Expeditors International of Washington, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Although the request identifies 2021 Q4, this filing is an annual report; it does not provide a complete standalone fourth-quarter income statement or cash flow statement. Amounts below are in U.S. dollars.
Business context
Expeditors is a non-asset-based global logistics provider. It arranges air and ocean freight, customs brokerage, and other logistics services, relying on third-party carriers rather than owning ships or aircraft. Its business depends on shipment volumes, customer sell rates, and carrier buy rates. No single customer accounted for 5% or more of revenue.
Financial results and liquidity
| Metric | FY 2021 | FY 2020 | Change |
|---|---|---|---|
| Revenue | $16.524 billion | $9.584 billion | +72% |
| Operating income | $1.909 billion | $940 million | +103% |
| Net earnings attributable to shareholders | $1.415 billion | $696 million | +103% |
| Diluted earnings per share | $8.27 | $4.07 | +103% |
| Cash from operating activities | $868 million | $655 million | +$213 million |
- Margins: Operating margin was approximately 11.6% in 2021 versus 9.8% in 2020; net margin attributable to shareholders was approximately 8.6% versus 7.3%. Calculated from reported figures.
- Service revenue: Airfreight $6.771 billion (+58%); ocean freight and services $5.546 billion (+137%); customs brokerage and other services $4.206 billion (+42%).
- Cash and working capital: Cash and cash equivalents were $1.729 billion at year-end, and working capital was $2.909 billion. Accounts receivable increased to $3.810 billion from $1.998 billion, reflecting higher activity and rates.
- Debt and obligations: No long-term debt. Borrowings on foreign credit lines were not significant. The company reported $468 million of operating lease liabilities, $300 million of purchase obligations, and $67 million of contingent exposure under standby letters of credit and guarantees.
- Cash uses and returns: Capital expenditures were $36 million; management estimated 2022 capital expenditures of $100 million. 2021 share repurchases were $515 million and dividends paid were $196 million, together approximately $710 million returned to shareholders. Annual dividends per share rose to $1.16 from $1.04.
- Liquidity: Management said cash and operating cash flows should meet capital and liquidity needs for at least the next 12 months and the foreseeable future. Free cash flow, calculated as operating cash flow less capital expenditures, was approximately $832 million.
Material changes versus prior year
- Revenue growth reflected sharply higher freight rates and increased volumes amid severe capacity constraints. Air tonnage rose 26%, with average sell and buy rates up 28% and 29%, respectively. Ocean containers shipped rose 17%; ocean consolidation sell and buy rates rose 151% and 148%.
- Direct transportation expenses increased 81%, faster than revenue growth of 72%. Salaries and related costs rose 34%, principally from higher incentive compensation and a 9% increase in headcount.
- Cash from operations increased despite substantial working-capital demands, including the increase in receivables and deferred contract costs.
- The company corrected immaterial prior-period errors that had overstated revenue and directly related transportation expenses by equal amounts. The correction did not affect operating income, net earnings, EPS, cash flows, or balance sheets.
Outlook, risks and unusual items
- Management expected disruptive supply-chain conditions to continue at least through the first half of 2022. It cautioned that record freight rates and operating conditions were not expected to persist long term; falling volumes or rates could significantly reduce revenue and operating income versus 2021.
- Cyber-attack: On February 20, 2022, the company discovered a targeted attack and shut down most global operating systems, limiting its ability to arrange shipments and manage customs and distribution. Operations had partially resumed, but timing for full recovery and the ultimate financial impact were unknown. The company expected a material adverse impact on business, revenue, expenses, results, cash flows, and reputation, and expected further investigation and remediation costs. This was a subsequent event, not a 2021 operating result.
- Other material risks include carrier capacity and financial stability, port congestion, customer credit and collections, inflation and labor costs, rate volatility, foreign exchange, trade restrictions, cybersecurity, regulatory compliance, and tax examinations. A hypothetical 10% weakening of the U.S. dollar was estimated to increase operating income by about $120 million; a 10% strengthening was estimated to reduce it by about $98 million.
- The company does not issue financial forecasts or projections. Management’s outlook is therefore qualitative rather than earnings guidance.
- KPMG issued unqualified opinions on the financial statements and internal control over financial reporting. Management and the auditor concluded internal controls were effective as of December 31, 2021.
Important facts for investors to verify
- Track the cyber-attack’s operational recovery, remediation costs, customer or legal claims, and quantified financial effects in subsequent filings.
- Assess whether freight volumes, buy/sell rates, capacity, and congestion normalize, and how quickly margins respond if rates decline.
- Monitor receivables, collections, customer credit exposure, and working-capital needs as freight rates and activity change.
- Review the $100 million 2022 capital expenditure estimate, including planned cybersecurity and technology upgrades, against actual spending.
- Confirm subsequent developments in tax audits, contingencies, and any material legal matters; the filing does not quantify potential additional losses from the cyber-attack.