Expeditors Reports Third Quarter 2016 EPS of $0.59

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| Source: Expeditors International of Washington, Inc.

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.

_______________________

Diluted earnings attributable to shareholders per share.

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