EXPD Expeditors International of Washington Inc

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced first quarter 2017 financial results including the following highlights compared to the same quarter of 2016:

• Diluted Net Earnings Attributable to Shareholders per share (EPS1) decreased 4% to $0.51
• Net Earnings Attributable to Shareholders decreased 3% to $93 million
• Operating Income decreased 4% to $146 million
• Revenues increased 9% to $1.5 billion
• Net Revenues2 increased 2% to $528 million
• Airfreight tonnage volume increased 16% and ocean container volume increased 7%

“Similar to the past few quarters, our people continued to execute well and we again increased volumes and grew market share,” said Jeffrey S. Musser, President and Chief Executive Officer. “We were especially pleased with the performance of our Transcon and customs brokerage teams, as they increased business with existing customers and also brought on new customers, proving our investments in those areas are bearing fruit. We remain deeply committed to the strategy we have laid out that continues to develop and grow our core business, leading to the purposeful growth in market share that we have been seeing. At the same time, we understand that we must continue to make future investments to remain in the market leading position our customers expect from us in terms of execution and innovation. Technology continues to advance at a rapid pace and we expect to remain at the leading edge of those changes.

“As expected and previously noted, we continued to experience the rate pressure that we have seen in recent quarters. Over the long term, we expect this rate volatility to subside and that we will return to more historical pricing patterns. In the meantime, we continue to refine our processes and carefully execute against our strategy to position our company for further growth.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Operating income as a percentage of net revenue was 28%, which is below our 30% operating benchmark, largely due to volume increases being offset by lower average net rates. Employee headcount and operating expenses increased during the quarter, as we continued to invest in people to handle the increases in freight volumes and to develop and deliver improved technology and processes related to our global network. We will continue to make these important investments in people, processes and technology, as well as to invest in our strategic efforts to explore new areas for long-term profitable growth.”

Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 177 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 2017 Earnings Release, May 2, 2017Financial Highlights for the Three months ended March 31, 2017 and 2016 (Unaudited) (in 000's of US dollars except per share data)

		Three months ended March 31,
		2017				2016				%Change
Revenues		$	1,545,132			$	1,418,472			9	%
Net revenues1		$	527,605			$	517,069			2	%
Operating income		$	146,114			$	151,826			(4	)%
Net earnings attributable to shareholders		$	93,264			$	96,584			(3	)%
Diluted earnings attributable to shareholders per share		$	0.51			$	0.53			(4	)%
Basic earnings attributable to shareholders per share		$	0.52			$	0.53			(2	)%
Diluted weighted average shares outstanding		182,094				183,018
Basic weighted average shares outstanding		180,062				182,010

_______________________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, 2017 and 2016, we repurchased 1 million and 1.5 million shares of common stock at an average price of $56.49 and $47.79 per share, respectively.

		Employee headcount as of March 31,
		2017			2016
North America		5,902			5,652
Europe		2,887			2,731
North Asia		2,503			2,457
Middle East, Africa and India		1,503			1,479
South Asia		1,414			1,327
Latin America		777			775
Information Systems		874			765
Corporate		362			332
Total		16,222			15,518

		Year-over-year percentage increase(decrease) in:
		Airfreight kilos			Ocean freight FEU
2017
January		10	%		15	%
February		17	%		(1	)%
March		20	%		6	%
Quarter		16	%		7	%

_______________________Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on May 5, 2017 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about May 12, 2017.

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 margin expectations, ability to adapt to changing business cycles, ability to increase volumes and manage buy and sell rates, quality growth over the long term, expectations for rate volatility and the current rate environment, driving incremental efficiencies in our processes, investing in people and technology, executing our strategic initiatives, and our ability to remain at the forefront of technological innovation. 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, the future success of our business model, our ability to maintain consistent and stable operating results, our ability to perpetuate profits, changes in customer demand for Expeditors’ services caused by a general economic slow-down, changes in global trade volumes, customers’ inventory build-up, decreased consumer confidence, volatility in equity markets, energy and fuel prices, geopolitical 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,  2017				December 31,2016
Assets
Current Assets:
Cash and cash equivalents		$	1,156,043			$	974,435
Accounts receivable, net		1,126,488				1,190,130
Other current assets		119,265				54,014
Total current assets		2,401,796				2,218,579
Property and equipment, net		463,604				536,572
Goodwill		7,927				7,927
Other assets, net		29,392				27,793
		$	2,902,719			$	2,790,871
Liabilities and Equity
Current Liabilities:
Accounts payable		$	701,122			$	726,571
Accrued expenses, primarily salaries and related costs		205,255				185,502
Federal, state and foreign income taxes		20,427				17,858
Total current liabilities		926,804				929,931
Deferred Federal and state income taxes		24,195				13,727
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued		—				—
Common stock, par value $0.01 per share. Issued and outstanding 179,924 shares at March 31,2017 and 179,857 shares at December 31, 2016		1,800				1,799
Additional paid-in capital		4,721				2,642
Retained earnings		2,038,053				1,944,789
Accumulated other comprehensive loss		(95,678		)		(104,592		)
Total shareholders’ equity		1,948,896				1,844,638
Noncontrolling interest		2,824				2,575
Total equity		1,951,720				1,847,213
		$	2,902,719			$	2,790,871

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
		Three months ended
		March 31,
		2017				2016
Revenues:
Airfreight services		$	615,545			$	560,853
Ocean freight and ocean services		493,759				454,192
Customs brokerage and other services		435,828				403,427
Total revenues		1,545,132				1,418,472
Operating Expenses:
Airfreight services		443,404				388,777
Ocean freight and ocean services		366,063				323,020
Customs brokerage and other services		208,060				189,606
Salaries and related costs		292,580				283,355
Rent and occupancy costs		28,130				26,859
Depreciation and amortization		11,927				11,329
Selling and promotion		10,915				9,432
Other		37,939				34,268
Total operating expenses		1,399,018				1,266,646
Operating income		146,114				151,826
Other Income (Expense):
Interest income		2,741				2,779
Other, net		298				879
Other income (expense), net		3,039				3,658
Earnings before income taxes		149,153				155,484
Income tax expense		55,586				58,437
Net earnings		93,567				97,047
Less net earnings attributable to the noncontrolling interest		303				463
Net earnings attributable to shareholders		$	93,264			$	96,584
Diluted earnings attributable to shareholders per share		$	0.51			$	0.53
Basic earnings attributable to shareholders per share		$	0.52			$	0.53
Weighted average diluted shares outstanding		182,094				183,018
Weighted average basic shares outstanding		180,062				182,010

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
		Three months ended
		March 31,
		2017				2016
Operating Activities:
Net earnings		$	93,567			$	97,047
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable		931				578
Deferred income tax expense		5,593				9,896
Stock compensation expense		10,623				10,831
Depreciation and amortization		11,927				11,329
Other, net		(351		)		36
Changes in operating assets and liabilities:
Decrease in accounts receivable		75,454				112,710
Decrease in accounts payable and accrued expenses		(18,324		)		(15,344		)
Increase in income taxes payable, net		19,824				10,925
Increase in other current assets		(3,565		)		(2,055		)
Net cash from operating activities		195,679				235,953
Investing Activities:
Purchase of property and equipment		(12,761		)		(14,035		)
Other, net		(671		)		(559		)
Net cash from investing activities		(13,432		)		(14,594		)
Financing Activities:
Proceeds from issuance of common stock		45,365				41,635
Repurchases of common stock		(53,908		)		(70,292		)
Net cash from financing activities		(8,543		)		(28,657		)
Effect of exchange rate changes on cash and cash equivalents		7,904				13,419
Increase in cash and cash equivalents		181,608				206,121
Cash and cash equivalents at beginning of period		974,435				807,796
Cash and cash equivalents at end of period		$	1,156,043			$	1,013,917
Taxes paid:
Income taxes		$	29,146			$	37,984

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Business Segment Information
(In thousands)
(Unaudited)
		UNITEDSTATES				OTHERNORTHAMERICA			LATINAMERICA			NORTHASIA			SOUTHASIA			EUROPE			MIDDLEEAST,AFRICAandINDIA			ELIMI-NATIONS			CONSOLI-DATED
Three months ended March 31, 2017:
Revenues from unaffiliated customers		$	426,019			59,899			22,103			566,428			147,240			231,457			91,986			—			1,545,132
Transfers between geographic areas		24,313				2,639			3,635			5,051			5,431			9,322			4,964			(55,355	)		—
Total revenues		$	450,332			62,538			25,738			571,479			152,671			240,779			96,950			(55,355	)		1,545,132
Net revenues		$	230,785			25,793			14,916			111,833			37,995			75,958			29,731			594			527,605
Operating income		$	52,346			5,051			3,451			53,352			13,224			11,646			7,043			1			146,114
Identifiable assets		$	1,536,520			106,068			50,344			514,509			122,765			379,853			188,098			4,562			2,902,719
Capital expenditures		$	5,242			234			255			1,240			373			5,078			339			—			12,761
Depreciation and amortization		$	7,753			372			320			1,320			531			1,171			460			—			11,927
Equity		$	1,192,601			51,812			27,248			371,152			105,726			118,211			119,627			(34,657	)		1,951,720
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		$	1,236,896			119,258			56,334			455,973			133,940			438,711			216,576			3,852			2,661,540
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

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)		2017				2016
Total revenues		$	1,545,132			$	1,418,472
Expenses:
Airfreight services		443,404				388,777
Ocean freight and ocean services		366,063				323,020
Customs brokerage and other services		208,060				189,606
Net revenues		$	527,605			$	517,069

 

CONTACTS:

Jeffrey S. Musser
President and Chief Executive Officer
(206) 674-3433

Bradley S. Powell
Senior Vice President and Chief Financial Officer
(206) 674-3412

Geoffrey Buscher
Director - Investor Relations
(206) 892-4510