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 June 30, 2020

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 August 3, 2020, the number of shares outstanding of the issuer’s common stock was 167,659,204.

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)

	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

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 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

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 June 30,					Six months ended June 30,
	2020		2019			2020			2019
Net earnings	$	184,188	$	153,530		$	306,970		$	293,641
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax    (benefit) expense of $(5,148) and $(82) for the three    months ended June 30, 2020 and 2019 and $(3,974)    and $439 for the six months ended June 30, 2020    and 2019		16,410		(769	)		(22,439	)		596
Reclassification adjustments for foreign currency realized    losses, net of tax of $145 for the three and six months    ended June 30, 2019		—		535			—			535
Other comprehensive income (loss)		16,410		(234	)		(22,439	)		1,131
Comprehensive income		200,598		153,296			284,531			294,772
Less comprehensive income attributable to the    noncontrolling interest		141		257			289			539
Comprehensive income attributable to shareholders	$	200,457	$	153,039		$	284,242		$	294,233

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 June 30,						Six months ended June 30,
	2020			2019			2020			2019
Operating Activities:
Net earnings	$	184,188		$	153,530		$	306,970		$	293,641
Adjustments to reconcile net earnings to net cash from    operating activities:
Provisions for losses (recoveries) on accounts receivable		2,389			1,584			4,209			(304	)
Deferred income tax expense		9,287			3,697			4,148			5,805
Stock compensation expense		21,638			23,824			32,794			37,206
Depreciation and amortization		14,109			12,677			26,769			26,070
Other, net		118			(29	)		551			160
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(185,055	)		(28,187	)		(168,375	)		202,290
Increase (decrease) in accounts payable and accrued    expenses		106,760			39,900			107,677			(82,383	)
(Increase) decrease in deferred contract costs		(2,333	)		(13,010	)		(18,401	)		18,249
(Decrease) increase in contract liabilities		(595	)		13,003			20,606			(23,722	)
Increase (decrease) in income taxes payable, net		20,154			(49,606	)		30,642			(32,613	)
Decrease (increase) in other, net		16,061			(1,676	)		4,131			791
Net cash from operating activities		186,721			155,707			351,721			445,190
Investing Activities:
Purchase of property and equipment		(22,114	)		(12,987	)		(28,241	)		(22,422	)
Other, net		(68	)		1,038			(211	)		1,293
Net cash from investing activities		(22,182	)		(11,949	)		(28,452	)		(21,129	)
Financing Activities:
Proceeds from issuance of common stock		29,187			32,287			52,586			59,477
Repurchases of common stock		(30,985	)		(190,589	)		(314,225	)		(234,923	)
Dividends Paid		(86,815	)		(85,184	)		(86,815	)		(85,184	)
Payments for taxes related to net share settlement of equity    awards		(9,170	)		(6,674	)		(10,566	)		(6,674	)
Net cash from financing activities		(97,783	)		(250,160	)		(359,020	)		(267,304	)
Effect of exchange rate changes on cash and cash equivalents		1,726			(377	)		(14,285	)		2,158
Change in cash and cash equivalents		68,482			(106,779	)		(50,036	)		158,915
Cash and cash equivalents at beginning of period		1,111,973			1,189,429			1,230,491			923,735
Cash and cash equivalents at end of period	$	1,180,455		$	1,082,650		$	1,180,455		$	1,082,650
Taxes Paid:
Income taxes	$	38,504		$	97,715		$	73,808		$	134,968

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 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		—			—			—