EX-99.1 2 a20163qerexhibit991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1
expeditorswtaga02.jpg
EARNINGS RELEASE
By:    Expeditors International of Washington, Inc.
1015 Third Avenue, Suite 1200
Seattle, Washington 98104
CONTACTS:    

Jeffrey S. Musser
Bradley S. Powell
Geoffrey Buscher
President and Chief Executive Officer
Senior Vice President and Chief Financial Officer
Director - Investor Relations
(206) 674-3433
(206) 674-3412
(206) 892-4510

FOR IMMEDIATE RELEASE
__________________________________________________________________________________________________________________________________________________________________________
EXPEDITORS REPORTS THIRD QUARTER 2016 EPS OF $0.59
SEATTLE, WASHINGTON - November 8, 2016, 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 (EPS1) 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 Revenues2 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.

_______________________
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.
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 revenues1
$
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



08-November-2016
Expeditors International of Washington, Inc.
Page 3 of 8


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



08-November-2016
Expeditors International of Washington, Inc.
Page 4 of 8

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


08-November-2016
Expeditors International of Washington, Inc.
Page 5 of 8

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





08-November-2016
Expeditors International of Washington, Inc.
Page 6 of 8

 
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





08-November-2016
Expeditors International of Washington, Inc.
Page 7 of 8

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




08-November-2016
Expeditors International of Washington, Inc.
Page 8 of 8