EXPD Expeditors International of Washington Inc

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

• Diluted Net Earnings Attributable to Shareholders per share (EPS1) increased 12% to $0.66
• Net Earnings Attributable to Shareholders increased 12% to $120 million
• Operating Income increased 12% to $187 million
• Revenues increased 15% to $1.8 billion
• Net Revenues2 increased 10% to $599 million
• Airfreight tonnage volume increased 12% and ocean container volume increased 4%

“This quarter represents the culmination of the efforts from our staff over the last few quarters,” said Jeffrey S. Musser, President and Chief Executive Officer. “We’ve spent a significant amount of time working with our customers to bring pricing back in line with the changes that have taken place in the market. While accomplishing that task, our staff has also continued to provide the high level of service that our customers have come to expect from Expeditors. We remain extremely thankful for the exceptional employees and customers with whom we get to work each day.

“While our current focus has shifted somewhat from volume growth - due to the margin impacts that can occur - we continued to record strong performance in all of our services, winning new business and growing volumes with existing customers. We think the numbers speak for themselves with regards to the quality of volume growth that we are experiencing.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Despite the highly unpredictable rate environment, our people exercised careful restraint to bring our benchmark operating income as a percentage of net revenue back above 30% for the quarter, as compared to the first two quarters of 2017. We are managing expenses well, as our growth in volumes has significantly outpaced our growth in headcount. At the same time, we continue to make critical investments in our technology and create additional efficiencies for both ourselves and our customers."

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.
Third Quarter 2017 Earnings Release, November 7, 2017
Financial Highlights for the Three and Nine months ended September 30, 2017 and 2016 (Unaudited)
(in 000's of US dollars except per share data)
	Three months ended September 30,											Nine months ended September 30,
	2017				2016				% Change			2017				2016				% Change
Revenues	$	1,802,166			$	1,562,394			15	%		$	5,019,577			$	4,456,030			13	%
Net revenues1	$	599,142			$	545,259			10	%		$	1,690,380			$	1,615,445			5	%
Operating income	$	186,895			$	167,263			12	%		$	501,249			$	497,953			1	%
Net earnings attributable to shareholders	$	120,263			$	107,581			12	%		$	322,378			$	320,217			1	%
Diluted earnings attributable to shareholders per share	$	0.66			$	0.59			12	%		$	1.77			$	1.75			1	%
Basic earnings attributable to shareholders per share	$	0.67			$	0.59			14	%		$	1.79			$	1.76			2	%
Diluted weighted average shares outstanding	181,788				182,692							181,951				182,958
Basic weighted average shares outstanding	179,416				181,177							179,827				181,645

_______________________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 and nine-month periods ended September 30, 2017, we repurchased 3.6 million and 6.1 million shares of common stock at an average price of $56.18 and $55.93 per share, respectively. During the three and nine-month periods ended September 30, 2016, the Company repurchased 2.0 million and 5.4 million shares of common stock at an average price of $51.16 and $49.64 per share, respectively.

	Employee headcount as of September 30,
	2017			2016
North America	6,043			5,769
Europe	3,013			2,846
North Asia	2,548			2,498
Middle East, Africa and India	1,503			1,494
South Asia	1,495			1,364
Latin America	800			758
Information Systems	889			810
Corporate	357			338
Total	16,648			15,877

		Year-over-year percentage increase in:
		Airfreight kilos			Ocean freight FEU
2017
July		7%			6%
August		10%			2%
September		17%			3%
Quarter		12%			4%

_______________________Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on November 10, 2017 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about November 20, 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 our ability to implement price adjustments, the quality of the volume growth that we are experiencing, the highly unpredictable rate environment, and our ability to manage expenses well. 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, 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)
	September 30, 2017				December 31, 2016
Assets
Current Assets:
Cash and cash equivalents	$	1,033,444			$	974,435
Accounts receivable, net	1,349,854				1,190,130
Other current assets	135,623				54,014
Total current assets	2,518,921				2,218,579
Property and equipment, net	513,070				536,572
Goodwill	7,927				7,927
Other assets, net	28,963				27,793
	$	3,068,881			$	2,790,871
Liabilities and Equity
Current Liabilities:
Accounts payable	$	836,055			$	726,571
Accrued expenses, primarily salaries and related costs	216,146				185,502
Federal, state and foreign income taxes	23,853				17,858
Total current liabilities	1,076,054				929,931
Deferred Federal and state income taxes	11,746				13,727
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued	—				—
Common stock, par value $0.01 per share. Issued and outstanding 177,559 shares at September 30, 2017 and 179,857 shares at December 31, 2016	1,776				1,799
Additional paid-in capital	1,464				2,642
Retained earnings	2,053,723				1,944,789
Accumulated other comprehensive loss	(78,960		)		(104,592		)
Total shareholders’ equity	1,978,003				1,844,638
Noncontrolling interest	3,078				2,575
Total equity	1,981,081				1,847,213
	$	3,068,881			$	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								Nine months ended
	September 30,								September 30,
	2017				2016				2017				2016
Revenues:
Airfreight services	$	735,164			$	621,566			$	2,022,577			$	1,764,512
Ocean freight and ocean services	563,386				495,460				1,585,730				1,414,344
Customs brokerage and other services	503,616				445,368				1,411,270				1,277,174
Total revenues	1,802,166				1,562,394				5,019,577				4,456,030
Operating Expenses:
Airfreight services	547,595				444,359				1,490,417				1,236,555
Ocean freight and ocean services	411,061				359,991				1,163,051				1,006,710
Customs brokerage and other services	244,368				212,785				675,729				597,320
Salaries and related costs	319,050				291,204				930,159				868,091
Rent and occupancy costs	30,533				27,091				87,826				81,029
Depreciation and amortization	12,272				11,882				36,241				34,853
Selling and promotion	10,608				10,134				32,476				29,817
Other	39,784				37,685				102,429				103,702
Total operating expenses	1,615,271				1,395,131				4,518,328				3,958,077
Operating income	186,895				167,263				501,249				497,953
Other Income (Expense):
Interest income	3,444				2,924				9,565				8,593
Other, net	96				925				2,584				3,407
Other income (expense), net	3,540				3,849				12,149				12,000
Earnings before income taxes	190,435				171,112				513,398				509,953
Income tax expense	69,829				63,163				190,470				188,518
Net earnings	120,606				107,949				322,928				321,435
Less net earnings attributable to the noncontrolling interest	343				368				550				1,218
Net earnings attributable to shareholders	$	120,263			$	107,581			$	322,378			$	320,217
Diluted earnings attributable to shareholders per share	$	0.66			$	0.59			$	1.77			$	1.75
Basic earnings attributable to shareholders per share	$	0.67			$	0.59			$	1.79			$	1.76
Dividends declared and paid per common share	$	—			$	—			$	0.42			$	0.40
Weighted average diluted shares outstanding	181,788				182,692				181,951				182,958
Weighted average basic shares outstanding	179,416				181,177				179,827				181,645

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,
	2017				2016				2017				2016
Operating Activities:
Net earnings	$	120,606			$	107,949			$	322,928			$	321,435
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable	1,741				1,321				3,187				2,461
Deferred income tax (benefit) expense	(28,854		)		(1,439		)		(16,000		)		2,342
Stock compensation expense	11,210				10,476				39,036				34,264
Depreciation and amortization	12,272				11,882				36,241				34,853
Other, net	377				11				(148		)		41
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(126,102		)		(58,279		)		(123,790		)		6,087
Increase in accounts payable and accrued expenses	61,833				38,070				96,132				74,148
Increase (decrease) in income taxes payable, net	38,149				7,197				10,814				(16,612		)
Increase in other current assets	(5,872		)		(1,395		)		(6,147		)		(2,089		)
Net cash from operating activities	85,360				115,793				362,253				456,930
Investing Activities:
Purchase of property and equipment	(34,462		)		(12,659		)		(67,603		)		(39,973		)
Other, net	(261		)		1,617				(892		)		5,472
Net cash from investing activities	(34,723		)		(11,042		)		(68,495		)		(34,501		)
Financing Activities:
Proceeds from issuance of common stock	65,915				57,522				162,781				147,645
Repurchases of common stock	(202,776		)		(101,690		)		(340,736		)		(268,097		)
Dividends paid	—				—				(75,726		)		(73,000		)
Net cash from financing activities	(136,861		)		(44,168		)		(253,681		)		(193,452		)
Effect of exchange rate changes on cash and cash equivalents	4,758				1,853				18,932				5,927
(Decrease) increase in cash and cash equivalents	(81,466		)		62,436				59,009				234,904
Cash and cash equivalents at beginning of period	1,114,910				980,264				974,435				807,796
Cash and cash equivalents at end of period	$	1,033,444			$	1,042,700			$	1,033,444			$	1,042,700
Taxes paid:
Income taxes	$	58,257			$	58,696			$	190,911			$	205,049

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.AND SUBSIDIARIES
Business Segment Information(In thousands)(Unaudited)
	UNITEDSTATES				OTHERNORTHAMERICA			LATINAMERICA			NORTH ASIA			SOUTH ASIA			EUROPE			MIDDLEEAST, AFRICAAND INDIA			ELIMI-NATIONS			CONSOLI-DATED
Three months ended September 30, 2017:
Revenues from unaffiliated customers	$	476,575			65,544			24,181			686,915			170,225			273,606			105,120			—			1,802,166
Transfers between geographic areas	26,888				2,782			3,679			5,253			5,681			10,302			5,318			(59,903	)		—
Total revenues	$	503,463			68,326			27,860			692,168			175,906			283,908			110,438			(59,903	)		1,802,166
Net revenues	$	257,030			30,664			14,710			138,667			41,411			85,390			29,956			1,314			599,142
Operating income	$	74,645			9,215			2,652			72,070			11,697			11,124			5,495			(3	)		186,895
Identifiable assets	$	1,636,293			100,651			52,238			446,826			143,893			473,509			212,210			3,261			3,068,881
Capital expenditures	$	7,398			263			2,436			589			390			23,138			248			—			34,462
Depreciation and amortization	$	7,905			405			310			1,313			569			1,309			461			—			12,272
Equity	$	1,345,266			52,212			25,709			231,831			102,477			139,688			119,649			(35,751	)		1,981,081
Three months ended September 30, 2016:
Revenues from unaffiliated customers	$	423,362			56,747			21,592			590,622			154,156			228,256			87,659			—			1,562,394
Transfers between geographic areas	24,610				2,770			3,724			5,368			6,206			9,938			5,551			(58,167	)		—
Total revenues	$	447,972			59,517			25,316			595,990			160,362			238,194			93,210			(58,167	)		1,562,394
Net revenues	$	229,773			30,211			14,063			124,251			42,711			74,888			29,363			(1	)		545,259
Operating income	$	69,457			6,200			3,328			59,682			14,045			7,018			7,534			(1	)		167,263
Identifiable assets	$	1,410,287			95,390			56,192			480,587			117,333			388,543			237,104			8,788			2,794,224
Capital expenditures	$	8,319			720			139			739			319			2,127			296			—			12,659
Depreciation and amortization	$	7,566			369			328			1,404			594			1,116			505			—			11,882
Equity	$	1,145,293			41,542			37,765			293,383			87,926			129,989			150,395			(32,360	)		1,853,933

(in thousands)	UNITED STATES				OTHER NORTH AMERICA			LATIN AMERICA			NORTH ASIA			SOUTH ASIA			EUROPE			MIDDLE EAST,  AFRICA AND INDIA			ELIMI- NATIONS			CONSOLI- DATED
Nine months ended September 30, 2017:
Revenues from unaffiliated customers	$	1,354,811			187,997			69,747			1,873,393			475,163			764,596			293,870			—			5,019,577
Transfers between geographic areas	79,356				8,246			11,073			15,139			16,520			29,288			15,316			(174,938	)		—
Total revenues	$	1,434,167			196,243			80,820			1,888,532			491,683			793,884			309,186			(174,938	)		5,019,577
Net revenues	$	737,842			84,630			43,634			371,459			117,634			242,244			89,973			2,964			1,690,380
Operating income	$	191,256			26,583			8,349			183,515			37,434			36,189			17,928			(5	)		501,249
Identifiable assets at period end	$	1,636,293			100,651			52,238			446,826			143,893			473,509			212,210			3,261			3,068,881
Capital expenditures	$	19,492			1,066			3,648			2,492			1,172			38,717			1,016			—			67,603
Depreciation and amortization	$	23,389			1,163			930			3,995			1,656			3,707			1,401			—			36,241
Equity	$	1,345,266			52,212			25,709			231,831			102,477			139,688			119,649			(35,751	)		1,981,081
Nine months ended September 30, 2016:
Revenues from unaffiliated customers	$	1,248,923			165,527			62,825			1,605,343			442,464			680,035			250,913			—			4,456,030
Transfers between geographic areas	79,617				8,141			11,512			15,849			18,338			30,396			16,452			(180,305	)		—
Total revenues	$	1,328,540			173,668			74,337			1,621,192			460,802			710,431			267,365			(180,305	)		4,456,030
Net revenues	$	683,331			88,404			42,264			357,159			128,486			227,068			88,745			(12	)		1,615,445
Operating income	$	184,876			23,091			11,016			176,621			48,090			31,109			23,162			(12	)		497,953
Identifiable assets at period end	$	1,410,287			95,390			56,192			480,587			117,333			388,543			237,104			8,788			2,794,224
Capital expenditures	$	25,234			1,476			941			2,502			1,325			6,386			2,109			—			39,973
Depreciation and amortization	$	22,264			1,113			869			4,111			1,649			3,402			1,445			—			34,853
Equity	$	1,145,293			41,542			37,765			293,383			87,926			129,989			150,395			(32,360	)		1,853,933

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)	2017				2016				2017				2016
Total revenues	$	1,802,166			$	1,562,394			$	5,019,577			$	4,456,030
Expenses:
Airfreight services	547,595				444,359				1,490,417				1,236,555
Ocean freight and ocean services	411,061				359,991				1,163,051				1,006,710
Customs brokerage and other services	244,368				212,785				675,729				597,320
Net revenues	$	599,142			$	545,259			$	1,690,380			$	1,615,445

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