10-QPeriod: Q2 FY2002

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q2 Ended Jun 30, 2002

Filed August 14, 2002For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported strong financial results for the quarter and six months ended June 30, 2002. Total revenues increased to $535.8 million for the quarter and $985.3 million for the six months, up from $445.5 million and $903.1 million in the prior year periods, respectively. This growth was driven primarily by a significant increase in ocean freight and ocean services net revenues, which rose 16% for both periods, and steady performance in customs brokerage and import services. Airfreight net revenues remained relatively flat year-over-year, impacted by declining yields despite increased tonnage, attributed to supply and demand dynamics and rising carrier rates. Net earnings for the second quarter of 2002 were $23.7 million, or $0.22 per diluted share, an increase from $21.6 million, or $0.20 per diluted share, in the same period of 2001. For the six-month period, net earnings were $45.9 million, or $0.42 per diluted share, compared to $42.8 million, or $0.39 per diluted share, in the prior year. The company maintained a consistent operating margin and demonstrated effective cost management, with salaries and related costs as a percentage of net revenues remaining stable, reflecting its incentive-based compensation philosophy. The company ended the quarter with a strong balance sheet, including $273.2 million in cash and cash equivalents and no long-term debt.

Key Highlights

  • 1Total revenues increased by 20.3% for the quarter and 8.8% for the six months, indicating robust business expansion.
  • 2Net earnings grew by 9.7% for the quarter and 7.4% for the six months, demonstrating improved profitability.
  • 3Ocean freight and ocean services net revenues saw a significant increase of 16% year-over-year for both periods.
  • 4Airfreight net revenues were stable, though yields declined, which management attributed to market conditions rather than loss of market share.
  • 5Operating income increased to $36.1 million for the quarter and $68.7 million for the six months.
  • 6The company maintained a strong liquidity position with $273.2 million in cash and cash equivalents and no long-term debt as of June 30, 2002.
  • 7A 2-for-1 stock split was effected in the form of a stock dividend in June 2002.

Frequently Asked Questions

Revenue growth was primarily driven by a significant increase in ocean freight and ocean services net revenues, which rose by 16% year-over-year. Additionally, customs brokerage and import services showed a modest increase.

The company demonstrated effective cost management. Salaries and related costs remained stable as a percentage of net revenues, reflecting the company's compensation philosophy. Other operating expenses also saw a decrease for the six-month period due to cost containment measures.

Expeditors maintained a very strong financial position. As of June 30, 2002, the company had $273.2 million in cash and cash equivalents and reported no long-term debt. They also had access to bank lines of credit for potential liquidity needs.

The company adopted new accounting pronouncements in early 2002, including SFAS No. 141 and 142 (Business Combinations and Goodwill/Intangible Assets) and SFAS No. 144 (Impairment or Disposal of Long-Lived Assets), which did not have a material impact. A change in accounting for certain reimbursed expenses (EITF D-103) required the company to present certain revenues and costs on a gross rather than net basis, but this change did not impact net revenue, operating income, or net earnings.