EX-99.1 2 a20143qerexhibit991.htm EXHIBIT 2014 3Q ER Exhibit 99.1

Exhibit 99.1
EARNINGS RELEASE
By:    Expeditors International of Washington, Inc.
1015 Third Avenue, Suite 1200
Seattle, Washington 98104
CONTACTS:
R. Jordan Gates                Bradley S. Powell
President and Chief Operating Officer    Senior Vice President and Chief Financial Officer
(206) 674-3427     (206) 674-3412
FOR IMMEDIATE RELEASE
__________________________________________________________________________________________________________________________________________________________________________
EXPEDITORS REPORTS THIRD QUARTER 2014 EPS OF $0.53 PER SHARE 1 
SEATTLE, WASHINGTON - November 4, 2014, Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced net earnings attributable to shareholders of $102,381,000 for the third quarter of 2014, as compared with $92,400,000 for the same quarter of 2013, an increase of 11%. Net revenues2 for the third quarter of 2014 increased 6% to $513,256,000 as compared with $484,902,000 for the same quarter in 2013. Total revenues and operating income were $1,705,105,000 and $159,131,000 in the third quarter of 2014, as compared with $1,537,966,000 and $146,313,000 for the same quarter of 2013, increases of 11% and 9%, respectively. Diluted net earnings attributable to shareholders per share for the third quarter were $0.53, as compared with $0.45 for the same quarter in 2013, an increase of 18%.
For the nine months ended September 30, 2014, net earnings attributable to shareholders was $277,507,000, as compared with $265,030,000 in 2013, an increase of 5%. Net revenues for the nine months increased to $1,462,556,000 from $1,404,781,000 for 2013, up 4%. Total revenues and operating income for the nine months were $4,795,891,000 and $436,777,000 in 2014, as compared with $4,454,398,000 and $418,410,000 for the same period in 2013, increases of 8% and 4%, respectively. Diluted net earnings attributable to shareholders per share for the first three quarters of 2014 were $1.40, as compared with $1.28 for the same period of 2013, an increase of 9%.
"These 2014 third quarter results have given us a great deal of confidence. Double digit growth in both air and ocean freight volumes, something we’ve not seen since the fourth quarter of 2010, resulted in double digit revenue growth and drove double digit net income growth. Firmer ocean pricing offset tightening margins in airfreight while customs brokerage and other services benefited commensurately with air and ocean volume increases," said Jeffrey S. Musser, President and Chief Executive Officer. "We experienced strong operating income growth in both the United States and Europe regions, which again compensated for relative weakness in the Asia Pacific and Middle East and India regions. Fundamentally, the things we look to as benchmarks for operational efficiency and financial achievement were in place this quarter. Our operational efficiency was highlighted by our ability to service double digit volume growth while expanding our operating income as a percentage of net revenue to 31%. Cash flow from operations, while down slightly year-over-year, was still very strong at nearly $87 million. We would also point out that by returning cash to shareholders via stock buy-backs over the course of the last 12 months, our third quarter 2014 EPS grew at a rate of 18%, as compared to a respectable net earnings growth rate of 11%," Musser went on to say.
"Looking forward to the fourth quarter, we are taking these third quarter results in stride. As we’ve said for years, trying to predict trends in these very fast changing air and ocean freight markets is futile. While heartened by the strength of ocean freight in the third quarter, so much of how the fourth quarter will turn out will depend on circumstances that are still playing out in the airfreight markets. Airfreight pricing is still very volatile. New product launches and increases in global demand certainly played out well in the third quarter," Musser continued. "The fourth quarter, with less seasonal ocean freight and more airfreight emphasis, has many more dynamics for us to manage. We are also keenly aware of the well-reasoned concerns about the state of the global economy. We’ll continue to focus on the things that have always been our hallmarks: solid execution, sound negotiation and unfailing customer service. We’re comfortable, backed by the dedication and capabilities of our 14,000+ proven employees working together globally, that we can make that happen," 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.
NOTE: See Disclaimer on Forward-Looking Statements on the following page of this release.

Expeditors International of Washington, Inc.
Third Quarter 2014 Earnings Release, November 4, 2014
Financial Highlights for the Three and Nine months ended September 30, 2014 and 2013 (Unaudited)
(in 000's of US dollars except share data)
 
Three months ended September 30,
 
 
 
Nine months ended September 30,
 
 
 
2014
 
2013
 
% Change
 
2014
 
2013
 
% Change
Revenues
$
1,705,105

 
$
1,537,966

 
11%
 
$
4,795,891

 
$
4,454,398

 
8%
Net revenues1
$
513,256

 
$
484,902

 
6%
 
$
1,462,556

 
$
1,404,781

 
4%
Operating income
$
159,131

 
$
146,313

 
9%
 
$
436,777

 
$
418,410

 
4%
Net earnings attributable to shareholders
$
102,381

 
$
92,400

 
11%
 
$
277,507

 
$
265,030

 
5%
Diluted earnings attributable to shareholders
$
0.53

 
$
0.45

 
18%
 
$
1.40

 
$
1.28

 
9%
Basic earnings attributable to shareholders
$
0.53

 
$
0.45

 
18%
 
$
1.41

 
$
1.28

 
10%
Diluted weighted average shares outstanding
195,001,267

 
207,368,792

 
 
 
197,953,810

 
207,351,569

 
 
Basic weighted average shares outstanding
194,419,071

 
206,516,194

 
 
 
197,305,251

 
206,478,746

 
 
_______________________
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 nine-month period ended September 30, 2014, the Company repurchased 9,533,616 shares of common stock, net of issuances.
 
Employee headcount as of September 30
 
2014
 
2013
North America
5,152

 
4,820

Asia Pacific
3,839

 
3,931

Europe and Africa
2,428

 
2,324

Middle East and India
1,227

 
1,206

Latin America
737

 
675

Information Systems
687

 
655

Corporate
302

 
273

Total
14,372

 
13,884

 
 
Year-over-year percentage increase in:
 
 
Airfreight kilos
 
Ocean freight FEU
2014
 
 
 
 
July
 
11
%
 
9
%
August
 
11
%
 
11
%
September
 
15
%
 
12
%
Quarter
 
12
%
 
11
%
_______________________
Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on November 7, 2014 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about November 21, 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 grow future revenues, grow and maintain margins during periods of pricing volatility, maintain or improve operating income as a percentage of net revenue, and control costs and headcount. 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 control costs and 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)
 
 
September 30,
2014
 
December 31, 2013
Assets
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
990,480

 
$
1,247,652

Short-term investments
40,317

 
26,337

Accounts receivable, net
1,183,167

 
1,073,500

Deferred Federal and state income taxes
20,782

 
18,396

Other current assets
83,226

 
49,384

Total current assets
2,317,972

 
2,415,269

Property and equipment, net
545,366

 
563,064

Goodwill
7,927

 
7,927

Other assets, net
54,788

 
28,552

 
$
2,926,053

 
$
3,014,812

Liabilities and Equity
 
 
 
Current Liabilities:
 
 
 
Accounts payable
746,193

 
648,156

Accrued expenses, primarily salaries and related costs
194,546

 
200,301

Federal, state and foreign income taxes
22,059

 
21,743

Total current liabilities
962,798

 
870,200

Deferred Federal and state income taxes
59,325

 
58,281

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Shareholders’ Equity:
 
 
 
Preferred stock; none issued
—

 
—

Common stock, par value $0.01 per share. Issued and outstanding 193,019,604 shares at September 30, 2014 and 202,553,220 shares at December 31, 2013
1,930

 
2,025

Additional paid-in capital
1,055

 
1,647

Retained earnings
1,920,166

 
2,087,376

Accumulated other comprehensive loss
(21,778
)
 
(6,265
)
Total shareholders’ equity
1,901,373

 
2,084,783

Noncontrolling interest
2,557

 
1,548

Total equity
1,903,930

 
2,086,331

 
$
2,926,053

 
$
3,014,812



04-November-2014
Expeditors International of Washington, Inc.
Page 3 of 7


EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except share data)
(Unaudited)
 
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
Airfreight services
$
686,434

 
$
628,116

 
$
2,000,829

 
$
1,891,459

Ocean freight and ocean services
600,483

 
525,193

 
1,606,145

 
1,462,679

Customs brokerage and other services
418,188

 
384,657

 
1,188,917

 
1,100,260

Total revenues
1,705,105

 
1,537,966

 
4,795,891

 
4,454,398

Operating Expenses:
 
 
 
 
 
 
 
Airfreight services
516,969

 
466,699

 
1,503,064

 
1,414,634

Ocean freight and ocean services
475,460

 
409,649

 
1,266,551

 
1,135,299

Customs brokerage and other services
199,420

 
176,716

 
563,720

 
499,684

Salaries and related costs
272,548

 
261,613

 
789,257

 
765,599

Rent and occupancy costs
26,396

 
24,542

 
76,959

 
73,447

Depreciation and amortization
12,741

 
12,629

 
37,540

 
35,581

Selling and promotion
9,240

 
8,306

 
26,704

 
23,891

Other
33,200

 
31,499

 
95,319

 
87,853

Total operating expenses
1,545,974

 
1,391,653

 
4,359,114

 
4,035,988

Operating income
159,131

 
146,313

 
436,777

 
418,410

Other Income (Expense):
 
 
 
 
 
 
 
Interest income
2,793

 
2,967

 
8,254

 
9,280

Other, net
2,336

 
1,212

 
5,245

 
7,068

Other income, net
5,129

 
4,179

 
13,499

 
16,348

Earnings before income taxes
164,260

 
150,492

 
450,276

 
434,758

Income tax expense
61,463

 
57,763

 
171,556

 
168,756

Net earnings
102,797

 
92,729

 
278,720

 
266,002

Less net earnings attributable to the noncontrolling interest
416

 
329

 
1,213

 
972

Net earnings attributable to shareholders
$
102,381

 
$
92,400

 
$
277,507

 
$
265,030

Diluted earnings attributable to shareholders per share
$
0.53

 
$
0.45

 
$
1.40

 
$
1.28

Basic earnings attributable to shareholders per share
$
0.53

 
$
0.45

 
$
1.41

 
$
1.28

Dividends declared and paid per common share
$
—

 
$
—

 
$
0.32

 
$
0.30

Weighted average diluted shares outstanding
195,001,267

 
207,368,792

 
197,953,810

 
207,351,569

Weighted average basic shares outstanding
194,419,071

 
206,516,194

 
197,305,251

 
206,478,746



04-November-2014
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
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Operating Activities:
 
 
 
 
 
 
 
Net earnings
$
102,797

 
$
92,729

 
$
278,720

 
$
266,002

Adjustments to reconcile net earnings to net cash from operating activities:
 
 
 
 
 
 
 
Provision for losses (recoveries) on accounts receivable
564

 
1,496

 
(55
)
 
2,537

Deferred income tax (benefit) expense
(2,085
)
 
(33,185
)
 
8,000

 
(20,245
)
Excess tax benefits from stock plans
(47
)
 
—

 
(1,031
)
 
(1,683
)
Stock compensation expense
10,049

 
11,015

 
32,220

 
33,060

Depreciation and amortization
12,741

 
12,629

 
37,540

 
35,581

Other
139

 
187

 
345

 
636

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Increase in accounts receivable
(58,984
)
 
(5,115
)
 
(131,374
)
 
(14,482
)
Increase (decrease) in accounts payable and accrued expenses
23,113

 
(8,875
)
 
114,036

 
34,815

Increase (decrease) in income taxes payable, net
2,050

 
30,114

 
(27,115
)
 
14,640

Increase in other current assets
(3,646
)
 
(4,702
)
 
(5,852
)
 
(5,278
)
Net cash from operating activities
86,691

 
96,293

 
305,434

 
345,583

Investing Activities:
 
 
 
 
 
 
 
Decrease (increase) in short-term investments, net
45,832

 
(9,925
)
 
(13,980
)
 
(99,690
)
Purchase of property and equipment
(8,255
)
 
(15,482
)
 
(26,650
)
 
(42,691
)
Escrow deposit for land acquisition
—

 
—

 
(27,101
)
 
—

Other, net
370

 
306

 
504

 
1,126

Net cash from investing activities
37,947

 
(25,101
)
 
(67,227
)
 
(141,255
)
Financing Activities:
 
 
 
 
 
 
 
Proceeds from issuance of common stock
28,452

 
33,615

 
58,469

 
52,092

Repurchases of common stock
(117,044
)
 
(85,925
)
 
(475,160
)
 
(125,206
)
Excess tax benefits from stock plans
47

 
—

 
1,031

 
1,683

Dividends paid
—

 
—

 
(62,807
)
 
(61,899
)
Purchase of noncontrolling interest
—

 
—

 
—

 
(7,730
)
Distribution to noncontrolling interest
—

 
(1,161
)
 
(85
)
 
(1,161
)
Net cash from financing activities
(88,545
)
 
(53,471
)
 
(478,552
)
 
(142,221
)
Effect of exchange rate changes on cash and cash equivalents
(16,174
)
 
6,500

 
(16,827
)
 
(12,619
)
Increase (decrease) in cash and cash equivalents
19,919

 
24,221

 
(257,172
)
 
49,488

Cash and cash equivalents at beginning of period
970,561

 
1,286,109

 
1,247,652

 
1,260,842

Cash and cash equivalents at end of period
$
990,480

 
$
1,310,330

 
$
990,480

 
$
1,310,330

Taxes paid:
 
 
 
 
 
 
 
Income taxes
$
61,899

 
$
62,053

 
$
195,358

 
$
174,199



04-November-2014
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
 
ASIA
PACIFIC
 
EUROPE and
AFRICA
 
MIDDLE
EAST and
INDIA
 
ELIMI-
NATIONS
 
CONSOLI-
DATED
Three months ended September 30, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
438,882

 
55,209

 
22,962

 
850,855

 
253,683

 
83,514

 
—

 
1,705,105

Transfers between geographic areas
24,847

 
2,867

 
5,194

 
12,965

 
9,492

 
5,427

 
(60,792
)
 
—

Total revenues
$
463,729

 
58,076

 
28,156

 
863,820

 
263,175

 
88,941

 
(60,792
)
 
1,705,105

Net revenues
$
215,320

 
27,323

 
16,792

 
149,069

 
79,007

 
25,745

 
—

 
513,256

Operating income
$
68,972

 
7,779

 
4,890

 
57,409

 
14,413

 
5,668

 
—

 
159,131

Identifiable assets
$
1,333,124

 
113,621

 
53,939

 
733,776

 
506,442

 
173,455

 
11,696

 
2,926,053

Capital expenditures
$
3,171

 
361

 
369

 
2,942

 
1,042

 
370

 
—

 
8,255

Depreciation and amortization
$
8,369

 
303

 
226

 
2,030

 
1,389

 
424

 
—

 
12,741

Equity
$
1,074,837

 
75,848

 
34,218

 
454,982

 
199,751

 
97,476

 
(33,182
)
 
1,903,930

Three months ended September 30, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
396,764

 
52,962

 
22,136

 
777,845

 
212,507

 
75,752

 
—

 
1,537,966

Transfers between geographic areas
22,065

 
2,911

 
5,643

 
12,081

 
9,358

 
4,473

 
(56,531
)
 
—

Total revenues
$
418,829

 
55,873

 
27,779

 
789,926


221,865

 
80,225

 
(56,531
)
 
1,537,966

Net revenues
$
199,107

 
26,255

 
15,627

 
147,477

 
70,949

 
25,487

 
—

 
484,902

Operating income
$
55,627

 
8,524

 
5,317

 
57,975

 
11,894

 
6,976

 
—

 
146,313

Identifiable assets
$
1,694,366

 
102,713

 
52,785

 
663,584

 
438,711

 
142,843

 
3,561

 
3,098,563

Capital expenditures
$
12,463

 
639

 
147

 
1,250

 
703

 
280

 
—

 
15,482

Depreciation and amortization
$
7,608

 
211

 
210

 
2,343

 
1,534

 
723

 
—

 
12,629

Equity
$
1,423,598

 
63,351

 
30,637

 
439,719

 
181,134

 
75,444

 
(33,153
)
 
2,180,730

Nine months ended September 30, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
1,256,075

 
162,136

 
65,594

 
2,346,073

 
725,833

 
240,180

 
—

 
4,795,891

Transfers between geographic areas
67,266

 
7,829

 
15,965

 
37,367

 
27,917

 
15,527

 
(171,871
)
 
—

Total revenues
$
1,323,341

 
169,965

 
81,559

 
2,383,440

 
753,750

 
255,707

 
(171,871
)
 
4,795,891

Net revenues
$
607,508

 
79,017

 
48,797

 
420,788

 
230,702

 
75,744

 
—

 
1,462,556

Operating income
$
180,650

 
23,155

 
14,425

 
161,686

 
39,698

 
17,163

 
—

 
436,777

Identifiable assets
$
1,333,124

 
113,621

 
53,939

 
733,776

 
506,442

 
173,455

 
11,696

 
2,926,053

Capital expenditures
$
12,646

 
1,047

 
841

 
7,975

 
3,156

 
985

 
—

 
26,650

Depreciation and amortization
$
24,100

 
879

 
665

 
6,246

 
4,352

 
1,298

 
—

 
37,540

Equity
$
1,074,837

 
75,848

 
34,218

 
454,982

 
199,751

 
97,476

 
(33,182
)
 
1,903,930

Nine months ended September 30, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
1,166,633

 
161,317

 
63,421

 
2,221,264

 
621,040

 
220,723

 
—

 
4,454,398

Transfers between geographic areas
65,308

 
7,971

 
16,133

 
34,316

 
27,427

 
13,359

 
(164,514
)
 
—

Total revenues
$
1,231,941

 
169,288

 
79,554

 
2,255,580

 
648,467

 
234,082

 
(164,514
)
 
4,454,398

Net revenues
$
572,959

 
75,476

 
45,560

 
424,466

 
212,631

 
73,689

 
—

 
1,404,781

Operating income
$
161,290

 
23,023

 
14,007

 
165,640

 
35,433

 
19,017

 
—

 
418,410

Identifiable assets
$
1,694,366

 
102,713

 
52,785

 
663,584

 
438,711

 
142,843

 
3,561

 
3,098,563

Capital expenditures
$
22,196

 
1,534

 
551

 
14,858

 
2,464

 
1,088

 
—

 
42,691

Depreciation and amortization
$
21,641

 
615

 
680

 
6,314

 
4,713

 
1,618

 
—

 
35,581

Equity
$
1,423,598

 
63,351

 
30,637

 
439,719

 
181,134

 
75,444

 
(33,153
)
 
2,180,730



04-November-2014
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
 
Nine months ended
 
September 30,
 
September 30,
(in thousands)
2014
 
2013
 
2014
 
2013
Total revenues
$
1,705,105

 
$
1,537,966

 
$
4,795,891

 
$
4,454,398

Expenses:
 
 
 
 
 
 
 
Airfreight services
516,969

 
466,699

 
1,503,064

 
1,414,634

Ocean freight and ocean services
475,460

 
409,649

 
1,266,551

 
1,135,299

Customs brokerage and other services
199,420

 
176,716

 
563,720

 
499,684

Net revenues
$
513,256

 
$
484,902

 
$
1,462,556

 
$
1,404,781



04-November-2014
Expeditors International of Washington, Inc.
Page 7 of 7