EXPD Expeditors International of Washington Inc

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced net earnings of $71,249,000 for the second quarter of 2008, as compared with $65,489,000 for the same quarter of 2007, an increase of 9%. Net revenues for the second quarter of 2008 increased 12% to $397,325,000 as compared with $354,574,000 reported for the second quarter of 2007. Total revenues and operating income were $1,454,255,000 and $112,971,000 in 2008, as compared with $1,258,618,000 and $101,738,000 for the same quarter of 2007, increases of 16% and 11%, respectively. Diluted net earnings per share for the second quarter were $.32, as compared with $.30 for the same quarter in 2007, an increase of 7%. The Company also reported that same store net revenues and operating income increased 12% and 11%, respectively, for the second quarter of 2008 when compared with 2007. For the six months ended June 30, 2008, net earnings rose to $137,721,000 from $124,777,000 in 2007, an increase of 10%. Net revenues for the six months increased to $771,653,000 from $688,710,000 for 2007, up 12%. Total revenues and operating income for the six months were $2,761,576,000 and $218,535,000 in 2008, as compared with $2,377,564,000 and $196,263,000 for the same period in 2007, increases of 16% and 11%, respectively. Diluted net earnings per share for the first two quarters of 2008 were $.62, as compared with $.56 for the same period of 2007, an increase of 11%. Same store net revenues and operating income increased 12% and 11%, respectively, for the six months ended June 30, 2008 when compared with same period of 2007. �This was fundamentally a very strong and a very sound quarter,� commented Peter J. Rose, Chairman and Chief Executive Officer. �We had good solid revenue and net revenue growth of 16% and 12%, respectively, and we did an excellent job of managing those costs over which we had control. Despite absorbing over $5.3 million of non-routine legal and related expenses related to the ongoing Department of Justice investigation, we still managed to post double digit operating income growth of 11%. Without the effect of these non-routine expenses, our operating income would have been up 16%1 over operating income reported for the second quarter of 2007. To us, those are numbers to be proud of, particularly in light of the Economic Armageddon stories du jour that seem to be omni-present in the media these days,� Rose said. �We understand that there are struggles going on out there in pockets of the economy, but we�re also fortunate enough, with our broad customer base, to see things that are going extremely well for some companies. Accordingly, we continue to ban the use of the �R� word here and direct our focus on expanding our market share and increasing our customer service capabilities. As always, we�d be remiss not to credit the success we have to the dedication and commitment of our employees. They have always executed well, in good times or in times that many have regarded as difficult. We at Expeditors think it would be a big mistake for anyone to �count us out� early. That isn�t in our culture,� Rose concluded. Expeditors is a global logistics company headquartered in Seattle, Washington, the company employs trained professionals in 180 full-service offices, 69 satellite locations and 4 international service centers located on six continents linked into a seamless worldwide network through an integrated information management system. Services include air and ocean freight forwarding, vendor consolidation, customs clearance, marine insurance, distribution and other value added international logistics services. 1 Second Quarter 2008 Operating Income of $112,971,000, with $5,322,000 of non-routine legal and related expenses added back would have been $118,293,000. This would have been a 16% increase over the $101,738,000 Operating Income amount reported in the Second Quarter 2007 results. Expeditors International of Washington, Inc. Financial Highlights Three months and Six months ended June 30, 2008 and 2007 Unaudited (in 000's except share data) � � � Three Months Ended June 30, � � Six Months Ended June 30, � 2008 � 2007 % Increase 2008 � 2007 % Increase Revenues $ 1,454,255 $ 1,258,618 16 % $ 2,761,576 $ 2,377,564 16 % Net revenues $ 397,325 $ 354,574 12 % $ 771,653 $ 688,710 12 % Operating income $ 112,971 $ 101,738 11 % $ 218,535 $ 196,263 11 % Net earnings $ 71,249 $ 65,489 9 % $ 137,721 $ 124,777 10 % Diluted earnings per share $ .32 $ .30 7 % $ .62 $ .56 11 % Basic earnings per share $ .33 $ .31 6 % $ .65 $ .58 12 % Diluted weighted average shares outstanding � 220,515,987 � � 221,716,414 � � 220,490,452 � � 222,283,372 � Basic weighted average shares outstanding � 213,275,229 � � 213,251,710 � 213,168,730 � � 213,339,478 � � Offices opened during the Second Quarter of 2008 ((a) = Full Service, (b) = Satellite) � ASIA NEAR/MIDDLE EAST (a) Suzhou, People�s Republic of China (formerly a satellite of Shanghai) (b) Mundra, India (satellite of Bombay) � Investors may submit written questions via e-mail to: investor@expeditors.com � Or by fax to: (206) 674-3459 � Questions received by the end of business on August 7, 2008 will be considered in management's 8-K "Responses to Selected Questions" expected to be filed on or about August 15, 2008. � EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except share data) (Unaudited) � � � � June 30, December 31, Assets 2008 2007 � Current assets: Cash and cash equivalents $ 703,488 $ 574,599 Short-term investments 410 674 Accounts receivable, net 982,725 933,519 Deferred Federal and state income taxes 7,885 8,278 Other current assets � 53,456 � 17,627 Total current assets � 1,747,964 � 1,534,697 � Property and equipment, net 505,263 497,892 Goodwill, net 7,927 7,927 Other intangibles, net 7,216 7,832 Other assets 21,334 20,717 � � $ 2,289,704 $ 2,069,065 Liabilities and Shareholders' Equity � Current liabilities: Accounts payable 682,409 613,108 Accrued expenses, primarily salaries and related costs 158,427 129,669 Federal, state and foreign income taxes � 31,343 � 26,976 Total current liabilities � 872,179 � 769,753 � Deferred Federal and state income taxes 76,923 55,533 � Minority interest 18,050 17,208 � Shareholders' equity: Preferred stock, par value $.01 per share. Authorized 2,000,000 shares; none issued -- -- Common stock, par value $.01 per share. Authorized 320,000,000 shares; issued and outstanding 212,995,326 shares at June 30, 2008 and 212,996,776 shares at December 31, 2007 2,130 2,130 Additional paid-in capital 32,567 50,006 Retained earnings 1,247,023 1,143,464 Accumulated other comprehensive income � 40,832 � 30,971 Total shareholders' equity � 1,322,552 � 1,226,571 � � $ 2,289,704 $ 2,069,065 � EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (In thousands, except share data) (Unaudited) � � � � Three months ended � Six months ended June 30, June 30, 2008 � 2007 2008 � 2007 Revenues: Airfreight $ 658,882 $ 564,471 $ 1,258,645 $ 1,081,676 Ocean freight and ocean services 516,473 450,431 963,265 825,633 Customs brokerage and other services 278,900 243,716 539,666 470,255 � � � � Total revenues � 1,454,255 � � 1,258,618 � � 2,761,576 � � 2,377,564 � � Operating expenses: Airfreight consolidation 517,683 437,446 978,782 827,090 Ocean freight consolidation 419,767 364,917 780,207 663,808 Customs brokerage and other services 119,480 101,681 230,934 197,956 Salaries and related costs 215,535 197,393 421,350 380,154 Rent and occupancy costs 19,374 15,744 38,809 32,411 Depreciation and amortization 10,056 10,275 19,828 19,850 Selling and promotion 9,744 9,581 19,248 18,677 Other � 29,645 � � 19,843 � � 53,883 � � 41,355 � Total operating expenses � 1,341,284 � � 1,156,880 � � 2,543,041 � � 2,181,301 � � Operating income � 112,971 � � 101,738 � � 218,535 � � 196,263 � � Interest expense (75 ) 118 (146 ) 104 Interest income 4,915 5,531 9,879 10,750 Other, net (162 ) 1,675 1,112 2,430 � � � � Other income, net � 4,678 � � 7,324 � � 10,845 � � 13,284 � � Earnings before income taxes and minority interest 117,649 109,062 229,380 209,547 � Income tax expense 46,043 43,315 91,253 84,475 � � � � Net earnings before minority interest � 71,606 � � 65,747 � � 138,127 � � 125,072 � � Minority interest (357 ) (258 ) (406 ) (295 ) � � � � Net earnings $ 71,249 � $ 65,489 � $ 137,721 � $ 124,777 � � Diluted earnings per share $ 0.32 � $ 0.30 � $ 0.62 � $ 0.56 � � Basic earnings per share $ 0.33 � $ 0.31 � $ 0.65 � $ 0.58 � � Weighted average diluted shares outstanding � 220,515,987 � � 221,716,414 � � 220,490,452 � � 222,283,372 � � Weighted average basic shares outstanding � 213,275,229 � � 213,251,710 � � 213,168,730 � � 213,339,478 � � EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) � � Three months ended Six months ended June 30, June 30, 2008 2007 2008 2007 Operating Activities: Net earnings $ 71,249 $ 65,489 $ 137,721 $ 124,777 Adjustments to reconcile net earnings to net cash provided by operating activities: � Provision for losses on accounts receivable (396 ) (869 ) (573 ) (355 ) Deferred income tax expense 7,647 6,772 16,473 12,240 Excess tax benefits from stock plans (7,889 ) (5,291 ) (9,395 ) (21,623 ) Stock compensation expense 11,323 12,043 22,603 23,503 Depreciation and amortization 10,056 10,275 19,828 19,850 Gain on sale of assets (30 ) (79 ) (605 ) (202 ) Minority interest in earnings of consolidated entities 357 258 406 295 Other 515 354 932 688 Changes in operating assets and liabilities: � Increase in accounts receivable (91,778 ) (70,962 ) (32,024 ) (13,261 ) Decrease (increase) in other current assets 622 173 677 (504 ) Increase in accounts payable and other current liabilities 67,024 76,080 82,102 62,445 Decrease in income taxes payable, net � (32,697 ) � (7,311 ) � (23,437 ) � (4,842 ) � Net cash provided by operating activities � 36,003 � � 86,932 � � 214,708 � � 203,011 � � Investing Activities: Decrease in short-term investments 169 76 216 162 Purchase of property and equipment (14,316 ) (12,904 ) (24,526 ) (26,342 ) Proceeds from sale of property and equipment 139 119 181 498 Prepayment on long-term land lease - (2,848 ) - (2,848 ) Deposit on building purchase and land lease - (5,056 ) - (5,056 ) Other � (308 ) � (1,188 ) � 55 � � (1,528 ) � Net cash used in investing activities � (14,316 ) � (21,801 ) � (24,074 ) � (35,114 ) � Financing Activities: Net distributions to minority interests - (316 ) (107 ) (316 ) (Repayments) borrowings of short-term debt, net (810 ) (17 ) - 203 Proceeds from issuance of common stock 15,537 12,602 20,151 27,868 Repurchases of common stock (50,970 ) (56,597 ) (69,588 ) (128,995 ) Excess tax benefits from stock plans 7,889 5,291 9,395 21,623 Dividends paid � (34,163 ) � (29,902 ) � (34,163 ) � (29,902 ) � Net cash used in financing activities (62,517 ) (68,939 ) (74,312 ) (109,519 ) � Effect of exchange rate changes on cash � 3,352 � � 2,034 � � 12,567 � � 5,306 � � (Decrease) increase in cash and cash equivalents (37,478 ) (1,774 ) 128,889 63,684 � Cash and cash equivalents at beginning of period 740,966 576,816 574,599 511,358 � Cash and cash equivalents at end of period $ � 703,488 � $ � 575,042 � $ � 703,488 � $ � 575,042 � � Interest and taxes paid: Interest 75 127 146 138 Income tax 67,613 41,279 91,885 74,312 � EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Business Segment Information (In thousands) (Unaudited) � � United � Other � Far � � Australia/ � Latin � Middle � Elimi- � Consoli- States N. America East Europe New Zealand America East nations dated Three months ended June 30, 2008 � Revenues from unaffiliated customers $ 320,278 41,397 768,086 209,297 23,407 24,626 67,164 - 1,454,255 Transfers between geographic areas $ 26,842 2,623 5,629 11,257 2,158 3,649 4,539 (56,697 ) - Total revenues $ 347,120 44,020 773,715 220,554 25,565 28,275 71,703 (56,697 ) 1,454,255 � Net revenues $ 153,846 18,009 104,688 72,286 13,125 14,159 21,212 - 397,325 Operating income $ 33,469 3,272 47,543 15,779 4,117 3,553 5,238 - 112,971 Identifiable assets at quarter end $ 1,004,374 75,321 501,944 485,926 41,521 60,909 111,532 8,177 2,289,704 Capital expenditures $ 7,159 855 3,207 1,684 159 505 747 - 14,316 Depreciation and amortization $ 5,424 328 1,499 1,681 247 322 555 - 10,056 Equity $ 1,462,274 37,101 399,486 185,411 26,884 30,550 56,451 (875,605 ) 1,322,552 � Three months ended June 30, 2007 � Revenues from unaffiliated customers $ 260,796 32,765 710,104 162,100 17,057 19,377 56,419 - 1,258,618 Transfers between geographic areas $ 25,856 1,989 4,470 8,172 1,853 3,078 3,340 (48,758 ) - Total revenues $ 286,652 34,754 714,574 170,272 18,910 22,455 59,759 (48,758 ) 1,258,618 � Net revenues $ 143,206 15,377 100,479 58,600 9,812 10,950 16,150 - 354,574 Operating income $ 31,459 2,941 46,587 11,951 2,658 2,354 3,788 - 101,738 Identifiable assets at quarter end $ 893,335 69,599 431,106 395,022 30,617 37,310 82,642 (2,370 ) 1,937,261 Capital expenditures $ 7,843 688 1,188 2,141 198 267 579 - 12,904 Depreciation and amortization $ 5,304 331 1,222 2,393 225 417 383 - 10,275 Equity $ 1,256,503 32,692 326,036 134,925 20,114 19,571 39,555 (714,363 ) 1,115,033 � Six months ended June 30, 2008 � Revenues from unaffiliated customers $ 618,224 76,466 1,447,936 394,861 43,246 46,486 134,357 - 2,761,576 Transfers between geographic areas $ 50,923 4,696 10,740 21,759 4,292 6,956 8,536 (107,902 ) - Total revenues $ 669,147 81,162 1,458,676 416,620 47,538 53,442 142,893 (107,902 ) 2,761,576 � Net revenues $ 302,901 34,683 203,429 138,059 24,824 26,804 40,953 - 771,653 Operating income $ 66,013 6,399 93,573 28,220 7,589 6,819 9,922 - 218,535 Identifiable assets at quarter end $ 1,004,374 75,321 501,944 485,926 41,521 60,909 111,532 8,177 2,289,704 Capital expenditures $ 10,795 1,191 6,510 3,294 353 776 1,607 - 24,526 Depreciation and amortization $ 10,770 640 2,753 3,449 496 637 1,083 - 19,828 Equity $ 1,462,274 37,101 399,486 185,411 26,884 30,550 56,451 (875,605 ) 1,322,552 � Six months ended June 30, 2007 � Revenues from unaffiliated customers $ 506,521 60,851 1,312,135 318,479 31,840 38,748 108,990 - 2,377,564 Transfers between geographic areas $ 48,354 3,967 8,450 15,933 3,550 5,584 6,763 (92,601 ) - Total revenues $ 554,875 64,818 1,320,585 334,412 35,390 44,332 115,753 (92,601 ) 2,377,564 � Net revenues $ 278,673 30,077 193,632 114,627 18,739 20,745 32,217 - 688,710 Operating income $ 59,522 5,670 91,471 22,102 5,062 4,406 8,030 - 196,263 Identifiable assets at quarter end $ 893,335 69,599 431,106 395,022 30,617 37,310 82,642 (2,370 ) 1,937,261 Capital expenditures $ 16,548 1,012 2,521 3,526 892 762 1,081 - 26,342 Depreciation and amortization $ 10,473 662 2,597 4,130 425 817 746 - 19,850 Equity $ 1,256,503 32,692 326,036 134,925 20,114 19,571 39,555 (714,363 ) 1,115,033 �