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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to

Commission File Number: 0-13468

 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

(Exact name of registrant as specified in its charter)

 

 

Washington

 

91-1069248

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification Number)

 

 

 

1015 Third Avenue, Seattle, Washington

 

98104

(Address of principal executive offices)

 

(Zip Code)

 

(Registrant’s telephone number, including area code): (206) 674-3400

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

EXPD

 

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

At November 2, 2020, the number of shares outstanding of the issuer’s common stock was 169,265,692.

 

 

 

 


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

 

 

 

September 30,

2020

 

 

December 31,

2019

 

Assets:

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,465,510

 

 

$

1,230,491

 

Accounts receivable, less allowance for credit loss of

   $5,171 at September 30, 2020 and $11,143 at December 31, 2019

 

 

1,582,424

 

 

 

1,315,091

 

Deferred contract costs

 

 

232,351

 

 

 

131,783

 

Other

 

 

129,617

 

 

 

92,558

 

Total current assets

 

 

3,409,902

 

 

 

2,769,923

 

Property and equipment, less accumulated depreciation and

   amortization of $510,103 at September 30, 2020 and $478,906 at

   December 31, 2019

 

 

499,189

 

 

 

499,344

 

Operating lease right-of-use assets

 

 

422,002

 

 

 

390,035

 

Goodwill

 

 

7,927

 

 

 

7,927

 

Deferred federal and state income taxes, net

 

 

3,130

 

 

 

8,034

 

Other assets, net

 

 

16,404

 

 

 

16,621

 

Total assets

 

$

4,358,554

 

 

$

3,691,884

 

Liabilities:

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

888,761

 

 

$

735,695

 

Accrued expenses, primarily salaries and related costs

 

 

236,826

 

 

 

189,446

 

Contract liabilities

 

 

267,266

 

 

 

154,183

 

Current portion of operating lease liabilities

 

 

70,755

 

 

 

65,367

 

Federal, state and foreign income taxes

 

 

33,100

 

 

 

23,627

 

Total current liabilities

 

 

1,496,708

 

 

 

1,168,318

 

Noncurrent portion of operating lease liabilities

 

 

357,373

 

 

 

326,347

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

 

Preferred stock, none issued

 

 

 

 

 

Common stock, par value $0.01 per share. Issued and

   outstanding: 169,231 shares at September 30, 2020 and 169,622

   shares at December 31, 2019

 

 

1,692

 

 

 

1,696

 

Additional paid-in capital

 

 

145,924

 

 

 

3,203

 

Retained earnings

 

 

2,489,694

 

 

 

2,321,316

 

Accumulated other comprehensive loss

 

 

(135,281

)

 

 

(131,187

)

Total shareholders’ equity

 

 

2,502,029

 

 

 

2,195,028

 

Noncontrolling interest

 

 

2,444

 

 

 

2,191

 

Total equity

 

 

2,504,473

 

 

 

2,197,219

 

Total liabilities and equity

 

$

4,358,554

 

 

$

3,691,884

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

2


 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airfreight services

 

$

1,093,550

 

 

$

715,450

 

 

$

3,237,179

 

 

$

2,171,928

 

Ocean freight and ocean services

 

 

612,858

 

 

 

585,374

 

 

 

1,597,997

 

 

 

1,697,824

 

Customs brokerage and other services

 

 

758,389

 

 

 

774,031

 

 

 

2,112,117

 

 

 

2,260,733

 

Total revenues

 

 

2,464,797

 

 

 

2,074,855

 

 

 

6,947,293

 

 

 

6,130,485

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airfreight services

 

 

833,689

 

 

 

522,868

 

 

 

2,450,931

 

 

 

1,574,717

 

Ocean freight and ocean services

 

 

455,072

 

 

 

424,215

 

 

 

1,185,154

 

 

 

1,234,845

 

Customs brokerage and other services

 

 

441,657

 

 

 

453,416

 

 

 

1,212,102

 

 

 

1,330,758

 

Salaries and related

 

 

373,613

 

 

 

356,331

 

 

 

1,110,760

 

 

 

1,069,592

 

Rent and occupancy

 

 

42,484

 

 

 

41,987

 

 

 

126,383

 

 

 

124,407

 

Depreciation and amortization

 

 

15,851

 

 

 

12,386

 

 

 

42,620

 

 

 

38,456

 

Selling and promotion

 

 

2,945

 

 

 

10,133

 

 

 

14,301

 

 

 

32,852

 

Other

 

 

47,541

 

 

 

46,969

 

 

 

146,416

 

 

 

138,506

 

Total operating expenses

 

 

2,212,852

 

 

 

1,868,305

 

 

 

6,288,667

 

 

 

5,544,133

 

Operating income

 

 

251,945

 

 

 

206,550

 

 

 

658,626

 

 

 

586,352

 

Other Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,504

 

 

 

5,501

 

 

 

8,870

 

 

 

18,123

 

Other, net

 

 

980

 

 

 

1,895

 

 

 

5,161

 

 

 

5,822

 

Other income, net

 

 

2,484

 

 

 

7,396

 

 

 

14,031

 

 

 

23,945

 

Earnings before income taxes

 

 

254,429

 

 

 

213,946

 

 

 

672,657

 

 

 

610,297

 

Income tax expense

 

 

62,710

 

 

 

53,319

 

 

 

173,968

 

 

 

156,029

 

Net earnings

 

 

191,719

 

 

 

160,627

 

 

 

498,689

 

 

 

454,268

 

Less net earnings attributable to the noncontrolling

   interest

 

 

412

 

 

 

406

 

 

 

1,169

 

 

 

1,199

 

Net earnings attributable to shareholders

 

$

191,307

 

 

$

160,221

 

 

$

497,520

 

 

$

453,069

 

Diluted earnings attributable to shareholders per share

 

$

1.12

 

 

$

0.92

 

 

$

2.92

 

 

$

2.60

 

Basic earnings attributable to shareholders per share

 

$

1.14

 

 

$

0.94

 

 

$

2.96

 

 

$

2.65

 

Weighted average diluted shares outstanding

 

 

170,735

 

 

 

173,483

 

 

 

170,539

 

 

 

174,463

 

Weighted average basic shares outstanding

 

 

168,310

 

 

 

170,415

 

 

 

167,942

 

 

 

171,084

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

3


 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net earnings

 

$

191,719

 

 

$

160,627

 

 

$

498,689

 

 

$

454,268

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax

   expense (benefit) of $4,200 and $(5,803) for the

   three months ended September 30, 2020 and

   2019 and $226 and $(5,364) for the nine months

   ended September 30, 2020 and 2019

 

 

17,429

 

 

 

(14,603

)

 

 

(5,010

)

 

 

(14,007

)

Reclassification adjustments for foreign currency

   realized losses, net of tax of $145 for the nine

   months ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

535

 

Other comprehensive income (loss)

 

 

17,429

 

 

 

(14,603

)

 

 

(5,010

)

 

 

(13,472

)

Comprehensive income

 

 

209,148

 

 

 

146,024

 

 

 

493,679

 

 

 

440,796

 

Less comprehensive (loss) income attributable to the

   noncontrolling interest

 

 

(36

)

 

 

481

 

 

 

253

 

 

 

1,020

 

Comprehensive income attributable to shareholders

 

$

209,184

 

 

$

145,543

 

 

$

493,426

 

 

$

439,776

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

4


 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

191,719

 

 

$

160,627

 

 

$

498,689

 

 

$

454,268

 

Adjustments to reconcile net earnings to net cash from

   operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions for losses on accounts receivable

 

 

398

 

 

 

757

 

 

 

4,607

 

 

 

453

 

Deferred income tax (benefit) expense

 

 

(1,276

)

 

 

(5,822

)

 

 

2,872

 

 

 

(17

)

Stock compensation expense

 

 

12,297

 

 

 

12,155

 

 

 

45,091

 

 

 

49,361

 

Depreciation and amortization

 

 

15,851

 

 

 

12,386

 

 

 

42,620

 

 

 

38,456

 

Other, net

 

 

2,919

 

 

 

652

 

 

 

3,470

 

 

 

812

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable

 

 

(106,065

)

 

 

43,885

 

 

 

(274,440

)

 

 

246,175

 

Increase (decrease) in accounts payable and accrued

   expenses

 

 

94,263

 

 

 

(58,816

)

 

 

201,940

 

 

 

(141,199

)

(Increase) decrease in deferred contract costs

 

 

(81,486

)

 

 

10,301

 

 

 

(99,887

)

 

 

28,550

 

Increase (decrease) in contract liabilities

 

 

91,638

 

 

 

(13,211

)

 

 

112,244

 

 

 

(36,933

)

(Decrease) in income taxes payable, net

 

 

(41,286

)

 

 

(671

)

 

 

(10,644

)

 

 

(33,284

)

(Increase) decrease in other, net

 

 

(17,373

)

 

 

(744

)

 

 

(13,242

)

 

 

47

 

Net cash from operating activities

 

 

161,599

 

 

 

161,499

 

 

 

513,320

 

 

 

606,689

 

Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(9,178

)

 

 

(15,521

)

 

 

(37,419

)

 

 

(37,943

)

Other, net

 

 

1,174

 

 

 

232

 

 

 

963

 

 

 

1,525

 

Net cash from investing activities

 

 

(8,004

)

 

 

(15,289

)

 

 

(36,456

)

 

 

(36,418

)

Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

121,430

 

 

 

60,713

 

 

 

174,016

 

 

 

120,190

 

Repurchases of common stock

 

 

 

 

 

(61,999

)

 

 

(314,225

)

 

 

(296,922

)

Dividends paid

 

 

 

 

 

 

 

 

(86,815

)

 

 

(85,184

)

Payments for taxes related to net share settlement of equity

   awards

 

 

 

 

 

 

 

 

(10,566

)

 

 

(6,674

)

Net cash from financing activities

 

 

121,430

 

 

 

(1,286

)

 

 

(237,590

)

 

 

(268,590

)

Effect of exchange rate changes on cash and cash equivalents

 

 

10,030

 

 

 

(11,604

)

 

 

(4,255

)

 

 

(9,446

)

Change in cash and cash equivalents

 

 

285,055

 

 

 

133,320

 

 

 

235,019

 

 

 

292,235

 

Cash and cash equivalents at beginning of period

 

 

1,180,455

 

 

 

1,082,650

 

 

 

1,230,491

 

 

 

923,735

 

Cash and cash equivalents at end of period

 

$

1,465,510

 

 

$

1,215,970

 

 

$

1,465,510

 

 

$

1,215,970

 

Taxes Paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

$

106,434

 

 

$

61,201

 

 

$

180,242

 

 

$

196,169

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

5


 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(In thousands)

(Unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30, 2020

   and 2019

 

Shares

 

 

Par

value

 

 

Additional

paid-in

capital

 

 

Retained

earnings

 

 

Accumulated

other

comprehensive

loss

 

 

Total

shareholders’

equity

 

 

Noncontrolling

interest

 

 

Total

equity

 

Balance at June 30, 2020

 

 

166,816

 

 

$

1,668

 

 

$

12,221

 

 

$

2,298,387

 

 

$

(153,158

)

 

$

2,159,118

 

 

$

2,480

 

 

$

2,161,598

 

Shares issued under employee

   stock plans

 

 

2,415

 

 

 

24

 

 

 

121,406

 

 

 

 

 

 

 

 

 

121,430

 

 

 

 

 

 

121,430

 

Stock compensation expense

 

 

 

 

 

 

 

 

12,297

 

 

 

 

 

 

 

 

 

12,297

 

 

 

 

 

 

12,297

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

191,307

 

 

 

 

 

 

191,307

 

 

 

412

 

 

 

191,719

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,877

 

 

 

17,877

 

 

 

(448

)

 

 

17,429

 

Balance at September 30, 2020

 

 

169,231

 

 

$

1,692

 

 

$

145,924

 

 

$

2,489,694

 

 

$

(135,281

)

 

$

2,502,029

 

 

$

2,444

 

 

$

2,504,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2019

 

 

170,040

 

 

$

1,701

 

 

$

12,433

 

 

$

2,140,935

 

 

$

(104,096

)

 

$

2,050,973

 

 

$

1,421

 

 

$

2,052,394

 

Shares issued under employee

   stock plans

 

 

1,095

 

 

 

11

 

 

 

60,702

 

 

 

 

 

 

 

 

 

60,713

 

 

 

 

 

 

60,713

 

Shares repurchased under provisions of

   stock repurchase plans

 

 

(892

)

 

 

(10

)

 

 

(61,989

)

 

 

 

 

 

 

 

 

(61,999

)

 

 

 

 

 

(61,999

)

Stock compensation expense

 

 

 

 

 

 

 

 

12,155

 

 

 

 

 

 

 

 

 

12,155

 

 

 

 

 

 

12,155

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

160,221

 

 

 

 

 

 

160,221

 

 

 

406

 

 

 

160,627

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,678

)

 

 

(14,678

)

 

 

75

 

 

 

(14,603

)

Balance at September 30, 2019

 

 

170,243

 

 

$

1,702

 

 

$

23,301

 

 

$

2,301,156

 

 

$

(118,774

)

 

$

2,207,385

 

 

$

1,902

 

 

$

2,209,287

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30, 2020

   and 2019

 

Shares

 

 

Par

value

 

 

Additional

paid-in

capital

 

 

Retained

earnings

 

 

Accumulated

other

comprehensive

loss

 

 

Total

shareholders’

equity

 

 

Noncontrolling

interest

 

 

Total

equity

 

Balance at December 31, 2019

 

 

169,622

 

 

$

1,696

 

 

$

3,203

 

 

$

2,321,316

 

 

$

(131,187

)

 

$

2,195,028

 

 

$

2,191

 

 

$

2,197,219

 

Cumulative effect of accounting

   change

 

 

 

 

 

 

 

 

 

 

 

6,074

 

 

 

 

 

 

6,074

 

 

 

 

 

 

6,074

 

Shares issued under employee

   stock plans

 

 

4,009

 

 

 

40

 

 

 

163,410

 

 

 

 

 

 

 

 

 

163,450

 

 

 

 

 

 

163,450

 

Shares repurchased under provisions

   of stock repurchase plans

 

 

(4,400

)

 

 

(44

)

 

 

(66,780

)

 

 

(247,401

)

 

 

 

 

 

(314,225

)

 

 

 

 

 

(314,225

)

Stock compensation expense

 

 

 

 

 

 

 

 

45,091

 

 

 

 

 

 

 

 

 

45,091

 

 

 

 

 

 

45,091

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

497,520

 

 

 

 

 

 

497,520

 

 

 

1,169

 

 

 

498,689

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,094

)

 

 

(4,094

)

 

 

(916

)

 

 

(5,010

)

Dividends paid ($0.52)

 

 

 

 

 

 

 

 

1,000

 

 

 

(87,815

)

 

 

 

 

 

(86,815