10-QPeriod: Q3 FY2013

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 7, 2013For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) reported solid financial results for the nine months ended September 30, 2013, demonstrating resilience in a competitive global logistics market. Total revenues remained stable year-over-year, but net revenues, a key performance indicator for the company's core services, showed growth. This indicates improved efficiency in managing operational costs and leveraging purchasing power. The company maintained a strong liquidity position with significant cash and cash equivalents, and importantly, no long-term debt, providing financial flexibility. Profitability also saw a healthy increase, with net earnings attributable to shareholders up by 6.2% for the nine-month period. This growth was driven by effective cost management across operating segments, particularly in airfreight and customs brokerage services. Despite some pricing pressures in ocean freight, the company's diversified service offerings and focus on operational efficiency contributed to a stronger bottom line. The company also highlighted its commitment to its unique compensation structure, which aligns employee incentives with profitability and long-term shareholder value.

Financial Highlights

44 data points
Beta

Revenue

$1.54B

Net Income

$92.40M

6.0% Net Margin

EPS (Diluted)

$0.45

Total Assets

$3.10B

Cash & Equivalents

$1.31B

Free Cash Flow

$96.29M

Financial Statements
Beta
Revenue$1.54B
Operating Expenses$1.39B
Operating Income$146.31M
Net Income$92.40M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)206.52M
Shares Outstanding (Diluted)207.37M

Key Highlights

  • 1Net earnings attributable to shareholders increased by 6.2% to $265.0 million for the nine months ended September 30, 2013, compared to $249.2 million in the prior year period.
  • 2Total revenues remained nearly flat at approximately $4.45 billion for the nine months ended September 30, 2013, compared to the same period in 2012, indicating stable demand for logistics services.
  • 3Net revenues, a key performance indicator reflecting the company's margin on services, increased by 2.3% to $1.396 billion for the nine months ended September 30, 2013, up from $1.365 billion in the prior year.
  • 4The company maintained a strong balance sheet with $1.31 billion in cash and cash equivalents and short-term investments, and notably, no long-term debt as of September 30, 2013.
  • 5Operating income grew by 3.9% to $418.4 million for the nine months ended September 30, 2013, demonstrating improved operational profitability.
  • 6The company's distinct compensation strategy, which links bonuses to cumulative profitability, continues to be a focus, aiming to align management incentives with shareholder interests and discourage excessive risk-taking.
  • 7Substantial share repurchases were executed, with $125.2 million spent in the nine months ended September 30, 2013, indicating a commitment to returning capital to shareholders and managing share count.

Frequently Asked Questions

Total revenues for Expeditors remained largely stable, reported at $4.446 billion for the nine months ended September 30, 2013, compared to $4.448 billion in the prior year. However, net revenues, which represent the company's core service margins, saw a positive increase of 2.3% to $1.396 billion, indicating improved operational efficiency and pricing strategies.

Expeditors maintains a very strong financial position. As of September 30, 2013, the company held $1.31 billion in cash and cash equivalents and short-term investments. Crucially, Expeditors has no long-term debt, which provides significant financial flexibility and reduces financial risk.

Airfreight services saw a slight revenue increase and a more significant net revenue increase due to higher tonnage and improved net revenue per kilo. Ocean freight services experienced a decrease in revenue driven by lower sell rates due to excess carrier capacity, although container volumes increased. Customs brokerage and other services showed revenue growth driven by increased volumes from new and existing customers. Overall, operational management and cost control contributed to profit growth.

Operating income for the nine months increased by 3.9% to $418.4 million. This growth was supported by an increase in net revenues, particularly in airfreight and customs brokerage services, and effective management of overhead expenses. While salaries and related costs increased, they remained a stable percentage of net revenues, consistent with the company's compensation philosophy. A significant fine incurred in the prior year for anti-competitive behavior in Europe also contributed to the year-over-year improvement in operating income.