Business Segment Information

6 Months Ended

Jun. 30, 2019

Note 9. Business Segment Information

The Company is organized functionally in geographic operating segments. Accordingly, management focuses its attention on revenues, net revenues¹, operating income, identifiable assets, capital expenditures, depreciation and amortization and equity generated in each of these geographical areas when evaluating the effectiveness of geographic management. Transactions among the Company’s various offices are conducted using the same arms-length pricing methodologies the Company uses when its offices transact business with independent agents. Certain costs are allocated among the segments based on the relative value of the underlying services, which can include allocation based on actual costs incurred or estimated cost plus a profit margin.

Financial information regarding the Company’s operations by geographic area is as follows:

	UNITED STATES		OTHER NORTH AMERICA		LATIN AMERICA		NORTH ASIA		SOUTH ASIA		EUROPE		MIDDLE EAST, AFRICA AND INDIA		ELIMI- NATIONS			CONSOLI- DATED
For the three months ended June 30, 2019:
Revenues²	$	681,076		85,537		38,757		621,951		181,380		319,331		108,311		(764	)		2,035,579
Net revenues¹	$	294,983		35,201		16,714		134,397		48,893		98,655		33,222		(370	)		661,695
Operating income	$	87,923		8,858		2,346		64,453		15,513		9,315		3,799		(6	)		192,201
Identifiable assets at period end	$	1,819,718		176,151		73,197		580,311		193,771		581,518		229,692		(7,368	)		3,646,990
Capital expenditures	$	8,985		768		145		300		428		1,914		447		—			12,987
Depreciation and amortization	$	7,687		459		380		1,384		496		1,775		496		—			12,677
Equity	$	1,303,381		83,417		31,014		282,192		107,229		168,570		109,790		(33,199	)		2,052,394
For the three months ended June 30, 2018:
Revenues²	$	598,076		84,244		42,618		680,227		179,528		330,775		114,005		(71,914	)		1,957,559
Net revenues¹	$	271,880		34,749		15,923		140,583		44,886		102,371		33,125		(971	)		642,546
Operating income	$	63,628		10,077		2,701		70,359		13,374		16,958		6,490		(3	)		183,584
Identifiable assets at period end	$	1,488,060		153,827		54,186		540,954		157,479		526,607		217,716		(5,997	)		3,132,832
Capital expenditures	$	6,032		2,191		167		559		695		1,225		1,244		—			12,113
Depreciation and amortization	$	8,447		473		395		1,303		542		1,955		461		—			13,576
Equity	$	1,196,226		56,702		26,625		250,513		112,259		157,493		127,032		(34,291	)		1,892,559

	UNITED STATES		OTHER NORTH AMERICA		LATIN AMERICA		NORTH ASIA		SOUTH ASIA		EUROPE		MIDDLE EAST, AFRICA AND INDIA		ELIMI- NATIONS			CONSOLI- DATED
For the six months ended June 30, 2019:
Revenues²	$	1,340,859		176,947		72,936		1,254,804		358,559		632,021		220,986		(1,482	)		4,055,630
Net revenues¹	$	587,412		70,370		31,777		268,604		96,262		195,450		66,394		(460	)		1,315,809
Operating income	$	161,936		19,818		4,982		130,233		31,420		23,267		8,160		(14	)		379,802
Identifiable assets at period end	$	1,819,718		176,151		73,197		580,311		193,771		581,518		229,692		(7,368	)		3,646,990
Capital expenditures	$	15,900		996		238		644		604		2,896		1,144		—			22,422
Depreciation and amortization	$	15,909		926		812		2,791		1,032		3,606		994		—			26,070
Equity	$	1,303,381		83,417		31,014		282,192		107,229		168,570		109,790		(33,199	)		2,052,394
For the six months ended June 30, 2018:
Revenues²	$	1,161,826		164,331		78,727		1,316,816		354,678		650,755		224,542		(139,854	)		3,811,821
Net revenues¹	$	549,065		65,196		30,668		277,791		89,292		201,006		66,326		(960	)		1,278,384
Operating income	$	133,276		19,095		5,071		140,282		28,506		36,236		13,928		8			376,402
Identifiable assets at period end	$	1,488,060		153,827		54,186		540,954		157,479		526,607		217,716		(5,997	)		3,132,832
Capital expenditures	$	9,203		3,719		672		1,343		1,024		8,416		1,532		—			25,909
Depreciation and amortization	$	17,212		871		763		2,679		1,125		3,931		917		—			27,498
Equity	$	1,196,226		56,702		26,625		250,513		112,259		157,493		127,032		(34,291	)		1,892,559

Net revenues are a non-GAAP measure calculated as revenues less directly related operating expenses attributable to the Company's principal services. The Company's management believes that net revenues are a better measure than total revenues when evaluating the Company's operating segment performance since total revenues earned as a freight consolidator include the carriers' charges for carrying the shipment, whereas revenues earned in other capacities include primarily the commissions and fees earned by the Company. Net revenue is one of the Company's primary operational and financial measures and demonstrates the Company's ability to concentrate and leverage purchasing power through effective consolidation of shipments from customers utilizing a variety of transportation carriers and optimal routings.

In 2019, the Company revised its process 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. This change better aligns revenue reporting with the location where the services are performed, as well as the transactional reporting being developed as part of the Company’s new accounting systems and processes. The change in presentation had no impact on consolidated or segment net revenues or operating income. The 2019 results also include the effect of changing the presentation of certain import services from a net to a gross basis, which increased segment revenues and directly related operating expenses but did not change net revenues. The impact of these changes on reported segment revenues was immaterial and prior year segment revenues have not been revised.

The following table presents the calculation of consolidated net revenues:

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
Revenues	$	2,035,579	$	1,957,559	$	4,055,630	$	3,811,821
Expenses:
Airfreight services		542,639		593,325		1,051,849		1,106,829
Ocean freight and ocean services		390,299		385,156		810,630		764,574
Customs brokerage and other services		440,946		336,532		877,342		662,034
Net revenues	$	661,695	$	642,546	$	1,315,809	$	1,278,384