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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 June 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 August 3, 2020, the number of shares outstanding of the issuer’s common stock was 167,659,204.

 

 

 

 


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)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Assets:

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,180,455

 

 

$

1,230,491

 

Accounts receivable, less allowance for credit loss of

   $5,347 at June 30, 2020 and $11,143 at December 31, 2019

 

 

1,460,324

 

 

 

1,315,091

 

Deferred contract costs

 

 

147,932

 

 

 

131,783

 

Other

 

 

69,560

 

 

 

92,558

 

Total current assets

 

 

2,858,271

 

 

 

2,769,923

 

Property and equipment, less accumulated depreciation and

   amortization of $494,773 at June 30, 2020 and $478,906 at

   December 31, 2019

 

 

497,762

 

 

 

499,344

 

Operating lease right-of-use assets

 

 

424,516

 

 

 

390,035

 

Goodwill

 

 

7,927

 

 

 

7,927

 

Deferred federal and state income taxes, net

 

 

5,300

 

 

 

8,034

 

Other assets, net

 

 

16,401

 

 

 

16,621

 

Total assets

 

$

3,810,177

 

 

$

3,691,884

 

Liabilities:

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

755,971

 

 

$

735,695

 

Accrued expenses, primarily salaries and related costs

 

 

257,923

 

 

 

189,446

 

Contract liabilities

 

 

172,148

 

 

 

154,183

 

Current portion of operating lease liabilities

 

 

69,740

 

 

 

65,367

 

Federal, state and foreign income taxes

 

 

32,287

 

 

 

23,627

 

Total current liabilities

 

 

1,288,069

 

 

 

1,168,318

 

Noncurrent portion of operating lease liabilities

 

 

360,510

 

 

 

326,347

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

 

Preferred stock, none issued

 

 

 

 

 

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

   outstanding: 166,816 shares at June 30, 2020 and 169,622

   shares at December 31, 2019

 

 

1,668

 

 

 

1,696

 

Additional paid-in capital

 

 

12,221

 

 

 

3,203

 

Retained earnings

 

 

2,298,387

 

 

 

2,321,316

 

Accumulated other comprehensive loss

 

 

(153,158

)

 

 

(131,187

)

Total shareholders’ equity

 

 

2,159,118

 

 

 

2,195,028

 

Noncontrolling interest

 

 

2,480

 

 

 

2,191

 

Total equity

 

 

2,161,598

 

 

 

2,197,219

 

Total liabilities and equity

 

$

3,810,177

 

 

$

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 June 30,

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airfreight services

 

$

1,434,590

 

 

$

741,577

 

 

$

2,143,629

 

 

$

1,456,478

 

Ocean freight and ocean services

 

 

491,712

 

 

 

543,809

 

 

 

985,139

 

 

 

1,112,450

 

Customs brokerage and other services

 

 

654,330

 

 

 

750,193

 

 

 

1,353,728

 

 

 

1,486,702

 

Total revenues

 

 

2,580,632

 

 

 

2,035,579

 

 

 

4,482,496

 

 

 

4,055,630

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airfreight services

 

 

1,097,073

 

 

 

542,639

 

 

 

1,617,242

 

 

 

1,051,849

 

Ocean freight and ocean services

 

 

363,599

 

 

 

390,299

 

 

 

730,082

 

 

 

810,630

 

Customs brokerage and other services

 

 

370,369

 

 

 

440,946

 

 

 

770,445

 

 

 

877,342

 

Salaries and related

 

 

395,107

 

 

 

356,351

 

 

 

737,147

 

 

 

713,261

 

Rent and occupancy

 

 

41,375

 

 

 

40,897

 

 

 

83,899

 

 

 

82,420

 

Depreciation and amortization

 

 

14,109

 

 

 

12,677

 

 

 

26,769

 

 

 

26,070

 

Selling and promotion

 

 

3,113

 

 

 

11,643

 

 

 

11,356

 

 

 

22,719

 

Other

 

 

48,261

 

 

 

47,926

 

 

 

98,875

 

 

 

91,537

 

Total operating expenses

 

 

2,333,006

 

 

 

1,843,378

 

 

 

4,075,815

 

 

 

3,675,828

 

Operating income

 

 

247,626

 

 

 

192,201

 

 

 

406,681

 

 

 

379,802

 

Other Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

2,559

 

 

 

6,516

 

 

 

7,366

 

 

 

12,622

 

Other, net

 

 

797

 

 

 

2,262

 

 

 

4,181

 

 

 

3,927

 

Other income, net

 

 

3,356

 

 

 

8,778

 

 

 

11,547

 

 

 

16,549

 

Earnings before income taxes

 

 

250,982

 

 

 

200,979

 

 

 

418,228

 

 

 

396,351

 

Income tax expense

 

 

66,794

 

 

 

47,449

 

 

 

111,258

 

 

 

102,710

 

Net earnings

 

 

184,188

 

 

 

153,530

 

 

 

306,970

 

 

 

293,641

 

Less net earnings attributable to the noncontrolling

   interest

 

 

319

 

 

 

381

 

 

 

757

 

 

 

793

 

Net earnings attributable to shareholders

 

$

183,869

 

 

$

153,149

 

 

$

306,213

 

 

$

292,848

 

Diluted earnings attributable to shareholders per share

 

$

1.09

 

 

$

0.88

 

 

$

1.80

 

 

$

1.67

 

Basic earnings attributable to shareholders per share

 

$

1.10

 

 

$

0.90

 

 

$

1.83

 

 

$

1.71

 

Weighted average diluted shares outstanding

 

 

169,290

 

 

 

174,466

 

 

 

170,382

 

 

 

174,953

 

Weighted average basic shares outstanding

 

 

166,767

 

 

 

171,003

 

 

 

167,751

 

 

 

171,425

 

 

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 June 30,

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net earnings

 

$

184,188

 

 

$

153,530

 

 

$

306,970

 

 

$

293,641

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax

   (benefit) expense of $(5,148) and $(82) for the three

   months ended June 30, 2020 and 2019 and $(3,974)

   and $439 for the six months ended June 30, 2020

   and 2019

 

 

16,410

 

 

 

(769

)

 

 

(22,439

)

 

 

596

 

Reclassification adjustments for foreign currency realized

   losses, net of tax of $145 for the three and six months

   ended June 30, 2019

 

 

 

 

 

535

 

 

 

 

 

 

535

 

Other comprehensive income (loss)

 

 

16,410

 

 

 

(234

)

 

 

(22,439

)

 

 

1,131

 

Comprehensive income

 

 

200,598

 

 

 

153,296

 

 

 

284,531

 

 

 

294,772

 

Less comprehensive income attributable to the

   noncontrolling interest

 

 

141

 

 

 

257

 

 

 

289

 

 

 

539

 

Comprehensive income attributable to shareholders

 

$

200,457

 

 

$

153,039

 

 

$

284,242

 

 

$

294,233

 

 

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 June 30,

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

184,188

 

 

$

153,530

 

 

$

306,970

 

 

$

293,641

 

Adjustments to reconcile net earnings to net cash from

   operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions for losses (recoveries) on accounts receivable

 

 

2,389

 

 

 

1,584

 

 

 

4,209

 

 

 

(304

)

Deferred income tax expense

 

 

9,287

 

 

 

3,697

 

 

 

4,148

 

 

 

5,805

 

Stock compensation expense

 

 

21,638

 

 

 

23,824

 

 

 

32,794

 

 

 

37,206

 

Depreciation and amortization

 

 

14,109

 

 

 

12,677

 

 

 

26,769

 

 

 

26,070

 

Other, net

 

 

118

 

 

 

(29

)

 

 

551

 

 

 

160

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable

 

 

(185,055

)

 

 

(28,187

)

 

 

(168,375

)

 

 

202,290

 

Increase (decrease) in accounts payable and accrued

   expenses

 

 

106,760

 

 

 

39,900

 

 

 

107,677

 

 

 

(82,383

)

(Increase) decrease in deferred contract costs

 

 

(2,333

)

 

 

(13,010

)

 

 

(18,401

)

 

 

18,249

 

(Decrease) increase in contract liabilities

 

 

(595

)

 

 

13,003

 

 

 

20,606

 

 

 

(23,722

)

Increase (decrease) in income taxes payable, net

 

 

20,154

 

 

 

(49,606

)

 

 

30,642

 

 

 

(32,613

)

Decrease (increase) in other, net

 

 

16,061

 

 

 

(1,676

)

 

 

4,131

 

 

 

791

 

Net cash from operating activities

 

 

186,721

 

 

 

155,707

 

 

 

351,721

 

 

 

445,190

 

Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(22,114

)

 

 

(12,987

)

 

 

(28,241

)

 

 

(22,422

)

Other, net

 

 

(68

)

 

 

1,038

 

 

 

(211

)

 

 

1,293

 

Net cash from investing activities

 

 

(22,182

)

 

 

(11,949

)

 

 

(28,452

)

 

 

(21,129

)

Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

29,187

 

 

 

32,287

 

 

 

52,586

 

 

 

59,477

 

Repurchases of common stock

 

 

(30,985

)

 

 

(190,589

)

 

 

(314,225

)

 

 

(234,923

)

Dividends Paid

 

 

(86,815

)

 

 

(85,184

)

 

 

(86,815

)

 

 

(85,184

)

Payments for taxes related to net share settlement of equity

   awards

 

 

(9,170

)

 

 

(6,674

)

 

 

(10,566

)

 

 

(6,674

)

Net cash from financing activities

 

 

(97,783

)

 

 

(250,160

)

 

 

(359,020

)

 

 

(267,304

)

Effect of exchange rate changes on cash and cash equivalents

 

 

1,726

 

 

 

(377

)

 

 

(14,285

)

 

 

2,158

 

Change in cash and cash equivalents

 

 

68,482

 

 

 

(106,779

)

 

 

(50,036

)

 

 

158,915

 

Cash and cash equivalents at beginning of period

 

 

1,111,973

 

 

 

1,189,429

 

 

 

1,230,491

 

 

 

923,735

 

Cash and cash equivalents at end of period

 

$

1,180,455

 

 

$

1,082,650

 

 

$

1,180,455

 

 

$

1,082,650

 

Taxes Paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

$

38,504

 

 

$

97,715

 

 

$

73,808

 

 

$

134,968

 

 

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 June 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 March 31, 2020

 

 

166,193

 

 

$

1,662

 

 

$

682

 

 

$

2,202,208

 

 

$

(169,746

)

 

$

2,034,806

 

 

$

2,339

 

 

$

2,037,145

 

Shares issued under employee

   stock plans

 

 

1,023

 

 

 

10

 

 

 

20,007

 

 

 

 

 

 

 

 

 

20,017

 

 

 

 

 

 

20,017

 

Shares repurchased under provisions of

   stock repurchase plan

 

 

(400

)

 

 

(4

)

 

 

(30,981

)

 

 

 

 

 

 

 

 

(30,985

)

 

 

 

 

 

(30,985

)

Stock compensation expense

 

 

 

 

 

 

 

 

21,638

 

 

 

 

 

 

 

 

 

21,638

 

 

 

 

 

 

21,638

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

183,869

 

 

 

 

 

 

183,869

 

 

 

319

 

 

 

184,188

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,588

 

 

 

16,588

 

 

 

(178

)

 

 

16,410

 

Dividends paid ($0.52)

 

 

 

 

 

 

 

 

875

 

 

 

(87,690

)

 

 

 

 

 

(86,815

)

 

 

 

 

 

(86,815

)

Balance at June 30, 2020

 

 

166,816

 

 

$

1,668

 

 

$

12,221

 

 

$

2,298,387

 

 

$

(153,158

)

 

$

2,159,118

 

 

$

2,480

 

 

$

2,161,598

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

 

171,648

 

 

$

1,716

 

 

$

3,978

 

 

$

2,222,562

 

 

$

(103,986

)

 

$

2,124,270

 

 

$

1,164

 

 

$

2,125,434

 

Shares issued under employee

   stock plans

 

 

1,002

 

 

 

11

 

 

 

25,602

 

 

 

 

 

 

 

 

 

25,613

 

 

 

 

 

 

25,613

 

Shares repurchased under provisions of

   stock repurchase plans

 

 

(2,610

)

 

 

(26

)

 

 

(41,374

)

 

 

(149,189

)

 

 

 

 

 

(190,589

)

 

 

 

 

 

(190,589

)

Stock compensation expense

 

 

 

 

 

 

 

 

23,824

 

 

 

 

 

 

 

 

 

23,824

 

 

 

 

 

 

23,824

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

153,149

 

 

 

 

 

 

153,149

 

 

 

381

 

 

 

153,530

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(110

)

 

 

(110

)

 

 

(124

)

 

 

(234

)

Dividends paid ($0.50)

 

 

 

 

 

 

 

 

403

 

 

 

(85,587

)

 

 

 

 

 

(85,184

)

 

 

 

 

 

(85,184

)

Balance at June 30, 2019

 

 

170,040

 

 

$

1,701

 

 

$

12,433

 

 

$

2,140,935

 

 

$

(104,096

)

 

$

2,050,973

 

 

$

1,421

 

 

$

2,052,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended June 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

 

 

1,594

 

 

 

16

 

 

 

42,004

 

 

 

 

 

 

 

 

 

42,020

 

 

 

 

 

 

42,020

 

Shares repurchased under provisions

   of stock repurchase plans

 

 

(4,400

)

 

 

(44

)

 

 

(66,780

)

 

 

(247,401

)

 

 

 

 

 

(314,225

)

 

 

 

 

 

(314,225

)

Stock compensation expense

 

 

 

 

 

 

 

 

32,794

 

 

 

 

 

 

 

 

 

32,794

 

 

 

 

 

 

32,794

 

Net earnings