10-QPeriod: Q3 FY2001

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q3 Ended Sep 30, 2001

Filed November 14, 2001For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid results for the nine months ended September 30, 2001, demonstrating resilience in a dynamic global logistics environment. The company saw an increase in net earnings to $70.1 million from $57.1 million in the prior year, driven by improved operating income and higher interest income. Total revenues remained relatively stable year-over-year, with a slight decrease from $1.228 billion to $1.223 billion, but net revenues saw a healthy increase of over 14% to $451.3 million, indicating effective management of core logistics services. Despite the global economic slowdown and the significant impact of the September 11th terrorist attacks on airfreight volumes, EXPD demonstrated strong operational performance. Net revenues in airfreight and ocean freight saw significant increases due to favorable market conditions and strategic initiatives. The company's financial position remains strong, with substantial cash and cash equivalents and no long-term debt. Management expressed confidence in the company's liquidity and ability to meet capital requirements.

Key Highlights

  • 1Net earnings increased by 23% to $70.1 million for the nine months ended September 30, 2001, compared to $57.1 million in the prior year.
  • 2Net revenues grew by 14.5% to $451.3 million for the nine months ended September 30, 2001, outpacing total revenue changes and indicating strong operational execution.
  • 3Airfreight net revenues saw a significant increase of 20% for the nine months, driven by expanded margins despite volume decreases, and benefiting from increased carrier rates post-9/11.
  • 4Ocean freight net revenues increased by 20% for the nine months, supported by competitive marketing and a strategy to expand market share.
  • 5Operating income increased by 19.3% to $105.3 million for the nine months, demonstrating improved profitability from core operations.
  • 6The company maintained a strong balance sheet with $256.2 million in cash and cash equivalents and no long-term debt as of September 30, 2001.
  • 7Despite the impact of the September 11th attacks, the company's diverse service offerings and geographic reach helped mitigate overall negative impacts, with management expressing confidence in future liquidity and capital resources.

Frequently Asked Questions

The September 11th attacks significantly impacted airfreight operations, including a temporary FAA ban on flights to and from the US and subsequent reductions in air cargo capacity. While this reduced airfreight volumes, it also led to increased carrier rates which, combined with expanded margins, resulted in a 20% increase in airfreight net revenues for the nine-month period. The company was able to continue moving customer freight due to utilizing dedicated freighters and did not experience significant disruption to its ability to serve clients.

Expeditors operates globally and is exposed to foreign currency fluctuations. The company primarily manages this risk by accelerating international currency settlements rather than using derivative financial instruments. For the nine months ended September 30, 2001, the company reported net foreign exchange losses of approximately $215,000, mainly due to intercompany obligations in Brazil, Taiwan, Indonesia, and Turkey.

Expeditors employs a compensation philosophy that includes a modest base salary combined with the opportunity for employees to share in a fixed and determinable percentage of the operating profit of their business unit. Management believes this incentive-driven model aligns employee interests with company profitability and has been a key driver of the historical growth in revenues, net revenues, and net earnings.

Expeditors is preparing for the introduction of the Euro currency in January 2002. The company has plans in place to adapt its computer systems and business processes to accommodate Euro-denominated transactions, expecting full conversion by the end of 2001. While conversion costs are not expected to be material, the company is evaluating the potential impact of a common European currency on pricing and is unable to predict the exact financial impact at this time.