Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced first quarter 2016 financial results including the following highlights compared to the same quarter of 2015:

  • Diluted Net Earnings Attributable to Shareholders per share decreased 4% to $0.53
  • Net Earnings Attributable to Shareholders decreased 9% to $97 million
  • Operating Income decreased 10% to $152 million
  • Net Revenues2 decreased 2% to $517 million while yields expanded 489 basis points to 36.5%
  • Airfreight tonnage volume decreased 9% and ocean container volume decreased 3%
  • Revenues decreased 15% to $1.4 billion

“We knew that comparing our 2016 results to our record year in 2015 would be challenging, especially when considering the current headwinds from slowing global trade,” commented Jeffrey S. Musser, President and Chief Executive Officer. “The business drivers in Q1 2015 were quite different from those in Q1 2016. In Q1 2015 we delivered solutions to customers who navigated around and through issues in the U.S. West Coast ports, and in Q1 2016 we worked with carriers to adjust pricing in over-supplied air and ocean markets to maintain and grow profitable market share. When reviewing the underlying fundamentals that drove these latest results, we are pleased with how things turned out. The outstanding customer service and efficiency that our people provide are critical to our success during this period of shifting balance of supply and demand.

“We are continuing our investment tied to the strategy that we laid out approximately two years ago. We have chosen the right areas of focus and our teams continue to execute extremely well. The high level of customer service offered by our employees, combined with our focus on implementing process improvements, are allowing us to continue to expand market share even in a difficult market.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Our people performed very well as we adapted to a rapidly changing marketplace affected by slowing global trade and excess carrier capacity. Similar to our Q4 2015 results, net revenue yields and cash flow from operations in Q1 2016 are among our best. Many of our customers are being cautious about how to spend their logistics dollar, taking advantage of abundant capacity in search of lower rates where possible, and we are aligning ourselves to address their needs. While volumes and average sell rates in air and ocean were lower compared to both Q1 and Q4 2015, we continued to benefit from available ocean and air carrier capacity and favorable market buying opportunities. We continued to invest in our people and our systems while carefully controlling our overhead expenses. Looking forward to Q2 and the rest of 2016, we expect rate volatility to continue and are aware of the uncertainties and challenges with the global economy and global trade and how they may continue to impact the comparisons to our 2015 financial results.”

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, time-definite transportation, order management, warehousing 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.
 
Financial Highlights for the Three months ended March 31, 2016 and 2015 (Unaudited)

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

 
  Three months ended March 31,  
2016   2015 % Change  
Revenues $ 1,418,472 $ 1,677,526 (15 )%
Net revenues1 $ 517,069 $ 529,486 (2 )%
Operating income $ 151,826 $ 168,883 (10 )%
Net earnings attributable to shareholders $ 96,584 $ 106,704 (9 )%
Diluted earnings attributable to shareholders per share $ 0.53 $ 0.55 (4 )%
Basic earnings attributable to shareholders per share $ 0.53 $ 0.56 (5 )%
Diluted weighted average shares outstanding 183,018 192,707
Basic weighted average shares outstanding 182,010 191,628
_______________________
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.

During the three-month periods ended March 31, 2016 and 2015, respectively, the Company repurchased 1.5 million and 1.6 million shares of common stock at an average price of $47.79 and $47.86 per share.

  Employee headcount as of March 31,
2016   2015
North America 5,652 5,399
Europe 2,731 2,552
North Asia 2,457 2,476
Middle East, Africa and India 1,479 1,369
South Asia 1,327 1,289
Latin America 775 784
Information Systems 765 705
Corporate 332 308
Total 15,518 14,882
  Year-over-year percentage increase (decrease) in:
Airfreight kilos   Ocean freight FEU
2016
January (9 )% (2 )%
February (12 )% (15 )%
March (7 )% 8 %
Quarter (9 )% (3 )%

_______________________

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on May 6, 2016 will be considered in management's 8-K “Responses to Selected Questions” expected to be filed on or about May 13, 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 future pricing volatility and impacts on margins, ability to maintain current margin levels, condition of the global economy and global trade, ability to grow profitable market share, ability to achieve benefits from strategies, and availability of carrier capacity and low rates. 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)
 
  March 31,
2016		   December 31, 2015

Assets

Current Assets:
Cash and cash equivalents $ 1,013,917 $ 807,796
Accounts receivable, net 1,010,667 1,112,260
Deferred Federal and state income taxes 18,203 16,861
Other current assets 44,693   56,453  
Total current assets 2,087,480   1,993,370  
Property and equipment, net 526,941 524,724
Goodwill 7,927 7,927
Other assets, net 57,395   56,417  
$ 2,679,743   $ 2,582,438  

Liabilities and Equity

Current Liabilities:
Accounts payable 623,699 645,304
Accrued expenses, primarily salaries and related costs 202,284 186,571
Federal, state and foreign income taxes 28,432   29,498  
Total current liabilities 854,415   861,373  
Deferred Federal and state income taxes 42,817 26,389
 
Commitments and contingencies
 
Shareholders’ Equity:
Preferred stock; none issued — —
Common stock, par value $0.01 per share. Issued and outstanding 181,562 shares at March 31, 2016 and 182,067 shares at December 31, 2015 1,816 1,821
Additional paid-in capital 3,851 31
Retained earnings 1,845,356 1,771,379
Accumulated other comprehensive loss (71,772 ) (81,238 )
Total shareholders’ equity 1,779,251   1,691,993  
Noncontrolling interest 3,260   2,683  
Total equity 1,782,511   1,694,676  
$ 2,679,743   $ 2,582,438  
 
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
 
  Three months ended
March 31,
2016   2015
Revenues:
Airfreight services $ 560,853 $ 707,444
Ocean freight and ocean services 454,192 565,717
Customs brokerage and other services 403,427   404,365
Total revenues 1,418,472   1,677,526
Operating Expenses:
Airfreight services 388,777 513,001
Ocean freight and ocean services 323,020 445,456
Customs brokerage and other services 189,606 189,583
Salaries and related costs 283,355 278,878
Rent and occupancy costs 26,859 25,388
Depreciation and amortization 11,329 11,529
Selling and promotion 9,432 9,247
Other 34,268   35,561
Total operating expenses 1,266,646   1,508,643
Operating income 151,826   168,883
Other Income (Expense):
Interest income 2,779 2,732
Other, net 879   34
Other income, net 3,658   2,766
Earnings before income taxes 155,484 171,649
Income tax expense 58,437   64,317
Net earnings 97,047   107,332
Less net earnings attributable to the noncontrolling interest 463   628
Net earnings attributable to shareholders $ 96,584   $ 106,704
Diluted earnings attributable to shareholders per share $ 0.53   $ 0.55
Basic earnings attributable to shareholders per share $ 0.53   $ 0.56
Weighted average diluted shares outstanding 183,018   192,707
Weighted average basic shares outstanding 182,010   191,628
 
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
 
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
  Three months ended
March 31,
2016   2015
Operating Activities:
Net earnings $ 97,047 $ 107,332
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable 578 277
Deferred income tax expense 9,896 11,937
Excess tax benefits from stock plans — (1,480 )
Stock compensation expense 10,831 9,907
Depreciation and amortization 11,329 11,529
Other 36 86
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 112,710 (46,790 )
(Decrease) increase in accounts payable and accrued expenses (15,344 ) 14,895
Increase in income taxes payable, net 10,925 23,132
(Increase) decrease in other current assets (2,055 ) 3,569  
Net cash from operating activities 235,953   134,394  
Investing Activities:
(Increase) decrease in short-term investments, net (35 ) 40,274
Purchase of property and equipment (14,035 ) (9,445 )
Other, net (524 ) 198  
Net cash from investing activities (14,594 ) 31,027  
Financing Activities:
Proceeds from issuance of common stock 41,635 35,048
Repurchases of common stock (70,292 ) (77,368 )
Excess tax benefits from stock plans — 1,480
Distribution to noncontrolling interest —   (857 )
Net cash from financing activities (28,657 ) (41,697 )
Effect of exchange rate changes on cash and cash equivalents 13,419   (17,687 )
Increase in cash and cash equivalents 206,121 106,037
Cash and cash equivalents at beginning of period 807,796   927,107  
Cash and cash equivalents at end of period $ 1,013,917   $ 1,033,144  
Taxes paid:
Income taxes $ 37,984 $ 28,261
 
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 March 31, 2016:  
Revenues from unaffiliated customers $ 407,826 52,106 20,064 497,232 136,418 221,897 82,929 — 1,418,472
Transfers between geographic areas 26,034   2,700   3,601   5,096   5,806   10,361   5,394   (58,992 ) —
Total revenues $ 433,860   54,806   23,665   502,328   142,224   232,258   88,323   (58,992 ) 1,418,472
Net revenues $ 220,698 27,378 13,733 110,791 39,518 74,541 30,407 3 517,069
Operating income $ 48,205 7,291 3,852 55,218 15,691 12,253 9,313 3 151,826
Identifiable assets $ 1,255,099 119,258 56,334 455,973 133,940 438,711 216,576 3,852 2,679,743
Capital expenditures $ 8,137 311 485 1,085 655 2,119 1,243 — 14,035
Depreciation and amortization $ 7,332 364 253 1,319 512 1,098 451 — 11,329
Equity $ 978,426 79,312 37,325 300,188 115,606 167,726 137,112 (33,184 ) 1,782,511
Three months ended March 31, 2015:
Revenues from unaffiliated customers $ 444,181 54,794 24,081 645,444 181,381 242,086 85,559 — 1,677,526
Transfers between geographic areas 27,675     2,814   4,777   5,697   5,915   9,637   5,067   (61,582 ) —
Total revenues $ 471,856   57,608   28,858   651,141   187,296   251,723   90,626   (61,582 ) 1,677,526
Net revenues $ 219,603 30,678 16,559 117,405 42,200 75,888 27,153 — 529,486
Operating income $ 59,181 11,091 5,356 57,056 13,880 15,071 7,248 — 168,883
Identifiable assets $ 1,451,103 109,180 57,232 541,983 143,910 430,338 198,954 11,078 2,943,778
Capital expenditures $ 6,325 288 617 290 319 1,148 458 — 9,445
Depreciation and amortization $ 7,393 292 268 1,399 530 1,246 401 — 11,529
Equity $ 1,182,808 58,998 34,604 306,775 106,139 154,343 120,086 (36,222 ) 1,927,531

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
March 31,
(in thousands) 2016   2015
Total revenues $ 1,418,472 $ 1,677,526
Expenses:
Airfreight services 388,777 513,001
Ocean freight and ocean services 323,020 445,456
Customs brokerage and other services 189,606   189,583
Net revenues $ 517,069   $ 529,486