10-KPeriod: FY2008

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Annual Report, Year Ended Dec 31, 2008

Filed February 27, 2009For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) operates as a global logistics provider, offering freight forwarding and customs brokerage services. For the fiscal year ended December 31, 2008, the company demonstrated solid revenue and net earnings growth, with net revenues reaching $1.6 billion and net earnings at $301 million. This represents a substantial increase from the prior year, driven by improvements in airfreight and ocean freight services, as well as customs brokerage. The company's strategic focus on organic growth, combined with a robust global network and a strong emphasis on customer service and employee incentives, appears to be a key driver of its performance. However, investors should be aware of significant ongoing investigations by the U.S. Department of Justice (DOJ) and the European Commission (EC) into alleged anti-competitive behavior among air cargo freight forwarders. These investigations carry the risk of substantial fines and penalties, which could materially impact the company's financial position. Furthermore, the company's results are susceptible to global economic conditions, currency fluctuations, and regulatory changes. Despite these risks, EXPD's strong balance sheet, with no long-term debt and significant working capital, positions it to navigate potential challenges.

Financial Highlights

48 data points
Beta

Revenue

$5.63B

28.5% Gross Margin

Net Income

$301.01M

5.3% Net Margin

EPS (Diluted)

$1.37

Total Assets

$2.10B

Cash & Equivalents

$741.03M

Free Cash Flow

$408.97M

Financial Statements
Beta
Revenue$5.63B
Gross Profit$1.60B
Operating Expenses$5.16B
Operating Income$473.14M
Interest Expense$183K
Net Income$301.01M
EPS (Basic)$1.41
EPS (Diluted)$1.37
Shares Outstanding (Basic)212.76M
Shares Outstanding (Diluted)219.17M

Key Highlights

  • 1Net revenues increased by 10% to $1.603 billion in 2008, driven by growth across airfreight, ocean freight, and customs brokerage services.
  • 2Net earnings grew by 12% to $301 million, or $1.37 per diluted share, demonstrating profitable growth.
  • 3The company maintains a strong balance sheet with no long-term debt and significant working capital ($903 million) as of year-end 2008.
  • 4Expeditors operates an extensive global network with 12,580 employees across 61 countries, indicating broad operational reach.
  • 5Significant ongoing investigations by the U.S. DOJ and European Commission pose a material risk of fines and penalties due to alleged anti-competitive practices.
  • 6The company relies heavily on third-party suppliers (airlines, steamship lines) and is therefore exposed to their operational and financial stability.
  • 7Executive compensation is strongly tied to performance, with a culture that emphasizes customer service, employee development, and operational profitability.

Frequently Asked Questions

Expeditors faces several key risks, including ongoing investigations by the U.S. Department of Justice and the European Commission regarding alleged anti-competitive practices in air cargo freight forwarding, which could lead to significant fines and penalties. Additionally, the company is exposed to the cyclical nature of international trade, currency exchange rate fluctuations, changes in governmental policies and regulations, and reliance on third-party carriers. The global economic downturn also poses a risk to freight volumes and customer payment capabilities.

Expeditors generates revenue from three primary sources: airfreight services (approximately 36% of net revenues), ocean freight and ocean services (approximately 25% of net revenues), and customs brokerage and other services (approximately 39% of net revenues). The company acts as a non-asset-based provider, purchasing transportation services from carriers and reselling them to customers, with net revenue representing the difference between the rates charged to customers and the costs paid to carriers, along with fees for ancillary services.

Expeditors International demonstrated a strong financial position at the end of 2008. They reported significant net earnings and healthy net revenue growth. Notably, the company has no long-term debt and maintains substantial working capital of $903 million, supported by $742 million in cash and short-term investments. Their cash flow from operations was robust, and capital expenditures were managed effectively, primarily for technology and facilities. The company expects to finance its 2009 capital expenditures through existing cash.

Expeditors primarily pursues organic growth by expanding its global network of offices and service offerings. While open to strategic acquisitions, the company emphasizes retaining its culture and operational efficiency, contrasting with competitors who often grow through larger mergers. The industry is highly competitive, with players ranging from niche specialists to large global networks. Expeditors differentiates itself through its emphasis on quality service, advanced technological capabilities, and a unique compensation system that incentivizes employee performance and profitability.