8-K - EXPD - Equibles

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: May 5, 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 May 5, 2020, Expeditors International of Washington, Inc., a Washington corporation, issued a press release announcing first quarter 2020 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 May 5, 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.
May 5, 2020	/S/ Bradley S. Powell
	Bradley S. Powell, Senior
	Vice President and Chief Financial Officer

expd-ex991_6.htm

Exhibit 99.1

EARNINGS RELEASE

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 FIRST QUARTER 2020 EPS OF $0.71

SEATTLE, WASHINGTON - May 5, 2020, Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced first quarter 2020 financial results including the following highlights compared to the same quarter of 2019:

•	Diluted Net Earnings Attributable to Shareholders per share (EPS^1^) decreased 11% to $0.71
•	Net Earnings Attributable to Shareholders decreased 12% to $122 million
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•	Operating Income decreased 15% to $159 million
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•	Revenues decreased 6% to $1.9 billion
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•	Airfreight tonnage volume decreased 7% and ocean container volume decreased 10%
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“I offer my heartfelt appreciation to everyone throughout our organization for their tremendous efforts during the challenging conditions brought about as a result of the COVID-19 pandemic,” said Jeffrey S. Musser, President and Chief Executive Officer. “As befits our legacy and the culture of our organization, we put the health, safety, and welfare of our employees and their families ahead of all other concerns. In doing so, we were able to shift much of our staff to a virtual environment while still providing essential supply chain services to our customers. Achieving this during a time of such unparalleled crisis is impressive and I offer my sincerest thank you to our entire staff.”

Mr. Musser continued, “Our Q1 performance was better than we might have expected, given the contraction in demand across geographies, as well as the severity and suddenness of the collapse in air carrier belly space and reduction in containership sailings. While there is talk of various markets starting to come back on line, the impact of COVID-19 continues to have an enormous impact on the global economic environment, to both supply and demand, as well as to buy/sell rates. While we remain fully staffed and ready for when economies across the world start to regain their post-crisis footing, we do not know when, how quickly, or how uniformly that will take place. Until then, we remain steadfast in our commitment to our valued customers, our carrier partners, and to all of our dedicated employees around the world.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Operating income was negatively impacted by the disruption caused by COVID-19, which led to many factory shutdowns, commercial flight cancellations, and reduced ocean sailings as economies around the world diverted activities to fight the pandemic. As a result, we experienced a shift in the goods we handle with increased shipments of medical equipment and supplies to help combat COVID-19 and technology products to support social distancing and working remotely. Conversely, we saw a significant decline in shipments from our customers in retail, aerospace, automotive and the oil and energy sectors. Salaries and related expenses declined 4% compared to a year ago, primarily as a result of lower bonuses and commissions under our variable compensation plans. Importantly, we honoured our commitment to not furlough or lay off our valuable employees around the world during this crisis. We expect disruptions from COVID-19 to continue for the remainder of 2020. Our balance sheet and cash flow are strong and we expect to continue to make investments in our people, processes and technology.”

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.

First Quarter 2020 Earnings Release, May 5, 2020

Financial Highlights for the three months ended March 31, 2020 and 2019 (Unaudited)

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

	Three months ended March 31,
	2020		2019		% Change
Revenues	$	1,901,864	$	2,020,051	(6)%
Directly related cost of transportation and<br><br><br>other expenses^1^	$	1,286,728	$	1,365,937	(6)%
Salaries and other operating expenses^2^	$	456,081	$	466,513	(2)%
Operating income	$	159,055	$	187,601	(15)%
Net earnings attributable to shareholders	$	122,344	$	139,699	(12)%
Diluted earnings attributable to<br><br><br>shareholders per share	$	0.71	$	0.80	(11)%
Basic earnings attributable to shareholders<br><br><br>per share	$	0.73	$	0.81	(10)%
Diluted weighted average shares<br><br><br>outstanding		171,450		175,388
Basic weighted average shares outstanding		168,735		171,818

^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.

During the three months ended March 31, 2020, we repurchased 4.0 million shares of common stock at an average price of $70.81 per share. During the three months ended March 31, 2019, we repurchased 0.6 million shares of common stock at an average price of $75.40 per share.

	Employee Full-time Equivalents March 31,
	2020		2019
North America		6,848		6,806
Europe		3,430		3,404
North Asia		2,429		2,540
South Asia		1,677		1,654
Middle East, Africa and India		1,536		1,541
Latin America		848		862
Information Systems		955		915
Corporate		379		380
Total		18,102		18,102
	First quarter year-over-year<br><br><br>percentage decrease in:
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	Airfreight<br><br><br>kilos	Ocean freight<br><br><br>FEU
2020
January	(7)%	(6)%
February	(4)%	(9)%
March	(10)%	(13)%
Quarter	(7)%	(10)%

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on May 8, 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 second quarter as a result of containment measures related to the Novel Coronavirus (COVID-19); uncertainty over if and when various markets may come back on line; the impact on the global economic environment, to both supply and demand, as well as to buy/sell rates; the duration of the COVID-19 pandemic; our continuing ability to make investments in people, process and technology throughout this period; 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, 2019 and as updated by our reports on Form 10-Q, filed with the Securities and Exchange Commission.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

			December 31,<br><br><br>2019
Assets:
Current Assets:
Cash and cash equivalents	1,111,973		$	1,230,491
Accounts receivable, less allowance for credit loss of<br> 3,578 at March 31, 2020 and 11,143 at December 31, 2019	1,268,798			1,315,091
Deferred contract costs	143,986			131,783
Other	94,060			92,558
Total current assets	2,618,817			2,769,923
Property and equipment, less accumulated depreciation and<br> amortization of 481,490 at March 31, 2020 and 478,906 at<br> December 31, 2019	484,588			499,344
Operating lease right-of-use assets	372,748			390,035
Goodwill	7,927			7,927
Deferred federal and state income taxes, net	9,680			8,034
Other assets, net	16,207			16,621
Total assets	3,509,967		$	3,691,884
Liabilities:
Current Liabilities:
Accounts payable	700,944		$	735,695
Accrued expenses, primarily salaries and related costs	201,756			189,446
Contract liabilities	170,866			154,183
Current portion of operating lease liabilities	63,748			65,367
Federal, state and foreign income taxes	21,864			23,627
Total current liabilities	1,159,178			1,168,318
Noncurrent portion of operating lease liabilities	313,644			326,347
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued	—		—
Common stock, par value 0.01 per share. Issued and<br> outstanding: 166,193 shares at March 31, 2020 and 169,622<br> shares at December 31, 2019	1,662			1,696
Additional paid-in capital	682			3,203
Retained earnings	2,202,208			2,321,316
Accumulated other comprehensive loss	(169,746	)		(131,187	)
Total shareholders’ equity	2,034,806			2,195,028
Noncontrolling interest	2,339			2,191
Total equity	2,037,145			2,197,219
Total liabilities and equity	3,509,967		$	3,691,884

All values are in US Dollars.

05-May-2020	Expeditors International of Washington, Inc.	Page 3 of 6

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

	Three months ended March 31,
	2020		2019
Revenues:
Airfreight services	$	709,039	$	714,901
Ocean freight and ocean services		493,427		568,641
Customs brokerage and other services		699,398		736,509
Total revenues		1,901,864		2,020,051
Operating Expenses:
Airfreight services		520,169		509,210
Ocean freight and ocean services		366,483		420,331
Customs brokerage and other services		400,076		436,396
Salaries and related		342,040		356,910
Rent and occupancy		42,524		41,523
Depreciation and amortization		12,660		13,393
Selling and promotion		8,243		11,076
Other		50,614		43,611
Total operating expenses		1,742,809		1,832,450
Operating income		159,055		187,601
Other Income (Expense):
Interest income		4,807		6,106
Other, net		3,384		1,665
Other income, net		8,191		7,771
Earnings before income taxes		167,246		195,372
Income tax expense		44,464		55,261
Net earnings		122,782		140,111
Less net earnings attributable to the noncontrolling<br><br><br>interest		438		412
Net earnings attributable to shareholders	$	122,344	$	139,699
Diluted earnings attributable to shareholders per share	$	0.71	$	0.80
Basic earnings attributable to shareholders per share	$	0.73	$	0.81
Weighted average diluted shares outstanding		171,450		175,388
Weighted average basic shares outstanding		168,735		171,818
05-May-2020	Expeditors International of Washington, Inc.	Page 4 of 6
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EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three months ended March 31,
	2020			2019
Operating Activities:
Net earnings	$	122,782		$	140,111
Adjustments to reconcile net earnings to net cash from<br><br><br>operating activities:
Provisions for losses (recoveries) on accounts receivable		1,820			(1,888	)
Deferred income tax (benefit) expense		(5,139	)		2,108
Stock compensation expense		11,156			13,382
Depreciation and amortization		12,660			13,393
Other, net		433			189
Changes in operating assets and liabilities:
Decrease in accounts receivable		16,680			230,477
Increase (decrease) in accounts payable and accrued<br><br><br>expenses		917			(122,283	)
(Increase) decrease in deferred contract costs		(16,068	)		31,259
Increase (decrease) in contract liabilities		21,201			(36,725	)
Increase in income taxes payable, net		10,488			16,993
(Increase) decrease in other, net		(11,930	)		2,467
Net cash from operating activities		165,000			289,483
Investing Activities:
Purchase of property and equipment		(6,127	)		(9,435	)
Other, net		(143	)		255
Net cash from investing activities		(6,270	)		(9,180	)
Financing Activities:
Proceeds from issuance of common stock		23,399			27,190
Repurchases of common stock		(283,240	)		(44,334	)
Payments for taxes related to net share settlement of equity<br><br><br>awards		(1,396	)		—
Net cash from financing activities		(261,237	)		(17,144	)
Effect of exchange rate changes on cash and cash equivalents		(16,011	)		2,535
Change in cash and cash equivalents		(118,518	)		265,694
Cash and cash equivalents at beginning of period		1,230,491			923,735
Cash and cash equivalents at end of period	$	1,111,973		$	1,189,429
Taxes Paid:
Income taxes	$	35,304		$	37,253
05-May-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
For the three months ended March 31, 2020:
Revenues^1^	$	650,407	81,831	37,890	537,955	169,042	105,039	(940	)	1,901,864
Directly related cost of transportation and<br><br><br>other expenses^2^	$	373,961	45,890	23,765	425,301	121,282	74,976	(445	)	1,286,728
Salaries and other operating expenses^3^	$	225,944	23,712	11,749	57,433	29,908	25,950	(469	)	456,081
Operating income	$	50,502	12,229	2,376	55,221	17,852	4,113	(26	)	159,055
Identifiable assets at period end	$	1,858,250	135,810	68,402	512,808	179,508	200,382	(24	)	3,509,967
Capital expenditures	$	4,497	61	102	325	188	309	—		6,127
Equity	$	1,369,580	63,378	28,020	237,255	102,001	113,349	(35,660	)	2,037,145
For the three months ended March 31, 2019:
Revenues^1^	$	659,784	91,410	34,179	632,853	177,179	112,675	(719	)	2,020,051
Directly related cost of transportation and<br><br><br>other expenses^2^	$	367,355	56,241	19,116	498,646	129,810	79,503	(629	)	1,365,937
Salaries and other operating expenses^3^	$	218,416	24,209	12,427	68,427	31,462	28,811	(82	)	466,513
Operating income	$	74,013	10,960	2,636	65,780	15,907	4,361	(8	)	187,601
Identifiable assets at period end	$	1,906,278	175,034	71,168	511,589	174,512	234,195	(9,788	)	3,642,912
Capital expenditures	$	6,915	228	93	344	176	697	—		9,435
Equity	$	1,401,450	82,170	28,581	238,518	114,290	126,953	(32,246	)	2,125,434

All values are in Euros.

^1^Beginning in the second quarter of 2019, the Company revised its process to record the transfer, between its geographic operating segments, of revenues and the directly related cost of transportation and other 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. The change in presentation had no impact on consolidated or segment operating income. The impact of these changes on reported segment revenues was immaterial and first quarter 2019 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 Condensed 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 Condensed Consolidated Statements of Earnings.

The Company’s consolidated financial results in the first quarter 2020 were significantly impacted by the effects of the Novel Coronavirus (COVID-19) pandemic and are expected to be further impacted in the remainder of 2020. In the first quarter of 2020, North Asia and United States experienced the most significant declines in results due to the disruptions of trade to and from China, which impacted overall freight movement around the globe. Factories in China experienced extended closures and many airlines cancelled flights to and from China. Additionally, ocean carriers have reduced their capacity by anchoring vessels and skipping ports due to the decline in demand. As a result, starting in January certain of the Company’s central China offices experienced temporary closures and limited operations and shipments were rerouted or delayed by customers and service providers taking their own precautionary measures. Also, available airfreight capacity was reduced affecting the ability to efficiently route customers’ freight. In the first quarter 2020 and 2019, the People's Republic of China, including Hong Kong, represented 23% and 27%, respectively, of the Company’s total revenues and 25% and 29%, respectively, of the Company’s total operating income

05-May-2020	Expeditors International of Washington, Inc.	Page 6 of 6