8-KRegulation FD

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report, Regulation FD Disclosure (Nov 21, 2017)

Filed November 21, 2017For Securities:EXPD

Summary

Expeditors International of Washington Inc. (EXPD) filed an 8-K on November 21, 2017, providing insights into recent operational trends and strategic initiatives. The filing addresses performance in North Asia and Europe, which saw strong results driven by successful rate negotiations, new business onboarding, and favorable buying rates. Conversely, South Asia experienced underperformance due to increased air freight buy rates outpacing sell rate adjustments, a situation exacerbated by longer transit times and carrier capacity shifts towards North Asia. The company also provided an update on its capital expenditure plans, estimating $100 million for 2017, primarily for technology, office improvements, and a new building in Europe. Strategic initiatives like the development of a China import and customs brokerage infrastructure, supported by Advanced Authorized Economic Operator certification, are ongoing. While acknowledging blockchain as a potential future technology, Expeditors emphasizes its core differentiators of skilled personnel, a unique compensation system, process efficiency, and a unified global technology platform as key to maintaining its competitive edge.

Key Highlights

  • 1North Asia and Europe regions demonstrated strong performance in Q3 2017 due to successful rate management and increased tonnage.
  • 2South Asia's profitability was impacted by significantly higher air freight buy rates compared to sell rate adjustments.
  • 3Expeditors is investing approximately $100 million in capital expenditures for 2017, including technology and a new European facility.
  • 4The company is actively developing its China import and customs brokerage capabilities, having achieved "Advanced Authorized Economic Operator" certification.
  • 5Volume growth in tonnage and TEU (Twenty-foot Equivalent Unit) is broad-based across geographies and verticals, with no single driver identified.
  • 6Price volatility in air and ocean markets is observed across all regions, with particular intensity on lanes from Asia to the U.S. and Europe.
  • 7Expeditors views blockchain as a potential future technology but remains focused on its established differentiators: people, processes, and technology.

Frequently Asked Questions

Performance in North Asia and Europe improved due to the company's success in negotiating higher rates with customers, onboarding new business, and in some instances, securing lower buying rates from carriers. Increased air tonnage and ocean volumes contributed to net revenue growth in these regions.

South Asia experienced higher air freight buy rates, which increased faster than the company could adjust its sell rates. This was attributed to longer transit times from South Asia to North America/Europe, leading carriers to prioritize capacity for shorter, more profitable routes from North Asia, thus limiting capacity and driving up prices in South Asia.

Expeditors views blockchain as one of many emerging technologies that may be useful. While it's too early to determine integration or benefits, the company will continue to monitor its development and be prepared to implement it where opportunities arise.

Expeditors differentiates itself through its focus on hiring the right people and investing in their training, a unique compensation system that incentivizes customer service, relentless process improvement for efficiency, and a single, global technology platform that enables speed, visibility, and new capabilities across its network.