Expeditors International of Washington, Inc. (NASDAQ:EXPD) today
announced first quarter 2020 financial results including the
following highlights compared to the same quarter of 2019:
- Diluted Net Earnings Attributable to Shareholders per share
(EPS1) decreased 11% to $0.71
- Net Earnings Attributable to Shareholders decreased 12% to $122
million
- Operating Income decreased 15% to $159 million
- Revenues decreased 6% to $1.9 billion
- Airfreight tonnage volume decreased 7% and ocean container
volume decreased 10%
“I offer my heartfelt appreciation to everyone throughout our
organization for their tremendous efforts during the challenging
conditions brought about as a result of the COVID-19 pandemic,”
said Jeffrey S. Musser, President and Chief Executive Officer. “As
befits our legacy and the culture of our organization, we put the
health, safety, and welfare of our employees and their families
ahead of all other concerns. In doing so, we were able to shift
much of our staff to a virtual environment while still providing
essential supply chain services to our customers. Achieving this
during a time of such unparalleled crisis is impressive and I offer
my sincerest thank you to our entire staff.”
Mr. Musser continued, “Our Q1 performance was better than we
might have expected, given the contraction in demand across
geographies, as well as the severity and suddenness of the collapse
in air carrier belly space and reduction in containership sailings.
While there is talk of various markets starting to come back on
line, the impact of COVID-19 continues to have an enormous impact
on the global economic environment, to both supply and demand, as
well as to buy/sell rates. While we remain fully staffed and ready
for when economies across the world start to regain their
post-crisis footing, we do not know when, how quickly, or how
uniformly that will take place. Until then, we remain steadfast in
our commitment to our valued customers, our carrier partners, and
to all of our dedicated employees around the world.”
Bradley S. Powell, Senior Vice President and Chief Financial
Officer, added, “Operating income was negatively impacted by the
disruption caused by COVID-19, which led to many factory shutdowns,
commercial flight cancellations, and reduced ocean sailings as
economies around the world diverted activities to fight the
pandemic. As a result, we experienced a shift in the goods we
handle with increased shipments of medical equipment and supplies
to help combat COVID-19 and technology products to support social
distancing and working remotely. Conversely, we saw a significant
decline in shipments from our customers in retail, aerospace,
automotive and the oil and energy sectors. Salaries and related
expenses declined 4% compared to a year ago, primarily as a result
of lower bonuses and commissions under our variable compensation
plans. Importantly, we honored our commitment to not furlough or
lay off our valuable employees around the world during this crisis.
We expect disruptions from COVID-19 to continue for the remainder
of 2020. Our balance sheet and cash flow are strong and we expect
to continue to make investments in our people, processes and
technology.”
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.
First Quarter 2020 Earnings Release,
May 5, 2020
Financial Highlights for the three
months ended March 31, 2020 and 2019 (Unaudited)
(in 000's of US dollars except per share
data)
Three months ended March
31,
2020
2019
% Change
Revenues
$
1,901,864
$
2,020,051
(6)%
Directly related cost of transportation
and other expenses1
$
1,286,728
$
1,365,937
(6)%
Salaries and other operating
expenses2
$
456,081
$
466,513
(2)%
Operating income
$
159,055
$
187,601
(15)%
Net earnings attributable to
shareholders
$
122,344
$
139,699
(12)%
Diluted earnings attributable to
shareholders per share
$
0.71
$
0.80
(11)%
Basic earnings attributable to
shareholders per share
$
0.73
$
0.81
(10)%
Diluted weighted average shares
outstanding
171,450
175,388
Basic weighted average shares
outstanding
168,735
171,818
_______________________ 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 Condensed 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 Condensed Consolidated
Statements of Earnings.
During the three months ended March 31, 2020, we repurchased 4.0
million shares of common stock at an average price of $70.81 per
share. During the three months ended March 31, 2019, we repurchased
0.6 million shares of common stock at an average price of $75.40
per share.
Employee Full-time Equivalents
March 31,
2020
2019
North America
6,848
6,806
Europe
3,430
3,404
North Asia
2,429
2,540
South Asia
1,677
1,654
Middle East, Africa and India
1,536
1,541
Latin America
848
862
Information Systems
955
915
Corporate
379
380
Total
18,102
18,102
First quarter
year-over-year percentage decrease in:
Airfreight
kilos
Ocean freight
FEU
2020
January
(7)%
(6)%
February
(4)%
(9)%
March
(10)%
(13)%
Quarter
(7)%
(10)%
Investors may submit written questions via e-mail to:
investor@expeditors.com. Questions received by the end of business
on May 8, 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 second
quarter as a result of containment measures related to the Novel
Coronavirus (COVID-19); uncertainty over if and when various
markets may come back on line; the impact on the global economic
environment, to both supply and demand, as well as to buy/sell
rates; the duration of the COVID-19 pandemic; our continuing
ability to make investments in people, process and technology
throughout this period; 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, 2019 and 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 per share
data)
(Unaudited)
March 31, 2020
December 31,
2019
Assets:
Current Assets:
Cash and cash equivalents
$
1,111,973
$
1,230,491
Accounts receivable, less allowance for
credit loss of $3,578 at March 31, 2020 and $11,143 at December 31,
2019
1,268,798
1,315,091
Deferred contract costs
143,986
131,783
Other
94,060
92,558
Total current assets
2,618,817
2,769,923
Property and equipment, less accumulated
depreciation and amortization of $481,490 at March 31, 2020 and
$478,906 at December 31, 2019
484,588
499,344
Operating lease right-of-use assets
372,748
390,035
Goodwill
7,927
7,927
Deferred federal and state income taxes,
net
9,680
8,034
Other assets, net
16,207
16,621
Total assets
$
3,509,967
$
3,691,884
Liabilities:
Current Liabilities:
Accounts payable
$
700,944
$
735,695
Accrued expenses, primarily salaries and
related costs
201,756
189,446
Contract liabilities
170,866
154,183
Current portion of operating lease
liabilities
63,748
65,367
Federal, state and foreign income
taxes
21,864
23,627
Total current liabilities
1,159,178
1,168,318
Noncurrent portion of operating lease
liabilities
313,644
326,347
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued
—
—
Common stock, par value $0.01 per share.
Issued and outstanding: 166,193 shares at March 31, 2020 and
169,622 shares at December 31, 2019
1,662
1,696
Additional paid-in capital
682
3,203
Retained earnings
2,202,208
2,321,316
Accumulated other comprehensive loss
(169,746
)
(131,187
)
Total shareholders’ equity
2,034,806
2,195,028
Noncontrolling interest
2,339
2,191
Total equity
2,037,145
2,197,219
Total liabilities and equity
$
3,509,967
$
3,691,884
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements
of Earnings
(In thousands, except per share
data)
(Unaudited)
Three months ended March
31,
2020
2019
Revenues:
Airfreight services
$
709,039
$
714,901
Ocean freight and ocean services
493,427
568,641
Customs brokerage and other services
699,398
736,509
Total revenues
1,901,864
2,020,051
Operating Expenses:
Airfreight services
520,169
509,210
Ocean freight and ocean services
366,483
420,331
Customs brokerage and other services
400,076
436,396
Salaries and related
342,040
356,910
Rent and occupancy
42,524
41,523
Depreciation and amortization
12,660
13,393
Selling and promotion
8,243
11,076
Other
50,614
43,611
Total operating expenses
1,742,809
1,832,450
Operating income
159,055
187,601
Other Income (Expense):
Interest income
4,807
6,106
Other, net
3,384
1,665
Other income, net
8,191
7,771
Earnings before income taxes
167,246
195,372
Income tax expense
44,464
55,261
Net earnings
122,782
140,111
Less net earnings attributable to the
noncontrolling
interest
438
412
Net earnings attributable to
shareholders
$
122,344
$
139,699
Diluted earnings attributable to
shareholders per share
$
0.71
$
0.80
Basic earnings attributable to
shareholders per share
$
0.73
$
0.81
Weighted average diluted shares
outstanding
171,450
175,388
Weighted average basic shares
outstanding
168,735
171,818
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements
of Cash Flows
(In thousands)
(Unaudited)
Three months ended March
31,
2020
2019
Operating Activities:
Net earnings
$
122,782
$
140,111
Adjustments to reconcile net earnings to
net cash from operating activities:
Provisions for losses (recoveries) on
accounts receivable
1,820
(1,888
)
Deferred income tax (benefit) expense
(5,139
)
2,108
Stock compensation expense
11,156
13,382
Depreciation and amortization
12,660
13,393
Other, net
433
189
Changes in operating assets and
liabilities:
Decrease in accounts receivable
16,680
230,477
Increase (decrease) in accounts payable
and accrued expenses
917
(122,283
)
(Increase) decrease in deferred contract
costs
(16,068
)
31,259
Increase (decrease) in contract
liabilities
21,201
(36,725
)
Increase in income taxes payable, net
10,488
16,993
(Increase) decrease in other, net
(11,930
)
2,467
Net cash from operating activities
165,000
289,483
Investing Activities:
Purchase of property and equipment
(6,127
)
(9,435
)
Other, net
(143
)
255
Net cash from investing activities
(6,270
)
(9,180
)
Financing Activities:
Proceeds from issuance of common stock
23,399
27,190
Repurchases of common stock
(283,240
)
(44,334
)
Payments for taxes related to net share
settlement of equity awards
(1,396
)
—
Net cash from financing activities
(261,237
)
(17,144
)
Effect of exchange rate changes on cash
and cash equivalents
(16,011
)
2,535
Change in cash and cash equivalents
(118,518
)
265,694
Cash and cash equivalents at beginning of
period
1,230,491
923,735
Cash and cash equivalents at end of
period
$
1,111,973
$
1,189,429
Taxes Paid:
Income taxes
$
35,304
$
37,253
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 March 31,
2020:
Revenues1
$
650,407
81,831
37,890
537,955
169,042
320,640
105,039
(940
)
1,901,864
Directly related cost of transportation
and other expenses2
$
373,961
45,890
23,765
425,301
121,282
221,998
74,976
(445
)
1,286,728
Salaries and other operating expenses3
$
225,944
23,712
11,749
57,433
29,908
81,854
25,950
(469
)
456,081
Operating income
$
50,502
12,229
2,376
55,221
17,852
16,788
4,113
(26
)
159,055
Identifiable assets at period end
$
1,858,250
135,810
68,402
512,808
179,508
554,831
200,382
(24
)
3,509,967
Capital expenditures
$
4,497
61
102
325
188
645
309
—
6,127
Equity
$
1,369,580
63,378
28,020
237,255
102,001
159,222
113,349
(35,660
)
2,037,145
For the three months ended March 31,
2019:
Revenues1
$
659,784
91,410
34,179
632,853
177,179
312,690
112,675
(719
)
2,020,051
Directly related cost of transportation
and other expenses2
$
367,355
56,241
19,116
498,646
129,810
215,895
79,503
(629
)
1,365,937
Salaries and other operating expenses3
$
218,416
24,209
12,427
68,427
31,462
82,843
28,811
(82
)
466,513
Operating income
$
74,013
10,960
2,636
65,780
15,907
13,952
4,361
(8
)
187,601
Identifiable assets at period end
$
1,906,278
175,034
71,168
511,589
174,512
579,924
234,195
(9,788
)
3,642,912
Capital expenditures
$
6,915
228
93
344
176
982
697
—
9,435
Equity
$
1,401,450
82,170
28,581
238,518
114,290
165,718
126,953
(32,246
)
2,125,434
1Beginning in the second quarter of 2019, the Company revised
its process to record the transfer, between its geographic
operating segments, of revenues and the directly related cost of
transportation and other 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. The change in presentation had no impact on consolidated
or segment operating income. The impact of these changes on
reported segment revenues was immaterial and first quarter 2019
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 Condensed 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 Condensed Consolidated
Statements of Earnings.
The Company’s consolidated financial results in the first
quarter 2020 were significantly impacted by the effects of the
Novel Coronavirus (COVID-19) pandemic and are expected to be
further impacted in the remainder of 2020. In the first quarter of
2020, North Asia and United States experienced the most significant
declines in results due to the disruptions of trade to and from
China, which impacted overall freight movement around the globe.
Factories in China experienced extended closures and many airlines
cancelled flights to and from China. Additionally, ocean carriers
have reduced their capacity by anchoring vessels and skipping ports
due to the decline in demand. As a result, starting in January
certain of the Company’s central China offices experienced
temporary closures and limited operations and shipments were
rerouted or delayed by customers and service providers taking their
own precautionary measures. Also, available airfreight capacity was
reduced affecting the ability to efficiently route customers’
freight. In the first quarter 2020 and 2019, the People's Republic
of China, including Hong Kong, represented 23% and 27%,
respectively, of the Company’s total revenues and 25% and 29%,
respectively, of the Company’s total operating income
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200505005232/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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