EXPD Expeditors International of Washington Inc

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced first quarter 2018 financial results including the following highlights compared to the same quarter of 2017:

• Diluted Net Earnings Attributable to Shareholders per share (EPS1) increased 49% to $0.76
• Net Earnings Attributable to Shareholders increased 45% to $136 million
• Operating Income increased 32% to $193 million
• Revenues increased 20% to $1.9 billion
• Net Revenues2 increased 21% to $636 million
• Airfreight tonnage volume and ocean container volume both increased 5%

“Building from a strong second half of 2017, we continued to execute well across all of our services during the quarter,” commented Jeffrey S. Musser, President and Chief Executive Officer. “We added profitable growth from new and existing customers and benefitted from favorable buying opportunities in certain markets. All across our global network, our people exercised pricing discipline while securing capacity to deliver the services and solutions our customers need. All told, this quarter showcases the best of our Company’s capabilities and our relentless drive for excellence."

“Compared with the robust volume growth in the first quarter a year ago,” Mr. Musser continued, “this quarter’s volume increases and financial performance track more in line with our historical performance and demonstrates our ability to execute and generate profitable growth. Demand has remained strong and we have continued to invest in people, processes and technology to efficiently handle the increased volumes across all products.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “These investments, including investments in facilities and equipment, will enhance our efficiencies. While investing for growth, we remain deliberate in how we commit resources and once again realized our target 30% operating efficiency (operating income as a percentage of net revenue) during the quarter.” Mr. Powell further commented that the Company’s effective tax rate for the quarter was 31.1%, compared to 37.3% a year ago. He also reiterated that the impact of the 2017 Tax Act on the Company’s effective tax rate in future periods will largely depend on the mix of pretax earnings that are generated in its U.S. and foreign operations, as well as further interpretation of and guidance to be issued on the new tax law.

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 2018 Earnings Release, May 8, 2018Financial Highlights for the Three months ended March 31, 2018 and 2017 (Unaudited) (in 000's of US dollars except per share data)

	Three months ended March 31,
	2018				2017				% Change
Revenues1	$	1,854,262			$	1,545,132			20	%
Net revenues2	$	635,838			$	527,605			21	%
Operating income	$	192,818			$	146,114			32	%
Net earnings attributable to shareholders	$	135,692			$	93,264			45	%
Diluted earnings attributable to shareholders per share	$	0.76			$	0.51			49	%
Basic earnings attributable to shareholders per share	$	0.77			$	0.52			48	%
Diluted weighted average shares outstanding	179,416				182,094
Basic weighted average shares outstanding	175,900				180,062

_______________________1Effective January 1, 2018, the Company adopted required new revenue recognition guidance, resulting in a $22 million net reduction to the opening balance of retained earnings. In addition, in conjunction with the adoption of new revenue recognition guidance, the Company also changed the presentation of certain warehouse and distribution revenues from a net to a gross basis, which increased both revenues and operating expenses in customs brokerage and other services by approximately $50 million in the first quarter of 2018. Comparative prior year revenues (and the related volume information in the table below) has not been adjusted and continues to be reported under the Company's historical policies.  2018 reported revenues (and the related volume information) are reported under the Company's new revenue recognition accounting policies.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.

During the three-month periods ended March 31, 2018 and 2017, we repurchased 2.7 million and 1.0 million shares of common stock at an average price of $64.76 and $56.49 per share, respectively.

	Employee Full-time Equivalents as of March 31,
	2018			2017
North America	6,264			5,947
Europe	3,132			2,816
North Asia	2,579			2,645
South Asia	1,582			1,494
Middle East, Africa and India	1,478			1,544
Latin America	811			770
Information Systems	888			873
Corporate	351			340
Total	17,085			16,429

		First quarter year-over-year percentage increase (decrease) in:
		Airfreight kilos			Ocean freight FEU
2018
January		10	%		(1	)%
February		1	%		27	%
March		3	%		(5	)%
Quarter		5	%		5	%

___________________________Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on May 11, 2018 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about May 21, 2018.

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 execute and generate profitable growth; benefitting from favorable buying opportunities in certain markets; the strength of demand; our ability to efficiently handle increased volumes across all products; our ability to reach and maintain our target rate of operating efficiency; investments enhancing our efficiency; the impact of the 2017 Tax Act on our effective tax rate; volatility in equity markets; energy and fuel prices; political changes; foreign exchange rates; regulatory actions or changes or the unpredictable acts of competitors and other risks; 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,  2018				December 31,  2017
Assets
Current Assets:
Cash and cash equivalents	$	1,132,901			$	1,051,099
Accounts receivable, net	1,326,168				1,414,741
Deferred contract costs	120,861				—
Other current assets	58,161				75,612
Total current assets	2,638,091				2,541,452
Property and equipment, net	531,068				525,203
Goodwill	7,927				7,927
Deferred Federal and state income taxes, net	7,402				13,207
Other assets, net	27,993				29,219
	$	3,212,481			$	3,117,008
Liabilities and Equity
Current Liabilities:
Accounts payable	$	812,200			$	866,305
Accrued expenses, primarily salaries and related costs	222,212				206,320
Contract liabilities	147,236				—
Federal, state and foreign income taxes	17,233				20,494
Total current liabilities	1,198,881				1,093,119
Noncurrent Federal income taxes payable	31,334				29,516
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued	—				—
Common stock, par value $0.01 per share. Issued and outstanding 174,308 shares at March 31, 2018 and 176,374 shares at December 31, 2017	1,743				1,764
Additional paid-in capital	1,198				546
Retained earnings	2,041,520				2,063,512
Accumulated other comprehensive loss	(64,992		)		(73,964		)
Total shareholders’ equity	1,979,469				1,991,858
Noncontrolling interest	2,797				2,515
Total equity	1,982,266				1,994,373
	$	3,212,481			$	3,117,008

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
	Three months ended
	March 31,
	2018				2017
Revenues:
Airfreight services	$	731,227			$	615,545
Ocean freight and ocean services	520,883				493,759
Customs brokerage and other services	602,152				435,828
Total revenues	1,854,262				1,545,132
Operating Expenses:
Airfreight services	513,504				443,404
Ocean freight and ocean services	379,418				366,063
Customs brokerage and other services	325,502				208,060
Salaries and related costs	339,895				292,580
Rent and occupancy costs	36,913				28,130
Depreciation and amortization	13,922				11,927
Selling and promotion	10,965				10,915
Other	41,325				37,939
Total operating expenses	1,661,444				1,399,018
Operating income	192,818				146,114
Other Income (Expense):
Interest income	4,314				2,741
Other, net	624				298
Other income (expense), net	4,938				3,039
Earnings before income taxes	197,756				149,153
Income tax expense	61,556				55,586
Net earnings	136,200				93,567
Less net earnings attributable to the noncontrolling interest	508				303
Net earnings attributable to shareholders	$	135,692			$	93,264
Diluted earnings attributable to shareholders per share	$	0.76			$	0.51
Basic earnings attributable to shareholders per share	$	0.77			$	0.52
Weighted average diluted shares outstanding	179,416				182,094
Weighted average basic shares outstanding	175,900				180,062

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	Three months ended
	March 31,
	2018				2017
Operating Activities:
Net earnings	$	136,200			$	93,567
Adjustments to reconcile net earnings to net cash from operating activities:
(Recoveries) provision for losses on accounts receivable	(265		)		931
Deferred income tax expense	2,853				5,593
Stock compensation expense	11,267				10,623
Depreciation and amortization	13,922				11,927
Other, net	48				(351		)
Changes in operating assets and liabilities:
Decrease in accounts receivable	100,647				75,454
Decrease in accounts payable and accrued expenses	(45,844		)		(18,324		)
Decrease in deferred contract costs	3,407				—
Decrease in contract liabilities	(7,401		)		—
Increase in income taxes payable, net	19,509				19,824
Decrease (increase) in other current assets	1,134				(3,565		)
Net cash from operating activities	235,477				195,679
Investing Activities:
Purchase of property and equipment	(13,796		)		(12,761		)
Other, net	(431		)		(671		)
Net cash from investing activities	(14,227		)		(13,432		)
Financing Activities:
Proceeds from issuance of common stock	26,397				45,365
Repurchases of common stock	(172,360		)		(53,908		)
Net cash from financing activities	(145,963		)		(8,543		)
Effect of exchange rate changes on cash and cash equivalents	6,515				7,904
Increase in cash and cash equivalents	81,802				181,608
Cash and cash equivalents at beginning of period	1,051,099				974,435
Cash and cash equivalents at end of period	$	1,132,901			$	1,156,043
Taxes paid:
Income taxes	$	38,519			$	29,146

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 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
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

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)	2018				2017
Total revenues	$	1,854,262			$	1,545,132
Expenses:
Airfreight services	513,504				443,404
Ocean freight and ocean services	379,418				366,063
Customs brokerage and other services	325,502				208,060
Net revenues	$	635,838			$	527,605

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