8-KOther Events

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report (Aug 15, 2003)

Filed August 15, 2003For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) filed an 8-K on August 15, 2003, providing insights into its second-quarter 2003 results and operational outlook. The report addresses investor inquiries, highlighting the company's strategy regarding new office openings, which are set to resume with a focus on the People's Republic of China, Central America, and Eastern Europe. This restart is driven by renewed customer demand after a period of consolidation and focus on system productivity. The company also commented on the impact of SARS on airline belly space, noting it had minimal disruption to their operations. Key financial discussions include a focus on airfreight gross yield expansion despite a softening global economy, contrasted with a contraction in ocean freight gross yield due to the timing of rate pass-throughs to customers. Expeditors emphasized its operational efficiencies and strategic market positioning as drivers of performance.

Key Highlights

  • 1Expeditors plans to resume opening new offices in the remainder of 2003 and into 2004, with a concentration in the People's Republic of China, followed by Central America and Eastern Europe. This marks a shift from the previous 18 months of no new office openings.
  • 2The company experienced a reduction in passenger airline belly space due to SARS but reported minimal disruption to freight movement, indicating resilience and effective contingency planning.
  • 3Airfreight gross yield showed year-over-year expansion in Q2 2003, outperforming many competitors, attributed to increased efficiencies in managing and purchasing ground handling services and a balanced approach to customer pricing and vendor costs.
  • 4Ocean freight gross yield experienced a year-over-year contraction, primarily due to a lag in passing through May 1st rate increases to customers, rather than an inability to do so.
  • 5The company reported approximately $500,000 in currency gains in the second quarter of 2003, included in 'Other Income'.
  • 6Expeditors has not historically taken 'one-time' or 'non-recurring' charges of a material nature and avoids using such labels.
  • 7New office openings did not occur in Q2 2003, but a UK office was consolidated into the London-Heathrow office.

Frequently Asked Questions

Expeditors plans to open a few offices in the United States, at least one in Central America, one in Eastern Europe, and several in the People's Republic of China (PRC). This resumption is driven by renewed customer demand and follows a period where the company focused on consolidating gains, improving system productivity, and addressing operational issues. The lack of new openings over the past 18 months was a direct response to the absence of significant customer demand.

While the SARS outbreak led to reduced passenger airline belly space due to decreased travel, Expeditors stated that this did not significantly impact their operations. They were able to move all customer freight without delay, except for a few isolated, short-term situations, indicating effective management and alternative solutions.

While Expeditors has more airfreight business volume, the ocean freight business is actually more profitable on a net revenue basis at the operating income line. This means that $1 of ocean freight net revenue generates more operating income than $1 of airfreight net revenue. Both services are complementary and play well together within the company's network.

Expeditors' strong airfreight gross yield performance was attributed to increased efficiencies in managing and purchasing ground handling services (pickup and delivery, container freight station fees) and a focus on maintaining an equilibrium between acceptable customer pricing and vendor costs. While market forces played a role, internal operational improvements were a key driver.