EXPD Expeditors International of Washington Inc

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced net earnings attributable to shareholders of $92,400,000 for the third quarter of 2013, as compared with $88,490,000 for 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 endedSeptember 30,

       

Nine months endedSeptember 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 sharesat 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.

Expeditors International of Washington, Inc.R. Jordan GatesPresident and Chief Operating Officer206-674-3427orBradley S. PowellSenior Vice President and Chief Financial Officer206-674-3412