Expeditors International of Washington, Inc. (NASDAQ:EXPD) today
announced second quarter 2022 financial results including the
following highlights compared to the same quarter of 2021:
- Diluted Net Earnings Attributable to Shareholders per share
(EPS1) increased 23% to $2.27
- Net Earnings Attributable to Shareholders increased 19% to $378
million
- Operating Income increased 23% to $506 million
- Revenues increased 28% to $4.6 billion
- Airfreight tonnage volume and ocean container volume decreased
17% and 11%, respectively
“This was the strongest second quarter in our company’s history,
even while our air and ocean volumes were soft compared to a year
ago,” said Jeffrey S. Musser, President and Chief Executive
Officer. “During the second quarter we continued the recovery from
the February cyber-attack and re-established digital connections
with many of our customers, which limited our ability to move cargo
through our systems. We also experienced a significant drop in
volumes in China due to the various lockdowns that resulted in
factories not operating and cargo being unavailable to ship. We
believe the volume changes are primarily related to timing of our
recovery from the cyber-attack, our significant market presence in
China, as well as a slowing economy and an overall drop in demand.
We simply cannot say enough about the quality of our employees and
their commitment to our customers over the last couple of years.
Our experiences during the pandemic and recovery from the
cyber-attack have tested the will of our staff, as well as the
strength and commitment of our service providers and customers.
“Looking at the current environment, our perspective is that
there is a great deal of uncertainty in the marketplace. Buy and
sell rates have come down from their peaks but remain elevated and
out of balance by historical standards. We see signs that the
global economy has started to slow and that capacity is no longer
severely constrained relative to demand that has also come down
from earlier peaks. Nevertheless, airline belly capacity in many
markets has not bounced back and we continued to access additional
capacity by using air charters to meet shipper demand. Ocean
transit times continued to be stretched by port congestion and many
ongoing shortages of equipment, labor, and warehousing space.
Various onshore bottlenecks further impacted many of our ocean and
air lanes, in addition to affecting our customs business due to
record high drayage, storage, delivery, demurrage, and detention
costs at destination. We do not see signs that these conditions are
likely to improve significantly any time soon. The unpredictability
of COVID restrictions and lockdowns in China, as well as route
restrictions and sanctions from the Ukraine conflict, continue to
make global shipping a highly challenging business right now. But
the strength of our organization and culture is in bringing order
to chaos to service the needs of our customers by accessing
capacity and delivering solutions despite the many
disruptions.”
Bradley S. Powell, Senior Vice President and Chief Financial
Officer, added, “All of our products performed well during the
quarter and we returned $659 million to shareholders in repurchased
stock and dividends. Given the current economic uncertainty and
government actions aimed at taming inflation, along with the
ongoing challenges throughout the global supply chain, we believe
that rates will continue to be highly volatile at least through the
end of the year, while generally continuing to trend downwards from
their highs over the longer-term. We are no strangers to
uncertainty and remain highly disciplined and focused on our
customers’ need for capacity and solutions. We will continue to
explore ways to further enhance our already strong efficiencies as
we continue to adapt to the current operating environment.”
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.
Disclaimer on Forward-Looking
Statements:
Certain statements contained in this news release are
“forward-looking statements,” based on management’s views with
respect to future events and underlying assumptions that involve
risks and uncertainties. These forward-looking statements include
statements regarding the financial and operational impact of the
cyber-attack; the future stabilization of supply/demand imbalance
and rate volatility; the continued unsettled operating environment
due to uncertain air and ocean capacity; volatile air and ocean
pricing and uneven demand for such services; port congestion;
equipment imbalances; labor shortages; insufficient warehouse and
pier space; trade disruptions; rising fuels costs; the conflict in
Ukraine; signs of a slowing economy and drop in demand; and the
uneven lifting of the COVID-19 pandemic restrictions around the
world. Future financial performance could differ materially because
of factors such as: our ability to leverage the strength of our
carrier relationships to secure space; the strength of our
non-asset-based operating model; our expectation that the
supply/demand imbalance, rate volatility, and various on-shore
bottlenecks are unlikely to improve any time soon; our ability to
fully re-open our offices for return-to-work; our ability to
continue to enhance our productivity; our ability to invest in our
strategic efforts to explore new areas for profitable growth; our
ability to avoid another material cyber-attack; and our ability to
remain a strong, healthy, unified and resilient organization. The
ongoing impact of the COVID-19 pandemic could have the effect of
heightening many of the other risks described in Item 1A of our
Annual Report on Form 10-K, including, without limitation, those
related to the success of our strategy and desire to maintain
historical unitary profitability, our ability to attract and retain
customers, our ability to manage costs, interruptions to our
information technology systems, the ability of third-party
providers to perform and potential litigation as updated by our
reports on Form 10-Q, filed with the Securities and Exchange
Commission. These and other factors are discussed in the Company’s
regulatory filings with the Securities and Exchange Commission,
including those in “Item 1A. Risk Factors” of the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2021 and
the Company’s most recent Form 10-Q. The forward-looking statements
contained in this news release speak only as of this date and the
Company does not assume any obligation to update them except as
required by law.
Expeditors International of Washington,
Inc.
Second Quarter 2022 Earnings Release,
August 2, 2022
Financial Highlights for the three and
six months ended June 30, 2022 and 2021 (Unaudited)
(in 000's of US dollars except per share
data)
Three months ended June
30,
Six months ended June
30,
2022
2021
% Change
2022
2021
% Change
Revenues
$
4,603,312
$
3,609,093
28%
$
9,267,610
$
6,807,913
36%
Directly related cost of transportation
and
other expenses1
$
3,440,948
$
2,598,633
32%
$
6,957,059
$
4,845,917
44%
Salaries and other operating
expenses2
$
656,382
$
599,815
9%
$
1,342,809
$
1,165,836
15%
Operating income
$
505,982
$
410,645
23%
$
967,742
$
796,160
22%
Net earnings attributable to
shareholders
$
377,805
$
316,372
19%
$
723,914
$
603,592
20%
Diluted earnings attributable
to
shareholders per share
$
2.27
$
1.84
23%
$
4.31
$
3.52
22%
Basic earnings attributable to
shareholders
per share
$
2.29
$
1.87
22%
$
4.35
$
3.57
22%
Diluted weighted average shares
outstanding
166,474
171,677
(3)%
167,980
171,660
(2)%
Basic weighted average shares
outstanding
165,092
169,210
(2)%
166,423
169,140
(2)%
__________________________________ 1 Directly 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. 2 Salaries 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.
Financial Impact of the Cyber-Attack
In the three and six months ended June 30, 2022, the Company
incurred, as a result of our inability to timely process and move
shipments through ports, approximately $22 million and $62 million,
respectively, in incremental demurrage charges, where the Company
has direct liability for this obligation. These costs are recorded
in customs brokerage and other services expenses.
Additionally, principally in the first quarter, the Company
incurred investigation, recovery, and remediation expenses,
including costs to recover its operational and accounting systems
and to enhance cybersecurity protections. These costs are primarily
comprised of various consulting services including cybersecurity
experts, outside legal advisors, and other IT professional
expenses. The Company also recorded estimated liabilities for
potential shipment-related claims. Total amounts recorded for the
items above for the three and six months ended June 30, 2022 were
approximately $6 million and $28 million, respectively, and are
reported in other operating expenses. The Company does not expect
to incur significant capital expenditures as a result of the
cyber-attack.
The Company may incur additional expenses which could include
third-party expenses, incremental information services costs, legal
fees, or indemnities to customers or business partners. When the
Company’s operating systems were down, many customers worked with
other providers to meet their logistics needs, resulting in lower
shipment volumes in the first quarter and to a lesser extent in the
second quarter for which the financial impact on revenues and
operating income cannot be quantified. Such costs and the ongoing
impacts from the down time caused by the cyber-attack could have a
further material adverse impact on the Company’s business,
revenues, expenses, results of operations, cash flows and
reputation. The Company is unable to estimate the ultimate direct
and indirect financial impacts of this cyber-attack.
Employee Full-time Equivalents
as of June 30,
2022
2021
North America
7,752
6,949
Europe
4,127
3,700
North Asia
2,490
2,416
South Asia
1,824
1,671
Middle East, Africa and India
1,543
1,496
Latin America
853
781
Information Systems
1,093
968
Corporate
414
399
Total
20,096
18,380
Second quarter
year-over-year
percentage decrease:
2022
Airfreight
kilos
Ocean freight
FEU
April
(24)%
(13)%
May
(13)%
(11)%
June
(13)%
(10)%
Quarter
(17)%
(11)%
During the three and six months ended June 30, 2022, we
repurchased 5 million shares of common stock at $109.81 per share.
During the three and six months ended June 30, 2021, we repurchased
0.5 million and 1.4 million shares of common stock at an average
price of $124.94 and $104.20 per share, respectively.
Investors may submit written questions via e-mail to:
investor@expeditors.com. Questions received by the end of business
on August 5, 2022 will be considered in management's 8-K “Responses
to Selected Questions.”
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands, except per share
data)
(Unaudited)
June 30,
2022
December 31,
2021
Assets:
Current Assets:
Cash and cash equivalents
$
1,976,971
$
1,728,692
Accounts receivable, less allowance for
credit loss of
$7,636 at June 30, 2022 and $6,686 at
December 31, 2021
3,469,833
3,810,286
Deferred contract costs
745,577
987,266
Other
137,768
108,801
Total current assets
6,330,149
6,635,045
Property and equipment, less accumulated
depreciation and
amortization of $554,252 at June 30, 2022
and $541,677 at
December 31, 2021
495,328
487,870
Operating lease right-of-use assets
491,630
459,158
Goodwill
7,927
7,927
Deferred federal and state income taxes,
net
19,413
729
Other assets, net
16,695
19,200
Total assets
$
7,361,142
$
7,609,929
Liabilities:
Current Liabilities:
Accounts payable
1,914,979
2,012,461
Accrued liabilities, primarily salaries
and related costs
473,644
403,625
Contract liabilities
867,467
1,142,026
Current portion of operating lease
liabilities
88,112
82,019
Federal, state and foreign income
taxes
66,864
86,166
Total current liabilities
3,411,066
3,726,297
Noncurrent portion of operating lease
liabilities
414,813
385,641
Commitments and contingencies
—
—
Shareholders’ Equity:
Preferred stock, none issued
—
—
Common stock, par value $0.01 per share.
Issued and
outstanding: 162,931 shares at June 30,
2022 and 167,210
shares at December 31, 2021
1,629
1,672
Additional paid-in capital
137
3,160
Retained earnings
3,717,316
3,620,008
Accumulated other comprehensive loss
(193,834
)
(130,414
)
Total shareholders’ equity
3,525,248
3,494,426
Noncontrolling interest
10,015
3,565
Total equity
3,535,263
3,497,991
Total liabilities and equity
$
7,361,142
$
7,609,929
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements
of Earnings
(In thousands, except per share
data)
(Unaudited)
Three months ended June
30,
Six months ended June
30,
2022
2021
2022
2021
Revenues:
Airfreight services
$
1,602,566
$
1,523,569
$
3,201,121
$
2,849,484
Ocean freight and ocean services
1,759,646
1,098,550
3,735,892
2,052,462
Customs brokerage and other services
1,241,100
986,974
2,330,597
1,905,967
Total revenues
4,603,312
3,609,093
9,267,610
6,807,913
Operating Expenses:
Airfreight services
1,212,503
1,136,328
2,355,049
2,090,872
Ocean freight and ocean services
1,402,365
862,251
3,002,608
1,604,686
Customs brokerage and other services
826,080
600,054
1,599,402
1,150,359
Salaries and related
508,222
481,186
1,047,162
933,291
Rent and occupancy
51,598
45,366
102,526
90,646
Depreciation and amortization
14,254
12,675
27,229
25,662
Selling and promotion
5,887
3,172
9,935
6,242
Other
76,421
57,416
155,957
109,995
Total operating expenses
4,097,330
3,198,448
8,299,868
6,011,753
Operating income
505,982
410,645
967,742
796,160
Other Income (Expense):
Interest income
2,720
2,188
4,612
4,134
Other, net
106
2,649
7,633
5,649
Other income, net
2,826
4,837
12,245
9,783
Earnings before income taxes
508,808
415,482
979,987
805,943
Income tax expense
126,582
98,508
248,281
201,019
Net earnings
382,226
316,974
731,706
604,924
Less net earnings attributable to the
noncontrolling
interest
4,421
602
7,792
1,332
Net earnings attributable to
shareholders
$
377,805
$
316,372
$
723,914
$
603,592
Diluted earnings attributable to
shareholders per share
$
2.27
$
1.84
$
4.31
$
3.52
Basic earnings attributable to
shareholders per share
$
2.29
$
1.87
$
4.35
$
3.57
Weighted average diluted shares
outstanding
166,474
171,677
167,980
171,660
Weighted average basic shares
outstanding
165,092
169,210
166,423
169,140
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements
of Cash Flows
(In thousands)
(Unaudited)
Three months ended June
30,
Six months ended June
30,
2022
2021
2022
2021
Operating Activities:
Net earnings
$
382,226
$
316,974
$
731,706
$
604,924
Adjustments to reconcile net earnings to
net cash from
operating activities:
Provisions for losses on accounts
receivable
4,763
1,090
4,347
2,289
Deferred income tax (benefit) expense
(8,622
)
1,850
(11,858
)
10,001
Stock compensation expense
25,518
30,909
37,121
42,094
Depreciation and amortization
14,254
12,675
27,229
25,662
Other, net
(1,746
)
346
(1,291
)
897
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable
378,291
(410,783
)
245,943
(663,697
)
(Decrease) increase in accounts payable
and accrued expenses
(133,171
)
99,944
7,020
333,182
Decrease (increase) in deferred contract
costs
37,138
(150,382
)
211,068
(221,640
)
(Decrease) increase in contract
liabilities
(45,574
)
174,504
(238,931
)
254,094
Decrease in income taxes payable, net
(93,430
)
(47,994
)
(47,171
)
(1,356
)
(Increase) decrease in other, net
(1,001
)
1,164
7,409
(324
)
Net cash from operating activities
558,646
30,297
972,592
386,126
Investing Activities:
Purchase of property and equipment
(38,158
)
(6,539
)
(52,570
)
(14,930
)
Other, net
(134
)
138
(55
)
104
Net cash from investing activities
(38,292
)
(6,401
)
(52,625
)
(14,826
)
Financing Activities:
Proceeds from borrowing on lines of
credit, net
28,571
174
48,061
89
Proceeds from issuance of common stock
5,682
22,711
11,433
42,468
Repurchases of common stock
(549,065
)
(62,472
)
(549,065
)
(148,469
)
Dividends paid
(109,828
)
(98,387
)
(109,828
)
(98,387
)
Payments for taxes related to net share
settlement of equity
awards
(11,851
)
(13,893
)
(19,333
)
(15,168
)
Net cash from financing activities
(636,491
)
(151,867
)
(618,732
)
(219,467
)
Effect of exchange rate changes on cash
and cash equivalents
(46,518
)
8,699
(52,956
)
(5,503
)
Change in cash and cash equivalents
(162,655
)
(119,272
)
248,279
146,330
Cash and cash equivalents at beginning of
period
2,139,626
1,793,393
1,728,692
1,527,791
Cash and cash equivalents at end of
period
$
1,976,971
$
1,674,121
$
1,976,971
$
1,674,121
Taxes Paid:
Income taxes
$
236,791
$
143,959
$
314,751
$
190,536
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 June 30,
2022:
Revenues
$
1,265,363
144,988
66,136
1,582,475
611,246
658,307
275,948
(1,151
)
4,603,312
Directly related cost of
transportation
and other expenses1
$
797,179
85,806
43,298
1,323,354
507,473
464,399
220,162
(723
)
3,440,948
Salaries and other operating expenses2
$
314,726
31,308
14,496
104,896
38,728
115,394
37,258
(424
)
656,382
Operating income
$
153,458
27,874
8,342
154,225
65,045
78,514
18,528
(4
)
505,982
Identifiable assets at period end
$
3,681,137
304,799
144,303
1,275,808
554,166
1,081,246
365,532
(45,849
)
7,361,142
Capital expenditures
$
26,394
1,038
177
766
436
7,666
1,681
—
38,158
Equity
$
2,435,088
127,428
54,762
307,453
217,437
297,572
134,388
(38,865
)
3,535,263
For the three months ended June 30,
2021:
Revenues
$
997,567
101,465
46,981
1,309,382
417,718
544,949
192,186
(1,155
)
3,609,093
Directly related cost of
transportation
and other expenses1
$
566,882
59,311
25,952
1,086,641
335,219
376,856
148,290
(518
)
2,598,633
Salaries and other operating expenses2
$
241,121
31,300
14,735
106,812
49,046
123,408
34,026
(633
)
599,815
Operating income
$
189,564
10,854
6,294
115,929
33,453
44,685
9,870
(4
)
410,645
Identifiable assets at period end
$
2,972,363
196,558
102,296
1,114,475
377,370
929,706
291,406
(31,003
)
5,953,171
Capital expenditures
$
2,905
64
72
400
532
2,100
466
—
6,539
Equity
$
2,163,114
80,802
36,316
318,111
146,583
255,006
128,148
(44,429
)
3,083,651
UNITED
STATES
OTHER
NORTH
AMERICA
LATIN
AMERICA
NORTH
ASIA
SOUTH
ASIA
EUROPE
MIDDLE
EAST,
AFRICA
AND
INDIA
ELIMI-
NATIONS
CONSOLI-
DATED
For the six months ended June 30,
2022:
Revenues
$
2,506,587
249,598
123,843
3,351,491
1,257,575
1,234,098
546,629
(2,211
)
9,267,610
Directly related cost of
transportation
and other expenses1
$
1,560,602
150,038
77,155
2,803,447
1,046,356
882,019
438,262
(820
)
6,957,059
Salaries and other operating expenses2
$
648,375
56,177
27,597
228,009
84,057
224,663
75,300
(1,369
)
1,342,809
Operating income
$
297,610
43,383
19,091
320,035
127,162
127,416
33,067
(22
)
967,742
Identifiable assets at period end
$
3,681,137
304,799
144,303
1,275,808
554,166
1,081,246
365,532
(45,849
)
7,361,142
Capital expenditures
$
35,871
2,116
286
1,297
726
9,724
2,550
—
52,570
Equity
$
2,435,088
127,428
54,762
307,453
217,437
297,572
134,388
(38,865
)
3,535,263
For the six months ended June 30,
2021:
Revenues
$
1,872,957
195,582
91,845
2,518,430
767,484
1,011,282
352,692
(2,359
)
6,807,913
Directly related cost of
transportation
and other expenses1
$
1,069,517
112,361
52,652
2,054,170
605,163
683,765
269,399
(1,110
)
4,845,917
Salaries and other operating expenses2
$
479,819
57,037
27,112
213,732
92,211
232,863
64,301
(1,239
)
1,165,836
Operating income
$
323,621
26,184
12,081
250,528
70,110
94,654
18,992
(10
)
796,160
Identifiable assets at period end
$
2,972,363
196,558
102,296
1,114,475
377,370
929,706
291,406
(31,003
)
5,953,171
Capital expenditures
$
5,930
186
125
757
1,111
5,654
1,167
—
14,930
Equity
$
2,163,114
80,802
36,316
318,111
146,583
255,006
128,148
(44,429
)
3,083,651
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220801005770/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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