
Accumulated other comprehensive loss(73,964) (104,592)
Total shareholders’ equity1,991,858 1,844,638
Noncontrolling interest2,515 2,575
Total equity1,994,373 1,847,213
$3,117,008 $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 Twelve months ended
December 31, December 31,
2017 2016 2017 2016
Revenues:
Airfreight services$854,455 $688,835 $2,877,032 $2,453,347
Ocean freight and ocean services521,315 503,150 2,107,045 1,917,494
Customs brokerage and other services525,601 450,022 1,936,871 1,727,196
Total revenues1,901,371 1,642,007 6,920,948 6,098,037
Operating Expenses:
Airfreight services636,344 515,612 2,126,761 1,752,167
Ocean freight and ocean services380,689 371,989 1,543,740 1,378,699
Customs brokerage and other services255,529 205,815 931,258 803,135
Salaries and related costs336,961 289,544 1,267,120 1,157,635
Rent and occupancy costs31,906 27,783 119,732 108,812
Depreciation and amortization13,069 11,943 49,310 46,796
Selling and promotion11,814 11,946 44,290 41,763
Other36,048 35,165 138,477 138,867
Total operating expenses1,702,360 1,469,797 6,220,688 5,427,874
Operating income199,011 172,210 700,260 670,163
Interest income3,639 2,987 13,204 11,580
Other, net2,547 1,706 5,131 5,113
Other income, net6,186 4,693 18,335 16,693
Earnings before income taxes205,197 176,903 718,595 686,856
Income tax expense37,742 65,805 228,212 254,323
Net earnings167,455 111,098 490,383 432,533
Less net earnings attributable to the noncontrolling interest488 508 1,038 1,726
Net earnings attributable to shareholders$166,967 $110,590 $489,345 $430,807
Diluted earnings attributable to shareholders per share$0.92 $0.61 $2.69 $2.36
Basic earnings attributable to shareholders per share$0.94 $0.61 $2.73 $2.38
Dividends declared and paid per common share$0.42 $0.40 $0.84 $0.80
Weighted average diluted shares outstanding180,635 181,887 181,666 182,704
Weighted average basic shares outstanding177,523 180,201 179,247 181,282


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,
2017 2016 2017 2016
Operating Activities:
Net earnings$167,455 $111,098 $490,383 $432,533
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable2,169 146 5,356 2,607
Deferred income tax (benefit) expense(27,695) 13,493 (43,695) 15,835
Stock compensation expense11,872 10,953 50,908 45,217
Depreciation and amortization13,069 11,943 49,310 46,796
Other(4,234) (3,581) (4,382) (3,540)
Changes in operating assets and liabilities:
Increase in accounts receivable(60,981) (108,384) (184,771) (102,297)
Increase in accounts payable and accrued expenses18,499 28,568 114,631 102,716
Increase (decrease) in income taxes payable, net5,450 4,242 16,264 (12,370)
Decrease (increase) in other current assets782 4,077 (5,365) 1,988
Net cash from operating activities126,386 72,555 488,639 529,485
Investing Activities:
Purchase of property and equipment(27,413) (19,343) (95,016) (59,316)
Proceeds from sale of property and equipment84,062 37 84,405 229
Other, net161 611 (1,074) 5,891
Net cash from investing activities56,810 (18,695) (11,685) (53,196)
Financing Activities:
Proceeds from issuance of common stock42,311 37,668 205,092 185,313
Repurchases of common stock(137,522) (69,561) (478,258) (337,658)
Dividends paid(74,769) (72,123) (150,495) (145,123)
Distribution to noncontrolling interest(904) (1,335) (904) (1,335)
Net cash from financing activities(170,884) (105,351) (424,565) (298,803)
Effect of exchange rate changes on cash and cash equivalents5,343 (16,774) 24,275 (10,847)
Increase (decrease) in cash and cash equivalents17,655 (68,265) 76,664 166,639
Cash and cash equivalents at beginning of period1,033,444 1,042,700 974,435 807,796
Cash and cash equivalents at end of period$1,051,099 $974,435 $1,051,099 $974,435
Supplemental Cash Flow Information:
Cash paid for income taxes$58,793 $49,263 $249,704 $254,312


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, 2017:
Revenues from unaffiliated customers$496,584 68,362 27,349 703,578 186,715 307,432 111,351 1,901,371
Transfers between geographic areas31,807 3,581 3,693 6,266 6,479 14,008 5,532 (71,366)
Total revenues$528,391 71,943 31,042 709,844 193,194 321,440 116,883 (71,366) 1,901,371
Net revenues$270,999 34,441 14,565 137,776 45,816 93,458 31,294 460 628,809
Operating income$86,565 11,548 1,615 64,907 15,623 12,302 6,437 14 199,011
Identifiable assets$1,595,140 151,181 55,431 458,152 137,279 501,711 215,495 2,619 3,117,008
Capital expenditures$8,720 497 964 1,264 516 15,237 215 27,413
Depreciation and amortization$8,628 383 347 1,331 559 1,361 460 13,069
Equity$1,337,568 60,705 26,546 240,721 94,516 142,971 123,600 (32,254) 1,994,373
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


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, 2017:
Revenues from unaffiliated customers$1,851,395 256,359 97,096 2,576,971 661,878 1,072,028 405,221 6,920,948
Transfers between geographic areas111,163 11,827 14,766 21,405 22,999 43,296 20,848 (246,304)
Total revenues$1,962,558 268,186 111,862 2,598,376 684,877 1,115,324 426,069 (246,304) 6,920,948
Net revenues$1,008,841 119,071 58,199 509,235 163,450 335,702 121,267 3,424 2,319,189
Operating income$277,821 38,131 9,964 248,422 53,057 48,491 24,365 9 700,260
Identifiable assets$1,595,140 151,181 55,431 458,152 137,279 501,711 215,495 2,619 3,117,008
Capital expenditures$28,212 1,563 4,612 3,756 1,688 53,954 1,231 95,016
Depreciation and amortization$32,017 1,546 1,277 5,326 2,215 5,068 1,861 49,310
Equity$1,337,568 60,705 26,546 240,721 94,516 142,971 123,600 (32,254) 1,994,373
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

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)2017 2016 2017 2016
Total revenues$1,901,371 $1,642,007 $6,920,948 $6,098,037
Expenses:
Airfreight services636,344 515,612 2,126,761 1,752,167
Ocean freight and ocean services380,689 371,989 1,543,740 1,378,699
Customs brokerage and other services255,529 205,815 931,258 803,135
Net revenues$628,809 $548,591 $2,319,189 $2,164,036

CONTACTS:

Jeffrey S. MusserBradley S. PowellGeoffrey Buscher
President and Chief Executive OfficerSenior Vice President and Chief Financial OfficerDirector - Investor Relations
(206) 674-3433(206) 674-3412(206) 892-4510

By: Expeditors International of Washington, Inc.
1015 Third Avenue, Suite 1200
Seattle, Washington 98104

Source:Expeditors International of Washington, Inc.