Expeditors Reports Third Quarter 2013 EPS Of $.45 Per Share1

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced net earnings attributable to shareholders of $92,400,000 for the third quarter of 2013, as compared with $88,490,000 for the same quarter of 2012, an increase of 4%. Net revenues 2 for the third quarter of 2013 increased 4% to $482,025,000 as compared with $465,138,000 for the same quarter in 2012. Total revenues and operating income were $1,535,089,000 and $146,313,000 in the third quarter of 2013, as compared with $1,531,664,000 and $145,099,000 for the same quarter of 2012, a slight increase and an increase of 1%, respectively. Diluted net earnings attributable to shareholders per share for the third quarter were $.45, as compared with $.42 for the same quarter in 2012, an increase of 7%.

For the nine months ended September 30, 2013, net earnings attributable to shareholders was $265,030,000, as compared with $249,152,000 in 2012, an increase of 6%. Net revenues for the nine months increased to $1,396,410,000 from $1,365,360,000 for 2012, up 2%. Total revenues and operating income for the nine months were $4,446,027,000 and $418,410,000 in 2013, as compared with $4,447,986,000 and $402,773,000 for the same period in 2012, a marginal decrease and an increase of 4%, respectively. Diluted net earnings attributable to shareholders per share for the first three quarters of 2013 were $1.28, as compared with $1.17 for the same period of 2012, an increase of 9%.

“Despite ongoing pricing volatility in the ocean markets and an air peak season that didn’t commence in September, as anticipated, we executed well in our 2013 third quarter. Our operating margin remained above our efficiency target point of 30% and our year-over-year growth in ocean and air volumes, 9% in ocean container volumes and 3% in air tonnage, is similar to the trends we’ve experienced over the past several quarters. We definitely view the growth as a continuing positive development,” said Peter J. Rose, Chairman and Chief Executive Officer.

“The ocean market remains very volatile and yet again, we’ve seen increases in ocean volumes be outpaced by the proliferation of excess carrier capacity. The carriers attempted to impose general rate increases and despite some temporary success early in the quarter, were generally unsuccessful and market ocean rates continued their downward slide. In an attempt to provide stability to the pricing discussions with our customers we chose to maintain market share, and actually grow share on some lanes, by absorbing those carrier costs increases we judged to be temporary and unsustainable. We also adjusted rates, as required to keep our pricing fresh amid a very dynamic pricing environment. In these situations, unlike the government, for us, shutting down isn’t an option. We have to keep working to find better ways to service our customers and address short term challenges without eroding long term strategic focus. We think the 30% operating margin figure re-affirms that overall we did a good job of both,” Rose continued.

“This being my 100 th earnings release as Expeditors’ CEO, I can definitely look back on previous announcements with a unique sense of optimism and say while we’ve had better, we’ve also definitely had worse. Given what we see firming up in the fourth quarter airfreight markets, we feel pretty good about what lies ahead in 2013 despite some of the aforementioned challenges. While the much awaited airfreight peak season, as we’ve noted, did not materialize in September, some of that anticipated volume, evidenced by backlogs in key export markets, particularly in Asia, seems to have manifested itself in October. This is in part due to planned new product launches and a gearing up for the November and December holiday season,” Rose said. “As always, we are most pleased with the efforts of our people...it is their dedication and their professionalism that not only reinforces our culture, but actually defines and distinguishes us as a company and ultimately provides the returns to our shareholders. Thanks again to one and all,” Rose concluded.

Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 188 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, domestic time definite transportation services, purchase order management, distribution and warehousing, and customized logistics solutions.

Expeditors International of Washington, Inc. Third Quarter 2013 Earnings Release, November 5, 2013

 

Financial Highlights for the Three and Nine months ended September 30, 2013 and 2012 (Unaudited)

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

Three months ended September 30,
       

Nine months ended September 30,
   
2013     2012

% Change
  2013     2012

% Change
 
Revenues $ 1,535,089 $ 1,531,664 % $ 4,446,027 $ 4,447,986 %
Net revenues 1 $ 482,025 $ 465,138 4 % $ 1,396,410 $ 1,365,360 2 %
Operating income $ 146,313 $ 145,099 1 % $ 418,410 $ 402,773 4 %
Net earnings attributable to shareholders $ 92,400 $ 88,490 4 % $ 265,030 $ 249,152 6 %
Diluted earnings attributable to shareholders $ .45 $ .42 7 % $ 1.28 $ 1.17 9 %
Basic earnings attributable to shareholders $ .45 $ .42 7 % $ 1.28 $ 1.18 8 %
Diluted weighted average shares outstanding 207,368,792 211,397,602 207,351,569 212,916,309
Basic weighted average shares outstanding 206,516,194 210,135,763 206,478,746 211,314,850

_______________________

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.
 
      Employee headcount as of September 30,
2013     2012
North America 4,820 4,786
Asia Pacific 3,931 3,936
Europe and Africa 2,288 2,336
Middle East and India 1,206 1,249
Latin America 675 683
Information Systems 635 603
Corporate 293 241
Total 13,848 13,834
      Year-over-year percentage increase in:
Airfreight kilos     Ocean freight FEU
2013
July 10 % 10 %
August 1 % 12 %
September (2 )% 6 %
Quarter 3 % 9 %

Investors may submit written questions via e-mail to: investor@expeditors.com . Questions received by the end of business on November 8, 2013 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about December 6, 2013.

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 ongoing price volatility and volumes in the ocean markets, excess carrier capacity, positive trends in air tonnage and ocean volumes, timing or extent of air peak season in the fourth quarter, ability to maintain or grow market share and ability to provide returns to our shareholders. 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 maintain consistent and stable operating results, future success of our business model, ability to perpetuate profits, changes in customer demand for Expeditors’ services caused by a general economic slow-down, customers’ inventory build-up, decreased consumer confidence, volatility in equity markets, energy prices, political 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 share data)

(Unaudited)
 
      September 30, 2013   December 31, 2012

Assets
Current Assets:
Cash and cash equivalents $ 1,310,330 $ 1,260,842
Short-term investments 99,828 139
Accounts receivable, net 1,027,572 1,031,376
Deferred Federal and state income taxes 12,670 12,102
Other current assets 47,811   53,140
Total current assets 2,498,211   2,357,599
Property and equipment, net 562,125 556,204
Goodwill 7,927 7,927
Other assets, net 30,300   32,395
$ 3,098,563   $ 2,954,125

Liabilities and Equity
Current Liabilities:
Accounts payable 656,674 641,593
Accrued expenses, primarily salaries and related costs 183,130 178,995
Federal, state and foreign income taxes 24,175   21,970
Total current liabilities 863,979   842,558
Deferred Federal and state income taxes 53,854 78,997
 
Commitments and contingencies
 
Shareholders’ Equity:
Preferred stock; none issued

Common stock, par value $.01 per share; issued and outstanding 205,455,991 sharesat September 30, 2013 and 206,392,013 shares at December 31, 2012
2,055 2,064
Additional paid-in capital 2,443 1,283

Retained earnings
2,181,317 2,018,618
Accumulated other comprehensive (loss) income (6,236 ) 5,734
Total shareholders’ equity 2,179,579   2,027,699
Noncontrolling interest 1,151   4,871
Total equity 2,180,730   2,032,570
$ 3,098,563   $ 2,954,125
 
 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES
 

Condensed Consolidated Statements of Earnings

(In thousands, except share data)

(Unaudited)
       
Three months ended Nine months ended
September 30, September 30,
2013   2012 2013   2012
Revenues:
Airfreight services $ 628,116 $ 622,678 $ 1,891,459 $ 1,900,131
Ocean freight and ocean services 525,193 549,250 1,462,679 1,502,584
Customs brokerage and other services 381,780   359,736   1,091,889   1,045,271
Total revenues 1,535,089   1,531,664   4,446,027   4,447,986
Operating Expenses:
Airfreight services 466,699 471,947 1,414,634 1,437,301
Ocean freight and ocean services 409,649 432,518 1,135,299 1,177,919
Customs brokerage and other services 176,716 162,061 499,684 467,406
Salaries and related costs 261,613 252,899 765,599 748,956
Rent and occupancy costs 21,851 21,304 65,640 63,333
Depreciation and amortization 12,629 10,030 35,581 29,245
Selling and promotion 8,306 7,847 23,891 25,370
Other 31,313   27,959   87,289   95,683
Total operating expenses 1,388,776   1,386,565   4,027,617   4,045,213
Operating income 146,313   145,099   418,410   402,773
 
Interest income 2,967 2,831 9,280 9,241
Other, net 1,212   1,050   7,068   4,987
Other income, net 4,179   3,881   16,348   14,228
Earnings before income taxes 150,492 148,980 434,758 417,001
Income tax expense 57,763   60,253   168,756   167,531
Net earnings 92,729   88,727   266,002   249,470
Less net earnings attributable to the noncontrolling interest 329   237   972   318
Net earnings attributable to shareholders $ 92,400   $ 88,490   $ 265,030   $ 249,152
Diluted earnings attributable to shareholders per share $ .45   $ .42   $ 1.28   $ 1.17
Basic earnings attributable to shareholders per share $ .45   $ .42   $ 1.28   $ 1.18
Dividends declared and paid per common share $   $   $ .30   $ .28
Weighted average diluted shares outstanding 207,368,792   211,397,602   207,351,569   212,916,309
Weighted average basic shares outstanding 206,516,194   210,135,763   206,478,746   211,314,850
 
 

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,
2013   2012 2013   2012
Operating Activities:
Net earnings $ 92,729 $ 88,727 $ 266,002 $ 249,470
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses (recoveries) on accounts receivable 1,496 463 2,537 (392 )
Deferred income tax (benefit) expense (33,185 ) 4,588 (20,245 ) 4,330
Excess tax benefits from stock plans (59 ) (1,683 ) (4,291 )
Stock compensation expense 11,015 11,320 33,060 32,846
Depreciation and amortization 12,629 10,030 35,581 29,245
Other 187 1,260 636 1,683
Changes in operating assets and liabilities:
Increase in accounts receivable (5,115 ) (23,520 ) (14,482 ) (73,812 )
Increase in other current assets (4,702 ) (7,195 ) (5,278 ) (3,629 )
(Decrease) increase in accounts payable and accrued expenses (8,875 ) (23,267 ) 34,815 60,966
Increase in income taxes payable, net 30,114   6,819   14,640   12,961  
Net cash from operating activities 96,293   69,166   345,583   309,377  
Investing Activities:
(Increase) decrease in short-term investments, net (9,925 ) 113 (99,690 ) 211
Purchase of property and equipment (15,482 ) (10,170 ) (42,691 ) (37,072 )
Other, net 306   (104 ) 1,126   275  
Net cash from investing activities (25,101 ) (10,161 ) (141,255 ) (36,586 )
Financing Activities:
Proceeds from issuance of common stock 33,615 24,599 52,092 45,001
Repurchases of common stock (85,925 ) (87,227 ) (125,206 ) (193,493 )
Excess tax benefits from stock plans 59 1,683 4,291
Dividends paid (61,899 ) (59,358 )
Purchase of noncontrolling interest (7,730 )
Distribution to noncontrolling interest (1,161 ) (1,177 ) (1,161 ) (1,177 )
Net cash from financing activities (53,471 ) (63,746 ) (142,221 ) (204,736 )
Effect of exchange rate changes on cash and cash equivalents 6,500   8,136   (12,619 ) 5,231  
Increase in cash and cash equivalents 24,221 3,395 49,488 73,286
Cash and cash equivalents at beginning of period 1,286,109   1,364,247   1,260,842   1,294,356  
Cash and cash equivalents at end of period $ 1,310,330   $ 1,367,642   $ 1,310,330   $ 1,367,642  
Taxes paid:
Income taxes $ 147,248 $ 50,911 $ 174,199 $ 155,006
 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES
 

Business Segment Information

(In thousands) (Unaudited)
 
      UNITED

STATES
  OTHER

NORTH

AMERICA
  LATIN

AMERICA
  ASIA

PACIFIC
  EUROPE and

AFRICA
  MIDDLE

EAST and

INDIA
  ELIMI-

NATIONS
  CONSOLI-

DATED
Three months ended September 30, 2013:
Revenues from unaffiliated customers $ 394,046 52,962 22,136 777,711 212,482 75,752 1,535,089
Transfers between geographic areas 22,065   2,911   5,643   12,081   9,358   4,473   (56,531 )
Total revenues $ 416,111   55,873   27,779   789,792   221,840   80,225   (56,531 ) 1,535,089
Net revenues $ 196,389 26,255 15,627 147,343 70,924 25,487 482,025
Operating income $ 55,627 8,524 5,317 57,975 11,894 6,976 146,313
Identifiable assets $ 1,694,366 102,713 52,785 663,584 438,711 142,843 3,561 3,098,563
Capital expenditures $ 12,463 639 147 1,250 703 280 15,482
Depreciation and amortization $ 7,608 211 210 2,343 1,534 723 12,629
Equity $ 1,423,598 63,351 30,637 439,719 181,134 75,444 (33,153 ) 2,180,730
Three months ended September 30, 2012:
Revenues from unaffiliated customers $ 383,830 50,208 20,815 804,855 198,124 73,832 1,531,664
Transfers between geographic areas 24,423   2,677   4,140   10,676   9,624   4,507   (56,047 )
Total revenues $ 408,253   52,885   24,955   815,531   207,748   78,339   (56,047 ) 1,531,664
Net revenues $ 187,737 23,412 13,978 146,992 69,841 23,178 465,138
Operating income $ 56,096 6,886 4,239 59,620 13,312 4,946 145,099
Identifiable assets $ 1,570,615 102,020 58,687 714,982 423,488 162,225 170 3,032,187
Capital expenditures $ 5,681 222 405 1,934 1,476 452 10,170
Depreciation and amortization $ 5,942 188 220 1,691 1,555 434 10,030
Equity $ 1,281,250 58,471 33,444 499,590 158,939 96,621 (32,616 ) 2,095,699
 
Nine months ended September 30, 2013:
Revenues from unaffiliated customers $ 1,158,569 161,317 63,421 2,221,033 620,964 220,723 4,446,027
Transfers between geographic areas 65,308   7,971   16,133   34,316   27,427   13,359   (164,514 )
Total revenues $ 1,223,877   169,288   79,554   2,255,349   648,391   234,082   (164,514 ) 4,446,027
Net revenues $ 564,895 75,476 45,560 424,235 212,555 73,689 1,396,410
Operating income $ 161,290 23,023 14,007 165,640 35,433 19,017 418,410
Identifiable assets $ 1,694,366 102,713 52,785 663,584 438,711 142,843 3,561 3,098,563
Capital expenditures $ 22,196 1,534 551 14,858 2,464 1,088 42,691
Depreciation and amortization $ 21,641 615 680 6,314 4,713 1,618 35,581
Equity $ 1,423,598 63,351 30,637 439,719 181,134 75,444 (33,153 ) 2,180,730
Nine months ended September 30, 2012:
Revenues from unaffiliated customers $ 1,140,258 149,964 61,450 2,273,783 606,696 215,835 4,447,986
Transfers between geographic areas 69,135   7,608   14,010   32,686   28,694   13,828   (165,961 )
Total revenues $ 1,209,393   157,572   75,460   2,306,469   635,390   229,663   (165,961 ) 4,447,986
Net revenues $ 551,503 70,769 43,537 414,714 212,871 71,966 1,365,360
Operating income $ 150,814 21,340 13,119 158,626 40,510 18,364 402,773
Identifiable assets $ 1,570,615 102,020 58,687 714,982 423,488 162,225 170 3,032,187
Capital expenditures $ 20,676 551 1,060 9,823 3,529 1,433 37,072
Depreciation and amortization $ 17,320 556 644 4,960 4,389 1,376 29,245
Equity $ 1,281,250 58,471 33,444 499,590 158,939 96,621 (32,616 ) 2,095,699

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) 2013   2012 2013   2012
Total revenues $ 1,535,089 $ 1,531,664 $ 4,446,027 $ 4,447,986
Expenses:
Airfreight services 466,699 471,947 1,414,634 1,437,301
Ocean freight and ocean services 409,649 432,518 1,135,299 1,177,919
Customs brokerage and other services 176,716   162,061   499,684   467,406
Net revenues $ 482,025   $ 465,138   $ 1,396,410   $ 1,365,360

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. 3Operating margin is calculated as operating income divided by net revenues.

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