8-KRegulation FD

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report, Regulation FD Disclosure (Aug 22, 2007)

Filed August 22, 2007For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) filed a Form 8-K on August 21, 2007, providing selected inquiries and their answers, offering insights into the company's operations and market outlook as of mid-August 2007. The report highlights strong growth in key segments, particularly in customs brokerage and other services, and provides updates on airfreight and ocean freight market dynamics. Key takeaways include stable customs brokerage revenue contribution, with domestic and warehouse services showing robust growth. The airfreight market is described as moving towards equilibrium, with carriers effectively managing capacity. Expeditors also addressed capital expenditure plans related to the Jobs Creation Act and provided details on their rigorous real estate acquisition approval process. The company reported solid year-over-year volume growth in both airfreight and ocean freight for June and the second quarter of 2007, with particular strength noted in the Asia to Europe and Asia to North America ocean lanes.

Key Highlights

  • 1Customs Brokerage and Other Services segment generates over 70% of net revenue from customs brokerage, with domestic and warehouse services showing strong double-digit growth.
  • 2Airfreight market is moving towards an 'equilibrium' situation, with carriers managing capacity effectively ahead of the peak season.
  • 3Ocean freight volumes showed significant year-over-year growth in June 2007 (21%) and Q2 2007 (19%), with Asia-to-Europe and Asia-to-North America lanes being key contributors.
  • 4Expeditors has completed its $150 million capital expenditure plan related to the Jobs Creation Act tax benefit.
  • 5Real estate acquisitions require direct Board of Directors approval, emphasizing a strategic rather than expedient approach to property purchases.
  • 6The company reported a global headcount increase of 9.9% as of March 31, 2007, and 7.9% as of June 30, 2007, compared to the prior year.
  • 7Second quarter 2007 net revenue growth was robust across key regions: United States (12%), Asia (13%), and Europe (10%).

Frequently Asked Questions

The primary driver of revenue within the 'Customs Brokerage and Other Services' segment is customs brokerage and activities directly associated with performing customs clearances, which constitute over 70% of the net revenue for this segment. Domestic services and warehouse/distribution services are also showing strong growth.

The airfreight market is expected to move towards an 'equilibrium' situation, with carriers effectively reducing excess capacity. While some overcapacity existed earlier in the year, the combination of peak season and asset redeployments is likely to create a balanced market. The ocean market is currently described as being at equilibrium, with space being tight but manageable. Yields in both markets are influenced by capacity management and freight demand.

Expeditors views real estate acquisitions as a strategic decision requiring direct approval from the Board of Directors, regardless of the property's size or cost. This approach aims to ensure that real estate purchases align with corporate strategy and are made in the right location, for the right amount, and for long-term utilization, rather than being driven by expediency. Leasing is considered the best alternative when a strategic purchase is not warranted.

In the second quarter of 2007, airfreight tonnages were up 4% globally compared to the second quarter of 2006. Ocean container counts saw a more significant increase, up 19% globally over the same period. June 2007 specifically showed a 5% increase in airfreight tonnages and a 21% increase in ocean container counts compared to June 2006.