Expeditors International of Washington, Inc. (NASDAQ:EXPD) today
announced second 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 24% to $1.09
- Net Earnings Attributable to Shareholders increased 20% to $184
million
- Operating Income increased 29% to $248 million
- Revenues increased 27% to $2.6 billion
- Airfreight tonnage volume decreased 10% and ocean container
volume decreased 14%
“Like so many companies, the COVID-19-related impacts to our
business have been significant and widespread, as the retail, auto,
aviation, energy and other sectors continued to be severely
disrupted by shutdowns and supply chain dislocations,” said Jeffrey
S. Musser, President and Chief Executive Officer. “While volumes
for all of our products were down, as we would have expected during
such unprecedented conditions, our airfreight revenue was much
greater than anticipated. The air market has been particularly
unsettled, with the cancellation of so many passenger flights
limiting access to passenger belly space and requiring the
increased use of charters to meet customer needs. While air
capacity has been tight, demand for shipping technology-related
equipment, medical equipment and supplies and other priority goods
has been intense, creating a supply and demand imbalance and a
spike in buy and sell rates. Our employees’ ability to perform at
an extremely high level during such turmoil attests to our strong
relationships with our customers and carriers, as we were able to
access capacity and execute well under such trying conditions.
Airfreight buy and sell rates, which peaked in April and May and
started to decline in June, remain highly volatile and continue to
be unpredictable.
“Buy and sell rates were much less volatile across our other
products, even as volumes were down due to COVID-19. Despite a
decrease in ocean volumes throughout the marketplace, capacity
remains tight as carriers have continued to take steps to manage
their capacity and costs.
“Perhaps needless to say, these times have been very challenging
for all of us and I appreciate how well our team has performed
under such conditions. All of our offices around the world remain
open and continue to serve our customers at the highest level,
proving that our employees remain our most valuable assets. Our
business is service-based and we believe that employee retention
remains critical to our long-term success. To that end and true to
our company culture, we did not lay off any employees, although
headcount was down slightly due to normal employee attrition. We
also increased paid sick leave to support those employees
unfortunate to have either contracted COVID-19 or to have shown
symptoms of the virus.
“We remain extremely appreciative to all of our dedicated
employees, including those vital members who report to work each
day to facilitate the essential movement of cargo around the world.
We are also very thankful to the majority of our employees who have
not yet been able to return to the in-person office environment and
recognize the extra effort required to work under such conditions.
To successfully manage our way through this pandemic, we relied on
the strength of our highly connected information systems and have
implemented our business continuity plans around the world in
support of all of our employees to safeguard their health and
safety.”
Bradley S. Powell, Senior Vice President and Chief Financial
Officer, added, “Compared to a year ago, the effects of COVID-19
led to lower volumes for all products. Air tonnage out of North
Asia, however, increased 14%, driven by goods needed to support
remote work and to combat COVID-19. We are unable to remember a
time when the operating environment has been so uncertain. Given
that unpredictability, we will keep costs in check and focus on
increasing operational efficiencies and gaining profitable market
share. We will also use our strong financial position to continue
to make investments in our strategic initiatives. Not knowing how
or when the global economy will recover, we remain a strong,
healthy, and unified organization that has demonstrated resiliency
under the most trying conditions and believe we are well-prepared
for the post-COVID economy, no matter what that looks like.”
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.
Second Quarter 2020 Earnings Release,
August 4, 2020
Financial Highlights for the three and
six months ended June 30, 2020 and 2019 (Unaudited)
(in 000's of US dollars except per share
data)
Three months ended June
30,
Six months ended June
30,
2020
2019
% Change
2020
2019
% Change
Revenues
$
2,580,632
$
2,035,579
27%
$
4,482,496
$
4,055,630
11%
Directly related cost of transportation
and other expenses1
$
1,831,041
$
1,373,884
33%
$
3,117,769
$
2,739,821
14%
Salaries and other operating
expenses2
$
501,965
$
469,494
7%
$
958,046
$
936,007
2%
Operating income
$
247,626
$
192,201
29%
$
406,681
$
379,802
7%
Net earnings attributable to
shareholders
$
183,869
$
153,149
20%
$
306,213
$
292,848
5%
Diluted earnings attributable to
shareholders per share
$
1.09
$
0.88
24%
$
1.80
$
1.67
8%
Basic earnings attributable to
shareholders per share
$
1.10
$
0.90
22%
$
1.83
$
1.71
7%
Diluted weighted average shares
outstanding
169,290
174,466
170,382
174,953
Basic weighted average shares
outstanding
166,767
171,003
167,751
171,425
_______________________
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 and six months ended June 30, 2020, we
repurchased 0.4 million and 4.4 million shares of common stock at
an average price of $77.46 and $71.41 per share, respectively.
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.
Employee Full-time Equivalents
June 30,
2020
2019
North America
6,749
6,893
Europe
3,419
3,439
North Asia
2,413
2,532
South Asia
1,654
1,661
Middle East, Africa and India
1,528
1,550
Latin America
823
873
Information Systems
971
922
Corporate
380
379
Total
17,937
18,249
Second quarter year-over-year
percentage decrease in:
Airfreight kilos
Ocean freight FEU
2020
April
(7)%
(10)%
May
(13)%
(17)%
June
(12)%
(15)%
Quarter
(10)%
(14)%
Investors may submit written questions via e-mail to:
investor@expeditors.com. Questions received by the end of business
on August 7, 2020 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 the impacts to our business as a result of the Novel
Coronavirus (COVID-19); 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; the impact of
the 2017 Tax Act and related interpretations on our effective tax
rate. 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.
EXPEDITORS INTERNATIONAL OF
WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands, except per share
data)
(Unaudited)
June 30,
2020
December 31,
2019
Assets:
Current Assets:
Cash and cash equivalents
$
1,180,455
$
1,230,491
Accounts receivable, less allowance for
credit loss of $5,347 at June 30, 2020 and $11,143 at December 31,
2019
1,460,324
1,315,091
Deferred contract costs
147,932
131,783
Other
69,560
92,558
Total current assets
2,858,271
2,769,923
Property and equipment, less accumulated
depreciation and amortization of $494,773 at June 30, 2020 and
$478,906 at December 31, 2019
497,762
499,344
Operating lease right-of-use assets
424,516
390,035
Goodwill
7,927
7,927
Deferred federal and state income taxes,
net
5,300
8,034
Other assets, net
16,401
16,621
Total assets
$
3,810,177
$
3,691,884
Liabilities:
Current Liabilities:
Accounts payable
$
755,971
$
735,695
Accrued expenses, primarily salaries and
related costs
257,923
189,446
Contract liabilities
172,148
154,183
Current portion of operating lease
liabilities
69,740
65,367
Federal, state and foreign income
taxes
32,287
23,627
Total current liabilities
1,288,069
1,168,318
Noncurrent portion of operating lease
liabilities
360,510
326,347
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued
—
—
Common stock, par value $0.01 per share.
Issued and outstanding: 166,816 shares at June 30, 2020 and 169,622
shares at December 31, 2019
1,668
1,696
Additional paid-in capital
12,221
3,203
Retained earnings
2,298,387
2,321,316
Accumulated other comprehensive loss
(153,158
)
(131,187
)
Total shareholders’ equity
2,159,118
2,195,028
Noncontrolling interest
2,480
2,191
Total equity
2,161,598
2,197,219
Total liabilities and equity
$
3,810,177
$
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 June
30,
Six months ended June
30,
2020
2019
2020
2019
Revenues:
Airfreight services
$
1,434,590
$
741,577
$
2,143,629
$
1,456,478
Ocean freight and ocean services
491,712
543,809
985,139
1,112,450
Customs brokerage and other services
654,330
750,193
1,353,728
1,486,702
Total revenues
2,580,632
2,035,579
4,482,496
4,055,630
Operating Expenses:
Airfreight services
1,097,073
542,639
1,617,242
1,051,849
Ocean freight and ocean services
363,599
390,299
730,082
810,630
Customs brokerage and other services
370,369
440,946
770,445
877,342
Salaries and related
395,107
356,351
737,147
713,261
Rent and occupancy
41,375
40,897
83,899
82,420
Depreciation and amortization
14,109
12,677
26,769
26,070
Selling and promotion
3,113
11,643
11,356
22,719
Other
48,261
47,926
98,875
91,537
Total operating expenses
2,333,006
1,843,378
4,075,815
3,675,828
Operating income
247,626
192,201
406,681
379,802
Other Income (Expense):
Interest income
2,559
6,516
7,366
12,622
Other, net
797
2,262
4,181
3,927
Other income, net
3,356
8,778
11,547
16,549
Earnings before income taxes
250,982
200,979
418,228
396,351
Income tax expense
66,794
47,449
111,258
102,710
Net earnings
184,188
153,530
306,970
293,641
Less net earnings attributable to the
noncontrolling interest
319
381
757
793
Net earnings attributable to
shareholders
$
183,869
$
153,149
$
306,213
$
292,848
Diluted earnings attributable to
shareholders per share
$
1.09
$
0.88
$
1.80
$
1.67
Basic earnings attributable to
shareholders per share
$
1.10
$
0.90
$
1.83
$
1.71
Weighted average diluted shares
outstanding
169,290
174,466
170,382
174,953
Weighted average basic shares
outstanding
166,767
171,003
167,751
171,425
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,
2020
2019
2020
2019
Operating Activities:
Net earnings
$
184,188
$
153,530
$
306,970
$
293,641
Adjustments to reconcile net earnings to
net cash from operating activities:
Provisions for losses (recoveries) on
accounts receivable
2,389
1,584
4,209
(304
)
Deferred income tax expense
9,287
3,697
4,148
5,805
Stock compensation expense
21,638
23,824
32,794
37,206
Depreciation and amortization
14,109
12,677
26,769
26,070
Other, net
118
(29
)
551
160
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable
(185,055
)
(28,187
)
(168,375
)
202,290
Increase (decrease) in accounts payable
and accrued
expenses
106,760
39,900
107,677
(82,383
)
(Increase) decrease in deferred contract
costs
(2,333
)
(13,010
)
(18,401
)
18,249
(Decrease) increase in contract
liabilities
(595
)
13,003
20,606
(23,722
)
Increase (decrease) in income taxes
payable, net
20,154
(49,606
)
30,642
(32,613
)
Decrease (increase) in other, net
16,061
(1,676
)
4,131
791
Net cash from operating activities
186,721
155,707
351,721
445,190
Investing Activities:
Purchase of property and equipment
(22,114
)
(12,987
)
(28,241
)
(22,422
)
Other, net
(68
)
1,038
(211
)
1,293
Net cash from investing activities
(22,182
)
(11,949
)
(28,452
)
(21,129
)
Financing Activities:
Proceeds from issuance of common stock
29,187
32,287
52,586
59,477
Repurchases of common stock
(30,985
)
(190,589
)
(314,225
)
(234,923
)
Dividends Paid
(86,815
)
(85,184
)
(86,815
)
(85,184
)
Payments for taxes related to net share
settlement of equity awards
(9,170
)
(6,674
)
(10,566
)
(6,674
)
Net cash from financing activities
(97,783
)
(250,160
)
(359,020
)
(267,304
)
Effect of exchange rate changes on cash
and cash equivalents
1,726
(377
)
(14,285
)
2,158
Change in cash and cash equivalents
68,482
(106,779
)
(50,036
)
158,915
Cash and cash equivalents at beginning of
period
1,111,973
1,189,429
1,230,491
923,735
Cash and cash equivalents at end of
period
$
1,180,455
$
1,082,650
$
1,180,455
$
1,082,650
Taxes Paid:
Income taxes
$
38,504
$
97,715
$
73,808
$
134,968
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,
2020:
Revenues1
$
639,231
74,314
37,553
1,117,058
224,313
387,430
101,611
(878
)
2,580,632
Directly related cost of transportation
and other expenses2
$
354,624
41,449
22,701
907,915
160,355
271,540
72,908
(451
)
1,831,041
Salaries and other operating expenses3
$
207,703
25,283
12,112
97,171
39,184
95,757
25,188
(433
)
501,965
Operating income
$
76,904
7,582
2,740
111,972
24,774
20,133
3,515
6
247,626
Identifiable assets at period end
$
1,886,463
170,873
72,912
669,335
213,007
581,988
221,381
(5,782
)
3,810,177
Capital expenditures
$
19,076
1,148
216
385
182
993
114
—
22,114
Equity
$
1,399,124
71,165
29,758
306,022
108,777
168,060
116,279
(37,587
)
2,161,598
For the three months ended June 30,
2019:
Revenues1
$
681,076
85,537
38,757
621,951
181,380
319,331
108,311
(764
)
2,035,579
Directly related cost of transportation
and other expenses2
$
386,093
50,336
22,043
487,554
132,487
220,676
75,089
(394
)
1,373,884
Salaries and other operating expenses3
$
207,060
26,343
14,368
69,944
33,380
89,340
29,423
(364
)
469,494
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
Equity
$
1,303,381
83,417
31,014
282,192
107,229
168,570
109,790
(33,199
)
2,052,394
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,
2020:
Revenues1
$
1,289,638
156,145
75,443
1,655,013
393,355
708,070
206,650
(1,818
)
4,482,496
Directly related cost of transportation
and other expenses2
$
728,585
87,339
46,466
1,333,216
281,637
493,538
147,884
(896
)
3,117,769
Salaries and other operating expenses3
$
433,647
48,995
23,861
154,604
69,092
177,611
51,138
(902
)
958,046
Operating income
$
127,406
19,811
5,116
167,193
42,626
36,921
7,628
(20
)
406,681
Identifiable assets at period end
$
1,886,463
170,873
72,912
669,335
213,007
581,988
221,381
(5,782
)
3,810,177
Capital expenditures
$
23,573
1,209
318
710
370
1,638
423
—
28,241
Equity
$
1,399,124
71,165
29,758
306,022
108,777
168,060
116,279
(37,587
)
2,161,598
For the six months ended June 30,
2019:
Revenues1
$
1,340,859
176,947
72,936
1,254,804
358,559
632,021
220,986
(1,482
)
4,055,630
Directly related cost of transportation
and other expenses2
$
753,448
106,576
41,158
986,200
262,298
436,571
154,592
(1,022
)
2,739,821
Salaries and other operating expenses3
$
425,475
50,553
26,796
138,371
64,841
172,183
58,234
(446
)
936,007
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
Equity
$
1,303,381
83,417
31,014
282,192
107,229
168,570
109,790
(33,199
)
2,052,394
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 no impact on consolidated
or segment operating income. The impact of these changes on
reported segment revenues was immaterial and in the six months
ended June 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 first and
second quarter 2020 were 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 quarter of 2020, North Asia experienced
significant increases in airfreight services revenues and related
expenses 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 second quarter 2020 and 2019,
the People's Republic of China, including Hong Kong, represented
37% and 26%, respectively, of the Company’s total revenues and 38%
and 28%, respectively, of the Company’s total operating income.
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
first half of 2020 and 2019, the People's Republic of China,
including Hong Kong, represented 31% and 26%, respectively, of the
Company’s total revenues and 33% and 28%, respectively, of the
Company’s total operating income.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200804005305/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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