10-QPeriod: Q3 FY2012

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 7, 2012For Securities:EXPD

Summary

Expeditors International of Washington, Inc. reported a decrease in revenues and net earnings for the nine months ended September 30, 2012, compared to the same period in 2011. This decline was primarily driven by a significant drop in airfreight services, impacted by lower tonnage and reduced net revenue per kilo, reflecting softer global demand and carrier capacity management. While ocean freight and customs brokerage services showed resilience or slight growth, they were not enough to offset the airfreight decline. The company's financial position remains solid with substantial cash and cash equivalents, and no long-term debt, providing flexibility for operations and capital expenditures. Management expects continued near-term pressure on pricing and terms due to global economic uncertainties, volatile fuel costs, and rising general costs. Despite revenue challenges, the company's focus on a strong corporate culture, employee development, and efficient operations aims to navigate these headwinds and maintain its competitive edge in the global logistics market.

Financial Highlights

45 data points
Beta

Revenue

$1.53B

30.3% Gross Margin

Net Income

$88.49M

5.8% Net Margin

EPS (Diluted)

$0.42

Total Assets

$3.03B

Cash & Equivalents

$1.37B

Free Cash Flow

$69.17M

Financial Statements
Beta
Revenue$1.53B
Gross Profit$465.14M
Operating Expenses$1.39B
Operating Income$145.10M
Interest Expense$182K
Net Income$88.49M
EPS (Basic)$0.42
EPS (Diluted)$0.42
Shares Outstanding (Basic)210.14M
Shares Outstanding (Diluted)211.40M

Key Highlights

  • 1Net revenues decreased by 4% for the nine months ended September 30, 2012, to $1.365 billion from $1.420 billion in the prior year period, primarily due to a 12% decline in airfreight services net revenues.
  • 2Net earnings attributable to shareholders decreased by 15% for the nine months ended September 30, 2012, to $249.15 million from $292.84 million in the prior year period.
  • 3Diluted earnings per share decreased to $1.17 for the nine months ended September 30, 2012, from $1.36 in the same period of 2011.
  • 4Total assets increased to $3.03 billion as of September 30, 2012, from $2.87 billion as of December 31, 2011.
  • 5The company maintained a strong liquidity position with $1.37 billion in cash and cash equivalents and no long-term debt as of September 30, 2012.
  • 6Expeditors repurchased a significant number of shares, utilizing $193.5 million for stock repurchases during the first nine months of 2012.
  • 7The company announced a semi-annual cash dividend of $0.28 per share, an increase from the $0.25 declared in the prior year.

Frequently Asked Questions

The primary driver of the revenue decline was a significant decrease in airfreight services, which fell by 12%. This was attributed to a 9% decrease in airfreight tonnage and a 7% decrease in net revenue per kilo, reflecting a weaker global airfreight market and carrier capacity management strategies.

Expeditors maintains a strong liquidity position with $1.37 billion in cash and cash equivalents and no long-term debt as of September 30, 2012. The company generated $309 million in cash from operating activities during the first nine months of 2012. They also continued to repurchase shares and declared a semi-annual dividend, indicating confidence in their financial stability.

The company anticipates continued near-term pressure on pricing and terms due to global economic uncertainties, volatile fuel costs, and rising general costs. They expect similar trends in airfreight services to continue in the near term, absent meaningful improvements in global economic conditions.

The company was previously investigated for alleged anti-competitive behavior in air cargo freight forwarding, but the DOJ confirmed it is no longer a subject of that investigation as of October 2012. They are also responding to subpoenas related to export controls to an embargoed country, though management does not expect any material impact from these matters. In addition, a European Commission finding resulted in a fine of €4.14 million ($5.5 million).