10-Q/APeriod: Q2 FY2008

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report (Amendment) for Q2 Ended Jun 30, 2008

Filed August 14, 2008For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid financial results for the quarter ended June 30, 2008, demonstrating continued revenue growth and profitability. Total revenues increased to $1.45 billion, up from $1.26 billion in the prior year's comparable quarter, driven by strength across all segments: airfreight, ocean freight, and customs brokerage. Net earnings also showed a healthy increase, reaching $71.2 million compared to $65.5 million in the second quarter of 2007. The company's non-asset-based model continues to generate strong operating income and cash flow. Despite facing an ongoing Department of Justice investigation and other legal proceedings that present potential financial risks, the company maintained a strong liquidity position with substantial cash reserves and no long-term debt.

Financial Highlights

26 data points
Beta

Revenue

$1.45B

Net Income

$71.25M

4.9% Net Margin

EPS (Diluted)

$0.32

Cash & Equivalents

$703.49M

Free Cash Flow

$36.00M

Financial Statements
Beta
Revenue$1.45B
Operating Expenses$1.34B
Operating Income$112.97M
Interest Expense$75K
Net Income$71.25M
EPS (Basic)$0.33
EPS (Diluted)$0.32
Shares Outstanding (Basic)213.28M
Shares Outstanding (Diluted)220.52M

Key Highlights

  • 1Total revenues grew by 15.5% year-over-year to $1.45 billion for the quarter ended June 30, 2008.
  • 2Net earnings increased by 8.8% to $71.2 million for the second quarter of 2008.
  • 3Airfreight, ocean freight, and customs brokerage segments all contributed to revenue growth.
  • 4Operating income improved to $113.0 million, an increase from $101.7 million in the prior year's quarter.
  • 5The company generated strong operating cash flow of $36.0 million for the quarter.
  • 6Expeditors maintained a robust balance sheet with $703.5 million in cash and cash equivalents and no long-term debt.
  • 7The company is actively managing legal and investigation costs, primarily related to a DOJ investigation, which were $5 million in the quarter.

Frequently Asked Questions

Revenue growth was driven by increases across all three primary segments: airfreight, ocean freight and ocean services, and customs brokerage and other services. Airfreight net revenues increased due to higher tonnage and favorable net revenue per kilo, while ocean freight saw growth in consolidation and fee-based services. Customs brokerage and other services also benefited from focused marketing and increased regulatory compliance needs.

Expeditors International is cooperating with a DOJ investigation into alleged anti-competitive behavior among air cargo freight forwarders. As of June 30, 2008, the company had incurred approximately $11 million in cumulative legal and associated costs related to this investigation. Management acknowledges that potential fines and penalties, if the DOJ finds anti-competitive behavior, could materially impact the company's financial condition and results of operations. Additionally, the company faces an antitrust class action lawsuit and an investigation by the European Commission.

The company maintains a strong liquidity position, reporting $703.5 million in cash and cash equivalents and short-term investments as of June 30, 2008. Expeditors has no long-term debt and has access to bank lines of credit. The company expects to finance its estimated capital expenditures of $85 million in 2008 primarily with cash generated from operations. Management believes its current resources are sufficient to meet its foreseeable capital and liquidity needs.

Expeditors International utilizes stock repurchase programs to manage the number of outstanding shares, primarily to offset the dilutive effect of stock option exercises. In the second quarter of 2008, the company repurchased 1,087,764 shares under its publicly announced plans and programs. The company has two ongoing repurchase plans: a Non-Discretionary Stock Repurchase Plan authorized in 1993 and a Discretionary Stock Repurchase Plan authorized in 2001, with significant remaining capacity for future repurchases.