10-QPeriod: Q3 FY2008

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 7, 2008For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported a solid third quarter and year-to-date performance for the period ending September 30, 2008. The company demonstrated revenue growth across its core services: airfreight, ocean freight, and customs brokerage. Net earnings for the quarter increased to $85.6 million, or $0.39 per diluted share, up from $74.3 million, or $0.34 per diluted share, in the prior year's third quarter. For the nine months ended September 30, 2008, net earnings were $223.3 million, or $1.02 per diluted share, compared to $199.1 million, or $0.90 per diluted share, in the corresponding period of 2007. The company maintained a strong operational income margin and managed its overhead expenses effectively, despite increased salaries and related costs due to hiring and compensation adjustments. Financially, EXPD reported total current assets of $1.73 billion and total current liabilities of $852 million, resulting in a healthy working capital position. Cash and cash equivalents stood at $696 million, underscoring the company's strong liquidity. While the company faces ongoing legal investigations, including one by the U.S. Department of Justice regarding alleged anti-competitive behavior, management is cooperating and believes the allegations are without merit. The company also highlighted its focus on organic growth, employee development, and operational efficiency as key drivers for future success, navigating a competitive global logistics market.

Financial Highlights

26 data points
Beta

Revenue

$1.56B

Net Income

$85.56M

5.5% Net Margin

EPS (Diluted)

$0.39

Cash & Equivalents

$696.35M

Free Cash Flow

$91.68M

Financial Statements
Beta
Revenue$1.56B
Operating Expenses$1.43B
Operating Income$135.40M
Interest Expense$23K
Net Income$85.56M
EPS (Basic)$0.40
EPS (Diluted)$0.39
Shares Outstanding (Basic)212.75M
Shares Outstanding (Diluted)218.73M

Key Highlights

  • 1Revenue growth across airfreight, ocean freight, and customs brokerage services.
  • 2Net earnings increased to $85.6 million in Q3 2008 from $74.3 million in Q3 2007.
  • 3Diluted EPS rose to $0.39 in Q3 2008 from $0.34 in Q3 2007.
  • 4Strong working capital position with $1.73 billion in current assets and $852 million in current liabilities.
  • 5Significant cash and cash equivalents of $696 million, indicating robust liquidity.
  • 6Management is actively cooperating with the DOJ investigation into alleged anti-competitive practices, while asserting the allegations are without merit.
  • 7Continued focus on organic growth, employee retention, and operational efficiency.

Frequently Asked Questions

For the third quarter ended September 30, 2008, Expeditors International reported net earnings of $85.6 million, an increase from $74.3 million in the same period of 2007. Diluted earnings per share were $0.39, up from $0.34 in the prior year's quarter. Total revenues grew to $1.56 billion from $1.41 billion.

Revenue growth was driven by increases in all three primary service segments: airfreight, ocean freight and ocean services, and customs brokerage and other services. Airfreight net revenues saw an 8% increase due to higher net revenue per kilo, while ocean freight net revenues increased by 17%, attributed to aggressive sales efforts and growth in specialized services. Customs brokerage and other services net revenues grew by 11%, driven by focused marketing and demand for sophisticated capabilities.

Expeditors International is currently involved in several significant legal matters. These include an ongoing investigation by the U.S. Department of Justice (DOJ) into alleged anti-competitive behavior among air cargo freight forwarders, a federal antitrust class action lawsuit, a former employee class action lawsuit regarding employment classification, and a request for information from the European Commission related to freight forwarders. The company is cooperating with these investigations and believes the allegations are without merit, but acknowledges that potential fines or penalties could materially impact its financial condition.

The company maintains strong liquidity, with $696 million in cash and cash equivalents and $1.73 billion in total current assets against $852 million in current liabilities as of September 30, 2008. Net cash provided by operating activities was robust at $306 million for the nine-month period. Management believes its current cash position, financing arrangements, and operating cash flows are sufficient to meet its capital and liquidity requirements.