10-QPeriod: Q3 FY2003

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q3 Ended Sep 30, 2003

Filed November 13, 2003For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported its third-quarter 2003 financial results, showcasing continued revenue growth and profitability. Total revenues increased to $711.5 million for the quarter ended September 30, 2003, up from $620.4 million in the prior year period, driven primarily by strong performance in ocean freight and customs brokerage services. Net earnings also saw a healthy increase, rising to $32.6 million from $30.6 million year-over-year, with diluted earnings per share improving to $0.30 from $0.28. The company demonstrated robust operational efficiency, with net revenues growing by 10.8% to $196.8 million for the quarter. Despite increased operating expenses, particularly in salaries and related costs due to strategic hiring and compensation adjustments, operating income saw a modest increase to $49.4 million. The company's balance sheet remains strong, with total assets growing to $1.04 billion and shareholders' equity increasing to $613.4 million, indicating sound financial health and capacity for future growth.

Key Highlights

  • 1Total revenues for Q3 2003 increased by 14.7% to $711.5 million compared to $620.4 million in Q3 2002.
  • 2Net earnings for Q3 2003 grew by 6.3% to $32.6 million, up from $30.6 million in the prior year period.
  • 3Diluted earnings per share (EPS) increased to $0.30 in Q3 2003 from $0.28 in Q3 2002.
  • 4Ocean freight and ocean services net revenues saw a significant increase of 20% in Q3 2003 compared to Q3 2002.
  • 5Customs brokerage and import services net revenues also grew by 16% for the same period.
  • 6The company maintained a strong balance sheet with total assets of $1.04 billion and total shareholders' equity of $613.4 million as of September 30, 2003.
  • 7Operating income for the quarter increased by 4.4% to $49.4 million.

Frequently Asked Questions

Revenue growth in the third quarter of 2003 was primarily driven by strong performance in the ocean freight and ocean services segment, which saw a 20% increase in net revenues year-over-year. Customs brokerage and import services also contributed significantly with a 16% increase in net revenues.

The company's profitability improved in the third quarter of 2003. Net earnings increased by 6.3% to $32.6 million, and diluted earnings per share rose to $0.30 from $0.28 in the same period last year. This indicates a positive trend in profitability despite increased operating expenses.

While overall revenues and net earnings are up, airfreight tonnages saw a decrease in Q3 2003 compared to the prior year. Management attributes this to a temporary shift of cargo to airfreight in the previous year due to anticipated labor disruptions in ocean freight. This traffic has now returned to ocean freight, and management believes this does not reflect a loss of market share.

Salaries and related costs increased by 12% for the quarter, attributed to strategic hiring for business growth and increased compensation levels, including higher health insurance costs and investments in IT personnel. Despite the increase, the company aims to maintain salaries and related costs as a relatively stable percentage of net revenues through its compensation philosophy that links a portion of pay to operating profit, ensuring cost management aligns with performance.