<PAGE>
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
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS.
- ------------------------------
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1997 1996
- ------ ------------ ------------
<S> <C> <C>
(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
------------ ------------
------------ ------------
</TABLE>
2
<PAGE>
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except share data)
<TABLE>
<CAPTION>
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
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
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
3
<PAGE>
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
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
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
4
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
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
------ -------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(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%
-------- --- ------- --- -------- --- -------- ---
-------- --- ------- --- -------- --- -------- ---
</TABLE>
8
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
North Latin
America Australasia America
- ------- ----------- -------
<S> <C> <C>
Calexico, CA-USA Adelaide, Australia Santos, Brazil
San Diego, CA-USA
Guadalajara,JL-MX
</TABLE>
11
<PAGE>
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).
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED SEPTEMBER 30,
1997 1996
---- ----
<S> <C> <C>
Net revenue 30% 28%
Operating income 50% 44%
</TABLE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
27 Financial Data Schedule, Edgar Filing Only
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the quarter ended September 30,
1997.
13
<PAGE>
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
<PAGE>
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Form 10-Q Index and Exhibits
September 30, 1997
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27 Financial Data Schedule (Filed Electronically Only)
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<CIK> 0000746515
<NAME> EXPEDITORS INTERNATIONAL
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