News Column

Expeditors Reports Fourth Quarter 2013 EPS of $.41 Per Share 1

February 25, 2014

SEATTLE--(BUSINESS WIRE)-- Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced net earnings attributable to shareholders of $83,496,000 for the fourth quarter of 2013, as compared with $84,208,000 for the same quarter of 2012, a decrease of (1)%. Net revenues2 for the fourth quarter of 2013 increased 4% to $478,072,000 as compared with $461,510,000 reported for the fourth quarter of 2012. Total revenues and operating income were $1,625,859,000and $133,663,000in 2013, as compared with $1,535,729,000 and $128,025,000 for the same quarter of 2012, increases of 6% and 4%, respectively. Diluted net earnings attributable to shareholders per share for the fourth quarter were $.41, as compared with $.40 for the same quarter in 2012, an increase of 2%.

For the year ended December 31, 2013, net earnings attributable to shareholders was $348,526,000, as compared with $333,360,000 in 2012, an increase of 5%. Net revenues for the year increased to $1,882,853,000 from $1,835,370,000 for 2012, up 3%. Total revenues and operating income for the year were $6,080,257,000 and $552,073,000 in 2013, as compared with $5,992,215,000 and $530,798,000 for the same period in 2012, increases of 1% and 4%, respectively. Diluted net earnings attributable to shareholders per share for the year ended December 31, 2013 were $1.68, as compared with $1.57 for the same period of 2012, an increase of 7%.

“Our 2013 fourth quarter showed steady growth in airfreight and ocean freight services, both in revenue and in volumes,” said Peter J. Rose, Chairman and Chief Executive Officer. “Airfreight volumes rose 5% while ocean freight volumes were up nearly 16%, as compared with the fourth quarter 2012. Airfreight pricing remained remarkably consistent with the 2012 fourth quarter while pricing in the ocean freight market continued to be weak and somewhat volatile, reflecting the underlying economic challenges that faced ocean freight carriers caused primarily by overcapacity concerns. We also saw the impact of these volume increases spill over into customs brokerage and other services. While it is increasingly acknowledged that the state of the global economy is still not nearly as robust as government, economic and financial pundits would all have us believe, we’ve still found ways to grow profitably while remaining true to the fundamental principles which have been the catalyst for developing this company that had 6 offices and 20 people in 1981 into the $6 billion, nearly 14,000 person, Fortune 500 company it is today,” Rose went on to say.

“The Greek philosopher Heraclitus, 2,500 years ago, coined the phrase, ‘Change is theonly constant in life is change.’ While the subject of change is currently very topical at Expeditors, the irony of this statement is that we’ve always believed change can only be effectively managed from a touchstone of constancy. Reflecting back on my career at Expeditors, particularly the last 25 years that I’ve been privileged to serve as CEO, I am amazed at the changes that have occurred in the world in general and in our industry in specific. We’ve always embraced those things that must change, like technology, customer expectations, regulatory requirements etc., while at the same time reinforcing the specific things that must never change, like our culture, our values and our commitment to exceptional customer service,” Rose continued. “We have the best people, we have great customers and we’ll soon have an outstanding new CEO who will be backed by an experienced and vibrant leadership team. What we do to serve our customers will continuously evolve. Our commitment to our customers, to our values and to each other, must never change. For a quarter of a century, it’s been a pleasure and an honor to lead the superb group of people who make up this great company. I’ll miss every aspect of being CEO...even, believe it or not, the good-natured (at least from our perspective) sparring with the analysts. I’ll close by saying a heart-felt thank you to everyone who has contributed to making Expeditors what it is today. I’ll also thank in advance those who will assist me in my transition to being ‘just’ the Chairman of the Board and in supporting Jeff Musser as he becomes our new CEO,” Rose concluded.

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.

1 Diluted 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 2013 Earnings Release, February 25, 2014
 
Financial Highlights for the Three months and Years ended December 31, 2013 and 2012 (Unaudited)

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

 
      Three months ended December 31,         Years ended December 31,    
    %    
Increase%
20132012(Decrease)20132012Increase
Revenues $ 1,625,859 $ 1,535,729 6% $ 6,080,257 $ 5,992,215 1%
Net revenues $ 478,072 $ 461,510 4% $ 1,882,853 $ 1,835,370 3%
Operating income3, 4 $ 133,663 $ 128,025 4% $ 552,073 $ 530,798 4%
Net earnings attributable to shareholders $ 83,496 $ 84,208 (1)% $ 348,526 $ 333,360 5%
Diluted earnings attributable to shareholders $ .41 $ .40 2% $ 1.68 $ 1.57 7%
Basic earnings attributable to shareholders $ .41 $ .41 —% $ 1.69 $ 1.58 7%
Diluted weighted average shares outstanding 205,526,229 208,963,216 206,895,473 211,935,171
Basic weighted average shares outstanding 204,558,152 207,766,619 205,994,656 210,422,945
 


3In the fourth quarter of 2013 the Company recorded $8 million of additional Salary and related costs related to the retirement bonus of Peter J. Rose, the Company’s Chairman and Chief Executive Officer, whose retirement was announced on October 7, 2013.

4In the fourth quarter of 2012, the Company recorded approximately $8.4 million in Other operating expenses related to certain foreign indirect withholding taxes that were determined to be non-creditable and approximately $3 million of Rent and occupancy costs associated with a decision not to continue the pursuit of certain real estate projects that had been recorded under construction in process.

     
Employee headcount as of December 31,
2013       2012
North America 4,860 4,726
Asia Pacific 3,952 3,914
Europe and Africa 2,277 2,332
Middle East 1,222 1,236
South America 685 672
Information Systems 630 600
Corporate 295 248
Total 13,921 13,728
 
     
Year-over-year percentage increase
(decrease) in:
Airfreight kilos       Ocean freight FEU
2013
October 6% 15%
November 11% 17%
December (3)% 16%
Quarter 5% 16%
 


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 ongoing price volatility overcapacity and volumes in the ocean markets, positive trends in air tonnage and ocean volumes, ability to maintain or grow market share, strength of the global economy, and ability to effectively manage change, including transition to a new CEO. 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 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 share data)
(Unaudited)
 
      December 31, 2013     December 31, 2012

Assets

Current Assets:
Cash and cash equivalents $ 1,247,652 $ 1,260,842
Short-term investments 26,337 139
Accounts receivable, net 1,073,500 1,031,376
Deferred Federal and state income taxes 18,396 12,102
Other current assets 49,384   53,140
Total current assets 2,415,269   2,357,599
Property and equipment, net 563,064 556,204
Goodwill 7,927 7,927
Other assets, net 28,552   32,395
$ 3,014,812   $ 2,954,125

Liabilities and Equity

Current Liabilities:
Accounts payable $ 648,156 $ 641,593
Accrued expenses, primarily salaries and related costs 200,301 178,995

Federal, state and foreign income taxes

21,743   21,970
Total current liabilities 870,200   842,558
Deferred Federal and state income taxes 58,281 78,997
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued
Common stock, par value $.01 per share; issued and outstanding 202,553,220 shares at December 31, 2013 and 206,392,013 shares at December 31, 2012 2,025 2,064
Additional paid-in capital 1,647 1,283
Retained earnings 2,087,376 2,018,618
Accumulated other comprehensive (loss) income (6,265 ) 5,734
Total shareholders’ equity 2,084,783   2,027,699
Noncontrolling interest 1,548   4,871
Total equity 2,086,331   2,032,570
$ 3,014,812   $ 2,954,125
 
 
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Earnings
(In thousands, except share data)
(Unaudited)
 
      Three months ended     Twelve months ended
December 31,December 31,
2013     20122013     2012
Revenues:
Airfreight services $ 742,371 $ 700,785 $ 2,633,830 $ 2,600,916
Ocean freight and ocean services 495,552 472,307 1,958,231 1,974,891
Customs brokerage and other services 387,936 362,637   1,488,196 1,416,408  
Total revenues 1,625,859 1,535,729   6,080,257 5,992,215  
Operating Expenses:
Airfreight services 579,740 546,395 1,994,374 1,983,696
Ocean freight and ocean services 386,041 364,251 1,521,340 1,542,170
Customs brokerage and other services 182,006 163,573 681,690 630,979
Salaries and related costs 267,002 246,096 1,032,601 995,052
Rent and occupancy costs 24,990 27,343 98,437

98,580

Depreciation and amortization 12,490 10,695 48,071 39,940
Selling and promotion 9,352 8,814 33,243 34,184
Other 30,575 40,537   118,428 136,816  
Total operating expenses 1,492,196 1,407,704   5,528,184 5,461,417  
Operating income 133,663 128,025   552,073 530,798  
 
Interest income 2,530 3,522 11,810 12,763
Other, net 1,645 1,845   8,713 6,832  
Other income, net 4,175 5,367   20,523 19,595  
Earnings before income taxes 137,838 133,392 572,596 550,393
Income tax expense 53,829 49,893   222,585 217,424  
Net earnings 84,009 83,499   350,011 332,969  
Less net earnings (losses) attributable to the noncontrolling interest 513 (709 ) 1,485 (391 )
Net earnings attributable to shareholders $ 83,496 $ 84,208   $ 348,526 $ 333,360  
Diluted earnings attributable to shareholders per share $ .41 $ .40   $ 1.68 $ 1.57  
Basic earnings attributable to shareholders per share $ .41 $ .41   $ 1.69 $ 1.58  
Dividends declared and paid per common share $ .30 $ .28   $ .60 $ .56  
Weighted average diluted shares outstanding 205,526,229 208,963,216   206,895,473 211,935,171  
Weighted average basic shares outstanding 204,558,152 207,766,619   205,994,656 210,422,945  
 
 
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,
2013     20122013     2012
Operating Activities:
Net earnings $ 84,009 $ 83,499 $ 350,011 $ 332,969
Adjustments to reconcile net earnings to net cash from operating activities:
(Recoveries) provision for losses on accounts receivable (421 ) 302 2,116 (90 )
Deferred income tax (benefit) expense (730 ) 7,309 (20,975 ) 11,639
Excess tax benefits from stock plans (656 ) (1,110 ) (2,339 ) (5,401 )
Stock compensation expense 10,753 11,212 43,813 44,058
Depreciation and amortization 12,490 10,695 48,071 39,940
Other 208 3,181 844 4,864
Changes in operating assets and liabilities:
Increase in accounts receivable (50,093 ) (16,044 ) (64,575 ) (89,856 )
Decrease (increase) in other current assets 3,263 3,566 (2,015 ) (63 )
Increase (decrease) in accounts payable and accrued expenses 9,335 (30,341 ) 44,150 30,625
(Decrease) in income taxes payable, net (6,205 ) (11,520 ) 8,435   1,441  
Net cash from operating activities 61,953   60,749   407,536   370,126  
Investing Activities:
Decrease (increase) in short-term investments, net 73,489 131 (26,201 ) 342
Purchase of property and equipment (10,720 ) (10,554 ) (53,411 ) (47,626 )
Other 1,680   15   2,806   290  
Net cash from investing activities 64,449   (10,408 ) (76,806 ) (46,994 )
Financing Activities:
Proceeds from issuance of common stock 7,660 7,510 59,752 52,511
Repurchases of common stock (136,730 ) (108,921 ) (261,936 ) (302,414 )
Excess tax benefits from stock plans 656 1,110 2,339 5,401
Dividends paid (61,393 ) (57,905 ) (123,292 ) (117,263 )
Purchase of noncontrolling interest (7,730 )
Distribution to noncontrolling interest   (105 ) (1,161 ) (1,282 )
Net cash from financing activities (189,807 ) (158,311 ) (332,028 ) (363,047 )
Effect of exchange rate changes on cash and cash equivalents 727   1,170   (11,892 ) 6,401  
Decrease in cash and cash equivalents (62,678 ) (106,800 ) (13,190 ) (33,514 )
Cash and cash equivalents at beginning of period 1,310,330   1,367,642   1,260,842   1,294,356  
Cash and cash equivalents at end of period $ 1,247,652   $ 1,260,842   $ 1,247,652   $ 1,260,842  
Taxes paid:
Income taxes $ 61,169 $ 52,168 $ 235,368 $ 207,174
 
 
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Business Segment Information
(In thousands) (Unaudited)
 
          OTHER             EUROPE     MIDDLE        
UNITEDNORTHLATINASIAandEAST andELIMI-CONSOLI-
STATESAMERICAAMERICAPACIFICAFRICAINDIANATIONSDATED
Three months ended December 31, 2013:
Revenues from unaffiliated customers $ 394,835 54,651 22,629 844,148 229,823 79,773 1,625,859
Transfers between geographic areas   24,262 3,067 5,578 12,388 10,036 4,478 (59,809 )
Total revenues $ 419,097 57,718 28,207 856,536 239,859 84,251 (59,809 ) 1,625,859
Net revenues $ 197,560 27,388 15,918 139,239 73,387 24,580 478,072
Operating income $ 34,509 12,201 1,727 59,682 17,506 8,038 133,663
Identifiable assets $ 1,582,557 104,735 58,027 669,040 445,722 148,626 6,105 3,014,812
Capital expenditures $ 6,503 336 459 2,404 684 334 10,720
Depreciation and amortization $ 7,928 267 221 2,106 1,531 437 12,490
Equity $ 1,330,262 72,772 29,590 408,824 196,087 83,174 (34,378 ) 2,086,331
Three months ended December 31, 2012:
Revenues from unaffiliated customers $ 381,638 51,557 20,887 800,835 210,352 70,460 1,535,729
Transfers between geographic areas   25,386 2,868 4,770 11,035 10,097 4,300 (58,456 )
Total revenues $ 407,024 54,425 25,657 811,870 220,449 74,760 (58,456 ) 1,535,729
Net revenues $ 188,796 25,029 14,258 136,528 73,514 23,385 461,510
Operating income $ 28,201 11,045 4,237 57,933 18,804 7,805 128,025
Identifiable assets $ 1,459,425 92,075 48,995 776,902 428,053 147,871 804 2,954,125
Capital expenditures $ 7,412 281 241 1,452 794 374 10,554
Depreciation and amortization $ 6,358 200 229 1,850 1,605 453 10,695
Equity $ 1,197,239 58,071 29,504 538,710 167,752 74,950 (33,656 ) 2,032,570
 
Twelve months ended December 31, 2013:
Revenues from unaffiliated customers $ 1,561,468 215,968 86,050 3,065,412 850,863 300,496 6,080,257
Transfers between geographic areas   89,570 11,038 21,711 46,704 37,463 17,837 (224,323 )
Total revenues $ 1,651,038 227,006 107,761 3,112,116 888,326 318,333 (224,323 ) 6,080,257
Net revenues $ 770,519 102,864 61,478 563,705 286,018 98,269 1,882,853
Operating income $ 195,799 35,224 15,734 225,322 52,939 27,055 552,073
Identifiable assets $ 1,582,557 104,735 58,027 669,040 445,722 148,626 6,105 3,014,812
Capital expenditures $ 28,699 1,870 1,010 17,262 3,148 1,422 53,411
Depreciation and amortization $ 29,569 882 901 8,420 6,244 2,055 48,071
Equity $ 1,330,262 72,772 29,590 408,824 196,087 83,174 (34,378 ) 2,086,331
Twelve months ended December 31, 2012:
Revenues from unaffiliated customers $ 1,529,917 201,521 82,337 3,074,737 817,408 286,295 5,992,215
Transfers between geographic areas   94,521 10,476 18,780 43,721 38,791 18,128 (224,417 )
Total revenues $ 1,624,438 211,997 101,117 3,118,458 856,199 304,423 (224,417 ) 5,992,215
Net revenues $ 748,320 95,798 57,795 551,361 286,745 95,351 1,835,370
Operating income $ 179,015 32,385 17,356 216,559 59,314 26,169 530,798
Identifiable assets $ 1,459,425 92,075 48,995 776,902 428,053 147,871 804 2,954,125
Capital expenditures $ 28,088 832 1,301 11,275 4,323 1,807 47,626
Depreciation and amortization $ 23,678 756 873 6,810 5,994 1,829 39,940
Equity $ 1,197,239 58,071 29,504 538,710 167,752 74,950 (33,656 ) 2,032,570
 


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 endedTwelve months ended
December 31,December 31,
(in thousands)2013     20122013     2012
Total revenues $ 1,625,859 $ 1,535,729 $ 6,080,257 $ 5,992,215
Expenses:
Airfreight services 579,740 546,395 1,994,374 1,983,696
Ocean freight and ocean services 386,041 364,251 1,521,340 1,542,170
Customs brokerage and other services 182,006 163,573 681,690 630,979
Net revenues $ 478,072 $ 461,510 $ 1,882,853 $ 1,835,370





Expeditors International of Washington, Inc.

R. Jordan Gates, 206-674-3427

President and Chief Operating Officer

or

Bradley S. Powell, 206-674-3412

Senior Vice President and Chief Financial Officer

Source: Expeditors International of Washington, Inc.


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