Expeditors International of Washington (EXPD)

EXPD » Topics » 20. Can you discuss the importance of North American ground and rail to Expeditors? Where do these modes fit in your plans as you continue to grow?

This excerpt taken from the EXPD 8-K filed Nov 20, 2006.

20.          Can you discuss the importance of North American ground and rail to Expeditors? Where do these modes fit in your plans as you continue to grow?

Rail as a link for international shipments arriving at or moving to a North American port is critical to our ocean product.  Currently, the vast majority of this coordination is done through the ocean carriers.  This could change at some point in the future.  One thing we can agree on is that the reliance on rail transport, regardless of who manages it, will only get more critical over time.

Ground service is also a necessary component of moving international shipments to and from international gateways, for both ocean and air.  In addition to the requirements for moving international shipments to and from inland locations, we have, during the last several years, begun to develop a domestic transportation network.  This network focuses on moving freight from point to point domestic locations.  The product is progressing nicely and is having the desired result of gained efficiencies on freight moved to and from international gateways.

21.          Throughout your investor documents, you indicate that incentive plans are based on operating profits.  I would like to know how you define operating profits.  I would typically view operating profits as profits before non-operating income, non-operating expenses, and before interest and taxes.  Alternatively, operating profits would be defined as gross revenues less cost of purchased services, less operating expenses.

We’re not sure how many different ways there are to define operating profits, having always believed this to be a fairly universally defined concept.  We would agree with your assessment, in both its alternatives, but do find ourselves musing somewhat about what strange experience you might have had that would have caused  you to feel the need to seek confirmation of what you already seem to understand.  We know that there are a lot of people out there doing a lot of novel and strange things in the name of financial analysis these days.  We wouldn’t have thought that even some of the more twisted and/or innovative financial analysis applications could blur the meaning of a staple of financial reporting that was ground into most of us in Accounting 101.  At any event, in looking at what you’ve written, we think you’ve got it—both of them!

22..         I was going through your historical 8-Ks and found that you guys occasionally provide details on container and airfreight volumes on a monthly and quarterly basis.  I was wondering if you could provide it on a historical basis so we can fill in gaps in the historical data series going back maybe three years or so.  It would be helpful to know volume comparisons, particularly in light of moderating economic trends.

We have provided this information as of and when it was contemporaneously requested.  Much of this information is contained within our 10-Q’s and 10-K’s.  We’re not sure what volume comparisons you’re talking about or how helpful they would be in assessing whatever “moderating” economic trends people seem to be expecting.

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