1: permanence, duration
2: the ability to withstand
hardship or adversity; especially:
the ability to sustain a prolonged
stressful effort or activity
To Our Shareholders
2012 – Another year, another anomaly. Apart
from coming through a difficult year, as usual,
we did pretty well. Tough times don’t last,
tough people do, and we have an abundance of
those such people.
The bright, albeit bitter sweet, note was a
It’s not politically correct, and seldom are
Our c arrier relations , b oth O c ean and
closure letter from the D.O.J.; one paragraph
we, to continue our hiring freeze. But,
A ir, are s olid and we have g reat third -
indicating that we were no longer a subject
first and
foremost our commitment
to
p ar t y p ar tner s . We c ontinue
to
t ake
of their industry-wide investigation into anti-
shareholder value must begin with our
prof i t able market share wi thou t
lo sing
competitive behavior. Five years and nearly
commitment to protect the people who are
any thing sig nif ic ant . shipment c ount is up
twenty million dollars later, we’re very pleased
here. They are the ones who create that
de spi te smaller volume and le s s weig ht in
to have emerged from this D.O.J. ordeal as we
value and they and their families come first.
shipment s . More market share in declining
thought we would, i.e. no adverse findings and
I refrain from any political statements as
market s is dif f icul t to measure. A s we’ve
no fines or penalties. The one company that
this letter would be ten pages in leng th. We
shown in the p as t , the true measurement
got immunity got off free from their admitted
continue our improvement in I.T. solutions
of tho s e down - market gains b e c ome mo s t
misdeeds and cost the entire industry millions.
with a great team and also have a ver y
acu tely measur able when
the market
It’s a shame, but the saga is over.
robust compliance system globally.
turns … and i t will turn.
Because of
the global economy, 2013
This year we opened new offices in santo
We will endure next year and as always we
should be only slightly better. As we enter
Domingo in the Dominican Republic Monte-
thank our shareholders, our customers, our
our 34th year, there is one word that lights
video, Uruguay, Copenhagen, Denmark and
carriers, and, most impor tantly, the best
our company – ENDURANCE. When asked
luxembourg. We also had an open house for
people in the industry – ours.
“what’s in store for the future,” the answer
our office in Beijing which is state of the art.
is always the same, “just more of the same.”
peter J. Rose
Chairman of the Board & CEO
Certain portions of this document contain information not included in the Company’s Form 10-K filed on February 27,
2013 and thereby may not be subject to the notice of forward-looking statements contained therein. Those portions
not included in the referenced Form 10-K include the Chairman and Chief Executive Officer’s letter to shareholders, as
well as comments written by each of the Company’s three Geographical presidents which also contain certain forward-
looking statements that are based on certain assumptions and expectations of future events that are subject to risks
and uncertainties. Actual future results and trends may differ materially from historical results or those projected in any
forward-looking statements depending on a variety of factors including, but not limited to, successful implementation
of or future benefits from third-party and self-developed software systems, global economic or political environments,
ability to increase future market share, obtain new customers, or maintain current customers; ability to control future
expenses; changes in customer demand for Expeditors’ services caused by a general economic slow-down, inventory
build-up, decreased consumer confidence, volatility in equity markets, energy prices, political changes, changes in foreign
currency rates, or the unpredictable acts of competitors, as well as any and all forward-looking statements contained in
the above-referenced Form 10-K.
201 2 ExpEDI TORs ANNUAl REpORT
| 3
Asia Pacific
2012 was definitely a difficult year for most
With the ongoing uncer tainties in the world
businesses, and ours was no exception. The
economy, the outlook for 2013 is somewhat
market competition was extremely severe,
hazy at this point in time. We are prepared
however we took an aggressive approach to
for carriers to continue to aggressively
increase our business and successfully “on-
manage capacity, and for customers to
boarded” quite a few “new logos.” On the other
persist in their drive for logistics providers
hand, we exercised prudent expense control
to offer lower costs and increased liability
to minimize the impact on our operating
limits. In response to that, we will stick
income of slightly narrowed margins. Despite
with our core competency to
focus on
the challenging market conditions, our
extraordinary customer service
through
continued investment in infrastructure and
offering total solutions, strategic trade lane
new products was rewarded by the growth we
capability and product diversification. Most
experienced in our Transcon and Distribution
impor tantly, we are continuing to invest in
services businesses.
our people and in servicing the network,
with strong confidence that our business will
keep growing in the coming years… and we
are ready for it!
James l .K. Wang
president - Asia p acific
201 2 ExpEDI TORs ANNUAl REpORT
| 5
The Americas
2012 was a challenging year
for
the
Americas from a growth perspective. While
not up to our usual growth standards,
we still continued to make the kinds of
critical investments within the Region that
managing for the long-term requires.
We expanded our footprint in latin America,
by opening
in santo Domingo, Dominican
Republic which is a major market in the
Caribbean for us, particularly in the garment
industry. We also opened Montevideo,
Uruguay which has a stable economy and a
Free Trade Zone to service our customers in
the deep south of latin America. We expanded
our service offering in lima, peru, by opening
a separate customs brokerage company.
We continued to
invest
in defending and
experience in the logistics industry. Twinning
which will allow our Ocean Expor t managers
extending our market share with existing
industry knowledge and experience with powerful
to navigate and manage contracts and
customers by
implementing our Customer
analytical
techniques not only has great
quotations to our customers faster and with
Retention Development program. Expanding
potential for us, it has already made an impact
more efficiency. We anticipate that these
our capabilities with Business Analytics is
on our customer service capabilities.
investments will star t to pay off in 2013.
another area where the region has invested.
We have a dedicated group who use state of
We’ve invested in diversifying our product
looking forward to 2013, one area of focus
the art analytics software to help us make
mix through investments in our distribution
will be continued network expansion. panama
more educated operational decisions. This
services capabilities made by
installing
is next on our list of planned locations. Data
influences
the way we purchase, how
a high-end third par ty software suite. We
Analytics will take on an increasingly major role
we organize our sales force and related
believe, this enhanced capability will help
in our sales, operations, productivity, service
infrastructure and how we
improve the
us meet the needs of the more complex,
provider management
and
procurement
efficiency of our customer billings. The
sophisticated distribution accounts, par tic-
efforts. Finally, we will continue our focus on
significant thing about this group is that they are
ularly those accounts requiring assistance
compliance, as we see this as a differentiator
not “hired guns” or the infamous “quants” with no
with VMI (Vendor Managed Inventory). We
that
is an
inseparable component of our
knowledge of the business. They are Expeditors
invested in our Ocean Expor t functionality
continued commitment to provide the best
employees, who all have detailed knowledge and
by implementing a software-based solution
customer service in any industry.
Rober t l . Villanueva
president - The Americas
201 2 ExpEDI TORs ANNUAl REpORT
| 7
EMAIR
We experienced another tough year in 2012
“project EMAIR,” is the theme for our focus,
throughout the entire EMAIR region. However,
goals and objectives for 2013. This includes
with our dedicated staff, our customers’
cost cutting and cost containment through
suppor t, and the impor tant relationships we
maintaining a hiring freeze, traveling less,
have with our service providers’, we held on.
working more closely with our service providers
We also closely watched our expenses and
and reducing total cost through technology
put a major emphasis on customer retention
and innovation. We also believe that this focus
and customer service.
will create and increase business volumes.
Key to our success for “project EMAIR” is our
objective to drive increased revenue from new
strategic EMAIR-based accounts,
increase
our overall market share in all products, and
to increase our business from our existing
clients. As usual I want to thank each and
every EMAIR employee, our customers and our
service providers.
Rommel C. s aber
president - Europe, Africa
Near/Middle East &
Indian s ubcontinent
201 2 ExpEDI TORs ANNUAl REpORT
| 9
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Financial Condition and Results of Operations” and Item 1A - "Risk Factors in this report.
For the fiscal year ended December 31, 2012
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-13468
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
(Exact name of registrant as specified in its charter)
Washington
(State or other jurisdiction of
incorporation or organization)
1015 Third Avenue, 12thFloor, Seattle, Washington
(Address of principal executive offices)
91-1069248
(I.R.S. Employer
Identification Number)
98104
(Zip Code)
(206) 674-3400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $.01 per share
Name of each exchange on which registered
NASDAQ Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
At June 29, 2012, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately
$8,018,868,890.
At February 21, 2013, the number of shares outstanding of registrant’s Common Stock was 206,497,492.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the Registrant’s 2013 Annual Meeting of Shareholders to be held on May 1, 2013 are
incorporated by reference into Part III of this Form 10-K.
Forward-Looking Statements
In accordance with the provisions of the Private Securities Litigation Reform Act of 1995, the Company is making readers aware that forward-
looking statements, because they relate to future events, are by their very nature subject to many important risk factors which could cause actual
results to differ materially from those contained in the forward-looking statements. For additional information about forward-looking statements
and for an identification of risk factors and their potential significance, see “Safe Harbor for Forward-Looking Statements Under Private Securities
Litigation Reform Act of 1995; Certain Cautionary Statements” immediately preceding Part II, Item 7 “Management’s Discussion and Analysis of
PART I
ITEM 1—BUSINESS
Expeditors International of Washington, Inc. is engaged in the business of providing global logistics services. The Company offers its customers
a seamless international network supporting the movement and strategic positioning of goods. The Company’s services include the consolidation
or forwarding of air and ocean freight. In each United States office, and in many overseas offices, the Company acts as a customs broker. The
Company also provides additional services including value-added distribution, vendor consolidation, cargo insurance, domestic time definite
transportation services, purchase order management and customized logistics solutions. The Company does not compete for overnight courier
or small parcel business and does not own aircraft or steamships.
Beginning in 1981, the Company’s primary business focus was on airfreight shipments from Asia to the United States and related customs
brokerage and other services. In the mid-1980’s, the Company began to expand its service capabilities in export airfreight, ocean freight and
distribution services. Today the Company offers a complete range of global logistics services to a diversified group of customers, both in terms
of industry specialization and geographic location. As opportunities for profitable growth arise, the Company plans to create new offices. While
the Company has historically expanded through organic growth, the Company has also been open to growth through acquisition of, or establishing
joint ventures with, existing agents or others within the industry.
At January 31, 2013, the Company, including its majority-owned subsidiaries, is organized functionally in geographic operating segments and
operates full service offices in the regions identified below. Full service offices have also been established in locations where the Company
maintains unilateral control over assets and operations and where the existence of the parent-subsidiary relationship is maintained by means
other than record ownership of voting stock.
The Company operates full service offices in the following geographic regions:
•
•
•
•
•
United States (47)
Other North America (10)
Latin America (14)
Asia Pacific (44)
Europe and Africa (50)
• Middle East and India (23)
The Company also maintains sales and satellite offices which are aligned with and dependent on one or more full service offices noted above.
Additionally, the Company contracts with independent agents to provide required services and has established 43 such relationships world-
wide.
statements.
The Company was incorporated in the State of Washington in May 1979. Its executive offices are located at 1015 Third Avenue, 12thFloor, Seattle,
Washington, and its telephone number is (206) 674-3400.
The Company’s Internet address is http://www.expeditors.com. The Company makes available free of charge through its Internet website its
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as
reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (SEC).
For information concerning the amount of revenues, net revenues, operating income, identifiable assets, capital expenditures, depreciation and
amortization and equity attributable to the geographic areas in which the Company conducts its business, see Note 10 to the consolidated financial
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-13468
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
(Exact name of registrant as specified in its charter)
Washington
(State or other jurisdiction of
incorporation or organization)
1015 Third Avenue, 12thFloor, Seattle, Washington
(Address of principal executive offices)
91-1069248
(I.R.S. Employer
Identification Number)
98104
(Zip Code)
(206) 674-3400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $.01 per share
Name of each exchange on which registered
NASDAQ Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
At June 29, 2012, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately
$8,018,868,890.
At February 21, 2013, the number of shares outstanding of registrant’s Common Stock was 206,497,492.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the Registrant’s 2013 Annual Meeting of Shareholders to be held on May 1, 2013 are
incorporated by reference into Part III of this Form 10-K.
Forward-Looking Statements
In accordance with the provisions of the Private Securities Litigation Reform Act of 1995, the Company is making readers aware that forward-
looking statements, because they relate to future events, are by their very nature subject to many important risk factors which could cause actual
results to differ materially from those contained in the forward-looking statements. For additional information about forward-looking statements
and for an identification of risk factors and their potential significance, see “Safe Harbor for Forward-Looking Statements Under Private Securities
Litigation Reform Act of 1995; Certain Cautionary Statements” immediately preceding Part II, Item 7 “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and Item 1A - "Risk Factors in this report.
PART I
ITEM 1—BUSINESS
Expeditors International of Washington, Inc. is engaged in the business of providing global logistics services. The Company offers its customers
a seamless international network supporting the movement and strategic positioning of goods. The Company’s services include the consolidation
or forwarding of air and ocean freight. In each United States office, and in many overseas offices, the Company acts as a customs broker. The
Company also provides additional services including value-added distribution, vendor consolidation, cargo insurance, domestic time definite
transportation services, purchase order management and customized logistics solutions. The Company does not compete for overnight courier
or small parcel business and does not own aircraft or steamships.
Beginning in 1981, the Company’s primary business focus was on airfreight shipments from Asia to the United States and related customs
brokerage and other services. In the mid-1980’s, the Company began to expand its service capabilities in export airfreight, ocean freight and
distribution services. Today the Company offers a complete range of global logistics services to a diversified group of customers, both in terms
of industry specialization and geographic location. As opportunities for profitable growth arise, the Company plans to create new offices. While
the Company has historically expanded through organic growth, the Company has also been open to growth through acquisition of, or establishing
joint ventures with, existing agents or others within the industry.
At January 31, 2013, the Company, including its majority-owned subsidiaries, is organized functionally in geographic operating segments and
operates full service offices in the regions identified below. Full service offices have also been established in locations where the Company
maintains unilateral control over assets and operations and where the existence of the parent-subsidiary relationship is maintained by means
other than record ownership of voting stock.
The Company operates full service offices in the following geographic regions:
•
•
•
•
•
United States (47)
Other North America (10)
Latin America (14)
Asia Pacific (44)
Europe and Africa (50)
• Middle East and India (23)
The Company also maintains sales and satellite offices which are aligned with and dependent on one or more full service offices noted above.
Additionally, the Company contracts with independent agents to provide required services and has established 43 such relationships world-
wide.
The Company was incorporated in the State of Washington in May 1979. Its executive offices are located at 1015 Third Avenue, 12thFloor, Seattle,
Washington, and its telephone number is (206) 674-3400.
The Company’s Internet address is http://www.expeditors.com. The Company makes available free of charge through its Internet website its
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as
reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (SEC).
For information concerning the amount of revenues, net revenues, operating income, identifiable assets, capital expenditures, depreciation and
amortization and equity attributable to the geographic areas in which the Company conducts its business, see Note 10 to the consolidated financial
statements.
1
Airfreight Services
Ocean Freight and Ocean Services
Airfreight services accounted for approximately 34, 37 and 38 percent of the Company’s 2012, 2011 and 2010 consolidated revenues net of
freight consolidation expenses (“net revenues”), respectively. When performing airfreight services, the Company typically acts either as a freight
consolidator or as an agent for the airline which carries the shipment. When acting as a freight consolidator, the Company purchases cargo space
from airlines on a volume basis and resells that space to its customers at lower rates than the customers could obtain directly from airlines. When
moving shipments between points where the volume of business does not facilitate consolidation, the Company receives and forwards individual
shipments as the agent of the airline which carries the shipment. Whether acting as a consolidator or agent, the Company offers its customers
knowledge of optimum routing, familiarity with local business practices, knowledge of export and import documentation and procedures, the ability
to arrange for ancillary services, and assistance with space availability in periods of peak demand.
In its airfreight forwarding operations, the Company procures shipments from its customers, determines the routing, consolidates shipments
bound for a particular airport distribution point, and selects the airline for transportation to the distribution point. At the distribution point, the
Company or its agent arranges for the consolidated lot to be broken down into its component shipments and for the transportation of the individual
shipments to their final destinations.
The Company estimates its average airfreight consolidation weighs approximately 2,500 pounds and a typical consolidation includes merchandise
from several shippers. Because shipment by air is relatively expensive compared with ocean transportation, air shipments are generally
characterized by a high value-to-weight ratio, the need for rapid delivery, or both.
The Company typically delivers shipments from a Company warehouse at the origin to the airline after consolidating the freight into containers
or onto pallets. Shipments normally arrive at the destination distribution point within forty-eight hours after such delivery. During peak shipment
periods, cargo space available from the scheduled air carriers can be limited and backlogs of freight shipments may occur. When these conditions
exist, the Company may charter aircraft to meet customer demand.
The Company consolidates individual shipments based on weight and volume characteristics in cost-effective combinations. Typically, as the
weight or volume of a shipment increases, the cost per pound/kilo or cubic inch/centimeter charged by the Company decreases. The rates charged
by airlines to forwarders and others also generally decrease as the weight or volume of the shipment increases. As a result, by aggregating
shipments and presenting them to an airline as a single shipment, the Company is able to obtain a lower rate per pound/kilo or cubic inch/
centimeter than that which it charges to its customers for the individual shipment, while generally offering the customer a lower rate than could
be obtained from the airline for an unconsolidated shipment.
The Company’s airfreight forwarding net revenues from a consolidated shipment include the differential between the rate charged to the Company
by an airline and the rate which the Company charges to its customers, commissions paid to the Company by the airline carrying the freight and
fees for ancillary services. Such ancillary services provided by the Company include preparation of shipping and customs documentation, packing,
crating and insurance services, negotiation of letters of credit, and preparation of documentation to comply with local export laws. When the
Company acts as an agent for an airline handling an unconsolidated shipment, its net revenues are primarily derived from commissions paid by
the airline and fees for ancillary services paid by the customer.
The Company also performs breakbulk services which involve receiving and breaking down consolidated airfreight lots and arranging for distribution
of the individual shipments. Breakbulk service revenues also include commissions from agents for airfreight shipments.
The Company does not own aircraft and does not plan to do so. Management believes that the ownership of aircraft would subject the Company
to undue business risks, including large capital outlays, increased fixed operating expenses, problems of fully utilizing aircraft and competition
with airlines. Because the Company relies on commercial airlines to transport its shipments, changes in carrier financial stability, policies and
practices such as pricing, payment terms, scheduling, capacity and frequency of service may affect its business.
The commercial airline industry as a whole incurred substantial operating losses in 2009. While their operations have improved over 2009 levels,
many airlines remain highly leveraged with debt. Carriers continue to merge and consolidate operations and reduce available capacity to improve
financial results. Some airlines have significantly reduced their reliance on cargo-only aircraft to service their airfreight customers as high technology
consumer products continue to decrease in size and weight and customers improve supply-chain efficiency by utilizing deferred airfreight or
ocean freight whenever possible. The reduction in capacity allows asset-based carriers to raise rates in the face of declining or stable demand.
When fewer planes are flying, the Company has fewer shipping options from which to craft service offerings to meet customers’ needs. The
combination of reduced capacity, higher rates and more infrequent flights could challenge the Company’s ability to maintain historical unitary
profitability.
Ocean freight services accounted for approximately 24, 23 and 23 percent of the Company’s 2012, 2011 and 2010 consolidated net revenues,
respectively. The Company operates Expeditors International Ocean (“EIO”), an Ocean Transportation Intermediary, sometimes referred to as a
Non-Vessel Operating Common Carrier (“NVOCC”) which specializes in ocean freight consolidation in most major trade lanes in the world. EIO
also provides service, on a smaller scale, to and from any location where the Company has an office or agent. As an NVOCC, EIO contracts with
ocean shipping lines to obtain transportation for a fixed number of containers between various points during a specified time period at an agreed
rate. EIO handles full container loads for customers that do not have annual shipping volumes sufficient to negotiate comparable contracts directly
with the ocean carriers and for those customers that prefer to have the flexibility that EIO's multiple carrier contracts and sailings offer. EIO also
solicits Less-than Container Load (“LCL”) freight to fill the containers and charges lower rates than those available directly from shipping lines.
The Company’s revenues as an ocean freight forwarder are also derived from commissions paid by the carrier and revenues from fees charged
to customers for ancillary services which the Company may provide, such as preparing documentation, procuring insurance, arranging for packing
and crating services, and providing consultation. The Company does not own vessels and generally does not physically handle the cargo.
Ocean carriers incurred substantial operating losses in 2009, 2011 and 2012 and many are highly leveraged with debt. While the overall global
volume in 2012 was comparable to 2011, many carriers took delivery of new ships which created excess capacity. This excessive capacity caused
most carriers to redeploy ships and modify sailing schedules to improve financial results. The potential combination of reduced sailing schedules
and pricing volatility could impact the Company’s ability to maintain historical unitary profitability.
Order Management provides services which manage origin consolidation, supplier performance, carrier allocation, carrier performance, container
management, document management, destination management and PO/SKU visibility through a web based application. Customers have the
ability to monitor and report against near real time status of purchase orders from the date of creation through final delivery. Item quantities,
required ship dates, commodity descriptions, estimated vs. actual ex-factory dates, container utilization, supplier performance and document
visibility are many of the managed functions that are visible and reportable via the web. Order Management is available for various modes of
transportation including ocean, air, truck and rail. Order Management revenues are derived from services provided to the shipper as well as
management fees associated with managing purchase order execution against customer specific rules. One basic function of Order Management
involves the taking of cargo from many suppliers in a particular origin and “consolidating” these shipments into the fewest possible number of
containers to maximize space utilization and minimize cost. Through origin consolidation, customers can reduce the number of containers shipped
by putting more product in larger and fewer containers. Data integrity is an increasingly critical function of Order Management. Efficient data
management is a by-product of our operational processes.
Customs Brokerage and Other Services
Customs brokerage and other services accounted for approximately 42, 40 and 39 percent of the Company’s 2012, 2011 and 2010 consolidated
net revenues, respectively. As a customs broker, the Company assists importers to clear shipments through customs by preparing required
documentation, calculating and providing for payment of duties and other taxes on behalf of the importer, arranging for any required inspections
by governmental agencies, and arranging for delivery. The Company also provides other value added services at destination such as warehousing
and distribution, inventory management and time definite transportation services. None of these other services are currently individually significant
to the Company’s net revenues.
The Company provides customs clearance services in connection with many of the shipments it handles as a freight forwarder. However, substantial
customs brokerage revenues are derived from customers that elect to use a competing forwarder. Conversely, shipments handled by the Company
as a forwarder may be processed by another customs broker selected by the customer.
The Company also provides custom clearances for goods moving by rail and truck between the United States, Canada and/or Mexico. The
commodities being cleared and the time sensitive nature of the border brokerage business require the Company to continue to make enhancements
to its systems in order to provide competitive service.
The Company’s wholly-owned subsidiary, Expeditors Tradewin, L.L.C., responds to customer driven requests for high-end customs consulting
services. Fees for these non-transactional services are based upon hourly billing rates and bids for mutually agreed projects.
Marketing and Customers
overseas suppliers.
The Company provides specific solutions tailored to each customer's individual business needs from order inception through order
delivery. Although the domestic importer usually designates the logistics company and the services that will be required, the foreign shipper may
also participate in this selection process. Therefore, the Company coordinates its marketing program to reach both domestic importers and their
2
3
Airfreight Services
Ocean Freight and Ocean Services
Airfreight services accounted for approximately 34, 37 and 38 percent of the Company’s 2012, 2011 and 2010 consolidated revenues net of
freight consolidation expenses (“net revenues”), respectively. When performing airfreight services, the Company typically acts either as a freight
consolidator or as an agent for the airline which carries the shipment. When acting as a freight consolidator, the Company purchases cargo space
from airlines on a volume basis and resells that space to its customers at lower rates than the customers could obtain directly from airlines. When
moving shipments between points where the volume of business does not facilitate consolidation, the Company receives and forwards individual
shipments as the agent of the airline which carries the shipment. Whether acting as a consolidator or agent, the Company offers its customers
knowledge of optimum routing, familiarity with local business practices, knowledge of export and import documentation and procedures, the ability
to arrange for ancillary services, and assistance with space availability in periods of peak demand.
In its airfreight forwarding operations, the Company procures shipments from its customers, determines the routing, consolidates shipments
bound for a particular airport distribution point, and selects the airline for transportation to the distribution point. At the distribution point, the
Company or its agent arranges for the consolidated lot to be broken down into its component shipments and for the transportation of the individual
shipments to their final destinations.
The Company estimates its average airfreight consolidation weighs approximately 2,500 pounds and a typical consolidation includes merchandise
from several shippers. Because shipment by air is relatively expensive compared with ocean transportation, air shipments are generally
characterized by a high value-to-weight ratio, the need for rapid delivery, or both.
The Company typically delivers shipments from a Company warehouse at the origin to the airline after consolidating the freight into containers
or onto pallets. Shipments normally arrive at the destination distribution point within forty-eight hours after such delivery. During peak shipment
periods, cargo space available from the scheduled air carriers can be limited and backlogs of freight shipments may occur. When these conditions
exist, the Company may charter aircraft to meet customer demand.
The Company consolidates individual shipments based on weight and volume characteristics in cost-effective combinations. Typically, as the
weight or volume of a shipment increases, the cost per pound/kilo or cubic inch/centimeter charged by the Company decreases. The rates charged
by airlines to forwarders and others also generally decrease as the weight or volume of the shipment increases. As a result, by aggregating
shipments and presenting them to an airline as a single shipment, the Company is able to obtain a lower rate per pound/kilo or cubic inch/
centimeter than that which it charges to its customers for the individual shipment, while generally offering the customer a lower rate than could
be obtained from the airline for an unconsolidated shipment.
The Company’s airfreight forwarding net revenues from a consolidated shipment include the differential between the rate charged to the Company
by an airline and the rate which the Company charges to its customers, commissions paid to the Company by the airline carrying the freight and
fees for ancillary services. Such ancillary services provided by the Company include preparation of shipping and customs documentation, packing,
crating and insurance services, negotiation of letters of credit, and preparation of documentation to comply with local export laws. When the
Company acts as an agent for an airline handling an unconsolidated shipment, its net revenues are primarily derived from commissions paid by
the airline and fees for ancillary services paid by the customer.
The Company also performs breakbulk services which involve receiving and breaking down consolidated airfreight lots and arranging for distribution
of the individual shipments. Breakbulk service revenues also include commissions from agents for airfreight shipments.
The Company does not own aircraft and does not plan to do so. Management believes that the ownership of aircraft would subject the Company
to undue business risks, including large capital outlays, increased fixed operating expenses, problems of fully utilizing aircraft and competition
with airlines. Because the Company relies on commercial airlines to transport its shipments, changes in carrier financial stability, policies and
practices such as pricing, payment terms, scheduling, capacity and frequency of service may affect its business.
The commercial airline industry as a whole incurred substantial operating losses in 2009. While their operations have improved over 2009 levels,
many airlines remain highly leveraged with debt. Carriers continue to merge and consolidate operations and reduce available capacity to improve
financial results. Some airlines have significantly reduced their reliance on cargo-only aircraft to service their airfreight customers as high technology
consumer products continue to decrease in size and weight and customers improve supply-chain efficiency by utilizing deferred airfreight or
ocean freight whenever possible. The reduction in capacity allows asset-based carriers to raise rates in the face of declining or stable demand.
When fewer planes are flying, the Company has fewer shipping options from which to craft service offerings to meet customers’ needs. The
combination of reduced capacity, higher rates and more infrequent flights could challenge the Company’s ability to maintain historical unitary
profitability.
Ocean freight services accounted for approximately 24, 23 and 23 percent of the Company’s 2012, 2011 and 2010 consolidated net revenues,
respectively. The Company operates Expeditors International Ocean (“EIO”), an Ocean Transportation Intermediary, sometimes referred to as a
Non-Vessel Operating Common Carrier (“NVOCC”) which specializes in ocean freight consolidation in most major trade lanes in the world. EIO
also provides service, on a smaller scale, to and from any location where the Company has an office or agent. As an NVOCC, EIO contracts with
ocean shipping lines to obtain transportation for a fixed number of containers between various points during a specified time period at an agreed
rate. EIO handles full container loads for customers that do not have annual shipping volumes sufficient to negotiate comparable contracts directly
with the ocean carriers and for those customers that prefer to have the flexibility that EIO's multiple carrier contracts and sailings offer. EIO also
solicits Less-than Container Load (“LCL”) freight to fill the containers and charges lower rates than those available directly from shipping lines.
The Company’s revenues as an ocean freight forwarder are also derived from commissions paid by the carrier and revenues from fees charged
to customers for ancillary services which the Company may provide, such as preparing documentation, procuring insurance, arranging for packing
and crating services, and providing consultation. The Company does not own vessels and generally does not physically handle the cargo.
Ocean carriers incurred substantial operating losses in 2009, 2011 and 2012 and many are highly leveraged with debt. While the overall global
volume in 2012 was comparable to 2011, many carriers took delivery of new ships which created excess capacity. This excessive capacity caused
most carriers to redeploy ships and modify sailing schedules to improve financial results. The potential combination of reduced sailing schedules
and pricing volatility could impact the Company’s ability to maintain historical unitary profitability.
Order Management provides services which manage origin consolidation, supplier performance, carrier allocation, carrier performance, container
management, document management, destination management and PO/SKU visibility through a web based application. Customers have the
ability to monitor and report against near real time status of purchase orders from the date of creation through final delivery. Item quantities,
required ship dates, commodity descriptions, estimated vs. actual ex-factory dates, container utilization, supplier performance and document
visibility are many of the managed functions that are visible and reportable via the web. Order Management is available for various modes of
transportation including ocean, air, truck and rail. Order Management revenues are derived from services provided to the shipper as well as
management fees associated with managing purchase order execution against customer specific rules. One basic function of Order Management
involves the taking of cargo from many suppliers in a particular origin and “consolidating” these shipments into the fewest possible number of
containers to maximize space utilization and minimize cost. Through origin consolidation, customers can reduce the number of containers shipped
by putting more product in larger and fewer containers. Data integrity is an increasingly critical function of Order Management. Efficient data
management is a by-product of our operational processes.
Customs Brokerage and Other Services
Customs brokerage and other services accounted for approximately 42, 40 and 39 percent of the Company’s 2012, 2011 and 2010 consolidated
net revenues, respectively. As a customs broker, the Company assists importers to clear shipments through customs by preparing required
documentation, calculating and providing for payment of duties and other taxes on behalf of the importer, arranging for any required inspections
by governmental agencies, and arranging for delivery. The Company also provides other value added services at destination such as warehousing
and distribution, inventory management and time definite transportation services. None of these other services are currently individually significant
to the Company’s net revenues.
The Company provides customs clearance services in connection with many of the shipments it handles as a freight forwarder. However, substantial
customs brokerage revenues are derived from customers that elect to use a competing forwarder. Conversely, shipments handled by the Company
as a forwarder may be processed by another customs broker selected by the customer.
The Company also provides custom clearances for goods moving by rail and truck between the United States, Canada and/or Mexico. The
commodities being cleared and the time sensitive nature of the border brokerage business require the Company to continue to make enhancements
to its systems in order to provide competitive service.
The Company’s wholly-owned subsidiary, Expeditors Tradewin, L.L.C., responds to customer driven requests for high-end customs consulting
services. Fees for these non-transactional services are based upon hourly billing rates and bids for mutually agreed projects.
Marketing and Customers
The Company provides specific solutions tailored to each customer's individual business needs from order inception through order
delivery. Although the domestic importer usually designates the logistics company and the services that will be required, the foreign shipper may
also participate in this selection process. Therefore, the Company coordinates its marketing program to reach both domestic importers and their
overseas suppliers.
2
3
The Company’s efforts are focused on optimizing our customers’ supply chains. Therefore, the Company's marketing efforts target professionals
in logistics, international and domestic transportation, customs, compliance and purchasing departments of existing and potential customers. The
district manager of each office is responsible for marketing, sales coordination, and implementation in the area in which he or she is located. All
employees are responsible for customer service and retention.
The Company staffs its offices largely with managers and other key personnel who are citizens of the nations in which they operate and who
have extensive experience in global logistics. Marketing and customer service staffs are responsible for marketing and selling the Company’s
services directly to customers and prospects who may select or influence the selection of logistics service providers and for ensuring that customers
receive timely and efficient service. The Company believes that its expertise in supplying solutions customized to the needs of its customers, its
emphasis on coordinating its origin and destination customer service and marketing activities, and the incentives it gives to its managers have
been important elements of its success.
The goods handled by the Company are generally a function of the products which dominate international trade between any particular origin
and destination. Shipments of computers and components, electronic and consumer goods, medical equipment, retail goods, machine and
automotive parts, aviation parts, industrial equipment and oil and energy equipment comprise a significant percentage of the Company’s
business. Typical import customers include retailers and distributors of consumer electronics, department store chains, clothing and shoe
wholesalers, and high-tech, industrial and automotive manufacturers. The Company has also established industry vertical teams located
throughout our network that focus on retail and fashion, oil and energy, aviation and aerospace and healthcare. Historically, no single customer
has accounted for five percent or more of the Company’s net revenues.
Competition
The global logistics services industry is intensely competitive and is expected to remain so for the foreseeable future. There are a large number
of companies competing in one or more segments of the industry, but the number of firms with a global network that offer a full complement of
logistics services is more limited. Many of these competitors have significantly more resources than the Company. Depending on the location of
the shipper and the importer, the Company must compete against both the niche players and larger entities. The industry continues to experience
consolidations into larger firms striving for stronger and more complete multinational and multi-service networks. However, regional and local
competitors still maintain a strong market presence in certain areas.
The primary competitive factors in the global logistics services industry continue to be price and quality of service, including reliability,
responsiveness, expertise, convenience, and scope of operations. The Company emphasizes quality customer service and believes that its prices
are competitive with the prices of others in the industry. Larger customers utilize the services of multiple logistics providers and implement more
sophisticated and efficient procedures for the management of their logistics supply chains by embracing strategies such as just-in-time inventory
management. Accordingly, timely and accurate information integrated into customer service capabilities are a significant factor in attracting and
retaining customers. This information integrated into customer service capabilities includes customized Electronic Data Interchange (“EDI”), on-
line freight tracing and tracking applications and customized reporting. The customized EDI applications allow the transfer of key information
between the customers’ systems and the Company’s systems. Freight tracing and tracking applications provide customers with near real time
visibility to the location, transit time and estimated delivery time of inventory in transit.
Management believes that the ability to develop and deliver innovative solutions to meet customers’ increasingly sophisticated information
requirements is a critical factor in the ongoing success of the Company. The Company devotes a significant amount of resources towards the
maintenance and enhancement of systems that will meet these customer demands. Management believes that the Company’s existing systems
are competitive with the systems currently in use by other logistics services companies with which it competes.
Unlike many of its competitors, who have tended to grow by merger and acquisition, the Company operates the same accounting and transportation
computer software, running on a common hardware platform, in all of its full-service locations. Small and middle-tier competitors, in general, do
not have the resources available to develop these customized systems. Historically, growth through aggressive acquisition has proven to be a
challenge for many of the Company’s competitors and typically involves the purchase of significant “goodwill.” As a result, the Company has
pursued a strategy emphasizing organic growth supplemented by certain strategic acquisitions.
The Company’s ability to attract, retain, and motivate highly qualified personnel with experience in global logistics services is an essential, if not
the most important, element of its ability to compete in the industry. To this end, the Company has adopted incentive compensation programs
which make percentages of an operating unit's net revenues or profits available to managers for distribution among key personnel. The Company
believes that these incentive compensation programs, combined with its experienced personnel and its ability to coordinate global marketing
efforts, provide it with a distinct competitive advantage and account for historical growth that competitors have generally matched only through
acquisition.
Currency and Other Risk Factors
The nature of the Company’s worldwide operations necessitates the Company dealing with a multitude of currencies other than the U.S. dollar. This
results in the Company being exposed to the inherent risks of volatile international currency markets and governmental interference. Some of
the countries where the Company maintains offices and/or agency relationships have strict currency control regulations which influence the
Company’s ability to hedge foreign currency exposure. The Company tries to compensate for these exposures by accelerating international
currency settlements among its offices or agents.
In addition, the Company’s ability to provide service to its customers is highly dependent on good working relationships with a variety of entities
including airlines, ocean steamship lines and governmental agencies. The Company considers its current working relationships with these entities
to be satisfactory. However, changes in the financial stability and operating capabilities and capacity of asset-based carriers, space allotments
available from carriers, governmental regulation or deregulation efforts, “modernization” of the regulations governing customs brokerage, and/or
changes in governmental restrictions or trade accords could affect the Company’s business in unpredictable ways.
Historically, the Company’s operating results have been subject to seasonal trends when measured on a quarterly basis. The first quarter has
traditionally been the weakest and the third and fourth quarters have traditionally been the strongest. This pattern has been the result of, or
influenced by, numerous factors including weather patterns, national holidays, consumer demand, economic conditions and a myriad of other
similar and subtle forces. In addition, this historical quarterly trend has been influenced by the growth and diversification of the Company’s
international network and service offerings. The Company cannot accurately forecast many of these factors, nor can the Company 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
In the United States, the Company is subject to Federal, state and local provisions regulating the discharge of materials into the environment or
otherwise for the protection of the environment. Similar laws apply in many other jurisdictions in which the Company operates. Although current
operations have not been significantly affected by compliance with these environmental laws, governments are becoming increasingly sensitive
to environmental issues, and the Company cannot predict what impact future environmental regulations may have on its business. The Company
does not anticipate making any material capital expenditures for environmental control purposes during 2013.
At January 31, 2013, the Company employed approximately 13,700 people, 4,700 in the United States and 840 in the balance of North America,
680 in Latin America, 3,910 in Asia Pacific, 2,340 in Europe and Africa, and 1,230 in the Middle East and India. Approximately 1,610 of the
Company’s employees are engaged principally in sales and marketing and customer service, 7,940 in operations and 4,150 in technology, finance
and administration. The Company is not a party to any collective bargaining agreement and considers its relations with its employees to be
In order to retain the services of highly qualified, experienced, and motivated employees, the Company places considerable emphasis on its non-
equity incentive compensation programs and stock option plans.
Seasonality
periods.
Environmental
Employees
satisfactory.
4
5
The Company’s efforts are focused on optimizing our customers’ supply chains. Therefore, the Company's marketing efforts target professionals
Currency and Other Risk Factors
in logistics, international and domestic transportation, customs, compliance and purchasing departments of existing and potential customers. The
district manager of each office is responsible for marketing, sales coordination, and implementation in the area in which he or she is located. All
employees are responsible for customer service and retention.
The Company staffs its offices largely with managers and other key personnel who are citizens of the nations in which they operate and who
have extensive experience in global logistics. Marketing and customer service staffs are responsible for marketing and selling the Company’s
services directly to customers and prospects who may select or influence the selection of logistics service providers and for ensuring that customers
receive timely and efficient service. The Company believes that its expertise in supplying solutions customized to the needs of its customers, its
emphasis on coordinating its origin and destination customer service and marketing activities, and the incentives it gives to its managers have
been important elements of its success.
The goods handled by the Company are generally a function of the products which dominate international trade between any particular origin
and destination. Shipments of computers and components, electronic and consumer goods, medical equipment, retail goods, machine and
automotive parts, aviation parts, industrial equipment and oil and energy equipment comprise a significant percentage of the Company’s
business. Typical import customers include retailers and distributors of consumer electronics, department store chains, clothing and shoe
wholesalers, and high-tech, industrial and automotive manufacturers. The Company has also established industry vertical teams located
throughout our network that focus on retail and fashion, oil and energy, aviation and aerospace and healthcare. Historically, no single customer
has accounted for five percent or more of the Company’s net revenues.
Competition
The global logistics services industry is intensely competitive and is expected to remain so for the foreseeable future. There are a large number
of companies competing in one or more segments of the industry, but the number of firms with a global network that offer a full complement of
logistics services is more limited. Many of these competitors have significantly more resources than the Company. Depending on the location of
the shipper and the importer, the Company must compete against both the niche players and larger entities. The industry continues to experience
consolidations into larger firms striving for stronger and more complete multinational and multi-service networks. However, regional and local
competitors still maintain a strong market presence in certain areas.
The primary competitive factors in the global logistics services industry continue to be price and quality of service, including reliability,
responsiveness, expertise, convenience, and scope of operations. The Company emphasizes quality customer service and believes that its prices
are competitive with the prices of others in the industry. Larger customers utilize the services of multiple logistics providers and implement more
sophisticated and efficient procedures for the management of their logistics supply chains by embracing strategies such as just-in-time inventory
management. Accordingly, timely and accurate information integrated into customer service capabilities are a significant factor in attracting and
retaining customers. This information integrated into customer service capabilities includes customized Electronic Data Interchange (“EDI”), on-
line freight tracing and tracking applications and customized reporting. The customized EDI applications allow the transfer of key information
between the customers’ systems and the Company’s systems. Freight tracing and tracking applications provide customers with near real time
visibility to the location, transit time and estimated delivery time of inventory in transit.
Management believes that the ability to develop and deliver innovative solutions to meet customers’ increasingly sophisticated information
requirements is a critical factor in the ongoing success of the Company. The Company devotes a significant amount of resources towards the
maintenance and enhancement of systems that will meet these customer demands. Management believes that the Company’s existing systems
are competitive with the systems currently in use by other logistics services companies with which it competes.
Unlike many of its competitors, who have tended to grow by merger and acquisition, the Company operates the same accounting and transportation
computer software, running on a common hardware platform, in all of its full-service locations. Small and middle-tier competitors, in general, do
not have the resources available to develop these customized systems. Historically, growth through aggressive acquisition has proven to be a
challenge for many of the Company’s competitors and typically involves the purchase of significant “goodwill.” As a result, the Company has
pursued a strategy emphasizing organic growth supplemented by certain strategic acquisitions.
The Company’s ability to attract, retain, and motivate highly qualified personnel with experience in global logistics services is an essential, if not
the most important, element of its ability to compete in the industry. To this end, the Company has adopted incentive compensation programs
which make percentages of an operating unit's net revenues or profits available to managers for distribution among key personnel. The Company
believes that these incentive compensation programs, combined with its experienced personnel and its ability to coordinate global marketing
efforts, provide it with a distinct competitive advantage and account for historical growth that competitors have generally matched only through
acquisition.
The nature of the Company’s worldwide operations necessitates the Company dealing with a multitude of currencies other than the U.S. dollar. This
results in the Company being exposed to the inherent risks of volatile international currency markets and governmental interference. Some of
the countries where the Company maintains offices and/or agency relationships have strict currency control regulations which influence the
Company’s ability to hedge foreign currency exposure. The Company tries to compensate for these exposures by accelerating international
currency settlements among its offices or agents.
In addition, the Company’s ability to provide service to its customers is highly dependent on good working relationships with a variety of entities
including airlines, ocean steamship lines and governmental agencies. The Company considers its current working relationships with these entities
to be satisfactory. However, changes in the financial stability and operating capabilities and capacity of asset-based carriers, space allotments
available from carriers, governmental regulation or deregulation efforts, “modernization” of the regulations governing customs brokerage, and/or
changes in governmental restrictions or trade accords could affect the Company’s business in unpredictable ways.
Seasonality
Historically, the Company’s operating results have been subject to seasonal trends when measured on a quarterly basis. The first quarter has
traditionally been the weakest and the third and fourth quarters have traditionally been the strongest. This pattern has been the result of, or
influenced by, numerous factors including weather patterns, national holidays, consumer demand, economic conditions and a myriad of other
similar and subtle forces. In addition, this historical quarterly trend has been influenced by the growth and diversification of the Company’s
international network and service offerings. The Company cannot accurately forecast many of these factors, nor can the Company 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.
Environmental
In the United States, the Company is subject to Federal, state and local provisions regulating the discharge of materials into the environment or
otherwise for the protection of the environment. Similar laws apply in many other jurisdictions in which the Company operates. Although current
operations have not been significantly affected by compliance with these environmental laws, governments are becoming increasingly sensitive
to environmental issues, and the Company cannot predict what impact future environmental regulations may have on its business. The Company
does not anticipate making any material capital expenditures for environmental control purposes during 2013.
Employees
At January 31, 2013, the Company employed approximately 13,700 people, 4,700 in the United States and 840 in the balance of North America,
680 in Latin America, 3,910 in Asia Pacific, 2,340 in Europe and Africa, and 1,230 in the Middle East and India. Approximately 1,610 of the
Company’s employees are engaged principally in sales and marketing and customer service, 7,940 in operations and 4,150 in technology, finance
and administration. The Company is not a party to any collective bargaining agreement and considers its relations with its employees to be
satisfactory.
In order to retain the services of highly qualified, experienced, and motivated employees, the Company places considerable emphasis on its non-
equity incentive compensation programs and stock option plans.
4
5
Executive Officers of the Registrant
Philip M. Coughlin joined the Company in October 1985 and was promoted to District Manager in August 1986. Mr. Coughlin was elected Regional
Manager in January 1991, Regional Vice President in January 1992, Senior Vice President of North America in September 1999 and to Executive
The following table sets forth the names, ages, and positions of current executive officers of the Company.
Vice President-North America in March 2008.
Name
Peter J. Rose .....................
James L.K. Wang ..............
R. Jordan Gates ................
Rommel C. Saber ..............
Robert L. Villanueva ..........
Timothy C. Barber .............
Rosanne Esposito .............
Eugene K. Alger ................
Philip M. Coughlin..............
Jeffrey S. Musser...............
Charles J. Lynch ................
Daniel R. Wall ....................
Jose A. Ubeda ...................
Amy J. Tangeman..............
Bradley S. Powell ..............
Age
69
64
57
55
60
53
61
52
52
47
52
44
46
44
52
Chairman and Chief Executive Officer and director
President-Asia Pacific and director
President and Chief Operating Officer and director
Position
President-Europe, Africa, Near/Middle East and Indian Subcontinent
and Senior Vice President-Corporate Controller in May 2002.
President-The Americas
President-Global Sales and Marketing
Executive Vice President-Global Customs
Executive Vice President-North America
Executive Vice President-North America
Executive Vice President and Chief Information Officer
Senior Vice President-Corporate Controller
Senior Vice President-Ocean Services
Senior Vice President-Air Cargo
Senior Vice President-General Counsel and Secretary
Senior Vice President and Chief Financial Officer
Peter J. Rose has served as a director and Vice President of the Company since July 1981. Mr. Rose was elected a Senior Vice President of the
Company in May 1986, Executive Vice President in May 1987, President and Chief Executive Officer in October 1988, and Chairman and Chief
Executive Officer in May 1991.
James L.K. Wang has served as a director and the Managing Director of Expeditors International Taiwan Ltd., the Company’s former exclusive
Taiwan agent, since September 1981. In 1991, Mr. Wang’s employment agreement was assigned to E.I. Freight (Taiwan), Ltd., the Company’s
exclusive Taiwan agent through 2004 and is now assigned to ECI Taiwan Co. Ltd., a wholly-owned subsidiary of the Company. Mr. Wang was
elected a director of the Company and its Director-Far East in October 1988, Executive Vice President in January 1996 and President-Asia Pacific
in May 2000.
R. Jordan Gates joined the Company as its Controller-Europe in February 1991. Mr. Gates was elected Chief Financial Officer and Treasurer of
the Company in August 1994, Senior Vice President-Chief Financial Officer and Treasurer in January 1998, Executive Vice President-Chief
Financial Officer and Treasurer in May 2000 and President and Chief Operating Officer in January 2008. Mr. Gates was also elected as a director
in May 2000.
Rommel C. Saber joined the Company as Director-Near/Middle East in February 1990. Mr. Saber was elected Senior Vice President-Sales and
Marketing in January 1993, Senior Vice President-Air Export in September 1993, Senior Vice President Near/Middle East and Indian Subcontinent
in July 1997, Executive Vice President-Europe, Africa and Near/Middle East in August 2000 and President-Europe, Africa, Near/Middle East and
Indian Subcontinent in February 2006.
Robert L. Villanueva joined the Company as Regional Vice President in April 1994. Mr. Villanueva was elected Executive Vice President-The
Americas in September 1999 and President-The Americas in May 2004.
Timothy C. Barber joined the Company in May 1986 and was promoted to District Manager in January 1987. Mr. Barber was elected to Regional
Vice President in January 1993, Vice President-Sales and Marketing in September 1993, Senior Vice President-Sales and Marketing in
January 1998, Executive Vice President-Global Sales in September 1999 and President-Global Sales and Marketing in January 2008.
Rosanne Esposito joined the Company as its Director-U.S. Import Services in January 1996. Ms. Esposito was elected to Vice President in
May 1997, Senior Vice President-Global Customs in May 2001 and to Executive Vice President-Global Customs in May 2004.
Eugene K. Alger joined the Company in October 1982 and was promoted to District Manager in May 1983. Mr. Alger was elected Regional Vice
President in January 1992, Senior Vice President of North America in September 1999 and to Executive Vice President-North America in March
2008.
6
7
Jeffrey S. Musser joined the Company in February 1983 and was promoted to District Manager in October 1989. Mr. Musser was elected to
Regional Vice President in September 1999, Senior Vice President-Chief Information Officer in January 2005 and to Executive Vice President
and Chief Information Officer in May 2009.
Charles J. Lynch joined the Company in September 1984, and was promoted to Assistant Controller in July 1985 and Controller-Domestic
Operations in January 1989. Mr. Lynch was elected Corporate Controller in January 1991, Vice President-Corporate Controller in January 1998
Daniel R. Wall joined the Company in March 1987, and was promoted to District Manager in May 1992 and Global Director-Account Management
in March 2002. Mr. Wall was elected Vice President-ECMS in January 2004 and Senior Vice President-Ocean Services in September 2004.
Jose A. Ubeda joined the Company in May 1984 and was promoted to District Manager in February 1993. Mr. Ubeda was elected to Regional
Vice President in May 2000 and to Senior Vice President-Air Cargo in April 2010.
Amy J. Tangeman joined the Company in January 1997 and was promoted to Assistant General Counsel in November 2001. Ms. Tangeman was
elected Vice-President-General Counsel and Secretary in October 2006 and elected Senior Vice President-General Counsel and Secretary in
Bradley S. Powell joined the Company as Chief Financial Officer in October 2008 and was elected Senior Vice President and Chief Financial
Officer in February 2012. Prior to joining the Company, Mr. Powell served as President and Chief Financial Officer of Eden Bioscience Corporation,
a publicly-traded biotechnology company, from December 2006 to September 2008 and as Vice President and Chief Financial Officer from July
February 2012.
1998 to December 2006.
Regulation and Security
With respect to the Company’s activities in the air transportation industry in the United States, it is subject to regulation by the Transportation
Security Administration (“TSA”) of the Department of Homeland Security as an indirect air carrier. All United States indirect air carriers are required
to maintain prescribed security procedures and are subject to periodic audits by TSA. The Company’s overseas offices and agents are licensed
as airfreight forwarders in their respective countries of operation. The Company is licensed in each of its offices, or in the case of its newer offices,
has made application for a license as an airfreight forwarder by the International Air Transport Association (“IATA”). IATA is a voluntary association
of airlines and air transport related entities which prescribes certain operating procedures for airfreight forwarders acting as agents for its
members. The majority of the Company’s airfreight forwarding business is conducted with airlines which are IATA members.
The Company is licensed as an Ocean Transportation Intermediary (“OTI”) (sometimes referred to as NVOCC-Non-Vessel Operating Common
Carrier) by the Federal Maritime Commission (“FMC”). The FMC has established certain qualifications for shipping agents, including certain surety
bonding requirements. The FMC is also responsible for the economic regulation of OTI/NVOCC activity originating or terminating in the United
States. To comply with these economic regulations, vessel operators and NVOCCs, such as EIO, are required to file tariffs electronically which
establish the rates to be charged for the movement of specified commodities into and out of the United States. The FMC has the power to enforce
these regulations by assessing penalties.
The Company is licensed as a customs broker by Customs and Border Protection (“CBP”) of the Department of Homeland Security nationally
and in each U.S. customs district in which it does business. All United States customs brokers are required to maintain prescribed records and
are subject to periodic audits by CBP. In other jurisdictions in which the Company performs clearance services, the Company is licensed by the
appropriate governmental authority (where such license is required to perform these services). The Company participates in various governmental
supply chain security programs, such as the Customs-Trade Partnership Against Terrorism (“C-TPAT”) in the United States and additional security
initiatives, such as Authorized Economic Operator ("AEO"), as they continue to be enacted by different governments.
The Company does not believe that current United States and foreign governmental regulations impose significant economic restraint upon its
business operations. In general, the Company conducts its business activities in each country through a wholly or majority-owned subsidiary
corporation that is organized and existing under the laws of that country. However, the regulations of foreign governments can impose barriers
to the Company’s ability to provide the full range of its business activities in a wholly or majority United States-owned subsidiary. For example,
foreign ownership of a customs brokerage business is prohibited in some jurisdictions and less frequently the ownership of the licenses required
for freight forwarding and/or freight consolidation is restricted to local entities. When the Company encounters this sort of governmental restriction,
it works to establish a legal structure that meets the requirements of the local regulations while also giving the Company the substantive operating
and economic advantages that would be available in the absence of such regulation. This can be accomplished by creating a joint venture or
exclusive agency relationship with a qualified local entity that holds the required license.
Executive Officers of the Registrant
The following table sets forth the names, ages, and positions of current executive officers of the Company.
Name
Age
Position
Peter J. Rose .....................
James L.K. Wang ..............
R. Jordan Gates ................
Rommel C. Saber ..............
Robert L. Villanueva ..........
Timothy C. Barber .............
Rosanne Esposito .............
Eugene K. Alger ................
Philip M. Coughlin..............
Jeffrey S. Musser...............
Charles J. Lynch ................
Daniel R. Wall ....................
Jose A. Ubeda ...................
Amy J. Tangeman..............
Bradley S. Powell ..............
69
64
57
55
60
53
61
52
52
47
52
44
46
44
52
Chairman and Chief Executive Officer and director
President-Asia Pacific and director
President and Chief Operating Officer and director
President-Europe, Africa, Near/Middle East and Indian Subcontinent
President-The Americas
President-Global Sales and Marketing
Executive Vice President-Global Customs
Executive Vice President-North America
Executive Vice President-North America
Executive Vice President and Chief Information Officer
Senior Vice President-Corporate Controller
Senior Vice President-Ocean Services
Senior Vice President-Air Cargo
Senior Vice President-General Counsel and Secretary
Senior Vice President and Chief Financial Officer
Peter J. Rose has served as a director and Vice President of the Company since July 1981. Mr. Rose was elected a Senior Vice President of the
Company in May 1986, Executive Vice President in May 1987, President and Chief Executive Officer in October 1988, and Chairman and Chief
Executive Officer in May 1991.
James L.K. Wang has served as a director and the Managing Director of Expeditors International Taiwan Ltd., the Company’s former exclusive
Taiwan agent, since September 1981. In 1991, Mr. Wang’s employment agreement was assigned to E.I. Freight (Taiwan), Ltd., the Company’s
exclusive Taiwan agent through 2004 and is now assigned to ECI Taiwan Co. Ltd., a wholly-owned subsidiary of the Company. Mr. Wang was
elected a director of the Company and its Director-Far East in October 1988, Executive Vice President in January 1996 and President-Asia Pacific
R. Jordan Gates joined the Company as its Controller-Europe in February 1991. Mr. Gates was elected Chief Financial Officer and Treasurer of
the Company in August 1994, Senior Vice President-Chief Financial Officer and Treasurer in January 1998, Executive Vice President-Chief
Financial Officer and Treasurer in May 2000 and President and Chief Operating Officer in January 2008. Mr. Gates was also elected as a director
in May 2000.
in May 2000.
Rommel C. Saber joined the Company as Director-Near/Middle East in February 1990. Mr. Saber was elected Senior Vice President-Sales and
Marketing in January 1993, Senior Vice President-Air Export in September 1993, Senior Vice President Near/Middle East and Indian Subcontinent
in July 1997, Executive Vice President-Europe, Africa and Near/Middle East in August 2000 and President-Europe, Africa, Near/Middle East and
Indian Subcontinent in February 2006.
Robert L. Villanueva joined the Company as Regional Vice President in April 1994. Mr. Villanueva was elected Executive Vice President-The
Americas in September 1999 and President-The Americas in May 2004.
Timothy C. Barber joined the Company in May 1986 and was promoted to District Manager in January 1987. Mr. Barber was elected to Regional
Vice President in January 1993, Vice President-Sales and Marketing in September 1993, Senior Vice President-Sales and Marketing in
January 1998, Executive Vice President-Global Sales in September 1999 and President-Global Sales and Marketing in January 2008.
Rosanne Esposito joined the Company as its Director-U.S. Import Services in January 1996. Ms. Esposito was elected to Vice President in
May 1997, Senior Vice President-Global Customs in May 2001 and to Executive Vice President-Global Customs in May 2004.
Eugene K. Alger joined the Company in October 1982 and was promoted to District Manager in May 1983. Mr. Alger was elected Regional Vice
President in January 1992, Senior Vice President of North America in September 1999 and to Executive Vice President-North America in March
2008.
Philip M. Coughlin joined the Company in October 1985 and was promoted to District Manager in August 1986. Mr. Coughlin was elected Regional
Manager in January 1991, Regional Vice President in January 1992, Senior Vice President of North America in September 1999 and to Executive
Vice President-North America in March 2008.
Jeffrey S. Musser joined the Company in February 1983 and was promoted to District Manager in October 1989. Mr. Musser was elected to
Regional Vice President in September 1999, Senior Vice President-Chief Information Officer in January 2005 and to Executive Vice President
and Chief Information Officer in May 2009.
Charles J. Lynch joined the Company in September 1984, and was promoted to Assistant Controller in July 1985 and Controller-Domestic
Operations in January 1989. Mr. Lynch was elected Corporate Controller in January 1991, Vice President-Corporate Controller in January 1998
and Senior Vice President-Corporate Controller in May 2002.
Daniel R. Wall joined the Company in March 1987, and was promoted to District Manager in May 1992 and Global Director-Account Management
in March 2002. Mr. Wall was elected Vice President-ECMS in January 2004 and Senior Vice President-Ocean Services in September 2004.
Jose A. Ubeda joined the Company in May 1984 and was promoted to District Manager in February 1993. Mr. Ubeda was elected to Regional
Vice President in May 2000 and to Senior Vice President-Air Cargo in April 2010.
Amy J. Tangeman joined the Company in January 1997 and was promoted to Assistant General Counsel in November 2001. Ms. Tangeman was
elected Vice-President-General Counsel and Secretary in October 2006 and elected Senior Vice President-General Counsel and Secretary in
February 2012.
Bradley S. Powell joined the Company as Chief Financial Officer in October 2008 and was elected Senior Vice President and Chief Financial
Officer in February 2012. Prior to joining the Company, Mr. Powell served as President and Chief Financial Officer of Eden Bioscience Corporation,
a publicly-traded biotechnology company, from December 2006 to September 2008 and as Vice President and Chief Financial Officer from July
1998 to December 2006.
Regulation and Security
With respect to the Company’s activities in the air transportation industry in the United States, it is subject to regulation by the Transportation
Security Administration (“TSA”) of the Department of Homeland Security as an indirect air carrier. All United States indirect air carriers are required
to maintain prescribed security procedures and are subject to periodic audits by TSA. The Company’s overseas offices and agents are licensed
as airfreight forwarders in their respective countries of operation. The Company is licensed in each of its offices, or in the case of its newer offices,
has made application for a license as an airfreight forwarder by the International Air Transport Association (“IATA”). IATA is a voluntary association
of airlines and air transport related entities which prescribes certain operating procedures for airfreight forwarders acting as agents for its
members. The majority of the Company’s airfreight forwarding business is conducted with airlines which are IATA members.
The Company is licensed as an Ocean Transportation Intermediary (“OTI”) (sometimes referred to as NVOCC-Non-Vessel Operating Common
Carrier) by the Federal Maritime Commission (“FMC”). The FMC has established certain qualifications for shipping agents, including certain surety
bonding requirements. The FMC is also responsible for the economic regulation of OTI/NVOCC activity originating or terminating in the United
States. To comply with these economic regulations, vessel operators and NVOCCs, such as EIO, are required to file tariffs electronically which
establish the rates to be charged for the movement of specified commodities into and out of the United States. The FMC has the power to enforce
these regulations by assessing penalties.
The Company is licensed as a customs broker by Customs and Border Protection (“CBP”) of the Department of Homeland Security nationally
and in each U.S. customs district in which it does business. All United States customs brokers are required to maintain prescribed records and
are subject to periodic audits by CBP. In other jurisdictions in which the Company performs clearance services, the Company is licensed by the
appropriate governmental authority (where such license is required to perform these services). The Company participates in various governmental
supply chain security programs, such as the Customs-Trade Partnership Against Terrorism (“C-TPAT”) in the United States and additional security
initiatives, such as Authorized Economic Operator ("AEO"), as they continue to be enacted by different governments.
The Company does not believe that current United States and foreign governmental regulations impose significant economic restraint upon its
business operations. In general, the Company conducts its business activities in each country through a wholly or majority-owned subsidiary
corporation that is organized and existing under the laws of that country. However, the regulations of foreign governments can impose barriers
to the Company’s ability to provide the full range of its business activities in a wholly or majority United States-owned subsidiary. For example,
foreign ownership of a customs brokerage business is prohibited in some jurisdictions and less frequently the ownership of the licenses required
for freight forwarding and/or freight consolidation is restricted to local entities. When the Company encounters this sort of governmental restriction,
it works to establish a legal structure that meets the requirements of the local regulations while also giving the Company the substantive operating
and economic advantages that would be available in the absence of such regulation. This can be accomplished by creating a joint venture or
exclusive agency relationship with a qualified local entity that holds the required license.
6
7
The war on terror and governments’ overriding concern for the safety of passengers and citizens who import and/or export goods into and out of
their respective countries has resulted in a proliferation of cargo security and other regulations over the past several years. Many of these
regulations are complex and require various degrees of interpretation. While these regulations have already created a marked difference in the
security and other arrangements required to move shipments around the globe, regulations are expected to become more stringent in the future.
As governments look for ways to minimize the exposure of their citizens to potential terror related incidents, the Company and its competitors in
the transportation business may be required to incorporate security and other procedures within their scope of services to a far greater degree
than has been required in the past. The Company feels that increased security and other requirements may involve further investments in
technology and more sophisticated screening procedures being applied to potential customers, vendors and employees. The Company’s position
is that any increased cost of compliance with security regulations will be passed through to those who are beneficiaries of the Company’s services.
Cargo Liability
When acting as an airfreight consolidator, the Company assumes a carrier’s liability for lost or damaged shipments. This legal liability is typically
limited by contract to the lower of the transaction value or the released value (19 Special Drawing Rights per kilo unless the customer declares
a higher value and pays a surcharge), except in the absence of an appropriate airway bill or if the loss or damage is caused by willful misconduct. The
airline which the Company utilizes to make the actual shipment is generally liable to the Company in the same manner and to the same extent. When
acting solely as the agent of the airline or shipper, the Company does not assume any contractual liability for loss or damage to shipments tendered
to the airline. In certain circumstances, the Company will assume additional limited liability.
When acting as an ocean freight consolidator, the Company assumes a carrier’s liability for lost or damaged shipments. This liability is typically
limited by contract to the lower of the transaction value or the released value ($500 per package or customary freight unit unless the customer
declares a higher value and pays a surcharge). The steamship line which the Company utilizes to make the actual shipment is generally liable
to the Company in the same manner and to the same extent. In its ocean freight forwarding and customs clearance operations, the Company
does not assume cargo liability. In certain circumstances, the Company will assume additional limited liability.
When providing warehouse and distribution services, the Company limits its legal liability by contract and tariff to an amount generally equal to
the lower of fair value or $0.50 per pound with a maximum of $50 per “lot” — which is defined as the smallest unit that the warehouse is required
to track. In certain circumstances, the Company will assume additional limited liability.
The Company maintains cargo legal liability insurance covering claims for losses attributable to missing or damaged shipments for which it is
legally liable. The Company also maintains insurance coverage for the property of others which is stored in Company warehouse facilities. This
insurance coverage is provided by a Vermont U.S. based insurance entity wholly-owned by the Company. The coverage is fronted and reinsured
by a global insurance company. The total risk retained by the Company in 2012 was $5 million. In addition, the Company is licensed as an
insurance broker through its subsidiary, Expeditors Cargo Insurance Brokers, Inc. and places insurance coverage for other customers.
ITEM 1A – RISK FACTORS
RISK FACTORS
DISCUSSION AND POTENTIAL SIGNIFICANCE
International Trade........................
The Company primarily provides services to customers engaged in international commerce. Everything
that affects international trade has the potential to expand or contract the Company’s primary market and
impact its operating results. For example, international trade is influenced by:
Third Party Service Providers .......
Predictability of Results ................
• currency exchange rates and currency control regulations;
• interest rate fluctuations;
• changes in governmental policies, such as taxation, quota restrictions, other forms of trade barriers
and/or restrictions and trade accords;
• changes in and application of international and domestic customs, trade and security regulations;
• wars, strikes, civil unrest, acts of terrorism, and other conflicts;
• natural disasters and pandemics;
• changes in consumer attitudes regarding goods made in countries other than their own;
• changes in availability of credit;
• changes in the price and readily available quantities of oil and other petroleum-related products; and
• increased global concerns regarding environmental sustainability.
The Company is a non-asset based provider of global logistics services. As a result, the Company
depends on a variety of asset-based third party suppliers. The quality and profitability of the Company’s
services depend upon effective selection, management and discipline of third party suppliers. In recent
years, many of the Company’s third party service providers have incurred significant operating losses and
are highly leveraged with debt. Changes in the financial stability, operating capabilities and capacity of
asset-based carriers and space allotment made available to the Company by asset-based carriers could
affect the Company in unpredictable ways, including volatility of pricing, and challenge the Company’s
ability to maintain historical unitary profitability.
The Company is not aware of any accurate means of forecasting short-term customer requirements.
However, long-term customer satisfaction depends upon the Company’s ability to meet these
unpredictable short-term customer requirements. Personnel costs, the Company’s single largest variable
expense, are always less flexible in the very near term as the Company must staff to meet uncertain
demand. As a result, short-term operating results could be disproportionately affected.
A significant portion of the Company’s revenues are derived from customers in retail 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 the Company’s
revenues are, to a large degree, impacted by factors out of the Company’s control, such as a sudden
change in consumer demand for retail goods 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, the
Company may not learn of a shortfall in revenues until late in a quarter. To the extent that a shortfall in
revenues or earnings was not expected by securities analysts, any such shortfall from levels predicted by
securities analysts could have an immediate and adverse effect on the trading price of the Company’s
stock.
Foreign Operations .......................
The majority of the Company’s revenues and operating income comes from operations conducted outside
the United States. To maintain a global service network, the Company may be required to operate in
hostile locations and in dangerous situations.
In addition, the Company operates in parts of the world where common business practices could
constitute violations of the anti-corruption laws, rules, regulations and decrees of the United States,
including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and of all other countries in which
the Company conducts business; as well as trade control laws, or laws, regulations and Executive Orders
imposing embargoes and sanctions; and anti-boycott laws and regulations. Compliance with these laws,
rules, regulations and decrees is dependent on the Company’s employees, subcontractors, agents, third
party brokers and customers, whose individual actions could violate these laws, rules, regulations and
decrees. Failure to comply could result in substantial penalties and additional expenses, damages to the
Company’s reputation and restrictions on its ability to conduct business.
8
9
The war on terror and governments’ overriding concern for the safety of passengers and citizens who import and/or export goods into and out of
ITEM 1A – RISK FACTORS
their respective countries has resulted in a proliferation of cargo security and other regulations over the past several years. Many of these
regulations are complex and require various degrees of interpretation. While these regulations have already created a marked difference in the
security and other arrangements required to move shipments around the globe, regulations are expected to become more stringent in the future.
As governments look for ways to minimize the exposure of their citizens to potential terror related incidents, the Company and its competitors in
the transportation business may be required to incorporate security and other procedures within their scope of services to a far greater degree
than has been required in the past. The Company feels that increased security and other requirements may involve further investments in
technology and more sophisticated screening procedures being applied to potential customers, vendors and employees. The Company’s position
is that any increased cost of compliance with security regulations will be passed through to those who are beneficiaries of the Company’s services.
Cargo Liability
When acting as an airfreight consolidator, the Company assumes a carrier’s liability for lost or damaged shipments. This legal liability is typically
limited by contract to the lower of the transaction value or the released value (19 Special Drawing Rights per kilo unless the customer declares
a higher value and pays a surcharge), except in the absence of an appropriate airway bill or if the loss or damage is caused by willful misconduct. The
airline which the Company utilizes to make the actual shipment is generally liable to the Company in the same manner and to the same extent. When
acting solely as the agent of the airline or shipper, the Company does not assume any contractual liability for loss or damage to shipments tendered
to the airline. In certain circumstances, the Company will assume additional limited liability.
When acting as an ocean freight consolidator, the Company assumes a carrier’s liability for lost or damaged shipments. This liability is typically
limited by contract to the lower of the transaction value or the released value ($500 per package or customary freight unit unless the customer
declares a higher value and pays a surcharge). The steamship line which the Company utilizes to make the actual shipment is generally liable
to the Company in the same manner and to the same extent. In its ocean freight forwarding and customs clearance operations, the Company
does not assume cargo liability. In certain circumstances, the Company will assume additional limited liability.
When providing warehouse and distribution services, the Company limits its legal liability by contract and tariff to an amount generally equal to
the lower of fair value or $0.50 per pound with a maximum of $50 per “lot” — which is defined as the smallest unit that the warehouse is required
to track. In certain circumstances, the Company will assume additional limited liability.
The Company maintains cargo legal liability insurance covering claims for losses attributable to missing or damaged shipments for which it is
legally liable. The Company also maintains insurance coverage for the property of others which is stored in Company warehouse facilities. This
insurance coverage is provided by a Vermont U.S. based insurance entity wholly-owned by the Company. The coverage is fronted and reinsured
by a global insurance company. The total risk retained by the Company in 2012 was $5 million. In addition, the Company is licensed as an
insurance broker through its subsidiary, Expeditors Cargo Insurance Brokers, Inc. and places insurance coverage for other customers.
RISK FACTORS
DISCUSSION AND POTENTIAL SIGNIFICANCE
International Trade........................
The Company primarily provides services to customers engaged in international commerce. Everything
that affects international trade has the potential to expand or contract the Company’s primary market and
impact its operating results. For example, international trade is influenced by:
Third Party Service Providers .......
Predictability of Results ................
• currency exchange rates and currency control regulations;
• interest rate fluctuations;
• changes in governmental policies, such as taxation, quota restrictions, other forms of trade barriers
and/or restrictions and trade accords;
• changes in and application of international and domestic customs, trade and security regulations;
• wars, strikes, civil unrest, acts of terrorism, and other conflicts;
• natural disasters and pandemics;
• changes in consumer attitudes regarding goods made in countries other than their own;
• changes in availability of credit;
• changes in the price and readily available quantities of oil and other petroleum-related products; and
• increased global concerns regarding environmental sustainability.
The Company is a non-asset based provider of global logistics services. As a result, the Company
depends on a variety of asset-based third party suppliers. The quality and profitability of the Company’s
services depend upon effective selection, management and discipline of third party suppliers. In recent
years, many of the Company’s third party service providers have incurred significant operating losses and
are highly leveraged with debt. Changes in the financial stability, operating capabilities and capacity of
asset-based carriers and space allotment made available to the Company by asset-based carriers could
affect the Company in unpredictable ways, including volatility of pricing, and challenge the Company’s
ability to maintain historical unitary profitability.
The Company is not aware of any accurate means of forecasting short-term customer requirements.
However, long-term customer satisfaction depends upon the Company’s ability to meet these
unpredictable short-term customer requirements. Personnel costs, the Company’s single largest variable
expense, are always less flexible in the very near term as the Company must staff to meet uncertain
demand. As a result, short-term operating results could be disproportionately affected.
A significant portion of the Company’s revenues are derived from customers in retail 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 the Company’s
revenues are, to a large degree, impacted by factors out of the Company’s control, such as a sudden
change in consumer demand for retail goods 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, the
Company may not learn of a shortfall in revenues until late in a quarter. To the extent that a shortfall in
revenues or earnings was not expected by securities analysts, any such shortfall from levels predicted by
securities analysts could have an immediate and adverse effect on the trading price of the Company’s
stock.
Foreign Operations .......................
The majority of the Company’s revenues and operating income comes from operations conducted outside
the United States. To maintain a global service network, the Company may be required to operate in
hostile locations and in dangerous situations.
In addition, the Company operates in parts of the world where common business practices could
constitute violations of the anti-corruption laws, rules, regulations and decrees of the United States,
including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and of all other countries in which
the Company conducts business; as well as trade control laws, or laws, regulations and Executive Orders
imposing embargoes and sanctions; and anti-boycott laws and regulations. Compliance with these laws,
rules, regulations and decrees is dependent on the Company’s employees, subcontractors, agents, third
party brokers and customers, whose individual actions could violate these laws, rules, regulations and
decrees. Failure to comply could result in substantial penalties and additional expenses, damages to the
Company’s reputation and restrictions on its ability to conduct business.
8
9
Economic Conditions ...................
As a multinational corporation, the Company is subject to formal or informal investigations or litigation
from governmental authorities or others in the countries in which it does business. These investigations
and other periodic investigations may require management time and could cause the Company to incur
substantial additional legal and related costs, which may include fines and/or penalties that could have a
material impact on the Company’s results of operations and operating cash flows.
The Company may also become subject to other civil litigation arising from such investigations or
litigation, including but not limited to shareholder class action lawsuits and derivative claims made on
The global economy and capital and credit markets continue to experience uncertainty and volatility.
Unfavorable changes in economic conditions may result in lower freight volumes and adversely affect
the Company’s revenues and operating results, as experienced in 2009 and 2012. These conditions
may adversely affect certain of the Company’s customers, carriers and third party services providers.
Were that to occur, the Company’s revenues and net earnings could also be adversely affected. Should
customers’ ability to pay deteriorate, additional bad debts may be incurred.
These unfavorable conditions can create situations where rate increases charged by carriers and other
service providers are implemented with little or no advanced notice. The Company often times cannot
pass these rate increases on to its customers in the same time frame, if at all. As a result, the
Company’s yields and margins can be negatively impacted, as experienced in 2012.
weather event, cyber-attack, terrorist attack, strike, civil unrest, pandemic or other catastrophic event
could cause delays in providing services or performing other mission-critical functions. The Company’s
corporate headquarters, and certain other critical business operations are in the Seattle, Washington
area, which is near major earthquake faults. A catastrophic event that results in the destruction or
disruption of any of the Company’s critical business or information technology systems could harm the
Company’s ability to conduct normal business operations and its operating results.
Catastrophic Events.....................
A disruption or failure of the Company’s systems or operations in the event of a major earthquake,
ITEM 1B — UNRESOLVED STAFF COMMENTS
Not applicable.
RISK FACTORS
DISCUSSION AND POTENTIAL SIGNIFICANCE
Key Personnel .............................
The Company is a service business. The quality of this service is directly related to the quality of the
Company’s employees. Identifying, training and retaining key employees is essential to continued
growth and future profitability. Continued loyalty to the Company will not be assured by contract.
RISK FACTORS
DISCUSSION AND POTENTIAL SIGNIFICANCE
Litigation/Investigations ...............
Technology ..................................
The Company believes that its compensation programs, which have been in place since the Company
became a publicly traded entity, are one of the unique characteristics responsible for differentiating its
performance from that of many of its competitors. Significant changes to its compensation programs
could affect the Company’s performance.
Increasingly, the Company must compete based upon the flexibility and sophistication of the
technologies utilized in performing its core businesses. Future results depend upon the Company's
success in the cost effective development, maintenance and integration of secure communication and
information systems technologies, including those acquired from and maintained by third parties. As the
Company and its customers continue to increase reliance on these systems, the risks also increase.
The Company has implemented processes and procedures to mitigate these risks, but these measures
do not guarantee the prevention of a serious negative event in the future.
Any significant disruptions to these systems for any reason, which could include equipment or network
failures, power outages, sabotage, employee error or other actions, cyber-attacks or other security
breaches, geo-political activity or natural disasters, would have a material negative effect on the
Company's results and could include loss of revenue, business disruptions, loss of property including
trade secrets and confidential information, legal claims and proceedings, reporting delays or errors,
interference with regulatory reporting, significant remediation costs, an increase in costs to protect the
Company's systems and technology and damage to its reputation.
Growth .........................................
To date, the Company has relied primarily upon organic growth and has tended to avoid growth through
acquisition. Future results will depend upon the Company’s ability to continue to grow internally or to
demonstrate the ability to successfully identify and integrate non-dilutive acquisitions.
Regulatory Environment ..............
Competition .................................
Taxes ...........................................
The Company is affected by ever increasing regulations from a number of sources in the United States
and in foreign locations in which the Company operates. Many of these regulations are complex and
require various degrees of interpretation and increase the Company's costs. The current business
environment tends to stress the avoidance of risk through regulation and oversight, the effect of which is
likely to be unforeseen costs and potentially unforeseen consequences.
In reaction to the global war on terror, governments around the world are continuously enacting or
updating security regulations. These regulations are multi-layered, increasingly technical in nature and
characterized by a lack of harmonization of substantive requirements amongst various governmental
authorities. Furthermore, the implementation of these regulations, including deadlines and substantive
requirements, is driven by political urgencies rather than the industries’ realistic ability to comply.
Failure to consistently and timely comply with these regulations, or the failure, breach or compromise of
the Company’s policies and procedures or those of its subcontractors or agents, may result in increased
operating costs, damage to the Company’s reputation, restrictions on operations and/or fines and
penalties.
The global logistics services industry is intensely competitive and is expected to remain so for the
foreseeable future. There are a large number of companies competing in one or more segments of the
industry, but the number of firms with a global network that offer a full complement of logistics services is
more limited. Many of these competitors have significantly more resources than the Company.
Depending on the location of the shipper and the importer, the Company must compete against both the
niche players and larger entities. Additionally, most larger customers utilize the services of multiple
logistics providers. The primary competitive factors are price and quality of service. Many customers
regularly put their logistics services out for bid in order to improve their pricing and contractual terms.
The Company is subject to many taxes in the United States and foreign jurisdictions. In many of these
jurisdictions, the tax laws are very complex and are open to different interpretations and application. Tax
authorities frequently implement new taxes and change their tax rates and rules, including
interpretations of those rules. The Company is regularly under audit by tax authorities. Although the
Company believes its tax estimates are reasonable, the final determination of tax audits could be
materially different from the Company’s tax provisions and accruals and negatively impact its financial
results.
10
11
RISK FACTORS
DISCUSSION AND POTENTIAL SIGNIFICANCE
Litigation/Investigations ...............
Economic Conditions ...................
Catastrophic Events.....................
As a multinational corporation, the Company is subject to formal or informal investigations or litigation
from governmental authorities or others in the countries in which it does business. These investigations
and other periodic investigations may require management time and could cause the Company to incur
substantial additional legal and related costs, which may include fines and/or penalties that could have a
material impact on the Company’s results of operations and operating cash flows.
The Company may also become subject to other civil litigation arising from such investigations or
litigation, including but not limited to shareholder class action lawsuits and derivative claims made on
behalf of the plaintiffs.
The global economy and capital and credit markets continue to experience uncertainty and volatility.
Unfavorable changes in economic conditions may result in lower freight volumes and adversely affect
the Company’s revenues and operating results, as experienced in 2009 and 2012. These conditions
may adversely affect certain of the Company’s customers, carriers and third party services providers.
Were that to occur, the Company’s revenues and net earnings could also be adversely affected. Should
customers’ ability to pay deteriorate, additional bad debts may be incurred.
These unfavorable conditions can create situations where rate increases charged by carriers and other
service providers are implemented with little or no advanced notice. The Company often times cannot
pass these rate increases on to its customers in the same time frame, if at all. As a result, the
Company’s yields and margins can be negatively impacted, as experienced in 2012.
A disruption or failure of the Company’s systems or operations in the event of a major earthquake,
weather event, cyber-attack, terrorist attack, strike, civil unrest, pandemic or other catastrophic event
could cause delays in providing services or performing other mission-critical functions. The Company’s
corporate headquarters, and certain other critical business operations are in the Seattle, Washington
area, which is near major earthquake faults. A catastrophic event that results in the destruction or
disruption of any of the Company’s critical business or information technology systems could harm the
Company’s ability to conduct normal business operations and its operating results.
ITEM 1B — UNRESOLVED STAFF COMMENTS
Not applicable.
11
ITEM 2 — PROPERTIES
The Company owns the following properties:
Location
United States:
Seattle, Washington ......................................................................................
Nature of Property
Office buildings
SeaTac, Washington .....................................................................................
Humble, Texas ..............................................................................................
Office building
Office and warehouse
Inwood, New York .........................................................................................
Office and warehouse
Edison, New Jersey ......................................................................................
Office and warehouse
Brisbane, California ......................................................................................
Office and warehouse
Hawthorne, California ...................................................................................
Office and warehouse
Bensenville, llinois ........................................................................................
Office and warehouse
Miami, Florida ...............................................................................................
Office and warehouse
Spokane, Washington ...................................................................................
Office building
Asia Pacific:
Kowloon, Hong Kong ....................................................................................
Offices
Taipei, Taiwan ...............................................................................................
Offices
Seoul, Korea .................................................................................................
Office and warehouse
Shanghai, China ...........................................................................................
Office building
Beijing, China ...............................................................................................
Office buildings and warehouse
December 15, 2011 ...................................................................................................................................................................... $
Europe:
Brussels, Belgium .........................................................................................
Office and warehouse
Dublin, Ireland ..............................................................................................
Office and warehouse
Cork, Ireland .................................................................................................
Office and warehouse
London, England ..........................................................................................
Office and warehouse
Latin America:
Alajuela, Costa Rica .....................................................................................
Office building
Period
Total Number
of Shares
Purchased
Average Price
Paid per
Share
Middle East:
Cairo, Egypt ..................................................................................................
Office and warehouse
The Company leases and maintains 69 additional offices and warehouse locations in the United States and 309 leased locations throughout the
world, primarily located close to an airport, ocean port, or on an important border crossing. The majority of these facilities contain warehouse
facilities. Lease terms are either on a month-to-month basis or terminate at various times through 2021. See Note 8 to the Company’s consolidated
financial statements for lease commitments. The Company will investigate the possibility of building or buying suitable facilities. The Company
believes that current leases can be extended and that suitable alternative facilities are available in the vicinity of each present facility should
extensions be unavailable at the conclusion of current leases.
ITEM 3 — LEGAL PROCEEDINGS
The Company is involved in claims, lawsuits, government investigations and other legal matters which arise in the ordinary course of business
and are subject to inherent uncertainties. Currently, in management's opinion and advice from legal advisors, none of these matters are
expected to have a significant effect on the Company's operations or financial position. As of December 31, 2012, the amounts accrued for
these claims, lawsuits, government investigations and other legal matters are not significant to the Company's operations or financial position.
At this time the Company is unable to estimate any additional loss or range of reasonably possible loss, if any, beyond the amounts recorded,
that might result from the resolution of these matters.
ITEM 4 — MINE SAFETY DISCLOSURES
Not applicable.
12
13
PART II
EQUITY SECURITIES
ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
The Company's common stock trades on The NASDAQ Global Select Market. The following table sets forth the high and low sale prices for
the Company’s common stock as reported by The NASDAQ Global Select Market under the symbol EXPD.
Quarter
2012
Common Stock
High
Low
Quarter
2011
Common Stock
High
Low
First ......................................................
Second .................................................
Third .....................................................
Fourth ...................................................
$
$
$
$
47.20
47.48
39.61
39.97
$
$
$
$
40.80 First ......................................................
36.72 Second .................................................
34.83 Third .....................................................
34.20 Fourth ...................................................
$
$
$
$
56.19
55.30
53.22
47.73
$
$
$
$
45.91
46.53
39.28
38.25
There were 1,118 shareholders of record as of February 21, 2012. This figure does not include a substantially greater number of beneficial holders
of the Company’s common stock, whose shares are held of record by banks, brokers and other financial institutions.
The Board of Directors declared semi-annual dividends per share during the two most recent fiscal years paid as follows:
June 15, 2012 ............................................................................................................................................................................... $
December 17, 2012 ...................................................................................................................................................................... $
June 15, 2011 ............................................................................................................................................................................... $
.28
.28
.25
.25
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
Maximum
Number
of Shares
that
May Yet Be
Purchased
Under the
Plans or
Programs
October 1-31, 2012 ........................................................
November 1-30, 2012 ....................................................
December 1-31, 2012 ....................................................
Total ...............................................................................
— $
2,189,662
758,650
2,948,312
$
$
$
—
36.83
37.27
36.94
—
2,189,662
758,650
2,948,312
24,672,952
22,658,208
21,947,096
21,947,096
In November 1993, the Company’s Board of Directors authorized a Non-Discretionary Stock Repurchase Plan for the purpose of repurchasing
the Company’s common stock in the open market with the proceeds received from the exercise of stock options. On February 9, 2009, the Plan
was amended to increase the authorization to repurchase up to 40 million shares of the Company’s common stock. This authorization has no
expiration date. This plan was disclosed in the Company’s report on Form 10-K filed March 31, 1995. In the fourth quarter of 2012, 162,809 shares
of common stock were repurchased under the Non-Discretionary Stock Repurchase Plan.
In November 2001, under a Discretionary Stock Repurchase Plan, the Company’s Board of Directors authorized the repurchase of such shares
as may be necessary to reduce the issued and outstanding stock to 200 million shares of common stock. The maximum number of shares
available for repurchase under this plan will change as the total number of outstanding shares changes. This authorization has no expiration
date. This plan was announced on November 13, 2001. In the fourth quarter of 2012, 2,785,503 shares of common stock were repurchased
under the Discretionary Stock Repurchase Plan. These discretionary repurchases included 147,953 shares that were made to limit the growth
in the number of issued and outstanding shares resulting from stock option exercises and 2,637,550 shares to reduce the number of total shares
outstanding.
ITEM 2 — PROPERTIES
The Company owns the following properties:
Location
United States:
Nature of Property
Seattle, Washington ......................................................................................
Office buildings
SeaTac, Washington .....................................................................................
Office building
Humble, Texas ..............................................................................................
Office and warehouse
Inwood, New York .........................................................................................
Office and warehouse
Edison, New Jersey ......................................................................................
Office and warehouse
Brisbane, California ......................................................................................
Office and warehouse
Hawthorne, California ...................................................................................
Office and warehouse
Bensenville, llinois ........................................................................................
Office and warehouse
Miami, Florida ...............................................................................................
Office and warehouse
Spokane, Washington ...................................................................................
Office building
Kowloon, Hong Kong ....................................................................................
Offices
Taipei, Taiwan ...............................................................................................
Offices
Seoul, Korea .................................................................................................
Office and warehouse
Shanghai, China ...........................................................................................
Office building
Beijing, China ...............................................................................................
Office buildings and warehouse
Brussels, Belgium .........................................................................................
Office and warehouse
Dublin, Ireland ..............................................................................................
Office and warehouse
Cork, Ireland .................................................................................................
Office and warehouse
London, England ..........................................................................................
Office and warehouse
Asia Pacific:
Europe:
Latin America:
Middle East:
Cairo, Egypt ..................................................................................................
Office and warehouse
The Company leases and maintains 69 additional offices and warehouse locations in the United States and 309 leased locations throughout the
world, primarily located close to an airport, ocean port, or on an important border crossing. The majority of these facilities contain warehouse
facilities. Lease terms are either on a month-to-month basis or terminate at various times through 2021. See Note 8 to the Company’s consolidated
financial statements for lease commitments. The Company will investigate the possibility of building or buying suitable facilities. The Company
believes that current leases can be extended and that suitable alternative facilities are available in the vicinity of each present facility should
extensions be unavailable at the conclusion of current leases.
ITEM 3 — LEGAL PROCEEDINGS
The Company is involved in claims, lawsuits, government investigations and other legal matters which arise in the ordinary course of business
and are subject to inherent uncertainties. Currently, in management's opinion and advice from legal advisors, none of these matters are
expected to have a significant effect on the Company's operations or financial position. As of December 31, 2012, the amounts accrued for
these claims, lawsuits, government investigations and other legal matters are not significant to the Company's operations or financial position.
At this time the Company is unable to estimate any additional loss or range of reasonably possible loss, if any, beyond the amounts recorded,
that might result from the resolution of these matters.
ITEM 4 — MINE SAFETY DISCLOSURES
Not applicable.
PART II
PART II
PART II
PART II
ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
EQUITY SECURITIES
EQUITY SECURITIES
ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
The Company's common stock trades on The NASDAQ Global Select Market. The following table sets forth the high and low sale prices for
The Company's common stock trades on The NASDAQ Global Select Market. The following table sets forth the high and low sale prices for
The Company's common stock trades on The NASDAQ Global Select Market. The following table sets forth the high and low sale prices for
the Company’s common stock as reported by The NASDAQ Global Select Market under the symbol EXPD.
the Company’s common stock as reported by The NASDAQ Global Select Market under the symbol EXPD.
the Company’s common stock as reported by The NASDAQ Global Select Market under the symbol EXPD.
The Company's common stock trades on The NASDAQ Global Select Market. The following table sets forth the high and low sale prices for
the Company’s common stock as reported by The NASDAQ Global Select Market under the symbol EXPD.
Quarter
First ......................................................
Quarter
Quarter
Quarter
2012
2012
2012
2012
First ......................................................
First ......................................................
First ......................................................
Second .................................................
Second .................................................
Second .................................................
Third .....................................................
Third .....................................................
Third .....................................................
Fourth ...................................................
Fourth ...................................................
Fourth ...................................................
Second .................................................
Third .....................................................
Fourth ...................................................
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Common Stock
Common Stock
Common Stock
High
Common Stock
Low
Low
Low
Low
High
High
High
Quarter
Quarter
Quarter
Quarter
2011
2011
2011
2011
Common Stock
Common Stock
Common Stock
High
Common Stock
Low
Low
Low
Low
High
High
High
47.20
47.20
47.20
47.20
47.48
47.48
47.48
39.61
39.61
39.61
39.97
39.97
39.97
47.48
39.61
39.97
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
40.80 First ......................................................
40.80 First ......................................................
40.80 First ......................................................
36.72 Second .................................................
36.72 Second .................................................
36.72 Second .................................................
34.83 Third .....................................................
34.83 Third .....................................................
34.83 Third .....................................................
34.20 Fourth ...................................................
34.20 Fourth ...................................................
34.20 Fourth ...................................................
40.80 First ......................................................
36.72 Second .................................................
34.83 Third .....................................................
34.20 Fourth ...................................................
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
56.19
55.30
56.19
56.19
56.19
55.30
55.30
55.30
53.22
53.22
53.22
47.73
47.73
47.73
47.73
53.22
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
45.91
46.53
45.91
45.91
45.91
46.53
46.53
46.53
39.28
39.28
39.28
38.25
38.25
38.25
39.28
38.25
There were 1,118 shareholders of record as of February 21, 2012. This figure does not include a substantially greater number of beneficial holders
There were 1,118 shareholders of record as of February 21, 2012. This figure does not include a substantially greater number of beneficial holders
There were 1,118 shareholders of record as of February 21, 2012. This figure does not include a substantially greater number of beneficial holders
of the Company’s common stock, whose shares are held of record by banks, brokers and other financial institutions.
of the Company’s common stock, whose shares are held of record by banks, brokers and other financial institutions.
of the Company’s common stock, whose shares are held of record by banks, brokers and other financial institutions.
There were 1,118 shareholders of record as of February 21, 2012. This figure does not include a substantially greater number of beneficial holders
of the Company’s common stock, whose shares are held of record by banks, brokers and other financial institutions.
The Board of Directors declared semi-annual dividends per share during the two most recent fiscal years paid as follows:
The Board of Directors declared semi-annual dividends per share during the two most recent fiscal years paid as follows:
The Board of Directors declared semi-annual dividends per share during the two most recent fiscal years paid as follows:
The Board of Directors declared semi-annual dividends per share during the two most recent fiscal years paid as follows:
December 17, 2012 ...................................................................................................................................................................... $
June 15, 2012 ............................................................................................................................................................................... $
June 15, 2012 ............................................................................................................................................................................... $
June 15, 2012 ............................................................................................................................................................................... $
June 15, 2012 ............................................................................................................................................................................... $
December 17, 2012 ...................................................................................................................................................................... $
December 17, 2012 ...................................................................................................................................................................... $
December 17, 2012 ...................................................................................................................................................................... $
June 15, 2011 ............................................................................................................................................................................... $
June 15, 2011 ............................................................................................................................................................................... $
June 15, 2011 ............................................................................................................................................................................... $
December 15, 2011 ...................................................................................................................................................................... $
December 15, 2011 ...................................................................................................................................................................... $
December 15, 2011 ...................................................................................................................................................................... $
June 15, 2011 ............................................................................................................................................................................... $
December 15, 2011 ...................................................................................................................................................................... $
.28
.28
.28
.28
.28
.28
.25
.25
.25
.25
.25
.25
.28
.28
.25
.25
Alajuela, Costa Rica .....................................................................................
Office building
Period
Period
Period
Period
Total Number
Total Number
Total Number
Total Number
of Shares
of Shares
of Shares
of Shares
Purchased
Purchased
Purchased
Purchased
Average Price
Average Price
Average Price
Average Price
Paid per
Paid per
Paid per
Paid per
Share
Share
Share
Share
ISSUER PURCHASES OF EQUITY SECURITIES
ISSUER PURCHASES OF EQUITY SECURITIES
ISSUER PURCHASES OF EQUITY SECURITIES
ISSUER PURCHASES OF EQUITY SECURITIES
October 1-31, 2012 ........................................................
November 1-30, 2012 ....................................................
October 1-31, 2012 ........................................................
October 1-31, 2012 ........................................................
October 1-31, 2012 ........................................................
November 1-30, 2012 ....................................................
November 1-30, 2012 ....................................................
November 1-30, 2012 ....................................................
December 1-31, 2012 ....................................................
December 1-31, 2012 ....................................................
December 1-31, 2012 ....................................................
Total ...............................................................................
Total ...............................................................................
Total ...............................................................................
December 1-31, 2012 ....................................................
Total ...............................................................................
— $
— $
— $
— $
$
$
$
$
$
$
$
$
$
$
2,189,662
2,189,662
2,189,662
2,189,662
758,650
758,650
758,650
2,948,312
2,948,312
2,948,312
2,948,312
758,650
$
$
—
—
—
—
36.83
36.83
36.83
36.83
37.27
37.27
37.27
36.94
36.94
36.94
37.27
36.94
Total Number
Total Number
Total Number
Total Number
of Shares
of Shares
of Shares
of Shares
Purchased as
Purchased as
Purchased as
Purchased as
Part of
Part of
Part of
Part of
Publicly
Publicly
Publicly
Publicly
Announced
Announced
Announced
Announced
Plans or
Plans or
Plans or
Plans or
Programs
Programs
Programs
Programs
—
—
—
2,189,662
2,189,662
2,189,662
—
2,189,662
758,650
758,650
758,650
758,650
2,948,312
2,948,312
2,948,312
2,948,312
Maximum
Maximum
Maximum
Maximum
Number
Number
Number
Number
of Shares
of Shares
of Shares
of Shares
that
that
that
that
May Yet Be
May Yet Be
May Yet Be
May Yet Be
Purchased
Purchased
Purchased
Purchased
Under the
Under the
Under the
Under the
Plans or
Plans or
Plans or
Plans or
Programs
Programs
Programs
Programs
24,672,952
24,672,952
24,672,952
22,658,208
22,658,208
22,658,208
21,947,096
21,947,096
21,947,096
21,947,096
21,947,096
21,947,096
24,672,952
22,658,208
21,947,096
21,947,096
In November 1993, the Company’s Board of Directors authorized a Non-Discretionary Stock Repurchase Plan for the purpose of repurchasing
In November 1993, the Company’s Board of Directors authorized a Non-Discretionary Stock Repurchase Plan for the purpose of repurchasing
In November 1993, the Company’s Board of Directors authorized a Non-Discretionary Stock Repurchase Plan for the purpose of repurchasing
the Company’s common stock in the open market with the proceeds received from the exercise of stock options. On February 9, 2009, the Plan
the Company’s common stock in the open market with the proceeds received from the exercise of stock options. On February 9, 2009, the Plan
the Company’s common stock in the open market with the proceeds received from the exercise of stock options. On February 9, 2009, the Plan
was amended to increase the authorization to repurchase up to 40 million shares of the Company’s common stock. This authorization has no
was amended to increase the authorization to repurchase up to 40 million shares of the Company’s common stock. This authorization has no
was amended to increase the authorization to repurchase up to 40 million shares of the Company’s common stock. This authorization has no
expiration date. This plan was disclosed in the Company’s report on Form 10-K filed March 31, 1995. In the fourth quarter of 2012, 162,809 shares
expiration date. This plan was disclosed in the Company’s report on Form 10-K filed March 31, 1995. In the fourth quarter of 2012, 162,809 shares
expiration date. This plan was disclosed in the Company’s report on Form 10-K filed March 31, 1995. In the fourth quarter of 2012, 162,809 shares
of common stock were repurchased under the Non-Discretionary Stock Repurchase Plan.
of common stock were repurchased under the Non-Discretionary Stock Repurchase Plan.
of common stock were repurchased under the Non-Discretionary Stock Repurchase Plan.
In November 1993, the Company’s Board of Directors authorized a Non-Discretionary Stock Repurchase Plan for the purpose of repurchasing
the Company’s common stock in the open market with the proceeds received from the exercise of stock options. On February 9, 2009, the Plan
was amended to increase the authorization to repurchase up to 40 million shares of the Company’s common stock. This authorization has no
expiration date. This plan was disclosed in the Company’s report on Form 10-K filed March 31, 1995. In the fourth quarter of 2012, 162,809 shares
of common stock were repurchased under the Non-Discretionary Stock Repurchase Plan.
In November 2001, under a Discretionary Stock Repurchase Plan, the Company’s Board of Directors authorized the repurchase of such shares
In November 2001, under a Discretionary Stock Repurchase Plan, the Company’s Board of Directors authorized the repurchase of such shares
In November 2001, under a Discretionary Stock Repurchase Plan, the Company’s Board of Directors authorized the repurchase of such shares
as may be necessary to reduce the issued and outstanding stock to 200 million shares of common stock. The maximum number of shares
as may be necessary to reduce the issued and outstanding stock to 200 million shares of common stock. The maximum number of shares
as may be necessary to reduce the issued and outstanding stock to 200 million shares of common stock. The maximum number of shares
available for repurchase under this plan will change as the total number of outstanding shares changes. This authorization has no expiration
available for repurchase under this plan will change as the total number of outstanding shares changes. This authorization has no expiration
available for repurchase under this plan will change as the total number of outstanding shares changes. This authorization has no expiration
date. This plan was announced on November 13, 2001. In the fourth quarter of 2012, 2,785,503 shares of common stock were repurchased
date. This plan was announced on November 13, 2001. In the fourth quarter of 2012, 2,785,503 shares of common stock were repurchased
date. This plan was announced on November 13, 2001. In the fourth quarter of 2012, 2,785,503 shares of common stock were repurchased
under the Discretionary Stock Repurchase Plan. These discretionary repurchases included 147,953 shares that were made to limit the growth
under the Discretionary Stock Repurchase Plan. These discretionary repurchases included 147,953 shares that were made to limit the growth
under the Discretionary Stock Repurchase Plan. These discretionary repurchases included 147,953 shares that were made to limit the growth
in the number of issued and outstanding shares resulting from stock option exercises and 2,637,550 shares to reduce the number of total shares
in the number of issued and outstanding shares resulting from stock option exercises and 2,637,550 shares to reduce the number of total shares
in the number of issued and outstanding shares resulting from stock option exercises and 2,637,550 shares to reduce the number of total shares
outstanding.
outstanding.
outstanding.
In November 2001, under a Discretionary Stock Repurchase Plan, the Company’s Board of Directors authorized the repurchase of such shares
as may be necessary to reduce the issued and outstanding stock to 200 million shares of common stock. The maximum number of shares
available for repurchase under this plan will change as the total number of outstanding shares changes. This authorization has no expiration
date. This plan was announced on November 13, 2001. In the fourth quarter of 2012, 2,785,503 shares of common stock were repurchased
under the Discretionary Stock Repurchase Plan. These discretionary repurchases included 147,953 shares that were made to limit the growth
in the number of issued and outstanding shares resulting from stock option exercises and 2,637,550 shares to reduce the number of total shares
outstanding.
12
13
13
13
13
The graph below compares Expeditors International of Washington, Inc.'s cumulative 5-Year total shareholder return on common stock with
the cumulative total returns of the S&P 500 index and the NASDAQ Transportation index. The graph assumes that the value of the investment
in our common stock and in each of the indexes (including reinvestment of dividends) was $100 on 12/31/2007 and tracks it through
12/31/2012.
ITEM 6 — SELECTED FINANCIAL DATA
Financial Highlights
In thousands except share and per share data
Revenues ......................................................................
$
5,980,943
Net revenues .................................................................
Net earnings attributable to shareholders .....................
Diluted earnings attributable to shareholders per share
Basic earnings attributable to shareholders per share ..
Dividends declared and paid per common share ..........
Working capital .............................................................
Total assets ...................................................................
Shareholders’ equity .....................................................
2012
1,824,098
333,360
1.57
1.58
.56
1,515,041
2,954,125
2,027,699
2011
6,150,498
1,896,477
385,679
1.79
1.82
.50
1,490,738
2,866,827
2,003,638
2010
5,967,573
1,692,786
344,172
1.59
1.62
.40
1,278,377
2,679,179
1,740,906
2009
4,092,283
1,382,786
240,217
1.11
1.13
.38
1,079,444
2,323,722
1,553,007
2008
5,633,878
1,603,261
301,014
1.37
1.41
.32
903,010
2,100,839
1,366,418
Weighted average diluted shares outstanding ..............
211,935,171
215,033,580
216,446,656
216,533,240
219,170,003
Weighted average basic shares outstanding.................
210,422,945
212,117,511
212,283,966
212,112,744
212,755,946
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995; CERTAIN
CAUTIONARY STATEMENTS
From time to time, the Company or its representatives have made or may make forward-looking statements, orally or in writing. Such forward-
looking statements may be included in, but not limited to, press releases, oral statements made with the approval of an authorized executive
officer or in various filings made by the Company with the Securities and Exchange Commission. The words or phrases “will likely result”, “are
expected to”, “will continue”, “is anticipated”, “estimate”, “project”, "probable", "reasonably possible" or similar expressions are intended to identify
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are qualified in their
entirety by reference to and are accompanied by the discussion in Item 1A of certain important factors that could cause actual results to differ
materially from such forward-looking statements.
The risks included in Item 1A are not exhaustive. Furthermore, reference is also made to other sections of this report which include additional
factors which could adversely impact the Company’s business and financial performance. Moreover, the Company operates in a very competitive
and rapidly changing global environment. New risk factors emerge from time to time and it is not possible for management to predict all of such
risk factors, nor can it assess the impact of all of such risk factors on the Company’s business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, forward-looking
statements cannot be relied upon as a guarantee of actual results.
Shareholders should be aware that while the Company does, from time to time, communicate with securities analysts, it is against the Company’s
policy to disclose to such analysts any material non-public information or other confidential commercial information. Accordingly, shareholders
should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of such statement or
report. Furthermore, the Company has a policy against issuing financial forecasts or projections or confirming the accuracy of forecasts or
projections issued by others. Accordingly, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions,
such reports are not the responsibility of the Company.
ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Expeditors International of Washington, Inc. is engaged in the business of global logistics management, including international freight forwarding
and consolidation, for both air and ocean freight. The Company acts as a customs broker in all domestic offices, and in many of its international
offices. The Company also provides additional services for its customers including value-added distribution, purchase order management, vendor
consolidation, domestic time definite transportation services, cargo insurance and other logistics solutions. The Company does not compete for
overnight courier or small parcel business. The Company does not own or operate aircraft or steamships.
International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange
rates, and laws and policies relating to tariffs, trade restrictions, foreign investments and taxation. Periodically, governments consider a variety
of changes to current tariffs and trade restrictions and accords. The Company cannot predict which, if any, of these proposals may be adopted,
nor can the Company predict the effects the adoption of any such proposal will have on the Company’s business. Doing business in foreign
locations also subjects the Company to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to
being influenced by governmental policies concerning international trade, the Company’s business may also be affected by political developments
12/07
12/08
12/09
12/10
12/11
12/12
Executive Summary
Expeditors International of Washington, Inc. ..
Standard and Poor's 500 Index .........................
NASDAQ Transportation....................................
$
100.00 $
100.00
100.00
75.07 $
63.00
72.93
79.38 $
79.67
72.29
125.78 $
91.67
91.64
95.39 $
93.61
79.89
93.48
108.59
95.85
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
14
15
The graph below compares Expeditors International of Washington, Inc.'s cumulative 5-Year total shareholder return on common stock with
ITEM 6 — SELECTED FINANCIAL DATA
the cumulative total returns of the S&P 500 index and the NASDAQ Transportation index. The graph assumes that the value of the investment
in our common stock and in each of the indexes (including reinvestment of dividends) was $100 on 12/31/2007 and tracks it through
12/31/2012.
Financial Highlights
In thousands except share and per share data
Revenues ......................................................................
$
Net revenues .................................................................
Net earnings attributable to shareholders .....................
Diluted earnings attributable to shareholders per share
Basic earnings attributable to shareholders per share ..
Dividends declared and paid per common share ..........
Working capital .............................................................
Total assets ...................................................................
Shareholders’ equity .....................................................
2012
5,980,943
1,824,098
333,360
1.57
1.58
.56
1,515,041
2,954,125
2,027,699
2011
6,150,498
1,896,477
385,679
1.79
1.82
.50
1,490,738
2,866,827
2,003,638
2010
5,967,573
1,692,786
344,172
1.59
1.62
.40
1,278,377
2,679,179
1,740,906
2009
4,092,283
1,382,786
240,217
1.11
1.13
.38
1,079,444
2,323,722
1,553,007
2008
5,633,878
1,603,261
301,014
1.37
1.41
.32
903,010
2,100,839
1,366,418
Weighted average diluted shares outstanding ..............
211,935,171
215,033,580
216,446,656
216,533,240
219,170,003
Weighted average basic shares outstanding.................
210,422,945
212,117,511
212,283,966
212,112,744
212,755,946
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995; CERTAIN
CAUTIONARY STATEMENTS
From time to time, the Company or its representatives have made or may make forward-looking statements, orally or in writing. Such forward-
looking statements may be included in, but not limited to, press releases, oral statements made with the approval of an authorized executive
officer or in various filings made by the Company with the Securities and Exchange Commission. The words or phrases “will likely result”, “are
expected to”, “will continue”, “is anticipated”, “estimate”, “project”, "probable", "reasonably possible" or similar expressions are intended to identify
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are qualified in their
entirety by reference to and are accompanied by the discussion in Item 1A of certain important factors that could cause actual results to differ
materially from such forward-looking statements.
The risks included in Item 1A are not exhaustive. Furthermore, reference is also made to other sections of this report which include additional
factors which could adversely impact the Company’s business and financial performance. Moreover, the Company operates in a very competitive
and rapidly changing global environment. New risk factors emerge from time to time and it is not possible for management to predict all of such
risk factors, nor can it assess the impact of all of such risk factors on the Company’s business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, forward-looking
statements cannot be relied upon as a guarantee of actual results.
Shareholders should be aware that while the Company does, from time to time, communicate with securities analysts, it is against the Company’s
policy to disclose to such analysts any material non-public information or other confidential commercial information. Accordingly, shareholders
should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of such statement or
report. Furthermore, the Company has a policy against issuing financial forecasts or projections or confirming the accuracy of forecasts or
projections issued by others. Accordingly, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions,
such reports are not the responsibility of the Company.
ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
12/07
12/08
12/09
12/10
12/11
12/12
Executive Summary
Expeditors International of Washington, Inc. ..
$
100.00 $
75.07 $
79.38 $
125.78 $
95.39 $
Standard and Poor's 500 Index .........................
NASDAQ Transportation....................................
100.00
100.00
63.00
72.93
79.67
72.29
91.67
91.64
93.61
79.89
93.48
108.59
95.85
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Expeditors International of Washington, Inc. is engaged in the business of global logistics management, including international freight forwarding
and consolidation, for both air and ocean freight. The Company acts as a customs broker in all domestic offices, and in many of its international
offices. The Company also provides additional services for its customers including value-added distribution, purchase order management, vendor
consolidation, domestic time definite transportation services, cargo insurance and other logistics solutions. The Company does not compete for
overnight courier or small parcel business. The Company does not own or operate aircraft or steamships.
International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange
rates, and laws and policies relating to tariffs, trade restrictions, foreign investments and taxation. Periodically, governments consider a variety
of changes to current tariffs and trade restrictions and accords. The Company cannot predict which, if any, of these proposals may be adopted,
nor can the Company predict the effects the adoption of any such proposal will have on the Company’s business. Doing business in foreign
locations also subjects the Company to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to
being influenced by governmental policies concerning international trade, the Company’s business may also be affected by political developments
14
15
and changes in government personnel or policies, as well as economic turbulence, political unrest and security concerns in the nations in which
it does business and the future impact that these events may have on international trade and oil prices. The global logistics services industry is
intensely competitive and is expected to remain so for the foreseeable future. Consistent with continuing uncertainty in global economic conditions,
concerns over volatile fuel costs, rising costs in general, political unrest and fluctuating currency exchange rates, the Company’s pricing and
terms continue to be pressured by customers, carriers and service providers which has resulted in a compression of the Company's operating
margins. The Company has also experienced a decrease in airfreight tonnage in 2012 compared to prior years as high technology consumer
products continue to decrease in size and weight and customers improve supply-chain efficiency by utilizing deferred airfreight or ocean freight
whenever possible. Absent of any meaningful improvement in these conditions, the Company expects similar trends to continue in the near term.
The Company derives its revenues from three principal sources: 1) airfreight services, 2) ocean freight and ocean services, and 3) customs
brokerage and other services. These are the revenue categories presented in the financial statements.
The Company is managed along three geographic areas of responsibility: Americas; Asia Pacific; and Europe, Africa, Near/Middle East and Indian
Subcontinent (EMAIR). Each area is divided into sub-regions which are composed of operating units with individual profit and loss
responsibility. The Company’s business involves shipments between operating units and typically touches more than one geographic area. The
nature of the international logistics business necessitates a high degree of communication and cooperation among operating units. Because of
this inter-relationship between operating units, it is very difficult to look at one geographic area and draw meaningful conclusions as to its contribution
to the Company’s overall success on a stand-alone basis.
The Company’s operating units share revenue using the same arms-length pricing methodologies the Company uses when its offices transact
business with independent agents. The Company charges its subsidiaries and affiliates for services rendered in the United States on a cost
recovery basis. The Company’s strategy closely links compensation with operating unit profitability. Individual success is closely linked to
cooperation with other operating units within the network.
As a non-asset based carrier, the Company does not own transportation assets. Rather, the Company generates the major portion of its air and
ocean freight revenues by purchasing transportation services on a wholesale basis from direct (asset-based) carriers and reselling those services
to its customers on a retail basis. The difference between the rate billed to customers (the sell rate) and the rate paid to the carrier (the buy rate)
is termed “net revenue” or “yield.” By consolidating shipments from multiple customers and concentrating its buying power, the Company is able
to negotiate favorable buy rates from the direct carriers, while at the same time offering lower sell rates than customers would otherwise be able
to negotiate themselves.
Customs brokerage and other services involves providing services at destination, such as helping customers clear shipments through customs
by preparing and filing required documentation, calculating and providing for payment of duties and other taxes on behalf of the customers as
well as arranging for any required inspections by governmental agencies, and arranging for delivery. This is a complicated function requiring
technical knowledge of customs rules and regulations in the multitude of countries in which the Company has offices.
The Company’s ability to provide services to its customers is highly dependent on good working relationships with a variety of entities including
airlines, ocean steamship lines, and governmental agencies. The significance of maintaining acceptable working relationships with governmental
agencies and asset-based carriers involved in global trade has gained increased importance as a result of ongoing concern over terrorism. As
each carrier labors to comply with additional governmental regulations implementing security policies and procedures, inherent conflicts emerge
which can and do affect global trade. A good reputation helps to develop practical working understandings that will assist in meeting security
requirements while minimizing potential international trade obstacles, especially as governments promulgate new regulations and increase
oversight and enforcement of new and existing laws. The Company considers its current working relationships with these entities to be satisfactory.
The airline and ocean steamship line industries have incurred significant losses in recent years and many carriers are highly leveraged with debt.
This situation has required the Company to be increasingly selective in which carriers to utilize. Further changes in the financial stability, operating
capabilities and capacity of asset-based carriers, space allotments available from carriers, governmental regulations, modernization of the
regulations governing customs brokerage, and/or changes in governmental quota restrictions or trade accords could affect the Company’s business
in unpredictable ways.
Historically, the Company’s operating results have been subject to a seasonal trend when measured on a quarterly basis. The first quarter has
traditionally been the weakest and the third and fourth quarters have traditionally been the strongest. This pattern is the result of, or is influenced
by, numerous factors including weather patterns, national holidays, consumer demand, economic conditions and a myriad of other similar and
subtle forces. In addition, this historical quarterly trend has been influenced by the growth and diversification of the Company’s international
network and service offerings. The Company cannot accurately forecast many of these factors nor can the Company estimate accurately the
relative influence of any particular factor and, as a result, there can be no assurance that historical patterns, if any, will continue in future periods.
A significant portion of the Company’s revenues are derived from customers in retail 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 the Company’s revenues are, to a large degree, impacted by factors out of the Company’s control, such as a sudden change in
consumer demand for retail goods 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, the Company may not learn of a shortfall in revenues until late in a quarter. To the extent that a
shortfall in revenues or earnings was not expected by securities analysts, any such shortfall from levels predicted by securities analysts could
have an immediate and adverse effect on the trading price of the Company’s stock.
•
•
•
•
•
•
•
•
•
•
•
•
•
The Company operates in 63 countries throughout the world in the competitive global logistics industry and Company activities are tied directly
to the global economy. The Company has pursued a strategy emphasizing organic growth supplemented by certain strategic acquisitions. From
the inception of the Company, management has believed that the elements required for a successful global service organization can only be
assured through recruiting, training, and ultimately retaining superior personnel. The Company’s greatest challenge is now and always has been
perpetuating a consistent global corporate culture which demands:
Total dedication, first and foremost, to providing superior customer service;
Compliance with Company policies and government regulations;
Aggressive marketing of all of the Company’s service offerings;
Ongoing development of key employees and management personnel via formal and informal means;
Creation of unlimited advancement opportunities for employees dedicated to hard work, personal growth and continuous improvement;
Individual commitment to the identification and mentoring of successors for every key position so that when inevitable change is required,
a qualified and well-trained internal candidate is ready to step forward; and
Continuous identification, design and implementation of system solutions, both technological and otherwise, to meet and exceed the
needs of our customers while simultaneously delivering tools to make our employees more efficient and more effective.
The Company reinforces these values with a compensation system that rewards employees for profitably managing the things they can control. This
compensation system has been in place since the Company became a publicly traded entity. There is no limit to how much a key manager can
be compensated for success. The Company believes in a “real world” environment in every operating unit where individuals are not sheltered
from the profit implications of their decisions. If these decisions result in operating losses, these losses must be made up from future operating
profits, in the aggregate, before any cash incentive compensation can be earned. At the same time, the Company insists on continued focus on
such things as accounts receivable collection, cash flow management and credit soundness in an attempt to insulate managers from the sort of
catastrophic errors that might end a career.
Any failure to perpetuate this unique culture on a self-sustained basis throughout the Company provides a greater threat to the Company’s
continued success than any external force, which would be largely beyond our control. Consequently, management spends the majority of its
time focused on creating an environment where employees can learn and develop while also improving systems and taking preventative action
to reduce exposure to negative events and risks. The Company strongly believes that it is nearly impossible to predict events that, in the aggregate,
could have a positive or a negative impact on future operations. As a result, our focus is on building and maintaining a global corporate culture
of well-trained employees and managers that are prepared to identify and react to subtle changes as they develop and thereby help the Company
adapt and thrive as major trends emerge.
Critical Accounting Estimates
the following areas:
accounts receivable valuation;
A summary of the Company’s significant accounting policies can be found in Note 1 to the consolidated financial statements in this report.
Management believes that the nature of the Company’s business is such that there are few complex challenges in accounting for operations.
While judgments and estimates are a necessary component of any system of accounting, the Company’s use of estimates is limited primarily to
accrual of costs related to ancillary services the Company provides;
accrual of insurance liabilities for the portion of the freight related exposure which the Company has self-insured;
accrual of various tax liabilities;
accrual of loss contingencies; and
calculation of share-based compensation expense.
These estimates, other than the accrual of loss contingencies and calculation of share-based compensation expense, are not highly uncertain
and have not historically been subject to significant change. Management believes that the methods utilized in all of these areas are non-aggressive
in approach and consistent in application. Management believes that there are limited, if any, alternative accounting principles or methods which
could be applied to the Company’s transactions. While the use of estimates means that actual future results may be different from those
contemplated by the estimates, the Company believes that alternative principles and methods used for making such estimates would not produce
materially different results than those reported.
16
17
and changes in government personnel or policies, as well as economic turbulence, political unrest and security concerns in the nations in which
it does business and the future impact that these events may have on international trade and oil prices. The global logistics services industry is
intensely competitive and is expected to remain so for the foreseeable future. Consistent with continuing uncertainty in global economic conditions,
concerns over volatile fuel costs, rising costs in general, political unrest and fluctuating currency exchange rates, the Company’s pricing and
terms continue to be pressured by customers, carriers and service providers which has resulted in a compression of the Company's operating
margins. The Company has also experienced a decrease in airfreight tonnage in 2012 compared to prior years as high technology consumer
products continue to decrease in size and weight and customers improve supply-chain efficiency by utilizing deferred airfreight or ocean freight
whenever possible. Absent of any meaningful improvement in these conditions, the Company expects similar trends to continue in the near term.
The Company derives its revenues from three principal sources: 1) airfreight services, 2) ocean freight and ocean services, and 3) customs
brokerage and other services. These are the revenue categories presented in the financial statements.
The Company is managed along three geographic areas of responsibility: Americas; Asia Pacific; and Europe, Africa, Near/Middle East and Indian
Subcontinent (EMAIR). Each area is divided into sub-regions which are composed of operating units with individual profit and loss
responsibility. The Company’s business involves shipments between operating units and typically touches more than one geographic area. The
nature of the international logistics business necessitates a high degree of communication and cooperation among operating units. Because of
this inter-relationship between operating units, it is very difficult to look at one geographic area and draw meaningful conclusions as to its contribution
to the Company’s overall success on a stand-alone basis.
The Company’s operating units share revenue using the same arms-length pricing methodologies the Company uses when its offices transact
business with independent agents. The Company charges its subsidiaries and affiliates for services rendered in the United States on a cost
recovery basis. The Company’s strategy closely links compensation with operating unit profitability. Individual success is closely linked to
cooperation with other operating units within the network.
As a non-asset based carrier, the Company does not own transportation assets. Rather, the Company generates the major portion of its air and
ocean freight revenues by purchasing transportation services on a wholesale basis from direct (asset-based) carriers and reselling those services
to its customers on a retail basis. The difference between the rate billed to customers (the sell rate) and the rate paid to the carrier (the buy rate)
is termed “net revenue” or “yield.” By consolidating shipments from multiple customers and concentrating its buying power, the Company is able
to negotiate favorable buy rates from the direct carriers, while at the same time offering lower sell rates than customers would otherwise be able
to negotiate themselves.
Customs brokerage and other services involves providing services at destination, such as helping customers clear shipments through customs
by preparing and filing required documentation, calculating and providing for payment of duties and other taxes on behalf of the customers as
well as arranging for any required inspections by governmental agencies, and arranging for delivery. This is a complicated function requiring
technical knowledge of customs rules and regulations in the multitude of countries in which the Company has offices.
The Company’s ability to provide services to its customers is highly dependent on good working relationships with a variety of entities including
airlines, ocean steamship lines, and governmental agencies. The significance of maintaining acceptable working relationships with governmental
agencies and asset-based carriers involved in global trade has gained increased importance as a result of ongoing concern over terrorism. As
each carrier labors to comply with additional governmental regulations implementing security policies and procedures, inherent conflicts emerge
which can and do affect global trade. A good reputation helps to develop practical working understandings that will assist in meeting security
requirements while minimizing potential international trade obstacles, especially as governments promulgate new regulations and increase
oversight and enforcement of new and existing laws. The Company considers its current working relationships with these entities to be satisfactory.
The airline and ocean steamship line industries have incurred significant losses in recent years and many carriers are highly leveraged with debt.
This situation has required the Company to be increasingly selective in which carriers to utilize. Further changes in the financial stability, operating
capabilities and capacity of asset-based carriers, space allotments available from carriers, governmental regulations, modernization of the
regulations governing customs brokerage, and/or changes in governmental quota restrictions or trade accords could affect the Company’s business
in unpredictable ways.
Historically, the Company’s operating results have been subject to a seasonal trend when measured on a quarterly basis. The first quarter has
traditionally been the weakest and the third and fourth quarters have traditionally been the strongest. This pattern is the result of, or is influenced
by, numerous factors including weather patterns, national holidays, consumer demand, economic conditions and a myriad of other similar and
subtle forces. In addition, this historical quarterly trend has been influenced by the growth and diversification of the Company’s international
network and service offerings. The Company cannot accurately forecast many of these factors nor can the Company estimate accurately the
relative influence of any particular factor and, as a result, there can be no assurance that historical patterns, if any, will continue in future periods.
A significant portion of the Company’s revenues are derived from customers in retail 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 the Company’s revenues are, to a large degree, impacted by factors out of the Company’s control, such as a sudden change in
consumer demand for retail goods 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, the Company may not learn of a shortfall in revenues until late in a quarter. To the extent that a
shortfall in revenues or earnings was not expected by securities analysts, any such shortfall from levels predicted by securities analysts could
have an immediate and adverse effect on the trading price of the Company’s stock.
The Company operates in 63 countries throughout the world in the competitive global logistics industry and Company activities are tied directly
to the global economy. The Company has pursued a strategy emphasizing organic growth supplemented by certain strategic acquisitions. From
the inception of the Company, management has believed that the elements required for a successful global service organization can only be
assured through recruiting, training, and ultimately retaining superior personnel. The Company’s greatest challenge is now and always has been
perpetuating a consistent global corporate culture which demands:
•
•
•
•
•
•
•
Total dedication, first and foremost, to providing superior customer service;
Compliance with Company policies and government regulations;
Aggressive marketing of all of the Company’s service offerings;
Ongoing development of key employees and management personnel via formal and informal means;
Creation of unlimited advancement opportunities for employees dedicated to hard work, personal growth and continuous improvement;
Individual commitment to the identification and mentoring of successors for every key position so that when inevitable change is required,
a qualified and well-trained internal candidate is ready to step forward; and
Continuous identification, design and implementation of system solutions, both technological and otherwise, to meet and exceed the
needs of our customers while simultaneously delivering tools to make our employees more efficient and more effective.
The Company reinforces these values with a compensation system that rewards employees for profitably managing the things they can control. This
compensation system has been in place since the Company became a publicly traded entity. There is no limit to how much a key manager can
be compensated for success. The Company believes in a “real world” environment in every operating unit where individuals are not sheltered
from the profit implications of their decisions. If these decisions result in operating losses, these losses must be made up from future operating
profits, in the aggregate, before any cash incentive compensation can be earned. At the same time, the Company insists on continued focus on
such things as accounts receivable collection, cash flow management and credit soundness in an attempt to insulate managers from the sort of
catastrophic errors that might end a career.
Any failure to perpetuate this unique culture on a self-sustained basis throughout the Company provides a greater threat to the Company’s
continued success than any external force, which would be largely beyond our control. Consequently, management spends the majority of its
time focused on creating an environment where employees can learn and develop while also improving systems and taking preventative action
to reduce exposure to negative events and risks. The Company strongly believes that it is nearly impossible to predict events that, in the aggregate,
could have a positive or a negative impact on future operations. As a result, our focus is on building and maintaining a global corporate culture
of well-trained employees and managers that are prepared to identify and react to subtle changes as they develop and thereby help the Company
adapt and thrive as major trends emerge.
Critical Accounting Estimates
A summary of the Company’s significant accounting policies can be found in Note 1 to the consolidated financial statements in this report.
Management believes that the nature of the Company’s business is such that there are few complex challenges in accounting for operations.
While judgments and estimates are a necessary component of any system of accounting, the Company’s use of estimates is limited primarily to
the following areas:
•
•
•
•
•
•
accounts receivable valuation;
accrual of costs related to ancillary services the Company provides;
accrual of insurance liabilities for the portion of the freight related exposure which the Company has self-insured;
accrual of various tax liabilities;
accrual of loss contingencies; and
calculation of share-based compensation expense.
These estimates, other than the accrual of loss contingencies and calculation of share-based compensation expense, are not highly uncertain
and have not historically been subject to significant change. Management believes that the methods utilized in all of these areas are non-aggressive
in approach and consistent in application. Management believes that there are limited, if any, alternative accounting principles or methods which
could be applied to the Company’s transactions. While the use of estimates means that actual future results may be different from those
contemplated by the estimates, the Company believes that alternative principles and methods used for making such estimates would not produce
materially different results than those reported.
16
17
The outcomes of government investigations, legal proceedings and claims brought against the Company are subject to significant uncertainty.
An estimated loss from a contingency such as a government investigation, legal proceeding or claim is accrued by a charge to income if it is
probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of
a loss contingency is required if there is at least a reasonable possibility that a significant loss has been incurred. In determining whether a loss
should be accrued, management evaluates several factors, including advice from outside legal counsel, in order to estimate the degree of
probability of an unfavorable outcome and make a reasonable estimate of the amount of loss or range of reasonably possible loss. Changes in
these factors could have a material impact on the Company's financial position, results of operations and operating cash flows for any particular
quarter or year.
As described in Note 1.H to the consolidated financial statements in this report, the Company accounts for share-based compensation based on
an estimate of the fair value of options granted to employees under the Company’s stock option and stock purchase rights plans. This expense,
as adjusted for expected forfeitures, is recorded on a straight-line basis over the vesting period.
Determining the appropriate option pricing model to use to estimate stock compensation expense requires judgment. Any option pricing model
requires assumptions that are subjective and these assumptions also require judgment. Examples include assumptions about long-term stock
price volatility, employee exercise patterns, pre-vesting option forfeitures, post-vesting option terminations, and future interest rates and dividend
yields. The Company uses the Black-Scholes model for estimating the fair value of stock options.
Management believes that the assumptions used are appropriate based upon the Company’s historical and currently expected future experience.
Looking to future events, management has been strongly influenced by historical patterns which may not be valid predictors of future developments
and any future deviation may be material.
The Company’s expected volatility assumptions are based on the historical volatility of the Company’s stock over a period of time commensurate
to the expected life. The expected life assumption is primarily based on historical employee exercise patterns and employee post-vesting termination
behavior. The risk-free interest rate for the expected term of the option is based on the corresponding yield curve in effect at the time of grant for
U.S. Treasury bonds having the same term as the expected life of the option, i.e. a ten year bond rate is used for valuing an option with a ten
year expected life. The expected dividend yield is based on the Company’s historical experience. The forfeiture assumption used to calculate
compensation expense is primarily based on historical pre-vesting employee forfeiture patterns.
The fair value of an option is more significantly impacted by changes in the expected volatility and expected life assumptions. The pre-vesting
forfeitures assumption is ultimately adjusted to the actual forfeiture rate. Therefore, changes in the forfeitures assumption would not impact the
total amount of expense ultimately recognized over the vesting period. Different forfeiture assumptions would only impact the timing of expense
recognition over the vesting period. Estimated forfeitures are reassessed in subsequent periods and may change based on new facts and
circumstances.
Results of Operations
In thousands
Net revenues:
The following table shows the consolidated net revenues (revenues less transportation expenses) attributable to the Company’s principal services
and the Company’s expenses for 2012, 2011, and 2010 expressed as percentages of net revenues. Management believes that net revenues are
a better measure than total revenues of the relative importance of the Company’s principal services since total revenues earned by the Company
as a freight consolidator include the carriers’ charges to the Company for carrying the shipment whereas revenues earned by the Company in
its other capacities include only the commissions and fees actually earned by the Company.
2012
2011
2010
Percent
of net
revenues
Percent
of net
revenues
Amount
Amount
Amount
Percent
of net
revenues
Airfreight services ................................................................
$ 617,220
34% $ 700,352
37% $ 640,230
38%
Ocean freight and ocean services .......................................
Customs brokerage and other services ...............................
Total net revenues ...............................................................
1,824,098
Overhead expenses:
Salaries and related costs ...................................................
Other ...................................................................................
Total overhead expenses ....................................................
1,293,300
Operating income ................................................................
530,798
Other income, net ................................................................
Earnings before income taxes .............................................
Income tax expense ............................................................
Net earnings ........................................................................
Less net (losses) earnings attributable to the
noncontrolling interest .........................................................
432,721
774,157
995,052
298,248
19,595
550,393
217,424
332,969
(391)
24
42
100
55
16
71
29
1
30
12
18
—
435,425
760,700
1,896,477
993,358
284,792
1,278,150
618,327
19,701
638,028
251,785
386,243
564
23
40
100
52
15
67
33
1
34
13
21
—
385,523
667,033
1,692,786
894,132
251,424
1,145,556
547,230
16,838
564,068
219,863
344,205
33
23
39
100
53
15
68
32
1
33
13
20
—
Net earnings attributable to shareholders ............................
$ 333,360
18% $ 385,679
21% $ 344,172
20%
2012 compared with 2011
Net revenues:
Airfreight services net revenues in 2012 decreased 12% as compared with 2011. The decrease in global airfreight services net revenues was
primarily due to a 6% decrease in airfreight tonnage and a 7% decrease in net revenue per kilo. North America, Asia Pacific and Europe airfreight
services net revenues decreased 7%, 16% and 13%, respectively, in 2012 as compared with 2011, while airfreight export tonnage decreased
12%, 2% and 6% in North America, Asia Pacific and Europe, respectively. The decline in airfreight tonnage in 2012 can be attributed to an overall
decrease in the global airfreight market as high technology consumer products continue to decrease in size and weight and customers improve
supply-chain efficiency by utilizing deferred airfreight or ocean freight whenever possible, and a lower level of customer specific infrastructure
and project related tonnage than experienced in 2011. Net revenue per kilo was lower in 2012 compared to 2011 as carriers reduced overall
available capacity to manage market pricing and the Company was unable to implement corresponding price adjustments to its customers in a
timely manner.
Ocean freight and ocean services net revenues decreased 1% in 2012 as compared with 2011. North America ocean freight net revenues increased
2% while Asia Pacific and Europe ocean freight net revenues decreased by 3% and 1%, respectively, in 2012 as compared with 2011.
Ocean freight net revenues are comprised of three basic services: ocean freight consolidation, direct ocean forwarding and order management.
The largest component of the Company’s ocean freight net revenue is derived from ocean freight consolidation which represented 47% and 50%
of ocean freight net revenue in 2012 and 2011, respectively.
Ocean freight consolidation net revenue decreased 7% in 2012 as compared with 2011, primarily due to a 4% decrease in net revenue per
container and a 2% decrease in container volume as measured in terms of forty-foot container equivalent units (FEUs). The decrease in net
revenue per container resulted from the timing of significant increases in buy rates implemented by carriers, requirements to provide notice of
these increases to customers and the company's ability to implement commensurate increases in its sell rates. Direct ocean freight forwarding
and order management net revenues, which are primarily fee-based, increased 8% and 2%, respectively, in 2012, as compared with 2011, due
to an increase in market share and volume.
18
19
The outcomes of government investigations, legal proceedings and claims brought against the Company are subject to significant uncertainty.
Results of Operations
An estimated loss from a contingency such as a government investigation, legal proceeding or claim is accrued by a charge to income if it is
probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of
a loss contingency is required if there is at least a reasonable possibility that a significant loss has been incurred. In determining whether a loss
should be accrued, management evaluates several factors, including advice from outside legal counsel, in order to estimate the degree of
probability of an unfavorable outcome and make a reasonable estimate of the amount of loss or range of reasonably possible loss. Changes in
these factors could have a material impact on the Company's financial position, results of operations and operating cash flows for any particular
quarter or year.
As described in Note 1.H to the consolidated financial statements in this report, the Company accounts for share-based compensation based on
an estimate of the fair value of options granted to employees under the Company’s stock option and stock purchase rights plans. This expense,
as adjusted for expected forfeitures, is recorded on a straight-line basis over the vesting period.
Determining the appropriate option pricing model to use to estimate stock compensation expense requires judgment. Any option pricing model
requires assumptions that are subjective and these assumptions also require judgment. Examples include assumptions about long-term stock
price volatility, employee exercise patterns, pre-vesting option forfeitures, post-vesting option terminations, and future interest rates and dividend
yields. The Company uses the Black-Scholes model for estimating the fair value of stock options.
Management believes that the assumptions used are appropriate based upon the Company’s historical and currently expected future experience.
Looking to future events, management has been strongly influenced by historical patterns which may not be valid predictors of future developments
and any future deviation may be material.
The Company’s expected volatility assumptions are based on the historical volatility of the Company’s stock over a period of time commensurate
to the expected life. The expected life assumption is primarily based on historical employee exercise patterns and employee post-vesting termination
behavior. The risk-free interest rate for the expected term of the option is based on the corresponding yield curve in effect at the time of grant for
U.S. Treasury bonds having the same term as the expected life of the option, i.e. a ten year bond rate is used for valuing an option with a ten
year expected life. The expected dividend yield is based on the Company’s historical experience. The forfeiture assumption used to calculate
compensation expense is primarily based on historical pre-vesting employee forfeiture patterns.
The fair value of an option is more significantly impacted by changes in the expected volatility and expected life assumptions. The pre-vesting
forfeitures assumption is ultimately adjusted to the actual forfeiture rate. Therefore, changes in the forfeitures assumption would not impact the
total amount of expense ultimately recognized over the vesting period. Different forfeiture assumptions would only impact the timing of expense
recognition over the vesting period. Estimated forfeitures are reassessed in subsequent periods and may change based on new facts and
circumstances.
The following table shows the consolidated net revenues (revenues less transportation expenses) attributable to the Company’s principal services
and the Company’s expenses for 2012, 2011, and 2010 expressed as percentages of net revenues. Management believes that net revenues are
a better measure than total revenues of the relative importance of the Company’s principal services since total revenues earned by the Company
as a freight consolidator include the carriers’ charges to the Company for carrying the shipment whereas revenues earned by the Company in
its other capacities include only the commissions and fees actually earned by the Company.
In thousands
Net revenues:
2012
2011
2010
Percent
of net
revenues
Percent
of net
revenues
Percent
of net
revenues
Amount
Amount
Amount
Airfreight services ................................................................
$ 617,220
34% $ 700,352
37% $ 640,230
38%
Ocean freight and ocean services .......................................
Customs brokerage and other services ...............................
432,721
774,157
Total net revenues ...............................................................
1,824,098
Overhead expenses:
Salaries and related costs ...................................................
Other ...................................................................................
995,052
298,248
Total overhead expenses ....................................................
1,293,300
Operating income ................................................................
530,798
Other income, net ................................................................
Earnings before income taxes .............................................
Income tax expense ............................................................
Net earnings ........................................................................
Less net (losses) earnings attributable to the
noncontrolling interest .........................................................
19,595
550,393
217,424
332,969
(391)
24
42
100
55
16
71
29
1
30
12
18
—
435,425
760,700
1,896,477
993,358
284,792
1,278,150
618,327
19,701
638,028
251,785
386,243
564
23
40
100
52
15
67
33
1
34
13
21
—
385,523
667,033
1,692,786
894,132
251,424
1,145,556
547,230
16,838
564,068
219,863
344,205
33
23
39
100
53
15
68
32
1
33
13
20
—
Net earnings attributable to shareholders ............................
$ 333,360
18% $ 385,679
21% $ 344,172
20%
2012 compared with 2011
Net revenues:
Airfreight services net revenues in 2012 decreased 12% as compared with 2011. The decrease in global airfreight services net revenues was
primarily due to a 6% decrease in airfreight tonnage and a 7% decrease in net revenue per kilo. North America, Asia Pacific and Europe airfreight
services net revenues decreased 7%, 16% and 13%, respectively, in 2012 as compared with 2011, while airfreight export tonnage decreased
12%, 2% and 6% in North America, Asia Pacific and Europe, respectively. The decline in airfreight tonnage in 2012 can be attributed to an overall
decrease in the global airfreight market as high technology consumer products continue to decrease in size and weight and customers improve
supply-chain efficiency by utilizing deferred airfreight or ocean freight whenever possible, and a lower level of customer specific infrastructure
and project related tonnage than experienced in 2011. Net revenue per kilo was lower in 2012 compared to 2011 as carriers reduced overall
available capacity to manage market pricing and the Company was unable to implement corresponding price adjustments to its customers in a
timely manner.
Ocean freight and ocean services net revenues decreased 1% in 2012 as compared with 2011. North America ocean freight net revenues increased
2% while Asia Pacific and Europe ocean freight net revenues decreased by 3% and 1%, respectively, in 2012 as compared with 2011.
Ocean freight net revenues are comprised of three basic services: ocean freight consolidation, direct ocean forwarding and order management.
The largest component of the Company’s ocean freight net revenue is derived from ocean freight consolidation which represented 47% and 50%
of ocean freight net revenue in 2012 and 2011, respectively.
Ocean freight consolidation net revenue decreased 7% in 2012 as compared with 2011, primarily due to a 4% decrease in net revenue per
container and a 2% decrease in container volume as measured in terms of forty-foot container equivalent units (FEUs). The decrease in net
revenue per container resulted from the timing of significant increases in buy rates implemented by carriers, requirements to provide notice of
these increases to customers and the company's ability to implement commensurate increases in its sell rates. Direct ocean freight forwarding
and order management net revenues, which are primarily fee-based, increased 8% and 2%, respectively, in 2012, as compared with 2011, due
to an increase in market share and volume.
18
19
Customs brokerage and other services net revenues increased 2% in 2012 as compared with 2011, primarily as a result of an increase in domestic
time definite transportation volumes. Customers continue to seek out customs brokers with sophisticated computerized capabilities critical to an
overall logistics management program, including rapid responses to changes in the regulatory and security environment.
Customs brokerage and other services net revenues increased 2% in 2012 as compared with 2011, primarily as a result of an increase in domestic
time definite transportation volumes. Customers continue to seek out customs brokers with sophisticated computerized capabilities critical to an
overall logistics management program, including rapid responses to changes in the regulatory and security environment.
2011 compared with 2010
Net revenues:
Overhead expenses:
Overhead expenses:
Salaries and related costs increased 0.2% in 2012, as compared with 2011, primarily due to a higher average number of employees, increases
Salaries and related costs increased 0.2% in 2012, as compared with 2011, primarily due to a higher average number of employees, increases
in base salaries, payroll taxes and medical costs, which were partially offset by a decline in bonuses earned due to lower operating income.
in base salaries, payroll taxes and medical costs, which were partially offset by a decline in bonuses earned due to lower operating income.
Salaries and related costs and stock-based compensation expense as a percentage of net revenue are as follows:
Salaries and related costs and stock-based compensation expense as a percentage of net revenue are as follows:
Airfreight services net revenues in 2011 increased 9% as compared with 2010. The increase in global airfreight services net revenues was primarily
due to a 12% increase in net revenue per kilo, while airfreight tonnage remained constant. North America, Asia Pacific and Europe airfreight
services net revenues increased 10%, 8% and 12%, respectively, in 2011 as compared with 2010, while airfreight export tonnage increased 5%
and 4% in North America and Europe, respectively, and decreased 3% in Asia Pacific. Net revenue per kilo was higher as the Company benefited
from intermittent buying opportunities created from excess carrier capacity, primarily in Asia. After the first quarter of 2011, the Company experienced
a decline in quarterly airfreight volumes as compared to 2010 and the customary peak season surge in the fourth quarter did not materialize.
$
$
2.4%
52.4%
44,058
44,278
2.3%
2.3%
995,052
993,358
993,358
52.4%
44,278
Years ended December 31,
Years ended December 31,
2012
2012
2011
2011
Ocean freight and ocean services net revenues increased 13% in 2011 as compared with 2010. North America, Asia Pacific and Europe ocean
freight net revenues increased approximately 13%, 13% and 16%, respectively, in 2011 as compared with 2010.
$
54.6%
$
995,052
54.6%
44,058
2.4%
In thousands
In thousands
Salaries and related costs ........................................................................................................
Salaries and related costs ........................................................................................................
$
$
As a % of net revenue ..............................................................................................................
As a % of net revenue ..............................................................................................................
Stock compensation expense ..................................................................................................
Stock compensation expense ..................................................................................................
$
$
As a % of net revenue ..............................................................................................................
As a % of net revenue ..............................................................................................................
Historically, the relatively consistent relationship between salaries and net revenues is the result of a compensation philosophy that has been
maintained since the inception of the 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 will occur in proportion to changes in Company operating income, creating a direct alignment between corporate performance and
shareholder interests. However, the results in 2012 were not consistent with this historical relationship primarily due to a decrease in net revenues
while the average number of employees increased to support customer driven initiatives, enhance information systems and expand certain
products. Bonuses to field and executive management in 2012, consistent with declines in branch and Company performance, were down 9%
and 14%, respectively, as compared with 2011. The Company’s management incentive compensation programs have always been incentive-
based and performance driven and there is no built-in bias that favors or enriches management in a manner inconsistent with overall corporate
performance.
Historically, the relatively consistent relationship between salaries and net revenues is the result of a compensation philosophy that has been
maintained since the inception of the 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 will occur in proportion to changes in Company operating income, creating a direct alignment between corporate performance and
shareholder interests. However, the results in 2012 were not consistent with this historical relationship primarily due to a decrease in net revenues
while the average number of employees increased to support customer driven initiatives, enhance information systems and expand certain
products. Bonuses to field and executive management in 2012, consistent with declines in branch and Company performance, were down 9%
and 14%, respectively, as compared with 2011. The Company’s management incentive compensation programs have always been incentive-
based and performance driven and there is no built-in bias that favors or enriches management in a manner inconsistent with overall corporate
performance.
Because the Company’s management incentive compensation programs are also cumulative, no management bonuses can be paid unless the
relevant business unit is, from inception, cumulatively profitable. Any operating losses must have been offset in their entirety by operating profits
before management is eligible for a bonus. Since the most significant portion of management compensation comes from the incentive bonus
programs, the Company believes that this cumulative feature is a disincentive to excessive risk taking by its managers. Due to the nature of the
Company’s services, it has a short operating cycle. 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 this short operating cycle, 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,
net revenues and net earnings are a result of the incentives inherent in the Company’s compensation program.
Because the Company’s management incentive compensation programs are also cumulative, no management bonuses can be paid unless the
relevant business unit is, from inception, cumulatively profitable. Any operating losses must have been offset in their entirety by operating profits
before management is eligible for a bonus. Since the most significant portion of management compensation comes from the incentive bonus
programs, the Company believes that this cumulative feature is a disincentive to excessive risk taking by its managers. Due to the nature of the
Company’s services, it has a short operating cycle. 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 this short operating cycle, 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,
net revenues and net earnings are a result of the incentives inherent in the Company’s compensation program.
Other overhead expenses increased 5% in 2012, as compared with 2011. This increase is primarily due to the European Commission's finding
against the Company for anti-competitive behavior, which resulted in a fine of €4.14 million ($5.5 million), higher legal expenses, an adjustment
for certain foreign indirect withholding taxes of approximately $5.9 million, claims related to increased liability limits and cost associated with
maintaining and enhancing our information systems. The Company also decided not to continue pursuit of certain real estate development projects
recorded under construction in process and expensed the associated costs of $3 million as a component of rent and occupancy expense.These
increases offset lower travel and entertainment expense achieved through continued cost reduction measures. Other overhead expenses as a
percentage of net revenues increased 1% in 2012, as compared with 2011.
Other overhead expenses increased 5% in 2012, as compared with 2011. This increase is primarily due to the European Commission's finding
against the Company for anti-competitive behavior, which resulted in a fine of €4.14 million ($5.5 million), higher legal expenses, an adjustment
for certain foreign indirect withholding taxes of approximately $5.9 million, claims related to increased liability limits and cost associated with
maintaining and enhancing our information systems. The Company also decided not to continue pursuit of certain real estate development projects
recorded under construction in process and expensed the associated costs of $3 million as a component of rent and occupancy expense.These
increases offset lower travel and entertainment expense achieved through continued cost reduction measures. Other overhead expenses as a
percentage of net revenues increased 1% in 2012, as compared with 2011.
Income tax expense:
Income tax expense:
The Company pays income taxes in the United States and other jurisdictions. The Company’s consolidated effective income tax rate was 39.5%
in both 2012 and 2011. On a percentage basis, relative to pre-tax earnings, available tax deductions associated with disqualifying dispositions
of both incentive stock options and employee stock purchase plan shares were consistent between both 2012 and 2011. The tax benefit related
to stock-based compensation expense is recorded for non-qualified stock options at the time the related compensation expense is recognized
while the tax benefit received for disqualifying dispositions of incentive stock options and employee stock purchase plan shares cannot be
anticipated and is recorded at the time of the disqualifying event.
The Company pays income taxes in the United States and other jurisdictions. The Company’s consolidated effective income tax rate was 39.5%
in both 2012 and 2011. On a percentage basis, relative to pre-tax earnings, available tax deductions associated with disqualifying dispositions
of both incentive stock options and employee stock purchase plan shares were consistent between both 2012 and 2011. The tax benefit related
to stock-based compensation expense is recorded for non-qualified stock options at the time the related compensation expense is recognized
while the tax benefit received for disqualifying dispositions of incentive stock options and employee stock purchase plan shares cannot be
anticipated and is recorded at the time of the disqualifying event.
20
20
21
In 2011 and 2010, the majority of the Company's ocean freight net revenue was derived from ocean freight consolidation which represented 50%
and 51%, respectively, of ocean freight net revenue.
Ocean freight consolidation net revenue increased 12% in 2011 as compared with 2010, primarily due to a 10% increase in net revenue per
container. Similar to airfreight, the increase in net revenue per container resulted from excess carrier capacity in 2011 leading to the creation of
positive buying opportunities, primarily in Asia. Volume, as measured in terms of FEUs, increased 2% in 2011 as compared with 2010. Direct
ocean freight forwarding and order management, which are primarily fee-based, increased 13% and 16%, respectively, in 2011, as compared
with 2010, due to an increase in volume.
Customs brokerage and other services net revenues increased 14% in 2011 as compared with 2010, primarily as a result of growth in market
share and an increase in domestic time definite transportation volumes. Customers continue to seek out customs brokers with sophisticated
computerized capabilities critical to an overall logistics management program, including rapid responses to changes in the regulatory and security
environment.
Overhead expenses:
income.
In thousands
Other income, net:
Income tax expense:
Salaries and related costs increased 11% in 2011, as compared with 2010, primarily as a result of (i) an increase in the number of employees,
(ii) an overall increase in average base salaries and related taxes and benefits and (iii) larger bonuses earned from achieving higher operating
Salaries and related costs and stock-based compensation expense as a percentage of net revenue are as follows:
Years ended December 31,
2011
2010
Salaries and related costs ........................................................................................................
As a % of net revenue ..............................................................................................................
Stock compensation expense ..................................................................................................
$
$
As a % of net revenue ..............................................................................................................
993,358
52.4%
44,278
2.3%
$
$
894,132
52.8%
43,743
2.6%
Bonuses to field and corporate management in 2011 were up 13% as compared with 2010, primarily as a result of a 13% increase in operating
income.
Other overhead expenses increased 13% in 2011, as compared with 2010, primarily as a result of increased facilities costs, higher business
taxes, systems maintenance and consulting expenses, travel and other expenses related to increased activity. Legal and related expenses
increased slightly in 2011, as compared with 2010, primarily attributable to responding to matters related to anti-competition allegations by the
European Commission. Other overhead expenses as a percentage of net revenues remained constant for 2011, as compared with 2010.
Other income, net, increased 17% in 2011, as compared with 2010. Interest income increased $3 million due to higher average cash and cash
equivalents balances during 2011, as compared with 2010.
The Company's consolidated effective income tax rate in 2011 was 39.5% as compared to 38.9% for 2010. The higher consolidated effective
income tax rate for 2011, as compared with 2010, is primarily the result of higher State tax rates and a lower tax benefit received for disqualifying
dispositions of incentive stock options for 2011, as compared with 2010.
Customs brokerage and other services net revenues increased 2% in 2012 as compared with 2011, primarily as a result of an increase in domestic
2011 compared with 2010
2011 compared with 2010
time definite transportation volumes. Customers continue to seek out customs brokers with sophisticated computerized capabilities critical to an
overall logistics management program, including rapid responses to changes in the regulatory and security environment.
Net revenues:
Net revenues:
Salaries and related costs increased 0.2% in 2012, as compared with 2011, primarily due to a higher average number of employees, increases
in base salaries, payroll taxes and medical costs, which were partially offset by a decline in bonuses earned due to lower operating income.
Salaries and related costs and stock-based compensation expense as a percentage of net revenue are as follows:
Airfreight services net revenues in 2011 increased 9% as compared with 2010. The increase in global airfreight services net revenues was primarily
Airfreight services net revenues in 2011 increased 9% as compared with 2010. The increase in global airfreight services net revenues was primarily
due to a 12% increase in net revenue per kilo, while airfreight tonnage remained constant. North America, Asia Pacific and Europe airfreight
due to a 12% increase in net revenue per kilo, while airfreight tonnage remained constant. North America, Asia Pacific and Europe airfreight
services net revenues increased 10%, 8% and 12%, respectively, in 2011 as compared with 2010, while airfreight export tonnage increased 5%
services net revenues increased 10%, 8% and 12%, respectively, in 2011 as compared with 2010, while airfreight export tonnage increased 5%
and 4% in North America and Europe, respectively, and decreased 3% in Asia Pacific. Net revenue per kilo was higher as the Company benefited
and 4% in North America and Europe, respectively, and decreased 3% in Asia Pacific. Net revenue per kilo was higher as the Company benefited
from intermittent buying opportunities created from excess carrier capacity, primarily in Asia. After the first quarter of 2011, the Company experienced
from intermittent buying opportunities created from excess carrier capacity, primarily in Asia. After the first quarter of 2011, the Company experienced
a decline in quarterly airfreight volumes as compared to 2010 and the customary peak season surge in the fourth quarter did not materialize.
a decline in quarterly airfreight volumes as compared to 2010 and the customary peak season surge in the fourth quarter did not materialize.
Years ended December 31,
2012
2011
Ocean freight and ocean services net revenues increased 13% in 2011 as compared with 2010. North America, Asia Pacific and Europe ocean
freight net revenues increased approximately 13%, 13% and 16%, respectively, in 2011 as compared with 2010.
Ocean freight and ocean services net revenues increased 13% in 2011 as compared with 2010. North America, Asia Pacific and Europe ocean
freight net revenues increased approximately 13%, 13% and 16%, respectively, in 2011 as compared with 2010.
Overhead expenses:
In thousands
In 2011 and 2010, the majority of the Company's ocean freight net revenue was derived from ocean freight consolidation which represented 50%
and 51%, respectively, of ocean freight net revenue.
In 2011 and 2010, the majority of the Company's ocean freight net revenue was derived from ocean freight consolidation which represented 50%
and 51%, respectively, of ocean freight net revenue.
Ocean freight consolidation net revenue increased 12% in 2011 as compared with 2010, primarily due to a 10% increase in net revenue per
container. Similar to airfreight, the increase in net revenue per container resulted from excess carrier capacity in 2011 leading to the creation of
positive buying opportunities, primarily in Asia. Volume, as measured in terms of FEUs, increased 2% in 2011 as compared with 2010. Direct
ocean freight forwarding and order management, which are primarily fee-based, increased 13% and 16%, respectively, in 2011, as compared
with 2010, due to an increase in volume.
Ocean freight consolidation net revenue increased 12% in 2011 as compared with 2010, primarily due to a 10% increase in net revenue per
container. Similar to airfreight, the increase in net revenue per container resulted from excess carrier capacity in 2011 leading to the creation of
positive buying opportunities, primarily in Asia. Volume, as measured in terms of FEUs, increased 2% in 2011 as compared with 2010. Direct
ocean freight forwarding and order management, which are primarily fee-based, increased 13% and 16%, respectively, in 2011, as compared
with 2010, due to an increase in volume.
Customs brokerage and other services net revenues increased 14% in 2011 as compared with 2010, primarily as a result of growth in market
share and an increase in domestic time definite transportation volumes. Customers continue to seek out customs brokers with sophisticated
computerized capabilities critical to an overall logistics management program, including rapid responses to changes in the regulatory and security
environment.
Customs brokerage and other services net revenues increased 14% in 2011 as compared with 2010, primarily as a result of growth in market
share and an increase in domestic time definite transportation volumes. Customers continue to seek out customs brokers with sophisticated
computerized capabilities critical to an overall logistics management program, including rapid responses to changes in the regulatory and security
environment.
Overhead expenses:
Overhead expenses:
Salaries and related costs increased 11% in 2011, as compared with 2010, primarily as a result of (i) an increase in the number of employees,
(ii) an overall increase in average base salaries and related taxes and benefits and (iii) larger bonuses earned from achieving higher operating
income.
Salaries and related costs increased 11% in 2011, as compared with 2010, primarily as a result of (i) an increase in the number of employees,
(ii) an overall increase in average base salaries and related taxes and benefits and (iii) larger bonuses earned from achieving higher operating
income.
Salaries and related costs and stock-based compensation expense as a percentage of net revenue are as follows:
Salaries and related costs and stock-based compensation expense as a percentage of net revenue are as follows:
In thousands
In thousands
Salaries and related costs ........................................................................................................
Salaries and related costs ........................................................................................................
$
$
As a % of net revenue ..............................................................................................................
As a % of net revenue ..............................................................................................................
Stock compensation expense ..................................................................................................
Stock compensation expense ..................................................................................................
$
$
Years ended December 31,
Years ended December 31,
2011
2011
2010
2010
993,358
993,358
52.4%
44,278
$
52.4%
$
44,278
$
$
894,132
894,132
52.8%
43,743
43,743
52.8%
As a % of net revenue ..............................................................................................................
As a % of net revenue ..............................................................................................................
2.3%
2.3%
2.6%
2.6%
Bonuses to field and corporate management in 2011 were up 13% as compared with 2010, primarily as a result of a 13% increase in operating
income.
Bonuses to field and corporate management in 2011 were up 13% as compared with 2010, primarily as a result of a 13% increase in operating
income.
Other overhead expenses increased 13% in 2011, as compared with 2010, primarily as a result of increased facilities costs, higher business
Other overhead expenses increased 13% in 2011, as compared with 2010, primarily as a result of increased facilities costs, higher business
taxes, systems maintenance and consulting expenses, travel and other expenses related to increased activity. Legal and related expenses
taxes, systems maintenance and consulting expenses, travel and other expenses related to increased activity. Legal and related expenses
increased slightly in 2011, as compared with 2010, primarily attributable to responding to matters related to anti-competition allegations by the
increased slightly in 2011, as compared with 2010, primarily attributable to responding to matters related to anti-competition allegations by the
European Commission. Other overhead expenses as a percentage of net revenues remained constant for 2011, as compared with 2010.
European Commission. Other overhead expenses as a percentage of net revenues remained constant for 2011, as compared with 2010.
Other income, net:
Other income, net:
Other income, net, increased 17% in 2011, as compared with 2010. Interest income increased $3 million due to higher average cash and cash
equivalents balances during 2011, as compared with 2010.
Other income, net, increased 17% in 2011, as compared with 2010. Interest income increased $3 million due to higher average cash and cash
equivalents balances during 2011, as compared with 2010.
Income tax expense:
Income tax expense:
The Company's consolidated effective income tax rate in 2011 was 39.5% as compared to 38.9% for 2010. The higher consolidated effective
income tax rate for 2011, as compared with 2010, is primarily the result of higher State tax rates and a lower tax benefit received for disqualifying
dispositions of incentive stock options for 2011, as compared with 2010.
The Company's consolidated effective income tax rate in 2011 was 39.5% as compared to 38.9% for 2010. The higher consolidated effective
income tax rate for 2011, as compared with 2010, is primarily the result of higher State tax rates and a lower tax benefit received for disqualifying
dispositions of incentive stock options for 2011, as compared with 2010.
20
21
21
Salaries and related costs ........................................................................................................
As a % of net revenue ..............................................................................................................
Stock compensation expense ..................................................................................................
$
$
As a % of net revenue ..............................................................................................................
995,052
54.6%
44,058
2.4%
$
$
993,358
52.4%
44,278
2.3%
Historically, the relatively consistent relationship between salaries and net revenues is the result of a compensation philosophy that has been
maintained since the inception of the 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 will occur in proportion to changes in Company operating income, creating a direct alignment between corporate performance and
shareholder interests. However, the results in 2012 were not consistent with this historical relationship primarily due to a decrease in net revenues
while the average number of employees increased to support customer driven initiatives, enhance information systems and expand certain
products. Bonuses to field and executive management in 2012, consistent with declines in branch and Company performance, were down 9%
and 14%, respectively, as compared with 2011. The Company’s management incentive compensation programs have always been incentive-
based and performance driven and there is no built-in bias that favors or enriches management in a manner inconsistent with overall corporate
performance.
Because the Company’s management incentive compensation programs are also cumulative, no management bonuses can be paid unless the
relevant business unit is, from inception, cumulatively profitable. Any operating losses must have been offset in their entirety by operating profits
before management is eligible for a bonus. Since the most significant portion of management compensation comes from the incentive bonus
programs, the Company believes that this cumulative feature is a disincentive to excessive risk taking by its managers. Due to the nature of the
Company’s services, it has a short operating cycle. 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 this short operating cycle, 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,
net revenues and net earnings are a result of the incentives inherent in the Company’s compensation program.
Other overhead expenses increased 5% in 2012, as compared with 2011. This increase is primarily due to the European Commission's finding
against the Company for anti-competitive behavior, which resulted in a fine of €4.14 million ($5.5 million), higher legal expenses, an adjustment
for certain foreign indirect withholding taxes of approximately $5.9 million, claims related to increased liability limits and cost associated with
maintaining and enhancing our information systems. The Company also decided not to continue pursuit of certain real estate development projects
recorded under construction in process and expensed the associated costs of $3 million as a component of rent and occupancy expense.These
increases offset lower travel and entertainment expense achieved through continued cost reduction measures. Other overhead expenses as a
percentage of net revenues increased 1% in 2012, as compared with 2011.
Income tax expense:
The Company pays income taxes in the United States and other jurisdictions. The Company’s consolidated effective income tax rate was 39.5%
in both 2012 and 2011. On a percentage basis, relative to pre-tax earnings, available tax deductions associated with disqualifying dispositions
of both incentive stock options and employee stock purchase plan shares were consistent between both 2012 and 2011. The tax benefit related
to stock-based compensation expense is recorded for non-qualified stock options at the time the related compensation expense is recognized
while the tax benefit received for disqualifying dispositions of incentive stock options and employee stock purchase plan shares cannot be
anticipated and is recorded at the time of the disqualifying event.
Currency and Other Risk Factors
The nature of the Company’s worldwide operations necessitates the Company dealing with a multitude of currencies other than the U.S. dollar. This
results in the Company being exposed to the inherent risks of volatile international currency markets and governmental interference. Some of
the countries where the Company maintains offices and/or agency relationships have strict currency control regulations which influence the
Company’s ability to hedge foreign currency exposure. The Company tries to compensate for these exposures by accelerating international
currency settlements among its offices or agents. The Company enters into foreign currency hedging transactions only in limited locations where
there are regulatory or commercial limitations on the Company’s 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 2012,
2011 and 2010 was insignificant. The Company had no foreign currency derivatives outstanding at December 31, 2012 and 2011. Net foreign
currency losses were $5 million, $2 million and $2 million in 2012, 2011 and 2010, respectively.
International air and ocean freight forwarding and customs brokerage are intensively competitive and are expected to remain so for the foreseeable
future. There are a large number of entities competing in the international logistics industry, some of which have significantly more resources
than the Company; however, the Company’s primary competition is confined to a relatively small number of companies within this group. The
industry continues to experience consolidations into larger firms striving for stronger and more complete multinational and multi-service networks.
However, regional and local brokers and forwarders remain a competitive force.
The primary competitive factors in the international logistics industry continue to be price and quality of service, including reliability, responsiveness,
expertise, convenience, and scope of operations. The Company emphasizes quality customer service and believes that its prices are competitive
with those of others in the industry. Larger customers utilize more sophisticated and efficient procedures for the management of their logistics
supply chains by embracing strategies such as just-in-time inventory management. The Company believes that this trend has resulted in customers
using fewer service providers with greater technological capacity and more consistent global coverage. Accordingly, sophisticated computerized
customer service capabilities and a stable worldwide network have become significant factors in attracting and retaining customers. Developing
and maintaining these systems and a worldwide network has added a considerable indirect cost to the services provided to customers. Smaller
and middle-tier competitors, in general, do not have the resources available to develop customized systems and a worldwide network.
Liquidity and Capital Resources
In thousands
The Company’s principal source of liquidity is cash and cash equivalents and cash generated from operating activities. Net cash provided by
operating activities for the year ended December 31, 2012 was $370 million, as compared with $457 million for 2011. This $87 million decrease
is primarily due to changes in working capital accounts and lower earnings. At December 31, 2012, working capital was $1,515 million, including
cash and cash equivalents of $1,261 million. The Company had no long-term debt at December 31, 2012. Management believes that the Company’s
current cash position and operating cash flows will be sufficient to meet its 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.
The Company’s business is subject to seasonal fluctuations. Cash flow fluctuates 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 peak
season (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.
As a customs broker, the Company makes significant cash advances for a select group of its credit-worthy customers. These cash advances are
for customer obligations such as the payment of duties to customs authorities in various countries throughout the world. 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. Management believes that the Company has effective credit control procedures, and historically has experienced relatively
insignificant collection problems.
Cash used in investing activities for the year ended December 31, 2012 was $47 million, as compared with $80 million for 2011. The largest use
of cash in investing activities is cash paid for capital expenditures. The Company does have need, on occasion, to purchase buildings to house
staff and to facilitate the staging of customers’ freight. The Company routinely invests in technology, leasehold improvements and equipment and
office furniture. For the year ended December 31, 2012, the Company made capital expenditures of $48 million as compared with $78 million for
2011. This includes capital expenditures as noted above and approximately $7 million for the development of office and warehouse facilities in
Beijing, China. Total anticipated capital expenditures in 2013 are currently estimated to be $100 million. This includes routine capital expenditures
as noted above, plus additional real estate development.
Cash used in financing activities for the year ended December 31, 2012 was $363 million as compared with $157 million in 2011. The Company
uses the proceeds from stock option exercises to repurchase the Company’s common stock on the open market. In 2012, the Company continued
its policy of repurchasing stock to limit growth in issued and outstanding shares as a result of stock option exercises. The increase in cash used
in financing activities for the year ended December 31, 2012, as compared with the same period in 2011, is primarily the result of this policy and
additional discretionary repurchases of 5.7 million shares at an average per share price of $37.00. During 2012 and 2011, the Company paid
dividends of $.56 per share and $.50 per share, respectively.
The Company has a Non-Discretionary Stock Repurchase Plan to repurchase shares from the proceeds of stock option exercises. As of
December 31, 2012, the Company had repurchased and retired 24,444,917 shares of common stock at an average price of $23.46 per share
over the period from 1994 through 2012. During 2012, 1,324,491 shares were repurchased at an average price of $38.38 per share.
The Company has a Discretionary Stock Repurchase Plan under which Management is allowed to repurchase such shares as may be necessary
to reduce the issued and outstanding stock to 200,000,000 shares of common stock. As of December 31, 2012, the Company had repurchased
and retired 27,871,019 shares of common stock at an average price of $35.71 per share over the period from 2001 through 2012. During 2012,
6,714,813 shares were repurchased at an average price of $37.47 per share.
The Company follows established guidelines relating to credit quality, diversification and maturities of its investments to preserve principal and
maintain liquidity. The Company’s investment portfolio has not been adversely impacted by the disruption in the credit markets. However, there
can be no assurance that the Company’s investment portfolio will not be adversely affected in the future.
The Company cannot predict what impact ongoing uncertainties in the global economy may have on its operating results, freight volumes, pricing,
changes in consumer demand, carrier stability and capacity, customers’ abilities to pay or on changes in competitors' behavior.
The Company maintains international unsecured bank lines of credit. At December 31, 2012, amounts available for borrowing under international
bank lines of credit totaled $15 million. At December 31, 2012, the Company was contingently liable for $99 million from standby letters of credit
and guarantees. The standby letters of credit and guarantees relate to obligations of the Company’s 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 books 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.
Amount of commitment expiration per period
Total
amounts
committed
Less than 1
year
1 - 3
years
3 - 5
years
After
5 years
Standby letters of credit and guarantees............
$
98,600
94,279
2,212
2,082
27
At December 31, 2012, the Company’s contractual obligations are as follows:
In thousands
Contractual Obligations:
Total
Less than
1 year
1 - 3
years
3 - 5
years
After
5 years
Payments due by period
Operating leases ...................................................
$
108,301
39,214
12,442
14,493
Unconditional purchase obligations.......................
Construction and equipment purchase obligations
86,929
6,138
—
—
—
—
—
—
42,152
86,929
6,138
Total contractual cash obligations .........................
$
201,368
135,219
39,214
12,442
14,493
The Company enters into short-term unconditional purchase obligations with asset-based providers reserving space on a guaranteed basis. The
pricing of these obligations varies to some degree with market conditions. The Company only enters into agreements that management believes
the Company can fulfill with relative ease. Historically, the Company has met these obligations in the normal course of business. Management
believes, in line with historical experience, committed purchase obligations outstanding as of December 31, 2012 will be fulfilled during 2013 in
the Company’s ordinary course of business.
The Company's foreign subsidiaries regularly remit dividends to the U.S. parent company after evaluating their working capital requirements and
needs to finance local capital expenditures. In some cases, the Company’s ability to repatriate funds from foreign operations may be subject to
foreign exchange controls. At December 31, 2012, cash and cash equivalent balances of $657 million were held by the Company’s non-United
States subsidiaries, of which $55 million was held in banks in the United States. Earnings of the Company's foreign subsidiaries are not considered
to be indefinitely reinvested outside of the United Sates and, accordingly, a deferred tax liability has been accrued for all undistributed earnings,
net of foreign related tax credits, that are available to be repatriated.
Impact of Inflation
To date, the Company’s business has not been adversely affected by inflation. Direct carrier rate increases could occur over the short- to medium-
term period. Due to the high degree of competition in the market place, these rate increases can lead to an erosion in the Company’s margins. As
the Company is not required to purchase or maintain extensive property and equipment and has not otherwise incurred substantial interest rate-
sensitive indebtedness, the Company currently has limited direct exposure to increased costs resulting from increases in interest rates.
22
23
Currency and Other Risk Factors
The nature of the Company’s worldwide operations necessitates the Company dealing with a multitude of currencies other than the U.S. dollar. This
results in the Company being exposed to the inherent risks of volatile international currency markets and governmental interference. Some of
the countries where the Company maintains offices and/or agency relationships have strict currency control regulations which influence the
Company’s ability to hedge foreign currency exposure. The Company tries to compensate for these exposures by accelerating international
currency settlements among its offices or agents. The Company enters into foreign currency hedging transactions only in limited locations where
there are regulatory or commercial limitations on the Company’s 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 2012,
2011 and 2010 was insignificant. The Company had no foreign currency derivatives outstanding at December 31, 2012 and 2011. Net foreign
currency losses were $5 million, $2 million and $2 million in 2012, 2011 and 2010, respectively.
International air and ocean freight forwarding and customs brokerage are intensively competitive and are expected to remain so for the foreseeable
future. There are a large number of entities competing in the international logistics industry, some of which have significantly more resources
than the Company; however, the Company’s primary competition is confined to a relatively small number of companies within this group. The
industry continues to experience consolidations into larger firms striving for stronger and more complete multinational and multi-service networks.
However, regional and local brokers and forwarders remain a competitive force.
The primary competitive factors in the international logistics industry continue to be price and quality of service, including reliability, responsiveness,
expertise, convenience, and scope of operations. The Company emphasizes quality customer service and believes that its prices are competitive
with those of others in the industry. Larger customers utilize more sophisticated and efficient procedures for the management of their logistics
supply chains by embracing strategies such as just-in-time inventory management. The Company believes that this trend has resulted in customers
using fewer service providers with greater technological capacity and more consistent global coverage. Accordingly, sophisticated computerized
customer service capabilities and a stable worldwide network have become significant factors in attracting and retaining customers. Developing
and maintaining these systems and a worldwide network has added a considerable indirect cost to the services provided to customers. Smaller
and middle-tier competitors, in general, do not have the resources available to develop customized systems and a worldwide network.
The Company’s principal source of liquidity is cash and cash equivalents and cash generated from operating activities. Net cash provided by
operating activities for the year ended December 31, 2012 was $370 million, as compared with $457 million for 2011. This $87 million decrease
is primarily due to changes in working capital accounts and lower earnings. At December 31, 2012, working capital was $1,515 million, including
cash and cash equivalents of $1,261 million. The Company had no long-term debt at December 31, 2012. Management believes that the Company’s
current cash position and operating cash flows will be sufficient to meet its 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.
The Company’s business is subject to seasonal fluctuations. Cash flow fluctuates 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 peak
season (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.
As a customs broker, the Company makes significant cash advances for a select group of its credit-worthy customers. These cash advances are
for customer obligations such as the payment of duties to customs authorities in various countries throughout the world. 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. Management believes that the Company has effective credit control procedures, and historically has experienced relatively
insignificant collection problems.
Cash used in investing activities for the year ended December 31, 2012 was $47 million, as compared with $80 million for 2011. The largest use
of cash in investing activities is cash paid for capital expenditures. The Company does have need, on occasion, to purchase buildings to house
staff and to facilitate the staging of customers’ freight. The Company routinely invests in technology, leasehold improvements and equipment and
office furniture. For the year ended December 31, 2012, the Company made capital expenditures of $48 million as compared with $78 million for
2011. This includes capital expenditures as noted above and approximately $7 million for the development of office and warehouse facilities in
Beijing, China. Total anticipated capital expenditures in 2013 are currently estimated to be $100 million. This includes routine capital expenditures
as noted above, plus additional real estate development.
Cash used in financing activities for the year ended December 31, 2012 was $363 million as compared with $157 million in 2011. The Company
uses the proceeds from stock option exercises to repurchase the Company’s common stock on the open market. In 2012, the Company continued
its policy of repurchasing stock to limit growth in issued and outstanding shares as a result of stock option exercises. The increase in cash used
in financing activities for the year ended December 31, 2012, as compared with the same period in 2011, is primarily the result of this policy and
additional discretionary repurchases of 5.7 million shares at an average per share price of $37.00. During 2012 and 2011, the Company paid
dividends of $.56 per share and $.50 per share, respectively.
The Company has a Non-Discretionary Stock Repurchase Plan to repurchase shares from the proceeds of stock option exercises. As of
December 31, 2012, the Company had repurchased and retired 24,444,917 shares of common stock at an average price of $23.46 per share
over the period from 1994 through 2012. During 2012, 1,324,491 shares were repurchased at an average price of $38.38 per share.
The Company has a Non-Discretionary Stock Repurchase Plan to repurchase shares from the proceeds of stock option exercises. As of
December 31, 2012, the Company had repurchased and retired 24,444,917 shares of common stock at an average price of $23.46 per share
over the period from 1994 through 2012. During 2012, 1,324,491 shares were repurchased at an average price of $38.38 per share.
The Company has a Discretionary Stock Repurchase Plan under which Management is allowed to repurchase such shares as may be necessary
to reduce the issued and outstanding stock to 200,000,000 shares of common stock. As of December 31, 2012, the Company had repurchased
and retired 27,871,019 shares of common stock at an average price of $35.71 per share over the period from 2001 through 2012. During 2012,
6,714,813 shares were repurchased at an average price of $37.47 per share.
The Company has a Discretionary Stock Repurchase Plan under which Management is allowed to repurchase such shares as may be necessary
to reduce the issued and outstanding stock to 200,000,000 shares of common stock. As of December 31, 2012, the Company had repurchased
and retired 27,871,019 shares of common stock at an average price of $35.71 per share over the period from 2001 through 2012. During 2012,
6,714,813 shares were repurchased at an average price of $37.47 per share.
The Company follows established guidelines relating to credit quality, diversification and maturities of its investments to preserve principal and
maintain liquidity. The Company’s investment portfolio has not been adversely impacted by the disruption in the credit markets. However, there
can be no assurance that the Company’s investment portfolio will not be adversely affected in the future.
The Company follows established guidelines relating to credit quality, diversification and maturities of its investments to preserve principal and
maintain liquidity. The Company’s investment portfolio has not been adversely impacted by the disruption in the credit markets. However, there
can be no assurance that the Company’s investment portfolio will not be adversely affected in the future.
The Company cannot predict what impact ongoing uncertainties in the global economy may have on its operating results, freight volumes, pricing,
changes in consumer demand, carrier stability and capacity, customers’ abilities to pay or on changes in competitors' behavior.
The Company cannot predict what impact ongoing uncertainties in the global economy may have on its operating results, freight volumes, pricing,
changes in consumer demand, carrier stability and capacity, customers’ abilities to pay or on changes in competitors' behavior.
The Company maintains international unsecured bank lines of credit. At December 31, 2012, amounts available for borrowing under international
bank lines of credit totaled $15 million. At December 31, 2012, the Company was contingently liable for $99 million from standby letters of credit
and guarantees. The standby letters of credit and guarantees relate to obligations of the Company’s 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 books 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.
The Company maintains international unsecured bank lines of credit. At December 31, 2012, amounts available for borrowing under international
bank lines of credit totaled $15 million. At December 31, 2012, the Company was contingently liable for $99 million from standby letters of credit
and guarantees. The standby letters of credit and guarantees relate to obligations of the Company’s 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 books 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.
Liquidity and Capital Resources
In thousands
In thousands
Amount of commitment expiration per period
Amount of commitment expiration per period
Total
Total
amounts
amounts
committed
committed
Less than 1
year
Less than 1
year
1 - 3
1 - 3
years
years
3 - 5
3 - 5
years
years
After
After
5 years
5 years
Standby letters of credit and guarantees............
Standby letters of credit and guarantees............
$
$
98,600
98,600
94,279
94,279
2,212
2,212
2,082
2,082
27
27
At December 31, 2012, the Company’s contractual obligations are as follows:
At December 31, 2012, the Company’s contractual obligations are as follows:
In thousands
In thousands
Contractual Obligations:
Operating leases ...................................................
Contractual Obligations:
Operating leases ...................................................
Unconditional purchase obligations.......................
Unconditional purchase obligations.......................
Construction and equipment purchase obligations
Construction and equipment purchase obligations
Total
Total
Less than
Less than
1 year
1 year
Payments due by period
Payments due by period
3 - 5
3 - 5
years
years
1 - 3
1 - 3
years
years
After
After
5 years
5 years
$
$
108,301
108,301
42,152
42,152
39,214
39,214
12,442
12,442
14,493
14,493
86,929
86,929
6,138
6,138
86,929
86,929
6,138
6,138
—
—
—
—
—
—
—
—
—
—
—
—
Total contractual cash obligations .........................
Total contractual cash obligations .........................
$
$
201,368
201,368
135,219
135,219
39,214
39,214
12,442
12,442
14,493
14,493
The Company enters into short-term unconditional purchase obligations with asset-based providers reserving space on a guaranteed basis. The
pricing of these obligations varies to some degree with market conditions. The Company only enters into agreements that management believes
the Company can fulfill with relative ease. Historically, the Company has met these obligations in the normal course of business. Management
believes, in line with historical experience, committed purchase obligations outstanding as of December 31, 2012 will be fulfilled during 2013 in
the Company’s ordinary course of business.
The Company enters into short-term unconditional purchase obligations with asset-based providers reserving space on a guaranteed basis. The
pricing of these obligations varies to some degree with market conditions. The Company only enters into agreements that management believes
the Company can fulfill with relative ease. Historically, the Company has met these obligations in the normal course of business. Management
believes, in line with historical experience, committed purchase obligations outstanding as of December 31, 2012 will be fulfilled during 2013 in
the Company’s ordinary course of business.
The Company's foreign subsidiaries regularly remit dividends to the U.S. parent company after evaluating their working capital requirements and
needs to finance local capital expenditures. In some cases, the Company’s ability to repatriate funds from foreign operations may be subject to
foreign exchange controls. At December 31, 2012, cash and cash equivalent balances of $657 million were held by the Company’s non-United
States subsidiaries, of which $55 million was held in banks in the United States. Earnings of the Company's foreign subsidiaries are not considered
to be indefinitely reinvested outside of the United Sates and, accordingly, a deferred tax liability has been accrued for all undistributed earnings,
net of foreign related tax credits, that are available to be repatriated.
The Company's foreign subsidiaries regularly remit dividends to the U.S. parent company after evaluating their working capital requirements and
needs to finance local capital expenditures. In some cases, the Company’s ability to repatriate funds from foreign operations may be subject to
foreign exchange controls. At December 31, 2012, cash and cash equivalent balances of $657 million were held by the Company’s non-United
States subsidiaries, of which $55 million was held in banks in the United States. Earnings of the Company's foreign subsidiaries are not considered
to be indefinitely reinvested outside of the United Sates and, accordingly, a deferred tax liability has been accrued for all undistributed earnings,
net of foreign related tax credits, that are available to be repatriated.
Impact of Inflation
Impact of Inflation
To date, the Company’s business has not been adversely affected by inflation. Direct carrier rate increases could occur over the short- to medium-
To date, the Company’s business has not been adversely affected by inflation. Direct carrier rate increases could occur over the short- to medium-
term period. Due to the high degree of competition in the market place, these rate increases can lead to an erosion in the Company’s margins. As
term period. Due to the high degree of competition in the market place, these rate increases can lead to an erosion in the Company’s margins. As
the Company is not required to purchase or maintain extensive property and equipment and has not otherwise incurred substantial interest rate-
the Company is not required to purchase or maintain extensive property and equipment and has not otherwise incurred substantial interest rate-
sensitive indebtedness, the Company currently has limited direct exposure to increased costs resulting from increases in interest rates.
sensitive indebtedness, the Company currently has limited direct exposure to increased costs resulting from increases in interest rates.
22
23
23
Off-Balance Sheet Arrangements
As of December 31, 2012, the Company did not have any material off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC
Regulation S-K.
ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks in the ordinary course of its business. These risks are primarily related to foreign exchange risk and
changes in short-term interest rates. The potential impact of the Company’s exposure to these risks is presented below:
ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following documents are filed on the pages listed below, as part of Part II, Item 8 of this report.
Document
1 Financial Statements and Reports of Independent Registered Public Accounting Firm:
Reports of Independent Registered Public Accounting Firm ........................................................................................
F-1 and F-2
Foreign Exchange Risk
Consolidated Financial Statements:
The Company conducts business in many different countries and currencies. The Company’s business often results in revenue billings issued
in a country and currency which differs from that where the expenses related to the service are incurred. In the ordinary course of business, the
Company creates 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 the Company’s earnings. The principal foreign exchange risks to which the Company
is exposed are in Chinese Yuan, Euro, Mexican Peso and Canadian Dollar.
Foreign exchange rate sensitivity analysis can be quantified by estimating the impact on the Company’s earnings as a result of hypothetical
changes in the value of the U.S. dollar, the Company’s functional currency, relative to the other currencies in which the Company transacts
business. All other things being equal, an average 10% weakening of the U.S. dollar, throughout the year ended December 31, 2012, would have
had the effect of raising operating income approximately $40 million. An average 10% strengthening of the U.S. dollar, for the same period, would
have the effect of reducing operating income approximately $33 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.
As of December 31, 2012, the Company had less than $1 million of net unsettled intercompany transactions. The Company currently does not
use derivative financial instruments to manage foreign currency risk and only enters into foreign currency hedging transactions in limited locations
where regulatory or commercial limitations restrict the Company’s ability to move money freely. Any such hedging activity throughout the year
ended December 31, 2012, was insignificant. Net foreign currency losses were $5 million, $2 million and $2 million in 2012, 2011 and 2010,
respectively. The Company had no foreign currency derivatives outstanding at December 31, 2012 and 2011. The Company instead follows a
policy of accelerating international currency settlements to manage foreign exchange risk relative to intercompany billings. The majority of
intercompany billings are resolved within 30 days.
Interest Rate Risk
At December 31, 2012, the Company had cash, cash equivalents and short-term investments of $1,261 million, of which $803 million was invested
at various short-term market interest rates. The Company had no significant short-term borrowings at December 31, 2012. A hypothetical change
in the interest rate of 10 basis points at December 31, 2012 would not have a significant impact on the Company’s earnings.
In management’s opinion, there has been no material change in the Company’s interest rate risk exposure between 2012 and 2011.
Page
F-3
F-4
F-5
Balance Sheets as of December 31, 2012 and 2011 ...................................................................................................
Statements of Earnings for the Years Ended December 31, 2012, 2011, and 2010 .....................................................
Statements of Comprehensive Income for the Years Ended December 31, 2012, 2011 and 2010 ..............................
Statements of Equity for the Years Ended December 31, 2012, 2011 and 2010 ..........................................................
F-6 and F-7
Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010 .................................................
F-8
Notes to Consolidated Financial Statements ...............................................................................................................
F-9 through F-20
ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A — CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
by this report at the reasonable assurance level.
Changes in Internal Controls
The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “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 the Company’s disclosure controls and procedures were effective as of the end of the period covered
There were no changes in the Company’s internal control over financial reporting that occurred during the most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company's management has confidence in the Company’s internal controls and procedures. Nevertheless, the Company’s management,
including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure procedures and
controls or the Company’s internal controls will prevent all errors or intentional fraud. 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
the Company’s control issues and instances of fraud, if any, have been detected.
Management Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as required
by the Sarbanes-Oxley Act of 2002 and as defined in Exchange Act Rule 13a-15(f). The Company’s system of internal control over financial
reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of our
financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting
principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the
Board of Directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company’s assets that could have a material effect on the financial statements.
24
25
Off-Balance Sheet Arrangements
Regulation S-K.
As of December 31, 2012, the Company did not have any material off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC
ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks in the ordinary course of its business. These risks are primarily related to foreign exchange risk and
changes in short-term interest rates. The potential impact of the Company’s exposure to these risks is presented below:
ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following documents are filed on the pages listed below, as part of Part II, Item 8 of this report.
Document
Page
1 Financial Statements and Reports of Independent Registered Public Accounting Firm:
Reports of Independent Registered Public Accounting Firm ........................................................................................
F-1 and F-2
Foreign Exchange Risk
Consolidated Financial Statements:
The Company conducts business in many different countries and currencies. The Company’s business often results in revenue billings issued
in a country and currency which differs from that where the expenses related to the service are incurred. In the ordinary course of business, the
Company creates 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 the Company’s earnings. The principal foreign exchange risks to which the Company
is exposed are in Chinese Yuan, Euro, Mexican Peso and Canadian Dollar.
Foreign exchange rate sensitivity analysis can be quantified by estimating the impact on the Company’s earnings as a result of hypothetical
changes in the value of the U.S. dollar, the Company’s functional currency, relative to the other currencies in which the Company transacts
business. All other things being equal, an average 10% weakening of the U.S. dollar, throughout the year ended December 31, 2012, would have
had the effect of raising operating income approximately $40 million. An average 10% strengthening of the U.S. dollar, for the same period, would
have the effect of reducing operating income approximately $33 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.
As of December 31, 2012, the Company had less than $1 million of net unsettled intercompany transactions. The Company currently does not
use derivative financial instruments to manage foreign currency risk and only enters into foreign currency hedging transactions in limited locations
where regulatory or commercial limitations restrict the Company’s ability to move money freely. Any such hedging activity throughout the year
ended December 31, 2012, was insignificant. Net foreign currency losses were $5 million, $2 million and $2 million in 2012, 2011 and 2010,
respectively. The Company had no foreign currency derivatives outstanding at December 31, 2012 and 2011. The Company instead follows a
policy of accelerating international currency settlements to manage foreign exchange risk relative to intercompany billings. The majority of
intercompany billings are resolved within 30 days.
Interest Rate Risk
At December 31, 2012, the Company had cash, cash equivalents and short-term investments of $1,261 million, of which $803 million was invested
at various short-term market interest rates. The Company had no significant short-term borrowings at December 31, 2012. A hypothetical change
in the interest rate of 10 basis points at December 31, 2012 would not have a significant impact on the Company’s earnings.
In management’s opinion, there has been no material change in the Company’s interest rate risk exposure between 2012 and 2011.
Balance Sheets as of December 31, 2012 and 2011 ...................................................................................................
Statements of Earnings for the Years Ended December 31, 2012, 2011, and 2010 .....................................................
Statements of Comprehensive Income for the Years Ended December 31, 2012, 2011 and 2010 ..............................
F-3
F-4
F-5
Statements of Equity for the Years Ended December 31, 2012, 2011 and 2010 ..........................................................
F-6 and F-7
Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010 .................................................
F-8
Notes to Consolidated Financial Statements ...............................................................................................................
F-9 through F-20
ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A — CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “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 the Company’s disclosure controls and procedures were effective as of the end of the period covered
by this report at the reasonable assurance level.
Changes in Internal Controls
There were no changes in the Company’s internal control over financial reporting that occurred during the most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company's management has confidence in the Company’s internal controls and procedures. Nevertheless, the Company’s management,
including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure procedures and
controls or the Company’s internal controls will prevent all errors or intentional fraud. 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
the Company’s control issues and instances of fraud, if any, have been detected.
Management Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as required
by the Sarbanes-Oxley Act of 2002 and as defined in Exchange Act Rule 13a-15(f). The Company’s system of internal control over financial
reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of our
financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting
principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the
Board of Directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company’s assets that could have a material effect on the financial statements.
24
25
A system of internal control can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our
management, including our Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of our internal
control over financial reporting, as of December 31, 2012, based on the framework in “Internal Control — Integrated Framework” issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management has concluded that,
as of December 31, 2012, our internal control over financial reporting was effective.
KPMG LLP, an independent registered public accounting firm, has issued an attestation report on the Company’s internal control over financial
reporting as of December 31, 2012, which is included on page F-2.
ITEM 9B — OTHER INFORMATION
Not applicable.
PART III
ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is set forth below or incorporated by reference to information under the caption “Proposal 1–Election of
Directors” and to the information under the captions “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance -
Director Nomination Process” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1, 2013. See
also Part I - Item 1 - Executive Officers of the Registrant.
Audit Committee and Audit Committee Financial Expert
Our Board has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The
members of the Audit Committee are Mark Emmert, Dan Kourkoumelis, Michael Malone, John Meisenbach, Robert Wright and Tay Yoshitani. Our
Board has determined that Robert Wright, Chairman of the Audit Committee, is an audit committee financial expert as defined by Item 407(d)
(5) of Regulation S-K under the Exchange Act and that each member of the Audit Committee is independent under the NASDAQ independence
standards applicable to audit committee members.
Code of Ethics and Governance Guidelines
We have adopted a Code of Business Conduct that applies to all Company employees including, of course, our principal executive officer and
principal financial and accounting officer. The Code of Business Conduct is posted on our website at http://www.investor.expeditors.com. We will
post any amendments to the Code of Business Conduct at that location. In the unlikely event that the Board of Directors approves any sort of
waiver to the Code of Business Conduct for our executive officers or directors, information concerning such waiver will also be posted at that
location. No waivers have been granted. In addition to posting information regarding amendments and waivers on our website, the same information
will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, unless website posting
of such amendments or waivers satisfies applicable NASDAQ listing rules.
Our investor relations website also includes under the heading “Stock Transactions - Stock Trading Plans” information regarding entries into a
Rule 10b5-1 trading plan by directors or officers of the Company or by the Company itself. Any new entry into such a trading plan or amendments
thereto will be posted at that location.
(a) 1. FINANCIAL STATEMENTS
ITEM 11 — EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to information under the captions “Proposal 1–Election of Directors” and
“Executive Compensation” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1, 2013.
ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010 ....................................
The information required by this item is incorporated by reference to information under the captions “Principal Holders of Voting Securities” and
“Proposal 1–Election of Directors” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1, 2013.
26
27
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 2012, regarding compensation plans under which equity securities of the
Company are authorized for issuance.
Plan Category
Equity Compensation Plans Approved by Security Holders ......
Equity Compensation Plans Not Approved by Security Holders
Total ..........................................................................................
(a)
(b)
(c)
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights (1)
Weighted-Average
Exercise Price of
Outstanding
Number of Securities
Available for Future
Issuance, Under Equity
Compensation Plans
(Excluding Securities
Options, Warrants
Reflected in Column (a))
and Rights (2)
(3)
17,833,764
$
—
17,833,764
$
40.51
—
40.51
2,259,344
—
2,259,344
Does not include 26,700 restricted stock awards that were not fully vested as of December 31, 2012.
The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding restricted stock awards
which have no exercise price.
(3)
Includes 1,966,432 available for issuance under the employee stock purchase plans, 220,210 available for future grants of stock options
and 72,702 available for issuance of restricted stock awards.
ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to information under the captions “Corporate Governance” and “Certain
Relationships and Related Transactions” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1,
ITEM 14 — PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference to information under the caption “Relationship with Independent Public
Accountants” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1, 2013.
(1)
(2)
2013.
PART IV
ITEM 15 — EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Reports of Independent Registered Public Accounting Firm ................................................................................................
F-1 and F-2
Consolidated Balance Sheets as of December 31, 2012 and 2011 ......................................................................................
Consolidated Statements of Earnings for the Years Ended December 31, 2012, 2011 and 2010 ........................................
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2012, 2011 and 2010.................
Consolidated Statements of Equity for the Years Ended December 31, 2012, 2011 and 2010 ............................................
F-6 and F-7
Notes to Consolidated Financial Statements ........................................................................................................................
F-9 through F-20
2. FINANCIAL STATEMENT SCHEDULES
Schedules are omitted because of the absence of conditions under which they are required or because the required
information is given in the consolidated financial statements or notes thereto.
Page
F-3
F-4
F-5
F-8
Plan Category
Plan Category
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights (2)
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights (1)
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights (1)
A system of internal control can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our
Securities Authorized for Issuance under Equity Compensation Plans
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 2012, regarding compensation plans under which equity securities of the
Company are authorized for issuance.
The following table provides information as of December 31, 2012, regarding compensation plans under which equity securities of the
Company are authorized for issuance.
(a)
(a)
(b)
(b)
(c)
(c)
management, including our Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of our internal
control over financial reporting, as of December 31, 2012, based on the framework in “Internal Control — Integrated Framework” issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management has concluded that,
as of December 31, 2012, our internal control over financial reporting was effective.
KPMG LLP, an independent registered public accounting firm, has issued an attestation report on the Company’s internal control over financial
reporting as of December 31, 2012, which is included on page F-2.
ITEM 9B — OTHER INFORMATION
Not applicable.
PART III
ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is set forth below or incorporated by reference to information under the caption “Proposal 1–Election of
Directors” and to the information under the captions “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance -
Director Nomination Process” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1, 2013. See
also Part I - Item 1 - Executive Officers of the Registrant.
Audit Committee and Audit Committee Financial Expert
Our Board has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The
members of the Audit Committee are Mark Emmert, Dan Kourkoumelis, Michael Malone, John Meisenbach, Robert Wright and Tay Yoshitani. Our
Board has determined that Robert Wright, Chairman of the Audit Committee, is an audit committee financial expert as defined by Item 407(d)
(5) of Regulation S-K under the Exchange Act and that each member of the Audit Committee is independent under the NASDAQ independence
standards applicable to audit committee members.
Code of Ethics and Governance Guidelines
We have adopted a Code of Business Conduct that applies to all Company employees including, of course, our principal executive officer and
principal financial and accounting officer. The Code of Business Conduct is posted on our website at http://www.investor.expeditors.com. We will
post any amendments to the Code of Business Conduct at that location. In the unlikely event that the Board of Directors approves any sort of
waiver to the Code of Business Conduct for our executive officers or directors, information concerning such waiver will also be posted at that
location. No waivers have been granted. In addition to posting information regarding amendments and waivers on our website, the same information
will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, unless website posting
of such amendments or waivers satisfies applicable NASDAQ listing rules.
thereto will be posted at that location.
ITEM 11 — EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to information under the captions “Proposal 1–Election of Directors” and
“Executive Compensation” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1, 2013.
The information required by this item is incorporated by reference to information under the captions “Principal Holders of Voting Securities” and
“Proposal 1–Election of Directors” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1, 2013.
Equity Compensation Plans Approved by Security Holders ......
Equity Compensation Plans Approved by Security Holders ......
17,833,764
17,833,764
$
$
40.51
40.51
2,259,344
2,259,344
Equity Compensation Plans Not Approved by Security Holders
Equity Compensation Plans Not Approved by Security Holders
—
—
—
—
—
—
Total ..........................................................................................
Total ..........................................................................................
17,833,764
17,833,764
$
$
40.51
40.51
2,259,344
2,259,344
(1)
(2)
(3)
(1)
Does not include 26,700 restricted stock awards that were not fully vested as of December 31, 2012.
Does not include 26,700 restricted stock awards that were not fully vested as of December 31, 2012.
(2)
The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding restricted stock awards
which have no exercise price.
The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding restricted stock awards
which have no exercise price.
(3)
Includes 1,966,432 available for issuance under the employee stock purchase plans, 220,210 available for future grants of stock options
and 72,702 available for issuance of restricted stock awards.
Includes 1,966,432 available for issuance under the employee stock purchase plans, 220,210 available for future grants of stock options
and 72,702 available for issuance of restricted stock awards.
ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to information under the captions “Corporate Governance” and “Certain
Relationships and Related Transactions” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1,
2013.
The information required by this item is incorporated by reference to information under the captions “Corporate Governance” and “Certain
Relationships and Related Transactions” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1,
2013.
ITEM 14 — PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14 — PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference to information under the caption “Relationship with Independent Public
Accountants” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1, 2013.
The information required by this item is incorporated by reference to information under the caption “Relationship with Independent Public
Accountants” in the Company’s definitive Proxy Statement for its annual meeting of shareholders to be held on May 1, 2013.
PART IV
PART IV
ITEM 15 — EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15 — EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Our investor relations website also includes under the heading “Stock Transactions - Stock Trading Plans” information regarding entries into a
Rule 10b5-1 trading plan by directors or officers of the Company or by the Company itself. Any new entry into such a trading plan or amendments
(a) 1. FINANCIAL STATEMENTS
(a) 1. FINANCIAL STATEMENTS
Page
Page
Consolidated Balance Sheets as of December 31, 2012 and 2011 ......................................................................................
Consolidated Balance Sheets as of December 31, 2012 and 2011 ......................................................................................
Consolidated Statements of Earnings for the Years Ended December 31, 2012, 2011 and 2010 ........................................
Consolidated Statements of Earnings for the Years Ended December 31, 2012, 2011 and 2010 ........................................
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2012, 2011 and 2010.................
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2012, 2011 and 2010.................
F-3
F-4
F-5
F-3
F-4
F-5
ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010 ....................................
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010 ....................................
F-8
F-8
Number of Securities
Available for Future
Issuance, Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a))
(3)
Number of Securities
Available for Future
Issuance, Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a))
(3)
Reports of Independent Registered Public Accounting Firm ................................................................................................
Reports of Independent Registered Public Accounting Firm ................................................................................................
Consolidated Statements of Equity for the Years Ended December 31, 2012, 2011 and 2010 ............................................
Consolidated Statements of Equity for the Years Ended December 31, 2012, 2011 and 2010 ............................................
Notes to Consolidated Financial Statements ........................................................................................................................
Notes to Consolidated Financial Statements ........................................................................................................................
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights (2)
F-9 through F-20
F-1 and F-2
F-6 and F-7
F-1 and F-2
F-6 and F-7
F-9 through F-20
2. FINANCIAL STATEMENT SCHEDULES
2. FINANCIAL STATEMENT SCHEDULES
Schedules are omitted because of the absence of conditions under which they are required or because the required
information is given in the consolidated financial statements or notes thereto.
Schedules are omitted because of the absence of conditions under which they are required or because the required
information is given in the consolidated financial statements or notes thereto.
26
27
27
3. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
The following list is a subset of the list of exhibits described below and contains all compensatory plans, contracts or arrangements in which any
director or executive officer of the Company is a participant, unless the method of allocation of benefits thereunder is the same for management
and non-management participants:
(1) Form of Employment Agreement executed by the Company’s Chairman and Chief Executive Officer. See Exhibit 10.23.
(2) Form of Employment Agreement executed by the Company’s President and Chief Operating Officer and certain of the Company’s
executive officers. See Exhibit 10.24.
(3) Form of Employment Agreement executed by the Company’s Chief Financial Officer. See Exhibit 10.25.
(4) Form of Employment Agreement executed by the Company's President-Asia Pacific and Director. See Exhibit 10.26.
(5) The Company’s Amended 1993 Directors’ Non-Qualified Stock Option Plan. See Exhibit 10.39.
(6) Form of Stock Option Agreement used in connection with options granted under the Company’s 1993 Directors’ Non-Qualified Stock
Option Plan. See Exhibit 10.9.
(7) The Company’s Amended 1997 Non-Qualified and Incentive Stock Option Plan. See Exhibit 10.40.
(8) Form of Stock Option Agreement used in connection with Non-Qualified options granted under the Company’s 1997 Non-Qualified and
Incentive Stock Option Plan. See Exhibit 10.30.
(9) Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 1997 Non-Qualified and
Incentive Stock Option Plan. See Exhibit 10.31.
(10) The Company’s 2008 Executive Incentive Compensation Plan. See Exhibit 10.35.
(11) The Company’s 2008 Directors’ Restricted Stock Plan. See Exhibit 10.36.
(12) The Company’s 2002 Employee Stock Purchase Plan. See Exhibit 10.42.
(13) The Company’s 2005 Stock Option Plan. See Exhibit 10.45.
(14) Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2005 Stock Option Plan.
See Exhibit 10.46.
(15) The Company’s 2006 Stock Option Plan. See Exhibit 10.47.
(16) Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2006 Stock Option Plan.
See Exhibit 10.48.
(17) The Company’s 2007 Stock Option Plan. See Exhibit 10.49.
(18) Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2007 Stock Option Plan.
See Exhibit 10.50.
(19) The Company’s 2008 Stock Option Plan. See Exhibit 10.51.
(20) Form of Stock Option Agreement used in connection with options granted under the Company’s 2008 Stock Option Plan. See Exhibit
10.52.
(21) The Company’s 2009 Stock Option Plan. See Exhibit 10.53.
(22) Form of Stock Option Agreement used in connection with options granted under the Company’s 2009 Stock Option Plan. See Exhibit
10.54.
(23) The Company’s 2010 Stock Option Plan. See Exhibit 10.55.
(24) Form of Stock Option Agreement used in connection with options granted under the Company’s 2010 Stock Option Plan. See Exhibit
10.56.
(25) The Company’s 2011 Stock Option Plan. See Exhibit 10.57.
(26) Form of Stock Option Agreement used in connection with options granted under the Company’s 2011 Stock Option Plan. See Exhibit
10.58.
(27) The Company’s 2012 Stock Option Plan. See Exhibit 10.59.
(28) Form of Stock Option Agreement used in connection with options granted under the Company’s 2012 Stock Option Plan. See Exhibit
10.60.
(b) EXHIBITS
Exhibit Number
Exhibit
3.1
The Company’s Restated Articles of Incorporation and the Articles of Amendment thereto dated December 9, 1993.
(Incorporated by reference to Exhibit 3.1 to Form 10-K, filed on or about March 31, 1995.)
3.1.1
Articles of Amendment to the Restated Articles of Incorporation dated November 12, 1996. (Incorporated by reference to
Exhibit 3.1.1 to Form 10-K, filed on or about March 31, 1997.)
3.1.2
Articles of Amendment to the Restated Articles of Incorporation dated May 20, 1999. (Incorporated by reference to Exhibit 3.1.2
to Form 10-K, filed on or about March 28, 2003.)
3.1.3
Articles of Amendment to the Restated Articles of Incorporation dated June 12, 2002. (Incorporated by reference to
Exhibit 3.1.3 to Form 10-K, filed on or about March 28, 2003.)
3.1.4
Articles of Amendment to the Restated Articles of Incorporation dated August 2, 2006.
The Company’s Amended and Restated Bylaws. (Incorporated by reference to Exhibit 3.2 to Form 10-Q, filed on or about
3.2
August 8, 2012.)
10.9
Form of Stock Option Agreement used in connection with options granted under the Company’s 1993 Directors’ Non-Qualified
Stock Option Plan. (Incorporated by reference to Exhibit 10.9 to Form 10-K, filed on or about March 28, 1994.)
Plan and Agreement of Reorganization, dated as of January 1, 1984, between the Company and the individual shareholders
of Fons Pte. Ltd. (Incorporated by reference to Exhibit 2.5 to Registration Statement No. 2-91224, filed on May 21, 1984.)
Plan and Agreement of Reorganization, dated as of January 1, 1984, among the Company, EIO Investment Ltd., Wong Hoy
Leung, Chiu Chi Shing, and James Li Kou Wang. (Incorporated by reference to Exhibit 2.6 to Registration Statement No.
2-91224, filed on May 21, 1984.)
10.23
Form of Employment Agreement executed by the Company’s Chairman and Chief Executive Officer dated December 31,
2008. (Incorporated by reference to Exhibit 10.23 to Form 10-K, filed on or about February 27, 2009.)
10.24
Form of Employment Agreement executed by the Company’s President and Chief Operating Officer and certain of the
Company’s executive officers dated December 31, 2008. (Incorporated by reference to Exhibit 10.24 to Form 10-K, filed on
or about February 27, 2009.)
10.25
Form of Employment Agreement executed by the Company’s Chief Financial Officer dated December 31, 2008. (Incorporated
by reference to Exhibit 10.25 to Form 10-K, filed on or about February 27, 2009.)
10.26
Form of Employment Agreement executed by the Company's President Asia-Pacific and Director (Incorporated by reference
to Exhibit 10.18 to Registration Statement No. 2-91224, filed on May 21, 1984.)
Form of Stock Option Agreement used in connection with Non-Qualified options granted under the Company’s 1997 Non-
Qualified and Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10.30 to Form 10-K, filed on or about
March 31, 1998.)
Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 1997 Non Qualified
and Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10.31 to Form 10-K, filed on or about March 31, 1998.)
The Company’s 2008 Executive Incentive Compensation Plan. (Incorporated by reference to Appendix C of the Company’s
Notice of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 21,
2008.)
The Company’s 2008 Directors’ Restricted Stock Plan. (Incorporated by reference to Appendix B of the Company’s Notice
of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 21, 2008.)
The Company’s Amended 1993 Directors’ Non-Qualified Stock Option Plan. (Incorporated by reference to Appendix B of the
Company’s Notice of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about
March 28, 2001.)
10.18
10.19
10.30
10.31
10.35
10.36
10.39
10.39.1
Amendment to Amended 1993 Directors’ Non-Qualified Stock Option Plan (Incorporated by reference to Exhibit 10.39.1 to
Form 10-Q filed on or about August 9, 2007.)
10.40
The Company’s Amended 1997 Non-Qualified and Incentive Stock Option Plan. (Incorporated by reference to Appendix C
of the Company’s Notice of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or
about March 28, 2001.)
10.42
The Company’s 2002 Employee Stock Purchase Plan. (Incorporated by reference to Appendix B of the Company’s Notice
of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 30, 2007.)
28
29
3. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
The following list is a subset of the list of exhibits described below and contains all compensatory plans, contracts or arrangements in which any
director or executive officer of the Company is a participant, unless the method of allocation of benefits thereunder is the same for management
and non-management participants:
(1) Form of Employment Agreement executed by the Company’s Chairman and Chief Executive Officer. See Exhibit 10.23.
(2) Form of Employment Agreement executed by the Company’s President and Chief Operating Officer and certain of the Company’s
executive officers. See Exhibit 10.24.
(3) Form of Employment Agreement executed by the Company’s Chief Financial Officer. See Exhibit 10.25.
(4) Form of Employment Agreement executed by the Company's President-Asia Pacific and Director. See Exhibit 10.26.
(5) The Company’s Amended 1993 Directors’ Non-Qualified Stock Option Plan. See Exhibit 10.39.
(6) Form of Stock Option Agreement used in connection with options granted under the Company’s 1993 Directors’ Non-Qualified Stock
Option Plan. See Exhibit 10.9.
(7) The Company’s Amended 1997 Non-Qualified and Incentive Stock Option Plan. See Exhibit 10.40.
(8) Form of Stock Option Agreement used in connection with Non-Qualified options granted under the Company’s 1997 Non-Qualified and
(9) Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 1997 Non-Qualified and
Incentive Stock Option Plan. See Exhibit 10.30.
Incentive Stock Option Plan. See Exhibit 10.31.
(10) The Company’s 2008 Executive Incentive Compensation Plan. See Exhibit 10.35.
(11) The Company’s 2008 Directors’ Restricted Stock Plan. See Exhibit 10.36.
(12) The Company’s 2002 Employee Stock Purchase Plan. See Exhibit 10.42.
(13) The Company’s 2005 Stock Option Plan. See Exhibit 10.45.
See Exhibit 10.46.
See Exhibit 10.48.
See Exhibit 10.50.
(14) Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2005 Stock Option Plan.
(15) The Company’s 2006 Stock Option Plan. See Exhibit 10.47.
(16) Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2006 Stock Option Plan.
(17) The Company’s 2007 Stock Option Plan. See Exhibit 10.49.
(18) Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2007 Stock Option Plan.
(19) The Company’s 2008 Stock Option Plan. See Exhibit 10.51.
(20) Form of Stock Option Agreement used in connection with options granted under the Company’s 2008 Stock Option Plan. See Exhibit
(21) The Company’s 2009 Stock Option Plan. See Exhibit 10.53.
(22) Form of Stock Option Agreement used in connection with options granted under the Company’s 2009 Stock Option Plan. See Exhibit
(23) The Company’s 2010 Stock Option Plan. See Exhibit 10.55.
(24) Form of Stock Option Agreement used in connection with options granted under the Company’s 2010 Stock Option Plan. See Exhibit
(25) The Company’s 2011 Stock Option Plan. See Exhibit 10.57.
(26) Form of Stock Option Agreement used in connection with options granted under the Company’s 2011 Stock Option Plan. See Exhibit
(27) The Company’s 2012 Stock Option Plan. See Exhibit 10.59.
(28) Form of Stock Option Agreement used in connection with options granted under the Company’s 2012 Stock Option Plan. See Exhibit
10.52.
10.54.
10.56.
10.58.
10.60.
(b) EXHIBITS
Exhibit Number
Exhibit
3.1
3.1.1
3.1.2
3.1.3
The Company’s Restated Articles of Incorporation and the Articles of Amendment thereto dated December 9, 1993.
(Incorporated by reference to Exhibit 3.1 to Form 10-K, filed on or about March 31, 1995.)
Articles of Amendment to the Restated Articles of Incorporation dated November 12, 1996. (Incorporated by reference to
Exhibit 3.1.1 to Form 10-K, filed on or about March 31, 1997.)
Articles of Amendment to the Restated Articles of Incorporation dated May 20, 1999. (Incorporated by reference to Exhibit 3.1.2
to Form 10-K, filed on or about March 28, 2003.)
Articles of Amendment to the Restated Articles of Incorporation dated June 12, 2002. (Incorporated by reference to
Exhibit 3.1.3 to Form 10-K, filed on or about March 28, 2003.)
3.1.4
Articles of Amendment to the Restated Articles of Incorporation dated August 2, 2006.
3.2
10.9
10.18
10.19
10.23
10.24
10.25
10.26
10.30
10.31
10.35
10.36
10.39
10.39.1
10.40
The Company’s Amended and Restated Bylaws. (Incorporated by reference to Exhibit 3.2 to Form 10-Q, filed on or about
August 8, 2012.)
Form of Stock Option Agreement used in connection with options granted under the Company’s 1993 Directors’ Non-Qualified
Stock Option Plan. (Incorporated by reference to Exhibit 10.9 to Form 10-K, filed on or about March 28, 1994.)
Plan and Agreement of Reorganization, dated as of January 1, 1984, between the Company and the individual shareholders
of Fons Pte. Ltd. (Incorporated by reference to Exhibit 2.5 to Registration Statement No. 2-91224, filed on May 21, 1984.)
Plan and Agreement of Reorganization, dated as of January 1, 1984, among the Company, EIO Investment Ltd., Wong Hoy
Leung, Chiu Chi Shing, and James Li Kou Wang. (Incorporated by reference to Exhibit 2.6 to Registration Statement No.
2-91224, filed on May 21, 1984.)
Form of Employment Agreement executed by the Company’s Chairman and Chief Executive Officer dated December 31,
2008. (Incorporated by reference to Exhibit 10.23 to Form 10-K, filed on or about February 27, 2009.)
Form of Employment Agreement executed by the Company’s President and Chief Operating Officer and certain of the
Company’s executive officers dated December 31, 2008. (Incorporated by reference to Exhibit 10.24 to Form 10-K, filed on
or about February 27, 2009.)
Form of Employment Agreement executed by the Company’s Chief Financial Officer dated December 31, 2008. (Incorporated
by reference to Exhibit 10.25 to Form 10-K, filed on or about February 27, 2009.)
Form of Employment Agreement executed by the Company's President Asia-Pacific and Director (Incorporated by reference
to Exhibit 10.18 to Registration Statement No. 2-91224, filed on May 21, 1984.)
Form of Stock Option Agreement used in connection with Non-Qualified options granted under the Company’s 1997 Non-
Qualified and Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10.30 to Form 10-K, filed on or about
March 31, 1998.)
Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 1997 Non Qualified
and Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10.31 to Form 10-K, filed on or about March 31, 1998.)
The Company’s 2008 Executive Incentive Compensation Plan. (Incorporated by reference to Appendix C of the Company’s
Notice of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 21,
2008.)
The Company’s 2008 Directors’ Restricted Stock Plan. (Incorporated by reference to Appendix B of the Company’s Notice
of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 21, 2008.)
The Company’s Amended 1993 Directors’ Non-Qualified Stock Option Plan. (Incorporated by reference to Appendix B of the
Company’s Notice of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about
March 28, 2001.)
Amendment to Amended 1993 Directors’ Non-Qualified Stock Option Plan (Incorporated by reference to Exhibit 10.39.1 to
Form 10-Q filed on or about August 9, 2007.)
The Company’s Amended 1997 Non-Qualified and Incentive Stock Option Plan. (Incorporated by reference to Appendix C
of the Company’s Notice of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or
about March 28, 2001.)
10.42
The Company’s 2002 Employee Stock Purchase Plan. (Incorporated by reference to Appendix B of the Company’s Notice
of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 30, 2007.)
28
29
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
10.58
10.59
10.60
21.1
23.1
31.1
31.2
32
The Company’s 2005 Stock Option Plan. (Incorporated by reference to Appendix A of the Company’s Notice of Annual Meeting
of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 31, 2005.)
Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2005 Stock Option
Plan. (Incorporated by reference to Exhibit 10.46 to Form 10-K filed on or about March 1, 2007.)
SIGNATURES
The Company’s 2006 Stock Option Plan. (Incorporated by reference to Appendix A of the Company’s Notice of Annual Meeting
of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about April 4, 2006.)
Pursuant to the requirements of Section 13 or 15(d) 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.
Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2006 Stock Option
Plan. (Incorporated by reference to Exhibit 10.48 to Form 10-K filed on or about March 1, 2007.)
Date: February 27, 2013
The Company’s 2007 Stock Option Plan. (Incorporated by reference to Appendix A of the Company’s Notice of Annual Meeting
of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 30, 2007.)
Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2007 Stock Option
Plan. (Incorporated by reference to Exhibit 10.50 to Form 10-K filed on or about February 9, 2008.)
The Company’s 2008 Stock Option Plan. (Incorporated by reference to Appendix A of the Company’s Notice of Annual Meeting
of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 21, 2008.)
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
By:
/s/ Bradley S. Powell
Bradley S. Powell
Senior Vice President and Chief Financial Officer
Form of Stock Option Agreement used in connection with options granted under the Company’s 2008 Stock Option Plan.
(Incorporated by reference to Exhibit 10.52 to Form 10-K filed on or about February 27, 2009.)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on February 27, 2013.
The Company’s 2009 Stock Option Plan. (Incorporated by reference to Appendix A of the Company’s Notice of Annual Meeting
of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 20, 2009.)
Signature
Title
Form of Stock Option Agreement used in connection with options granted under the Company’s 2009 Stock Option Plan.
(Incorporated by reference to Exhibit 10.2 to Form 8-K filed on or about May 11, 2009.)
The Company's 2010 Stock Option Plan. (Incorporated by reference to Appendix A of the Company's Notice of Annual
Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 19, 2010.)
Form of Stock Option Agreement used in connection with options granted under the Company's 2010 Stock Option Plan.
(Incorporated by reference to Appendix B of the Company's Notice of Annual Meeting of Shareholders and Proxy
Statement pursuant to Regulation 14A filed on or about March 19, 2010.)
The Company's 2011 Stock Option Plan. (Incorporated by reference to Appendix A of the Company's Notice of Annual
Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 18, 2011.)
Form of Stock Option Agreement used in connection with options granted under the Company's 2011 Stock Option Plan.
(Incorporated by reference to Appendix B of the Company's Notice of Annual Meeting of Shareholders and Proxy
Statement pursuant to Regulation 14A filed on or about March 18, 2011.)
The Company's 2012 Stock Option Plan. (Incorporated by reference to Appendix A of the Company's Notice of Annual
Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 20, 2012.)
Form of Stock Option Agreement used in connection with options granted under the Company's 2012 Stock Option Plan.
(Incorporated by reference to Appendix B of the Company's Notice of Annual Meeting of Shareholders and Proxy
Statement pursuant to Regulation 14A filed on or about March 20, 2011.)
Subsidiaries of the registrant.
Consent of Independent Registered Public Accounting Firm.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Instance Document.
101.SCH
XBRL Taxonomy Extension Schema Document.
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
30
31
/s/ Peter J. Rose
(Peter J. Rose)
/s/ R. Jordan Gates
(R. Jordan Gates)
/s/ James Li Kou Wang
(James Li Kou Wang)
/s/ Bradley S. Powell
(Bradley S. Powell)
/s/ Mark A. Emmert
(Mark A. Emmert)
/s/ Dan P. Kourkoumelis
(Dan P. Kourkoumelis)
/s/ Michael J. Malone
(Michael J. Malone)
/s/ John W. Meisenbach
(John W. Meisenbach)
/s/ Robert R. Wright
(Robert R. Wright)
/s/ Tay Yoshitani
(Tay Yoshitani)
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer) and Director
President and Chief Operating Officer and Director
President-Asia Pacific and Director
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
By:
By:
10.45
The Company’s 2005 Stock Option Plan. (Incorporated by reference to Appendix A of the Company’s Notice of Annual Meeting
of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 31, 2005.)
10.46
Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2005 Stock Option
Plan. (Incorporated by reference to Exhibit 10.46 to Form 10-K filed on or about March 1, 2007.)
SIGNATURES
SIGNATURES
10.47
The Company’s 2006 Stock Option Plan. (Incorporated by reference to Appendix A of the Company’s Notice of Annual Meeting
of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about April 4, 2006.)
Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of Section 13 or 15(d) 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.
10.48
Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2006 Stock Option
Plan. (Incorporated by reference to Exhibit 10.48 to Form 10-K filed on or about March 1, 2007.)
Date: February 27, 2013
Date: February 27, 2013
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
/s/ Bradley S. Powell
/s/ Bradley S. Powell
10.49
The Company’s 2007 Stock Option Plan. (Incorporated by reference to Appendix A of the Company’s Notice of Annual Meeting
of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 30, 2007.)
10.50
Form of Stock Option Agreement used in connection with Incentive options granted under the Company’s 2007 Stock Option
Plan. (Incorporated by reference to Exhibit 10.50 to Form 10-K filed on or about February 9, 2008.)
10.51
The Company’s 2008 Stock Option Plan. (Incorporated by reference to Appendix A of the Company’s Notice of Annual Meeting
of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 21, 2008.)
10.54
10.55
10.56
10.57
10.58
10.59
10.60
21.1
23.1
31.1
31.2
32
Form of Stock Option Agreement used in connection with options granted under the Company’s 2009 Stock Option Plan.
(Incorporated by reference to Exhibit 10.2 to Form 8-K filed on or about May 11, 2009.)
The Company's 2010 Stock Option Plan. (Incorporated by reference to Appendix A of the Company's Notice of Annual
Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 19, 2010.)
Form of Stock Option Agreement used in connection with options granted under the Company's 2010 Stock Option Plan.
(Incorporated by reference to Appendix B of the Company's Notice of Annual Meeting of Shareholders and Proxy
Statement pursuant to Regulation 14A filed on or about March 19, 2010.)
The Company's 2011 Stock Option Plan. (Incorporated by reference to Appendix A of the Company's Notice of Annual
Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 18, 2011.)
Form of Stock Option Agreement used in connection with options granted under the Company's 2011 Stock Option Plan.
(Incorporated by reference to Appendix B of the Company's Notice of Annual Meeting of Shareholders and Proxy
Statement pursuant to Regulation 14A filed on or about March 18, 2011.)
The Company's 2012 Stock Option Plan. (Incorporated by reference to Appendix A of the Company's Notice of Annual
Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 20, 2012.)
Form of Stock Option Agreement used in connection with options granted under the Company's 2012 Stock Option Plan.
(Incorporated by reference to Appendix B of the Company's Notice of Annual Meeting of Shareholders and Proxy
Statement pursuant to Regulation 14A filed on or about March 20, 2011.)
Subsidiaries of the registrant.
Consent of Independent Registered Public Accounting Firm.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Instance Document.
101.SCH
XBRL Taxonomy Extension Schema Document.
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
10.52
Form of Stock Option Agreement used in connection with options granted under the Company’s 2008 Stock Option Plan.
(Incorporated by reference to Exhibit 10.52 to Form 10-K filed on or about February 27, 2009.)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on February 27, 2013.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on February 27, 2013.
10.53
The Company’s 2009 Stock Option Plan. (Incorporated by reference to Appendix A of the Company’s Notice of Annual Meeting
of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 20, 2009.)
Signature
Signature
Title
Title
Bradley S. Powell
Bradley S. Powell
Senior Vice President and Chief Financial Officer
Senior Vice President and Chief Financial Officer
/s/ Peter J. Rose
/s/ Peter J. Rose
(Peter J. Rose)
(Peter J. Rose)
/s/ R. Jordan Gates
/s/ R. Jordan Gates
(R. Jordan Gates)
(R. Jordan Gates)
/s/ James Li Kou Wang
/s/ James Li Kou Wang
(James Li Kou Wang)
(James Li Kou Wang)
/s/ Bradley S. Powell
/s/ Bradley S. Powell
(Bradley S. Powell)
(Bradley S. Powell)
/s/ Mark A. Emmert
/s/ Mark A. Emmert
(Mark A. Emmert)
(Mark A. Emmert)
/s/ Dan P. Kourkoumelis
/s/ Dan P. Kourkoumelis
(Dan P. Kourkoumelis)
(Dan P. Kourkoumelis)
/s/ Michael J. Malone
/s/ Michael J. Malone
(Michael J. Malone)
(Michael J. Malone)
/s/ John W. Meisenbach
/s/ John W. Meisenbach
(John W. Meisenbach)
(John W. Meisenbach)
/s/ Robert R. Wright
/s/ Robert R. Wright
(Robert R. Wright)
(Robert R. Wright)
/s/ Tay Yoshitani
/s/ Tay Yoshitani
(Tay Yoshitani)
(Tay Yoshitani)
Chairman of the Board and Chief Executive Officer
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer) and Director
(Principal Executive Officer) and Director
President and Chief Operating Officer and Director
President and Chief Operating Officer and Director
President-Asia Pacific and Director
President-Asia Pacific and Director
Senior Vice President and Chief Financial Officer
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
30
31
31
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
COMPRISING ITEM 8
ANNUAL REPORT ON FORM 10-K
TO SECURITIES AND EXCHANGE COMMISSION FOR THE
YEARS ENDED DECEMBER 31, 2012, 2011, AND 2010
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Expeditors International of Washington, Inc.:
We have audited the accompanying consolidated balance sheets of Expeditors International of Washington, Inc. and subsidiaries as of
December 31, 2012 and 2011, and the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of
the years in the three-year period ended December 31, 2012. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Expeditors
International of Washington, Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Expeditors
International of Washington, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report
dated February 27, 2013 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Seattle, Washington
February 27, 2013
F-1
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
COMPRISING ITEM 8
ANNUAL REPORT ON FORM 10-K
TO SECURITIES AND EXCHANGE COMMISSION FOR THE
YEARS ENDED DECEMBER 31, 2012, 2011, AND 2010
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Expeditors International of Washington, Inc.:
We have audited the accompanying consolidated balance sheets of Expeditors International of Washington, Inc. and subsidiaries as of
December 31, 2012 and 2011, and the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of
the years in the three-year period ended December 31, 2012. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Expeditors
International of Washington, Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Expeditors
International of Washington, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report
dated February 27, 2013 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Seattle, Washington
February 27, 2013
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Expeditors International of Washington, Inc.:
We have audited Expeditors International of Washington, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria
established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Expeditors International of Washington, Inc.’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on
Internal Control Over Financial Reporting under Item 9A. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Shareholders’ Equity:
Preferred stock, par value $.01 per share, authorized 2,000,000 shares; none issued .......................
—
—
In our opinion, Expeditors International of Washington, Inc. maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
balance sheets of Expeditors International of Washington, Inc. and subsidiaries as of December 31, 2012 and 2011, and the related consolidated
statements of earnings, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2012,
and our report dated February 27, 2013 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Seattle, Washington
February 27, 2013
2012
2011
Total assets ............................................................................................................................ $
2,954,125
2,866,827
Consolidated Balance Sheets
In thousands except share data
December 31,
Current Assets:
Cash and cash equivalents ................................................................................................................. $
Accounts receivable, less allowance for doubtful accounts of $9,383 in 2012 and $10,381 in 2011 ...
Deferred Federal and state income taxes ............................................................................................
Other ...................................................................................................................................................
Total current assets ................................................................................................................
Property and equipment, net ...............................................................................................................
Goodwill
..............................................................................................................................................
Other assets, net .................................................................................................................................
Current Liabilities:
Accounts payable ................................................................................................................................ $
Accrued expenses, primarily salaries and related costs ......................................................................
Federal, state, and foreign income taxes .............................................................................................
Total current liabilities ............................................................................................................
Deferred Federal and state income taxes ............................................................................................
Commitments and contingencies ........................................................................................................
Common stock, par value $.01 per share, authorized 640,000,000 shares; ........................................
issued and outstanding 206,392,013 shares at December 31, 2012 ...........................................
and 212,003,662 shares at December 31, 2011 ..........................................................................
Additional paid-in capital
.....................................................................................................................
Retained earnings ...............................................................................................................................
Accumulated other comprehensive income (loss) ...............................................................................
Total shareholders’ equity ............................................................................................................
Noncontrolling interest .........................................................................................................................
Total equity ..................................................................................................................................
Total liabilities and equity ....................................................................................................... $
See accompanying notes to consolidated financial statements.
1,260,842
1,031,376
12,102
53,279
2,357,599
556,204
7,927
32,395
641,593
178,995
21,970
842,558
78,997
2,064
1,283
2,018,618
5,734
2,027,699
4,871
2,032,570
2,954,125
1,294,356
934,752
10,415
47,360
2,286,883
538,806
7,927
33,211
606,628
169,445
20,072
796,145
60,613
2,120
13,260
1,991,222
(2,964)
2,003,638
6,431
2,010,069
2,866,827
F-2
F-3
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Expeditors International of Washington, Inc.:
We have audited Expeditors International of Washington, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria
established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Expeditors International of Washington, Inc.’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on
Internal Control Over Financial Reporting under Item 9A. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Expeditors International of Washington, Inc. maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
balance sheets of Expeditors International of Washington, Inc. and subsidiaries as of December 31, 2012 and 2011, and the related consolidated
statements of earnings, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2012,
and our report dated February 27, 2013 expressed an unqualified opinion on those consolidated financial statements.
Consolidated Balance Sheets
Consolidated Balance Sheets
In thousands except share data
In thousands except share data
December 31,
December 31,
2012
2012
2011
2011
Current Assets:
Current Assets:
Cash and cash equivalents ................................................................................................................. $
Cash and cash equivalents ................................................................................................................. $
Accounts receivable, less allowance for doubtful accounts of $9,383 in 2012 and $10,381 in 2011 ...
Deferred Federal and state income taxes ............................................................................................
Accounts receivable, less allowance for doubtful accounts of $9,383 in 2012 and $10,381 in 2011 ...
Deferred Federal and state income taxes ............................................................................................
Other ...................................................................................................................................................
Other ...................................................................................................................................................
Total current assets ................................................................................................................
Total current assets ................................................................................................................
Property and equipment, net ...............................................................................................................
Property and equipment, net ...............................................................................................................
Goodwill
Goodwill
..............................................................................................................................................
..............................................................................................................................................
Other assets, net .................................................................................................................................
Other assets, net .................................................................................................................................
1,260,842
1,031,376
1,260,842
1,031,376
12,102
12,102
53,279
53,279
2,357,599
2,357,599
556,204
556,204
7,927
7,927
32,395
32,395
Total assets ............................................................................................................................ $
Total assets ............................................................................................................................ $
2,954,125
2,954,125
Current Liabilities:
Current Liabilities:
Accounts payable ................................................................................................................................ $
Accounts payable ................................................................................................................................ $
Accrued expenses, primarily salaries and related costs ......................................................................
Accrued expenses, primarily salaries and related costs ......................................................................
Federal, state, and foreign income taxes .............................................................................................
Federal, state, and foreign income taxes .............................................................................................
Total current liabilities ............................................................................................................
Total current liabilities ............................................................................................................
Deferred Federal and state income taxes ............................................................................................
Deferred Federal and state income taxes ............................................................................................
Commitments and contingencies ........................................................................................................
Commitments and contingencies ........................................................................................................
641,593
641,593
178,995
178,995
21,970
21,970
842,558
842,558
78,997
78,997
Shareholders’ Equity:
Shareholders’ Equity:
1,294,356
1,294,356
934,752
934,752
10,415
10,415
47,360
47,360
2,286,883
2,286,883
538,806
538,806
7,927
7,927
33,211
33,211
2,866,827
2,866,827
606,628
606,628
169,445
169,445
20,072
20,072
796,145
796,145
60,613
60,613
Preferred stock, par value $.01 per share, authorized 2,000,000 shares; none issued .......................
Preferred stock, par value $.01 per share, authorized 2,000,000 shares; none issued .......................
Common stock, par value $.01 per share, authorized 640,000,000 shares; ........................................
Common stock, par value $.01 per share, authorized 640,000,000 shares; ........................................
issued and outstanding 206,392,013 shares at December 31, 2012 ...........................................
issued and outstanding 206,392,013 shares at December 31, 2012 ...........................................
—
—
—
—
and 212,003,662 shares at December 31, 2011 ..........................................................................
and 212,003,662 shares at December 31, 2011 ..........................................................................
.....................................................................................................................
.....................................................................................................................
Additional paid-in capital
Additional paid-in capital
2,064
2,064
1,283
1,283
Retained earnings ...............................................................................................................................
Retained earnings ...............................................................................................................................
Accumulated other comprehensive income (loss) ...............................................................................
Accumulated other comprehensive income (loss) ...............................................................................
Total shareholders’ equity ............................................................................................................
Noncontrolling interest .........................................................................................................................
Total shareholders’ equity ............................................................................................................
Noncontrolling interest .........................................................................................................................
Total equity ..................................................................................................................................
Total equity ..................................................................................................................................
2,018,618
2,018,618
5,734
5,734
2,027,699
2,027,699
4,871
4,871
2,032,570
2,032,570
/s/ KPMG LLP
Seattle, Washington
February 27, 2013
Total liabilities and equity ....................................................................................................... $
Total liabilities and equity ....................................................................................................... $
2,954,125
2,954,125
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
F-2
F-3
F-3
2,120
2,120
13,260
13,260
1,991,222
1,991,222
(2,964)
(2,964)
2,003,638
2,003,638
6,431
6,431
2,010,069
2,010,069
2,866,827
2,866,827
Consolidated Statements of Earnings
In thousands except share data
Consolidated Statements of Comprehensive Income
In thousands
Years ended December 31,
2012
2011
2010
Revenues:
Airfreight services .........................................................................................
$
Ocean freight and ocean services ................................................................
Customs brokerage and other services ........................................................
Total revenues ........................................................................................
Operating Expenses:
Airfreight consolidation .................................................................................
Ocean freight consolidation ..........................................................................
Customs brokerage and other services ........................................................
Salaries and related costs ............................................................................
Rent and occupancy costs ...........................................................................
Depreciation and amortization ......................................................................
Selling and promotion ..................................................................................
Other ............................................................................................................
Total operating expenses ........................................................................
Operating income ...................................................................................
Other Income (Expense):
Interest income .............................................................................................
Interest expense ...........................................................................................
Other, net .....................................................................................................
Other income, net ...................................................................................
Earnings before income taxes ......................................................................
Income tax expense .....................................................................................
Net earnings ...........................................................................................
Less net (losses) earnings attributable to the noncontrolling interest ...........
Net earnings attributable to shareholders ...............................................
Diluted earnings attributable to shareholders per share ...............................
Basic earnings attributable to shareholders per share .................................
Weighted average diluted shares outstanding ..............................................
Weighted average basic shares outstanding ................................................
$
$
$
See accompanying notes to consolidated financial statements.
2,600,916
1,974,891
1,405,136
5,980,943
1,983,696
1,542,170
630,979
995,052
88,044
39,940
34,184
136,080
5,450,145
530,798
12,763
(1,251)
8,083
19,595
550,393
217,424
332,969
(391)
333,360
1.57
2,893,474
1,878,595
1,378,429
6,150,498
2,193,122
1,443,170
617,729
993,358
84,665
36,776
38,974
124,377
5,532,171
618,327
10,235
(970)
10,436
19,701
638,028
251,785
386,243
564
385,679
1.79
2,821,828
1,955,400
1,190,345
5,967,573
2,181,598
1,569,877
523,312
894,132
77,209
36,900
32,055
105,260
5,420,343
547,230
7,002
(576)
10,412
16,838
564,068
219,863
344,205
33
344,172
1.59
1.58
211,935,171
210,422,945
1.82
215,033,580
212,117,511
1.62
216,446,656
212,283,966
Years ended December 31,
2012
2011
2010
Net earnings ..............................................................................................
$
332,969
386,243
344,205
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax of $4,419 in 2012,
$6,471 in 2011 and $4,122 in 2010 ........................................................
Reclassification adjustments for foreign currency realized losses, net
of tax of $348 in 2012, $393 in 2011 and $0 in 2010 ..............................
Other comprehensive income (loss) .......................................................
Comprehensive income ..........................................................................
341,780
Less comprehensive (loss) income attributable to the noncontrolling
interest ......................................................................................................
Comprehensive income attributable to shareholders ..............................
$
342,058
See accompanying notes to consolidated financial statements.
8,164
647
8,811
(278)
(12,131)
616
(11,515)
374,728
138
374,590
7,447
—
7,447
351,652
(41)
351,693
F-4
F-5
2012
2011
2010
Years ended December 31,
2012
2011
2010
Net earnings ..............................................................................................
$
332,969
386,243
344,205
Consolidated Statements of Comprehensive Income
In thousands
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax of $4,419 in 2012,
$6,471 in 2011 and $4,122 in 2010 ........................................................
Reclassification adjustments for foreign currency realized losses, net
of tax of $348 in 2012, $393 in 2011 and $0 in 2010 ..............................
Other comprehensive income (loss) .......................................................
8,164
647
8,811
Comprehensive income ..........................................................................
341,780
Less comprehensive (loss) income attributable to the noncontrolling
interest ......................................................................................................
(278)
Comprehensive income attributable to shareholders ..............................
$
342,058
See accompanying notes to consolidated financial statements.
(12,131)
616
(11,515)
374,728
138
374,590
7,447
—
7,447
351,652
(41)
351,693
Consolidated Statements of Earnings
In thousands except share data
Years ended December 31,
Revenues:
Airfreight services .........................................................................................
$
Ocean freight and ocean services ................................................................
Customs brokerage and other services ........................................................
Total revenues ........................................................................................
Operating Expenses:
Airfreight consolidation .................................................................................
Ocean freight consolidation ..........................................................................
Customs brokerage and other services ........................................................
Salaries and related costs ............................................................................
Rent and occupancy costs ...........................................................................
Depreciation and amortization ......................................................................
Selling and promotion ..................................................................................
Other ............................................................................................................
Total operating expenses ........................................................................
Operating income ...................................................................................
Other Income (Expense):
Interest income .............................................................................................
Interest expense ...........................................................................................
Other, net .....................................................................................................
Other income, net ...................................................................................
Earnings before income taxes ......................................................................
Income tax expense .....................................................................................
Net earnings ...........................................................................................
Less net (losses) earnings attributable to the noncontrolling interest ...........
Net earnings attributable to shareholders ...............................................
Diluted earnings attributable to shareholders per share ...............................
Basic earnings attributable to shareholders per share .................................
$
$
$
2,600,916
1,974,891
1,405,136
5,980,943
1,983,696
1,542,170
630,979
995,052
88,044
39,940
34,184
136,080
5,450,145
530,798
12,763
(1,251)
8,083
19,595
550,393
217,424
332,969
(391)
333,360
1.57
1.58
2,893,474
1,878,595
1,378,429
6,150,498
2,193,122
1,443,170
617,729
993,358
84,665
36,776
38,974
124,377
5,532,171
618,327
10,235
(970)
10,436
19,701
638,028
251,785
386,243
564
385,679
1.79
1.82
2,821,828
1,955,400
1,190,345
5,967,573
2,181,598
1,569,877
523,312
894,132
77,209
36,900
32,055
105,260
5,420,343
547,230
7,002
(576)
10,412
16,838
564,068
219,863
344,205
33
344,172
1.59
1.62
Weighted average diluted shares outstanding ..............................................
Weighted average basic shares outstanding ................................................
211,935,171
210,422,945
215,033,580
212,117,511
216,446,656
212,283,966
See accompanying notes to consolidated financial statements.
F-4
F-5
Consolidated Statements of Equity
Consolidated Statements of Equity
In thousands except share data
Years ended December 31, 2012, 2011 and 2010
In thousands except share data
Years ended December 31, 2012, 2011 and 2010
Common Stock
Common Stock
Shares
Shares
Par Value
Par Value
Balance at December 31, 2009 ...............................................................................................................................
Balance at December 31, 2009 ...............................................................................................................................
Exercise of stock options and release of restricted shares ......................................................................................
Exercise of stock options and release of restricted shares ......................................................................................
212,025,494
4,781,971
212,025,494
4,781,971
$
Issuance of shares under stock purchase plan ........................................................................................................
Issuance of shares under stock purchase plan ........................................................................................................
Shares repurchased under provisions of stock repurchase plans ............................................................................
Shares repurchased under provisions of stock repurchase plans ............................................................................
Stock compensation expense ..................................................................................................................................
Stock compensation expense ..................................................................................................................................
694,329
(5,454,020)
—
694,329
(5,454,020)
—
Tax benefits from stock plans, net ............................................................................................................................
Tax benefits from stock plans, net ............................................................................................................................
Net earnings ............................................................................................................................................................
Net earnings ............................................................................................................................................................
Other comprehensive income ..................................................................................................................................
Other comprehensive income ..................................................................................................................................
Dividends paid ($.40 per share) ...............................................................................................................................
Dividends paid ($.40 per share) ...............................................................................................................................
—
—
—
—
—
—
—
—
Distributions of dividends to noncontrolling interest .................................................................................................
Distributions of dividends to noncontrolling interest .................................................................................................
Balance at December 31, 2010 ...............................................................................................................................
Balance at December 31, 2010 ...............................................................................................................................
Exercise of stock options and release of restricted shares ......................................................................................
Exercise of stock options and release of restricted shares ......................................................................................
—
212,047,774
—
212,047,774
1,632,077
1,632,077
Issuance of shares under stock purchase plan ........................................................................................................
Shares repurchased under provisions of stock repurchase plans ............................................................................
Issuance of shares under stock purchase plan ........................................................................................................
Shares repurchased under provisions of stock repurchase plans ............................................................................
Stock compensation expense ..................................................................................................................................
Stock compensation expense ..................................................................................................................................
663,386
(2,339,575)
—
663,386
(2,339,575)
—
Tax benefits from stock plans, net ............................................................................................................................
Tax benefits from stock plans, net ............................................................................................................................
Net earnings ............................................................................................................................................................
Net earnings ............................................................................................................................................................
Other comprehensive loss .......................................................................................................................................
Other comprehensive loss .......................................................................................................................................
Dividends paid ($.50 per share) ...............................................................................................................................
Dividends paid ($.50 per share) ...............................................................................................................................
—
—
—
—
—
—
—
—
Distributions of dividends to noncontrolling interest .................................................................................................
Distributions of dividends to noncontrolling interest .................................................................................................
Balance at December 31, 2011 ................................................................................................................................
Balance at December 31, 2011 ................................................................................................................................
—
212,003,662
—
212,003,662
Exercise of stock options and release of restricted shares ......................................................................................
Exercise of stock options and release of restricted shares ......................................................................................
1,653,994
1,653,994
Issuance of shares under stock purchase plan ........................................................................................................
Issuance of shares under stock purchase plan ........................................................................................................
Shares repurchased under provisions of stock repurchase plans ............................................................................
Stock compensation expense ..................................................................................................................................
Shares repurchased under provisions of stock repurchase plans ............................................................................
Stock compensation expense ..................................................................................................................................
Tax benefits from stock plans, net ............................................................................................................................
Net earnings ............................................................................................................................................................
Tax benefits from stock plans, net ............................................................................................................................
Net earnings ............................................................................................................................................................
Other comprehensive income ..................................................................................................................................
Other comprehensive income ..................................................................................................................................
Dividends paid ($.56 per share) ...............................................................................................................................
Dividends paid ($.56 per share) ...............................................................................................................................
773,661
(8,039,304)
—
773,661
(8,039,304)
—
—
—
—
—
—
—
—
—
Distributions of dividends to noncontrolling interest .................................................................................................
Distributions of dividends to noncontrolling interest .................................................................................................
Balance at December 31, 2012 ...............................................................................................................................
Balance at December 31, 2012 ...............................................................................................................................
—
206,392,013
—
206,392,013
$
$
2,120
48
7
(55)
—
—
—
—
—
—
2,120
16
7
(23)
—
—
—
—
—
—
2,120
16
8
(80)
—
—
—
—
—
—
2,064
$
2,120
48
7
(55)
—
—
—
—
—
—
2,120
16
7
(23)
—
—
—
—
—
—
2,120
16
8
(80)
—
—
—
—
—
—
2,064
Additional
paid-in
capital
Retained
earnings
1,532,018
Accumulated other
comprehensive
income (loss)
Total
equity
shareholders’
Noncontrolling
interest
Total
equity
604
1,553,007
8,340
1,561,347
18,265
79,186
20,543
43,743
23,863
13,412
32,406
24,217
44,278
5,300
13,260
29,103
23,384
44,058
5,111
—
—
—
—
—
—
—
—
—
—
—
—
(172,188)
(74,069)
(106,353)
(5,695)
344,172
(84,872)
7,521
1,717,249
8,125
1,740,906
385,679
(106,011)
(11,089)
1,991,222
(2,964)
2,003,638
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
79,234
20,550
(246,312)
43,743
23,863
344,172
7,521
(84,872)
—
32,422
24,224
(112,071)
44,278
5,300
385,679
(11,089)
(106,011)
—
29,119
23,392
(302,414)
44,058
5,111
333,360
8,698
(117,263)
—
(113,633)
(188,701)
333,360
(117,263)
8,698
1,283
2,018,618
5,734
2,027,699
See accompanying notes to consolidated financial statements.
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
33
—
—
—
—
—
—
—
—
—
—
(74)
—
(1,051)
7,248
564
(426)
—
(955)
6,431
(391)
113
—
(1,282)
4,871
1,748,154
79,234
20,550
(246,312)
43,743
23,863
344,205
7,447
(84,872)
(1,051)
32,422
24,224
(112,071)
44,278
5,300
386,243
(11,515)
(106,011)
(955)
2,010,069
29,119
23,392
(302,414)
44,058
5,111
332,969
8,811
(117,263)
(1,282)
2,032,570
F-6
F-6
F-7
Noncontrolling
interest
8,340
—
—
—
—
—
33
(74)
—
(1,051)
7,248
—
—
—
—
—
564
(426)
—
(955)
6,431
—
—
—
—
—
(391)
113
—
(1,282)
4,871
Total
equity
1,561,347
79,234
20,550
(246,312)
43,743
23,863
344,205
7,447
(84,872)
(1,051)
1,748,154
32,422
24,224
(112,071)
44,278
5,300
386,243
(11,515)
(106,011)
(955)
2,010,069
29,119
23,392
(302,414)
44,058
5,111
332,969
8,811
(117,263)
(1,282)
2,032,570
Additional
paid-in
capital
Retained
earnings
Accumulated other
comprehensive
income (loss)
Total
shareholders’
equity
18,265
1,532,018
79,186
20,543
(172,188)
43,743
23,863
—
—
—
—
13,412
32,406
24,217
—
—
(74,069)
—
—
344,172
—
(84,872)
—
1,717,249
—
—
(106,353)
(5,695)
44,278
5,300
—
—
—
—
13,260
29,103
23,384
(113,633)
44,058
5,111
—
—
—
—
1,283
—
—
385,679
—
(106,011)
—
1,991,222
—
—
(188,701)
—
—
333,360
—
(117,263)
—
2,018,618
604
—
—
—
—
—
—
7,521
—
—
8,125
—
—
—
—
—
—
(11,089)
—
—
(2,964)
—
—
—
—
—
—
8,698
—
—
5,734
See accompanying notes to consolidated financial statements.
1,553,007
79,234
20,550
(246,312)
43,743
23,863
344,172
7,521
(84,872)
—
1,740,906
32,422
24,224
(112,071)
44,278
5,300
385,679
(11,089)
(106,011)
—
2,003,638
29,119
23,392
(302,414)
44,058
5,111
333,360
8,698
(117,263)
—
2,027,699
F-7
Consolidated Statements of Cash Flows
In thousands
Years ended December 31,
2012
2011
2010
332,969
386,243
344,205
Operating Activities:
Net earnings ..................................................................................................
$
Adjustments to reconcile net earnings to net cash provided by operating
activities:
(Recoveries) provision for losses on accounts receivable ........................
Deferred income tax expense (benefit) .....................................................
Excess tax benefits from stock plans ........................................................
Stock compensation expense ...................................................................
Depreciation and amortization ..................................................................
Other ........................................................................................................
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable .............................................
Increase (decrease) in accounts payable and accrued expenses ............
Increase (decrease) in income taxes payable, net ....................................
(Increase) decrease in other current assets .............................................
Net cash from operating activities ..................................................................
Investing Activities:
Purchase of property and equipment .............................................................
Prepayment on long-term leases, net ............................................................
Other ..............................................................................................................
Net cash from investing activities ...................................................................
Financing Activities: .......................................................................................
Proceeds from issuance of common stock .....................................................
Repurchases of common stock ......................................................................
Excess tax benefits from stock plans .............................................................
Dividends paid ...............................................................................................
Distributions to noncontrolling interest ...........................................................
Net cash from financing activities ...................................................................
Effect of exchange rate changes on cash and cash equivalents ....................
(Decrease) increase in cash and cash equivalents ........................................
Cash and cash equivalents at beginning of year ............................................
Cash and cash equivalents at end of year .....................................................
Interest and Taxes Paid:
(90)
11,639
(5,401)
44,058
39,940
4,864
(89,856)
30,625
1,441
(63)
370,126
(47,626)
—
632
(46,994)
52,511
(302,414)
5,401
(117,263)
(1,282)
(363,047)
6,401
(33,514)
1,294,356
1,260,842
Interest ...........................................................................................................
Income taxes .................................................................................................
$
$
515
207,174
See accompanying notes to consolidated financial statements
1,327
(4,065)
(5,300)
44,278
36,776
2,496
46,915
(40,819)
(3,237)
(7,483)
457,131
(78,115)
(936)
(1,288)
(80,339)
56,646
(112,071)
5,300
(106,011)
(955)
(157,091)
(9,810)
209,891
1,084,465
1,294,356
296
266,621
3,414
10,569
(23,863)
43,743
36,900
1,215
(188,823)
130,138
39,495
(1,475)
395,518
(42,408)
—
229
(42,179)
99,784
(246,312)
23,863
(84,872)
(1,051)
(208,588)
13,785
158,536
925,929
1,084,465
110
171,618
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. | Basis of Presentation
Expeditors International of Washington, Inc. (“the Company”) is a non-asset based provider of global logistics services operating
through a worldwide network of offices and exclusive or non-exclusive agents. The Company’s customers include retailing and
wholesaling, electronics, and manufacturing companies around the world.
International trade is influenced by many factors, including economic and political conditions in the United States and abroad,
currency exchange rates, regulatory environments, cargo and other security concerns, laws and policies relating to tariffs, trade
restrictions, foreign investments and taxation. Periodically, governments consider a variety of changes to current tariffs and trade
restrictions. The Company cannot predict which, if any, of these proposals may be adopted, nor can the Company predict the effects
adoption of any such proposal will have on the Company’s business. Doing business in foreign locations also subjects the Company
to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to being influenced by
governmental policies concerning international trade, the Company’s business may also be affected by political developments and
changes in government personnel or policies as well as economic turbulence or security concerns in the nations in which it does
business.
The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange
Commission in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The consolidated
financial statements include the accounts of the Company and its subsidiaries stated in U.S. dollars, the Company’s reporting
currency. In addition, the consolidated financial statements also include the accounts of operating entities where the Company
maintains a parent-subsidiary relationship through unilateral control over assets and operations together with responsibility for
payment of all liabilities, notwithstanding a lack of technical majority ownership of the subsidiary common stock.
All significant intercompany accounts and transactions have been eliminated in consolidation. All dollar amounts in the notes are
presented in thousands except for share data. Certain prior year amounts have been reclassified to conform to the 2012 presentation.
B. | Cash Equivalents
C. | Accounts Receivable
All highly liquid investments with a maturity of three months or less at date of purchase are considered to be cash equivalents.
The Company maintains an allowance for doubtful accounts, which is reviewed at least monthly for estimated losses resulting from
the inability of its customers to make required payments for services and advances. Additional allowances may be necessary in
the future if the ability of its customers to pay deteriorates. The Company has recorded an allowance for doubtful accounts in the
amounts of $9,383, $10,381 and $14,636 as of December 31, 2012, 2011 and 2010, respectively. Additions and write-offs have
not been significant in any of these years.
D. | Long-Lived Assets, Depreciation and Amortization
Property and equipment are recorded at cost and are depreciated or amortized on the straight-line method over the shorter of the
assets’ estimated useful lives or lease terms. Useful lives for major categories of property and equipment are as follows:
Land Improvements .............................................................................................................................................
50 years
Buildings ..............................................................................................................................................................
28 to 40 years
Furniture, fixtures, equipment and purchased software ........................................................................................
3 to 5 years
Expenditures for maintenance, repairs, and replacements of minor items are charged to earnings as incurred. Major upgrades and
improvements that extend the life of the asset are capitalized. Upon disposition, the cost and related accumulated depreciation are
removed from the accounts and the resulting gain or loss is included in income for the period.
For the years ended December 31, 2012 and 2011, the Company performed the required goodwill annual impairment test during
the fourth quarter and determined that no impairment had occurred.
E. | Revenues and Revenue Recognition
The Company derives its revenues from three principal sources: 1) airfreight services, 2) ocean freight and ocean services, and
3) customs brokerage and other services. These are the revenue categories presented in the financial statements.
F-8
F-9
Net earnings ..................................................................................................
$
332,969
386,243
344,205
Consolidated Statements of Cash Flows
In thousands
Years ended December 31,
Operating Activities:
Adjustments to reconcile net earnings to net cash provided by operating
activities:
(Recoveries) provision for losses on accounts receivable ........................
Deferred income tax expense (benefit) .....................................................
Excess tax benefits from stock plans ........................................................
Stock compensation expense ...................................................................
Depreciation and amortization ..................................................................
Other ........................................................................................................
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable .............................................
Increase (decrease) in accounts payable and accrued expenses ............
Increase (decrease) in income taxes payable, net ....................................
(Increase) decrease in other current assets .............................................
Net cash from operating activities ..................................................................
Investing Activities:
Purchase of property and equipment .............................................................
(47,626)
Prepayment on long-term leases, net ............................................................
Other ..............................................................................................................
Net cash from investing activities ...................................................................
(46,994)
Financing Activities: .......................................................................................
Proceeds from issuance of common stock .....................................................
Repurchases of common stock ......................................................................
Excess tax benefits from stock plans .............................................................
Dividends paid ...............................................................................................
Distributions to noncontrolling interest ...........................................................
Net cash from financing activities ...................................................................
Effect of exchange rate changes on cash and cash equivalents ....................
(Decrease) increase in cash and cash equivalents ........................................
Cash and cash equivalents at beginning of year ............................................
Cash and cash equivalents at end of year .....................................................
Interest and Taxes Paid:
Interest ...........................................................................................................
Income taxes .................................................................................................
$
$
515
207,174
See accompanying notes to consolidated financial statements
(90)
11,639
(5,401)
44,058
39,940
4,864
(89,856)
30,625
1,441
(63)
370,126
—
632
52,511
(302,414)
5,401
(117,263)
(1,282)
(363,047)
6,401
(33,514)
1,294,356
1,260,842
1,327
(4,065)
(5,300)
44,278
36,776
2,496
46,915
(40,819)
(3,237)
(7,483)
457,131
(78,115)
(936)
(1,288)
(80,339)
56,646
(112,071)
5,300
(106,011)
(955)
(157,091)
(9,810)
209,891
1,084,465
1,294,356
296
266,621
3,414
10,569
(23,863)
43,743
36,900
1,215
(188,823)
130,138
39,495
(1,475)
395,518
(42,408)
—
229
(42,179)
99,784
(246,312)
23,863
(84,872)
(1,051)
(208,588)
13,785
158,536
925,929
1,084,465
110
171,618
2012
2011
2010
A. | Basis of Presentation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Expeditors International of Washington, Inc. (“the Company”) is a non-asset based provider of global logistics services operating
through a worldwide network of offices and exclusive or non-exclusive agents. The Company’s customers include retailing and
wholesaling, electronics, and manufacturing companies around the world.
International trade is influenced by many factors, including economic and political conditions in the United States and abroad,
currency exchange rates, regulatory environments, cargo and other security concerns, laws and policies relating to tariffs, trade
restrictions, foreign investments and taxation. Periodically, governments consider a variety of changes to current tariffs and trade
restrictions. The Company cannot predict which, if any, of these proposals may be adopted, nor can the Company predict the effects
adoption of any such proposal will have on the Company’s business. Doing business in foreign locations also subjects the Company
to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to being influenced by
governmental policies concerning international trade, the Company’s business may also be affected by political developments and
changes in government personnel or policies as well as economic turbulence or security concerns in the nations in which it does
business.
The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange
Commission in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The consolidated
financial statements include the accounts of the Company and its subsidiaries stated in U.S. dollars, the Company’s reporting
currency. In addition, the consolidated financial statements also include the accounts of operating entities where the Company
maintains a parent-subsidiary relationship through unilateral control over assets and operations together with responsibility for
payment of all liabilities, notwithstanding a lack of technical majority ownership of the subsidiary common stock.
All significant intercompany accounts and transactions have been eliminated in consolidation. All dollar amounts in the notes are
presented in thousands except for share data. Certain prior year amounts have been reclassified to conform to the 2012 presentation.
B. | Cash Equivalents
All highly liquid investments with a maturity of three months or less at date of purchase are considered to be cash equivalents.
C. | Accounts Receivable
The Company maintains an allowance for doubtful accounts, which is reviewed at least monthly for estimated losses resulting from
the inability of its customers to make required payments for services and advances. Additional allowances may be necessary in
the future if the ability of its customers to pay deteriorates. The Company has recorded an allowance for doubtful accounts in the
amounts of $9,383, $10,381 and $14,636 as of December 31, 2012, 2011 and 2010, respectively. Additions and write-offs have
not been significant in any of these years.
D. | Long-Lived Assets, Depreciation and Amortization
Property and equipment are recorded at cost and are depreciated or amortized on the straight-line method over the shorter of the
assets’ estimated useful lives or lease terms. Useful lives for major categories of property and equipment are as follows:
Land Improvements .............................................................................................................................................
50 years
Buildings ..............................................................................................................................................................
28 to 40 years
Furniture, fixtures, equipment and purchased software ........................................................................................
3 to 5 years
Expenditures for maintenance, repairs, and replacements of minor items are charged to earnings as incurred. Major upgrades and
improvements that extend the life of the asset are capitalized. Upon disposition, the cost and related accumulated depreciation are
removed from the accounts and the resulting gain or loss is included in income for the period.
For the years ended December 31, 2012 and 2011, the Company performed the required goodwill annual impairment test during
the fourth quarter and determined that no impairment had occurred.
E. | Revenues and Revenue Recognition
The Company derives its revenues from three principal sources: 1) airfreight services, 2) ocean freight and ocean services, and
3) customs brokerage and other services. These are the revenue categories presented in the financial statements.
F-8
F-9
As a non-asset based carrier, the Company does not own transportation assets. Rather, the Company generates the major portion
of its air and ocean freight revenues by purchasing transportation services from direct (asset-based) carriers and reselling those
services to its customers. The difference between the rate billed to customers (the sell rate), and the rate paid to the carrier (the
buy rate) is termed “net revenue” or “yield”. By consolidating shipments from multiple customers and concentrating its buying power,
the Company is able to negotiate favorable buy rates from the direct carriers, while at the same time offering lower sell rates than
customers would otherwise be able to negotiate themselves.
Airfreight services revenues include the charges to the Company for carrying the shipments when the Company acts as a freight
consolidator. Ocean freight services revenues include the charges to the Company for carrying the shipments when the Company
acts as a Non-Vessel Operating Common Carrier (NVOCC). In each case the Company is acting as an indirect carrier. When acting
as an indirect carrier, the Company will issue a House Airway Bill (HAWB) or a House Ocean Bill of Lading (HOBL) to customers
as the contract of carriage. In turn, when the freight is physically tendered to a direct carrier, the Company receives a contract of
carriage known as a Master Airway Bill for airfreight shipments and a Master Ocean Bill of Lading for ocean shipments. At this point,
the risk of loss passes to the carrier, however, in order to claim for any such loss, the customer is first obligated to pay the freight
charges.
Based upon the terms in the contract of carriage, revenues related to shipments where the Company issues an HAWB or an HOBL
are recognized at the time the freight is tendered to the direct carrier at origin. Costs related to the shipments are also recognized
at this same time.
Revenues realized in other capacities, for instance, when the Company acts as an agent for the shipper, and does not issue an
HAWB or an HOBL, include only the commissions and fees earned for the services performed. These revenues are recognized
upon completion of the services.
Customs brokerage and other services involves providing services at destination, such as helping customers clear shipments
through customs by preparing required documentation, calculating and providing for payment of duties and other taxes on behalf
of the customers as well as arranging for any required inspections by governmental agencies, and arranging for delivery. This is a
complicated function requiring technical knowledge of customs rules and regulations in the multitude of countries in which the
Company has offices. Revenues related to customs brokerage and other services are recognized upon completion of the services.
Arranging international shipments is a complex task. Each actual movement can require multiple services. In some instances, the
Company is asked to perform only one of these services. However, in most instances, the Company may perform multiple
services. These services include destination breakbulk services and value added ancillary services such as local transportation,
export customs formalities, distribution services and logistics management. Each of these services has an associated fee which is
recognized as revenue upon completion of the service.
Typically, the fees for each of these services are quoted as separate components, however, customers on occasion will request
an all-inclusive rate for a set of services known in the industry as “door-to-door service.” This means that the customer is billed a
single rate for all services from pickup at origin to delivery at destination. In these instances, the revenue for origin and destination
services, as well as revenue that will be characterized as freight charges, is allocated to branches as set by preexisting Company
policy perhaps supplemented by customer specific negotiations between the offices involved. Each of the Company’s branches
are separate profit centers and the primary compensation for the branch management group comes in the form of incentive-based
compensation calculated directly from the operating income of that branch. This compensation structure ensures that the allocation
of revenue and expense among components of services, when provided under an all-inclusive rate, is done in an objective manner
on a relative selling price basis.
The Company presents revenues net of sales and value-added taxes.
F. | Income Taxes
Income taxes are accounted for under the asset and liability method of accounting. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases, the tax effect of loss carryforwards and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date. Earnings of the Company's foreign
subsidiaries are not considered to be indefinitely reinvested outside of the United States and, accordingly, U.S. Federal and State
income taxes have been provided for all undistributed earnings net of related foreign tax credits. A valuation allowance is established
when necessary to reduce deferred tax assets to amounts expected to be realized. The Company recognizes interest expense
related to unrecognized tax benefits or underpayment of income taxes in interest expense and recognizes penalties in operating
expenses.
G | Net Earnings Attributable to Shareholders per Common Share
Diluted earnings attributable to shareholders per share is computed using the weighted average number of common shares and
dilutive potential common shares outstanding. Dilutive potential common shares represent outstanding stock options and stock
purchase rights. Basic earnings attributable to shareholders per share is calculated using the weighted average number of common
shares outstanding without taking into consideration dilutive potential common shares outstanding.
H. | Stock Plans
I. | Foreign Currency
The Company recognizes stock compensation expense based on an estimate of the fair value of awards granted to employees
and directors under the Company’s stock option, director restricted stock and employee stock purchase rights plans. This expense,
adjusted for expected forfeitures, is recognized on a straight-line basis over the stock awards' vesting periods.
Foreign currency amounts attributable to foreign operations have been translated into U.S. dollars using year-end exchange rates
for assets and liabilities, historical rates for equity, and weighted average rates for revenues and expenses. Translation adjustments
resulting from this process are recorded as components of other comprehensive income until complete or substantially complete
liquidation by the Company of its investment in a foreign entity. Currency fluctuations are a normal operating factor in the conduct
of the Company’s business and foreign exchange transaction gains and losses are included in revenues and operating expenses.
Also, the Company is exposed to foreign currency exchange fluctuations on monetary assets and liabilities denominated in currencies
that are not the local functional currency. Foreign exchange gains and losses on such balances are recognized in net earnings as
other income. Net foreign currency losses in 2012, 2011 and 2010 were $4,525, $1,947 and $2,157, respectively.
The Company follows a policy of accelerating international currency settlements to manage its foreign exchange
exposure. Accordingly, the Company enters into foreign currency hedging transactions only in limited locations where there are
regulatory or commercial limitations on the Company’s ability to move money freely. Such hedging activity during 2012, 2011, and
2010 was insignificant. The Company had no foreign currency derivatives outstanding at December 31, 2012 and 2011.
J. | Comprehensive Income
Comprehensive income consists of net earnings and other gains and losses affecting equity that, under U.S. GAAP, are excluded
from net earnings. For the Company, these consist of foreign currency translation gains and losses, net of related income tax effects
and comprehensive income or loss attributable to the noncontrolling interests. Upon the complete or substantially complete liquidation
of the Company's investment in a foreign entity, cumulative translation adjustments are recorded as reclassification adjustments
in other comprehensive income and recognized in net earnings as Other, net.
Accumulated other comprehensive income consisted entirely of foreign currency translation adjustments, net of related income tax
effects, as of December 31, 2012 and 2011.
K. | Segment Reporting
The Company is organized functionally in geographic operating segments. Accordingly, management focuses its attention on
revenues, net revenues, operating income, identifiable assets, capital expenditures, depreciation and amortization and equity
generated in each of these geographical areas when evaluating effectiveness of geographic management. The Company charges
its subsidiaries and affiliates for services rendered in the United States on a cost recovery basis. Transactions among the Company’s
various offices are conducted using the same arms-length pricing methodologies the Company uses when its offices transact
business with independent agents.
L. | Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the period. The Company uses estimates primarily
in the following areas: accounts receivable valuation, accrual of costs related to ancillary services the Company provides, accrual
of insurance liabilities for the portion of the freight related exposure which the Company has self-insured, accrual of various tax
liabilities, accrual of loss contingencies and calculation of share-based compensation expense. Actual results could differ from
those estimates.
F-10
F-11
As a non-asset based carrier, the Company does not own transportation assets. Rather, the Company generates the major portion
of its air and ocean freight revenues by purchasing transportation services from direct (asset-based) carriers and reselling those
services to its customers. The difference between the rate billed to customers (the sell rate), and the rate paid to the carrier (the
buy rate) is termed “net revenue” or “yield”. By consolidating shipments from multiple customers and concentrating its buying power,
the Company is able to negotiate favorable buy rates from the direct carriers, while at the same time offering lower sell rates than
customers would otherwise be able to negotiate themselves.
Airfreight services revenues include the charges to the Company for carrying the shipments when the Company acts as a freight
consolidator. Ocean freight services revenues include the charges to the Company for carrying the shipments when the Company
acts as a Non-Vessel Operating Common Carrier (NVOCC). In each case the Company is acting as an indirect carrier. When acting
as an indirect carrier, the Company will issue a House Airway Bill (HAWB) or a House Ocean Bill of Lading (HOBL) to customers
as the contract of carriage. In turn, when the freight is physically tendered to a direct carrier, the Company receives a contract of
carriage known as a Master Airway Bill for airfreight shipments and a Master Ocean Bill of Lading for ocean shipments. At this point,
the risk of loss passes to the carrier, however, in order to claim for any such loss, the customer is first obligated to pay the freight
charges.
at this same time.
Based upon the terms in the contract of carriage, revenues related to shipments where the Company issues an HAWB or an HOBL
are recognized at the time the freight is tendered to the direct carrier at origin. Costs related to the shipments are also recognized
Revenues realized in other capacities, for instance, when the Company acts as an agent for the shipper, and does not issue an
HAWB or an HOBL, include only the commissions and fees earned for the services performed. These revenues are recognized
upon completion of the services.
Customs brokerage and other services involves providing services at destination, such as helping customers clear shipments
through customs by preparing required documentation, calculating and providing for payment of duties and other taxes on behalf
of the customers as well as arranging for any required inspections by governmental agencies, and arranging for delivery. This is a
complicated function requiring technical knowledge of customs rules and regulations in the multitude of countries in which the
Company has offices. Revenues related to customs brokerage and other services are recognized upon completion of the services.
Arranging international shipments is a complex task. Each actual movement can require multiple services. In some instances, the
Company is asked to perform only one of these services. However, in most instances, the Company may perform multiple
services. These services include destination breakbulk services and value added ancillary services such as local transportation,
export customs formalities, distribution services and logistics management. Each of these services has an associated fee which is
recognized as revenue upon completion of the service.
Typically, the fees for each of these services are quoted as separate components, however, customers on occasion will request
an all-inclusive rate for a set of services known in the industry as “door-to-door service.” This means that the customer is billed a
single rate for all services from pickup at origin to delivery at destination. In these instances, the revenue for origin and destination
services, as well as revenue that will be characterized as freight charges, is allocated to branches as set by preexisting Company
policy perhaps supplemented by customer specific negotiations between the offices involved. Each of the Company’s branches
are separate profit centers and the primary compensation for the branch management group comes in the form of incentive-based
compensation calculated directly from the operating income of that branch. This compensation structure ensures that the allocation
of revenue and expense among components of services, when provided under an all-inclusive rate, is done in an objective manner
on a relative selling price basis.
The Company presents revenues net of sales and value-added taxes.
F. | Income Taxes
Income taxes are accounted for under the asset and liability method of accounting. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases, the tax effect of loss carryforwards and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date. Earnings of the Company's foreign
subsidiaries are not considered to be indefinitely reinvested outside of the United States and, accordingly, U.S. Federal and State
income taxes have been provided for all undistributed earnings net of related foreign tax credits. A valuation allowance is established
when necessary to reduce deferred tax assets to amounts expected to be realized. The Company recognizes interest expense
related to unrecognized tax benefits or underpayment of income taxes in interest expense and recognizes penalties in operating
expenses.
G | Net Earnings Attributable to Shareholders per Common Share
Diluted earnings attributable to shareholders per share is computed using the weighted average number of common shares and
dilutive potential common shares outstanding. Dilutive potential common shares represent outstanding stock options and stock
purchase rights. Basic earnings attributable to shareholders per share is calculated using the weighted average number of common
shares outstanding without taking into consideration dilutive potential common shares outstanding.
H. | Stock Plans
The Company recognizes stock compensation expense based on an estimate of the fair value of awards granted to employees
and directors under the Company’s stock option, director restricted stock and employee stock purchase rights plans. This expense,
adjusted for expected forfeitures, is recognized on a straight-line basis over the stock awards' vesting periods.
I. | Foreign Currency
Foreign currency amounts attributable to foreign operations have been translated into U.S. dollars using year-end exchange rates
for assets and liabilities, historical rates for equity, and weighted average rates for revenues and expenses. Translation adjustments
resulting from this process are recorded as components of other comprehensive income until complete or substantially complete
liquidation by the Company of its investment in a foreign entity. Currency fluctuations are a normal operating factor in the conduct
of the Company’s business and foreign exchange transaction gains and losses are included in revenues and operating expenses.
Also, the Company is exposed to foreign currency exchange fluctuations on monetary assets and liabilities denominated in currencies
that are not the local functional currency. Foreign exchange gains and losses on such balances are recognized in net earnings as
other income. Net foreign currency losses in 2012, 2011 and 2010 were $4,525, $1,947 and $2,157, respectively.
The Company follows a policy of accelerating international currency settlements to manage its foreign exchange
exposure. Accordingly, the Company enters into foreign currency hedging transactions only in limited locations where there are
regulatory or commercial limitations on the Company’s ability to move money freely. Such hedging activity during 2012, 2011, and
2010 was insignificant. The Company had no foreign currency derivatives outstanding at December 31, 2012 and 2011.
J. | Comprehensive Income
Comprehensive income consists of net earnings and other gains and losses affecting equity that, under U.S. GAAP, are excluded
from net earnings. For the Company, these consist of foreign currency translation gains and losses, net of related income tax effects
and comprehensive income or loss attributable to the noncontrolling interests. Upon the complete or substantially complete liquidation
of the Company's investment in a foreign entity, cumulative translation adjustments are recorded as reclassification adjustments
in other comprehensive income and recognized in net earnings as Other, net.
Accumulated other comprehensive income consisted entirely of foreign currency translation adjustments, net of related income tax
effects, as of December 31, 2012 and 2011.
K. | Segment Reporting
The Company is organized functionally in geographic operating segments. Accordingly, management focuses its attention on
revenues, net revenues, operating income, identifiable assets, capital expenditures, depreciation and amortization and equity
generated in each of these geographical areas when evaluating effectiveness of geographic management. The Company charges
its subsidiaries and affiliates for services rendered in the United States on a cost recovery basis. Transactions among the Company’s
various offices are conducted using the same arms-length pricing methodologies the Company uses when its offices transact
business with independent agents.
L. | Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the period. The Company uses estimates primarily
in the following areas: accounts receivable valuation, accrual of costs related to ancillary services the Company provides, accrual
of insurance liabilities for the portion of the freight related exposure which the Company has self-insured, accrual of various tax
liabilities, accrual of loss contingencies and calculation of share-based compensation expense. Actual results could differ from
those estimates.
F-10
F-11
M. | Recent Accounting Pronouncements
C. | Stock Purchase Plan
In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-No. 05
“Presentation of Comprehensive Income”, which amends Accounting Standards Codification (ASC) Topic 220 -“Comprehensive
Income”. This update is intended to increase the prominence of items reported in other comprehensive income by giving the option
to present the total of comprehensive income, the components of net income, and the components of other comprehensive income
either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The Company
adopted the provisions of ASU 2011-No. 05, as amended by ASU 2011-No. 12, beginning in the first quarter of 2012. Accordingly,
consolidated statements of comprehensive income were included consecutive to the consolidated statements of earnings. The
adoption only had a presentation impact on the Company's consolidated financial statements.
NOTE 2.
PROPERTY AND EQUIPMENT
The components of property and equipment are as follows:
Years ended December 31,
2012
2011
Land ...............................................................................................................
$
Buildings and leasehold improvements ..........................................................
Furniture, fixtures, equipment and purchased software ..................................
Construction in progress .................................................................................
Property and equipment, at cost .....................................................................
Less accumulated depreciation and amortization ...........................................
Property and equipment, net ..........................................................................
$
169,985
446,381
253,668
11,765
881,799
325,595
556,204
167,037
400,487
233,447
34,316
835,287
296,481
538,806
NOTE 3.
SHAREHOLDERS’ EQUITY
A. | Stock Repurchase Plans
The Company has a Non-Discretionary Stock Repurchase Plan, originally approved by the Board of Directors in November 1993,
under which management is authorized to repurchase up to 40,000,000 shares of the Company’s common stock in the open market
with the proceeds received from the exercise of employee and director stock options.
In November 2001, under the Company’s Discretionary Stock Repurchase Plan, the Board of Directors authorized the repurchase
of such shares as may be necessary to reduce the issued and outstanding stock to 200,000,000 shares of common stock.
The following table summarizes by repurchase plan the Company’s repurchasing activity:
Non-Discretionary Plan (1994 through 2012) ....................................................
Discretionary Plan (2001 through 2012) ...........................................................
24,444,917
27,871,019
$
$
23.46
35.71
assumptions:
Cumulative shares
repurchased
Average price
per share
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following
B. | Stock Option Plans
At December 31, 2012, the Company had one stock option plan (the “2012 Plan”) under which the Board of Directors may grant
officers and employees options to purchase common stock at prices equal to or greater than market value on the date of grant. On
May 2, 2012, the shareholders approved the Company’s 2012 Plan, which made available a total of 3,000,000 shares of the
Company’s common stock for purchase upon exercise of options granted. The 2012 Plan provides for qualified and non-qualified
grants, which are limited to not more than 100,000 shares per person. As of December 31, 2012, there are 220,210 shares available
for grant under the 2012 Plan. No additional shares can be granted under the 2012 Plan after April 30, 2013. Outstanding options
generally vest and become exercisable over periods up to five years from the date of grant and expire no more than 10 years from
the date of grant. On May 2, 2012 the Board of Directors approved the cancellation of the 1985 Plan.
Upon the exercise of non-qualified stock options and disqualifying dispositions of incentive stock options, the Company derives a
tax deduction measured by the excess of the market value over the option price at the date of exercise or disqualifying disposition.
The portion of the benefit from the deduction which equals the estimated fair value of the options (previously recognized as
compensation expense) is recorded as a credit to the deferred tax asset for non-qualified stock options and is recorded as a credit
to current tax expense for any disqualified dispositions of incentive stock options. All of the tax benefit received upon option exercise
for the tax deduction in excess of the estimated fair value of the options is credited to additional paid-in capital.
F-12
F-13
In May 2002, the shareholders approved the Company’s 2002 Employee Stock Purchase Plan (“2002 Plan”), which became effective
August 1, 2002. The Company’s amended 2002 Plan provides for 9,305,452 shares of the Company’s common stock to be reserved
for issuance upon exercise of purchase rights granted to employees who elect to participate through regular payroll deductions
beginning August 1 of each year. The purchase rights are exercisable on July 31 of the following year at a price equal to the lesser
of (1) 85% of the fair market value of the Company’s stock on the last trading day in July or (2) 85% of the fair market value of the
Company’s stock on the first trading day in August of the preceding year. A total of 7,339,020 shares have been issued under the
2002 Plan and $12,192 have been withheld from employees at December 31, 2012 in connection with the plan year ending July 31,
2013.
D. | Director Restricted Stock Plan
In May 2008, the shareholders approved the Company’s 2008 Directors’ Restricted Stock Plan (the 2008 Directors’ Plan), which
provides for annual awards of restricted stock to non-employee directors and makes 200,000 shares of the Company’s common
stock available for grant. The plan provides for an annual grant of restricted stock awards with a fair market value equal to $200 to
st
each participant on June 1
of each year. There are 72,702 shares available for grant under the 2008 Directors’ Plan as of
December 31, 2012. Each restricted stock award under the 2008 Directors’ Plan vests in equal amounts monthly over one year.
Restricted shares entitle the grantees to all shareholder rights once vested, except for cash dividends and transfer rights which are
forfeited until the final vesting date of the award. If a non-employee director’s service is terminated, any unvested portion of an
award will be forfeited unless the Compensation Committee of the Board of Directors determines otherwise.
E. | Stock Option Activity
The following table summarizes information about stock options:
Number of
shares
Weighted
average
exercise price
per share
Weighted
average
remaining
contractual life
Aggregate
intrinsic value
(in thousands)
Outstanding at December 31, 2011 ...............................
17,252,879
$
Options granted .............................................................
Options exercised ..........................................................
Options forfeited ............................................................
Options canceled ...........................................................
2,822,990
(1,634,494)
(385,309)
(222,302)
Outstanding at December 31, 2012 ...............................
Exercisable at December 31, 2012 ................................
17,833,764
8,449,041
$
$
38.45
40.74
17.82
44.75
42.95
40.51
36.42
F. | Share-Based Compensation Expense
5.93
3.60
$
$
52,718
50,178
For the years ended December 31,
2012
2011
2010
Dividend yield .....................................................................................................
1.30 - 1.35%
.97 - .98% 1.07 - 1.08%
Volatility – stock option plans ..............................................................................
38 - 39%
38 - 40%
38 - 40%
Volatility – stock purchase rights plans ...............................................................
34%
26%
29%
Risk-free interest rates .......................................................................................
.19 - 1.43%
.19 - 2.84%
.29 - 2.86%
Expected life (years) – stock option plans ..........................................................
5.79 - 7.26
5.50 - 7.11
5.44 - 6.90
Expected life (years) – stock purchase rights plans ............................................
Weighted average fair value of stock options granted during the period ............
Weighted average fair value of stock purchase rights granted during the period
1
13.53
9.70
$
$
1
19.35
11.70
$
$
1
14.51
11.16
$
$
The Company’s expected volatility assumptions are based on the historical volatility of the Company’s stock over a period of time
commensurate to the expected life. The expected life assumption is primarily based on historical employee exercise patterns and
employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the
corresponding yield curve in effect at the time of grant for U.S. Treasury bonds having the same term as the expected life of the
option, i.e. a ten year bond rate is used for valuing an option with a ten year expected life. The expected dividend yield is based
M. | Recent Accounting Pronouncements
C. | Stock Purchase Plan
In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-No. 05
“Presentation of Comprehensive Income”, which amends Accounting Standards Codification (ASC) Topic 220 -“Comprehensive
Income”. This update is intended to increase the prominence of items reported in other comprehensive income by giving the option
to present the total of comprehensive income, the components of net income, and the components of other comprehensive income
either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The Company
adopted the provisions of ASU 2011-No. 05, as amended by ASU 2011-No. 12, beginning in the first quarter of 2012. Accordingly,
consolidated statements of comprehensive income were included consecutive to the consolidated statements of earnings. The
adoption only had a presentation impact on the Company's consolidated financial statements.
NOTE 2.
PROPERTY AND EQUIPMENT
The components of property and equipment are as follows:
Years ended December 31,
2012
2011
Land ...............................................................................................................
$
Buildings and leasehold improvements ..........................................................
Furniture, fixtures, equipment and purchased software ..................................
Construction in progress .................................................................................
Property and equipment, at cost .....................................................................
Less accumulated depreciation and amortization ...........................................
Property and equipment, net ..........................................................................
$
169,985
446,381
253,668
11,765
881,799
325,595
556,204
167,037
400,487
233,447
34,316
835,287
296,481
538,806
NOTE 3.
SHAREHOLDERS’ EQUITY
A. | Stock Repurchase Plans
The Company has a Non-Discretionary Stock Repurchase Plan, originally approved by the Board of Directors in November 1993,
under which management is authorized to repurchase up to 40,000,000 shares of the Company’s common stock in the open market
with the proceeds received from the exercise of employee and director stock options.
In November 2001, under the Company’s Discretionary Stock Repurchase Plan, the Board of Directors authorized the repurchase
of such shares as may be necessary to reduce the issued and outstanding stock to 200,000,000 shares of common stock.
The following table summarizes by repurchase plan the Company’s repurchasing activity:
Non-Discretionary Plan (1994 through 2012) ....................................................
Discretionary Plan (2001 through 2012) ...........................................................
24,444,917
27,871,019
$
$
23.46
35.71
Cumulative shares
repurchased
Average price
per share
B. | Stock Option Plans
At December 31, 2012, the Company had one stock option plan (the “2012 Plan”) under which the Board of Directors may grant
officers and employees options to purchase common stock at prices equal to or greater than market value on the date of grant. On
May 2, 2012, the shareholders approved the Company’s 2012 Plan, which made available a total of 3,000,000 shares of the
Company’s common stock for purchase upon exercise of options granted. The 2012 Plan provides for qualified and non-qualified
grants, which are limited to not more than 100,000 shares per person. As of December 31, 2012, there are 220,210 shares available
for grant under the 2012 Plan. No additional shares can be granted under the 2012 Plan after April 30, 2013. Outstanding options
generally vest and become exercisable over periods up to five years from the date of grant and expire no more than 10 years from
the date of grant. On May 2, 2012 the Board of Directors approved the cancellation of the 1985 Plan.
Upon the exercise of non-qualified stock options and disqualifying dispositions of incentive stock options, the Company derives a
tax deduction measured by the excess of the market value over the option price at the date of exercise or disqualifying disposition.
The portion of the benefit from the deduction which equals the estimated fair value of the options (previously recognized as
compensation expense) is recorded as a credit to the deferred tax asset for non-qualified stock options and is recorded as a credit
to current tax expense for any disqualified dispositions of incentive stock options. All of the tax benefit received upon option exercise
for the tax deduction in excess of the estimated fair value of the options is credited to additional paid-in capital.
In May 2002, the shareholders approved the Company’s 2002 Employee Stock Purchase Plan (“2002 Plan”), which became effective
August 1, 2002. The Company’s amended 2002 Plan provides for 9,305,452 shares of the Company’s common stock to be reserved
for issuance upon exercise of purchase rights granted to employees who elect to participate through regular payroll deductions
beginning August 1 of each year. The purchase rights are exercisable on July 31 of the following year at a price equal to the lesser
of (1) 85% of the fair market value of the Company’s stock on the last trading day in July or (2) 85% of the fair market value of the
Company’s stock on the first trading day in August of the preceding year. A total of 7,339,020 shares have been issued under the
2002 Plan and $12,192 have been withheld from employees at December 31, 2012 in connection with the plan year ending July 31,
2013.
D. | Director Restricted Stock Plan
In May 2008, the shareholders approved the Company’s 2008 Directors’ Restricted Stock Plan (the 2008 Directors’ Plan), which
provides for annual awards of restricted stock to non-employee directors and makes 200,000 shares of the Company’s common
stock available for grant. The plan provides for an annual grant of restricted stock awards with a fair market value equal to $200 to
of each year. There are 72,702 shares available for grant under the 2008 Directors’ Plan as of
each participant on June 1
December 31, 2012. Each restricted stock award under the 2008 Directors’ Plan vests in equal amounts monthly over one year.
Restricted shares entitle the grantees to all shareholder rights once vested, except for cash dividends and transfer rights which are
forfeited until the final vesting date of the award. If a non-employee director’s service is terminated, any unvested portion of an
award will be forfeited unless the Compensation Committee of the Board of Directors determines otherwise.
st
E. | Stock Option Activity
The following table summarizes information about stock options:
Number of
shares
Weighted
average
exercise price
per share
Weighted
average
remaining
contractual life
Aggregate
intrinsic value
(in thousands)
Outstanding at December 31, 2011 ...............................
17,252,879
$
Options granted .............................................................
Options exercised ..........................................................
Options forfeited ............................................................
Options canceled ...........................................................
Outstanding at December 31, 2012 ...............................
Exercisable at December 31, 2012 ................................
2,822,990
(1,634,494)
(385,309)
(222,302)
17,833,764
8,449,041
$
$
38.45
40.74
17.82
44.75
42.95
40.51
36.42
F. | Share-Based Compensation Expense
5.93
3.60
$
$
52,718
50,178
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following
assumptions:
For the years ended December 31,
2012
2011
2010
Dividend yield .....................................................................................................
1.30 - 1.35%
.97 - .98% 1.07 - 1.08%
Volatility – stock option plans ..............................................................................
38 - 39%
38 - 40%
38 - 40%
Volatility – stock purchase rights plans ...............................................................
34%
26%
29%
Risk-free interest rates .......................................................................................
.19 - 1.43%
.19 - 2.84%
.29 - 2.86%
Expected life (years) – stock option plans ..........................................................
5.79 - 7.26
5.50 - 7.11
5.44 - 6.90
Expected life (years) – stock purchase rights plans ............................................
Weighted average fair value of stock options granted during the period ............
Weighted average fair value of stock purchase rights granted during the period
1
13.53
9.70
$
$
1
19.35
11.70
$
$
1
14.51
11.16
$
$
The Company’s expected volatility assumptions are based on the historical volatility of the Company’s stock over a period of time
commensurate to the expected life. The expected life assumption is primarily based on historical employee exercise patterns and
employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the
corresponding yield curve in effect at the time of grant for U.S. Treasury bonds having the same term as the expected life of the
option, i.e. a ten year bond rate is used for valuing an option with a ten year expected life. The expected dividend yield is based
F-12
F-13
on the Company’s historical experience. The forfeiture assumption used to calculate compensation expense is primarily based on
historical pre-vesting employee forfeiture patterns.
NOTE 5.
INCOME TAXES
The compensation for restricted stock awards is based on the fair market value of the Company’s share of common stock on the
date of grant. In 2012, restricted shares totaling 26,700 were granted with a fair value per share of $37.45.
The total intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010 was approximately $39
million, $47 million and $135 million, respectively.
As of December 31, 2012, the total unrecognized compensation cost related to unvested stock options, unvested restricted stock
awards and stock purchase rights is $91 million and the weighted average period over which that cost is expected to be recognized
is 3.1 years.
Total stock compensation expense and the total related tax benefit recognized are as follows:
For the years ended December 31,
2012
2011
2010
Stock compensation expense ......................................................................
Recognized tax benefit ................................................................................
$
$
44,058
2,016
44,278
156
43,743
187
Current .......................................................................
Deferred .....................................................................
Shares issued as a result of stock option exercises, restricted stock awards and employee stock plan purchases are issued as new
shares outstanding by the Company.
NOTE 4.
BASIC AND DILUTED EARNINGS PER SHARE
The following table reconciles the numerator and the denominator of the basic and diluted per share computations for earnings
attributable to shareholders per share.
Net earnings
attributable to
shareholders
Weighted
average
shares
Earnings
per share
2012
Basic earnings attributable to shareholders .................................................
Effect of dilutive potential common shares ...................................................
Diluted earnings attributable to shareholders ...............................................
2011
Basic earnings attributable to shareholders .................................................
Effect of dilutive potential common shares ...................................................
Diluted earnings attributable to shareholders ...............................................
2010
Basic earnings attributable to shareholders .................................................
Effect of dilutive potential common shares ...................................................
Diluted earnings attributable to shareholders ...............................................
$
$
$
$
$
$
333,360
210,422,945
$
—
1,512,226
333,360
211,935,171
385,679
212,117,511
—
2,916,069
385,679
215,033,580
344,172
212,283,966
—
4,162,690
$
$
$
$
344,172
216,446,656
$
1.58
—
1.57
1.82
—
1.79
1.62
—
1.59
The following shares have been excluded from the computation of diluted earnings per share because the effect would have been
antidilutive:
Years ended December 31,
2012
Shares ..........................................................................................................
15,044,514
2011
7,321,670
2010
10,675,403
Income tax expense (benefit) includes the following components:
Current .......................................................................
Deferred .....................................................................
Current .......................................................................
Deferred .....................................................................
2012
2011
2010
Federal
State
Foreign
Total
$
$
$
$
$
$
86,606
11,864
98,470
100,479
(4,335)
96,144
76,745
10,197
86,942
12,704
(225)
12,479
20,219
270
20,489
13,558
372
13,930
106,475
—
106,475
135,152
—
135,152
118,991
—
118,991
205,785
11,639
217,424
255,850
(4,065)
251,785
209,294
10,569
219,863
Income tax expense differs from amounts computed by applying the United States Federal income tax rate of 35% to earnings
before income taxes as a result of the following:
Computed “expected” tax expense ................................................................
$
192,638
223,310
197,424
2012
2011
2010
Increase in income taxes resulting from:
State income taxes, net of Federal income tax benefit .....................
Nondeductible stock compensation expense, net .............................
Other, net ..........................................................................................
The components of earnings before income taxes are as follows:
United States .................................................................................................
Foreign ...........................................................................................................
8,111
12,061
4,614
$
217,424
13,318
12,877
2,280
251,785
9,054
10,254
3,131
219,863
2012
2011
2010
$
$
179,483
370,910
550,393
212,308
425,720
638,028
196,382
367,686
564,068
F-14
F-15
The compensation for restricted stock awards is based on the fair market value of the Company’s share of common stock on the
date of grant. In 2012, restricted shares totaling 26,700 were granted with a fair value per share of $37.45.
The total intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010 was approximately $39
million, $47 million and $135 million, respectively.
As of December 31, 2012, the total unrecognized compensation cost related to unvested stock options, unvested restricted stock
awards and stock purchase rights is $91 million and the weighted average period over which that cost is expected to be recognized
is 3.1 years.
Total stock compensation expense and the total related tax benefit recognized are as follows:
Stock compensation expense ......................................................................
Recognized tax benefit ................................................................................
$
$
44,058
2,016
44,278
156
43,743
187
Shares issued as a result of stock option exercises, restricted stock awards and employee stock plan purchases are issued as new
shares outstanding by the Company.
For the years ended December 31,
2012
2011
2010
NOTE 4.
BASIC AND DILUTED EARNINGS PER SHARE
The following table reconciles the numerator and the denominator of the basic and diluted per share computations for earnings
attributable to shareholders per share.
Net earnings
attributable to
shareholders
Weighted
average
shares
Earnings
per share
Basic earnings attributable to shareholders .................................................
333,360
210,422,945
Effect of dilutive potential common shares ...................................................
—
1,512,226
Diluted earnings attributable to shareholders ...............................................
333,360
211,935,171
Basic earnings attributable to shareholders .................................................
385,679
212,117,511
Effect of dilutive potential common shares ...................................................
—
2,916,069
Diluted earnings attributable to shareholders ...............................................
385,679
215,033,580
2012
2011
2010
Basic earnings attributable to shareholders .................................................
344,172
212,283,966
Effect of dilutive potential common shares ...................................................
—
4,162,690
Diluted earnings attributable to shareholders ...............................................
344,172
216,446,656
$
$
$
$
$
$
$
$
$
$
$
$
1.58
—
1.57
1.82
—
1.79
1.62
—
1.59
The following shares have been excluded from the computation of diluted earnings per share because the effect would have been
antidilutive:
Years ended December 31,
2012
2011
2010
Shares ..........................................................................................................
15,044,514
7,321,670
10,675,403
on the Company’s historical experience. The forfeiture assumption used to calculate compensation expense is primarily based on
historical pre-vesting employee forfeiture patterns.
NOTE 5.
NOTE 5.
NOTE 5.
INCOME TAXES
INCOME TAXES
INCOME TAXES
Income tax expense (benefit) includes the following components:
Income tax expense (benefit) includes the following components:
Income tax expense (benefit) includes the following components:
Federal
Federal
Federal
State
State
State
Foreign
Foreign
Foreign
Total
Total
Total
2012
2012
2012
2011
2011
2011
2010
2010
2010
Current .......................................................................
Current .......................................................................
Current .......................................................................
Deferred .....................................................................
Deferred .....................................................................
Deferred .....................................................................
$
$
$
$
$
$
86,606
11,864
86,606
86,606
11,864
11,864
98,470
98,470
98,470
Current .......................................................................
Current .......................................................................
Current .......................................................................
Deferred .....................................................................
Deferred .....................................................................
Deferred .....................................................................
Current .......................................................................
Current .......................................................................
Current .......................................................................
Deferred .....................................................................
Deferred .....................................................................
Deferred .....................................................................
$
$
$
100,479
100,479
100,479
(4,335)
(4,335)
96,144
96,144
(4,335)
96,144
76,745
10,197
76,745
76,745
10,197
10,197
86,942
86,942
86,942
$
$
$
$
$
$
$
$
$
12,704
12,704
12,704
(225)
(225)
(225)
12,479
12,479
12,479
20,219
20,219
20,219
270
270
20,489
20,489
20,489
270
13,558
13,558
13,558
372
372
13,930
13,930
13,930
372
106,475
106,475
106,475
—
—
—
106,475
106,475
106,475
135,152
135,152
135,152
—
—
135,152
135,152
135,152
—
118,991
118,991
118,991
—
—
118,991
118,991
118,991
—
205,785
11,639
205,785
205,785
11,639
11,639
217,424
217,424
217,424
255,850
255,850
255,850
(4,065)
(4,065)
(4,065)
251,785
251,785
251,785
209,294
209,294
209,294
10,569
10,569
219,863
219,863
219,863
10,569
Income tax expense differs from amounts computed by applying the United States Federal income tax rate of 35% to earnings
Income tax expense differs from amounts computed by applying the United States Federal income tax rate of 35% to earnings
before income taxes as a result of the following:
before income taxes as a result of the following:
Income tax expense differs from amounts computed by applying the United States Federal income tax rate of 35% to earnings
before income taxes as a result of the following:
Computed “expected” tax expense ................................................................
Computed “expected” tax expense ................................................................
Computed “expected” tax expense ................................................................
Increase in income taxes resulting from:
Increase in income taxes resulting from:
Increase in income taxes resulting from:
2012
2012
2012
2011
2011
2011
$
$
$
192,638
192,638
192,638
223,310
223,310
223,310
State income taxes, net of Federal income tax benefit .....................
State income taxes, net of Federal income tax benefit .....................
State income taxes, net of Federal income tax benefit .....................
Nondeductible stock compensation expense, net .............................
Nondeductible stock compensation expense, net .............................
Other, net ..........................................................................................
Other, net ..........................................................................................
Nondeductible stock compensation expense, net .............................
Other, net ..........................................................................................
8,111
8,111
8,111
12,061
12,061
4,614
4,614
12,061
4,614
13,318
12,877
13,318
13,318
12,877
12,877
2,280
2,280
2,280
The components of earnings before income taxes are as follows:
The components of earnings before income taxes are as follows:
The components of earnings before income taxes are as follows:
$
$
$
217,424
217,424
217,424
251,785
251,785
251,785
2012
2012
2012
2011
2011
2011
United States .................................................................................................
United States .................................................................................................
United States .................................................................................................
Foreign ...........................................................................................................
Foreign ...........................................................................................................
Foreign ...........................................................................................................
$
$
$
$
$
$
F-14
F-15
F-15
F-15
179,483
179,483
179,483
370,910
370,910
550,393
550,393
370,910
550,393
212,308
212,308
212,308
425,720
425,720
638,028
638,028
425,720
638,028
2010
2010
2010
197,424
197,424
197,424
9,054
10,254
9,054
9,054
10,254
10,254
3,131
3,131
219,863
219,863
219,863
3,131
2010
2010
196,382
2010
196,382
196,382
367,686
367,686
564,068
564,068
367,686
564,068
The tax effects of temporary differences and tax credits that give rise to significant portions of deferred tax assets and deferred tax
The tax effects of temporary differences and tax credits that give rise to significant portions of deferred tax assets and deferred tax
liabilities are as follows:
liabilities are as follows:
The tax effects of temporary differences and tax credits that give rise to significant portions of deferred tax assets and deferred tax
liabilities are as follows:
NOTE 7.
CREDIT ARRANGEMENTS
Years ended December 31,
Years ended December 31,
Years ended December 31,
Deferred Tax Assets:
Deferred Tax Assets:
Deferred Tax Assets:
2012
2012
2012
2011
2011
2011
Total gross deferred tax assets ....................................................................................................
Partnership basis difference ........................................................................................................
Retained liability for cargo claims ................................................................................................
Accrued third party charges, deductible for taxes upon economic performance ..........................
Provision for doubtful accounts receivable ...................................................................................
Excess of financial statement over tax depreciation ....................................................................
Deductible stock compensation expense, net ..............................................................................
Foreign currency translation adjustment ......................................................................................
Accrued third party charges, deductible for taxes upon economic performance ..........................
Accrued third party charges, deductible for taxes upon economic performance ..........................
Provision for doubtful accounts receivable ...................................................................................
Provision for doubtful accounts receivable ...................................................................................
Excess of financial statement over tax depreciation ....................................................................
Excess of financial statement over tax depreciation ....................................................................
Deductible stock compensation expense, net ..............................................................................
Deductible stock compensation expense, net ..............................................................................
Foreign currency translation adjustment ......................................................................................
Foreign currency translation adjustment ......................................................................................
Partnership basis difference ........................................................................................................
Partnership basis difference ........................................................................................................
Retained liability for cargo claims ................................................................................................
Retained liability for cargo claims ................................................................................................
Total gross deferred tax assets ....................................................................................................
Total gross deferred tax assets ....................................................................................................
Deferred Tax Liabilities:
Deferred Tax Liabilities:
Unremitted foreign earnings, net of related foreign tax credits .....................................................
Unremitted foreign earnings, net of related foreign tax credits .....................................................
Foreign currency translation adjustment ......................................................................................
Foreign currency translation adjustment ......................................................................................
...........................................................................................................................................
Other
Other
...........................................................................................................................................
Total gross deferred tax liabilities .................................................................................................
Total gross deferred tax liabilities .................................................................................................
Total gross deferred tax liabilities .................................................................................................
Net deferred tax liabilities ............................................................................................................
Net deferred tax liabilities ............................................................................................................
Current deferred tax assets .........................................................................................................
Current deferred tax assets .........................................................................................................
Noncurrent deferred tax liabilities ................................................................................................
Noncurrent deferred tax liabilities ................................................................................................
Current deferred tax assets .........................................................................................................
Foreign currency translation adjustment ......................................................................................
Noncurrent deferred tax liabilities ................................................................................................
Unremitted foreign earnings, net of related foreign tax credits .....................................................
Net deferred tax liabilities ............................................................................................................
...........................................................................................................................................
Deferred Tax Liabilities:
Other
$
$
$
$
$
$
10,144
10,144
10,144
1,111
1,111
8,122
8,122
9,382
9,382
1,111
8,122
9,382
—
—
—
1,426
1,426
1,426
983
983
31,168
31,168
31,168
983
4,651
9,220
1,074
8,138
9,220
9,220
1,074
1,074
8,138
8,138
4,651
4,651
1,625
1,625
1,043
1,043
1,043
192
192
25,943
25,943
25,943
1,625
192
(94,787)
(94,787)
(94,787)
(3,141)
(3,141)
(3,141)
(135)
(135)
(135)
(98,063)
(98,063)
(98,063)
(66,895)
(66,895)
(12,102)
(12,102)
(78,997)
(78,997)
(66,895)
(78,997)
(12,102)
(76,070)
(76,070)
(76,070)
—
—
—
(71)
(71)
(71)
(76,141)
(76,141)
(76,141)
(50,198)
(50,198)
(10,415)
(10,415)
(60,613)
(60,613)
(50,198)
(10,415)
(60,613)
Based on management’s review of the Company’s tax positions, the Company had no significant unrecognized tax benefits as of
Based on management’s review of the Company’s tax positions, the Company had no significant unrecognized tax benefits as of
December 31, 2012 and 2011.
December 31, 2012 and 2011.
Based on management’s review of the Company’s tax positions, the Company had no significant unrecognized tax benefits as of
December 31, 2012 and 2011.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state, local and foreign
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state, local and foreign
jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to 2009
jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to 2009
With respect to state and local jurisdictions and countries outside of the United States, with limited exceptions, the Company and
With respect to state and local jurisdictions and countries outside of the United States, with limited exceptions, the Company and
its subsidiaries are no longer subject to income tax audits for years prior to 2001. In the normal course of business, the Company
its subsidiaries are no longer subject to income tax audits for years prior to 2001. In the normal course of business, the Company
is subject to examination by taxing authorities throughout the world. Although the outcome of tax audits is always uncertain, the
is subject to examination by taxing authorities throughout the world. Although the outcome of tax audits is always uncertain, the
Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that may result
Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that may result
from these open tax years. Any interest and penalties expensed in relation to the underpayment of income taxes were insignificant
from these open tax years. Any interest and penalties expensed in relation to the underpayment of income taxes were insignificant
for the years ended December 31, 2012, 2011 and 2010.
for the years ended December 31, 2012, 2011 and 2010.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state, local and foreign
jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to 2009
With respect to state and local jurisdictions and countries outside of the United States, with limited exceptions, the Company and
its subsidiaries are no longer subject to income tax audits for years prior to 2001. In the normal course of business, the Company
is subject to examination by taxing authorities throughout the world. Although the outcome of tax audits is always uncertain, the
Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that may result
from these open tax years. Any interest and penalties expensed in relation to the underpayment of income taxes were insignificant
for the years ended December 31, 2012, 2011 and 2010.
NOTE 6.
NOTE 6.
NOTE 6.
FAIR VALUE OF FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments, other than cash, consist primarily of cash equivalents, short-term investments, accounts
The Company’s financial instruments, other than cash, consist primarily of cash equivalents, short-term investments, accounts
receivable, accounts payable and accrued expenses. The carrying value of these financial instruments approximates their fair
receivable, accounts payable and accrued expenses. The carrying value of these financial instruments approximates their fair
value. Cash equivalents consist of highly liquid investments with a maturity of three months or less at date of purchase. Cash and
value. Cash equivalents consist of highly liquid investments with a maturity of three months or less at date of purchase. Cash and
cash equivalents consist of the following:
cash equivalents consist of the following:
The Company’s financial instruments, other than cash, consist primarily of cash equivalents, short-term investments, accounts
receivable, accounts payable and accrued expenses. The carrying value of these financial instruments approximates their fair
value. Cash equivalents consist of highly liquid investments with a maturity of three months or less at date of purchase. Cash and
cash equivalents consist of the following:
December 31, 2012
December 31, 2012
December 31, 2012
Cost
Fair Value
Fair Value
Fair Value
Cost
Cost
December 31, 2011
December 31, 2011
December 31, 2011
Cost
Fair Value
Fair Value
Fair Value
Cost
Cost
Cash and cash equivalents:
Cash and overnight deposits .........................................
Cash and cash equivalents:
Cash and cash equivalents:
Cash and overnight deposits .........................................
Cash and overnight deposits .........................................
Corporate commercial paper .........................................
Corporate commercial paper .........................................
Time deposits ................................................................
Time deposits ................................................................
Total cash and cash equivalents ......................
Total cash and cash equivalents ......................
Corporate commercial paper .........................................
Time deposits ................................................................
Total cash and cash equivalents ......................
$
$
$
$
$
$
642,884
458,169
458,169
458,169
642,884
642,884
159,789
159,789
1,260,842
1,260,842
1,260,842
159,789
642,886
458,169
458,169
458,169
642,886
642,886
159,789
159,789
159,789
1,260,844
1,260,844
1,260,844
445,586
445,586
445,586
791,729
791,729
57,041
57,041
1,294,356
1,294,356
1,294,356
791,729
57,041
791,902
445,586
445,586
445,586
791,902
791,902
57,041
57,041
1,294,529
1,294,529
1,294,529
57,041
The fair value of corporate commercial paper is based on the use of market interest rates for identical or similar assets.
The fair value of corporate commercial paper is based on the use of market interest rates for identical or similar assets.
The fair value of corporate commercial paper is based on the use of market interest rates for identical or similar assets.
F-16
F-16
F-16
F-17
Certain of the Company’s foreign subsidiaries maintain bank lines of credit for short-term working capital purposes. 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. Amounts available for borrowing under lines of credit totaled $15,466 and $15,128 at December 31,
2012 and 2011, respectively. At December 31, 2012, the Company had $204 outstanding under these lines and was contingently
liable for approximately $98,600 under outstanding standby letters of credit and guarantees. At December 31, 2012, the Company
was in compliance with all restrictive covenants of these credit lines and the associated credit facilities.
The standby letters of credit and guarantees relate to obligations of the Company’s 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 books of the respective foreign subsidiaries, and there would be
no need to record additional expense in the unlikely event the parent company were to be required to perform.
NOTE 8.
COMMITMENTS
A. | Leases
The Company occupies office and warehouse facilities under terms of operating leases expiring up to 2021. The Company also
has two long term operating lease arrangements to use land, for which the usage rights were entirely prepaid in 2009 and 2007.
Usage rights for those arrangements are recognized in rent expense over the lease terms up to 2057. Total rent expense for all
operating leases in 2012, 2011 and 2010 was $57,260, $58,978 and $54,024, respectively.
At December 31, 2012, future minimum annual lease payments under all noncancelable leases are as follows:
2013 ........................................................................................................................................................ $
2014 ........................................................................................................................................................
2015 ........................................................................................................................................................
2016 ........................................................................................................................................................
2017 ........................................................................................................................................................
Thereafter ................................................................................................................................................
$
42,152
25,546
13,668
8,827
3,615
14,493
108,301
B. | Unconditional Purchase Obligations
The Company enters into short-term unconditional purchase obligations with asset-based providers reserving space on a guaranteed
basis. The pricing of these obligations varies to some degree with market conditions. The Company only enters into agreements
that management believes the Company can fulfill with relative ease. Historically, the Company has met these obligations in the
normal course of business. Management believes, in line with historical experience, committed purchase obligations outstanding
as of December 31, 2012 of $86,929, will be fulfilled during 2013 in the Company’s ordinary course of business.
C. | Employee Benefits
NOTE 9.
CONTINGENCIES
The Company has employee savings plans under which the Company provides a discretionary matching contribution. In 2012,
2011 and 2010, the Company’s contributions under the plans were $7,523, $6,312, and $6,127, respectively.
The Company is involved in claims, lawsuits, government investigations and other legal matters which arise in the ordinary course
of business and are subject to inherent uncertainties. Currently, in management's opinion and advice from legal advisors, none of
these matters are expected to have a significant effect on the Company's operations or financial position. As of December 31, 2012,
the amounts accrued for these claims, lawsuits, government investigations and other legal matters are not significant to the
Company's operations or financial position. At this time the Company is unable to estimate any additional loss or range of reasonably
possible loss, if any, beyond the amounts recorded, that might result from the resolution of these matters.
The tax effects of temporary differences and tax credits that give rise to significant portions of deferred tax assets and deferred tax
NOTE 7.
CREDIT ARRANGEMENTS
liabilities are as follows:
Years ended December 31,
Deferred Tax Assets:
Accrued third party charges, deductible for taxes upon economic performance ..........................
$
10,144
Provision for doubtful accounts receivable ...................................................................................
Excess of financial statement over tax depreciation ....................................................................
Deductible stock compensation expense, net ..............................................................................
Foreign currency translation adjustment ......................................................................................
Partnership basis difference ........................................................................................................
Retained liability for cargo claims ................................................................................................
Total gross deferred tax assets ....................................................................................................
31,168
25,943
Deferred Tax Liabilities:
Unremitted foreign earnings, net of related foreign tax credits .....................................................
Foreign currency translation adjustment ......................................................................................
Other
...........................................................................................................................................
Total gross deferred tax liabilities .................................................................................................
Net deferred tax liabilities ............................................................................................................
Current deferred tax assets .........................................................................................................
Noncurrent deferred tax liabilities ................................................................................................
$
2012
2011
1,111
8,122
9,382
—
1,426
983
(94,787)
(3,141)
(135)
(98,063)
(66,895)
(12,102)
(78,997)
9,220
1,074
8,138
4,651
1,625
1,043
192
(76,070)
—
(71)
(76,141)
(50,198)
(10,415)
(60,613)
Based on management’s review of the Company’s tax positions, the Company had no significant unrecognized tax benefits as of
December 31, 2012 and 2011.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state, local and foreign
jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to 2009
With respect to state and local jurisdictions and countries outside of the United States, with limited exceptions, the Company and
its subsidiaries are no longer subject to income tax audits for years prior to 2001. In the normal course of business, the Company
is subject to examination by taxing authorities throughout the world. Although the outcome of tax audits is always uncertain, the
Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that may result
from these open tax years. Any interest and penalties expensed in relation to the underpayment of income taxes were insignificant
for the years ended December 31, 2012, 2011 and 2010.
NOTE 6.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments, other than cash, consist primarily of cash equivalents, short-term investments, accounts
receivable, accounts payable and accrued expenses. The carrying value of these financial instruments approximates their fair
value. Cash equivalents consist of highly liquid investments with a maturity of three months or less at date of purchase. Cash and
cash equivalents consist of the following:
December 31, 2012
December 31, 2011
Cost
Fair Value
Cost
Fair Value
Cash and cash equivalents:
Cash and overnight deposits .........................................
$
Corporate commercial paper .........................................
Time deposits ................................................................
458,169
642,884
159,789
458,169
642,886
159,789
445,586
791,729
57,041
445,586
791,902
57,041
Total cash and cash equivalents ......................
$
1,260,842
1,260,844
1,294,356
1,294,529
The fair value of corporate commercial paper is based on the use of market interest rates for identical or similar assets.
Certain of the Company’s foreign subsidiaries maintain bank lines of credit for short-term working capital purposes. 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. Amounts available for borrowing under lines of credit totaled $15,466 and $15,128 at December 31,
2012 and 2011, respectively. At December 31, 2012, the Company had $204 outstanding under these lines and was contingently
liable for approximately $98,600 under outstanding standby letters of credit and guarantees. At December 31, 2012, the Company
was in compliance with all restrictive covenants of these credit lines and the associated credit facilities.
The standby letters of credit and guarantees relate to obligations of the Company’s 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 books of the respective foreign subsidiaries, and there would be
no need to record additional expense in the unlikely event the parent company were to be required to perform.
NOTE 8.
COMMITMENTS
A. | Leases
The Company occupies office and warehouse facilities under terms of operating leases expiring up to 2021. The Company also
has two long term operating lease arrangements to use land, for which the usage rights were entirely prepaid in 2009 and 2007.
Usage rights for those arrangements are recognized in rent expense over the lease terms up to 2057. Total rent expense for all
operating leases in 2012, 2011 and 2010 was $57,260, $58,978 and $54,024, respectively.
At December 31, 2012, future minimum annual lease payments under all noncancelable leases are as follows:
2013 ........................................................................................................................................................ $
2014 ........................................................................................................................................................
2015 ........................................................................................................................................................
2016 ........................................................................................................................................................
2017 ........................................................................................................................................................
Thereafter ................................................................................................................................................
$
42,152
25,546
13,668
8,827
3,615
14,493
108,301
B. | Unconditional Purchase Obligations
The Company enters into short-term unconditional purchase obligations with asset-based providers reserving space on a guaranteed
basis. The pricing of these obligations varies to some degree with market conditions. The Company only enters into agreements
that management believes the Company can fulfill with relative ease. Historically, the Company has met these obligations in the
normal course of business. Management believes, in line with historical experience, committed purchase obligations outstanding
as of December 31, 2012 of $86,929, will be fulfilled during 2013 in the Company’s ordinary course of business.
C. | Employee Benefits
The Company has employee savings plans under which the Company provides a discretionary matching contribution. In 2012,
2011 and 2010, the Company’s contributions under the plans were $7,523, $6,312, and $6,127, respectively.
NOTE 9.
CONTINGENCIES
The Company is involved in claims, lawsuits, government investigations and other legal matters which arise in the ordinary course
of business and are subject to inherent uncertainties. Currently, in management's opinion and advice from legal advisors, none of
these matters are expected to have a significant effect on the Company's operations or financial position. As of December 31, 2012,
the amounts accrued for these claims, lawsuits, government investigations and other legal matters are not significant to the
Company's operations or financial position. At this time the Company is unable to estimate any additional loss or range of reasonably
possible loss, if any, beyond the amounts recorded, that might result from the resolution of these matters.
F-16
F-17
NOTE 10.
NOTE 10.
BUSINESS SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION
Financial information regarding 2012, 2011 and 2010 operations by the Company’s designated geographic areas is as follows:
Financial information regarding 2012, 2011 and 2010 operations by the Company’s designated geographic areas is as follows:
2012
2012
United States
United States
Other
North
America
Other
North
America
Latin
America
Asia Pacific
Europe and
Africa
Middle
East and
India
Eliminations Consolidated
Transfers between geographic areas ..................................................................................
Revenues from unaffiliated customers ................................................................................ $
Revenues from unaffiliated customers ................................................................................ $
Transfers between geographic areas ..................................................................................
Total revenues ..................................................................................................................... $
Total revenues ..................................................................................................................... $
1,519,276
1,519,276
94,521
94,521
1,613,797
1,613,797
201,521
201,521
10,476
10,476
211,997
211,997
82,337
18,780
3,074,587
43,721
101,117
3,118,308
Net revenues ....................................................................................................................... $
Net revenues ....................................................................................................................... $
737,679
737,679
Operating income ................................................................................................................ $
Operating income ................................................................................................................ $
Identifiable assets at year end ............................................................................................. $
Identifiable assets at year end ............................................................................................. $
Capital expenditures ............................................................................................................ $
Capital expenditures ............................................................................................................ $
179,015
179,015
1,459,425
1,459,425
28,088
28,088
Depreciation and amortization ............................................................................................. $
Depreciation and amortization ............................................................................................. $
23,678
23,678
Equity .................................................................................................................................. $
Equity .................................................................................................................................. $
1,197,239
1,197,239
2011
2011
Revenues from unaffiliated customers ................................................................................ $
Revenues from unaffiliated customers ................................................................................ $
1,540,477
1,540,477
Transfers between geographic areas ..................................................................................
Transfers between geographic areas ..................................................................................
Total revenues ..................................................................................................................... $
Total revenues ..................................................................................................................... $
101,738
101,738
1,642,215
1,642,215
Net revenues ....................................................................................................................... $
Net revenues ....................................................................................................................... $
732,299
732,299
Operating income ................................................................................................................ $
Operating income ................................................................................................................ $
Identifiable assets at year end ............................................................................................. $
Identifiable assets at year end ............................................................................................. $
Capital expenditures ............................................................................................................ $
Capital expenditures ............................................................................................................ $
210,702
210,702
1,521,657
1,521,657
23,219
23,219
Depreciation and amortization ............................................................................................. $
Depreciation and amortization ............................................................................................. $
20,037
20,037
Equity .................................................................................................................................. $
Equity .................................................................................................................................. $
1,285,812
1,285,812
2010
2010
Revenues from unaffiliated customers ................................................................................ $
Revenues from unaffiliated customers ................................................................................ $
Transfers between geographic areas ..................................................................................
Transfers between geographic areas ..................................................................................
Total revenues ..................................................................................................................... $
Total revenues ..................................................................................................................... $
1,348,259
1,348,259
99,547
99,547
1,447,806
1,447,806
Net revenues ....................................................................................................................... $
Net revenues ....................................................................................................................... $
666,669
666,669
Operating income ................................................................................................................ $
Identifiable assets at year end ............................................................................................. $
Operating income ................................................................................................................ $
Identifiable assets at year end ............................................................................................. $
Capital expenditures ............................................................................................................ $
Capital expenditures ............................................................................................................ $
198,393
198,393
1,343,098
1,343,098
18,128
18,128
95,798
95,798
32,385
32,385
92,075
92,075
832
832
756
756
58,071
58,071
189,843
189,843
11,095
11,095
200,938
200,938
90,432
90,432
29,209
29,209
86,020
86,020
1,122
1,122
1,038
1,038
49,571
49,571
163,750
163,750
10,836
10,836
174,586
174,586
77,079
77,079
23,521
23,521
95,298
95,298
574
574
Depreciation and amortization ............................................................................................. $
Depreciation and amortization ............................................................................................. $
20,125
20,125
Equity .................................................................................................................................. $
Equity .................................................................................................................................. $
1,089,053
1,089,053
1,344
1,344
46,601
46,601
371,610
160,428
(31,456)
1,748,154
F-18
F-18
F-19
538,710
167,752
(33,656)
2,032,570
816,927
38,791
855,718
286,264
59,314
428,053
4,323
5,994
891,185
43,359
934,544
307,471
72,248
401,518
25,856
5,414
729,022
40,778
769,800
264,663
63,115
432,019
14,383
4,661
286,295
18,128
304,423
95,351
26,169
147,871
1,807
1,829
74,950
302,040
17,897
319,937
101,156
28,065
141,379
1,995
2,045
85,605
302,255
16,184
318,439
89,569
23,272
144,043
2,260
2,379
84,456
—
5,980,943
(224,417)
(224,417)
804
2,954,125
—
5,980,943
1,824,098
530,798
47,626
39,940
—
6,150,498
1,896,477
618,327
78,115
36,776
—
5,967,573
1,692,786
547,230
42,408
36,900
—
6,150,498
(235,323)
(235,323)
861
2,866,827
—
5,967,573
(217,114)
(217,114)
1,310
2,679,179
—
—
—
—
—
—
—
—
—
—
—
—
82,312
21,222
3,144,641
40,012
103,534
3,184,653
57,795
17,356
48,995
1,301
873
29,504
59,968
19,151
48,221
628
999
74,327
16,932
91,259
50,937
15,985
51,326
1,320
880
27,462
551,211
216,559
776,902
11,275
6,810
605,151
258,952
667,171
25,295
7,243
3,349,960
32,837
3,382,797
543,869
222,944
612,085
5,743
7,511
27,346
448,613
145,998
(32,876)
2,010,069
NOTE 10.
BUSINESS SEGMENT INFORMATION
Financial information regarding 2012, 2011 and 2010 operations by the Company’s designated geographic areas is as follows:
United States
Other
North
America
Latin
America
Asia Pacific
Europe and
Africa
Middle
East and
India
Eliminations Consolidated
2012
2011
2010
Revenues from unaffiliated customers ................................................................................ $
1,519,276
Transfers between geographic areas ..................................................................................
94,521
Total revenues ..................................................................................................................... $
1,613,797
Net revenues ....................................................................................................................... $
Operating income ................................................................................................................ $
Identifiable assets at year end ............................................................................................. $
1,459,425
Capital expenditures ............................................................................................................ $
Depreciation and amortization ............................................................................................. $
Equity .................................................................................................................................. $
1,197,239
Revenues from unaffiliated customers ................................................................................ $
Transfers between geographic areas ..................................................................................
Total revenues ..................................................................................................................... $
Net revenues ....................................................................................................................... $
Operating income ................................................................................................................ $
Identifiable assets at year end ............................................................................................. $
1,521,657
Capital expenditures ............................................................................................................ $
Depreciation and amortization ............................................................................................. $
Equity .................................................................................................................................. $
1,285,812
Revenues from unaffiliated customers ................................................................................ $
1,348,259
Transfers between geographic areas ..................................................................................
99,547
Total revenues ..................................................................................................................... $
1,447,806
Net revenues ....................................................................................................................... $
Operating income ................................................................................................................ $
Identifiable assets at year end ............................................................................................. $
1,343,098
Capital expenditures ............................................................................................................ $
Depreciation and amortization ............................................................................................. $
Equity .................................................................................................................................. $
1,089,053
737,679
179,015
28,088
23,678
1,540,477
101,738
1,642,215
732,299
210,702
23,219
20,037
666,669
198,393
18,128
20,125
201,521
10,476
211,997
95,798
32,385
92,075
832
756
58,071
189,843
11,095
200,938
90,432
29,209
86,020
1,122
1,038
49,571
163,750
10,836
174,586
77,079
23,521
95,298
574
1,344
46,601
82,337
18,780
101,117
57,795
17,356
48,995
1,301
873
29,504
82,312
21,222
103,534
59,968
19,151
48,221
628
999
27,346
74,327
16,932
91,259
50,937
15,985
51,326
1,320
880
27,462
3,074,587
43,721
3,118,308
551,211
216,559
776,902
11,275
6,810
816,927
38,791
855,718
286,264
59,314
428,053
4,323
5,994
538,710
167,752
3,144,641
40,012
3,184,653
605,151
258,952
667,171
25,295
7,243
891,185
43,359
934,544
307,471
72,248
401,518
25,856
5,414
448,613
145,998
3,349,960
32,837
3,382,797
543,869
222,944
612,085
5,743
7,511
729,022
40,778
769,800
264,663
63,115
432,019
14,383
4,661
371,610
160,428
286,295
18,128
304,423
95,351
26,169
147,871
1,807
1,829
74,950
302,040
17,897
319,937
101,156
28,065
141,379
1,995
2,045
85,605
302,255
16,184
318,439
89,569
23,272
144,043
2,260
2,379
84,456
—
(224,417)
(224,417)
—
—
804
—
—
(33,656)
—
(235,323)
(235,323)
—
—
861
—
—
(32,876)
—
(217,114)
(217,114)
—
—
1,310
—
—
(31,456)
5,980,943
—
5,980,943
1,824,098
530,798
2,954,125
47,626
39,940
2,032,570
6,150,498
—
6,150,498
1,896,477
618,327
2,866,827
78,115
36,776
2,010,069
5,967,573
—
5,967,573
1,692,786
547,230
2,679,179
42,408
36,900
1,748,154
F-18
F-19
Other than the United States, only the People’s Republic of China, including Hong Kong, represented more than 10% of the
Company’s total revenue, net revenue, total identifiable assets or equity in any period presented as noted in the table below.
Total revenues .........................................................................................................
Net revenues ...........................................................................................................
Identifiable assets at year end .................................................................................
Equity .......................................................................................................................
2012
2011
2010
34%
16%
17%
16%
34%
19%
14%
13%
37%
19%
13%
10%
NOTE 11. QUARTERLY RESULTS (UNAUDITED)
1st
2nd
3rd
4th
2012
Revenues ............................................................................
Net revenues .......................................................................
$
1,411,370
446,571
Net earnings ........................................................................
Net earnings attributable to shareholders ............................
Diluted earnings attributable to shareholders per share.......
Basic earnings attributable to shareholders per share .........
76,722
76,707
.36
.36
1,504,952
453,651
84,021
83,955
.39
.40
1,531,664
465,138
88,727
88,490
.42
.42
2011
Revenues ............................................................................
$
1,460,848
1,581,368
1,606,368
Net revenues .......................................................................
Net earnings ........................................................................
Net earnings attributable to shareholders ............................
Diluted earnings attributable to shareholders per share.......
Basic earnings attributable to shareholders per share .........
453,915
91,207
91,232
.42
.43
472,561
95,020
95,000
.44
.45
493,846
106,876
106,604
.50
.50
1,532,957
458,738
83,499
84,208
.40
.41
1,501,914
476,155
93,140
92,843
.43
.44
Net revenues are determined by deducting transportation expenses from total revenues. The sum of quarterly per share data may
not equal the per share total reported for the year.
F-20
Directors & Executive Officers
Directors
executive oFFicers
Peter J. r ose
chairman of the Board &
chief e xecutive o fficer
Director
James L. K. Wang
President
asia Pacific
Director
r. JorDan g ates
President & c hief
operating o fficer
Director
roBert r . Wright
Lead Director, President &
chief e xecutive o fficer,
matthew g . n or ton c o.,
a r eal e state Firm
marK a . e mmert
Director, President,
national c ollegiate
athletic a ssociation
Dan P. KourKoume Lis
Director
michaeL J. maL one
Director
John W. meisenB ach
Director
President, mcm ,
a Financial s ervices c ompany
tay y oshitani
Director, c hief e xecutive o fficer,
Por t of s eattle
timothy c . BarBer
President
global s ales & m arketing
rommeL c. saB er
President
europe, a frica, n ear/middle e ast
& i ndian s ub-continent
roBert L. v iLL anueva
President
the a mericas
eugene K. aL ger
executive v ice President
nor th a merica
PhiLiP m . c oughLin
executive v ice President
nor th a merica
rosanne e sPosito
executive v ice President
global c ustoms
JeFFre y s . m usser
executive v ice President
& c hief i nformation o fficer
BraDLe y s . PoWeLL
senior v ice President
& c hief Financial o fficer
Jose a . uB eDa
senior v ice President
air c argo
charLes J. Lynch
senior v ice President
corporate c ontroller
DanieL r . WaLL
senior v ice President
ocean s ervices
amy J. t angeman
senior v ice President
general c ounsel & s ecretary
Product & Service Managers
gLoBaL & ProDuct services
steven J. g rimmer
senior v ice President
account m anagement
WiLLiam a . r omB erger iii
senior v ice President
global transcon s ervices
richarD h . r ostan
senior v ice President
global Distribution s ervices
Bret c. Bac Kman
vice President
research & Development
se an m . Francisco
vice President
the a mericas, a ir c argo
a aron L. h oWes
vice President
risk m anagement & i nsurance
scot t m . KeLLy
vice President
global ocean s ervices
christoPher J. m ccLincy
vice President
information s ervices
samue L r . BoKor
vice President
training & Personnel Development
michaeL a . sPranger
vice President
information s ervices
Darren B. BoWman
vice President
the a mericas, s ales & m arketing
micheLLe D. We aver
vice President
the a mericas, o cean c argo s ervices
toDD r . n . BroWn
vice President
security, h ealth & s afety
De anna L. WiLson
vice President
global Business Processes
Geographic Managers
asia PaciFic
DaviD h sieh
senior v ice President
asia Pacific
anDre W goh
senior v ice President
south e ast a sia
Lim Khoon Ling
managing Director
singapore
Danny Lee
managing Director
vietnam & c ambodia
PauL a rthur
senior v ice President
south Pacific, i ndo c hina & Philippines
WiLson y ang
managing Director
shanghai, c hina
mong Pheng Koh
senior v ice President
hong Kong, s outh & West c hina
aLLen Wang
regional v ice President
nor th a sia
mary yao
regional v ice President
central c hina
seiichi sasaK i
managing Director
Japan
Leo Lee
managing Director
Korea
megan Jeng
managing Director
taiwan
simon Liu
managing Director
hong Kong
K aiser L am
general m anager
shenzhen, c hina
gina hsieh
general m anager
Bangkok, t hailand
aris y e aP
general m anager
Penang, m alaysia
gary c hen
general m anager
Jakar ta, i ndonesia
syeD ersha D a hmeD
general m anager
Dhaka, Bangladesh
aristotLe a niceto
general m anager
manila, Philippines
Geographic Managers
Latin america
north america
guiLLermo a yerBe
senior v ice President
Latin a merica
Diego e strin
regional Director
andean c ountries
Jose a ntonio BeDoya
country m anager
Peru
PauL o FernanDes
country m anager
Brazil
FaBricio s cheunemann
country m anager
costa r ica
marceLLo ma zzeo
country m anager
argentina & u ruguay
Brian r . c arraB es
regional v ice President
southeast r egion
JosePh P. c oogan
regional v ice President
nor theast r egion
K arL c. Francisco
regional v ice President
southwest r egion
toDD a . h inKL e
regional v ice President
midwest r egion
J. r oss h urst
regional v ice President
canada
John a . Kerner
regional v ice President
south c entral r egion
Bruce J. KreBs
regional v ice President
southern Border & m exico
WiLLiam F. urBan iii
regional v ice President
nor thwest r egion
steven F. W aLKer
regional v ice President
nor th c entral r egion
craig WiLWerDing
regional v ice President
mid-atlantic r egion
Geographic Managers
euroPe & aFrica
near/miDDLe east &
inDian suBcontinent
Kurt m eister
senior v ice President
continental e urope & n or thern e urope
tony h eL ayeL
senior v ice President
near/ east mediterranean & nor th a frica
DaviD m acPherson
senior v ice President
gulf s tates, i ndia & Pakistan
K. mura Li
regional v ice President
india
suL e yman t ure
regional v ice President
turkey & cis c ountries
mageD aL-ra JJi
regional v ice President
gulf s tates
samir g haoui
managing Director
Levant
aFsar mahmoo D
managing Director
Pakistan
Barry L. Baron
senior v ice President
united Kingdom, i reland,
south a frica & m adagascar
Kees Wagena ar
regional v ice President
Benelux & c entral e urope
PaoL o Domante
regional v ice President
italy & s witzerland
rainer Kirschner
regional v ice President
germany, a ustria & s lovakia
ron KerBus
regional v ice President
south a frica & m adagascar
magDoLna ac s
managing Director
hungary
rene g raBmuLLer
managing Director
czech republic
FranK s chaeFFer
country m anager
France
ingeBorg DruecKLer
Director
european a gents
BiLLy g riFFiths
Director
african s tates
thomas sunD in
regional Director
nordic
Corporate Information
corPorate
heaDquarters
investor reLations
expeditors i nternational of Washing ton, i nc.
1015 t hird a venue
12th Floor
seattle, Wa 98104
Fur ther information about the c ompany,
additional copies of this repor t, Form
10 -K or other financial information may be
obtained without charge by writing:
information is available on
http://www.expeditors.com
transFer agent & registrar,
DiviDenD DisBursing agent
computershare trust c ompany, n .a.
250 r oyall s treet
canton, ma 02021
shareholder s ervices
(877) 498-8861
hearing i mpaired / t DD
(800) 952-9245
Website
http://www.computershare.com
inDePenDent registereD
PuBLic a ccounting Firm
KPmg LLP
1918 e ighth a venue
suite 2900
seattle, Wa 98101
oFFices & agents
a directory can be viewed on our website.
annuaL meeting
the annual meeting of shareholders is
Wednesday, m ay 1, 2013, at 2:00 pm at:
expeditors’ c orporate h eadquar ters
1015 t hird a venue
seattle, Wa 98104
BraDLe y s . PoWeLL
senior v ice President
& c hief Financial o fficer
expeditors i nternational of Washing ton, i nc.
1015 t hird a venue
12th Floor
seattle, Wa 98104
stocK Price & DiviDenDs
the following table sets for th the high and
low sale prices for the c ompany’s common
stock as repor ted by t he nas Daq g lobal
select m arket under the symbol ex PD.
Quar ter
High
Low
2012
First
second
third
Four th
2011
First
second
third
Four th
$47.20
$47.48
$39.61
$39.97
$56.19
$55.30
$53.22
$47.73
$40.80
$36.72
$34.83
$34.20
$45.91
$46.53
$39.28
$38.25
in 2012 and 2011, the Board of Directors
declared a semi-annual dividend of $.28
per and $.25 per share, respectively, which
was paid as follows:
2012
2011
15 June
17 December
15 June
15 December