8-KRegulation FD

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report, Regulation FD Disclosure (Feb 28, 2008)

Filed February 28, 2008For Securities:EXPD

Summary

This Form 8-K filing from Expeditors International of Washington, Inc. (EXPD), filed on February 28, 2008, addresses selected inquiries received by the company up to February 14, 2008. A significant portion of the filing details the company's response to a Department of Justice (DOJ) subpoena, outlining substantial costs incurred for legal fees and record-keeping requirements, totaling nearly $4 million in Q4 2007 and an additional $855,000 in January 2008. The company emphasizes that these costs are primarily corporate and not allocated to specific operating units at this time. Additionally, the filing provides insights into market conditions, particularly in airfreight, where yields experienced slight compression year-over-year in Q4 2007, aligning with prior company expectations. Expeditors discusses its approach to managing labor costs for future growth and provides guidance on capital expenditures for 2008, estimating approximately $85 million. The company also touches upon currency impacts on its global operations and addresses investor concerns regarding stock market performance despite consistent earnings growth.

Key Highlights

  • 1Expeditors incurred approximately $4 million in legal and record-keeping costs in Q4 2007 due to a DOJ subpoena, with an additional $855,000 in January 2008.
  • 2These costs are treated as corporate expenses and are not being charged to operating units.
  • 3Airfreight yields saw a slight year-over-year compression in Q4 2007, as anticipated by the company.
  • 4Expeditors plans to increase real labor costs in 2008 to support business growth while focusing on increasing productivity.
  • 5The company estimates its 2008 capital expenditures budget to be approximately $85 million.
  • 6Volume trends showed positive year-over-year growth in net revenue, operating income, airfreight tonnage, and ocean freight container count in October, November, and December 2007, continuing into January 2008.
  • 7The company believes its current business model and sales strategy are effective, opting against traditional advertising like Yellow Pages listings.

Frequently Asked Questions

In Q4 2007, Expeditors incurred nearly $4 million in legal fees and record-keeping expenses related to a DOJ subpoena. An additional $855,000 was incurred in January 2008. The company indicated these costs are ongoing until compliance with the subpoena is complete and stated they are treating these as corporate costs. They are cautious about projecting future expenses due to the unpredictable nature of the investigation.

Expeditors experienced a small year-over-year compression in airfreight yields in Q4 2007, which was in line with their prior expectations due to market conditions and backlogs. For Q1 2008, they anticipate yields might expand slightly sequentially from Q4 2007 but do not expect year-over-year increases compared to Q1 2007. They describe current market conditions in January 2008 as 'just right +,' with global airfreight tonnage up 12%.

Expeditors anticipates growing its business in 2008 and expects to increase real labor costs to support this growth. However, their primary goal is to improve productivity, aiming for salaries and related costs as a percentage of net revenue to be lower in 2008 than in 2007. This indicates a focus on handling more business with less proportional increase in employee headcount.

Expeditors estimates its capital expenditures budget for 2008 to be approximately $85 million, which is similar to the capital expenditures made in 2007.