EXPD Expeditors International of Washington Inc

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

• Diluted Net Earnings Attributable to Shareholders per share (EPS1) decreased 5% to $0.60
• Net Earnings Attributable to Shareholders decreased 6% to $109 million
• Operating Income decreased 6% to $168 million
• Revenues increased 13% to $1.7 billion
• Net Revenues2 increased 2% to $564 million
• Airfreight tonnage volume increased 9% and ocean container volume increased 4%

“Volumes remain strong across all of our services and we believe we continue to take profitable market share,” said Jeffrey S. Musser, President and Chief Executive Officer. “Our order management, warehousing and distribution, Transcon, and customs brokerage businesses performed exceptionally well during the quarter. While we experienced similar margin pressures that we have seen in recent quarters in our air and ocean offerings, we recorded some of the highest freight volumes in our company’s history. As always, our people provided outstanding customer service and performed extremely well in this environment.

“Global demand for air and ocean capacity continues to be stronger than we have seen in the past few years, which has led to a scarcity of favorable pricing. As the rate environment continues to shift, we are being increasingly disciplined in how we work both with our customers and with our carrier partners to secure access to capacity. In June, we initiated rate increases in certain high-volume lanes in response to the current market and expect to see strong demand, tight capacity, and rate volatility to continue throughout the remainder of the year.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “All regions have added people to process additional shipment volumes in order to maintain our high level of customer service. We are handling more shipments and are doing so more efficiently than ever before. We continue to focus on implementing process improvements and investing in our core technologies that allow us to grow our business profitably. As the industry continues to evolve and innovate at a more rapid pace, we are also making additional investments to develop strategies, including the use of technologies that allow us to maintain our leadership position.”

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.Second Quarter 2017 Earnings Release, August 8, 2017Financial Highlights for the Three and Six months ended June 30, 2017 and 2016 (Unaudited) (in 000's of US dollars except per share data)

	Three months ended June 30,											Six months ended June 30,
	2017				2016				%Change			2017				2016				%Change
Revenues	$	1,672,279			$	1,475,164			13	%		$	3,217,411			$	2,893,636			11	%
Net revenues1	$	563,633			$	553,117			2	%		$	1,091,238			$	1,070,186			2	%
Operating income2	$	168,240			$	178,864			(6	)%		$	314,354			$	330,690			(5	)%
Net earnings attributable to shareholders	$	108,851			$	116,052			(6	)%		$	202,115			$	212,636			(5	)%
Diluted earnings attributable to shareholders per share	$	0.60			$	0.63			(5	)%		$	1.11			$	1.16			(4	)%
Basic earnings attributable to shareholders per share	$	0.60			$	0.64			(6	)%		$	1.12			$	1.17			(4	)%
Diluted weighted average shares outstanding	182,033				183,132							182,091				183,110
Basic weighted average shares outstanding	180,012				181,753							180,037				181,882

_______________________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.

2Includes recovery of certain legal and related fees totaling $8 million for both the quarter and year-to date periods ended June 30, 2017 compared to $5 million in the same periods in 2016 and the favorable resolution of an indirect tax contingency of $6 million in the second quarter of 2017. We do not expect further recoveries in either matter.

During the three and six-month periods ended June 30, 2017, we repurchased 1.5 million and 2.5 million shares of common stock at an average price of $55.02 and $55.58 per share, respectively. During the three and six-month periods ended June 30, 2016, the Company repurchased 1.9 million and 3.4 million shares of common stock at an average price of $49.47 and $48.75 per share, respectively.

	Employee headcount as of June 30,
	2017			2016
North America	6,002			5,732
Europe	2,915			2,764
North Asia	2,524			2,461
Middle East, Africa and India	1,521			1,480
South Asia	1,447			1,338
Latin America	782			754
Information Systems	892			795
Corporate	366			341
Total	16,449			15,665

		Year-over-year percentage increase in:
		Airfreight kilos			Ocean freight FEU
2017
April		9	%		2	%
May		11	%		2	%
June		7	%		7	%
Quarter		9	%		4	%

_______________________Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 11, 2017 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about August 21, 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 continuing to take profitable market share, the global demand for air and ocean capacity, favorable pricing, the shifting rate environment, our ability to secure access to capacity, our expectation that we will see strong demand, tight capacity, and rate volatility throughout the remainder of the year, our ability to maintain a high level of customer service, our ability to handle more shipments more efficiently than ever before, our ability to implement process improvements and invest in core technologies that allow us to grow our business profitably, and our ability to make investments to develop strategies, including the use of additional technologies that allow us to maintain our leadership position. 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, volatility in equity markets, energy and fuel prices, 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 SUBSIDIARIESCondensed Consolidated Balance Sheets(In thousands, except per share data)(Unaudited)
	June 30,    2017				December 31,2016
Assets
Current Assets:
Cash and cash equivalents	$	1,114,910			$	974,435
Accounts receivable, net	1,215,278				1,190,130
Other current assets	164,128				54,014
Total current assets	2,494,316				2,218,579
Property and equipment, net	490,776				536,572
Goodwill	7,927				7,927
Other assets, net	29,737				27,793
	$	3,022,756			$	2,790,871
Liabilities and Equity
Current Liabilities:
Accounts payable	$	774,941			$	726,571
Accrued expenses, primarily salaries and related costs	211,376				185,502
Federal, state and foreign income taxes	21,329				17,858
Total current liabilities	1,007,646				929,931
Deferred Federal and state income taxes	36,473				13,727
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued	—				—
Common stock, par value $0.01 per share. Issued and outstanding 179,637 shares at June 30,2017 and 179,857 shares at December 31, 2016	1,796				1,799
Additional paid-in capital	11,152				2,642
Retained earnings	2,049,403				1,944,789
Accumulated other comprehensive loss	(86,507		)		(104,592		)
Total shareholders’ equity	1,975,844				1,844,638
Noncontrolling interest	2,793				2,575
Total equity	1,978,637				1,847,213
	$	3,022,756			$	2,790,871

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.AND SUBSIDIARIESCondensed Consolidated Statements of Earnings(In thousands, except per share data)(Unaudited)
	Three months ended								Six months ended
	June 30,								June 30,
	2017				2016				2017				2016
Revenues:
Airfreight services	$	671,868			$	582,093			$	1,287,413			$	1,142,946
Ocean freight and ocean services	528,585				464,692				1,022,344				918,884
Customs brokerage and other services	471,826				428,379				907,654				831,806
Total revenues	1,672,279				1,475,164				3,217,411				2,893,636
Operating Expenses:
Airfreight services	499,418				403,419				942,822				792,196
Ocean freight and ocean services	385,927				323,699				751,990				646,719
Customs brokerage and other services	223,301				194,929				431,361				384,535
Salaries and related costs	318,529				293,532				611,109				576,887
Rent and occupancy costs	29,163				27,079				57,293				53,938
Depreciation and amortization	12,042				11,642				23,969				22,971
Selling and promotion	10,953				10,251				21,868				19,683
Other	24,706				31,749				62,645				66,017
Total operating expenses	1,504,039				1,296,300				2,903,057				2,562,946
Operating income	168,240				178,864				314,354				330,690
Other Income (Expense):
Interest income	3,380				2,890				6,121				5,669
Other, net	2,190				1,603				2,488				2,482
Other income (expense), net	5,570				4,493				8,609				8,151
Earnings before income taxes	173,810				183,357				322,963				338,841
Income tax expense	65,055				66,918				120,641				125,355
Net earnings	108,755				116,439				202,322				213,486
Less net (loss) earnings attributable to the noncontrolling interest	(96		)		387				207				850
Net earnings attributable to shareholders	$	108,851			$	116,052			$	202,115			$	212,636
Diluted earnings attributable to shareholders per share	$	0.60			$	0.63			$	1.11			$	1.16
Basic earnings attributable to shareholders per share	$	0.60			$	0.64			$	1.12			$	1.17
Dividends declared and paid per common share	$	0.42			$	0.40			$	0.42			$	0.40
Weighted average diluted shares outstanding	182,033				183,132				182,091				183,110
Weighted average basic shares outstanding	180,012				181,753				180,037				181,882

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.AND SUBSIDIARIESCondensed Consolidated Statements of Cash Flows(In thousands)(Unaudited)
	Three months ended								Six months ended
	June 30,								June 30,
	2017				2016				2017				2016
Operating Activities:
Net earnings	$	108,755			$	116,439			$	202,322			$	213,486
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable	515				562				1,446				1,140
Deferred income tax expense (benefit)	7,261				(6,115		)		12,854				3,781
Stock compensation expense	17,203				12,957				27,826				23,788
Depreciation and amortization	12,042				11,642				23,969				22,971
Other, net	(174		)		(6		)		(525		)		30
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(73,142		)		(48,344		)		2,312				64,366
Increase in accounts payable and accrued expenses	52,623				51,422				34,299				36,078
Decrease in income taxes payable, net	(47,159		)		(34,734		)		(27,335		)		(23,809		)
Decrease (increase) in other current assets	3,290				1,361				(275		)		(694		)
Net cash from operating activities	81,214				105,184				276,893				341,137
Investing Activities:
Purchase of property and equipment	(20,380		)		(13,279		)		(33,141		)		(27,314		)
Other, net	40				4,414				(631		)		3,855
Net cash from investing activities	(20,340		)		(8,865		)		(33,772		)		(23,459		)
Financing Activities:
Proceeds from issuance of common stock	51,501				48,488				96,866				90,123
Repurchases of common stock	(84,052		)		(96,115		)		(137,960		)		(166,407		)
Dividends paid	(75,726		)		(73,000		)		(75,726		)		(73,000		)
Net cash from financing activities	(108,277		)		(120,627		)		(116,820		)		(149,284		)
Effect of exchange rate changes on cash and cash equivalents	6,270				(9,345		)		14,174				4,074
(Decrease) increase in cash and cash equivalents	(41,133		)		(33,653		)		140,475				172,468
Cash and cash equivalents at beginning of period	1,156,043				1,013,917				974,435				807,796
Cash and cash equivalents at end of period	$	1,114,910			$	980,264			$	1,114,910			$	980,264
Taxes paid:
Income taxes	$	103,508			$	108,369			$	132,654			$	146,353

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.AND SUBSIDIARIESBusiness Segment Information(In thousands)(Unaudited)
	UNITEDSTATES				OTHERNORTHAMERICA			LATINAMERICA			NORTHASIA			SOUTHASIA			EUROPE			MIDDLEEAST,AFRICAAND INDIA			ELIMI-NATIONS			CONSOLI-DATED
Three months ended June30, 2017:
Revenues from unaffiliatedcustomers	$	452,217			62,554			23,463			620,050			157,698			259,533			96,764			—			1,672,279
Transfers betweengeographic areas	28,155				2,825			3,759			4,835			5,408			9,664			5,034			(59,680	)		—
Total revenues	$	480,372			65,379			27,222			624,885			163,106			269,197			101,798			(59,680	)		1,672,279
Net revenues	$	250,027			28,173			14,008			120,959			38,228			80,896			30,286			1,056			563,633
Operating income	$	64,265			12,317			2,246			58,093			12,513			13,419			5,390			(3	)		168,240
Identifiable assets	$	1,487,582			129,830			48,064			576,655			129,002			437,628			207,191			6,804			3,022,756
Capital expenditures	$	6,852			569			957			663			409			10,501			429			—			20,380
Depreciation and amortization	$	7,731			386			300			1,362			556			1,227			480			—			12,042
Equity	$	1,147,962			61,957			24,320			402,211			117,077			135,726			124,628			(35,244	)		1,978,637
Three months ended June30, 2016:
Revenues from unaffiliatedcustomers	$	417,735			56,674			21,169			517,489			151,890			229,882			80,325			—			1,475,164
Transfers betweengeographic areas	28,973				2,671			4,187			5,385			6,326			10,097			5,507			(63,146	)		—
Total revenues	$	446,708			59,345			25,356			522,874			158,216			239,979			85,832			(63,146	)		1,475,164
Net revenues	$	232,860			30,815			14,468			122,117			46,257			77,639			28,975			(14	)		553,117
Operating income	$	67,214			9,600			3,836			61,721			18,354			11,838			6,315			(14	)		178,864
Identifiable assets	$	1,343,669			84,358			58,570			471,832			118,352			378,859			225,877			5,938			2,687,455
Capital expenditures	$	8,778			445			317			678			351			2,140			570			—			13,279
Depreciation and amortization	$	7,366			380			288			1,388			543			1,188			489			—			11,642
Equity	$	1,069,876			38,638			39,482			309,557			78,668			133,387			141,315			(31,418	)		1,779,505

(in thousands)	UNITED STATES				OTHER NORTH AMERICA			LATIN AMERICA			NORTHASIA			SOUTHASIA			EUROPE			MIDDLEEAST,AFRICAAND INDIA			ELIMI- NATIONS			CONSOLI- DATED
Six months ended June30, 2017:
Revenues from unaffiliatedcustomers	$	878,236			122,453			45,566			1,186,478			304,938			490,990			188,750			—			3,217,411
Transfers betweengeographic areas	52,468				5,464			7,394			9,886			10,839			18,986			9,998			(115,035	)		—
Total revenues	$	930,704			127,917			52,960			1,196,364			315,777			509,976			198,748			(115,035	)		3,217,411
Net revenues	$	480,812			53,966			28,924			232,792			76,223			156,854			60,017			1,650			1,091,238
Operating income	$	116,611			17,368			5,697			111,445			25,737			25,065			12,433			(2	)		314,354
Identifiable assets at period end	$	1,487,582			129,830			48,064			576,655			129,002			437,628			207,191			6,804			3,022,756
Capital expenditures	$	12,094			803			1,212			1,903			782			15,579			768			—			33,141
Depreciation and amortization	$	15,484			758			620			2,682			1,087			2,398			940			—			23,969
Equity	$	1,147,962			61,957			24,320			402,211			117,077			135,726			124,628			(35,244	)		1,978,637
Six months ended June30, 2016:
Revenues from unaffiliatedcustomers	$	825,561			108,780			41,233			1,014,721			288,308			451,779			163,254			—			2,893,636
Transfers betweengeographic areas	55,007				5,371			7,788			10,481			12,132			20,458			10,901			(122,138	)		—
Total revenues	$	880,568			114,151			49,021			1,025,202			300,440			472,237			174,155			(122,138	)		2,893,636
Net revenues	$	453,558			58,193			28,201			232,908			85,775			152,180			59,382			(11	)		1,070,186
Operating income	$	115,419			16,891			7,688			116,939			34,045			24,091			15,628			(11	)		330,690
Identifiable assets at period end	$	1,343,669			84,358			58,570			471,832			118,352			378,859			225,877			5,938			2,687,455
Capital expenditures	$	16,915			756			802			1,763			1,006			4,259			1,813			—			27,314
Depreciation and amortization	$	14,698			744			541			2,707			1,055			2,286			940			—			22,971
Equity	$	1,069,876			38,638			39,482			309,557			78,668			133,387			141,315			(31,418	)		1,779,505

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								Six months ended
	June 30,								June 30,
(in thousands)	2017				2016				2017				2016
Total revenues	$	1,672,279			$	1,475,164			$	3,217,411			$	2,893,636
Expenses:
Airfreight services	499,418				403,419				942,822				792,196
Ocean freight and ocean services	385,927				323,699				751,990				646,719
Customs brokerage and other services	223,301				194,929				431,361				384,535
Net revenues	$	563,633			$	553,117			$	1,091,238			$	1,070,186

 

CONTACTS:

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