EXPD Expeditors International of Washington Inc

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced second quarter 2016 financial results including the following highlights compared to the same quarter of 2015:

• Diluted Net Earnings Attributable to Shareholders per share increased 3% to $0.63
• Net Earnings Attributable to Shareholders decreased 1% to $116 million
• Operating Income decreased 2% to $179 million
• Revenues decreased 13% to $1.5 billion
• Net Revenues2 increased slightly to $553 million while yields increased 490 basis points to 37.5%
• Airfreight tonnage volume increased 2% and ocean container volume decreased 1%

“We made significant progress in the second quarter, especially in Asia and the U.S., and continued to make the right investments with the right people to advance our strategic initiatives,” said Jeffrey S. Musser, President and Chief Executive Officer. “When faced with the same challenges that we experienced in the first quarter, our people did again what they do best, which is drive efficiency and provide highly optimized solutions for our customers. The global economic environment remains uncertain, particularly in Europe, and trade continues to slow. Despite these conditions, we continue to gain new customers and expand our market share, and we generated the best quarter of EPS in our history. We remain focused on implementing our strategic plan, with emphasis on markets to and within China and by further leveraging our strength in North America. Given our position in the global marketplace, our people and our resources, we remain optimistic about our ability to generate profitable growth.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Even though rates remained volatile again this quarter, we achieved an operating income margin as a percent of net revenues above 30%, as our people remain highly disciplined on costs and continue to take advantage of available capacity and rates in all parts of our business. We are investing in the growth of the company, but not without keeping an eye on our margins or allowing costs to impact our profitability, cash flow and returns to shareholders.”

Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 185 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.

_______________________ 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.

NOTE: See Disclaimer on Forward-Looking Statements on the following page of this release.     Expeditors International of Washington, Inc. Second Quarter 2016 Earnings Release, August 2, 2016 Financial Highlights for the Three and Six months ended June 30, 2016 and 2015 (Unaudited)

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

      Three months ended June 30,         Six months ended June 30,     2016     2015

%Change

2016     2015

%Change

Revenues $ 1,475,164 $ 1,691,553 (13)% $ 2,893,636 $ 3,369,079 (14)% Net revenues1 $ 553,117 $ 552,141 —% $ 1,070,186 $ 1,081,627 (1)% Operating income $ 178,864 $ 182,716 (2)% $ 330,690 $ 351,599 (6)% Net earnings attributable to shareholders $ 116,052 $ 117,760 (1)% $ 212,636 $ 224,464 (5)% Diluted earnings attributable to shareholders per share $ 0.63 $ 0.61 3% $ 1.16 $ 1.17 (1)% Basic earnings attributable to shareholders per share $ 0.64 $ 0.62 3% $ 1.17 $ 1.17 —% Diluted weighted average shares outstanding 183,132 191,918 183,110 192,426 Basic weighted average shares outstanding 181,753 190,679 181,882 191,151 _______________________

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 six-month periods ended June 30, 2016 the Company repurchased 1.9 million and 3.4 million shares of common stock at an average price of $49.47 and $48.75 per share, respectively. During the three and six-month periods ended June 30, 2015, the Company repurchased 2.7 million and 4.3 million shares of common stock at an average price of $47.46 and $47.61 per share, respectively.

    Employee headcount as of June 30, 2016     2015 North America 5,732 5,493 Europe 2,764 2,609 North Asia 2,461 2,425 Middle East, Africa and India 1,480 1,387 South Asia 1,338 1,312 Latin America 754 809 Information Systems 795 711 Corporate 341 313 Total 15,665 15,059      

Year-over-year percentage increase(decrease) in:

Airfreight kilos     Ocean freight FEU 2016 April (1 )% — % May — % (1 )% June 9 % (2 )% Quarter 2 % (1 )%   _______________________

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 5, 2016 will be considered in management’s 8-K “Responses to Selected Questions” expected to be filed on or about August 12, 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 pricing volatility and impacts on margins; the uncertainty of the global economic environment and slowing global trade; and our ability to maintain current margin levels, advance our strategic initiatives, implement our strategic plan, continue to gain new customers, expand our market share, grow markets to and within China, leverage our position in North America, generate profitable growth and manage costs. 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, 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)       June 30,     December 31, 2016 2015

Assets

Current Assets: Cash and cash equivalents $ 980,264 $ 807,796 Accounts receivable, net 1,051,373 1,112,260 Deferred Federal and state income taxes 19,683 16,861 Other current assets 75,525   56,453   Total current assets 2,126,845   1,993,370   Property and equipment, net 540,737 524,724 Goodwill 7,927 7,927 Other assets, net 31,629   56,417  

 

$ 2,707,138   $ 2,582,438  

Liabilities and Equity

Current Liabilities: Accounts payable $ 642,056 $ 645,304 Accrued expenses, primarily salaries and related costs 225,821 186,571 Federal, state and foreign income taxes 26,149   29,498   Total current liabilities 894,026   861,373   Deferred Federal and state income taxes 33,607 26,389   Commitments and contingencies   Shareholders’ Equity: Preferred stock; none issued — — Common stock, par value $0.01 per share. Issued and outstanding 180,841 shares at June 30, 2016 and 182,067 shares at December 31, 2015 1,808 1,821 Additional paid-in capital 184 31 Retained earnings 1,855,935 1,771,379 Accumulated other comprehensive loss (82,012 ) (81,238 ) Total shareholders’ equity 1,775,915   1,691,993   Noncontrolling interest 3,590   2,683   Total equity 1,779,505   1,694,676   $ 2,707,138   $ 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     Six months ended June 30, June 30, 2016     2015 2016     2015 Revenues: Airfreight services $ 582,093 $ 693,812 $ 1,142,946 $ 1,401,256 Ocean freight and ocean services 464,692 576,772 918,884 1,142,489 Customs brokerage and other services 428,379 420,969 831,806 825,334 Total revenues 1,475,164 1,691,553 2,893,636 3,369,079 Operating Expenses: Airfreight services 403,419 506,988 792,196 1,019,989 Ocean freight and ocean services 323,699 433,356 646,719 878,812 Customs brokerage and other services 194,929 199,068 384,535 388,651 Salaries and related costs 293,532 287,065 576,887 565,943 Rent and occupancy costs 27,079 24,971 53,938 50,359 Depreciation and amortization 11,642 11,420 22,971 22,949 Selling and promotion 10,251 10,529 19,683 19,776 Other 31,749 35,440 66,017 71,001 Total operating expenses 1,296,300 1,508,837 2,562,946 3,017,480 Operating income 178,864 182,716 330,690 351,599 Other Income (Expense): Interest income 2,890 2,636 5,669 5,368 Other, net 1,603 3,804 2,482 3,838 Other income, net 4,493 6,440 8,151 9,206 Earnings before income taxes 183,357 189,156 338,841 360,805 Income tax expense 66,918 70,827 125,355 135,144 Net earnings 116,439 118,329 213,486 225,661 Less net earnings attributable to the noncontrolling interest 387 569 850 1,197 Net earnings attributable to shareholders $ 116,052 $ 117,760 $ 212,636 $ 224,464 Diluted earnings attributable to shareholders per share $ 0.63 $ 0.61 $ 1.16 $ 1.17 Basic earnings attributable to shareholders per share $ 0.64 $ 0.62 $ 1.17 $ 1.17 Dividends declared and paid per common share $ 0.40 $ 0.36 $ 0.40 $ 0.36 Weighted average diluted shares outstanding 183,132 191,918 183,110 192,426 Weighted average basic shares outstanding 181,753 190,679 181,882 191,151     EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES   Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)       Three months ended     Six months ended June 30, June 30, 2016     2015 2016     2015 Operating Activities: Net earnings $ 116,439 $ 118,329 $ 213,486 $ 225,661 Adjustments to reconcile net earnings to net cash from operating activities: Provision for losses on accounts receivable 562 584 1,140 861 Deferred income tax (benefit) expense (6,115 ) 8,986 3,781 20,923 Excess tax benefits from stock plans (132 ) (366 ) (132 ) (1,846 ) Stock compensation expense 12,957 11,663 23,788 21,570 Depreciation and amortization 11,642 11,420 22,971 22,949 Other (6 ) 27 30 113 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (48,344 ) 63,234 64,366 16,444 Increase in accounts payable and accrued expenses 51,422 8,038 36,078 22,933 Decrease in income taxes payable, net (34,734 ) (39,000 ) (23,809 ) (15,868 ) Decrease (increase) in other current assets 1,361   (1,187 ) (694 ) 2,382   Net cash from operating activities 105,052   181,728   341,005   316,122   Investing Activities: Increase in short-term investments, net (2 ) (46,986 ) (37 ) (6,712 ) Purchase of property and equipment (13,279 ) (12,912 ) (27,314 ) (22,357 ) Other, net 4,416   (14 ) 3,892   184   Net cash from investing activities (8,865 ) (59,912 ) (23,459 ) (28,885 ) Financing Activities: Proceeds from issuance of common stock 48,488 25,047 90,123 60,095 Repurchases of common stock (96,115 ) (128,137 ) (166,407 ) (205,505 ) Excess tax benefits from stock plans 132 366 132 1,846 Dividends paid (73,000 ) (68,781 ) (73,000 ) (68,781 ) Distribution to noncontrolling interest —   —   —   (857 ) Net cash from financing activities (120,495 ) (171,505 ) (149,152 ) (213,202 ) Effect of exchange rate changes on cash and cash equivalents (9,345 ) 2,272   4,074   (15,415 ) (Decrease) increase in cash and cash equivalents (33,653 ) (47,417 ) 172,468 58,620 Cash and cash equivalents at beginning of period 1,013,917   1,033,144   807,796   927,107   Cash and cash equivalents at end of period $ 980,264   $ 985,727   $ 980,264   $ 985,727   Taxes paid: Income taxes $ 108,369 $ 101,389 $ 146,353 $ 129,650     EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES   Business Segment Information (In thousands) (Unaudited)      

UNITEDSTATES

   

OTHERNORTHAMERICA

   

LATINAMERICA

   

NORTHASIA

   

SOUTHASIA

    EUROPE    

MIDDLEEAST,AFRICAandINDIA

   

ELIMI-NATIONS

   

CONSOLI-DATED

Three months ended June 30, 2016: Revenues from unaffiliated customers $ 417,735 56,674 21,169 517,489 151,890 229,882 80,325 — 1,475,164 Transfers between geographic areas 28,973 2,671 4,187 5,385 6,326 10,097 5,507 (63,146 ) — Total revenues $ 446,708 59,345 25,356 522,874 158,216 239,979 85,832 (63,146 ) 1,475,164 Net revenues $ 232,860 30,815 14,468 122,117 46,257 77,639 28,975 (14 ) 553,117 Operating income $ 67,214 9,600 3,836 61,721 18,354 11,838 6,315 (14 ) 178,864 Identifiable assets $ 1,363,352 84,358 58,570 471,832 118,352 378,859 225,877 5,938 2,707,138 Capital expenditures $ 8,778 445 317 678 351 2,140 570 — 13,279 Depreciation and amortization $ 7,366 380 288 1,388 543 1,188 489 — 11,642 Equity $ 1,069,876 38,638 39,482 309,557 78,668 133,387 141,315 (31,418 ) 1,779,505 Three months ended June 30, 2015: Revenues from unaffiliated customers $ 449,622 58,739 24,314 649,901 184,862 239,953 84,162 — 1,691,553 Transfers between geographic areas 32,486 3,685 5,403 5,427 6,473 10,716 5,112 (69,302 ) — Total revenues $ 482,108 62,424 29,717 655,328 191,335 250,669 89,274 (69,302 ) 1,691,553 Net revenues $ 229,353 30,576 17,485 124,491 46,944 76,607 26,685 — 552,141 Operating income $ 68,547 10,437 5,441 60,597 16,140 15,587 5,967 — 182,716 Identifiable assets $ 1,381,755 103,613 57,711 572,425 141,344 448,475 219,280 7,772 2,932,375 Capital expenditures $ 7,711 1,656 569 475 989 921 591 — 12,912 Depreciation and amortization $ 7,339 310 248 1,379 548 1,176 420 — 11,420 Equity $ 1,075,703 59,374 38,447 344,479 118,175 166,569 124,564 (37,578 ) 1,889,733                                      

UNITEDSTATES

OTHERNORTHAMERICA

LATINAMERICA

NORTHASIA

SOUTHASIA

EUROPE

MIDDLEEAST,AFRICAandINDIA

ELIMI-NATIONS

CONSOLI-DATED

Six months ended June 30, 2016: Revenues from unaffiliated customers $ 825,561 108,780 41,233 1,014,721 288,308 451,779 163,254 — 2,893,636 Transfers between geographic areas 55,007 5,371 7,788 10,481 12,132 20,458 10,901 (122,138 ) — Total revenues $ 880,568 114,151 49,021 1,025,202 300,440 472,237 174,155 (122,138 ) 2,893,636 Net revenues $ 453,558 58,193 28,201 232,908 85,775 152,180 59,382 (11 ) 1,070,186 Operating income $ 115,419 16,891 7,688 116,939 34,045 24,091 15,628 (11 ) 330,690 Identifiable assets $ 1,363,352 84,358 58,570 471,832 118,352 378,859 225,877 5,938 2,707,138 Capital expenditures $ 16,915 756 802 1,763 1,006 4,259 1,813 — 27,314 Depreciation and amortization $ 14,698 744 541 2,707 1,055 2,286 940 — 22,971 Equity $ 1,069,876 38,638 39,482 309,557 78,668 133,387 141,315 (31,418 ) 1,779,505 Six months ended June 30, 2015: Revenues from unaffiliated customers $ 893,803 113,533 48,395 1,295,345 366,243 482,039 169,721 — 3,369,079 Transfers between geographic areas 60,161 6,499 10,180 11,124 12,388 20,353 10,179 (130,884 ) — Total revenues $ 953,964 120,032 58,575 1,306,469 378,631 502,392 179,900 (130,884 ) 3,369,079 Net revenues $ 448,956 61,254 34,044 241,896 89,144 152,495 53,838 — 1,081,627 Operating income $ 127,728 21,528 10,797 117,653 30,020 30,658 13,215 — 351,599 Identifiable assets $ 1,381,755 103,613 57,711 572,425 141,344 448,475 219,280 7,772 2,932,375 Capital expenditures $ 14,036 1,944 1,186 765 1,308 2,069 1,049 — 22,357 Depreciation and amortization $ 14,732 602 516 2,778 1,078 2,422 821 — 22,949 Equity $ 1,075,703 59,374 38,447 344,479 118,175 166,569 124,564 (37,578 ) 1,889,733  

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 Six months ended June 30, June 30, (in thousands) 2016     2015 2016     2015 Total revenues $ 1,475,164 $ 1,691,553 $ 2,893,636 $ 3,369,079 Expenses: Airfreight services 403,419 506,988 792,196 1,019,989 Ocean freight and ocean services 323,699 433,356 646,719 878,812 Customs brokerage and other services 194,929 199,068 384,535 388,651 Net revenues $ 553,117 $ 552,141 $ 1,070,186 $ 1,081,627

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Expeditors International of Washington, Inc.Jeffrey S. Musser, 206-674-3433President and Chief Executive OfficerorBradley S. Powell, 206-674-3412Senior Vice President and Chief Financial OfficerorGeoffrey Buscher, 206-892-4510Director - Investor Relations