Seattle Shipper Responds to Street
By Putting 'Dis' in Full Disclosure
By ROBERT MCGOUGH
Staff Reporter of THE WALL STREET JOURNAL
Most public companies go out of their way to please Wall Street analysts. Then there's Expeditors International of Washington Inc.
In one of its periodic regulatory filings, which usually include responses to Wall Street queries, the freight forwarder issued this riposte to an analyst's suggestion that it hire an investment banker: "We decline to learn about fairness from anybody who has worn braces within the last five years."
In another filing, the company sniped: "Is it just us, or are the rest of you also getting tired of this?"
In still another, Expeditors sneered that a certain analyst's mathematical argument "strikes us as a totally meaningless observation. We advise most people to stop reading right here."
A Good Read
But Wall Streeters can't stop reading. The reports have gained a small but enthusiastic cult following, especially among investors in Expeditors. Money managers e-mail snippets of the filings to colleagues. One research assistant at a large brokerage firm, who pleads that he would be fired if he were named, calls the filings "the best bathroom reads of all time."
ANALYZING THE ANALYSTS
[[Analyzing the Analysts]] ? See complete coverage of the heightened scrutiny of analysts, including key e-mails among Merrill employees and their contexts.
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Expeditors' verbal volleys strike a chord at a time when the integrity of analysts and corporate officers alike is under attack. "You've got to love their attitude," says Helane Becker, an analyst at the small firm Buckingham Research Group. Chuck McQuaid, co-manager of the $6 billion Liberty Acorn Fund, which has owned Expeditors stock for more than a decade, calls the reports "irreverent and funny."
Not everyone on Wall Street sees it that way. "Quite frankly, Wall Street made them rich," says Arthur W. Hatfield, an analyst at Morgan Keegan & Co. in Memphis. "They should back off."
Fortunately for the targets of its derision, Expeditors doesn't mention analysts by name. Alexander V. Brand, an analyst at BB&T Capital Markets in Richmond, Va., says he finds some comfort in the anonymity. "Nobody outside of the person who works with me knows I was insulted," he says.
Expeditors gets away with dishing out abuse to Wall Street because it doesn't really need its services. The company, which buys freight space in ships and airplanes and then resells it to customers at a profit, hasn't raised money from Wall Street since it went public in 1984. Its stock price has far outstripped the Standard & Poor's 500 Index in the past five years. Net income has risen every year since 1993, and the company has no plans to raise money from investors in the foreseeable future.
No Conference Calls
Unlike most companies, Expeditors doesn't conduct a quarterly conference call, that staple of Wall Street communication where analysts get to ask top executives questions after a company reports its earnings. As an April filing by Expeditors put it: "We don't do conference calls, and we never follow children or animal acts."
Instead, Expeditors publishes its comments around the middle of each month in a regulatory filing known as a "Form 8-K Current Report." These filings are used by companies to report important news that occurs between quarterly earnings reports. The 8-K filings are made to the Securities and Exchange Commission and are normally bare-bones communications of a sale of assets, the resignation of a director or a change in auditors. They often consist of only a one-page news release.
Expeditors began filing its enhanced 8-Ks, which are are available through Expeditor's own Web site (www.expd.com) as well as Web sites that compile SEC filings, about a year and a half ago to comply with new SEC rules on fair disclosure. These rules generally forbid material news from being selectively disclosed to a favored few analysts. The first few editions were fairly tame, but over time, the executives found their voice.
[[Portrait of Peter Rose]]
"Brokers in New York want to call the dweeb in Seattle and show they know how things work," says Chairman and Chief Executive Peter J. Rose, 59 years old. Once a month, Mr. Rose meets with his chief financial officer, Jordan Gates, and general counsel, Jeffrey King, to compose their responses, often gathering in Mr. Gates's office overlooking Seattle's Elliott Bay.
Mr. Rose, who co-founded Expeditors in 1981 after spending years working in the freight industry, makes no bones about his dislike for Wall Street. The current message on his answering machine at work says: "Hi, this is Pete Rose ... If you're a customer, employee or a friend, I'll get back to you as soon as I can. If you're a stockbroker, consultant or selling the latest scam, there's a good chance you won't be hearing from me. Thanks for calling."
In an 8-K filing last October, the company apologized for having made its e-mail and Web site temporarily unavailable to outsiders. Mr. Rose explained in the filing that, to shut off unsolicited pornographic e-mails, the company accidentally shut off all e-mail.
"In the process of filtering out the pornographers, we also filtered out the investment bankers," the filing stated. "We can assure you that this was inadvertent." |
