Expeditors Reports Record Second Quarter 2015 EPS of $0.61 Per Share 1

SEATTLE--()--Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced second quarter 2015 financial results including the following highlights:

  • Revenues increased 6% to a second quarter record of $1.69 billion
  • Airfreight tonnage volume increased 9% and ocean container volume increased 5%
  • Net Revenues2 increased 14% to a record $552 million and yields expanded 233 basis points to 32.6%
  • Operating Income increased 28% to a record $183 million
  • Net Earnings Attributable to Shareholders increased 29% to a record $118 million
  • Diluted Net Earnings Attributable to Shareholders per share increased 33% to a record $0.61

“We are extremely pleased with our second quarter financial results and believe that these results validate the efforts that our senior team has put in over the last twelve months crafting and creating a strategy that would return our Company to double digit growth. Of course the best planned strategy cannot be effectively executed without a solid team of individuals who perform our daily operations. We remain incredibly thankful for those 15,000 employees,” said Jeffrey S. Musser, President and Chief Executive Officer. “Although still in the early implementation of our strategic initiatives, we are on track with our internal targets. As an example, this quarter represents the fourth consecutive quarter where we have achieved our target of double digit growth in Operating Income and EPS1. We are, however, fully aware of the stiff comparable that exists in the second half of 2015. There is no doubt that global trade has slowed from its peak period but rest assured that we will remain focused on the things we can control such as best in class customer service and efficient execution,” Musser went on to say.

“In addition to our strong growth in air and ocean volumes, the second quarter benefited from favorable spot market buying opportunities. This resulted in a significant expansion of our margins. We expect pricing volatility to continue as customers and carriers adjust to current market conditions,” commented Bradley S. Powell, Senior Vice President and Chief Financial Officer. “We believe the unquantifiable benefit to airfreight volumes attributable to the West Coast labor dispute carried over to the early part of the second quarter as port operations improved. Our people did an exceptional job controlling expenses and cash flow while continuing our investments in customer service and technology,” concluded Powell.

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, time-definite transportation, order management, warehousing 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.
Second Quarter 2015 Earnings Release, August 4, 2015
 
Financial Highlights for the Three and Six months ended June 30, 2015 and 2014 (Unaudited)

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

 
      Three months ended June 30,         Six months ended June 30,    
    %     %
2015 2014 Change 2015 2014 Change
Revenues $ 1,691,553 $ 1,599,141 6% $ 3,369,079 $ 3,090,786 9%
Net revenues1 $ 552,141 $ 484,714 14% $ 1,081,627 $ 949,300 14%
Operating income $ 182,716 $ 142,443 28% $ 351,599 $ 277,646 27%
Net earnings attributable to shareholders $ 117,760 $ 91,302 29% $ 224,464 $ 175,126 28%
Diluted earnings attributable to shareholders per share $ 0.61 $ 0.46 33% $ 1.17 $ 0.88 33%
Basic earnings attributable to shareholders per share $ 0.62 $ 0.46 35% $ 1.17 $ 0.88 33%
Diluted weighted average shares outstanding 191,917,973 197,126,243 192,425,521 199,482,932
Basic weighted average shares outstanding 190,679,008 196,451,912 191,150,758 198,772,260
 
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 and six-month periods ended June 30, 2015, the Company repurchased 2.7 million and 4.3 million shares of common stock at an average price of $47.46 and $47.61 per share, respectively. During the three and six-month periods ended June 30, 2014, the Company repurchased 2.9 million and 8.6 million shares of common stock at an average price of $45.72 and $41.64 per share, respectively.

     
Employee headcount as of June 30,
2015     2014
North America 5,493 5,032
Europe 2,609 2,290
North Asia 2,425 2,502
Middle East, Africa and India 1,387 1,327
South Asia 1,312 1,262
Latin America 809 725
Information Systems 711 651
Corporate 313 294
Total 15,059 14,083
 
     
Year-over-year percentage increase in:
Airfreight kilos     Ocean freight FEU
2015
April 10% 6%
May 8% 6%
June 8% 2%
Quarter 9% 5%
 

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 7, 2015 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about August 14, 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 future pricing volatility and impacts on margins, condition of the global economy, ability to achieve sustainable double digit growth, 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)
 
      June 30,     December 31,
2015 2014

Assets

Current Assets:
Cash and cash equivalents $ 985,727 $ 927,107
Short-term investments 47,047 40,336
Accounts receivable, net 1,194,180 1,236,042
Deferred Federal and state income taxes 20,930 20,279
Other current assets 86,871   65,486  
Total current assets 2,334,755   2,289,250  
Property and equipment, net 536,121 538,415
Goodwill 7,927 7,927
Other assets, net 53,572   55,313  

 

$ 2,932,375   $ 2,890,905  

Liabilities and Equity

Current Liabilities:
Accounts payable 738,323 770,238
Accrued expenses, primarily salaries and related costs 228,537 192,468
Federal, state and foreign income taxes 26,821   21,077  
Total current liabilities 993,681   983,783  
Deferred Federal and state income taxes 48,961 35,514
 
Commitments and contingencies
 
Shareholders’ Equity:
Preferred stock; none issued
Common stock, par value $0.01 per share. Issued and outstanding 189,117,916 shares at June 30, 2015 and 191,655,690 shares at December 31, 2014 1,891 1,916
Additional paid-in capital 2,349 1,113
Retained earnings 1,935,159 1,903,196
Accumulated other comprehensive loss (52,778 ) (37,817 )
Total shareholders’ equity 1,886,621   1,868,408  
Noncontrolling interest 3,112   3,200  
Total equity 1,889,733   1,871,608  
$ 2,932,375   $ 2,890,905  
 
 
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Earnings
(In thousands, except share data)
(Unaudited)
 
      Three months ended     Six months ended
June 30, June 30,
2015     2014 2015     2014
Revenues:
Airfreight services $ 693,812 $ 667,257 $ 1,401,256 $ 1,314,395
Ocean freight and ocean services 576,772 536,438 1,142,489 1,005,662
Customs brokerage and other services 420,969 395,446 825,334 770,729
Total revenues 1,691,553 1,599,141 3,369,079 3,090,786
Operating Expenses:
Airfreight services 506,988 503,213 1,019,989 986,095
Ocean freight and ocean services 433,356 423,716 878,812 791,091
Customs brokerage and other services 199,068 187,498 388,651 364,300
Salaries and related costs 287,065 260,767 565,943 516,709
Rent and occupancy costs 24,971 25,401 50,359 50,563
Depreciation and amortization 11,420 12,417 22,949 24,799
Selling and promotion 10,529 9,291 19,776 17,464
Other 35,440 34,395 71,001 62,119
Total operating expenses 1,508,837 1,456,698 3,017,480 2,813,140
Operating income 182,716 142,443 351,599 277,646
Other Income (Expense):
Interest income 2,636 2,764 5,368 5,461
Other, net 3,804 3,190 3,838 2,909
Other income, net 6,440 5,954 9,206 8,370
Earnings before income taxes 189,156 148,397 360,805 286,016
Income tax expense 70,827 56,669 135,144 110,093
Net earnings 118,329 91,728 225,661 175,923
Less net earnings attributable to the noncontrolling interest 569 426 1,197 797
Net earnings attributable to shareholders $ 117,760 $ 91,302 $ 224,464 $ 175,126
Diluted earnings attributable to shareholders per share $ 0.61 $ 0.46 $ 1.17 $ 0.88
Basic earnings attributable to shareholders per share $ 0.62 $ 0.46 $ 1.17 $ 0.88
Weighted average diluted shares outstanding 191,917,973 197,126,243 192,425,521 199,482,932
Weighted average basic shares outstanding 190,679,008 196,451,912 191,150,758 198,772,260
 
 
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
      Three months ended     Six months ended
June 30, June 30,
2015     2014 2015     2014
Operating Activities:
Net earnings $ 118,329 $ 91,728 $ 225,661 $ 175,923
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses (recoveries) on accounts receivable 584 496 861 (619 )
Deferred income tax expense 8,986 2,891 20,923 10,085
Excess tax benefits from stock plans (366 ) (495 ) (1,846 ) (984 )
Stock compensation expense 11,663 11,877 21,570 22,171
Depreciation and amortization 11,420 12,417 22,949 24,799
Other 27 68 113 206
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 63,234 (84,618 ) 16,444 (72,390 )
Increase in accounts payable and accrued expenses 8,038 61,377 22,933 90,923
Decrease in income taxes payable, net (39,000 ) (47,370 ) (15,868 ) (29,165 )
(Increase) decrease in other current assets (1,187 ) (3,485 ) 2,382   (2,206 )
Net cash from operating activities 181,728   44,886   316,122   218,743  
Investing Activities:
(Increase) decrease in short-term investments, net (46,986 ) 342 (6,712 ) (59,812 )
Purchase of property and equipment (12,912 ) (9,635 ) (22,357 ) (18,395 )
Escrow deposit for land acquisition (27,101 ) (27,101 )
Other, net (14 ) (1,536 ) 184   134  
Net cash from investing activities (59,912 ) (37,930 ) (28,885 ) (105,174 )
Financing Activities:
Proceeds from issuance of common stock 25,047 22,125 60,095 30,017
Repurchases of common stock (128,137 ) (131,391 ) (205,505 ) (358,116 )
Excess tax benefits from stock plans 366 495 1,846 984
Dividends paid (68,781 ) (62,807 ) (68,781 ) (62,807 )
Distribution to noncontrolling interest     (857 ) (85 )
Net cash from financing activities (171,505 ) (171,578 ) (213,202 ) (390,007 )
Effect of exchange rate changes on cash and cash equivalents 2,272   4,137   (15,415 ) (653 )
(Decrease) increase in cash and cash equivalents (47,417 ) (160,485 ) 58,620 (277,091 )
Cash and cash equivalents at beginning of period 1,033,144   1,131,046   927,107   1,247,652  
Cash and cash equivalents at end of period $ 985,727   $ 970,561   $ 985,727   $ 970,561  
Taxes paid:
Income taxes $ 101,389 $ 105,963 $ 129,650 $ 133,459
 
 
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Business Segment Information
(In thousands)
(Unaudited)
 
                              MIDDLE        
EAST,
OTHER AFRICA
UNITED NORTH LATIN NORTH SOUTH and ELIMI- CONSOLI-
STATES AMERICA AMERICA ASIA ASIA EUROPE INDIA NATIONS DATED
Three months ended

June 30, 2015:

Revenues from unaffiliated customers $ 449,622 58,739 24,314 649,901 184,862 239,953 84,162 1,691,553
Transfers between geographic areas 32,486 3,685 5,403 5,427 6,473 10,716 5,112 (69,302 )
Total revenues $ 482,108 62,424 29,717 655,328 191,335 250,669 89,274 (69,302 ) 1,691,553
Net revenues1 $ 229,353 30,576 17,485 124,491 46,944 76,607 26,685 552,141
Operating income $ 68,547 10,437 5,441 60,597 16,140 15,587 5,967 182,716
Identifiable assets $ 1,381,755 103,613 57,711 572,425 141,344 448,475 219,280 7,772 2,932,375
Capital expenditures $ 7,711 1,656 569 475 989 921 591 12,912
Depreciation and amortization $ 7,339 310 248 1,379 548 1,176 420 11,420
Equity $ 1,075,703 59,374 38,447 344,479 118,175 166,569 124,564 (37,578 ) 1,889,733
Three months ended

June 30, 2014:

Revenues from unaffiliated customers $ 416,454 55,343 22,003 623,625 152,570 250,823 78,323 1,599,141
Transfers between geographic areas 22,408 2,587 5,567 5,637 6,708 9,829 4,925 (57,661 )
Total revenues $ 438,862 57,930 27,570 629,262 159,278 260,652 83,248 (57,661 ) 1,599,141
Net revenues1 $ 200,106 25,533 16,648 97,498 40,145 79,958 24,826 484,714
Operating income $ 59,780 7,001 4,676 39,321 11,828 14,952 4,885 142,443
Identifiable assets $ 1,328,312 110,498 57,588 587,891 153,660 481,190 205,023 5,778 2,929,940
Capital expenditures $ 5,547 422 171 1,383 518 1,234 360 9,635
Depreciation and amortization $ 7,879 296 227 1,476 620 1,478 441 12,417
Equity $ 1,044,386 72,681 35,578 356,974 122,577 189,296 112,394 (36,749 ) 1,897,137
 
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.
 
 
                              MIDDLE        
EAST,
OTHER AFRICA
UNITED NORTH LATIN NORTH SOUTH and ELIMI- CONSOLI-
STATES AMERICA AMERICA ASIA ASIA EUROPE INDIA NATIONS DATED
Six months ended

June 30, 2015:

Revenues from unaffiliated customers $ 893,803 113,533 48,395 1,295,345 366,243 482,039 169,721 3,369,079
Transfers between geographic areas 60,161 6,499 10,180 11,124 12,388 20,353 10,179 (130,884 )
Total revenues $ 953,964 120,032 58,575 1,306,469 378,631 502,392 179,900 (130,884 ) 3,369,079
Net revenues1 $ 448,956 61,254 34,044 241,896 89,144 152,495 53,838 1,081,627
Operating income $ 127,728 21,528 10,797 117,653 30,020 30,658 13,215 351,599
Identifiable assets $ 1,381,755 103,613 57,711 572,425 141,344 448,475 219,280 7,772 2,932,375
Capital expenditures $ 14,036 1,944 1,186 765 1,308 2,069 1,049 22,357
Depreciation and amortization $ 14,732 602 516 2,778 1,078 2,422 821 22,949
Equity $ 1,075,703 59,374 38,447 344,479 118,175 166,569 124,564 (37,578 ) 1,889,733
Six months ended

June 30, 2014:

Revenues from unaffiliated customers $ 817,193 106,927 42,632 1,192,314 293,313 484,506 153,901 3,090,786
Transfers between geographic areas 42,419 4,962 10,771 11,054 13,258 19,148 9,467 (111,079 )
Total revenues $ 859,612 111,889 53,403 1,203,368 306,571 503,654 163,368 (111,079 ) 3,090,786
Net revenues1 $ 392,188 51,694 32,005 190,892 79,238 154,289 48,994 949,300
Operating income $ 111,678 15,376 9,535 79,375 24,298 26,594 10,790 277,646
Identifiable assets $ 1,328,312 110,498 57,588 587,891 153,660 481,190 205,023 5,778 2,929,940
Capital expenditures $ 9,475 686 472 4,043 974 2,100 645 18,395
Depreciation and amortization $ 15,731 576 439 2,978 1,216 2,985 874 24,799
Equity $ 1,044,386 72,681 35,578 356,974 122,577 189,296 112,394 (36,749 ) 1,897,137
 
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.
 

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 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 Six months ended
June 30, June 30,
(in thousands) 2015     2014 2015     2014
Total revenues $ 1,691,553 $ 1,599,141 $ 3,369,079 $ 3,090,786
Expenses:
Airfreight services 506,988 503,213 1,019,989 986,095
Ocean freight and ocean services 433,356 423,716 878,812 791,091
Customs brokerage and other services 199,068 187,498 388,651 364,300
Net revenues $ 552,141 $ 484,714 $ 1,081,627 $ 949,300

Contacts

Expeditors International of Washington, Inc.
Jeffrey S. Musser, 206-674-3433
President and Chief Executive Officer
or
Bradley S. Powell, 206-674-3412
Senior Vice President and Chief Financial Officer

Contacts

Expeditors International of Washington, Inc.
Jeffrey S. Musser, 206-674-3433
President and Chief Executive Officer
or
Bradley S. Powell, 206-674-3412
Senior Vice President and Chief Financial Officer