01—Abstract
Summary
Summary of the 10-K filed March 15, 2022. Cited figures are marked; the original filing is the authoritative source.
Expeditors International (EXPD) reported a dramatic 2021 rebound driven by the global freight market dislocation.
Total revenues rose 72% to $16.52 billiona from $9.58 billion, and operating income more than doubled (up 103%) to $1.91 billion. Net earnings attributable to shareholders reached $1.42 billion, or $8.27 per diluted share, versus $4.07 in 2020. Management attributes the surge to historically high air and ocean buy and sell rates, port congestion, and capacity constraints, and explicitly warns that these conditions are not expected to last long term, so a decline in rates would significantly reduce revenues and operating income.
Balance sheet strength is notable: the company ended 2021 with $1.73 billionb of cash, no long-term debt, and working capital of $2.91 billion, and it returned $710 million to shareholders through buybacks and dividends. The most important new risk is a targeted cyber-attack disclosed on February 20, 2022, after which Expeditors shut down most of its operating systems globally. Management says it has only partially resumed operations, cannot yet estimate when full operations will return, and expects a material adverse impact on business, revenues, expenses, cash flows and reputation.
It also cannot estimate the ultimate financial impact. Investors should treat 2021 results as a peak-cycle snapshot and watch for the restoration timeline, incremental remediation costs, and any customer or liability claims tied to the incident.
For 2022, management expects disruptive market conditions to persist at least through the first half, and it guided to $100 millionc in capital expenditures, including cyber-related upgrades. Its 2021 operating margin of roughly 11.6% and its strong cash generation of $868 million in operating cash flow position it well if freight rates normalize gradually, but the combination of rate normalization risk and cyber-related disruption makes near-term earnings visibility low.
02—Key points
Key Highlights
- Revenue of $16.52 billion, up 72% year over year, driven by record air and ocean freight rates and higher volumes; ocean freight revenue rose 137% and airfreight revenue rose 58%.
- Operating income of $1.91 billion, up 103%; diluted EPS of $8.27 versus $4.07 in 2020 (basic EPS $8.37).
- Feb. 20, 2022 targeted cyber-attack led to a global shutdown of most operating systems; operations are only partially restored and the company cannot estimate full recovery timing or total financial impact.
- Management explicitly flags that record buy and sell rates are unsustainable long term and that a normalization in rates would significantly reduce revenues, expenses and operating income.
- Strong balance sheet: $1.73 billion in cash, no long-term debt, $2.91 billion working capital, and operating cash flow of $868 million.
- Capital returned to shareholders of $710 million in 2021 through $515 million of share repurchases and $196 million of dividends; the dividend was $0.58 per share semi-annually.
- 2022 capex guidance of $100 million, including cyber-related upgrades; the company expects incremental cyber remediation expenses to significantly increase overhead costs in 2022.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed March 15, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $16.52B$9.58B | +72.4% |
| Operating Expenses | $14.61B$8.64B | +69.1% |
| Operating Income | $1.91B$940.44M | +103.0% |
| Interest Expense | $411K$219K | +87.7% |
| Net Income | $1.42B$696.14M | +103.3% |
| EPS (Basic) | $8.37$4.14 | +102.2% |
| EPS (Diluted) | $8.27$4.07 | +103.2% |
| Shares Outstanding (Basic) | 169.15M168.33M | +0.5% |
| Shares Outstanding (Diluted) | 171.25M170.90M | +0.2% |
05—Questions
Frequently Asked Questions
How did Expeditors perform financially in 2021?
Revenue rose 72% to $16.52 billion and operating income rose 103% to $1.91 billion, driven by historically high freight rates and volumes. Net earnings attributable to shareholders were $1.42 billion, or $8.27 per diluted share, compared with $4.07 in 2020. Airfreight, ocean freight and customs brokerage revenues all grew, with ocean freight showing the largest increase.
What is the impact of the February 2022 cyber-attack?
Expeditors shut down most of its global operating systems after discovering a targeted cyber-attack on February 20, 2022, which limited its ability to arrange shipments and manage customs activities. Operations have only partially resumed, and management cannot estimate when full operations will return or the ultimate financial impact. The company expects a material adverse effect on its business, revenues, expenses, cash flows and reputation, and it expects continued remediation costs.
Are the 2021 record results likely to continue?
Management does not expect them to last long term. It expects disruptive conditions, including high rates and port congestion, to persist at least through the first half of 2022, but it states that these unprecedented conditions are not expected to be sustained over the long term. Falling rates would reduce revenue, expenses and operating income compared with 2021, and the company has noted that its fixed-rate buy agreements are limited.
How strong is Expeditors' balance sheet and capital position?
The company had no long-term debt at year-end 2021, $1.73 billion in cash and equivalents, and working capital of $2.91 billion. Operating cash flow was $868 million. Management believes this position is sufficient to meet capital and liquidity needs for at least the next 12 months, including effects of the cyber-attack. Most foreign cash ($923 million) is held by non-U.S. subsidiaries.
What is the company's capital return policy?
In 2021 Expeditors repurchased 4.4 million shares for $515 million at an average price of $117.54, and paid dividends of $1.16 per share ($0.58 in June and $0.58 in December). Remaining repurchase authorization was 7.2 million shares as of December 31, 2021, under a plan that reduces outstanding shares toward 160 million.
06—Continue