10-QPeriod: Q1 FY2003

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q1 Ended Mar 31, 2003

Filed May 15, 2003For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported strong performance in its first quarter ended March 31, 2003, with net earnings of $25.1 million, an increase of approximately 13% compared to the same period in the prior year. This growth was driven by robust performance across all its key service lines: airfreight, ocean freight, and customs brokerage. Total revenues saw a significant jump of 23.7% year-over-year, reaching $556.3 million, indicating successful market penetration and increasing global trade volumes. The company's operational efficiency is highlighted by its stable operating income margin of 22% and effective management of expenses, particularly salaries and related costs, which remained constant as a percentage of net revenues due to its incentive-based compensation structure. Key financial health indicators remain positive, with a substantial increase in cash provided by operating activities to $64.0 million, driven by improved accounts receivable management. The company maintains a strong liquidity position with $272.2 million in cash and cash equivalents and no long-term debt, positioning it well to navigate future growth and potential market fluctuations. Management expressed confidence in the company's ability to meet its capital and liquidity requirements through existing cash flows and financing arrangements.

Key Highlights

  • 1Net earnings increased by 13% to $25.1 million for the first quarter of 2003 compared to the prior year.
  • 2Total revenues grew significantly by 23.7% to $556.3 million, driven by strong performance in airfreight, ocean freight, and customs brokerage services.
  • 3Net revenues increased by 16% to $170.0 million, reflecting effective revenue generation across all service segments.
  • 4Operating income rose by 15.1% to $37.5 million, maintaining a strong operating margin of 22%.
  • 5Net cash provided by operating activities significantly increased by 46.5% to $64.0 million, largely due to improved accounts receivable management.
  • 6The company ended the quarter with a healthy cash and cash equivalents balance of $272.2 million and no long-term debt, indicating a strong liquidity position.
  • 7Consistent revenue growth was observed in all major segments: airfreight (+11% net revenue), ocean freight (+19% net revenue), and customs brokerage (+19% net revenue).

Frequently Asked Questions

Expeditors International demonstrated strong financial performance in the first quarter of 2003. Net earnings grew by 13% to $25.1 million, and total revenues increased by 23.7% to $556.3 million compared to the same period in 2002. This growth was broad-based across airfreight, ocean freight, and customs brokerage services.

Salaries and related costs increased by 16% but remained stable as a percentage of net revenues (55%). This consistency is attributed to the company's compensation philosophy, which links individual compensation directly to the operating profit of the business unit, ensuring that compensation changes align with profit changes and incentivizing performance.

The company maintains a robust liquidity position. As of March 31, 2003, Expeditors International had $272.2 million in cash and cash equivalents and no long-term debt. Furthermore, net cash provided by operating activities significantly increased to $64.0 million, indicating strong operational cash generation.

In the first quarter of 2003, Expeditors adopted SFAS No. 143 (Asset Retirement Obligations), SFAS No. 146 (Exit or Disposal Activities), and FIN 45 (Guarantor's Accounting and Disclosure Requirements for Guarantees). The adoption of these standards had no material impact on the company's financial condition or results of operations. SFAS No. 148 (Stock-Based Compensation) was also adopted for interim disclosure provisions.