8-KRegulation FD

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report, Regulation FD Disclosure (Nov 20, 2006)

Filed November 20, 2006For Securities:EXPD

Summary

This Form 8-K filing from Expeditors International of Washington, Inc. (EXPD) on November 20, 2006, provides insights into the company's operational performance and financial outlook as of and for the period ending in the third quarter of 2006. The report addresses key performance indicators, including significant year-over-year growth in both airfreight tonnage and ocean container counts for August, September, and the overall third quarter. It also touches upon pricing trends, the competitive landscape, and the company's capital allocation strategy, particularly regarding its cash reserves. Furthermore, the filing clarifies a higher-than-usual tax rate in the third quarter, attributing it to a "true up" adjustment related to the American Jobs Creation Act. Management emphasizes its focus on organic growth, operational efficiency, and market share expansion, rather than aggressive share buybacks or dividend increases, citing the importance of maintaining liquidity for business development. The company also provides an update on its real estate strategy, emphasizing a shift towards strategic asset ownership to lower long-term operating costs.

Key Highlights

  • 1Expeditors reported strong year-over-year growth in airfreight tonnage (17% for Q3) and ocean container counts (23% for Q3) for the third quarter of 2006.
  • 2October 2006 saw continued growth, with a 4% increase in airfreight tonnage and a 20% increase in ocean container counts year-over-year.
  • 3The company experienced a "true up" adjustment in the third quarter related to tax credits for the American Jobs Creation Act, leading to a higher effective tax rate for the quarter.
  • 4Pricing for ocean freight has moderated slightly from prior periods, while airfreight pricing is expected to rise seasonally in anticipation of the holiday rush.
  • 5Expeditors is strategically investing in company-owned real estate in key locations to lower long-term operating costs, a shift from previous lease-heavy strategies.
  • 6Headcount increased by 9.6% year-over-year, reaching 11,318 employees as of September 30, 2006.
  • 7The company continues to prioritize organic growth and market share expansion, balancing this with investments in property and equipment, share repurchases to maintain share count, and dividend increases.

Frequently Asked Questions

Expeditors International of Washington, Inc. experienced robust year-over-year growth in the third quarter of 2006. Airfreight tonnage increased by 17%, and ocean freight container counts grew by 23%.

The higher tax rate in the third quarter of 2006 was primarily due to a "true up" adjustment related to tax credits under the American Jobs Creation Act of 2005. This adjustment, while larger than typical, was deemed insignificant in the context of the company's overall financial statements.

Expeditors maintains substantial cash reserves to support its organic growth strategy and ensure business liquidity. While the company has increased share buybacks to keep share counts flat and has consistently increased dividends, its primary focus remains on reinvesting in the business and expanding market share rather than aggressive share repurchases or large one-time dividends.

Expeditors acknowledges the increasingly competitive market driven by customer demands for more value-added services. The company is focusing on enhancing supply chain reliability and visibility, offering broader service offerings, and implementing more accountable performance monitoring to differentiate itself, alongside maintaining historically stable pricing.