Expeditors International of Washington, Inc. (NASDAQ:EXPD) today
announced third quarter 2020 financial results including the
following highlights compared to the same quarter of 2019:
- Diluted Net Earnings Attributable to Shareholders per share
(EPS1) increased 22% to $1.12
- Net Earnings Attributable to Shareholders increased 19% to $191
million
- Operating Income increased 22% to $252 million
- Revenues increased 19% to $2.5 billion
- Airfreight tonnage volume and ocean container volume both
decreased 5%
“Volumes started to recover across most of our products during
the quarter, even as the global effects of COVID-19 continued to
impact our business worldwide,” said Jeffrey S. Musser, President
and Chief Executive Officer. “Similar to Q2, the pandemic caused an
increase in demand for certain goods at the same time that air
capacity remained tight due to travel restrictions and the limited
schedule of domestic and international passenger flights. This
caused continued imbalances between carrier capacity and demand,
principally on exports out of North Asia, which was the only market
in which air volumes increased during the third quarter. To meet
the urgent transportation needs that could not be fulfilled with
scheduled capacity, we utilized charter capacity for certain
customers, resulting in higher average buy and sell rates. While
airfreight buy and sell rates were generally lower in our third
quarter than the extremes we experienced in the second quarter,
they remained historically elevated and highly unpredictable due to
ongoing supply/demand imbalances. We would expect air pricing to
remain volatile until passenger traffic starts to return in a
meaningful way.
“While our ocean freight business has not been nearly as
impacted by supply constraints, carriers remain disciplined and are
carefully managing capacity even as volumes have increased from the
lows we saw earlier in this pandemic. Across most of our products
in the third quarter, we experienced a steady recovery in demand as
shippers adjusted to an altered marketplace and disrupted supply
chains.
“Despite the challenges, we continue to serve our customers at
the highest level throughout our organization, whether working from
remote locations or on-site at one of our many warehouses, where we
are following very strict safety protocols. Thanks to the ongoing
implementation of our business continuity plans and the
adaptability of our people, all of our offices remain open,
connected, and are functioning extremely well. Our network is
strong, and our people remain steadfast and highly flexible.”
Bradley S. Powell, Senior Vice President and Chief Financial
Officer, added, “The effects of COVID-19 continued to impact
volumes for all products, although not as significantly as in the
prior sequential quarter. While we have experienced increased
demand in many of our markets for a mix of products, capacity
constraints in air, and to a lesser extent in ocean, have led to a
continued buy/sell rate imbalance. While we remain uncertain about
the pace, strength, or evenness of an economic recovery, we will
continue to use our strong financial position to make important
strategic investments that are necessary for our future growth,
while continuing our focus on controlling costs and improving
operational efficiencies. We appreciate the hard work of our
District Managers and their leadership teams as they continue to
execute at a high level, control operational expenses and limit the
addition of headcount.”
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.
NOTE: See Disclaimer on Forward-Looking
Statements on the following page of this release.
Expeditors International of Washington,
Inc.
Third Quarter 2020 Earnings Release,
November 3, 2020
Financial Highlights for the three and
nine months ended September 30, 2020 and 2019 (Unaudited)
(in 000's of US dollars except per share
data)
Three months ended September
30,
Nine months ended September
30,
2020
2019
% Change
2020
2019
% Change
Revenues
$
2,464,797
$
2,074,855
19
%
$
6,947,293
$
6,130,485
13
%
Directly related cost of transportation
and other expenses1
$
1,730,418
$
1,400,499
24
%
$
4,848,187
$
4,140,320
17
%
Salaries and other operating
expenses2
$
482,434
$
467,806
3
%
$
1,440,480
$
1,403,813
3
%
Operating income
$
251,945
$
206,550
22
%
$
658,626
$
586,352
12
%
Net earnings attributable to
shareholders
$
191,307
$
160,221
19
%
$
497,520
$
453,069
10
%
Diluted earnings attributable to
shareholders per share
$
1.12
$
0.92
22
%
$
2.92
$
2.60
12
%
Basic earnings attributable to
shareholders per share
$
1.14
$
0.94
21
%
$
2.96
$
2.65
12
%
Diluted weighted average shares
outstanding
170,735
173,483
170,539
174,463
Basic weighted average shares
outstanding
168,310
170,415
167,942
171,084
1Directly related cost of transportation
and other expenses totals Operating Expenses from Airfreight
services, Ocean freight and ocean services and Customs brokerage
and other services as shown in the Condensed Consolidated
Statements of Earnings.
2Salaries and other operating expenses
totals Salaries and related, Rent and occupancy, Depreciation and
amortization, Selling and promotion and Other as shown in the
Condensed Consolidated Statements of Earnings.
During the three months ended September 30, 2020, we did not
repurchase any shares of common stock and during the nine months
ended September 30, 2020, we repurchased 4.4 million shares of
common stock at an average price of $71.41 per share. During the
three and nine months ended September 30, 2019, we repurchased 0.9
million and 4.1 million shares of common stock at an average price
of $69.51 and $72.60 per share, respectively.
Employee Full-time Equivalents
as of September 30,
2020
2019
North America
6,666
6,861
Europe
3,361
3,427
North Asia
2,406
2,483
South Asia
1,643
1,674
Middle East, Africa and India
1,509
1,565
Latin America
800
860
Information Systems
975
939
Corporate
383
383
Total
17,743
18,192
Third quarter
year-over-year
percentage (decrease) increase
in:
2020
Airfreight
kilos
Ocean freight
FEU
July
(12
)%
(13
)%
August
(5
)%
(5
)%
September
2
%
5
%
Quarter
(5
)%
(5
)%
Investors may submit written questions via e-mail to:
investor@expeditors.com. Questions received by the end of business
on November 6, 2020 will be considered in management's 8-K
“Responses to Selected Questions.”
Disclaimer on Forward-Looking
Statements:
Certain statements contained in this news release are
“forward-looking statements” that involve risks and uncertainties,
including statements such as our expectations of continued
volatility in air pricing. Actual results could differ materially
because of factors such as: the timing until passenger traffic
starts to return in a meaningful way; the impact on our ocean
volumes; the pace, strength, or evenness of the of an economic
recovery; our employees’ ability to continue to perform at a high
level; airfreight buy and sell rates; our access to carrier
capacity; our ability to keep our global offices open and
operating; employee retention; employee health and safety; our
ability to execute our business continuity plans; the strength of
our financial position and our ability to continue to make
investments in our strategic initiatives; our ability to remain a
strong, healthy, unified and resilient organization; our ability to
control costs and improve operational efficiencies; our ability to
control operational expenses and limit the addition of headcount.
The COVID-19 pandemic could have the effect of heightening many of
the other risks described in Item 1A of our Annual Report on Form
10-K, including, without limitation, those related to the success
of our strategy and desire to maintain historical unitary
profitability, our ability to attract and retain customers, our
ability to manage costs, interruptions to our information
technology systems, the ability of third-party providers to perform
and potential litigation as updated by our reports on Form 10-Q,
filed with the Securities and Exchange Commission. These and other
factors are discussed in the Company’s regulatory filings with the
Securities and Exchange Commission, including those in “Item 1A.
Risk Factors” of the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2019 and in “Item 1A. Risk Factors”
of the Company’s most recent Quarterly Report on Form 10-Q. The
forward-looking statements contained in this news release speak
only as of this date, and the Company does not assume any
obligation to update them except as required by law.
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands, except per share
data)
(Unaudited)
September 30,
2020
December 31,
2019
Assets:
Current Assets:
Cash and cash equivalents
$
1,465,510
$
1,230,491
Accounts receivable, less allowance for
credit loss of $5,171 at September 30, 2020 and $11,143 at December
31, 2019
1,582,424
1,315,091
Deferred contract costs
232,351
131,783
Other
129,617
92,558
Total current assets
3,409,902
2,769,923
Property and equipment, less accumulated
depreciation and amortization of $510,103 at September 30, 2020 and
$478,906 at December 31, 2019
499,189
499,344
Operating lease right-of-use assets
422,002
390,035
Goodwill
7,927
7,927
Deferred federal and state income taxes,
net
3,130
8,034
Other assets, net
16,404
16,621
Total assets
$
4,358,554
$
3,691,884
Liabilities:
Current Liabilities:
Accounts payable
$
888,761
$
735,695
Accrued expenses, primarily salaries and
related costs
236,826
189,446
Contract liabilities
267,266
154,183
Current portion of operating lease
liabilities
70,755
65,367
Federal, state and foreign income
taxes
33,100
23,627
Total current liabilities
1,496,708
1,168,318
Noncurrent portion of operating lease
liabilities
357,373
326,347
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued
—
—
Common stock, par value $0.01 per share.
Issued and outstanding: 169,231 shares at September 30, 2020 and
169,622 shares at December 31, 2019
1,692
1,696
Additional paid-in capital
145,924
3,203
Retained earnings
2,489,694
2,321,316
Accumulated other comprehensive loss
(135,281
)
(131,187
)
Total shareholders’ equity
2,502,029
2,195,028
Noncontrolling interest
2,444
2,191
Total equity
2,504,473
2,197,219
Total liabilities and equity
$
4,358,554
$
3,691,884
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements
of Earnings
(In thousands, except per share
data)
(Unaudited)
Three months ended September
30,
Nine months ended September
30,
2020
2019
2020
2019
Revenues:
Airfreight services
$
1,093,550
$
715,450
$
3,237,179
$
2,171,928
Ocean freight and ocean services
612,858
585,374
1,597,997
1,697,824
Customs brokerage and other services
758,389
774,031
2,112,117
2,260,733
Total revenues
2,464,797
2,074,855
6,947,293
6,130,485
Operating Expenses:
Airfreight services
833,689
522,868
2,450,931
1,574,717
Ocean freight and ocean services
455,072
424,215
1,185,154
1,234,845
Customs brokerage and other services
441,657
453,416
1,212,102
1,330,758
Salaries and related
373,613
356,331
1,110,760
1,069,592
Rent and occupancy
42,484
41,987
126,383
124,407
Depreciation and amortization
15,851
12,386
42,620
38,456
Selling and promotion
2,945
10,133
14,301
32,852
Other
47,541
46,969
146,416
138,506
Total operating expenses
2,212,852
1,868,305
6,288,667
5,544,133
Operating income
251,945
206,550
658,626
586,352
Other Income (Expense):
Interest income
1,504
5,501
8,870
18,123
Other, net
980
1,895
5,161
5,822
Other income, net
2,484
7,396
14,031
23,945
Earnings before income taxes
254,429
213,946
672,657
610,297
Income tax expense
62,710
53,319
173,968
156,029
Net earnings
191,719
160,627
498,689
454,268
Less net earnings attributable to the
noncontrolling interest
412
406
1,169
1,199
Net earnings attributable to
shareholders
$
191,307
$
160,221
$
497,520
$
453,069
Diluted earnings attributable to
shareholders per share
$
1.12
$
0.92
$
2.92
$
2.60
Basic earnings attributable to
shareholders per share
$
1.14
$
0.94
$
2.96
$
2.65
Weighted average diluted shares
outstanding
170,735
173,483
170,539
174,463
Weighted average basic shares
outstanding
168,310
170,415
167,942
171,084
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements
of Cash Flows
(In thousands)
(Unaudited)
Three months ended September
30,
Nine months ended September
30,
2020
2019
2020
2019
Operating Activities:
Net earnings
$
191,719
$
160,627
$
498,689
$
454,268
Adjustments to reconcile net earnings to
net cash from operating activities:
Provisions for losses on accounts
receivable
398
757
4,607
453
Deferred income tax (benefit) expense
(1,276
)
(5,822
)
2,872
(17
)
Stock compensation expense
12,297
12,155
45,091
49,361
Depreciation and amortization
15,851
12,386
42,620
38,456
Other, net
2,919
652
3,470
812
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable
(106,065
)
43,885
(274,440
)
246,175
Increase (decrease) in accounts payable
and accrued expenses
94,263
(58,816
)
201,940
(141,199
)
(Increase) decrease in deferred contract
costs
(81,486
)
10,301
(99,887
)
28,550
Increase (decrease) in contract
liabilities
91,638
(13,211
)
112,244
(36,933
)
(Decrease) in income taxes payable,
net
(41,286
)
(671
)
(10,644
)
(33,284
)
(Increase) decrease in other, net
(17,373
)
(744
)
(13,242
)
47
Net cash from operating activities
161,599
161,499
513,320
606,689
Investing Activities:
Purchase of property and equipment
(9,178
)
(15,521
)
(37,419
)
(37,943
)
Other, net
1,174
232
963
1,525
Net cash from investing activities
(8,004
)
(15,289
)
(36,456
)
(36,418
)
Financing Activities:
Proceeds from issuance of common stock
121,430
60,713
174,016
120,190
Repurchases of common stock
—
(61,999
)
(314,225
)
(296,922
)
Dividends paid
—
—
(86,815
)
(85,184
)
Payments for taxes related to net share
settlement of equity awards
—
—
(10,566
)
(6,674
)
Net cash from financing activities
121,430
(1,286
)
(237,590
)
(268,590
)
Effect of exchange rate changes on cash
and cash equivalents
10,030
(11,604
)
(4,255
)
(9,446
)
Change in cash and cash equivalents
285,055
133,320
235,019
292,235
Cash and cash equivalents at beginning of
period
1,180,455
1,082,650
1,230,491
923,735
Cash and cash equivalents at end of
period
$
1,465,510
$
1,215,970
$
1,465,510
$
1,215,970
Taxes Paid:
Income taxes
$
106,434
$
61,201
$
180,242
$
196,169
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 September
30, 2020:
Revenues1
$
686,245
78,129
39,193
883,104
267,228
378,048
133,765
(915
)
2,464,797
Directly related cost of transportation
and other expenses2
$
379,588
44,911
23,361
720,807
200,334
261,325
100,619
(527
)
1,730,418
Salaries and other operating expenses3
$
197,749
25,325
12,359
81,876
39,926
96,658
28,925
(384
)
482,434
Operating income
$
108,908
7,893
3,473
80,421
26,968
20,065
4,221
(4
)
251,945
Identifiable assets at period end
$
2,336,071
163,943
76,173
689,525
231,771
642,124
228,423
(9,476
)
4,358,554
Capital expenditures
$
4,703
483
180
1,075
665
1,780
292
—
9,178
Equity
$
1,791,658
77,915
31,324
246,557
97,564
185,352
110,714
(36,611
)
2,504,473
For the three months ended September
30, 2019:
Revenues1
$
692,229
88,088
38,341
624,351
196,569
320,769
115,397
(889
)
2,074,855
Directly related cost of transportation
and other expenses2
$
389,254
51,420
22,990
489,195
145,345
221,149
81,592
(446
)
1,400,499
Salaries and other operating expenses3
$
210,767
25,731
14,547
70,410
32,482
86,156
28,151
(438
)
467,806
Operating income
$
92,208
10,937
804
64,746
18,742
13,464
5,654
(5
)
206,550
Identifiable assets at period end
$
2,059,345
128,336
72,029
489,322
164,976
563,289
226,657
2,499
3,706,453
Capital expenditures
$
7,644
513
833
523
631
5,119
258
—
15,521
Equity
$
1,578,682
60,526
27,217
216,061
77,733
169,450
111,355
(31,737
)
2,209,287
UNITED
STATES
OTHER
NORTH
AMERICA
LATIN
AMERICA
NORTH
ASIA
SOUTH
ASIA
EUROPE
MIDDLE
EAST,
AFRICA
AND
INDIA
ELIMI-
NATIONS
CONSOLI-
DATED
For the nine months ended September 30,
2020:
Revenues1
$
1,975,883
234,274
114,636
2,538,117
660,583
1,086,118
340,415
(2,733
)
6,947,293
Directly related cost of transportation
and other expenses2
$
1,108,173
132,250
69,827
2,054,023
481,971
754,863
248,503
(1,423
)
4,848,187
Salaries and other operating expenses3
$
631,396
74,320
36,220
236,480
109,018
274,269
80,063
(1,286
)
1,440,480
Operating income
$
236,314
27,704
8,589
247,614
69,594
56,986
11,849
(24
)
658,626
Identifiable assets at period end
$
2,336,071
163,943
76,173
689,525
231,771
642,124
228,423
(9,476
)
4,358,554
Capital expenditures
$
28,276
1,692
498
1,785
1,035
3,418
715
—
37,419
Equity
$
1,791,658
77,915
31,324
246,557
97,564
185,352
110,714
(36,611
)
2,504,473
For the nine months ended September 30,
2019:
Revenues1
$
2,033,088
265,035
111,277
1,879,155
555,128
952,790
336,383
(2,371
)
6,130,485
Directly related cost of transportation
and other expenses2
$
1,142,701
157,997
64,149
1,475,395
407,642
657,720
236,184
(1,468
)
4,140,320
Salaries and other operating expenses3
$
636,243
76,283
41,342
208,781
97,324
258,339
86,385
(884
)
1,403,813
Operating income
$
254,144
30,755
5,786
194,979
50,162
36,731
13,814
(19
)
586,352
Identifiable assets at period end
$
2,059,345
128,336
72,029
489,322
164,976
563,289
226,657
2,499
3,706,453
Capital expenditures
$
23,544
1,509
1,071
1,167
1,235
8,015
1,402
—
37,943
Equity
$
1,578,682
60,526
27,217
216,061
77,733
169,450
111,355
(31,737
)
2,209,287
1Beginning in the second quarter of 2019,
the Company revised its process to record the transfer, between its
geographic operating segments, of revenues and the directly related
cost of transportation and other 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. The change in presentation had nine months ended
September 30, 2019, segment revenues have not been revised.
2Directly related cost of transportation
and other expenses totals Operating Expenses from Airfreight
services, Ocean freight and ocean services and Customs brokerage
and other services as shown in the Condensed Consolidated
Statements of Earnings.
3Salaries and other operating expenses
totals Salaries and related, Rent and occupancy, Depreciation and
amortization, Selling and promotion and Other as shown in the
Condensed Consolidated Statements of Earnings.
The Company’s consolidated financial results in the nine months
ended September 30, 2020 was significantly impacted by the effects
of the global pandemic and are expected to be further impacted in
the remainder of 2020. The impact is affecting the Company’s
geographical segments unevenly.
In the second and third quarter of 2020, North Asia experienced
significant increases in airfreight services revenues and directly
related expenses primarily as a result of demand for time-sensitive
delivery of technology equipment and medical equipment and supplies
from China, which combined with reductions in airfreight supply
resulted in significantly higher rates. In the third quarter 2020
and 2019, the People's Republic of China, including Hong Kong,
represented 30% and 26%, respectively, of the Company’s total
revenues and 26% of the Company’s total operating income in both
periods.
This is in contrast with slower activity in North Asia in the
first quarter of 2020 as the global pandemic resulted in temporary
closures and limited operations from the Company’s China offices
and shipments that were rerouted or delayed by customers and
service providers taking their own precautionary measures. In the
nine months ended September 30, 2020 and 2019, the People's
Republic of China, including Hong Kong, represented 31% and 26%,
respectively, of the Company’s total revenues and 30% and 27%,
respectively, of the Company’s total operating income.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201103005080/en/
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
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