Summary
This Form 8-K filing from Expeditors International of Washington, Inc. (EXPD), dated January 23, 2003, provides responses to selected inquiries received by the company up to January 15, 2003. The report focuses heavily on the company's operations and strategies in the People's Republic of China (PRC) and addresses various other operational and financial topics. Key areas of discussion include the company's presence and growth in China, competitive landscape, the impact of China's WTO entry, and regulatory changes such as the 24-hour Advance Manifest Rule for ocean shipments. Expeditors emphasizes its growth strategy, focus on knowledge-based solutions, and its ability to adapt to regulatory changes and market dynamics. The filing also touches upon historical stock performance and future capital expenditure guidance.
Key Highlights
- 1Expeditors has had a presence in the People's Republic of China (PRC) since 1994 and is experiencing rapid growth, with revenue from the PRC being a significant and growing part of its business, though less than 10% as of December 31, 2001.
- 2The company views the PRC as a highly competitive market with immense growth potential, and it plans to leverage its expertise and knowledge-based solutions to succeed there, similar to its strategy in other global markets.
- 3Expeditors' growth rate in the PRC has exceeded 30% annually over the last five years, and the company expects Shanghai to become one of its largest worldwide offices within five years.
- 4The company acknowledges that barriers to entry in China have historically been high but are progressively decreasing, especially with China's entry into the World Trade Organization (WTO), which Expeditors views positively for creating increased opportunities and stability.
- 5Expeditors is adapting to the new 24-hour Advance Manifest Rule for ocean shipments, viewing it as an opportunity to leverage its technological capabilities and help customers navigate the new requirements.
- 6The company's operating margin for the PRC is higher than its average global operating margin.
- 7Expeditors provided a detailed historical stock performance analysis, indicating that an initial investment of $1,375 at the IPO in 1984 would be worth approximately $110,916 as of January 22, 2003, reflecting significant shareholder value creation.
Frequently Asked Questions
Expeditors has been operating in the People's Republic of China (PRC) since 1994 and has 7 full-fledged offices and 10 satellite offices as of mid-January 2003. While specific revenue figures for the PRC are not disclosed for the most recent annual report (as of December 31, 2001), it is stated that less than 10% of total revenue was generated in the PRC at that date, as the company only discloses figures for countries exceeding 10% annually.
Expeditors describes the China market as very competitive, with a mix of state-owned behemoths and asset/non-asset based competitors. The company believes its success hinges on its knowledge-based employees and incentive system. Historically, barriers to entry in China have been significant due to its past experiences with foreign powers, but these restrictions have progressively dropped, especially with China's WTO membership, which Expeditors anticipates will bring more stability and opportunities.
Expeditors sees the 24-hour Advance Manifest Rule, which became effective in December 2002, as an opportunity. The company believes that logistics companies with strong technological capabilities will be better positioned to meet these stringent requirements. They are actively assisting customers to comply and anticipate that freight might shift to other modes or customers may wait if compliance is not met efficiently, but do not foresee this rule fundamentally disrupting ocean freight in the long term.
The filing details that Expeditors went public on September 18, 1984, at $9.00 per unit (share plus warrant). An investor who bought 100 units and exercised warrants would have owned 150 shares for a total investment of $1,375. Due to five stock splits since the IPO, these 150 shares would have grown to 3,600 shares. As of January 22, 2003, these shares were worth approximately $110,916, representing over an 80-fold increase on the initial investment.