8-KRegulation FD

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report, Regulation FD Disclosure (Mar 18, 2009)

Filed March 18, 2009For Securities:EXPD

Summary

This 8-K filing from Expeditors International of Washington, Inc. (EXPD) provides answers to selected inquiries received by February 12, 2009, offering insights into their business performance and outlook during a challenging economic period. The company details its revenue distribution by vertical, which remains consistent with retail and hi-tech segments forming the largest portions. Legal and associated costs related to DOJ and EC investigations are noted, with expectations for these to moderate in 2009, though uncertainty remains. Furthermore, the filing highlights significant year-over-year declines in airfreight tonnage and ocean container volumes throughout the latter half of 2008 and into early 2009, a direct reflection of the global economic slowdown. Despite volume declines, the company discusses strategies to manage and improve yields through efficient buying and focusing on service quality, particularly in the face of volatile fuel prices and market dynamics.

Key Highlights

  • 1Revenue distribution remains consistent, with Retail (33%) and Hi-Tech/Consumer Electronics (31%) being the largest segments.
  • 2Legal and associated costs for Q3 2008 were $2.6 million, and $0.9 million for Q4 2008, with expectations for moderation in 2009 but ongoing investigations.
  • 3Significant year-over-year volume declines observed: Airfreight Tonnage decreased by 24% in December 2008 and 32% in January 2009; Ocean Freight Container Count decreased by 13% in December 2008 and 18% in January 2009.
  • 4Expeditors repurchased 2,103,907 shares at an average price of $35.81 in Q3 2008 and 277,819 shares at $33.33 in Q4 2008.
  • 5The company has an approved 2009 capital budget of approximately $70 million, with expectations that actual expenditures might be less.
  • 6Asia origins show the largest year-over-year volume decreases, though some modest strength is seen in specific markets within Europe, Middle East, Africa, and Latin America.
  • 7Net airfreight revenue per kilo was up over 30% in Q4 2008, and net ocean freight revenue per TEU was up 18% in Q4 2008, driven by favorable spot markets and operational efficiencies.

Frequently Asked Questions

The declines were primarily driven by the global economic slowdown and the credit crisis of 2008, which led to decreased consumer confidence, reduced inventory build-up, and a general contraction in global trade demand.

Expeditors is focusing on managing yields through efficient buying in the spot market, optimizing freight mix, and implementing cost containment and productivity initiatives. They are also strategically reducing exposure in areas where making money is difficult.

The company anticipates that legal expenses will be significantly lower in 2009 than in 2008. However, ongoing investigations by the DOJ and EC, as well as related civil litigation, mean that costs are unlikely to be zero, and effective judgment on exact figures is difficult.

Expeditors maintains a 'Cash is King' philosophy, prioritizing investments in the business, paying dividends, and repurchasing stock opportunistically. They are not pursuing radical new uses for their cash and believe their conservative approach positions them well in the current environment.