Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced second 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 11% to $0.88
- Net Earnings Attributable to Shareholders increased 9% to $153 million
- Operating Income increased 5% to $192 million
- Revenues increased 4% to $2 billion
- Net Revenues2 increased 3% to $662 million
- Airfreight tonnage volume decreased 5% and ocean container volume increased 2%
“During the quarter and throughout the first half of the year, we have shown our ability to manage uncertainty and deliver profitable growth,” said Jeffrey S. Musser, President and Chief Executive Officer. “While our air freight business was challenged as a result of a slowdown in export volumes out of North Asia and the United States, we continued to enhance our efforts on growing these two important markets as a focus of our key strategic initiatives. Additionally, the current climate of geopolitical volatility has created uncertainty, but our organization continues to show that the strength of our global presence and customer focus has never been more important in our relentless drive to grow while maintaining our profitability.
“In addition, we continued to grow our customs brokerage and import services, Transcon, and warehouse and distribution services by winning business with new customers as well as from existing accounts. For a second consecutive quarter, we increased the volume of ocean freight containers that we handled and boosted net revenue per container. Except for comparatively soft demand in certain air markets, this was a strong quarter and our people performed at their highest level.”
Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “We grew net revenues ahead of overhead expenses, even as we continue to make important investments in people and systems, such as our integrated order management, quoting, booking, visibility, security, reporting and analytics platform. While we boosted operating efficiency (operating income as a percentage of net revenue) compared to the first quarter, it remained below our target 30%, due again to lower air freight net revenues. Our effective tax rate declined from 25.8% in the second quarter of 2018 to 23.6% in 2019, largely due to the benefit from Foreign-derived intangible income deductions and a state tax refund."
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. | ||||||||||||||||||||
Second Quarter 2019 Earnings Release, August 6, 2019 | ||||||||||||||||||||
Financial Highlights for the three and six months ended June 30, 2019 and 2018 (Unaudited) | ||||||||||||||||||||
(in 000's of US dollars except per share data) | ||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | |||||||||||||||
Revenues | $ | 2,035,579 | $ | 1,957,559 | 4% | $ | 4,055,630 | $ | 3,811,821 | 6% | ||||||||||
Net revenues1 | $ | 661,695 | $ | 642,546 | 3% | $ | 1,315,809 | $ | 1,278,384 | 3% | ||||||||||
Operating income | $ | 192,201 | $ | 183,584 | 5% | $ | 379,802 | $ | 376,402 | 1% | ||||||||||
Net earnings attributable to shareholders | $ | 153,149 | $ | 140,605 | 9% | $ | 292,848 | $ | 276,297 | 6% | ||||||||||
Diluted earnings attributable to shareholders per share | $ | 0.88 | $ | 0.79 | 11% | $ | 1.67 | $ | 1.54 | 8% | ||||||||||
Basic earnings attributable to shareholders per share | $ | 0.90 | $ | 0.80 | 13% | $ | 1.71 | $ | 1.58 | 8% | ||||||||||
Diluted weighted average shares outstanding | 174,466 | 178,603 | 174,953 | 179,120 | ||||||||||||||||
Basic weighted average shares outstanding | 171,003 | 174,754 | 171,425 | 175,324 | ||||||||||||||||
| ___________________ |
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. |
The three and six months ended June 30, 2019 include the effect of changing our presentation of certain import services from a net to a gross basis and our revised presentation of destination services, which increased revenues and directly related operating expenses in customs brokerage and other services but did not change net revenues.
During the three and six months ended June 30, 2019, we repurchased 2.6 million and 3.2 million shares of common stock at an average price of $73.03 and $73.47 per share, respectively. During the three and six months ended June 30, 2018, we repurchased 3.1 million and 5.8 million shares of common stock at an average price of $76.22 and $70.92 per share, respectively.
Employee Full-time Equivalents June 30, 2019 | |||||||
2019 | 2018 | ||||||
North America | 6,893 | 6,414 | |||||
Europe | 3,439 | 3,205 | |||||
North Asia | 2,532 | 2,616 | |||||
South Asia | 1,661 | 1,604 | |||||
Middle East, Africa and India | 1,550 | 1,466 | |||||
Latin America | 873 | 801 | |||||
Information Systems | 922 | 892 | |||||
Corporate | 379 | 351 | |||||
Total | 18,249 | 17,349 | |||||
Second quarter
| ||||||
Airfreight
| Ocean freight
| |||||
2019 | ||||||
April | (4 | )% | 5 | % | ||
May | (2 | )% | — | % | ||
June | (7 | )% | — | % | ||
Quarter | (5 | )% | 2 | % | ||
___________________ |
Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 9, 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 ability to extract value from investment in key systems; 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) | ||||||||
June 30,
| December 31,
| |||||||
Assets: | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 1,082,650 | $ | 923,735 | ||||
Accounts receivable, less allowance for doubtful accounts of $13,391 at June 30, 2019 and $15,345 at December 31, 2018 | 1,382,070 | 1,581,530 | ||||||
Deferred contract costs | 143,651 | 159,510 | ||||||
Other | 103,089 | 70,041 | ||||||
Total current assets | 2,711,460 | 2,734,816 | ||||||
Property and equipment, less accumulated depreciation and amortization of $465,983 at June 30, 2019 and $446,977 at December 31, 2018 | 499,233 | 504,105 | ||||||
Operating lease right-of-use assets | 377,423 | — | ||||||
Goodwill | 7,927 | 7,927 | ||||||
Deferred federal and state income taxes, net | 33,617 | 40,465 | ||||||
Other assets, net | 17,330 | 27,246 | ||||||
Total assets | $ | 3,646,990 | $ | 3,314,559 | ||||
Liabilities: | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 811,144 | $ | 902,259 | ||||
Accrued expenses, primarily salaries and related costs | 217,463 | 215,813 | ||||||
Contract liabilities | 169,055 | 190,343 | ||||||
Current portion of operating lease liabilities | 61,267 | — | ||||||
Federal, state and foreign income taxes | 19,891 | 18,424 | ||||||
Total current liabilities | 1,278,820 | 1,326,839 | ||||||
Noncurrent portion of operating lease liabilities | 315,776 | — | ||||||
Commitments and contingencies | ||||||||
Shareholders’ Equity: | ||||||||
Preferred stock, none issued | — | — | ||||||
Common stock, par value $0.01 per share. Issued and outstanding: 170,040 shares at June 30, 2019 and 171,582 shares at December 31, 2018 | 1,701 | 1,716 | ||||||
Additional paid-in capital | 12,433 | 1,896 | ||||||
Retained earnings | 2,140,935 | 2,088,707 | ||||||
Accumulated other comprehensive loss | (104,096 | ) | (105,481 | ) | ||||
Total shareholders’ equity | 2,050,973 | 1,986,838 | ||||||
Noncontrolling interest | 1,421 | 882 | ||||||
Total equity | 2,052,394 | 1,987,720 | ||||||
Total liabilities and equity | $ | 3,646,990 | $ | 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 June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Airfreight services | $ | 741,577 | $ | 801,761 | $ | 1,456,478 | $ | 1,532,988 | |||||||
Ocean freight and ocean services | 543,809 | 530,008 | 1,112,450 | 1,050,891 | |||||||||||
Customs brokerage and other services | 750,193 | 625,790 | 1,486,702 | 1,227,942 | |||||||||||
Total revenues | 2,035,579 | 1,957,559 | 4,055,630 | 3,811,821 | |||||||||||
Operating Expenses: | |||||||||||||||
Airfreight services | 542,639 | 593,325 | 1,051,849 | 1,106,829 | |||||||||||
Ocean freight and ocean services | 390,299 | 385,156 | 810,630 | 764,574 | |||||||||||
Customs brokerage and other services | 440,946 | 336,532 | 877,342 | 662,034 | |||||||||||
Salaries and related | 356,351 | 350,948 | 713,261 | 690,843 | |||||||||||
Rent and occupancy | 40,897 | 38,071 | 82,420 | 74,984 | |||||||||||
Depreciation and amortization | 12,677 | 13,576 | 26,070 | 27,498 | |||||||||||
Selling and promotion | 11,643 | 10,788 | 22,719 | 21,753 | |||||||||||
Other | 47,926 | 45,579 | 91,537 | 86,904 | |||||||||||
Total operating expenses | 1,843,378 | 1,773,975 | 3,675,828 | 3,435,419 | |||||||||||
Operating income | 192,201 | 183,584 | 379,802 | 376,402 | |||||||||||
Other Income (Expense): | |||||||||||||||
Interest income | 6,516 | 5,153 | 12,622 | 9,467 | |||||||||||
Other, net | 2,262 | 1,167 | 3,927 | 1,791 | |||||||||||
Other income (expense), net | 8,778 | 6,320 | 16,549 | 11,258 | |||||||||||
Earnings before income taxes | 200,979 | 189,904 | 396,351 | 387,660 | |||||||||||
Income tax expense | 47,449 | 48,958 | 102,710 | 110,514 | |||||||||||
Net earnings | 153,530 | 140,946 | 293,641 | 277,146 | |||||||||||
Less net earnings attributable to the noncontrolling interest | 381 | 341 | 793 | 849 | |||||||||||
Net earnings attributable to shareholders | $ | 153,149 | $ | 140,605 | $ | 292,848 | $ | 276,297 | |||||||
Diluted earnings attributable to shareholders per share | $ | 0.88 | $ | 0.79 | $ | 1.67 | $ | 1.54 | |||||||
Basic earnings attributable to shareholders per share | $ | 0.90 | $ | 0.80 | $ | 1.71 | $ | 1.58 | |||||||
Weighted average diluted shares outstanding | 174,466 | 178,603 | 174,953 | 179,120 | |||||||||||
Weighted average basic shares outstanding | 171,003 | 174,754 | 171,425 | 175,324 | |||||||||||
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. | ||||||||||||||||
AND SUBSIDIARIES | ||||||||||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
(In thousands) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Operating Activities: | ||||||||||||||||
Net earnings | $ | 153,530 | $ | 140,946 | $ | 293,641 | $ | 277,146 | ||||||||
Adjustments to reconcile net earnings to net cash from operating activities: | ||||||||||||||||
Provisions for losses (recoveries) on accounts receivable | 1,584 | 528 | (304 | ) | 263 | |||||||||||
Deferred income tax expense | 3,697 | 3,235 | 5,805 | 6,088 | ||||||||||||
Stock compensation expense | 23,824 | 18,002 | 37,206 | 29,269 | ||||||||||||
Depreciation and amortization | 12,677 | 13,576 | 26,070 | 27,498 | ||||||||||||
Other, net | (29 | ) | 56 | 160 | 104 | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
(Increase) decrease in accounts receivable | (28,187 | ) | (46,876 | ) | 202,290 | 53,771 | ||||||||||
Increase (decrease) in accounts payable and accrued expenses | 39,900 | 58,075 | (82,383 | ) | 12,231 | |||||||||||
(Increase) decrease in deferred contract costs | (13,010 | ) | (20,019 | ) | 18,249 | (16,612 | ) | |||||||||
Increase (decrease) in contract liabilities | 13,003 | 20,294 | (23,722 | ) | 12,893 | |||||||||||
(Decrease) increase in income taxes payable, net | (49,606 | ) | (38,059 | ) | (32,613 | ) | (18,550 | ) | ||||||||
(Decrease) increase in other, net | (1,676 | ) | (1,202 | ) | 791 | (68 | ) | |||||||||
Net cash from operating activities | 155,707 | 148,556 | 445,190 | 384,033 | ||||||||||||
Investing Activities: | ||||||||||||||||
Purchase of property and equipment | (12,987 | ) | (12,113 | ) | (22,422 | ) | (25,909 | ) | ||||||||
Other, net | 1,038 | (1,564 | ) | 1,293 | (1,995 | ) | ||||||||||
Net cash from investing activities | (11,949 | ) | (13,677 | ) | (21,129 | ) | (27,904 | ) | ||||||||
Financing Activities: | ||||||||||||||||
Proceeds from issuance of common stock | 32,287 | 95,363 | 59,477 | 121,760 | ||||||||||||
Repurchases of common stock | (190,589 | ) | (235,572 | ) | (234,923 | ) | (407,932 | ) | ||||||||
Dividends Paid | (85,184 | ) | (79,180 | ) | (85,184 | ) | (79,180 | ) | ||||||||
Payments for taxes related to net share settlement of equity awards | (6,674 | ) | (3,215 | ) | (6,674 | ) | (3,215 | ) | ||||||||
Net cash from financing activities | (250,160 | ) | (222,604 | ) | (267,304 | ) | (368,567 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (377 | ) | (24,322 | ) | 2,158 | (17,807 | ) | |||||||||
Change in cash and cash equivalents | (106,779 | ) | (112,047 | ) | 158,915 | (30,245 | ) | |||||||||
Cash and cash equivalents at beginning of period | 1,189,429 | 1,132,901 | 923,735 | 1,051,099 | ||||||||||||
Cash and cash equivalents at end of period | $ | 1,082,650 | $ | 1,020,854 | $ | 1,082,650 | $ | 1,020,854 | ||||||||
Taxes Paid: | ||||||||||||||||
Income taxes | $ | 97,715 | $ | 85,612 | $ | 134,968 | $ | 124,131 | ||||||||
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-
| CONSOLI-
| ||||||||||||||||||||||||||||
For the three months ended June 30, 2019: | ||||||||||||||||||||||||||||||||||||
Revenues2 | $ | 681,076 | 85,537 | 38,757 | 621,951 | 181,380 | 319,331 | 108,311 | (764 | ) | 2,035,579 | |||||||||||||||||||||||||
Net revenues1 | $ | 294,983 | 35,201 | 16,714 | 134,397 | 48,893 | 98,655 | 33,222 | (370 | ) | 661,695 | |||||||||||||||||||||||||
Operating income | $ | 87,923 | 8,858 | 2,346 | 64,453 | 15,513 | 9,315 | 3,799 | (6 | ) | 192,201 | |||||||||||||||||||||||||
Identifiable assets at period end | $ | 1,819,718 | 176,151 | 73,197 | 580,311 | 193,771 | 581,518 | 229,692 | (7,368 | ) | 3,646,990 | |||||||||||||||||||||||||
Capital expenditures | $ | 8,985 | 768 | 145 | 300 | 428 | 1,914 | 447 | — | 12,987 | ||||||||||||||||||||||||||
Depreciation and amortization | $ | 7,687 | 459 | 380 | 1,384 | 496 | 1,775 | 496 | — | 12,677 | ||||||||||||||||||||||||||
Equity | $ | 1,303,381 | 83,417 | 31,014 | 282,192 | 107,229 | 168,570 | 109,790 | (33,199 | ) | 2,052,394 | |||||||||||||||||||||||||
For the three months ended June 30, 2018: | ||||||||||||||||||||||||||||||||||||
Revenues2 | $ | 598,076 | 84,244 | 42,618 | 680,227 | 179,528 | 330,775 | 114,005 | (71,914 | ) | 1,957,559 | |||||||||||||||||||||||||
Net revenues1 | $ | 271,880 | 34,749 | 15,923 | 140,583 | 44,886 | 102,371 | 33,125 | (971 | ) | 642,546 | |||||||||||||||||||||||||
Operating income | $ | 63,628 | 10,077 | 2,701 | 70,359 | 13,374 | 16,958 | 6,490 | (3 | ) | 183,584 | |||||||||||||||||||||||||
Identifiable assets at period end | $ | 1,488,060 | 153,827 | 54,186 | 540,954 | 157,479 | 526,607 | 217,716 | (5,997 | ) | 3,132,832 | |||||||||||||||||||||||||
Capital expenditures | $ | 6,032 | 2,191 | 167 | 559 | 695 | 1,225 | 1,244 | — | 12,113 | ||||||||||||||||||||||||||
Depreciation and amortization | $ | 8,447 | 473 | 395 | 1,303 | 542 | 1,955 | 461 | — | 13,576 | ||||||||||||||||||||||||||
Equity | $ | 1,196,226 | 56,702 | 26,625 | 250,513 | 112,259 | 157,493 | 127,032 | (34,291 | ) | 1,892,559 | |||||||||||||||||||||||||
UNITED STATES | OTHER NORTH AMERICA | LATIN AMERICA | NORTH ASIA | SOUTH ASIA | EUROPE | MIDDLE EAST, AFRICA AND INDIA | ELIMI-
| CONSOLI-
| ||||||||||||||||||||||||||||
For the six months ended June 30, 2019: | ||||||||||||||||||||||||||||||||||||
Revenues2 | $ | 1,340,859 | 176,947 | 72,936 | 1,254,804 | 358,559 | 632,021 | 220,986 | (1,482 | ) | 4,055,630 | |||||||||||||||||||||||||
Net revenues1 | $ | 587,412 | 70,370 | 31,777 | 268,604 | 96,262 | 195,450 | 66,394 | (460 | ) | 1,315,809 | |||||||||||||||||||||||||
Operating income | $ | 161,936 | 19,818 | 4,982 | 130,233 | 31,420 | 23,267 | 8,160 | (14 | ) | 379,802 | |||||||||||||||||||||||||
Identifiable assets at period end | $ | 1,819,718 | 176,151 | 73,197 | 580,311 | 193,771 | 581,518 | 229,692 | (7,368 | ) | 3,646,990 | |||||||||||||||||||||||||
Capital expenditures | $ | 15,900 | 996 | 238 | 644 | 604 | 2,896 | 1,144 | — | 22,422 | ||||||||||||||||||||||||||
Depreciation and amortization | $ | 15,909 | 926 | 812 | 2,791 | 1,032 | 3,606 | 994 | — | 26,070 | ||||||||||||||||||||||||||
Equity | $ | 1,303,381 | 83,417 | 31,014 | 282,192 | 107,229 | 168,570 | 109,790 | (33,199 | ) | 2,052,394 | |||||||||||||||||||||||||
For the six months ended June 30, 2018: | ||||||||||||||||||||||||||||||||||||
Revenues2 | $ | 1,161,826 | 164,331 | 78,727 | 1,316,816 | 354,678 | 650,755 | 224,542 | (139,854 | ) | 3,811,821 | |||||||||||||||||||||||||
Net revenues1 | $ | 549,065 | 65,196 | 30,668 | 277,791 | 89,292 | 201,006 | 66,326 | (960 | ) | 1,278,384 | |||||||||||||||||||||||||
Operating income | $ | 133,276 | 19,095 | 5,071 | 140,282 | 28,506 | 36,236 | 13,928 | 8 | 376,402 | ||||||||||||||||||||||||||
Identifiable assets at period end | $ | 1,488,060 | 153,827 | 54,186 | 540,954 | 157,479 | 526,607 | 217,716 | (5,997 | ) | 3,132,832 | |||||||||||||||||||||||||
Capital expenditures | $ | 9,203 | 3,719 | 672 | 1,343 | 1,024 | 8,416 | 1,532 | — | 25,909 | ||||||||||||||||||||||||||
Depreciation and amortization | $ | 17,212 | 871 | 763 | 2,679 | 1,125 | 3,931 | 917 | — | 27,498 | ||||||||||||||||||||||||||
Equity | $ | 1,196,226 | 56,702 | 26,625 | 250,513 | 112,259 | 157,493 | 127,032 | (34,291 | ) | 1,892,559 | |||||||||||||||||||||||||
1Net revenues are a non-GAAP measure calculated as revenues less directly related operating expenses attributable to the Company's principal services. The Company's management believes that net revenues are a better measure than total revenues when evaluating the Company's operating segment performance since total revenues earned as a freight consolidator include the carriers' charges for carrying the shipment, whereas revenues earned in other capacities include primarily the commissions and fees earned by the Company. Net revenue is one of the Company's primary operational and financial measures and demonstrates the Company's ability to concentrate and leverage purchasing power through effective consolidation of shipments from customers utilizing a variety of transportation carriers and optimal routings. |
2In 2019, the Company revised its process 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. This change better aligns revenue reporting with the location where the services are performed, as well as the transactional reporting being developed as part of the Company’s new accounting systems and processes. Prior year segment revenues have not been revised. The change in presentation had no impact on consolidated or segment net revenues or operating income. The impact on reported segment revenues and expenses was immaterial. |
The following table presents the calculation of net revenues: |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues | $ | 2,035,579 | $ | 1,957,559 | $ | 4,055,630 | $ | 3,811,821 | ||||||||
Expenses: | ||||||||||||||||
Airfreight services | 542,639 | 593,325 | 1,051,849 | 1,106,829 | ||||||||||||
Ocean freight and ocean services | 390,299 | 385,156 | 810,630 | 764,574 | ||||||||||||
Customs brokerage and other services | 440,946 | 336,532 | 877,342 | 662,034 | ||||||||||||
Net revenues | $ | 661,695 | $ | 642,546 | $ | 1,315,809 | $ | 1,278,384 | ||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190806005208/en/
Contacts:
President and Chief Executive Officer
(206) 674-3433
