EXPD Expeditors International of Washington Inc

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     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   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   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

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

Expeditors International of Washington, Inc.President and Chief Operating OfficerR. Jordan Gates, 206-674-3427orSenior Vice President and Chief Financial OfficerBradley S. Powell, 206-674-3412