10-QPeriod: Q2 FY2006

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q2 Ended Jun 30, 2006

Filed August 9, 2006For Securities:EXPD

Summary

Expeditors International of Washington, Inc. reported strong financial performance for the quarter and six months ended June 30, 2006. The company saw significant revenue growth driven by its airfreight and ocean freight segments. Net earnings also saw a substantial increase year-over-year, reflecting effective cost management and operational efficiencies. Key financial highlights include robust growth in net revenues across all service lines, with particular strength in ocean freight and customs brokerage. The adoption of SFAS 123R has been implemented, with prior periods restated to reflect stock-based compensation expenses, which is now incorporated into salaries and related costs. The company continues to manage its capital effectively, with strong operating cash flow generation and no long-term debt. Expeditors remains focused on organic growth and operational excellence in the competitive global logistics market.

Key Highlights

  • 1Total revenues increased by 21.7% to $1,129.3 million for the three months ended June 30, 2006, compared to $928.0 million in the prior year period.
  • 2Net earnings for the three months ended June 30, 2006, increased by 53.5% to $56.3 million, or $0.25 per diluted share, compared to $36.7 million, or $0.17 per diluted share, in the prior year period.
  • 3Airfreight net revenues grew by 26.9% and ocean freight and ocean services net revenues grew by 33.2% for the three months ended June 30, 2006.
  • 4Customs brokerage and other services net revenues increased by 18.7% for the three months ended June 30, 2006.
  • 5Operating income increased significantly by 51.2% to $88.8 million for the three months ended June 30, 2006.
  • 6The company reported strong operating cash flow of $55.6 million for the three months ended June 30, 2006, an increase from $42.2 million in the prior year period.
  • 7Expeditors successfully adopted SFAS 123R, incorporating stock-based compensation expense and restating prior periods for comparability.

Frequently Asked Questions

Expeditors International reported a strong quarter with significant increases in total revenues, net earnings, and operating income. Total revenues rose 21.7% year-over-year, and net earnings saw a substantial 53.5% increase, demonstrating robust business growth and effective operational management.

Expeditors adopted SFAS 123R effective January 1, 2006, using the modified retrospective method. This requires the recognition of stock-based compensation expense. Prior periods have been restated to reflect this, primarily impacting salaries and related costs and resulting in adjustments to deferred income taxes and additional paid-in capital. The company has reclassified excess tax benefits from operating to financing activities in the cash flow statement.

Revenue growth is primarily driven by increases in airfreight tonnage and ocean freight volumes. For the three months ended June 30, 2006, airfreight tonnage increased by 22%, and ocean freight volumes (measured in FEUs) increased by 17%. Additionally, growth in ocean freight net revenues outpaced volume growth due to higher yields and an expanding fee-based order management and ocean forwarding business. Customs brokerage and other services also saw healthy growth, benefiting from the company's reputation and industry consolidation.

Expeditors maintains a strong liquidity position with $455 million in cash and short-term investments as of June 30, 2006. Notably, the company has no long-term debt. Operating cash flows are robust, and management believes its current financial resources, including available credit lines, are sufficient to meet its capital and liquidity requirements.