10-QPeriod: Q1 FY2020

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported a decline in revenues and net earnings for the first quarter of 2020 compared to the prior year, largely attributable to the significant impact of the COVID-19 pandemic. Total revenues decreased by 6% to $1.90 billion, and net earnings attributable to shareholders fell by 12% to $122.3 million. The company experienced a notable decrease in airfreight and ocean freight volumes, particularly in its North Asia operations, due to widespread disruptions in global trade, factory closures, and reduced transportation capacity. Despite the challenging operating environment, EXPD maintained its position as an essential service provider and implemented business continuity plans to safeguard employees and operations. The company's financial position remains solid, with a strong liquidity position and no long-term debt (excluding lease liabilities). However, management anticipates these disruptive conditions will persist throughout 2020, potentially impacting future results. The company's proactive approach to managing its business continuity and its non-asset-based model are key factors for investors to consider in this uncertain economic climate.

Financial Highlights

41 data points
Beta

Revenue

$1.90B

Net Income

$122.34M

6.4% Net Margin

EPS (Diluted)

$0.71

Total Assets

$3.51B

Cash & Equivalents

$1.11B

Free Cash Flow

$165.00M

Financial Statements
Beta
Revenue$1.90B
Operating Expenses$1.74B
Operating Income$159.06M
Net Income$122.34M
EPS (Basic)$0.73
EPS (Diluted)$0.71
Shares Outstanding (Basic)168.74M
Shares Outstanding (Diluted)171.45M

Key Highlights

  • 1Total revenues for Q1 2020 decreased by 6% to $1.90 billion, compared to $2.02 billion in Q1 2019.
  • 2Net earnings attributable to shareholders declined by 12% to $122.3 million ($0.71 per diluted share) in Q1 2020, down from $139.7 million ($0.80 per diluted share) in Q1 2019.
  • 3Operating income decreased by 15% to $159.1 million, primarily due to lower revenues and increased operating expenses in certain segments.
  • 4The COVID-19 pandemic significantly impacted operations, leading to reduced freight volumes, particularly in North Asia, and supply chain disruptions.
  • 5The company's balance sheet remains strong, with $1.11 billion in cash and cash equivalents and no long-term debt (excluding lease liabilities) as of March 31, 2020.
  • 6Expeditors repurchased $283.2 million of its common stock in Q1 2020, compared to $44.3 million in Q1 2019, reflecting a continued commitment to capital return to shareholders.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted Expeditors' financial performance in the first quarter of 2020. Revenues and operating income decreased due to disruptions in global trade, factory closures, and reduced transportation capacity, particularly affecting volumes in North Asia. Management expects these disruptions to continue throughout 2020.

Expeditors maintains a strong liquidity position, with $1.11 billion in cash and cash equivalents as of March 31, 2020. The company has no long-term debt other than recorded lease liabilities, indicating a relatively low financial risk profile from a debt perspective.

Expeditors actively repurchased its common stock during the first quarter of 2020, spending $283.2 million on share repurchases. This indicates a strategy to return capital to shareholders and potentially reduce the number of outstanding shares, a trend that has been ongoing.

The decline in airfreight revenues was primarily due to a 7% decrease in tonnage, offset by a 6% increase in average sell rates. Airfreight expenses rose by 2%, mainly due to an 8% increase in buy rates. Ocean freight and ocean services revenues and expenses both decreased by 13%, driven by lower volumes (especially in North Asia) and reduced sell and buy rates. These decreases are largely attributed to the global impact of the COVID-19 pandemic.