EXPD Expeditors International of Washington Inc

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

• Diluted Net Earnings Attributable to Shareholders per share (EPS1) remained constant at $0.61
• Net Earnings Attributable to Shareholders decreased 3% to $111 million
• Operating Income decreased 3% to $172 million
• Revenues increased 3% to $1.64 billion
• Net Revenues2 increased 2% to $549 million
• Airfreight tonnage and ocean container volumes both increased 12% to record levels

“Through the hard work and dedication of our people, we shipped the most freight in our Company’s history and gained market share in the fourth quarter, as we did throughout 2016,” said Jeffrey S. Musser, President and Chief Executive Officer. “We are especially pleased with the growth in our customs brokerage and other services, particularly in the U.S. through our Transcon business. Rates remained highly unpredictable in the quarter, as they were throughout much of 2016, again putting unusual pressure on our margins. While experience has shown us that margin pressure is cyclical, in light of such truly unprecedented rate volatility, we are improving processes to better address the rapid changes in buy and sell rates, which we expect to continue.

“We continue to execute our strategic initiatives and remain focused on expanding our business and exploring opportunities for growth. At the same time, given the uncertainties for global trade, we are also working hard to expand our presence in markets that are less uncertain. In addition, we recently appointed one of our most senior executives, Phil Coughlin, to the new position of Chief Strategy Officer to form a team that will explore additional opportunities for growth. As a market leader, we recognize that in order to maintain our leadership position and remain at the forefront of innovation, we must continuously invest in people, processes and technology. We believe the additional investments we’re making will enhance our market position.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “We shipped record volumes and again maintained operating income as a percentage of net revenues - a key measure of operating efficiency - above 30%. We believe the additional investments we have made in people and technology are delivering enhanced growth and market share. In 2017, we will continue to make additional important investments in technology and in our strategic efforts to explore new areas for profitable growth.”

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, domestic time-definite transportation services, purchase 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 2016 Earnings Release, February 21, 2017

Financial Highlights for the Three months and Years ended  December 31, 2016 and 2015 (Unaudited) (in 000's of US dollars except per share data)

	Three months ended December 31,											Years ended December 31,
	2016				2015				% Change			2016				2015				% Change
Revenues	$	1,642,007			$	1,596,221			3	%		$	6,098,037			$	6,616,632			(8	)%
Net revenues3	$	548,591			$	536,169			2	%		$	2,164,036			$	2,187,777			(1	)%
Operating income4	$	172,210			$	177,992			(3	)%		$	670,163			$	721,484			(7	)%
Net earnings attributable to shareholders	$	110,590			$	114,449			(3	)%		$	430,807			$	457,223			(6	)%
Diluted earnings attributable to shareholders	$	0.61			$	0.61			—	%		$	2.36			$	2.40			(2	)%
Basic earnings attributable to shareholders	$	0.61			$	0.62			(2	)%		$	2.38			$	2.42			(2	)%
Diluted weighted average shares outstanding	181,887				186,519							182,704				190,223
Basic weighted average shares outstanding	180,201				185,111							181,282				188,941

_______________________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. Operating Income in the fourth quarter of 2015 includes a $6 million recovery of legal and related fees.

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. During the three and twelve-month periods ended December 31, 2015, the Company repurchased 4.5 million and 13.1 million shares of common stock at an average price of $47.66 and $47.95 per share, respectively.

	Employee headcount as of December 31,
	2016			2015
North America	5,868			5,655
Europe	2,904			2,685
North Asia	2,509			2,464
South Asia	1,370			1,323
Middle East, Africa and India	1,510			1,417
Latin America	765			796
Information Systems	825			741
Corporate	338			316
Total	16,089			15,397

		Year-over-year percentage increase in:
		Airfreight kilos			Ocean freight FEU
2016
October		3%			13%
November		14%			13%
December		18%			9%
Quarter		12%			12%

_______________________

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on February 24, 2017 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about March 3, 2017.

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 uncertainties and challenges with the global economy and global trade, ability to adapt to a rapidly changing environment, availability of ocean and air carrier capacity, favorable spot market buying opportunities, rate volatility, benefits from our strategic and innovation plans, and ability to improve efficiency, expand margins and gain market share. 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 better address the rapid changes in buy and sell rates, expand our business and explore opportunities for growth, maintain our leadership position and remain at the forefront of innovation, enhance our market position, deliver enhanced growth and market share, and make successful investments in technology and strategies that result in new areas for profitable growth; 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,  2016				December 31, 2015
Assets
Current Assets:
Cash and cash equivalents	$	974,435			$	807,796
Accounts receivable, net	1,190,130				1,112,260
Other current assets	54,014				56,453
Total current assets	2,218,579				1,976,509
Property and equipment, net	536,572				524,724
Goodwill	7,927				7,927
Other assets, net	27,793				56,417
	$	2,790,871			$	2,565,577
Liabilities and Equity
Current Liabilities:
Accounts payable	$	726,571			$	645,304
Accrued expenses, primarily salaries and related costs	185,502				186,571
Federal, state and foreign income taxes	17,858				29,498
Total current liabilities	929,931				861,373
Deferred Federal and state income taxes	13,727				9,528
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued	—				—
Common stock, par value $0.01 per share; issued and outstanding 179,857 shares at December 31, 2016 and 182,067 shares at December 31, 2015	1,799				1,821
Additional paid-in capital	2,642				31
Retained earnings	1,944,789				1,771,379
Accumulated other comprehensive loss	(104,592		)		(81,238		)
Total shareholders’ equity	1,844,638				1,691,993
Noncontrolling interest	2,575				2,683
Total equity	1,847,213				1,694,676
	$	2,790,871			$	2,565,577

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,
	2016				2015				2016				2015
Revenues:
Airfreight services	$	688,835			$	679,720			$	2,453,347			$	2,740,583
Ocean freight and ocean services	503,150				491,539				1,917,494				2,194,004
Customs brokerage and other services	450,022				424,962				1,727,196				1,682,045
Total revenues	1,642,007				1,596,221				6,098,037				6,616,632
Operating Expenses:
Airfreight services	515,612				503,540				1,752,167				1,987,690
Ocean freight and ocean services	371,989				354,106				1,378,699				1,648,993
Customs brokerage and other services	205,815				202,406				803,135				792,172
Salaries and related costs	289,544				282,002				1,157,635				1,143,511
Rent and occupancy costs	27,783				26,364				108,812				102,470
Depreciation and amortization	11,943				11,588				46,796				46,012
Selling and promotion	11,946				11,844				41,763				41,990
Other	35,165				26,379				138,867				132,310
Total operating expenses	1,469,797				1,418,229				5,427,874				5,895,148
Operating income	172,210				177,992				670,163				721,484
Interest income	2,987				2,387				11,580				10,421
Other, net	1,706				4,031				5,113				4,784
Other income, net	4,693				6,418				16,693				15,205
Earnings before income taxes	176,903				184,410				686,856				736,689
Income tax expense	65,805				69,310				254,323				277,192
Net earnings	111,098				115,100				432,533				459,497
Less net earnings attributable to the noncontrolling interest	508				651				1,726				2,274
Net earnings attributable to shareholders	$	110,590			$	114,449			$	430,807			$	457,223
Diluted earnings attributable to shareholders per share	$	0.61			$	0.61			$	2.36			$	2.40
Basic earnings attributable to shareholders per share	$	0.61			$	0.62			$	2.38			$	2.42
Dividends declared and paid per common share	$	0.40			$	0.36			$	0.80			$	0.72
Weighted average diluted shares outstanding	181,887				186,519				182,704				190,223
Weighted average basic shares outstanding	180,201				185,111				181,282				188,941

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,
	2016				2015				2016				2015
Operating Activities:
Net earnings	$	111,098			$	115,100			$	432,533			$	459,497
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable	146				1,178				2,607				2,173
Deferred income tax expense	13,493				4,687				15,835				17,999
Excess tax benefits from stock plans	(147		)		(4		)		(386		)		(1,850		)
Stock compensation expense	10,953				10,926				45,217				43,415
Depreciation and amortization	11,943				11,588				46,796				46,012
Other	(3,581		)		(139		)		(3,540		)		(24		)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(108,384		)		43,709				(102,297		)		62,619
Increase (decrease) in accounts payable and accrued expenses	28,568				(87,475		)		102,716				(84,164		)
Increase (decrease) in income taxes payable, net	4,242				14,272				(12,370		)		18,382
Decrease in other current assets	4,077				2,072				1,988				653
Net cash from operating activities	72,408				115,914				529,099				564,712
Investing Activities:
Decrease (increase) in short-term investments, net	—				8,218				(37		)		40,294
Purchase of property and equipment	(19,343		)		(12,480		)		(59,316		)		(44,383		)
Other, net	648				(855		)		6,157				(3,337		)
Net cash from investing activities	(18,695		)		(5,117		)		(53,196		)		(7,426		)
Financing Activities:
Proceeds from issuance of common stock	37,668				16,263				185,313				130,964
Repurchases of common stock	(69,561		)		(214,516		)		(337,658		)		(629,991		)
Excess tax benefits from stock plans	147				4				386				1,850
Dividends paid	(72,123		)		(66,892		)		(145,123		)		(135,673		)
Distribution to noncontrolling interest	(1,335		)		(1,265		)		(1,335		)		(2,122		)
Net cash from financing activities	(105,204		)		(266,406		)		(298,417		)		(634,972		)
Effect of exchange rate changes on cash and cash equivalents	(16,774		)		(5,278		)		(10,847		)		(41,625		)
(Decrease) increase in cash and cash equivalents	(68,265		)		(160,887		)		166,639				(119,311		)
Cash and cash equivalents at beginning of period	1,042,700				968,683				807,796				927,107
Cash and cash equivalents at end of period	$	974,435			$	807,796			$	974,435			$	807,796
Taxes paid:
Income taxes	$	49,263			$	49,343			$	254,312			$	239,367

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.AND SUBSIDIARIESBusiness Segment Information(In thousands) (Unaudited)
	UNITEDSTATES				OTHERNORTHAMERICA			LATINAMERICA			NORTH ASIA			SOUTH ASIA			EUROPE			MIDDLEEAST, AFRICAand INDIA			ELIMI-NATIONS			CONSOLI-DATED
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 areas	26,459				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
Three months ended December 31, 2015:
Revenues from unaffiliated customers	$	428,461			55,933			21,153			613,957			153,374			242,454			80,889			—			1,596,221
Transfers between geographic areas	29,555				3,392			3,987			5,392			6,341			11,309			5,684			(65,660	)		—
Total revenues	$	458,016			59,325			25,140			619,349			159,715			253,763			86,573			(65,660	)		1,596,221
Net revenues	$	224,912			30,414			13,858			115,851			43,996			78,556			28,582			—			536,169
Operating income	$	52,140			13,413			3,852			58,511			21,049			20,178			8,849			—			177,992
Identifiable assets	$	1,185,671			111,549			48,678			446,914			127,014			421,590			221,835			2,326			2,565,577
Capital expenditures	$	6,575			1,313			348			727			784			1,930			803			—			12,480
Depreciation and amortization	$	7,361			366			257			1,311			501			1,389			403			—			11,588
Equity	$	986,330			70,932			33,161			253,097			99,220			154,174			130,105			(32,343	)		1,694,676

	UNITEDSTATES				OTHERNORTHAMERICA			LATINAMERICA			NORTH ASIA			SOUTH ASIA			EUROPE			MIDDLEEAST, AFRICAand INDIA			ELIMI-NATIONS			CONSOLI-DATED
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 areas	106,076				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
Twelve months ended December 31, 2015:
Revenues from unaffiliated customers	$	1,763,361			226,284			94,229			2,557,398			677,628			958,827			338,905			—			6,616,632
Transfers between geographic areas	118,884				13,383			19,158			21,722			25,018			42,787			21,322			(262,274	)		—
Total revenues	$	1,882,245			239,667			113,387			2,579,120			702,646			1,001,614			360,227			(262,274	)		6,616,632
Net revenues	$	906,780			124,381			65,017			493,235			179,110			308,301			110,953			—			2,187,777
Operating income	$	245,257			46,846			19,656			245,854			69,643			65,024			29,204			—			721,484
Identifiable assets	$	1,185,671			111,549			48,678			446,914			127,014			421,590			221,835			2,326			2,565,577
Capital expenditures	$	26,807			3,915			1,756			2,203			2,383			5,222			2,097			—			44,383
Depreciation and amortization	$	29,532			1,331			1,041			5,425			2,110			4,931			1,642			—			46,012
Equity	$	986,330			70,932			33,161			253,097			99,220			154,174			130,105			(32,343	)		1,694,676

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)	2016				2015				2016				2015
Total revenues	$	1,642,007			$	1,596,221			$	6,098,037			$	6,616,632
Expenses:
Airfreight services	515,612				503,540				1,752,167				1,987,690
Ocean freight and ocean services	371,989				354,106				1,378,699				1,648,993
Customs brokerage and other services	205,815				202,406				803,135				792,172
Net revenues	$	548,591			$	536,169			$	2,164,036			$	2,187,777

 

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