10-QPeriod: Q2 FY2009

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 7, 2009For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported a significant year-over-year decline in revenues and net earnings for the three and six months ended June 30, 2009, primarily attributed to the global economic downturn. Total revenues for the second quarter decreased from $1.45 billion to $895 million, and net earnings attributable to shareholders fell from $71.2 million to $54.1 million. For the six-month period, total revenues declined from $2.76 billion to $1.81 billion, with net earnings attributable to shareholders decreasing from $137.7 million to $113.3 million. Despite the revenue and profit decline, the company's liquidity position remained strong, with cash and cash equivalents increasing to $916 million at June 30, 2009. Operating activities provided robust cash flow. The company also highlighted ongoing investigations into alleged anti-competitive behavior by various regulatory bodies, which pose potential risks including fines and penalties, though the financial impact remains uncertain. Management's focus remains on perpetuating a strong company culture and employee development to navigate these challenging economic conditions.

Financial Highlights

46 data points
Beta

Revenue

$895.36M

36.9% Gross Margin

Net Income

$54.07M

6.0% Net Margin

EPS (Diluted)

$0.25

Total Assets

$2.07B

Cash & Equivalents

$915.98M

Free Cash Flow

$85.09M

Financial Statements
Beta
Revenue$895.36M
Gross Profit$330.05M
Operating Expenses$808.43M
Operating Income$86.93M
Interest Expense$64K
Net Income$54.07M
EPS (Basic)$0.25
EPS (Diluted)$0.25
Shares Outstanding (Basic)212.12M
Shares Outstanding (Diluted)216.65M

Key Highlights

  • 1Significant revenue and net earnings decline year-over-year due to the global economic downturn.
  • 2Total revenues for Q2 2009 decreased to $895.4 million (vs. $1.45 billion in Q2 2008), and net earnings attributable to shareholders decreased to $54.1 million (vs. $71.2 million).
  • 3For the first six months of 2009, total revenues were $1.81 billion (vs. $2.76 billion in H1 2008), and net earnings attributable to shareholders were $113.3 million (vs. $137.7 million).
  • 4Despite revenue declines, cash and cash equivalents increased to $916 million at June 30, 2009, with strong cash flow from operations.
  • 5The company is subject to ongoing investigations by the DOJ, the European Commission, and class-action lawsuits regarding alleged anti-competitive behavior, with potential for material impact and ongoing legal costs.
  • 6Net revenue per kilo/container saw increases in certain segments, partially offsetting volume declines, reflecting favorable short-term market conditions.
  • 7The company continues to invest in offices and strategic growth, opening new locations in Oman and China during the quarter.

Frequently Asked Questions

The primary reason cited for the decrease in revenues and net earnings is the global economic downturn that began in the second half of 2008. This downturn has led to lower volumes in airfreight and ocean freight services.

The company maintains a strong liquidity position. Cash and cash equivalents increased to $915.98 million as of June 30, 2009. Net cash provided by operating activities remained robust, totaling $85.1 million for the quarter and $257.4 million for the six months ended June 30, 2009. The company also has access to international unsecured bank lines of credit.

The company is involved in ongoing investigations by the U.S. Department of Justice (DOJ) and the European Commission (EC) concerning alleged anti-competitive behavior among air cargo freight forwarders. Additionally, the company is a defendant in a federal antitrust class action lawsuit. These proceedings could result in significant fines, penalties, and legal costs, though the ultimate financial impact is currently undetermined.

While facing a challenging economic climate, Expeditors continues to focus on its core strategy of organic growth supplemented by strategic acquisitions where beneficial. Management emphasizes perpetuating a strong company culture centered on customer service, employee development, and efficient operations. They are also actively managing costs, as seen in the decrease in salaries and related costs and other overhead expenses.