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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

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

For the quarterly period ended September 30, 2023

OR

 

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

For the transition period from to

Commission File Number: 0-13468

 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

(Exact name of registrant as specified in its charter)

 

 

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)

 

(Registrant’s telephone number, including area code): (206) 674-3400

 

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

 

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

At November 3, 2023, the number of shares outstanding of the issuer’s common stock was 145,389,371.

 

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

 

 

 

September 30,
2023

 

 

December 31,
2022

 

Assets:

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,639,428

 

 

$

2,034,131

 

Accounts Receivable, less allowance for credit loss of
    $
5,724 at September 30, 2023 and $9,466 at December 31, 2022

 

 

1,458,983

 

 

 

2,107,645

 

Deferred contract costs

 

 

223,768

 

 

 

257,545

 

Other

 

 

189,737

 

 

 

118,696

 

Total current assets

 

 

3,511,916

 

 

 

4,518,017

 

Property and equipment, less accumulated depreciation and amortization
     of $
579,961 at September 30, 2023 and $567,758 at December 31, 2022

 

 

480,924

 

 

 

501,916

 

Operating lease right-of-use assets

 

 

506,981

 

 

 

507,503

 

Goodwill

 

 

7,927

 

 

 

7,927

 

Deferred federal and state income taxes, net

 

 

50,796

 

 

 

37,449

 

Other assets, net

 

 

19,577

 

 

 

17,622

 

Total assets

 

$

4,578,121

 

 

$

5,590,434

 

Liabilities:

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

 

846,461

 

 

 

1,108,996

 

Accrued liabilities, primarily salaries and related costs

 

 

423,685

 

 

 

479,262

 

Contract liabilities

 

 

283,797

 

 

 

323,101

 

Current portion of operating lease liabilities

 

 

99,876

 

 

 

95,621

 

Federal, state and foreign income taxes

 

 

13,226

 

 

 

47,075

 

Total current liabilities

 

 

1,667,045

 

 

 

2,054,055

 

Noncurrent portion of operating lease liabilities

 

 

419,602

 

 

 

422,844

 

Commitments and contingencies

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

Preferred stock, none issued

 

 

 

 

 

 

Common stock, par value $0.01 per share. Issued and outstanding: 145,386 
     shares at September 30, 2023 and
154,313 shares at December 31, 2022

 

 

1,454

 

 

 

1,543

 

Additional paid-in capital

 

 

 

 

 

139

 

Retained earnings

 

 

2,701,386

 

 

 

3,310,892

 

Accumulated other comprehensive loss

 

 

(213,060

)

 

 

(202,553

)

Total shareholders’ equity

 

 

2,489,780

 

 

 

3,110,021

 

Noncontrolling interest

 

 

1,694

 

 

 

3,514

 

Total equity

 

 

2,491,474

 

 

 

3,113,535

 

Total liabilities and equity

 

$

4,578,121

 

 

$

5,590,434

 

 

See accompanying notes to condensed consolidated financial statements.

2


 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Airfreight services

 

$

724,331

 

 

$

1,480,955

 

 

$

2,380,405

 

 

$

4,682,076

 

Ocean freight and ocean services

 

 

560,281

 

 

 

1,684,579

 

 

 

1,851,389

 

 

 

5,420,471

 

Customs brokerage and other services

 

 

905,389

 

 

 

1,196,612

 

 

 

2,790,548

 

 

 

3,527,209

 

Total revenues

 

 

2,190,001

 

 

 

4,362,146

 

 

 

7,022,342

 

 

 

13,629,756

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Airfreight services

 

 

516,519

 

 

 

1,104,812

 

 

 

1,707,568

 

 

 

3,459,861

 

Ocean freight and ocean services

 

 

387,670

 

 

 

1,343,355

 

 

 

1,277,159

 

 

 

4,345,963

 

Customs brokerage and other services

 

 

497,922

 

 

 

746,106

 

 

 

1,555,669

 

 

 

2,345,508

 

Salaries and related

 

 

412,505

 

 

 

499,341

 

 

 

1,290,911

 

 

 

1,546,503

 

Rent and occupancy

 

 

58,387

 

 

 

52,715

 

 

 

174,224

 

 

 

155,241

 

Depreciation and amortization

 

 

15,607

 

 

 

15,187

 

 

 

46,374

 

 

 

42,416

 

Selling and promotion

 

 

6,149

 

 

 

6,239

 

 

 

18,847

 

 

 

16,174

 

Other

 

 

79,173

 

 

 

67,468

 

 

 

211,055

 

 

 

223,425

 

Total operating expenses

 

 

1,973,932

 

 

 

3,835,223

 

 

 

6,281,807

 

 

 

12,135,091

 

Operating income

 

 

216,069

 

 

 

526,923

 

 

 

740,535

 

 

 

1,494,665

 

Other Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

17,156

 

 

 

7,835

 

 

 

53,723

 

 

 

12,447

 

Interest expense

 

 

(1,601

)

 

 

(470

)

 

 

(4,641

)

 

 

(1,031

)

Other, net

 

 

267

 

 

 

568

 

 

 

9,035

 

 

 

8,762

 

Other income, net

 

 

15,822

 

 

 

7,933

 

 

 

58,117

 

 

 

20,178

 

Earnings before income taxes

 

 

231,891

 

 

 

534,856

 

 

 

798,652

 

 

 

1,514,843

 

Income tax expense

 

 

61,048

 

 

 

120,694

 

 

 

206,018

 

 

 

368,975

 

Net earnings

 

 

170,843

 

 

 

414,162

 

 

 

592,634

 

 

 

1,145,868

 

Less net (losses) earnings attributable to the noncontrolling interest

 

 

(510

)

 

 

(47

)

 

 

(1,530

)

 

 

7,745

 

Net earnings attributable to shareholders

 

$

171,353

 

 

$

414,209

 

 

$

594,164

 

 

$

1,138,123

 

Diluted earnings attributable to shareholders per share

 

$

1.16

 

 

$

2.54

 

 

$

3.92

 

 

$

6.84

 

Basic earnings attributable to shareholders per share

 

$

1.16

 

 

$

2.56

 

 

$

3.95

 

 

$

6.90

 

Weighted average diluted shares outstanding

 

 

148,001

 

 

 

163,250

 

 

 

151,619

 

 

 

166,398

 

Weighted average basic shares outstanding

 

 

147,099

 

 

 

162,029

 

 

 

150,543

 

 

 

164,944

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net earnings

 

$

170,843

 

 

$

414,162

 

 

$

592,634

 

 

$

1,145,868

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of income tax benefits of $928 and $5,648 for the three months ended September 30, 2023 and 2022 and $7,025 and $13,429 for the nine months ended September 30, 2023 and 2022

 

 

(15,027

)

 

 

(64,507

)

 

 

(10,797

)

 

 

(129,269

)

Other comprehensive loss

 

 

(15,027

)

 

 

(64,507

)

 

 

(10,797

)

 

 

(129,269

)

Comprehensive income

 

 

155,816

 

 

 

349,655

 

 

 

581,837

 

 

 

1,016,599

 

Less comprehensive (loss) income attributable to the noncontrolling interest

 

 

(478

)

 

 

(259

)

 

 

(1,820

)

 

 

6,191

 

Comprehensive income attributable to shareholders

 

$

156,294

 

 

$

349,914

 

 

$

583,657

 

 

$

1,010,408

 

 

See accompanying notes to condensed consolidated financial statements.

4


 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

170,843

 

 

$

414,162

 

 

$

592,634

 

 

$

1,145,868

 

Adjustments to reconcile net earnings to net cash from
   operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Provisions for losses on accounts receivable

 

 

1,411

 

 

 

5,570

 

 

 

2,316

 

 

 

9,917

 

Deferred income tax benefit

 

 

(6,418

)

 

 

(3,070

)

 

 

(7,942

)

 

 

(14,928

)

Stock compensation expense

 

 

15,879

 

 

 

14,175

 

 

 

46,962

 

 

 

51,296

 

Depreciation and amortization

 

 

15,607

 

 

 

15,187

 

 

 

46,374

 

 

 

42,416

 

Other, net

 

 

2,673

 

 

 

1,435

 

 

 

6,396

 

 

 

144

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable

 

 

(53,722

)

 

 

634,421

 

 

 

629,205

 

 

 

880,364

 

Increase (decrease) in accounts payable and accrued liabilities

 

 

40,919

 

 

 

(350,922

)

 

 

(311,990

)

 

 

(343,902

)

(Increase) decrease in deferred contract costs

 

 

(56,917

)

 

 

226,087

 

 

 

28,870

 

 

 

437,155

 

Increase (decrease) in contract liabilities

 

 

74,701

 

 

 

(249,895

)

 

 

(33,549

)

 

 

(488,826

)

Decrease in income taxes payable, net

 

 

(4,017

)

 

 

(31,397

)

 

 

(97,743

)

 

 

(78,568

)

(Increase) decrease in other, net

 

 

(10,979

)

 

 

(5,369

)

 

 

(6,695

)

 

 

2,040

 

Net cash from operating activities

 

 

189,980

 

 

 

670,384

 

 

 

894,838

 

 

 

1,642,976

 

Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(7,993

)

 

 

(15,928

)

 

 

(28,600

)

 

 

(68,498

)

Other, net

 

 

10

 

 

 

(590

)

 

 

(209

)

 

 

(645

)

Net cash from investing activities

 

 

(7,983

)

 

 

(16,518

)

 

 

(28,809

)

 

 

(69,143

)

Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Payments on borrowings on lines of credit

 

 

(1,491

)

 

 

(21,117

)

 

 

(33,636

)

 

 

(29,601

)

Proceeds from borrowings on lines of credit

 

 

8,404

 

 

 

 

 

 

26,953

 

 

 

56,545

 

Proceeds from issuance of common stock

 

 

61,841

 

 

 

61,885

 

 

 

80,305

 

 

 

73,318

 

Repurchases of common stock

 

 

(298,103

)

 

 

(469,041

)

 

 

(1,199,294

)

 

 

(1,018,106

)

Dividends paid

 

 

 

 

 

 

 

 

(102,263

)

 

 

(109,828

)

Payments for taxes related to net share settlement of equity
   awards

 

 

 

 

 

 

 

 

(19,501

)

 

 

(19,333

)

Distribution to noncontrolling interest

 

 

 

 

 

(543

)

 

 

 

 

 

(543

)

Net cash from financing activities

 

 

(229,349

)

 

 

(428,816

)

 

 

(1,247,436

)

 

 

(1,047,548

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(11,807

)

 

 

(47,487

)

 

 

(13,296

)

 

 

(100,443

)

Change in cash and cash equivalents

 

 

(59,159

)

 

 

177,563

 

 

 

(394,703

)

 

 

425,842

 

Cash and cash equivalents at beginning of period

 

 

1,698,587

 

 

 

1,976,971

 

 

 

2,034,131

 

 

 

1,728,692

 

Cash and cash equivalents at end of period

 

$

1,639,428

 

 

$

2,154,534

 

 

$

1,639,428

 

 

$

2,154,534

 

Taxes Paid:

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

$

61,603

 

 

$

150,960

 

 

$

306,059

 

 

$

465,711

 

 

See accompanying notes to condensed consolidated financial statements.

5


 

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(In thousands)

(Unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30, 2023
   and 2022

 

Shares

 

 

Par
value

 

 

Additional
paid-in
capital

 

 

Retained
earnings

 

 

Accumulated
other
comprehensive
loss

 

 

Total
shareholders’
equity

 

 

Noncontrolling
interest

 

 

Total
equity

 

Balance at June 30, 2023

 

 

147,222

 

 

$

1,472

 

 

$

-

 

 

$

2,752,461

 

 

$

(198,001

)

 

$

2,555,932

 

 

$

2,172

 

 

$

2,558,104

 

Shares issued under employee stock plans, net
   of tax withholding for net settlement

 

 

727

 

 

 

7

 

 

 

61,834

 

 

 

 

 

 

 

 

 

61,841

 

 

 

 

 

 

61,841

 

Shares repurchased under provisions of
   stock repurchase plan

 

 

(2,563

)

 

 

(25

)

 

 

(77,713

)

 

 

(222,428

)

 

 

 

 

 

(300,166

)

 

 

 

 

 

(300,166

)

Stock compensation expense

 

 

 

 

 

 

 

 

15,879

 

 

 

 

 

 

 

 

 

15,879

 

 

 

 

 

 

15,879

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

171,353

 

 

 

 

 

 

171,353

 

 

 

(510

)

 

 

170,843

 

Other comprehensive (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,059

)

 

 

(15,059

)

 

 

32

 

 

 

(15,027

)

Balance at September 30, 2023

 

 

145,386

 

 

$

1,454

 

 

$

 

 

$

2,701,386

 

 

$

(213,060

)

 

$

2,489,780

 

 

$

1,694

 

 

$

2,491,474

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2022

 

 

162,931

 

 

$

1,629

 

 

$

137

 

 

$

3,717,316

 

 

$

(193,834

)

 

$

3,525,248

 

 

$

10,015

 

 

$

3,535,263

 

Shares issued under employee stock plans, net
   of tax withholding for net settlement

 

 

726

 

 

 

7

 

 

 

61,877

 

 

 

 

 

 

 

 

 

61,884

 

 

 

 

 

 

61,884

 

Shares repurchased under provisions of
   stock repurchase plan

 

 

(4,529

)

 

 

(45

)

 

 

(76,071

)

 

 

(392,925

)

 

 

 

 

 

(469,041

)

 

 

 

 

 

(469,041

)

Stock compensation expense

 

 

 

 

 

 

 

 

14,175

 

 

 

 

 

 

 

 

 

14,175

 

 

 

 

 

 

14,175

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

414,209

 

 

 

 

 

 

414,209

 

 

 

(47

)

 

 

414,162

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(64,295

)

 

 

(64,295

)

 

 

(212

)

 

 

(64,507

)

Distribution to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(543

)

 

 

(543

)

Balance at September 30, 2022

 

 

159,128

 

 

$

1,591

 

 

$

118

 

 

$

3,738,600

 

 

$

(258,129

)

 

$

3,482,180

 

 

$

9,213

 

 

$

3,491,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock