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Expeditors Reports First Quarter 2019 EPS of $0.80

SEATTLE--(BUSINESS WIRE)--

Expeditors International of Washington, Inc. (EXPD) today announced first quarter 2019 financial results including the following highlights compared to the same quarter of 2018:

  • Diluted Net Earnings Attributable to Shareholders per share (EPS1) increased 5% to $0.80
  • Net Earnings Attributable to Shareholders increased 3% to $140 million
  • Operating Income decreased 3% to $188 million
  • Revenues increased 9% to $2.02 billion
  • Net Revenues2 increased 3% to $654 million
  • Airfreight tonnage volume decreased 4% and ocean container volume increased 6%

“We are pleased with our results in Q1 2019, especially when we look at the comparison period last year that produced so many records and set an extremely high bar,” said Jeffrey S. Musser, President and Chief Executive Officer. “Customs brokerage and import services led the way this quarter on increased volumes and on-boarding new customers. Transcon, warehouse and distribution also posted solid gains on expanded business with current customers, as well as by winning new business. We increased the volume of ocean freight containers shipped by 6%, while also improving net revenue per container, particularly from exports out of North and South Asia. The air market was the only area that was challenged, particularly as customers reduced export volumes out of North Asia. I credit our air group for their efforts in a volatile pricing environment, and I thank everyone throughout our global network for their ongoing effort to handle the increase in volumes and business activity.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Operating efficiency (operating income as a percentage of net revenue) dipped below 30% this quarter, due largely to lower air net revenues, as well as our continuing investments in people at the district level to handle the increase in volumes, and investments in technology and facilities. Our effective tax rate declined from 31.1% in the first quarter of 2018 to 28.3% in 2019, largely due to the benefit from share-based compensation deductions, higher foreign tax credits and deductions for foreign derived investment income."

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, 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 2019 Earnings Release, May 7, 2019

Financial Highlights for the Three months ended March 31, 2019 and 2018 (Unaudited)

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

 
    Three months ended March 31,
2019   2018   % Change
Revenues $ 2,020,051 $ 1,854,262 9 %
Net revenues1 $ 654,114 $ 635,838 3 %
Operating income $ 187,601 $ 192,818 (3

)%

Net earnings attributable to shareholders $ 139,699 $ 135,692 3 %
Diluted earnings attributable to shareholders per share $ 0.80 $ 0.76 5 %
Basic earnings attributable to shareholders per share $ 0.81 $ 0.77 5 %
Diluted weighted average shares outstanding 175,388 179,416
Basic weighted average shares outstanding 171,818 175,900
 
_______________________
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-month period ended March 31, 2019, we repurchased 0.6 million shares of common stock at an average price of $75.40 per share. During the three-month period ended March 31, 2018, we repurchased 2.7 million shares of common stock at an average price of $64.76 per share.

   

Employee Full-time
Equivalents as of
March 31,

2019     2018
North America 6,806   6,264
Europe 3,404 3,132
North Asia 2,540 2,579
South Asia 1,654 1,582
Middle East, Africa and India 1,541 1,478
Latin America 862 811
Information Systems 915 888
Corporate 380   351
Total 18,102 17,085
 
   

First quarter year-over-year
percentage increase (decrease) in:

 
Airfreight kilos   Ocean freight FEU
2019
January (2)% 8%
February (6)% 3%
March (2)% 6%
Quarter (4)% 6%
 

_______________________

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on May 10, 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 our continued ability to manage increased volumes and business activity; the impact of the 2017 Tax Act and related interpretations on our effective tax rate; 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,
2019
  December 31,
2018

Assets

Current Assets:
Cash and cash equivalents $ 1,189,429 $ 923,735
Accounts receivable, less allowance for doubtful accounts of $12,727 at March 31, 2019 and $15,345 at December 31, 2018 1,353,725 1,581,530
Deferred contract costs 131,535 159,510
Other current assets 54,305   70,041  
Total current assets 2,728,994   2,734,816  
Property and equipment, less accumulated depreciation and amortization of $457,513 at March 31, 2019 and $446,977 at December 31, 2018 500,853 504,105
Operating lease right-of-use assets 349,140
Goodwill 7,927 7,927
Deferred federal and state income taxes, net 37,781 40,465
Other assets, net 18,217   27,246  
$ 3,642,912   $ 3,314,559  

Liabilities and Equity

Current Liabilities:
Accounts payable $ 768,665 $ 902,259
Accrued expenses, primarily salaries and related costs 220,085 215,813
Contract liabilities 157,040 190,343
Current portion of operating lease liabilities 58,635
Federal, state and foreign income taxes 23,502   18,424  
Total current liabilities 1,227,927   1,326,839  
Noncurrent portion of operating lease liabilities 289,551
 
Commitments and contingencies
 
Shareholders’ Equity:
Preferred stock; none issued
Common stock, par value $0.01 per share. Issued and outstanding 171,648 shares at March 31, 2019 and 171,582 shares at December 31, 2018 1,716 1,716
Additional paid-in capital 3,978 1,896
Retained earnings 2,222,562 2,088,707
Accumulated other comprehensive loss (103,986 ) (105,481 )
Total shareholders’ equity 2,124,270   1,986,838  
Noncontrolling interest 1,164 882
Total equity 2,125,434   1,987,720  
$ 3,642,912   $ 3,314,559  
 
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
    Three months ended
March 31,
2019   2018
Revenues:
Airfreight services $ 714,901 $ 731,227
Ocean freight and ocean services 568,641 520,883
Customs brokerage and other services 736,509   602,152
Total revenues 2,020,051   1,854,262
Operating Expenses:
Airfreight services 509,210 513,504
Ocean freight and ocean services 420,331 379,418
Customs brokerage and other services 436,396 325,502
Salaries and related costs 356,910 339,895
Rent and occupancy costs 41,523 36,913
Depreciation and amortization 13,393 13,922
Selling and promotion 11,076 10,965
Other 43,611   41,325
Total operating expenses 1,832,450   1,661,444
Operating income 187,601   192,818
Other Income (Expense):
Interest income 6,106 4,314
Other, net 1,665   624
Other income (expense), net 7,771   4,938
Earnings before income taxes 195,372 197,756
Income tax expense 55,261   61,556
Net earnings 140,111   136,200
Less net earnings attributable to the noncontrolling interest 412   508
Net earnings attributable to shareholders $ 139,699   $ 135,692
Diluted earnings attributable to shareholders per share $ 0.80   $ 0.76
Basic earnings attributable to shareholders per share $ 0.81   $ 0.77
Weighted average diluted shares outstanding 175,388   179,416
Weighted average basic shares outstanding 171,818   175,900
 
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
    Three months ended
March 31,
2019   2018
Operating Activities:
Net earnings $ 140,111 $ 136,200
Adjustments to reconcile net earnings to net cash from operating activities:
Recoveries on accounts receivable (1,888 ) (265 )
Deferred income tax expense 2,108 2,853
Stock compensation expense 13,382 11,267
Depreciation and amortization 13,393 13,922
Other, net 189 48
Changes in operating assets and liabilities:
Decrease in accounts receivables 230,477 100,647
Decrease in accounts payable and accrued expenses (122,283 ) (45,844 )
Decrease in deferred contract costs 31,259 3,407

Decrease in contract liabilities

(36,725 ) (7,401 )
Increase in income taxes payable, net 16,993 19,509
Decrease in other, net 2,467   1,134  
Net cash from operating activities 289,483   235,477  
Investing Activities:
Purchase of property and equipment (9,435 ) (13,796 )
Other, net 255   (431 )
Net cash from investing activities (9,180 ) (14,227 )
Financing Activities:
Proceeds from issuance of common stock 27,190 26,397
Repurchases of common stock (44,334 ) (172,360 )
Net cash from financing activities (17,144 ) (145,963 )
Effect of exchange rate changes on cash and cash equivalents 2,535   6,515  
Increase in cash and cash equivalents 265,694 81,802
Cash and cash equivalents at beginning of period 923,735   1,051,099  
Cash and cash equivalents at end of period $ 1,189,429   $ 1,132,901  
Taxes paid:
Income taxes 37,253 38,519
 
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, 2019:  
Revenues from unaffiliated customers $ 681,424 85,103 35,949 617,000 171,930 320,049 108,596 2,020,051
Transfers between geographic areas 1 $ (21,640 ) 6,307   (1,770 ) 15,853   5,249   (7,359 ) 4,079   (719 )
Total revenues $ 659,784   91,410   34,179   632,853   177,179   312,690   112,675   (719 ) 2,020,051
Net revenues $ 292,429 35,169 15,063 134,207 47,369 96,795 33,172 (90 ) 654,114
Operating income $ 74,013 10,960 2,636 65,780 15,907 13,952 4,361 (8 ) 187,601
Identifiable assets $ 1,906,278 175,034 71,168 511,589 174,512 579,924 234,195 (9,788 ) 3,642,912
Capital expenditures $ 6,915 228 93 344 176 982 697 9,435
Depreciation and amortization $ 8,222 467 432 1,407 536 1,831 498 13,393
Equity $ 1,401,450   82,170   28,581   238,518   114,290   165,718   126,953   (32,246 ) 2,125,434
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
 
1During the quarter ended March 31, 2019, the Company revised the process used to record the transfer, between its geographic operating segments, of revenues and the directly related cost of transportation expenses for freight service transactions between Company origin and destination locations. There were no changes for services rendered at the origin, such as pick-up and delivery to port, nor for services rendered at the destination, such as customs clearance and final delivery. The change in process had no impact on reported segment net revenues or operating income nor on reported consolidated revenues or expenses. Prior year segment revenues have not been revised.
 

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) 2019   2018
Total revenues $ 2,020,051 $ 1,854,262
Expenses:
Airfreight services 509,210 513,504
Ocean freight and ocean services 420,331 379,418
Customs brokerage and other services 436,396   325,502
Net revenues $ 654,114   $ 635,838

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