8-KRegulation FD

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report, Regulation FD Disclosure (May 26, 2010)

Filed May 26, 2010For Securities:EXPD

Summary

This 8-K filing from Expeditors International of Washington Inc. (EXPD) provides insights into the company's performance and outlook as of May 26, 2010, primarily through a Q&A format addressing investor inquiries. The report highlights a strong rebound in freight volumes, particularly airfreight, which experienced significant year-over-year growth in early 2010, reflecting an improving economy and easier comparisons to the prior year's downturn. Key operational and financial aspects are discussed, including the company's expense management strategies, particularly concerning salaries and related expenses, which are expected to align more with historical patterns as revenues increase, supported by a continued no-layoff policy. The filing also touches upon legal matters, including ongoing investigations and potential fines, though specific financial impacts are not quantified, directing investors to more detailed disclosures in the company's 10-Q. Expeditors emphasizes its resilient business model and focus on operational strength rather than making speculative forecasts.

Key Highlights

  • 1Strong rebound in airfreight tonnage, up approximately 40% year-to-date through March 2010 and 49% in April compared to 2009.
  • 2Ocean freight volumes also showed significant recovery, up 14% for Q1 2010 and 18% in April compared to the prior year.
  • 3Salaries and related expenses are expected to decrease as a percentage of net revenue and conform to historical patterns as net revenues increase, supported by a 'no layoff' policy.
  • 4Expeditors acknowledges ongoing legal expenses related to investigations by the DOJ and EC, but refrains from commenting on potential fine amounts.
  • 5The company has increased capital expenditures for 2010 to approximately $90 million, primarily for new buildings in Europe and Asia and IT equipment.
  • 6Expeditors' dividend policy remains consistent: increases are expected to be commensurate with net income growth, supported by strong cash flow.
  • 7The company does not disclose spot market booking percentages for competitive reasons but notes a significant decrease in spot pricing usage compared to the prior year.

Frequently Asked Questions

Expeditors expects salaries and related expenses as a percentage of net revenue to return to more historical patterns as net revenues increase. This expectation is supported by the company's 'no layoff' policy during 2009 and the observed trend of net revenue growing faster than operating expenses in early 2010.

Yes, Expeditors has incurred and expects to incur additional legal expenses related to various legal issues, including responses to the EC's Statement of Objections. While the company hopes to pay no fines, the amount of any potential fine, if levied by the EC, would be determined by the EC. Investors are directed to the 'Legal Proceedings' section of the company's 10-Q filing for further details.

Airfreight tonnage was up approximately 40% year-over-year through March 2010 and 49% in April. Ocean freight volumes were up 14% year-to-date for Q1 2010 and 18% in April, indicating a strong recovery in both segments compared to 2009.

Expeditors' philosophy is to repurchase shares primarily to offset the impact of stock option exercises, thereby maintaining a relatively stable share count. Discretionary buybacks may occur if significant value disconnects are identified, but these are opportunistic rather than part of a pre-conceived plan.