-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TunuaanbWr83YN2Mnh6vBicEnKkcgZzJs13ANSllJ5KV5e9N+ASoTU9F2sZ6fFqV 7ZrGMOT7SdHI8BQkFRG+Gg== 0000912057-96-005655.txt : 19960402 0000912057-96-005655.hdr.sgml : 19960402 ACCESSION NUMBER: 0000912057-96-005655 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXPEDITORS INTERNATIONAL OF WASHINGTON INC CENTRAL INDEX KEY: 0000746515 STANDARD INDUSTRIAL CLASSIFICATION: ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO [4731] IRS NUMBER: 911069248 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13468 FILM NUMBER: 96542188 BUSINESS ADDRESS: STREET 1: 19119 16TH AVE S STREET 2: P.O.BOX 69620 CITY: SEATTLE STATE: WA ZIP: 98188 BUSINESS PHONE: 206-246-3711 MAIL ADDRESS: STREET 1: 19119 16TH AVENUE SOUTH STREET 2: P.O.BOX 69620 CITY: SEATTLE STATE: WA ZIP: 98168-9620 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _______________ Commission File Number: 0-13468 EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. (Exact name of registrant as specified in its charter) Washington 91-1069248 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 19119 - 16th Avenue South, Seattle, Washington 98188 (Address of principal executive offices) (Zip Code) (206) 246-3711 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / At March 11, 1996, the aggregate market value of the registrant's Common Stock held by non-affiliates of the registrant was approximately $ 306,722,894. At March 11, 1996, the number of shares outstanding of registrant's Common Stock was 12,038,687. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement for the Registrant's 1996 Annual Meeting of Shareholders to be held on May 8, 1996 are incorporated by reference into Part III of this Form 10-K. Portions of the Annual Report to Shareholders for the year ended December 31, 1995 are incorporated by reference into Part I, Part II and Part IV of this Form 10-K. Page 1 of 52 pages. The Exhibit Index appears on page 22. PART I ITEM 1 - BUSINESS Expeditors International of Washington, Inc. (the "Company") is engaged in the business of providing global logistics services. The Company offers its customers a seamless international network supporting the movement and strategic positioning of goods. The Company's services include the consolidation or forwarding of air and ocean freight. In each U.S. office, and in many overseas offices, the Company acts as a customs broker. The Company also provides additional services including distribution management, vendor consolidation, cargo insurance, purchase order management and customized logistics information. The Company does not compete for domestic freight, overnight courier or small parcel business and does not own aircraft or steamships. The Company, including its majority owned subsidiaries, operates full service offices (-) in the major cities identified below. Full service offices have also been established in locations where the Company maintains unilateral control over assets and operations and where the existence of the parent subsidiary relationship is maintained by means other than record ownership of voting stock (#). See Notes 1(a) and 1(j) to the Consolidated Financial Statements for discussion of reclassification of the Taiwan exclusive agency and consolidation as a result of unilateral control over assets and operations. In other cities, the Company contracts with independent agents to provide required services and has established over 120 such entities world-wide. Agent locations where Company employees perform sales and customer service functions are identified below as international service centers (*). In each case, the opening date for the full service office or international service center is set forth in parenthesis.
NORTH AMERICA SOUTH AMERICA FAR EAST - ------------- ------------- -------- UNITED STATES CANADA BRAZIL CHINA - - Seattle (5/79) - Toronto (5/84) - Sao Paulo (9/95) - Beijing (7/94) - - Chicago (7/81) - Vancouver (9/95) - Rio de Janeiro (9/95) - Guangzhou (4/94) - - San Francisco (7/81) - Campinas (9/95) - Dalian (7/94) - - New York (11/81) MEXICO - Shanghai (7/94) - - Los Angeles (5/82) - Mexico City (6/95) CHILE - Shenzen (7/94) - - Atlanta (8/83) - Santiago (2/95) - Quingdao (7/94) - - Boston (11/85) - Tianjin (7/94) - - Miami (3/86) - Xi'an (7/94) - - Minneapolis (7/86) - Xiamen (7/94) - - Denver (2/88) - - Detroit (7/88) HONG KONG (9/81) - - Portland (7/88) - - Cincinnati (8/89) INDONESIA - - Cleveland (7/90) # Jakarta (12/90) - - Phoenix (7/91) # Surabaya (2/92) - - Louisville (10/91) - - St. Louis (4/92) JAPAN - - Houston (4/92) * Tokyo (3/91) - - Baltimore (4/92) - - Dallas (5/92) MALAYSIA - - Columbus (6/92) - Penang (11/87) - - Charlotte (7/92) - Kuala Lumpur (6/90) - - Newark (9/94) - - Philadelphia (3/95) SINGAPORE (9/81) - - Charleston (6/95) - - Memphis (8/95) TAIWAN - - Salt Lake City (11/95) # Taipei (9/81) # Kaohsiung (9/81) PUERTO RICO # Taichung (9/81) - - San Juan (5/95) THAILAND - Bangkok (9/94)
2
EUROPE AUSTRALASIA NEAR/MIDDLE EAST AFRICA - ------ ----------- ---------------- ------ AUSTRIA AUSTRALIA BANGLADESH EGYPT - - Salzburg (11/95) - Sydney (8/88) * Dacca (6/89) - Cairo (2/95) - - Vienna (11/95) - Melbourne (8/88) * Chittagong (8/93) - Alexandria (2/95) - Brisbane (10/93) BELGIUM - Perth (12/94) INDIA SOUTH AFRICA - - Brussels (7/90) * New Delhi (1/94) - Johannesburg (3/94) - - Antwerp (4/91) NEW ZEALAND - Durban (3/94) - Auckland (8/88) KUWAIT FINLAND # Kuwait City (12/91) - - Helsinki (4/94) LEBANON GERMANY * Beirut (4/93) - - Frankfurt (4/92) - - Munich (4/92) SAUDI ARABIA - - Dusseldorf (4/92) # Riyadh (7/92) - - Stuttgart (4/92) # Jeddah (7/92) - - Hamburg (1/93) SRI LANKA GREECE # Colombo (3/93) * Athens (1/91) TURKEY ITALY * Istanbul (5/91) - - Milan (4/93) - - Verona (4/93) U.A.E. * Dubai (10/92) NETHERLANDS * Abu Dhabi (1/94) - - Amsterdam (6/94) - - Rotterdam (3/95) PORTUGAL - - Lisbon (10/91) - - Oporto (10/91) SPAIN - - Barcelona (1/94) - - Madrid (1/94) SWEDEN - - Stockholm (1/94) - - Goteborg (1/94) UNITED KINGDOM - - London (4/86) - - Manchester (11/88) - - Birmingham (3/90) - - Glasgow (4/92) - - Bedford (6/94)
3 The Company was incorporated in the State of Washington in May 1979. Its executive offices are located at 19119 - 16th Avenue South, Seattle, Washington, and its telephone number is (206) 246-3711. For information concerning the amount of revenues, operating income, identifiable assets, capital expenditures and depreciation and amortization attributable to the geographic areas in which the Company conducts its business, see Note 7 to the Consolidated Financial Statements. Beginning in 1981, the Company's primary business focus was on airfreight shipments from the Far East to the United States and related customs brokerage and import services. In the mid-1980's, the Company began to expand its service capabilities in export airfreight, ocean freight and distribution services. Today the Company offers a complete range of global logistics services to a diversified group of customers, both in terms of industry specialization and geographic location. As opportunities for profitable growth arise, the Company plans to create new offices. While the Company has historically expanded through organic growth, the Company has also been open to growth through acquisition of, or establishing joint ventures with, existing agents or others within the industry. Airfreight Services Airfreight services accounted for approximately 47, 48, and 54 percent of the Company's 1995, 1994, and 1993 consolidated revenues net of freight consolidation expenses ("net revenues"), respectively. When performing airfreight services, the Company typically acts either as a freight consolidator or as an agent for the airline which carries the shipment. When acting as a freight consolidator, the Company purchases cargo space from airlines on a volume basis and resells that space to its customers at lower rates than the customers could obtain directly from airlines. When moving shipments between points where the volume of business does not facilitate consolidation, the Company receives and forwards individual shipments as the agent of the airline which carries the shipment. Whether acting as an agent or consolidator, the Company offers its customers knowledge of optimum routing, familiarity with local business practices, knowledge of export and import documentation and procedures, the ability to arrange for ancillary services, and assistance with space availability in periods of peak demand. In its airfreight forwarding operations, the Company procures shipments from its customers, determines the routing, consolidates shipments bound for a particular airport distribution point, and selects the airline for transportation to the distribution point. At the distribution point, the Company or its agent arranges for the consolidated lot to be broken down into its component shipments and for the transportation of the individual shipments to their final destinations. The Company estimates its average airfreight consolidation weighs approximately 3,500 to 4,500 pounds and includes merchandise from several shippers. Because shipment by air is relatively expensive compared with ocean transportation, air shipments are generally characterized by a high value-to-weight ratio, the need for rapid delivery, or both. The Company typically delivers shipments from a Company warehouse at the origin to the airline after consolidating the freight into containers or onto pallets. Shipments normally arrive at the destination distribution point within forty-eight hours after such delivery. During peak shipment periods, cargo space available from the scheduled air carriers can be limited and backlogs of freight shipments may occur. When these conditions exist, the Company will, on occasion, charter aircraft to meet customer demand. The Company consolidates individual shipments based on weight and volume characteristics in cost-effective combinations. Typically, as the weight or volume of a shipment increases, the cost per pound/kilo or cubic inch/centimeter charged by the Company decreases. The rate charged by airlines to forwarders and others also generally decrease as the weight or volume of the shipment increases. As a result, by aggregating shipments and presenting them to an airline as a single shipment, the Company is able to obtain a lower rate per pound/kilo or cubic inch/centimeter than that which it charges to its customers for the individual shipment, while generally offering the customer a lower rate than could be obtained from the airline for an unconsolidated shipment. The Company's net airfreight forwarding revenues from a consolidated shipment includes the differential between the rate charged to the Company by an airline and the rate which the Company charges to its customers, commissions paid to the Company by the airline carrying the freight and fees for ancillary services. Such ancillary services provided by the Company include preparation of shipping and customs documentation, packing, crating and insurance services, negotiation of letters of credit, and preparation of documentation to comply with local export laws. When the Company acts as an agent 4 for an airline handling an unconsolidated shipment, its net revenues are primarily derived from commissions paid by the airline and fees for ancillary services paid by the customer. The Company does not own aircraft and does not plan to do so. Management believes that the ownership of aircraft would subject the Company to undue business risks, including large capital outlays, increased fixed operating expenses, problems of fully utilizing aircraft and competition with airlines. Because the Company relies on commercial airlines to transport its shipments, changes in carrier policies and practices such as pricing, payment terms, scheduling, and frequency of service may affect its business. The Company also performs breakbulk services which involve receiving and breaking down consolidated airfreight lots and arranging for distribution of the individual shipments. Breakbulk service revenues also include commissions from non-exclusive agents for airfreight shipments. Customs Brokerage and Import Services Customs brokerage and import services accounted for approximately 33, 35, and 29 percent of the Company's 1995, 1994, and 1993 consolidated net revenues, respectively. As a customs broker, the Company assists importers to clear shipments through customs by preparing required documentation, calculating and providing for payment of duties on behalf of the importer, arranging for any required inspections by governmental agencies, and arranging for delivery. The Company also provides other services at destination including temporary warehousing, inland transportation, inventory manipulation and management, cargo insurance and product distribution. The Company provides customs clearance services in connection with many of the shipments it handles as a freight forwarder. However, substantial customs brokerage revenues are derived from customers that elect to use a competing forwarder. Conversely, shipments handled by the Company as a forwarder may be processed by another customs broker selected by the customer. There is currently a noticeable trend, prompted by customer demand, to quote rates on a door-to-door basis. Management foresees the potential, in the medium to long-term, for fees normally associated with customs clearance to be de-emphasized and included as a component of other services offered by the Company. Ocean Freight Services Ocean freight services accounted for approximately 20, 17, and 17 percent of the Company's 1995, 1994, and 1993 consolidated net revenues, respectively. The Company's revenues as an ocean freight forwarder are derived from commissions paid by the carrier and revenues from fees charged to customers for ancillary services which the Company may provide, such as preparing documentation, procuring insurance, arranging for packing and crating services, and providing consultation. The Company operates Expeditors International Ocean ("EIO"), a Non-Vessel Operating Common Carrier ("NVOCC") specializing in ocean freight consolidation from the Far East to the United States. EIO also provides service, on a smaller scale, to and from any location where the Company has an office or agent. As an NVOCC, EIO contracts with ocean shipping lines to obtain transportation for a fixed number of containers between various points during a specified time period at an agreed rate. EIO solicits less than container load ("LCL") freight to fill the containers and charges lower rates than those available directly from shipping lines. EIO also handles full container loads for customers that do not have annual shipping volumes sufficient to negotiate comparable contracts directly with the ocean carriers. The Company does not own vessels and generally does not physically handle the cargo. Expeditors Cargo Management Systems ("ECMS") supplies a sophisticated ocean consolidation service. The Company owns and maintains software that allows it to sell ECMS to large volume customers that have signed their own service contracts with the ocean carriers. As an ocean consolidator, ECMS may obtain LCL freight from several vendors and consolidate this cargo into full containers. The Company's revenues as an ocean consolidator are derived from handling LCL cargo at origin and from the fees paid by customers for access to data captured during the consolidation process. Marketing and Customers The Company provides flexible service and seeks to understand the needs of the customers from point of origin to ultimate destinations. Although the domestic importer usually designates the logistics company and the services that will be required, the foreign shipper may also participate in this selection process. Therefore, the Company coordinates its marketing program to reach both domestic importers and their overseas suppliers. 5 The Company's marketing efforts are focused primarily on the traffic, shipping and purchasing departments of existing and potential customers. The district manager of each office is responsible for marketing, sales coordination, and implementation in the area in which he or she is located. All employees are responsible for customer service and relations. The Company staffs its offices largely with managers and other key personnel who are citizens of the nations in which they operate and who have extensive experience in global logistics. Marketing and customer service staffs are responsible for marketing the Company's services directly to local shippers and traffic managers who may select or influence the selection of the logistics vendor and for ensuring that customers receive timely and efficient service. The Company believes that its expertise in supplying solutions customized to the needs of its customers, its emphasis on coordinating its origin and destination customer service and marketing activities, and the incentives it gives to its managers have been important elements of its success. The goods handled by the Company are generally a function of the products which dominate international trade between any particular origin and destination. Shipments of computer components, other electronic equipment, housewares, sporting goods, machine parts, and toys comprise a significant percentage of the Company's business. Typical import customers include computer retailers and distributors of consumer electronics, department store chains, clothing and shoe wholesalers, manufacturers and catalogue stores. Historically, no single customer has accounted for five percent or more of the Company's revenues. COMPETITION The global logistics services industry is intensively competitive and is expected to remain so for the foreseeable future. There are a large number of companies competing in one or more segments of the industry, but the number of firms with a global network that offer a full complement of logistics services is more limited. Depending on the location of the shipper and the importer, the Company must compete against both the niche players and larger entities. While there is currently a marked trend within the industry toward consolidation of the niche players into the larger firms striving for immediate multinational and multi-service networks, the regional and local competitors maintain a strong market presence. The U.S. publicly traded entities most similar to the Company are Air Express International Corporation, The Harper Group, Inc. and Fritz Companies, Inc. Historically, the primary competitive factors in the global logistics services industry have been price and quality of service, including reliability, responsiveness, expertise, convenience, and scope of operations. The Company emphasizes quality service and believes that its prices are competitive with the prices of others in the industry. Recently, larger customers have exhibited a trend toward the more sophisticated and efficient procedures for the management of the logistics supply chain by embracing strategies such as just-in-time inventory management. This trend has made computerized customer service capabilities a significant factor in attracting and retaining customers. These computerized customer service capabilities include customized Electronic Data Interchange, or EDI, and on-line freight tracing and tracking applications. The customized EDI applications allow the transfer of key information between the customers' systems and the Company's systems. Freight tracing and tracking applications allows customers to know the location, transit time and estimated delivery time of inventory in transit. Management believes that the ability to develop and deliver innovative solutions to meet customers' increasingly sophisticated information requirements is a critical factor in the ongoing success of the Company. Accordingly, the Company has devoted a significant amount of resources towards the maintenance and enhancement of systems that will meet these customer demands. Management believes that the Company's existing systems are competitive with the systems currently in use by other logistics services companies with whom it competes. Developing these systems has added a considerable indirect cost to the services provided to customers. Small and middle-tier competitors, in general, do not have the resources available to develop these customized systems. As a result, there is a significant amount of consolidation currently taking place in the industry. Management expects that this trend toward consolidation will continue for the short to medium term. Historically, growth through aggressive acquisition has proven to be a challenge for many of the Company's competitors and typically involves the purchase of significant "goodwill." As a result, the Company has pursued a strategy emphasizing organic growth supplemented by certain strategic acquisitions. The Company's ability to attract, retain, and motivate highly qualified personnel with experience in global logistics services is an essential, if not the most important, element of its ability to compete in the industry. To this end, the Company has adopted incentive compensation programs which make percentages of branch revenues or profits available to managers for distribution among key personnel. The Company believes that these incentive compensation programs, combined with its experienced personnel and its ability to coordinate global marketing efforts, provide it with a distinct competitive 6 advantage and accounts for historical growth that competitors have matched only through acquisition. Currency and Other Risk Factors The nature of the Company's worldwide operations necessitate the Company dealing with a multitude of currencies other than the U.S. dollar. This results in the Company being exposed to the inherent risks of the international currency markets and governmental interference. Many of the countries where the Company maintains offices and/or agency relationships have strict currency control regulations which influence the Company's ability to hedge foreign currency exposure. The Company tries to compensate for these exposures by accelerating international currency settlements among these offices or agents. In addition, the Company's ability to provide service to its customers is highly dependent on good working relationships with a variety of entities including airlines, steamship lines and governmental agencies. The Company considers its current working relationships with these entities to be good. However, changes in space allotments available from carriers, governmental deregulation efforts, "modernization" of the regulations governing customs clearance, and/or changes in governmental quota restrictions could affect the Company's business in unpredictable ways. Seasonality Historically, the Company's operating results have been subject to seasonal trends when measured on a quarterly basis. The first quarter has traditionally been the weakest and the third quarter has traditionally been the strongest. This pattern is the result of, or is influenced by, numerous factors including climate, national holidays, consumer demand, economic conditions and a myriad of other similar and subtle forces. In addition, this historical quarterly trend has been influenced by the growth and diversification of the Company's international network and service offerings. The Company cannot accurately forecast many of these factors nor can the Company estimate accurately the relative influence of any particular factor and, as a result, there can be no assurance that historical patterns, if any, will continue in future periods. A significant portion of the Company's revenues are derived from customers in industries whose shipping patterns are tied closely to consumer demand and from customers in industries whose shipping patterns are dependent upon just-in-time production schedules. Therefore, the timing of the Company's revenues are, to a large degree, impacted by factors out of the Company's control, such as shifting consumer demand for retail goods and/or manufacturing production delays. Additionally, many customers ship a significant portion of their goods at or near the end of a quarter, and therefore, the Company may not learn of a shortfall in revenues until late in a quarter. To the extent that a shortfall in revenues or earnings was not expected by securities analysts, any shortfall from levels predicted by securities analysts could have an immediate and adverse effect on the trading price of the Company's stock. Environmental In the United States, the Company is subject to Federal, state and local provisions regulating the discharge of materials into the environment or otherwise for the protection of the environment. Similar laws apply in many foreign jurisdictions in which the Company operates. Although current operations have not been significantly affected by compliance with these environmental laws, governments are becoming increasingly sensitive to environmental issues, and the Company cannot predict what impact future environmental regulations may have on its business. The Company does not anticipate making any material capital expenditures for environmental control purposes during the remainder of the current or succeeding fiscal years. Employees At February 29, 1996, the Company employed approximately 2,465 people, 1,190 in the United States and 40 in the balance of North America, 20 in South America, 340 in Europe, 735 in the Far East & Australasia, 25 in the Near/Middle East and 115 in Africa. Approximately 250 of the Company's employees are engaged principally in sales and marketing and customer service, 1,585 in operations and 630 in finance and administration. The Company is not a party to any collective bargaining agreement and considers its relations with its employees to be satisfactory. In order to retain the services of highly qualified, experienced, and motivated employees, the Company places considerable emphasis on its incentive compensation programs and stock option plans. 7 Executive Officers of the Registrant The following table sets forth the names, ages, and positions of current executive officers of the Company. NAME AGE POSITION Peter J. Rose 53 Chairman and Chief Executive Officer and director Kevin M. Walsh 45 President and Chief Operating Officer and director James L.K. Wang 48 Executive Vice President and director Glenn M. Alger 39 Senior Vice President William J. Coogan 41 Senior Vice President-Ocean Rommel C. Saber 38 Senior Vice President-Air Export Michael R. Claydon 48 Director-Europe Timothy C. Barber 36 Vice President-Sales and Marketing R. Jordan Gates 40 Chief Financial Officer and Treasurer Jeffrey J. King 41 Vice President-General Counsel and Secretary David M. Lincoln 37 Vice President-Systems Management Charles J. Lynch 35 Corporate Controller Peter J. Rose has served as a director and Vice President of the Company since July 1981. Mr. Rose was elected a Senior Vice President of the Company in May 1986, Executive Vice President in May 1987, President and Chief Executive Officer in October 1988, and Chairman and Chief Executive Officer in May 1991. Kevin M. Walsh has served as a director and Vice President of the Company since July 1981. Mr. Walsh was elected a Senior Vice President of the Company in May 1986, Executive Vice President in December 1989, and President and Chief Operating Officer in May 1991. James L.K. Wang has served as a director and the Managing Director of Expeditors International Taiwan Ltd., the Company's former exclusive Taiwan agent, since September 1981. Mr. Wang's employment agreement with the Company has been assigned to the Company's current exclusive Taiwan agent, E.I. Freight (Taiwan), Ltd. In October 1988, Mr. Wang became a director of the Company and its Director-Far East. In January 1996, Mr. Wang was elected to the office of Executive Vice President. Glenn M. Alger joined the Company in July 1981 as a Regional Manager. Mr. Alger was elected Vice President in October 1988, Senior Vice President and Regional Manager in January 1992, and Senior Vice President in January 1993. William J. Coogan was employed as New York Ocean Manager of EIO when it was acquired by the Company in May 1985. Mr. Coogan was promoted to East Coast Regional Sales Manager of the Company in June 1986, District Manager of the Company's New York office in July 1988, and Senior Vice President of EIO in April 1989. Mr. Coogan was elected Senior Vice President - Ocean in February 1993. Rommel C. Saber joined the Company as Director-Middle/Near East in February 1990 and was elected Senior Vice President-Sales and Marketing in January 1993. In September 1993, Mr. Saber was elected Senior Vice President-Air Export. Michael R. Claydon joined the Company as Director-Europe in October 1987. Timothy C. Barber joined the Company in May 1986 as Import Manager in the Seattle office. Mr. Barber was promoted to District Manager in January 1987 and Regional Vice President in January 1993. Mr. Barber was elected Vice President-Sales and Marketing in September 1993. R. Jordan Gates joined the Company as its Controller-Europe in February 1991. Mr. Gates was elected Chief Financial Officer and Treasurer of the Company in August 1994. Jeffrey J. King joined the Company in October 1990 as Director-Taxation and Legal Services and was elected Vice President-General Counsel in May 1992. In August 1994, Mr. King was elected Vice President-General Counsel and Secretary. David M. Lincoln joined the Company as its Controller-U.S. Operations in March 1984. Mr. Lincoln served as 8 Corporate Controller of the Company from May 1986 to January 1991, and was elected Vice President-Systems Management in December 1989. Charles J. Lynch joined the Company as its Senior Accountant in September 1984. Mr. Lynch was promoted to Assistant Controller in July 1985 and Controller-Domestic Operations in January 1989. Mr. Lynch was elected Corporate Controller in January 1991. Regulation With respect to Company's activities in the air transportation industry in the United States, it is subject to regulation by the Department of Transportation ("DOT") as an indirect air carrier. The Company's overseas offices and agents are licensed as airfreight forwarders in their respective countries of operation. The Company is licensed in each of its offices or in the case of its newer offices, has made application for a license, as an airfreight forwarder by the International Air Transport Association ("IATA"). IATA is a voluntary association of airlines which prescribes certain operating procedures for airfreight forwarders acting as agents for its members. The majority of the Company's airfreight forwarding business is conducted with airlines which are IATA members. The Company is licensed as a customs broker by the Customs Service of the Department of the Treasury in each U.S. customs district in which it does business. All U.S. customs brokers are required to maintain prescribed records and are subject to periodic audits by the Customs Service. In other jurisdictions in which the Company performs clearance services, the Company is licensed by the appropriate governmental authority. The Company is licensed as an ocean freight forwarder by the Federal Maritime Commission ("FMC"). The FMC has established certain qualifications for shipping agents, including certain surety bonding requirements. The FMC also is responsible for the economic regulation of NVOCC activity originating or terminating in the United States. To comply with these economic regulations, vessel operators and NVOCCs, such as EIO, are required to file tariffs electronically which establish the rates to be charged for the movement of specified commodities into and out of the U.S. The FMC has the power to enforce these regulations by assessing penalties. The Company does not believe that current U.S. and foreign governmental regulation impose significant economic restraint upon its business operations. In general, the Company conducts its business activities in each country through a majority owned subsidiary corporation that is organized and existing under the laws of that country. However, the regulations of foreign governments can impose barriers to the Company's ability to provide the full range of its business activities in a wholly or majority U.S. owned subsidiary. For example, foreign ownership of a customs brokerage business is prohibited in some jurisdictions and less frequently the ownership of the licenses required for freight forwarding and/or freight consolidation is restricted to local entities. When the Company encounters this sort of governmental restriction, it works to establish a legal structure that meets the requirements of the local regulations while also giving the Company the substantive operating and economic advantages that would be available in the absence of such regulation. This can be accomplished by creating a joint venture or exclusive agency relationship with a qualified local entity that holds the required license. In cases where the Company has unilateral control over the assets and operations of the local entity, notwithstanding the lack of technical majority ownership of common stock, the Company consolidates the accounts of the local entity. In such cases, consolidation is necessary to fairly present the financial position and results of operations of the Company because of the existence of the parent-subsidiary relationship by means other than record ownership of voting common stock. Cargo Liability When acting as an airfreight consolidator, the Company assumes a carrier's liability for lost or damaged shipments. This legal liability is typically limited by contract to the lower of the transaction value or the released value ($9.07 per pound unless the customer declares a higher value and pays a surcharge), except if the loss or damage is caused by willful misconduct or in the absence of an appropriate air waybill. The airline which the Company utilizes to make the actual shipment is generally liable to the Company in the same manner and to the same extent. When acting solely as the agent of the airline or shipper, the Company does not assume any contractual liability for loss or damage to shipments tendered to the airline. When acting as an ocean freight consolidator, the Company assumes a carrier's liability for lost or damaged shipments. This liability is typically limited by contract to the lower of the transaction value or the released value ($500 per package or customary freight unit unless the customer declares a higher value and pays a surcharge). The steamship line which the Company utilizes to make the actual shipment is generally liable to the Company in the same manner and to the same extent. 9 In its ocean freight forwarding and customs clearance operations, the Company does not assume cargo liability. When providing warehouse and distribution services, the Company limits its legal liability by contract and tariff to an amount generally equal to the lower of fair value or fifty cents per pound with a maximum of fifty dollars per "lot" - which is defined as the smallest unit that the warehouse is required to track. Upon payment of a surcharge for warehouse and distribution services, the Company will assume additional liability. The Company maintains marine cargo insurance covering claims for losses attributable to missing or damaged shipments for which it is legally liable. The Company also maintains insurance coverage for the property of others which is stored in Company warehouse facilities. 10 ITEM 2 - PROPERTIES The Company owns a 27,200 square foot office facility near Seattle-Tacoma International Airport, an 80,000 square foot office and warehouse facility on a ten-acre parcel near O'Hare International Airport in Chicago, a 5,500 square foot office facility in the Tsim Sha Tsui East district of Kowloon, Hong Kong, and a 10,900 square foot office facility in Taipei, Taiwan. The Company also owns a 23,400 square foot office and warehouse facility on a long-term renewable land lease at the Brussels Cargo facility in Brussels, Belgium. The Company has entered into a contract to purchase a 150,000 square foot warehouse with a long term land lease in Nassau County, New York. As of the date hereof, the Company could terminate each of the purchase contracts without financial obligation. The Company leases and maintains 23 additional offices and satellite locations in the United States and 59 offices throughout the world, each located close to an airport or ocean port. The majority of these facilities contain warehouse facilities. Lease terms are either on a month-to-month basis or terminate at various times through 2007. As an office matures, the Company will investigate the possibility of building or buying suitable facilities. Lease payments currently aggregate approximately $470,000 per month. See Note 5 to the Company's Consolidated Financial Statements. The Company believes that current leases can be extended and that suitable alternative facilities are available in the vicinity of each present facility should extensions be unavailable at the conclusion of current leases. ITEM 3 - LEGAL PROCEEDINGS The Company is ordinarily involved in claims and lawsuits which arise in the normal course of business, none of which currently, in management's opinion, will have a significant effect on the Company's financial condition. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Inapplicable. 11 PART II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item is included on page 64 of the Company's Annual Report to Shareholders for the year ended December 31, 1995 and is incorporated herein by reference. ITEM 6 - SELECTED FINANCIAL DATA The information required by this item is included on page 1 of the Company's Annual Report to Shareholders for the year ended December 31, 1995 and is incorporated herein by reference. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is included on pages 57 through 61 of the Company's Annual Report to Shareholders for the year ended December 31, 1995 and is incorporated herein by reference. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is included on pages 40 through 56 of the Company's Annual Report to Shareholders for the year ended December 31, 1995 and is incorporated herein by reference. See also Item 14. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Inapplicable. 12 PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is incorporated by reference to information under the caption "Proposal 1 - Election of Directors" and to the information under the caption "Section 16(a) Reporting Delinquencies" in the Company's definitive Proxy Statement for its annual meeting of shareholders to be held on May 8, 1996. See also Part I - Item 1 - Executive Officers of the Registrant. ITEM 11 - EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to information under the caption "Executive Compensation" in the Company's definitive Proxy Statement for its annual meeting of shareholders to be held on May 8, 1996. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference to information under the captions "Voting Securities and Principal Holders" and "Proposal 1 - Election of Directors" in the Company's definitive Proxy Statement for its annual meeting of shareholders to be held on May 8, 1996. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference to information under the caption "Executive Compensation" and "Certain Transactions" in the Company's definitive Proxy Statement for its annual meeting of shareholders to be held on May 8, 1996. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) FINANCIAL STATEMENTS The Financial Statements and Independent Auditors' Report are included in the Company's 1995 Annual Report to Shareholders (pages 40 through 56) and are incorporated in this Annual Report on Form 10-K as Exhibit 13.1. Location in Location in this Report Annual Report on Form 10-K ------------- ------------ Consolidated Balance Sheets, December 31, 1995 and 1994 40 27 Consolidated Statements of Earnings for each of the years ended December 31, 1995, 1994, and 1993 42 29 Consolidated Statements of Shareholders' Equity for each of the years ended December 31, 1995, 1994, and 1993 43 30 Consolidated Statements of Cash Flows for each of the years ended December 31, 1995, 1994, and 1993 44 31 Notes to Consolidated Financial Statements 46 33 Independent Auditors' Report 56 43 13 (a)(2) FINANCIAL STATEMENT SCHEDULES Location in this Report on Form 10-K ------------ Independent Auditors' Report 20 Schedule II - Valuation and Qualifying Accounts for the years ended 21 December 31, 1995, 1994, and 1993 All other schedules are omitted because they are not required, not applicable, or the required information is included in the consolidated financial statements or notes thereto. (a)(3) EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS The following list is a subset of the list of exhibits described below and contains all compensatory plans, contracts or arrangements in which any director or executive officer of the Company is a participant, unless the method of allocation of benefits thereunder is the same for management and non-management participants: (1) Form of Employment Agreement executed by the Company's Chairman and Chief Executive Officer. See Exhibit 10.23. (2) Form of Employment Agreement executed by the Company's President and Chief Operating Officer and certain of the Company's executive officers. See Exhibit 10.24. (3) Form of Employment Agreement executed by certain of the Company's Principal foreign employees. See Exhibit 10.2. (4) Form of Employment Agreement executed by the Company's Director - Europe. See Exhibit 10.3. (5) The Company's Amended 1985 Stock Option Plan. See Exhibit 10.4. (6) Form of Stock Option Agreement used in connection with options granted under the Company's Amended 1985 Stock Option Plan. See Exhibit 10.5. (7) The Company's Restated and Amended 1988 Employee Stock Purchase Plan. See Exhibit 10.20. (8) Form of Stock Purchase Agreement used in connection with options granted under the Company's Restated and Amended 1988 Employee Stock Purchase Plan. See Exhibit 10.7. (9) The Company's 1993 Directors' Non-Qualified Stock Option Plan. See Exhibit 10.8. (10) Form of Stock Option Agreement used in connection with options granted under the Company's 1993 Directors' Non- Qualified Stock Option Plan. See Exhibit 10.9. (b)REPORTS ON FORM 8-K No reports on Form 8-K were filed during the last quarter of the period covered by this Annual Report on Form 10-K. 14 (c) EXHIBITS Exhibit Number Exhibit ------- 3.1 The Company's Restated Articles of Incorporation and the Articles of Amendment thereto dated December 9, 1993. (Incorporated by reference to Exhibit 3.1 to Form 10-K, filed on or about March 31, 1995.) 3.2 The Company's Amended and Restated Bylaws. (Incorporated by reference to Exhibit 3.2 to Form 10-K, filed on or about March 28, 1994.) 10.2 Form of Employment Agreement executed by certain of the Company's Principal foreign employees. (Incorporated by reference to Exhibit 10.18 to Registration Statement No. 2-91224, filed on May 21, 1984.) 10.3 Form of Employment Agreement executed by the Company's Director - Europe. (Incorporated by reference to Exhibit 10.7 to Form 10-K, filed on or about March 28, 1991.) 10.4 The Company's Amended 1985 Stock Option Plan. (Incorporated by reference to Exhibit 10.14 to Form 10-K, filed on or about March 28, 1991.) 10.5 Form of Stock Option Agreement used in connection with options granted under the Company's Amended 1985 Stock Option Plan. (Incorporated by reference to Exhibit 10.15 to Form 10-K, filed on or about March 28, 1991.) 10.7 Form of Stock Purchase Agreement used in connection with options granted under the Company's Restated and Amended 1988 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 10.36 to Form 10-K, filed on or about March 28, 1989.) 10.8 The Company's 1993 Directors' Non-Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10.8 to Form 10-K, filed on or about March 28, 1994.) 10.9 Form of Stock Option Agreement used in connection with options granted under the Company's 1993 Directors' Non-Qualified Stock Option Plan. (Incorporated by reference to Exhibit 10.9 to Form 10-K, filed on or about March 28, 1994.) 10.17 Exclusive Agency Agreement, dated as of January 1, 1991, between E.I. Freight (Taiwan) Ltd. and EI Freight (H.K.) Limited. (Incorporated by reference to Exhibit 10.17 to Form 10-K, filed on or about March 28, 1994.) 10.18 Plan and Agreement of Reorganization, dated as of January 1, 1984, between the Company and the individual shareholders of Fons Pte. Ltd. (Incorporated by reference to Exhibit 2.5 to Registration Statement No. 2-91224, filed on May 21, 1984.) 10.19 Plan and Agreement of Reorganization, dated as of January 1, 1984, among the Company, EIO Investment Ltd., Wong Hoy Leung, Chiu Chi Shing, and James Li Kou Wang. (Incorporated by reference to Exhibit 2.6 to Registration Statement No. 2-91224, filed on May 21, 1984.) 10.20 The Company's Restated and Amended 1988 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 4.1 to Registration Statement No. 33-81460, filed on July 12, 1994.) 15 Exhibit Number Exhibit ------- 10.21 Credit Agreement Between the Company and Seattle-First National Bank dated June 6, 1994 with respect to the Company's $10,000,000 unsecured line of credit together with the Revolving Note due March 31, 1995. (Incorporated by reference to Exhibit 10.21 to Form 10-K, filed on or about March 31, 1995.) 10.22 Loan Modification Agreement Between the Company and Seattle-First National Bank dated March 28, 1995 amending the maturity date of the Revolving Note and extending the loan commitment to March 31, 1996. (Incorporated by reference to Exhibit 10.22 to Form 10-K, filed on or about March 31, 1995. Superseded by Exhibit 10.26 to this Report.) 10.23 Form of Employment Agreement executed by the Company's Chairman and Chief Executive Officer dated November 2, 1994. (Incorporated by reference to Exhibit 10.23 to Form 10-K, filed on or about March 31, 1995.) 10.24 Form of Employment Agreement executed by the Company's President and Chief Operating Officer and certain of the Company's executive officers dated November 2, 1994. (Incorporated by reference to Exhibit 10.24 to Form 10-K, filed on or about March 31, 1995.) 10.25 Loan Modification Agreement Between the Company and Seattle-First National Bank dated August 2, 1995 amending the maximum principal amount of the Company's unsecured line of credit to $ 15,000,000 and increasing the Company's maximum obligation under the Revolving Note to $ 15,000,000. 10.26 Loan Modification Agreement Between the Company and Bank of America NW, N.A. doing business as Seafirst Bank dated March 22, 1996 amending the maturity date of the Revolving Note and extending the loan commitment to March 31, 1997. 16 Exhibit Number Exhibit ------- --------- 11.1 Statement Re: Computation of Per Share Net Earnings. 13.1 Portions of the Company's Annual Report to Shareholders for the year ended December 31, 1995 incorporated by reference herein. Filed herewith. 21.1 Subsidiaries of the Registrant. 23. Consent of Independent Certified Public Accountants. 27. Financial Data Schedule (Filed Electronically Only). 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 28, 1996. EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. By: /s/ R. JORDAN GATES ------------------------------------- R. Jordan Gates Chief Financial Officer and Treasurer 18 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 28, 1996. SIGNATURE TITLE - --------- ----- /s/ Peter J. Rose Chairman of the Board and Chief Executive Officer - ------------------------- (Principal Executive Officer) and Director (Peter J. Rose) /s/ R. Jordan Gates Chief Financial Officer and Treasurer - ------------------------- (Principal Financial and Accounting Officer) (R. Jordan Gates) /s/ Kevin M. Walsh President and Chief Operating Officer and Director - ------------------------- (Kevin M. Walsh) /s/ James Li Kou Wang Executive Vice President and Director - ------------------------- (James Li Kou Wang) /s/ James J. Casey Director - ------------------------- (James J. Casey) /s/ Dan P. Kourkoumelis Director - ------------------------- (Dan P. Kourkoumelis) /s/ John W. Meisenbach Director - ------------------------- (John W. Meisenbach) 19 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Expeditors International of Washington, Inc.: Under date of February 16, 1996, we reported on the consolidated balance sheets of Expeditors International of Washington, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the 1995 Annual Report to Shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 1995. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK LLP /s/ KPMG PEAT MARWICK LLP Seattle, Washington February 16, 1996 20 SCHEDULE II EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993 (in thousands)
Additions --------------- Balance at Charged to Balance beginning costs and Deductions - at end Description of year expenses Other write-offs of year - ----------- ---------- ---------- ----- ------------ ------- ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE 1995 $3,310 $ 710 $14 $227 $3,807 ------ ------ --- ---- ------ ------ ------ --- ---- ------ 1994 $2,230 $1,322 $-- $242 $3,310 ------ ------ --- ---- ------ ------ ------ --- ---- ------ 1993 $1,214 $1,583 $-- $567 $2,230 ------ ------ --- ---- ------ ------ ------ --- ---- ------
21 INDEX TO EXHIBITS Location in Exhibit this Report Number Description on Form 10-K - ------- ----------- ----------- 10.25 Loan Modification Agreement Between the Company and Seattle-First National Bank dated August 2, 1995 amending the maximum principal amount of the Company's unsecured line of credit to $ 15,000,000 and increasing the Company's maximum obligation under the Revolving Note to $ 15,000,000. 23 10.26 Loan Modification Agreement Between the Company and Bank of America NW, N.A. doing business as Seafirst Bank dated March 22, 1996 amending the maturity date of the Revolving Note and extending the loan commitment to March 31, 1997. 24 11.1 Statement Re: Computation of Per Share Net Earnings. 25 13.1 Portions of the Company's Annual Report to Shareholders for the year ended December 31, 1995 incorporated by reference herein. Filed herewith. 26 21.1 Subsidiaries of the Registrant. 50 23. Consent of Independent Certified Public Accountants. 52 27. Financial Data Schedule (Filed Electronically Only). 22 EX-10.25 2 LOAN MODIFICATION AGREEMENT DATED 8/2/95 EXHIBIT 10.25 [Bank Logo] LOAN MODIFICATION AGREEMENT This agreement amends the REVOLVING NOTE dated JUNE 6, 1994 ("Note") and Credit Agreement dated June 6, 1994 ("Credit Agreement"), each executed by EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. ("Borrower") in favor of SEATTLE-FIRST NATIONAL BANK ("Bank"), regarding a loan in the maximum principal amount of $10,000,000.00 (the "Loan"). For mutual consideration, Borrower and Bank agree to amend the above loan documents as follows: 1. CREDIT LIMIT. The maximum principal amount of Borrower's line of credit is hereby changed to $15,000,000.00, and Borrower's maximum liability for principal under the Note is also changed to $15,000,000.00. 2. OTHER TERMS. Except as specifically amended by this agreement or any prior amendment, all other terms, conditions, and definitions of the Note and all other security agreements, guaranties, deeds of trust, mortgages, and other instruments or agreements entered into with regard to the Loan shall remain in full force and effect. DATED AUGUST 2, 1995. Bank: Borrower: SEATTLE-FIRST NATIONAL BANK EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. By: /s/ Peter J. Rose ----------------------------------- Title: Chief Executive Officer -------------------------------- By: /s/ Stan Diddams ------------------------ Title Vice President ---------------------- By: /s/ R. Jordan Gates ----------------------------------- Title: Chief Financial Officer -------------------------------- 23 EX-10.26 3 LOAN MODIFICATION AGREEMENT DATED 3/22/96 EXHIBIT 10.26 [Bank Logo] LOAN MODIFICATION AGREEMENT This agreement amends the REVOLVING NOTE dated JUNE 6, 1994 ("Note") and Credit Agreement dated JUNE 6, 1994 ("Credit Agreement"), each executed by EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. ("Borrower") in favor of Bank of America NW, N.A., doing business as Seafirst Bank, successor by name change to Seattle-First National Bank ("Bank"), regarding a loan in the maximum principal amount of $10,000,000.00 (the "Loan"), which currently has a maximum principal amount of $15,000,000.00. For mutual consideration, Borrower and Bank agree to amend the above loan documents as follows: 1. MATURITY DATE. The maturity date of the Note is changed to March 31, 1997. Bank's commitment to make advances to Borrower under its line of credit is also extended to MARCH 31, 1997. 2. OTHER TERMS. Except as specifically amended by this agreement or any prior amendment, all other terms, conditions, and definitions of the Note, Credit Agreement, and all other security agreements, guaranties, deeds of trust, mortgages, and other instruments or agreements entered into with regard to the Loan shall remain in full force and effect. DATED March 22, 1996. Bank: Borrower: SEATTLE-FIRST NATIONAL BANK EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. By: /s/ Peter J. Rose ------------------------------- Title: Chief Executive Officer ------------------------------- By: /s/ Stan Diddams ------------------------- Title Vice President ------------------------- By: /s/ R. Jordan Gates ------------------------------- Title: Chief Financial Officer ------------------------------- 24 EX-11.1 4 COMPUTATION OF PER SHARE NET EARNINGS EXHIBIT 11.1 Statement Re: Computation of Per Share Net Earnings Net earnings per weighted average common share is computed using the weighted average number of common shares and common share equivalents outstanding during each period presented. Common share equivalents represent stock options. Fully diluted earnings per share do not differ materially from primary earnings per share. 25 EX-13.1 5 FINANCIAL HIGHLIGHTS EXHIBIT 13.1
Financial Highlights (In thousands, except per share data) 1995 1994 1993 1992 1991 Revenues $584,691 450,607 361,487 333,166 253,974 Net earnings 17,395 13,217 10,167 11,279 10,196 Net earnings per share 1.38 1.08 .85 .94 .86 Cash dividends paid per share .12 .10 .10 -- -- Working capital 81,431 68,464 60,847 53,498 46,012 Total assets 204,128 162,788 144,314 118,029 104,702 Long-term debt -- -- -- 789 902 Shareholders' equity 117,192 101,110 87,641 78,993 66,428 Weighted average shares outstanding 12,583 12,275 12,026 12,062 11,819
All share and per share information has been adjusted to reflect a 2-for-1 stock split effected in November 1993. 26
Consolidated Balance Sheets (In thousands, except share data) December 31, 1995 1994 - ----------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents $ 36,142 21,427 Short-term investments 457 2,810 Accounts receivable, less allowance for doubtful accounts of $3,807 in 1995 and $3,310 in 1994 123,793 100,533 Deferred Federal and state income taxes 4,113 2,781 Other 3,862 2,566 -------- ------- Total current assets 168,367 130,117 -------- ------- Property and Equipment: Buildings and leasehold improvements 13,493 12,376 Furniture, fixtures, and equipment 27,210 20,473 Vehicles 3,644 3,205 -------- ------- 44,347 36,054 Less accumulated depreciation and amortization 20,799 15,100 -------- ------- 23,548 20,954 Land 4,694 4,741 -------- ------- Net property and equipment 28,242 25,695 Other assets, net 7,519 6,976 -------- ------- $204,128 162,788 -------- ------- -------- -------
See accompanying notes to consolidated financial statements. 27
(In thousands, except share data) December 31, 1995 1994 - ----------------------------------------------------------------------------------------- Current Liabilities: Short-term borrowings $ 285 234 Accounts payable 72,238 48,994 Accrued expenses, primarily salaries and related costs 11,129 8,542 Federal, state, and foreign income taxes 3,284 3,883 -------- ------- Total current liabilities 86,936 61,653 -------- ------- Deferred Federal income taxes -- 25 Shareholders' Equity: Preferred stock, par value $.01 per share Authorized 2,000,000 shares; none issued -- -- Common stock, par value $.01 per share Authorized 40,000,000 shares, issued and outstanding 12,010,663 shares at December 31, 1995 and 11,934,843 shares at December 31, 1994 120 119 Additional paid-in capital 13,129 12,651 Retained earnings 100,928 84,971 Equity adjustments from foreign currency translation 3,015 3,369 -------- ------- Total shareholders' equity 117,192 101,110 -------- ------- Commitments and contingencies $204,128 162,788 -------- ------- -------- -------
See accompanying notes to consolidated financial statements. 28
Consolidated Statements of Earnings (In thousands, except share data) Years Ended December 31, 1995 1994 1993 - ------------------------------------------------------------------------------------- Revenues: Airfreight $ 407,188 315,546 259,172 Ocean freight 126,638 92,945 74,859 Customsbrokerage and import services 50,865 42,116 27,456 ----------- ----------- ----------- Total revenues 584,691 450,607 361,487 ----------- ----------- ----------- Operating Expenses: Airfreight consolidation 334,281 257,994 208,665 Ocean freight consolidation 96,337 73,473 59,398 Salaries and related costs 84,272 64,177 50,104 Selling and promotion 7,545 5,293 4,021 Rent 6,651 5,563 3,881 Depreciation and amortization 6,629 4,919 3,692 Other 22,125 17,834 15,409 ----------- ----------- ----------- Total operating expenses 557,840 429,253 345,170 ----------- ----------- ----------- Operating income 26,851 21,354 16,317 ----------- ----------- ----------- OTHER INCOME (EXPENSE): Interest expense (312) (199) (249) Interest income 1,741 1,273 1,061 Other, net 119 (40) (60) ----------- ----------- ----------- Other income, net 1,548 1,034 752 ----------- ----------- ----------- Earnings before income taxes 28,399 22,388 17,069 Income tax expense 11,004 9,171 6,902 ----------- ----------- ----------- Net earnings $ 17,395 13,217 10,167 ----------- ----------- ----------- ----------- ----------- ----------- Net earnings per common share $ 1.38 $ 1.08 $ .85 ----------- ----------- ----------- ----------- ----------- ----------- Weighted average shares outstanding 12,583,078 12,275,117 12,025,690 ----------- ----------- ----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements. 29 Consolidated Statements of Shareholders' Equity
Equity adjustments (In thousands, except share data) Additional from foreign Years Ended December 31, 1995, Common stock paid-in Retained currency ------------------- 1994 and 1993 Shares Par Value capital earnings translation Total - --------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1992 11,795,642 $118 11,840 63,960 3,075 78,993 Exercise of stock options 3,350 -- 30 -- -- 30 Issuance of shares under stock purchase plan 41,688 -- 452 -- -- 452 Tax benefits related to stock options and stock purchase plan -- -- 7 -- -- 7 Net earnings -- -- -- 10,167 -- 10,167 Foreign currency translation adjustments -- -- -- -- (826) (826) Dividends paid ($.10 per share) -- -- -- (1,182) -- (1,182) ---------- ---- ------ ------ ----- ------ Balance at December 31, 1993 11,840,680 $118 12,329 72,945 2,249 87,641 Exercise of stock options, net 154,340 2 1,622 -- -- 1,624 Issuance of shares under stock purchase plan 50,999 -- 556 -- -- 556 Shares repurchased under provisions of stock repurchase plan (111,176) (1) (2,172) -- -- (2,173) Tax benefits related to stock options and stock purchase plan -- -- 316 -- -- 316 Net earnings -- -- -- 13,217 -- 13,217 Foreign currency translation adjustments, net of deferred taxes of $196 -- -- -- -- 1,120 1,120 Dividends paid ($.10 per share) -- -- -- (1,191) -- (1,191) ---------- ---- ------ ------ ----- ------- Balance at December 31, 1994 11,934,843 $119 12,651 84,971 3,369 101,110 Exercise of stock options, net 96,520 1 1,143 -- -- 1,144 Issuance of shares under stock purchase plan 60,423 1 989 -- -- 990 Shares repurchased under provisions of stock repurchase plan (81,123) (1) (2,062) -- -- (2,063) Tax benefits related to stock options and stock purchase plan -- -- 408 -- -- 408 Net earnings -- -- -- 17,395 -- 17,395 Foreign currency translation adjustments, net of deferred tax credit of $196 -- -- -- -- (354) (354) Dividends paid ($.12 per share) -- -- -- (1,438) -- (1,438) ---------- ---- ------ ------- ----- ------- Balance at December 31, 1995 12,010,663 $120 13,129 100,928 3,015 117,192 ---------- ---- ------ ------- ----- ------- ---------- ---- ------ ------- ----- -------
See accompanying notes to consolidated financial statements. 30 Consolidated Statements of Cash Flows
(In thousands) Years Ended December 31, 1995 1994 1993 - --------------------------------------------------------------------------------------------- Operating Activities: Net earnings $ 17,395 13,217 10,167 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for losses on accounts receivable 710 1,322 1,583 Depreciation and amortization 6,629 4,919 3,692 Deferred income tax benefit (340) (2,461) (533) Amortization of cost in excess of net assets of acquired businesses 320 244 186 Provision for insurance claims -- -- 914 Changes in operating assets and liabilities: Increase in accounts receivable (24,054) (15,725) (23,407) Increase in accounts payable, accrued expenses and taxes payable 24,525 9,571 12,860 Other ( 1,641) 107 (1,163) -------- ------- ------- Net cash provided by operating activities (balances carried forward) $ 23,544 11,194 4,299 --------- ------- ------- --------- ------- ------- 31
(In thousands) Years Ended December 31, 1995 1994 1993 - --------------------------------------------------------------------------------------------- Net cash provided by operating activities (balances brought forward) $ 23,544 11,194 4,299 Investing Activities: Decrease (increase) in short-term investments 2,353 (1,325) (1,485) Purchase of property and equipment (9,302) (8,561) (5,687) Other ( 977) (1,147) (1,021) -------- ------ ------ Net cash used in investing activities (7,926) (11,033) (8,193) -------- ------ ------ Financing Activities: Short-term borrowings, net 44 (4,092) 4,328 Principal payments on long-term debt -- -- (902) Proceeds from issuance of common stock 2,134 2,180 489 Repurchases of common stock (2,063) (2,173) -- Dividends paid (1,438) (1,191) (1,182) -------- ------ ------ Net cash (used in) provided by financing activities (1,323) (5,276) 2,733 Effect of exchange rate changes on cash 420 369 (516) -------- ------ ------ Increase (decrease) in cash and cash equivalents 14,715 (4,746) (1,677) Cash and cash equivalents at beginning of year 21,427 26,173 27,850 --------- ------ ------ Cash and cash equivalents at end of year $ 36,142 21,427 26,173 --------- ------ ------ --------- ------ ------ Interest and Taxes paid: Interest $ 306 158 309 Income taxes 13,697 8,797 7,701
See accompanying notes to consolidated financial statements. 32 Notes to Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies A. Basis of Presentation Expeditors International of Washington, Inc. ("the Company") is an international logistics company operating in the United States, Europe, the Far East, the Middle East, Australia/New Zealand, Latin America and Canada, and through a worldwide network of exclusive and non-exclusive agents. The Company's customers include retailing and wholesaling, electronics, and manufacturing companies around the world. The Company grants credit upon approval to customers. The consolidated financial statements include the accounts of the Company and its subsidiaries. In addition the accounts of exclusive agents have been consolidated in those circumstances where the Company maintains unilateral control over the agent's assets and operations, notwithstanding a lack of technical majority ownership of the agents common stock. All significant intercompany accounts and transactions have been eliminated in consolidation. All dollar amounts in the footnotes are presented in thousands except for share data. B. Short-term investments On January 1, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, which requires that investments be designated as either held-to-maturity, available-for-sale, or trading. Short-term investments are available-for-sale and cost approximates market at December 31, 1995 and 1994. C. Property and Equipment, Depreciation and Amortization Property and equipment are recorded at cost, including interest capitalized for the construction of certain facilities, and are depreciated or amortized on the straight-line method over the shorter of the assets' estimated useful lives or lease terms. No interest was capitalized in 1995 or 1994. Interest capitalized in 1993 amounted to $53. Expenditures for maintenance, repairs, and renewals of minor items are charged to earnings as incurred. Major renewals and improvements are capitalized. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in income for the period. The excess of the cost over the fair value of the net assets of acquired businesses (included in Other assets, net) is amortized on the straight-line method over periods up to 20 years. D. Revenues and Revenue Recognition Air freight revenues include the charges to the Company for carrying the shipments when the Company acts as a freight consolidator. Ocean freight revenues include the charges to the Company for carrying the shipments when the Company acts as a Non-Vessel Operating Common Carrier (NVOCC). Revenues realized in other capacities include only the commissions and fees earned. Revenues related to shipments are recognized at the time the freight is tendered to a direct carrier at origin. All other revenues, including breakbulk services, local transportation, customs formalities, distribution services and logistics management, are recognized upon performance. 33 E. Income Taxes Income taxes are accounted for under the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company used 34% in 1993 and 35% for both 1994 and 1995. The impact of this change was immaterial. F. Net Earnings per Common Share Net earnings per common share is computed using the weighted average number of common shares and dilutive common share equivalents outstanding. Fully diluted earnings per share do not differ materially from primary earnings per share. G. Foreign Currency Foreign currency amounts attributable to foreign operations have been translated into U.S. dollars using year-end exchange rates for assets and liabilities, historical rates for equity, and average annual rates for revenues and expenses. Unrealized gains or losses arising from fluctuations in the year-end exchange rates are generally recorded as equity adjustments from foreign currency translation. Currency fluctuations are a normal operating factor in the conduct of the Company's business and exchange transaction gains and losses are included in freight consolidation expenses. Foreign currency transaction gains and losses realized by the Company's foreign operations in 1995, 1994, and 1993, were insignificant. H. Cash Equivalents All highly liquid investments with a maturity of three months or less at date of purchase are considered to be cash equivalents. I. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange rates, and United States and foreign laws and policies relating to tariffs, trade restrictions, foreign investments and taxation. Periodically, governments consider a variety of changes to current tariffs and trade restrictions. The Company cannot predict which, if any, of these proposals may be adopted. Nor can the Company predict the effects adoption of any such proposal will have on the Company's business. Doing business in foreign locations also subjects the Company to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to being affected by governmental policies concerning international trade, the Company's business may also be affected by political developments and changes in government personnel or policies in the nations in which it does business. 34 J. Reclassification In 1995, the Company modified its presentation for the investment in its exclusive agent in Taiwan. The respective asset and liability accounts of this entity are reported within the appropriate captions of the Company's Consolidated Balance Sheet in conformance with the Company's consolidation policy. The Company has historically included the operating results of this exclusive agent within the appropriate captions of the Consolidated Statement of Earnings. Conforming reclassifications have been made to the 1994 Consolidated Balance Sheet and to the 1993 and 1994 Statements of Cash Flows. In addition, certain other 1994 and 1993 amounts have been reclassified to conform with the 1995 presentation. Note 2. Credit Arrangements At December 31, 1995, the Company had a $15,000 bank line of credit extending through March 31, 1996. Borrowings under the line bear interest at the prime rate and are unsecured. As of December 31, 1995 and December 31, 1994 there were no borrowings under this line of credit. The majority of the Company's foreign subsidiaries maintain bank lines of credit for short-term working capital purposes. These credit lines are supported by standby letters of credit issued by a United States bank, or guarantees issued by the Company to the foreign banks issuing the credit line. Lines of credit bear interest at .5% to 1.5% over the foreign banks' equivalent prime rate. At December 31, 1995 and 1994, the Company was liable for $285 and $234 respectively, of short-term borrowings under these lines, and at December 31, 1995 was contingently liable for approximately $12,849 under outstanding standby letters of credit and guarantees related to these lines of credit and other obligations. In addition, at December 31, 1995 the Company had a $7,750 credit facility with a United Kingdom bank (U.K. facility), secured by a corporate guarantee. The Company was contingently liable under the U.K. facility at December 31, 1995 for approximately $7,396 used to secure customs bonds issued by foreign governments and to provide short-term overdraft facilities to several of the Company's subsidiaries. At December 31, 1995, the Company was in compliance with all restrictive covenants of these credit lines and the associated credit facilities, including maintenance of certain minimum asset, working capital and equity balances and ratios. 35 Note 3. Income Taxes Income tax expense for 1995, 1994 and 1993 includes the following components:
Federal State Foreign Total --------- ------- ------- ------- 1995 Current $ 7,121 866 3,357 11,344 Deferred income tax (benefit) (403) 63 -- (340) --------- ------- ------- ------- $ 6,718 929 3,357 11,004 --------- ------- ------- ------- --------- ------- ------- ------- 1994 Current $ 7,162 1,660 2,810 11,632 Deferred income tax (benefit) (2,131) (330) -- (2,461) --------- ------- ------- ------- $ 5,031 1,330 2,810 9,171 --------- ------- ------- ------- --------- ------- ------- ------- 1993 Current $ 4,481 966 1,988 7,435 Deferred income tax (benefit) (592) 59 -- (533) --------- ------- ------- ------- $ 3,889 1,025 1,988 6,902 --------- ------- ------- ------- --------- ------- ------- -------
Income tax expense differs from amounts computed by applying the U.S. Federal income tax rate of 35% in 1995 and 1994 and 34% in 1993, to earnings before income taxes as a result of the following:
1995 1994 1993 ------ ------ ------ Computed "expected" tax expense $ 9,940 7,836 5,974 Increase (reduction) in income taxes resulting from: State and local income taxes, net of federal income tax benefit 604 865 666 Increase in valuation allowance for deferred tax assets 49 119 20 Other, net 411 351 242 ------ ------ ------ $ 11,004 9,171 6,902 ------ ------ ------ ------ ------ ------
36 The components of earnings before income taxes are as follows:
1995 1994 1993 -------- -------- -------- United States $ 13,307 11,108 7,939 Foreign 15,092 11,280 9,130 -------- -------- -------- $ 28,399 22,388 17,069 -------- -------- -------- -------- -------- --------
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 1995 and 1994 are as follows:
Year Ended December 31, 1995 1994 ------- ------- Deferred tax assets: Foreign tax credits related to unremitted foreign earnings $ 4,010 1,737 Accrued intercompany and third party charges, deductible for taxes upon economic performance (i.e. actual payment) 2,501 1,372 Provision for doubtful accounts receivable 1,035 925 Excess of financial statement over tax depreciation 610 347 Foreign net operating loss carryforwards 587 538 Provision for insurance claims 372 372 Interest income - seller financed real estate 168 90 Other 434 346 ------- ------- Total gross deferred tax assets 9,717 5,727 Less valuation allowance (587) (538) ------- ------- 9,130 5,189 ------- ------- Deferred tax liabilities: Unremitted foreign earnings (4,219) (2,234) Other (798) (199) ------- ------- Total gross deferred tax liabilities (5,017) (2,433) Net deferred tax assets $ 4,113 2,756 ------- ------- ------- -------
37 At December 31, 1995 the Company has net operating loss carryforwards for foreign income tax purposes of $1,678 which are available over an indefinite period to offset future foreign taxable income. The Company has not provided U.S. Federal income taxes on undistributed earnings of foreign subsidiaries accumulated through December 31, 1992 since the Company intends to reinvest such earnings indefinitely or to distribute them in a manner in which no significant additional taxes would be incurred. Such undistributed earnings are approximately $41,900 and the additional Federal and state taxes payable in a hypothetical distribution of such accumulated earnings would approximate $10,100. The Company provides for Federal and state income tax expense on foreign earnings in 1993 and future fiscal years without regard to whether such earnings will be permanently reinvested outside the United States. Note 4. Shareholders' Equity A. Dividends The Board of Directors declared semi-annual dividends of $.06 per share of common stock in 1995 and $.05 per share of common stock in 1994 and 1993. Dividends were paid on June 15, 1995, 1994 and 1993 and December 15, 1995, 1994 and 1993 to shareholders of record as of June 1, 1995, 1994 and 1993 and December 1, 1995, 1994 and 1993, respectively. On October 11, 1993, the Board declared a 2-for-1 stock split, effected in the form of a stock dividend of one share of common stock for every share outstanding, and increased the authorized common stock to 40,000,000 shares. The stock dividend was distributed on November 11, 1993 to shareholders of record on October 27, 1993. All share and per share information, except par value, has been adjusted for all years to reflect the stock split. B. Non-Discretionary Stock Repurchase Plan The Board of Directors has approved a Non-Discretionary Stock Repurchase Plan. Under the terms of this plan, management is authorized to repurchase up to 550,000 shares of the Company's common stock, in the open market, with the proceeds received from the exercise of Employee and Director Stock Options. As of December 31, 1995, the Company had repurchased and retired 192,299 shares of common stock at an average price of $22.03. C. Stock Option Plans The Company has a stock option plan ("1985 Plan") for employees under which the Board of Directors may grant to officers and key employees incentive and/or non-qualified stock options to purchase common stock at prices equal to or greater than market value on the date of grant. The Company also has a stock option plan ("Directors' Plan") under which non-employee directors elected at each annual meeting are granted non-qualified options to purchase 2,000 shares of common stock on the first business day of the next month following the meeting. Outstanding options under the 1985 Plan vest and become exercisable over periods up to five years from the date of grant and expire no more than ten years from the date of grant. Outstanding options under the Directors' Plan vest and are exercisable immediately and expire ten years from the date of grant. Upon the exercise of non-qualified stock options, the Company derives a tax deduction measured by the excess of the market value over the option price at the date of exercise. The related tax benefit is credited to additional paid-in capital. 38 Details regarding the plans are as follows:
Unoptioned Shares Oustanding Options - ----------------------------------------------------------------------------------------- 1985 Directors' Number of Price per Plan Plan shares shares - ----------------------------------------------------------------------------------------- Balance at December 31, 1992 124,182 --- 1,146,352 $ .37-$15.75 Options authorized 500,000 56,000 --- Options granted (99,000) (8,000) 107,000 $ 12.75-$14.25 Options exercised --- --- (3,350) $ 8.00-$12.63 Options cancelled 24,000 2,000 (26,000) $ 8.00-$15.75 --------- --------- --------- Balance at December 31, 1993 549,182 50,000 1,224,002 $ .37-$15.75 --------- --------- --------- Options granted (172,750) (6,000) 178,750 $ 17.00-$20.75 Options exercised --- --- (172,782) $ .37-$13.00 Options cancelled 63,750 --- (63,750) $ 11.25-$17.00 --------- --------- --------- Balance at December 31, 1994 440,182 44,000 1,166,220 $ 5.17-$20.75 --------- --------- --------- Options granted (352,300) (6,000) 358,300 $ 22.50-$22.75 Options exercised -- (96,520) $ 5.17-$15.75 Options cancelled 22,900 -- (22,900) $ 5.92-$22.50 --------- --------- --------- Balance at December 31, 1995 110,782 38,000 1,405,100 $ 5.17-$22.75 --------- --------- --------- --------- --------- ---------
At December 31, 1995, options to purchase 707,635 shares were exercisable at a weighted average price of $11.57 per share. Financial Accounting Standards Board Statement No. 123, Accounting for Stock-Based Compensation, establishes the accounting and reporting standards for stock-based employee compensation plans, including stock purchase plans, stock options and stock appreciation rights. This new standard defines a fair value-based method of accounting for these equity instruments. This method measures compensation cost based on the value of the award and recognizes that cost over a specified service period. Companies may elect to adopt the fair value method or may continue accounting for these types of equity instruments under current APB Opinion No. 25, Accounting for Stock Issued to Employees. Companies which continue using APB Opinion No. 25 must make pro forma disclosures of net income and earnings per share using the fair value method. Statement No. 123 applies to fiscal years beginning after December 15, 1995. The Company anticipates that it will continue to use APB Opinion No. 25 and will make pro forma disclosures using the fair value method. 39 D. Stock Purchase Plan The Company's 1988 Employee Stock Purchase Plan provides for 700,000 shares of the Company's common stock to be reserved for issuance upon exercise of purchase rights granted to employees who elect to participate through regular payroll deductions beginning August 1 of each year. The purchase rights are exercisable on July 31 of the following year at a price equal to the lesser of (1) 85% of the fair market value of the Company's stock on July 31 or (2) 85% of the fair market value of the Company's stock on the preceding August 1. At December 31, 1995, 1994 and 1993, an aggregate of 273,886 shares, 213,463 shares, and 162,464 shares, respectively, had been issued under the plan, and at December 31, 1995, $580 had been withheld in connection with the plan year ending July 31, 1996. Note 5. Commitments A. Leases The Company occupies office and warehouse facilities under terms of operating leases expiring up to 2007. At December 31, 1995, future minimum annual lease payments under all leases are as follows:
1996 $ 5,186 1997 3,986 1998 2,664 1999 1,697 2000 628 Thereafter 609 --------- $ 14,770 --------- ---------
B. Employee Benefits The Company has an employee savings plan under which the Company provides a discretionary matching contribution. In 1995, 1994, and 1993, the Company's contributions under the plan were $521, $396, and $304, respectively. Note 6. Contingent Liabilities The Company is ordinarily involved in claims and lawsuits which arise in the normal course of business, none of which currently, in management's opinion, will have a significant effect on the Company's financial condition. 40 Note 7. Business Segment Information Financial information regarding the Company's 1995, 1994, and 1993 operations by geographic area follows:
- ---------------------------------------------------------------------------------------------------------------------------- North Australia/ Middle Latin Elimi- Consoli- America Far East New Zealand Europe East America nation dated - ---------------------------------------------------------------------------------------------------------------------------- 1995 Revenues from unaffiliated customers $165,026 351,056 5,610 61,785 511 703 -- 584,691 Transfers between geographic areas 8,756 1,579 1,883 2,083 301 181 (14,783) -- -------- -------- -------- -------- -------- ------- -------- -------- Total revenues $173,782 352,635 7,493 63,868 812 884 14,783) 584,691 -------- -------- -------- -------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ------- -------- -------- Operating income (loss) $ 13,431 9,005 651 4,553 (308) (481) -- 26,851 Identifiable assets at year end $112,248 51,732 5,135 31,326 2,213 1,474 -- 204,128 Capital expenditures $ 4,210 1,422 373 2,189 457 651 -- 9,302 Depreciation and amortization $ 3,485 1,328 261 1,427 62 66 -- 6,629 - ---------------------------------------------------------------------------------------------------------------------------- 1994 Revenues from unaffiliated customers $133,926 269,432 5,400 41,617 232 -- -- 450,607 Transfers between geographic areas 6,771 1,134 388 1,426 263 -- (9,982) -- -------- -------- -------- -------- -------- ------- -------- -------- Total revenues $140,697 270,566 5,788 43,043 495 -- (9,982) 450,607 -------- -------- -------- -------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ------- -------- -------- Operating income (loss) $ 10,789 7,309 384 2,951 (79) -- -- 21,354 Identifiable assets at year end $ 85,633 47,327 3,760 24,761 1,307 -- -- 162,788 Capital expenditures $ 4,293 1,645 640 1,908 75 -- -- 8,561 Depreciation and amortization $ 2,602 955 230 1,107 25 -- -- 4,919 - ---------------------------------------------------------------------------------------------------------------------------- 1993 Revenues from unaffiliated customers $114,803 220,127 2,448 23,967 142 -- -- 361,487 Transfers between geographic areas 5,306 838 1,449 1,022 249 -- (8,864) -- -------- -------- -------- -------- -------- ------- -------- -------- Total revenues $120,109 220,965 3,897 24,989 391 -- (8,864) 61,487 -------- -------- -------- -------- -------- ------- -------- -------- -------- -------- -------- -------- -------- ------- -------- -------- Operating income $ 8,266 5,980 306 1,762 3 -- -- 16,317 Identifiable assets at year end $ 73,486 50,790 3,419 15,257 1,362 -- -- 144,314 Capital expenditures $ 2,765 1,123 336 1,455 8 -- -- 5,687 Depreciation and amortization $ 2,062 652 184 780 14 -- -- 3,692 - ----------------------------------------------------------------------------------------------------------------------------
Financial information contained under the North America caption relate to the United States and Canada. The Canadian balances are immaterial. The Company charges its subsidiaries and affiliates for services rendered in the United States on a cost recovery basis. 41 Note 8. Quarterly Results (Unaudited)
- ------------------------------------------------------------------------------------ 1st 2nd 3rd 4th - ------------------------------------------------------------------------------------ 1995 Revenues $122,878 141,520 159,168 161,125 Net revenues 33,286 36,732 41,272 42,783 Net earnings 3,218 4,087 5,015 5,075 Net earnings per share .26 .33 .40 .40 1994 Revenues $ 93,088 106,065 123,846 127,608 Net revenues 24,956 28,204 32,033 33,947 Net earnings 2,282 3,153 3,902 3,880 Net earnings per share .19 .26 .32 .31
Net revenues are determined by deducting freight consolidation costs from total revenues. Quarterly per share data may not equal the per share total reported for the year. 42 Independent Auditors' Report The Board of Directors and Shareholders Expeditors International of Washington, Inc.: We have audited the consolidated balance sheets of Expeditors International of Washington, Inc. and subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Expeditors International of Washington, Inc. and subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK, LLP /s/ KPMG Peat Marwick, LLP Seattle, Washington February 16, 1996 43 Management's Discussion and Analysis of Financial Condition and Results of Operations General Expeditors International of Washington, Inc. is engaged in the business of global logistics management, including international freight forwarding and consolidation, for both air and ocean freight. The Company acts as a customs broker in all domestic offices, and in many of its overseas offices. The Company also provides additional services for its customers including value added distribution, purchase order management, vendor consolidation and other logistics solutions. The Company offers domestic forwarding services only in conjunction with international shipments. The Company does not compete for overnight courier or small parcel business. The Company does not own or operate aircraft or steamships. International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange rates, and United States and foreign laws and policies relating to tariffs, trade restrictions, foreign investments and taxation. Periodically, governments consider a variety of changes to current tariffs and trade restrictions. The Company cannot predict which, if any, of these proposals may be adopted. Nor can the Company predict the effects adoption of any such proposal will have on the Company's business. Doing business in foreign locations also subjects the Company to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to being affected by governmental policies concerning international trade, the Company's business may also be affected by political developments and changes in government personnel or policies in the nations in which it does business. The Company's ability to provide services to its customers is highly dependent on good working relationships with a variety of entities including airlines, ocean steamship lines, and governmental agencies. The Company considers its current working relationships with these entities to be satisfactory. However, changes in space allotments available from carriers, governmental deregulation efforts, "modernization" of the regulations governing customs brokerage, and/or changes in governmental quota restrictions could affect the Company's business in unpredictable ways. Historically, the Company's operating results have been subject to a seasonal trend when measured on a quarterly basis. The first quarter has traditionally been the weakest and the third quarter has traditionally been the strongest. This pattern is the result of, or is influenced by, numerous factors including climate, national holidays, consumer demand, economic conditions and a myriad of other similar and subtle forces. In addition, this historical quarterly trend has been influenced by the growth and diversification of the Company's international network and service offerings. The Company cannot accurately forecast many of these factors nor can the Company estimate accurately the relative influence of any particular factor and, as a result, there can be no assurance that historical patterns, if any, will continue in future periods. A significant portion of the Company's revenues are derived from customers in retail industries whose shipping patterns are tied closely to consumer demand, and from customers in industries whose shipping patterns are dependent upon just-in-time production schedules. Therefore, the timing of the Company's revenues are, to a large degree, impacted by factors out of the Company's control, such as a sudden change in consumer demand for retail goods and/or manufacturing production delays. Additionally, many customers ship a significant portion of their goods at or near the end of a quarter, and therefore, the Company may not learn of a shortfall in revenues until late in a quarter. To the extent that a shortfall in revenues or earnings was not expected by securities analysts, any such shortfall from levels predicted by securities analysts could have an immediate and adverse effect on the trading price of the Company's stock. In October 1995, the Financial Accounting Standards Board issued Statement No. 123, Accounting for Stock-Based Compensation, which established the accounting and reporting standards for stock-based employee compensation plans, including stock purchase plans, stock options and stock appreciation rights. Under the provision of this pronouncement, Companies utilizing these kinds of equity instruments must either (1) provide compensation expense, based upon prescribed measurement guidelines or (2), elect to continue using APB Opinion No. 25, Accounting for Stock Issued to Employees under the stipulation that supplemental pro forma disclosures of net income and earnings per share be made as if these new accounting and reporting standards had been applied. Statement No. 123 is 44 required for fiscal years beginning after December 15, 1995. The Company anticipates that it will continue to use APB Opinion No. 25 and will make the required supplemental pro forma disclosures. Results of Operations The following table shows the consolidated net revenues (revenues less consolidation expenses) attributable to the Company's principal services and the Company's expenses for 1995, 1994 and 1993, expressed as percentages of net revenues. With respect to the Company's services other than consolidation, net revenues are identical to revenues. Management believes that net revenues are a better measure than total revenues of the relative importance of the Company's principal services since total revenues earned by the Company as a freight consolidator include the carriers' charges to the Company for carrying the shipment whereas revenues earned by the Company in its other capacities include only the commissions and fees actually earned by the Company.
- --------------------------------------------------------------------------------------------------- (Amounts in thousands) 1995 1994 1993 Percent Percent Percent of net of net of net Amount revenues Amount revenues Amount revenues - --------------------------------------------------------------------------------------------------- Net revenues: Airfreight $ 72,907 47% $ 57,552 48% $ 50,507 54% Ocean freight 30,301 20 19,472 17 15,461 17 Customs brokerage and import services 50,865 33 42,116 35 27,456 29 -------- --- -------- --- -------- --- Net revenues 154,073 100 119,140 100 93,424 100 -------- --- -------- --- -------- --- Operating expenses: Salaries and related costs 84,272 55 64,177 54 50,104 54 Other 42,950 28 33,609 28 27,003 29 -------- --- -------- --- -------- --- Total operating expense $127,222 83 97,786 82 77,107 83 -------- --- -------- --- -------- --- Operating income 26,851 17 21,354 18 16,317 17 Other income, net 1,548 1 1,034 1 752 1 -------- --- -------- --- -------- --- Earnings before income taxes 28,399 18 22,388 19 17,069 18 Income tax expense 11,004 7 9,171 8 6,902 7 Net earnings $ 17,395 11% $ 13,217 11% $ 10,167 11% -------- --- -------- --- -------- --- -------- --- -------- --- -------- ---
1995 compared with 1994 Airfreight net revenues in 1995 increased 27% compared with 1994 primarily due to (1) increased airfreight shipments and tonnages handled by the Company from the Far East to North America and Europe, (2) increased prices charged by the airlines which were passed along to customers, and (3) increased export airfreight shipments and tonnages from North America and Europe, and from North America to Australia and the Middle East. The Company's North American export airfreight net revenues increased 24% in 1995 compared to 1994. Net air freight revenues from the Far East and from Europe increased 18% and 46%, respectively for 1995 compared with 1994. Ocean freight net revenues increased 56% in 1995 compared to 1994 a result of the Company being able to aggressively market extremely competitive ocean freight rates to its customers, primarily on freight from the Far East to North America. The ability to offer these competitive rates was due to favorable contracts with certain key ocean carriers from whom the Company contracts space on a wholesale basis to be offered to its customers on a retail basis. 45 The Company was able to expand market share while at the same time increase its ocean freight margins. In addition to increases in the traditional NVOCC (Non-Vessel Operating Common Carrier) and ocean forwarding business, E.C.M.S. (Expeditors Cargo Management Service), a PC-based ocean freight consolidation management and purchase order tracking service, was instrumental in providing new business. The Company's North American export ocean freight net revenues increased 48% in 1995 compared to 1994. This increase was a result of the Company handling more ocean shipments moving from North America to Europe, and, from North America to the Far East. Net ocean freight revenues from the Far East and from Europe increased 69% and 71%, respectively for 1995 compared with 1994. Customs brokerage and import services increased 21% in 1995 as compared with 1994 as a result of (1) the Company's growing reputation for providing high quality service; (2) consolidation within the customs brokerage market as customers seek out customs brokers with more sophisticated computerized capabilities, critical to an overall logistics management program, and (3) the growing importance of distribution services as a separate and distinct service offered to existing and potential customers-distribution services account for nearly 18% of the increase in Customs brokerage and import services revenues for 1995 compared with 1994. Salaries and related costs increased annually as a result of, (1) the Company's increased hiring of sales, operations, and administrative personnel in existing and new offices to accommodate increases in business activity and (2) increased compensation levels. Salaries and related costs increased approximately 1% as a percentage of net revenue. This small 1% increase is largely attributable to increased staffing related to the opening of new offices, principally in Latin America and Europe, in the last six months of 1995. The relationship between salaries and net revenues is the result of a compensation philosophy that has been maintained since the inception of the Company: offer a modest base salary and the opportunity to share in a fixed and determinable percentage of the operating profit of the business unit controlled by each key employee. Using this compensation model, changes in individual compensation will occur in proportion to changes in Company profits. Management believes that the growth in revenues, net revenue and net income for 1995, (and 1994 and 1993) are a direct result of the incentives inherent in the Company's compensation program. Other operating expenses increased in 1995 as compared with 1994 as rent expense, communications expense, quality and training expenses, and other costs to accommodate the Company's growing operations. Other operating expenses as a percentage of net revenues remained constant in 1995 as compared with 1994. Other income, net, increased in 1995 as compared to 1994 primarily due to higher interest income earned, as a result of higher positive cash flow during 1995 and resulting higher interest income on the Company's invested cash balances. In addition, due to the change in the Company's tax policy effective January 1, 1993, line of credit borrowings in the United States were kept at a minimum level by repatriating cash from overseas subsidiaries. This is very significant to the Company's U.S. operations where the Company is most active in its role as a customs broker and regularly advances duties on behalf of customers. The Company pays income taxes in the United States and other jurisdictions, as well as other taxes, which are typically included in costs of operations. Effective income tax rates per financial statements decreased in 1995 to 38.7% compared with 41% in 1994. This decrease is a result of lower state taxes in the state of California allowed because of changes in that state's unitary tax regulations and also as a result of the reversal of certain valuation allowances established in 1994 and earlier. These valuation allowances related to net operating loss carryforwards generated at the time the actual losses were incurred in foreign countries, but were not recognized as a reduction in income tax expense until actually utilized to offset subsequent taxable income. 1994 compared with 1993 Airfreight net revenues increased approximately 14% in 1994 as compared with 1993, primarily due to increased volumes of air freight tonnages on shipments from certain of the Company's Far East markets, combined with growth in the Company's U.S. export and European export airfreight markets as a result of increased sales efforts, and, in 1994, an improving world economy as compared with 1993. The Company's U.S. Exports increased 10% in 1994 compared to 1993. Net air freight revenues from the Far East and from Europe increased 21% and 28%, respectively for 1994 compared with 1993. 46 Ocean freight net revenues increased in 26% 1994 compared to 1993 due to increased ocean freight volumes handled by the Company's offices in North America, the Far East and Europe. The increase in ocean freight net revenue in 1994 compared with 1993 were a result of favorable contracts with certain key ocean carriers. During 1994, the Company's ocean freight volumes reached a size that major ocean carriers offered the Company significant rate concessions, not previously available to the Company. These incentives resulted in higher profit margins for the Company in 1994 as compared with 1993. In addition to increases in the traditional NVOCC and ocean forwarding business - 20% in 1994 compared to 1993, E.C.M.S., in its first full year of operation, accounted for nearly 40% of the Company's 1994 increase in ocean freight net revenue. Net ocean freight revenues from the Far East and from Europe increased 32% and 51%, respectively in 1994 as compared with 1993. Customs brokerage and import services increased annually as a result of (1) the Company's growing reputation for providing high quality service; (2) consolidation within the customs brokerage market as customers seek out customs brokers with more sophisticated computerized capabilities, critical to an overall logistics management program, and (3) the emergence of distribution services in 1994 as a separate and distinct service offered to existing and potential customers - distribution services accounted for nearly 20% of the increase in Customs brokerage and import services revenues for 1994 compared with 1993. Salaries and related costs increased annually as a result of (1) the Company's increased hiring of sales, operations, and administrative personnel in existing and new offices to accommodate increases in business activity and (2) increased compensation levels . Salaries and related costs as a percentage of net revenue remained constant in 1994 as compared with the same percentage figure in 1993. Other operating expenses increased in 1994 as compared with 1993 as rent expense, communications expense, quality and training expenses, and other costs expanded to accommodate the Company's growing operations. Other operating expenses as a percentage of net revenue actually decreased 1% in 1994 as compared with 1993, largely related to economies of scale recognized in fixed costs of computers and communications. Other income, net, increased in 1994 as compared to 1993 primarily due to higher interest income earned, as a result of higher interest rates, on the Company's invested cash balances. In addition, due to the change in the Company's tax policy effective January 1, 1993, line of credit borrowings in the United States were kept at a minimum level by repatriating cash from overseas subsidiaries. This resulted in lower interest expense in 1994, despite higher interest rates and higher levels of business activity than experienced in 1993. Currency and Other Risk Factors International air/ocean freight forwarding and customs brokerage are intensively competitive and are expected to remain so for the foreseeable future. There are a large number of entities competing in the international logistics industry, however, the Company's primary competition is confined to a relatively small number of companies within this group. While there is currently a marked trend within the industry toward consolidation into large firms with multinational office and agency networks, regional and local broker/forwarders remain a competitive force. Historically, the primary competitive factors in the international logistics industry have been price and quality of service, including reliability, responsiveness, expertise, convenience, and scope of operations. The Company emphasizes quality service and believes that its prices are competitive with those of others in the industry. Recently customers have exhibited a trend towards the more sophisticated and efficient procedures for the management of the logistics supply chain by embracing strategies such as just in time inventory management. This trend has made having sophisticated computerized customer service capabilities and a stable worldwide network significant factors in attracting and retaining customers. Developing these systems and a worldwide network has added a considerable indirect cost to the services provided to customers. Smaller and middle-tier competitors, in general, do not have the resources available to develop customized systems and worldwide network. As a result, there is a significant amount of consolidation currently taking place in the industry. Management expects that this trend toward consolidation will continue for the short to medium term. Historically, growth through aggressive acquisition has proven to be 47 a challenge for many of the Company's competitors and typically involves the purchase of significant "goodwill", the value of which can be realized in large measure only by retaining the customers and profit margins of the acquired business. As a result, the Company has pursued a strategy emphasizing organic growth supplemented by certain strategic acquisitions. The nature of the Company's worldwide operations necessitate the Company dealing with a multitude of currencies other than the U.S. dollar. This results in the Company being exposed to the inherent risks of the international currency markets and governmental interference. Many of the countries where the Company maintains offices and/or agency relationships have strict currency control regulations which influence the Company's ability to hedge foreign currency exposure. The Company tries to compensate for these exposures by accelerating international currency settlements among these offices or agents. Foreign currency gains and losses recognized during 1995, 1994 and 1993 were immaterial. The Company has traditionally generated revenues from air freight, ocean freight and customs brokerage and import services. In light of the customer-driven trend to provide customer rates on a door-to-door basis, management foresees the potential, in the medium to long-term, for fees normally associated with customs house brokerage to be de-emphasized and included as a component of other services offered by the Company. Liquidity and Capital Resources The Company's principal source of liquidity is cash generated from operations. At December 31, 1995, working capital was $81 million, including cash and short-term investments of $37 million. The Company had no long-term debt at December 31, 1995. While the nature of its business does not require an extensive investment in property and equipment, the Company is actively looking for suitable facilities and/or property to acquire at or near airports in certain cities in North America and overseas. The Company expects to purchase at least one high-end combined office/warehouse and distribution facility in a key metropolitan area in 1996. Including this facility, the Company currently expects to spend approximately $ 25 million on property and equipment in 1996, which is expected to be financed with cash, short-term floating rate, and/or long-term fixed-rate borrowings. The Company borrows foreign and domestically under unsecured bank lines of credit totaling $15 million. At December 31, 1995, the Company was directly liable for $285,000 drawn on these lines of credit and was contingently liable for an additional $12.8 million of standby letters of credit. In addition, the Company maintains a bank facility with its U.K. bank for $7.75 million of which the Company was contingently liable for $7.4 million. Management believes that the Company's current cash position, bank financing arrangements, and operating cash flows will be sufficient to meet its capital and liquidity requirements for the foreseeable future. In some cases, the Company's ability to repatriate funds from foreign operations is subject to foreign exchange controls. In addition, certain undistributed earnings of the Company's subsidiaries accumulated through December 31, 1992 would, under most circumstances, be subject to some additional United States income tax if distributed to the Company. The Company has not provided for this additional tax because the Company intends to reinvest such earnings to fund the expansion of its foreign activities, or to distribute them in a manner in which no significant additional taxes would be incurred. At December 31, 1995, the total of such undistributed earnings was approximately $42 million. And the associated Federal and state tax that would be payable on any hypothetical repatriation of these earnings at that date approximates $10.1 million. Impact of Inflation To date, the Company's business has not been adversely affected by inflation, nor has the Company experienced significant difficulty in passing carrier rate increases on to its customers by means of price increases. It is, however generally felt by the Company that airline rate increases will occur over the short to medium term period and, due to the high degree of competition in the market place, it is possible that these rate increases could lead to an erosion in the Company's air freight margins. Also, as the Company is not required to purchase or maintain extensive property and equipment and has not otherwise incurred substantial interest rate-sensitive indebtedness, the Company's direct exposure to increased costs resulting from increases in interest rates is not severe. 48
CORPORATE INFORMATION Shareholder Information TRANSFER AGENT AND ANNUAL MEETING STOCK PRICE AND REGISTRAR, The annual meeting of SHAREHOLDER DATA DIVIDEND DISBURSING AGENT shareholders is The following table sets forth First Interstate Bank Wednesday, May 8, 1996, the high and low sale prices Washington, N.A. at 2:00 p.m. in the in the over-the-counter market First Interstate Center SeaTac Marriott Hotel for the Company's Common Stock P.O. Box 21927 International Blvd. as reported by The NASDAQ Seattle, WA 98111 Seattle, WA National Market System under the symbol EXPD. INDEPENDENT AUDITORS FORM 10-K _____________________________________________________ KPMG Peat Marwick LLP The Company files an Common 3100 Two Union Square Annual Report with the Stock Quarter High Low 601 Union Street Securities and Exchange _____________________________________________________ Seattle, WA 98101-2327 Commission on Form 10-K 1995 First 23-1/4 19-3/4 Shareholders may obtain Second 25 21 CORPORATE HEADQUARTERS a copy of this report Third 28-1/4 21 Expeditors International without charge by Fourth 28-1/4 22-3/4 of Washington, Inc. writing: _____________________________________________________ 19119 - 16th Avenue South Jeffrey J. King, 1994 First 19-1/4 15 Seattle, WA 98188 Secretary Second 19-1/2 15-1/2 Expeditors International Third 22 16-1/2 Information is available on of Washington, Inc. Fourth 23-1/4 17-7/8 the World Wide Web at 19119-16th Avenue South _____________________________________________________ http://www.expd.com P.O. Box 69620 Seattle, WA 98168-9620 There were 455 shareholders of OFFICES AND AGENTS record as of December 31, Major Cities of the World 1995. Management estimates that there were approximately 3,000 beneficial shareholders at that date. In 1994 and 1995, the Board of Directors declared a semi- annual dividend of $.05 per share and $.06 per share, respectively, which was paid on the 15th day of June and December.
49 EX-21.1 6 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT
State or Country of Subsidiary (1)(2)(3) Organization - ------------------- ------------ E.I. Freight SDN. BHD. Malaysia EI Freight Forwarding (Thailand) Limited (4) Thailand EI Freight (H.K.) Limited (5) Hong Kong EI Freight (Taiwan) Ltd. Republic of China EI Freight (U.S.A.), Inc. Illinois EI Holdings, Ltd. (6) Thailand EIF SDN. BHD. (7) Malaysia Expeditors Canada, Inc. Canada Expeditors Chile Transportes Internacionales Limitada Chile Expeditors Finland Oy (8) Finland Expeditors International Saudi Arabia Expeditors International B.V. Netherlands Expeditors International de Mexico, S.A. de C.V. Mexico Expeditors International do Brasil Ltda. Brazil Expeditors International Espana, S.A. Spain Expeditors International GmbH Germany Expeditors International Italia S.r.l. Italy Expeditors International N.V. Belgium Expeditors International Ocean, Inc. Delaware Expeditors International Pty. Limited Australia Expeditors International SA (Proprietary) Limited South Africa Expeditors International Sverige AB Sweden Expeditors International (Korea) Company, Ltd. South Korea Expeditors International (NZ) Ltd. New Zealand Expeditors International (Puerto Rico) Inc. Puerto Rico Expeditors International (UK) Limited England Expeditors Sarah International Co. (9) Egypt Expeditors Speditions GmbH (10) Austria Expeditors (China) Investment Co. Pte. Ltd. (11) Singapore Expeditors (Portugal)Transitarios Internacionais Lda. (12) Portugal Expeditors (Singapore) Private Limited Singapore Heik Liquid Limited (13) Hong Kong P.T. Lancar Utama Tatnusa Indonesia
(1) For purposes of this list, if the Company owns directly or indirectly a controlling interest in the voting securities of any entity or if the Company has unilateral control over the assets and operations of any entity, such entity is deemed to be a subsidiary. Except as otherwise noted, the Company has 100% controlling interest in subsidiary operations. With respect to certain companies, shares of voting securities in the names of nominees and qualifying shares in the names of directors are included in Company's ownership percentage. (2) Except as otherwise noted, each subsidiary does business in its own name and in the name of the Company. (3) The names of other subsidiaries have been omitted from the above list since considered in the aggregate, they would not constitute a significant subsidiary. (4) Dual ownership; of the 100%, 49% is owned by the Company and 51% is owned by EI Holdings, Ltd. 50 (5) Second tier subsidiary. (6) Dual ownership; of the 100%, 56% is owned by the Company and 44% is owned by EI Freight Forwarding (Thailand) Limited. (7) Dual ownership; of the 100%, 53.33% is owned by the Company and 46.67% is owned by E.I. Freight SDN. BHD. (8) Company has 82% controlling interest in subsidiary. (9) Company has 75% controlling interest in subsidiary. (10) Company has 85% controlling interest in subsidiary. (11) Operates in Beijing as Beijing Kang Jie Kong Cargo Agent Co., Ltd./E.I., in Shanghai as EI Freight (Co.) Ltd. and in Shenzhen as Shenzhen Yige Freight Warehouse Co. Ltd. (12) Company has 80% controlling interest in subsidiary. (13) Operates as Expeditors Overseas Management and EOM. 51 EX-23 7 CONSENT OF IND ACCTS EXHIBIT 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Expeditors International of Washington, Inc.: We consent to incorporation by reference in the Registration Statements (No. 33-17219, No. 33-22992, No. 33-36392, No. 33-38075, No. 33-67066 and No. 33-81460) on Form S-8 of Expeditors International of Washington, Inc. of our report dated February 16, 1996, relating to the consolidated balance sheets of Expeditors International of Washington, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995 and related financial statement schedule, which reports appear in the December 31, 1995 Annual Report on Form 10-K, or are incorporated by reference therein from the 1995 Annual Report to Shareholders, of Expeditors International of Washington, Inc. KPMG PEAT MARWICK LLP /s/ KPMG Peat Marwick LLP Seattle, Washington March 28, 1996 52 EX-27 8 FDS EXH. 27
5 This schedule contains summary financial information extracted from the consolidated balance sheet at December 31, 1995 and consolidated statement of income for the year 1995 and the related notes to these consolidated financial statements that are contained in the Company's 1995 Annual Report on Form 10-K and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-31-1995 DEC-31-1995 36,142 457 123,793 3,807 0 168,367 49,041 20,799 204,128 86,936 0 0 0 120 117,072 204,128 0 584,691 0 430,618 127,222 0 312 28,399 11,004 0 0 0 0 17,395 1.38 1.38
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