Expeditors Reports Second Quarter 2019 EPS of $0.88

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced second quarter 2019 financial results including the following highlights compared to the same quarter of 2018:

• Diluted Net Earnings Attributable to Shareholders per share (EPS¹) increased 11% to $0.88
• Net Earnings Attributable to Shareholders increased 9% to $153 million
• Operating Income increased 5% to $192 million
• Revenues increased 4% to $2 billion
• Net Revenues² increased 3% to $662 million
• Airfreight tonnage volume decreased 5% and ocean container volume increased 2%

“During the quarter and throughout the first half of the year, we have shown our ability to manage uncertainty and deliver profitable growth,” said Jeffrey S. Musser, President and Chief Executive Officer. “While our air freight business was challenged as a result of a slowdown in export volumes out of North Asia and the United States, we continued to enhance our efforts on growing these two important markets as a focus of our key strategic initiatives. Additionally, the current climate of geopolitical volatility has created uncertainty, but our organization continues to show that the strength of our global presence and customer focus has never been more important in our relentless drive to grow while maintaining our profitability.

“In addition, we continued to grow our customs brokerage and import services, Transcon, and warehouse and distribution services by winning business with new customers as well as from existing accounts. For a second consecutive quarter, we increased the volume of ocean freight containers that we handled and boosted net revenue per container. Except for comparatively soft demand in certain air markets, this was a strong quarter and our people performed at their highest level.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “We grew net revenues ahead of overhead expenses, even as we continue to make important investments in people and systems, such as our integrated order management, quoting, booking, visibility, security, reporting and analytics platform. While we boosted operating efficiency (operating income as a percentage of net revenue) compared to the first quarter, it remained below our target 30%, due again to lower air freight net revenues. Our effective tax rate declined from 25.8% in the second quarter of 2018 to 23.6% in 2019, largely due to the benefit from Foreign-derived intangible income deductions and a state tax refund."

Expeditors is a global logistics company headquartered in Seattle, Washington. The Company employs trained professionals in 176 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.
Second Quarter 2019 Earnings Release, August 6, 2019
Financial Highlights for the three and six months ended June 30, 2019 and 2018 (Unaudited)
(in 000's of US dollars except per share data)
		Three months ended June 30,										Six months ended June 30,
		2019				2018				% Change		2019				2018				% Change
Revenues		$	2,035,579			$	1,957,559			4%		$	4,055,630			$	3,811,821			6%
Net revenues1		$	661,695			$	642,546			3%		$	1,315,809			$	1,278,384			3%
Operating income		$	192,201			$	183,584			5%		$	379,802			$	376,402			1%
Net earnings attributable to shareholders		$	153,149			$	140,605			9%		$	292,848			$	276,297			6%
Diluted earnings attributable to shareholders per share		$	0.88			$	0.79			11%		$	1.67			$	1.54			8%
Basic earnings attributable to shareholders per share		$	0.90			$	0.80			13%		$	1.71			$	1.58			8%
Diluted weighted average shares outstanding			174,466				178,603						174,953				179,120
Basic weighted average shares outstanding			171,003				174,754						171,425				175,324

___________________

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.

The three and six months ended June 30, 2019 include the effect of changing our presentation of certain import services from a net to a gross basis and our revised presentation of destination services, which increased revenues and directly related operating expenses in customs brokerage and other services but did not change net revenues.

During the three and six months ended June 30, 2019, we repurchased 2.6 million and 3.2 million shares of common stock at an average price of $73.03 and $73.47 per share, respectively. During the three and six months ended June 30, 2018, we repurchased 3.1 million and 5.8 million shares of common stock at an average price of $76.22 and $70.92 per share, respectively.

	Employee Full-time Equivalents June 30, 2019
	2019				2018
North America		6,893				6,414
Europe		3,439				3,205
North Asia		2,532				2,616
South Asia		1,661				1,604
Middle East, Africa and India		1,550				1,466
Latin America		873				801
Information Systems		922				892
Corporate		379				351
Total		18,249				17,349

		Second quarter year-over-year percentage increase (decrease) in:
		Airfreight kilos			Ocean freight FEU
2019
April		(4	)%		5	%
May		(2	)%		—	%
June		(7	)%		—	%
Quarter		(5	)%		2	%

___________________

Investors may submit written questions via e-mail to: [e-mail]. Questions received by the end of business on August 9, 2019 will be considered in management's 8-K “Responses to Selected Questions.”

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 our ability to extract value from investment in key systems; the impact of the 2017 Tax Act and related interpretations on our effective tax rate; 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)
		June 30, 2019				December 31, 2018
Assets:
Current Assets:
Cash and cash equivalents		$	1,082,650			$	923,735
Accounts receivable, less allowance for doubtful accounts of $13,391 at June 30, 2019 and $15,345 at December 31, 2018			1,382,070				1,581,530
Deferred contract costs			143,651				159,510
Other			103,089				70,041
Total current assets			2,711,460				2,734,816
Property and equipment, less accumulated depreciation and amortization of $465,983 at June 30, 2019 and $446,977 at December 31, 2018			499,233				504,105
Operating lease right-of-use assets			377,423				—
Goodwill			7,927				7,927
Deferred federal and state income taxes, net			33,617				40,465
Other assets, net			17,330				27,246
Total assets		$	3,646,990			$	3,314,559
Liabilities:
Current Liabilities:
Accounts payable		$	811,144			$	902,259
Accrued expenses, primarily salaries and related costs			217,463				215,813
Contract liabilities			169,055				190,343
Current portion of operating lease liabilities			61,267				—
Federal, state and foreign income taxes			19,891				18,424
Total current liabilities			1,278,820				1,326,839
Noncurrent portion of operating lease liabilities			315,776				—
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued			—				—
Common stock, par value $0.01 per share. Issued and outstanding: 170,040 shares at June 30, 2019 and 171,582 shares at December 31, 2018			1,701				1,716
Additional paid-in capital			12,433				1,896
Retained earnings			2,140,935				2,088,707
Accumulated other comprehensive loss			(104,096	)			(105,481	)
Total shareholders’ equity			2,050,973				1,986,838
Noncontrolling interest			1,421				882
Total equity			2,052,394				1,987,720
Total liabilities and equity		$	3,646,990			$	3,314,559

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
	Three months ended June 30,								Six months ended June 30,
	2019				2018				2019				2018
Revenues:
Airfreight services	$	741,577			$	801,761			$	1,456,478			$	1,532,988
Ocean freight and ocean services		543,809				530,008				1,112,450				1,050,891
Customs brokerage and other services		750,193				625,790				1,486,702				1,227,942
Total revenues		2,035,579				1,957,559				4,055,630				3,811,821
Operating Expenses:
Airfreight services		542,639				593,325				1,051,849				1,106,829
Ocean freight and ocean services		390,299				385,156				810,630				764,574
Customs brokerage and other services		440,946				336,532				877,342				662,034
Salaries and related		356,351				350,948				713,261				690,843
Rent and occupancy		40,897				38,071				82,420				74,984
Depreciation and amortization		12,677				13,576				26,070				27,498
Selling and promotion		11,643				10,788				22,719				21,753
Other		47,926				45,579				91,537				86,904
Total operating expenses		1,843,378				1,773,975				3,675,828				3,435,419
Operating income		192,201				183,584				379,802				376,402
Other Income (Expense):
Interest income		6,516				5,153				12,622				9,467
Other, net		2,262				1,167				3,927				1,791
Other income (expense), net		8,778				6,320				16,549				11,258
Earnings before income taxes		200,979				189,904				396,351				387,660
Income tax expense		47,449				48,958				102,710				110,514
Net earnings		153,530				140,946				293,641				277,146
Less net earnings attributable to the noncontrolling interest		381				341				793				849
Net earnings attributable to shareholders	$	153,149			$	140,605			$	292,848			$	276,297
Diluted earnings attributable to shareholders per share	$	0.88			$	0.79			$	1.67			$	1.54
Basic earnings attributable to shareholders per share	$	0.90			$	0.80			$	1.71			$	1.58
Weighted average diluted shares outstanding		174,466				178,603				174,953				179,120
Weighted average basic shares outstanding		171,003				174,754				171,425				175,324

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
		Three months ended June 30,								Six months ended June 30,
		2019				2018				2019				2018
Operating Activities:
Net earnings		$	153,530			$	140,946			$	293,641			$	277,146
Adjustments to reconcile net earnings to net cash from operating activities:
Provisions for losses (recoveries) on accounts receivable			1,584				528				(304	)			263
Deferred income tax expense			3,697				3,235				5,805				6,088
Stock compensation expense			23,824				18,002				37,206				29,269
Depreciation and amortization			12,677				13,576				26,070				27,498
Other, net			(29	)			56				160				104
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable			(28,187	)			(46,876	)			202,290				53,771
Increase (decrease) in accounts payable and accrued expenses			39,900				58,075				(82,383	)			12,231
(Increase) decrease in deferred contract costs			(13,010	)			(20,019	)			18,249				(16,612	)
Increase (decrease) in contract liabilities			13,003				20,294				(23,722	)			12,893
(Decrease) increase in income taxes payable, net			(49,606	)			(38,059	)			(32,613	)			(18,550	)
(Decrease) increase in other, net			(1,676	)			(1,202	)			791				(68	)
Net cash from operating activities			155,707				148,556				445,190				384,033
Investing Activities:
Purchase of property and equipment			(12,987	)			(12,113	)			(22,422	)			(25,909	)
Other, net			1,038				(1,564	)			1,293				(1,995	)
Net cash from investing activities			(11,949	)			(13,677	)			(21,129	)			(27,904	)
Financing Activities:
Proceeds from issuance of common stock			32,287				95,363				59,477				121,760
Repurchases of common stock			(190,589	)			(235,572	)			(234,923	)			(407,932	)
Dividends Paid			(85,184	)			(79,180	)			(85,184	)			(79,180	)
Payments for taxes related to net share settlement of equity awards			(6,674	)			(3,215	)			(6,674	)			(3,215	)
Net cash from financing activities			(250,160	)			(222,604	)			(267,304	)			(368,567	)
Effect of exchange rate changes on cash and cash equivalents			(377	)			(24,322	)			2,158				(17,807	)
Change in cash and cash equivalents			(106,779	)			(112,047	)			158,915				(30,245	)
Cash and cash equivalents at beginning of period			1,189,429				1,132,901				923,735				1,051,099
Cash and cash equivalents at end of period		$	1,082,650			$	1,020,854			$	1,082,650			$	1,020,854
Taxes Paid:
Income taxes		$	97,715			$	85,612			$	134,968			$	124,131

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Business Segment Information
(In thousands)
(Unaudited)
		UNITED STATES				OTHER NORTH AMERICA				LATIN AMERICA				NORTH ASIA				SOUTH ASIA				EUROPE				MIDDLE EAST, AFRICA AND INDIA				ELIMI- NATIONS				CONSOLI- DATED
For the three months ended June 30, 2019:
Revenues2		$	681,076				85,537				38,757				621,951				181,380				319,331				108,311				(764	)			2,035,579
Net revenues1		$	294,983				35,201				16,714				134,397				48,893				98,655				33,222				(370	)			661,695
Operating income		$	87,923				8,858				2,346				64,453				15,513				9,315				3,799				(6	)			192,201
Identifiable assets at period end		$	1,819,718				176,151				73,197				580,311				193,771				581,518				229,692				(7,368	)			3,646,990
Capital expenditures		$	8,985				768				145				300				428				1,914				447				—				12,987
Depreciation and amortization		$	7,687				459				380				1,384				496				1,775				496				—				12,677
Equity		$	1,303,381				83,417				31,014				282,192				107,229				168,570				109,790				(33,199	)			2,052,394
For the three months ended June 30, 2018:
Revenues2		$	598,076				84,244				42,618				680,227				179,528				330,775				114,005				(71,914	)			1,957,559
Net revenues1		$	271,880				34,749				15,923				140,583				44,886				102,371				33,125				(971	)			642,546
Operating income		$	63,628				10,077				2,701				70,359				13,374				16,958				6,490				(3	)			183,584
Identifiable assets at period end		$	1,488,060				153,827				54,186				540,954				157,479				526,607				217,716				(5,997	)			3,132,832
Capital expenditures		$	6,032				2,191				167				559				695				1,225				1,244				—				12,113
Depreciation and amortization		$	8,447				473				395				1,303				542				1,955				461				—				13,576
Equity		$	1,196,226				56,702				26,625				250,513				112,259				157,493				127,032				(34,291	)			1,892,559

		UNITED STATES				OTHER NORTH AMERICA				LATIN AMERICA				NORTH ASIA				SOUTH ASIA				EUROPE				MIDDLE EAST, AFRICA AND INDIA				ELIMI- NATIONS				CONSOLI- DATED
For the six months ended June 30, 2019:
Revenues2		$	1,340,859				176,947				72,936				1,254,804				358,559				632,021				220,986				(1,482	)			4,055,630
Net revenues1		$	587,412				70,370				31,777				268,604				96,262				195,450				66,394				(460	)			1,315,809
Operating income		$	161,936				19,818				4,982				130,233				31,420				23,267				8,160				(14	)			379,802
Identifiable assets at period end		$	1,819,718				176,151				73,197				580,311				193,771				581,518				229,692				(7,368	)			3,646,990
Capital expenditures		$	15,900				996				238				644				604				2,896				1,144				—				22,422
Depreciation and amortization		$	15,909				926				812				2,791				1,032				3,606				994				—				26,070
Equity		$	1,303,381				83,417				31,014				282,192				107,229				168,570				109,790				(33,199	)			2,052,394
For the six months ended June 30, 2018:
Revenues2		$	1,161,826				164,331				78,727				1,316,816				354,678				650,755				224,542				(139,854	)			3,811,821
Net revenues1		$	549,065				65,196				30,668				277,791				89,292				201,006				66,326				(960	)			1,278,384
Operating income		$	133,276				19,095				5,071				140,282				28,506				36,236				13,928				8				376,402
Identifiable assets at period end		$	1,488,060				153,827				54,186				540,954				157,479				526,607				217,716				(5,997	)			3,132,832
Capital expenditures		$	9,203				3,719				672				1,343				1,024				8,416				1,532				—				25,909
Depreciation and amortization		$	17,212				871				763				2,679				1,125				3,931				917				—				27,498
Equity		$	1,196,226				56,702				26,625				250,513				112,259				157,493				127,032				(34,291	)			1,892,559

1Net revenues are a non-GAAP measure calculated as revenues less directly related operating expenses attributable to the Company's principal services. The Company's management believes that net revenues are a better measure than total revenues when evaluating the Company's operating segment performance since total revenues earned as a freight consolidator include the carriers' charges for carrying the shipment, whereas revenues earned in other capacities include primarily the commissions and fees earned by the Company. Net revenue is one of the Company's primary operational and financial measures and demonstrates the Company's ability to concentrate and leverage purchasing power through effective consolidation of shipments from customers utilizing a variety of transportation carriers and optimal routings.

2In 2019, the Company revised its process to record the transfer, between its geographic operating segments, of revenues and the directly related cost of transportation expenses for freight service transactions between Company origin and destination locations. This change better aligns revenue reporting with the location where the services are performed, as well as the transactional reporting being developed as part of the Company’s new accounting systems and processes. Prior year segment revenues have not been revised. The change in presentation had no impact on consolidated or segment net revenues or operating income. The impact on reported segment revenues and expenses was immaterial.

The following table presents the calculation of net revenues:

		Three months ended June 30,								Six months ended June 30,
		2019				2018				2019				2018
Revenues		$	2,035,579			$	1,957,559			$	4,055,630			$	3,811,821
Expenses:
Airfreight services			542,639				593,325				1,051,849				1,106,829
Ocean freight and ocean services			390,299				385,156				810,630				764,574
Customs brokerage and other services			440,946				336,532				877,342				662,034
Net revenues		$	661,695			$	642,546			$	1,315,809			$	1,278,384

 

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