EX-99.1 2 a20184qerexhibit991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1
expeditorswtagcmyka02a01a03.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 2018 EPS OF $1.02
    
SEATTLE, WASHINGTON - February 19, 2019, 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.

 

________________________
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 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.

4Net 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



February 19, 2019
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,
 
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



February 19, 2019
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,
 
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



February 19, 2019
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, 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




February 19, 2019
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, 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



February 19, 2019
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)
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



February 19, 2019
Expeditors International of Washington, Inc.
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