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, 2021

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 1, 2021, the number of shares outstanding of the issuer’s common stock was 169,403,822.

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, 2021			December 31, 2020
Assets:
Current Assets:
Cash and cash equivalents	$	1,820,106		$	1,527,791
Accounts receivable, less allowance for credit loss of    $7,285 at September 30, 2021 and $5,579 at December 31, 2020		3,330,398			1,998,055
Deferred contract costs		841,689			327,448
Other		119,346			110,250
Total current assets		6,111,539			3,963,544
Property and equipment, less accumulated depreciation and    amortization of $533,450 at September 30, 2021 and $516,988 at    December 31, 2020		491,577			506,425
Operating lease right-of-use assets		448,228			432,723
Goodwill		7,927			7,927
Other assets, net		17,112			16,884
Total assets	$	7,076,383		$	4,927,503
Liabilities:
Current Liabilities:
Accounts payable	$	1,806,977		$	1,136,859
Accrued liabilities, primarily salaries and related costs		342,151			257,021
Contract liabilities		977,660			379,722
Current portion of operating lease liabilities		81,362			74,004
Federal, state and foreign income taxes		67,332			45,437
Total current liabilities		3,275,482			1,893,043
Noncurrent portion of operating lease liabilities		374,658			364,185
Deferred federal and state income taxes, net		5,651			7,048
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued		—			—
Common stock, par value $0.01 per share. Issued and    outstanding: 169,392 shares at September 30, 2021 and 169,294    shares at December 31, 2020		1,694			1,693
Additional paid-in capital		74,925			157,496
Retained earnings		3,463,539			2,600,201
Accumulated other comprehensive loss		(122,800	)		(99,753	)
Total shareholders’ equity		3,417,358			2,659,637
Noncontrolling interest		3,234			3,590
Total equity		3,420,592			2,663,227
Total liabilities and equity	$	7,076,383		$	4,927,503

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,
	2021		2020		2021		2020
Revenues:
Airfreight services	$	1,628,115	$	983,199	$	4,477,599	$	2,908,451
Ocean freight and ocean services		1,598,597		609,816		3,651,059		1,590,541
Customs brokerage and other services		1,092,549		755,698		2,998,516		2,104,566
Total revenues		4,319,261		2,348,713		11,127,174		6,603,558
Operating Expenses:
Airfreight services		1,244,381		723,340		3,335,253		2,122,205
Ocean freight and ocean services		1,254,334		452,028		2,859,020		1,177,696
Customs brokerage and other services		686,775		438,966		1,837,134		1,204,551
Salaries and related		519,611		373,613		1,452,902		1,110,760
Rent and occupancy		46,730		42,484		137,376		126,383
Depreciation and amortization		12,753		15,851		38,415		42,620
Selling and promotion		4,237		2,945		10,479		14,301
Other		60,803		47,541		170,798		146,416
Total operating expenses		3,829,624		2,096,768		9,841,377		5,944,932
Operating income		489,637		251,945		1,285,797		658,626
Other Income (Expense):
Interest income		2,462		1,504		6,596		8,870
Other, net		733		980		6,382		5,161
Other income, net		3,195		2,484		12,978		14,031
Earnings before income taxes		492,832		254,429		1,298,775		672,657
Income tax expense		132,922		62,710		333,941		173,968
Net earnings		359,910		191,719		964,834		498,689
Less net earnings attributable to the noncontrolling    interest		842		412		2,174		1,169
Net earnings attributable to shareholders	$	359,068	$	191,307	$	962,660	$	497,520
Diluted earnings attributable to shareholders per share	$	2.09	$	1.12	$	5.61	$	2.92
Basic earnings attributable to shareholders per share	$	2.12	$	1.14	$	5.68	$	2.96
Weighted average diluted shares outstanding		171,565		170,735		171,549		170,539
Weighted average basic shares outstanding		169,633		168,310		169,398		167,942

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,
	2021			2020			2021			2020
Net earnings	$	359,910		$	191,719		$	964,834		$	498,689
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of income tax (benefit) expense of ($1,592) and $4,200 for the three months ended September 30, 2021 and 2020 and ($4,764) and $226 for the nine months ended September 30, 2021 and 2020		(16,908	)		17,429			(23,946	)		(5,010	)
Other comprehensive (loss) income		(16,908	)		17,429			(23,946	)		(5,010	)
Comprehensive income		343,002			209,148			940,888			493,679
Less comprehensive income (loss) attributable to the    noncontrolling interest		668			(36	)		1,275			253
Comprehensive income attributable to shareholders	$	342,334		$	209,184		$	939,613		$	493,426

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,
	2021			2020			2021			2020
Operating Activities:
Net earnings	$	359,910		$	191,719		$	964,834		$	498,689
Adjustments to reconcile net earnings to net cash from    operating activities:
Provisions for losses on accounts receivable		3,739			398			6,028			4,607
Deferred income tax (benefit) expense		(7,658	)		(1,276	)		2,343			2,872
Stock compensation expense		15,204			12,297			57,298			45,091
Depreciation and amortization		12,753			15,851			38,415			42,620
Other, net		626			2,919			1,523			3,470
Changes in operating assets and liabilities:
Increase in accounts receivable		(714,300	)		(106,065	)		(1,377,997	)		(274,440	)
Increase in accounts payable and accrued    liabilities		436,343			94,232			769,525			201,929
Increase in deferred contract costs		(328,932	)		(81,486	)		(550,572	)		(99,887	)
Increase in contract liabilities		381,192			91,638			635,286			112,244
Increase (decrease) in income taxes payable, net		33,378			(41,286	)		32,022			(10,644	)
Increase in other, net		(14,884	)		(17,373	)		(15,208	)		(13,242	)
Net cash from operating activities		177,371			161,568			563,497			513,309
Investing Activities:
Purchase of property and equipment		(9,870	)		(9,178	)		(24,800	)		(37,419	)
Other, net		(157	)		1,174			(53	)		963
Net cash from investing activities		(10,027	)		(8,004	)		(24,853	)		(36,456	)
Financing Activities:
Proceeds from borrowing on lines of credit, net		7,479			31			7,568			11
Proceeds from issuance of common stock		56,965			121,430			99,433			174,016
Repurchases of common stock		(76,595	)		—			(225,064	)		(314,225	)
Dividends paid		—			—			(98,387	)		(86,815	)
Payments for taxes related to net share settlement of equity    awards		(4	)		—			(15,172	)		(10,566	)
Distribution to noncontrolling interest		(1,631	)		—			(1,631	)		—
Net cash from financing activities		(13,786	)		121,461			(233,253	)		(237,579	)
Effect of exchange rate changes on cash and cash equivalents		(7,573	)		10,030			(13,076	)		(4,255	)
Change in cash and cash equivalents		145,985			285,055			292,315			235,019
Cash and cash equivalents at beginning of period		1,674,121			1,180,455			1,527,791			1,230,491
Cash and cash equivalents at end of period	$	1,820,106		$	1,465,510		$	1,820,106		$	1,465,510
Taxes Paid:
Income taxes	$	104,617		$	106,434		$	295,153		$	180,242

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, 2021    and 2020	Shares			Par value			Additional paid-in capital			Retained earnings		Accumulated other comprehensive loss			Total shareholders’ equity			Noncontrolling interest			Total equity
Balance at June 30, 2021		169,169		$	1,692		$	79,357		$	3,104,471	$	(106,066	)	$	3,079,454		$	4,197		$	3,083,651
Shares issued under employee    stock plans		836			8			56,953			—		—			56,961			—			56,961
Shares repurchased under provisions of    stock repurchase plan		(613	)		(6	)		(76,589	)		—		—			(76,595	)		—			(76,595	)
Stock compensation expense		—			—			15,204			—		—			15,204			—			15,204
Net earnings		—			—			—			359,068		—			359,068			842			359,910
Other comprehensive income loss		—			—			—			—		(16,734	)		(16,734	)		(174	)		(16,908	)
Distribution to noncontrolling interest		—			—			—			—		—			—			(1,631	)		(1,631	)
Balance at September 30, 2021		169,392		$	1,694		$	74,925		$	3,463,539	$	(122,800	)	$	3,417,358		$	3,234		$	3,420,592
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