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

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 revenues2 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.
Third Quarter 2013 Earnings Release, November 5, 2013

 

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
September 30,

         

Nine months ended
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        

_______________________

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.

 
        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 %

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)

 
        September 30,
2013
  December 31, 2012

Assets

           
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

Liabilities and Equity

           
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          

Common stock, par value $.01 per share; issued and outstanding 205,455,991 shares
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

Retained earnings

      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
                   
 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

 

Condensed Consolidated Statements of Earnings

(In thousands, except share data)

(Unaudited)

             
        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
                           
 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

 
  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  
 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

 

Business Segment Information

(In thousands) (Unaudited)

 
        UNITED

STATES

  OTHER

NORTH

AMERICA

  LATIN

AMERICA

  ASIA

PACIFIC

  EUROPE and

AFRICA

  MIDDLE

EAST and

INDIA

  ELIMI-

NATIONS

  CONSOLI-

DATED

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

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   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

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.
3Operating margin is calculated as operating income divided by net revenues.

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