Expeditors Reports Fourth Quarter 2015 EPS of $0.61 Per Share1

SEATTLE--()--Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced fourth quarter 2015 financial results including the following highlights compared to the same quarter of 2014:

“As the strength of our results show, we have adapted well to a rapidly changing environment to produce net revenue yields that are among the best in our history”

  • Diluted Net Earnings Attributable to Shareholders per share increased 20% to $0.61
  • Net Earnings Attributable to Shareholders increased 15% to $114 million
  • Operating Income increased 13% to $178 million
  • Net Revenues2 increased 3% to $536 million and yields expanded 426 basis points to 33.6%
  • Airfreight tonnage volume decreased (1)% and ocean container volume decreased (2)%
  • Revenues decreased (10)% to 1.6 billion

“As the strength of our results show, we have adapted well to a rapidly changing environment to produce net revenue yields that are among the best in our history,” commented Bradley S. Powell, Senior Vice President and Chief Financial Officer. “We generated these strong results even though both air and ocean volume growth softened in the latter part of the year, and average sell rates came under pressure. Despite those dynamics, our people proved adept at taking advantage of opportunistic buy rates to increase operating profit and produce a fourth quarter operating income to net revenue margin in excess of 33%. In the fourth quarter, we continued to benefit from available ocean and air carrier capacity and favorable spot market buying opportunities, even as our revenues declined on lower average sell rates and volumes, as a result of slower market conditions. It’s no surprise that global uncertainty has made an increasingly interconnected marketplace more unpredictable, and we expect rate volatility to continue for some time. Looking forward, we are aware of the uncertainties and challenges with the global economy and global trade, and how they may impact the comparisons to our 2015 financial results.”

Jeffrey S. Musser, President and Chief Executive Officer, added, “The best year in the Company’s history doesn’t happen by accident. Throughout 2015, we further implemented our strategic plan to align more closely with opportunities and focus on growing our businesses. While we believe we benefited in the first half of the year from some unquantifiable increase in airfreight because of the West Coast labor dispute, we were adversely impacted by a softening in rates and volumes in the second half of the year. These shifting dynamics required our people to do what they do best, which is drive efficiency while providing the highest level of customer service. Through their efforts, we demonstrated how we are able to expand our margins by going after profitable business and gaining market share. I couldn’t be more proud of the energy and the entrepreneurial spirit at Expeditors. That culture has enabled us to grow and achieve a new Company best. We’ve grown deliberately and organically, investing in our people and our systems to make us more efficient and profitable than ever before in our history. I thank all of our employees for their dedication to making this our best year ever.”

“This was also a year of record returns to shareholders,” Mr. Musser continued. “In 2015, we paid out more than $135 million in dividends and repurchased nearly $630 million in stock. Our disciplined business model, combined with the strength of our balance sheet, has given us the flexibility to invest in profitable growth while also returning capital to investors. While our first priority will always be investing for growth in our business, we are dedicated to accomplishing both.”

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, domestic time-definite transportation services, purchase order management, warehousing and distribution and customized logistics solutions.

________________________

1Diluted earnings attributable to shareholders per share.

2 Non-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.

4th Quarter 2015 Earnings Release, February 23, 2016

 
Financial Highlights for the Three months and Years ended

December 31, 2015 and 2014 (Unaudited)

(in 000's of US dollars except per share data)

 
Three months ended Years ended
December 31, December 31,
2015   2014 % Change   2015   2014 % Change  
Revenues $ 1,596,221 $ 1,768,830 (10 )% $ 6,616,632 $ 6,564,721 1 %
Net revenues3 $ 536,169 $ 518,871 3 % $ 2,187,777 $ 1,981,427 10 %
Operating income4 $ 177,992 $ 157,871 13 % $ 721,484 $ 594,648 21 %
Net earnings attributable to shareholders $ 114,449 $ 99,381 15 % $ 457,223 $ 376,888 21 %
Diluted earnings attributable to shareholders $ 0.61 $ 0.51 20 % $ 2.40 $ 1.92 25 %
Basic earnings attributable to shareholders $ 0.62 $ 0.52 19 % $ 2.42 $ 1.92 26 %
Diluted weighted average shares outstanding 186,519 193,307 190,223 196,768
Basic weighted average shares outstanding 185,111 192,709 188,941 196,147
 

_______________________

3Non-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.

4Includes a $6 million recovery of legal and related fees in the fourth quarter of 2015.

During the three- and twelve-month periods ended December 31, 2015, the Company repurchased 4.5 million and 13.1 million shares of common stock at an average price of $47.66 and $47.95 per share, respectively. During the three- and twelve-month periods ended December 31, 2014, the Company repurchased 1.7 million and 13.1 million shares of common stock at an average price of $45.13 and $42.05 per share, respectively.

 
Employee headcount as of December 31,
2015   2014
North America 5,655 5,279
Europe 2,685 2,472
North Asia 2,464 2,539
South Asia 1,323 1,285
Middle East, Africa and India 1,417 1,344
Latin America 796 748
Information Systems 741 702
Corporate 316   290
Total 15,397 14,659
 
 

Year-over-year percentage increase
(decrease) in:

Airfreight kilos   Ocean freight FEU
2015
October 6

%

(5 )%
November (6 )% (3 )%
December (2 )% 1 %
Quarter (1 )% (2 )%
 

_______________________

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on February 26, 2016, will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about March 11, 2016.

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 uncertainties and challenges with the global economy and global trade, ability to adapt to a rapidly changing environment, availability of ocean and air carrier capacity, favorable spot market buying opportunities, rate volatility, benefits from our strategic plan, and ability to improve efficiency, expand margins and gain market share. 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 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 and fuel 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 per share data)

(Unaudited)

 

December 31,
2015

December 31,
2014

Assets

Current Assets:
Cash and cash equivalents $ 807,796 $ 927,107
Short-term investments 40 40,336
Accounts receivable, net 1,112,260 1,236,042
Deferred Federal and state income taxes 16,861 20,279
Other current assets 56,413   65,486  
Total current assets 1,993,370   2,289,250  
Property and equipment, net 524,724 538,415
Goodwill 7,927 7,927
Other assets, net 56,417   55,313  
$ 2,582,438   $ 2,890,905  

Liabilities and Equity

Current Liabilities:
Accounts payable $ 645,304 $ 770,238
Accrued expenses, primarily salaries and related costs 186,571 192,468
Federal, state and foreign income taxes 29,498   21,077  
Total current liabilities 861,373   983,783  
Deferred Federal and state income taxes 26,389 35,514
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued

Common stock, par value $0.01 per share; issued and outstanding 182,067 shares at December 31, 2015, and 191,656 shares at December 31, 2014

1,821 1,916
Additional paid-in capital 31 1,113
Retained earnings 1,771,379 1,903,196
Accumulated other comprehensive loss (81,238 ) (37,817 )
Total shareholders’ equity 1,691,993   1,868,408  
Noncontrolling interest 2,683   3,200  
Total equity 1,694,676   1,871,608  
$ 2,582,438   $ 2,890,905  
 
   

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

 

Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

 

(Unaudited)

 
Three months ended Twelve months ended
December 31, December 31,
2015   2014 2015   2014
Revenues:  
Airfreight services $ 679,720 $ 780,011 $ 2,740,583 $ 2,780,840
Ocean freight and ocean services 491,539 568,249 2,194,004 2,174,394
Customs brokerage and other services 424,962   420,570   1,682,045   1,609,487
Total revenues 1,596,221   1,768,830   6,616,632   6,564,721
Operating Expenses:
Airfreight services 503,540 600,713 1,987,690 2,103,777
Ocean freight and ocean services 354,106 446,244 1,648,993 1,712,795
Customs brokerage and other services 202,406 203,002 792,172 766,722
Salaries and related costs 282,002 276,072 1,143,511 1,065,329
Rent and occupancy costs 26,364 25,851 102,470 102,810
Depreciation and amortization 11,588 11,752 46,012 49,292
Selling and promotion 11,844 11,421 41,990 38,125
Other 26,379   35,904   132,310   131,223
Total operating expenses 1,418,229   1,610,959   5,895,148   5,970,073
Operating income 177,992   157,871   721,484   594,648
 
Interest income 2,387 2,519 10,421 10,773
Other, net 4,031   223   4,784   5,468
Other income, net 6,418   2,742   15,205   16,241
Earnings before income taxes 184,410 160,613 736,689 610,889
Income tax expense 69,310   59,873   277,192   231,429
Net earnings 115,100   100,740   459,497   379,460
Less net earnings attributable to the noncontrolling interest 651   1,359   2,274   2,572
Net earnings attributable to shareholders $ 114,449   $ 99,381   $ 457,223   $ 376,888
Diluted earnings attributable to shareholders per share $ 0.61   $ 0.51   $ 2.40   $ 1.92
Basic earnings attributable to shareholders per share $ 0.62   $ 0.52   $ 2.42   $ 1.92
Dividends declared and paid per common share $ 0.36   $ 0.32   $ 0.72   $ 0.64
Weighted average diluted shares outstanding 186,519   193,307   190,223   196,768
Weighted average basic shares outstanding 185,111   192,709   188,941   196,147
 
   

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

 
Three months ended Twelve months ended
December 31, December 31,
2015   2014 2015   2014
Operating Activities:
Net earnings $ 115,100 $ 100,740 $ 459,497 $ 379,460
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable 1,178 818 2,173 763
Deferred income tax expense (benefit) 4,687 (14,576 ) 17,999 (6,576 )
Excess tax benefits from stock plans (4 ) (84 ) (1,850 ) (1,115 )
Stock compensation expense 10,926 10,313 43,415 42,533
Depreciation and amortization 11,588 11,752 46,012 49,292
Other (139 ) (5 ) (24 ) 340
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 43,709 (75,513 ) 62,619 (206,887 )
(Decrease) increase in accounts payable and accrued expenses (87,475 ) 39,388 (84,164 ) 153,424
Increase (decrease) in income taxes payable, net 14,272 14,117 18,382 (12,998 )
Decrease (increase) in other current assets 2,072   2,582   653   (3,270 )
Net cash from operating activities 115,914   89,532   564,712   394,966  
Investing Activities:
Decrease (increase) in short-term investments, net 8,218 (20 ) 40,294 (14,000 )
Purchase of property and equipment (12,480 ) (10,822 ) (44,383 ) (37,472 )
Escrow deposit on land acquisition (27,101 )
Other, net (855 ) (842 ) (3,337 ) (338 )
Net cash from investing activities (5,117 ) (11,684 ) (7,426 ) (78,911 )
Financing Activities:
Proceeds from issuance of common stock 16,263 10,800 130,964 69,269
Repurchases of common stock (214,516 ) (75,621 ) (629,991 ) (550,781 )
Excess tax benefits from stock plans 4 84 1,850 1,115
Dividends paid (66,892 ) (61,827 ) (135,673 ) (124,634 )
Distribution to noncontrolling interest (1,265 ) (418 ) (2,122 ) (503 )
Net cash from financing activities (266,406 ) (126,982 ) (634,972 ) (605,534 )
Effect of exchange rate changes on cash and cash equivalents (5,278 ) (14,239 ) (41,625 ) (31,066 )
Decrease in cash and cash equivalents (160,887 ) (63,373 ) (119,311 ) (320,545 )
Cash and cash equivalents at beginning of period 968,683   990,480   927,107   1,247,652  
Cash and cash equivalents at end of period $ 807,796   $ 927,107   $ 807,796   $ 927,107  
Taxes paid:
Income taxes $ 49,343 $ 59,081 $ 239,367 $ 254,439
 
                 

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

Three months ended December 31, 2015:

Revenues from unaffiliated customers $ 428,461 55,933 21,153 613,957 153,374 242,454 80,889 1,596,221
Transfers between geographic areas 29,555   3,392   3,987   5,392   6,341   11,309   5,684   (65,660 )
Total revenues $ 458,016   59,325   25,140   619,349   159,715   253,763   86,573   (65,660 ) 1,596,221
Net revenues $ 224,912 30,414 13,858 115,851 43,996 78,556 28,582 536,169
Operating income $ 52,140 13,413 3,852 58,511 21,049 20,178 8,849 177,992
Identifiable assets $ 1,202,532 111,549 48,678 446,914 127,014 421,590 221,835 2,326 2,582,438
Capital expenditures $ 6,575 1,313 348 727 784 1,930 803 12,480
Depreciation and amortization $ 7,361 366 257 1,311 501 1,389 403 11,588
Equity $ 986,330 70,932 33,161 253,097 99,220 154,174 130,105 (32,343 ) 1,694,676
Three months ended December 31, 2014:
Revenues from unaffiliated customers $ 438,744 56,599 23,464 713,273 189,037 267,923 79,790 1,768,830
Transfers between geographic areas 29,762   3,062   4,669   5,850   6,507   10,610   5,016   (65,476 )
Total revenues $ 468,506   59,661   28,133   719,123   195,544   278,533   84,806   (65,476 ) 1,768,830
Net revenues $ 215,603 29,614 16,219 110,293 42,122 79,012 26,008 518,871
Operating income $ 40,516 13,320 5,430 52,968 16,225 20,586 8,826 157,871
Identifiable assets $ 1,408,598 111,324 53,815 513,649 141,499 447,349 208,684 5,987 2,890,905
Capital expenditures $ 6,964 392 733 264 897 1,130 442 10,822
Depreciation and amortization $ 7,453 291 246 1,467 556 1,314 425 11,752
Equity $ 1,165,488 54,338 34,386 262,295 99,234 169,117 121,520 (34,770 ) 1,871,608
 
                 

UNITED

STATES

OTHER

NORTH

AMERICA

LATIN

AMERICA

NORTH
ASIA

SOUTH
ASIA

EUROPE

MIDDLE

EAST,
AFRICA

and INDIA

ELIMI-

NATIONS

CONSOLI-

DATED

Twelve months ended December 31, 2015:
Revenues from unaffiliated customers $ 1,763,361 226,284 94,229 2,557,398 677,628 958,827 338,905 6,616,632
Transfers between geographic areas 118,884   13,383   19,158   21,722   25,018   42,787   21,322   (262,274 )
Total revenues $ 1,882,245   239,667   113,387   2,579,120   702,646   1,001,614   360,227   (262,274 ) 6,616,632
Net revenues $ 906,780 124,381 65,017 493,235 179,110 308,301 110,953 2,187,777
Operating income $ 245,257 46,846 19,656 245,854 69,643 65,024 29,204 721,484
Identifiable assets $ 1,202,532 111,549 48,678 446,914 127,014 421,590 221,835 2,326 2,582,438
Capital expenditures $ 26,807 3,915 1,756 2,203 2,383 5,222 2,097 44,383
Depreciation and amortization $ 29,532 1,331 1,041 5,425 2,110 4,931 1,642 46,012
Equity $ 986,330 70,932 33,161 253,097 99,220 154,174 130,105 (32,343 ) 1,694,676
Twelve months ended December 31, 2014:
Revenues from unaffiliated customers $ 1,694,819 218,735 89,058 2,576,350 657,189 1,012,389 316,181 6,564,721
Transfers between geographic areas 97,028   10,891   20,634   23,020   26,579   39,541   19,654   (237,347 )
Total revenues $ 1,791,847   229,626   109,692   2,599,370   683,768   1,051,930   335,835   (237,347 ) 6,564,721
Net revenues $ 823,111 108,631 65,016 407,410 163,383 313,325 100,551 1,981,427
Operating income $ 221,166 36,475 19,855 177,496 52,596 62,101 24,959 594,648
Identifiable assets $ 1,408,598 111,324 53,815 513,649 141,499 447,349 208,684 5,987 2,890,905
Capital expenditures $ 19,610 1,439 1,574 5,955 3,118 4,246 1,530 37,472
Depreciation and amortization $ 31,553 1,170 911 5,938 2,295 5,690 1,735 49,292
Equity $ 1,165,488 54,338 34,386 262,295 99,234 169,117 121,520 (34,770 ) 1,871,608
 

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 include 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 Twelve months ended
December 31, December 31,
(in thousands) 2015   2014 2015   2014
Total revenues $ 1,596,221 $ 1,768,830 $ 6,616,632 $ 6,564,721
Expenses:
Airfreight services 503,540 600,713 1,987,690 2,103,777
Ocean freight and ocean services 354,106 446,244 1,648,993 1,712,795
Customs brokerage and other services 202,406   203,002   792,172   766,722
Net revenues $ 536,169   $ 518,871   $ 2,187,777   $ 1,981,427
 

Contacts

Expeditors International of Washington, Inc.
Jeffrey S. Musser, 206-674-3433
President and Chief Executive Officer
or
Bradley S. Powell, 206-674-3412
Senior Vice President and Chief Financial Officer
or
Geoffrey Buscher, 206-892-4510
Director - Investor Relations

Expeditors International of Washington, Inc.