EXPD Expeditors International of Washington Inc

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced net earnings of $52,352,000 for the first quarter of 2006, compared with $30,870,000(1) for the same quarter of 2005, an increase of 70%. Net revenues for the first quarter increased 28% to $296,197,000 as compared with $230,683,000 reported for the first quarter of 2005. Total revenues and operating income were $1,024,592,000 and $85,401,000 in 2006 compared with $825,164,000 and $50,449,000(1) for the same quarter of 2005, an increase of 24% and 69%, respectively. Diluted net earnings per share for the first quarter were $.47 as compared with $.28(1) for the same quarter in 2005, an increase of 68%. The company also reported that same store net revenues and operating income increased 28% and 69%, respectively, during the first quarter of 2006 as compared with the same period in 2005. "It is tempting to just say 'wow' in this press release and let our first quarter numbers speak for themselves, but this would ignore the fact that we accomplished this in the same quarter that we implemented FAS 123R - the new accounting rule requiring us to expense stock options," said Peter J. Rose, Chairman and Chief Executive Officer. "We landed a great deal of new business over the last six months so while airfreight yields were down marginally, the 25% increase in airfreight tonnage when compared with the first quarter of 2005 more than compensated for this yield decrease." "This quarter, we feel extraordinary pride in the efforts of all of our people. They've known for a year now that the first quarter of 2006 would bring the accounting rule change that requires expensing of stock options. While this non-cash expense reduced all incentive compensation payments, rather than moaning and complaining, our employees put their heads down and went to work on bringing in new business, improving productivity, and increasing overall efficiency through technological enhancements. These efforts allowed us to generate substantial growth in operating income without adding substantial amounts of staff as our headcount grew only 10.1%. While it takes more than one great quarter to make a year and while there are tough comparables ahead, a quarter like this really makes you stand up and take notice of your potential and take pride in your accomplishments," Rose concluded. Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 166 full-service offices, 56 satellite locations and 5 international service centers located on six continents linked into a seamless worldwide network through an integrated information management system. Services include air and ocean freight forwarding, vendor consolidation, customs clearance, marine insurance, distribution and other value added international logistics services. -0- *T (1) In applying the provisions of FAS 123R which requires the Company to expense stock options as of January 1, 2006, the Company has elected to apply the modified retrospective method. The modified retrospective method adjusts previously reported numbers to reflect the expense of stock options in amounts as had been reported in footnote disclosures. Accordingly, certain 2005 numbers will not agree with the figures previously reported under the then applicable generally accepted accounting principles. Diluted weighted shares outstanding for 2005 are also now reported consistent with the modified retrospective method of FAS 123R and will also not agree with the amount reported in the 2005 first quarter release. Expeditors International of Washington, Inc. 1st Quarter 2006 Earnings Release May 3, 2006 Expeditors International of Washington, Inc. Financial Highlights Three months ended March 31, 2006 and 2005 Unaudited (in 000's of US dollars except share data) Three Months Three Months % Ended Ended Increase March 31, March 31, 2006 2005(2) --------------------------------- ------------ ------------ --------- Revenues $1,024,592 $825,164 24% --------------------------------- ------------ ------------ --------- Net Revenues $296,197 $230,683 28% --------------------------------- ------------ ------------ --------- Operating Income $85,401 $50,449 69% --------------------------------- ------------ ------------ --------- Net Earnings $52,352 $30,870 70% --------------------------------- ------------ ------------ --------- Diluted Earnings per share $.47 $.28 68% --------------------------------- ------------ ------------ --------- Basic Earnings per share $.49 $.29 69% --------------------------------- ------------ ------------ --------- Diluted weighted average shares outstanding(2) 111,280,049 111,357,999 --------------------------------- ------------ ------------ --------- Basic weighted average shares outstanding(2) 106,711,239 106,728,418 --------------------------------- ------------ ------------ --------- Offices opened during the First Quarter of 2006 ----------------------------------------------- EUROPE ------ Graz, Austria + + Satellite office of Vienna Investors may submit written questions via e-mail to: investor@expeditors.com Or by fax to: 206-674-3459 Questions received by the end of business on May 5, 2006 will be considered in management's 8-K "Responses to Selected Questions" expected to be filed on or about May 22, 2006. (2) See note 1 for important information regarding comparability of prior year numbers. EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except share data) (Unaudited) March 31, December 31, Assets 2006 2005 ------ ---------- ----------- Current assets: Cash and cash equivalents $ 567,688 $ 463,894 Short-term investments 135 123 Accounts receivable, net 689,693 709,331 Deferred Federal and state income taxes 6,765 7,208 Other current assets 13,495 21,405 ---------- ----------- Total current assets 1,277,776 1,201,961 ---------- ----------- Property and equipment, net 348,200 333,787 Goodwill, net 7,774 7,774 Other intangibles, net 8,650 8,997 Other assets 13,810 13,525 ----------- ------------ $1,656,210 $ 1,566,044 ========== =========== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable 494,859 479,546 Accrued expenses, primarily salaries and related costs 118,881 103,674 Federal, state and foreign income taxes 31,858 29,281 ---------- ----------- Total current liabilities $ 645,598 $ 612,501 ---------- ----------- Deferred Federal and state income taxes $ 20,219 $ 13,278 Minority interest $ 16,079 $ 13,883 Shareholders' equity: Preferred stock, par value $.01 per share. Authorized 2,000,000 shares; none issued -- -- Common stock, par value $.01 per share. Authorized 320,000,000 shares; issued and outstanding 106,655,520 shares at March 31, 2006 and 106,613,521 shares at December 31, 2005 1,067 1,066 Additional paid-in capital 182,592 189,120 Retained earnings 791,186 738,835 Accumulated other comprehensive income (531) (2,639) ---------- ----------- Total shareholders' equity 974,314 926,382 ---------- ----------- ----------- ------------ $1,656,210 $ 1,566,044 ========== =========== Certain 2005 amounts have been restated as required by the modified retrospective method in connection with the implementation of FAS 123R and other amounts have been reclassified to conform to the 2006 presentation. EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (In thousands, except share data) (Unaudited) Three months ended March 31, 2006 2005 ------------ ------------ Revenues: Airfreight $ 490,998 $ 372,885 Ocean freight and ocean services 344,659 297,144 Customs brokerage and other services 188,935 155,135 ------------ ------------ Total revenues 1,024,592 825,164 ------------ ------------ Operating expenses: Airfreight consolidation 380,581 284,438 Ocean freight consolidation 270,879 243,970 Customs brokerage and other services 76,935 66,073 Salaries and related costs 160,974 132,890 Rent and occupancy costs 13,723 13,748 Depreciation and amortization 8,053 7,339 Selling and promotion 7,957 7,546 Other 20,089 18,711 ------------ ------------ Total operating expenses 939,191 774,715 ------------ ------------ Operating income 85,401 50,449 ------------ ------------ Interest expense (27) (29) Interest income 4,274 2,147 Other, net 1,667 1,196 ------------ ------------ Other income, net 5,914 3,314 ------------ ------------ Earnings before income taxes and minority interest 91,315 53,763 Income tax expense 37,052 21,839 ------------ ------------ Net earnings before minority interest 54,263 31,924 ------------ ------------ Minority interest (1,911) (1,054) ------------ ------------ Net earnings $ 52,352 $ 30,870 ============ ============ Diluted earnings per share $ 0.47 $ 0.28 ============ ============ Basic earnings per share $ 0.49 $ 0.29 ============ ============ Weighted average diluted shares outstanding 111,280,049 111,357,999 ============ ============ Weighted average basic shares outstanding 106,711,239 106,728,418 ============ ============ Certain 2005 amounts have been restated as required by the modified retrospective method in connection with the implementation of FAS 123R and other amounts have been reclassified to conform to the 2006 presentation. EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three months ended March 31, 2006 2005 -------- -------- Operating Activities: Net earnings $ 52,352 $ 30,870 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for losses on accounts receivable (154) 36 Deferred income tax expense 6,280 4,025 Tax benefits from employee stock plans 492 1,361 Stock compensation expense 8,398 7,108 Depreciation and amortization 8,053 7,339 Gain on sale of property and equipment (147) (19) Other 788 (927) Changes in operating assets and liabilities: Decrease in accounts receivable 20,839 43,670 Decrease in other current assets 5,094 2,793 Increase in minority interest 2,196 837 Increase (decrease) in accounts payable and other current liabilities 33,942 (2,958) -------- -------- Net cash provided by operating activities 138,133 94,135 -------- -------- Investing Activities: Increase in short-term investments (8) (643) Purchase of property and equipment (21,499) (29,017) Proceeds from sale of property and equipment 178 142 Other (206) (666) -------- -------- Net cash used in investing activities (21,535) (30,184) -------- -------- Financing Activities: Repayments of short-term debt, net - (2,173) Proceeds from issuance of common stock 5,507 2,375 Repurchases of common stock (26,960) (14,527) Excess tax benefits from employee stock plans 6,035 1,575 -------- -------- Net cash used in financing activities (15,418) (12,750) Effect of exchange rate changes on cash 2,614 (2,794) -------- -------- Increase in cash and cash equivalents 103,794 48,407 Cash and cash equivalents at beginning of period 463,894 408,983 Cash and cash equivalents at end of period 567,688 457,390 ======== ======== Interest and taxes paid: Interest 24 20 Income tax 12,675 10,116 Certain 2005 amounts have been restated as required by the modified retrospective method in connection with the implementation of FAS 123R and other amounts have been reclassified to conform to the 2006 presentation. EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Business Segment Information (In thousands) (Unaudited) United Other Far Australia/ States N. East Europe New America Zealand ----------- --------- -------- -------- ---------- Three months ended March 31, 2006 Revenues from unaffiliated customers $ 215,812 28,404 558,759 141,099 12,354 Transfers between geographic areas $ 25,442 1,730 3,683 7,325 1,409 ----------- --------- -------- -------- ---------- Total revenues $ 241,254 30,134 562,442 148,424 13,763 =========== ========= ======== ======== ========== Net revenues $ 122,288 14,705 82,813 49,337 7,401 Operating income $ 24,572 3,339 41,283 10,570 1,981 Identifiable assets at quarter end $ 858,480 53,528 334,631 301,741 22,222 Capital expenditures $ 17,186 97 2,754 714 237 Depreciation and amortization $ 4,068 351 1,190 1,536 198 Equity $1,070,416 20,233 245,513 85,066 12,283 ----------- --------- -------- -------- ---------- Three months ended March 31, 2005 Revenues from unaffiliated customers $ 168,671 20,209 442,013 126,840 11,740 Transfers between geographic areas $ 16,394 1,169 2,722 5,415 1,222 ----------- --------- -------- -------- ---------- Total revenues $ 185,065 21,378 444,735 132,255 12,962 =========== ========= ======== ======== ========== Net revenues $ 94,069 11,356 60,657 42,170 6,715 Operating income $ 12,519 2,007 27,333 4,905 1,628 Identifiable assets at quarter end $ 653,209 46,554 302,033 288,449 24,603 Capital expenditures $ 25,972 305 1,076 1,210 68 Depreciation and amortization $ 3,509 367 1,170 1,513 154 Equity $ 908,267 18,784 225,864 88,367 14,129 ----------- --------- -------- -------- ---------- Latin Middle Elimi- Consoli- America East nations dated ---------- ---------- ---------- ---------- Three months ended March 31, 2006 Revenues from unaffiliated customers 16,153 52,011 1,024,592 Transfers between geographic areas 1,893 2,382 (43,864) - ---------- ---------- ---------- ---------- Total revenues 18,046 54,393 (43,864) 1,024,592 ========== ========== ========== ========== Net revenues 7,231 12,422 296,197 Operating income 1,274 2,382 85,401 Identifiable assets at quarter end 28,199 55,011 2,398 1,656,210 Capital expenditures 323 188 21,499 Depreciation and amortization 365 345 8,053 Equity 12,305 24,269 (495,771) 974,314 ---------- ---------- ---------- ---------- Three months ended March 31, 2005 Revenues from unaffiliated customers 13,104 42,587 825,164 Transfers between geographic areas 1,559 1,857 (30,338) - ---------- ---------- ---------- ---------- Total revenues 14,663 44,444 (30,338) 825,164 ========== ========== ========== ========== Net revenues 5,658 10,058 230,683 Operating income 858 1,199 50,449 Identifiable assets at quarter end 21,591 43,332 5,617 1,385,388 Capital expenditures 191 195 29,017 Depreciation and amortization 261 365 7,339 Equity 6,969 19,386 (439,596) 842,170 ---------- ---------- ---------- ---------- Certain 2005 amounts have been restated as required by the modified retrospective method in connection with the implementation of FAS 123R and other amounts have been reclassified to conform to the 2006 presentation. *T