10-QPeriod: Q2 FY2014

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 7, 2014For Securities:EXPD

Summary

Expeditors International of Washington Inc. (EXPD) reported a slight year-over-year increase in net revenues for both the three and six-month periods ended June 30, 2014, driven by growth in ocean freight and customs brokerage services. However, net revenue per unit in airfreight and ocean freight consolidation saw declines due to competitive pricing pressures, with the company lowering sell rates to maintain market share and customer relationships. While total revenues and net revenues showed modest growth, net earnings attributable to shareholders saw a slight decrease in the three-month period and a modest increase in the six-month period compared to 2013. The company's balance sheet reflects a decrease in cash and cash equivalents but an increase in accounts receivable and accounts payable, indicating shifts in working capital. Notably, EXPD continued its share repurchase program, indicating a commitment to returning capital to shareholders.

Financial Highlights

44 data points
Beta

Revenue

$1.60B

Net Income

$91.30M

5.7% Net Margin

EPS (Diluted)

$0.46

Total Assets

$2.93B

Cash & Equivalents

$970.56M

Free Cash Flow

$44.89M

Financial Statements
Beta
Revenue$1.60B
Operating Expenses$1.46B
Operating Income$142.44M
Net Income$91.30M
EPS (Basic)$0.46
EPS (Diluted)$0.46
Shares Outstanding (Basic)196.45M
Shares Outstanding (Diluted)197.13M

Key Highlights

  • 1Total revenues increased by 6.4% to $1.6 billion for the three months ended June 30, 2014, compared to the prior year period.
  • 2Net revenues, a non-GAAP measure, increased by 2.7% to $484.7 million for the three months ended June 30, 2014.
  • 3Net earnings attributable to shareholders were $91.3 million for the three months ended June 30, 2014, a decrease of 1.1% from the prior year.
  • 4For the six months ended June 30, 2014, net earnings attributable to shareholders increased by 1.5% to $175.1 million.
  • 5The company repurchased a significant number of shares under its discretionary stock repurchase plan, reducing the total number of outstanding shares.
  • 6Expeditors experienced a decrease in cash and cash equivalents from $1.25 billion to $970.6 million, alongside an increase in accounts receivable.
  • 7Net revenue per kilo in airfreight services decreased by 4% for the three-month period due to competitive sell rate reductions.

Frequently Asked Questions

Revenues increased across all segments. Airfreight services revenue grew by 4%, ocean freight and ocean services revenue grew by 9%, and customs brokerage and other services revenue increased by 7% for the three months ended June 30, 2014, compared to the same period in 2013. This growth was driven by increased volume, though net revenue per unit was impacted by competitive pricing.

Expeditors actively engages in share repurchases through both a non-discretionary plan (using proceeds from stock option exercises) and a discretionary plan aimed at reducing the total number of outstanding shares. During the second quarter of 2014, the company repurchased approximately 2.87 million shares under these plans, indicating a continued focus on capital return to shareholders and managing share count.

The company's cash and cash equivalents decreased from $1.25 billion at the end of 2013 to $970.6 million at June 30, 2014. This was primarily due to significant cash outflows from financing activities, including substantial share repurchases. Despite the decrease, the company maintains a strong liquidity position with $1.057 billion in cash, cash equivalents, and short-term investments, and has no long-term debt, indicating sufficient resources to meet its obligations for at least the next 12 months.

Profitability and margins are influenced by a combination of factors including shipping volumes, buy rates from carriers, and sell rates to customers. While the company saw increased volumes, competitive market conditions, particularly in North America and Asia Pacific, led to reduced sell rates to maintain market share. This, in turn, compressed net revenue per unit in airfreight and ocean freight consolidation, impacting overall profitability despite revenue growth.