10-KPeriod: FY2005

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Annual Report, Year Ended Dec 31, 2005

Filed March 16, 2006For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) operates as a global logistics provider, focusing on international freight forwarding (air and ocean) and customs brokerage. The company's business model is non-asset based, meaning it does not own aircraft or steamships but rather leverages its network and purchasing power to secure transportation services from third-party carriers. For the fiscal year ended December 31, 2005, EXPD demonstrated strong revenue growth, with net revenues increasing to $1.06 billion. The company experienced significant growth across its core services: airfreight, ocean freight, and customs brokerage. This growth was driven by increased volumes, strategic market share gains, and favorable market conditions, particularly in ocean freight. The company's financial performance is closely tied to global economic conditions and international trade volumes. Management highlighted a consistent focus on operational efficiency and customer service as key drivers of success, supported by an incentive-based compensation structure for its employees.

Key Highlights

  • 1Net revenues grew 16.9% year-over-year to $1.06 billion in 2005.
  • 2Airfreight, ocean freight, and customs brokerage services all experienced revenue growth, indicating broad-based business strength.
  • 3Ocean freight volumes saw a substantial 18% increase, contributing to a 23% rise in ocean freight net revenues.
  • 4Salaries and related costs, while increasing 16%, remained stable as a percentage of net revenues, reflecting a consistent compensation philosophy tied to profitability.
  • 5The company reported no long-term debt as of December 31, 2005, indicating a strong balance sheet.
  • 6EXPD continued its global expansion, opening 12 new full-service offices and 5 satellite offices in 2005, alongside strategic acquisitions.
  • 7A significant one-time tax benefit of $22 million was recognized in Q4 2005 due to the adoption of a plan under IRC 965.

Frequently Asked Questions

Expeditors International of Washington, Inc. provides global logistics services, primarily through international freight forwarding (air and ocean) and customs brokerage. They generate revenue by purchasing transportation services from carriers and reselling them to customers at a higher rate (net revenue or 'yield'), as well as through fees for customs brokerage and other value-added logistics solutions.

Expeditors operates on a 'non-asset-based' model. Instead of owning transportation assets, they leverage their extensive global network and consolidate shipments from multiple customers to negotiate favorable rates with asset-based carriers (airlines, steamship lines). They then resell these services, managing the complexity of the supply chain and customs processes.

Growth is driven by increased global trade volumes, expansion of their international office network, organic growth by gaining market share through focused sales efforts, and strategic acquisitions. The company also emphasizes its sophisticated IT systems and customized customer service capabilities as key differentiators.

Key risks include fluctuations in international trade due to economic conditions, currency exchange rates, and government policies; reliance on third-party vendors (carriers); potential for unexpected changes in demand affecting short-term results; foreign operational risks; competition; and the need to continually adapt to technological advancements and evolving security and customs regulations.