Expeditors International of Washington's Q3 earnings attributable to shareholders rise 4% from a year ago to US$92.4M as net revenues increase 4% to US$482M
Cindy Allen
SEATTLE
,
November 5, 2013
(press release)
–
Expeditors International of Washington, Inc. (
EXPD) today announced net earnings attributable to shareholders of $92,400,000 for the third quarter of 2013, as compared with $88,490,000for the same quarter of 2012, an increase of 4%. Net revenues
2 for the third quarter of 2013 increased 4% to $482,025,000 as compared with $465,138,000 for the same quarter in 2012. Total revenues and operating income were $1,535,089,000 and $146,313,000
in the third quarter of 2013, as compared with $1,531,664,000 and $145,099,000 for the same quarter of 2012, a slight increase and an increase of 1%, respectively. Diluted net earnings attributable to shareholders per share for the third quarter were $.45, as compared with $.42 for the same quarter in 2012, an increase of 7%.
For the nine months ended September 30, 2013, net earnings attributable to shareholders was $265,030,000, as compared with $249,152,000 in 2012, an increase of 6%. Net revenues for the nine months increased to $1,396,410,000 from $1,365,360,000 for 2012, up 2%. Total revenues and operating income for the nine months were $4,446,027,000 and $418,410,000 in 2013, as compared with $4,447,986,000 and $402,773,000 for the same period in 2012, a marginal decrease and an increase of 4%, respectively. Diluted net earnings attributable to shareholders per share for the first three quarters of 2013 were $1.28, as compared with $1.17 for the same period of 2012, an increase of 9%. “Despite ongoing pricing volatility in the ocean markets and an air peak season that didn’t commence in September, as anticipated, we executed well in our 2013 third quarter. Our operating margin remained above our efficiency target point of 30% and our year-over-year growth in ocean and air volumes, 9% in ocean container volumes and 3% in air tonnage, is similar to the trends we’ve experienced over the past several quarters. We definitely view the growth as a continuing positive development,” said Peter J. Rose, Chairman and Chief Executive Officer. “The ocean market remains very volatile and yet again, we’ve seen increases in ocean volumes be outpaced by the proliferation of excess carrier capacity. The carriers attempted to impose general rate increases and despite some temporary success early in the quarter, were generally unsuccessful and market ocean rates continued their downward slide. In an attempt to provide stability to the pricing discussions with our customers we chose to maintain market share, and actually grow share on some lanes, by absorbing those carrier costs increases we judged to be temporary and unsustainable. We also adjusted rates, as required to keep our pricing fresh amid a very dynamic pricing environment. In these situations, unlike the government, for us, shutting down isn’t an option. We have to keep working to find better ways to service our customers and address short term challenges without eroding long term strategic focus. We think the 30% operating margin figure re-affirms that overall we did a good job of both,” Rose continued. “This being my 100th earnings release as Expeditors’ CEO, I can definitely look back on previous announcements with a unique sense of optimism and say while we’ve had better, we’ve also definitely had worse. Given what we see firming up in the fourth quarter airfreight markets, we feel pretty good about what lies ahead in 2013 despite some of the aforementioned challenges. While the much awaited airfreight peak season, as we’ve noted, did not materialize in September, some of that anticipated volume, evidenced by backlogs in key export markets, particularly in Asia, seems to have manifested itself in October. This is in part due to planned new product launches and a gearing up for the November and December holiday season,” Rose said. “As always, we are most pleased with the efforts of our people...it is their dedication and their professionalism that not only reinforces our culture, but actually defines and distinguishes us as a company and ultimately provides the returns to our shareholders. Thanks again to one and all,” Rose concluded. Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 188 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, distribution and warehousing, and customized logistics solutions. Expeditors International of Washington, Inc. Financial Highlights for the Three and Nine months ended September 30, 2013 and 2012 (Unaudited) (in 000's of US dollars except share data) Three months ended Nine months ended % % _______________________ 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. Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on November 8, 2013 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about December 6, 2013. 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 ongoing price volatility and volumes in the ocean markets, excess carrier capacity, positive trends in air tonnage and ocean volumes, timing or extent of air peak season in the fourth quarter, ability to maintain or grow market share and ability to provide returns to our shareholders. 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 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) Assets Liabilities and Equity Common stock, par value $.01 per share; issued and outstanding 205,455,991 shares Retained earnings EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (In thousands, except share data) (Unaudited) EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Business Segment Information (In thousands) (Unaudited) STATES NORTH AMERICA AMERICA PACIFIC AFRICA EAST and INDIA NATIONS DATED 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. 1Diluted earnings attributable to shareholders per share.
Third Quarter 2013 Earnings Release, November 5, 2013
September 30,
September 30,
2013
2012
Change
2013
2012
Change
Revenues
$
1,535,089
$
1,531,664
—
%
$
4,446,027
$
4,447,986
—
%
Net revenues1
$
482,025
$
465,138
4
%
$
1,396,410
$
1,365,360
2
%
Operating income
$
146,313
$
145,099
1
%
$
418,410
$
402,773
4
%
Net earnings attributable to shareholders
$
92,400
$
88,490
4
%
$
265,030
$
249,152
6
%
Diluted earnings attributable to shareholders
$
.45
$
.42
7
%
$
1.28
$
1.17
9
%
Basic earnings attributable to shareholders
$
.45
$
.42
7
%
$
1.28
$
1.18
8
%
Diluted weighted average shares outstanding
207,368,792
211,397,602
207,351,569
212,916,309
Basic weighted average shares outstanding
206,516,194
210,135,763
206,478,746
211,314,850
Employee headcount as of September 30,
2013
2012
North America
4,820
4,786
Asia Pacific
3,931
3,936
Europe and Africa
2,288
2,336
Middle East and India
1,206
1,249
Latin America
675
683
Information Systems
635
603
Corporate
293
241
Total
13,848
13,834
Year-over-year percentage increase in:
Airfreight kilos
Ocean freight FEU
2013
July
10
%
10
%
August
1
%
12
%
September
(2
)%
6
%
Quarter
3
%
9
%
September 30,
2013
December 31, 2012
Current Assets:
Cash and cash equivalents
$
1,310,330
$
1,260,842
Short-term investments
99,828
139
Accounts receivable, net
1,027,572
1,031,376
Deferred Federal and state income taxes
12,670
12,102
Other current assets
47,811
53,140
Total current assets
2,498,211
2,357,599
Property and equipment, net
562,125
556,204
Goodwill
7,927
7,927
Other assets, net
30,300
32,395
$
3,098,563
$
2,954,125
Current Liabilities:
Accounts payable
656,674
641,593
Accrued expenses, primarily salaries and related costs
183,130
178,995
Federal, state and foreign income taxes
24,175
21,970
Total current liabilities
863,979
842,558
Deferred Federal and state income taxes
53,854
78,997
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued
—
—
at September 30, 2013 and 206,392,013 shares at December 31, 2012
2,055
2,064
Additional paid-in capital
2,443
1,283
2,181,317
2,018,618
Accumulated other comprehensive (loss) income
(6,236
)
5,734
Total shareholders’ equity
2,179,579
2,027,699
Noncontrolling interest
1,151
4,871
Total equity
2,180,730
2,032,570
$
3,098,563
$
2,954,125
Three months ended
Nine months ended
September 30,
September 30,
2013
2012
2013
2012
Revenues:
Airfreight services
$
628,116
$
622,678
$
1,891,459
$
1,900,131
Ocean freight and ocean services
525,193
549,250
1,462,679
1,502,584
Customs brokerage and other services
381,780
359,736
1,091,889
1,045,271
Total revenues
1,535,089
1,531,664
4,446,027
4,447,986
Operating Expenses:
Airfreight services
466,699
471,947
1,414,634
1,437,301
Ocean freight and ocean services
409,649
432,518
1,135,299
1,177,919
Customs brokerage and other services
176,716
162,061
499,684
467,406
Salaries and related costs
261,613
252,899
765,599
748,956
Rent and occupancy costs
21,851
21,304
65,640
63,333
Depreciation and amortization
12,629
10,030
35,581
29,245
Selling and promotion
8,306
7,847
23,891
25,370
Other
31,313
27,959
87,289
95,683
Total operating expenses
1,388,776
1,386,565
4,027,617
4,045,213
Operating income
146,313
145,099
418,410
402,773
Interest income
2,967
2,831
9,280
9,241
Other, net
1,212
1,050
7,068
4,987
Other income, net
4,179
3,881
16,348
14,228
Earnings before income taxes
150,492
148,980
434,758
417,001
Income tax expense
57,763
60,253
168,756
167,531
Net earnings
92,729
88,727
266,002
249,470
Less net earnings attributable to the noncontrolling interest
329
237
972
318
Net earnings attributable to shareholders
$
92,400
$
88,490
$
265,030
$
249,152
Diluted earnings attributable to shareholders per share
$
.45
$
.42
$
1.28
$
1.17
Basic earnings attributable to shareholders per share
$
.45
$
.42
$
1.28
$
1.18
Dividends declared and paid per common share
$
—
$
—
$
.30
$
.28
Weighted average diluted shares outstanding
207,368,792
211,397,602
207,351,569
212,916,309
Weighted average basic shares outstanding
206,516,194
210,135,763
206,478,746
211,314,850
Three months ended
Nine months ended
September 30,
September 30,
2013
2012
2013
2012
Operating Activities:
Net earnings
$
92,729
$
88,727
$
266,002
$
249,470
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses (recoveries) on accounts receivable
1,496
463
2,537
(392
)
Deferred income tax (benefit) expense
(33,185
)
4,588
(20,245
)
4,330
Excess tax benefits from stock plans
—
(59
)
(1,683
)
(4,291
)
Stock compensation expense
11,015
11,320
33,060
32,846
Depreciation and amortization
12,629
10,030
35,581
29,245
Other
187
1,260
636
1,683
Changes in operating assets and liabilities:
Increase in accounts receivable
(5,115
)
(23,520
)
(14,482
)
(73,812
)
Increase in other current assets
(4,702
)
(7,195
)
(5,278
)
(3,629
)
(Decrease) increase in accounts payable and accrued expenses
(8,875
)
(23,267
)
34,815
60,966
Increase in income taxes payable, net
30,114
6,819
14,640
12,961
Net cash from operating activities
96,293
69,166
345,583
309,377
Investing Activities:
(Increase) decrease in short-term investments, net
(9,925
)
113
(99,690
)
211
Purchase of property and equipment
(15,482
)
(10,170
)
(42,691
)
(37,072
)
Other, net
306
(104
)
1,126
275
Net cash from investing activities
(25,101
)
(10,161
)
(141,255
)
(36,586
)
Financing Activities:
Proceeds from issuance of common stock
33,615
24,599
52,092
45,001
Repurchases of common stock
(85,925
)
(87,227
)
(125,206
)
(193,493
)
Excess tax benefits from stock plans
—
59
1,683
4,291
Dividends paid
—
—
(61,899
)
(59,358
)
Purchase of noncontrolling interest
—
—
(7,730
)
—
Distribution to noncontrolling interest
(1,161
)
(1,177
)
(1,161
)
(1,177
)
Net cash from financing activities
(53,471
)
(63,746
)
(142,221
)
(204,736
)
Effect of exchange rate changes on cash and cash equivalents
6,500
8,136
(12,619
)
5,231
Increase in cash and cash equivalents
24,221
3,395
49,488
73,286
Cash and cash equivalents at beginning of period
1,286,109
1,364,247
1,260,842
1,294,356
Cash and cash equivalents at end of period
$
1,310,330
$
1,367,642
$
1,310,330
$
1,367,642
Taxes paid:
Income taxes
$
147,248
$
50,911
$
174,199
$
155,006
UNITED
OTHER
LATIN
ASIA
EUROPE and
MIDDLE
ELIMI-
CONSOLI-
Three months ended September 30, 2013:
Revenues from unaffiliated customers
$
394,046
52,962
22,136
777,711
212,482
75,752
—
1,535,089
Transfers between geographic areas
22,065
2,911
5,643
12,081
9,358
4,473
(56,531
)
—
Total revenues
$
416,111
55,873
27,779
789,792
221,840
80,225
(56,531
)
1,535,089
Net revenues
$
196,389
26,255
15,627
147,343
70,924
25,487
—
482,025
Operating income
$
55,627
8,524
5,317
57,975
11,894
6,976
—
146,313
Identifiable assets
$
1,694,366
102,713
52,785
663,584
438,711
142,843
3,561
3,098,563
Capital expenditures
$
12,463
639
147
1,250
703
280
—
15,482
Depreciation and amortization
$
7,608
211
210
2,343
1,534
723
—
12,629
Equity
$
1,423,598
63,351
30,637
439,719
181,134
75,444
(33,153
)
2,180,730
Three months ended September 30, 2012:
Revenues from unaffiliated customers
$
383,830
50,208
20,815
804,855
198,124
73,832
—
1,531,664
Transfers between geographic areas
24,423
2,677
4,140
10,676
9,624
4,507
(56,047
)
—
Total revenues
$
408,253
52,885
24,955
815,531
207,748
78,339
(56,047
)
1,531,664
Net revenues
$
187,737
23,412
13,978
146,992
69,841
23,178
—
465,138
Operating income
$
56,096
6,886
4,239
59,620
13,312
4,946
—
145,099
Identifiable assets
$
1,570,615
102,020
58,687
714,982
423,488
162,225
170
3,032,187
Capital expenditures
$
5,681
222
405
1,934
1,476
452
—
10,170
Depreciation and amortization
$
5,942
188
220
1,691
1,555
434
—
10,030
Equity
$
1,281,250
58,471
33,444
499,590
158,939
96,621
(32,616
)
2,095,699
Nine months ended September 30, 2013:
Revenues from unaffiliated customers
$
1,158,569
161,317
63,421
2,221,033
620,964
220,723
—
4,446,027
Transfers between geographic areas
65,308
7,971
16,133
34,316
27,427
13,359
(164,514
)
—
Total revenues
$
1,223,877
169,288
79,554
2,255,349
648,391
234,082
(164,514
)
4,446,027
Net revenues
$
564,895
75,476
45,560
424,235
212,555
73,689
—
1,396,410
Operating income
$
161,290
23,023
14,007
165,640
35,433
19,017
—
418,410
Identifiable assets
$
1,694,366
102,713
52,785
663,584
438,711
142,843
3,561
3,098,563
Capital expenditures
$
22,196
1,534
551
14,858
2,464
1,088
—
42,691
Depreciation and amortization
$
21,641
615
680
6,314
4,713
1,618
—
35,581
Equity
$
1,423,598
63,351
30,637
439,719
181,134
75,444
(33,153
)
2,180,730
Nine months ended September 30, 2012:
Revenues from unaffiliated customers
$
1,140,258
149,964
61,450
2,273,783
606,696
215,835
—
4,447,986
Transfers between geographic areas
69,135
7,608
14,010
32,686
28,694
13,828
(165,961
)
—
Total revenues
$
1,209,393
157,572
75,460
2,306,469
635,390
229,663
(165,961
)
4,447,986
Net revenues
$
551,503
70,769
43,537
414,714
212,871
71,966
—
1,365,360
Operating income
$
150,814
21,340
13,119
158,626
40,510
18,364
—
402,773
Identifiable assets
$
1,570,615
102,020
58,687
714,982
423,488
162,225
170
3,032,187
Capital expenditures
$
20,676
551
1,060
9,823
3,529
1,433
—
37,072
Depreciation and amortization
$
17,320
556
644
4,960
4,389
1,376
—
29,245
Equity
$
1,281,250
58,471
33,444
499,590
158,939
96,621
(32,616
)
2,095,699
Three months ended
Nine months ended
September 30,
September 30,
(in thousands)
2013
2012
2013
2012
Total revenues
$
1,535,089
$
1,531,664
$
4,446,027
$
4,447,986
Expenses:
Airfreight services
466,699
471,947
1,414,634
1,437,301
Ocean freight and ocean services
409,649
432,518
1,135,299
1,177,919
Customs brokerage and other services
176,716
162,061
499,684
467,406
Net revenues
$
482,025
$
465,138
$
1,396,410
$
1,365,360
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.
3Operating margin is calculated as operating income divided by net revenues.
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