Expeditors Reports Fourth Quarter 2014 EPS of $0.51 Per Share1

SEATTLE--()--Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced net earnings attributable to shareholders of $99,381,000 for the fourth quarter of 2014, as compared with $83,496,000 for the same quarter of 2013, an increase of 19%. Net revenues2 for the fourth quarter of 2014 increased 9% to $518,871,000 as compared with $478,072,000 reported for the fourth quarter of 2013. Total revenues and operating income were $1,768,830,000 and $157,871,000 in 2014, as compared with $1,625,859,000 and $133,663,000 for the same quarter of 2013, increases of 9% and 18%, respectively. Diluted net earnings attributable to shareholders per share for the fourth quarter were $0.51, as compared with $0.41 for the same quarter in 2013, an increase of 24%.

For the year ended December 31, 2014, net earnings attributable to shareholders was $376,888,000, as compared with $348,526,000 in 2013, an increase of 8%. Net revenues for the year increased to $1,981,427,000 from $1,882,853,000 for 2013, up 5%. Total revenues and operating income for the year were $6,564,721,000 and $594,648,000 in 2014, as compared with $6,080,257,000 and $552,073,000 for the same period in 2013, both increases of 8%. Diluted net earnings attributable to shareholders per share for the year ended December 31, 2014 were $1.92, as compared with $1.68 for the same period of 2013, an increase of 14%.

“During the 2014 fourth quarter we saw strong year-over-year increases in both air and ocean freight volumes. Despite the 10 basis point reduction in overall net revenue margin, airfreight and ocean freight net revenues both managed double digit increases, up 10% and 11%, respectively, as overall net revenue increased 9%. We think this is significant,” said Bradley S. Powell, Senior Vice President and Chief Financial Officer. “The percentage growth in fourth quarter operating income was substantially in double digits, even when one-time charges in the 2013 fourth quarter are normalized. Operating income as a percentage of net revenue during the 2014 fourth quarter was just above our target of 30%, something we also view as significant. Net earnings per share for the fourth quarter saw a 24% increase, to $.51 per share and was significantly influenced by the $551 million in capital we returned to shareholders in the form of stock buybacks during 2014,” Powell continued.

“These fourth quarter results are a great affirmation of our efforts to date. We’ve worked steadily to improve our performance throughout 2014, being able to see the effects of our focus and concentration reflected this quarter in double digit operating income growth, as well as double digit growth in both air and ocean freight net revenue has provided us with some important positive reinforcement at a very opportune time. This is particularly true in light of a global economy that still struggles to gain traction,” said Jeffrey S. Musser, President and Chief Executive Officer. “We continue to be grateful for the dedication of our people, whose efforts, day in and day out, are what made these results happen. We would be particularly remiss not to acknowledge the long hours and extraordinary efforts by our ocean team to assist our customers in working through a most difficult and challenging ocean freight environment caused by the US West Coast labor situation,” Musser went on to say. “While this year has been one of change at Expeditors, the impact of greater synergies among the various parts of our internal and external network is becoming increasingly more visible. As we work to embrace new strategies and adapt to new organizational structures, we are already seeing the benefits of more global consistency and greater accountability, all which are necessary for us to achieve our strategic goals. While we still have much to do in fully implementing our strategic assessment, we feel good about moving into 2015 with the momentum created in the last several quarters,” Musser concluded.

Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 186 full-service offices and numerous satellite 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, domestic time-definite transportation services, purchase order management, warehousing and distribution and customized logistics solutions.

1 Diluted 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 2014 Earnings Release, February 24, 2015
 
Financial Highlights for the Three months and Years ended December 31, 2014 and 2013 (Unaudited)

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

 
      Three months ended December 31,         Years ended December 31,    
2014     2013

%
Increase

2014     2013

%
Increase

Revenues $ 1,768,830 $ 1,625,859 9% $ 6,564,721 $ 6,080,257 8%
Net revenues $ 518,871 $ 478,072 9% $ 1,981,427 $ 1,882,853 5%

Operating income3

$ 157,871 $ 133,663 18% $ 594,648 $ 552,073 8%
Net earnings attributable to shareholders $ 99,381 $ 83,496 19% $ 376,888 $ 348,526 8%
Diluted earnings attributable to shareholders $ 0.51 $ 0.41 24% $ 1.92 $ 1.68 14%
Basic earnings attributable to shareholders $ 0.52 $ 0.41 27% $ 1.92 $ 1.69 14%
Diluted weighted average shares outstanding 193,307,389 205,526,229 196,768,067 206,895,473
Basic weighted average shares outstanding 192,708,729 204,558,152 196,146,676 205,994,656
 

3 In the fourth quarter of 2013 the Company recorded $8 million of additional Salary and related costs related to the retirement bonus of Peter J. Rose, the Company’s Chairman and Chief Executive Officer, whose retirement was announced on October 7, 2013.

 
     
Employee headcount as of December 31,
2014     2013
North America 5,279 4,860
Asia Pacific 3,824 3,891
Europe 2,472 2,291
Middle East, Africa and India 1,344 1,316
Latin America 748 685
Information Systems 702 648
Corporate 290 277
Total 14,659 13,968
 
      Year-over-year percentage increase in:
Airfreight kilos     Ocean freight FEU
2014
October 9% 11%
November 7% 10%
December 19% 6%
Quarter 11% 9%
 

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on February 27, 2015 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about March 13, 2015.

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, including positive trends in air tonnage and ocean volumes and related net revenues, strength of the global economy, ability to continue to improve our performance, ability to achieve benefits from new strategies and organization structure and ability to achieve strategic goals. 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 maintain consistent and stable operating results, future success of our business model, ability to perpetuate profits, changes in customer demand for Expeditors’ services caused by a general economic slow-down, customers’ inventory build-up, decreased consumer confidence, 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, 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 share data)
(Unaudited)
 
      December 31,     December 31,
2014 2013

Assets

Current Assets:
Cash and cash equivalents $ 927,107 $ 1,247,652
Short-term investments 40,336 26,337
Accounts receivable, net 1,236,042 1,073,500
Deferred Federal and state income taxes 20,279 18,396
Other current assets 65,486   49,384  
Total current assets 2,289,250   2,415,269  
Property and equipment, net 538,415 563,064
Goodwill 7,927 7,927
Other assets, net 55,313   28,552  

 

$ 2,890,905   $ 3,014,812  

Liabilities and Equity

Current Liabilities:
Accounts payable $ 770,238 $ 648,156
Accrued expenses, primarily salaries and related costs 192,468 200,301
Federal, state and foreign income taxes 21,077   21,743  
Total current liabilities 983,783   870,200  
Deferred Federal and state income taxes 35,514 58,281
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued
Common stock, par value $0.01 per share; issued and outstanding 191,655,690 shares at December 31, 2014 and 202,553,220 shares at December 31, 2013 1,916 2,025
Additional paid-in capital 1,113 1,647
Retained earnings 1,903,196 2,087,376
Accumulated other comprehensive loss (37,817 ) (6,265 )
Total shareholders’ equity 1,868,408   2,084,783  
Noncontrolling interest 3,200   1,548  
Total equity 1,871,608   2,086,331  
$ 2,890,905   $ 3,014,812  
 
 
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Earnings
(In thousands, except share data)
 
(Unaudited)
 
      Three months ended     Twelve months ended
December 31, December 31,
2014     2013 2014     2013
Revenues:
Airfreight services $ 780,011 $ 742,371 $ 2,780,840 $ 2,633,830
Ocean freight and ocean services 568,249 495,552 2,174,394 1,958,231
Customs brokerage and other services 420,570 387,936 1,609,487 1,488,196
Total revenues 1,768,830 1,625,859 6,564,721 6,080,257
Operating Expenses:
Airfreight services 600,713 579,740 2,103,777 1,994,374
Ocean freight and ocean services 446,244 386,041 1,712,795 1,521,340
Customs brokerage and other services 203,002 182,006 766,722 681,690
Salaries and related costs 276,072 267,002 1,065,329 1,032,601
Rent and occupancy costs 25,851 24,990 102,810 98,437
Depreciation and amortization 11,752 12,490 49,292 48,071
Selling and promotion 11,421 9,352 38,125 33,243
Other 35,904 30,575 131,223 118,428
Total operating expenses 1,610,959 1,492,196 5,970,073 5,528,184
Operating income 157,871 133,663 594,648 552,073
 
Interest income 2,519 2,530 10,773 11,810
Other, net 223 1,645 5,468 8,713
Other income, net 2,742 4,175 16,241 20,523
Earnings before income taxes 160,613 137,838 610,889 572,596
Income tax expense 59,873 53,829 231,429 222,585
Net earnings 100,740 84,009 379,460 350,011
Less net earnings attributable to the noncontrolling interest 1,359 513 2,572 1,485
Net earnings attributable to shareholders $ 99,381 $ 83,496 $ 376,888 $ 348,526
Diluted earnings attributable to shareholders per share $ 0.51 $ 0.41 $ 1.92 $ 1.68
Basic earnings attributable to shareholders per share $ 0.52 $ 0.41 $ 1.92 $ 1.69
Dividends declared and paid per common share $ 0.32 $ 0.30 $ 0.64 $ 0.60
Weighted average diluted shares outstanding 193,307,389 205,526,229 196,768,067 206,895,473
Weighted average basic shares outstanding 192,708,729 204,558,152 196,146,676 205,994,656
 
 
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,
2014     2013 2014     2013
Operating Activities:
Net earnings $ 100,740 $ 84,009 $ 379,460 $ 350,011
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses (recoveries) on accounts receivable 818 (421 ) 763 2,116
Deferred income tax benefit (14,576 ) (730 ) (6,576 ) (20,975 )
Excess tax benefits from stock plans (84 ) (656 ) (1,115 ) (2,339 )
Stock compensation expense 10,313 10,753 42,533 43,813
Depreciation and amortization 11,752 12,490 49,292 48,071
Other (5 ) 208 340 844
Changes in operating assets and liabilities:
Increase in accounts receivable (75,513 ) (50,093 ) (206,887 ) (64,575 )
Increase in accounts payable and accrued expenses 39,388 9,335 153,424 44,150
Increase (decrease) in income taxes payable, net 14,117 (6,205 ) (12,998 ) 8,435
Decrease (increase) in other current assets 2,582   3,263   (3,270 ) (2,015 )
Net cash from operating activities 89,532   61,953   394,966   407,536  
Investing Activities:
(Increase) decrease in short-term investments, net (20 ) 73,489 (14,000 ) (26,201 )
Purchase of property and equipment (10,822 ) (10,720 ) (37,472 ) (53,411 )
Escrow deposit on land acquisition (27,101 )
Other, net (842 ) 1,680   (338 ) 2,806  
Net cash from investing activities (11,684 ) 64,449   (78,911 ) (76,806 )
Financing Activities:
Proceeds from issuance of common stock 10,800 7,660 69,269 59,752
Repurchases of common stock (75,621 ) (136,730 ) (550,781 ) (261,936 )
Excess tax benefits from stock plans 84 656 1,115 2,339
Dividends paid (61,827 ) (61,393 ) (124,634 ) (123,292 )
Purchase of noncontrolling interest (7,730 )
Distribution to noncontrolling interest (418 )   (503 ) (1,161 )
Net cash from financing activities (126,982 ) (189,807 ) (605,534 ) (332,028 )
Effect of exchange rate changes on cash and cash equivalents (14,239 ) 727   (31,066 ) (11,892 )
Decrease in cash and cash equivalents (63,373 ) (62,678 ) (320,545 ) (13,190 )
Cash and cash equivalents at beginning of period 990,480   1,310,330   1,247,652   1,260,842  
Cash and cash equivalents at end of period $ 927,107   $ 1,247,652   $ 927,107   $ 1,247,652  
Taxes paid:
Income taxes $ 59,081 $ 61,169 $ 254,439 $ 235,368
 
 
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Business Segment Information
(In thousands) (Unaudited)
 
     

UNITED
STATES

   

OTHER
NORTH
AMERICA

   

LATIN
AMERICA

   

ASIA
PACIFIC4

   

EUROPE4

   

MIDDLE
EAST,
AFRICA
and INDIA4

   

ELIMI-
NATIONS

   

CONSOLI-
DATED

Three months ended December 31, 2014:
Revenues from unaffiliated customers $ 438,744 56,599 23,464 902,310

267,923

79,790 1,768,830
Transfers between geographic areas 29,762 3,062 4,669 12,357 10,610 5,016 (65,476 )
Total revenues $ 468,506 59,661 28,133 914,667 278,533 84,806 (65,476 ) 1,768,830
Net revenues $ 215,603 29,614 16,219 152,415 79,012 26,008 518,871
Operating income $ 40,516 13,320 5,430 69,193 20,586 8,826 157,871
Identifiable assets $ 1,408,598 111,324 53,815 655,148 447,349 208,684 5,987 2,890,905
Capital expenditures $ 6,964 392 733 1,161 1,130 442 10,822
Depreciation and amortization $ 7,453 291 246 2,023 1,314 425 11,752
Equity $ 1,165,488 54,338 34,386 361,529 169,117 121,520 (34,770 ) 1,871,608
Three months ended December 31, 2013:
Revenues from unaffiliated customers $ 394,835 54,651 22,629 838,881 236,302 78,561 1,625,859
Transfers between geographic areas 24,262 3,067 5,578 12,353 10,430 4,119 (59,809 )
Total revenues $ 419,097 57,718 28,207 851,234 246,732 82,680 (59,809 ) 1,625,859
Net revenues $ 197,560 27,388 15,918 138,453 74,203 24,550 478,072
Operating income $ 34,509 12,201 1,727 59,009 17,791 8,426 133,663
Identifiable assets $ 1,582,557 104,735 58,027 668,032 414,710 180,646 6,105 3,014,812
Capital expenditures $ 6,503 336 459 2,400 775 247 10,720
Depreciation and amortization $ 7,928 267 221 2,096 1,538 440 12,490
Equity $ 1,330,262 72,772 29,590 406,728 178,729 102,628 (34,378 ) 2,086,331
 
Twelve months ended December 31, 2014:
Revenues from unaffiliated customers $ 1,694,819 218,735 89,058 3,233,539 1,012,389 316,181 6,564,721
Transfers between geographic areas 97,028 10,891 20,634 49,599 39,541 19,654 (237,347 )
Total revenues $ 1,791,847 229,626 109,692 3,283,138 1,051,930 335,835 (237,347 ) 6,564,721
Net revenues $ 823,111 108,631 65,016 570,793 313,325 100,551 1,981,427
Operating income $ 221,166 36,475 19,855 230,092 62,101 24,959 594,648
Identifiable assets $ 1,408,598 111,324 53,815 655,148 447,349 208,684 5,987 2,890,905
Capital expenditures $ 19,610 1,439 1,574 9,073 4,246 1,530 37,472
Depreciation and amortization $ 31,553 1,170 911 8,233 5,690 1,735 49,292
Equity $ 1,165,488 54,338 34,386 361,529 169,117 121,520 (34,770 ) 1,871,608
Twelve months ended December 31, 2013:
Revenues from unaffiliated customers $ 1,561,468 215,968 86,050 3,046,039 876,967 293,765 6,080,257
Transfers between geographic areas 89,570 11,038 21,711 46,578 38,728 16,698 (224,323 )
Total revenues $ 1,651,038 227,006 107,761 3,092,617 915,695 310,463 (224,323 ) 6,080,257
Net revenues $ 770,519 102,864 61,478 560,900 288,407 98,685 1,882,853
Operating income $ 195,799 35,224 15,734 223,980 53,294 28,042 552,073
Identifiable assets $ 1,582,557 104,735 58,027 668,032 414,710 180,646 6,105 3,014,812
Capital expenditures $ 28,699 1,870 1,010 17,231 3,313 1,288 53,411
Depreciation and amortization $ 29,569 882 901 8,381 6,569 1,769 48,071
Equity $ 1,330,262 72,772 29,590 406,728 178,729 102,628 (34,378 ) 2,086,331
 
4Effective in the fourth quarter of 2014, management made changes to the reporting structure of the geographic operating segments. Africa is now reported as Middle East, Africa and India ("MAIR") and certain countries have shifted between designated geographic areas. Amounts for 2013 have been recast to conform to the 2014 presentation.
 

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 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) 2014     2013 2014     2013
Total revenues $ 1,768,830 $ 1,625,859 $ 6,564,721 $ 6,080,257
Expenses:
Airfreight services 600,713 579,740 2,103,777 1,994,374
Ocean freight and ocean services 446,244 386,041 1,712,795 1,521,340
Customs brokerage and other services 203,002 182,006 766,722 681,690
Net revenues $ 518,871 $ 478,072 $ 1,981,427 $ 1,882,853

Contacts

Expeditors International of Washington, Inc.
R. Jordan Gates, 206-674-3427
President and Chief Operating Officer
or
Bradley S. Powell, 206-674-3412
Senior Vice President and Chief Financial Officer

Contacts

Expeditors International of Washington, Inc.
R. Jordan Gates, 206-674-3427
President and Chief Operating Officer
or
Bradley S. Powell, 206-674-3412
Senior Vice President and Chief Financial Officer