EXPEDITORS INTERNATIONAL OF WASHINGTON INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - May 3, 2016

Attached files

file filename
8-K - 8-K - EXPEDITORS INTERNATIONAL OF WASHINGTON INCa20161qer8-k.htm
Exhibit 99.1
EARNINGS RELEASE
By:    Expeditors International of Washington, Inc.
1015 Third Avenue, Suite 1200
Seattle, Washington 98104
CONTACTS:    

Jeffrey S. Musser
Bradley S. Powell                    Geoffrey Buscher
President and Chief Executive Officer    Senior Vice President and Chief Financial Officer        Director - Investor Relations
(206) 674-3433     (206) 674-3412                    (206) 892-4510

FOR IMMEDIATE RELEASE
__________________________________________________________________________________________________________________________________________________________________________
EXPEDITORS REPORTS FIRST QUARTER 2016 EPS OF $0.53 PER SHARE 1 
SEATTLE, WASHINGTON - May 3, 2016, Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced first quarter 2016 financial results including the following highlights compared to the same quarter of 2015:
•
Diluted Net Earnings Attributable to Shareholders per share decreased 4% to $0.53
•
Net Earnings Attributable to Shareholders decreased 9% to $97 million
•
Operating Income decreased 10% to $152 million
•
Net Revenues2 decreased 2% to $517 million while yields expanded 489 basis points to 36.5%
•
Airfreight tonnage volume decreased 9% and ocean container volume decreased 3%
•
Revenues decreased 15% to $1.4 billion

“We knew that comparing our 2016 results to our record year in 2015 would be challenging, especially when considering the current headwinds from slowing global trade,” commented Jeffrey S. Musser, President and Chief Executive Officer. “The business drivers in Q1 2015 were quite different from those in Q1 2016. In Q1 2015 we delivered solutions to customers who navigated around and through issues in the U.S. West Coast ports, and in Q1 2016 we worked with carriers to adjust pricing in over-supplied air and ocean markets to maintain and grow profitable market share. When reviewing the underlying fundamentals that drove these latest results, we are pleased with how things turned out. The outstanding customer service and efficiency that our people provide are critical to our success during this period of shifting balance of supply and demand.

“We are continuing our investment tied to the strategy that we laid out approximately two years ago. We have chosen the right areas of focus and our teams continue to execute extremely well. The high level of customer service offered by our employees, combined with our focus on implementing process improvements, are allowing us to continue to expand market share even in a difficult market.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Our people performed very well as we adapted to a rapidly changing marketplace affected by slowing global trade and excess carrier capacity. Similar to our Q4 2015 results, net revenue yields and cash flow from operations in Q1 2016 are among our best. Many of our customers are being cautious about how to spend their logistics dollar, taking advantage of abundant capacity in search of lower rates where possible, and we are aligning ourselves to address their needs. While volumes and average sell rates in air and ocean were lower compared to both Q1 and Q4 2015, we continued to benefit from available ocean and air carrier capacity and favorable market buying opportunities. We continued to invest in our people and our systems while carefully controlling our overhead expenses. Looking forward to Q2 and the rest of 2016, we expect rate volatility to continue and are aware of the uncertainties and challenges with the global economy and global trade and how they may continue to impact the comparisons to our 2015 financial results.”

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

Expeditors International of Washington, Inc.
First Quarter 2016 Earnings Release, May 3, 2016
Financial Highlights for the Three months ended March 31, 2016 and 2015 (Unaudited)
(in 000's of US dollars except per share data)
 
Three months ended March 31,
 
 
 
 
2016
 
2015
 
% Change
 
Revenues
$
1,418,472

 
$
1,677,526

 
(15)%
 
Net revenues1
$
517,069

 
$
529,486

 
(2)%
 
Operating income
$
151,826

 
$
168,883

 
(10)%
 
Net earnings attributable to shareholders
$
96,584

 
$
106,704

 
(9)%
 
Diluted earnings attributable to shareholders per share
$
0.53

 
$
0.55

 
(4)%
 
Basic earnings attributable to shareholders per share
$
0.53

 
$
0.56

 
(5)%
 
Diluted weighted average shares outstanding
183,018

 
192,707

 
 
 
Basic weighted average shares outstanding
182,010

 
191,628

 
 
 
_______________________
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.

During the three-month periods ended March 31, 2016 and 2015, respectively, the Company repurchased 1.5 million and 1.6 million shares of common stock at an average price of $47.79 and $47.86 per share.
 
Employee headcount as of March 31,
 
2016
 
2015
North America
5,652

 
5,399

Europe
2,731

 
2,552

North Asia
2,457

 
2,476

Middle East, Africa and India
1,479

 
1,369

South Asia
1,327

 
1,289

Latin America
775

 
784

Information Systems
765

 
705

Corporate
332

 
308

Total
15,518

 
14,882

 
 
Year-over-year percentage increase (decrease) in:
 
 
Airfreight kilos
 
Ocean freight FEU
2016
 
 
 
 
January
 
(9
)%
 
(2
)%
February
 
(12
)%
 
(15
)%
March
 
(7
)%
 
8
 %
Quarter
 
(9
)%
 
(3
)%
_______________________
Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on May 6, 2016 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about May 13, 2016.

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 future pricing volatility and impacts on margins, ability to maintain current margin levels, condition of the global economy and global trade, ability to grow profitable market share, ability to achieve benefits from strategies, and availability of carrier capacity and low rates. 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 and fuel 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 per share data)
(Unaudited)
 
 
March 31,
2016
 
December 31, 2015
Assets
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
1,013,917

 
$
807,796

Accounts receivable, net
1,010,667

 
1,112,260

Deferred Federal and state income taxes
18,203

 
16,861

Other current assets
44,693

 
56,453

Total current assets
2,087,480

 
1,993,370

Property and equipment, net
526,941

 
524,724

Goodwill
7,927

 
7,927

Other assets, net
57,395

 
56,417

 
$
2,679,743

 
$
2,582,438

Liabilities and Equity
 
 
 
Current Liabilities:
 
 
 
Accounts payable
623,699

 
645,304

Accrued expenses, primarily salaries and related costs
202,284

 
186,571

Federal, state and foreign income taxes
28,432

 
29,498

Total current liabilities
854,415

 
861,373

Deferred Federal and state income taxes
42,817

 
26,389

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Shareholders’ Equity:
 
 
 
Preferred stock; none issued
—

 
—

Common stock, par value $0.01 per share. Issued and outstanding 181,562 shares at March 31, 2016 and 182,067 shares at December 31, 2015
1,816

 
1,821

Additional paid-in capital
3,851

 
31

Retained earnings
1,845,356

 
1,771,379

Accumulated other comprehensive loss
(71,772
)
 
(81,238
)
Total shareholders’ equity
1,779,251

 
1,691,993

Noncontrolling interest
3,260

 
2,683

Total equity
1,782,511

 
1,694,676

 
$
2,679,743

 
$
2,582,438



03-May-2016
Expeditors International of Washington, Inc.
Page 3 of 7


EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
 
 
Three months ended
 
March 31,
 
2016
 
2015
Revenues:
 
 
 
Airfreight services
$
560,853

 
$
707,444

Ocean freight and ocean services
454,192

 
565,717

Customs brokerage and other services
403,427

 
404,365

Total revenues
1,418,472

 
1,677,526

Operating Expenses:
 
 
 
Airfreight services
388,777

 
513,001

Ocean freight and ocean services
323,020

 
445,456

Customs brokerage and other services
189,606

 
189,583

Salaries and related costs
283,355

 
278,878

Rent and occupancy costs
26,859

 
25,388

Depreciation and amortization
11,329

 
11,529

Selling and promotion
9,432

 
9,247

Other
34,268

 
35,561

Total operating expenses
1,266,646

 
1,508,643

Operating income
151,826

 
168,883

Other Income (Expense):
 
 
 
Interest income
2,779

 
2,732

Other, net
879

 
34

Other income, net
3,658

 
2,766

Earnings before income taxes
155,484

 
171,649

Income tax expense
58,437

 
64,317

Net earnings
97,047

 
107,332

Less net earnings attributable to the noncontrolling interest
463

 
628

Net earnings attributable to shareholders
$
96,584

 
$
106,704

Diluted earnings attributable to shareholders per share
$
0.53

 
$
0.55

Basic earnings attributable to shareholders per share
$
0.53

 
$
0.56

Weighted average diluted shares outstanding
183,018

 
192,707

Weighted average basic shares outstanding
182,010

 
191,628



03-May-2016
Expeditors International of Washington, Inc.
Page 4 of 7

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Three months ended
 
March 31,
 
2016
 
2015
Operating Activities:
 
 
 
Net earnings
$
97,047

 
$
107,332

Adjustments to reconcile net earnings to net cash from operating activities:
 
 
 
Provision for losses on accounts receivable
578

 
277

Deferred income tax expense
9,896

 
11,937

Excess tax benefits from stock plans
—

 
(1,480
)
Stock compensation expense
10,831

 
9,907

Depreciation and amortization
11,329

 
11,529

Other
36

 
86

Changes in operating assets and liabilities:
 
 
 
Decrease (increase) in accounts receivable
112,710

 
(46,790
)
(Decrease) increase in accounts payable and accrued expenses
(15,344
)
 
14,895

Increase in income taxes payable, net
10,925

 
23,132

(Increase) decrease in other current assets
(2,055
)
 
3,569

Net cash from operating activities
235,953

 
134,394

Investing Activities:
 
 
 
(Increase) decrease in short-term investments, net
(35
)
 
40,274

Purchase of property and equipment
(14,035
)
 
(9,445
)
Other, net
(524
)
 
198

Net cash from investing activities
(14,594
)
 
31,027

Financing Activities:
 
 
 
Proceeds from issuance of common stock
41,635

 
35,048

Repurchases of common stock
(70,292
)
 
(77,368
)
Excess tax benefits from stock plans
—

 
1,480

Distribution to noncontrolling interest
—

 
(857
)
Net cash from financing activities
(28,657
)
 
(41,697
)
Effect of exchange rate changes on cash and cash equivalents
13,419

 
(17,687
)
Increase in cash and cash equivalents
206,121

 
106,037

Cash and cash equivalents at beginning of period
807,796

 
927,107

Cash and cash equivalents at end of period
$
1,013,917

 
$
1,033,144

Taxes paid:
 
 
 
Income taxes
$
37,984

 
$
28,261



03-May-2016
Expeditors International of Washington, Inc.
Page 5 of 7

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
Three months ended March 31, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
407,826

 
52,106

 
20,064

 
497,232

 
136,418

 
221,897

 
82,929

 
—

 
1,418,472

Transfers between geographic areas
26,034

 
2,700

 
3,601

 
5,096

 
5,806

 
10,361

 
5,394

 
(58,992
)
 
—

Total revenues
$
433,860

 
54,806

 
23,665

 
502,328

 
142,224

 
232,258

 
88,323

 
(58,992
)
 
1,418,472

Net revenues
$
220,698

 
27,378

 
13,733

 
110,791

 
39,518

 
74,541

 
30,407

 
3

 
517,069

Operating income
$
48,205

 
7,291

 
3,852

 
55,218

 
15,691

 
12,253

 
9,313

 
3

 
151,826

Identifiable assets
$
1,255,099

 
119,258

 
56,334

 
455,973

 
133,940

 
438,711

 
216,576

 
3,852

 
2,679,743

Capital expenditures
$
8,137

 
311

 
485

 
1,085

 
655

 
2,119

 
1,243

 
—

 
14,035

Depreciation and amortization
$
7,332

 
364

 
253

 
1,319

 
512

 
1,098

 
451

 
—

 
11,329

Equity
$
978,426

 
79,312

 
37,325

 
300,188

 
115,606

 
167,726

 
137,112

 
(33,184
)
 
1,782,511

Three months ended March 31, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
444,181

 
54,794

 
24,081

 
645,444

 
181,381

 
242,086

 
85,559

 
—

 
1,677,526

Transfers between geographic areas
27,675

 
2,814

 
4,777

 
5,697

 
5,915

 
9,637

 
5,067

 
(61,582
)
 
—

Total revenues
$
471,856

 
57,608

 
28,858

 
651,141

 
187,296


251,723

 
90,626

 
(61,582
)
 
1,677,526

Net revenues
$
219,603

 
30,678

 
16,559

 
117,405

 
42,200

 
75,888

 
27,153

 
—

 
529,486

Operating income
$
59,181

 
11,091

 
5,356

 
57,056

 
13,880

 
15,071

 
7,248

 
—

 
168,883

Identifiable assets
$
1,451,103

 
109,180

 
57,232

 
541,983

 
143,910

 
430,338

 
198,954

 
11,078

 
2,943,778

Capital expenditures
$
6,325

 
288

 
617

 
290

 
319

 
1,148

 
458

 
—

 
9,445

Depreciation and amortization
$
7,393

 
292

 
268

 
1,399

 
530

 
1,246

 
401

 
—

 
11,529

Equity
$
1,182,808

 
58,998

 
34,604

 
306,775

 
106,139

 
154,343

 
120,086

 
(36,222
)
 
1,927,531





03-May-2016
Expeditors International of Washington, Inc.
Page 6 of 7

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)
2016
 
2015
Total revenues
$
1,418,472

 
$
1,677,526

Expenses:
 
 
 
Airfreight services
388,777

 
513,001

Ocean freight and ocean services
323,020

 
445,456

Customs brokerage and other services
189,606

 
189,583

Net revenues
$
517,069

 
$
529,486




03-May-2016
Expeditors International of Washington, Inc.
Page 7 of 7

Stock widget

Investing forum

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Reports