10-KPeriod: FY2007

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Annual Report, Year Ended Dec 31, 2007

Filed February 29, 2008For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported strong performance for the fiscal year ended December 31, 2007, demonstrating consistent growth across its core service offerings: airfreight, ocean freight, and customs brokerage. The company experienced a notable increase in net revenues, driven by higher volumes in air and ocean freight, as well as continued expansion in its customs brokerage services. This growth was achieved through a combination of organic expansion and focused sales efforts, reinforcing the company's strategy of providing customized logistics solutions and maintaining high service quality. Despite facing a competitive global logistics market and potential risks associated with international trade, currency fluctuations, and regulatory changes, EXPD maintained its non-asset based operational model, relying on strong relationships with third-party vendors and carriers. The company's financial health appears robust, with significant operating cash flow, substantial working capital, and no long-term debt. Key to its strategy is a strong emphasis on personnel development and a unique compensation system that incentivizes profitability and customer service, which management believes is a critical competitive advantage.

Financial Highlights

28 data points
Beta

Revenue

$5.24B

Net Income

$269.15M

5.1% Net Margin

EPS (Diluted)

$1.21

Cash & Equivalents

$574.60M

Free Cash Flow

$312.58M

Financial Statements
Beta
Revenue$5.24B
Operating Expenses$4.81B
Operating Income$423.40M
Interest Expense-$45K
Net Income$269.15M
EPS (Basic)$1.26
EPS (Diluted)$1.21
Shares Outstanding (Basic)213.31M
Shares Outstanding (Diluted)221.80M

Key Highlights

  • 1Expeditors International of Washington, Inc. (EXPD) reported strong revenue growth in 2007, with net revenues increasing to $1,452,961,000, up from $1,290,960,000 in 2006.
  • 2Net earnings grew to $269,154,000 in 2007, representing a 14.5% increase over the $235,094,000 reported in 2006, with diluted EPS rising to $1.21 from $1.06.
  • 3The company saw balanced growth across its service segments, with airfreight, ocean freight, and customs brokerage and other services all contributing positively.
  • 4Airfreight net revenues increased by 12% driven by higher volumes and expanded yields.
  • 5Ocean freight volumes grew by 15%, though net revenues increased by 7% due to a decrease in yields, partially offset by growth in fee-based services.
  • 6Customs brokerage and other services net revenues showed strong growth of 16%, benefiting from market consolidation and increased emphasis on regulatory compliance.
  • 7The company maintains a strong financial position with $765 million in working capital and no long-term debt as of December 31, 2007.

Frequently Asked Questions

Expeditors International of Washington, Inc. experienced revenue growth primarily driven by increases in airfreight volumes and yields, robust growth in ocean freight volumes (despite some yield pressure), and a significant rise in customs brokerage and other services. These increases were supported by effective sales efforts, market share gains, and the company's ability to leverage its network and services to meet evolving customer demands for logistics solutions.

Expeditors' competitive advantage stems from its non-asset based global network, its focus on customized logistics solutions, and a strong emphasis on customer service. The company also highlights its unique compensation system, which incentivizes employees based on profitability and aims to foster a culture of dedication and continuous improvement. Furthermore, its investment in technology and sophisticated computerized customer service capabilities helps it stand out in an increasingly competitive and consolidating industry.

Expeditors faces several risks, including the inherent volatility of international trade, which is influenced by economic conditions, governmental policies, and geopolitical events. It is also exposed to currency exchange rate fluctuations and relies heavily on third-party vendors and carriers, making it susceptible to their performance and policies. Additionally, the company is subject to a complex and evolving regulatory environment, and is currently facing an investigation by the U.S. Department of Justice into alleged anti-competitive behavior among air cargo freight forwarders, which could result in significant costs, fines, or penalties.

Expeditors demonstrated a strong liquidity position at the end of 2007, with $765 million in working capital and $575 million in cash and short-term investments. The company has no long-term debt, relying instead on operating cash flow and existing credit lines for liquidity. Management expects its current resources to be sufficient for future capital and liquidity needs. The company also continues its stock repurchase program, utilizing proceeds from stock option exercises to manage its share count.