EX-99.1 2 a20181qerexhibit991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1
expeditorswtaga03.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 FIRST QUARTER 2018 EPS OF $0.76
SEATTLE, WASHINGTON - May 8, 2018, Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced first 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 49% to $0.76
•
Net Earnings Attributable to Shareholders increased 45% to $136 million
•
Operating Income increased 32% to $193 million
•
Revenues increased 20% to $1.9 billion
•
Net Revenues2 increased 21% to $636 million
•
Airfreight tonnage volume and ocean container volume both increased 5%

“Building from a strong second half of 2017, we continued to execute well across all of our services during the quarter,” commented Jeffrey S. Musser, President and Chief Executive Officer. “We added profitable growth from new and existing customers and benefitted from favorable buying opportunities in certain markets. All across our global network, our people exercised pricing discipline while securing capacity to deliver the services and solutions our customers need. All told, this quarter showcases the best of our Company’s capabilities and our relentless drive for excellence."

“Compared with the robust volume growth in the first quarter a year ago,” Mr. Musser continued, “this quarter’s volume increases and financial performance track more in line with our historical performance and demonstrates our ability to execute and generate profitable growth. Demand has remained strong and we have continued to invest in people, processes and technology to efficiently handle the increased volumes across all products.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “These investments, including investments in facilities and equipment, will enhance our efficiencies. While investing for growth, we remain deliberate in how we commit resources and once again realized our target 30% operating efficiency (operating income as a percentage of net revenue) during the quarter.” Mr. Powell further commented that the Company’s effective tax rate for the quarter was 31.1%, compared to 37.3% a year ago. He also reiterated that the impact of the 2017 Tax Act on the Company’s effective tax rate in future periods will largely depend on the mix of pretax earnings that are generated in its U.S. and foreign operations, as well as further interpretation of and guidance to be issued on the new tax law.

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, 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 2018 Earnings Release, May 8, 2018
Financial Highlights for the Three months ended March 31, 2018 and 2017 (Unaudited)
(in 000's of US dollars except per share data)
 
Three months ended March 31,
 
2018
 
2017
 
% Change
Revenues1
$
1,854,262

 
$
1,545,132

 
20%
Net revenues2
$
635,838

 
$
527,605

 
21%
Operating income
$
192,818

 
$
146,114

 
32%
Net earnings attributable to shareholders
$
135,692

 
$
93,264

 
45%
Diluted earnings attributable to shareholders per share
$
0.76

 
$
0.51

 
49%
Basic earnings attributable to shareholders per share
$
0.77

 
$
0.52

 
48%
Diluted weighted average shares outstanding
179,416

 
182,094

 
 
Basic weighted average shares outstanding
175,900

 
180,062

 
 
_______________________
1Effective January 1, 2018, the Company adopted required new revenue recognition guidance, resulting in a $22 million net reduction to the opening balance of retained earnings. In addition, in conjunction with the adoption of new revenue recognition guidance, the Company also changed the presentation of certain warehouse and distribution revenues from a net to a gross basis, which increased both revenues and operating expenses in customs brokerage and other services by approximately $50 million in the first quarter of 2018. Comparative prior year revenues (and the related volume information in the table below) has not been adjusted and continues to be reported under the Company's historical policies. 2018 reported revenues (and the related volume information) are reported under the Company's new revenue recognition accounting policies.
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.

During the three-month periods ended March 31, 2018 and 2017, we repurchased 2.7 million and 1.0 million shares of common stock at an average price of $64.76 and $56.49 per share, respectively.
 
Employee Full-time Equivalents as of March 31,
 
2018
 
2017
North America
6,264

 
5,947

Europe
3,132

 
2,816

North Asia
2,579

 
2,645

South Asia
1,582

 
1,494

Middle East, Africa and India
1,478

 
1,544

Latin America
811

 
770

Information Systems
888

 
873

Corporate
351

 
340

Total
17,085

 
16,429

 
 
First quarter year-over-year percentage increase (decrease) in:
 
 
Airfreight kilos
 
Ocean freight FEU
2018
 
 
 
 
January
 
10%
 
(1)%
February
 
1%
 
27%
March
 
3%
 
(5)%
Quarter
 
5%
 
5%


_______________________
Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on May 11, 2018 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about May 21, 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 our ability to execute and generate profitable growth; benefitting from favorable buying opportunities in certain markets; the strength of demand; our ability to efficiently handle increased volumes across all products; our ability to reach and maintain our target rate of operating efficiency; investments enhancing our efficiency; the impact of the 2017 Tax Act on our effective tax rate; 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)
 
 
March 31, 2018
 
December 31, 2017
Assets
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
1,132,901

 
$
1,051,099

Accounts receivable, net
1,326,168

 
1,414,741

Deferred contract costs
120,861

 
—

Other current assets
58,161

 
75,612

Total current assets
2,638,091

 
2,541,452

Property and equipment, net
531,068

 
525,203

Goodwill
7,927

 
7,927

Deferred Federal and state income taxes, net
7,402

 
13,207

Other assets, net
27,993

 
29,219

 
$
3,212,481

 
$
3,117,008

Liabilities and Equity
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
812,200

 
$
866,305

Accrued expenses, primarily salaries and related costs
222,212

 
206,320

Contract liabilities
147,236

 
—

Federal, state and foreign income taxes
17,233

 
20,494

Total current liabilities
1,198,881

 
1,093,119

Noncurrent Federal income taxes payable
31,334

 
29,516

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Shareholders’ Equity:
 
 
 
Preferred stock; none issued
—

 
—

Common stock, par value $0.01 per share. Issued and outstanding 174,308 shares at March 31, 2018 and 176,374 shares at December 31, 2017
1,743

 
1,764

Additional paid-in capital
1,198

 
546

Retained earnings
2,041,520

 
2,063,512

Accumulated other comprehensive loss
(64,992
)
 
(73,964
)
Total shareholders’ equity
1,979,469

 
1,991,858

Noncontrolling interest
2,797

 
2,515

Total equity
1,982,266

 
1,994,373

 
$
3,212,481

 
$
3,117,008



08-May-2018
Expeditors International of Washington, Inc.
Page 3 of 7


EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
 
 
Three months ended
 
March 31,
 
2018
 
2017
Revenues:
 
 
 
Airfreight services
$
731,227

 
$
615,545

Ocean freight and ocean services
520,883

 
493,759

Customs brokerage and other services
602,152

 
435,828

Total revenues
1,854,262

 
1,545,132

Operating Expenses:
 
 
 
Airfreight services
513,504

 
443,404

Ocean freight and ocean services
379,418

 
366,063

Customs brokerage and other services
325,502

 
208,060

Salaries and related costs
339,895

 
292,580

Rent and occupancy costs
36,913

 
28,130

Depreciation and amortization
13,922

 
11,927

Selling and promotion
10,965

 
10,915

Other
41,325

 
37,939

Total operating expenses
1,661,444

 
1,399,018

Operating income
192,818

 
146,114

Other Income (Expense):
 
 
 
Interest income
4,314

 
2,741

Other, net
624

 
298

Other income (expense), net
4,938

 
3,039

Earnings before income taxes
197,756

 
149,153

Income tax expense
61,556

 
55,586

Net earnings
136,200

 
93,567

Less net earnings attributable to the noncontrolling interest
508

 
303

Net earnings attributable to shareholders
$
135,692

 
$
93,264

Diluted earnings attributable to shareholders per share
$
0.76

 
$
0.51

Basic earnings attributable to shareholders per share
$
0.77

 
$
0.52

Weighted average diluted shares outstanding
179,416

 
182,094

Weighted average basic shares outstanding
175,900

 
180,062



08-May-2018
Expeditors International of Washington, Inc.
Page 4 of 7

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Three months ended
 
March 31,
 
2018
 
2017
Operating Activities:
 
 
 
Net earnings
$
136,200

 
$
93,567

Adjustments to reconcile net earnings to net cash from operating activities:
 
 
 
(Recoveries) provision for losses on accounts receivable
(265
)
 
931

Deferred income tax expense
2,853

 
5,593

Stock compensation expense
11,267

 
10,623

Depreciation and amortization
13,922

 
11,927

Other, net
48

 
(351
)
Changes in operating assets and liabilities:
 
 
 
Decrease in accounts receivable
100,647

 
75,454

Decrease in accounts payable and accrued expenses
(45,844
)
 
(18,324
)
Decrease in deferred contract costs
3,407

 
—

Decrease in contract liabilities
(7,401
)
 
—

Increase in income taxes payable, net
19,509

 
19,824

Decrease (increase) in other current assets
1,134

 
(3,565
)
Net cash from operating activities
235,477

 
195,679

Investing Activities:
 
 
 
Purchase of property and equipment
(13,796
)
 
(12,761
)
Other, net
(431
)
 
(671
)
Net cash from investing activities
(14,227
)
 
(13,432
)
Financing Activities:
 
 
 
Proceeds from issuance of common stock
26,397

 
45,365

Repurchases of common stock
(172,360
)
 
(53,908
)
Net cash from financing activities
(145,963
)
 
(8,543
)
Effect of exchange rate changes on cash and cash equivalents
6,515

 
7,904

Increase in cash and cash equivalents
81,802

 
181,608

Cash and cash equivalents at beginning of period
1,051,099

 
974,435

Cash and cash equivalents at end of period
$
1,132,901

 
$
1,156,043

Taxes paid:
 
 
 
Income taxes
$
38,519

 
$
29,146


08-May-2018
Expeditors International of Washington, Inc.
Page 5 of 7

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, 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

Three months ended March 31, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
426,019

 
59,899

 
22,103

 
566,428

 
147,240

 
231,457

 
91,986

 
—

 
1,545,132

Transfers between geographic areas
24,313

 
2,639

 
3,635

 
5,051

 
5,431

 
9,322

 
4,964

 
(55,355
)
 
—

Total revenues
$
450,332

 
62,538

 
25,738

 
571,479

 
152,671


240,779

 
96,950

 
(55,355
)
 
1,545,132

Net revenues
$
230,785

 
25,793

 
14,916

 
111,833

 
37,995

 
75,958

 
29,731

 
594

 
527,605

Operating income
$
52,346

 
5,051

 
3,451

 
53,352

 
13,224

 
11,646

 
7,043

 
1

 
146,114

Identifiable assets
$
1,536,520

 
106,068

 
50,344

 
514,509

 
122,765

 
379,853

 
188,098

 
4,562

 
2,902,719

Capital expenditures
$
5,242

 
234

 
255

 
1,240

 
373

 
5,078

 
339

 
—

 
12,761

Depreciation and amortization
$
7,753

 
372

 
320

 
1,320

 
531

 
1,171

 
460

 
—

 
11,927

Equity
$
1,192,601

 
51,812

 
27,248

 
371,152

 
105,726

 
118,211

 
119,627

 
(34,657
)
 
1,951,720





08-May-2018
Expeditors International of Washington, Inc.
Page 6 of 7

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)
2018
 
2017
Total revenues
$
1,854,262

 
$
1,545,132

Expenses:
 
 
 
Airfreight services
513,504

 
443,404

Ocean freight and ocean services
379,418

 
366,063

Customs brokerage and other services
325,502

 
208,060

Net revenues
$
635,838

 
$
527,605



08-May-2018
Expeditors International of Washington, Inc.
Page 7 of 7