10-QPeriod: Q3 FY2016

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 8, 2016For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported its third-quarter and year-to-date results for the period ending September 30, 2016. The company experienced a decrease in total revenues for both the three-month and nine-month periods compared to the prior year, driven primarily by lower average sell rates in its airfreight and ocean freight services due to competitive market conditions and excess carrier capacity. Despite declining revenues, net revenues, which represent the company's margin, showed a modest decrease of 4% for the quarter and a 2.3% decrease year-to-date. Profitability saw a notable decline, with net earnings attributable to shareholders decreasing by 9% for the quarter and 7.1% for the nine-month period. This was largely influenced by lower net revenues and an increase in salaries and related costs as a percentage of net revenues. The company continued its share repurchase program, signaling a commitment to returning capital to shareholders. While facing pricing pressures and a competitive landscape, Expeditors maintained a strong balance sheet with substantial cash and cash equivalents and no long-term debt, positioning it to navigate the current market conditions.

Financial Highlights

42 data points
Beta

Revenue

$1.56B

Net Income

$107.58M

6.9% Net Margin

EPS (Diluted)

$0.59

Total Assets

$2.79B

Cash & Equivalents

$1.04B

Free Cash Flow

$115.79M

Financial Statements
Beta
Revenue$1.56B
Operating Expenses$1.40B
Operating Income$167.26M
Net Income$107.58M
EPS (Basic)$0.59
EPS (Diluted)$0.59
Shares Outstanding (Basic)181.18M
Shares Outstanding (Diluted)182.69M

Key Highlights

  • 1Total revenues decreased by 5.4% for the three months ended September 30, 2016, and by 11.2% for the nine months ended September 30, 2016, compared to the prior year.
  • 2Net revenues, a key performance indicator for margins, decreased by 4.3% for the third quarter and 2.3% for the first nine months of 2016.
  • 3Net earnings attributable to shareholders declined by 9.0% for the third quarter and 7.1% for the first nine months of 2016.
  • 4Airfreight services saw a revenue decrease of 6.0% for the quarter and 14.0% year-to-date, with net revenues down 9.0% for the quarter.
  • 5Ocean freight services experienced a revenue decrease of 11.9% for the quarter and 17.1% year-to-date, with net revenues decreasing 6.0% for the quarter.
  • 6Customs brokerage and other services showed revenue growth of 3.1% for the quarter and 1.5% year-to-date, with net revenues increasing 1.0% for the quarter.
  • 7The company maintained a strong liquidity position with cash and cash equivalents of $1,042.7 million at September 30, 2016, and no long-term debt.
  • 8Expeditors continued its share repurchase program, buying back 1,987,615 shares in the third quarter of 2016.

Frequently Asked Questions

The primary drivers for the revenue decline were lower average sell rates in airfreight and ocean freight services. This was a response to competitive market conditions and an oversupply of carrier capacity, which led to decreased rates offered to customers.

Profitability declined. Net earnings attributable to shareholders decreased by 9.0% for the three months ended September 30, 2016, and by 7.1% for the nine months ended September 30, 2016, compared to the same periods in 2015. This was impacted by lower net revenues and an increase in overhead expenses relative to net revenues.

Expeditors maintains a strong financial position. As of September 30, 2016, the company had $1,042.7 million in cash and cash equivalents and no long-term debt, indicating robust liquidity and a lack of financial leverage.

The company continued its share repurchase program during the third quarter of 2016, buying back nearly 2 million shares. This demonstrates a commitment to returning value to shareholders by reducing the number of outstanding shares.