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 (EPS 1) 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 Revenues 2 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 revenues 1 $ 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 outstanding 182,692     189,642         182,958     191,448      
Basic weighted average shares outstanding 181,177     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 America 5,769     5,573  
Europe 2,846     2,664  
North Asia 2,498     2,465  
Middle East, Africa and India 1,494     1,388  
South Asia 1,364     1,311  
Latin America 758     797  
Information Systems 810     722  
Corporate 338     318  
Total 15,877     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, net 1,108,516     1,112,260  
Deferred Federal and state income taxes 19,573     16,861  
Other current assets 64,897     56,453  
Total current assets 2,235,686     1,993,370  
Property and equipment, net 539,984     524,724  
Goodwill 7,927     7,927  
Other assets, net 30,200     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 costs 207,547     186,571  
Federal, state and foreign income taxes 21,437     29,498  
Total current liabilities 927,604     861,373  
Deferred Federal and state income taxes 32,260     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, 2015 1,803     1,821  
Additional paid-in capital 475     31  
Retained earnings 1,929,449     1,771,379  
Accumulated other comprehensive loss (81,644 )   (81,238 )
Total shareholders' equity 1,850,083     1,691,993  
Noncontrolling interest 3,850     2,683  
Total equity 1,853,933     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 services 495,460     559,976     1,414,344     1,702,465  
Customs brokerage and other services 445,368     431,749     1,277,174     1,257,083  
Total revenues 1,562,394     1,651,332     4,456,030     5,020,411  
Operating Expenses:              
Airfreight services 444,359     464,161     1,236,555     1,484,150  
Ocean freight and ocean services 359,991     416,075     1,006,710     1,294,887  
Customs brokerage and other services 212,785     201,115     597,320     589,766  
Salaries and related costs 291,204     295,566     868,091     861,509  
Rent and occupancy costs 27,091     25,747     81,029     76,106  
Depreciation and amortization 11,882     11,475     34,853     34,424  
Selling and promotion 10,134     10,370     29,817     30,146  
Other 37,685     34,930     103,702     105,931  
Total operating expenses 1,395,131     1,459,439     3,958,077     4,476,919  
Operating income 167,263     191,893     497,953     543,492  
Other Income (Expense):              
Interest income 2,924     2,666     8,593     8,034  
Other, net 925     (3,085 )   3,407     753  
Other income (expense), net 3,849     (419 )   12,000     8,787  
Earnings before income taxes 171,112     191,474     509,953     552,279  
Income tax expense 63,163     72,738     188,518     207,882  
Net earnings 107,949     118,736     321,435     344,397  
Less net earnings attributable to the noncontrolling interest 368     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 outstanding 182,692     189,642     182,958     191,448  
Weighted average basic shares outstanding 181,177     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 receivable 1,321     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 expense 10,476     10,919     34,264     32,489  
Depreciation and amortization 11,882     11,475     34,853     34,424  
Other 11     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 expenses 38,070     (19,622 )   74,148     3,311  
Increase (decrease) in income taxes payable, net 7,197     19,978     (16,612 )   4,110  
Increase in other current assets (1,395 )   (3,801 )   (2,089 )   (1,419 )
Net cash from operating activities 115,686     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, net 1,617     (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 stock 57,522     54,606     147,645     114,701  
Repurchases of common stock (101,690 )   (209,970 )   (268,097 )   (415,475 )
Excess tax benefits from stock plans 107         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 equivalents 1,853     (20,932 )   5,927     (36,347 )
Increase (decrease) in cash and cash equivalents 62,436     (17,044 )   234,904     41,576  
Cash and cash equivalents at beginning of period 980,264     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 areas 24,610     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 areas 29,168     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 areas 79,617     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 areas 89,329     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 services 444,359     464,161     1,236,555     1,484,150  
Ocean freight and ocean services 359,991     416,075     1,006,710     1,294,887  
Customs brokerage and other services 212,785     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) 674-3433Bradley S. PowellSenior Vice President and Chief Financial Officer(206) 674-3412Geoffrey BuscherDirector - Investor Relations(206) 892-4510

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