10-QPeriod: Q2 FY2007

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q2 Ended Jun 30, 2007

Filed August 9, 2007For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported strong financial results for the quarter and six months ended June 30, 2007, demonstrating robust top-line growth and improved profitability. Total revenues increased by 11% for the quarter and 10% for the six months, driven by significant gains in airfreight and customs brokerage services. Operating income saw a healthy increase of 14% for the quarter and 15% for the six months, reflecting effective cost management and operational efficiencies. The company's financial position remains solid, with a substantial increase in cash generated from operations, providing ample liquidity. Expeditors continues to focus on organic growth supplemented by strategic acquisitions, emphasizing the development of its global network and technological capabilities. The company's proactive approach to cultural perpetuation, employee development, and system implementation underpins its strategy for sustained success in the competitive global logistics industry.

Key Highlights

  • 1Total revenues increased by 11% to $1.26 billion for the quarter ended June 30, 2007, compared to $1.13 billion in the prior year period.
  • 2Net earnings grew by 16% to $65.5 million ($0.30 per diluted share) for the quarter, compared to $56.3 million ($0.25 per diluted share) in the prior year period.
  • 3Operating income for the quarter rose 14% to $101.7 million, indicating strong operational performance.
  • 4Airfreight net revenues saw a 10% increase for the quarter, driven by higher tonnage and improved yield.
  • 5Customs brokerage and other services net revenues increased by 17% for the quarter, showcasing growth in this segment.
  • 6The company generated $86.9 million in cash from operating activities for the quarter, a significant increase from $55.6 million in the prior year period.
  • 7Shareholders' equity increased to $1.12 billion from $1.07 billion at the end of 2006, reflecting retained earnings growth.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance in airfreight, which saw a 10% increase in net revenues due to higher tonnage and improved yield. Customs brokerage and other services also contributed significantly with a 17% increase in net revenues. Ocean freight volumes increased, although net revenues saw a smaller rise due to yield pressures.

Operating expenses, particularly salaries and related costs, increased by 14% in line with business growth and increased hiring to support expanded operations and new office openings. Other overhead expenses saw a more modest increase. The company's compensation philosophy, which links pay to profit, is designed to incentivize performance and manage costs effectively.

Expeditors maintains a strong liquidity position, with a significant increase in cash generated from operations. The company expects to finance its planned capital expenditures of approximately $106 million for 2007 through existing cash flow. Management believes its current cash position, financing arrangements, and operating cash flows are sufficient to meet its liquidity and capital requirements.

The company adopted FASB Interpretation No. 48, 'Accounting for Uncertainty in Income Taxes,' effective January 1, 2007, which had no material impact. They also adopted EITF 06-3 regarding the presentation of sales taxes, presenting revenues net of these taxes. The company is assessing the impact of forthcoming standards SFAS 157 and SFAS 159.