8-KRegulation FD

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report, Regulation FD Disclosure (Jan 31, 2006)

Filed January 31, 2006For Securities:EXPD

Summary

This 8-K filing from Expeditors International of Washington, Inc. (EXPD) on January 31, 2006, primarily addresses selected inquiries received up to January 30, 2006. A key disclosure relates to a one-time tax benefit of approximately $21.6 million expected in the fourth quarter of 2005, resulting from the repatriation of offshore earnings under the American Jobs Creation Act of 2004. This repatriation involved qualifying cash dividends of just over $105 million, with an effective tax cost of slightly over 14%. The company also provided an update on freight volume growth and discussed its strategy regarding gateway cities and new business acquisition. Expeditors also commented on the impact of European port work stoppages, stating they had been inconvenienced but not significantly affected. The company expressed a general belief in the benefits of competition and customer service through market standards. Regarding freight volumes, ocean freight container counts increased by nearly 15% year-over-year in December 2005, and airfreight tonnages rose by 21% over the same period. The company also clarified its gateway city strategy for inbound airfreight into the U.S., with approximately 80% moving through six major gateway cities.

Key Highlights

  • 1Expeditors expects to record a one-time tax benefit of approximately $21.6 million in Q4 2005 due to the repatriation of offshore earnings under the American Jobs Creation Act.
  • 2The repatriation involved over $105 million in qualifying cash dividends, with an effective tax cost of slightly over 14%.
  • 3Ocean freight container counts increased by nearly 15% year-over-year in December 2005.
  • 4Airfreight tonnages saw a 21% year-over-year increase in December 2005.
  • 5Approximately 80% of U.S.-bound inbound airfreight moves through six major gateway cities (Los Angeles, Chicago, New York, Atlanta, Miami, Columbus).
  • 6The company has not been significantly affected by recent European port work stoppages, though some inconvenience was noted.

Frequently Asked Questions

Expeditors expects to recognize a one-time tax benefit of approximately $21.6 million in its fourth quarter 2005 tax provision. This benefit arises from repatriating previously untaxed offshore earnings under the American Jobs Creation Act of 2004. The repatriation involved over $105 million in qualifying cash dividends, subject to an effective tax cost of slightly over 14%, and included a commitment to reinvest the proceeds in job-producing activities in the U.S., such as real estate development projects totaling around $150 million over three years.

In December 2005, Expeditors experienced robust year-over-year growth in freight volumes. Ocean freight container counts were up nearly 15%, and airfreight tonnages increased by 21% compared to December 2004.

Expeditors utilizes six major gateway cities for inbound airfreight into the U.S.: Los Angeles, Chicago, New York, Atlanta, Miami, and Columbus. Approximately 80% of the company's inbound airfreight to the U.S. is processed through these key locations.

Expeditors has indicated that recent work stoppages at several major European ports have caused some inconvenience but have not significantly impacted their operations. The company generally views labor stoppages as immediate headaches for forwarders, with the duration and nature of the shutdown determining the extent of the disruption.