10-QPeriod: Q3 FY2004

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q3 Ended Sep 30, 2004

Filed November 8, 2004For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported strong financial performance for the nine months ended September 30, 2004. Total revenues grew by 26% year-over-year to $2.38 billion, driven by significant increases in airfreight and ocean freight services. Net earnings rose by 31% to $112.6 million, reflecting effective cost management and continued operational efficiency. The company's non-asset-based model allows it to leverage purchasing power for favorable rates while offering competitive pricing to customers, a strategy that continues to yield positive results. The balance sheet shows robust growth in current assets, particularly cash and cash equivalents, which increased by $81.7 million year-to-date. Total shareholders' equity also saw a substantial increase, indicating strong retained earnings growth. The company maintained a solid liquidity position with ample working capital and no long-term debt, supported by strong operating cash flows. EXPD's focus on organic growth, operational excellence, and employee development appears to be a key driver of its sustained performance in the competitive global logistics market.

Key Highlights

  • 1Total revenues increased by 26% to $2.38 billion for the nine months ended September 30, 2004, compared to the same period in 2003.
  • 2Net earnings grew by 31% to $112.6 million for the nine months ended September 30, 2004.
  • 3Airfreight net revenues saw a significant increase of 26% year-over-year, driven by a 26% rise in tonnage.
  • 4Ocean freight volumes increased by 26%, although net revenue growth was a more modest 9% due to a decline in yields.
  • 5Customs brokerage and other services net revenues increased by 27%, reflecting strong service quality and technological capabilities.
  • 6Operating income increased by 36% for the nine months ended September 30, 2004, demonstrating improved profitability.
  • 7The company reported strong operating cash flow, with a $46.7 million increase for the nine months ended September 30, 2004, compared to the prior year.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance in airfreight and ocean freight services. Airfreight tonnage increased by 26% for the nine months ended September 30, 2004, while ocean freight volumes grew by 26%.

Expeditors demonstrated effective cost management. While salaries and related costs increased to support business growth, they remained stable as a percentage of net revenues. Other operating expenses also increased at a slower pace than net revenues, leading to an improvement in operating income as a percentage of net revenues.

Expeditors maintained a very strong liquidity position. As of September 30, 2004, the company had no long-term debt, a substantial working capital of $496 million, and $378 million in cash and short-term investments. Its operations generated significant cash flow, providing ample resources to meet its capital and liquidity requirements.

The company highlighted revenue recognition as its critical accounting policy due to the complexity of global logistics transactions. For estimates, areas include accounts receivable valuation, useful lives of assets, accrual of costs for ancillary services, insurance liabilities, and interim tax expense. Management believes these estimates are non-aggressive and consistently applied.