8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report:  February 18, 2020 (Date of earliest event reported)

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

(Exact name of registrant as specified in its charter)

Washington	000-13468	91-1069248
(State or other jurisdiction<br><br><br>of incorporation or organization)	(Commission<br><br><br>File No.)	(IRS Employer<br><br><br>Identification Number)
1015 Third Avenue,<br><br><br>Seattle, Washington	(206) 674-3400	98104
(Address of principal executive offices)	(Registrant's telephone number, including area code)	(Zip Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class	Trading<br><br><br>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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

Item 2.02 Results of Operations and Financial Condition.

On February 18, 2020, Expeditors International of Washington, Inc., a Washington corporation, issued a press release announcing fourth quarter 2019 financial results.  A copy of the press release is furnished as Exhibit 99.1 to this report.

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d)	The following items are filed as exhibits to this report:
99.1	Press release, dated February 18, 2020 issued by Expeditors International of Washington, Inc.
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104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
February 18, 2020	/S/ Bradley S. Powell
	Bradley S. Powell, Senior
	Vice President and Chief Financial Officer

expd-ex991_6.htm

Exhibit 99.1

EARNINGS RELEASE

By:	Expeditors International of Washington, Inc.
	1015 Third Avenue
	Seattle, Washington 98104
	CONTACTS:
	Jeffrey S. Musser	Bradley S. Powell	Geoffrey Buscher
	President and Chief Executive Officer	Senior Vice President and Chief Financial Officer	Director - Investor Relations
	(206) 674-3433	(206) 674-3412	(206) 892-4510

FOR IMMEDIATE RELEASE

EXPEDITORS REPORTS FOURTH QUARTER 2019 EPS OF $0.79

SEATTLE, WASHINGTON - February 18, 2020, Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced fourth quarter 2019 financial results including the following highlights compared to the same quarter of 2018:

•	Diluted Net Earnings Attributable to Shareholders per share (EPS^1^) decreased 23% to $0.79
•	Net Earnings Attributable to Shareholders decreased 23% to $137 million
---	---
•	Operating Income decreased 17% to $180 million
---	---
•	Revenues decreased 9% to $2.0 billion
---	---
•	Airfreight tonnage volume decreased 6% and ocean container volume decreased 13%
---	---

“Our final financial results for the fourth quarter were within the range of earnings guidance we issued last month,” said Jeffrey S. Musser, President and Chief Executive Officer. “As noted in that guidance, we do not believe this comparatively soft fourth quarter is the result of a business performance issue, but is instead more closely tied to the business environment in which we are operating. Average sell rates declined faster than our average buy rates, and both air and ocean volumes declined as slowing trade to and from China impacted overall freight movement around the globe. In the year-ago fourth quarter, by comparison, we believe our volumes benefitted as shippers moved product ahead of scheduled tariff increases.”

Mr. Musser continued: “Our people and operations in China are a very important part of our global network. China imports and exports are interrelated to all of our other geographic regions and, on a stand-alone basis, represented 26% of our consolidated revenue and 27% of operating income in 2019. While we would normally expect softness in the first part of Q1 because of the Chinese Lunar New Year Holidays, this year has been much more pronounced due to the extended closures of factories in China in support of containing the Novel Coronavirus (COVID-19). There remains a great deal of uncertainty as to when factories will return to full production, and those delays will have a significant impact on freight volumes moved in Q1. In addition to traditional supply chain movements, we also believe this may have a further impact to global supply chains through potential shortages of raw materials, parts and supplies.

“Over our 40-year history, we have experienced many events that have disrupted supply chains. We have not, however, experienced a situation where manufacturing capability has been shut-down or severely hampered to such an extent, so it is difficult to predict how this will play out. However, we remain steadfastly optimistic that when the marketplace does return to normal, we are in an excellent position to take advantage of what could be a sharp rebound in trade.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Operating income in Q4 2019 was negatively impacted by lower volumes and lower average sell rates. The largest decline in volumes and rates were experienced in our China operations where revenues and operating income declined 27% and 23%, respectively, in the fourth quarter. We will continue to make important investments in people and technology to support our long-term growth initiatives.” Mr. Powell noted that the Company’s effective tax rate for the full year of 2019 was 25.6%, compared to 24.3% in 2018. The effect of higher average tax rates of our international subsidiaries, when compared to U.S. federal and state tax rates, were offset by U.S. foreign tax credits and U.S. income tax deductions for Foreign-derived intangible income (FDII). In addition, both 2019 and 2018 benefited from state income tax refunds. These benefits were partially offset by certain expenses that are no longer deductible under the 2017 Tax Act. Mr. Powell reiterated that the Company’s effective tax rate will be largely dependent upon the mix of pre-tax earnings that are generated in its U.S. versus foreign operations, as well as any further interpretations and guidance issued on the tax law in the future.

Expeditors is a global logistics company headquartered in Seattle, Washington. The Company employs trained professionals in 176 district offices and numerous branch locations located on six continents linked into a seamless worldwide network through an integrated information management system. Services include the consolidation or forwarding of air and ocean freight, customs brokerage, vendor consolidation, cargo insurance, time-definite transportation, order management, warehousing and distribution and customized logistics solutions.

_______________________

^1^Diluted earnings attributable to shareholders per share.

NOTE:  See Disclaimer on Forward-Looking Statements on the following page of this release.

Expeditors International of Washington, Inc.

Fourth Quarter 2019 Earnings Release, February 18, 2020

Financial Highlights for the Three and Twelve months ended December 31, 2019 (Unaudited)

(in 000's of US dollars except per share data)

	Three months ended December 31,					Twelve months ended December 31,
	2019		2018		% Change	2019		2018		% Change
Revenues	$	2,044,941	$	2,235,597	(9)%	$	8,175,426	$	8,138,365	—%
Directly related cost of transportation and other expenses^1^	$	1,398,638	$	1,554,922	(10)%	$	5,538,958	$	5,517,992	—%
Salaries and other operating expenses^2^	$	465,963	$	463,668	—%	$	1,869,776	$	1,823,810	3%
Operating income	$	180,340	$	217,007	(17)%	$	766,692	$	796,563	(4)%
Net earnings attributable to shareholders	$	137,326	$	179,210	(23)%	$	590,395	$	618,199	(4)%
Diluted earnings attributable to shareholders per share	$	0.79	$	1.02	(23)%	$	3.39	$	3.48	(3)%
Basic earnings attributable to shareholders per share	$	0.81	$	1.04	(22)%	$	3.45	$	3.55	(3)%
Diluted weighted average shares outstanding		173,401		175,935			174,209		177,833
Basic weighted average shares outstanding		170,339		172,493			170,899		174,133

^1^Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Consolidated Statements of Earnings.

^2^Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Consolidated Statements of Earnings.

The three and twelve months ended December 31, 2019 include the effect of changing our presentation of certain import services from a net to a gross basis and our revised presentation of destination services, which increased revenues and directly related operating expenses in customs brokerage and other services but did not change operating income.

During the three and twelve months ended December 31, 2019, we repurchased 1.2 million and 5.3 million shares of common stock at an average price of $73.89 and $72.91 per share, respectively. During the three and twelve months ended December 31, 2018, we repurchased 1.3 million and 9.0 million shares of common stock at an average price of $71.82 and $71.61 per share, respectively.

	Employee Full-time Equivalents as of December 31,
	2019		2018
North America		6,905		6,833
Europe		3,459		3,375
North Asia		2,488		2,607
South Asia		1,697		1,643
Middle East, Africa and India		1,548		1,520
Latin America		855		839
Information Systems		961		912
Corporate		384		352
Total		18,297		18,081
	Fourth quarter year-over-year<br><br><br>percentage decrease in:
---	---	---
	Airfreight<br><br><br>kilos	Ocean freight<br><br><br>FEU
2019
October	(6)%	(14)%
November	(6)%	(9)%
December	(7)%	(14)%
Quarter	(6)%	(13)%

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on February 21, 2020 will be considered in management's 8-K “Responses to Selected Questions.”

Disclaimer on Forward-Looking Statements:

Certain portions of this release contain forward-looking statements, including the impact on freight volumes in the first quarter as a result of the containment measures relating to the Novel Coronavirus (COVID-19) causing extended closures of factories in China; the further impact on downstream supply chains; our ability to take advantage of a rebound in trade; and the impact of the 2017 Tax Act and related interpretations on our effective tax rate. Forward-looking statements involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations include the length and severity of the Novel Coronavirus (COVID-19); our ability to contain costs; our ability to retain existing and attract new customers; our ability to use our broad market footprint to respond to and take advantage of a sudden shift in manufacturing capacity and associated trade; and risk factors and uncertainties detailed in our Annual Report on Form 10-K for the year ended December 31, 2018 and as updated by our reports on Form 10-Q, filed with the Securities and Exchange Commission. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2019.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

			December 31, 2018
Assets:
Current Assets:
Cash and cash equivalents	1,230,491		$	923,735
Accounts receivable, net	1,315,091			1,581,530
Deferred contract costs	131,783			159,510
Other	92,558			70,041
Total current assets	2,769,923			2,734,816
Property and equipment, net	499,344			504,105
Operating lease right-of-use assets	390,035			—
Goodwill	7,927			7,927
Deferred federal and state income taxes, net	8,034			40,465
Other assets, net	16,621			27,246
Total assets	3,691,884		$	3,314,559
Liabilities:
Current Liabilities:
Accounts payable	735,695		$	902,259
Accrued expenses, primarily salaries and related costs	189,446			215,813
Contract liabilities	154,183			190,343
Current portion of operating lease liabilities	65,367			—
Federal, state and foreign income taxes	23,627			18,424
Total current liabilities	1,168,318			1,326,839
Noncurrent portion of operating lease liabilities	326,347			—
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued	—			—
Common stock, par value 0.01 per share, authorized 640,000. Issued and outstanding: 169,622 shares at December 31, 2019 and 171,582 shares at December 31, 2018	1,696			1,716
Additional paid-in capital	3,203			1,896
Retained earnings	2,321,316			2,088,707
Accumulated other comprehensive loss	(131,187	)		(105,481	)
Total shareholders’ equity	2,195,028			1,986,838
Noncontrolling interest	2,191			882
Total equity	2,197,219			1,987,720
Total liabilities and equity	3,691,884		$	3,314,559

All values are in US Dollars.

18-February-2020	Expeditors International of Washington, Inc.	Page 3 of 6

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

	Three months ended December 31,				Twelve months ended December 31,
	2019		2018		2019		2018
Revenues:
Airfreight services	$	757,954	$	905,606	$	2,929,882	$	3,271,932
Ocean freight and ocean services		519,730		615,053		2,217,554		2,251,754
Customs brokerage and other services		767,257		714,938		3,027,990		2,614,679
Total revenues		2,044,941		2,235,597		8,175,426		8,138,365
Operating Expenses:
Airfreight services		569,282		683,410		2,143,999		2,410,793
Ocean freight and ocean services		378,801		464,281		1,613,646		1,664,168
Customs brokerage and other services		450,555		407,231		1,781,313		1,443,031
Salaries and related		352,723		350,839		1,422,315		1,393,259
Rent and occupancy		41,775		39,627		166,182		152,813
Depreciation and amortization		12,494		13,186		50,950		54,019
Selling and promotion		11,150		12,961		44,002		45,346
Other		47,821		47,055		186,327		178,373
Total operating expenses		1,864,601		2,018,590		7,408,734		7,341,802
Operating income		180,340		217,007		766,692		796,563
Other Income (Expense):
Interest income		4,680		4,982		22,803		19,153
Other, net		477		256		6,299		2,613
Other income (expense), net		5,157		5,238		29,102		21,766
Earnings before income taxes		185,497		222,245		795,794		818,329
Income tax expense		47,749		42,668		203,778		198,539
Net earnings		137,748		179,577		592,016		619,790
Less net earnings attributable to the noncontrolling<br><br><br>interest		422		367		1,621		1,591
Net earnings attributable to shareholders	$	137,326	$	179,210	$	590,395	$	618,199
Diluted earnings attributable to shareholders per share	$	0.79	$	1.02	$	3.39	$	3.48
Basic earnings attributable to shareholders per share	$	0.81	$	1.04	$	3.45	$	3.55
Weighted average diluted shares outstanding		173,401		175,935		174,209		177,833
Weighted average basic shares outstanding		170,339		172,493		170,899		174,133
18-February-2020	Expeditors International of Washington, Inc.	Page 4 of 6
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EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three months ended December 31,						Twelve months ended December 31,
	2019			2018			2019			2018
Operating Activities:
Net earnings	$	137,748		$	179,577		$	592,016		$	619,790
Adjustments to reconcile net earnings to net cash from operating activities:
(Recoveries) provisions for losses on accounts receivable		(454	)		1,576			(1	)		3,808
Deferred income tax expense (benefit)		4,499			5,491			4,482			(12,031	)
Stock compensation expense		12,182			12,976			61,543			56,147
Depreciation and amortization		12,494			13,186			50,950			54,019
Other, net		129			(123	)		941			647
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		19,744			(58,650	)		265,919			(214,971	)
(Decrease) increase in accounts payable and accrued expenses		(40,788	)		(41,824	)		(181,987	)		86,036
Decrease (increase) in deferred contract costs		261			9,138			28,811			(42,097	)
(Decrease) increase in contract liabilities		(164	)		(5,221	)		(37,097	)		43,928
Increase (decrease) in income taxes payable, net		14,812			(10,433	)		(18,472	)		(19,691	)
Decrease (increase) in other, net		4,783			(3,643	)		4,830			(2,781	)
Net cash from operating activities		165,246			102,050			771,935			572,804
Investing Activities:
Purchase of property and equipment		(9,079	)		(9,832	)		(47,022	)		(47,474	)
Other, net		(518	)		(39	)		1,007			(925	)
Net cash from investing activities		(9,597	)		(9,871	)		(46,015	)		(48,399	)
Financing Activities:
Proceeds from issuance of common stock		28,055			13,166			148,245			182,732
Repurchases of common stock		(92,138	)		(92,138	)		(389,060	)		(647,898	)
Dividends Paid		(85,369	)		(77,660	)		(170,553	)		(156,840	)
Payments for taxes related to net share settlement of equity awards		—			(33	)		(6,674	)		(3,248	)
Distributions to noncontrolling interest		—			(75	)		—			(688	)
Purchase of noncontrolling interest		—			(1,163	)		—			(1,796	)
Net cash from financing activities		(149,452	)		(157,903	)		(418,042	)		(627,738	)
Effect of exchange rate changes on cash and cash equivalents		8,324			(1,153	)		(1,122	)		(24,031	)
Change in cash and cash equivalents		14,521			(66,877	)		306,756			(127,364	)
Cash and cash equivalents at beginning of period		1,215,970			990,612			923,735			1,051,099
Cash and cash equivalents at end of period	$	1,230,491		$	923,735		$	1,230,491		$	923,735
Taxes Paid:
Income taxes	$	25,914		$	55,811		$	222,083		$	239,255
18-February-2020	Expeditors International of Washington, Inc.	Page 5 of 6
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EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Business Segment Information

(In thousands)

(Unaudited)

	UNITED<br><br><br>STATES		OTHER<br><br><br>NORTH<br><br><br>AMERICA		LATIN<br><br><br>AMERICA		NORTH<br><br><br>ASIA		SOUTH<br><br><br>ASIA		OPE	MIDDLE<br><br><br>EAST,<br><br><br>AFRICA<br><br><br>AND<br><br><br>INDIA		ELIMI-<br><br><br>NATIONS			CONSOLI-<br><br><br>DATED
For the three months ended December 31, 2019:
Revenues^1^	$	678,979		89,370		38,925		615,401		188,278			107,104		(995	)		2,044,941
Directly related cost of transportation and other expenses^2^	$	386,114		54,372		23,148		495,267		137,231			75,813		(555	)		1,398,638
Salaries and other operating expenses^3^	$	223,703		25,371		14,170		62,813		30,154			26,459		(441	)		465,963
Operating income	$	69,162		9,627		1,607		57,321		20,893			4,832		1			180,340
Identifiable assets at period end	$	1,978,307		153,813		72,677		538,526		178,336			219,953		(1,304	)		3,691,884
Capital expenditures	$	5,122		844		485		600		323			489		—			9,079
Depreciation and amortization	$	7,581		494		324		1,227		449			474		—			12,494
Equity	$	1,521,059		65,100		29,148		247,725		94,727			114,726		(34,574	)		2,197,219
For the three months ended December 31, 2018:
Revenues^1^	$	688,943		98,596		34,684		820,917		217,793			121,482		(99,216	)		2,235,597
Directly related cost of transportation and other expenses^2^	$	394,927		59,154		18,347		675,102		168,313			88,001		(98,704	)		1,554,922
Salaries and other operating expenses^3^	$	196,788		24,914		14,974		77,439		32,647			28,349		(507	)		463,668
Operating income	$	97,228		14,528		1,363		68,376		16,833			5,132		(5	)		217,007
Identifiable assets at period end	$	1,689,950		161,604		53,542		533,071		152,646			206,367		3,635			3,314,559
Capital expenditures	$	5,640		239		143		434		248			1,480		—			9,832
Depreciation and amortization	$	8,114		479		370		1,311		578			496		—			13,186
Equity	$	1,339,673		72,941		26,007		200,371		100,706			123,228		(32,209	)		1,987,720

All values are in Euros.

	UNITED<br><br><br>STATES		OTHER<br><br><br>NORTH<br><br><br>AMERICA		LATIN<br><br><br>AMERICA		NORTH<br><br><br>ASIA		SOUTH<br><br><br>ASIA		OPE	MIDDLE<br><br><br>EAST,<br><br><br>AFRICA<br><br><br>AND<br><br><br>INDIA		ELIMI-<br><br><br>NATIONS			CONSOLI-<br><br><br>DATED
For the twelve months ended December 31, 2019:
Revenues^1^	$	2,712,067		354,405		150,202		2,494,556		743,406			443,487		(3,366	)		8,175,426
Directly related cost of transportation and other expenses^2^	$	1,528,815		212,369		87,297		1,970,662		544,873			311,997		(2,023	)		5,538,958
Salaries and other operating expenses^3^	$	859,946		101,654		55,512		271,594		127,478			112,844		(1,325	)		1,869,776
Operating income	$	323,306		40,382		7,393		252,300		71,055			18,646		(18	)		766,692
Identifiable assets at period end	$	1,978,307		153,813		72,677		538,526		178,336			219,953		(1,304	)		3,691,884
Capital expenditures	$	28,666		2,353		1,556		1,767		1,558			1,891		—			47,022
Depreciation and amortization	$	31,049		1,881		1,489		5,263		1,912			1,958		—			50,950
Equity	$	1,521,059		65,100		29,148		247,725		94,727			114,726		(34,574	)		2,197,219
For the twelve months ended December 31, 2018:
Revenues^1^	$	2,479,812		355,802		156,854		2,886,322		777,863			464,071		(312,724	)		8,138,365
Directly related cost of transportation and other expenses^2^	$	1,352,924		216,753		94,041		2,315,826		591,925			330,209		(310,635	)		5,517,992
Salaries and other operating expenses^3^	$	816,817		94,950		53,970		289,015		125,056			108,131		(2,099	)		1,823,810
Operating income	$	310,071		44,099		8,843		281,481		60,882			25,731		10			796,563
Identifiable assets at period end	$	1,689,950		161,604		53,542		533,071		152,646			206,367		3,635			3,314,559
Capital expenditures	$	21,732		4,259		1,042		3,057		2,182			4,387		—			47,474
Depreciation and amortization	$	33,511		1,847		1,508		5,309		2,257			1,860		—			54,019
Equity	$	1,339,673		72,941		26,007		200,371		100,706			123,228		(32,209	)		1,987,720

All values are in Euros.

^1^In 2019, the Company revised its process to record the transfer, between its geographic operating segments, of revenues and the directly related cost of transportation expenses for freight service transactions between Company origin and destination locations. This change better aligns revenue reporting with the location where the services are performed, as well as the transactional reporting being developed as part of the Company’s new accounting systems and processes. Prior year segment revenues have not been revised. The change in presentation had no impact on consolidated or segment operating income. The 2019 results also include the effect of changing the presentation of certain import services from a net to a gross basis, which increased segment revenues and directly related operating expenses but did not change operating income. The impact of these changes on reported segment revenues was immaterial and prior year segment revenues have not been revised.

^2^Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Consolidated Statements of Earnings.

^3^Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Consolidated Statements of Earnings.

18-February-2020	Expeditors International of Washington, Inc.	Page 6 of 6