Expeditors Reports 18% Increase in Third Quarter Operating Income

Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced quarterly net earnings of $74,320,000 for the third quarter of 2007, compared with $63,803,000 for the same quarter of 2006, an increase of 16%. Net revenues for the third quarter of 2007 increased 13% to $384,810,000 as compared with $341,275,000 reported for the third quarter of 2006. Total revenues and operating income were $1,411,025,000 and $119,521,000 in 2007 compared with $1,231,660,000 and $101,257,000 for the same quarter of 2006, increases of 15% and 18%, respectively. Diluted net earnings per share for the third quarter were $.34 as compared with $.29 for the same quarter in 2006, an increase of 17%. The company also reported that same store net revenues and operating income increased 13% and 18%, respectively for the third quarter of 2007 when compared with 2006. For the nine months ended September 30, 2007, net earnings rose to $199,097,000 from $172,484,000 in 2006, an increase of 15%. Net revenues for the nine months increased to $1,073,520,000 from $955,104,000 for 2006, up 12%. Total revenues and operating income for the nine months were $3,788,589,000 and $315,784,000 in 2007 compared with $3,389,638,000 and $275,461,000 for the same period in 2006, increases of 12% and 15%, respectively. Diluted net earnings per share for the first three quarters of 2007 were $.90 as compared with $.78 for the same period of 2006, an increase of 15%. Same store net revenues and operating income increased 12% and 15%, respectively, for the nine months ended September 30, 2007, when compared with the same period of 2006. "We are very encouraged by these record quarterly results, particularly in light of what we hear bantered about in the media regarding the strength of the global economy,” said Peter J. Rose, Chairman and Chief Executive Officer. "We believe these results illustrate what we are able to accomplish when we are united in our efforts to grow our business through a continued and consistent focus on providing quality customer service. We are best served by focusing on our opportunities and ignoring the pundits and prognosticators who choose to spend their time analyzing only the challenges, which will always exist in some form or fashion. At Expeditors we think the glass should always be at least half full, and it’s up to us, not external factors, to keep it that way,” Rose continued. "Fundamentally, this quarter was very sound. Our people have worked smarter as they have continued to work harder. Those efficiency gains showed up this quarter as we were successful in bringing labor costs as a percentage of net revenue back into proven historical ranges. We also experienced a net revenue growth rate that exceeded the growth rate in operating overhead expenses. The upshot of all this was a record high operating income margin of 31% of net revenue…something we regard as truly significant. We never tire of giving the real credit to those to whom it rightfully belongs. We have the best people, and we’re grateful to them for their professionalism and for their dedication. They’re the ones, quarter after quarter, who really make it happen,” Rose said. "Finally, we’re sure that everyone is expecting us to say something about the investigation of the international airfreight forwarding industry being conducted by the Department of Justice (DOJ) and the subpoena we received in October. Rest assured that we are taking this whole issue very seriously. We have retained the services of a noted law firm with a stellar reputation in these matters to help us comply with the DOJ’s subpoena. They are also assisting us in conducting a very rigorous self-review. As part of this process, we have met with and continue to co-operate with the DOJ. There has been no determination made at this stage that any anti-competitive behavior occurred. We are doing our utmost to conduct 'business as usual.' It is our intention not to disrupt our employees’ routine or their ability to meet the needs of our customers. Thank you for your understanding and for your continued support,” Rose concluded. Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 174 full-service offices, 63 satellite locations and 4 international service centers located on six continents linked into a seamless worldwide network through an integrated information management system. Services include air and ocean freight forwarding, vendor consolidation, customs clearance, marine insurance, distribution and other value added international logistics services. Expeditors International of Washington, Inc. Financial Highlights Three months and Nine months ended September 30, 2007 and 2006 Unaudited (in 000's of US dollars except share data)               Three Months Ended September 30, Nine Months Ended September 30, %   %   2007   2006 Increase   2007   2006   Increase Revenues   $ 1,411,025   $ 1,231,660 15%   $ 3,788,589   $ 3,389,638 12% Net revenues   $ 384,810   $ 341,275 13%   $ 1,073,520   $ 955,104 12% Operating income   $ 119,521   $ 101,257 18%   $ 315,784   $ 275,461 15% Net earnings   $ 74,320   $ 63,803 16%   $ 199,097   $ 172,484 15% Diluted earnings per share   $ 0.34   $ 0.29 17%   $ 0.90   $ 0.78 15% Basic earnings per share   $ 0.35   $ 0.3 17%   $ 0.93   $ 0.81 15% Diluted weighted average shares outstanding   221,649,693   221,417,053   221,993,433   220,539,975 Basic weighted average shares outstanding   213,485,465   213,524,680   213,388,675   213,557,892 Offices opened during the Third Quarter of 2007   EUROPE NEAR/MIDDLE EAST   Krakow, Poland (a) Abu Dhabi, United Arab Emirates (b) Maastricht, The Netherlands (a) Amman, Jordan (b)   (b) Full-service office (a) Satellite office Investors may submit written questions via e-mail to: investor@expeditors.com Or by fax to: 206-674-3459 Questions received by the end of business on November 8, 2007, will be considered in management’s 8-K "Responses to Selected Questions” expected to be filed on or about November 15, 2007. EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except share data) (Unaudited)         September 30, December 31, Assets 2007 2006   Current assets: Cash and cash equivalents $ 557,182 $ 511,358 Short-term investments 441 578 Accounts receivable, net 984,092 811,486 Deferred Federal and state income taxes 7,760 7,490 Other current assets   21,854   10,925 Total current assets   1,571,329   1,341,837   Property and equipment, net 497,768 449,247 Goodwill, net 7,927 7,927 Other intangibles, net 8,141 7,584 Other assets 20,044 15,743     $ 2,105,209 $ 1,822,338 Liabilities and Shareholders' Equity   Current liabilities: Accounts payable 660,460 544,028 Accrued expenses, primarily salaries and related costs 146,821 122,081 Federal, state and foreign income taxes   33,739   43,036 Total current liabilities $ 841,020 $ 709,145   Deferred Federal and state income taxes $ 60,160 $ 26,743   Minority interest $ 16,696 $ 16,515   Shareholders' equity: Preferred stock, par value $.01 per share. Authorized 2,000,000 shares; none issued -- -- Common stock, par value $.01 per share. Authorized 320,000,000 shares; issued and outstanding 212,995,326 shares at September 30, 2007, and 213,080,466 shares at December 31, 2006 2,130 2,131 Additional paid-in capital 53,402 119,582 Retained earnings 1,103,253 934,058 Accumulated other comprehensive income   28,548   14,164 Total shareholders' equity   1,187,333   1,069,935     $ 2,105,209 $ 1,822,338   Certain 2006 amounts have been reclassified to conform to the 2007 presentation. 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, 2007 2006 2007 2006 Revenues: Airfreight $ 629,071 $ 575,285 $ 1,710,747 $ 1,611,556 Ocean freight and ocean services 520,312 433,212 1,345,945 1,158,151 Customs brokerage and other services 261,642 223,163 731,897 619,931         Total revenues   1,411,025     1,231,660     3,788,589     3,389,638     Operating expenses: Airfreight consolidation 490,880 453,246 1,317,970 1,263,803 Ocean freight consolidation 424,383 343,909 1,088,191 915,568 Customs brokerage and other services 110,952 93,230 308,908 255,163 Salaries and related costs 205,206 183,995 585,360 517,422 Rent and occupancy costs 17,751 15,814 50,162 46,971 Depreciation and amortization 9,690 9,341 29,540 26,020 Selling and promotion 8,890 8,484 27,567 25,398 Other   23,752     22,384     65,107     63,832   Total operating expenses   1,291,504     1,130,403     3,472,805     3,114,177     Operating income 119,521 101,257 315,784 275,461   Interest expense (22 ) (4 ) 82 (41 ) Interest income 5,586 4,236 16,336 12,900 Other, net 1,038 743 3,468 2,875         Other income, net   6,602     4,975     19,886     15,734     Earnings before income taxes and minority interest 126,123 106,232 335,670 291,195   Income tax expense 51,750 47,133 136,225 119,688         Net earnings before minority interest   74,373     59,099     199,445     171,507     Minority interest (53 ) 4,704 (348 ) 977         Net earnings $ 74,320   $ 63,803   $ 199,097   $ 172,484     Diluted earnings per share $ 0.34   $ 0.29   $ 0.90   $ 0.78     Basic earnings per share $ 0.35   $ 0.30   $ 0.93   $ 0.81     Weighted average diluted shares outstanding   221,649,693     221,417,053     221,993,433     220,539,975     Weighted average basic shares outstanding   213,485,465     213,524,680     213,388,675     213,557,892     Certain 2006 amounts have been reclassified to conform to the 2007 presentation. 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, 2007 2006 2007 2006 Operating Activities: Net earnings $74,320 $63,803 $199,097 $172,484 Adjustments to reconcile net earnings to net cash provided by operating activities:   Provision for losses on accounts receivable 701 259 346 752 Deferred income tax expense 13,216 3,378 25,456 15,967 Excess tax benefits from stock option plans (4,149 ) (1,194 ) (25,772 ) (22,202 ) Stock compensation expense 11,206 11,813 34,709 29,629 Depreciation and amortization 9,690 9,341 29,540 26,020 Gain on sale of assets (802 ) - (1,004 ) (214 ) Minority interest in earnings of consolidated entities 53 (4,704 ) 348 (977 ) Other 369 1,640 1,057 3,500 Changes in operating assets and liabilities: Increase in accounts receivable (157,406 ) (66,758 ) (170,667 ) (95,757 ) Increase in other current assets (1,821 ) (2,150 ) (2,325 ) (3,922 ) Increase in accounts payable and other current liabilities 79,108 44,290 141,553 113,306 Increase in taxes payable, net 12,029   24,960   7,187   39,803     Net cash provided by operating activities 36,514   84,678   239,525   278,389     Investing Activities: Decrease (increase) in short-term investments 26 30 188 (253 ) Purchase of property and equipment (39,650 ) (9,668 ) (70,833 ) (129,740 ) Proceeds from sale of property and equipment 131 52 414 317 Prepayment on long-term land lease (40 ) - (2,816 ) (1,761 ) Other (786 ) (1,999 ) (2,386 ) (1,513 )   Net cash used in investing activities (40,319 ) (11,585 ) (75,433 ) (132,950 )   Financing Activities: Repayments of short-term debt, net (203 ) - - - Net distributions to minority interests - (4,053 ) (316 ) (4,053 ) Proceeds from issuance of common stock 31,588 19,353 59,456 45,373 Repurchases of common stock (57,122 ) (44,139 ) (186,117 ) (157,767 ) Dividends paid - - (29,902 ) (23,576 ) Excess tax benefits from stock option plans 4,149   1,194   25,772   22,202     Net cash used in financing activities (21,588 ) (27,645 ) (131,107 ) (117,821 )   Effect of exchange rate changes on cash 7,533   (613 ) 12,839   8,017     (Decrease) increase in cash and cash equivalents (17,860 ) 44,835 45,824 35,635   Cash and cash equivalents at beginning of period 575,042 454,694 511,358 463,894   Cash and cash equivalents at end of period 557,182   499,529   557,182   499,529     Interest and taxes paid: Interest 25 22 163 54 Income tax 24,227 17,713 98,539 60,764   Certain 2006 amounts have been reclassified to conform to the 2007 presentation. EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Business Segment Information (In thousands) (Unaudited)                     United Other Far Australia/ Latin Middle Elimi- Consoli- States N. America   East Europe New Zealand   America   East nations dated Three months ended September 30, 2007   Revenues from unaffiliated customers $ 273,476 36,209 825,183 174,668 18,049 20,155 63,285 1,411,025 Transfers between geographic areas $ 29,031 2,450 4,719 9,564 1,927 2,827 3,598 (54,116) - Total revenues $ 302,507 38,659 829,902 184,232 19,976 22,982 66,883 (54,116) 1,411,025   Net revenues $ 153,030 17,399 112,327 62,932 10,820 10,952 17,350 384,810 Operating income $ 37,465 3,971 55,772 12,965 3,236 2,044 4,068 119,521 Identifiable assets at quarter end $ 908,430 77,717 494,081 449,433 36,591 41,328 97,700 (71) 2,105,209 Capital expenditures $ 4,496 304 31,058 2,095 248 194 1,255 39,650 Depreciation and amortization $ 5,385 334 1,166 1,773 242 384 406 9,690 Equity $ 1,330,031 36,581 375,287 150,828 23,384 21,307 44,117 (794,202) 1,187,333   Three months ended September 30, 2006   Revenues from unaffiliated customers $ 242,237 30,085 709,222 160,565 14,595 17,305 57,651 1,231,660 Transfers between geographic areas $ 29,516 2,136 4,266 8,335 1,573 2,092 3,082 (51,000) - Total revenues $ 271,753 32,221 713,488 168,900 16,168 19,397 60,733 (51,000) 1,231,660   Net revenues $ 138,747 15,251 101,202 54,412 8,403 8,388 14,872 341,275 Operating income $ 27,313 3,718 50,380 11,998 2,311 1,546 3,991 101,257 Identifiable assets at quarter end $ 854,409 67,458 415,273 349,654 27,506 33,518 63,802 44 1,811,664 Capital expenditures $ 6,378 226 799 1,430 29 269 537 9,668 Depreciation and amortization $ 4,976 318 1,369 1,738 197 406 337 9,341 Equity $ 1,165,850 27,797 307,047 102,363 16,065 13,533 27,779 (638,822) 1,021,612   Nine months ended September 30, 2007   Revenues from unaffiliated customers $ 779,998 97,063 2,137,320 493,149 49,888 58,900 172,271 3,788,589 Transfers between geographic areas $ 77,383 6,414 13,168 25,495 5,478 8,414 10,364 (146,716) - Total revenues $ 857,381 103,477 2,150,488 518,644 55,366 67,314 182,635 (146,716) 3,788,589   Net revenues $ 431,702 47,476 305,960 177,560 29,559 31,698 49,565 1,073,520 Operating income $ 96,986 9,642 147,244 35,066 8,298 6,450 12,098 315,784 Identifiable assets at quarter end $ 908,430 77,717 494,081 449,433 36,591 41,328 97,700 (71) 2,105,209 Capital expenditures $ 21,045 1,316 38,419 5,621 1,139 957 2,336 70,833 Depreciation and amortization $ 15,857 997 3,763 5,903 667 1,201 1,152 29,540 Equity $ 1,330,031 36,581 375,287 150,828 23,384 21,307 44,117 (794,202) 1,187,333   Nine months ended September 30, 2006   Revenues from unaffiliated customers $ 695,679 88,720 1,894,933 457,198 40,383 50,215 162,510 3,389,638 Transfers between geographic areas $ 82,443 5,828 12,120 23,560 4,603 6,096 8,144 (142,794) - Total revenues $ 778,122 94,548 1,907,053 480,758 44,986 56,311 170,654 (142,794) 3,389,638   Net revenues $ 394,669 45,804 270,896 156,345 23,827 23,862 39,701 955,104 Operating income $ 80,059 10,921 132,519 32,622 6,419 4,485 8,436 275,461 Identifiable assets at quarter end $ 854,409 67,458 415,273 349,654 27,506 33,518 63,802 44 1,811,664 Capital expenditures $ 115,142 521 6,259 5,240 375 1,060 1,143 129,740 Depreciation and amortization $ 13,461 1,014 3,769 5,003 584 1,153 1,036 26,020 Equity $ 1,165,850 27,797 307,047 102,363 16,065 13,533 27,779 (638,822) 1,021,612   Certain 2006 amounts have been reclassified to conform to the 2007 presentation.