10-QPeriod: Q2 FY2018

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 8, 2018For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported strong financial results for the second quarter and first half of 2018. Total revenues saw a significant increase, driven by robust performance across all three key service segments: airfreight, ocean freight, and customs brokerage. Net earnings attributable to shareholders grew substantially year-over-year, reflecting effective operational management and favorable market conditions. The company's balance sheet remains solid, with ample liquidity to support its operations and capital expenditures. EXPD continued its share repurchase program, demonstrating a commitment to returning value to shareholders. The company also noted a lower effective income tax rate, largely due to the U.S. Tax Cuts and Jobs Act of 2017, which is a positive development for profitability. While facing a competitive and dynamic global logistics market, EXPD appears well-positioned due to its diversified service offerings and strong customer relationships.

Financial Highlights

43 data points
Beta

Revenue

$1.96B

Net Income

$140.60M

7.2% Net Margin

EPS (Diluted)

$0.79

Total Assets

$3.13B

Cash & Equivalents

$1.02B

Free Cash Flow

$148.56M

Financial Statements
Beta
Revenue$1.96B
Operating Expenses$1.77B
Operating Income$183.58M
Net Income$140.60M
EPS (Basic)$0.80
EPS (Diluted)$0.79
Shares Outstanding (Basic)174.75M
Shares Outstanding (Diluted)178.60M

Key Highlights

  • 1Total revenues increased by 17% to $1.96 billion for the three months ended June 30, 2018, and by 19% to $3.81 billion for the six months ended June 30, 2018, compared to the prior year periods.
  • 2Net earnings attributable to shareholders increased by 29% to $140.6 million for the three months ended June 30, 2018, and by 37% to $276.3 million for the six months ended June 30, 2018.
  • 3Diluted earnings per share (EPS) rose to $0.79 for the three months and $1.54 for the six months ended June 30, 2018, up from $0.60 and $1.11, respectively, in the prior year periods.
  • 4Airfreight services showed strong growth with revenues up 19% and net revenues up 21% year-over-year for the second quarter, driven by increased tonnage and higher sell rates.
  • 5Customs brokerage and other services revenue increased by 33% for the quarter and 35% for the six months, indicating strong demand for these specialized services.
  • 6The effective income tax rate decreased significantly to 25.8% for the quarter and 28.5% for the six months ended June 30, 2018, down from 37.4% in the prior year, primarily due to the U.S. Tax Cuts and Jobs Act of 2017.
  • 7The company continued to repurchase shares, with $222.6 million used in financing activities for the quarter and $368.6 million for the six months, reflecting a consistent capital return strategy.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance across all three service segments. Airfreight services saw a 19% increase in revenue due to higher tonnage and sell rates, while customs brokerage and other services revenue rose by 33% driven by increased volumes in brokerage, road freight, and distribution. Ocean freight and ocean services also contributed with a slight increase in revenue.

The Tax Cuts and Jobs Act of 2017 significantly lowered Expeditors' effective income tax rate. The rate decreased from 37.4% in the comparable 2017 periods to 25.8% for the three months and 28.5% for the six months ended June 30, 2018. This reduction in tax expense contributed positively to net earnings.

Expeditors actively engages in share repurchases through both its Non-Discretionary Stock Repurchase Plan (funded by stock option exercises) and its Discretionary Stock Repurchase Plan. The company aims to use these programs to manage the number of outstanding shares and return capital to shareholders, as evidenced by the significant cash deployed for repurchases during the period.

Expeditors maintains a strong liquidity position, with $1,020.9 million in cash and cash equivalents at June 30, 2018, and positive net cash from operating activities ($148.6 million for the quarter and $384.0 million for the six months). The company has no long-term debt and believes its current cash position and operating cash flows are sufficient to meet its liquidity needs.