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, 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 November 2, 2020, the number of shares outstanding of the issuer’s common stock was 169,265,692.

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, 2020			December 31, 2019
Assets:
Current Assets:
Cash and cash equivalents	$	1,465,510		$	1,230,491
Accounts receivable, less allowance for credit loss of    $5,171 at September 30, 2020 and $11,143 at December 31, 2019		1,582,424			1,315,091
Deferred contract costs		232,351			131,783
Other		129,617			92,558
Total current assets		3,409,902			2,769,923
Property and equipment, less accumulated depreciation and    amortization of $510,103 at September 30, 2020 and $478,906 at    December 31, 2019		499,189			499,344
Operating lease right-of-use assets		422,002			390,035
Goodwill		7,927			7,927
Deferred federal and state income taxes, net		3,130			8,034
Other assets, net		16,404			16,621
Total assets	$	4,358,554		$	3,691,884
Liabilities:
Current Liabilities:
Accounts payable	$	888,761		$	735,695
Accrued expenses, primarily salaries and related costs		236,826			189,446
Contract liabilities		267,266			154,183
Current portion of operating lease liabilities		70,755			65,367
Federal, state and foreign income taxes		33,100			23,627
Total current liabilities		1,496,708			1,168,318
Noncurrent portion of operating lease liabilities		357,373			326,347
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued		—		—
Common stock, par value $0.01 per share. Issued and    outstanding: 169,231 shares at September 30, 2020 and 169,622    shares at December 31, 2019		1,692			1,696
Additional paid-in capital		145,924			3,203
Retained earnings		2,489,694			2,321,316
Accumulated other comprehensive loss		(135,281	)		(131,187	)
Total shareholders’ equity		2,502,029			2,195,028
Noncontrolling interest		2,444			2,191
Total equity		2,504,473			2,197,219
Total liabilities and equity	$	4,358,554		$	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 September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Revenues:
Airfreight services	$	1,093,550	$	715,450	$	3,237,179	$	2,171,928
Ocean freight and ocean services		612,858		585,374		1,597,997		1,697,824
Customs brokerage and other services		758,389		774,031		2,112,117		2,260,733
Total revenues		2,464,797		2,074,855		6,947,293		6,130,485
Operating Expenses:
Airfreight services		833,689		522,868		2,450,931		1,574,717
Ocean freight and ocean services		455,072		424,215		1,185,154		1,234,845
Customs brokerage and other services		441,657		453,416		1,212,102		1,330,758
Salaries and related		373,613		356,331		1,110,760		1,069,592
Rent and occupancy		42,484		41,987		126,383		124,407
Depreciation and amortization		15,851		12,386		42,620		38,456
Selling and promotion		2,945		10,133		14,301		32,852
Other		47,541		46,969		146,416		138,506
Total operating expenses		2,212,852		1,868,305		6,288,667		5,544,133
Operating income		251,945		206,550		658,626		586,352
Other Income (Expense):
Interest income		1,504		5,501		8,870		18,123
Other, net		980		1,895		5,161		5,822
Other income, net		2,484		7,396		14,031		23,945
Earnings before income taxes		254,429		213,946		672,657		610,297
Income tax expense		62,710		53,319		173,968		156,029
Net earnings		191,719		160,627		498,689		454,268
Less net earnings attributable to the noncontrolling    interest		412		406		1,169		1,199
Net earnings attributable to shareholders	$	191,307	$	160,221	$	497,520	$	453,069
Diluted earnings attributable to shareholders per share	$	1.12	$	0.92	$	2.92	$	2.60
Basic earnings attributable to shareholders per share	$	1.14	$	0.94	$	2.96	$	2.65
Weighted average diluted shares outstanding		170,735		173,483		170,539		174,463
Weighted average basic shares outstanding		168,310		170,415		167,942		171,084

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,
	2020			2019			2020			2019
Net earnings	$	191,719		$	160,627		$	498,689		$	454,268
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax    expense (benefit) of $4,200 and $(5,803) for the    three months ended September 30, 2020 and    2019 and $226 and $(5,364) for the nine months    ended September 30, 2020 and 2019		17,429			(14,603	)		(5,010	)		(14,007	)
Reclassification adjustments for foreign currency    realized losses, net of tax of $145 for the nine    months ended September 30, 2019		—			—			—			535
Other comprehensive income (loss)		17,429			(14,603	)		(5,010	)		(13,472	)
Comprehensive income		209,148			146,024			493,679			440,796
Less comprehensive (loss) income attributable to the    noncontrolling interest		(36	)		481			253			1,020
Comprehensive income attributable to shareholders	$	209,184		$	145,543		$	493,426		$	439,776

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,
	2020			2019			2020			2019
Operating Activities:
Net earnings	$	191,719		$	160,627		$	498,689		$	454,268
Adjustments to reconcile net earnings to net cash from    operating activities:
Provisions for losses on accounts receivable		398			757			4,607			453
Deferred income tax (benefit) expense		(1,276	)		(5,822	)		2,872			(17	)
Stock compensation expense		12,297			12,155			45,091			49,361
Depreciation and amortization		15,851			12,386			42,620			38,456
Other, net		2,919			652			3,470			812
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(106,065	)		43,885			(274,440	)		246,175
Increase (decrease) in accounts payable and accrued    expenses		94,263			(58,816	)		201,940			(141,199	)
(Increase) decrease in deferred contract costs		(81,486	)		10,301			(99,887	)		28,550
Increase (decrease) in contract liabilities		91,638			(13,211	)		112,244			(36,933	)
(Decrease) in income taxes payable, net		(41,286	)		(671	)		(10,644	)		(33,284	)
(Increase) decrease in other, net		(17,373	)		(744	)		(13,242	)		47
Net cash from operating activities		161,599			161,499			513,320			606,689
Investing Activities:
Purchase of property and equipment		(9,178	)		(15,521	)		(37,419	)		(37,943	)
Other, net		1,174			232			963			1,525
Net cash from investing activities		(8,004	)		(15,289	)		(36,456	)		(36,418	)
Financing Activities:
Proceeds from issuance of common stock		121,430			60,713			174,016			120,190
Repurchases of common stock		—			(61,999	)		(314,225	)		(296,922	)
Dividends paid		—			—			(86,815	)		(85,184	)
Payments for taxes related to net share settlement of equity    awards		—			—			(10,566	)		(6,674	)
Net cash from financing activities		121,430			(1,286	)		(237,590	)		(268,590	)
Effect of exchange rate changes on cash and cash equivalents		10,030			(11,604	)		(4,255	)		(9,446	)
Change in cash and cash equivalents		285,055			133,320			235,019			292,235
Cash and cash equivalents at beginning of period		1,180,455			1,082,650			1,230,491			923,735
Cash and cash equivalents at end of period	$	1,465,510		$	1,215,970		$	1,465,510		$	1,215,970
Taxes Paid:
Income taxes	$	106,434		$	61,201		$	180,242		$	196,169

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, 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 June 30, 2020		166,816		$	1,668		$	12,221		$	2,298,387	$	(153,158	)	$	2,159,118		$	2,480		$	2,161,598
Shares issued under employee    stock plans		2,415			24			121,406			—		—			121,430			—			121,430
Stock compensation expense		—			—			12,297			—		—			12,297			—			12,297
Net earnings		—			—			—			191,307		—			191,307			412			191,719
Other comprehensive income (loss)		—			—			—			—		17,877			17,877			(448	)		17,429
Balance at September 30, 2020		169,231		$	1,692		$	145,924		$	2,489,694	$	(135,281	)	$	2,502,029		$	2,444		$	2,504,473
Balance at June 30, 2019		170,040		$	1,701		$	12,433		$	2,140,935	$	(104,096	)	$	2,050,973		$	1,421		$	2,052,394
Shares issued under employee    stock plans		1,095			11			60,702			—		—			60,713			—			60,713
Shares repurchased under provisions of    stock repurchase plans		(892	)		(10	)		(61,989	)		—		—			(61,999	)		—			(61,999	)
Stock compensation expense		—			—			12,155			—		—			12,155			—			12,155
Net earnings		—			—			—			160,221		—			160,221			406			160,627
Other comprehensive income (loss)		—			—			—			—		(14,678	)		(14,678	)		75			(14,603	)
Balance at September 30, 2019		170,243		$	1,702		$	23,301