Expeditors International of Washington, Inc. (NASDAQ:EXPD) today
announced net earnings attributable to shareholders of $91,302,000
for the second quarter of 2014, as compared with $92,315,000 for
the same quarter of 2013, a decrease of (1)%. Net revenues2 for the
second quarter of 2014 increased 3% to $484,714,000 as compared
with $471,872,000 for the same quarter in 2013. Total revenues and
operating income were $1,599,141,000 and $142,443,000 in the second
quarter of 2014, as compared with $1,503,224,000 and $143,579,000
for the same quarter of 2013, an increase of 6% and decrease of
(1)%, respectively. Diluted net earnings attributable to
shareholders per share for the second quarter were $0.46, as
compared with $0.45 for the same quarter in 2013, an increase of
2%.
For the six months ended June 30, 2014, net earnings
attributable to shareholders was $175,126,000, as compared with
$172,630,000 in 2013, an increase of 1%. Net revenues for the six
months increased to $949,300,000 from $919,879,000 for 2013, up 3%.
Total revenues and operating income for the six months were
$3,090,786,000 and $277,646,000 in 2014, as compared with
$2,916,432,000 and $272,097,000 for the same period in 2013,
increases of 6% and 2%, respectively. Diluted net earnings
attributable to shareholders per share for the first two quarters
of 2014 were $0.88, as compared with $0.83 for the same period of
2013, an increase of 6%.
“Our second quarter ocean and airfreight volume increases of 12%
and 6%, respectively, provided encouraging revenue growth. We also
saw strong revenue growth in our customs brokerage and other
services product. While pricing volatility still presents
challenges, we feel very good about expanding our ocean freight and
airfreight market share in key markets,” said Jeffrey S. Musser,
President and CEO. “From a geographic perspective, our efforts
during the last year to expand our European-based business showed
up in European operating income growth. These European results
compensated for weaker Americas’ growth and an actual decline in
Asia Pacific results. We did benefit from a favorable experience in
our health insurance program which resulted in a $5.4 million
reduction in salaries and related costs. Our other expense line
item saw an increase of $6.0 million, none of which were
individually significant. This also included the benefit of the
transition to a value added tax system in certain jurisdictions in
the second quarter of 2013; consulting fees and costs associated
with the Company's current strategic assessment and recent
organizational changes; and the accrual of claims, all which, in
the aggregate, total approximately $3.5 million. Operating income
as a percentage of net revenue was 29.4%, slightly below our target
of 30%. We will be actively addressing the factors that contributed
to this shortfall during the next several quarters,” Musser went on
to say.
“Looking forward to the remainder of 2014, our priority will be
to refine and implement the tactical plans supporting the outcome
of our strategic assessment. We will also continue to focus on
customer service, market share expansion and opportunities to
leverage operating efficiencies,” Musser continued. “The assessment
process will necessitate a reallocation of resources. This will
require us to focus very carefully on optimizing existing resources
to internally fund our strategic objectives without requiring
excessive additions to overall headcount. We’re grateful for the
enthusiasm with which our employees have embraced the
organizational changes we’ve made thus far. We look forward to
their further involvement and participation as we complete and
implement the outcome of our strategic assessment. We understand
that only through engaging with and effectively supporting our
employees can we meet the requirements of our customers and the
expectations of our shareholders. Our employees in turn understand
that they become the primary beneficiaries of increased
opportunities which result from satisfied customers and gratified
shareholders. We're grateful for their continued loyalty and
commitment,” 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.
3Operating margin is calculated as operating income divided by
net revenues.
NOTE: See Disclaimer on Forward-Looking Statements on the
following page of this release.
Expeditors International of
Washington, Inc. Second Quarter 2014 Earnings Release,
August 5, 2014 Financial Highlights for the Three and Six
months ended June 30, 2014 and 2013 (Unaudited)
(in 000's of US dollars except share
data)
Three months ended June 30, Six months ended June
30, % % 2014 2013
Change 2014 2013 Change Revenues
$ 1,599,141 $ 1,503,224 6% $ 3,090,786 $ 2,916,432 6%
Net
revenues1 $ 484,714 $ 471,872 3% $ 949,300 $ 919,879 3%
Operating income $ 142,443 $ 143,579 (1)% $ 277,646 $
272,097 2%
Net earnings attributable to shareholders $
91,302 $ 92,315 (1)% $ 175,126 $ 172,630 1%
Diluted earnings
attributable to shareholders $ 0.46 $ 0.45 2% $ 0.88 $ 0.83 6%
Basic earnings attributable to shareholders $ 0.46 $ 0.45 2%
$ 0.88 $ 0.84 5%
Diluted weighted average shares outstanding
197,126,243 207,192,534 199,482,932 207,421,805
Basic weighted
average shares outstanding 196,451,912 206,444,464 198,772,260
206,459,701
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 six month period ended June 30, 2014, the Company
repurchased 7,516,397 shares of common stock, net of issuances.
Employee headcount as of June 30 2014
2013 North America 5,032 4,761
Asia Pacific
3,826 3,881
Europe and Africa 2,325 2,349
Middle East and
India 1,229 1,213
Latin America 725 679
Information
Systems 638 628
Corporate 307 270
Total 14,082
13,781
Year-over-year percentage increase in:
Airfreight kilos Ocean freight FEU 2014
April 2 10% 12%
May 5% 10%
June 2% 12%
Quarter 6% 12%
2Reported on an interim basis on June 10, 2014, Item 7.01
Regulation FD Disclosure on Form 8-K as 8% and subsequently revised
to 10% as part of quarter-end review process.
Investors may submit written questions via e-mail to:
investor@expeditors.com. Questions received by the end of business
on August 8, 2014 will be considered in management's 8-K “Responses
to Selected Questions” expected to be filed on or about August 18,
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 revenues, maintain margins
during periods of pricing volatility, maintain or grow market share
in key markets, expand European-based business, maintain or improve
operating income as a percentage of net revenue, improve
operational processes, leverage operating efficiencies or optimize
existing resources, successfully reallocate resources, control
costs and headcount, and successfully complete and implement
comprehensive strategic reassessment to improve alignment and
operations. 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)
June 30,
December 31, 2014 2013
Assets
Current Assets: Cash and cash equivalents $ 970,561 $
1,247,652 Short-term investments 86,149 26,337 Accounts receivable,
net 1,150,531 1,073,500 Deferred Federal and state income taxes
19,148 18,396 Other current assets 84,081 49,384
Total current assets 2,310,470 2,415,269 Property and
equipment, net 556,228 563,064 Goodwill 7,927 7,927 Other assets,
net 55,315 28,552 $ 2,929,940 $ 3,014,812
Liabilities and
Equity
Current Liabilities: Accounts payable 717,141 648,156
Accrued expenses, primarily salaries and related costs 220,753
200,301 Federal, state and foreign income taxes 24,337
21,743 Total current liabilities 962,231 870,200
Deferred Federal and state income taxes 70,572 58,281
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued — — Common stock, par value $0.01 per
share. Issued and outstanding 195,036,823 shares at June 30, 2014
and 202,553,220 shares at December 31, 2013 1,951 2,025 Additional
paid-in capital 2,701 1,647 Retained earnings 1,893,771 2,087,376
Accumulated other comprehensive loss (3,609 ) (6,265 ) Total
shareholders’ equity 1,894,814 2,084,783
Noncontrolling interest 2,323 1,548 Total equity
1,897,137 2,086,331 $ 2,929,940 $ 3,014,812
EXPEDITORS INTERNATIONAL OF WASHINGTON,
INC. AND SUBSIDIARIES Condensed Consolidated Statements of
Earnings (In thousands, except share data) (Unaudited)
Three months ended Six months ended June 30,
June 30, 2014 2013 2014
2013 Revenues: Airfreight services $ 667,257 $
642,969 $ 1,314,395 $ 1,263,343 Ocean freight and ocean services
536,438 492,007 1,005,662 937,486 Customs brokerage and other
services 395,446 368,248 770,729 715,603 Total
revenues 1,599,141 1,503,224 3,090,786
2,916,432
Operating Expenses: Airfreight services 503,213
483,016 986,095 947,935 Ocean freight and ocean services 423,716
380,727 791,091 725,650 Customs brokerage and other services
187,498 167,609 364,300 322,968 Salaries and related costs 260,767
255,569 516,709 503,986 Rent and occupancy costs 25,401 24,712
50,563 48,905 Depreciation and amortization 12,417 11,674 24,799
22,952 Selling and promotion 9,291 8,328 17,464 15,585 Other 34,395
28,010 62,119 56,354 Total operating expenses
1,456,698 1,359,645 2,813,140 2,644,335
Operating income 142,443 143,579 277,646
272,097
Other Income (Expense): Interest income 2,764 3,070
5,461 6,313 Other, net 3,190 4,325 2,909 5,856
Other income, net 5,954 7,395 8,370 12,169
Earnings before income taxes 148,397 150,974 286,016 284,266 Income
tax expense 56,669 58,311 110,093 110,993 Net
earnings 91,728 92,663 175,923 173,273 Less
net earnings attributable to the noncontrolling interest 426
348 797 643 Net earnings attributable to shareholders
$ 91,302 $ 92,315 $ 175,126 $ 172,630 Diluted
earnings attributable to shareholders per share $ 0.46 $
0.45 $ 0.88 $ 0.83 Basic earnings attributable to
shareholders per share $ 0.46 $ 0.45 $ 0.88 $
0.84 Dividends declared and paid per common share $ 0.32 $
0.30 $ 0.32 $ 0.30 Weighted average diluted shares
outstanding 197,126,243 207,192,534 199,482,932
207,421,805 Weighted average basic shares outstanding
196,451,912 206,444,464 198,772,260
206,459,701 EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated
Statements of Cash Flows (In thousands) (Unaudited)
Three
months ended Six months ended June 30, June
30, 2014 2013 2014
2013 Operating Activities: Net earnings $ 91,728 $
92,663 $ 175,923 $ 173,273 Adjustments to reconcile net earnings to
net cash from operating activities: Provision for losses
(recoveries) on accounts receivable 496 100 (619 ) 1,041 Deferred
income tax expense 2,891 5,818 10,085 12,940 Excess tax benefits
from stock plans (495 ) (584 ) (984 ) (1,683 ) Stock compensation
expense 11,877 11,040 22,171 22,045 Depreciation and amortization
12,417 11,674 24,799 22,952 Other 68 241 206 449 Changes in
operating assets and liabilities: Increase in accounts receivable
(84,618 ) (48,223 ) (72,390 ) (9,367 ) Increase in accounts payable
and accrued expenses 61,377 45,080 90,923 43,690 Increase in income
taxes payable, net (47,370 ) (33,692 ) (29,165 ) (15,474 ) Increase
in other current assets (3,485 ) (91 ) (2,206 ) (576 ) Net cash
from operating activities 44,886 84,026 218,743
249,290
Investing Activities: Decrease
(increase) in short-term investments, net 342 (89,803 ) (59,812 )
(89,765 ) Purchase of property and equipment (9,635 ) (17,141 )
(18,395 ) (27,209 ) Escrow deposit for land acquisition (27,101 ) —
(27,101 ) — Other, net (1,536 ) 1,264 134 820
Net cash from investing activities (37,930 ) (105,680 ) (105,174 )
(116,154 )
Financing Activities: Proceeds from issuance of
common stock 22,125 7,548 30,017 18,477 Repurchases of common stock
(131,391 ) (21,600 ) (358,116 ) (39,281 ) Excess tax benefits from
stock plans 495 584 984 1,683 Dividends paid (62,807 ) (61,899 )
(62,807 ) (61,899 ) Purchase of noncontrolling interest — — —
(7,730 ) Distribution to noncontrolling interest — —
(85 ) — Net cash from financing activities (171,578 )
(75,367 ) (390,007 ) (88,750 ) Effect of exchange rate changes on
cash and cash equivalents 4,137 (11,557 ) (653 ) (19,119 )
(Decrease) increase in cash and cash equivalents (160,485 )
(108,578 ) (277,091 ) 25,267 Cash and cash equivalents at beginning
of period 1,131,046 1,394,687 1,247,652
1,260,842 Cash and cash equivalents at end of period $
970,561 $ 1,286,109 $ 970,561 $ 1,286,109
Taxes paid: Income taxes $ 105,963 $ 85,195 $ 133,459
$ 112,146
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND
SUBSIDIARIES Business Segment Information (In thousands)
(Unaudited)
OTHER EUROPE MIDDLE
UNITED NORTH LATIN ASIA and
EAST and ELIMI- CONSOLI- STATES
AMERICA AMERICA PACIFIC AFRICA
INDIA NATIONS DATED Three months ended June
30, 2014: Revenues from unaffiliated customers $ 416,454 55,343
22,003 780,834 244,642 79,865 — 1,599,141 Transfers between
geographic areas 22,408 2,587 5,567 12,393
9,468 5,238 (57,661 ) — Total revenues $
438,862 57,930 27,570 793,227 254,110
85,103 (57,661 ) 1,599,141 Net revenues $ 200,106
25,533 16,648 138,445 78,638 25,344 — 484,714 Operating income $
59,780 7,001 4,676 51,436 14,219 5,331 — 142,443 Identifiable
assets $ 1,328,312 110,498 57,588 743,190 511,149 173,425 5,778
2,929,940 Capital expenditures $ 5,547 422 171 1,907 1,262 326 —
9,635 Depreciation and amortization $ 7,879 296 227 2,108 1,471 436
— 12,417 Equity $ 1,044,386 72,681 35,578 481,899 204,952 94,390
(36,749 ) 1,897,137
Three months ended June 30, 2013:
Revenues from unaffiliated customers $ 395,495 56,626 21,421
749,282 206,020 74,380 — 1,503,224 Transfers between geographic
areas 23,217 2,516 5,614 11,605
9,189 4,559 (56,700 ) — Total revenues $ 418,712
59,142 27,035 760,887 215,209
78,939 (56,700 ) 1,503,224 Net revenues $ 193,509 25,440
15,522 141,439 71,068 24,894 — 471,872 Operating income $ 58,310
7,887 4,601 54,781 11,613 6,387 — 143,579 Identifiable assets $
1,531,739 101,721 53,795 809,827 418,077 155,058 (6,552 ) 3,063,665
Capital expenditures $ 4,354 708 145 11,056 563 315 — 17,141
Depreciation and amortization $ 7,276 197 229 1,983 1,550 439 —
11,674 Equity $ 1,209,762 65,897 33,272 606,793 166,891 75,418
(36,091 ) 2,121,942
Six months ended June 30, 2014:
Revenues from unaffiliated customers $ 817,193 106,927 42,632
1,495,218 472,150 156,666 — 3,090,786 Transfers between geographic
areas 42,419 4,962 10,771 24,402 18,425
10,100 (111,079 ) — Total revenues $ 859,612
111,889 53,403 1,519,620 490,575
166,766 (111,079 ) 3,090,786 Net revenues $ 392,188 51,694
32,005 271,719 151,695 49,999 — 949,300 Operating income $ 111,678
15,376 9,535 104,277 25,285 11,495 — 277,646 Identifiable assets $
1,328,312 110,498 57,588 743,190 511,149 173,425 5,778 2,929,940
Capital expenditures $ 9,475 686 472 5,033 2,114 615 — 18,395
Depreciation and amortization $ 15,731 576 439 4,216 2,963 874 —
24,799 Equity $ 1,044,386 72,681 35,578 481,899 204,952 94,390
(36,749 ) 1,897,137
Six months ended June 30, 2013: Revenues
from unaffiliated customers $ 769,869 108,355 41,285 1,443,419
408,533 144,971 — 2,916,432 Transfers between geographic areas
43,243 5,060 10,490 22,235
18,069 8,886 (107,983 ) — Total revenues $ 813,112
113,415 51,775 1,465,654 426,602
153,857 (107,983 ) 2,916,432 Net revenues $ 373,852 49,221
29,933 276,989 141,682 48,202 — 919,879 Operating income $ 105,663
14,499 8,690 107,665 23,539 12,041 — 272,097 Identifiable assets $
1,531,739 101,721 53,795 809,827 418,077 155,058 (6,552 ) 3,063,665
Capital expenditures $ 9,733 895 404 13,608 1,761 808 — 27,209
Depreciation and amortization $ 14,033 404 470 3,971 3,179 895 —
22,952 Equity $ 1,209,762 65,897 33,272 606,793 166,891 75,418
(36,091 ) 2,121,942
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 Six months ended
June 30, June 30, (in thousands) 2014
2013 2014 2013 Total revenues $
1,599,141 $ 1,503,224 $ 3,090,786 $ 2,916,432
Expenses:
Airfreight services 503,213 483,016 986,095 947,935 Ocean freight
and ocean services 423,716 380,727 791,091 725,650 Customs
brokerage and other services 187,498 167,609 364,300
322,968 Net revenues $ 484,714 $ 471,872 $
949,300 $ 919,879
Expeditors International of Washington, Inc.R. Jordan Gates,
206-674-3427President and Chief Operating OfficerorBradley S.
Powell, 206-674-3412Senior Vice President and Chief Financial
Officer
Expeditors International... (NASDAQ:EXPD)
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