10-QPeriod: Q1 FY2008

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q1 Ended Mar 31, 2008

Filed May 9, 2008For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid financial performance for the first quarter ended March 31, 2008. The company's total revenues increased by 16.8% year-over-year to $1.31 billion, driven by strong growth across its core services: airfreight, ocean freight, and customs brokerage. Net earnings also saw a significant increase of 12.1% to $66.5 million, translating to diluted earnings per share of $0.30. The company maintained healthy operating income margins, underscoring its efficient operational model. While facing ongoing investigations and a class-action lawsuit related to alleged anti-competitive practices in the air cargo industry, Expeditors continues to focus on its core strategy of organic growth, superior customer service, and talent management.

Key Highlights

  • 1Total revenues grew 16.8% to $1.31 billion for the first quarter of 2008 compared to the same period in 2007.
  • 2Net earnings increased by 12.1% to $66.5 million in the first quarter of 2008.
  • 3Diluted earnings per share rose to $0.30 from $0.27 in the prior year's first quarter.
  • 4Airfreight net revenues increased by 9%, driven by an 8% rise in tonnage.
  • 5Ocean freight and ocean services net revenues grew by 13%, with container volumes up 8%.
  • 6Customs brokerage and other services net revenues saw a 15% increase, reflecting focused marketing and service quality.
  • 7The company reported strong operating income of $105.6 million, a 11.7% increase year-over-year.

Frequently Asked Questions

Revenue growth was driven by increases across all three core service segments: airfreight, ocean freight and ocean services, and customs brokerage and other services. Airfreight saw higher tonnage, ocean freight benefited from increased container volumes and net revenue per container, and customs brokerage growth was attributed to focused marketing and service quality.

Expeditors is cooperating with the U.S. Department of Justice's investigation into alleged anti-competitive behavior among air cargo freight forwarders and believes the allegations in the federal antitrust class action lawsuit are without merit. The company intends to vigorously defend itself. Significant legal costs have been incurred, and the outcome could materially impact financial results, though the full extent remains uncertain.

Expeditors primarily relies on cash generated from operating activities for liquidity. In the first quarter of 2008, net cash provided by operating activities was robust at $179 million. The company maintains a strong liquidity position with $742 million in cash and short-term investments and no long-term debt as of March 31, 2008. Management believes current resources are sufficient to meet capital and liquidity needs.

Expeditors adopted the provisions of SFAS No. 157, 'Fair Value Measurements,' and SFAS No. 159, 'The Fair Value Option for Financial Assets and Financial Liabilities,' effective at the beginning of the first quarter of 2008. The adoption of these standards had no material impact on the company's consolidated financial condition or results of operations. The company is also assessing the impact of future adoptions of SFAS No. 160 and SFAS No. 141R.