美國
證券交易委員會
華盛頓特區20549
表格
根據1934年證券交易法第13或15(d)條款的季度報告。 |
截至2024年6月30日季度結束
或
根據1934年證券交易法第13或15(d)條款的過渡報告 |
到 至
委員會檔案編號：
（依憑章程所載的完整登記名稱）
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(依據所在地或其他管轄區) 的註冊地或組織地點) |
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(IRS雇主 識別號碼) |
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(總部辦公地址) |
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（郵政編碼） |
(註冊人電話號碼，包括區號): (
根據法案第12(b)條規定註冊的證券：
每種類別的名稱 |
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交易標的（s） |
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每個註冊交易所的名稱 |
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請勾選表示：（1）申報人在過去12個月內（或申報人在此期間需要提交此類報告的較短時間內，已提交了證券交易所法案第13條或第15(d)條規定的所有報告；並 （2）該申報人在過去90天內一直受到申報要求的約束。
在前12個月內（或公司需要提交這些文件的較短時間內），公司是否已通過選中標記表明已閱讀並提交了應根據S-t法規第405條規定（本章第232.405條）提交的所有互動式數據文件？
請用勾選標記表示公司是否為大型加速掛牌者、加速掛牌者、非加速掛牌者、較小報告公司或新興成長公司。請參閱《交易所法》第120億2條中“大型加速掛牌者”、“加速掛牌者”、“較小報告公司”和“新興成長公司”的定義。
☒ |
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加速歸檔人 |
☐ |
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非加速歸檔人 |
☐ |
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小型報告公司 |
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新興成長型企業 |
如果是新興成長公司，請以勾號標示註冊人是否選擇不使用延長過渡期來遵守根據《交易法》第 13 (a) 條所提供的任何新或經修訂的財務會計準則。 ☐
在核准的名冊是否屬於殼公司（如股市法規第1202條所定義之意義）方面，請用勾選符號表示。是 ☐ 否
在2024年11月1日，發行人普通股的流通股數為
第一部分. 財務資訊AL資訊
項目1. 財務報表財務報表
華盛頓國際貨運人公司
及其附屬公司
縮短的資產負債表已簡化的資產負債表
(以千為單位，除每股數據外)
(未經查核)
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九月三十日， |
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12月31日， |
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資產： |
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流動資產： |
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現金及現金等價物 |
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$ |
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應收賬款，減免信用損失 |
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延滯合同成本 |
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其他 |
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全部流動資產 |
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資產和設備，扣除累計折舊和攤銷 |
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營運租賃權使用資產 |
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商譽 |
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推遲的聯邦和州所得稅，淨額 |
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其他資產，淨額 |
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資產總額 |
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$ |
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$ |
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負債： |
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當前負債： |
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應付賬款 |
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應計負債，主要是薪金和相關成本 |
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合約負債 |
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營運租賃負債的流動部分 |
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聯邦、州和外國所得稅 |
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流動負債合計 |
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營業租賃負債非流動部分 |
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股東權益： |
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優先股，面額; 授權 |
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普通股，面額 $ |
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資本公積額額外增資 |
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保留收益 |
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累積其他全面損失 |
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股東權益總額 |
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非控制權益 |
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總股本 |
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負債加股東權益總額 |
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$ |
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$ |
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請參閱簡明綜合財務報表附註。
2
康捷國際物流 華盛頓分公司
及子公司
彙總的合併財務報表收益表
(以千爲單位，除每股數據外)
(未經審計)
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截至9月30日的三個月 |
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截至9月30日的九個月 |
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2024 |
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2023 |
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2024 |
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2023 |
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營業收入: |
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空運服務 |
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$ |
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$ |
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$ |
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$ |
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海洋貨運和海運服務 |
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報關代理和其他服務 |
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總收入 |
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營業費用： |
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空運服務 |
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海洋貨運和海運服務 |
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報關代理和其他服務 |
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工資及相關 |
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租金和佔用費用 |
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折舊和攤銷 |
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銷售和促銷 |
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其他 |
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總營業費用 |
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營業收入 |
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其他收益（費用）： |
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利息收入 |
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其他，淨數 |
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其他收入，淨額 |
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所得稅前收益 |
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所得稅費用 |
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淨收益 |
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少於歸屬於非控制性權益的淨收益（損失） |
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歸屬於股東的淨收益 |
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$ |
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$ |
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$ |
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每股攤薄後歸屬於股東的盈利 |
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$ |
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$ |
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$ |
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每股基本後歸屬於股東的盈利 |
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$ |
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$ |
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$ |
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$ |
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加權平均攤薄股數 |
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加權平均基本股份 |
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請參閱簡明綜合財務報表附註。
3
華盛頓EXPEDITORS INTERNATIONAL, INC.
及子公司
壓縮合並財務報表綜合收益的組成部分
(以千爲單位)
(未經審計)
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截至9月30日的三個月 |
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截至9月30日的九個月 |
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2024 |
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2023 |
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2024 |
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2023 |
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淨收益 |
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$ |
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$ |
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$ |
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$ |
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其他綜合收益(損失), 淨額(稅後): |
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淨外幣翻譯調整，扣除所得稅費用（收益）$ |
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其他綜合收益（損失） |
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綜合收益 |
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減少歸屬於 |
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歸屬於股東的綜合收益 |
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$ |
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$ |
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$ |
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$ |
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請參閱簡明綜合財務報表附註。
4
康捷國際物流 華盛頓分公司
及子公司
壓縮的合併現金流量表現金流量表
(以千爲單位)
(未經審計)
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截至9月30日的三個月 |
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截至9月30日的九個月 |
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2024 |
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2023 |
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2024 |
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2023 |
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經營活動： |
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淨收益 |
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$ |
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$ |
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$ |
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Adjustments to reconcile net earnings to net cash from |
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應收賬款減值準備 |
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遞延所得稅收益 |
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股票補償費用 |
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折舊和攤銷 |
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其他，淨數 |
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運營資產和負債的變化： |
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應收賬款增加（減少） |
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應付賬款和應計負債的增加（減少） |
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（增加）遞延合同成本的減少 |
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合同負債的增加（減少） |
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增加（減少）應交所得稅淨額 |
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增加其他淨額 |
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經營活動產生的現金流量淨額 |
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投資活動： |
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購置固定資產等資產支出 |
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其他，淨數 |
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投資活動產生的淨現金流量 |
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籌資活動： |
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信用額度借款收入 |
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信用額度借款付款 |
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普通股發行收入 |
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回購普通股 |
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分紅派息 |
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與淨股份結算相關的稅款支付 |
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融資活動產生的淨現金流量 |
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匯率變動對現金及現金等價物的影響 |
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現金及現金等價物變動 |
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期初現金及現金等價物餘額 |
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期末現金及現金等價物 |
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已支付的稅金: |
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所得稅 |
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請參閱簡明綜合財務報表附註。
5
康捷國際物流 華盛頓分公司
及子公司
簡明綜合報表 權益報表
(以千爲單位)
(未經審計)
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截至9月30日的三個月 |
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截至9月30日的九個月 |
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2024 |
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2023 |
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2023 |
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期初股東權益 |
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普通股票面值 |
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期初 |
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員工股票計劃下發行的股份，淨額 |
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根據股票回購計劃的規定回購的股份 |
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期末 |
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額外實收資本 |
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期初 |
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員工股票計劃發行的股份淨額 |
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根據股票回購條款回購的股份 |
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股票補償費用 |
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支付的股息相當於分紅 |
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請參閱簡明綜合財務報表附註。
6
康捷國際物流 華盛頓分公司
及子公司
簡明合併財務報表附註合併財務報表註記
(以千爲單位，除每股數據外)
(未經審計)
注1. 重大會計政策摘要
康捷國際物流服務提供商，是一家全球貨幣物流服務提供商，通過全球辦事處和獨家或非獨家代理商運營。公司的客戶包括零售和批發、電子、醫療保健、科技、工業和製造業公司。
按照證券交易委員會的規定編制的簡明合併財務報表。因此，根據美國通用會計準則（U.S. GAAP）編制的財務報表通常包含的某些信息和註釋披露已經簡化或省略。公司認爲所作的披露足以使所呈現的信息不會產生誤導。這些簡明合併財務報表反映了所有調整，包括經常性項目，據管理層認爲，這些調整是必要的，以公平地反映所呈現的中期結果。應當閱讀這些簡要合併財務報表，並結合公司於2024年2月23日提交給證券交易委員會的10-k表格中包含的合併財務報表和相關注釋。
所有重要的公司內部帳戶和交易在合併中已經被消除。註釋中的所有金額均爲千元，除每股數據外或另有規定。某些往年金額已經重新分類，以符合簡明合併損益表中其他收入（費用）的本年呈現。
公司通過訂立通常包括單一履約義務的協議來獲取收入，即爲客戶運送貨物。每個履約義務由公司的一個或多個服務組成。公司的三項主要服務是簡明合併收益表中呈現的營業收入類別: 1）空運服務、2）海運和海洋服務以及3）報關和其他服務。
公司通常在服務隨時間提供的情況下滿足其履約義務。典型的裝運包括起運地提供的服務（如提貨和送貨到港口，從起運地到目的地港口的貨運服務及目的地服務，例如報關和最終交付）。公司在貨物裝運的整個生命週期內衡量其履約義務的履行情況，包括起運地、貨運和目的地的服務。公司幾乎在一個到兩個月的期間內履行了幾乎所有的履約義務，並且與客戶的合同原始預期期限少於一年。到2024年6月30日記錄的合同負債的幾乎所有履約義務均已得到履行。
公司評估是否應將向客戶開具的金額按毛利或淨額報告爲收入。一般而言，當公司主要負責履行提供服務的承諾，承擔損失風險，有權設置服務價格並有能力指導第三方提供的服務時，收入是按毛利報告的。當收入以淨額形式記錄時，所獲金額是通過固定費用、按活動單位收費或二者組合確定的。例如當公司以其他方式賺取收入時，例如當公司不開具空運提單（HAWB）、海洋提單（HOBL）或其他運輸提單，或者僅充當貨主的代理時，僅包括通過這類服務賺取的佣金和費用在收入中。在這些交易中，公司不是主體，僅報告通過這類服務賺取的佣金和費用。
7
公司在簽訂安排時確定是否屬於租賃。使用權資產代表公司在租賃期內使用基礎資產的權利，租賃負債代表公司根據租賃產生的租金支付責任。所有使用權資產和租賃負債在起始日期按租賃期內租金支付的現值確認。使用權資產根據租賃激勵和初始直接成本進行調整。租賃期包括公司行使期權的可再續期選項，在公司相對有把握行使該期權時按公司自主決定行使。由於公司的租賃通常沒有內含利率，公司使用根據起始日期可獲市場信息估算的增量借貸利率來確定現值。我們的某些租賃包括可變支付，這些支付可能會因租賃起始後的事實或情況變化而有所不同。公司將可變支付排除在使用權資產和租賃負債之外，除非不視爲固定支付，並將可變支付費用視爲發生時費用支出。租賃費用按直線法在租賃期內確認，幷包括在損益簡表的租金和佔用費用中。
此外，公司選擇了對非取消期不超過十二個月的短期租賃豁免，並選擇不分離非租賃元件和租賃元件，而是將每個元件作爲單個租賃元件進行覈算。
公司的應收賬款呈現出類似的信用風險特徵，信用損失準備按照集體基礎估算，使用信用損失率方法，結合歷史信用損失信息並考慮當前經濟環境。如果經濟條件發生重大變化足以影響預期信用損失，未來可能需要額外準備。公司已經錄得信用損失準備金額 $
根據美國通用會計準則編制財務報表需要管理層對影響資產和負債的報告金額、披露財產和負債的具體情況的估計和假設進行。公司主要在以下領域使用估計值: 應收賬款減值、公司通常在目的地地點提供的附屬服務成本的計提、自保責任、各種稅務責任的計提、損失的計提、股權補償費用的計提和確定租約資產及租賃責任時與租金收入和費用金額相關的估計。
F. 最近的會計聲明
報告業務板塊披露的改進
2023年11月，Financial Accounting Standards Board（FASB）發佈了一項會計準則更新（ASU），改進了可報告部門披露內容，要求在中期披露中披露可報告部門的利潤或損失以及資產，這些內容目前要求每年披露，以及向首席運營決策者提供的重要部門費用和利潤損失措施的披露。ASU不會改變公司識別其經營部門的方式。公司預計將在其2024年度10-K表格的年度報告中採納此準則，並從2025年1月1日起，包括對已呈現在財務報表中的所有以前期間進行追溯呈現。公司目前正在評估此ASU對其部門披露的影響，並預計對其合併財務報表、現金流量和財務狀況沒有影響。
所得稅披露改進
2023年12月，FASB發佈了一項ASU，通過要求以年度基礎披露收入稅披露，使用百分比和貨幣金額製作表格化稅率調解，根據性質和司法管轄區進行分解，以至少這些項目超過指定閾值的程度。此外，要求披露已支付的所得稅淨額，以扣除所收到的退款，按聯邦、州/地方和外國以及司法管轄區進行分解，如果該金額佔淨所得稅支付額的至少5%。該標準將於2025年1月1日生效。公司可以通過提供截至2025年12月31日的期間的修訂披露並繼續向之前期間提供之前的ASU披露，或者通過對所有呈現期間提供修訂披露來追溯地應用此ASU修訂。公司預計此ASU僅影響其披露，對其合併財務報表、現金流量和財務狀況沒有影響。.
8
Note 2. Share-Based Compensation
The Company has historically granted the majority of its share-based awards during the second quarter of each fiscal year.
In the nine months ended September 30, 2024 and 2023, the Company awarded
The Company also awarded
The grant of employee stock purchase rights and the issuance of shares under the employee stock purchase plan are made in the third quarter of each fiscal year and
The Company recognizes stock compensation expense based on the fair value of awards granted to employees and directors under the Company’s Amended and Restated 2017 Omnibus Plan and employee stock purchase rights plans. This expense, adjusted for expected performance and forfeitures, is recognized in net earnings on a straight-line basis over the service periods as salaries and related costs on the condensed consolidated statements of earnings. RSUs and PSUs awarded to certain employees meeting specific retirement eligibility criteria at the time of grant are expensed immediately as there is no substantive service period associated with those awards.
註釋 3. 所得稅
公司須在多個州和許多外國司法管轄區繳納稅款，包括中華人民共和國，包括香港、臺灣、越南、印度、墨西哥、巴西、加拿大、荷蘭和英國。公司相信其稅務立場，包括內部轉讓定價政策，是合理的，與已建立的轉讓定價方法和規範一致。公司正在接受或可能會受到相關當局對這些及其他司法管轄區的審計或檢查和評估，主要針對2009年及以後的年度。有時審計會導致提議的評估，最終解決方案可能導致需要額外大額稅款、罰款和利息支付。公司在其認爲稅務申報立場適當並符合稅法的情況下，仍需在得知可能無法成功實現稅務立場的情況下建立負債。在評估稅務立場時，公司確定在審查時該立場是否很可能會被支持，包括解決任何相關上訴或訴訟過程，這基於該立場的技術優點並與合格的法律和稅務顧問進行諮詢。
9
The total amount of the Company’s tax contingencies may increase in 2024. In addition, changes in state, federal, and foreign tax laws, including transfer pricing and changes in interpretations of these laws, may increase the Company’s existing tax contingencies. The timing of the resolution of income tax examinations can be highly uncertain, and the amounts ultimately paid including interest and penalties, if any, upon resolution of the issues raised by the taxing authorities may differ significantly from the amounts recorded. It is reasonably possible that within the next twelve months the Company or its subsidiaries will undergo further audits and examinations by various tax authorities and possibly may reach resolution related to income tax and indirect tax examinations in one or more jurisdictions. These assessments or settlements could result in changes to the Company’s contingencies related to positions on tax filings in future years. The estimate of any ultimate tax liability contains assumptions based on experiences, judgments about potential actions by taxing jurisdictions as well as judgments about the likely outcome of issues that have been raised by the taxing jurisdiction. The Company cannot currently provide an estimate of the range of possible outcomes.
The Company recognizes interest expense related to unrecognized tax benefits or underpayment of income taxes in interest expense, included in other income (expense) and recognizes penalties in other operating expenses.
The Company’s consolidated effective income tax rate was
第四部分 股份基本和攤薄每股收益
攤薄每股收益是利潤歸屬於股東的利潤，是根據普通股的加權平均股數和攤薄潛在普通股的實際數額計算得出的。攤薄潛在股份代表着尚未行使的員工股票購買計劃下的購買期權，以及未解除的限制性股票。基本每股收益是利潤歸屬於股東的利潤，是使用未考慮攤薄潛在普通股實際數額的普通股的加權平均股數計算得出的。
以下表格對基本和攤薄每股收益的分子和分母進行了調整，以計算歸屬於股東的收益：
|
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截至9月30日的三個月 |
|
|
截至9月30日的九個月 |
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||||||||||
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2024 |
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2023 |
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2024 |
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2023 |
|
||||
分子： |
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|
||||
淨收益歸屬於股東 |
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$ |
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|
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$ |
|
||||
分母： |
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||||
加權平均基本股份數 |
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||||
受稀釋股份獎勵影響 |
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||||
加權平均攤薄股份 |
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|
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|
||||
每股基本收益 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
每股攤薄收益 |
|
$ |
|
|
$ |
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|
$ |
|
|
$ |
|
||||
截至2024年9月30日的三個月和九個月，
10
第5條 股東權益
公司董事會已批准了一個自由股票回購計劃，授權管理層減少已發行和流通的普通股。董事會上次修訂該計劃是在2024年2月19日，授權回購股份至
累計其他全面損失完全由匯兌差額組成，扣除相關所得稅影響，適用於所有呈現期。
在
2024年第三季度結束後，在
第6條 金融工具的公允價值
公司的金融工具，除現金外，主要包括現金等價物、應收賬款、應付賬款和預提費用。這些金融工具的賬面價值大致等於其公允價值。所有到期日在購買日起三個月或更短的高度流動性投資被視爲現金等價物。
現金及現金等價物包括以下內容:
|
|
2024年9月30日 |
|
|
2023年12月31日 |
|
||||||||||
|
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成本 |
|
|
公允價值 |
|
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成本 |
|
|
公允價值 |
|
||||
651,281 |
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|
||||
現金及隔夜存款 |
|
$ |
|
|
$ |
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|
$ |
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|
$ |
|
||||
企業商業票據 |
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||||
定期存款和貨幣市場基金 |
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|
||||
現金及現金等價物總額 |
|
$ |
|
|
$ |
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|
$ |
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|
$ |
|
||||
企業商業票據和定期存款的公允價值基於使用市場利率計算的類似或相同資產（二級公允價值計量）。
第7條。備抵事項
公司涉及索賠、訴訟、政府調查、收入、轉讓定價和間接稅款審計以及業務中出現的其他法律事項，這些事項都具有固有的不確定性。目前，在管理層的意見及律師和稅務顧問的建議基礎上，預計這些事項均不會對公司的運營、現金流或財務狀況產生實質影響。對於所記錄的索賠、訴訟、政府調查和其他法律事項金額的變化對公司的運營、現金流或財務狀況來說並不重要。目前，公司無法估計超出已記錄金額的任何額外損失或可能損失區間，如果解決這些事項可能導致的任何損失。
11
注8. 業務部門信息
關於公司按地理區域運營的財務信息如下：
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聯合 |
|
其它 |
|
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拉丁 |
|
|
北部 |
|
|
南部 |
|
|
EUROPE |
|
|
MIDDLE |
|
|
消除- |
|
|
彙總- |
|
|||||||||
截至2024年9月30日的三個月： |
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收入 |
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$ |
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( |
) |
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||||||||
直接相關的運輸成本 |
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$ |
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( |
) |
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||||||||
工資和其他營業費用2 |
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$ |
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|
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( |
) |
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||||||||
營業收入 |
|
$ |
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|||||||||
期末可辨認資產 |
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$ |
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資本支出 |
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$ |
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|||||||||
股權 |
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$ |
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( |
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截至2023年9月30日三個月的情況： |
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收入 |
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$ |
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||||||||
與運輸直接相關的費用 |
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$ |
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工資和其他營業費用2 |
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$ |
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( |
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營業收入 |
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$ |
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||||||||
期末可辨認資產 |
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$ |
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( |
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資本支出 |
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$ |
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股權 |
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$ |
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聯合 |
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其它 |
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拉丁 |
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北部 |
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南部 |
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EUROPE |
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MIDDLE |
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消除- |
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彙總- |
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|||||||||
截至2024年9月30日的九個月： |
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收入 |
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||||||||
直接相關的運輸費用 |
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$ |
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工資和其他營業費用2 |
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$ |
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營業收入 |
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期末可辨認資產 |
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股權 |
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截至2023年9月30日止九個月： |
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收入 |
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直接相關的運輸費用 |
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$ |
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工資和其他營業費用2 |
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$ |
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營業收入 |
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$ |
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期末可辨認資產 |
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$ |
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1
2
12
第二條 營運績效及財務狀況之管理討論分析。 財務狀況和經營業績的分析
1995年《私人證券訴訟改革法案》下關於前瞻性陳述的安全港；某些警告性陳述
本報告中某些部分以10-Q表格的形式，包括"概述"、"2024年第三季度總結"、"行業趨勢、貿易狀況和競爭"、"季節性"、"關鍵會計估算"、"經營結果"、"所得稅費用"、"貨幣和其他風險因素"以及"流動性和資本資源"的章節，包含前瞻性聲明。諸如"可能導致"、"預計"、"被預期"、"會期待"、"不會期待"、"將繼續"、"被預期"、"估計"、"項目"、"計劃"、"相信"、"可能"、"合理可能"、"可能"、"可以"、"應該"、"會"、"打算"、"可預見的未來"或類似表達的詞語，旨在識別出根據1995年《私人證券訴訟改革法》的定義的前瞻性聲明。此外，任何提及未來財務表現預測、我們預計的增長以及公司業務趨勢、經濟放緩跡象和需求下降、未來供應鏈和運輸中斷及其他對干擾事件或情況的描述均爲前瞻性聲明。此外，前瞻性聲明還受特定風險和不確定性的影響，包括與稅務審計和其他意外情況相關的風險，這可能導致實際結果與我們的歷史經驗和當前預期或預測發生重大差異。這些聲明必須結合討論可能導致實際結果與前瞻性聲明顯著不同的重要因素進行考慮。應關注在2024年2月23日提交的公司10-K年報的第一部分，第1A項中所識別和討論的風險因素，以及本報告的第二部分，第1A項。管理層相信，這些前瞻性聲明在本提交日期是合理的，我們不承擔更新這些聲明的任何義務，除非法律要求。
概覽
康捷國際物流（以下簡稱"康捷"，"公司"，"我們"，"我們"，"我們"）提供全套全球物流服務。我們的服務包括空運和海運貨物 consol貨和轉發, 報關, 倉儲和配送, 採購訂單管理, 供應商整合, 定時運輸服務, 溫控運輸, 貨物保險, 專業貨物監控和跟蹤, 以及其他供應鏈解決方案。我們不參與隔夜快遞或小包裹業務競爭。作爲非資產所有制承運人，我們不擁有或運營運輸資產。
我們的營業收入來自於簽訂協議，這些協議通常包括一個單一履約義務，即爲我們的客戶運輸貨物。每項履約義務包括公司的一個或多個服務。我們通常在服務隨時間提供而履行履約義務。典型的貨運包括在起運地提供的服務，例如提貨和送貨到港口、起運地到目的地港口的貨運服務以及目的地服務，例如清關和最終交付。我們的三項主要服務是我們基本報表中呈現的收入類別：1）空運服務，2）海洋貨運和海洋服務，3）報關和其他服務。影響總收入和相關運輸費用變化最顯著的驅動因素是成交量、賣出率和買入率。成交量對我們三項主要營收來源中總收入和相關運輸費用變化的影響類似。
我們主要通過從直接（資產基礎）承運商那裏按成交量購買運輸服務來生成大部分的空運和海運收入，然後將這些運力轉售給我們的客戶。我們向客戶收取的費用（賣出價）被認定爲收入，而我們支付給承運商的費用（買入價）被認定爲營業費用，作爲運輸的直接相關成本和其他費用。通過整合來自多個客戶的貨物運輸並集中我們的採購力量，我們能夠與直接承運商談判有利的買入價，同時也能提供比客戶自己談判的更低的賣出價。
在大多數情況下，我們作爲間接承運人。當作爲間接承運人時，我們向客戶簽發一份航空提單（HAWB）、海運提單（HOBL）或海運貨運單作爲運輸合同。隨後，當貨物實際交給直接承運人時，我們會收到一份運輸合同，稱爲航空主提單用於空運貨物，海運主提單用於海運貨物。
13
海關代理和其他服務包括在目的地提供服務，例如幫助客戶通過海關清關，準備和提交所需的文件，爲客戶計算並支付關稅和其他稅款，以及安排政府機構要求的檢查，和進口服務，如在目的地安排本地提貨、存儲和配送。這些是需要對我們所在國家的海關規則和法規有技術知識的複雜功能。我們還提供其他增值服務，如在目的地的倉儲和配送、時間確定的運輸服務和諮詢。
我們按照五個地理責任區域管理我們的公司：美洲; 北亞; 南亞; 歐洲; 以及中東、非洲和印度（MAIR）。每個區域都分爲由各個盈虧責任單元組成的子區域。我們的業務涉及各個運營單元之間的貨物運輸，並通常涉及多個地理區域。國際物流業務的性質要求運營單位之間保持高度的溝通和合作。由於運營單位之間的相互關係，很難檢查任何一個地理區域並對其對我們的整體成功的貢獻進行獨立評估並得出有意義的結論。
我們的運營單位使用與辦公室與獨立代理機構進行業務交易時使用的相同公平定價方法來分享收入。某些成本是根據基礎服務的相對價值在細分市場之間分配的，其中可能包括基於實際成本或估計成本加上利潤率的分配。我們的戰略將薪酬與運營單位的盈利能力（包括共享收入和分配成本）緊密聯繫在一起。因此，個人的成功與我們網絡中其他運營單位的合作密切相關。 服務組合因細分市場而異，主要取決於我們每個地區的本地業務的進出口導向。
2024年第三季度總結
重要影響在「運營結果」中進行了討論，並以下面方式進行總結。
14
Industry Trends, Trade Conditions and Competition
We operate in over 60 countries in the competitive global logistics industry and our activities are closely tied to the global economy. International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange rates, laws and policies relating to tariffs, trade restrictions, foreign investment and taxation. Periodically, governments consider a variety of changes to tariffs and impose trade restrictions and accords. Currently, the United States and China have increased concerns affecting certain imports and exports and are considering additional tariffs. We cannot predict the outcome of changes in tariffs, or interpretations, and trade restrictions and accords and the effects they will have on our business. As governments implement restrictions on imports and exports, manufacturers may change sourcing patterns, to the extent possible, and, over time, may shift manufacturing to other countries. Doing business in foreign locations also subjects us to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to being influenced by governmental policies and inter-governmental disputes concerning international trade, our business may also be negatively affected by political developments and changes in government personnel or policies in the United States and other countries, as well as economic turbulence, political unrest and security concerns in the nations and on the trade shipping lanes in which we conduct business and the future impact that these events may have on international trade, oil prices and security costs. We do not have employees, assets, or operations in Russia, Ukraine, Israel, the Gaza Strip or the West Bank. While limited, any shipment activity is conducted with independent agents in those countries in compliance with all applicable trade sanctions, laws and regulations. We have a branch and employees in Lebanon but no significant assets.
Our ability to provide services to our customers is highly dependent on good working relationships with a variety of entities, including airlines, ocean carrier lines and ground transportation providers, as well as governmental agencies. We select and engage with best-in-class, compliance-focused, efficiently run, growth-oriented partners, based upon defined value elements and are intentional in our relationship and performance management activity, reinforcing success by awarding service providers who consistently achieve at the highest levels with additional business. We consider our current working relationships with these entities to be satisfactory. However, changes in the financial stability and operating capabilities and capacity of asset-based carriers, capacity allotments available from carriers, governmental regulation or deregulation efforts, modernization of the regulations governing customs brokerage, and/or changes in governmental restrictions, quota restrictions or trade accords could affect our business in unpredictable ways. When the market experiences seasonal peaks or any sort of disruption, the carriers often increase their pricing suddenly. This carrier behavior creates pricing volatility that could impact Expeditors' ability to maintain historical unitary profitability.
The global economic and trade environments remain uncertain, including inflation remaining higher than historical levels, greater volatility in oil prices, high interest rates and the conflicts in the Middle East and Ukraine. Starting in the second quarter of 2024, we saw capacity constraints on exports out of Asia resulting in increases in average buy and sell rates. However, if demand softens or safe passage through the Red Sea resumes, then additional ocean transportation capacity will become available. These conditions could result in declines in average sell and buy rates. We also expect that pricing volatility will continue as carriers adapt to lower demand, changing fuel prices, security risks and react to governmental trade policies and other regulations. Additionally, we cannot predict the direct or indirect impact that further changes in purchasing behavior, such as the evolution of international direct e-commerce platforms, could have on our business. Some customers have begun shifting manufacturing to other countries in response to governments implementing higher tariffs on imports, to reduce their supply chain risks, and in response to pandemic disruptions or geopolitical risks, which could negatively impact us.
Seasonality
Historically, our operating results have been subject to seasonal demand trends with the first quarter being the weakest and the third and fourth quarters being the strongest; however, there is no assurance that this seasonal trend will occur in the future or to what degree it will be impacted by an uncertain economy. This historical pattern has been the result of, or influenced by, numerous factors, including weather patterns, national holidays, consumer demand, new product launches, just-in-time inventory models, economic conditions, pandemics, governmental policies and inter-governmental disputes and a myriad of other similar and subtle forces.
A significant portion of our revenues is derived from customers in the retail and technology industries whose shipping patterns are tied closely to consumer demand, and from customers in industries whose shipping patterns are dependent upon just-in-time production schedules. Therefore, the timing of our revenues is, to a large degree, impacted by factors out of our control, such as a sudden change in consumer demand for retail goods, changes in trade tariffs, product launches, disruptions in supply-chains and/or manufacturing production delays. Additionally, many customers ship a significant portion of their goods at or near the end of a quarter and, therefore, we may not learn of a shortfall in revenues until late in a quarter.
15
To the extent that a shortfall in revenues or earnings was not expected by securities analysts or investors, any such shortfall from levels predicted by securities analysts or investors could have an immediate and adverse effect on the trading price of our stock. We cannot accurately forecast many of these factors, nor can we estimate accurately the relative influence of any particular factor and, as a result, there can be no assurance that historical patterns will continue in future periods.
Critical Accounting Estimates
The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and judgments. We base our estimates on historical experience and on assumptions that we believe are reasonable. Our critical accounting estimates are discussed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our annual report on Form 10-K for the year ended December 31, 2023, filed on February 23, 2024 to the critical accounting estimates previously disclosed in that report.
Results of Operations
The following table shows the revenues, the directly related cost of transportation and other expenses for our principal services and our overhead expenses for the three and nine months ended September 30, 2024 and 2023, including the respective percentage changes comparing 2024 and 2023.
The table and the accompanying discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes thereto in this quarterly report.
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
||||||||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Percentage |
|
2024 |
|
|
2023 |
|
|
Percentage |
||||
Airfreight services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues |
|
$ |
986,950 |
|
|
$ |
724,331 |
|
|
36% |
|
$ |
2,606,647 |
|
|
$ |
2,380,405 |
|
|
10% |
Expenses |
|
|
740,356 |
|
|
|
516,519 |
|
|
43 |
|
|
1,923,115 |
|
|
|
1,707,568 |
|
|
13 |
Ocean freight services and ocean services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues |
|
|
1,017,618 |
|
|
|
560,281 |
|
|
82 |
|
|
2,240,079 |
|
|
|
1,851,389 |
|
|
21 |
Expenses |
|
|
783,827 |
|
|
|
387,670 |
|
|
102 |
|
|
1,675,931 |
|
|
|
1,277,159 |
|
|
31 |
Customs brokerage and other services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues |
|
|
995,563 |
|
|
|
905,389 |
|
|
10 |
|
|
2,799,084 |
|
|
|
2,790,548 |
|
|
— |
Expenses |
|
|
569,781 |
|
|
|
497,922 |
|
|
14 |
|
|
1,567,606 |
|
|
|
1,555,669 |
|
|
1 |
Overhead expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and related costs |
|
|
450,308 |
|
|
|
412,505 |
|
|
9 |
|
|
1,289,901 |
|
|
|
1,290,911 |
|
|
— |
Other |
|
|
154,335 |
|
|
|
159,316 |
|
|
(3) |
|
|
449,038 |
|
|
|
450,500 |
|
|
— |
Total overhead expenses |
|
|
604,643 |
|
|
|
571,821 |
|
|
6 |
|
|
1,738,939 |
|
|
|
1,741,411 |
|
|
— |
Operating income |
|
|
301,524 |
|
|
|
216,069 |
|
|
40 |
|
|
740,219 |
|
|
|
740,535 |
|
|
— |
Other income, net |
|
|
10,890 |
|
|
|
15,822 |
|
|
(31) |
|
|
41,298 |
|
|
|
58,117 |
|
|
(29) |
Earnings before income taxes |
|
|
312,414 |
|
|
|
231,891 |
|
|
35 |
|
|
781,517 |
|
|
|
798,652 |
|
|
(2) |
Income tax expense |
|
|
82,488 |
|
|
|
61,048 |
|
|
35 |
|
|
206,040 |
|
|
|
206,018 |
|
|
— |
Net earnings |
|
|
229,926 |
|
|
|
170,843 |
|
|
35 |
|
|
575,477 |
|
|
|
592,634 |
|
|
(3) |
Less net earnings (losses) attributable to |
|
|
352 |
|
|
|
(510 |
) |
|
(169) |
|
|
1,282 |
|
|
|
(1,530 |
) |
|
(184) |
Net earnings attributable to shareholders |
|
$ |
229,574 |
|
|
$ |
171,353 |
|
|
34% |
|
$ |
574,195 |
|
|
$ |
594,164 |
|
|
(3)% |
16
Airfreight services:
Airfreight services revenues and expenses increased 36% and 43%, respectively, during the three months ended September 30, 2024, as compared with the same period in 2023, due to 20% and 25% increases in average sell and buy rates, respectively, and a 19% increase in tonnage.
Airfreight services revenues increased 10% during the nine months ended September 30, 2024, as compared with the same period in 2023, mainly due to a 13% increase in tonnage partially offset by a 2% decrease in average sell rates. Airfreight services costs increased 13% primarily due to a 13% increase in tonnage and 1% increase in average buy rates. Average sell rates increased in North Asia, South Asia and Middle East, Africa and India as a result of higher buy rates while they decreased in North America and Europe as a result of lower buy rates.
Tonnage increased during the three and nine months ended September 30,2024, as compared with the same periods in 2023, as a result of increased market demand primarily in healthcare and technology sectors compared to a slow first nine months in 2023 and some transportation shifting from ocean shipping in the second and third quarter of 2024 due to the conflicts in the Middle East. Tonnage increased in all regions during the three and nine months ended September 30, 2024.
Average sell and buy rates increased during the three and nine months ended September 30, 2024 on exports out of North Asia due to high demand from international direct e-commerce. Average buy rates also increased on exports out of South Asia and India as demand for airfreight grew from manufacturing relocations in that region and shippers shifting to airfreight due to longer transits in ocean as a result of the conflicts in the Middle East. Average sell and buy rates decreased during the three months and nine months ended September 30, 2024 on exports out of North America and Europe due to excess available capacity over slower demand and still high buy rates in the first quarter of 2023.
Seasonal changes in demand, impact from disruptions in the ocean market due to security and port congestion concerns and variable demand for airfreight capacity from direct e-commerce business cause volatility in average buy rates on certain lanes. Additionally, continued uncertainty in the economy including the impacts of geopolitical concerns could negatively affect demand for airfreight services which could reduce our volumes and average sell rates. These conditions could result in decreases in our revenues, expenses and operating income. We are unable to predict how these uncertainties and any future disruptions will affect our operations or financial results prospectively.
Ocean freight and ocean services:
Ocean freight consolidation, direct ocean forwarding, and order management are the three basic services that constitute and are collectively referred to as ocean freight and ocean services. Ocean freight and ocean services revenues and expense increased 82% and 102%, respectively, for the three months ended September 30, 2024 as compared with the same period in 2023. Ocean freight and ocean services revenues and expense increased 21% and 31%, respectively, for the nine months ended September 30, 2024 as compared with the same period in 2023.The largest component of our ocean freight and ocean services revenue is derived from ocean freight consolidation, which represented 70% and 66% of ocean freight and ocean services revenue for the nine months ended September 30, 2024 and 2023, respectively.
Ocean freight consolidation revenues and expenses increased 125% and 142%, respectively, for the three months ended September 30, 2024, as compared with the same period in 2023, primarily due to 101% and 115% increases in average sell and buy rates, and a 12% increase in containers shipped. Average buy rates per container increased due to strong demand and longer transit times, congestion and capacity issues caused by the disruptions in the Red Sea. Importers front loaded shipments creating a peak in demand starting in June 2024 in anticipation of potential US East and Gulf Coast ports disruptions and factoring in longer transit times. These conditions boosted volumes and caused sharp increases in buy rates in the third quarter of 2024.
Ocean freight consolidation revenues and expenses increased 29% and 41% for the nine months ended September 30, 2024, as compared with the same period in 2023, primarily due to increases of 24% in average sell rates and 35% in average buy rates. Overall, the sharp rise in average buy and sell rates in the third quarter offset declines in the first half of the year. Containers shipped increased 4%. We expect carrier capacity to grow more than customer demand in the near term and average buy and sell rates to decline as a result. If safe passage through the Red Sea resumes, additional capacity will become available as a result of shorter transit times, which will put additional pressure on pricing.
North Asia and South Asia ocean freight and ocean services revenues increased 135% and 164% and expenses increased 161% and 210%, respectively, for the three months ended September 30, 2024, compared to the same period in 2023. North Asia and South Asia ocean freight and ocean services revenues increased 55% and 68% and expenses increased 68% and 91%, respectively, for the nine months ended September 30, 2024, compared to the same periods in 2023. Increases were primarily due to higher average sell and buy rates due to the factors above.
17
North America ocean freight and ocean services revenues increased 7% primarily due to higher revenues on imports while expenses decreased 24% due to lower buy rates on exports and a 1% decline in containers shipped, for the three months ended September 30, 2024, compared to the same period in 2023. North America and Europe ocean freight and ocean services revenues decreased 14% and 21%, respectively, and expenses decreased 23% for both for the nine months ended September 30, 2024, compared to 2023. Decreases were primarily due to lower average sell and buy rate and declines in container shipped.
Order management revenues increased 35% and 25%, respectively, and expenses increased 40% and 27%, respectively, for the three and nine months ended September 30, 2024, due to increases in volumes from new and existing customers. Direct ocean freight forwarding revenues and expenses increased 2% and 6%, respectively, for the three months ended September 30, 2024. Direct ocean freight forwarding revenues and expenses decreased 5% and 2%, respectively, for the nine months ended September 30, 2024 principally due to lower volumes and lower rates for ancillary services in the United States.
Global economic conditions remain uncertain. Further, carriers are adding new vessels which will increase capacity. In addition, if safe passage through the Red Sea resumes, additional capacity will become available due to shorter transit times. These conditions could depress sell and buy rates. We expect that pricing volatility will continue as carriers adapt to fluctuations in fuel prices, new regulations, security risks and manage available capacity. As customers seek lower pricing and react to governmental trade policies and other regulations, this could result in further decreases in our revenues and operating income.
Customs brokerage and other services:
Customs brokerage and other services revenues increased 10% and expenses increased 14% for the three months ended September 30, 2024, respectively, as compared with the same period in 2023, primarily due to increases in customs clearances, import services and road freight from higher shipment volumes, principally in North America.
Customs brokerage and other services revenues remained flat while expenses increased 1% for the nine months ended September 30, 2024, respectively, as compared with the same period in 2023, primarily as increases in customs clearances and road freight shipments were offset by lower volumes for local drayage and storage and warehouse and distribution services, principally in North America. Import services, including charges at ports such as detention, drayage, terminal charges and delivery, decreased significantly in the first quarter 2024 as compared to the first quarter of 2023 that still had residual effects from the supply chain congestion. Road freight, warehousing and distribution services also declined in the first quarter of 2024 due to lower volumes and decreased trucking, storage and labor costs.
While customers continue to value our brokerage services due to changing tariffs and increasing complexity in the declaration process, some customers are opting to use back up customs brokerage service providers as a risk reduction strategy. Customers continue to seek knowledgeable customs brokers with sophisticated computerized capabilities critical to an overall logistics management program that are necessary to rapidly respond to changes in the regulatory and security environment. Should international trade slow, volumes shipped and pricing could negatively impact our revenues and expenses.
Overhead expenses:
Salaries and related costs increased 9% for the three months ended September 30, 2024 as compared with the same period in 2023 principally due to increases in commissions and bonuses earned from higher revenues and operating income while headcount remained flat. During the nine months ended September 30, 2024, salaries and related costs remained flat, consistent with operating income and headcount.
Historically, the relatively consistent relationship between salaries and operating income has been the result of a compensation philosophy that has been maintained since the inception of our company: offer a modest base salary and the opportunity to share in a fixed and determinable percentage of the operating profit of the business unit controlled by each key employee. Using this compensation model, changes in individual incentive compensation occur in proportion to changes in our operating income, creating an alignment between branch and corporate performance and shareholder interests.
Our management compensation programs have always been incentive-based and performance driven. Total bonuses to field and executive management for the nine months ended September 30, 2024, decreased 1% when compared to the same periods in 2023, primarily due to operating income remaining flat.
18
Because our management incentive compensation programs are also cumulative, generally no management bonuses can be paid unless the relevant business unit is, from inception, cumulatively profitable. Any operating losses must be offset in their entirety by operating profits before management is eligible for a bonus. Executive management, in limited circumstances, makes exceptions at the branch operating unit level. Since the most significant portion of management compensation comes from the incentive bonus programs, we believe that this cumulative feature is a disincentive to excessive risk taking by our managers. The outcome of any higher risk transactions, such as overriding established credit limits, would be known in a relatively short time frame. Management believes that when the potential and certain impact on the bonus is fully considered in light of the short operating cycle of our services, the potential for short-term gains that could be generated by engaging in risky business practices is sufficiently mitigated to discourage excessive and inappropriate risk taking. Management believes that both the stability and the long-term growth in revenues, operating income and net earnings are a result of the incentives inherent in our compensation programs.
Other overhead expenses decreased 3% or $5 million for the three months ended September 30, 2024, as compared with the same period in 2023. This decrease in 2024 is primarily the result of a $14 million decrease in expenses related to indirect tax contingencies, partially offset by higher rental expenses, travel and technology related expenses. For the nine months ended September 30, 2024, other overhead expense remained flat compared to the same period in 2023 as higher rental expenses, travel and technology related expenses were offset by a $21 million decrease in expenses related to indirect tax contingencies.
So long as the economic environment remains uncertain, we will be focused on aligning operational headcount and our overhead expenses commensurate with our transactional volumes. We expect to continue to enhance security and internal controls over our technology and systems and plan to deploy additional solutions which will result in increased expenses in the future. We will also continue to make important investments in people, processes and technology, as well as to invest in our strategic efforts to explore new areas for profitable growth.
Income tax expense:
Our consolidated effective income tax rate was 26.4% for both the three and nine months ended September 30, 2024, as compared to 26.3% and 25.8% in the comparable periods of 2023. For the three and nine months ended September 30, 2024, and 2023, there was no BEAT expense and GILTI expense was insignificant. All periods benefited from U.S. income tax deductions for FDII as well as available U.S. Federal foreign tax credits principally from withholding taxes related to our foreign operations. We have no liability as of September 30, 2024, for the 15% corporate alternative minimum tax based on financial statement income (BMT), which became effective in 2023 in the U.S., under the Inflation Reduction Act. Some elements of the recorded impacts of the Inflation Reduction Act could be impacted by further legislative action as well as additional interpretations and guidance issued by the Internal Revenue Service or Treasury which could impact the estimates of the amounts the Company would be required to record for BMT in the future.
Currency and Other Risk Factors
The nature of our worldwide operations necessitates transacting in a multitude of currencies other than the U.S. dollar. That exposes us to the inherent risks of volatile international currency markets and governmental interference. Some of the countries where we maintain offices and/or have agency relationships maintain strict currency control regulations that influence our ability to hedge foreign currency exposure. We try to compensate for these exposures by accelerating international currency settlements among our offices and agents. We may enter into foreign currency hedging transactions where there are regulatory or commercial limitations on our ability to move money freely around the world or the short-term financial outlook in any country is such that hedging is the most time-sensitive way to mitigate short-term exchange losses. Any such hedging activity during the three and nine months ended September 30, 2024 and 2023 was insignificant. We had no foreign currency derivatives outstanding at September 30, 2024 and December 31, 2023. For the three months ended September 30, 2024, net foreign currency losses were approximately $11 million compared to net foreign currency losses of less than $1 million in the same period in 2023. During the nine months ended September 30, 2024, net foreign currency gains were less than $1 million compared to net foreign currency losses of approximately $6 million in the same period in 2023.
19
Historically, our business has not been adversely affected by inflation. Beginning in 2021 and continuing through 2024, many countries including the United States experienced increasing levels of inflation. As a result, our business continues to experience rising labor costs, service provider rate increases, higher rent and occupancy and other expenses. While buy rates for freight transportation capacity started declining in the second half of 2022, purchase prices for labor and other expenditures have continued to increase. Due to the high degree of competition in the marketplace we may not be able to increase our prices to our customers to offset this inflationary pressure, which could lead to an erosion in our margins and operating income in the future. Conversely, raising our prices to keep pace with inflationary pressure may result in a decrease in volume and customer demand for our services. As we are not required to purchase or maintain extensive property and equipment and have not otherwise incurred substantial interest rate-sensitive indebtedness, we currently have limited direct exposure to increased costs resulting from increases in interest rates.
There is uncertainty as to how future regulatory requirements and volatility in oil prices will continue to impact future buy rates. Because fuel is an integral part of carriers' costs and impacts both our buy rates and sell rates, we would expect our revenues and costs to be impacted as carriers adjust rates for the effect of changing fuel prices. To the extent that future fuel prices increase, and we are unable to pass through the increase to our customers, fuel price increases could adversely affect our operating income.
Liquidity and Capital Resources
Our principal source of liquidity is cash and cash equivalents and cash generated from operating activities. Net cash provided by operating activities for the three and nine months ended September 30, 2024 was $90 million and $474 million as compared with $190 million and $895 million for the same period in 2023. The decreases of $100 million and $421 million for the three and nine months ended September 30, 2024, were primarily due to changes in working capital. At September 30, 2024, working capital was $1,707 million, including cash and cash equivalents of $1,293 million. Other than our recorded lease liabilities, we had no long-term obligations or debt at September 30, 2024. Management believes that our current cash position and operating cash flows will be sufficient to meet our capital and liquidity requirements for at least the next 12 months and thereafter for the foreseeable future, including meeting any contingent liabilities related to standby letters of credit and other obligations.
As a customs broker, we make significant cash advances for a select group of our credit-worthy customers. These cash advances are for customer obligations such as the payment of duties and taxes to customs authorities in various countries throughout the world. Increases in duty rates could result in increases in the amounts we advance on behalf of our customers. Cash advances are a “pass through” and are not recorded as a component of revenue and expense. The billings of such advances to customers are accounted for as a direct increase in accounts receivable from the customer and a corresponding increase in accounts payable to governmental customs authorities. As a result of these “pass through” billings, the conventional Days Sales Outstanding or DSO calculation does not directly measure collection efficiency. For customers that meet certain criteria, we have agreed to extend payment terms beyond our customary terms. Management believes that it has established effective credit control procedures, and historically has experienced relatively insignificant collection problems.
Our business historically has been subject to seasonal fluctuations, and this is expected to continue in the future. Cash flows fluctuate as a result of this seasonality. Historically, the first quarter shows an excess of customer collections over customer billings. This results in positive cash flow. The increased activity associated with periods of higher demand (typically commencing late second or early third quarter and continuing well into the fourth quarter) causes an excess of customer billings over customer collections. This cyclical growth in customer receivables consumes available cash. However, there is no assurance that this seasonal trend will occur in the future.
Cash used in investing activities for the three and nine months ended September 30, 2024 was $13 million and $30 million as compared with $8 million and $29 million for the same periods in 2023, primarily for capital expenditures. Capital expenditures in the three and nine months ended September 30, 2024 were primarily related to continuing investments in building and leasehold improvements and technology and facilities equipment. Total anticipated capital expenditures in 2024 are currently estimated to be $50 million. This includes routine capital expenditures, leasehold and building improvements and investments in technology.
Cash used in financing activities during the three and nine months ended September 30, 2024 was $76 million and $659 million as compared with $229 million and $1,247 million for the same period in 2023. We use the proceeds from stock option exercises, employee stock purchases and available cash to repurchase our common stock on the open market to reduce outstanding shares. During both the three and nine months ended September 30, 2024, we used cash to repurchase 1.2 million and 5.1 million shares of common stock, compared to 2.6 million and 10.5 million shares of common stock during the same periods in 2023.
20
We follow established guidelines relating to credit quality, diversification and maturities of our investments to preserve principal and maintain liquidity. Historically, our investment portfolio has not been adversely impacted by disruptions occurring in the credit markets. However, there can be no assurance that our investment portfolio will not be adversely affected in the future.
We cannot predict what further impact ongoing uncertainties in the global economy, inflation, future interest rates, and political conflicts and uncertainty, may have on our operating results, freight volumes, pricing, amounts advanced on behalf of our customers, changes in consumer demand, carrier stability and capacity, customers’ abilities to pay or changes in competitors' behavior.
We maintain international unsecured bank lines of credit for short-term working capital purposes. A few of these credit lines are supported by standby letters of credit issued by a United States bank or guarantees issued by the Company to the foreign banks issuing the credit line. At September 30, 2024, borrowings under these credit lines were $48 million and we were contingently liable for $87 million from standby letters of credit and guarantees. The standby letters of credit and guarantees primarily relate to obligations of our foreign subsidiaries for credit extended in the ordinary course of business by direct carriers, primarily airlines, and for duty and tax deferrals available from governmental entities responsible for customs and value-added-tax (VAT) taxation. The total underlying amounts due and payable for transportation and governmental excises are properly recorded as obligations in the accounting records of the respective foreign subsidiaries, and there would be no need to record additional expense in the unlikely event the parent company is required to perform.
We have lease arrangements primarily for office and warehouse space in all districts where we conduct business. As of September 30, 2024, we had fixed lease payment obligations of $699 million, with $141 million payable within 12 months.
We typically enter into unconditional purchase obligations with asset-based providers (generally short-term in nature) reserving space on a guaranteed basis. The pricing of these obligations varies to some degree with market conditions. We only enter into agreements that management believes we can fulfill. In the regular course of business, we also enter into agreements with service providers to maintain or operate equipment, facilities or software that can be longer than one year. We also regularly have contractual obligations for specific projects related to improvements of our owned or leased facilities and information technology infrastructure. Purchase obligations outstanding as of September 30, 2024 totaled $217 million.
Our foreign subsidiaries regularly remit dividends to the U.S. parent company after evaluating their working capital requirements and funds necessary to finance local capital expenditures. In some cases, our ability to repatriate funds from foreign operations may be subject to foreign exchange controls. At September 30, 2024, cash and cash equivalent balances of $635 million were held by our non-United States subsidiaries, of which $4 million was held in banks in the United States. Earnings of our foreign subsidiaries are not considered to be indefinitely reinvested outside of the United States.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. These risks are primarily related to foreign exchange risk and changes in short-term interest rates. The potential impact of our exposure to these risks is presented below:
Foreign Exchange Risk
We conduct business in many different countries and currencies. Our business often results in billings issued in a country and currency that differs from that where the expenses related to the service are incurred. In the ordinary course of business, we create numerous intercompany transactions and may have receivables, payables and currencies that are not denominated in the local functional currency. This brings foreign exchange risk to our earnings. The principal foreign exchange risks to which Expeditors is exposed include Chinese Yuan, Indian Rupee, Euro, Mexican Peso, Canadian Dollar and British Pound.
Foreign exchange rate sensitivity analysis can be quantified by estimating the impact on our earnings as a result of hypothetical changes in the value of the U.S. dollar, our functional currency, relative to the other currencies in which we transact business. All other things being equal, an average 10% weakening of the U.S. dollar, throughout the nine months ended September 30, 2024, would have had the effect of raising operating income by approximately $45 million. An average 10% strengthening of the U.S. dollar, for the same period, would have the effect of reducing operating income by approximately $37 million. This analysis does not take into account changes in shipping patterns based upon this hypothetical currency fluctuation. For example, a weakening in the U.S. dollar would be expected to increase exports from the United States and decrease imports into the United States over some relevant period of time, but the exact effect of this change cannot be quantified without making speculative assumptions.
21
We currently do not use derivative financial instruments to manage foreign currency risk and only enter into foreign currency hedging transactions in limited locations where regulatory or commercial limitations restrict our ability to move money freely. Any such hedging activity throughout the three and nine months ended September 30, 2024 and 2023 was insignificant. For the three months ended September 30, 2024, net foreign currency losses were approximately $11 million compared to less than $1 million of net losses during the same period in 2023. During the nine months ended September 30, 2024 net foreign currency gains were less than $1 million compared to net foreign currency losses of approximately $6 million during the same period in 2023. We had no foreign currency derivatives outstanding at September 30, 2024 and December 31, 2023. We instead follow a policy of accelerating international currency settlements to manage foreign exchange risk relative to intercompany billings. As of September 30, 2024, we had approximately $87 million of net unsettled intercompany transactions. The majority of intercompany billings are resolved within 30 days.
Interest Rate Risk
At September 30, 2024, we had cash and cash equivalents of $1,293 million of which $614 million was invested at various short-term market interest rates. We had no long-term debt at September 30, 2024. A hypothetical change in the interest rate of 10 basis points at September 30, 2024 would not have a significant impact on our earnings. In management’s opinion, there has been no material change in our interest rate risk exposure in the third quarter of 2024.
Item 4. Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report due to material weaknesses in internal control over financial reporting as described below.
Management concluded that unauthorized changes to databases and related applications could have gone undetected as controls to review and authorize direct changes that support several key operational and accounting systems excluded certain changes from review or were not captured, and as such were either not designed properly or did not operate effectively as designed. In addition, the system logic used to record direct changes excluded certain changes from being captured for review. These control deficiencies related to personnel without specific training and experience to fulfill internal control responsibilities related to information technology general controls over systems and processes resulting in an ineffective design of controls necessary to ensure the reliability of information used in financial reporting. As a consequence of these control deficiencies, the Company concluded that it did not effectively design, implement and operate process-level controls across its financial reporting processes.
In light of the material weaknesses, management performed additional analysis and other procedures to ensure that our consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP). Accordingly, management believes that the consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented, in accordance with U.S. GAAP.
22
Remediation
As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2023, we continue to take steps to remediate the material weaknesses, including:
As described in our last quarterly report, certain steps were completed but as we continued our remediation process and review, we identified additional controls that were not designed or operated appropriately that relate to the above-described material weaknesses. The material weaknesses will not be considered fully remediated, until the applicable controls operate for a sufficient period of time and management has concluded, through additional testing, that these controls are operating effectively. At this time, we are not able to estimate when full remediation of these material weaknesses will be completed.
Changes in Internal Controls
Except for on-going remediation related to the material weaknesses, there were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We are developing a new accounting system, which is being implemented on a worldwide basis over the next several years. This system is expected to improve the efficiency of certain financial and transactional processes and reporting. This transition affects the processes that constitute our internal control over financial reporting and requires testing for operating effectiveness.
An internal control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of such internal controls are met. Further, the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all internal control systems, no evaluation of controls can provide absolute assurance that all of our control issues and instances of fraud, if any, have been detected.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Expeditors is involved in claims, lawsuits, government investigations, income, transfer pricing and indirect tax audits and other legal matters that arise in the ordinary course of business and are subject to inherent uncertainties. Currently, in management's opinion and based upon advice from legal and tax advisors, none of these matters are expected to have a material effect on our operations, cash flows or financial position. As of September 30, 2024, the amounts recorded for claims, lawsuits, government investigations and other legal matters are not significant to our operations, cash flows or financial position. At this time, we are unable to estimate any additional loss or range of reasonably possible losses, if any, beyond the amounts recorded, that might result from the resolution of these matters.
Item 1A. Risk Factors
In addition to the other information set forth in this report, careful consideration should be given to the risk factors under Item 1A Risk Factors in our Annual Report on Form 10-K filed on February 23, 2024. There have been no material changes in Expeditors' risk factors from those disclosed under Item 1A Risk Factors in our annual report on Form 10-K filed on February 23, 2024, except for the following:
23
Operational Risks
We face risks associated with the handling, transporting, and storing of customer inventory, including high value commodities.
Under some of our agreements, we maintain and transport the inventory of our customers, some of which may be high value in nature. Our failure to properly handle and safeguard such inventory exposes us to potential claims and expenses as well as harm to our business and reputation.
Our insurance coverage does not cover all potential losses and significant uninsured losses could adversely impact our financial results.
We carry insurance coverage for property damage, personal injury and other insurable events resulting from certain events such as fire, accidents, and other perils under extended coverage policies. Our insurance coverages contain policy specifications and insured limits customarily carried for similar locations, business activities and markets. We believe we are adequately insured. Certain losses, however, including losses from floods, earthquakes, acts of war, acts of terrorism or riots, cybersecurity events and pandemics, generally are not insured against or not fully insured against because it is not deemed economically feasible or prudent to do so. In some instances, the value of our customers’ goods stored in a single facility or contained in a single shipment may be high in nature and may exceed our general property damage insurance policy limits. If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of our facilities in the future, we could experience a significant loss of assets, including customer inventory (inclusive of high value commodities), and future operations could be harmed resulting in a loss of revenues or higher claims and operating expenses.
Furthermore, we cannot be sure that the insurance companies will be able to continue to offer products with sufficient coverage at commercially reasonable rates. If we experience a loss that is uninsured or that exceeds insured limits, then we could incur additional expenses or a loss of future revenues from a facility that is damaged. Any such losses or higher insurance costs could adversely affect our business.
General Risks
We identified material weaknesses in our internal control over financial reporting related to ineffective information technology general controls which, if not remediated appropriately or timely, could result in loss of investor confidence and adversely impact our stock price.
Internal controls related to the operation of technology systems are critical to maintaining adequate internal control over financial reporting. As disclosed in Part II, Item 9A, during the fourth quarter of 2022, management identified material weaknesses in internal control related to certain database changes made to information technology (IT) systems that support the Company’s financial reporting processes. As management continued the remediation process and reviews, we identified additional IT controls that were not designed or operated appropriately that relate to these material weaknesses. Management concluded that unauthorized changes to databases and related applications could have gone undetected as controls to review and authorize direct changes that support several key operational and accounting systems excluded certain changes from review or were not captured, and as such were either not designed properly or did not operate effectively as designed. In addition, the system logic used to record direct changes excluded certain changes from being captured for review. As a result, management concluded that our internal control over financial reporting was not effective as of December 31, 2022 and 2023 and as of the date of this report. At this time, we are not able to estimate when full remediation of these material weaknesses will be completed. The material weaknesses will not be considered fully remediated, until the applicable controls operate for a sufficient period of time and management has concluded through additional testing that these controls are operating effectively. To the extent management is unable to ultimately conclude that the identified issues have been remediated, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.
24
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
ISSUER PURCHASES OF EQUITY SECURITIES
Period |
|
Total number |
|
|
Average price |
|
|
Total number |
|
|
Maximum |
|
||||
July 1-31, 2024 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,126 |
|
August 1-31, 2024 |
|
|
1,182 |
|
|
$ |
118.47 |
|
|
|
1,182 |
|
|
|
9,964 |
|
September 1-30, 2024 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,971 |
|
Total |
|
|
1,182 |
|
|
$ |
118.47 |
|
|
|
1,182 |
|
|
|
9,971 |
|
In November 2001, Expeditors' Board of Directors authorized a Discretionary Stock Repurchase Plan for the purpose of repurchasing our common stock in the open market to reduce the issued and outstanding stock down to 200 million outstanding shares. Subsequently, the Board of Directors has from time to time increased the amount of our common stock that may be repurchased. On February 19, 2024, the Board of Directors last authorized repurchases from 140 million shares of common stock down to 130 million outstanding shares of common stock. The maximum number of shares available for repurchase under this plan will increase as the total number of outstanding shares increases. This authorization has no expiration date.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
25
Item 6. Exhibits
Exhibits required by Item 601 of Regulation S-K.
Exhibit Number |
|
Description |
31.1 |
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
|
104 |
|
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, has been formatted in Inline XBRL. |
26
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. |
|
|
|
November 5, 2024 |
|
/s/ JEFFREY S. MUSSER |
|
|
Jeffrey S. Musser, President, Chief Executive Officer and Director |
|
|
|
November 5, 2024 |
|
/s/ BRADLEY S. POWELL |
|
|
Bradley S. Powell, Senior Vice President and Chief Financial Officer |
27