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Expeditors Reports Third Quarter 2021 EPS of $2.09

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SEATTLE, November 02, 2021--(BUSINESS WIRE)--Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced third quarter 2021 financial results including the following highlights compared to the same quarter of 2020:

  • Diluted Net Earnings Attributable to Shareholders per share (EPS1) increased 87% to $2.09

  • Net Earnings Attributable to Shareholders increased 88% to $359 million

  • Operating Income increased 94% to $490 million

  • Revenues increased 84% to $4.3 billion

  • Airfreight tonnage volume and ocean container volume increased 28% and 15%, respectively

"In a marketplace that remains severely impacted by labor and infrastructure constraints throughout the supply chain, our people continue to perform at their best by identifying, accessing, and securing available space," said Jeffrey S. Musser, President and Chief Executive Officer. "There remains an overall deficiency of available air capacity due to a reduction of passenger belly space on international routes. Despite increased utilization of air charters, there is insufficient capacity to meet the current high demand. At the same time, unprecedented congestion at the ocean ports due to labor and equipment shortages is disrupting sailing schedules and causing significant delays. There is simply not enough equipment, warehouse and pier space, or people in the locations where they are needed to meaningfully reduce the significant backlogs of cargo. Handling record volumes under these conditions has not been easy, but we continue to set records for company performance by servicing our customers at the highest level.

"The entire global infrastructure for the movement of cargo remains stretched beyond its limits. While certain ocean ports are particularly constrained, most notably on the U.S. west coast, many of the current bottlenecks stem from supply and infrastructure issues that were building well before the pandemic. The global reaction to COVID-19, including lockdowns, facility closures and spikes in demand for certain products, exposed and exacerbated those long-simmering issues. Unfortunately, there is no simple or immediate fix. As a result, we believe these current conditions are likely to last well into 2022.

"We also believe, as we always have, that our company’s best strategy for achieving ongoing success in servicing our customers and growing our business depends on our strong culture of close collaboration. As many of the most restrictive pandemic precautionary measures are being lifted around the world, we are carefully bringing our people back to on-site work in a measured and cautious manner. Our view is that the stresses of so many of our people working at such an accelerated pace from so many remote, off-site locations would be unsustainable over the long term."

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, "Our strong results continue to demonstrate our ability to adapt and perform exceptionally well on behalf of our customers under very trying conditions. Demand continues to far outstrip available capacity. Buy and sell rates for both air and ocean remain elevated and erratic. Despite those conditions, our operating efficiency is strong, even as each individual shipment requires more resources and greater attention, and conditions change rapidly. While we are performing exceptionally well under these trying circumstances, I continue to caution that we are unable to predict how long the current conditions will persist or the impact they will have on our future operations."

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.

NOTE: See Disclaimer on Forward-Looking Statements in this release.

Expeditors International of Washington, Inc.

Third Quarter 2021 Earnings Release, November 2, 2021

Financial Highlights for the three and nine months ended September 30, 2021 and 2020 (Unaudited)

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

Three months ended September 30,

Nine months ended September 30,

2021

2020

% Change

2021

2020

% Change

Revenues3

$

4,319,261

$

2,348,713

84%

$

11,127,174

$

6,603,558

69%

Directly related cost of transportation and other expenses1, 3

$

3,185,490

$

1,614,334

97%

$

8,031,407

$

4,504,452

78%

Salaries and other operating expenses2

$

644,134

$

482,434

34%

$

1,809,970

$

1,440,480

26%

Operating income

$

489,637

$

251,945

94%

$

1,285,797

$

658,626

95%

Net earnings attributable to shareholders

$

359,068

$

191,307

88%

$

962,660

$

497,520

93%

Diluted earnings attributable to shareholders per share

$

2.09

$

1.12

87%

$

5.61

$

2.92

92%

Basic earnings attributable to shareholders per share

$

2.12

$

1.14

86%

$

5.68

$

2.96

92%

Diluted weighted average shares outstanding

171,565

170,735

171,549

170,539

Basic weighted average shares outstanding

169,633

168,310

169,398

167,942

_______________________

1Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.

2Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Condensed Consolidated Statements of Earnings.

3Beginning in the first quarter of 2019, the Company made changes to its process and presentation of freight services revenue and directly related transportation operating expenses with the objective that at each reporting level (reporting entity, segment and consolidated level) the gross revenue and associated directly related operating expenses be representative of the location where the services were performed, the operating expenses were incurred and where the revenues were earned. During the second quarter of 2021, management identified and corrected certain immaterial errors in the Company’s historical financial statements primarily related to this process that was utilized through the first quarter of 2021. The process missed an intercompany elimination of revenues and an equal and offsetting amount of directly related transportation expenses, principally impacting airfreight services in North Asia. The errors overstated revenues and directly related transportation operating expenses by equal amounts in the consolidated statements of earnings. The errors had no impact on operating income, net earnings, and earnings per share nor any other financial statement amount. Further, the errors had no impact on the balance sheets, statements of shareholders’ equity, other comprehensive income and cash flows. These errors do not affect any of the metrics used to calculate or evaluate management’s compensation and had no impact on bonuses, commissions, share-based compensation or any other employee remuneration. Historical amounts have been revised and are presented on a comparable basis.

During the nine months ended September 30, 2021 and 2020, we repurchased 2.0 million and 4.4 million shares of common stock at an average price of $110.45 and $71.41 per share, respectively.

Employee Full-time Equivalents as of September 30,

2021

2020

North America

7,315

6,666

Europe

3,860

3,361

North Asia

2,440

2,406

South Asia

1,740

1,643

Middle East, Africa and India

1,507

1,509

Latin America

801

800

Information Systems

976

975

Corporate

395

383

Total

19,034

17,743

Disclaimer on Forward-Looking Statements:

NOTE: See Disclaimer on Forward-Looking Statements in this release.

Third quarter year-over-year

percentage increase in:

2021

Airfreight

kilos

Ocean freight

FEU

July

36%

18%

August

36%

21%

September

15%

7%

Quarter

28%

15%

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on November 5, 2021 will be considered in management's 8-K "Responses to Selected Questions."

Disclaimer on Forward-Looking Statements:

Certain statements contained in this news release are "forward-looking statements," based on management’s views with respect to future events and underlying assumptions that involve risks and uncertainties. These forward-looking statements include statements regarding the future stabilization of supply/demand imbalance and rate volatility; the continued unsettled operating environment due to continued scarce air and ocean capacity; elevated air and ocean pricing and an increase in demand for such services; port congestion; equipment imbalances; labor shortages; insufficient warehouse and pier space; trade disruptions; rising fuels costs; and the uneven lifting of the COVID-19 pandemic restrictions. Future financial performance could differ materially because of factors such as: our ability to leverage the strength of our carrier relationships to secure space; the strength of our non-asset-based operating model; our expectation that the supply/demand imbalance and rate volatility will continue for the remainder of 2021 and likely well into 2022, and will stabilize over time; our ability to re-open our offices for return-to-work; our ability to continue to enhance our productivity; our expectation that the current unprecedented operating conditions will not persist long-term; our ability to invest in our strategic efforts to explore new areas for profitable growth; and our ability to remain a strong, healthy, unified and resilient organization. The COVID-19 pandemic could have the effect of heightening many of the other risks described in Item 1A of our Annual Report on Form 10-K, including, without limitation, those related to the success of our strategy and desire to maintain historical unitary profitability, our ability to attract and retain customers, our ability to manage costs, interruptions to our information technology systems, the ability of third-party providers to perform and potential litigation as updated by our reports on Form 10-Q, filed with the Securities and Exchange Commission. These and other factors are discussed in the Company’s regulatory filings with the Securities and Exchange Commission, including those in "Item 1A. Risk Factors" of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The forward-looking statements contained in this news release speak only as of this date and the Company does not assume any obligation to update them except as required by law.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

September 30,

2021

December 31,

2020

Assets:

Current Assets:

Cash and cash equivalents

$

1,820,106

$

1,527,791

Accounts receivable, less allowance for credit loss of $7,285 at September 30, 2021 and $5,579 at December 31, 2020

3,330,398

1,998,055

Deferred contract costs

841,689

327,448

Other

119,346

110,250

Total current assets

6,111,539

3,963,544

Property and equipment, less accumulated depreciation and amortization of $533,450 at September 30, 2021 and $516,988 at

December 31, 2020

491,577

506,425

Operating lease right-of-use assets

448,228

432,723

Goodwill

7,927

7,927

Other assets, net

17,112

16,884

Total assets

$

7,076,383

$

4,927,503

Liabilities:

Current Liabilities:

Accounts payable

$

1,806,977

$

1,136,859

Accrued liabilities, primarily salaries and related costs

342,151

257,021

Contract liabilities

977,660

379,722

Current portion of operating lease liabilities

81,362

74,004

Federal, state and foreign income taxes

67,332

45,437

Total current liabilities

3,275,482

1,893,043

Noncurrent portion of operating lease liabilities

374,658

364,185

Deferred federal and state income taxes, net

5,651

7,048

Commitments and contingencies

Shareholders’ Equity:

Preferred stock, none issued

Common stock, par value $0.01 per share. Issued and outstanding: 169,392 shares at September 30, 2021 and 169,294 shares at December 31, 2020

1,694

1,693

Additional paid-in capital

74,925

157,496

Retained earnings

3,463,539

2,600,201

Accumulated other comprehensive loss

(122,800

)

(99,753

)

Total shareholders’ equity

3,417,358

2,659,637

Noncontrolling interest

3,234

3,590

Total equity

3,420,592

2,663,227

Total liabilities and equity

$

7,076,383

$

4,927,503

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

Three months ended September 30,

Nine months ended September 30,

2021

2020

2021

2020

Revenues:

Airfreight services

$

1,628,115

$

983,199

$

4,477,599

$

2,908,451

Ocean freight and ocean services

1,598,597

609,816

3,651,059

1,590,541

Customs brokerage and other services

1,092,549

755,698

2,998,516

2,104,566

Total revenues

4,319,261

2,348,713

11,127,174

6,603,558

Operating Expenses:

Airfreight services

1,244,381

723,340

3,335,253

2,122,205

Ocean freight and ocean services

1,254,334

452,028

2,859,020

1,177,696

Customs brokerage and other services

686,775

438,966

1,837,134

1,204,551

Salaries and related

519,611

373,613

1,452,902

1,110,760

Rent and occupancy

46,730

42,484

137,376

126,383

Depreciation and amortization

12,753

15,851

38,415

42,620

Selling and promotion

4,237

2,945

10,479

14,301

Other

60,803

47,541

170,798

146,416

Total operating expenses

3,829,624

2,096,768

9,841,377

5,944,932

Operating income

489,637

251,945

1,285,797

658,626

Other Income (Expense):

Interest income

2,462

1,504

6,596

8,870

Other, net

733

980

6,382

5,161

Other income, net

3,195

2,484

12,978

14,031

Earnings before income taxes

492,832

254,429

1,298,775

672,657

Income tax expense

132,922

62,710

333,941

173,968

Net earnings

359,910

191,719

964,834

498,689

Less net earnings attributable to the noncontrolling interest

842

412

2,174

1,169

Net earnings attributable to shareholders

$

359,068

$

191,307

$

962,660

$

497,520

Diluted earnings attributable to shareholders per share

$

2.09

$

1.12

$

5.61

$

2.92

Basic earnings attributable to shareholders per share

$

2.12

$

1.14

$

5.68

$

2.96

Weighted average diluted shares outstanding

171,565

170,735

171,549

170,539

Weighted average basic shares outstanding

169,633

168,310

169,398

167,942

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three months ended September 30,

Nine months ended September 30,

2021

2020

2021

2020

Operating Activities:

Net earnings

$

359,910

$

191,719

$

964,834

$

498,689

Adjustments to reconcile net earnings to net cash from operating activities:

Provisions for losses on accounts receivable

3,739

398

6,028

4,607

Deferred income tax (benefit) expense

(7,658

)

(1,276

)

2,343

2,872

Stock compensation expense

15,204

12,297

57,298

45,091

Depreciation and amortization

12,753

15,851

38,415

42,620

Other, net

626

2,919

1,523

3,470

Changes in operating assets and liabilities:

Increase in accounts receivable

(714,300

)

(106,065

)

(1,377,997

)

(274,440

)

Increase in accounts payable and accrued liabilities

436,343

94,232

769,525

201,929

Increase in deferred contract costs

(328,932

)

(81,486

)

(550,572

)

(99,887

)

Increase in contract liabilities

381,192

91,638

635,286

112,244

Increase (decrease) in income taxes payable, net

33,378

(41,286

)

32,022

(10,644

)

Increase in other, net

(14,884

)

(17,373

)

(15,208

)

(13,242

)

Net cash from operating activities

177,371

161,568

563,497

513,309

Investing Activities:

Purchase of property and equipment

(9,870