8-KRegulation FD

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report, Regulation FD Disclosure (Nov 9, 2015)

Filed November 9, 2015For Securities:EXPD

Summary

Expeditors International of Washington Inc. (EXPD) filed an 8-K on November 9, 2015, providing insights into its operational performance and strategic outlook as of early November 2015. The report addresses key investor inquiries, highlighting the company's approach to employee growth, compensation, and its financial performance. Notably, EXPD emphasizes a flexible headcount strategy driven by business needs and customer requirements, rather than a fixed target, aligning with its service-based model. The company also touched upon wage inflation, indicating it's observing some localized increases but within expected parameters. Further details were provided on the company's share buyback authorization, with approximately 186.4 million shares outstanding as of November 2, 2015, against an authorization to reduce to 180 million. EXPD acknowledged geo-economic and political risks as potential threats to earnings growth but expressed confidence in executing its strategic plan focused on customer service and operational efficiencies. The report also indicated that October freight volume data was not yet available, but highlighted strong gross yields and net operating margins, attributed to favorable buying opportunities, enhanced productivity, and continuous operational improvements, with a focus on technology and process standardization.

Key Highlights

  • 1Expeditors (EXPD) maintains a flexible approach to headcount, adjusting based on business volume, market investment decisions, and customer needs, rather than adhering to a fixed 'right size' target.
  • 2The company is experiencing some selective wage inflation in certain markets, but it remains within expected levels and is managed within their compensation philosophy.
  • 3As of November 2, 2015, EXPD had approximately 186.4 million shares outstanding, with a Board authorization to reduce outstanding stock to 180 million shares under its Discretionary Stock Repurchase Plan.
  • 4Potential risks to double-digit earnings growth are primarily seen in unpredictable geo-economic and political issues that could disrupt global trade.
  • 5Gross yields have reached their highest levels since early 2009, driven by a combination of favorable spot buy rates relative to sell rates, improved productivity, and better customer service.
  • 6Net operating margins are performing strongly, well above the company's 30%+ target, with opportunities for further improvement seen through technology adoption, process standardization, and workforce development.
  • 7Expeditors remains focused on organic growth and does not currently plan to pursue growth through industry consolidation, emphasizing continued focus on customers, service providers, and employees.

Frequently Asked Questions

Expeditors does not have a fixed 'right size' for headcount. Instead, they adjust staffing levels based on fluctuations in business volume, strategic decisions to invest in specific markets or services, and the unique requirements of their customers. Their compensation philosophy, including incentive bonuses tied to net revenue growth and expense management, and a focus on long-term employee development, guides these decisions.

The recent strength in gross yields, the highest since early 2009, is attributed to a combination of factors including favorable spot market buying opportunities that outpaced sell rates, increased productivity from their workforce, and enhanced service delivery to customers. Management believes that by focusing on operational efficiencies, technology, process improvements, and a motivated workforce, they can sustain high levels of performance and continuous improvement.

Expeditors identifies unpredictable geo-economic and political issues as the primary risks that could potentially disrupt global trade and impact earnings growth. While they cannot control these external factors, the company plans to mitigate these risks by continuing to execute its strategic plan and maintaining a strong focus on delivering exceptional customer service and improving operating efficiencies.

As of November 2, 2015, Expeditors had approximately 186,413,350 shares of common stock outstanding. The company's Board of Directors had authorized management to reduce issued and outstanding stock to 180 million shares under its Discretionary Stock Repurchase Plan. Investors can refer to Part II, Item 2 of their third quarter Form 10-Q filed on November 5, 2015, for more details.