Expeditors International Of Washington Inc 10-Q for FY2020 Q2

Expeditors International Of Washington Inc (EXPD)

10-Q 2020-08-06 For: 2020-06-30

Added on April 08, 2026

About this 10-Q

Expeditors International Of Washington Inc filed this 10-Q on August 6, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

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

Revenue: $2.58B; up 26.8% from $2.04B a year earlier
Net income: $183.87M; up 20.1% from net income of $153.15M a year earlier
Diluted EPS: $1.09; up 23.9% from $0.88 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	☐

	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

	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


☒	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 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		—			—			—			306,213			—			306,213			757			306,970
Other comprehensive income (loss)		—			—			—			—			(21,971	)		(21,971	)		(468	)		(22,439	)
Dividends paid ($0.52)		—			—			1,000			(87,815	)		—			(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 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		1,656			17			52,786			—			—			52,803			—			52,803
Shares repurchased under provisions of stock repurchase plans		(3,198	)		(32	)		(79,858	)		(155,033	)		—			(234,923	)		—			(234,923	)
Stock compensation expense		—			—			37,206			—			—			37,206			—			37,206
Net earnings		—			—			—			292,848			—			292,848			793			293,641
Other comprehensive income (loss)		—			—			—			—			1,385			1,385			(254	)		1,131
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

	Three months ended June 30,
	Net earnings attributable to shareholders		Weighted average shares		Earnings per share
2020
Basic earnings attributable to shareholders	$	183,869		166,767	$	1.10
Effect of dilutive potential common shares		—		2,523		—
Diluted earnings attributable to shareholders	$	183,869		169,290	$	1.09
2019
Basic earnings attributable to shareholders	$	153,149		171,003	$	0.90
Effect of dilutive potential common shares		—		3,463		—
Diluted earnings attributable to shareholders	$	153,149		174,466	$	0.88

	June 30, 2020				December 31, 2019
	Cost		Fair Value		Cost		Fair Value
Cash and Cash Equivalents:
Cash and overnight deposits	$	576,740	$	576,740	$	417,456	$	417,456
Corporate commercial paper		562,706		562,722		775,504		776,356
Time deposits		41,009		41,009		37,531		37,531
Total cash and cash equivalents	$	1,180,455	$	1,180,471	$	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 June 30, 2020:
Revenues¹	$	639,231		74,314		37,553		1,117,058		224,313		387,430		101,611		(878	)		2,580,632
Directly related cost of transportation and other expenses²	$	354,624		41,449		22,701		907,915		160,355		271,540		72,908		(451	)		1,831,041
Salaries and other operating expenses³	$	207,703		25,283		12,112		97,171		39,184		95,757		25,188		(433	)		501,965
Operating income	$	76,904		7,582		2,740		111,972		24,774		20,133		3,515		6			247,626
Identifiable assets at period end	$	1,886,463		170,873		72,912		669,335		213,007		581,988		221,381		(5,782	)		3,810,177
Capital expenditures	$	19,076		1,148		216		385		182		993		114		—			22,114
Equity	$	1,399,124		71,165		29,758		306,022		108,777		168,060		116,279		(37,587	)		2,161,598
For the three months ended June 30, 2019:
Revenues¹	$	681,076		85,537		38,757		621,951		181,380		319,331		108,311		(764	)		2,035,579
Directly related cost of transportation and other expenses²	$	386,093		50,336		22,043		487,554		132,487		220,676		75,089		(394	)		1,373,884
Salaries and other operating expenses³	$	207,060		26,343		14,368		69,944		33,380		89,340		29,423		(364	)		469,494
Operating income	$	87,923		8,858		2,346		64,453		15,513		9,315		3,799		(6	)		192,201
Identifiable assets at period end	$	1,819,718		176,151		73,197		580,311		193,771		581,518		229,692		(7,368	)		3,646,990
Capital expenditures	$	8,985		768		145		300		428		1,914		447		—			12,987
Equity	$	1,303,381		83,417		31,014		282,192		107,229		168,570		109,790		(33,199	)		2,052,394

	Three months ended June 30,					Six months ended June 30,
(in thousands)	2020		2019		Percentage change	2020		2019		Percentage change
Airfreight services:
Revenues	$	1,434,590	$	741,577	93%	$	2,143,629	$	1,456,478	47%
Expenses		1,097,073		542,639	102		1,617,242		1,051,849	54
Ocean freight services and ocean services:
Revenues		491,712		543,809	(10)		985,139		1,112,450	(11)
Expenses		363,599		390,299	(7)		730,082		810,630	(10)
Customs brokerage and other services:
Revenues		654,330		750,193	(13)		1,353,728		1,486,702	(9)
Expenses		370,369		440,946	(16)		770,445		877,342	(12)
Overhead expenses:
Salaries and related costs		395,107		356,351	11		737,147		713,261	3
Other		106,858		113,143	(6)		220,899		222,746	(1)
Total overhead expenses		501,965		469,494	7		958,046		936,007	2
Operating income		247,626		192,201	29		406,681		379,802	7
Other income, net		3,356		8,778	(62)		11,547		16,549	(30)
Earnings before income taxes		250,982		200,979	25		418,228		396,351	6
Income tax expense		66,794		47,449	41		111,258		102,710	8
Net earnings		184,188		153,530	20		306,970		293,641	5
Less net earnings attributable to the noncontrolling interest		319		381	(16)		757		793	(5)
Net earnings attributable to shareholders	$	183,869	$	153,149	20%	$	306,213	$	292,848	5%

Novel Coronavirus (COVID-19)		COVID-19 significantly impacted worldwide economic conditions and global trade and may continue to have an adverse effect on our operations, and the operations of our service providers and our customers, which may further impact our business. COVID-19 was declared as a global health emergency and later declared as a global pandemic by the World Health Organization. As a result, governments have implemented travel restrictions, mandated lockdowns and other precautionary measures that resulted in significant business and supply chain disruptions and a slowdown in international trade. This crisis has affected, and is expected to continue affecting, our business in many aspects. Governments have designated our operations as essential business and we activated our business continuity plan to be able to conduct operations. Our facilities and employees are operating under the constraints of special protective measures and many are working remotely. These disruptions are also threatening the financial stability of our service providers and the ability to efficiently and profitably route our customers’ freight. Reduced flight schedules and cancellations have significantly reduced available space for airfreight, while ocean carriers have continued to reduce their operating capacity. These freight market conditions create pricing volatility that challenges Expeditors’ ability to maintain historical unitary profitability. Many of our customers are experiencing disruptions in their revenue and cash flow, prompting these customers to renegotiate contractual terms and increasing our accounts receivable collection risks. Such conditions could result in the loss of business and additional bad debt allowances in the future if our customers’ ability to pay deteriorates. Although we are monitoring the situation, we cannot predict for how long, or the ultimate extent to which the pandemic and related precautionary measures may disrupt our operations. Any significant disruption resulting from this on a large scale or over an extended period of time would negatively affect our business and our financial results.

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. 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.

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans		Maximum number of shares that may yet be purchased under the plans
April 1-30, 2020		—	$	—		—		6,272,162
May 1-31, 2020		—		—		—		6,931,797
June 1-30, 2020		400,000		77.46		400,000		6,816,311
Total		400,000	$	77.46		400,000		6,816,311

Exhibit Number		Description
3.2		The Company's Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to Form 8-K filed on or about August 4, 2020.)

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.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

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 June 30, 2020, has been formatted in Inline XBRL.

		EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

August 6, 2020		/s/ JEFFREY S. MUSSER
		Jeffrey S. Musser, President, Chief Executive Officer and Director

August 6, 2020		/s/ BRADLEY S. POWELL
		Bradley S. Powell, Senior Vice President and Chief Financial Officer