Expeditors International of Washington, Inc. (NASDAQ: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 | ||||||
| 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 | |||||
| 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 | OTHER AMERICA | LATIN | NORTH | SOUTH | EUROPE | MIDDLE | ELIMI- | CONSOLI- | ||||||||||||||||||||
| 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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Contacts:
President and Chief Executive Officer
(206)
674-3433
