10-QPeriod: Q2 FY2011

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 5, 2011For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid revenue growth in its second quarter and first half of 2011, with total revenues increasing by 4.3% and 12.0% respectively, compared to the prior year periods. Net earnings attributable to shareholders also saw an increase, rising by 5.2% for the quarter and 22.8% for the six months. The company's performance was driven by strong growth in its airfreight and customs brokerage services, with increases in net revenue per kilo and net revenue per container, respectively. The company maintained a strong liquidity position with significant cash and cash equivalents and no long-term debt. Despite the positive financial results, the company faces ongoing legal challenges related to alleged anti-competitive behavior in various jurisdictions, including investigations by the U.S. Department of Justice, the European Commission, and the Brazilian Ministry of Justice, as well as a class-action lawsuit. While these matters could potentially have a material impact, the company is actively defending itself. Management remains focused on perpetuating a strong global culture of customer service and employee development to navigate the competitive global logistics industry.

Financial Highlights

48 data points
Beta

Revenue

$1.58B

29.9% Gross Margin

Net Income

$95.00M

6.0% Net Margin

EPS (Diluted)

$0.44

Total Assets

$2.88B

Cash & Equivalents

$1.23B

Free Cash Flow

$78.06M

Financial Statements
Beta
Revenue$1.58B
Gross Profit$472.56M
Operating Expenses$1.43B
Operating Income$152.28M
Interest Expense$229K
Net Income$95.00M
EPS (Basic)$0.45
EPS (Diluted)$0.44
Shares Outstanding (Basic)212.14M
Shares Outstanding (Diluted)215.66M

Key Highlights

  • 1Total revenues increased by 4.3% to $1.58 billion for Q2 2011 and by 12.0% to $3.04 billion for the first six months of 2011, compared to the prior year periods.
  • 2Net earnings attributable to shareholders grew by 5.2% to $95.0 million for Q2 2011 and by 22.8% to $186.2 million for the first six months of 2011.
  • 3Airfreight services net revenue increased by 7% in Q2 and 19% in the first six months, driven by higher net revenue per kilo and increased tonnage in certain regions.
  • 4Ocean freight and ocean services net revenue increased by 17% in Q2 and 21% in the first six months, primarily due to higher net revenue per container.
  • 5Customs brokerage and other services net revenue saw a 16% increase in Q2 and a 17% increase in the first six months, attributed to market share growth and increased domestic volumes.
  • 6The company maintained a strong balance sheet with $1.23 billion in cash and cash equivalents and no long-term debt as of June 30, 2011.
  • 7The company is subject to ongoing investigations and litigation regarding alleged anti-competitive behavior, with potential for material financial impact, although the company believes these allegations are without merit.

Frequently Asked Questions

Expeditors International reported a revenue increase of 4.3% to $1.58 billion and a 5.2% rise in net earnings attributable to shareholders to $95.0 million for the second quarter of 2011, compared to the same period in 2010. This performance was driven by growth across its main service lines, particularly airfreight and customs brokerage.

Revenue growth was primarily driven by increases in airfreight services (up 7% in Q2) and ocean freight services (up 17% in Q2), along with customs brokerage and other services (up 16% in Q2). The growth in airfreight and ocean freight was largely due to increased net revenue per unit (kilo for airfreight, container for ocean freight), while customs brokerage growth benefited from market share gains and increased domestic volumes.

Expeditors International is involved in several significant legal proceedings and investigations related to alleged anti-competitive behavior in the air cargo freight forwarding industry. These include investigations by the U.S. Department of Justice, the European Commission, and the Brazilian Ministry of Justice, as well as an antitrust class action lawsuit. While the company is actively defending itself and believes the allegations are without merit, an unfavorable outcome could materially impact its financial position and results.

The company maintains a strong financial position. As of June 30, 2011, Expeditors had $1.23 billion in cash and cash equivalents and reported no long-term debt. Net cash provided by operating activities increased significantly in Q2 2011 compared to the prior year, indicating robust operational cash generation.