EXPD Expeditors International of Washington Inc

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced net earnings attributable to shareholders of $83,824,000 for the first quarter of 2014, as compared with $80,315,000 for the same quarter of 2013, an increase of 4%. Net revenues2 for the first quarter of 2014 increased 4% to $464,586,000 as compared with $448,007,000 for the same quarter in 2013. Total revenues and operating income were $1,491,645,000 and $135,203,000 in the first quarter of 2014, as compared with $1,413,208,000 and $128,518,000 for the same quarter of 2013, increases of 6% and 5%, respectively. Diluted net earnings attributable to shareholders per share for the first quarter were $.42, as compared with $.39 for the same quarter in 2013, an increase of 8%.

“There were several significant external challenges this quarter, including weather issues and continued concern over the strength of the economy. We’ve always believed that challenging times can only be managed through disciplined execution. Despite a relatively slow start, we are very encouraged by how the 2014 first quarter finished up. Ocean freight and airfreight volume increased 12% and 6%, respectively. Disciplined execution was responsible for increasing our operating margin3 percentage from the 2013 first quarter, while also efficiently handling the acceleration in business we experienced during the last part of the quarter,” said Jeffrey S. Musser, President and Chief Executive Officer. “From a geographic standpoint, we had strong double digit operating income growth from our Americas group, while our Asia-Pacific and Europe, Africa, Near/Middle East, and Indian Subcontinent (“EMAIR”) groups, though steady, were essentially flat. From a product perspective, while we continued to manage through short cycles of rate instability and volatility, we successfully gained market share in both the ocean and airfreight markets. Customs and other services, led by our customs brokerage and Transcon products, grew revenues by 8%, illustrating the reliable and strategic anchor they are in our knowledge-based service offerings. Also noteworthy is our repurchase of 5.7 million shares of stock during the 2014 first quarter. This brings our outstanding share count to 197.2 million shares, the lowest share-count, on a split adjust basis, since going public nearly 30 years ago,” Musser continued.

“For the remainder of the year, we’ll focus our attention on actively pursuing opportunities for profitable market share expansion and driving efficiencies in operational processes. We’re currently conducting a very comprehensive strategic reassessment of our various market positions and organizational structures, the objective of which will be to bring greater alignment and focus on the most cost-beneficial opportunities. We won’t be changing our culture, but we will be refining our focus,” Musser went on to say. “Finally, we appreciate the support of our customers, our service providers and, most importantly, all the members of the Expeditors family who come to work every day and strive to live up to the values and goals of customer service excellence we’ve always believed makes the true difference in who we are and what we can do,” Musser concluded.

Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 185 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, time-definite transportation, order management, warehousing distribution and customized logistics solutions.

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.

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

 

Expeditors International of Washington, Inc.

First Quarter 2014 Earnings Release, May 7, 2014   Financial Highlights for the Three months ended March 31, 2014 and 2013 (Unaudited)

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

        Three months ended March 31,     2014     2013 % Change Revenues $ 1,491,645 $ 1,413,208 6% Net revenues1 $ 464,586 $ 448,007 4% Operating income $ 135,203 $ 128,518 5% Net earnings attributable to shareholders $ 83,824 $ 80,315 4% Diluted earnings attributable to shareholders $ .42 $ .39 8% Basic earnings attributable to shareholders $ .42 $ .39 8% Diluted weighted average shares outstanding 201,843,858 207,613,863 Basic weighted average shares outstanding 201,118,390 206,475,095  

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 March 31 2014     2013 North America 4,926 4,705 Asia Pacific 3,889 3,867 Europe and Africa 2,343 2,361 Middle East and India 1,221 1,216 Latin America 713 665 Information Systems 633 628 Corporate 292 273 Total 14,017 13,715         Year-over-year percentage increase in: Airfreight kilos     Ocean freight FEU 2014 January 3% 15% February 5% 1% March 7% 17% Quarter 6% 12%  

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on May 9, 2014 will be considered in management’s 8-K “Responses to Selected Questions” expected to be filed on or about May 16, 2014.

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 ability to increase operating margins, efficiently handle accelerating business, manage through rate instability and volatility, gain market share in both ocean and air markets, obtain profitable market share, improve operational processes and successfully complete and implement comprehensive strategic reassessment to improve alignment and operations. 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)         March 31,     December 31, 2014 2013

Assets

Current Assets: Cash and cash equivalents $ 1,131,046 $ 1,247,652 Short-term investments 86,491 26,337 Accounts receivable, net 1,062,924 1,073,500 Deferred Federal and state income taxes 18,248 18,396 Other current assets 36,284   49,384   Total current assets 2,334,993   2,415,269   Property and equipment, net 556,071 563,064 Goodwill 7,927 7,927 Other assets, net 26,513   28,552   $ 2,925,504   $ 3,014,812  

Liabilities and Equity

Current Liabilities: Accounts payable 677,582 648,156 Accrued expenses, primarily salaries and related costs 196,157 200,301 Federal, state and foreign income taxes 27,754   21,743   Total current liabilities 901,493   870,200   Deferred Federal and state income taxes 63,997 58,281   Commitments and contingencies   Shareholders’ Equity: Preferred stock; none issued — — Common stock, par value $.01 per share. Issued and outstanding 197,166,665 shares at March 31, 2014 and 202,553,220 shares at December 31, 2013 1,972 2,025 Additional paid-in capital 728 1,647 Retained earnings 1,964,122 2,087,376 Accumulated other comprehensive loss (8,691 ) (6,265 ) Total shareholders’ equity 1,958,131   2,084,783   Noncontrolling interest 1,883   1,548   Total equity 1,960,014   2,086,331   $ 2,925,504   $ 3,014,812       EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES   Condensed Consolidated Statements of Earnings (In thousands, except share data) (Unaudited)         Three months ended March 31, 2014     2013 Revenues: Airfreight services $ 647,138 $ 620,374 Ocean freight and ocean services 469,224 445,479 Customs brokerage and other services 375,283   347,355 Total revenues 1,491,645   1,413,208 Operating Expenses: Airfreight services 482,882 464,919 Ocean freight and ocean services 367,375 344,923 Customs brokerage and other services 176,802 155,359 Salaries and related costs 255,942 248,417 Rent and occupancy costs 25,162 24,193 Depreciation and amortization 12,382 11,278 Selling and promotion 8,173 7,257 Other 27,724   28,344 Total operating expenses 1,356,442   1,284,690 Operating income 135,203   128,518   Interest income 2,697 3,243 Other, net (281 ) 1,531 Other income, net 2,416   4,774 Earnings before income taxes 137,619 133,292 Income tax expense 53,424   52,682 Net earnings 84,195   80,610 Less net earnings attributable to the noncontrolling interest 371   295 Net earnings attributable to shareholders $ 83,824   $ 80,315 Diluted earnings attributable to shareholders per share $ .42   $ .39 Basic earnings attributable to shareholders per share $ .42   $ .39 Weighted average diluted shares outstanding 201,843,858   207,613,863 Weighted average basic shares outstanding 201,118,390   206,475,095     EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES   Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)         Three months ended March 31, 2014     2013 Operating Activities: Net earnings $ 84,195 $ 80,610 Adjustments to reconcile net earnings to net cash from operating activities: (Recoveries) provision for losses on accounts receivable (1,115 ) 941 Deferred income tax expense 7,194 7,122 Excess tax benefits from stock plans (489 ) (1,099 ) Stock compensation expense 10,294 11,005 Depreciation and amortization 12,382 11,278 Other 138 208 Changes in operating assets and liabilities: Decrease in accounts receivable 12,228 38,856 Increase (decrease) in accounts payable and accrued expenses 29,546 (1,390 ) Increase in income taxes payable, net 18,205 18,218 Increase (decrease) in other current assets 1,279   (485 ) Net cash from operating activities 173,857   165,264   Investing Activities: (Increase) decrease in short-term investments, net (60,154 ) 38 Purchase of property and equipment (8,760 ) (10,068 ) Other, net 1,670   (444 ) Net cash from investing activities (67,244 ) (10,474 ) Financing Activities: Proceeds from issuance of common stock 7,892 10,929 Repurchases of common stock (226,725 ) (17,681 ) Excess tax benefits from stock plans 489 1,099 Purchase of noncontrolling interest — (7,730 ) Distribution to noncontrolling interest (85 ) —   Net cash from financing activities (218,429 ) (13,383 ) Effect of exchange rate changes on cash and cash equivalents (4,790 ) (7,562 ) (Decrease) increase in cash and cash equivalents (116,606 ) 133,845 Cash and cash equivalents at beginning of period 1,247,652   1,260,842   Cash and cash equivalents at end of period $ 1,131,046   $ 1,394,687   Taxes paid: Income taxes $ 27,496 $ 26,951     EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES   Business Segment Information (In thousands) (Unaudited)             OTHER             EUROPE     MIDDLE         UNITED NORTH LATIN ASIA and EAST and ELIMI- CONSOLI- STATES AMERICA AMERICA PACIFIC AFRICA INDIA NATIONS DATED Three months ended March 31, 2014: Revenues from unaffiliated customers $ 400,739 51,584 20,629 714,384 227,508 76,801 — 1,491,645 Transfers between geographic areas   20,011 2,375 5,204 12,009 8,957 4,862 (53,418 ) — Total revenues $ 420,750 53,959 25,833 726,393 236,465 81,663 (53,418 ) 1,491,645 Net revenues $ 192,082 26,161 15,357 133,274 73,057 24,655 — 464,586 Operating income $ 51,898 8,375 4,859 52,841 11,066 6,164 — 135,203 Identifiable assets $ 1,437,768 105,070 61,503 697,614 457,614 162,249 3,686 2,925,504 Capital expenditures $ 3,928 264 301 3,126 852 289 — 8,760 Depreciation and amortization $ 7,852 280 212 2,108 1,492 438 — 12,382 Equity $ 1,151,455 69,702 32,017 448,196 205,060 89,068 (35,484 ) 1,960,014 Three months ended March 31, 2013: Revenues from unaffiliated customers $ 374,374 51,729 19,864 694,137 202,513 70,591 — 1,413,208 Transfers between geographic areas   20,026 2,544 4,876 10,630 8,880 4,327 (51,283 ) — Total revenues $ 394,400 54,273 24,740 704,767 211,393 74,918 (51,283 ) 1,413,208 Net revenues $ 180,343 23,781 14,411 135,550 70,614 23,308 — 448,007 Operating income $ 47,353 6,612 4,089 52,884 11,926 5,654 — 128,518 Identifiable assets $ 1,502,795 96,555 53,935 795,946 406,801 158,569 3,198 3,017,799 Capital expenditures $ 5,379 187 259 2,552 1,198 493 — 10,068 Depreciation and amortization $ 6,757 207 241 1,988 1,629 456 — 11,278 Equity $ 1,231,424 62,267 32,638 568,609 165,014 79,434 (34,765 ) 2,104,621  

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 March 31, (in thousands) 2014     2013 Total revenues $ 1,491,645 $ 1,413,208 Expenses: Airfreight services 482,882 464,919 Ocean freight and ocean services 367,375 344,923 Customs brokerage and other services 176,802 155,359 Net revenues $ 464,586 $ 448,007

Expeditors International of Washington, Inc.R. Jordan Gates, 206-674-3427President and Chief Operating OfficerorBradley S. Powell, 206-674-3412Senior Vice President and Chief Financial Officer