10-QPeriod: Q2 FY2015

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q2 Ended Jun 30, 2015

Filed August 6, 2015For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid financial performance for the six months ended June 30, 2015. Total revenues increased by approximately 9% year-over-year, reaching $3.37 billion, driven by growth across all major service segments: airfreight, ocean freight, and customs brokerage. Net earnings attributable to shareholders saw a significant increase of 28.6% to $224.5 million for the first half of 2015, translating to diluted earnings per share of $1.17, up from $0.88 in the prior year. This strong bottom-line growth was fueled by improved operating income, which rose 26.7%, and a more favorable net revenue margin, particularly in ocean freight services, due to strategic pricing adjustments and favorable market conditions. The company also demonstrated robust cash flow generation from operations, with a substantial increase of $97.3 million year-over-year. Expeditors maintained a strong balance sheet with total assets of $2.93 billion and a significant portion held in cash and cash equivalents. The company continued its commitment to returning capital to shareholders through stock repurchases and dividends, while also investing in technology and infrastructure to support future growth. The company's outlook suggests continued focus on organic growth and operational efficiency.

Financial Highlights

43 data points
Beta

Revenue

$1.69B

Net Income

$117.76M

7.0% Net Margin

EPS (Diluted)

$0.61

Total Assets

$2.93B

Cash & Equivalents

$985.73M

Free Cash Flow

$181.73M

Financial Statements
Beta
Revenue$1.69B
Operating Expenses$1.51B
Operating Income$182.72M
Net Income$117.76M
EPS (Basic)$0.62
EPS (Diluted)$0.61
Shares Outstanding (Basic)190.68M
Shares Outstanding (Diluted)191.92M

Key Highlights

  • 1Total revenues increased 9% to $3.37 billion for the six months ended June 30, 2015, compared to $3.09 billion in the prior year.
  • 2Net earnings attributable to shareholders grew by 28.6% to $224.5 million for the first six months of 2015, compared to $175.1 million in the same period last year.
  • 3Diluted earnings per share rose to $1.17 for the first six months of 2015, up from $0.88 in the comparable period of 2014.
  • 4Operating income increased by 26.7% to $351.6 million for the first six months of 2015.
  • 5Net cash from operating activities significantly improved, reaching $316.1 million for the first six months of 2015, up from $218.7 million in 2014.
  • 6The company maintained a strong liquidity position with cash and cash equivalents of $985.7 million as of June 30, 2015.
  • 7The company's stock repurchase program continued, with approximately 2.7 million shares repurchased during the second quarter of 2015.

Frequently Asked Questions

The substantial increase in net earnings was driven by several factors including a 9% increase in total revenues across all service segments, a notable improvement in operating income by 26.7%, and enhanced net revenue margins, particularly in ocean freight services. These improvements were attributed to strategic pricing adjustments, favorable market conditions, and efficient cost management.

Salaries and related costs increased by 10% in the first six months of 2015 compared to the prior year, primarily due to increased bonuses reflecting higher operating income and a growing employee base. However, as a percentage of net revenues, these costs decreased by 2%, indicating effective management in proportion to revenue growth. The company's compensation philosophy aligns employee incentives with company profitability.

Expeditors operates in a competitive global logistics industry influenced by economic and political conditions, currency fluctuations, and evolving trade policies. The company anticipates continued price pressure and a focus on supply chain efficiency from customers. Potential risks include carrier overcapacity, disruptions in port services, and volatile fuel costs, although the company believes its non-asset based model and diversified services provide resilience. Management is also focused on perpetuating its global corporate culture and adapting to emerging trends.

The company maintains a strong liquidity position with $1.03 billion in cash, cash equivalents, and short-term investments as of June 30, 2015. Expeditors has no long-term debt and generates substantial cash flow from operations, which management believes is sufficient to meet its liquidity and capital requirements for the foreseeable future. The company continues to use cash for stock repurchases and dividend payments, demonstrating a commitment to shareholder returns.