Expeditors Reports Fourth Quarter 2020 EPS Of $1.16

Rhea-AI Summary

Expeditors International (NASDAQ:EXPD) reported impressive fourth quarter 2020 results, with diluted earnings per share increasing 47% to $1.16 and net earnings rising 45% to $199 million. Operating income surged 56% to $282 million, while revenues soared 55% to $3.2 billion. The company achieved record airfreight tonnage and ocean container volumes, showcasing its resilience amidst the challenges of the COVID-19 pandemic. Despite elevated air and ocean rates, supply and demand imbalances are expected to persist into 2021, impacting pricing conditions.

Positive

• Diluted EPS increased 47% to $1.16.
• Net earnings rose 45% to $199 million.
• Operating income grew 56% to $282 million.
• Revenues jumped 55% to $3.2 billion.
• Record airfreight tonnage and ocean container volumes achieved.

Negative

• Air capacity remains tight due to reduced passenger flights.
• Disruption in supply chains continues, affecting operations.
• Anticipated ongoing market volatility in air and ocean services.

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced fourth quarter 2020 financial results including the following highlights compared to the same quarter of 2019:

• Diluted Net Earnings Attributable to Shareholders per share (EPS¹) increased 47% to $1.16
• Net Earnings Attributable to Shareholders increased 45% to $199 million
• Operating Income increased 56% to $282 million
• Revenues increased 55% to $3.2 billion
• Airfreight tonnage volume increased 10% and ocean container volume increased 19%

“We moved more freight in the fourth quarter of 2020 than in any other quarter in our history,” said Jeffrey S. Musser, President and Chief Executive Officer. “We set Company bests in airfreight tonnage and ocean containers shipped, as well as in revenue, operating income and net earnings. All 17,500 people in our international network performed at levels we have never experienced before and in one of the most challenging operating environments in our 40-year history. I cannot thank our people enough and am tremendously proud to be part of an organization capable of performing at these levels while facing so many disruptions due to the COVID-19 pandemic. I credit our strong knowledge-based culture and our ability to collectively work as one team as primary factors in our success.

“Air buy and sell rates were elevated and volatile during the quarter, and supply and demand remained severely out of alignment, as demand for certain goods, particularly from North Asia, drove record high air tonnage. Air capacity remained extremely tight, as passenger flights have not returned to anywhere near their pre-COVID-19 pandemic levels. We anticipate that air supply/demand and pricing conditions are likely to remain unsettled well into 2021.

“Our ocean services business also experienced significant marketplace imbalance during the quarter, as demand soared and volumes increased, particularly on exports from North and South Asia, which drove higher average buy and sell rates. In addition, port congestion from labor and equipment shortages have significantly disrupted sailing schedules. We expect the pressure on buy rates to remain elevated until those conditions subside.

“In addition to our diverse workforce and our inclusive culture, our solid performance was largely based on the strength of our carrier relationships – both in air and ocean. Here, too, I applaud the extra focus and dedication of our people to keep those relationships strong and to secure available space for our customers in such unpredictable conditions. The marketplace remains very fluid. Despite some signs of improved COVID-19 conditions in certain parts of the world, supply chains continue to be disrupted. We remain focused on keeping our people safe, first and foremost, while continuing to serve our customers at the very highest level.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “We also experienced strong growth in Customs Brokerage, Order Management, Transcon and Distribution, as our customers’ businesses improved and we on-boarded new customers. These latest results are particularly striking in comparison to the fourth quarter of 2019, when average sell rates had declined faster than our average buy rates, and both air and ocean volumes fell as slowing trade to and from China impacted overall freight movement around the globe just as the earliest effects of COVID-19 were being felt. While we are unable to predict how ongoing disruptions related to COVID-19 will affect our future operations or financial results going forward, we do not expect these unprecedented operating conditions to persist long-term. 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.”

Mr. Powell noted that the Company’s effective tax rate for the full year of 2020 was 27.0%, compared to 25.6% in 2019. Earnings of our international subsidiaries, which on average have higher effective tax rates when compared to U.S. Federal and State tax rates, were proportionally higher in 2020 than in the U.S.

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 on the following page of this release.

Expeditors International of Washington, Inc. Fourth Quarter 2020 Earnings Release, February 16, 2021 Financial Highlights for the Three and Twelve months ended December 31, 2020 (Unaudited) (in 000's of US dollars except per share data)
		Three months ended December 31,													Twelve months ended December 31,
		2020				2019				% Change					2020				2019				% Change
Revenues		$	3,169,188			$	2,044,941			55		%			$	10,116,481			$	8,175,426			24		%
Directly related cost of transportation and other expenses1		$	2,340,603			$	1,398,638			67		%			$	7,188,790			$	5,538,958			30		%
Salaries and other operating expenses2		$	546,774			$	465,963			17		%			$	1,987,254			$	1,869,776			6		%
Operating income		$	281,811			$	180,340			56		%			$	940,437			$	766,692			23		%
Net earnings attributable to shareholders		$	198,620			$	137,326			45		%			$	696,140			$	590,395			18		%
Diluted earnings attributable to shareholders per share		$	1.16			$	0.79			47		%			$	4.07			$	3.39			20		%
Basic earnings attributable to shareholders per share		$	1.17			$	0.81			44		%			$	4.14			$	3.45			20		%
Diluted weighted average shares outstanding			171,692				173,401									170,896				174,209
Basic weighted average shares outstanding			169,473				170,339									168,333				170,899

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

The twelve months ended December 31, 2019 includes the effect of changing our presentation of certain import services from a net to a gross basis and our revised presentation of destination services that started in the second quarter of 2019, which increased revenues and directly related operating expenses in customs brokerage and other services but did not change operating income.

During the three and twelve months ended December 31, 2020, we repurchased 0.2 million and 4.6 million shares of common stock at an average price of $90.81 and $72.26 per share, respectively. During the three and twelve months ended December 31, 2019, we repurchased 1.2 million and 5.3 million shares of common stock at an average price of $73.89 and $72.91 per share, respectively.

		Employee Full-time Equivalents as of December 31,
		2020				2019
North America			6,724				6,905
Europe			3,492				3,459
North Asia			2,398				2,488
South Asia			1,631				1,697
Middle East, Africa and India			1,497				1,548
Latin America			784				855
Information Systems			983				961
Corporate			399				384
Total			17,908				18,297

		Fourth quarter year-over-year percentage increase in:
		Airfreight kilos					Ocean freight FEU
2020
October		5		%			15		%
November		12		%			20		%
December		13		%			21		%
Quarter		10		%			19		%

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on February 19, 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,” such as statements relating to management’s views with respect to future events and underlying assumptions that involve risks and uncertainties, including statements such as our expectations of continued volatility in air pricing, ongoing pressure for elevated buy rates in the ocean services business, that the COVID-19-related operating conditions will not continue long-term, and that the Company expects to continue making investments in people, processes and technology. Future financial performance could differ materially because of factors such as: our ability to perform at these levels while facing several disruptions due to the COVID-19 pandemic, including employee retention and their health and safety; our ability to execute during port congestion due to labor and equipment shortages and disrupted sailing schedules; the timing of passenger flights returning close to their pre-COVID-19 levels; the impact on our ocean volumes; continued volatility in airfreight and ocean buy and sell rates; our access to carrier capacity; our ability to keep our global offices open and operating; our ability to execute our business continuity plans; the strength of our financial position and our ability to continue to make investments in our strategic initiatives; our ability to remain a strong, healthy, unified and resilient organization; and the future impact of changes in the mix of domestic and foreign income on our effective tax rate. 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, 2019 and in “Item 1A. Risk Factors” of the Company’s most recent Quarterly Report on Form 10-Q. Additional information will also be set forth in our Annual Report on Form 10-K for the 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 Consolidated Balance Sheets (In thousands, except per share data) (Unaudited)
		December 31, 2020				December 31, 2019
Assets:
Current Assets:
Cash and cash equivalents		$	1,527,791			$	1,230,491
Accounts receivable, net			1,998,055				1,315,091
Deferred contract costs			327,448				131,783
Other			110,250				92,558
Total current assets			3,963,544				2,769,923
Property and equipment, net			506,425				499,344
Operating lease right-of-use assets			432,723				390,035
Goodwill			7,927				7,927
Deferred federal and state income taxes, net			—				8,034
Other assets, net			16,884				16,621
Total assets		$	4,927,503			$	3,691,884
Liabilities:
Current Liabilities:
Accounts payable		$	1,136,859			$	735,695
Accrued expenses, primarily salaries and related costs			257,021				189,446
Contract liabilities			379,722				154,183
Current portion of operating lease liabilities			74,004				65,367
Federal, state and foreign income taxes			45,437				23,627
Total current liabilities			1,893,043				1,168,318
Noncurrent portion of operating lease liabilities			364,185				326,347
Deferred federal and state income taxes, net			7,048				—
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued			—				—
Common stock, par value $0.01 per share, authorized 640,000. Issued and outstanding: 169,294 shares at December 31, 2020 and 169,622 shares at December 31, 2019			1,693				1,696
Additional paid-in capital			157,496				3,203
Retained earnings			2,600,201				2,321,316
Accumulated other comprehensive loss			(99,753	)			(131,187	)
Total shareholders’ equity			2,659,637				2,195,028
Noncontrolling interest			3,590				2,191
Total equity			2,663,227				2,197,219
Total liabilities and equity		$	4,927,503			$	3,691,884

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (In thousands, except per share data) (Unaudited)
		Three months ended December 31,							Twelve months ended December 31,
		2020			2019				2020			2019
Revenues:
Airfreight services		$	1,547,223		$	757,954			$	4,784,402		$	2,929,882
Ocean freight and ocean services			755,250			519,730				2,353,247			2,217,554
Customs brokerage and other services			866,715			767,257				2,978,832			3,027,990
Total revenues			3,169,188			2,044,941				10,116,481			8,175,426
Operating Expenses:
Airfreight services			1,228,254			569,282				3,679,185			2,143,999
Ocean freight and ocean services			577,600			378,801				1,762,754			1,613,646
Customs brokerage and other services			534,749			450,555				1,746,851			1,781,313
Salaries and related			427,344			352,723				1,538,104			1,422,315
Rent and occupancy			43,480			41,775				169,863			166,182
Depreciation and amortization			14,339			12,494				56,959			50,950
Selling and promotion			4,135			11,150				18,436			44,002
Other			57,476			47,821				203,892			186,327
Total operating expenses			2,887,377			1,864,601				9,176,044			7,408,734
Operating income			281,811			180,340				940,437			766,692
Other Income (Expense):
Interest income			1,545			4,680				10,415			22,803
Other, net			551			477				5,712			6,299
Other income, net			2,096			5,157				16,127			29,102
Earnings before income taxes			283,907			185,497				956,564			795,794
Income tax expense			84,382			47,749				258,350			203,778
Net earnings			199,525			137,748				698,214			592,016
Less net earnings attributable to the noncontrolling interest			905			422				2,074			1,621
Net earnings attributable to shareholders		$	198,620		$	137,326			$	696,140		$	590,395
Diluted earnings attributable to shareholders per share		$	1.16		$	0.79			$	4.07		$	3.39
Basic earnings attributable to shareholders per share		$	1.17		$	0.81			$	4.14		$	3.45
Weighted average diluted shares outstanding			171,692			173,401				170,896			174,209
Weighted average basic shares outstanding			169,473			170,339				168,333			170,899

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) (Unaudited)
		Three months ended December 31,								Twelve months ended December 31,
		2020				2019				2020				2019
Operating Activities:
Net earnings		$	199,525			$	137,748			$	698,214			$	592,016
Adjustments to reconcile net earnings to net cash from operating activities:
Provisions for losses (recoveries) on accounts receivable			977				(454	)			5,584				(1	)
Deferred income tax expense			5,499				4,499				8,371				4,482
Stock compensation expense			17,407				12,182				62,498				61,543
Depreciation and amortization			14,339				12,494				56,959				50,950
Other, net			490				129				3,960				941
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable			(372,753	)			19,744				(647,193	)			265,919
Increase (decrease) in accounts payable and accrued expenses			228,555				(40,788	)			430,495				(181,987	)
(Increase) decrease in deferred contract costs			(89,560	)			261				(189,447	)			28,811
Increase (decrease) in contract liabilities			105,455				(164	)			217,699				(37,097	)
Increase (decrease) in income taxes payable, net			19,146				14,812				8,502				(18,472	)
Decrease (increase) in other, net			12,612				4,783				(630	)			4,830
Net cash from operating activities			141,692				165,246				655,012				771,935
Investing Activities:
Purchase of property and equipment			(10,124	)			(9,079	)			(47,543	)			(47,022	)
Other, net			553				(518	)			1,516				1,007
Net cash from investing activities			(9,571	)			(9,597	)			(46,027	)			(46,015	)
Financing Activities:
Proceeds from issuance of common stock			12,329				28,055				186,345				148,245
Repurchases of common stock			(18,162	)			(92,138	)			(332,387	)			(389,060	)
Dividends Paid			(88,114	)			(85,369	)			(174,929	)			(170,553	)
Payments for taxes related to net share settlement of equity awards			—				—				(10,566	)			(6,674	)
Net cash from financing activities			(93,947	)			(149,452	)			(331,537	)			(418,042	)
Effect of exchange rate changes on cash and cash equivalents			24,107				8,324				19,852				(1,122	)
Change in cash and cash equivalents			62,281				14,521				297,300				306,756
Cash and cash equivalents at beginning of period			1,465,510				1,215,970				1,230,491				923,735
Cash and cash equivalents at end of period		$	1,527,791			$	1,230,491			$	1,527,791			$	1,230,491
Taxes Paid:
Income taxes		$	59,607			$	25,914			$	239,849			$	222,083

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 December 31, 2020:
Revenues1		$	800,663		94,153		41,527		1,300,215		329,050		458,012		146,596		(1,028	)		3,169,188
Directly related cost of transportation and other expenses2		$	460,288		60,625		23,422		1,103,063		256,677		325,878		111,179		(529	)		2,340,603
Salaries and other operating expenses3		$	245,721		26,367		11,894		96,498		40,251		101,631		24,905		(493	)		546,774
Operating income		$	94,654		7,161		6,211		100,654		32,122		30,503		10,512		(6	)		281,811
Identifiable assets at period end		$	2,532,324		186,204		85,085		876,856		272,106		752,589		240,984		(18,645	)		4,927,503
Capital expenditures		$	3,328		194		66		417		1,229		2,976		1,914		—			10,124
Depreciation and amortization		$	9,235		498		284		1,283		493		2,091		455		—			14,339
Equity		$	1,928,945		67,243		32,273		241,155		121,411		196,637		114,369		(38,806	)		2,663,227
For the three months ended December 31, 2019:
Revenues1		$	678,979		89,370		38,925		615,401		188,278		327,879		107,104		(995	)		2,044,941
Directly related cost of transportation and other expenses2		$	386,114		54,372		23,148		495,267		137,231		227,248		75,813		(555	)		1,398,638
Salaries and other operating expenses3		$	223,703		25,371		14,170		62,813		30,154		83,734		26,459		(441	)		465,963
Operating income		$	69,162		9,627		1,607		57,321		20,893		16,897		4,832		1			180,340
Identifiable assets at period end		$	1,978,307		153,813		72,677		538,526		178,336		551,576		219,953		(1,304	)		3,691,884
Capital expenditures		$	5,122		844		485		600		323		1,216		489		—			9,079
Depreciation and amortization		$	7,581		494		324		1,227		449		1,945		474		—			12,494
Equity		$	1,521,059		65,100		29,148		247,725		94,727		159,308		114,726		(34,574	)		2,197,219

		UNITED STATES			OTHER NORTH AMERICA		LATIN AMERICA		NORTH ASIA		SOUTH ASIA		EUROPE		MIDDLE EAST, AFRICA AND INDIA		ELIMI- NATIONS			CONSOLI- DATED
For the twelve months ended December 31, 2020:
Revenues1		$	2,776,546		328,427		156,163		3,838,332		989,633		1,544,130		487,011		(3,761	)		10,116,481
Directly related cost of transportation and other expenses2		$	1,568,461		192,875		93,249		3,157,086		738,648		1,080,741		359,682		(1,952	)		7,188,790
Salaries and other operating expenses3		$	877,117		100,687		48,114		332,978		149,269		375,900		104,968		(1,779	)		1,987,254
Operating income		$	330,968		34,865		14,800		348,268		101,716		87,489		22,361		(30	)		940,437
Identifiable assets at period end		$	2,532,324		186,204		85,085		876,856		272,106		752,589		240,984		(18,645	)		4,927,503
Capital expenditures		$	31,604		1,886		564		2,202		2,264		6,394		2,629		—			47,543
Depreciation and amortization		$	37,081		1,946		1,194		4,961		1,876		8,029		1,872		—			56,959
Equity		$	1,928,945		67,243		32,273		241,155		121,411		196,637		114,369		(38,806	)		2,663,227
For the twelve months ended December 31, 2019:
Revenues1		$	2,712,067		354,405		150,202		2,494,556		743,406		1,280,669		443,487		(3,366	)		8,175,426
Directly related cost of transportation and other expenses2		$	1,528,815		212,369		87,297		1,970,662		544,873		884,968		311,997		(2,023	)		5,538,958
Salaries and other operating expenses3		$	859,946		101,654		55,512		271,594		127,478		342,073		112,844		(1,325	)		1,869,776
Operating income		$	323,306		40,382		7,393		252,300		71,055		53,628		18,646		(18	)		766,692
Identifiable assets at period end		$	1,978,307		153,813		72,677		538,526		178,336		551,576		219,953		(1,304	)		3,691,884
Capital expenditures		$	28,666		2,353		1,556		1,767		1,558		9,231		1,891		—			47,022
Depreciation and amortization		$	31,049		1,881		1,489		5,263		1,912		7,398		1,958		—			50,950
Equity		$	1,521,059		65,100		29,148		247,725		94,727		159,308		114,726		(34,574	)		2,197,219

1		In 2019, the Company revised its process to record the transfer, between its geographic operating segments, of revenues and the directly related cost of transportation and other expenses for freight service transactions between Company origin and destination locations. This change better aligns revenue reporting with the location where the services are performed, as well as the transactional reporting being developed as part of the Company’s new accounting systems and processes. The change in presentation had no impact on consolidated or segment operating income. The 2019 results also include the effect of changing the presentation of certain import services from a net to a gross basis, which increased segment revenues and directly related operating expenses but did not change operating income. The impact of these changes on reported segment revenues was immaterial and prior year segment revenues have not been revised.
2		Directly 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 Consolidated Statements of Earnings.
3		Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Consolidated Statements of Earnings.

 

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FAQ

What were Expeditors International's fourth quarter 2020 revenues?

Expeditors International reported revenues of $3.2 billion for the fourth quarter of 2020.

How much did Expeditors' operating income increase in Q4 2020?

Operating income increased by 56% to $282 million in the fourth quarter of 2020.

What was the diluted EPS for Expeditors in Q4 2020?

The diluted earnings per share for Expeditors in the fourth quarter of 2020 was $1.16.

What challenges did Expeditors face in the fourth quarter of 2020?

Expeditors faced tight air capacity and supply chain disruptions due to ongoing impacts from the COVID-19 pandemic.

What is the outlook for Expeditors' air and ocean service pricing in 2021?

The outlook indicates that pricing conditions for air and ocean services are likely to remain unsettled well into 2021.