Expeditors Reports Second Quarter 2021 EPS of $1.84

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced second quarter 2021 financial results including the following highlights compared to the same quarter of 2020:

  • Diluted Net Earnings Attributable to Shareholders per share (EPS1) increased 69% to $1.84
  • Net Earnings Attributable to Shareholders increased 72% to $316 million
  • Operating Income increased 66% to $411 million
  • Revenues increased 50% to $3.6 billion
  • Airfreight tonnage volume and ocean container volume increased 37% and 34%, respectively

“We continued to move unprecedented volumes during the quarter, as ocean and air buy/sell rates remained elevated and volatile, capacity was extremely tight, and supply chain disruptions showed no signs of abatement,” said Jeffrey S. Musser, President and Chief Executive Officer. “Our entire company continues to perform at its very best, with strong performance and growth across all of our products. Because of ongoing supply/demand imbalances, as well as labor and equipment shortages around the globe, shippers face extraordinarily complex challenges throughout their supply chains. Logistics is now top of mind at the highest levels in most organizations. Unfortunately, there is no quick or simple fix to any of these issues and every one of our transactions seems to require significantly more attention and dedication. Whether it’s an ocean container, a customs declaration, a fulfillment order in one of our warehouses, or a high-touch, white-glove delivery for one of our Transcon customers – just about everything we do requires us to be more innovative, flexible, and alert to change in the current operating environment. I want to express enormous gratitude to our employees, who have continued to take care of our customers throughout these challenges.

“During the quarter, we achieved new records in airfreight tonnage and ocean container volumes, operating income and net earnings. Buy and sell rates remained significantly higher than pre-pandemic norms, as we worked with our carrier partners to secure precious space for our customers. It has not been easy. Many of the impediments to smoother trade flow, such as port congestion and equipment shortages, were not appreciably better in Q2 than they were in Q1.

“Currently, we do not foresee any meaningful improvements to the operating environment over at least the remainder of the year, as the global infrastructure for moving freight seems nearly stretched to its limit. Robust demand is bumping up against capacity constraints in the air and ocean markets, all of which is made more challenging by limited warehouse space, staffing constraints, port congestion, equipment dislocations, and driver shortages, not to mention additional disturbances such as the closure of the Yantian port due to a COVID-19 outbreak in May or the blockage of the Suez Canal back in March.

“We will continue to do all that we can to help our customers during such difficult times. While we remain optimistic that conditions will improve over time, we are unable to predict when that might take place, or how even the recovery might be, and we believe that demand will likely continue to outstrip capacity in both air and ocean for the near term, keeping buy/sell rates unsettled for at least the duration of 2021.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “The quarter just ended provides the first meaningful comparisons to a strong year-ago quarter in 2020, when we first started to see the results of our improved performance during the unprecedented conditions brought on by the global COVID-19 pandemic. At that time, we were just starting to demonstrate our ability to quickly adapt to a radically different operating environment of high demand for very specific products in certain lanes at a time when the vast majority of air capacity had been removed and most of our people were settling in to working from home. A year later, as we are cautiously beginning to bring our people back on site, we are navigating a multitude of challenges and performing at levels we have never seen before across the company and in all of our products. We are busier than ever, generating growth in revenue, operating income, and earnings that is well ahead of expenses, as we continue to learn how to operate in this environment. While we believe the current environment is likely to remain at least through the end of 2021, I would again caution that we are unable to predict how long these ongoing conditions will persist or the impact they will have on our future operations. Regardless, we will continue to make important investments in people, processes, and technology, as well as to invest in our strategic efforts to explore new areas for profitable growth.”

Expeditors is a global logistics company headquartered in Seattle, Washington. The Company employs trained professionals in 176 district offices and numerous branch locations located on six continents linked into a seamless worldwide network through an integrated information management system. Services include the consolidation or forwarding of air and ocean freight, customs brokerage, vendor consolidation, cargo insurance, time-definite transportation, order management, warehousing and distribution and customized logistics solutions.

____________________

1Diluted earnings attributable to shareholders per share.

NOTE: See Disclaimer on Forward-Looking Statements in this release.

Expeditors International of Washington, Inc.

Second Quarter 2021 Earnings Release, August 3, 2021

Financial Highlights for the three and six months ended June 30, 2021 and 2020 (Unaudited)

(in 000's of US dollars except per share data)

 

Three months ended June 30,

Six months ended June 30,

2021

2020

% Change

2021

2020

% Change

Revenues3

$

3,609,093

$

2,411,078

50%

$

6,807,913

$

4,254,845

60%

Directly related cost of transportation and other expenses1,3

$

2,598,633

$

1,661,487

56%

$

4,845,917

$

2,890,118

68%

Salaries and other operating expenses2

$

599,815

$

501,965

19%

$

1,165,836

$

958,046

22%

Operating income

$

410,645

$

247,626

66%

$

796,160

$

406,681

96%

Net earnings attributable to shareholders

$

316,372

$

183,869

72%

$

603,592

$

306,213

97%

Diluted earnings attributable to shareholders per share

$

1.84

$

1.09

69%

$

3.52

$

1.80

96%

Basic earnings attributable to shareholders per share

$

1.87

$

1.10

70%

$

3.57

$

1.83

95%

Diluted weighted average shares outstanding

171,677

169,290

171,660

170,382

Basic weighted average shares outstanding

169,210

166,767

169,140

167,751

____________________

1Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.

2Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Condensed Consolidated Statements of Earnings.

3Beginning in the first quarter 2019, the Company made changes to its process and presentation of freight services revenue and directly related transportation operating expenses with the objective that at each reporting level (reporting entity, segment and consolidated level) the gross revenue and associated directly related operating expenses be representative of the location where the services were performed, the operating expenses were incurred and where the revenues were earned. During the second quarter 2021, management identified and corrected certain immaterial errors in the Company’s historical financial statements primarily related to this process that was utilized through the first quarter of 2021. The process missed an intercompany elimination of revenues and an equal and offsetting amount of directly related transportation expenses, principally impacting airfreight services in North Asia. The errors overstated revenues and directly related transportation operating expenses by equal amounts in the consolidated statements of earnings. The errors had no impact on operating income, net earnings, and earnings per share nor any other financial statement amount. Further, the errors had no impact on the balance sheets, statements of shareholders’ equity, other comprehensive income and cash flows. These errors do not affect any of the metrics used to calculate or evaluate management’s compensation and had no impact on bonuses, commissions, share-based compensation or any other employee remuneration. Historical amounts have been revised and are presented on a comparable basis.

During the three and six months ended June 30, 2021, we repurchased 0.5 million and 1.4 million shares of common stock at an average price of $124.94 and $104.20 per share, respectively. During the three and six months ended June 30, 2020, we repurchased 0.4 million and 4.4 million shares of common stock at an average price of $77.46 and $71.41 per share, respectively.

Employee Full-time Equivalents as of
June 30,

2021

2020

North America

6,949

6,749

Europe

3,700

3,419

North Asia

2,416

2,413

South Asia

1,671

1,654

Middle East, Africa and India

1,496

1,528

Latin America

781

823

Information Systems

968

971

Corporate

399

380

Total

18,380

17,937

Disclaimer on Forward-Looking Statements:

NOTE: See Disclaimer on Forward-Looking Statements in this release.

Second quarter year-over-year
percentage increase in:

2021

Airfreight
kilos

Ocean freight
FEU

April

29%

34%

May

39%

36%

June

46%

30%

Quarter

37%

34%

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 6, 2021 will be considered in management's 8-K “Responses to Selected Questions.”

Disclaimer on Forward-Looking Statements:

Certain statements contained in this news release are “forward-looking statements,” based on management’s views with respect to future events and underlying assumptions that involve risks and uncertainties. These forward-looking statements include statements regarding the future stabilization of supply/demand imbalance and rate volatility; the continued unsettled operating environment due to continued scarce air and ocean capacity; elevated air and ocean pricing and an increase in demand for such services; port congestion; equipment imbalances; trade disruptions; rising fuels costs; and the uneven lifting of the COVID-19 pandemic restrictions. Future financial performance could differ materially because of factors such as: our ability to leverage the strength of our carrier relationships to secure space; the strength of our non-asset-based operating model; our expectation that the supply/demand imbalance and rate volatility will continue for the remainder of 2021 and will stabilize over time; our ability to re-open our offices for return-to-work; our ability to continue to enhance our productivity; our expectation that the current unprecedented operating conditions will not persist long-term; our ability to invest in our strategic efforts to explore new areas for profitable growth; and our ability to remain a strong, healthy, unified and resilient organization. The COVID-19 pandemic could have the effect of heightening many of the other risks described in Item 1A of our Annual Report on Form 10-K, including, without limitation, those related to the success of our strategy and desire to maintain historical unitary profitability, our ability to attract and retain customers, our ability to manage costs, interruptions to our information technology systems, the ability of third-party providers to perform and potential litigation as updated by our reports on Form 10-Q, filed with the Securities and Exchange Commission. These and other factors are discussed in the Company’s regulatory filings with the Securities and Exchange Commission, including those in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The forward-looking statements contained in this news release speak only as of this date and the Company does not assume any obligation to update them except as required by law.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

 

June 30,
2021

December 31,
2020

Assets:

Current Assets:

Cash and cash equivalents

$

1,674,121

$

1,527,791

Accounts receivable, less allowance for credit loss of $6,104 at June 30, 2021 and $5,579 at December 31, 2020

2,647,516

1,998,055

Deferred contract costs

534,692

327,448

Other

128,933

110,250

Total current assets

4,985,262

3,963,544

Property and equipment, less accumulated depreciation and amortization of $534,790 at June 30, 2021 and $516,988 at December 31, 2020

499,282

506,425

Operating lease right-of-use assets

443,708

432,723

Goodwill

7,927

7,927

Other assets, net

16,992

16,884

Total assets

$

5,953,171

$

4,927,503

Liabilities:

Current Liabilities:

Accounts payable

$

1,408,572

$

1,136,859

Accrued expenses, primarily salaries and related costs

319,696

257,021

Contract liabilities

619,140

379,722

Current portion of operating lease liabilities

80,210

74,004

Federal, state and foreign income taxes

57,608

45,437

Total current liabilities

2,485,226

1,893,043

Noncurrent portion of operating lease liabilities

370,333

364,185

Deferred federal and state income taxes, net

13,961

7,048

Commitments and contingencies

Shareholders’ Equity:

Preferred stock, none issued

Common stock, par value $0.01 per share. Issued and outstanding: 169,169 shares at June 30, 2021 and 169,294 shares at December 31, 2020

1,692

1,693

Additional paid-in capital

79,357

157,496

Retained earnings

3,104,471

2,600,201

Accumulated other comprehensive loss

(106,066

)

(99,753

)

Total shareholders’ equity

3,079,454

2,659,637

Noncontrolling interest

4,197

3,590

Total equity

3,083,651

2,663,227

Total liabilities and equity

$

5,953,171

$

4,927,503

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

 

Three months ended June 30,

Six months ended June 30,

2021

2020

2021

2020

Revenues:

Airfreight services

$

1,523,569

$

1,269,654

$

2,849,484

$

1,925,252

Ocean freight and ocean services

1,098,550

489,385

2,052,462

980,725

Customs brokerage and other services

986,974

652,039

1,905,967

1,348,868

Total revenues

3,609,093

2,411,078

6,807,913

4,254,845

Operating Expenses:

Airfreight services

1,136,328

932,137

2,090,872

1,398,865

Ocean freight and ocean services

862,251

361,272

1,604,686

725,668

Customs brokerage and other services

600,054

368,078

1,150,359

765,585

Salaries and related

481,186

395,107

933,291

737,147

Rent and occupancy

45,366

41,375

90,646

83,899

Depreciation and amortization

12,675

14,109

25,662

26,769

Selling and promotion

3,172

3,113

6,242

11,356

Other

57,416

48,261

109,995

98,875

Total operating expenses

3,198,448

2,163,452

6,011,753

3,848,164

Operating income

410,645

247,626

796,160

406,681

Other Income (Expense):

Interest income

2,188

2,559

4,134

7,366

Other, net

2,649

797

5,649

4,181

Other income, net

4,837

3,356

9,783

11,547

Earnings before income taxes

415,482

250,982

805,943

418,228

Income tax expense

98,508

66,794

201,019

111,258

Net earnings

316,974

184,188

604,924

306,970

Less net earnings attributable to the noncontrolling interest

602

319

1,332

757

Net earnings attributable to shareholders

$

316,372

$

183,869

$

603,592

$

306,213

Diluted earnings attributable to shareholders per share

$

1.84

$

1.09

$

3.52

$

1.80

Basic earnings attributable to shareholders per share

$

1.87

$

1.10

$

3.57

$

1.83

Weighted average diluted shares outstanding

171,677

169,290

171,660

170,382

Weighted average basic shares outstanding

169,210

166,767

169,140

167,751

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

Three months ended June 30,

Six months ended June 30,

2021

2020

2021

2020

Operating Activities:

Net earnings

$

316,974

$

184,188

$

604,924

$

306,970

Adjustments to reconcile net earnings to net cash from operating activities:

Provisions for losses on accounts receivable

1,090

2,389

2,289

4,209

Deferred income tax expense

1,850

9,287

10,001

4,148

Stock compensation expense

30,909

21,638

42,094

32,794

Depreciation and amortization

12,675

14,109

25,662

26,769

Other, net

346

118

897

551

Changes in operating assets and liabilities:

Increase in accounts receivable

(410,783

)

(185,055

)

(663,697

)

(168,375

)

Increase in accounts payable and accrued expenses

100,118

106,760

333,271

107,677

Increase in deferred contract costs

(150,382

)

(2,333

)

(221,640

)

(18,401

)

Increase (decrease) in contract liabilities

174,504

(595

)

254,094

20,606

(Decrease) increase in income taxes payable, net

(47,994

)

20,154

(1,356

)

30,642

Decrease (increase) in other, net

1,164

16,061

(324

)

4,131

Net cash from operating activities

30,471

186,721

386,215

351,721

Investing Activities:

Purchase of property and equipment

(6,539

)

(22,114

)

(14,930

)

(28,241

)

Other, net

138

(68

)

104

(211

)

Net cash from investing activities

(6,401

)

(22,182

)

(14,826

)

(28,452

)

Financing Activities:

Proceeds from issuance of common stock

22,711

29,187

42,468

52,586

Repurchases of common stock

(62,472

)

(30,985

)

(148,469

)

(314,225

)

Dividends paid

(98,387

)

(86,815

)

(98,387

)

(86,815

)

Payments for taxes related to net share settlement of equity awards

(13,893

)

(9,170

)

(15,168

)

(10,566

)

Net cash from financing activities

(152,041

)

(97,783

)

(219,556

)

(359,020

)

Effect of exchange rate changes on cash and cash equivalents

8,699

1,726

(5,503

)

(14,285

)

Change in cash and cash equivalents

(119,272

)

68,482

146,330

(50,036

)

Cash and cash equivalents at beginning of period

1,793,393

1,111,973

1,527,791

1,230,491

Cash and cash equivalents at end of period

$

1,674,121

$

1,180,455

$

1,674,121

$

1,180,455

Taxes Paid:

Income taxes

$

143,959

$

38,504

$

190,536

$

73,808

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Business Segment Information

(In thousands)

(Unaudited)

 

UNITED
STATES

OTHER

NORTH
AMERICA

LATIN
AMERICA

NORTH
ASIA

SOUTH
ASIA

EUROPE

MIDDLE
EAST,
AFRICA
AND
INDIA

ELIMI-
NATIONS

CONSOLI-
DATED

For the three months ended June 30, 2021:

Revenues

$

997,567

101,465

46,981

1,309,382

417,718

544,949

192,186

(1,155

)

3,609,093

Directly related cost of transportation and other expenses1

$

566,882

59,311

25,952

1,086,641

335,219

376,856

148,290

(518

)

2,598,633

Salaries and other operating expenses2

$

241,121

31,300

14,735

106,812

49,046

123,408

34,026

(633

)

599,815

Operating income

$

189,564

10,854

6,294

115,929

33,453

44,685

9,870

(4

)

410,645

Identifiable assets at period end

$

2,972,363

196,558

102,296

1,114,475

377,370

929,706

291,406

(31,003

)

5,953,171

Capital expenditures

$

2,905

64

72

400

532

2,100

466

6,539

Equity

$

2,163,114

80,802

36,316

318,111

146,583

255,006

128,148

(44,429

)

3,083,651

For the three months ended June 30, 2020:

Revenues3

$

639,226

73,679

37,553

984,715

217,152

358,060

101,571

(878

)

2,411,078

Directly related cost of transportation and other expenses1, 3

$

354,619

40,814

22,701

775,572

153,194

242,170

72,868

(451

)

1,661,487

Salaries and other operating expenses2

$

207,703

25,283

12,112

97,171

39,184

95,757

25,188

(433

)

501,965

Operating income

$

76,904

7,582

2,740

111,972

24,774

20,133

3,515

6

247,626

Identifiable assets at period end

$

1,886,463

170,873

72,912

669,335

213,007

581,988

221,381

(5,782

)

3,810,177

Capital expenditures

$

19,076

1,148

216

385

182

993

114

22,114

Equity

$

1,399,124

71,165

29,758

306,022

108,777

168,060

116,279

(37,587

)

2,161,598

UNITED
STATES

OTHER
NORTH
AMERICA

LATIN
AMERICA

NORTH
ASIA

SOUTH
ASIA

EUROPE

MIDDLE
EAST,
AFRICA
AND
INDIA

ELIMI-
NATIONS

CONSOLI-
DATED

For the six months ended June 30, 2021:

Revenues3

$

1,872,957

195,582

91,845

2,518,430

767,484

1,011,282

352,692

(2,359

)

6,807,913

Directly related cost of transportation and other expenses1, 3

$

1,069,517

112,361

52,652

2,054,170

605,163

683,765

269,399

(1,110

)

4,845,917

Salaries and other operating expenses2

$

479,819

57,037

27,112

213,732

92,211

232,863

64,301

(1,239

)

1,165,836

Operating income

$

323,621

26,184

12,081

250,528

70,110

94,654

18,992

(10

)

796,160

Identifiable assets at period end

$

2,972,363

196,558

102,296

1,114,475

377,370

929,706

291,406

(31,003

)

5,953,171

Capital expenditures

$

5,930

186

125

757

1,111

5,654

1,167

14,930

Equity

$

2,163,114

80,802

36,316

318,111

146,583

255,006

128,148

(44,429

)

3,083,651

For the six months ended June 30, 2020:

Revenues3

$

1,289,631

154,910

75,444

1,481,872

383,233

665,020

206,553

(1,818

)

4,254,845

Directly related cost of transportation and other expenses1, 3

$

728,578

86,104

46,467

1,160,075

271,515

450,488

147,787

(896

)

2,890,118

Salaries and other operating expenses2

$

433,647

48,995

23,861

154,604

69,092

177,611

51,138

(902

)

958,046

Operating income

$

127,406

19,811

5,116

167,193

42,626

36,921

7,628

(20

)

406,681

Identifiable assets at period end

$

1,886,463

170,873

72,912

669,335

213,007

581,988

221,381

(5,782

)

3,810,177

Capital expenditures

$

23,573

1,209

318

710

370

1,638

423

28,241

Equity

$

1,399,124

71,165

29,758

306,022

108,777

168,060

116,279

(37,587

)

2,161,598

1Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.

2Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Condensed Consolidated Statements of Earnings.

3Beginning in the first quarter 2019, the Company made changes to its process and presentation of freight services revenue and directly related transportation operating expenses with the objective that at each reporting level (reporting entity, segment and consolidated level) the gross revenue and associated directly related operating expenses be representative of the location where the services were performed, the operating expenses were incurred and where the revenues were earned. During the second quarter 2021, management identified and corrected certain immaterial errors in the Company’s historical financial statements primarily related to this process that was utilized through the first quarter of 2021. The process missed an intercompany elimination of revenues and an equal and offsetting amount of directly related transportation expenses, principally impacting airfreight services in North Asia. The errors overstated revenues and directly related transportation operating expenses by equal amounts in the consolidated statements of earnings. The errors had no impact on operating income, net earnings, and earnings per share nor any other financial statement amount. Further, the errors had no impact on the balance sheets, statements of shareholders’ equity, other comprehensive income and cash flows. Historical amounts for business segment information have been revised and are presented on a comparable basis.

The Company’s consolidated financial results in the three and six months ended June 30, 2021 and 2020 were each significantly impacted by the effects of the global pandemic in divergent ways. In the first and second quarter of 2021, the Company experienced strong volumes and high average sell and buy rates as a result of imbalances between demand and carrier capacity and continuing effects of disruptions in supply chains originating in measures to combat the pandemic in 2020.

This is in contrast with slower activity in North Asia in the first quarter of 2020 as the pandemic resulted in temporary closures and limited operations in the Company’s China offices. Shipments were also rerouted or delayed by customers and service providers as they were taking their own precautionary measures. This was followed by significant increases in airfreight services revenues and related expenses, in the second quarter of 2020, as a result of demand for time-sensitive delivery of technology equipment and medical equipment and supplies from China, which combined with reductions in airfreight supply resulted in significantly higher average buy and sell rates.

These impacts are affecting all of the Company’s geographical segments and most notably the year-over-year comparability of the North Asia segment. For the three months ended June 30, 2021 and 2020, the People's Republic of China, including Hong Kong, represented 29% and 34%, respectively, of the Company’s total revenues and 22% and 38%, respectively, of the total operating income. For the six months ended June 30, 2021 and 2020, the People's Republic of China, including Hong Kong, represented 29% of the Company’s total revenues and 24% and 33%, respectively, of the total operating income.

Contacts:

Jeffrey S. Musser
President and Chief Executive Officer
(206) 674-3433

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