EXPD Expeditors International of Washington Inc

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced net earnings attributable to shareholders of $83,955,000 for the second quarter of 2012, as compared with $95,000,000 for the same quarter of 2011, a decrease of (12)%. Net revenues for the second quarter of 2012 decreased (4)% to $453,651,000 as compared with $472,561,000 reported for the second quarter of 2011. Total revenues and operating income were $1,504,952,000 and $132,403,000 in the second quarter of 2012, as compared with $1,581,368,000 and $152,275,000 for the same quarter of 2011, decreases of (5)% and (13)%, respectively. Diluted net earnings attributable to shareholders per share for the second quarter were $.39, as compared with $.44 for the same quarter in 2011, a decrease of (11)%.

For the six months ended June 30, 2012, net earnings attributable to shareholders was $160,662,000, as compared with $186,232,000 in 2011, a decrease of (14)%. Net revenues for the six months decreased to $900,222,000 from $926,476,000 for 2011, down (3)%. Total revenues and operating income for the six months were $2,916,322,000 and $257,674,000 in 2012, as compared with $3,042,216,000 and $299,505,000 for the same period in 2011, decreases of (4)% and (14)%, respectively. Diluted net earnings attributable to shareholders per share for the first two quarters of 2012 were $0.75, as compared with $0.86 for the same period of 2011, a decrease of (13)%.

“The same market trends we experienced during our 2012 first quarter, as we suggested at the time, continued into the second quarter. That said, we saw volume growth in all areas of our business with the exception of airfreight, despite navigating in what people are finally acknowledging is a very challenging and uncertain global economy,” said Peter J. Rose, Chairman and Chief Executive Officer. “Ocean freight yields dipped, sequentially, as is typical of the second quarter, due to the time lag between when carrier rate increases during annual May contract negotiations are commercially implemented and on a year-over-year basis, reflecting the magnitude of this years' buy rate increases, as carriers moved aggressively to stabilize their precarious financial situation. This was mitigated somewhat by 7% net revenue growth in our direct ocean forwarding product. In spite of flat shipment counts, we continued to experience similar year-over-year trends with respect to airfreight tonnage (smaller shipments, diminished global airfreight demand, lower levels of customer specific infrastructure and projects) that we highlighted in our 2012 first quarter release. Customs brokerage and other services, posted positive growth in net revenue, primarily due to the contributions from our continued international roll out of our domestic time definite product, Transcon services,” Rose continued.

“We remain focused on controlling the parts of our business which have the greatest immediate impact to our stakeholders: our customers; our shareholders; and ultimately our people. That includes focusing on customer retention and profitable market share expansion. While our operating margin (29.2% based on net revenue) hovers below the mark we've enjoyed the last two years (average of 32%), it still remains very healthy from both a competitive and a historical perspective,” Rose went on to say. “Very importantly, our cash position and strong operating cash flow have allowed us to continue to pursue our strategic investments, particularly in customer service proficiency and in productivity enhancements via both information system and process engineering solutions. We also bought back just over 2 million shares of stock during the quarter. Expeditors was founded in tough times and we've been through plenty of them since our founding. Being able to get through tough times without letting tough times get through us is deeply embedded in our DNA. Until there is more certainty in the global economy, these trends could continue for the short to medium term. Regardless of what happens, it won't change who we are and what we do for our stakeholders. We continue to be grateful for the resilience of our people, their dedication to our customers and our culture which recognizes, reinforces and rewards the key to our long-term success being tied to servicing our customers. These tough times too will pass and it should go without saying, at the end of the day, we'd rather be us, than anyone else inside or outside this industry,” Rose concluded.

Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 185 full-service offices and 65 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, domestic time definite services and other value added international logistics services.

1 Diluted earnings attributable to shareholders per share.

NOTE: See Disclaimer on Forward-Looking Statements on the following page of this release.

Expeditors International of Washington, Inc. Second Quarter 2012 Earnings Release, August 7, 2012   Financial Highlights for the Three and Six months ended June 30, 2012 and 2011 (Unaudited)

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

        Three months ended June         Six months ended June   30, 30,    

%

   

%

2012 2011

Decrease

2012 2011

Increase

Revenues $ 1,504,952 $ 1,581,368 (5 )% $ 2,916,322 $ 3,042,216 (4 )% Net revenues $ 453,651 $ 472,561 (4 )% $ 900,222 $ 926,476 (3 )% Operating income $ 132,403 $ 152,275 (13 )% $ 257,674 $ 299,505 (14 )% Net earnings attributable to shareholders $ 83,955 $ 95,000 (12 )% $ 160,662 $ 186,232 (14 )% Diluted earnings attributable to shareholders $ .39 $ .44 (11 )% $ .75 $ .86 (13 )% Basic earnings attributable to shareholders $ .40 $ .45 (11 )% $ .76 $ .88 (14 )% Diluted weighted average shares outstanding 213,212,912 215,659,043 213,683,587 215,780,230 Basic weighted average shares outstanding 211,724,082 212,136,164 211,910,872 212,112,643   Employee headcount as of June 30,       2012     2011 North America 4,764 4,528 Asia Pacific 3,979 4,053 Europe and Africa 2,308 2,168 Middle East 1,249 1,222 South America 660 625 Information Systems 577 551 Corporate 243 212 Total 13,780 13,359         Year-over-year percentage increase (decrease) in: Airfreight kilos     Ocean freight FEU 2012 April (17 )% (1 )% May (7 )% 1 % June (6 )% 3 % Quarter (10 )% 1 %  

During the second quarter of 2012, the Company opened one full service office in Montevideo, Uruguay, opened one satellite office in Xuzhou, China and closed one full service office in Colombo, Sri Lanka. The Company also transitioned its Tampa, Florida office from a full service office to a satellite office of its full-service office in Orlando, Florida and merged its satellite office in Adana, Turkey with its nearby full-service office in Mersin, Turkey.

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 trends in the global economy and duration of these trends, future air and ocean volume levels; ability to retain customers, expand profitable market share, maintain operating margins and cash flows, achieve productivity enhancements in information systems and process engineering and expansion of domestic time definite product Transcon services. 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.

AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except share data) (Unaudited)         June 30,     December 31, 2012   2011  

Assets

Current Assets: Cash and cash equivalents $ 1,364,247 $ 1,294,356 Short-term investments 376 472 Accounts receivable, net 983,131 934,752 Deferred Federal and state income taxes 10,234 10,415 Other current assets 47,409   46,888  

Total current assets

2,405,397   2,286,883   Property and equipment, net 546,754 538,806 Goodwill and other intangibles, net 10,003 10,557 Other assets, net 30,218   30,581   $ 2,992,372   $ 2,866,827  

Liabilities and Equity

Current Liabilities: Accounts payable 672,836 606,628 Accrued expenses, primarily salaries and related costs 184,114 169,445 Federal, state and foreign income taxes 25,948   20,072   Total current liabilities 882,898   796,145   Deferred Federal and state income taxes 59,417 60,613   Commitments and contingencies   Shareholders’ Equity: Preferred stock; none issued — — Common stock, par value $.01 per share; issued and outstanding 210,503,675 shares at June 30, 2012 and 212,003,662 shares at December 31, 2011 2,105 2,120 Additional paid-in capital 1,013 13,260 Retained earnings 2,044,682 1,991,222 Accumulated other comprehensive loss (4,345 ) (2,964 ) Total shareholders’ equity 2,043,455   2,003,638   Noncontrolling interest 6,602   6,431   Total equity 2,050,057   2,010,069   $ 2,992,372   $2,866,827     EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (In thousands, except share data) (Unaudited)         Three months ended     Six months ended June 30, June 30, 2012     2011 2012     2011 Revenues:   Airfreight services $ 638,541 $ 749,861 $ 1,277,453 $ 1,450,784 Ocean freight and ocean services 518,998 486,831 953,334 926,972 Customs brokerage and other services 347,413   344,676   685,535   664,460   Total revenues 1,504,952   1,581,368   2,916,322   3,042,216   Operating Expenses: Airfreight consolidation 484,311 576,280 965,354 1,100,916 Ocean freight consolidation 413,447 377,805 745,401 717,354 Customs brokerage and other services 153,543 154,722 305,345 297,470 Salaries and related costs 249,925 249,114 496,057 486,929 Rent and occupancy costs 20,853 21,354 42,029 42,735 Depreciation and amortization 9,670 9,257 19,215 18,431 Selling and promotion 8,860 10,022 17,523 19,185 Other 31,940   30,539   67,724   59,691   Total operating expenses 1,372,549   1,429,093   2,658,648   2,742,711   Operating income 132,403   152,275   257,674   299,505     Interest income 3,050 2,312 6,410 4,632 Interest expense (222 ) (229 ) (842 ) (443 ) Other, net 3,682   857   4,779   1,974   Other income, net 6,510   2,940   10,347   6,163   Earnings before income taxes 138,913 155,215 268,021 305,668 Income tax expense 54,892   60,195   107,278   119,441   Net earnings 84,021   95,020   160,743   186,227   Less net earnings (losses) attributable to the noncontrolling interest 66   20   81   (5 ) Net earnings attributable to shareholders $ 83,955   $ 95,000   $ 160,662   $ 186,232   Diluted earnings attributable to shareholders per share $ .39   $ .44   $ .75   $ .86   Basic earnings attributable to shareholders per share $ .40   $ .45   $ .76   $ .88   Dividends declared and paid per common share $ .28   $ .25   $ .28   $ .25   Weighted average diluted shares outstanding 213,212,912   215,659,043   213,683,587   215,780,230   Weighted average basic shares outstanding 211,724,082   212,136,164   211,910,872   212,112,643     EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)   Three months ended      

 

 

Six months ended

June 30,

June 30,

2012     2011 2012     2011 Operating Activities: Net earnings $ 84,021 $ 95,020 $ 160,743 $ 186,227 Adjustments to reconcile net earnings to net cash from operating activities: Provision for losses on accounts receivable (388 ) (63 ) (855 ) 1,790 Deferred income tax (benefit) expense (5,739 ) 1,601 (258 ) (335 ) Excess tax benefits from stock plans (806 ) (2,285 ) (4,232 ) (4,531 ) Stock compensation expense 10,926 10,236 21,526 20,708 Depreciation and amortization 9,670 9,257 19,215 18,431 Gain on sale of assets (65 ) (21 ) (130 ) (51 ) Other 271 311 553 618 Changes in operating assets and liabilities: Increase in accounts receivable (63,260 ) (14,173 ) (50,292 ) (7,490 ) Decrease in other current assets 1,642 3,896 3,566 2,481 Increase in accounts payable and accrued expenses 70,674 7,943 84,233 38,130 (Decrease) increase in income taxes payable, net (14,132 ) (33,665 ) 6,142   (88 ) Net cash from operating activities 92,814   78,057   240,211   255,890   Investing Activities: Decrease (increase) in short-term investments, net 15,878 (449 ) 98 (538 ) Purchase of property and equipment (9,814 ) (17,110 ) (26,902 ) (38,235 ) Proceeds from sale of property and equipment 141 42 253 85 Other (232 ) (64 ) 126   (1,506 ) Net cash from investing activities 5,973   (17,581 ) (26,425 ) (40,194 ) Financing Activities: Proceeds from issuance of common stock 7,482 15,821 20,402 23,625 Repurchases of common stock (84,401 ) (45,690 ) (106,266 ) (65,274 ) Excess tax benefits from stock plans 806 2,285 4,232 4,531 Dividends paid (59,358 ) (53,014 ) (59,358 ) (53,014 ) Net cash from financing activities (135,471 ) (80,598 ) (140,990 ) (90,132 ) Effect of exchange rate changes on cash and cash equivalents (11,984 ) 7,481   (2,905 ) 15,801   (Decrease) increase in cash and cash equivalents (48,668 ) (12,641 ) 69,891 141,365 Cash and cash equivalents at beginning of period 1,412,915   1,238,471   1,294,356   1,084,465   Cash and cash equivalents at end of period $ 1,364,247   $ 1,225,830   $ 1,364,247   $ 1,225,830   Interest and taxes paid: Interest $ 233 $ 13 $ 420 $ 17 Income taxes 77,583 91,035 104,095 117,311   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 June 30, 2012: Revenues from unaffiliated customers $ 379,126 49,802 21,366 780,858 202,301 71,499 — 1,504,952 Transfers between geographic areas

 

22,504

2,466 4,791 11,038 9,603 4,670   (55,072 ) — Total revenues $ 401,630 52,268 26,157 791,896 211,904 76,169   (55,072 ) 1,504,952 Net revenues $ 182,291 25,115 14,724 135,908 71,497 24,116 — 453,651 Operating income $ 49,193 8,085 4,118 51,768 12,951 6,288 — 132,403 Identifiable assets $ 1,597,543 93,374 52,019 687,586 412,752 152,754 (3,656 ) 2,992,372 Capital expenditures $ 5,236 153 400 2,602 1,111 312 — 9,814 Depreciation and amortization $ 5,756 181 207 1,645 1,430 451 — 9,670 Equity $ 1,295,963 51,248 31,903 462,123 144,659 94,892 (30,731 ) 2,050,057 Three months ended June 30, 2011: Revenues from unaffiliated customers $ 390,806 47,816 21,136 816,350 229,724 75,536 — 1,581,368 Transfers between geographic areas

 

25,973

2,783 5,220 10,170 11,355 4,500 (60,001 ) — Total revenues $ 416,779 50,599 26,356 826,520 241,079 80,036 (60,001 ) 1,581,368 Net revenues $ 181,603 21,581 15,157 150,616 78,828 24,776 — 472,561 Operating income $ 57,752 5,761 4,486 61,542 16,877 5,857 — 152,275 Identifiable assets $ 1,411,881 91,678 58,396 678,668 479,852 155,503 2,026 2,878,004 Capital expenditures $ 3,350 448 144 4,622 7,881 665 — 17,110 Depreciation and amortization $ 4,926 277 264 1,847 1,416 527 — 9,257 Equity $ 1,123,482 52,814 33,784 420,962 184,252 94,447 (30,591 ) 1,879,150   Six months ended June 30, 2012:   Revenues from unaffiliated customers $ 756,428 99,756 40,635 1,468,928 408,572 142,003 — 2,916,322 Transfers between geographic areas

 

44,712

4,931 9,870 22,010 19,070 9,321 (109,914 ) — Total revenues $ 801,140 104,687 50,505 1,490,938 427,642 151,324 (109,914 ) 2,916,322 Net revenues $ 363,766 47,357 29,559 267,722 143,030 48,788 — 900,222 Operating income $ 94,718 14,454 8,880 99,006 27,198 13,418 — 257,674 Identifiable assets $ 1,597,543 93,374 52,019 687,586 412,752 152,754 (3,656 ) 2,992,372 Capital expenditures $ 14,995 329 655 7,889 2,053 981 — 26,902 Depreciation and amortization $ 11,378 368 424 3,269 2,834 942 — 19,215 Equity $ 1,295,963 51,248 31,903 462,123 144,659 94,892 (30,731 ) 2,050,057 Six months ended June 30, 2011: Revenues from unaffiliated customers $ 767,911 91,663 41,469 1,544,480 443,335 153,358 — 3,042,216 Transfers between geographic areas

 

49,938

5,465 10,841 19,353 22,062 8,709 (116,368 ) — Total revenues $ 817,849 97,128 52,310 1,563,833 465,397 162,067 (116,368 ) 3,042,216 Net revenues $ 359,537 42,282 30,260 292,104 152,753 49,540 — 926,476 Operating income $ 111,486 11,550 9,249 120,980 34,584 11,656 — 299,505 Identifiable assets $ 1,411,881 91,678 58,396 678,668 479,852 155,503 2,026 2,878,004 Capital expenditures $ 7,380 608 300 9,334 19,587 1,026 — 38,235 Depreciation and amortization $ 9,911 580 533 3,816 2,526 1,065 — 18,431 Equity $ 1,123,482 52,814 33,784 420,962 184,252 94,447 (30,591 ) 1,879,150