Expeditors International of Washington, Inc. (NASDAQ:EXPD) today
announced fourth quarter 2019 financial results including the
following highlights compared to the same quarter of 2018:
- Diluted Net Earnings Attributable to Shareholders per share
(EPS1) decreased 23% to $0.79
- Net Earnings Attributable to Shareholders decreased 23% to $137
million
- Operating Income decreased 17% to $180 million
- Revenues decreased 9% to $2.0 billion
- Airfreight tonnage volume decreased 6% and ocean container
volume decreased 13%
“Our final financial results for the fourth quarter were within
the range of earnings guidance we issued last month,” said Jeffrey
S. Musser, President and Chief Executive Officer. “As noted in that
guidance, we do not believe this comparatively soft fourth quarter
is the result of a business performance issue, but is instead more
closely tied to the business environment in which we are operating.
Average sell rates declined faster than our average buy rates, and
both air and ocean volumes declined as slowing trade to and from
China impacted overall freight movement around the globe. In the
year-ago fourth quarter, by comparison, we believe our volumes
benefitted as shippers moved product ahead of scheduled tariff
increases.”
Mr. Musser continued: “Our people and operations in China are a
very important part of our global network. China imports and
exports are interrelated to all of our other geographic regions
and, on a stand-alone basis, represented 26% of our consolidated
revenue and 27% of operating income in 2019. While we would
normally expect softness in the first part of Q1 because of the
Chinese Lunar New Year Holidays, this year has been much more
pronounced due to the extended closures of factories in China in
support of containing the Novel Coronavirus (COVID-19). There
remains a great deal of uncertainty as to when factories will
return to full production, and those delays will have a significant
impact on freight volumes moved in Q1. In addition to traditional
supply chain movements, we also believe this may have a further
impact to global supply chains through potential shortages of raw
materials, parts and supplies.
“Over our 40-year history, we have experienced many events that
have disrupted supply chains. We have not, however, experienced a
situation where manufacturing capability has been shut-down or
severely hampered to such an extent, so it is difficult to predict
how this will play out. However, we remain steadfastly optimistic
that when the marketplace does return to normal, we are in an
excellent position to take advantage of what could be a sharp
rebound in trade.”
Bradley S. Powell, Senior Vice President and Chief Financial
Officer, added, “Operating income in Q4 2019 was negatively
impacted by lower volumes and lower average sell rates. The largest
decline in volumes and rates were experienced in our China
operations where revenues and operating income declined 27% and
23%, respectively, in the fourth quarter. We will continue to make
important investments in people and technology to support our
long-term growth initiatives.” Mr. Powell noted that the Company’s
effective tax rate for the full year of 2019 was 25.6%, compared to
24.3% in 2018. The effect of higher average tax rates of our
international subsidiaries, when compared to U.S. federal and state
tax rates, were offset by U.S. foreign tax credits and U.S. income
tax deductions for Foreign-derived intangible income (FDII). In
addition, both 2019 and 2018 benefited from state income tax
refunds. These benefits were partially offset by certain expenses
that are no longer deductible under the 2017 Tax Act. Mr. Powell
reiterated that the Company’s effective tax rate will be largely
dependent upon the mix of pre-tax earnings that are generated in
its U.S. versus foreign operations, as well as any further
interpretations and guidance issued on the tax law in the
future.
Expeditors is a global logistics company headquartered in
Seattle, Washington. The Company employs trained professionals in
176 district offices and numerous branch 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 and distribution and
customized logistics solutions.
_______________________
1Diluted 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.
Fourth Quarter 2019 Earnings Release,
February 18, 2020
Financial Highlights for the Three and
Twelve months ended December 31, 2019 (Unaudited)
(in 000's of US dollars except per share
data)
Three months ended December
31,
Twelve months ended December
31,
2019
2018
% Change
2019
2018
% Change
Revenues
$
2,044,941
$
2,235,597
(9)%
$
8,175,426
$
8,138,365
—%
Directly related cost of transportation
and other expenses1
$
1,398,638
$
1,554,922
(10)%
$
5,538,958
$
5,517,992
—%
Salaries and other operating
expenses2
$
465,963
$
463,668
—%
$
1,869,776
$
1,823,810
3%
Operating income
$
180,340
$
217,007
(17)%
$
766,692
$
796,563
(4)%
Net earnings attributable to
shareholders
$
137,326
$
179,210
(23)%
$
590,395
$
618,199
(4)%
Diluted earnings attributable to
shareholders per share
$
0.79
$
1.02
(23)%
$
3.39
$
3.48
(3)%
Basic earnings attributable to
shareholders per share
$
0.81
$
1.04
(22)%
$
3.45
$
3.55
(3)%
Diluted weighted average shares
outstanding
173,401
175,935
174,209
177,833
Basic weighted average shares
outstanding
170,339
172,493
170,899
174,133
_______________________________
1Directly related cost of transportation
and other expenses totals Operating Expenses from Airfreight
services, Ocean freight and ocean services and Customs brokerage
and other services as shown in the Consolidated Statements of
Earnings.
2Salaries and other operating expenses
totals Salaries and related, Rent and occupancy, Depreciation and
amortization, Selling and promotion and Other as shown in the
Consolidated Statements of Earnings.
The three and twelve months ended December 31, 2019 include the
effect of changing our presentation of certain import services from
a net to a gross basis and our revised presentation of destination
services, which increased revenues and directly related operating
expenses in customs brokerage and other services but did not change
operating income.
During the three and twelve months ended December 31, 2019, we
repurchased 1.2 million and 5.3 million shares of common stock at
an average price of $73.89 and $72.91 per share, respectively.
During the three and twelve months ended December 31, 2018, we
repurchased 1.3 million and 9.0 million shares of common stock at
an average price of $71.82 and $71.61 per share, respectively.
Employee Full-time Equivalents
as of December 31,
2019
2018
North America
6,905
6,833
Europe
3,459
3,375
North Asia
2,488
2,607
South Asia
1,697
1,643
Middle East, Africa and India
1,548
1,520
Latin America
855
839
Information Systems
961
912
Corporate
384
352
Total
18,297
18,081
Fourth quarter year-over-year
percentage decrease in:
Airfreight kilos
Ocean freight FEU
2019
October
(6)%
(14)%
November
(6)%
(9)%
December
(7)%
(14)%
Quarter
(6)%
(13)%
_________________________________
Investors may submit written questions via
e-mail to: investor@expeditors.com. Questions received by the end
of business on February 21, 2020 will be considered in management's
8-K “Responses to Selected Questions.”
Disclaimer on Forward-Looking
Statements:
Certain portions of this release contain forward-looking
statements, including the impact on freight volumes in the first
quarter as a result of the containment measures relating to the
Novel Coronavirus (COVID-19) causing extended closures of factories
in China; the further impact on downstream supply chains; our
ability to take advantage of a rebound in trade; and the impact of
the 2017 Tax Act and related interpretations on our effective tax
rate. Forward-looking statements involve various risks and
uncertainties. There can be no assurance that such statements will
prove to be accurate, and actual results and future events could
differ materially from those anticipated in such statements.
Important factors that could cause actual results to differ
materially from the Company's expectations include the length and
severity of the Novel Coronavirus (COVID-19); our ability to
contain costs; our ability to retain existing and attract new
customers; our ability to use our broad market footprint to respond
to and take advantage of a sudden shift in manufacturing capacity
and associated trade; and risk factors and uncertainties detailed
in our Annual Report on Form 10-K for the year ended December 31,
2018 and as updated by our reports on Form 10-Q, filed with the
Securities and Exchange Commission. Additional information will
also be set forth in our Annual Report on Form 10-K for the year
ended December 31, 2019.
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share
data)
(Unaudited)
December 31, 2019
December 31, 2018
Assets:
Current Assets:
Cash and cash equivalents
$
1,230,491
$
923,735
Accounts receivable, net
1,315,091
1,581,530
Deferred contract costs
131,783
159,510
Other
92,558
70,041
Total current assets
2,769,923
2,734,816
Property and equipment, net
499,344
504,105
Operating lease right-of-use assets
390,035
—
Goodwill
7,927
7,927
Deferred federal and state income taxes,
net
8,034
40,465
Other assets, net
16,621
27,246
Total assets
$
3,691,884
$
3,314,559
Liabilities:
Current Liabilities:
Accounts payable
$
735,695
$
902,259
Accrued expenses, primarily salaries and
related costs
189,446
215,813
Contract liabilities
154,183
190,343
Current portion of operating lease
liabilities
65,367
—
Federal, state and foreign income
taxes
23,627
18,424
Total current liabilities
1,168,318
1,326,839
Noncurrent portion of operating lease
liabilities
326,347
—
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued
—
—
Common stock, par value $0.01 per share,
authorized 640,000. Issued and outstanding: 169,622 shares at
December 31, 2019 and 171,582 shares at December 31, 2018
1,696
1,716
Additional paid-in capital
3,203
1,896
Retained earnings
2,321,316
2,088,707
Accumulated other comprehensive loss
(131,187
)
(105,481
)
Total shareholders’ equity
2,195,028
1,986,838
Noncontrolling interest
2,191
882
Total equity
2,197,219
1,987,720
Total liabilities and equity
$
3,691,884
$
3,314,559
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Consolidated Statements of
Earnings
(In thousands, except per share
data)
(Unaudited)
Three months ended December
31,
Twelve months ended December
31,
2019
2018
2019
2018
Revenues:
Airfreight services
$
757,954
$
905,606
$
2,929,882
$
3,271,932
Ocean freight and ocean services
519,730
615,053
2,217,554
2,251,754
Customs brokerage and other services
767,257
714,938
3,027,990
2,614,679
Total revenues
2,044,941
2,235,597
8,175,426
8,138,365
Operating Expenses:
Airfreight services
569,282
683,410
2,143,999
2,410,793
Ocean freight and ocean services
378,801
464,281
1,613,646
1,664,168
Customs brokerage and other services
450,555
407,231
1,781,313
1,443,031
Salaries and related
352,723
350,839
1,422,315
1,393,259
Rent and occupancy
41,775
39,627
166,182
152,813
Depreciation and amortization
12,494
13,186
50,950
54,019
Selling and promotion
11,150
12,961
44,002
45,346
Other
47,821
47,055
186,327
178,373
Total operating expenses
1,864,601
2,018,590
7,408,734
7,341,802
Operating income
180,340
217,007
766,692
796,563
Other Income (Expense):
Interest income
4,680
4,982
22,803
19,153
Other, net
477
256
6,299
2,613
Other income (expense), net
5,157
5,238
29,102
21,766
Earnings before income taxes
185,497
222,245
795,794
818,329
Income tax expense
47,749
42,668
203,778
198,539
Net earnings
137,748
179,577
592,016
619,790
Less net earnings attributable to the
noncontrolling
interest
422
367
1,621
1,591
Net earnings attributable to
shareholders
$
137,326
$
179,210
$
590,395
$
618,199
Diluted earnings attributable to
shareholders per share
$
0.79
$
1.02
$
3.39
$
3.48
Basic earnings attributable to
shareholders per share
$
0.81
$
1.04
$
3.45
$
3.55
Weighted average diluted shares
outstanding
173,401
175,935
174,209
177,833
Weighted average basic shares
outstanding
170,339
172,493
170,899
174,133
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash
Flows
(In thousands)
(Unaudited)
Three months ended December
31,
Twelve months ended December
31,
2019
2018
2019
2018
Operating Activities:
Net earnings
$
137,748
$
179,577
$
592,016
$
619,790
Adjustments to reconcile net earnings to
net cash from operating activities:
(Recoveries) provisions for losses on
accounts receivable
(454
)
1,576
(1
)
3,808
Deferred income tax expense (benefit)
4,499
5,491
4,482
(12,031
)
Stock compensation expense
12,182
12,976
61,543
56,147
Depreciation and amortization
12,494
13,186
50,950
54,019
Other, net
129
(123
)
941
647
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable
19,744
(58,650
)
265,919
(214,971
)
(Decrease) increase in accounts payable
and accrued expenses
(40,788
)
(41,824
)
(181,987
)
86,036
Decrease (increase) in deferred contract
costs
261
9,138
28,811
(42,097
)
(Decrease) increase in contract
liabilities
(164
)
(5,221
)
(37,097
)
43,928
Increase (decrease) in income taxes
payable, net
14,812
(10,433
)
(18,472
)
(19,691
)
Decrease (increase) in other, net
4,783
(3,643
)
4,830
(2,781
)
Net cash from operating activities
165,246
102,050
771,935
572,804
Investing Activities:
Purchase of property and equipment
(9,079
)
(9,832
)
(47,022
)
(47,474
)
Other, net
(518
)
(39
)
1,007
(925
)
Net cash from investing activities
(9,597
)
(9,871
)
(46,015
)
(48,399
)
Financing Activities:
Proceeds from issuance of common stock
28,055
13,166
148,245
182,732
Repurchases of common stock
(92,138
)
(92,138
)
(389,060
)
(647,898
)
Dividends Paid
(85,369
)
(77,660
)
(170,553
)
(156,840
)
Payments for taxes related to net share
settlement of equity awards
—
(33
)
(6,674
)
(3,248
)
Distributions to noncontrolling
interest
—
(75
)
—
(688
)
Purchase of noncontrolling interest
—
(1,163
)
—
(1,796
)
Net cash from financing activities
(149,452
)
(157,903
)
(418,042
)
(627,738
)
Effect of exchange rate changes on cash
and cash equivalents
8,324
(1,153
)
(1,122
)
(24,031
)
Change in cash and cash equivalents
14,521
(66,877
)
306,756
(127,364
)
Cash and cash equivalents at beginning of
period
1,215,970
990,612
923,735
1,051,099
Cash and cash equivalents at end of
period
$
1,230,491
$
923,735
$
1,230,491
$
923,735
Taxes Paid:
Income taxes
$
25,914
$
55,811
$
222,083
$
239,255
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Business Segment Information
(In thousands)
(Unaudited)
UNITED STATES
OTHER NORTH AMERICA
LATIN AMERICA
NORTH ASIA
SOUTH ASIA
EUROPE
MIDDLE EAST, AFRICA AND
INDIA
ELIMI- NATIONS
CONSOLI- DATED
For the three months ended December 31,
2019:
Revenues1
$
678,979
89,370
38,925
615,401
188,278
327,879
107,104
(995
)
2,044,941
Directly related cost of transportation
and other expenses2
$
386,114
54,372
23,148
495,267
137,231
227,248
75,813
(555
)
1,398,638
Salaries and other operating expenses3
$
223,703
25,371
14,170
62,813
30,154
83,734
26,459
(441
)
465,963
Operating income
$
69,162
9,627
1,607
57,321
20,893
16,897
4,832
1
180,340
Identifiable assets at period end
$
1,978,307
153,813
72,677
538,526
178,336
551,576
219,953
(1,304
)
3,691,884
Capital expenditures
$
5,122
844
485
600
323
1,216
489
—
9,079
Depreciation and amortization
$
7,581
494
324
1,227
449
1,945
474
—
12,494
Equity
$
1,521,059
65,100
29,148
247,725
94,727
159,308
114,726
(34,574
)
2,197,219
For the three months ended December 31,
2018:
Revenues1
$
688,943
98,596
34,684
820,917
217,793
352,398
121,482
(99,216
)
2,235,597
Directly related cost of transportation
and other expenses2
$
394,927
59,154
18,347
675,102
168,313
249,782
88,001
(98,704
)
1,554,922
Salaries and other operating expenses3
$
196,788
24,914
14,974
77,439
32,647
89,064
28,349
(507
)
463,668
Operating income
$
97,228
14,528
1,363
68,376
16,833
13,552
5,132
(5
)
217,007
Identifiable assets at period end
$
1,689,950
161,604
53,542
533,071
152,646
513,744
206,367
3,635
3,314,559
Capital expenditures
$
5,640
239
143
434
248
1,648
1,480
—
9,832
Depreciation and amortization
$
8,114
479
370
1,311
578
1,838
496
—
13,186
Equity
$
1,339,673
72,941
26,007
200,371
100,706
157,003
123,228
(32,209
)
1,987,720
UNITED STATES
OTHER NORTH AMERICA
LATIN AMERICA
NORTH ASIA
SOUTH ASIA
EUROPE
MIDDLE EAST, AFRICA AND
INDIA
ELIMI- NATIONS
CONSOLI- DATED
For the twelve months ended December
31, 2019:
Revenues1
$
2,712,067
354,405
150,202
2,494,556
743,406
1,280,669
443,487
(3,366
)
8,175,426
Directly related cost of transportation
and other expenses2
$
1,528,815
212,369
87,297
1,970,662
544,873
884,968
311,997
(2,023
)
5,538,958
Salaries and other operating expenses3
$
859,946
101,654
55,512
271,594
127,478
342,073
112,844
(1,325
)
1,869,776
Operating income
$
323,306
40,382
7,393
252,300
71,055
53,628
18,646
(18
)
766,692
Identifiable assets at period end
$
1,978,307
153,813
72,677
538,526
178,336
551,576
219,953
(1,304
)
3,691,884
Capital expenditures
$
28,666
2,353
1,556
1,767
1,558
9,231
1,891
—
47,022
Depreciation and amortization
$
31,049
1,881
1,489
5,263
1,912
7,398
1,958
—
50,950
Equity
$
1,521,059
65,100
29,148
247,725
94,727
159,308
114,726
(34,574
)
2,197,219
For the twelve months ended December
31, 2018:
Revenues1
$
2,479,812
355,802
156,854
2,886,322
777,863
1,330,365
464,071
(312,724
)
8,138,365
Directly related cost of transportation
and other expenses2
$
1,352,924
216,753
94,041
2,315,826
591,925
926,949
330,209
(310,635
)
5,517,992
Salaries and other operating expenses3
$
816,817
94,950
53,970
289,015
125,056
337,970
108,131
(2,099
)
1,823,810
Operating income
$
310,071
44,099
8,843
281,481
60,882
65,446
25,731
10
796,563
Identifiable assets at period end
$
1,689,950
161,604
53,542
533,071
152,646
513,744
206,367
3,635
3,314,559
Capital expenditures
$
21,732
4,259
1,042
3,057
2,182
10,815
4,387
—
47,474
Depreciation and amortization
$
33,511
1,847
1,508
5,309
2,257
7,727
1,860
—
54,019
Equity
$
1,339,673
72,941
26,007
200,371
100,706
157,003
123,228
(32,209
)
1,987,720
1In 2019, the Company revised its process
to record the transfer, between its geographic operating segments,
of revenues and the directly related cost of transportation
expenses for freight service transactions between Company origin
and destination locations. This change better aligns revenue
reporting with the location where the services are performed, as
well as the transactional reporting being developed as part of the
Company’s new accounting systems and processes. Prior year segment
revenues have not been revised. The change in presentation had no
impact on consolidated or segment operating income. The 2019
results also include the effect of changing the presentation of
certain import services from a net to a gross basis, which
increased segment revenues and directly related operating expenses
but did not change operating income. The impact of these changes on
reported segment revenues was immaterial and prior year segment
revenues have not been revised.
2Directly related cost of transportation
and other expenses totals Operating Expenses from Airfreight
services, Ocean freight and ocean services and Customs brokerage
and other services as shown in the Consolidated Statements of
Earnings.
3Salaries and other operating expenses
totals Salaries and related, Rent and occupancy, Depreciation and
amortization, Selling and promotion and Other as shown in the
Consolidated Statements of Earnings.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200218005322/en/
Jeffrey S. Musser President and Chief Executive Officer (206)
674-3433
Bradley S. Powell Senior Vice President and Chief Financial
Officer (206) 674-3412
Geoffrey Buscher Director - Investor Relations (206)
892-4510
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