10-QPeriod: Q1 FY2004

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q1 Ended Mar 31, 2004

Filed May 10, 2004For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid financial results for the first quarter ended March 31, 2004. The company demonstrated strong revenue growth across its core services: airfreight, ocean freight, and customs brokerage. Net revenues increased significantly, driven by higher volumes in air and ocean freight, and continued expansion in customs brokerage services. This top-line growth translated into improved profitability, with operating income and net earnings showing substantial year-over-year increases. The company's financial position remains robust, with a healthy increase in cash and cash equivalents from operations. EXPD continues to manage its expenses effectively, maintaining a consistent ratio of salaries and related costs to net revenues, reflecting its compensation philosophy and operational efficiency. The company also highlighted its strategic focus on organic growth supplemented by select acquisitions, demonstrating a proactive approach to market expansion and client service.

Key Highlights

  • 1Net revenues increased by 19% to $202.5 million for the first quarter of 2004 compared to $170.0 million in the prior year period.
  • 2Airfreight net revenues grew 19%, driven by increased tonnages handled.
  • 3Ocean freight net revenues saw a 9% increase, despite a decline in yields, due to a 30% increase in volume (FEUs) and strategic pricing to maintain market share and customer relationships.
  • 4Customs brokerage and import services net revenues rose by 26%, attributed to the company's growing reputation and enhanced computerized capabilities.
  • 5Operating income increased by 30% to $48.8 million, reflecting strong revenue growth and effective cost management.
  • 6Net earnings grew by 27% to $31.8 million, or $0.30 per diluted share, demonstrating improved profitability.
  • 7The company maintained a strong liquidity position, with cash and cash equivalents increasing to $364.3 million, and no short-term debt outstanding at quarter-end.

Frequently Asked Questions

Revenue growth was driven by increased volumes in airfreight and ocean freight, alongside a 26% increase in customs brokerage and import services net revenues. The company strategically managed pricing in ocean freight to gain market share while increasing volumes.

Salaries and related costs increased by 19%, but as a percentage of net revenues, they remained constant at 55%. This stability is attributed to the company's compensation philosophy, which ties individual compensation to the operating profit of the business unit, ensuring changes in compensation align with changes in profits.

Expeditors focuses on organic growth supplemented by strategic acquisitions where the future economic benefit significantly exceeds the goodwill recorded. In the first quarter of 2004, they opened an office in Hanoi, Vietnam, and converted two Brazilian offices to non-exclusive agents.

The company maintained a strong liquidity position with $364.3 million in cash and cash equivalents and no short-term debt at March 31, 2004. Its primary source of liquidity is cash generated from operating activities, which increased significantly year-over-year. They expect to finance planned capital expenditures of approximately $50 million for 2004 through existing cash.