8-KRegulation FD

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report, Regulation FD Disclosure (Sep 17, 2013)

Filed September 17, 2013For Securities:EXPD

Summary

This 8-K filing from Expeditors International of Washington Inc. (EXPD) on September 17, 2013, addresses selected investor inquiries from August 13, 2013. The report clarifies the company's philosophy on returning capital to shareholders, emphasizing a balanced approach including dividends and share repurchases, while prioritizing reinvestment in the business. It also provides insights into operational trends, competitive dynamics, and future industry challenges. Key discussions revolve around the company's capital allocation strategy, with management expressing a pragmatic view that the debate between dividends and buybacks is subjective and that their strategy aims to balance shareholder returns with business investment. Operational details focus on air freight volume trends, explaining the deceleration in year-over-year growth as a function of comps rather than a fundamental weakening, and highlighting positive underlying tonnage increases. The report also touches upon competitive pressures, particularly in the Trans-Pacific lane, and the company's strategy of prioritizing profitable market share over volume at any cost.

Key Highlights

  • 1Expeditors clarifies its capital allocation philosophy, stating a preference for a responsible policy that balances dividend growth, share repurchases, and reinvestment in the business as its top priority.
  • 2The company returned nearly $2.1 billion to shareholders through dividends and stock repurchases between 2003 and 2012, while also investing $663 million in the business.
  • 3Expeditors does not believe that dividend or share buyback policies alone drive stock prices, emphasizing that 'What to do with excess cash lies in the eye of the beholder.'
  • 4Regarding air freight volumes in Q2 2013, while year-over-year percentage growth decelerated, actual air tonnage volumes accelerated throughout the quarter and followed expected seasonal patterns.
  • 5July 2013 airfreight tonnage and TEU (Twenty-foot Equivalent Unit) volumes both saw approximately 10% year-over-year growth.
  • 6The company acknowledges intense competition, especially on Trans-Pacific lanes, and reiterates its focus on profitable market share rather than aggressive pricing to gain volume.
  • 7Expeditors is exploring expansion opportunities in Russia and western Africa, focusing on markets where there is a demonstrated customer demand and a strategic fit.

Frequently Asked Questions

Expeditors employs a balanced approach that includes growing dividend payments, regularly buying back shares (particularly when opportunities arise), and investing in the business, which is considered their first priority. They believe this responsible policy ultimately benefits shareholders the most.

While the year-over-year percentage growth in air freight tonnage decelerated in Q2 2013, the actual airfreight tonnage volumes accelerated throughout the quarter and followed typical seasonal patterns. The company considers the quarter to have been quite healthy.

Expeditors acknowledges tough competition, particularly in the Trans-Pacific lanes. However, they prioritize gaining 'profitable market share' over simply taking market share, stating that it is a 'business where you need to have two dimensional success' (i.e., market share and profitability).

Expeditors is actively exploring opportunities for expansion in Russia and western Africa. They emphasize that new offices are opened based on strategic planning and growing customer demand, rather than adhering to a fixed timetable.