8-KOther Events

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report (Feb 20, 2003)

Filed February 20, 2003For Securities:EXPD

Summary

Expeditors International of Washington, Inc. (EXPD) filed an 8-K on February 20, 2003, providing responses to a series of investor questions regarding their fourth quarter and full-year 2002 results. The company addressed topics ranging from currency fluctuations and operating leverage to specific geographic revenue contributions and capital expenditures. A significant portion of the filing focuses on clarifying the company's approach to managing currency risks, highlighting their preference for natural settlement over complex hedging strategies. Expeditors also detailed its philosophy on stock options, emphasizing broad distribution to non-executive employees and responsible governance. The report offered insights into capital investments, particularly the acquisition of a significant development site near Heathrow Airport in London and a distribution center in New Jersey, explaining the strategic rationale behind these moves. Overall, the filing aims to provide transparency and detailed answers to investor inquiries, demonstrating the company's operational strategies and financial management.

Key Highlights

  • 1Expeditors does not actively manage currency risk through hedging strategies, preferring to manage transaction risk by accelerating inter-company settlements.
  • 2Ocean freight net revenue from Spain is less than 1% of total, while Europe contributed approximately 13% of total ocean freight net revenue in 2002.
  • 3The company has a consistent policy of awarding stock options broadly across all employee levels, not just executives, and highlights shareholder approval for such programs.
  • 4Expeditors acquired a development opportunity near Heathrow Airport for approximately $60 million to consolidate its UK operations.
  • 5A $3.5 million impairment charge was taken in Q4 2002, primarily related to technology investments.
  • 6The company expects 2003 capital expenditures to be approximately $35 million, or $66 million if the San Francisco property acquisition is included.
  • 7Expeditors experienced increased demand for air freight due to the West Coast port shutdown, which also benefited ocean freight revenue growth.

Frequently Asked Questions

Expeditors primarily manages currency risk by accelerating inter-company settlements to reduce the time that assets and liabilities are denominated in different currencies. They believe complex hedging programs are not cost-effective and prefer to address transaction risk naturally through actual payments rather than synthetic instruments.

Expeditors has a long-standing practice of awarding stock options broadly across all levels of the company, not just to executives. They emphasize that all stock option programs are approved by shareholders and overseen by an independent Compensation Committee of the Board of Directors.

The most significant capital expenditures in 2002 included the purchase of a development opportunity near Heathrow Airport for approximately $60 million, the acquisition of a distribution center in New Jersey (with a cash impact of less than $1.5 million in 2002), and completion of a new facility in Cairo, Egypt. Additionally, $31 million was held in escrow for a San Francisco property acquisition that closed in early 2003.

The West Coast port shutdown in late 2002 led to a tightness in ocean and air freight capacity. Expeditors experienced a significant increase in ocean freight gross revenue (over 40% year-over-year) and benefited from increased demand for airfreight services. While quantifying the exact impact is difficult, the company believes it displayed resourcefulness, potentially gained market share, and helped maintain customer supply chains.