EX-99.1 2 a20174qerexhibit991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1
expeditorswtagcmyka02a01a02.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 FOURTH QUARTER 2017 EPS OF $0.92
    
SEATTLE, WASHINGTON - February 20, 2018, Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced fourth quarter 2017 financial results including the following highlights compared to the same quarter of 2016:

•
Diluted Net Earnings Attributable to Shareholders per share (EPS1) increased 51% to $0.92 (includes a net income tax benefit from U.S. tax reform of $0.21)
•
Net Earnings Attributable to Shareholders increased 51% to $167 million (includes a net income tax benefit from U.S. tax reform of $39 million)
•
Operating Income increased 16% to $199 million
•
Revenues increased 16% to $1.90 billion
•
Net Revenues2 increased 15% to $629 million
•
Airfreight tonnage volumes increased 6% and ocean container volumes increased 1%

“We executed well across all of our businesses in the fourth quarter, with improved performance throughout the second half of 2017,” said Jeffrey S. Musser, President and Chief Executive Officer. “The global freight industry is stronger than it was a year ago, particularly in certain key lanes and especially for shipments by air. In response to that continued robust demand, and combined with tight capacity and unpredictable rates, we continued to grow profitably by delivering outstanding services and solutions to our customers.

“I credit our strong results to the hard work and discipline of everyone throughout our talented organization, as we continue to move higher volumes in all services with greater efficiency per-shipment. The vast majority of our dedicated employees work in the field at one of our many District operations, where they are close to our customers and greatly attuned to their individual supply chain needs. Because each District is responsible for its own P&L, we are all highly motivated to drive efficiency and growth in support of profitable business.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “We continued to improve operational performance on many levels, pushing operating efficiency (operating income as a percentage of net revenue) to nearly 32% in Q4 and above 30% for the full year. We are managing our pricing well in a volatile rate environment, and we are controlling expenses by making the best of our investments in people, processes, and core technologies. We will continue to invest in people and systems to support profitable growth, while working to further hone our performance at the District level to move more freight and to move it more efficiently.”

Mr. Powell also noted, “We were positively impacted by the implementation of U.S. tax law changes in Q4, which resulted in recognizing a $39 million net income tax benefit. The impact on our effective tax rate in future periods will largely depend on the mix of pretax earnings that we generate in our U.S. and foreign operations, as well as further interpretation of and guidance to be issued on the new tax law. At this time, we expect our effective tax rate in 2018 will be between 31% and 34% of pretax earnings.”

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, time-definite transportation services, 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 2017 Earnings Release, February 20, 2018

Financial Highlights for the Three months and Years ended December 31, 2017 and 2016 (Unaudited)
(in 000's of US dollars except per share data)
 
Three months ended December 31,
 
 
 
Years ended December 31,
 
 
 
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
Revenues
$
1,901,371

 
$
1,642,007

 
16%
 
$
6,920,948

 
$
6,098,037

 
13%
Net revenues3
$
628,809

 
$
548,591

 
15%
 
$
2,319,189

 
$
2,164,036

 
7%
Operating income4
$
199,011

 
$
172,210

 
16%
 
$
700,260

 
$
670,163

 
4%
Net earnings attributable to shareholders5
$
166,967

 
$
110,590

 
51%
 
$
489,345

 
$
430,807

 
14%
Diluted earnings attributable to shareholders
$
0.92

 
$
0.61

 
51%
 
$
2.69

 
$
2.36

 
14%
Basic earnings attributable to shareholders
$
0.94

 
$
0.61

 
54%
 
$
2.73

 
$
2.38

 
15%
Diluted weighted average shares outstanding
180,635

 
181,887

 
 
 
181,666

 
182,704

 
 
Basic weighted average shares outstanding
177,523

 
180,201

 
 
 
179,247

 
181,282

 
 
_______________________
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.
5Net 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 is 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, 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. 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.
 
Employee Full-time Equivalents as of December 31,
 
2017
 
2016
North America
6,091

 
5,835

Europe
3,050

 
2,887

North Asia
2,593

 
2,597

South Asia
1,623

 
1,506

Middle East, Africa and India
1,503

 
1,562

Latin America
814

 
778

Information Systems
884

 
877

Corporate
386

 
376

Total
16,944

 
16,418

 
 
Year-over-year percentage increase/(decrease) in:
 
 
Airfreight kilos
 
Ocean freight FEU
2017
 
 
 
 
October
 
8
%
 
(1
)%
November
 
7
%
 
1
 %
December
 
2
%
 
2
 %
Quarter
 
6
%
 
1
 %
_______________________
Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on February 23, 2018 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about March 5, 2018.

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 the strength of the global freight industry and continued robust demand, tight capacity and unpredictable rates. 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 move increased volumes with greater efficiency, employee motivation to drive efficiency and growth in support of profitability, our ability to manage pricing in a volatile environment, our ability to control expenses and optimize our investments to support profitable growth, and our ability to predict our effective tax rate in 2018; 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, 2017
 
December 31, 2016
Assets
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
1,051,099

 
$
974,435

Accounts receivable, net
1,414,741

 
1,190,130

Other current assets
75,612

 
54,014

Total current assets
2,541,452

 
2,218,579

Property and equipment, net
525,203

 
536,572

Goodwill
7,927

 
7,927

Deferred Federal and state taxes, net
13,207

 
—

Other assets, net
29,219

 
27,793

 
$
3,117,008

 
$
2,790,871

Liabilities and Equity
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
866,305

 
$
726,571

Accrued expenses, primarily salaries and related costs
206,320

 
185,502

Federal, state and foreign income taxes
20,494

 
17,858

Total current liabilities
1,093,119

 
929,931

Noncurrent Federal income tax payable
29,516

 
—

Deferred Federal and state income taxes
—

 
13,727

Commitments and contingencies
 
 
 
Shareholders’ Equity:
 
 
 
Preferred stock; none issued
—

 
—

Common stock, par value $0.01 per share; issued and outstanding 176,374 shares at December 31, 2017 and 179,857 shares at December 31, 2016
1,764

 
1,799

Additional paid-in capital
546

 
2,642

Retained earnings
2,063,512

 
1,944,789

Accumulated other comprehensive loss
(73,964
)
 
(104,592
)
Total shareholders’ equity
1,991,858

 
1,844,638

Noncontrolling interest
2,515

 
2,575

Total equity
1,994,373

 
1,847,213

 
$
3,117,008

 
$
2,790,871



February 20, 2018
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
 
Twelve months ended
 
December 31,
 
December 31,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Airfreight services
$
854,455

 
$
688,835

 
$
2,877,032

 
$
2,453,347

Ocean freight and ocean services
521,315

 
503,150

 
2,107,045

 
1,917,494

Customs brokerage and other services
525,601

 
450,022

 
1,936,871

 
1,727,196

Total revenues
1,901,371

 
1,642,007

 
6,920,948

 
6,098,037

Operating Expenses:
 
 
 
 
 
 
 
Airfreight services
636,344

 
515,612

 
2,126,761

 
1,752,167

Ocean freight and ocean services
380,689

 
371,989

 
1,543,740

 
1,378,699

Customs brokerage and other services
255,529

 
205,815

 
931,258

 
803,135

Salaries and related costs
336,961

 
289,544

 
1,267,120

 
1,157,635

Rent and occupancy costs
31,906

 
27,783

 
119,732

 
108,812

Depreciation and amortization
13,069

 
11,943

 
49,310

 
46,796

Selling and promotion
11,814

 
11,946

 
44,290

 
41,763

Other
36,048

 
35,165

 
138,477

 
138,867

Total operating expenses
1,702,360

 
1,469,797

 
6,220,688

 
5,427,874

Operating income
199,011

 
172,210

 
700,260

 
670,163

 
 
 
 
 
 
 
 
Interest income
3,639

 
2,987

 
13,204

 
11,580

Other, net
2,547

 
1,706

 
5,131

 
5,113

Other income, net
6,186

 
4,693

 
18,335

 
16,693

Earnings before income taxes
205,197

 
176,903

 
718,595

 
686,856

Income tax expense
37,742

 
65,805

 
228,212

 
254,323

Net earnings
167,455

 
111,098

 
490,383

 
432,533

Less net earnings attributable to the noncontrolling interest
488

 
508

 
1,038

 
1,726

Net earnings attributable to shareholders
$
166,967

 
$
110,590

 
$
489,345

 
$
430,807

Diluted earnings attributable to shareholders per share
$
0.92

 
$
0.61

 
$
2.69

 
$
2.36

Basic earnings attributable to shareholders per share
$
0.94

 
$
0.61

 
$
2.73

 
$
2.38

Dividends declared and paid per common share
$
0.42

 
$
0.40

 
$
0.84

 
$
0.80

Weighted average diluted shares outstanding
180,635

 
181,887

 
181,666

 
182,704

Weighted average basic shares outstanding
177,523

 
180,201

 
179,247

 
181,282



February 20, 2018
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
 
Twelve months ended
 
December 31,
 
December 31,
 
2017
 
2016
 
2017
 
2016
Operating Activities:
 
 
 
 
 
 
 
Net earnings
$
167,455

 
$
111,098

 
$
490,383

 
$
432,533

Adjustments to reconcile net earnings to net cash from operating activities:
 
 
 
 
 
 
 
Provision for losses on accounts receivable
2,169

 
146

 
5,356

 
2,607

Deferred income tax (benefit) expense
(27,695
)
 
13,493

 
(43,695
)
 
15,835

Stock compensation expense
11,872

 
10,953

 
50,908

 
45,217

Depreciation and amortization
13,069

 
11,943

 
49,310

 
46,796

Other
(4,234
)
 
(3,581
)
 
(4,382
)
 
(3,540
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Increase in accounts receivable
(60,981
)
 
(108,384
)
 
(184,771
)
 
(102,297
)
Increase in accounts payable and accrued expenses
18,499

 
28,568

 
114,631

 
102,716

Increase (decrease) in income taxes payable, net
5,450

 
4,242

 
16,264

 
(12,370
)
Decrease (increase) in other current assets
782

 
4,077

 
(5,365
)
 
1,988

Net cash from operating activities
126,386

 
72,555

 
488,639

 
529,485

Investing Activities:
 
 
 
 
 
 
 
Purchase of property and equipment
(27,413
)
 
(19,343
)
 
(95,016
)
 
(59,316
)
Proceeds from sale of property and equipment
84,062

 
37

 
84,405

 
229

Other, net
161

 
611

 
(1,074
)
 
5,891

Net cash from investing activities
56,810

 
(18,695
)
 
(11,685
)
 
(53,196
)
Financing Activities:
 
 
 
 
 
 
 
Proceeds from issuance of common stock
42,311

 
37,668

 
205,092

 
185,313

Repurchases of common stock
(137,522
)
 
(69,561
)
 
(478,258
)
 
(337,658
)
Dividends paid
(74,769
)
 
(72,123
)
 
(150,495
)
 
(145,123
)
Distribution to noncontrolling interest
(904
)
 
(1,335
)
 
(904
)
 
(1,335
)
Net cash from financing activities
(170,884
)
 
(105,351
)
 
(424,565
)
 
(298,803
)
Effect of exchange rate changes on cash and cash equivalents
5,343

 
(16,774
)
 
24,275

 
(10,847
)
Increase (decrease) in cash and cash equivalents
17,655

 
(68,265
)
 
76,664

 
166,639

Cash and cash equivalents at beginning of period
1,033,444

 
1,042,700

 
974,435

 
807,796

Cash and cash equivalents at end of period
$
1,051,099

 
$
974,435

 
$
1,051,099

 
$
974,435

Supplemental Cash Flow Information:
 
 
 
 
 
 
 
Cash paid for income taxes
$
58,793

 
$
49,263

 
$
249,704

 
$
254,312



February 20, 2018
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 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

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




February 20, 2018
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
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

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



February 20, 2018
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 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)
2017
 
2016
 
2017
 
2016
Total revenues
$
1,901,371

 
$
1,642,007

 
$
6,920,948

 
$
6,098,037

Expenses:
 
 
 
 
 
 
 
Airfreight services
636,344

 
515,612

 
2,126,761

 
1,752,167

Ocean freight and ocean services
380,689

 
371,989

 
1,543,740

 
1,378,699

Customs brokerage and other services
255,529

 
205,815

 
931,258

 
803,135

Net revenues
$
628,809

 
$
548,591

 
$
2,319,189

 
$
2,164,036



February 20, 2018
Expeditors International of Washington, Inc.
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