EXPD Expeditors International of Washington Inc

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced net earnings attributable to shareholders of $76,707,000 for the first quarter of 2012, as compared with $91,232,000 for the same quarter of 2011, a decrease of (16)%. Net revenues for the first quarter of 2012 decreased (2)% to $446,571,000 as compared with $453,915,000 reported for the first quarter of 2011. Total revenues and operating income were $1,411,370,000 and $125,271,000 in the first quarter of 2012, as compared with $1,460,848,000 and $147,230,000 for the same quarter of 2011, decreases of (3)% and (15)%, respectively. Diluted net earnings attributable to shareholders per share for the first quarter were $.36, as compared with $.42 for the same quarter in 2011, a decrease of (14)%.

“Today's announcement of our first quarter 2012 results could be viewed by some as anti-climactic given our earlier guidance,” said Peter J. Rose, Chairman and Chief Executive Officer. “Our public comments on the state of the global economy these past six months foreshadowed the possibility that some volume weakness could develop in 2012 as compared with 2011. However, a 9% decline in year-over-year airfreight tonnages during the first quarter of 2012 was not what we would have predicted, even if we made predictions. Our largest customers are being very cautious about the amount of airfreight they are using this year. The 5% increase in airfreight shipments handled during the first quarter, despite this decline in tonnage, reinforces that our customers do continue to ship, however. Historically, March is a very significant airfreight month from a tonnage perspective. March 2012 was a notable exception. It is also an anomaly when we experience both a strong reduction in year-over-year airfreight tonnage and a margin contraction. Those who understand the nuances of this business will recognize that as a sign of what it is, a very atypical airfreight environment. We'd be remiss not to mention that these results also include the full accrual of the $5.5 million fine levied by the European Commission the last week of March. We will also take this opportunity to reiterate what we announced when the EC disclosed the fine. We disagree with this decision. As we said then, we did not enter into any agreement that affected customer pricing in any way,” Rose went on to say.

“We don't believe in making excuses at Expeditors. While we feel obligated to explain, we are not happy about these results. Our focus for the remainder of 2012 will be to aggressively expand our customer base and seek to extend our business reach with existing customers while implementing the kind of common sense cost control measures that we used in 2009. We will not abandon our core principles. We also understand that sustainable market share gains, like trust, must be earned and cannot be purchased. At the end of the day, it is only by meeting the needs of our customers that we demonstrate our value. Fortunately our people do just that,” Rose concluded.

Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 186 full-service offices and 63 satellite locations 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.

1 Diluted earnings attributable to shareholders per share.

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 changes in the global economy, future volume levels, future airfreight shipments and tonnage, future airfreight tonnage in March, future airfreight margins and ability to meet the needs and provide value of customers. 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, 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.

First Quarter 2012 Earnings Release, May 2, 2012   Financial Highlights for the Three months ended March 31, 2012 and 2011 (Unaudited)

(in 000's of US dollars except share data)

          Three months ended March 31, % 2012 2011 Decrease Revenues $ 1,411,370 $ 1,460,848

(3

)%

Net revenues $ 446,571 $ 453,915 (2 )% Operating income $ 125,271 $ 147,230 (15 )% Net earnings attributable to shareholders $ 76,707 $ 91,232 (16 )% Diluted earnings attributable to shareholders $ .36 $ .42 (14 )% Basic earnings attributable to shareholders $ .36 $ .43 (16 )% Diluted weighted average shares outstanding 214,199,510   215,863,386 Basic weighted average shares outstanding 212,097,662 212,088,860           Employee headcount as of March 31, 2012   2011 North America 4,702 4,443 Asia Pacific 4,006 3,898 Europe and Africa 2,292 2,142 Middle East 1,229 1,187 South America 644 626 Information Systems 567 551 Corporate 234   205 Total 13,674 13,052       Year-over-year percentage increase (decrease) in: Airfreight kilos   Ocean freight FEU 2012 January (15 )% (6 )% February 3 % 15 % March (13 )% (1 )% Quarter (9 )% 1 %

During the first quarter of 2012, the Company opened one full service office in Tulsa, Oklahoma (formerly a satellite of Dallas).

  EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except share data) (Unaudited)     March 31, 2012 December 31, 2011

Assets

Current Assets: Cash and cash equivalents $ 1,412,915 $ 1,294,356 Short-term investments 16,277 472 Accounts receivable, net 934,866 934,752 Deferred Federal and state income taxes 9,754 10,415 Other current assets 36,386   46,888   Total current assets 2,410,198   2,286,883   Property and equipment, net 550,323 538,806 Goodwill and other intangibles, net 10,215 10,557 Other assets, net 30,487   30,581   $ 3,001,223   $ 2,866,827  

Liabilities and Equity

Current Liabilities: Accounts payable 629,503 606,628 Accrued expenses, primarily salaries and related costs 170,535 169,445 Federal, state and foreign income taxes 28,219   20,072   Total current liabilities 828,257   796,145   Deferred Federal and state income taxes 70,932 60,613   Commitments and contingencies   Shareholders’ Equity: Preferred stock; none issued — — Common stock, par value $.01 per share; issued and outstanding 212,275,083 shares at March 31, 2012 and 212,003,662 shares at December 31, 2011 2,123 2,120 Additional paid-in capital 18,338 13,260 Retained earnings 2,067,929 1,991,222 Accumulated other comprehensive income (loss) 7,064   (2,964 ) Total shareholders’ equity 2,095,454   2,003,638   Noncontrolling interest 6,580   6,431   Total equity 2,102,034   2,010,069   $ 3,001,223   $ 2,866,827       EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (In thousands, except share data) (Unaudited)     Three months ended March 31, 2012 2011 Revenues: Airfreight services $ 638,912 $ 700,923 Ocean freight and ocean services 434,336 440,141 Customs brokerage and other services 338,122   319,784   Total revenues 1,411,370   1,460,848   Operating Expenses: Airfreight consolidation 481,043 524,636 Ocean freight consolidation 331,954 339,549 Customs brokerage and other services 151,802 142,748 Salaries and related costs 246,132 237,815 Rent and occupancy costs 21,176 21,381 Depreciation and amortization 9,545 9,174 Selling and promotion 8,663 9,163 Other 35,784   29,152   Total operating expenses 1,286,099   1,313,618   Operating income 125,271   147,230     Interest income 3,360 2,320 Interest expense (620 ) (214 ) Other, net 1,097   1,117   Other income, net 3,837   3,223   Earnings before income taxes 129,108 150,453 Income tax expense 52,386   59,246   Net earnings 76,722   91,207   Less net earnings (losses) attributable to the noncontrolling interest 15   (25 ) Net earnings attributable to shareholders $ 76,707   $ 91,232   Diluted earnings attributable to shareholders per share $ .36   $ .42   Basic earnings attributable to shareholders per share $ .36   $ .43   Dividends declared and paid per common share $ —   $ —   Weighted average diluted shares outstanding 214,199,510   215,863,386   Weighted average basic shares outstanding 212,097,662   212,088,860       EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)   Three months ended March 31, 2012 2011 Operating Activities: Net earnings $ 76,722 $ 91,207 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for losses on accounts receivable (467 ) 1,853 Deferred income tax expense (benefit) 5,481 (1,936 ) Excess tax benefits from stock plans (3,426 ) (2,246 ) Stock compensation expense 10,600 10,472 Depreciation and amortization 9,545 9,174 Gain on sale of assets (65 ) (30 ) Other 282 307 Changes in operating assets and liabilities: Decrease in accounts receivable 12,968 6,683 Decrease (increase) in other current assets 1,924 (1,415 ) Increase in accounts payable and accrued expenses 13,559 30,187 Increase in income taxes payable, net 20,274   33,577   Net cash provided by operating activities 147,397   177,833   Investing Activities: Increase in short-term investments, net (15,780 ) (89 ) Purchase of property and equipment (17,088 ) (21,125 ) Proceeds from sale of property and equipment 112 43 Other 358   (1,442 ) Net cash used in investing activities (32,398 ) (22,613 ) Financing Activities: Proceeds from issuance of common stock 12,920 7,804 Repurchases of common stock (21,865 ) (19,584 ) Excess tax benefits from stock plans 3,426   2,246   Net cash used in financing activities (5,519 ) (9,534 ) Effect of exchange rate changes on cash and cash equivalents 9,079   8,320   Increase in cash and cash equivalents 118,559 154,006 Cash and cash equivalents at beginning of period 1,294,356   1,084,465   Cash and cash equivalents at end of period $ 1,412,915   $ 1,238,471   Interest and taxes paid: Interest $ 187 $ 4 Income taxes 26,512 26,276     EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Business Segment Information (In thousands) (Unaudited)                                     OTHER MIDDLE UNITED NORTH LATIN ASIA EUROPE and EAST and ELIMI- CONSOLI- STATES AMERICA AMERICA PACIFIC AFRICA INDIA NATIONS DATED Three months ended March 31, 2012: Revenues from unaffiliated customers $ 377,302 49,954 19,269 688,070 206,271 70,504 — 1,411,370 Transfers between geographic areas 22,208 2,465 5,079   10,972 9,467 4,651 (54,842 ) — Total revenues $ 399,510 52,419 24,348   699,042 215,738 75,155 (54,842 ) 1,411,370 Net revenues $ 181,475 22,242 14,835 131,814 71,533 24,672 — 446,571 Operating income $ 45,525 6,369 4,762 47,238 14,247 7,130 — 125,271 Identifiable assets $ 1,590,900 96,312 52,214 708,528 404,839 149,416 (986 ) 3,001,223 Capital expenditures $ 9,759 176 255 5,287 942 669 — 17,088 Depreciation and amortization $ 5,622 187 217 1,624 1,404 491 — 9,545 Equity $ 1,315,321 56,341 31,060 471,498 164,165 93,282 (29,633 ) 2,102,034 Three months ended March 31, 2011: Revenues from unaffiliated customers $ 377,106 43,846 20,332 728,130 213,612 77,822 — 1,460,848 Transfers between geographic areas 23,965   2,682 5,621   9,183 10,707 4,209 (56,367 ) — Total revenues $ 401,071 46,528 25,953   737,313 224,319 82,031 (56,367 ) 1,460,848 Net revenues $ 177,934 20,701 15,103 141,487 73,926 24,764 — 453,915 Operating income $ 53,734 5,789 4,763 59,438 17,707 5,799 — 147,230 Identifiable assets $ 1,427,414 86,371 57,960 659,352 452,675 153,236 (276 ) 2,836,732 Capital expenditures $ 4,030 160 156 4,712 11,706 361 — 21,125 Depreciation and amortization $ 4,985 303 269 1,969 1,110 538 — 9,174 Equity $ 1,124,913 47,793 30,981 407,053 181,245 89,422 (32,287 ) 1,849,120