10-QPeriod: Q3 FY2007

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q3 Ended Sep 30, 2007

Filed November 9, 2007For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid financial performance for the nine months ended September 30, 2007, with net earnings of $199.1 million, a notable increase from $172.5 million in the prior year period. This growth was driven by a consolidated revenue increase of 11.7% to $3.79 billion, primarily fueled by strength in its airfreight and customs brokerage segments. The company's net revenue, which excludes transportation costs, also saw a significant rise, indicating effective yield management and service-based revenue growth. Despite a slight decrease in operating cash flow for the third quarter compared to the previous year, largely attributed to an increase in accounts receivable reflecting seasonal business patterns and a spike in late-quarter volume, the company's overall financial health remains robust. With strong operating income, a healthy working capital position, and no long-term debt, EXPD is well-positioned to manage its liquidity and capital resource needs. Management expressed confidence in their ability to meet future obligations and continue their focus on organic growth and operational efficiency, while also navigating competitive pressures and global economic factors.

Key Highlights

  • 1Net earnings increased to $199.1 million for the nine months ended September 30, 2007, up from $172.5 million in the same period of 2006.
  • 2Total revenues grew 11.7% to $3.79 billion for the nine months ended September 30, 2007.
  • 3Airfreight net revenues saw a 13% increase for the third quarter and a 6% increase year-to-date, driven by both increased tonnage and yield expansion, particularly strong in Asia.
  • 4Customs brokerage and other services net revenues increased by 16% for both the three and nine-month periods, reflecting market consolidation and increased demand for sophisticated logistics solutions.
  • 5Operating income rose to $315.8 million for the nine months ended September 30, 2007, up from $275.5 million in the prior year.
  • 6The company reported strong working capital of $730 million and had no long-term debt as of September 30, 2007.
  • 7Despite a year-over-year decrease in cash flow from operations for Q3 2007 due to higher accounts receivable, overall liquidity remains strong with sufficient cash and available credit lines.

Frequently Asked Questions

Revenue growth was primarily driven by increases in airfreight and customs brokerage and other services. Airfreight saw growth due to higher tonnage and improved yields, especially in Asia, while customs brokerage benefited from industry consolidation and demand for advanced logistics capabilities.

For the nine months ended September 30, 2007, net cash provided by operating activities was $239.5 million, a decrease from $278.4 million in the prior year. The decrease in the third quarter was primarily due to an increase in accounts receivable, reflecting seasonal business patterns and a significant volume spike in late September, which meant a larger portion of receivables were not yet due for collection.

Expeditors International of Washington, Inc. had no long-term debt as of September 30, 2007. The company maintains a strong liquidity position with $558 million in cash and short-term investments, significant working capital of $730 million, and access to unused bank lines of credit, indicating a solid ability to meet its financial obligations.

Key risks include the intensely competitive nature of the international logistics industry, reliance on good working relationships with airlines, ocean carriers, and governmental agencies, potential impacts from changes in international trade policies and regulations, and the company's culture and ability to retain and develop personnel. Currency fluctuations also present a market risk.