expd-ex991

SEATTLE, WASHINGTON - November 3, 2020, Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced third quarter 2020 financial results including the following highlights compared to the same quarter of 2019:

“Volumes started to recover across most of our products during the quarter, even as the global effects of COVID-19 continued to impact our business worldwide,” said Jeffrey S. Musser, President and Chief Executive Officer. “Similar to Q2, the pandemic caused an increase in demand for certain goods at the same time that air capacity remained tight due to travel restrictions and the limited schedule of domestic and international passenger flights. This caused continued imbalances between carrier capacity and demand, principally on exports out of North Asia, which was the only market in which air volumes increased during the third quarter. To meet the urgent transportation needs that could not be fulfilled with scheduled capacity, we utilized charter capacity for certain customers, resulting in higher average buy and sell rates. While airfreight buy and sell rates were generally lower in our third quarter than the extremes we experienced in the second quarter, they remained historically elevated and highly unpredictable due to ongoing supply/demand imbalances. We would expect air pricing to remain volatile until passenger traffic starts to return in a meaningful way.

“While our ocean freight business has not been nearly as impacted by supply constraints, carriers remain disciplined and are carefully managing capacity even as volumes have increased from the lows we saw earlier in this pandemic. Across most of our products in the third quarter, we experienced a steady recovery in demand as shippers adjusted to an altered marketplace and disrupted supply chains.

“Despite the challenges, we continue to serve our customers at the highest level throughout our organization, whether working from remote locations or on-site at one of our many warehouses, where we are following very strict safety protocols. Thanks to the ongoing implementation of our business continuity plans and the adaptability of our people, all of our offices remain open, connected, and are functioning extremely well. Our network is strong, and our people remain steadfast and highly flexible.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “The effects of COVID-19 continued to impact volumes for all products, although not as significantly as in the prior sequential quarter. While we have experienced increased demand in many of our markets for a mix of products, capacity constraints in air, and to a lesser extent in ocean, have led to a continued buy/sell rate imbalance. While we remain uncertain about the pace, strength, or evenness of an economic recovery, we will continue to use our strong financial position to make important strategic investments that are necessary for our future growth, while continuing our focus on controlling costs and improving operational efficiencies. We appreciate the hard work of our District Managers and their leadership teams as they continue to execute at a high level, control operational expenses and limit the addition of headcount.”

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.

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

Financial Highlights for the three and nine months ended September 30, 2020 and 2019 (Unaudited)

	Three months ended September 30,					Nine months ended September 30,
	2020		2019		% Change	2020		2019		% Change
Revenues	$	2,464,797	$	2,074,855	19%	$	6,947,293	$	6,130,485	13%
Directly related cost of transportation and other expenses¹	$	1,730,418	$	1,400,499	24%	$	4,848,187	$	4,140,320	17%
Salaries and other operating expenses²	$	482,434	$	467,806	3%	$	1,440,480	$	1,403,813	3%
Operating income	$	251,945	$	206,550	22%	$	658,626	$	586,352	12%
Net earnings attributable to shareholders	$	191,307	$	160,221	19%	$	497,520	$	453,069	10%
Diluted earnings attributable to shareholders per share	$	1.12	$	0.92	22%	$	2.92	$	2.60	12%
Basic earnings attributable to shareholders per share	$	1.14	$	0.94	21%	$	2.96	$	2.65	12%
Diluted weighted average shares outstanding		170,735		173,483			170,539	174,463
Basic weighted average shares outstanding		168,310		170,415			167,942	171,084

¹Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.

²Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Condensed Consolidated Statements of Earnings

During the three months ended September 30, 2020, we did not repurchase any shares of common stock and during the nine months ended September 30, 2020, we repurchased 4.4 million shares of common stock at an average price of $71.41 per share. During the three and nine months ended September 30, 2019, we repurchased 0.9 million and 4.1 million shares of common stock at an average price of $69.51 and $72.60 per share, respectively.

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on November 6, 2020 will be considered in management's 8-K “Responses to Selected Questions.”

Certain statements contained in this news release are “forward-looking statements” that involve risks and uncertainties, including statements such as our expectations of continued volatility in air pricing. Actual results could differ materially because of factors such as: the timing until passenger traffic starts to return in a meaningful way; the impact on our ocean volumes; the pace, strength, or evenness of the of an economic recovery; our employees’ ability to continue to perform at a high level; airfreight buy and sell rates; our access to carrier capacity; our ability to keep our global offices open and operating; employee retention; employee health and safety; our ability to execute our business continuity plans; the strength of our financial position and our ability to continue to make investments in our strategic initiatives; our ability to remain a strong, healthy, unified and resilient organization; our ability to control costs and improve operational efficiencies; our ability to control operational expenses and limit the addition of headcount. The COVID-19 pandemic could have the effect of heightening many of the other risks described in Item 1A of our Annual Report on Form 10-K, including, without limitation, those related to the success of our strategy and desire to maintain historical unitary profitability, our ability to attract and retain customers, our ability to manage costs, interruptions to our information technology systems, the ability of third-party providers to perform and potential litigation as updated by our reports on Form 10-Q, filed with the Securities and Exchange Commission. These and other factors are discussed in the Company’s regulatory filings with the Securities and Exchange Commission, including those in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in “Item 1A. Risk Factors” of the Company’s most recent Quarterly Report on Form 10-Q. The forward-looking statements contained in this news release speak only as of this date, and the Company does not assume any obligation to update them except as required by law.

	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

	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

	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

	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 September 30, 2020:
Revenues¹	$	686,245		78,129		39,193		883,104		267,228		378,048		133,765		(915	)		2,464,797
Directly related cost of transportation and other expenses²	$	379,588		44,911		23,361		720,807		200,334		261,325		100,619		(527	)		1,730,418
Salaries and other operating expenses³	$	197,749		25,325		12,359		81,876		39,926		96,658		28,925		(384	)		482,434
Operating income	$	108,908		7,893		3,473		80,421		26,968		20,065		4,221		(4	)		251,945
Identifiable assets at period end	$	2,336,071		163,943		76,173		689,525		231,771		642,124		228,423		(9,476	)		4,358,554
Capital expenditures	$	4,703		483		180		1,075		665		1,780		292		—			9,178
Equity	$	1,791,658		77,915		31,324		246,557		97,564		185,352		110,714		(36,611	)		2,504,473
For the three months ended September 30, 2019:
Revenues¹	$	692,229		88,088		38,341		624,351		196,569		320,769		115,397		(889	)		2,074,855
Directly related cost of transportation and other expenses²	$	389,254		51,420		22,990		489,195		145,345		221,149		81,592		(446	)		1,400,499
Salaries and other operating expenses³	$	210,767		25,731		14,547		70,410		32,482		86,156		28,151		(438	)		467,806
Operating income	$	92,208		10,937		804		64,746		18,742		13,464		5,654		(5	)		206,550
Identifiable assets at period end	$	2,059,345		128,336		72,029		489,322		164,976		563,289		226,657		2,499			3,706,453
Capital expenditures	$	7,644		513		833		523		631		5,119		258		—			15,521
Equity	$	1,578,682		60,526		27,217		216,061		77,733		169,450		111,355		(31,737	)		2,209,287

	UNITED STATES		OTHER NORTH AMERICA		LATIN AMERICA		NORTH ASIA		SOUTH ASIA		EUROPE		MIDDLE EAST, AFRICA AND INDIA		ELIMI- NATIONS			CONSOLI- DATED
For the nine months ended September 30, 2020:
Revenues¹	$	1,975,883		234,274		114,636		2,538,117		660,583		1,086,118		340,415		(2,733	)		6,947,293
Directly related cost of transportation and other expenses²	$	1,108,173		132,250		69,827		2,054,023		481,971		754,863		248,503		(1,423	)		4,848,187
Salaries and other operating expenses³	$	631,396		74,320		36,220		236,480		109,018		274,269		80,063		(1,286	)		1,440,480
Operating income	$	236,314		27,704		8,589		247,614		69,594		56,986		11,849		(24	)		658,626
Identifiable assets at period end	$	2,336,071		163,943		76,173		689,525		231,771		642,124		228,423		(9,476	)		4,358,554
Capital expenditures	$	28,276		1,692		498		1,785		1,035		3,418		715		—			37,419
Equity	$	1,791,658		77,915		31,324		246,557		97,564		185,352		110,714		(36,611	)		2,504,473
For the nine months ended September 30, 2019:
Revenues¹	$	2,033,088		265,035		111,277		1,879,155		555,128		952,790		336,383		(2,371	)		6,130,485
Directly related cost of transportation and other expenses²	$	1,142,701		157,997		64,149		1,475,395		407,642		657,720		236,184		(1,468	)		4,140,320
Salaries and other operating expenses³	$	636,243		76,283		41,342		208,781		97,324		258,339		86,385		(884	)		1,403,813
Operating income	$	254,144		30,755		5,786		194,979		50,162		36,731		13,814		(19	)		586,352
Identifiable assets at period end	$	2,059,345		128,336		72,029		489,322		164,976		563,289		226,657		2,499			3,706,453
Capital expenditures	$	23,544		1,509		1,071		1,167		1,235		8,015		1,402		—			37,943
Equity	$	1,578,682		60,526		27,217		216,061		77,733		169,450		111,355		(31,737	)		2,209,287

¹Beginning in the second quarter of 2019, the Company revised its process to record the transfer, between its geographic operating segments, of revenues and the directly related cost of transportation and other 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 nine months ended September 30, 2019, segment revenues have not been revised.

²Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.

³Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Condensed Consolidated Statements of Earnings.

The Company’s consolidated financial results in the nine months ended September 30, 2020 was significantly impacted by the effects of the global pandemic and are expected to be further impacted in the remainder of 2020. The impact is affecting the Company’s geographical segments unevenly.

In the second and third quarter of 2020, North Asia experienced significant increases in airfreight services revenues and directly related expenses primarily as a result of demand for time-sensitive delivery of technology equipment and medical equipment and supplies from China, which combined with reductions in airfreight supply resulted in significantly higher rates. In the third quarter 2020 and 2019, the People's Republic of China, including Hong Kong, represented 30% and 26%, respectively, of the Company’s total revenues and 26% of the Company’s total operating income in both periods.

This is in contrast with slower activity in North Asia in the first quarter of 2020 as the global pandemic resulted in temporary closures and limited operations from the Company’s China offices and shipments that were rerouted or delayed by customers and service providers taking their own precautionary measures. In the nine months ended September 30, 2020 and 2019, the People's Republic of China, including Hong Kong, represented 31% and 26%, respectively, of the Company’s total revenues and 30% and 27%, respectively, of the Company’s total operating income.

By:	Expeditors International of Washington, Inc.
	1015 Third Avenue
	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

	Employee Full-time Equivalents as of September 30,
	2020		2019
North America		6,666		6,861
Europe		3,361		3,427
North Asia		2,406		2,483
South Asia		1,643		1,674
Middle East, Africa and India		1,509		1,565
Latin America		800		860
Information Systems		975		939
Corporate		383		383
Total		17,743		18,192

	Third quarter year-over-year percentage (decrease) increase in:
2020	Airfreight kilos	Ocean freight FEU
July	(12)%	(13)%
August	(5)%	(5)%
September	2%	5%
Quarter	(5)%	(5)%