EX-99.1 2 a20191qerexhibit991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1
expeditorswtaga06.jpg
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 2019 EPS OF $0.80
SEATTLE, WASHINGTON - May 7, 2019, Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced first quarter 2019 financial results including the following highlights compared to the same quarter of 2018:
•
Diluted Net Earnings Attributable to Shareholders per share (EPS1) increased 5% to $0.80
•
Net Earnings Attributable to Shareholders increased 3% to $140 million
•
Operating Income decreased 3% to $188 million
•
Revenues increased 9% to $2.02 billion
•
Net Revenues2 increased 3% to $654 million
•
Airfreight tonnage volume decreased 4% and ocean container volume increased 6%

“We are pleased with our results in Q1 2019, especially when we look at the comparison period last year that produced so many records and set an extremely high bar,” said Jeffrey S. Musser, President and Chief Executive Officer. “Customs brokerage and import services led the way this quarter on increased volumes and on-boarding new customers. Transcon, warehouse and distribution also posted solid gains on expanded business with current customers, as well as by winning new business. We increased the volume of ocean freight containers shipped by 6%, while also improving net revenue per container, particularly from exports out of North and South Asia. The air market was the only area that was challenged, particularly as customers reduced export volumes out of North Asia. I credit our air group for their efforts in a volatile pricing environment, and I thank everyone throughout our global network for their ongoing effort to handle the increase in volumes and business activity.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Operating efficiency (operating income as a percentage of net revenue) dipped below 30% this quarter, due largely to lower air net revenues, as well as our continuing investments in people at the district level to handle the increase in volumes, and investments in technology and facilities. Our effective tax rate declined from 31.1% in the first quarter of 2018 to 28.3% in 2019, largely due to the benefit from share-based compensation deductions, higher foreign tax credits and deductions for foreign derived investment income."

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.
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 2019 Earnings Release, May 7, 2019
Financial Highlights for the Three months ended March 31, 2019 and 2018 (Unaudited)
(in 000's of US dollars except per share data)
 
Three months ended March 31,
 
2019
 
2018
 
% Change
Revenues
$
2,020,051

 
$
1,854,262

 
9
 %
Net revenues1
$
654,114

 
$
635,838

 
3
 %
Operating income
$
187,601

 
$
192,818

 
(3
)%
Net earnings attributable to shareholders
$
139,699

 
$
135,692

 
3
 %
Diluted earnings attributable to shareholders per share
$
0.80

 
$
0.76

 
5
 %
Basic earnings attributable to shareholders per share
$
0.81

 
$
0.77

 
5
 %
Diluted weighted average shares outstanding
175,388

 
179,416

 
 
Basic weighted average shares outstanding
171,818

 
175,900

 
 
_______________________
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 period ended March 31, 2019, we repurchased 0.6 million shares of common stock at an average price of $75.40 per share. During the three-month period ended March 31, 2018, we repurchased 2.7 million shares of common stock at an average price of $64.76 per share.
 
Employee Full-time Equivalents as of March 31,
 
2019
 
2018
North America
6,806

 
6,264

Europe
3,404

 
3,132

North Asia
2,540

 
2,579

South Asia
1,654

 
1,582

Middle East, Africa and India
1,541

 
1,478

Latin America
862

 
811

Information Systems
915

 
888

Corporate
380

 
351

Total
18,102

 
17,085

 
 
First quarter year-over-year percentage increase (decrease) in:
 
 
Airfreight kilos
 
Ocean freight FEU
2019
 
 
 
 
January
 
(2)%
 
8%
February
 
(6)%
 
3%
March
 
(2)%
 
6%
Quarter
 
(4)%
 
6%

_______________________
Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on May 10, 2019 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, which are based on certain assumptions and expectations of future events that are subject to risks and uncertainties, including our continued ability to manage increased volumes and business activity; the impact of the 2017 Tax Act and related interpretations on our effective tax rate; and 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,
2019
 
December 31,
2018
Assets
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
1,189,429

 
$
923,735

Accounts receivable, less allowance for doubtful accounts of $12,727 at March 31, 2019 and $15,345 at December 31, 2018
1,353,725

 
1,581,530

Deferred contract costs
131,535

 
159,510

Other current assets
54,305

 
70,041

Total current assets
2,728,994

 
2,734,816

Property and equipment, less accumulated depreciation and amortization of $457,513 at March 31, 2019 and $446,977 at December 31, 2018
500,853

 
504,105

Operating lease right-of-use assets
349,140

 
—

Goodwill
7,927

 
7,927

Deferred federal and state income taxes, net
37,781

 
40,465

Other assets, net
18,217

 
27,246

 
$
3,642,912

 
$
3,314,559

Liabilities and Equity
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
768,665

 
$
902,259

Accrued expenses, primarily salaries and related costs
220,085

 
215,813

Contract liabilities
157,040

 
190,343

Current portion of operating lease liabilities
58,635

 
—

Federal, state and foreign income taxes
23,502

 
18,424

Total current liabilities
1,227,927

 
1,326,839

Noncurrent portion of operating lease liabilities
289,551

 
—

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Shareholders’ Equity:
 
 
 
Preferred stock; none issued
—

 
—

Common stock, par value $0.01 per share. Issued and outstanding 171,648 shares at March 31, 2019 and 171,582 shares at December 31, 2018
1,716

 
1,716

Additional paid-in capital
3,978

 
1,896

Retained earnings
2,222,562

 
2,088,707

Accumulated other comprehensive loss
(103,986
)
 
(105,481
)
Total shareholders’ equity
2,124,270

 
1,986,838

Noncontrolling interest
1,164

 
882

Total equity
2,125,434

 
1,987,720

 
$
3,642,912

 
$
3,314,559



07-May-2019
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,
 
2019

2018
Revenues:
 
 
 
Airfreight services
$
714,901

 
$
731,227

Ocean freight and ocean services
568,641

 
520,883

Customs brokerage and other services
736,509

 
602,152

Total revenues
2,020,051

 
1,854,262

Operating Expenses:
 
 
 
Airfreight services
509,210

 
513,504

Ocean freight and ocean services
420,331

 
379,418

Customs brokerage and other services
436,396

 
325,502

Salaries and related costs
356,910

 
339,895

Rent and occupancy costs
41,523

 
36,913

Depreciation and amortization
13,393

 
13,922

Selling and promotion
11,076

 
10,965

Other
43,611

 
41,325

Total operating expenses
1,832,450

 
1,661,444

Operating income
187,601

 
192,818

Other Income (Expense):
 
 
 
Interest income
6,106

 
4,314

Other, net
1,665

 
624

Other income (expense), net
7,771

 
4,938

Earnings before income taxes
195,372

 
197,756

Income tax expense
55,261

 
61,556

Net earnings
140,111

 
136,200

Less net earnings attributable to the noncontrolling interest
412

 
508

Net earnings attributable to shareholders
$
139,699

 
$
135,692

Diluted earnings attributable to shareholders per share
$
0.80

 
$
0.76

Basic earnings attributable to shareholders per share
$
0.81

 
$
0.77

Weighted average diluted shares outstanding
175,388

 
179,416

Weighted average basic shares outstanding
171,818

 
175,900



07-May-2019
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,
 
2019

2018
Operating Activities:
 
 
 
Net earnings
$
140,111

 
$
136,200

Adjustments to reconcile net earnings to net cash from operating activities:

 

Recoveries on accounts receivable
(1,888
)
 
(265
)
Deferred income tax expense
2,108

 
2,853

Stock compensation expense
13,382

 
11,267

Depreciation and amortization
13,393

 
13,922

Other, net
189

 
48

Changes in operating assets and liabilities:
 
 
 
Decrease in accounts receivables
230,477


100,647

Decrease in accounts payable and accrued expenses
(122,283
)

(45,844
)
Decrease in deferred contract costs
31,259


3,407

Decrease in contract liabilities
(36,725
)

(7,401
)
Increase in income taxes payable, net
16,993


19,509

Decrease in other, net
2,467


1,134

Net cash from operating activities
289,483

 
235,477

Investing Activities:
 
 
 
Purchase of property and equipment
(9,435
)

(13,796
)
Other, net
255


(431
)
Net cash from investing activities
(9,180
)
 
(14,227
)
Financing Activities:
 
 
 
Proceeds from issuance of common stock
27,190


26,397

Repurchases of common stock
(44,334
)

(172,360
)
Net cash from financing activities
(17,144
)
 
(145,963
)
Effect of exchange rate changes on cash and cash equivalents
2,535

 
6,515

Increase in cash and cash equivalents
265,694

 
81,802

Cash and cash equivalents at beginning of period
923,735

 
1,051,099

Cash and cash equivalents at end of period
$
1,189,429

 
$
1,132,901

Taxes paid:
 
 
 
Income taxes
37,253


38,519


07-May-2019
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, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
681,424

 
85,103

 
35,949

 
617,000

 
171,930

 
320,049

 
108,596

 
—

 
2,020,051

Transfers between geographic areas 1
$
(21,640
)
 
6,307

 
(1,770
)
 
15,853

 
5,249

 
(7,359
)
 
4,079

 
(719
)
 
—

Total revenues
$
659,784

 
91,410

 
34,179

 
632,853

 
177,179

 
312,690

 
112,675

 
(719
)
 
2,020,051

Net revenues
$
292,429

 
35,169

 
15,063

 
134,207

 
47,369

 
96,795

 
33,172

 
(90
)
 
654,114

Operating income
$
74,013

 
10,960

 
2,636

 
65,780

 
15,907

 
13,952

 
4,361

 
(8
)
 
187,601

Identifiable assets
$
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

Depreciation and amortization
$
8,222

 
467

 
432

 
1,407

 
536

 
1,831

 
498

 
—

 
13,393

Equity
$
1,401,450

 
82,170

 
28,581

 
238,518

 
114,290

 
165,718

 
126,953

 
(32,246
)
 
2,125,434

Three months ended March 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues from unaffiliated customers
$
534,869

 
76,525

 
32,722

 
630,572

 
168,600

 
305,792

 
105,182

 
—

 
1,854,262

Transfers between geographic areas
$
28,881

 
3,562

 
3,387

 
6,017

 
6,550

 
14,188

 
5,355

 
(67,940
)
 
—

Total revenues
$
563,750

 
80,087

 
36,109

 
636,589

 
175,150


319,980

 
110,537

 
(67,940
)
 
1,854,262

Net revenues
$
277,185

 
30,447

 
14,745

 
137,208

 
44,406

 
98,635

 
33,201

 
11

 
635,838

Operating income
$
69,648

 
9,018

 
2,370

 
69,923

 
15,132

 
19,278

 
7,438

 
11

 
192,818

Identifiable assets
$
1,558,181

 
165,368

 
55,036

 
542,965

 
153,411

 
533,012

 
208,173

 
(3,665
)
 
3,212,481

Capital expenditures
$
3,171

 
1,528

 
505

 
784

 
329

 
7,191

 
288

 
—

 
13,796

Depreciation and amortization
$
8,765

 
398

 
368

 
1,376

 
583

 
1,976

 
456

 
—

 
13,922

Equity
$
1,247,522

 
68,050

 
27,226

 
278,651

 
105,642

 
160,038

 
128,487

 
(33,350
)
 
1,982,266

1During the quarter ended March 31, 2019, the Company revised the process used 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. There were no changes for services rendered at the origin, such as pick-up and delivery to port, nor for services rendered at the destination, such as customs clearance and final delivery. The change in process had no impact on reported segment net revenues or operating income nor on reported consolidated revenues or expenses. Prior year segment revenues have not been revised.






07-May-2019
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 revenues are 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)
2019

2018
Total revenues
$
2,020,051

 
$
1,854,262

Expenses:
 
 
 
Airfreight services
509,210

 
513,504

Ocean freight and ocean services
420,331

 
379,418

Customs brokerage and other services
436,396

 
325,502

Net revenues
$
654,114

 
$
635,838



07-May-2019
Expeditors International of Washington, Inc.
Page 7 of 7