8-K

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 7, 2019

(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 of		(Commission File No.)	(IRS Employer Identification Number)
incorporation or organization)
1015 Third Avenue, Seattle, Washington			98104
(Address of principal executive offices)			(Zip Code)
		(206) 674-3400
	(Registrant's telephone number, including area code)
		N/A
	(Former name or former address, if changed since last report)

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:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

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. o

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, $0.01 par value	EXPD	NASDAQ

Item 2.02 Results of Operations and Financial Condition.

The following information is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.”

On May 7, 2019, Expeditors International of Washington, Inc., a Washington corporation, issued a press release announcing first quarter 2019 financial results. A copy of the press release is furnished as Exhibit 99.1 to this report.

Item 9.01 Financial Statements and Exhibits.

(d)     The following items are filed as exhibits to this report:

99.1     Press release, dated May 7, 2019issued by Expeditors International of Washington, Inc.

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 7, 2019	/S/ Bradley S. Powell
	Bradley S. Powell, Senior Vice President and Chief Financial Officer

EX-99.1

Exhibit 99.1

EARNINGS RELEASE

By:    Expeditors International of Washington, Inc.

1015 Third Avenue, Suite 1200

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 2019 EPS OF $0.80

SEATTLE, WASHINGTON - May 7, 2019, Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced first quarter 2019 financial results including the following highlights compared to the same quarter of 2018:

• Diluted Net Earnings Attributable to Shareholders per share (EPS¹) increased 5% to $0.80

• Net Earnings Attributable to Shareholders increased 3% to $140 million

• Operating Income decreased 3% to $188 million

• Revenues increased 9% to $2.02 billion

• Net Revenues² increased 3% to $654 million

• Airfreight tonnage volume decreased 4% and ocean container volume increased 6%

“We are pleased with our results in Q1 2019, especially when we look at the comparison period last year that produced so many records and set an extremely high bar,” said Jeffrey S. Musser, President and Chief Executive Officer. “Customs brokerage and import services led the way this quarter on increased volumes and on-boarding new customers. Transcon, warehouse and distribution also posted solid gains on expanded business with current customers, as well as by winning new business. We increased the volume of ocean freight containers shipped by 6%, while also improving net revenue per container, particularly from exports out of North and South Asia. The air market was the only area that was challenged, particularly as customers reduced export volumes out of North Asia. I credit our air group for their efforts in a volatile pricing environment, and I thank everyone throughout our global network for their ongoing effort to handle the increase in volumes and business activity.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Operating efficiency (operating income as a percentage of net revenue) dipped below 30% this quarter, due largely to lower air net revenues, as well as our continuing investments in people at the district level to handle the increase in volumes, and investments in technology and facilities. Our effective tax rate declined from 31.1% in the first quarter of 2018 to 28.3% in 2019, largely due to the benefit from share-based compensation deductions, higher foreign tax credits and deductions for foreign derived investment income."

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.

_______________________

¹Diluted earnings attributable to shareholders per share.

²Non-GAAP measure calculated as revenues less directly related operating expenses attributable to the Company's principal services. See reconciliation on the last page of this release.

NOTE: See Disclaimer on Forward-Looking Statements on the following page of this release.

Expeditors International of Washington, Inc.

First Quarter 2019 Earnings Release, May 7, 2019

Financial Highlights for the Three months endedMarch 31, 2019and 2018 (Unaudited)

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

	Three months ended March 31,
	2019		2018		% Change
Revenues	$	2,020,051	$	1,854,262	9	%
Net revenues1	$	654,114	$	635,838	3	%
Operating income	$	187,601	$	192,818	(3	)%
Net earnings attributable to shareholders	$	139,699	$	135,692	3	%
Diluted earnings attributable to shareholders per share	$	0.80	$	0.76	5	%
Basic earnings attributable to shareholders per share	$	0.81	$	0.77	5	%
Diluted weighted average shares outstanding	175,388		179,416
Basic weighted average shares outstanding	171,818		175,900

_______________________

¹Non-GAAP measure calculated as revenues less directly related operating expenses attributable to the Company's principal services. See reconciliation on the last page of this release.

During the three-month period ended March 31, 2019, we repurchased 0.6 million shares of common stock at an average price of $75.40 per share. During the three-month period ended March 31, 2018, we repurchased 2.7 million shares of common stock at an average price of $64.76 per share.

	Employee Full-time Equivalents as of March 31,
	2019	2018
North America	6,806	6,264
Europe	3,404	3,132
North Asia	2,540	2,579
South Asia	1,654	1,582
Middle East, Africa and India	1,541	1,478
Latin America	862	811
Information Systems	915	888
Corporate	380	351
Total	18,102	17,085

	First quarter year-over-year percentage increase (decrease) in:
	Airfreight kilos	Ocean freight FEU
2019
January	(2)%	8%
February	(6)%	3%
March	(2)%	6%
Quarter	(4)%	6%

_______________________

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on May 10, 2019 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, which are based on certain assumptions and expectations of future events that are subject to risks and uncertainties, including our continued ability to manage increased volumes and business activity; the impact of the 2017 Tax Act and related interpretations on our effective tax rate; and risk factors and uncertainties detailed in our Annual Report 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)

	March 31, 2019			December 31, 2018
Assets
Current Assets:
Cash and cash equivalents	$	1,189,429		$	923,735
Accounts receivable, less allowance for doubtful accounts of $12,727 at March 31, 2019 and $15,345 at December 31, 2018	1,353,725			1,581,530
Deferred contract costs	131,535			159,510
Other current assets	54,305			70,041
Total current assets	2,728,994			2,734,816
Property and equipment, less accumulated depreciation and amortization of $457,513 at March 31, 2019 and $446,977 at December 31, 2018	500,853			504,105
Operating lease right-of-use assets	349,140			—
Goodwill	7,927			7,927
Deferred federal and state income taxes, net	37,781			40,465
Other assets, net	18,217			27,246
	$	3,642,912		$	3,314,559
Liabilities and Equity
Current Liabilities:
Accounts payable	$	768,665		$	902,259
Accrued expenses, primarily salaries and related costs	220,085			215,813
Contract liabilities	157,040			190,343
Current portion of operating lease liabilities	58,635			—
Federal, state and foreign income taxes	23,502			18,424
Total current liabilities	1,227,927			1,326,839
Noncurrent portion of operating lease liabilities	289,551			—
Commitments and contingencies
Shareholders’ Equity:
Preferred stock; none issued	—			—
Common stock, par value $0.01 per share. Issued and outstanding 171,648 shares at March 31, 2019 and 171,582 shares at December 31, 2018	1,716			1,716
Additional paid-in capital	3,978			1,896
Retained earnings	2,222,562			2,088,707
Accumulated other comprehensive loss	(103,986		)	(105,481		)
Total shareholders’ equity	2,124,270			1,986,838
Noncontrolling interest	1,164			882
Total equity	2,125,434			1,987,720
	$	3,642,912		$	3,314,559

07-May-2019 Expeditors International of Washington, Inc. Page 3 of 7

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

	Three months ended
	March 31,
	2019		2018
Revenues:
Airfreight services	$	714,901	$	731,227
Ocean freight and ocean services	568,641		520,883
Customs brokerage and other services	736,509		602,152
Total revenues	2,020,051		1,854,262
Operating Expenses:
Airfreight services	509,210		513,504
Ocean freight and ocean services	420,331		379,418
Customs brokerage and other services	436,396		325,502
Salaries and related costs	356,910		339,895
Rent and occupancy costs	41,523		36,913
Depreciation and amortization	13,393		13,922
Selling and promotion	11,076		10,965
Other	43,611		41,325
Total operating expenses	1,832,450		1,661,444
Operating income	187,601		192,818
Other Income (Expense):
Interest income	6,106		4,314
Other, net	1,665		624
Other income (expense), net	7,771		4,938
Earnings before income taxes	195,372		197,756
Income tax expense	55,261		61,556
Net earnings	140,111		136,200
Less net earnings attributable to the noncontrolling interest	412		508
Net earnings attributable to shareholders	$	139,699	$	135,692
Diluted earnings attributable to shareholders per share	$	0.80	$	0.76
Basic earnings attributable to shareholders per share	$	0.81	$	0.77
Weighted average diluted shares outstanding	175,388		179,416
Weighted average basic shares outstanding	171,818		175,900

07-May-2019 Expeditors International of Washington, Inc. Page 4 of 7

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three months ended
	March 31,
	2019			2018
Operating Activities:
Net earnings	$	140,111		$	136,200
Adjustments to reconcile net earnings to net cash from operating activities:
Recoveries on accounts receivable	(1,888		)	(265		)
Deferred income tax expense	2,108			2,853
Stock compensation expense	13,382			11,267
Depreciation and amortization	13,393			13,922
Other, net	189			48
Changes in operating assets and liabilities:
Decrease in accounts receivables	230,477			100,647
Decrease in accounts payable and accrued expenses	(122,283		)	(45,844		)
Decrease in deferred contract costs	31,259			3,407
Decrease in contract liabilities	(36,725		)	(7,401		)
Increase in income taxes payable, net	16,993			19,509
Decrease in other, net	2,467			1,134
Net cash from operating activities	289,483			235,477
Investing Activities:
Purchase of property and equipment	(9,435		)	(13,796		)
Other, net	255			(431		)
Net cash from investing activities	(9,180		)	(14,227		)
Financing Activities:
Proceeds from issuance of common stock	27,190			26,397
Repurchases of common stock	(44,334		)	(172,360		)
Net cash from financing activities	(17,144		)	(145,963		)
Effect of exchange rate changes on cash and cash equivalents	2,535			6,515
Increase in cash and cash equivalents	265,694			81,802
Cash and cash equivalents at beginning of period	923,735			1,051,099
Cash and cash equivalents at end of period	$	1,189,429		$	1,132,901
Taxes paid:
Income taxes	37,253			38,519

07-May-2019 Expeditors International of Washington, Inc. Page 5 of 7

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Business Segment Information

(In thousands)

(Unaudited)

	UNITED STATES			OTHER NORTH AMERICA	LATIN AMERICA		NORTH ASIA	SOUTH ASIA	EUROPE		MIDDLE EAST, AFRICA  AND INDIA	ELIMI- NATIONS		CONSOLI- DATED
Three months ended March 31, 2019:
Revenues from unaffiliated customers	$	681,424		85,103	35,949		617,000	171,930	320,049		108,596	—		2,020,051
Transfers between geographic areas 1	$	(21,640	)	6,307	(1,770	)	15,853	5,249	(7,359	)	4,079	(719	)	—
Total revenues	$	659,784		91,410	34,179		632,853	177,179	312,690		112,675	(719	)	2,020,051
Net revenues	$	292,429		35,169	15,063		134,207	47,369	96,795		33,172	(90	)	654,114
Operating income	$	74,013		10,960	2,636		65,780	15,907	13,952		4,361	(8	)	187,601
Identifiable assets	$	1,906,278		175,034	71,168		511,589	174,512	579,924		234,195	(9,788	)	3,642,912
Capital expenditures	$	6,915		228	93		344	176	982		697	—		9,435
Depreciation and amortization	$	8,222		467	432		1,407	536	1,831		498	—		13,393
Equity	$	1,401,450		82,170	28,581		238,518	114,290	165,718		126,953	(32,246	)	2,125,434
Three months ended March 31, 2018:
Revenues from unaffiliated customers	$	534,869		76,525	32,722		630,572	168,600	305,792		105,182	—		1,854,262
Transfers between geographic areas	$	28,881		3,562	3,387		6,017	6,550	14,188		5,355	(67,940	)	—
Total revenues	$	563,750		80,087	36,109		636,589	175,150	319,980		110,537	(67,940	)	1,854,262
Net revenues	$	277,185		30,447	14,745		137,208	44,406	98,635		33,201	11		635,838
Operating income	$	69,648		9,018	2,370		69,923	15,132	19,278		7,438	11		192,818
Identifiable assets	$	1,558,181		165,368	55,036		542,965	153,411	533,012		208,173	(3,665	)	3,212,481
Capital expenditures	$	3,171		1,528	505		784	329	7,191		288	—		13,796
Depreciation and amortization	$	8,765		398	368		1,376	583	1,976		456	—		13,922
Equity	$	1,247,522		68,050	27,226		278,651	105,642	160,038		128,487	(33,350	)	1,982,266

¹During the quarter ended March 31, 2019, the Company revised the process used to record the transfer, between its geographic operating segments, of revenues and the directly related cost of transportation expenses for freight service transactions between Company origin and destination locations. There were no changes for services rendered at the origin, such as pick-up and delivery to port, nor for services rendered at the destination, such as customs clearance and final delivery. The change in process had no impact on reported segment net revenues or operating income nor on reported consolidated revenues or expenses. Prior year segment revenues have not been revised.

07-May-2019 Expeditors International of Washington, Inc. Page 6 of 7

Net Revenues (Non-GAAP measure)

We commonly refer to the term “net revenues” when commenting about our Company and the results of its operations. Net revenues are a Non-GAAP measure calculated as revenues less directly related operations expenses attributable to the Company's principal services. We believe that net revenues are a better measure than are total revenues when analyzing and discussing our effectiveness in managing our principal services since total revenues earned as a freight consolidator must consider the carriers' charges to us for carrying the shipment, whereas revenues earned in other capacities include primarily the commissions and fees earned by us. Net revenues are one of our primary operational and financial measures and demonstrates our ability to concentrate and leverage purchasing power through effective consolidation of shipments from customers utilizing a variety of transportation carriers and optimal routings. Using net revenues also provides a commonality for comparison among various services. The following table presents the calculation of net revenues.

	Three months ended
	March 31,
(in thousands)	2019		2018
Total revenues	$	2,020,051	$	1,854,262
Expenses:
Airfreight services	509,210		513,504
Ocean freight and ocean services	420,331		379,418
Customs brokerage and other services	436,396		325,502
Net revenues	$	654,114	$	635,838

07-May-2019 Expeditors International of Washington, Inc. Page 7 of 7