10-QPeriod: Q2 FY2019

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 7, 2019For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid financial results for the second quarter and first half of 2019, demonstrating resilience amidst a dynamic global trade environment. The company saw an increase in total revenues, driven primarily by growth in its ocean freight and customs brokerage services, offsetting a slight decline in airfreight revenues. Net earnings attributable to shareholders also showed a healthy increase, reflecting effective cost management and operational efficiencies. The balance sheet indicates a strong liquidity position with a significant increase in cash and cash equivalents. The adoption of new lease accounting standards has led to the recognition of operating lease right-of-use assets and liabilities, impacting the balance sheet structure but not the underlying operational cash flow. The company continues to return value to shareholders through share repurchases and dividends, underscoring its commitment to capital allocation.

Financial Highlights

43 data points
Beta

Revenue

$2.04B

Net Income

$153.15M

7.5% Net Margin

EPS (Diluted)

$0.88

Total Assets

$3.65B

Cash & Equivalents

$1.08B

Free Cash Flow

$155.71M

Financial Statements
Beta
Revenue$2.04B
Operating Expenses$1.84B
Operating Income$192.20M
Net Income$153.15M
EPS (Basic)$0.90
EPS (Diluted)$0.88
Shares Outstanding (Basic)171.00M
Shares Outstanding (Diluted)174.47M

Key Highlights

  • 1Total revenues increased by 4% to $2.04 billion for the three months ended June 30, 2019, and by 6.4% to $4.06 billion for the six months ended June 30, 2019, driven by growth in ocean freight and customs brokerage services.
  • 2Net earnings attributable to shareholders rose by 8.9% to $153.1 million for the three months ended June 30, 2019, and by 6.0% to $292.8 million for the six months ended June 30, 2019.
  • 3Operating income increased to $192.2 million and $379.8 million for the three and six months ended June 30, 2019, respectively, indicating improved operational profitability.
  • 4Cash and cash equivalents increased significantly to $1.08 billion as of June 30, 2019, from $923.7 million as of December 31, 2018, reflecting strong cash generation.
  • 5The company continued its share repurchase program, using $250.2 million and $267.3 million for the three and six months ended June 30, 2019, respectively, demonstrating a commitment to returning capital to shareholders.
  • 6Effective income tax rate decreased to 23.6% and 25.9% for the three and six months ended June 30, 2019, compared to 25.8% and 28.5% in the prior year periods, benefiting from tax credits and deductions.
  • 7The company adopted new lease accounting guidance (ASC 842) effective January 1, 2019, resulting in the recognition of operating lease right-of-use assets ($377.4 million) and liabilities ($377.0 million) on the balance sheet.

Frequently Asked Questions

For the three months ended June 30, 2019, total revenues increased by 4% to $2.04 billion compared to $1.96 billion in the same period of 2018. For the six months ended June 30, 2019, total revenues increased by 6.4% to $4.06 billion compared to $3.81 billion in the same period of 2018. This growth was driven by strong performance in ocean freight and customs brokerage services, which offset a decline in airfreight revenues.

Expeditors maintains a strong liquidity position. As of June 30, 2019, cash and cash equivalents stood at $1.08 billion, an increase from $923.7 million at December 31, 2018. Net cash provided by operating activities was $155.7 million and $445.2 million for the three and six months ended June 30, 2019, respectively, indicating robust cash generation. The company reported no long-term debt, excluding lease liabilities, as of June 30, 2019.

Expeditors is actively returning capital to shareholders through share repurchases and dividends. During the first six months of 2019, the company repurchased $267.3 million worth of its common stock. The company also declared and paid a semi-annual dividend of $0.50 per share in the second quarter of 2019. These actions reflect management's confidence in the company's financial health and commitment to shareholder value.

Effective January 1, 2019, Expeditors adopted ASC 842, which requires the recognition of operating lease right-of-use (ROU) assets and lease liabilities on the balance sheet. As of June 30, 2019, the company recognized ROU assets of $377.4 million and lease liabilities of $377.0 million. This adoption primarily impacts the balance sheet presentation and does not materially affect the company's cash flows from operations.