Expeditors Reports Second Quarter 2020 EPS of $1.09

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 of this 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				% Change				2020				2019				% Change
Revenues		$	2,580,632			$	2,035,579			27%				$	4,482,496			$	4,055,630			11%
Directly related cost of transportation and other expenses1		$	1,831,041			$	1,373,884			33%				$	3,117,769			$	2,739,821			14%
Salaries and other operating expenses2		$	501,965			$	469,494			7%				$	958,046			$	936,007			2%
Operating income		$	247,626			$	192,201			29%				$	406,681			$	379,802			7%
Net earnings attributable to shareholders		$	183,869			$	153,149			20%				$	306,213			$	292,848			5%
Diluted earnings attributable to shareholders per share		$	1.09			$	0.88			24%				$	1.80			$	1.67			8%
Basic earnings attributable to shareholders per share		$	1.10			$	0.90			22%				$	1.83			$	1.71			7%
Diluted weighted average shares outstanding			169,290				174,466								170,382				174,953
Basic weighted average shares outstanding			166,767				171,003								167,751				171,425

_______________________

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 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 kilos				Ocean freight FEU
2020
April		(7)%				(10)%
May		(13)%				(17)%
June		(12)%				(15)%
Quarter		(10)%				(14)%

Investors may submit written questions via e-mail to: [e-mail]. 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, 2020				December 31, 2019
Assets:
Current Assets:
Cash and cash equivalents		$	1,180,455			$	1,230,491
Accounts receivable, less allowance for credit loss of $5,347 at June 30, 2020 and $11,143 at December 31, 2019			1,460,324				1,315,091
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 accumulated depreciation and amortization of $494,773 at June 30, 2020 and $478,906 at December 31, 2019			497,762				499,344
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 related costs			257,923				189,446
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 liabilities			360,510				326,347
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued			—			—
Common stock, par value $0.01 per share. Issued and outstanding: 166,816 shares at June 30, 2020 and 169,622 shares at December 31, 2019			1,668				1,696
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 services		$	1,434,590			$	741,577			$	2,143,629			$	1,456,478
Ocean freight and ocean services			491,712				543,809				985,139				1,112,450
Customs brokerage and other services			654,330				750,193				1,353,728				1,486,702
Total revenues			2,580,632				2,035,579				4,482,496				4,055,630
Operating Expenses:
Airfreight services			1,097,073				542,639				1,617,242				1,051,849
Ocean freight and ocean services			363,599				390,299				730,082				810,630
Customs brokerage and other services			370,369				440,946				770,445				877,342
Salaries and related			395,107				356,351				737,147				713,261
Rent and occupancy			41,375				40,897				83,899				82,420
Depreciation and amortization			14,109				12,677				26,769				26,070
Selling and promotion			3,113				11,643				11,356				22,719
Other			48,261				47,926				98,875				91,537
Total operating expenses			2,333,006				1,843,378				4,075,815				3,675,828
Operating income			247,626				192,201				406,681				379,802
Other Income (Expense):
Interest income			2,559				6,516				7,366				12,622
Other, net			797				2,262				4,181				3,927
Other income, net			3,356				8,778				11,547				16,549
Earnings before income taxes			250,982				200,979				418,228				396,351
Income tax expense			66,794				47,449				111,258				102,710
Net earnings			184,188				153,530				306,970				293,641
Less net earnings attributable to the noncontrolling interest			319				381				757				793
Net earnings attributable to shareholders		$	183,869			$	153,149			$	306,213			$	292,848
Diluted earnings attributable to shareholders per share		$	1.09			$	0.88			$	1.80			$	1.67
Basic earnings attributable to shareholders per share		$	1.10			$	0.90			$	1.83			$	1.71
Weighted average diluted shares outstanding			169,290				174,466				170,382				174,953
Weighted average basic shares outstanding			166,767				171,003				167,751				171,425

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 to reconcile net earnings to net cash from operating activities:
Provisions for losses (recoveries) on accounts receivable			2,389				1,584				4,209				(304	)
Deferred income tax expense			9,287				3,697				4,148				5,805
Stock compensation expense			21,638				23,824				32,794				37,206
Depreciation and amortization			14,109				12,677				26,769				26,070
Other, net			118				(29	)			551				160
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable			(185,055	)			(28,187	)			(168,375	)			202,290
Increase (decrease) in accounts payable and accrued expenses			106,760				39,900				107,677				(82,383	)
(Increase) decrease in deferred contract costs			(2,333	)			(13,010	)			(18,401	)			18,249
(Decrease) increase in contract liabilities			(595	)			13,003				20,606				(23,722	)
Increase (decrease) in income taxes payable, net			20,154				(49,606	)			30,642				(32,613	)
Decrease (increase) in other, net			16,061				(1,676	)			4,131				791
Net cash from operating activities			186,721				155,707				351,721				445,190
Investing Activities:
Purchase of property and equipment			(22,114	)			(12,987	)			(28,241	)			(22,422	)
Other, net			(68	)			1,038				(211	)			1,293
Net cash from investing activities			(22,182	)			(11,949	)			(28,452	)			(21,129	)
Financing Activities:
Proceeds from issuance of common stock			29,187				32,287				52,586				59,477
Repurchases of common stock			(30,985	)			(190,589	)			(314,225	)			(234,923	)
Dividends Paid			(86,815	)			(85,184	)			(86,815	)			(85,184	)
Payments for taxes related to net share settlement of equity awards			(9,170	)			(6,674	)			(10,566	)			(6,674	)
Net cash from financing activities			(97,783	)			(250,160	)			(359,020	)			(267,304	)
Effect of exchange rate changes on cash and cash equivalents			1,726				(377	)			(14,285	)			2,158
Change in cash and cash equivalents			68,482				(106,779	)			(50,036	)			158,915
Cash and cash equivalents at beginning of period			1,111,973				1,189,429				1,230,491				923,735
Cash and cash equivalents at end of period		$	1,180,455			$	1,082,650			$	1,180,455			$	1,082,650
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)
		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, 2020:
Revenues1		$	639,231				74,314				37,553				1,117,058				224,313				387,430				101,611				(878	)			2,580,632
Directly related cost of transportation and other expenses2		$	354,624				41,449				22,701				907,915				160,355				271,540				72,908				(451	)			1,831,041
Salaries and other operating expenses3		$	207,703				25,283				12,112				97,171				39,184				95,757				25,188				(433	)			501,965
Operating income		$	76,904				7,582				2,740				111,972				24,774				20,133				3,515				6				247,626
Identifiable assets at period end		$	1,886,463				170,873				72,912				669,335				213,007				581,988				221,381				(5,782	)			3,810,177
Capital expenditures		$	19,076				1,148				216				385				182				993				114				—				22,114
Equity		$	1,399,124				71,165				29,758				306,022				108,777				168,060				116,279				(37,587	)			2,161,598
For the three months ended June 30, 2019:
Revenues1		$	681,076				85,537				38,757				621,951				181,380				319,331				108,311				(764	)			2,035,579
Directly related cost of transportation and other expenses2		$	386,093				50,336				22,043				487,554				132,487				220,676				75,089				(394	)			1,373,884
Salaries and other operating expenses3		$	207,060				26,343				14,368				69,944				33,380				89,340				29,423				(364	)			469,494
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
Equity		$	1,303,381				83,417				31,014				282,192				107,229				168,570				109,790				(33,199	)			2,052,394

		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, 2020:
Revenues1		$	1,289,638				156,145				75,443				1,655,013				393,355				708,070				206,650				(1,818	)			4,482,496
Directly related cost of transportation and other expenses2		$	728,585				87,339				46,466				1,333,216				281,637				493,538				147,884				(896	)			3,117,769
Salaries and other operating expenses3		$	433,647				48,995				23,861				154,604				69,092				177,611				51,138				(902	)			958,046
Operating income		$	127,406				19,811				5,116				167,193				42,626				36,921				7,628				(20	)			406,681
Identifiable assets at period end		$	1,886,463				170,873				72,912				669,335				213,007				581,988				221,381				(5,782	)			3,810,177
Capital expenditures		$	23,573				1,209				318				710				370				1,638				423				—				28,241
Equity		$	1,399,124				71,165				29,758				306,022				108,777				168,060				116,279				(37,587	)			2,161,598
For the six months ended June 30, 2019:
Revenues1		$	1,340,859				176,947				72,936				1,254,804				358,559				632,021				220,986				(1,482	)			4,055,630
Directly related cost of transportation and other expenses2		$	753,448				106,576				41,158				986,200				262,298				436,571				154,592				(1,022	)			2,739,821
Salaries and other operating expenses3		$	425,475				50,553				26,796				138,371				64,841				172,183				58,234				(446	)			936,007
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
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 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 no impact on consolidated or segment operating income. The impact of these changes on reported segment revenues was immaterial and in the six months ended June 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 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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