Expeditors International Of Washington Inc 10-Q for FY2020 Q3

Expeditors International Of Washington Inc (EXPD)

10-Q 2020-11-04 For: 2020-09-30

Added on April 08, 2026

About this 10-Q

Expeditors International Of Washington Inc filed this 10-Q on November 4, 2020, covering the quarter ended September 30, 2020 (FY2020 Q3).

Headline figures

Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.46B; up 18.8% from $2.07B a year earlier
Net income: $191.31M; up 19.4% from net income of $160.22M a year earlier
Diluted EPS: $1.12; up 21.7% from $0.92 a year earlier

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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)

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

	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

	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


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


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

	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	)		—			(86,815	)
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 December 31, 2018		171,582		$	1,716		$	1,896		$	2,088,707		$	(105,481	)	$	1,986,838		$	882		$	1,987,720
Shares issued under employee stock plans		2,751			28			113,488			—			—			113,516			—			113,516
Shares repurchased under provisions of stock repurchase plans		(4,090	)		(42	)		(141,847	)		(155,033	)		—			(296,922	)		—			(296,922	)
Stock compensation expense		—			—			49,361			—			—			49,361			—			49,361
Net earnings		—			—			—			453,069			—			453,069			1,199			454,268
Other comprehensive income (loss)		—			—			—			—			(13,293	)		(13,293	)		(179	)		(13,472	)
Dividends paid ($0.50)		—			—			403			(85,587	)		—			(85,184	)		—			(85,184	)
Balance at September 30, 2019		170,243		$	1,702		$	23,301		$	2,301,156		$	(118,774	)	$	2,207,385		$	1,902		$	2,209,287

	Three months ended September 30,
	Net earnings attributable to shareholders		Weighted average shares		Earnings per share
2020
Basic earnings attributable to shareholders	$	191,307		168,310	$	1.14
Effect of dilutive potential common shares		—		2,425		—
Diluted earnings attributable to shareholders	$	191,307		170,735	$	1.12
2019
Basic earnings attributable to shareholders	$	160,221		170,415	$	0.94
Effect of dilutive potential common shares		—		3,068		—
Diluted earnings attributable to shareholders	$	160,221		173,483	$	0.92

	September 30, 2020				December 31, 2019
	Cost		Fair Value		Cost		Fair Value
Cash and Cash Equivalents:
Cash and overnight deposits	$	558,886	$	558,886	$	417,456	$	417,456
Corporate commercial paper		873,725		873,727		775,504		776,356
Time deposits		32,899		32,899		37,531		37,531
Total cash and cash equivalents	$	1,465,510	$	1,465,512	$	1,230,491	$	1,231,343

	UNITED STATES		OTHER NORTH AMERICA		LATIN AMERICA		NORTH ASIA		SOUTH ASIA		EUROPE		MIDDLE EAST, AFRICA AND INDIA		ELIMI- NATIONS			CONSOLI- DATED
For the three months ended September 30, 2020:
Revenues¹	$	686,245		78,129		39,193		883,104		267,228		378,048		133,765		(915	)		2,464,797
Directly related cost of transportation and other expenses²	$	379,588		44,911		23,361		720,807		200,334		261,325		100,619		(527	)		1,730,418
Salaries and other operating expenses³	$	197,749		25,325		12,359		81,876		39,926		96,658		28,925		(384	)		482,434
Operating income	$	108,908		7,893		3,473		80,421		26,968		20,065		4,221		(4	)		251,945
Identifiable assets at period end	$	2,336,071		163,943		76,173		689,525		231,771		642,124		228,423		(9,476	)		4,358,554
Capital expenditures	$	4,703		483		180		1,075		665		1,780		292		—			9,178
Equity	$	1,791,658		77,915		31,324		246,557		97,564		185,352		110,714		(36,611	)		2,504,473
For the three months ended September 30, 2019:
Revenues¹	$	692,229		88,088		38,341		624,351		196,569		320,769		115,397		(889	)		2,074,855
Directly related cost of transportation and other expenses²	$	389,254		51,420		22,990		489,195		145,345		221,149		81,592		(446	)		1,400,499
Salaries and other operating expenses³	$	210,767		25,731		14,547		70,410		32,482		86,156		28,151		(438	)		467,806
Operating income	$	92,208		10,937		804		64,746		18,742		13,464		5,654		(5	)		206,550
Identifiable assets at period end	$	2,059,345		128,336		72,029		489,322		164,976		563,289		226,657		2,499			3,706,453
Capital expenditures	$	7,644		513		833		523		631		5,119		258		—			15,521
Equity	$	1,578,682		60,526		27,217		216,061		77,733		169,450		111,355		(31,737	)		2,209,287

	Three months ended September 30,					Nine months ended September 30,
(in thousands)	2020		2019		Percentage change	2020		2019		Percentage change
Airfreight services:
Revenues	$	1,093,550	$	715,450	53%	$	3,237,179	$	2,171,928	49%
Expenses		833,689		522,868	59		2,450,931		1,574,717	56
Ocean freight services and ocean services:
Revenues		612,858		585,374	5		1,597,997		1,697,824	(6)
Expenses		455,072		424,215	7		1,185,154		1,234,845	(4)
Customs brokerage and other services:
Revenues		758,389		774,031	(2)		2,112,117		2,260,733	(7)
Expenses		441,657		453,416	(3)		1,212,102		1,330,758	(9)
Overhead expenses:
Salaries and related costs		373,613		356,331	5		1,110,760		1,069,592	4
Other		108,821		111,475	(2)		329,720		334,221	(1)
Total overhead expenses		482,434		467,806	3		1,440,480		1,403,813	3
Operating income		251,945		206,550	22		658,626		586,352	12
Other income, net		2,484		7,396	(66)		14,031		23,945	(41)
Earnings before income taxes		254,429		213,946	19		672,657		610,297	10
Income tax expense		62,710		53,319	18		173,968		156,029	11
Net earnings		191,719		160,627	19		498,689		454,268	10
Less net earnings attributable to the noncontrolling interest		412		406	1		1,169		1,199	(3)
Net earnings attributable to shareholders	$	191,307	$	160,221	19%	$	497,520	$	453,069	10%

			Payments due by period
In thousands	Total		Less than 1 year		1 - 3 years		3 - 5 years		After 5 years
Contractual Obligations:
Operating leases, including imputed interest	$	499,331		86,689		147,136		101,332		164,174
Unconditional purchase obligations		117,101		117,101		—		—		—
Technology, equipment and construction purchase obligations		37,924		23,067		14,677		87		93
Total contractual cash obligations	$	654,356		226,857		161,813		101,419		164,267

Service Providers		As a non-asset based provider of global logistics services, Expeditors depends on a variety of asset-based service providers, including air, ocean and ground freight carriers. The quality and profitability of our services depend upon effective selection and oversight of our service providers. COVID-19 places significant stress on our air, ocean and freight ground carriers, which may continue to result in reduced carrier capacity or availability, pricing volatility or more limited carrier transportation schedules which could adversely impact our operations and financial results. During the pandemic, air carriers have been particularly affected having to cancel flights due to travel restrictions resulting in dramatic drops in revenues, historical losses and liquidity challenges. Uncertainty over recovery of demand for passenger air travel, in particular business travel, to pre-pandemic levels means air carriers’ operations and financial stability may be adversely affected long term. Ocean carriers have incurred significant operating losses in recent years, further exacerbated by trade reductions from COVID-19 measures, and are highly leveraged with debt. Additionally, several ocean carriers have consolidated, with the potential for more to occur in the future. Changes in the financial stability, operating capabilities and capacity of asset-based carriers and capacity allotment made available to Expeditors by asset-based carriers affects us in unpredictable ways. Any combination of reduced carrier capacity or availability, pricing volatility or more limited carrier transportation schedules, such as those caused by the pandemic, could further negatively affect our ability to execute services and maintain profitability. Expeditors cannot predict whether relief measures extended by certain governments will be effective in supporting the financial viability of carriers nor can we predict the long-term effects of this crisis on carriers’ financial stability and ability to provide services. Additionally, Expeditors' carriers are subject to increasingly stringent laws, which could, directly or indirectly, have a material adverse effect on our business. Future regulatory developments in the U.S. and abroad could adversely affect operations and increase operating costs in the transportation industry, which in turn could increase our purchased transportation costs. If we are unable to pass such costs on to our customers, our business and results of operations could be materially adversely affected.

Economic Conditions		The global economy has entered a recession as a result of the pandemic, which has affected trade and could further affect demand for our services. Continued unfavorable economic conditions will result in lower freight volumes and adversely affects Expeditors' revenues, operating results and cash flows. These conditions should they continue for extended period of time would further adversely affect our customers and service providers. Should our customers’ ability to pay deteriorate, additional bad debts may be incurred.

Key Personnel		Identifying, training and retaining key employees is essential to continued growth and future profitability. Effective succession planning is an important element of our programs. Failure to ensure an effective transfer of knowledge and smooth transitions involving key employees could adversely affect our business by hindering our ability to execute our business strategies and impacting our level of service. We must continue to develop and retain management personnel to address issues of succession planning. We believe that our compensation programs, which have been in place since we became a publicly traded company, are among the unique characteristics responsible for differentiating our performance from that of our competitors. Significant changes to compensation programs or significant declines in our operating income or operating losses could impact our ability to attract and retain key personnel. The global pandemic has caused disruptions to our work environment by requiring the majority of employees to work remotely. We cannot predict how this may affect employees’ habits, preferences nor the impact it may have on our Company’s culture and our ability to continue to retain and attract talented employees who have become accustomed to a remote work environment.

Exhibit Number		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

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101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, has been formatted in Inline XBRL.

		EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

November 4, 2020		/s/ JEFFREY S. MUSSER
		Jeffrey S. Musser, President, Chief Executive Officer and Director

November 4, 2020		/s/ BRADLEY S. POWELL
		Bradley S. Powell, Senior Vice President and Chief Financial Officer