-----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, VO2FsYkHIppup1YwX2ItvWeZYPkQBmN1NdMRBRi87snjOyLy3S5TBjoVSdtPDef3 cCLkqCrRvqg+r5rlwtBKUg== 0001047469-97-004513.txt : 19971117 0001047469-97-004513.hdr.sgml : 19971117 ACCESSION NUMBER: 0001047469-97-004513 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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-Q SEC ACT: SEC FILE NUMBER: 000-13468 FILM NUMBER: 97717757 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-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 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 of other jurisdiction of incorporation or organization) (IRS Employer Identification Number) 999 Third Avenue, Suite 2500, Seattle, Washington 98104 (Address of principal executive offices) (Zip Code) (206) 674-3400 (Registrant's telephone number, including area code) 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 ----- ----- At November 7, 1997, the number of shares outstanding of the issuer's Common Stock was 24,545,380. Page 1 of 15 pages. The Exhibit Index appears on page 15. 1 PART I. FINANCIAL INFORMATION - ------------------------------ ITEM 1. FINANCIAL STATEMENTS. - ------------------------------ EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except share data)
SEPTEMBER 30, DECEMBER 31, ASSETS 1997 1996 - ------ ------------ ------------ (Unaudited) Current assets: Cash and cash equivalents $ 47,416 36,966 Short term investments 357 357 Accounts receivable, net 224,165 168,763 Deferred Federal and state taxes 6,820 4,854 Other current assets 7,862 4,503 ------------ ------------ Total current assets 286,620 215,443 Property and equipment, net 61,746 46,246 Other assets, net 15,088 10,297 ------------ ------------ $ 363,454 271,986 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Short term borrowings $ 29,336 3,452 Accounts payable 139,547 101,670 Income taxes 7,045 5,659 Other current liabilities 24,299 21,194 ------------ ------------ Total current liabilities 200,227 131,975 Shareholders' equity: Preferred stock, par value $.01 per share. Authorized 2,000,000 shares; none issued -- -- Common stock, par value $.01 per share. Authorized 80,000,000 shares; issued and outstanding 24,529,891 shares at September 30, 1997, and 24,212,946 at December 31, 1996 245 242 Additional paid-in capital 15,449 13,179 Retained earnings 147,590 123,258 Equity adjustments from foreign currency translation (57) 3,332 ------------ ------------ Total shareholders' equity 163,227 140,011 ------------ ------------ $ 363,454 271,986 ------------ ------------ ------------ ------------
2 EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (In thousands, except share data)
(Unaudited) Three months ended Nine months ended September 30, September 30, ------------------- ------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Revenues: Airfreight $ 178,158 142,071 470,060 350,652 Ocean freight 52,128 44,310 134,006 108,964 Customs brokerage and import services 32,023 18,511 79,787 49,152 ----------- ----------- ----------- ----------- Total revenues 262,309 204,892 683,853 508,768 Operating expenses: Airfreight consolidation 145,357 115,778 382,107 282,899 Ocean freight consolidation 36,772 32,881 95,679 81,774 Salaries and related costs 41,733 29,311 111,002 77,952 Rent 2,654 2,264 7,649 6,158 Depreciation and amortization 2,878 2,070 7,922 5,899 Selling and promotion 3,506 2,618 9,614 7,138 Other 10,451 7,888 29,525 20,935 ----------- ----------- ----------- ----------- Total operating expenses 243,351 192,810 643,498 482,755 Operating income 18,958 12,082 40,355 26,013 ----------- ----------- ----------- ----------- Interest expense (146) (71) (224) (195) Interest income 420 471 1,519 1,696 Other, net (179) 59 (171) 110 ----------- ----------- ----------- ----------- Other income, net 95 459 1,124 1,611 ----------- ----------- ----------- ----------- Earnings before income taxes 19,053 12,541 41,479 27,624 Income tax expense 7,276 4,861 15,930 10,784 ----------- ----------- ----------- ----------- Net earnings $ 11,777 7,680 25,549 16,840 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net earnings per share $ .44 $.30 $ .97 $ .66 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average number of common shares 26,555,155 25,689,522 26,243,552 25,540,458 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
3 EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
Three months ended Nine months ended September 30, September 30, ------------------ ----------------- 1997 1996 1997 1996 ---- ---- ---- ---- Operating Activities: Net earnings $ 11,777 7,680 25,549 16,840 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for losses on accounts receivable 325 446 1,291 1,305 Deferred income tax expense (benefit) 564 132 (98) (421) Depreciation and amortization 2,878 2,070 7,922 5,899 Other 271 235 649 430 Changes in operating assets and liabilities: Increase in accounts receivable (42,836) (19,686) (54,842) (39,804) (Increase) decrease in other current assets (1,448) 757 (3,398) (1,365) Increase in accounts payable and other current liabilities 31,388 11,705 45,946 29,495 -------- -------- -------- -------- Net cash provided by operating activities 2,919 3,339 23,019 12,379 -------- -------- -------- -------- Investing Activities: Decrease (increase) in short-term investments 1,985 1,584 (87) (17) Purchase of property and equipment (13,800) (2,602) (26,655) (20,509) Acquisitions, net of cash acquired - - (7,076) - Other 209 988 501 (1,746) -------- -------- -------- -------- Net cash used in investing activities (11,606) (30) (33,317) (22,272) -------- -------- -------- -------- Financing Activities: Short-term borrowings, net 13,548 2,945 24,205 16,413 Proceeds from issuance of common stock 2,653 1,625 3,536 2,570 Repurchases of common stock (2,821) (1,690) (2,974) (2,541) Dividends paid - - (1,217) (964) -------- -------- -------- -------- Net cash provided by financing activities 13,380 2,880 23,550 15,478 Effect of exchange rate changes on cash (1,863) (253) (2,802) (300) -------- -------- -------- -------- Increase in cash and cash equivalents 2,830 5,936 10,450 5,285 Cash and cash equivalents at beginning of period 44,586 35,491 36,966 36,142 -------- -------- -------- -------- Cash and cash equivalents at end of period $ 47,416 41,427 47,416 41,427 -------- -------- -------- -------- -------- -------- -------- --------
4 EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies The attached condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. As a result, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The Company believes that the disclosures made are adequate to make the information presented not misleading. The condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain 1996 amounts have been reclassified to conform to the 1997 presentation. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company's report on Form 10-K as filed with the Securities and Exchange Commission on or about March 31, 1997. In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128"). The statement establishes standards for the computation, presentation, and disclosure of earnings per share (EPS), replacing the presentation of currently required Primary EPS with a presentation of Basic EPS. It also requires dual presentation of Basic EPS and Diluted EPS on the face of the income statement for entities with complex capital structures. Basic EPS, unlike Primary EPS, excludes all dilution while Diluted EPS, like the current Fully Diluted EPS, reflects the potential dilution that could occur from the exercise or conversion of securities into common stock or from other contracts to issue common stock. SFAS No. 128 is effective for financial statements for periods ending after December 15, 1997 and earlier application is not permitted. The Company does not expect the impact of the adoption of this statement to be material to previously reported EPS amounts. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"), which establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. This statement is effective for fiscal years beginning after December 15, 1997 and requires reclassification of prior period financial statements. The Company is currently considering the various presentation options of SFAS No. 130. Also in June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131"), which revises disclosure requirements about operating segments and establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS No. 131 requires that public business enterprises report financial and descriptive information about its reportable operating segments. The statement is effective for periods beginning after December 15, 1997 and requires restatement of prior years in the initial year of application. SFAS No. 131 will impact the Company's segment disclosures, but will not impact the Company's results of operations, financial position or cash flows. 5 ITEM 2. 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 also acts as a customs broker in all United States offices, and in many of its other 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 carriers 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. 6 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 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. SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER SECURITIES LITIGATION REFORM ACT OF 1995; CERTAIN CAUTIONARY STATEMENTS Certain portions of this report on Form 10-Q contain forward-looking statements which must be considered in connection with the discussion of the important factors that could cause actual results to differ materially from the forward-looking statements. In addition to risk factors identified elsewhere in this report, attention should be given to the factors identified and discussed in the report on Form 10-K on or about March 31, 1997. 7 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 the three and nine-month periods ended September 30, 1997 and 1996, expressed as percentages of net revenues. With respect to the Company's services other than freight 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. The table and the accompanying discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes thereto which appear elsewhere in this Quarterly Report.
Three months ended September 30, Nine months ended September 30, 1997 1996 1997 1996 ---- ---- ---- ---- Percent Percent Percent Percent of net of net of net of net Amount revenues Amount revenues Amount revenues Amount revenues ------ -------- ------ -------- ------ -------- ------ -------- (Amounts in thousands) Net Revenues: Airfreight $ 32,801 41 26,293 47 $ 87,953 42 67,753 47 Ocean freight 15,356 19 11,429 20 38,327 19 27,190 19 Customs brokerage and import services 32,023 40 18,511 33 79,787 39 49,152 34 -------- --- ------- --- -------- --- -------- --- Net revenues 80,180 100 56,233 100 206,067 100 144,095 100 -------- --- ------- --- -------- --- -------- --- Operating expenses: Salaries and related costs 41,733 52 29,311 52 111,002 54 77,952 54 Other 19,489 24 14,840 27 54,710 26 40,130 28 -------- --- ------- --- -------- --- -------- --- Total operating expenses 61,222 76 44,151 79 165,712 80 118,082 82 -------- --- ------- --- -------- --- -------- --- Operating income 18,958 24 12,082 21 40,355 20 26,013 18 Other income, net 95 - 459 1 1,124 - 1,611 1 -------- --- ------- --- -------- --- -------- --- Earnings before income taxes 19,053 24 12,541 22 41,479 20 27,624 19 Income tax expense 7,276 9 4,861 8 15,930 8 10,784 7 -------- --- ------- --- -------- --- -------- --- Net earnings $ 11,777 15% $ 7,680 14% $ 25,549 12% $ 16,840 12% -------- --- ------- --- -------- --- -------- --- -------- --- ------- --- -------- --- -------- ---
8 Airfreight net revenues increased 25% and 30% for the three and nine-month periods ended September 30, 1997 as compared with the same periods for 1996. This increase was primarily due to (1) increased airfreight tonnage handled by the Company from the Far East, North America and Europe and (2) increased prices charged by airlines which were passed along to customers. Management also believes that the Company was more efficient during the three and nine-month periods ended September 30, 1997 in the handling and routing of shipments through key export gateway locations, particularly in North America. To the extent that it is successful in increasing its concentration of export freight in key export gateway locations, the Company has been able to take advantage of the volume, weight and service-related incentives offered by the direct air carriers. Ocean freight net revenues increased 34% and 41% for the three and nine-month periods ended September 30, 1997 as compared with the same periods for 1996 as a result of a Company decision to aggressively market extremely competitive ocean freight rates to its customers, primarily on freight moving eastbound from the Far East. Despite falling prices, the Company was able to substantially maintain margins and expand market share, a development management believes to be significant in assessing its strength in the highly competitive transpacific NVOCC (Non-Vessel Operating Common Carrier) market. Due to increased cargo volumes during the three months ended September 30, 1997, the pricing situation stabilized, allowing significant margin expansion in the third quarter. In addition to increases in the traditional NVOCC and ocean forwarding business, ECMS (Expeditors Cargo Management Systems), the Company's ocean freight consolidation management and purchase order tracking service, continues to be instrumental in providing new business. Customs brokerage and import services increased 73% and 62% for the three and nine-month periods ended September 30, 1997 as compared with the same periods for 1996. This increase is the result of (1) the Company's entry into the truck and rail border brokerage business in the United States, (2) the Company's growing reputation for providing high quality service, (3) consolidation within the customs brokerage market as customers seek out brokers with sophisticated computerized capabilities critical to an overall logistics management program, and (4) the growing importance of distribution services as a separate and distinct service which is included in this category. Salaries and related costs increased during the three and nine-month periods ended September 30, 1997 as compared with the same periods in 1996 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 have, however, remained virtually constant as a percentage of net revenue--a measure that management believes is significant in assessing the effectiveness of corporate cost containment objectives. The relatively consistent 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 organic growth in revenues, net revenue and net income for the three and nine-month periods ended September 30, 1997 and 1996 are a direct result of the incentives inherent in the Company's compensation program. 9 Other operating expenses increased for the three and nine-month periods ended September 30, 1997 as compared with the same period in 1996 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 revenues decreased approximately 2% for the three and nine-month periods ended September 30, 1997, as compared with the same periods in 1996. This decrease is primarily due to economies of scale realized as the Company's semi-variable other operating expenses were spread over increased net revenues. Other income, net, decreased for the three and nine-month periods ended September 30, 1997 as compared with the same period of 1996, due to (1) lower interest income, as a result of cash being used in 1997 for the acquisition of real estate and the Company's agent in Ireland, and (2) higher interest expense on higher bank borrowings. In addition, the Company recognized losses on the unamortized portion of certain leasehold improvements which the Company abandoned to consolidate office space. The Company pays income taxes in the United States and other jurisdictions. In addition, the Company pays various other taxes, which are typically included in costs of operations. Effective income tax rates per financial statements during the three and nine-month periods ended September 30, 1997 were virtually constant as compared with the same periods in 1996. 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 various portions of the global 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 global 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 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. Accordingly, sophisticated computerized customer service capabilities and a stable worldwide network have become 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. 10 The nature of the Company's worldwide operations necessitates 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. During the third quarter of 1997, the currencies in Thailand, Malaysia and Indonesia, devalued significantly against the U.S. dollar. Other currencies in the Far East were weakened by the events in these countries. A large percentage of billings from these countries are denominated in U.S. dollars, and in any case, the Company utilizes an internal clearing house to expedite settlements among offices to reduce exposure to foreign exchange rate fluctuations. The Company was not materially affected by the decline in currencies, and foreign currency gains and losses recognized during the three and nine-month periods of 1997 and 1996 were immaterial. The Company has traditionally generated revenues from airfreight, ocean freight and customs brokerage and other 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. Sources of Growth Acquisitions - 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", 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, where future economic benefit significantly exceeds the "goodwill" recorded in the transaction. Office Openings - The Company opened five offices during the third quarter of 1997.
North Latin America Australasia America - ------- ----------- ------- Calexico, CA-USA Adelaide, Australia Santos, Brazil San Diego, CA-USA Guadalajara,JL-MX
11 Internal Growth - Management believes that a comparison of "same store" growth is critical in the evaluation of the quality and extent of the Company's internally generated growth. This "same store" analysis isolates the financial contributions from offices that have been included in the Company's operating results for at least one full year. The table below presents same store comparisons for the third quarter of 1997 (which is the measure of any increase from the same quarter of 1996) and for the third quarter of 1996 (which measures growth over 1995).
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 1996 ---- ---- Net revenue 30% 28% Operating income 50% 44%
Liquidity and Capital Resources The Company's principal source of liquidity is cash generated from operations. At September 30, 1997, working capital was $86.4 million, including cash and short-term investments of $47.8 million. The Company had no long-term debt at September 30, 1997. While the nature of its business does not require an extensive investment in property and equipment, the Company is continuously 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 spend approximately $35 million on property and equipment in 1997, which is expected to be financed with cash, short-term floating rate and/or long-term fixed-rate borrowings. The Company maintains foreign and domestic borrowings under unsecured bank lines of credit totaling $30 million. At September 30, 1997, the Company was directly liable for $28 million drawn on these lines of credit and was contingently liable for an additional $15.7 million of standby letters of credit. In addition, the Company maintains a bank facility with its U.K. bank for $8.1 million of which the Company was contingently liable for $8.1 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 may be 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. 12 EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION - --------------------------- Item 1. 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 6. Exhibits and Reports on Form 8-K - ---------------------------------------- (a) Exhibits required by Item 601 of Regulation S-K.
Exhibit Number Description ------ ----------- 27 Financial Data Schedule, Edgar Filing Only
(b) Reports on Form 8-K No reports on Form 8-K were filed in the quarter ended September 30, 1997. 13 SIGNATURES Pursuant to the requirements 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. EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. November 7, 1997 /s/ Peter J. Rose ----------------------------------------------- Peter J. Rose, Chairman and Chief Executive Officer (Principal Executive Officer) November 7, 1997 /s/ R. Jordan Gates ----------------------------------------------- R. Jordan Gates, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 14 EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Form 10-Q Index and Exhibits September 30, 1997
Exhibit Number Description - ------ ----------- 27 Financial Data Schedule (Filed Electronically Only)
15 EX-27 2 EXHIBIT 27 - FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SET FORTH AS ITEM 1 OF FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000746515 EXPEDITORS INTERNATIONAL 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 47,416 357 224,165 0 0 286,620 61,746 0 363,454 200,227 0 0 0 245 162,982 363,454 0 683,853 0 477,786 165,712 0 0 41,479 15,930 0 0 0 0 25,549 .97 .97
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