Quarterly Report (10-q)

Date : 11/06/2019 @ 6:16PM
Source : Edgar (US Regulatory)
Stock : Expeditors International of Washington Inc (EXPD)
Quote : 74.34  0.37 (0.50%) @ 12:59AM
Expeditors International... share price Chart
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Quarterly Report (10-q)

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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, 2019

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, $0.01 par value

 

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 4, 2019, the number of shares outstanding of the issuer’s common stock was 170,301,245.

 

 

 

 


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,

2019

 

 

December 31,

2018

 

Assets:

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,215,970

 

 

$

923,735

 

Accounts receivable, less allowance for doubtful accounts of

   $11,853 at September 30, 2019 and $15,345 at December 31, 2018

 

 

1,319,032

 

 

 

1,581,530

 

Deferred contract costs

 

 

130,690

 

 

 

159,510

 

Other

 

 

103,521

 

 

 

70,041

 

Total current assets

 

 

2,769,213

 

 

 

2,734,816

 

Property and equipment, less accumulated depreciation and

   amortization of $468,059 at September 30, 2019 and $446,977 at

   December 31, 2018

 

 

494,153

 

 

 

504,105

 

Operating lease right-of-use assets

 

 

374,231

 

 

 

 

Goodwill

 

 

7,927

 

 

 

7,927

 

Deferred federal and state income taxes, net

 

 

44,351

 

 

 

40,465

 

Other assets, net

 

 

16,578

 

 

 

27,246

 

Total assets

 

$

3,706,453

 

 

$

3,314,559

 

Liabilities:

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

744,002

 

 

$

902,259

 

Accrued expenses, primarily salaries and related costs

 

 

207,752

 

 

 

215,813

 

Contract liabilities

 

 

152,717

 

 

 

190,343

 

Current portion of operating lease liabilities

 

 

61,842

 

 

 

 

Federal, state and foreign income taxes

 

 

17,273

 

 

 

18,424

 

Total current liabilities

 

 

1,183,586

 

 

 

1,326,839

 

Noncurrent portion of operating lease liabilities

 

 

313,580

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

 

Preferred stock, none issued

 

 

 

 

 

 

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

   outstanding: 170,243 shares at September 30, 2019 and 171,582

   shares at December 31, 2018

 

 

1,702

 

 

 

1,716

 

Additional paid-in capital

 

 

23,301

 

 

 

1,896

 

Retained earnings

 

 

2,301,156

 

 

 

2,088,707

 

Accumulated other comprehensive loss

 

 

(118,774

)

 

 

(105,481

)

Total shareholders’ equity

 

 

2,207,385

 

 

 

1,986,838

 

Noncontrolling interest

 

 

1,902

 

 

 

882

 

Total equity

 

 

2,209,287

 

 

 

1,987,720

 

Total liabilities and equity

 

$

3,706,453

 

 

$

3,314,559

 

 

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,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airfreight services

 

$

715,450

 

 

$

833,338

 

 

$

2,171,928

 

 

$

2,366,326

 

Ocean freight and ocean services

 

 

585,374

 

 

 

585,810

 

 

 

1,697,824

 

 

 

1,636,701

 

Customs brokerage and other services

 

 

774,031

 

 

 

671,799

 

 

 

2,260,733

 

 

 

1,899,741

 

Total revenues

 

 

2,074,855

 

 

 

2,090,947

 

 

 

6,130,485

 

 

 

5,902,768

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airfreight services

 

 

522,868

 

 

 

620,554

 

 

 

1,574,717

 

 

 

1,727,383

 

Ocean freight and ocean services

 

 

424,215

 

 

 

435,313

 

 

 

1,234,845

 

 

 

1,199,887

 

Customs brokerage and other services

 

 

453,416

 

 

 

373,766

 

 

 

1,330,758

 

 

 

1,035,800

 

Salaries and related

 

 

356,331

 

 

 

351,577

 

 

 

1,069,592

 

 

 

1,042,420

 

Rent and occupancy

 

 

41,987

 

 

 

38,202

 

 

 

124,407

 

 

 

113,186

 

Depreciation and amortization

 

 

12,386

 

 

 

13,335

 

 

 

38,456

 

 

 

40,833

 

Selling and promotion

 

 

10,133

 

 

 

10,632

 

 

 

32,852

 

 

 

32,385

 

Other

 

 

46,969

 

 

 

44,414

 

 

 

138,506

 

 

 

131,318

 

Total operating expenses

 

 

1,868,305

 

 

 

1,887,793

 

 

 

5,544,133

 

 

 

5,323,212

 

Operating income

 

 

206,550

 

 

 

203,154

 

 

 

586,352

 

 

 

579,556

 

Other Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

5,501

 

 

 

4,704

 

 

 

18,123

 

 

 

14,171

 

Other, net

 

 

1,895

 

 

 

566

 

 

 

5,822

 

 

 

2,357

 

Other income (expense), net

 

 

7,396

 

 

 

5,270

 

 

 

23,945

 

 

 

16,528

 

Earnings before income taxes

 

 

213,946

 

 

 

208,424

 

 

 

610,297

 

 

 

596,084

 

Income tax expense

 

 

53,319

 

 

 

45,357

 

 

 

156,029

 

 

 

155,871

 

Net earnings

 

 

160,627

 

 

 

163,067

 

 

 

454,268

 

 

 

440,213

 

Less net earnings attributable to the noncontrolling

   interest

 

 

406

 

 

 

375

 

 

 

1,199

 

 

 

1,224

 

Net earnings attributable to shareholders

 

$

160,221

 

 

$

162,692

 

 

$

453,069

 

 

$

438,989

 

Diluted earnings attributable to shareholders per share

 

$

0.92

 

 

$

0.92

 

 

$

2.60

 

 

$

2.46

 

Basic earnings attributable to shareholders per share

 

$

0.94

 

 

$

0.94

 

 

$

2.65

 

 

$

2.51

 

Weighted average diluted shares outstanding

 

 

173,483

 

 

 

177,173

 

 

 

174,463

 

 

 

178,447

 

Weighted average basic shares outstanding

 

 

170,415

 

 

 

173,394

 

 

 

171,084

 

 

 

174,675

 

 

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,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net earnings

 

$

160,627

 

 

$

163,067

 

 

$

454,268

 

 

$

440,213

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax of

   $5,803 and $2,904 for the three months ended

   September 30, 2019 and 2018 and $5,364 and $12,563

   for the nine months ended September 30, 2019 and

   2018

 

 

(14,603

)

 

 

(10,929

)

 

 

(14,007

)

 

 

(28,129

)

Reclassification adjustments for foreign currency realized

   losses, net of tax of $145 for the nine months ended

   September 30, 2019

 

 

 

 

 

 

 

 

535

 

 

 

 

Other comprehensive loss

 

 

(14,603

)

 

 

(10,929

)

 

 

(13,472

)

 

 

(28,129

)

Comprehensive income

 

 

146,024

 

 

 

152,138

 

 

 

440,796

 

 

 

412,084

 

Less comprehensive income (loss) attributable to the

   noncontrolling interest

 

 

481

 

 

 

(167

)

 

 

1,020

 

 

 

230

 

Comprehensive income attributable to shareholders

 

$

145,543

 

 

$

152,305

 

 

$

439,776

 

 

$

411,854

 

 

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,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

160,627

 

 

$

163,067

 

 

$

454,268

 

 

$

440,213

 

Adjustments to reconcile net earnings to net cash from

   operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions for losses on accounts receivable

 

 

757

 

 

 

1,969

 

 

 

453

 

 

 

2,232

 

Deferred income tax benefit

 

 

(5,822

)

 

 

(23,610

)

 

 

(17

)

 

 

(17,522

)

Stock compensation expense

 

 

12,155

 

 

 

13,902

 

 

 

49,361

 

 

 

43,171

 

Depreciation and amortization

 

 

12,386

 

 

 

13,335

 

 

 

38,456

 

 

 

40,833

 

Other, net

 

 

652

 

 

 

666

 

 

 

812

 

 

 

770

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Decrease (increase) in accounts receivable

 

 

43,885

 

 

 

(210,092

)

 

 

246,175

 

 

 

(156,321

)

(Decrease) increase in accounts payable and accrued

   expenses

 

 

(58,816

)

 

 

115,629

 

 

 

(141,199

)

 

 

127,860

 

Decrease (increase) in deferred contract costs

 

 

10,301

 

 

 

(34,623

)

 

 

28,550

 

 

 

(51,235

)

(Decrease) increase in contract liabilities

 

 

(13,211

)

 

 

36,256

 

 

 

(36,933

)

 

 

49,149

 

(Decrease) increase in income taxes payable, net

 

 

(671

)

 

 

9,292

 

 

 

(33,284

)

 

 

(9,258

)

(Decrease) increase in other, net

 

 

(744

)

 

 

930

 

 

 

47

 

 

 

862

 

Net cash from operating activities

 

 

161,499

 

 

 

86,721

 

 

 

606,689

 

 

 

470,754

 

Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(15,521

)

 

 

(11,733

)

 

 

(37,943

)

 

 

(37,642

)

Other, net

 

 

232

 

 

 

1,109

 

 

 

1,525

 

 

 

(886

)

Net cash from investing activities

 

 

(15,289

)

 

 

(10,624

)

 

 

(36,418

)

 

 

(38,528

)

Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

60,713

 

 

 

47,806

 

 

 

120,190

 

 

 

169,566

 

Repurchases of common stock

 

 

(61,999

)

 

 

(147,828

)

 

 

(296,922

)

 

 

(555,760

)

Dividends Paid

 

 

 

 

 

 

 

 

(85,184

)

 

 

(79,180

)

Payments for taxes related to net share settlement of equity

   awards

 

 

 

 

 

 

 

 

(6,674

)

 

 

(3,215

)

Distributions to noncontrolling interest

 

 

 

 

 

(633

)

 

 

 

 

 

(633

)

Purchase of noncontrolling interest

 

 

 

 

 

(613

)

 

 

 

 

 

(613

)

Net cash from financing activities

 

 

(1,286

)

 

 

(101,268

)

 

 

(268,590

)

 

 

(469,835

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(11,604

)

 

 

(5,071

)

 

 

(9,446

)

 

 

(22,878

)

Change in cash and cash equivalents

 

 

133,320

 

 

 

(30,242

)

 

 

292,235

 

 

 

(60,487

)

Cash and cash equivalents at beginning of period

 

 

1,082,650

 

 

 

1,020,854

 

 

 

923,735

 

 

 

1,051,099

 

Cash and cash equivalents at end of period

 

$

1,215,970

 

 

$

990,612

 

 

$

1,215,970

 

 

$

990,612

 

Taxes Paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

$

61,201

 

 

$

59,313

 

 

$

196,169

 

 

$

183,444

 

 

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, 2019

   and 2018

 

Shares

 

 

Par

value

 

 

Additional

paid-in

capital

 

 

Retained

earnings

 

 

Accumulated

other

comprehensive

loss

 

 

Total

shareholders’

equity

 

 

Noncontrolling

interest

 

 

Total

equity

 

Balance at June 30, 2019

 

 

170,040

 

 

$

1,701

 

 

$

12,433

 

 

$

2,140,935

 

 

$

(104,096

)

 

$

2,050,973

 

 

$

1,421

 

 

$

2,052,394

 

Exercise of stock options and release of

   restricted shares

 

 

510

 

 

 

5

 

 

 

22,833

 

 

 

 

 

 

 

 

 

22,838

 

 

 

 

 

 

22,838

 

Issuance of shares under stock

   purchase plan

 

 

585

 

 

 

6

 

 

 

37,869

 

 

 

 

 

 

 

 

 

37,875

 

 

 

 

 

 

37,875

 

Shares repurchased under provisions of

   stock repurchase plan

 

 

(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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2018

 

 

173,577

 

 

$

1,736

 

 

$

1,607

 

 

$

1,977,121

 

 

$

(90,712

)

 

$

1,889,752

 

 

$

2,807

 

 

$

1,892,559

 

Exercise of stock options and release of

   restricted shares

 

 

332

 

 

 

3

 

 

 

14,512

 

 

 

 

 

 

 

 

 

14,515

 

 

 

 

 

 

14,515

 

Issuance of shares under stock

   purchase plan

 

 

666

 

 

 

7

 

 

 

33,285

 

 

 

 

 

 

 

 

 

33,292

 

 

 

 

 

 

33,292

 

Shares repurchased under provisions of

   stock repurchase plans

 

 

(2,011

)

 

 

(20

)

 

 

(61,384

)

 

 

(86,424

)

 

 

 

 

 

(147,828

)

 

 

 

 

 

(147,828

)

Stock compensation expense

 

 

 

 

 

 

 

 

13,902

 

 

 

 

 

 

 

 

 

13,902

 

 

 

 

 

 

13,902

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

162,692

 

 

 

 

 

 

162,692

 

 

 

375

 

 

 

163,067

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,386

)

 

 

(10,386

)

 

 

(543

)

 

 

(10,929

)

Purchase of noncontrolling interest

 

 

 

 

 

 

 

 

(90

)

 

 

 

 

 

 

 

 

(90

)

 

 

(523

)

 

 

(613

)

Distributions to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(633

)

 

 

(633

)

Balance at September 30, 2018

 

 

172,564

 

 

$

1,726

 

 

$

1,832

 

 

$

2,053,389

 

 

$

(101,098

)

 

$

1,955,849

 

 

$

1,483

 

 

$

1,957,332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30, 2019

   and 2018

 

Shares

 

 

Par

value

 

 

Additional

paid-in

capital

 

 

Retained

earnings

 

 

Accumulated

other

comprehensive

loss

 

 

Total

shareholders’

equity

 

 

Noncontrolling

interest

 

 

Total

equity

 

Balance at December 31, 2018

 

 

171,582

 

 

$

1,716

 

 

$

1,896

 

 

$

2,088,707

 

 

$

(105,481

)

 

$

1,986,838

 

 

$

882

 

 

$

1,987,720

 

Exercise of stock options and release of

   restricted shares

 

 

2,166

 

 

 

22

 

 

 

75,619