10-KPeriod: FY2011

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Annual Report, Year Ended Dec 31, 2011

Filed February 28, 2012For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) is a global logistics company providing freight forwarding, customs brokerage, and other supply chain services. In 2011, the company reported net revenues of $1.9 billion, a 12% increase from 2010, with net earnings of $385.7 million. This growth was driven by a 9% increase in airfreight services and a 13% increase in ocean freight services, with customs brokerage also showing strong performance. The company's non-asset based model, which relies on purchasing transportation capacity from carriers and reselling it, contributed to improved yields and profitability, particularly benefiting from excess carrier capacity in Asia. Despite strong operational performance, EXPD faces several risks including intense competition, potential volatility in carrier pricing and capacity due to industry consolidation and financial instability, and increasing regulatory scrutiny, particularly concerning anti-competitive investigations in the US and Europe. The company continues to focus on organic growth, technology investment, and a strong employee incentive program to maintain its competitive edge. Management believes its current liquidity and cash flow are sufficient to meet future obligations, with no long-term debt reported.

Financial Highlights

47 data points
Beta

Revenue

$6.16B

30.8% Gross Margin

Net Income

$385.68M

6.3% Net Margin

EPS (Diluted)

$1.79

Total Assets

$2.87B

Cash & Equivalents

$1.29B

Free Cash Flow

$457.13M

Financial Statements
Beta
Revenue$6.16B
Gross Profit$1.90B
Operating Expenses$5.54B
Operating Income$618.33M
Interest Expense$970K
Net Income$385.68M
EPS (Basic)$1.82
EPS (Diluted)$1.79
Shares Outstanding (Basic)212.12M
Shares Outstanding (Diluted)215.03M

Key Highlights

  • 1Net revenues increased by 12% to $1.9 billion in 2011, indicating robust growth in core services.
  • 2Net earnings rose to $385.7 million in 2011, up from $344.2 million in 2010, demonstrating improved profitability.
  • 3Airfreight and Ocean freight services, which together accounted for 60% of net revenues, both experienced significant growth (9% and 13% respectively).
  • 4Customs brokerage and other services remained a significant contributor, representing 40% of net revenues and growing by 14%.
  • 5The company reported no long-term debt as of December 31, 2011, indicating a strong balance sheet.
  • 6Expeditors is actively engaged in legal and governmental investigations in the US and Europe related to alleged anti-competitive practices, which pose a significant risk and potential for fines.
  • 7The company's non-asset based model allows it to benefit from excess carrier capacity, leading to improved net revenue per unit.
  • 8Seasonality is a factor, with Q1 typically being the weakest and Q3/Q4 the strongest quarters for operating results.

Frequently Asked Questions

Expeditors International operates as a non-asset based global logistics provider. Its core business involves freight forwarding (air and ocean), customs brokerage, and other supply chain management services. The company acts as an intermediary, purchasing transportation capacity from airlines and steamship lines and reselling it to customers, often consolidating shipments to achieve better rates. This model allows them to offer competitive pricing and benefit from carrier capacity dynamics without owning physical assets like aircraft or ships.

Expeditors derives its revenues from three principal sources: airfreight services, ocean freight and ocean services, and customs brokerage and other services. In 2011, these segments represented 37%, 23%, and 40% of net revenues, respectively. Growth in these areas, driven by increased volumes, improved net revenue per unit, and market share gains, are key to the company's financial performance.

Key risks highlighted include intense competition in the global logistics industry, reliance on third-party asset-based carriers whose financial stability can fluctuate, and the impact of international trade dynamics (currency fluctuations, governmental policies, trade restrictions). Additionally, the company is subject to significant legal and regulatory risks, including ongoing investigations by the U.S. Department of Justice and the European Commission regarding alleged anti-competitive practices, which could result in substantial fines and penalties.

Expeditors operates in numerous countries and handles various currencies, exposing it to foreign exchange risk. To manage this, the company primarily accelerates international currency settlements among its offices and agents. It generally does not use derivative financial instruments for hedging, only engaging in such transactions in limited circumstances where regulatory or commercial limitations restrict the free movement of money. Net foreign currency gains were relatively small ($2 million in 2011).