EXPD - Expeditors Reports First Quarter 2019 EPS of $0.80

May, 07 2019 08:30 AM Expeditors International of Washington Inc.

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced first quarter 2019 financial results including the following highlights compared to the same quarter of 2018:

Diluted Net Earnings Attributable to Shareholders per share (EPS¹) increased 5% to $0.80
Net Earnings Attributable to Shareholders increased 3% to $140 million
Operating Income decreased 3% to $188 million
Revenues increased 9% to $2.02 billion
Net Revenues² increased 3% to $654 million
Airfreight tonnage volume decreased 4% and ocean container volume increased 6%

“We are pleased with our results in Q1 2019, especially when we look at the comparison period last year that produced so many records and set an extremely high bar,” said Jeffrey S. Musser, President and Chief Executive Officer. “Customs brokerage and import services led the way this quarter on increased volumes and on-boarding new customers. Transcon, warehouse and distribution also posted solid gains on expanded business with current customers, as well as by winning new business. We increased the volume of ocean freight containers shipped by 6%, while also improving net revenue per container, particularly from exports out of North and South Asia. The air market was the only area that was challenged, particularly as customers reduced export volumes out of North Asia. I credit our air group for their efforts in a volatile pricing environment, and I thank everyone throughout our global network for their ongoing effort to handle the increase in volumes and business activity.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Operating efficiency (operating income as a percentage of net revenue) dipped below 30% this quarter, due largely to lower air net revenues, as well as our continuing investments in people at the district level to handle the increase in volumes, and investments in technology and facilities. Our effective tax rate declined from 31.1% in the first quarter of 2018 to 28.3% in 2019, largely due to the benefit from share-based compensation deductions, higher foreign tax credits and deductions for foreign derived investment income."

Expeditors is a global logistics company headquartered in Seattle, Washington. The Company employs trained professionals in 176 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, time-definite transportation, order management, warehousing and 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.
First Quarter 2019 Earnings Release, May 7, 2019
Financial Highlights for the Three months ended March 31, 2019 and 2018 (Unaudited)
(in 000's of US dollars except per share data)




Three months ended March 31,



2019

2018

% Change
Revenues


$
2,020,051


$
1,854,262


9
%
Net revenues¹


$
654,114


$
635,838


3
%
Operating income


$
187,601


$
192,818


(3
)%
Net earnings attributable to shareholders


$
139,699


$
135,692


3
%
Diluted earnings attributable to shareholders per share


$
0.80


$
0.76


5
%
Basic earnings attributable to shareholders per share


$
0.81


$
0.77


5
%
Diluted weighted average shares outstanding


175,388


179,416



Basic weighted average shares outstanding


171,818


175,900

_______________________

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-month period ended March 31, 2019, we repurchased 0.6 million shares of common stock at an average price of $75.40 per share. During the three-month period ended March 31, 2018, we repurchased 2.7 million shares of common stock at an average price of $64.76 per share.









Employee Full-time Equivalents as of March 31,



2019


2018
North America


6,806


6,264
Europe


3,404


3,132
North Asia


2,540


2,579
South Asia


1,654


1,582
Middle East, Africa and India


1,541


1,478
Latin America


862


811
Information Systems


915


888
Corporate


380


351
Total


18,102


17,085




First quarter year-over-year percentage increase (decrease) in:







Airfreight kilos

Ocean freight FEU
2019





January


(2)%

8%
February


(6)%

3%
March


(2)%

6%
Quarter


(4)%

6%

_______________________

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on May 10, 2019 will be considered in management's 8-K “Responses to Selected Questions.”

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 our continued ability to manage increased volumes and business activity; the impact of the 2017 Tax Act and related interpretations on our effective tax rate; 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)



March 31, 2019

December 31, 2018
Assets





Current Assets:





Cash and cash equivalents


$
1,189,429


$
923,735

Accounts receivable, less allowance for doubtful accounts of $12,727 at March 31, 2019 and $15,345 at December 31, 2018


1,353,725


1,581,530

Deferred contract costs


131,535


159,510

Other current assets


54,305


70,041

Total current assets


2,728,994


2,734,816

Property and equipment, less accumulated depreciation and amortization of $457,513 at March 31, 2019 and $446,977 at December 31, 2018


500,853


504,105

Operating lease right-of-use assets


349,140


—

Goodwill


7,927


7,927

Deferred federal and state income taxes, net


37,781


40,465

Other assets, net


18,217


27,246




$
3,642,912


$
3,314,559

Liabilities and Equity





Current Liabilities:





Accounts payable


$
768,665


$
902,259

Accrued expenses, primarily salaries and related costs


220,085


215,813

Contract liabilities


157,040


190,343

Current portion of operating lease liabilities


58,635


—

Federal, state and foreign income taxes


23,502


18,424

Total current liabilities


1,227,927


1,326,839

Noncurrent portion of operating lease liabilities


289,551


—







Commitments and contingencies











Shareholders’ Equity:





Preferred stock; none issued


—


—

Common stock, par value $0.01 per share. Issued and outstanding 171,648 shares at March 31, 2019 and 171,582 shares at December 31, 2018


1,716


1,716

Additional paid-in capital


3,978


1,896

Retained earnings


2,222,562


2,088,707

Accumulated other comprehensive loss


(103,986
)

(105,481
)
Total shareholders’ equity


2,124,270


1,986,838

Noncontrolling interest


1,164


882

Total equity


2,125,434


1,987,720




$
3,642,912


$
3,314,559

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)



Three months ended



March 31,



2019

2018
Revenues:





Airfreight services


$
714,901


$
731,227
Ocean freight and ocean services


568,641


520,883
Customs brokerage and other services


736,509


602,152
Total revenues


2,020,051


1,854,262
Operating Expenses:





Airfreight services


509,210


513,504
Ocean freight and ocean services


420,331


379,418
Customs brokerage and other services


436,396


325,502
Salaries and related costs


356,910


339,895
Rent and occupancy costs


41,523


36,913
Depreciation and amortization


13,393


13,922
Selling and promotion


11,076


10,965
Other


43,611


41,325
Total operating expenses


1,832,450


1,661,444
Operating income


187,601


192,818
Other Income (Expense):





Interest income


6,106


4,314
Other, net


1,665


624
Other income (expense), net


7,771


4,938
Earnings before income taxes


195,372


197,756
Income tax expense


55,261


61,556
Net earnings


140,111


136,200
Less net earnings attributable to the noncontrolling interest


412


508
Net earnings attributable to shareholders


$
139,699


$
135,692
Diluted earnings attributable to shareholders per share


$
0.80


$
0.76
Basic earnings attributable to shareholders per share


$
0.81


$
0.77
Weighted average diluted shares outstanding


175,388


179,416
Weighted average basic shares outstanding


171,818


175,900

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)



Three months ended



March 31,



2019

2018
Operating Activities:





Net earnings


$
140,111


$
136,200

Adjustments to reconcile net earnings to net cash from operating activities:





Recoveries on accounts receivable


(1,888
)

(265
)
Deferred income tax expense


2,108


2,853

Stock compensation expense


13,382


11,267

Depreciation and amortization


13,393


13,922

Other, net


189


48

Changes in operating assets and liabilities:





Decrease in accounts receivables


230,477


100,647

Decrease in accounts payable and accrued expenses


(122,283
)

(45,844
)
Decrease in deferred contract costs


31,259


3,407

Decrease in contract liabilities


(36,725
)

(7,401
)
Increase in income taxes payable, net


16,993


19,509

Decrease in other, net


2,467


1,134

Net cash from operating activities


289,483


235,477

Investing Activities:





Purchase of property and equipment


(9,435
)

(13,796
)
Other, net


255


(431
)
Net cash from investing activities


(9,180
)

(14,227
)
Financing Activities:





Proceeds from issuance of common stock


27,190


26,397

Repurchases of common stock


(44,334
)

(172,360
)
Net cash from financing activities


(17,144
)

(145,963
)
Effect of exchange rate changes on cash and cash equivalents


2,535


6,515

Increase in cash and cash equivalents


265,694


81,802

Cash and cash equivalents at beginning of period


923,735


1,051,099

Cash and cash equivalents at end of period


$
1,189,429


$
1,132,901

Taxes paid:





Income taxes


37,253


38,519

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 March 31, 2019:



















Revenues from unaffiliated customers


$
681,424


85,103


35,949


617,000


171,930


320,049


108,596


—


2,020,051
Transfers between geographic areas ¹


$
(21,640
)

6,307


(1,770
)

15,853


5,249


(7,359
)

4,079


(719
)

—
Total revenues


$
659,784


91,410


34,179


632,853


177,179


312,690


112,675


(719
)

2,020,051
Net revenues


$
292,429


35,169


15,063


134,207


47,369


96,795


33,172


(90
)

654,114
Operating income


$
74,013


10,960


2,636


65,780


15,907


13,952


4,361


(8
)

187,601
Identifiable assets


$
1,906,278


175,034


71,168


511,589


174,512


579,924


234,195


(9,788
)

3,642,912
Capital expenditures


$
6,915


228


93


344


176


982


697


—


9,435
Depreciation and amortization


$
8,222


467


432


1,407


536


1,831


498


—


13,393
Equity


$
1,401,450


82,170


28,581


238,518


114,290


165,718


126,953


(32,246
)

2,125,434
Three months ended March 31, 2018:



















Revenues from unaffiliated customers


$
534,869


76,525


32,722


630,572


168,600


305,792


105,182


—


1,854,262
Transfers between geographic areas


$
28,881


3,562


3,387


6,017


6,550


14,188


5,355


(67,940
)

—
Total revenues


$
563,750


80,087


36,109


636,589


175,150


319,980


110,537


(67,940
)

1,854,262
Net revenues


$
277,185


30,447


14,745


137,208


44,406


98,635


33,201


11


635,838
Operating income


$
69,648


9,018


2,370


69,923


15,132


19,278


7,438


11


192,818
Identifiable assets


$
1,558,181


165,368


55,036


542,965


153,411


533,012


208,173


(3,665
)

3,212,481
Capital expenditures


$
3,171


1,528


505


784


329


7,191


288


—


13,796
Depreciation and amortization


$
8,765


398


368


1,376


583


1,976


456


—


13,922
Equity


$
1,247,522


68,050


27,226


278,651


105,642


160,038


128,487


(33,350
)

1,982,266

¹During the quarter ended March 31, 2019, the Company revised the process used to record the transfer, between its geographic operating segments, of revenues and the directly related cost of transportation expenses for freight service transactions between Company origin and destination locations. There were no changes for services rendered at the origin, such as pick-up and delivery to port, nor for services rendered at the destination, such as customs clearance and final delivery. The change in process had no impact on reported segment net revenues or operating income nor on reported consolidated revenues or expenses. Prior year segment revenues have not been revised.

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 revenues are 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



March 31,
(in thousands)


2019

2018
Total revenues


$
2,020,051


$
1,854,262
Expenses:





Airfreight services


509,210


513,504
Ocean freight and ocean services


420,331


379,418
Customs brokerage and other services


436,396


325,502
Net revenues


$
654,114


$
635,838

View source version on businesswire.com: https://www.businesswire.com/news/home/20190507005325/en/

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

Company Name:	Expeditors International of Washington Inc.
Stock Symbol:	EXPD
Market:	NYSE
Website:	expeditors.com

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