10-QPeriod: Q1 FY2011

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 9, 2011For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported strong performance for the first quarter ended March 31, 2011, with significant year-over-year growth in both revenues and net earnings. Total revenues increased by approximately 21.6% to $1.46 billion, driven by robust performance across all its service segments: airfreight, ocean freight, and customs brokerage. Net earnings attributable to shareholders rose substantially by 49.0% to $91.2 million, translating to diluted EPS of $0.42, up from $0.28 in the prior year period. The company's operational efficiency improved, with operating income growing by 46.5% to $147.2 million. This was achieved despite a notable increase in salaries and related costs, which were up 19% due to higher bonuses linked to performance and increased headcount. The company highlights its commitment to a strong corporate culture, employee development, and customer service as key drivers of its success. Despite ongoing legal investigations and potential for material impact, management expressed confidence in the company's liquidity and ability to meet its obligations, with operating cash flows remaining strong.

Financial Highlights

46 data points
Beta

Revenue

$1.46B

31.1% Gross Margin

Net Income

$91.23M

6.2% Net Margin

EPS (Diluted)

$0.42

Total Assets

$2.84B

Cash & Equivalents

$1.24B

Free Cash Flow

$177.83M

Financial Statements
Beta
Revenue$1.46B
Gross Profit$453.92M
Operating Expenses$1.31B
Operating Income$147.23M
Interest Expense$214K
Net Income$91.23M
EPS (Basic)$0.43
EPS (Diluted)$0.42
Shares Outstanding (Basic)212.09M
Shares Outstanding (Diluted)215.86M

Key Highlights

  • 1Total revenues increased by 21.6% to $1.46 billion for the first quarter of 2011 compared to the same period in 2010.
  • 2Net earnings attributable to shareholders grew significantly by 49.0% to $91.2 million, with diluted EPS rising to $0.42 from $0.28 year-over-year.
  • 3Operating income saw a substantial increase of 46.5%, reaching $147.2 million, reflecting improved operational performance.
  • 4Airfreight services net revenues increased by 34%, ocean freight by 25%, and customs brokerage by 18%, indicating broad-based strength across all segments.
  • 5The company generated strong operating cash flow of $177.8 million in the first quarter, an increase from $127.1 million in the prior year.
  • 6Salaries and related costs increased by 19% primarily due to performance-based bonuses and increased headcount, reflecting investment in human capital.

Frequently Asked Questions

The revenue growth was driven by a combination of increased volume and higher net revenue per unit across all major service lines. Specifically, airfreight tonnage increased by 16% and net revenue per kilo rose by 22%. Ocean freight saw a 7% increase in volume (FEUs) and a 24% increase in net revenue per container. Customs brokerage and other services also benefited from increased volumes.

Expeditors International maintains a strong liquidity position. As of March 31, 2011, the company had cash and cash equivalents of $1.24 billion. Net cash provided by operating activities was $177.8 million for the quarter. The company has no long-term debt and sufficient cash and operating cash flows to meet its foreseeable capital and liquidity requirements.

Yes, the company is involved in several ongoing investigations and litigation concerning alleged anti-competitive behavior by regulatory bodies such as the U.S. Department of Justice, the European Commission, and the Brazilian Ministry of Justice. There is also an ongoing antitrust class action lawsuit. While the company is vigorously defending itself and cannot currently estimate the range of potential loss, it acknowledges that unfavorable outcomes could materially harm its financial position, results of operations, and cash flows.

Salaries and related costs increased by 19%, driven by higher bonuses earned due to improved operating income and an increase in employee numbers. The company's compensation philosophy links incentive compensation directly to operating profit, aligning employee interests with shareholder interests. While salaries increased, they represented a smaller percentage of net revenue in Q1 2011 compared to Q1 2010, indicating improved productivity and efficiency.