Expeditors Reports Third Quarter 2021 EPS of $2.09

Rhea-AI Summary

Expeditors International of Washington (NASDAQ:EXPD) reported impressive Q3 2021 results compared to Q3 2020. Diluted EPS rose 87% to $2.09, while net earnings surged 88% to $359 million. Operating income increased 94% to $490 million, and revenues jumped 84% to $4.3 billion. Despite record performance, the company faces labor and infrastructure constraints impacting air and ocean freight capacity. The CEO anticipates these conditions will persist well into 2022, impacting future operations.

Positive

• Diluted EPS increased 87% to $2.09.
• Net earnings rose 88% to $359 million.
• Operating income grew 94% to $490 million.
• Revenues jumped 84% to $4.3 billion.
• Airfreight tonnage volume increased by 28%.
• Ocean container volume increased by 15%.

Negative

• Labor and infrastructure constraints affecting capacity.
• Insufficient air capacity due to reduced passenger flights.
• Congestion at ocean ports resulting in significant delays.
• Current adverse conditions anticipated to last into 2022.

SEATTLE--(BUSINESS WIRE)-- Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced third 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 87% to $2.09
• Net Earnings Attributable to Shareholders increased 88% to $359 million
• Operating Income increased 94% to $490 million
• Revenues increased 84% to $4.3 billion
• Airfreight tonnage volume and ocean container volume increased 28% and 15%, respectively

“In a marketplace that remains severely impacted by labor and infrastructure constraints throughout the supply chain, our people continue to perform at their best by identifying, accessing, and securing available space,” said Jeffrey S. Musser, President and Chief Executive Officer. “There remains an overall deficiency of available air capacity due to a reduction of passenger belly space on international routes. Despite increased utilization of air charters, there is insufficient capacity to meet the current high demand. At the same time, unprecedented congestion at the ocean ports due to labor and equipment shortages is disrupting sailing schedules and causing significant delays. There is simply not enough equipment, warehouse and pier space, or people in the locations where they are needed to meaningfully reduce the significant backlogs of cargo. Handling record volumes under these conditions has not been easy, but we continue to set records for company performance by servicing our customers at the highest level.

“The entire global infrastructure for the movement of cargo remains stretched beyond its limits. While certain ocean ports are particularly constrained, most notably on the U.S. west coast, many of the current bottlenecks stem from supply and infrastructure issues that were building well before the pandemic. The global reaction to COVID-19, including lockdowns, facility closures and spikes in demand for certain products, exposed and exacerbated those long-simmering issues. Unfortunately, there is no simple or immediate fix. As a result, we believe these current conditions are likely to last well into 2022.

“We also believe, as we always have, that our company’s best strategy for achieving ongoing success in servicing our customers and growing our business depends on our strong culture of close collaboration. As many of the most restrictive pandemic precautionary measures are being lifted around the world, we are carefully bringing our people back to on-site work in a measured and cautious manner. Our view is that the stresses of so many of our people working at such an accelerated pace from so many remote, off-site locations would be unsustainable over the long term.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Our strong results continue to demonstrate our ability to adapt and perform exceptionally well on behalf of our customers under very trying conditions. Demand continues to far outstrip available capacity. Buy and sell rates for both air and ocean remain elevated and erratic. Despite those conditions, our operating efficiency is strong, even as each individual shipment requires more resources and greater attention, and conditions change rapidly. While we are performing exceptionally well under these trying circumstances, I continue to caution that we are unable to predict how long the current conditions will persist or the impact they will have on our future operations.”

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. Third Quarter 2021 Earnings Release, November 2, 2021 Financial Highlights for the three and nine months ended September 30, 2021 and 2020 (Unaudited) (in 000's of US dollars except per share data)
		Three months ended September 30,											Nine months ended September 30,
		2021				2020				% Change			2021				2020				% Change
Revenues3		$	4,319,261			$	2,348,713			84%			$	11,127,174			$	6,603,558			69%
Directly related cost of transportation and other expenses1, 3		$	3,185,490			$	1,614,334			97%			$	8,031,407			$	4,504,452			78%
Salaries and other operating expenses2		$	644,134			$	482,434			34%			$	1,809,970			$	1,440,480			26%
Operating income		$	489,637			$	251,945			94%			$	1,285,797			$	658,626			95%
Net earnings attributable to shareholders		$	359,068			$	191,307			88%			$	962,660			$	497,520			93%
Diluted earnings attributable to shareholders per share		$	2.09			$	1.12			87%			$	5.61			$	2.92			92%
Basic earnings attributable to shareholders per share		$	2.12			$	1.14			86%			$	5.68			$	2.96			92%
Diluted weighted average shares outstanding			171,565				170,735							171,549				170,539
Basic weighted average shares outstanding			169,633				168,310							169,398				167,942
_______________________
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 of 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 of 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 nine months ended September 30, 2021 and 2020, we repurchased 2.0 million and 4.4 million shares of common stock at an average price of $110.45 and $71.41 per share, respectively.

		Employee Full-time Equivalents as of September 30,
		2021				2020
North America			7,315				6,666
Europe			3,860				3,361
North Asia			2,440				2,406
South Asia			1,740				1,643
Middle East, Africa and India			1,507				1,509
Latin America			801				800
Information Systems			976				975
Corporate			395				383
Total			19,034				17,743

Disclaimer on Forward-Looking Statements:

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

		Third quarter year-over-year percentage increase in:
2021		Airfreight kilos			Ocean freight FEU
July		36%			18%
August		36%			21%
September		15%			7%
Quarter		28%			15%

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on November 5, 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; labor shortages; insufficient warehouse and pier space; 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 likely well into 2022, 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)
		September 30, 2021				December 31, 2020
Assets:
Current Assets:
Cash and cash equivalents		$	1,820,106			$	1,527,791
Accounts receivable, less allowance for credit loss of $7,285 at September 30, 2021 and $5,579 at December 31, 2020			3,330,398				1,998,055
Deferred contract costs			841,689				327,448
Other			119,346				110,250
Total current assets			6,111,539				3,963,544
Property and equipment, less accumulated depreciation and amortization of $533,450 at September 30, 2021 and $516,988 at December 31, 2020			491,577				506,425
Operating lease right-of-use assets			448,228				432,723
Goodwill			7,927				7,927
Other assets, net			17,112				16,884
Total assets		$	7,076,383			$	4,927,503
Liabilities:
Current Liabilities:
Accounts payable		$	1,806,977			$	1,136,859
Accrued liabilities, primarily salaries and related costs			342,151				257,021
Contract liabilities			977,660				379,722
Current portion of operating lease liabilities			81,362				74,004
Federal, state and foreign income taxes			67,332				45,437
Total current liabilities			3,275,482				1,893,043
Noncurrent portion of operating lease liabilities			374,658				364,185
Deferred federal and state income taxes, net			5,651				7,048
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued			—				—
Common stock, par value $0.01 per share. Issued and outstanding: 169,392 shares at September 30, 2021 and 169,294 shares at December 31, 2020			1,694				1,693
Additional paid-in capital			74,925				157,496
Retained earnings			3,463,539				2,600,201
Accumulated other comprehensive loss			(122,800	)			(99,753	)
Total shareholders’ equity			3,417,358				2,659,637
Noncontrolling interest			3,234				3,590
Total equity			3,420,592				2,663,227
Total liabilities and equity		$	7,076,383			$	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 September 30,								Nine months ended September 30,
		2021				2020				2021				2020
Revenues:
Airfreight services		$	1,628,115			$	983,199			$	4,477,599			$	2,908,451
Ocean freight and ocean services			1,598,597				609,816				3,651,059				1,590,541
Customs brokerage and other services			1,092,549				755,698				2,998,516				2,104,566
Total revenues			4,319,261				2,348,713				11,127,174				6,603,558
Operating Expenses:
Airfreight services			1,244,381				723,340				3,335,253				2,122,205
Ocean freight and ocean services			1,254,334				452,028				2,859,020				1,177,696
Customs brokerage and other services			686,775				438,966				1,837,134				1,204,551
Salaries and related			519,611				373,613				1,452,902				1,110,760
Rent and occupancy			46,730				42,484				137,376				126,383
Depreciation and amortization			12,753				15,851				38,415				42,620
Selling and promotion			4,237				2,945				10,479				14,301
Other			60,803				47,541				170,798				146,416
Total operating expenses			3,829,624				2,096,768				9,841,377				5,944,932
Operating income			489,637				251,945				1,285,797				658,626
Other Income (Expense):
Interest income			2,462				1,504				6,596				8,870
Other, net			733				980				6,382				5,161
Other income, net			3,195				2,484				12,978				14,031
Earnings before income taxes			492,832				254,429				1,298,775				672,657
Income tax expense			132,922				62,710				333,941				173,968
Net earnings			359,910				191,719				964,834				498,689
Less net earnings attributable to the noncontrolling interest			842				412				2,174				1,169
Net earnings attributable to shareholders		$	359,068			$	191,307			$	962,660			$	497,520
Diluted earnings attributable to shareholders per share		$	2.09			$	1.12			$	5.61			$	2.92
Basic earnings attributable to shareholders per share		$	2.12			$	1.14			$	5.68			$	2.96
Weighted average diluted shares outstanding			171,565				170,735				171,549				170,539
Weighted average basic shares outstanding			169,633				168,310				169,398				167,942

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES   Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
		Three months ended September 30,								Nine months ended September 30,
		2021				2020				2021				2020
Operating Activities:
Net earnings		$	359,910			$	191,719			$	964,834			$	498,689
Adjustments to reconcile net earnings to net cash from operating activities:
Provisions for losses on accounts receivable			3,739				398				6,028				4,607
Deferred income tax (benefit) expense			(7,658	)			(1,276	)			2,343				2,872
Stock compensation expense			15,204				12,297				57,298				45,091
Depreciation and amortization			12,753				15,851				38,415				42,620
Other, net			626				2,919				1,523				3,470
Changes in operating assets and liabilities:
Increase in accounts receivable			(714,300	)			(106,065	)			(1,377,997	)			(274,440	)
Increase in accounts payable and accrued liabilities			436,343				94,232				769,525				201,929
Increase in deferred contract costs			(328,932	)			(81,486	)			(550,572	)			(99,887	)
Increase in contract liabilities			381,192				91,638				635,286				112,244
Increase (decrease) in income taxes payable, net			33,378				(41,286	)			32,022				(10,644	)
Increase in other, net			(14,884	)			(17,373	)			(15,208	)			(13,242	)
Net cash from operating activities			177,371				161,568				563,497				513,309
Investing Activities:
Purchase of property and equipment			(9,870	)			(9,178	)			(24,800	)			(37,419	)
Other, net			(157	)			1,174				(53	)			963
Net cash from investing activities			(10,027	)			(8,004	)			(24,853	)			(36,456	)
Financing Activities:
Proceeds from borrowing on lines of credit, net			7,479				31				7,568				11
Proceeds from issuance of common stock			56,965				121,430				99,433				174,016
Repurchases of common stock			(76,595	)			—				(225,064	)			(314,225	)
Dividends paid			—				—				(98,387	)			(86,815	)
Payments for taxes related to net share settlement of equity awards			(4	)			—				(15,172	)			(10,566	)
Distribution to noncontrolling interest			(1,631	)			—				(1,631	)			—
Net cash from financing activities			(13,786	)			121,461				(233,253	)			(237,579	)
Effect of exchange rate changes on cash and cash equivalents			(7,573	)			10,030				(13,076	)			(4,255	)
Change in cash and cash equivalents			145,985				285,055				292,315				235,019
Cash and cash equivalents at beginning of period			1,674,121				1,180,455				1,527,791				1,230,491
Cash and cash equivalents at end of period		$	1,820,106			$	1,465,510			$	1,820,106			$	1,465,510
Taxes Paid:
Income taxes		$	104,617			$	106,434			$	295,153			$	180,242

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 September 30, 2021:
Revenues		$	1,134,096				116,404				54,303				1,690,381				538,780				564,810				221,777				(1,290	)			4,319,261
Directly related cost of transportation and other expenses1		$	661,515				63,031				34,216				1,417,283				445,970				389,208				174,733				(466	)			3,185,490
Salaries and other operating expenses2		$	238,943				33,077				14,759				141,109				54,003				126,475				36,598				(830	)			644,134
Operating income		$	233,638				20,296				5,328				131,989				38,807				49,127				10,446				6				489,637
Identifiable assets at period end		$	3,417,496				256,638				110,406				1,558,109				457,615				990,123				328,671				(42,675	)			7,076,383
Capital expenditures		$	6,001				248				175				435				351				2,254				406				—				9,870
Equity		$	2,451,584				93,084				37,087				368,535				129,941				258,805				123,304				(41,748	)			3,420,592
For the three months ended September 30, 2020:
Revenues3		$	686,243				77,414				39,193				795,155				259,069				359,107				133,447				(915	)			2,348,713
Directly related cost of transportation and other expenses1,3		$	379,586				44,196				23,361				632,858				192,175				242,384				100,301				(527	)			1,614,334
Salaries and other operating expenses2		$	197,749				25,325				12,359				81,876				39,926				96,658				28,925				(384	)			482,434
Operating income		$	108,908				7,893				3,473				80,421				26,968				20,065				4,221				(4	)			251,945
Identifiable assets at period end		$	2,336,071				163,943				76,173				689,525				231,771				642,124				228,423				(9,476	)			4,358,554
Capital expenditures		$	4,703				483				180				1,075				665				1,780				292				—				9,178
Equity		$	1,791,658				77,915				31,324				246,557				97,564				185,352				110,714				(36,611	)			2,504,473
		UNITED STATES				OTHER NORTH AMERICA				LATIN AMERICA				NORTH ASIA				SOUTH ASIA				EUROPE				MIDDLE EAST, AFRICA AND INDIA				ELIMI- NATIONS				CONSOLI- DATED
For the nine months ended September 30, 2021:
Revenues3		$	3,007,053				311,986				146,148				4,208,811				1,306,264				1,576,092				574,469				(3,649	)			11,127,174
Directly related cost of transportation and other expenses1,3		$	1,731,032				175,392				86,868				3,471,453				1,051,133				1,072,973				444,132				(1,576	)			8,031,407
Salaries and other operating expenses2		$	718,762				90,114				41,871				354,841				146,214				359,338				100,899				(2,069	)			1,809,970
Operating income		$	557,259				46,480				17,409				382,517				108,917				143,781				29,438				(4	)			1,285,797
Identifiable assets at period end		$	3,417,496				256,638				110,406				1,558,109				457,615				990,123				328,671				(42,675	)			7,076,383
Capital expenditures		$	11,931				434				300				1,192				1,462				7,908				1,573				—				24,800
Equity		$	2,451,584				93,084				37,087				368,535				129,941				258,805				123,304				(41,748	)			3,420,592
For the nine months ended September 30, 2020:
Revenues3		$	1,975,874				232,324				114,637				2,277,027				642,302				1,024,127				340,000				(2,733	)			6,603,558
Directly related cost of transportation and other expenses1,3		$	1,108,164				130,300				69,828				1,792,933				463,690				692,872				248,088				(1,423	)			4,504,452
Salaries and other operating expenses2		$	631,396				74,320				36,220				236,480				109,018				274,269				80,063				(1,286	)			1,440,480
Operating income		$	236,314				27,704				8,589				247,614				69,594				56,986				11,849				(24	)			658,626
Identifiable assets at period end		$	2,336,071				163,943				76,173				689,525				231,771				642,124				228,423				(9,476	)			4,358,554
Capital expenditures		$	28,276				1,692				498				1,785				1,035				3,418				715				—				37,419
Equity		$	1,791,658				77,915				31,324				246,557				97,564				185,352				110,714				(36,611	)			2,504,473

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 of 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 of 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 nine months ended September 30, 2021 and 2020 were each significantly impacted by the effects of the global pandemic in divergent ways. In all quarters 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 and third quarters 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 September 30, 2021 and 2020, the People's Republic of China, including Hong Kong, represented 32% and 27%, respectively, of the Company’s total revenues and 21% and 26%, respectively, of the total operating income. For the nine months ended September 30, 2021 and 2020, the People's Republic of China, including Hong Kong, represented 30% and 28%, respectively, of the Company’s total revenues and 23% and 30%, respectively, of the total operating income.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211102005337/en/

Jeffrey S. Musser

President and Chief Executive Officer

(206) 674-3433

Bradley S. Powell

Senior Vice President and Chief Financial Officer

(206) 674-3412

Geoffrey Buscher

Director - Investor Relations

(206) 892-4510

Source: Expeditors International of Washington, Inc.

FAQ

What were Expeditors International's Q3 2021 earnings?

Expeditors reported diluted EPS of $2.09, an 87% increase from Q3 2020, along with net earnings of $359 million.

How much did Expeditors' revenues increase in Q3 2021?

Revenues for Q3 2021 increased by 84% to $4.3 billion compared to the same quarter in 2020.

What challenges is Expeditors facing in the logistics sector?

Expeditors is facing significant labor and infrastructure constraints, affecting air and ocean freight capacity.

What is the outlook for Expeditors in 2022?

The company anticipates that current supply chain challenges will likely persist into 2022.

How much did operating income rise for Expeditors in Q3 2021?

Operating income rose 94% to $490 million in Q3 2021 compared to the same quarter in the previous year.