10-KPeriod: FY2003

EXPEDITORS INTERNATIONAL OF WASHINGTON INC Annual Report, Year Ended Dec 31, 2003

Filed March 15, 2004For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) operates as a global logistics services provider, offering air and ocean freight forwarding, customs brokerage, and related services. For the fiscal year ended December 31, 2003, the company reported robust growth in net revenues, which increased by 12% over the previous year, driven primarily by strong performance in ocean freight and customs brokerage services. Airfreight, while experiencing a slight dip in net revenues due to declining yields, maintained stable tonnage. The company's business model is non-asset based, meaning it does not own aircraft or steamships, but leverages its purchasing power to negotiate favorable rates with carriers. This strategy, combined with a focus on high-quality customer service and technological investment, has enabled EXPD to maintain competitive pricing and expand its global network. The company's commitment to organic growth, supplemented by strategic acquisitions, positions it for continued expansion in the dynamic logistics industry. EXPD also highlights its strong employee culture and incentive compensation programs as key drivers of success.

Key Highlights

  • 1Expeditors International of Washington, Inc. reported a 12% increase in net revenues for fiscal year 2003, reaching $750.5 million, up from $682.2 million in 2002.
  • 2The company experienced significant growth in ocean freight and customs brokerage services, with net revenues increasing by 16% and 20% respectively in 2003.
  • 3Airfreight net revenues saw a slight decrease of 2% in 2003, primarily due to a decline in airfreight yields, though tonnages remained comparable to the previous year.
  • 4Expeditors maintains a non-asset-based business model, focusing on purchasing transportation services from direct carriers and reselling them to customers, thus avoiding significant capital expenditures on owned assets like aircraft or ships.
  • 5The company's operational strategy emphasizes organic growth, supplemented by selective strategic acquisitions, as a means to expand its global network and service offerings.
  • 6Salaries and related costs remained a stable percentage (53%) of net revenues, reflecting the company's compensation philosophy tied to branch operating profit and its focus on cost containment.
  • 7The company continues to invest in technology and sophisticated computerized customer service capabilities, recognizing their importance in attracting and retaining clients in the competitive logistics market.

Frequently Asked Questions

Expeditors International generates revenue from three main sources: airfreight services, ocean freight and ocean services, and customs brokerage and import services. These services are offered globally to facilitate international trade for their clients.

Expeditors competes by focusing on high-quality, reliable, and responsive service, leveraging its extensive global network, and investing in technology for sophisticated customer service capabilities. The company emphasizes organic growth, supplemented by strategic acquisitions, and maintains a non-asset-based model to remain agile. They also manage pricing strategies to balance customer competitiveness with carrier negotiations.

Key risks include fluctuations in international trade due to economic and political conditions, currency exchange rate volatility, changes in governmental policies and customs regulations, reliance on third-party vendors (carriers), and the critical need to attract, retain, and motivate highly qualified personnel. Geopolitical events and global security concerns also pose risks.

Expeditors operates in multiple currencies and is exposed to foreign exchange risk. The company primarily manages this risk by accelerating international currency settlements between its offices and agents, aiming to resolve intercompany billings within 90 days. They generally do not use derivative financial instruments for hedging, except in limited circumstances where regulatory or commercial restrictions prevent free money movement.