Business Wire | Aug 4, 2020 08:30AM EDT

Expeditors Reports Second Quarter 2020 EPS of $1.09

Aug. 04, 2020

SEATTLE--(BUSINESS WIRE)--Aug. 04, 2020--Expeditors International of Washington, Inc. (NASDAQ:EXPD) today announced second quarter 2020 financial results including the following highlights compared to the same quarter of 2019:

* Diluted Net Earnings Attributable to Shareholders per share (EPS1) increased 24% to $1.09 * Net Earnings Attributable to Shareholders increased 20% to $184 million * Operating Income increased 29% to $248 million * Revenues increased 27% to $2.6 billion * Airfreight tonnage volume decreased 10% and ocean container volume decreased 14%

"Like so many companies, the COVID-19-related impacts to our business have been significant and widespread, as the retail, auto, aviation, energy and other sectors continued to be severely disrupted by shutdowns and supply chain dislocations," said Jeffrey S. Musser, President and Chief Executive Officer. "While volumes for all of our products were down, as we would have expected during such unprecedented conditions, our airfreight revenue was much greater than anticipated. The air market has been particularly unsettled, with the cancellation of so many passenger flights limiting access to passenger belly space and requiring the increased use of charters to meet customer needs. While air capacity has been tight, demand for shipping technology-related equipment, medical equipment and supplies and other priority goods has been intense, creating a supply and demand imbalance and a spike in buy and sell rates. Our employees' ability to perform at an extremely high level during such turmoil attests to our strong relationships with our customers and carriers, as we were able to access capacity and execute well under such trying conditions. Airfreight buy and sell rates, which peaked in April and May and started to decline in June, remain highly volatile and continue to be unpredictable.

"Buy and sell rates were much less volatile across our other products, even as volumes were down due to COVID-19. Despite a decrease in ocean volumes throughout the marketplace, capacity remains tight as carriers have continued to take steps to manage their capacity and costs.

"Perhaps needless to say, these times have been very challenging for all of us and I appreciate how well our team has performed under such conditions. All of our offices around the world remain open and continue to serve our customers at the highest level, proving that our employees remain our most valuable assets. Our business is service-based and we believe that employee retention remains critical to our long-term success. To that end and true to our company culture, we did not lay off any employees, although headcount was down slightly due to normal employee attrition. We also increased paid sick leave to support those employees unfortunate to have either contracted COVID-19 or to have shown symptoms of the virus.

"We remain extremely appreciative to all of our dedicated employees, including those vital members who report to work each day to facilitate the essential movement of cargo around the world. We are also very thankful to the majority of our employees who have not yet been able to return to the in-person office environment and recognize the extra effort required to work under such conditions. To successfully manage our way through this pandemic, we relied on the strength of our highly connected information systems and have implemented our business continuity plans around the world in support of all of our employees to safeguard their health and safety."

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, "Compared to a year ago, the effects of COVID-19 led to lower volumes for all products. Air tonnage out of North Asia, however, increased 14%, driven by goods needed to support remote work and to combat COVID-19. We are unable to remember a time when the operating environment has been so uncertain. Given that unpredictability, we will keep costs in check and focus on increasing operational efficiencies and gaining profitable market share. We will also use our strong financial position to continue to make investments in our strategic initiatives. Not knowing how or when the global economy will recover, we remain a strong, healthy, and unified organization that has demonstrated resiliency under the most trying conditions and believe we are well-prepared for the post-COVID economy, no matter what that looks like."

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.

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

Expeditors International of Washington, Inc.

Second Quarter 2020 Earnings Release, August 4, 2020

Financial Highlights for the three and six months ended June 30, 2020 and 2019(Unaudited)

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

Three months ended June 30, Six months ended June 30,

2020 2019 % 2020 2019 % Change Change

Revenues $ 2,580,632 $ 2,035,579 27% $ 4,482,496 $ 4,055,630 11%

Directlyrelated costof $ 1,831,041 $ 1,373,884 33% $ 3,117,769 $ 2,739,821 14%transportationand otherexpenses^1

Salaries andother $ 501,965 $ 469,494 7% $ 958,046 $ 936,007 2%operatingexpenses^2

Operating $ 247,626 $ 192,201 29% $ 406,681 $ 379,802 7%income

Net earningsattributable $ 183,869 $ 153,149 20% $ 306,213 $ 292,848 5%toshareholders

Dilutedearningsattributable $ 1.09 $ 0.88 24% $ 1.80 $ 1.67 8%toshareholdersper share

Basic earningsattributableto $ 1.10 $ 0.90 22% $ 1.83 $ 1.71 7%shareholdersper share

Dilutedweighted 169,290 174,466 170,382 174,953 average sharesoutstanding

Basic weightedaverage shares 166,767 171,003 167,751 171,425 outstanding

_______________________

^1Directly related cost of transportation and other expenses totals OperatingExpenses from Airfreight services, Ocean freight and ocean services and Customsbrokerage and other services as shown in the Condensed Consolidated Statementsof Earnings.

^2Salaries and other operating expenses totals Salaries and related, Rent andoccupancy, Depreciation and amortization, Selling and promotion and Other asshown in the Condensed Consolidated Statements of Earnings

During the three and six months ended June 30, 2020, we repurchased 0.4 million and 4.4 million shares of common stock at an average price of $77.46 and $71.41 per share, respectively. During the three and six months ended June 30, 2019, we repurchased 2.6 million and 3.2 million shares of common stock at an average price of $73.03 and $73.47 per share, respectively.

Employee Full-time Equivalents June 30,

2020 2019

North America 6,749 6,893

Europe 3,419 3,439

North Asia 2,413 2,532

South Asia 1,654 1,661

Middle East, Africa and India 1,528 1,550

Latin America 823 873

Information Systems 971 922

Corporate 380 379

Total 17,937 18,249

Second quarter year-over-year percentage decrease in:

Airfreight Ocean freight kilos FEU

2020

April (7)% (10)%

May (13)% (17)%

June (12)% (15)%

Quarter (10)% (14)%



Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 7, 2020 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 the impacts to our business as a result of the Novel Coronavirus (COVID-19); 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; the impact of the 2017 Tax Act and related interpretations on our effective tax rate. 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.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES



Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

June 30, December 31, 2020 2019

Assets:

Current Assets:

Cash and cash equivalents $ 1,180,455 $ 1,230,491

Accounts receivable, less allowance for creditloss of $5,347 at June 30, 2020 and $11,143 at 1,460,324 1,315,091 December 31, 2019

Deferred contract costs 147,932 131,783

Other 69,560 92,558

Total current assets 2,858,271 2,769,923

Property and equipment, less accumulateddepreciation and amortization of $494,773 at 497,762 499,344 June 30, 2020 and $478,906 at December 31, 2019

Operating lease right-of-use assets 424,516 390,035

Goodwill 7,927 7,927

Deferred federal and state income taxes, net 5,300 8,034

Other assets, net 16,401 16,621

Total assets $ 3,810,177 $ 3,691,884

Liabilities:

Current Liabilities:

Accounts payable $ 755,971 $ 735,695

Accrued expenses, primarily salaries and 257,923 189,446 related costs

Contract liabilities 172,148 154,183

Current portion of operating lease liabilities 69,740 65,367

Federal, state and foreign income taxes 32,287 23,627

Total current liabilities 1,288,069 1,168,318

Noncurrent portion of operating lease 360,510 326,347 liabilities

Commitments and contingencies

Shareholders' Equity:

Preferred stock, none issued - -

Common stock, par value $0.01 per share. Issuedand outstanding: 166,816 shares at June 30, 1,668 1,696 2020 and 169,622 shares at December 31, 2019

Additional paid-in capital 12,221 3,203

Retained earnings 2,298,387 2,321,316

Accumulated other comprehensive loss (153,158 ) (131,187 )

Total shareholders' equity 2,159,118 2,195,028

Noncontrolling interest 2,480 2,191

Total equity 2,161,598 2,197,219

Total liabilities and equity $ 3,810,177 $ 3,691,884

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES



Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

Three months ended June 30, Six months ended June 30,

2020 2019 2020 2019

Revenues:

Airfreight $ 1,434,590 $ 741,577 $ 2,143,629 $ 1,456,478 services

Ocean freightand ocean 491,712 543,809 985,139 1,112,450 services

Customsbrokerage and 654,330 750,193 1,353,728 1,486,702 other services

Total revenues 2,580,632 2,035,579 4,482,496 4,055,630

Operating Expenses:

Airfreight 1,097,073 542,639 1,617,242 1,051,849 services

Ocean freightand ocean 363,599 390,299 730,082 810,630 services

Customsbrokerage and 370,369 440,946 770,445 877,342 other services

Salaries and 395,107 356,351 737,147 713,261 related

Rent and 41,375 40,897 83,899 82,420 occupancy

Depreciationand 14,109 12,677 26,769 26,070 amortization

Selling and 3,113 11,643 11,356 22,719 promotion

Other 48,261 47,926 98,875 91,537

Total operating 2,333,006 1,843,378 4,075,815 3,675,828 expenses

Operating 247,626 192,201 406,681 379,802 income

Other Income (Expense):

Interest income 2,559 6,516 7,366 12,622

Other, net 797 2,262 4,181 3,927

Other income, 3,356 8,778 11,547 16,549 net

Earnings before 250,982 200,979 418,228 396,351 income taxes

Income tax 66,794 47,449 111,258 102,710 expense

Net earnings 184,188 153,530 306,970 293,641

Less netearningsattributable to 319 381 757 793 thenoncontrollinginterest

Net earningsattributable to $ 183,869 $ 153,149 $ 306,213 $ 292,848 shareholders

Dilutedearningsattributable to $ 1.09 $ 0.88 $ 1.80 $ 1.67 shareholdersper share

Basic earningsattributable to $ 1.10 $ 0.90 $ 1.83 $ 1.71 shareholdersper share

Weightedaverage diluted 169,290 174,466 170,382 174,953 sharesoutstanding

Weightedaverage basic 166,767 171,003 167,751 171,425 sharesoutstanding

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES



Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three months ended June 30, Six months ended June 30,

2020 2019 2020 2019

Operating Activities:

Net earnings $ 184,188 $ 153,530 $ 306,970 $ 293,641

Adjustments toreconcile netearnings to net cash fromoperatingactivities:

Provisions forlosses(recoveries) on 2,389 1,584 4,209 (304 )accountsreceivable

Deferred income 9,287 3,697 4,148 5,805 tax expense

Stockcompensation 21,638 23,824 32,794 37,206 expense

Depreciationand 14,109 12,677 26,769 26,070 amortization

Other, net 118 (29 ) 551 160

Changes inoperating assets andliabilities:

(Increase)decrease in (185,055 ) (28,187 ) (168,375 ) 202,290 accountsreceivable

Increase(decrease) inaccountspayable and 106,760 39,900 107,677 (82,383 )accrued

expenses

(Increase)decrease in (2,333 ) (13,010 ) (18,401 ) 18,249 deferredcontract costs

(Decrease)increase in (595 ) 13,003 20,606 (23,722 )contractliabilities

Increase(decrease) in 20,154 (49,606 ) 30,642 (32,613 )income taxespayable, net

Decrease(increase) in 16,061 (1,676 ) 4,131 791 other, net

Net cash fromoperating 186,721 155,707 351,721 445,190 activities

Investing Activities:

Purchase ofproperty and (22,114 ) (12,987 ) (28,241 ) (22,422 )equipment

Other, net (68 ) 1,038 (211 ) 1,293

Net cash frominvesting (22,182 ) (11,949 ) (28,452 ) (21,129 )activities

Financing Activities:

Proceeds fromissuance of 29,187 32,287 52,586 59,477 common stock

Repurchases of (30,985 ) (190,589 ) (314,225 ) (234,923 )common stock

Dividends Paid (86,815 ) (85,184 ) (86,815 ) (85,184 )

Payments fortaxes relatedto net share (9,170 ) (6,674 ) (10,566 ) (6,674 )settlement ofequity awards

Net cash fromfinancing (97,783 ) (250,160 ) (359,020 ) (267,304 )activities

Effect ofexchange ratechanges on cash 1,726 (377 ) (14,285 ) 2,158 and cashequivalents

Change in cashand cash 68,482 (106,779 ) (50,036 ) 158,915 equivalents

Cash and cashequivalents at 1,111,973 1,189,429 1,230,491 923,735 beginning ofperiod

Cash and cashequivalents at $ 1,180,455 $ 1,082,650 $ 1,180,455 $ 1,082,650 end of period

Taxes Paid:

Income taxes $ 38,504 $ 97,715 $ 73,808 $ 134,968

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Business Segment Information

(In thousands)

(Unaudited)

MIDDLE

OTHER EAST, UNITED LATIN NORTH SOUTH ELIMI- CONSOLI- NORTH EUROPE AFRICA STATES AMERICA ASIA ASIA NATIONS DATED AMERICA AND

INDIA

For the threemonths ended June 30, 2020:

Revenues^1 $ 639,231 74,314 37,553 1,117,058 224,313 387,430 101,611 (878 ) 2,580,632

Directlyrelated costof $ 354,624 41,449 22,701 907,915 160,355 271,540 72,908 (451 ) 1,831,041 transportationand otherexpenses^2

Salaries andother $ 207,703 25,283 12,112 97,171 39,184 95,757 25,188 (433 ) 501,965 operatingexpenses^3

Operating $ 76,904 7,582 2,740 111,972 24,774 20,133 3,515 6 247,626 income

Identifiableassets at $ 1,886,463 170,873 72,912 669,335 213,007 581,988 221,381 (5,782 ) 3,810,177 period end

Capital $ 19,076 1,148 216 385 182 993 114 - 22,114 expenditures

Equity $ 1,399,124 71,165 29,758 306,022 108,777 168,060 116,279 (37,587 ) 2,161,598

For the threemonths ended June 30, 2019:

Revenues^1 $ 681,076 85,537 38,757 621,951 181,380 319,331 108,311 (764 ) 2,035,579

Directlyrelated costof $ 386,093 50,336 22,043 487,554 132,487 220,676 75,089 (394 ) 1,373,884 transportationand otherexpenses^2

Salaries andother $ 207,060 26,343 14,368 69,944 33,380 89,340 29,423 (364 ) 469,494 operatingexpenses^3

Operating $ 87,923 8,858 2,346 64,453 15,513 9,315 3,799 (6 ) 192,201 income

Identifiableassets at $ 1,819,718 176,151 73,197 580,311 193,771 581,518 229,692 (7,368 ) 3,646,990 period end

Capital $ 8,985 768 145 300 428 1,914 447 - 12,987 expenditures

Equity $ 1,303,381 83,417 31,014 282,192 107,229 168,570 109,790 (33,199 ) 2,052,394

MIDDLE

OTHER EAST, UNITED LATIN NORTH SOUTH ELIMI- CONSOLI- NORTH EUROPE AFRICA STATES AMERICA ASIA ASIA NATIONS DATED AMERICA AND

INDIA

For the sixmonths ended June 30, 2020:

Revenues^1 $ 1,289,638 156,145 75,443 1,655,013 393,355 708,070 206,650 (1,818 ) 4,482,496

Directlyrelated costof $ 728,585 87,339 46,466 1,333,216 281,637 493,538 147,884 (896 ) 3,117,769 transportationand otherexpenses^2

Salaries andother $ 433,647 48,995 23,861 154,604 69,092 177,611 51,138 (902 ) 958,046 operatingexpenses^3

Operating $ 127,406 19,811 5,116 167,193 42,626 36,921 7,628 (20 ) 406,681 income

Identifiableassets at $ 1,886,463 170,873 72,912 669,335 213,007 581,988 221,381 (5,782 ) 3,810,177 period end

Capital $ 23,573 1,209 318 710 370 1,638 423 - 28,241 expenditures

Equity $ 1,399,124 71,165 29,758 306,022 108,777 168,060 116,279 (37,587 ) 2,161,598

For the sixmonths ended June 30, 2019:

Revenues^1 $ 1,340,859 176,947 72,936 1,254,804 358,559 632,021 220,986 (1,482 ) 4,055,630

Directlyrelated costof $ 753,448 106,576 41,158 986,200 262,298 436,571 154,592 (1,022 ) 2,739,821 transportationand otherexpenses^2

Salaries andother $ 425,475 50,553 26,796 138,371 64,841 172,183 58,234 (446 ) 936,007 operatingexpenses^3

Operating $ 161,936 19,818 4,982 130,233 31,420 23,267 8,160 (14 ) 379,802 income

Identifiableassets at $ 1,819,718 176,151 73,197 580,311 193,771 581,518 229,692 (7,368 ) 3,646,990 period end

Capital $ 15,900 996 238 644 604 2,896 1,144 - 22,422 expenditures

Equity $ 1,303,381 83,417 31,014 282,192 107,229 168,570 109,790 (33,199 ) 2,052,394

^1Beginning in the second quarter of 2019, the Company revised its process torecord the transfer, between its geographic operating segments, of revenues andthe directly related cost of transportation and other expenses for freightservice transactions between Company origin and destination locations. Thischange better aligns revenue reporting with the location where the services areperformed, as well as the transactional reporting being developed as part ofthe Company's new accounting systems and processes. The change in presentationhad no impact on consolidated or segment operating income. The impact of thesechanges on reported segment revenues was immaterial and in the six months endedJune 30, 2019, segment revenues have not been revised.

^2Directly related cost of transportation and other expenses totals OperatingExpenses from Airfreight services, Ocean freight and ocean services and Customsbrokerage and other services as shown in the Condensed Consolidated Statementsof Earnings.

^3Salaries and other operating expenses totals Salaries and related, Rent andoccupancy, Depreciation and amortization, Selling and promotion and Other asshown in the Condensed Consolidated Statements of Earnings.

The Company's consolidated financial results in the first and second quarter 2020 were 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 quarter of 2020, North Asia experienced significant increases in airfreight services revenues and related expenses 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 second quarter 2020 and 2019, the People's Republic of China, including Hong Kong, represented 37% and 26%, respectively, of the Company's total revenues and 38% and 28%, respectively, of the Company's total operating income.

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 first half of 2020 and 2019, the People's Republic of China, including Hong Kong, represented 31% and 26%, respectively, of the Company's total revenues and 33% and 28%, respectively, of the Company's total operating income.

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CONTACT: Jeffrey S. Musser President and Chief Executive Officer (206) 674-3433

CONTACT: Bradley S. Powell Senior Vice President and Chief Financial Officer (206) 674-3412

CONTACT: Geoffrey Buscher Director - Investor Relations (206) 892-4510