8-K
EXPEDITORS INTERNATIONAL OF WASHINGTON INC (EXPD)
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: August 3, 2021 (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 August 3, 2021, Expeditors International of Washington, Inc., a Washington corporation, issued a press release announcing second quarter 2021 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 August 3, 2021 issued by Expeditors International of Washington, Inc. |
| --- | --- |
| 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. | |
|---|---|
| August 3, 2021 | /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 SECOND QUARTER 2021 EPS OF $1.84
SEATTLE, WASHINGTON - August 3, 2021, Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced second quarter 2021 financial results including the following highlights compared to the same quarter of 2020:
| • | Diluted Net Earnings Attributable to Shareholders per share (EPS^1^) increased 69% to $1.84 |
|---|---|
| • | Net Earnings Attributable to Shareholders increased 72% to $316 million |
| --- | --- |
| • | Operating Income increased 66% to $411 million |
| --- | --- |
| • | Revenues increased 50% to $3.6 billion |
| --- | --- |
| • | Airfreight tonnage volume and ocean container volume increased 37% and 34%, respectively |
| --- | --- |
“We continued to move unprecedented volumes during the quarter, as ocean and air buy/sell rates remained elevated and volatile, capacity was extremely tight, and supply chain disruptions showed no signs of abatement,” said Jeffrey S. Musser, President and Chief Executive Officer. “Our entire company continues to perform at its very best, with strong performance and growth across all of our products. Because of ongoing supply/demand imbalances, as well as labor and equipment shortages around the globe, shippers face extraordinarily complex challenges throughout their supply chains. Logistics is now top of mind at the highest levels in most organizations. Unfortunately, there is no quick or simple fix to any of these issues and every one of our transactions seems to require significantly more attention and dedication. Whether it’s an ocean container, a customs declaration, a fulfillment order in one of our warehouses, or a high-touch, white-glove delivery for one of our Transcon customers – just about everything we do requires us to be more innovative, flexible, and alert to change in the current operating environment. I want to express enormous gratitude to our employees, who have continued to take care of our customers throughout these challenges.
“During the quarter, we achieved new records in airfreight tonnage and ocean container volumes, operating income and net earnings. Buy and sell rates remained significantly higher than pre-pandemic norms, as we worked with our carrier partners to secure precious space for our customers. It has not been easy. Many of the impediments to smoother trade flow, such as port congestion and equipment shortages, were not appreciably better in Q2 than they were in Q1.
“Currently, we do not foresee any meaningful improvements to the operating environment over at least the remainder of the year, as the global infrastructure for moving freight seems nearly stretched to its limit. Robust demand is bumping up against capacity constraints in the air and ocean markets, all of which is made more challenging by limited warehouse space, staffing constraints, port congestion, equipment dislocations, and driver shortages, not to mention additional disturbances such as the closure of the Yantian port due to a COVID-19 outbreak in May or the blockage of the Suez Canal back in March.
“We will continue to do all that we can to help our customers during such difficult times. While we remain optimistic that conditions will improve over time, we are unable to predict when that might take place, or how even the recovery might be, and we believe that demand will likely continue to outstrip capacity in both air and ocean for the near term, keeping buy/sell rates unsettled for at least the duration of 2021.”
Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “The quarter just ended provides the first meaningful comparisons to a strong year-ago quarter in 2020, when we first started to see the results of our improved performance during the unprecedented conditions brought on by the global COVID-19 pandemic. At that time, we were just starting to demonstrate our ability to quickly adapt to a radically different operating environment of high demand for very specific products in certain lanes at a time when the vast majority of air capacity had been removed and most of our people were settling in to working from home. A year later, as we are cautiously beginning to bring our people back on site, we are navigating a multitude of challenges and performing at levels we have never seen before across the company and in all of our products. We are busier than ever, generating growth in revenue, operating income, and earnings that is well ahead of expenses, as we continue to learn how to operate in this environment. While we believe the current environment is likely to remain at least through the end of 2021, I would again caution that we are unable to predict how long these ongoing conditions will persist or the impact they will have on our future operations. Regardless, we will continue to make important investments in people, processes, and technology, as well as to invest in our strategic efforts to explore new areas for profitable growth.”
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 in this release.
Expeditors International of Washington, Inc.
Second Quarter 2021 Earnings Release, August 3, 2021
Financial Highlights for the three and six months ended June 30, 2021 and 2020 (Unaudited)
(in 000's of US dollars except per share data)
| Three months ended June 30, | Six months ended June 30, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | % Change | 2021 | 2020 | % Change | |||||
| Revenues^3^ | $ | 3,609,093 | $ | 2,411,078 | 50% | $ | 6,807,913 | $ | 4,254,845 | 60% |
| Directly related cost of transportation and<br><br><br>other expenses^1,3^ | $ | 2,598,633 | $ | 1,661,487 | 56% | $ | 4,845,917 | $ | 2,890,118 | 68% |
| Salaries and other operating expenses^2^ | $ | 599,815 | $ | 501,965 | 19% | $ | 1,165,836 | $ | 958,046 | 22% |
| Operating income | $ | 410,645 | $ | 247,626 | 66% | $ | 796,160 | $ | 406,681 | 96% |
| Net earnings attributable to shareholders | $ | 316,372 | $ | 183,869 | 72% | $ | 603,592 | $ | 306,213 | 97% |
| Diluted earnings attributable to<br><br><br>shareholders per share | $ | 1.84 | $ | 1.09 | 69% | $ | 3.52 | $ | 1.80 | 96% |
| Basic earnings attributable to shareholders<br><br><br>per share | $ | 1.87 | $ | 1.10 | 70% | $ | 3.57 | $ | 1.83 | 95% |
| Diluted weighted average shares<br><br><br>outstanding | 171,677 | 169,290 | 171,660 | 170,382 | ||||||
| Basic weighted average shares outstanding | 169,210 | 166,767 | 169,140 | 167,751 |
^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 Condensed 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 Condensed Consolidated Statements of Earnings.
^3^Beginning in the first quarter 2019, the Company made changes to its process and presentation of freight services revenue and directly related transportation operating expenses with the objective that at each reporting level (reporting entity, segment and consolidated level) the gross revenue and associated directly related operating expenses be representative of the location where the services were performed, the operating expenses were incurred and where the revenues were earned. During the second quarter 2021, management identified and corrected certain immaterial errors in the Company’s historical financial statements primarily related to this process that was utilized through the first quarter of 2021. The process missed an intercompany elimination of revenues and an equal and offsetting amount of directly related transportation expenses, principally impacting airfreight services in North Asia. The errors overstated revenues and directly related transportation operating expenses by equal amounts in the consolidated statements of earnings. The errors had no impact on operating income, net earnings, and earnings per share nor any other financial statement amount. Further, the errors had no impact on the balance sheets, statements of shareholders’ equity, other comprehensive income and cash flows. These errors do not affect any of the metrics used to calculate or evaluate management’s compensation and had no impact on bonuses, commissions, share-based compensation or any other employee remuneration. Historical amounts have been revised and are presented on a comparable basis.
During the three and six months ended June 30, 2021, we repurchased 0.5 million and 1.4 million shares of common stock at an average price of $124.94 and $104.20 per share, respectively. During the three and six months ended June 30, 2020, we repurchased 0.4 million and 4.4 million shares of common stock at an average price of $77.46 and $71.41 per share, respectively.
| Employee Full-time Equivalents as of June 30, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| North America | 6,949 | 6,749 | ||
| Europe | 3,700 | 3,419 | ||
| North Asia | 2,416 | 2,413 | ||
| South Asia | 1,671 | 1,654 | ||
| Middle East, Africa and India | 1,496 | 1,528 | ||
| Latin America | 781 | 823 | ||
| Information Systems | 968 | 971 | ||
| Corporate | 399 | 380 | ||
| Total | 18,380 | 17,937 |
Disclaimer on Forward-Looking Statements:
NOTE: See Disclaimer on Forward-Looking Statements in this release.
| Second quarter year-over-year<br><br><br>percentage increase in: | ||
|---|---|---|
| 2021 | Airfreight<br><br><br>kilos | Ocean freight<br><br><br>FEU |
| April | 29% | 34% |
| May | 39% | 36% |
| June | 46% | 30% |
| Quarter | 37% | 34% |
Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 6, 2021 will be considered in management's 8-K “Responses to Selected Questions.”
Disclaimer on Forward-Looking Statements:
Certain statements contained in this news release are “forward-looking statements,” based on management’s views with respect to future events and underlying assumptions that involve risks and uncertainties. These forward-looking statements include statements regarding the future stabilization of supply/demand imbalance and rate volatility; the continued unsettled operating environment due to continued scarce air and ocean capacity; elevated air and ocean pricing and an increase in demand for such services; port congestion; equipment imbalances; trade disruptions; rising fuels costs; and the uneven lifting of the COVID-19 pandemic restrictions. Future financial performance could differ materially because of factors such as: our ability to leverage the strength of our carrier relationships to secure space; the strength of our non-asset-based operating model; our expectation that the supply/demand imbalance and rate volatility will continue for the remainder of 2021 and will stabilize over time; our ability to re-open our offices for return-to-work; our ability to continue to enhance our productivity; our expectation that the current unprecedented operating conditions will not persist long-term; our ability to invest in our strategic efforts to explore new areas for profitable growth; and our ability to remain a strong, healthy, unified and resilient organization. The COVID-19 pandemic could have the effect of heightening many of the other risks described in Item 1A of our Annual Report on Form 10-K, including, without limitation, those related to the success of our strategy and desire to maintain historical unitary profitability, our ability to attract and retain customers, our ability to manage costs, interruptions to our information technology systems, the ability of third-party providers to perform and potential litigation as updated by our reports on Form 10-Q, filed with the Securities and Exchange Commission. These and other factors are discussed in the Company’s regulatory filings with the Securities and Exchange Commission, including those in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The forward-looking statements contained in this news release speak only as of this date and the Company does not assume any obligation to update them except as required by law.
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
| December 31,<br><br><br>2020 | |||||
|---|---|---|---|---|---|
| Assets: | |||||
| Current Assets: | |||||
| Cash and cash equivalents | 1,674,121 | $ | 1,527,791 | ||
| Accounts receivable, less allowance for credit loss of<br> 6,104 at June 30, 2021 and 5,579 at December 31, 2020 | 2,647,516 | 1,998,055 | |||
| Deferred contract costs | 534,692 | 327,448 | |||
| Other | 128,933 | 110,250 | |||
| Total current assets | 4,985,262 | 3,963,544 | |||
| Property and equipment, less accumulated depreciation and<br> amortization of 534,790 at June 30, 2021 and 516,988 at<br> December 31, 2020 | 499,282 | 506,425 | |||
| Operating lease right-of-use assets | 443,708 | 432,723 | |||
| Goodwill | 7,927 | 7,927 | |||
| Other assets, net | 16,992 | 16,884 | |||
| Total assets | 5,953,171 | $ | 4,927,503 | ||
| Liabilities: | |||||
| Current Liabilities: | |||||
| Accounts payable | 1,408,572 | $ | 1,136,859 | ||
| Accrued expenses, primarily salaries and related costs | 319,696 | 257,021 | |||
| Contract liabilities | 619,140 | 379,722 | |||
| Current portion of operating lease liabilities | 80,210 | 74,004 | |||
| Federal, state and foreign income taxes | 57,608 | 45,437 | |||
| Total current liabilities | 2,485,226 | 1,893,043 | |||
| Noncurrent portion of operating lease liabilities | 370,333 | 364,185 | |||
| Deferred federal and state income taxes, net | 13,961 | 7,048 | |||
| Commitments and contingencies | |||||
| Shareholders’ Equity: | |||||
| Preferred stock, none issued | — | ||||
| Common stock, par value 0.01 per share. Issued and<br> outstanding: 169,169 shares at June 30, 2021 and 169,294<br> shares at December 31, 2020 | 1,692 | 1,693 | |||
| Additional paid-in capital | 79,357 | 157,496 | |||
| Retained earnings | 3,104,471 | 2,600,201 | |||
| Accumulated other comprehensive loss | (106,066 | ) | (99,753 | ) | |
| Total shareholders’ equity | 3,079,454 | 2,659,637 | |||
| Noncontrolling interest | 4,197 | 3,590 | |||
| Total equity | 3,083,651 | 2,663,227 | |||
| Total liabilities and equity | 5,953,171 | $ | 4,927,503 |
All values are in US Dollars.
| 03-August-2021 | Expeditors International of Washington, Inc. | Page 4 of 8 |
|---|
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, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Revenues: | ||||||||
| Airfreight services | $ | 1,523,569 | $ | 1,269,654 | $ | 2,849,484 | $ | 1,925,252 |
| Ocean freight and ocean services | 1,098,550 | 489,385 | 2,052,462 | 980,725 | ||||
| Customs brokerage and other services | 986,974 | 652,039 | 1,905,967 | 1,348,868 | ||||
| Total revenues | 3,609,093 | 2,411,078 | 6,807,913 | 4,254,845 | ||||
| Operating Expenses: | ||||||||
| Airfreight services | 1,136,328 | 932,137 | 2,090,872 | 1,398,865 | ||||
| Ocean freight and ocean services | 862,251 | 361,272 | 1,604,686 | 725,668 | ||||
| Customs brokerage and other services | 600,054 | 368,078 | 1,150,359 | 765,585 | ||||
| Salaries and related | 481,186 | 395,107 | 933,291 | 737,147 | ||||
| Rent and occupancy | 45,366 | 41,375 | 90,646 | 83,899 | ||||
| Depreciation and amortization | 12,675 | 14,109 | 25,662 | 26,769 | ||||
| Selling and promotion | 3,172 | 3,113 | 6,242 | 11,356 | ||||
| Other | 57,416 | 48,261 | 109,995 | 98,875 | ||||
| Total operating expenses | 3,198,448 | 2,163,452 | 6,011,753 | 3,848,164 | ||||
| Operating income | 410,645 | 247,626 | 796,160 | 406,681 | ||||
| Other Income (Expense): | ||||||||
| Interest income | 2,188 | 2,559 | 4,134 | 7,366 | ||||
| Other, net | 2,649 | 797 | 5,649 | 4,181 | ||||
| Other income, net | 4,837 | 3,356 | 9,783 | 11,547 | ||||
| Earnings before income taxes | 415,482 | 250,982 | 805,943 | 418,228 | ||||
| Income tax expense | 98,508 | 66,794 | 201,019 | 111,258 | ||||
| Net earnings | 316,974 | 184,188 | 604,924 | 306,970 | ||||
| Less net earnings attributable to the noncontrolling<br><br><br>interest | 602 | 319 | 1,332 | 757 | ||||
| Net earnings attributable to shareholders | $ | 316,372 | $ | 183,869 | $ | 603,592 | $ | 306,213 |
| Diluted earnings attributable to shareholders per share | $ | 1.84 | $ | 1.09 | $ | 3.52 | $ | 1.80 |
| Basic earnings attributable to shareholders per share | $ | 1.87 | $ | 1.10 | $ | 3.57 | $ | 1.83 |
| Weighted average diluted shares outstanding | 171,677 | 169,290 | 171,660 | 170,382 | ||||
| Weighted average basic shares outstanding | 169,210 | 166,767 | 169,140 | 167,751 | ||||
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| --- | --- | --- |
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, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Operating Activities: | ||||||||||||
| Net earnings | $ | 316,974 | $ | 184,188 | $ | 604,924 | $ | 306,970 | ||||
| Adjustments to reconcile net earnings to net cash from<br><br><br>operating activities: | ||||||||||||
| Provisions for losses on accounts receivable | 1,090 | 2,389 | 2,289 | 4,209 | ||||||||
| Deferred income tax expense | 1,850 | 9,287 | 10,001 | 4,148 | ||||||||
| Stock compensation expense | 30,909 | 21,638 | 42,094 | 32,794 | ||||||||
| Depreciation and amortization | 12,675 | 14,109 | 25,662 | 26,769 | ||||||||
| Other, net | 346 | 118 | 897 | 551 | ||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Increase in accounts receivable | (410,783 | ) | (185,055 | ) | (663,697 | ) | (168,375 | ) | ||||
| Increase in accounts payable and accrued<br><br><br>expenses | 100,118 | 106,760 | 333,271 | 107,677 | ||||||||
| Increase in deferred contract costs | (150,382 | ) | (2,333 | ) | (221,640 | ) | (18,401 | ) | ||||
| Increase (decrease) in contract liabilities | 174,504 | (595 | ) | 254,094 | 20,606 | |||||||
| (Decrease) increase in income taxes payable, net | (47,994 | ) | 20,154 | (1,356 | ) | 30,642 | ||||||
| Decrease (increase) in other, net | 1,164 | 16,061 | (324 | ) | 4,131 | |||||||
| Net cash from operating activities | 30,471 | 186,721 | 386,215 | 351,721 | ||||||||
| Investing Activities: | ||||||||||||
| Purchase of property and equipment | (6,539 | ) | (22,114 | ) | (14,930 | ) | (28,241 | ) | ||||
| Other, net | 138 | (68 | ) | 104 | (211 | ) | ||||||
| Net cash from investing activities | (6,401 | ) | (22,182 | ) | (14,826 | ) | (28,452 | ) | ||||
| Financing Activities: | ||||||||||||
| Proceeds from issuance of common stock | 22,711 | 29,187 | 42,468 | 52,586 | ||||||||
| Repurchases of common stock | (62,472 | ) | (30,985 | ) | (148,469 | ) | (314,225 | ) | ||||
| Dividends paid | (98,387 | ) | (86,815 | ) | (98,387 | ) | (86,815 | ) | ||||
| Payments for taxes related to net share settlement of equity<br><br><br>awards | (13,893 | ) | (9,170 | ) | (15,168 | ) | (10,566 | ) | ||||
| Net cash from financing activities | (152,041 | ) | (97,783 | ) | (219,556 | ) | (359,020 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 8,699 | 1,726 | (5,503 | ) | (14,285 | ) | ||||||
| Change in cash and cash equivalents | (119,272 | ) | 68,482 | 146,330 | (50,036 | ) | ||||||
| Cash and cash equivalents at beginning of period | 1,793,393 | 1,111,973 | 1,527,791 | 1,230,491 | ||||||||
| Cash and cash equivalents at end of period | $ | 1,674,121 | $ | 1,180,455 | $ | 1,674,121 | $ | 1,180,455 | ||||
| Taxes Paid: | ||||||||||||
| Income taxes | $ | 143,959 | $ | 38,504 | $ | 190,536 | $ | 73,808 | ||||
| 03-August-2021 | Expeditors International of Washington, Inc. | Page 6 of 8 | ||||||||||
| --- | --- | --- |
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 June 30, 2021: | ||||||||||||||||||
| Revenues | $ | 997,567 | 101,465 | 46,981 | 1,309,382 | 417,718 | 192,186 | (1,155 | ) | 3,609,093 | ||||||||
| Directly related cost of transportation<br><br><br>and other expenses^1^ | $ | 566,882 | 59,311 | 25,952 | 1,086,641 | 335,219 | 148,290 | (518 | ) | 2,598,633 | ||||||||
| Salaries and other operating expenses^2^ | $ | 241,121 | 31,300 | 14,735 | 106,812 | 49,046 | 34,026 | (633 | ) | 599,815 | ||||||||
| Operating income | $ | 189,564 | 10,854 | 6,294 | 115,929 | 33,453 | 9,870 | (4 | ) | 410,645 | ||||||||
| Identifiable assets at period end | $ | 2,972,363 | 196,558 | 102,296 | 1,114,475 | 377,370 | 291,406 | (31,003 | ) | 5,953,171 | ||||||||
| Capital expenditures | $ | 2,905 | 64 | 72 | 400 | 532 | 466 | — | 6,539 | |||||||||
| Equity | $ | 2,163,114 | 80,802 | 36,316 | 318,111 | 146,583 | 128,148 | (44,429 | ) | 3,083,651 | ||||||||
| For the three months ended June 30, 2020: | ||||||||||||||||||
| Revenues^3^ | $ | 639,226 | 73,679 | 37,553 | 984,715 | 217,152 | 101,571 | (878 | ) | 2,411,078 | ||||||||
| Directly related cost of transportation<br><br><br>and other expenses^1, 3^ | $ | 354,619 | 40,814 | 22,701 | 775,572 | 153,194 | 72,868 | (451 | ) | 1,661,487 | ||||||||
| Salaries and other operating expenses^2^ | $ | 207,703 | 25,283 | 12,112 | 97,171 | 39,184 | 25,188 | (433 | ) | 501,965 | ||||||||
| Operating income | $ | 76,904 | 7,582 | 2,740 | 111,972 | 24,774 | 3,515 | 6 | 247,626 | |||||||||
| Identifiable assets at period end | $ | 1,886,463 | 170,873 | 72,912 | 669,335 | 213,007 | 221,381 | (5,782 | ) | 3,810,177 | ||||||||
| Capital expenditures | $ | 19,076 | 1,148 | 216 | 385 | 182 | 114 | — | 22,114 | |||||||||
| Equity | $ | 1,399,124 | 71,165 | 29,758 | 306,022 | 108,777 | 116,279 | (37,587 | ) | 2,161,598 | ||||||||
| 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 six months ended June 30, 2021: | ||||||||||||||||||
| Revenues^3^ | $ | 1,872,957 | 195,582 | 91,845 | 2,518,430 | 767,484 | 352,692 | (2,359 | ) | 6,807,913 | ||||||||
| Directly related cost of transportation<br><br><br>and other expenses^1, 3^ | $ | 1,069,517 | 112,361 | 52,652 | 2,054,170 | 605,163 | 269,399 | (1,110 | ) | 4,845,917 | ||||||||
| Salaries and other operating expenses^2^ | $ | 479,819 | 57,037 | 27,112 | 213,732 | 92,211 | 64,301 | (1,239 | ) | 1,165,836 | ||||||||
| Operating income | $ | 323,621 | 26,184 | 12,081 | 250,528 | 70,110 | 18,992 | (10 | ) | 796,160 | ||||||||
| Identifiable assets at period end | $ | 2,972,363 | 196,558 | 102,296 | 1,114,475 | 377,370 | 291,406 | (31,003 | ) | 5,953,171 | ||||||||
| Capital expenditures | $ | 5,930 | 186 | 125 | 757 | 1,111 | 1,167 | — | 14,930 | |||||||||
| Equity | $ | 2,163,114 | 80,802 | 36,316 | 318,111 | 146,583 | 128,148 | (44,429 | ) | 3,083,651 | ||||||||
| For the six months ended June 30, 2020: | ||||||||||||||||||
| Revenues^3^ | $ | 1,289,631 | 154,910 | 75,444 | 1,481,872 | 383,233 | 206,553 | (1,818 | ) | 4,254,845 | ||||||||
| Directly related cost of transportation<br><br><br>and other expenses^1, 3^ | $ | 728,578 | 86,104 | 46,467 | 1,160,075 | 271,515 | 147,787 | (896 | ) | 2,890,118 | ||||||||
| Salaries and other operating expenses^2^ | $ | 433,647 | 48,995 | 23,861 | 154,604 | 69,092 | 51,138 | (902 | ) | 958,046 | ||||||||
| Operating income | $ | 127,406 | 19,811 | 5,116 | 167,193 | 42,626 | 7,628 | (20 | ) | 406,681 | ||||||||
| Identifiable assets at period end | $ | 1,886,463 | 170,873 | 72,912 | 669,335 | 213,007 | 221,381 | (5,782 | ) | 3,810,177 | ||||||||
| Capital expenditures | $ | 23,573 | 1,209 | 318 | 710 | 370 | 423 | — | 28,241 | |||||||||
| Equity | $ | 1,399,124 | 71,165 | 29,758 | 306,022 | 108,777 | 116,279 | (37,587 | ) | 2,161,598 |
All values are in Euros.
| 03-August-2021 | Expeditors International of Washington, Inc. | Page 7 of 8 |
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^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 Condensed 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 Condensed Consolidated Statements of Earnings.
^3^Beginning in the first quarter 2019, the Company made changes to its process and presentation of freight services revenue and directly related transportation operating expenses with the objective that at each reporting level (reporting entity, segment and consolidated level) the gross revenue and associated directly related operating expenses be representative of the location where the services were performed, the operating expenses were incurred and where the revenues were earned. During the second quarter 2021, management identified and corrected certain immaterial errors in the Company’s historical financial statements primarily related to this process that was utilized through the first quarter of 2021. The process missed an intercompany elimination of revenues and an equal and offsetting amount of directly related transportation expenses, principally impacting airfreight services in North Asia. The errors overstated revenues and directly related transportation operating expenses by equal amounts in the consolidated statements of earnings. The errors had no impact on operating income, net earnings, and earnings per share nor any other financial statement amount. Further, the errors had no impact on the balance sheets, statements of shareholders’ equity, other comprehensive income and cash flows. Historical amounts for business segment information have been revised and are presented on a comparable basis.
The Company’s consolidated financial results in the three and six months ended June 30, 2021 and 2020 were each significantly impacted by the effects of the global pandemic in divergent ways. In the first and second quarter of 2021, the Company experienced strong volumes and high average sell and buy rates as a result of imbalances between demand and carrier capacity and continuing effects of disruptions in supply chains originating in measures to combat the pandemic in 2020.
This is in contrast with slower activity in North Asia in the first quarter of 2020 as the pandemic resulted in temporary closures and limited operations in the Company’s China offices. Shipments were also rerouted or delayed by customers and service providers as they were taking their own precautionary measures. This was followed by significant increases in airfreight services revenues and related expenses, in the second quarter of 2020, as a result of demand for time-sensitive delivery of technology equipment and medical equipment and supplies from China, which combined with reductions in airfreight supply resulted in significantly higher average buy and sell rates.
These impacts are affecting all of the Company’s geographical segments and most notably the year-over-year comparability of the North Asia segment. For the three months ended June 30, 2021 and 2020, the People's Republic of China, including Hong Kong, represented 29% and 34%, respectively, of the Company’s total revenues and 22% and 38%, respectively, of the total operating income. For the six months ended June 30, 2021 and 2020, the People's Republic of China, including Hong Kong, represented 29% of the Company’s total revenues and 24% and 33%, respectively, of the total operating income.
| 03-August-2021 | Expeditors International of Washington, Inc. | Page 8 of 8 |
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