Peter Rose’s early departure from the board of Expeditors International may have come as a surprise, but in comments released to the Securities and Exchange Commission, company officials present the outline of a company undergoing a change in outlook.
In a written question-and-answer document, Expeditors officials wrote that Jeffrey Musser, who took over as chief executive officer in March, is undertaking strategic assessment as his No. 1 priority.
“Mr. Musser has also been most adamant in his reassurances, internally and externally, of what will not change — namely, the values that have always formed the foundation of Expeditors' culture,” Expeditors officials wrote. They added that Musser has been at the company for 31 years, and his experience has helped him realize that the firm’s success “could only have been achieved through people united by a common culture working in an environment that allows them to grow and flourish.”
Officials went on to say that the goal of the assessment is to prioritize opportunities so resources can be concentrated on the correct goals, while also adding that much of this strategy may remain confidential for competition reasons. Expeditors also explained that this strategy includes focusing on “lower-cost opportunities” among new offerings.
“Our initial foray into the strategic assessment suggests that there may be several areas of low-hanging fruit where re-directing resources and adjusting concentration and focus can help us revitalize the growth potential in our network,” the company wrote. “These areas will help us take greater advantage of the fact we compete in a very large market against competitors who individually, for the most part, have relatively small percentages of overall market.”
Organic growth will remain a significant focus, the company wrote, but that strategic acquisitions have their place. Officials reminded investors that the assessment is still in its early stages, and that Expeditors hasn't really gotten beyond data-gathering to see what needs to be improved in certain markets.
“At present, we are working on creating a set of strategic hypotheses, for lack of a better term, of what the best options are for Expeditors to pursue in order to increase profitable growth through sustainable operations conducted on an even larger scale,” the firm wrote. “Once that exercise is complete, we'll ‘stress-test’ those hypotheses to make sure they address any obstacles we've identified that need to be overcome for them to take us in the strategic directions we'll identify for the best corporate returns.”
Nate Brochmann of investment firm William Blair takes this to mean that Expeditors may be more focused on generating shareholder return than when Peter Rose served as CEO. He noted that Expeditors hinted at cash returns to shareholders if this money can’t be used to improve the business.
“While former CEO Peter Rose often joked that he would like to take all of the company's excess cash, put it in a room, and swim through it in the buff, we believe that shareholders will prefer Mr. Musser's approach,” he wrote in an email to investors.
Brochmann wrote that while implementing a more “shareholder-friendly” culture at Expeditors will not happen overnight, the assessment process may be complete fairly quickly.
“Mr. Rose's timing to depart the board was an attempt to let the new management implement the findings without any distractions,” he wrote.