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home / news releases / EXPD - Expeditors Reports Fourth Quarter 2018 EPS of $1.02

EXPD - Expeditors Reports Fourth Quarter 2018 EPS of $1.02

Expeditors International of Washington Inc.

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced fourth quarter 2018 financial results including the following highlights compared to the same quarter of 2017:

  • Diluted Net Earnings Attributable to Shareholders per share (EPS1) increased 11% to $1.02
  • Net Earnings Attributable to Shareholders increased 7% to $179 million
  • Operating Income increased 9% to $217 million
  • Revenues increased 18% to $2.24 billion
  • Net Revenues2 increased 8% to $681 million
  • Airfreight tonnage volumes increased 2% and ocean container volumes increased 10%

“The fourth quarter marked a strong finish to a record year of growth in revenues, net revenues, volumes, and profitability,” said Jeffrey S. Musser, President and Chief Executive Officer. “The air and ocean markets have continued to be highly unpredictable, with ongoing shifts in the balance of supply and demand requiring extra attention to address the needs of each individual customer. These are the conditions when our people really prove themselves, as they did in Q4 and throughout the year. I commend them for continuing to grow volumes in ocean and air, with a determined focus on profitability. During the quarter, our air and customs brokerage segments were particularly strong once again. In addition, we further improved our ocean business by growing volumes while adjusting sell rates. We accomplished all of this in spite of ongoing rate pressure, as the industry evolves and carriers continue to test the supply/demand imbalance.

“Throughout 2018, we did a terrific job of growing net revenues ahead of headcount and related costs,” Mr. Musser continued. “We also generated improved efficiencies, while establishing a selective mix of business partners who value an elevated level of customer service. Our ability to perform well comes from our deeply ingrained, core culture that puts customer service at the forefront.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “We carefully managed expenses as net revenues grew during the quarter, demonstrating the effectiveness of our processes and technology. During the quarter, net revenues grew at roughly twice the rate of headcount and related expenses, and, at nearly 32%, our fourth quarter operating efficiency (operating income as a percentage of net revenue) was the highest since Q2 2016.”

Mr. Powell noted that the Company’s effective tax rate for the full year was 24.3%, compared to 31.8% in 2017. The Company’s lower effective tax rates were principally due to the lower U.S. federal tax rate that resulted from the 2017 Tax Act, significant share-based compensation deductions, U.S. federal tax credits from withholding taxes related to our foreign operations, and deductions for foreign-derived intangible income. Mr. Powell reiterated that the Company’s effective tax rate will be largely dependent upon the mix of pretax earnings that are generated in its U.S. versus foreign operations, as well as any further interpretations and guidance issued on the tax law in the future.

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 services, order management, warehousing and distribution and customized logistics solutions.

________________________
1 Diluted 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 2018 Earnings Release, February 19, 2019
 
Financial Highlights for the Three months and Years ended
December 31, 2018 and 2017 (Unaudited)

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

 
 
 
Three months ended
December 31,
 
 
 
 
Years ended
December 31,
 
 
2018
 
 
2017
% Change
2018
 
 
2017
% Change
Revenues
$
2,235,597
$
1,901,371
18%
$
8,138,365
$
6,920,948
18%
Net revenues3
$
680,675
$
628,809
8%
$
2,620,373
$
2,319,189
13%
Operating income
$
217,007
$
199,011
9%
$
796,563
$
700,260
14%
Net earnings attributable to shareholders4
$
179,210
$
166,967
7%
$
618,199
$
489,345
26%
Diluted earnings attributable to shareholders
$
1.02
$
0.92
11%
$
3.48
$
2.69
29%
Basic earnings attributable to shareholders
$
1.04
$
0.94
11%
$
3.55
$
2.73
30%
Diluted weighted average shares outstanding
175,935
180,635
177,833
181,666
Basic weighted average shares outstanding
172,493
177,523
174,133
179,247
_______________________
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 Net earnings in the fourth quarter of 2017 include a $39 million net income tax benefit that resulted from the effect of the 2017 Tax Cut and Jobs Act. This amount was composed of the remeasurement of net deferred tax liabilities and assets, based on the new lower U.S. corporate tax rate, the recording of a provisional estimate of the one-time mandatory tax on the undistributed earnings of the Company's non-U.S. subsidiaries, and the effects of the transition to a territorial tax system in the U.S.
 

During the three and twelve-month periods ended December 31, 2018, the Company repurchased 1.3 million and 9.0 million shares of common stock at an average price of $71.82 and $71.61 per share, respectively. During the three and twelve-month periods ended December 31, 2017, the Company repurchased 2.1 million and 8.2 million shares of common stock at an average price of $64.52 and $58.16 per share, respectively.

 
 

Employee Full-time Equivalents
as of December 31,

2018
 
 
2017
North America
6,833
6,091
Europe
3,375
3,050
North Asia
2,607
2,593
South Asia
1,643
1,623
Middle East, Africa and India
1,520
1,503
Latin America
839
814
Information Systems
912
884
Corporate
352
386
Total
18,081
16,944
 
 
 

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

Airfreight kilos
 
 
Ocean freight FEU
2018
October
7
%
21
%
November
(2
)%
6
%
December
1
%
4
%
Quarter
2
%
10
%
 
_______________________

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on February 22, 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 comments on delivering customer satisfaction and profitable growth; our ability to perform well; the effectiveness of our processes and technology; our ability to predict our effective tax rates; 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,
2018

 
 

December 31,
2017

Assets

Current Assets:
Cash and cash equivalents
$
923,735
$
1,051,099
Accounts receivable, net
1,581,530
1,414,741
Deferred contract costs
159,510
–
Other current assets
70,041
 
75,612
 
Total current assets
2,734,816
 
2,541,452
 
Property and equipment, net
504,105
525,203
Goodwill
7,927
7,927
Deferred Federal and state taxes, net
40,465
13,207
Other assets, net
27,246
 
29,219
 
$
3,314,559
 
$
3,117,008
 

Liabilities and Equity

Current Liabilities:
Accounts payable
$
902,259
$
866,305
Accrued expenses, primarily salaries and related costs
215,813
206,320
Contract liabilities
190,343
 
–
 
Federal, state and foreign income taxes
18,424
 
20,494
 
Total current liabilities
1,326,839
 
1,093,119
 
Noncurrent Federal income tax payable
–
29,516
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued
–
–
Common stock, par value $0.01 per share; issued and outstanding 171,582 shares at December 31, 2018 and 176,374 shares at December 31, 2017
1,716
1,764
Additional paid-in capital
1,896
546
Retained earnings
2,088,707
2,063,512
Accumulated other comprehensive loss
(105,481
)
(73,964
)
Total shareholders’ equity
1,986,838
 
1,991,858
 
Noncontrolling interest
882
 
2,515
 
Total equity
1,987,720
 
1,994,373
 
$
3,314,559
 
$
3,117,008
 
 
 
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,
2018
 
 
2017
2018
 
 
2017
Revenues:
 
 
Airfreight services
$
905,606
$
854,455
$
3,271,932
$
2,877,032
Ocean freight and ocean services
615,053
521,315
2,251,754
2,107,045
Customs brokerage and other services
714,938
525,601
2,614,679
1,936,871
Total revenues
2,235,597
1,901,371
8,138,365
6,920,948
Operating Expenses:
Airfreight services
683,410
636,344
2,410,793
2,126,761
Ocean freight and ocean services
464,281
380,689
1,664,168
1,543,740
Customs brokerage and other services
407,231
255,529
1,443,031
931,258
Salaries and related costs
350,839
336,961
1,393,259
1,267,120
Rent and occupancy costs
39,627
31,906
152,813
119,732
Depreciation and amortization
13,186
13,069
54,019
49,310
Selling and promotion
12,961
11,814
45,346
44,290
Other
47,055
36,048
178,373
138,477
Total operating expenses
2,018,590
1,702,360
7,341,802
6,220,688
Operating income
217,007
199,011
796,563
700,260
 
Interest income
4,982
3,639
19,153
13,204
Other, net
256
2,547
2,613
5,131
Other income, net
5,238
6,186
21,766
18,335
Earnings before income taxes
222,245
205,197
818,329
718,595
Income tax expense
42,668
37,742
198,539
228,212
Net earnings
179,577
167,455
619,790
490,383
Less net earnings attributable to the noncontrolling interest
367
488
1,591
1,038
Net earnings attributable to shareholders
$
179,210
$
166,967
$
618,199
$
489,345
Diluted earnings attributable to shareholders per share
$
1.02
$
0.92
$
3.48
$
2.69
Basic earnings attributable to shareholders per share
$
1.04
$
0.94
$
3.55
$
2.73
Dividends declared and paid per common share
$
0.45
$
0.42
$
0.90
$
0.84
Weighted average diluted shares outstanding
175,935
180,635
177,833
181,666
Weighted average basic shares outstanding
172,493
177,523
174,133
179,247
 
 
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,
2018
 
 
2017
2018
 
 
2017
Operating Activities:
Net earnings
$
179,577
$
167,455
$
619,790
$
490,383
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable
1,576
2,169
3,808
5,356
Deferred income tax expense (benefit)
5,491
(27,695
)
(12,031
)
(43,695
)
Stock compensation expense
12,976
11,872
56,147
50,908
Depreciation and amortization
13,186
13,069
54,019
49,310
Other
(123
)
(4,234
)
647
(4,382
)
Changes in operating assets and liabilities:
Increase in accounts receivable
(58,650
)
(60,981
)
(214,971
)
(184,771
)
(Decrease) increase in accounts payable and accrued expenses
(41,824
)
18,499
86,036
114,631
Decrease (increase) in deferred contract costs
9,138
–
(42,097
)
–
(Decrease) increase in contract liabilities
(5,221
)
–
43,928
–
(Decrease) increase in income taxes payable, net
(10,433
)
5,450
(19,691
)
16,264
(Increase) decrease in other current assets
(3,643
)
782
 
(2,781
)
(5,365
)
Net cash from operating activities
102,050
 
126,386
 
572,804
 
488,639
 
Investing Activities:
Purchase of property and equipment
(9,832
)
(27,413
)
(47,474
)
(95,016
)
Proceeds from sale of property and equipment
143
84,062
215
84,405
Other, net
(182
)
161
 
(1,140
)
(1,074
)
Net cash from investing activities
(9,871
)
56,810
 
(48,399
)
(11,685
)
Financing Activities:
Proceeds from issuance of common stock
13,166
42,311
182,732
205,092
Repurchases of common stock
(92,138
)
(137,522
)
(647,898
)
(478,258
)
Dividends paid
(77,660
)
(74,769
)
(156,840
)
(150,495
)
Payments for taxes related to net share settlement of equity awards
(33
)
–
(3,248
)
–
Purchase of noncontrolling interest
(75
)
(904
)
(688
)
(904
)
Distribution to noncontrolling interest
(1,163
)
–
 
(1,796
)
–
 
Net cash from financing activities
(157,903
)
(170,884
)
(627,738
)
(424,565
)
Effect of exchange rate changes on cash and cash equivalents
(1,153
)
5,343
 
(24,031
)
24,275
 
Increase (decrease) in cash and cash equivalents
(66,877
)
17,655
(127,364
)
76,664
Cash and cash equivalents at beginning of period
990,612
 
1,033,444
 
1,051,099
 
974,435
 
Cash and cash equivalents at end of period
$
923,735
 
$
1,051,099
 
$
923,735
 
$
1,051,099
 
Supplemental Cash Flow Information:
Cash paid for income taxes
$
55,811
$
58,793
$
239,255
$
249,704
 
 
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 December 31, 2018:
Revenues from unaffiliated customers
$
637,358
94,452
30,388
814,206
209,025
334,291
115,877
–
2,235,597
Transfers between geographic areas
51,585
4,144
4,296
6,711
8,768
18,107
5,605
(99,216
)
–
Total revenues
$
688,943
98,596
34,684
820,917
217,793
352,398
121,482
(99,216
)
2,235,597
Net revenues
$
294,016
39,442
16,337
145,815
49,480
102,616
33,481
(512
)
680,675
Operating income
$
97,228
14,528
1,363
68,376
16,833
13,552
5,132
(5
)
217,007
Identifiable assets
$
1,689,950
161,604
53,542
533,071
152,646
513,744
206,367
3,635
3,314,559
Capital expenditures
$
5,640
239
143
434
248
1,648
1,480
–
9,832
Depreciation and amortization
$
8,114
479
370
1,311
578
1,838
496
–
13,186
Equity
$
1,339,673
72,941
26,007
200,371
100,706
157,003
123,228
(32,209
)
1,987,720
Three months ended December 31, 2017:
Revenues from unaffiliated customers
$
496,584
68,362
27,349
703,578
186,715
307,432
111,351
–
1,901,371
Transfers between geographic areas
31,807
3,581
3,693
6,266
6,479
14,008
5,532
(71,366
)
–
Total revenues
$
528,391
71,943
31,042
709,844
193,194
321,440
116,883
(71,366
)
1,901,371
Net revenues
$
270,999
34,441
14,565
137,776
45,816
93,458
31,294
460
628,809
Operating income
$
86,565
11,548
1,615
64,907
15,623
12,302
6,437
14
199,011
Identifiable assets
$
1,595,140
151,181
55,431
458,152
137,279
501,711
215,495
2,619
3,117,008
Capital expenditures
$
8,720
497
964
1,264
516
15,237
215
–
27,413
Depreciation and amortization
$
8,628
383
347
1,331
559
1,361
460
–
13,069
Equity
$
1,337,568
60,705
26,546
240,721
94,516
142,971
123,600
(32,254
)
1,994,373
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

UNITED
STATES

OTHER
NORTH
AMERICA

LATIN
AMERICA

NORTH
ASIA

SOUTH
ASIA

EUROPE

MIDDLE
EAST,
AFRICA
and
INDIA

ELIMI-
NATIONS

CONSOLI-
DATED

Twelve months ended December 31, 2018:
Revenues from unaffiliated customers
$
2,336,681
340,122
141,196
2,860,876
748,858
1,268,757
441,875
–
8,138,365
Transfers between geographic areas
143,131
15,680
15,658
25,446
29,005
61,608
22,196
(312,724
)
–
Total revenues
$
2,479,812
355,802
156,854
2,886,322
777,863
1,330,365
464,071
(312,724
)
8,138,365
Net revenues
$
1,126,888
139,049
62,813
570,496
185,938
403,416
133,862
(2,089
)
2,620,373
Operating income
$
310,071
44,099
8,843
281,481
60,882
65,446
25,731
10
796,563
Identifiable assets
$
1,689,950
161,604
53,542
533,071
152,646
513,744
206,367
3,635
3,314,559
Capital expenditures
$
21,732
4,259
1,042
3,057
2,182
10,815
4,387
–
47,474
Depreciation and amortization
$
33,511
1,847
1,508
5,309
2,257
7,727
1,860
–
54,019
Equity
$
1,339,673
72,941
26,007
200,371
100,706
157,003
123,228
(32,209
)
1,987,720
Twelve months ended December 31, 2017:
Revenues from unaffiliated customers
$
1,851,395
256,359
97,096
2,576,971
661,878
1,072,028
405,221
–
6,920,948
Transfers between geographic areas
111,163
11,827
14,766
21,405
22,999
43,296
20,848
(246,304
)
–
Total revenues
$
1,962,558
268,186
111,862
2,598,376
684,877
1,115,324
426,069
(246,304
)
6,920,948
Net revenues
$
1,008,841
119,071
58,199
509,235
163,450
335,702
121,267
3,424
2,319,189
Operating income
$
277,821
38,131
9,964
248,422
53,057
48,491
24,365
9
700,260
Identifiable assets
$
1,595,140
151,181
55,431
458,152
137,279
501,711
215,495
2,619
3,117,008
Capital expenditures
$
28,212
1,563
4,612
3,756
1,688
53,954
1,231
–
95,016
Depreciation and amortization
$
32,017
1,546
1,277
5,326
2,215
5,068
1,861
–
49,310
Equity
$
1,337,568
60,705
26,546
240,721
94,516
142,971
123,600
(32,254
)
1,994,373
 

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)
2018
 
 
2017
2018
 
 
2017
Total revenues
$
2,235,597
$
1,901,371
$
8,138,365
$
6,920,948
Expenses:
Airfreight services
683,410
636,344
2,410,793
2,126,761
Ocean freight and ocean services
464,281
380,689
1,664,168
1,543,740
Customs brokerage and other services
407,231
255,529
1,443,031
931,258
Net revenues
$
680,675
$
628,809
$
2,620,373
$
2,319,189

View source version on businesswire.com: https://www.businesswire.com/news/home/20190219005276/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

Copyright Business Wire 2019
Stock Information
Company Name: Expeditors International of Washington Inc.
Stock Symbol: EXPD
Market: NYSE
Website: expeditors.com
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