8-KOther Events

EXPEDITORS INTERNATIONAL OF WASHINGTON INC 8-K Report (Jul 23, 2002)

Filed July 23, 2002For Securities:EXPD

Summary

This Form 8-K filing from Expeditors International of Washington, Inc. (EXPD), dated July 23, 2002, primarily addresses inquiries received by the company regarding its operations and business practices. A significant portion is dedicated to responding to questions about its presence and conduct in Northern Ireland, reiterating its commitment to complying with all applicable local and international laws and emphasizing its policy of employing and empowering local residents. The company also provides updates on market conditions, including airfreight demand surges and ocean carrier booking trends, while elaborating on its approach to currency exposure and the rationale behind its accounting treatment of employee stock options. Key investor information includes clarification on the company's operational scope in Northern Ireland, confirming only a single Belfast office engaged in standard freight forwarding services. Expeditors details its strategy for managing currency fluctuations through an automated internal clearinghouse and an indirect approach to hedging by maintaining a robust global network. Furthermore, the company explains its decision to continue accounting for stock options under APB 25, providing comprehensive disclosures under FAS 123, and offers its perspective on the ongoing debate regarding stock-based compensation accounting, emphasizing its alignment with shareholder interests.

Key Highlights

  • 1Expeditors International of Washington, Inc. operates a single full-service office in Belfast, Northern Ireland, offering standard international freight import/export, customs brokerage, and distribution services.
  • 2The company has no other subsidiaries, joint ventures, or business entities in Northern Ireland.
  • 3Expeditors employs a strategy of using third-party subcontractors globally, which it views as a cornerstone of its non-asset based service model, and will not disclose names of these suppliers.
  • 4The company's approach to social responsibility is defined by compliance with all applicable laws, both U.S. and local, and fostering a culture of mutual respect and equal opportunity.
  • 5Expeditors utilizes an automated internal clearinghouse, based on U.S. Dollars as its functional currency, to manage direct currency exposure through accelerated inter-company balance settlement and views rapid settlement as more effective and cheaper than hedging.
  • 6Regarding employee stock options, Expeditors continues to account for them under APB 25, not as an expense in the P&L, but provides full disclosure of pro forma expense under FAS 123 in its financial statement footnotes.
  • 7The company anticipates releasing its second quarter 2002 earnings results before the market opens on August 6, 2002.

Frequently Asked Questions

Expeditors defines social responsibility as strict compliance with all applicable laws, both U.S. and local. They emphasize employing and empowering native residents within a global network and applying uniform standards for success and compensation. The company stated that if adherence to specific voluntary accords or principles (like the MacBride Principles beyond legal requirements) is crucial for an investor's decision, they may be better off investing elsewhere.

Expeditors categorizes currency exposure into direct and indirect. Direct exposure from inter-company balances is managed via an automated internal clearinghouse that bases transactions on U.S. Dollars (its functional currency) and accelerates settlement, which they find more effective and cheaper than hedging. Indirect exposure from shifts in global trade activity due to currency valuations is managed by maintaining a strong, full-service global network that can capitalize on market movements.

Expeditors currently accounts for employee stock options under APB 25, meaning options granted at market value are not treated as compensation expense in the P&L. However, they provide full footnote disclosure of the pro forma expense that would be recognized under FAS 123, allowing investors to make their own adjustments. The company's rationale includes historical practice, complete transparency via disclosures, and avoiding a potential competitive disadvantage from unilaterally adopting FAS 123.

Expeditors observed a surge in airfreight demand from Asia to North America in the latter part of June 2002, with current volumes still appearing strong, though it's early to make a definitive assessment for the full quarter. For ocean container volumes, the company reported consistent year-over-year strength throughout the year.