(Registrant’s telephone number, including area code): (206) 674-3400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.01 par value		EXPD		NASDAQ Global Select Market

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 x ☒ No o

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x ☒ No o

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. ~~(Check one):~~



Large accelerated filer	x ☒	Accelerated filer	o ☐

Non-accelerated filer	o ☐	Smaller reporting company	o ☐

		Emerging growth company	o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			o ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o☐ No x

☒

At November ~~5, 2018,~~4, 2019, the number of shares outstanding of the issuer’s ~~Common Stock~~common stock was ~~172,590,076.~~

170,301,245.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

	September 30, 2019			December 31, 2018
Assets:
Current Assets:
Cash and cash equivalents	$	1,215,970		$	923,735
Accounts receivable, less allowance for doubtful accounts of $11,853 at September 30, 2019 and $15,345 at December 31, 2018		1,319,032			1,581,530
Deferred contract costs		130,690			159,510
Other		103,521			70,041
Total current assets		2,769,213			2,734,816
Property and equipment, less accumulated depreciation and amortization of $468,059 at September 30, 2019 and $446,977 at December 31, 2018		494,153			504,105
Operating lease right-of-use assets		374,231			—
Goodwill		7,927			7,927
Deferred federal and state income taxes, net		44,351			40,465
Other assets, net		16,578			27,246
Total assets	$	3,706,453		$	3,314,559
Liabilities:
Current Liabilities:
Accounts payable	$	744,002		$	902,259
Accrued expenses, primarily salaries and related costs		207,752			215,813
Contract liabilities		152,717			190,343
Current portion of operating lease liabilities		61,842			—
Federal, state and foreign income taxes		17,273			18,424
Total current liabilities		1,183,586			1,326,839
Noncurrent portion of operating lease liabilities		313,580			—
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, NaN issued		—			—
Common stock, par value $0.01 per share. Issued and outstanding: 170,243 shares at September 30, 2019 and 171,582 shares at December 31, 2018		1,702			1,716
Additional paid-in capital		23,301			1,896
Retained earnings		2,301,156			2,088,707
Accumulated other comprehensive loss		(118,774	)		(105,481	)
Total shareholders’ equity		2,207,385			1,986,838
Noncontrolling interest		1,902			882
Total equity		2,209,287			1,987,720
Total liabilities and equity	$	3,706,453		$	3,314,559

~~(Unaudited)~~

September 30, 2018 December 31, 2017
Current Assets:
Cash and cash equivalents $ 990,612
$ 1,051,099
Accounts receivable, less allowance for doubtful accounts of $13,696 at September 30, 2018 and $12,858 at December 31, 2017 1,528,524
1,414,741
Deferred contract costs 168,090
—
Other 59,247
75,612
Total current assets 2,746,473
2,541,452
Property and equipment, less accumulated depreciation and amortization of $441,433 at September 30, 2018 and $420,282 at December 31, 2017 510,328
525,203
Goodwill 7,927
7,927
Deferred Federal and state income taxes, net 43,293
13,207
Other assets, net 26,779
29,219
Total assets $ 3,334,800
$ 3,117,008
Current Liabilities:
Accounts payable $ 934,509
$ 866,305
Accrued expenses, primarily salaries and related costs 228,785
206,320
Contract liabilities 195,035
—
Federal, state and foreign income taxes 19,139
20,494
Total current liabilities 1,377,468
1,093,119
Noncurrent Federal income taxes payable —
29,516

Commitments and contingencies

Shareholders’ Equity:
Preferred stock, none issued —
—
Common stock, par value $0.01 per share. Issued and outstanding 172,564 shares at September 30, 2018 and 176,374 shares at December 31, 2017 1,726
1,764
Additional paid-in capital 1,832
546
Retained earnings 2,053,389
2,063,512
Accumulated other comprehensive loss (101,098 ) (73,964 )
Total shareholders’ equity 1,955,849
1,991,858
Noncontrolling interest 1,483
2,515
Total equity 1,957,332
1,994,373
Total liabilities and equity $ 3,334,800
$ 3,117,008

See accompanying notes to condensed consolidated financial statements.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Revenues:
Airfreight services	$	715,450	$	833,338	$	2,171,928	$	2,366,326
Ocean freight and ocean services		585,374		585,810		1,697,824		1,636,701
Customs brokerage and other services		774,031		671,799		2,260,733		1,899,741
Total revenues		2,074,855		2,090,947		6,130,485		5,902,768
Operating Expenses:
Airfreight services		522,868		620,554		1,574,717		1,727,383
Ocean freight and ocean services		424,215		435,313		1,234,845		1,199,887
Customs brokerage and other services		453,416		373,766		1,330,758		1,035,800
Salaries and related		356,331		351,577		1,069,592		1,042,420
Rent and occupancy		41,987		38,202		124,407		113,186
Depreciation and amortization		12,386		13,335		38,456		40,833
Selling and promotion		10,133		10,632		32,852		32,385
Other		46,969		44,414		138,506		131,318
Total operating expenses		1,868,305		1,887,793		5,544,133		5,323,212
Operating income		206,550		203,154		586,352		579,556
Other Income (Expense):
Interest income		5,501		4,704		18,123		14,171
Other, net		1,895		566		5,822		2,357
Other income (expense), net		7,396		5,270		23,945		16,528
Earnings before income taxes		213,946		208,424		610,297		596,084
Income tax expense		53,319		45,357		156,029		155,871
Net earnings		160,627		163,067		454,268		440,213
Less net earnings attributable to the noncontrolling interest		406		375		1,199		1,224
Net earnings attributable to shareholders	$	160,221	$	162,692	$	453,069	$	438,989
Diluted earnings attributable to shareholders per share	$	0.92	$	0.92	$	2.60	$	2.46
Basic earnings attributable to shareholders per share	$	0.94	$	0.94	$	2.65	$	2.51
Weighted average diluted shares outstanding		173,483		177,173		174,463		178,447
Weighted average basic shares outstanding		170,415		173,394		171,084		174,675

~~(Unaudited)~~

Three months ended Nine months ended
September 30, September 30,
2018 2017 2018 2017
Revenues:
Airfreight services $ 833,338
$ 735,164
$ 2,366,326
$ 2,022,577
Ocean freight and ocean services 585,810
563,386
1,636,701
1,585,730
Customs brokerage and other services 671,799
503,616
1,899,741
1,411,270
Total revenues 2,090,947
1,802,166
5,902,768
5,019,577
Operating Expenses:
Airfreight services 620,554
547,595
1,727,383
1,490,417
Ocean freight and ocean services 435,313
411,061
1,199,887
1,163,051
Customs brokerage and other services 373,766
244,368
1,035,800
675,729
Salaries and related costs 351,577
319,050
1,042,420
930,159
Rent and occupancy costs 38,202
30,533
113,186
87,826
Depreciation and amortization 13,335
12,272
40,833
36,241
Selling and promotion 10,632
10,608
32,385
32,476
Other 44,414
39,784
131,318
102,429
Total operating expenses 1,887,793
1,615,271
5,323,212
4,518,328
Operating income 203,154
186,895
579,556
501,249
Other Income (Expense):
Interest income 4,704
3,444
14,171
9,565
Other, net 566
96
2,357
2,584
Other income (expense), net 5,270
3,540
16,528
12,149
Earnings before income taxes 208,424
190,435
596,084
513,398
Income tax expense 45,357
69,829
155,871
190,470
Net earnings 163,067
120,606
440,213
322,928
Less net earnings attributable to the noncontrolling interest 375
343
1,224
550
Net earnings attributable to shareholders $ 162,692
$ 120,263
$ 438,989
$ 322,378
Diluted earnings attributable to shareholders per share $ 0.92
$ 0.66
$ 2.46
$ 1.77
Basic earnings attributable to shareholders per share $ 0.94
$ 0.67
$ 2.51
$ 1.79
Dividends declared and paid per common share $ —
$ —
$ 0.45
$ 0.42
Weighted average diluted shares outstanding 177,173
181,788
178,447
181,951
Weighted average basic shares outstanding 173,394
179,416
174,675
179,827

See accompanying notes to condensed consolidated financial statements.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Net earnings	$	160,627		$	163,067		$	454,268		$	440,213
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax of $5,803 and $2,904 for the three months ended September 30, 2019 and 2018 and $5,364 and $12,563 for the nine months ended September 30, 2019 and 2018		(14,603	)		(10,929	)		(14,007	)		(28,129	)
Reclassification adjustments for foreign currency realized losses, net of tax of $145 for the nine months ended September 30, 2019		—			—			535			—
Other comprehensive loss		(14,603	)		(10,929	)		(13,472	)		(28,129	)
Comprehensive income		146,024			152,138			440,796			412,084
Less comprehensive income (loss) attributable to the noncontrolling interest		481			(167	)		1,020			230
Comprehensive income attributable to shareholders	$	145,543		$	152,305		$	439,776		$	411,854

~~(Unaudited)~~

Three months ended Nine months ended
September 30, September 30,
2018 2017 2018 2017
Net earnings $ 163,067
$ 120,606
$ 440,213
$ 322,928
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments, net of tax of $2,904 and $4,128 for the three months ended September 30, 2018 and 2017 and $12,563 and $14,019 for the nine months ended September 30, 2018 and 2017 (10,929 ) 7,489
(28,129 ) 25,585
Other comprehensive (loss) income (10,929 ) 7,489
(28,129 ) 25,585
Comprehensive income 152,138
128,095
412,084
348,513
Less comprehensive (loss) income attributable to the noncontrolling interest (167 ) 285
230
503
Comprehensive income attributable to shareholders $ 152,305
$ 127,810
$ 411,854
$ 348,010

See accompanying notes to condensed consolidated financial statements.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Operating Activities:
Net earnings	$	160,627		$	163,067		$	454,268		$	440,213
Adjustments to reconcile net earnings to net cash from operating activities:
Provisions for losses on accounts receivable		757			1,969			453			2,232
Deferred income tax benefit		(5,822	)		(23,610	)		(17	)		(17,522	)
Stock compensation expense		12,155			13,902			49,361			43,171
Depreciation and amortization		12,386			13,335			38,456			40,833
Other, net		652			666			812			770
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		43,885			(210,092	)		246,175			(156,321	)
(Decrease) increase in accounts payable and accrued expenses		(58,816	)		115,629			(141,199	)		127,860
Decrease (increase) in deferred contract costs		10,301			(34,623	)		28,550			(51,235	)
(Decrease) increase in contract liabilities		(13,211	)		36,256			(36,933	)		49,149
(Decrease) increase in income taxes payable, net		(671	)		9,292			(33,284	)		(9,258	)
(Decrease) increase in other, net		(744	)		930			47			862
Net cash from operating activities		161,499			86,721			606,689			470,754
Investing Activities:
Purchase of property and equipment		(15,521	)		(11,733	)		(37,943	)		(37,642	)
Other, net		232			1,109			1,525			(886	)
Net cash from investing activities		(15,289	)		(10,624	)		(36,418	)		(38,528	)
Financing Activities:
Proceeds from issuance of common stock		60,713			47,806			120,190			169,566
Repurchases of common stock		(61,999	)		(147,828	)		(296,922	)		(555,760	)
Dividends Paid		—			—			(85,184	)		(79,180	)
Payments for taxes related to net share settlement of equity awards		—			—			(6,674	)		(3,215	)
Distributions to noncontrolling interest		—			(633	)		—			(633	)
Purchase of noncontrolling interest		—			(613	)		—			(613	)
Net cash from financing activities		(1,286	)		(101,268	)		(268,590	)		(469,835	)
Effect of exchange rate changes on cash and cash equivalents		(11,604	)		(5,071	)		(9,446	)		(22,878	)
Change in cash and cash equivalents		133,320			(30,242	)		292,235			(60,487	)
Cash and cash equivalents at beginning of period		1,082,650			1,020,854			923,735			1,051,099
Cash and cash equivalents at end of period	$	1,215,970		$	990,612		$	1,215,970		$	990,612
Taxes Paid:
Income taxes	$	61,201		$	59,313		$	196,169		$	183,444

~~(Unaudited)~~

Three months ended Nine months ended
September 30, September 30,
2018 2017 2018 2017
Operating Activities:
Net earnings $ 163,067
$ 120,606
$ 440,213
$ 322,928
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable 1,969
1,741
2,232
3,187
Deferred income tax expense (23,610 ) (28,854 ) (17,522 ) (16,000 )
Stock compensation expense 13,902
11,210
43,171
39,036
Depreciation and amortization 13,335
12,272
40,833
36,241
Other, net 666
377
770
(148 )
Changes in operating assets and liabilities:
Increase in accounts receivable (210,092 ) (126,102 ) (156,321 ) (123,790 )
Increase in accounts payable and accrued expenses 115,629
61,833
127,860
96,132
Increase in deferred contract costs (34,623 ) —
(51,235 ) —
Increase in contract liabilities 36,256
—
49,149
—
Increase (decrease) in income taxes payable, net 9,292
38,149
(9,258 ) 10,814
Decrease (increase) in other current assets 930
(5,872 ) 862
(6,147 )
Net cash from operating activities 86,721
85,360
470,754
362,253
Investing Activities:
Purchase of property and equipment (11,733 ) (34,462 ) (37,642 ) (67,603 )
Other, net 1,109
(261 ) (886 ) (892 )
Net cash from investing activities (10,624 ) (34,723 ) (38,528 ) (68,495 )
Financing Activities:
Proceeds from issuance of common stock 47,806
65,915
169,566
162,781
Repurchases of common stock (147,828 ) (202,776 ) (555,760 ) (340,736 )
Dividends paid —
—
(79,180 ) (75,726 )
Payments for taxes related to net share settlement of equity awards —
—
(3,215 ) —
Distributions to noncontrolling interest (633 ) —
(633 ) —
Purchase of noncontrolling interest (613 ) —
(613 ) —
Net cash from financing activities (101,268 ) (136,861 ) (469,835 ) (253,681 )
Effect of exchange rate changes on cash and cash equivalents (5,071 ) 4,758
(22,878 ) 18,932
(Decrease) increase in cash and cash equivalents (30,242 ) (81,466 ) (60,487 ) 59,009
Cash and cash equivalents at beginning of period 1,020,854
1,114,910
1,051,099
974,435
Cash and cash equivalents at end of period $ 990,612
$ 1,033,444
$ 990,612
$ 1,033,444
Taxes Paid:
Income taxes $ 59,313
$ 58,257
$ 183,444
$ 190,911

See accompanying notes to condensed consolidated financial statements.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(In thousands)

(Unaudited)

	Common Stock
For the three months ended September 30, 2019 and 2018	Shares			Par value			Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Total shareholders’ equity			Noncontrolling interest			Total equity
Balance at June 30, 2019		170,040		$	1,701		$	12,433		$	2,140,935		$	(104,096	)	$	2,050,973		$	1,421		$	2,052,394
Exercise of stock options and release of restricted shares		510			5			22,833			—			—			22,838			—			22,838
Issuance of shares under stock purchase plan		585			6			37,869			—			—			37,875			—			37,875
Shares repurchased under provisions of stock repurchase plan		(892	)		(10	)		(61,989	)		—			—			(61,999	)		—			(61,999	)
Stock compensation expense		—			—			12,155			—			—			12,155			—			12,155
Net earnings		—			—			—			160,221			—			160,221			406			160,627
Other comprehensive income (loss)		—			—			—			—			(14,678	)		(14,678	)		75			(14,603	)
Balance at September 30, 2019		170,243		$	1,702		$	23,301		$	2,301,156		$	(118,774	)	$	2,207,385		$	1,902		$	2,209,287

Balance at June 30, 2018		173,577		$	1,736		$	1,607		$	1,977,121		$	(90,712	)	$	1,889,752		$	2,807		$	1,892,559
Exercise of stock options and release of restricted shares		332			3			14,512			—			—			14,515			—			14,515
Issuance of shares under stock purchase plan		666			7			33,285			—			—			33,292			—			33,292
Shares repurchased under provisions of stock repurchase plans		(2,011	)		(20	)		(61,384	)		(86,424	)		—			(147,828	)		—			(147,828	)
Stock compensation expense		—			—			13,902			—			—			13,902			—			13,902
Net earnings		—			—			—			162,692			—			162,692			375			163,067
Other comprehensive income (loss)		—			—			—			—			(10,386	)		(10,386	)		(543	)		(10,929	)
Purchase of noncontrolling interest		—			—			(90	)		—			—			(90	)		(523	)		(613	)
Distributions to noncontrolling interest		—			—			—			—			—			—			(633	)		(633	)
Balance at September 30, 2018		172,564		$	1,726		$	1,832		$	2,053,389		$	(101,098	)	$	1,955,849		$	1,483		$	1,957,332


	Common Stock
For the nine months ended September 30, 2019 and 2018	Shares			Par value			Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Total shareholders’ equity			Noncontrolling interest			Total equity
Balance at December 31, 2018		171,582		$	1,716		$	1,896		$	2,088,707		$	(105,481	)	$	1,986,838		$	882		$	1,987,720
Exercise of stock options and release of restricted shares		2,166			22			75,619			—			—			75,641			—			75,641
Issuance of shares under stock purchase plan		585			6			37,869			—			—			37,875			—			37,875
Shares repurchased under provisions of stock repurchase plans		(4,090	)		(42	)		(141,847	)		(155,033	)		—			(296,922	)		—			(296,922	)
Stock compensation expense		—			—			49,361			—			—			49,361			—			49,361
Net earnings		—			—			—			453,069			—			453,069			1,199			454,268
Other comprehensive income (loss)		—			—			—			—			(13,293	)		(13,293	)		(179	)		(13,472	)
Dividends paid ($0.50)		—			—			403			(85,587	)		—			(85,184	)		—			(85,184	)
Balance at September 30, 2019		170,243		$	1,702		$	23,301		$	2,301,156		$	(118,774	)	$	2,207,385		$	1,902		$	2,209,287

Balance at December 31, 2017		176,374		$	1,764		$	546		$	2,063,512		$	(73,964	)	$	1,991,858		$	2,515		$	1,994,373
Cumulative effect of accounting change		—			—			—			(22,357	)		—			(22,357	)		(105	)		(22,462	)
Exercise of stock options and release of restricted shares		3,288			33			133,027			—			—			133,060			—			133,060
Issuance of shares under stock purchase plan		666			7			33,285			—			—			33,292			—			33,292
Shares repurchased under provisions of stock repurchase plans		(7,764	)		(78	)		(208,266	)		(347,416	)		—			(555,760	)		—			(555,760	)
Stock compensation expense		—			—			43,171			—			—			43,171			—			43,171
Net earnings		—			—			—			438,989			—			438,989			1,224			440,213
Other comprehensive income (loss)		—			—			—			—			(27,134	)		(27,134	)		(995	)		(28,129	)
Dividends paid ($0.45)		—			—			159			(79,339	)		—			(79,180	)		—			(79,180	)
Purchase of noncontrolling interest		—			—			(90	)		—			—			(90	)		(523	)		(613	)
Distributions to noncontrolling interest		—			—			—			—			—			—			(633	)		(633	)
Balance at September 30, 2018		172,564		$	1,726		$	1,832		$	2,053,389		$	(101,098	)	$	1,955,849		$	1,483		$	1,957,332

See accompanying notes to condensed consolidated financial statements.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands, except per share data)

(Unaudited)

~~(Unaudited)~~


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, industrial and manufacturing companies around the world.

The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. As a result, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted. The Company believes that the disclosures made are adequate to make the information presented not misleading. The condensed consolidated financial statements reflect all adjustments, consisting of normal recurring items, which are, in the opinion of management, necessary tofor a fair statement of the results for the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Form 10-K as filed with the Securities and Exchange Commission on February ~~23, 2018.~~

22, 2019.

All significant intercompany accounts and transactions have been eliminated in consolidation. All dollar amounts in the notes are presented in thousands except for per share data or unless otherwise specified.


B.	Revenue Recognition

~~Effective January 1, 2018, revenue is recognized upon transfer of control of promised services to customers, which occurs over time.~~

The Company ~~has determined~~derives its revenues by entering into agreements that in general each shipment transaction or service order constitutes a separate contract with the customer. However, when the Company provides multiple services to a customer, different contracts may be present for different services. The Company combines the contracts, which formare generally comprised of a single performance obligation, which is that freight is shipped for and ~~accounts for~~received by the ~~contracts as a single contract when certain criteria~~customer. The Company's three principal services are ~~met.~~

the revenue categories presented in the consolidated statements of earnings: 1) airfreight services, 2) ocean freight and ocean services, and 3) customs brokerage and other services.

The Company typically satisfies its performance obligations as services are rendered over time. A typical shipment would include services rendered at origin, such as pick-up and delivery to port, freight services from origin to destination port and destination services, such as customs clearance and final delivery. The Company measures the performance of its obligations as services are completed over the life of a shipment, including services at origin, freight and destination.

This method of measurement of progress depicts the pattern of the Company's actual performance under the contracts with the customer. There are no significant judgments involved in measuring the progress of the performance obligations. Amounts allocated to the services for each performance obligation are typically based on standalone selling prices. The Company does not have significant variable consideration in its contracts. Taxes assessed concurrently with a specific revenue-producing transaction that are collected by the Company from a customer are excluded from revenue.

Typically, transaction prices for each of the Company's 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 transaction price is allocated to each service on a relative selling price basis.

The Company fulfills nearly all of its performance obligations within a one to two month-period and contracts with customers have an original expected duration of less than one year. The Company ~~generally has an unconditional right~~satisfied nearly all performance obligations for the contract liabilities recorded as of June 30, 2019.

In 2019, the Company revised its presentation for revenue transfers between its geographic operating segments and services rendered at the destination, which moved certain revenues and directly related operating expenses for air and ocean transactions to ~~consideration when~~destination services within customs brokerage and other services. These changes better align revenue reporting with the location where the services are ~~initiated~~performed, as well as the transactional reporting being developed as part of the Company’s new accounting systems and processes. The change in presentation had no impact on consolidated or ~~soon thereafter.~~segment operating income. The ~~amount due~~2019 results also include the effect of changing the presentation of certain import services from a net to a gross basis, which increased revenues and directly related operating expenses in customs brokerage and other services but did not change operating income. The impact on reported consolidated and segment total revenues and expenses for these changes was immaterial and the prior year presentation has not been revised.

Leases

Effective January 1, 2019, the Company adopted new lease accounting guidance using a modified retrospective approach and recognizing a right-of-use (ROU) asset and lease liability on the balance sheet. On January 1, 2019, ROU assets and lease liabilities were recorded for all existing leases exceeding one-year terms and were measured at the present value of lease payments over the remaining lease term. The adoption of this accounting standard resulted in recording ROU assets and lease liabilities for operating leases of $343 million and $340 million, respectively, as of January 1, 2019. The adoption of this standard had no impact on retained earnings on the condensed consolidated balance sheet.

In recording the ROU asset and lease liability, the Company elected to apply the following practical expedients:

•

Package of practical expedients not to reassess:

◦

Whether a contract is or contains a lease,

◦

Historical lease classification, and

◦

Initial direct costs.

•

Use of hindsight when determining the lease term.

Additionally, the Company has elected to apply the short-term lease exemption for leases with a non-cancelable period of twelve months or less and has chosen not to separate nonlease components from lease components and instead to account for each as a single lease component.

The Company determines if an arrangement is a lease at inception. ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the ~~customer is recorded as accounts receivable. The amounts related to services that~~lease. All ROU assets and lease liabilities are ~~not yet completed~~recognized at the ~~reporting~~commencement date at the present value of lease payments over the lease term. ROU assets are ~~presented as contract liabilities, with corresponding~~adjusted for lease incentives and initial direct ~~costs to fulfill the performance obligation that will be satisfied in the future presented as deferred contract~~ costs. The ~~Company generally does not incur incremental costs to obtain~~lease term includes renewal options exercisable at the contract with the customer. The Company may incur costs to fulfill the contract with the customers, such as set-up costs. However, the amount incurred is insignificant to the Company’s consolidated financial statements.

~~The Company evaluates whether amounts billed to customers should be reported as gross or net revenue. Generally, revenue is recorded on a gross basis~~Company's sole discretion when the Company is ~~primarily responsible for fulfilling~~reasonably certain to exercise that option. As the ~~promise~~Company's leases generally do not have an implicit rate, the Company uses an estimated incremental borrowing rate based on market information available at the commencement date to ~~provide~~determine the ~~services, when it assumes risk~~present value. Certain of ~~loss, when it has discretion~~our leases include variable payments, which may vary based upon changes in ~~setting~~facts or circumstances after the ~~prices for~~start of the ~~services~~lease. The Company excludes variable payments from lease ROU assets and lease liabilities, to the ~~customers,~~extent not considered fixed, and ~~when~~instead expense variable payments as incurred. Lease expense is recognized on a straight-line basis over the ~~Company has~~lease term and is included in rent and occupancy expenses on the ~~ability to direct the use~~condensed consolidated statement of ~~the services provided by the third party.~~

earnings.


C. D.	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 customers to pay deteriorates. The Company has recorded an allowance for doubtful accounts in the amounts of $~~13,696~~11,853 as of September 30, ~~2018~~2019 and ~~$12,858~~$15,345 as of December 31, ~~2017.~~ 2018. Additions and write-offs have not been significant in the periods presented.


D. E.	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 disclosures 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 liabilities for the portion of the related exposure that the Company has self-insured, accrual of various tax liabilities including ~~provisional~~ estimates associated with the U.S. enacted Tax Cuts and Jobs Act (the 2017 Tax Act), accrual of loss contingencies, ~~and~~ calculation of share-based compensation ~~expense.~~expense and estimates related to determining the lease term and discount rate when measuring ROU assets and lease liabilities. Actual results could be materially different from the estimated provisions and accruals recorded.

Recent Accounting Pronouncement

~~E. Recent Accounting Pronouncements~~

~~Leases~~

In ~~February~~June 2016, the Financial Accounting Standards Board (FASB) issued an Accounting ~~Standard~~Standards Update (ASU) changing the accounting for leases and includes a requirement to record all leases exceeding one year on the consolidated balance sheet as assets and liabilities. The Company expects to adopt the standard using a modified retrospective method and initially apply the standard beginning January 1, 2019. Upon adoption, the Company will record right-of-use assets equal to the present value of its lease payments and corresponding lease liabilities on its consolidated balance sheet. As of September 30, 2018, undiscounted future minimum lease payments under noncancelable operating leases totaled approximately $294 million. On an on-going basis the Company does not expect any material changes to its operating results or cash flows from adoption of this standard. The Company is currently evaluating its existing lease portfolio, including accumulating all of the necessary information required to make appropriate accounting policy elections and properly account for the leases under this new standard. Additionally, the Company is implementing an enterprise-wide lease management system that, along with accompanying process changes, will assist in the accounting and internal control changes necessary to meet the reporting and disclosure requirements of the new standard when it becomes effective.

~~Taxes~~

~~In February 2018, the FASB issued an ASU,~~, which amends existing guidance for reporting comprehensive income to reflect changes resulting from the 2017 Tax Act. The amendment provides the option to reclassify stranded tax effects resulting from the 2017 Tax Act within accumulated other comprehensive income (AOCI) to retained earnings. New disclosures will be required upon adoption, including the accounting ~~policy~~of credit losses on financial instruments. Under the ASU, the Company will record a valuation allowance for ~~releasing income tax effects from AOCI, whether reclassification of stranded income tax effects is elected, and information about other income tax effect reclassifications. The amendment~~credit losses that are expected to be incurred over the financial asset’s contractual term. This standard will ~~become~~be effective for the Company on January 1, ~~2019,~~2020 and is not expected to have a material effect on the consolidated financial statements as the new credit loss model will primarily apply to the Company's accounts receivable, which are of short duration and for which the Company ~~will adopt in~~has not historically experienced significant credit losses. However, the ~~first quarter of 2019 as required. The~~ Company is ~~currently~~still evaluating the impact of ~~adopting this standard on~~the new prescribed model compared to its ~~consolidated financial statements and disclosures.~~

current methodology.

Note 2. ~~Revenues~~Leases

The Company enters into lease agreements primarily for office and warehouse space in all districts where it conducts business. As of September 30, 2019, all of the Company's leases are operating leases.

Lease cost for the three and nine months ended September 30, 2019 are all recorded under rent and occupancy expenses on the condensed consolidated statement of earnings and are comprised of the following:

	Three months ended September 30, 2019		Nine months ended September 30, 2019
Operating lease cost	$	20,784	$	60,832
Variable lease cost		6,990		19,867
Total lease cost	$	27,774	$	80,699

Variable lease cost includes short-term lease expenses, which are insignificant.

Maturities of lease liabilities as of September 30, 2019 are as follows:

~~Effective January 1,~~

2019	$	19,112
2020		77,416
2021		67,505
2022		61,044
2023		52,427
Thereafter		174,492
Total minimum lease payments		451,996
Less imputed interest		76,574
Lease liability	$	375,422

At December 31, 2018, the Company adopted Topic 606 Revenue from Contracts with Customers (Topic 606). The adoption of Topic 606 did not materially impact the Company's revenue recognition policy. The Company adopted the standard using the modified retrospective transition method applied to those contracts not completed as of January 1, 2018, resulting in a $22 million adjustment to the openinglast balance of retained earnings and the recording of deferred contract costs and contract liabilities of $135 million and $165 million, respectively. The Company satisfied nearly all performance obligations for the contract liabilities recorded upon adoption at January 1, 2018, and recognized the corresponding revenues and costs during the first quarter. The Company also satisfied nearly all performance obligations for the contract liabilities recorded as of June 30, 2018 and recognized the corresponding revenues and costs during the third quarter. In conjunction withsheet presented before the adoption of the new accounting standard Topic ~~606, the Company also changed its presentation~~842 Leases, future minimum annual lease payments under all noncancelable leases were as follows:

2019	$	75,227
2020		62,974
2021		47,552
2022		38,352
2023		26,580
Thereafter		67,140
	$	317,825

The weighted-average remaining lease term and weighted-average discount rate as of certain warehouse and distribution revenues from a net to a gross basis, which increased customs brokerage and other services revenues and operating expenses by approximately $50 million in each of the first three quarters of 2018.September 30, 2019 are as follows:

Weighted-average remaining lease term (in years)			7.47
Weighted-average discount rate			4.94	%

~~Comparative prior year~~

Other information ~~has not been adjusted and continues to be reported under the Company's historical revenue recognition policies described in Note 1.E~~related to the Company's ~~Form 10-K~~operating leases are as ~~filed on February 23, 2018.~~follows:

Three months ended

September 30, 2019

Nine months ended

September 30, 2019

Right-of-use assets obtained in exchange for

new operating lease liabilities

14,630

76,664

Cash paid for amounts included in the

measurement of lease liabilities

19,642

58,934

The Company disaggregates its revenues by its three primary service categories in the consolidated financial statements: airfreight, ocean freight and ocean services and customs brokerage and other. Revenues by geographic location are presented within business segment information in Note 10.

Note 3.

Share-Based Compensation

~~Note 3. Share-Based Compensation~~

The Company has historically granted the majority of its share-based awards during the second quarter of each fiscal year. InDuring the ~~nine-month periods~~nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the Company awarded ~~461~~ 462and ~~583~~461 restricted stock units ~~(RSU)~~(RSUs), respectively, under the Omnibus Incentive Plan (2017 Plan), which was approved by shareholders in 2017. The ~~RSU, awarded to certain employees,~~RSUs were granted at a weighted-average ~~grant date~~ fair value of $75.73 in 2019 and $69.58 in ~~2018 and $54.04 in 2017.~~2018. The ~~RSU~~RSUs vest annually over 3 years based on continued employment and are settled upon vesting in shares of the Company's common stock on a ~~one-for-one~~1-for-1 basis. The value of an RSU ~~grant~~award is based on the Company's stock price on the date of grant. Additionally, in the ~~second quarter of~~nine months ended September 30, 2019 and 2018, 24 and ~~2017, respectively,~~ 25 ~~and 38~~ fully vested shares were granted to non-employee ~~directors.~~directors, respectfully.

The Company also awarded 18 96and 2318 performance stock units ~~(PSU)~~(PSUs) in ~~2018~~2019 and ~~2017,~~2018, respectively, under the 2017 Plan. ~~The PSU~~Outstanding PSUs include performance conditions to be finally measured inat December 31, 2019, 2020 and ~~2019,~~2021, respectively. The final number of ~~PSU~~PSUs will be determined using an adjustment factor of up to ~~two~~2 times or down to 0.5 of the targeted PSU grant. If the minimum performance thresholds are not achieved, no0 shares will be issued. Each PSU will convert to ~~one~~1 share of the Company's common stock upon vesting.

RSUs and PSUs granted under the 2017 Plan have dividend equivalent rights, which entitle holders of the awards to the same dividend value per share as holders of common stock. Dividend equivalent rights are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs and PSUs and are accumulated and paid in shares when the underlying awards vest.

The grant of employee stock purchase rights and the issuance of shares under the employee stock purchase plan are made in the third quarter of each fiscal year and 585 and 666 ~~and 682~~shares were issued in the three and ~~nine-month periods~~nine months ended September 30, 2019 and 2018, ~~and 2017.~~respectively. The fair value of the employee stock purchase rights granted was ~~$17.49~~$17.03 and ~~$11.69~~$17.49 per share in 2019 and 2018, ~~and 2017,~~ respectively.

The Company recognizes stock compensation expense based on the fair value of awards granted to employees and directors under the Company’s omnibus incentive, stock option, director restricted stock and employee stock purchase rights plans. This expense, adjusted for expected forfeitures, is recognized in net earnings on a straight-line basis over the service periods as salaries and related ~~costs. RSU awards~~costs on the condensed consolidated statements of earnings. RSUs and PSUs awarded to certain employees meeting specific retirement eligibility criteria at the time of grant are expensed immediately as there is no substantive service period associated with those awards. For RSU awards meeting retirement eligibility criteria, approximately $5,000 of stock compensation expense was recognized during the nine months ended September 30, 2019, and approximately $4,000 of stock compensation expense was recognized during 2018. For PSU awards meeting retirement eligibility criteria, approximately $5,000 of stock compensation expense was recognized during the nine months ended September 30, 2019. There were 0 PSU awards granted meeting retirement eligibility criteria during 2018.

Note 4.

Income Taxes

~~Note 4. Income Taxes~~

In December 2017, the 2017 Tax Act was enacted in the United States. Among its many provisions, the 2017 Tax Act imposed a mandatory one-time transition tax on undistributed international earnings (Transition Tax), reduced the U.S. corporate income tax rate from 35% to 21% and created a territorial tax system. As a result of the enactment of the 2017 Tax Act, the Company recognized a provisional net income tax benefit of $39 million in 2017. Beginning January 1, 2018, foreign earnings of the Company's international subsidiaries are generally exempt from U.S. Federal income tax upon repatriation. Notwithstanding these changes, certain ~~non-U.S.~~ withholding taxes and foreign exchange gains and losses will continue to be applicable upon the ~~future~~ repatriation of foreign earnings.

During 2018 and 2019, the Internal Revenue Service (IRS) and the U.S. Department of Treasury (Treasury) issued additional guidelines and clarifying regulations related to the implementation of the 2017 Tax Act. The Company expects that additional guidance will continue to be issued in future periods. As this guidance is issued, the Company will continue to evaluate the information to determine whether any additional adjustments to its tax provisions are required.

The 2017 Tax Act included provisions for Global Intangible Low-Taxed Income (GILTI) under which taxes on foreign income are imposed on the excess of a deemed return on tangible assets of certain foreign subsidiaries and for Base Erosion and Anti-Abuse Tax (BEAT) under which taxes are imposed on certain base eroding payments to affiliated foreign companies. ~~Consistent with U.S. GAAP, the~~The Company ~~will treat~~treats BEAT and GILTI as ~~discrete adjustments to the~~components of current income tax ~~provision when incurred in future periods~~expense. Income tax expense for ~~which no deferred taxes are required to be provided~~the three and ~~has made an accounting policy election to treat GILTI taxes in a similar manner. No provision for income taxes related to GILTI has been recorded through~~nine months ended September 30, ~~2018. No provision for BEAT was recorded until the second quarter of~~2019 and 2018 ~~when an estimated BEAT income~~had 0 significant tax expense related BEAT or GILTI.

In February 2018, the FASB issued amended guidance for reporting comprehensive income to reflect changes resulting from the 2017 Tax Act. The amendment, which had an effective date of ~~$2.0 million was recognized. This amount was reversed in~~January 1, 2019, provided the ~~third quarter of 2018 based upon updated BEAT calculations and projections as of September 30, 2018.~~

option to reclassify stranded tax effects resulting from the 2017 Tax Act within accumulated other comprehensive income (AOCI) to retained earnings. The Company elected to ~~adopt the Securities and Exchange Commission issued guidance that allows for a measurement period,~~ not reclassify stranded income tax effects from AOCI to ~~exceed one year after the enactment date~~retained earnings, including those related to implementation of the 2017 Tax Act, to finalize the recording of the related tax impacts. The Company expects to finalize its tax positions and calculations in the fourth quarter of 2018 though a possibility remains that additional guidance and regulations could be issued beyond 2018 that could impact the amounts recorded. The tax effects for these provisional items are recorded as discrete adjustments to the income tax provision as information becomes known.

The components of the provisional net income taxes recorded in 2017 and through the nine-month period ended September 30, 2018 are based on the best available information at the current time. As noted, guidance and interpretations have been issued throughout 2018 and more is expected to be released in future periods. Provisional items include amounts related to the mandatory repatriation of undistributed international earnings, certain foreign exchange gains or losses, foreign tax credits as well as the impacts on deferred taxes, for example 100% expensing of qualified assets.

Based on additional guidance issued during the applicable periods related to the computation of the Transition Tax, the Company recorded additional provisional tax expense of $1.8 million in the first quarter of 2018 and a provisional tax benefit of $800 in the third quarter of 2018. In the second quarter of 2018, the Company reclassified its provisional liability associated with the Transition Tax from a long-term liability to a current obligation, offsetting its prepaid income tax balance, as a result of guidance issued by the IRS during that quarter.

~~The Company's~~Act.

Our consolidated effective income tax rate was ~~21.8%~~24.9% and ~~26.1%, respectively,~~25.6% for the three and ~~nine-month periods~~nine months ended September 30, ~~2018~~,2019, respectively, as compared to ~~36.7%~~21.8% and ~~37.1%~~26.1% for the comparable periods in ~~2017.~~2018. The effect of higher average tax rates of our international subsidiaries, when compared to U.S. federal and state tax rates, were partially offset by U.S. foreign tax credits and U.S. income tax deductions for Foreign-derived intangible income (FDII). In addition, to the ~~lower U.S. federal tax rate that resulted from the 2017 Tax Act, the effective tax rate in~~three month period ended 2018 benefited from ~~significant share-based compensation deductions principally as a result of stock option exercises occurring during the second quarter of 2018,~~ required discrete adjustments as a result of interpretations issued related to the 2017 Tax Act ~~that included the recording of certain~~for foreign tax credits earned as a result of withholding taxes paid on repatriated foreign earnings ~~that totaled~~totaling $7 million and a state income tax refund oftotaling $4 million that settled during the ~~third~~ quarter ofin 2018. ~~These amounts were partially offset by certain expenses that are no longer deductible under the 2017 Tax Act.~~

As discussed above, some elements of the recorded impacts of the 2017 Tax Act ~~remain provisional as of September 30, 2018. The final amounts of provisional~~could be impacted by further legislative action as well as ~~other recorded~~additional interpretations and guidance issued by the IRS or Treasury. As a result, the amount of income tax ~~amounts~~recorded in the future may differ, possibly materially, due to, among other things, changes in estimates, interpretations and assumptions the Company has made, changes in IRS or Treasury interpretations, the issuance of new guidance, legislative actions, changes in accounting standards or related interpretations in response to the 2017 Tax Act and future actions by states within the United States that have not currently adopted the 2017 Tax Act.materially. For further information and discussion of the potential impact of the 2017 Tax Act, refer to ~~“Item 1A. Risk Factors”,~~ Note 5 to the consolidated financial statements ~~and “Critical Accounting Estimates,”~~ in the Company's ~~2017~~2018 Annual Report on Form 10-K.

Note 5. Basic and Diluted Earnings per 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 shares represent outstanding stock options, including purchase options under the Company's employee stock purchase plan, and unvested restricted stock units. 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.

The following table reconciles the numerator and the denominator of the basic and diluted per share computations for earnings attributable to shareholders:

	Three months ended September 30,
	Net earnings attributable to shareholders		Weighted average shares		Earnings per share
2019
Basic earnings attributable to shareholders	$	160,221		170,415	$	0.94
Effect of dilutive potential common shares		—		3,068		—
Diluted earnings attributable to shareholders	$	160,221		173,483	$	0.92
2018
Basic earnings attributable to shareholders	$	162,692		173,394	$	0.94
Effect of dilutive potential common shares		—		3,779		—
Diluted earnings attributable to shareholders	$	162,692		177,173	$	0.92

	Nine months ended September 30,
	Net earnings attributable to shareholders		Weighted average shares		Earnings per share
2019
Basic earnings attributable to shareholders	$	453,069		171,084	$	2.65
Effect of dilutive potential common shares		—		3,379		—
Diluted earnings attributable to shareholders	$	453,069		174,463	$	2.60
2018
Basic earnings attributable to shareholders	$	438,989		174,675	$	2.51
Effect of dilutive potential common shares		—		3,772		—
Diluted earnings attributable to shareholders	$	438,989		178,447	$	2.46

Three months ended
September 30,
(Amounts in thousands, except per share amounts)
Net earnings
attributable to
shareholders

Weighted average
shares
Earnings per share
2018
Basic earnings attributable to shareholders $ 162,692
173,394
$ 0.94
Effect of dilutive potential common shares —
3,779
—
Diluted earnings attributable to shareholders $ 162,692
177,173
$ 0.92
2017
Basic earnings attributable to shareholders $ 120,263
179,416
$ 0.67
Effect of dilutive potential common shares —
2,372
—
Diluted earnings attributable to shareholders $ 120,263
181,788
$ 0.66

Nine months ended
September 30,
(Amounts in thousands, except per share amounts)
Net earnings
attributable to
shareholders

Weighted average
shares
Earnings per share
2018
Basic earnings attributable to shareholders $ 438,989
174,675
$ 2.51
Effect of dilutive potential common shares —
3,772
—
Diluted earnings attributable to shareholders $ 438,989
178,447
$ 2.46
2017
Basic earnings attributable to shareholders $ 322,378
179,827
$ 1.79
Effect of dilutive potential common shares —
2,124
—
Diluted earnings attributable to shareholders $ 322,378
181,951
$ 1.77

Note 6. ~~Components of~~Shareholders' Equity

~~The components of equity for the~~ ~~nine~~ ~~months ended September 30,~~ ~~2018~~ ~~and~~ ~~2017~~ ~~are as follows:~~

Shareholders’
equity

Noncontrolling
interest

Total
equity
Balance at December 31, 2017 $ 1,991,858
2,515
1,994,373
Cumulative effect of accounting change (22,357 ) (105 ) (22,462 )
Exercise of stock options and release of restricted awards, net of shares withheld for employee taxes 133,060
—
133,060
Issuance of shares under stock purchase plan 33,292
—
33,292
Shares repurchased under provisions of stock repurchase plans (555,760 ) —
(555,760 )
Stock compensation expense 43,171
—
43,171
Net earnings 438,989
1,224
440,213
Other comprehensive loss (27,135 ) (994 ) (28,129 )
Dividends paid ($0.45 per share) (79,180 ) (79,180 )
Purchase of noncontrolling interest (89 ) (524 ) (613 )
Distributions to noncontrolling interest —
(633 ) (633 )
Balance at September 30, 2018 $ 1,955,849
1,483
1,957,332

Balance at December 31, 2016 $ 1,844,638
2,575
1,847,213
Exercise of stock options 134,014
—
134,014
Issuance of shares under stock purchase plan 28,767
28,767
Shares repurchased under provisions of stock repurchase plans (340,736 ) —
(340,736 )
Stock compensation expense 39,036
—
39,036
Net earnings 322,378
550
322,928
Other comprehensive income 25,632
(47 ) 25,585
Dividends paid ($0.42 per share) $ (75,726 ) (75,726 )
Balance at September 30, 2017 $ 1,978,003
3,078
1,981,081

The Company has a Non-Discretionary Stock Repurchase Plan to repurchase shares from the proceeds of stock option exercises and employee stock purchases. During the nine-month periods ended September 30, 2018 and 2017, 2,386 and 2,902 shares were repurchased at an average price of $72.72 and $55.58 per share, respectively.

~~The Company also~~ has a Discretionary Stock Repurchase Plan approved by the Board of Directors that authorizes management to reduce issued and outstanding common stock down to ~~170 million shares of common stock. On November 5, 2018, the Board of Directors amended the plan to further authorize repurchases down to 160 million shares of common stock.~~160,000 shares. During the ~~nine-month period~~nine months ended September 30, ~~2018, 5,378~~2019, 4,002 shares were repurchased at an average price of ~~$71.07~~$72.57 per share, compared to ~~3,189~~5,378 shares at an average price of ~~$56.26~~$71.07 per share during the same period in ~~2017.~~

2018.

The Company also had a Non-Discretionary Stock Repurchase Plan to repurchase shares from the proceeds of stock option exercises and employee stock purchases. As of March 31, 2019, all shares authorized under this plan have been repurchased. During the nine months ended September 30, 2019, 88 shares were repurchased at an average price of $74.03, compared to 2,386 at an average price of $72.72 per share during the same period in 2018.

Accumulated other comprehensive loss consisted entirely of foreign currency translation adjustments, net of related income tax effects, for all the periods presented.

On May 7, 2019, the Board of Directors declared a semi-annual dividend of $0.50 per share payable on June 17, 2019 to shareholders of record as of June 3, 2019. On May 8, 2018, the Board of Directors declared a semi-annual dividend of $0.45 per share ~~payable~~paid on June 15, 2018 to shareholders of record as of June 1, 2018. ~~On May 2, 2017,~~

Subsequent to the end of third quarter 2019, on November 4, 2019, the Board of Directors declared a semi-annual dividend of ~~$0.42 per share payable on June 15, 2017 to shareholders of record as of June 1, 2017.~~

~~Subsequent to the end of the third quarter, on November 5, 2018, the Board of Directors declared a semi-annual dividend of $0.45~~$0.50 per share payable on December ~~17, 2018~~16, 2019 to shareholders of record as of December ~~3, 2018.~~

2, 2019.

Note 7. Fair Value of Financial Instruments

The Company’s financial instruments, other than cash, consist primarily of cash equivalents, accounts receivable, accounts payable and accrued expenses. The carrying value of these financial instruments approximates their fair value. All highly liquid investments with a maturity of three months or less at date of purchase are considered to be cash equivalents.

Cash and cash equivalents consist of the following:

	September 30, 2019				December 31, 2018
	Cost		Fair Value		Cost		Fair Value
Cash and Cash Equivalents:
Cash and overnight deposits	$	398,235	$	398,235	$	427,307	$	427,307
Corporate commercial paper		788,060		788,708		467,300		467,760
Time deposits		29,675		29,675		29,128		29,128
Total cash and cash equivalents	$	1,215,970	$	1,216,618	$	923,735	$	924,195

September 30, 2018 December 31, 2017
Cost Fair Value Cost Fair Value
Cash and Cash Equivalents:
Cash and overnight deposits $ 444,650
444,650
383,021
383,021
Corporate commercial paper 520,740
521,292
635,345
635,919
Time deposits 25,222
25,222
32,733
32,733
Total cash and cash equivalents $ 990,612
991,164
1,051,099
1,051,673

The fair value of corporate commercial paper and time deposits is based on the use of market interest rates for identical or similar assets (Level 2 fair value measurement).

Note 8. ~~Commitments~~

The Company generally 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. Historically, the Company has met these obligations in the normal course of business within one year. Purchase obligations outstanding as of September 30, 2018 totaled $90 million.

Additionally, the Company occupies offices and warehouse facilities under terms of operating leases expiring up to 2032. At September 30, 2018, future minimum annual lease payments under all noncancelable leases are as follows:

2018 $ 19,731
2019 70,736
2020 58,479
2021 41,107
2022 31,585
Thereafter 72,412
$ 294,050

~~Note 9.~~ Contingencies

The Company is involved in claims, lawsuits, government investigations and other legal matters that arise in the ordinary course of business and are subject to inherent uncertainties. Currently, in management's opinion and based upon advice from legal advisors, none of these matters are expected to have a significant effect on the Company's operations, cash flows or financial position. As of September 30, ~~2018,~~2019, the amounts accrued for these claims, lawsuits, government investigations and other legal matters are not significant to the Company's operations, cash flows or financial position. At this time, the Company is unable to estimate any additional loss or range of reasonably possible losses, if any, beyond the amounts recorded, that might result from the resolution of these matters.

Note ~~10.~~9. Business Segment Information

The Company is organized functionally in geographic operating segments. Accordingly, management focuses its attention on revenues, ~~net revenues~~¹,directly related cost of transportation and other expenses for each of the Company’s three primary sources of revenue, salaries and other operating expenses, operating income, identifiable assets, capital expenditures ~~depreciation and amortization~~ and equity generated in each of these geographical areas when evaluating the effectiveness of geographic management. 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. Certain costs are allocated among the segments based on the relative value of the underlying services, which can include allocation based on actual costs incurred or estimated cost plus a profit margin.

Financial information regarding the Company’s operations by geographic area is as follows:

	UNITED STATES		OTHER NORTH AMERICA		LATIN AMERICA		NORTH ASIA		SOUTH ASIA		EUROPE		MIDDLE EAST, AFRICA AND INDIA		ELIMI- NATIONS			CONSOLI- DATED
For the three months ended September 30, 2019:
Revenues¹	$	692,229		88,088		38,341		624,351		196,569		320,769		115,397		(889	)		2,074,855
Directly related cost of transportation and other expenses²	$	389,254		51,420		22,990		489,195		145,345		221,149		81,592		(446	)		1,400,499
Salaries and other operating expenses³	$	210,767		25,731		14,547		70,410		32,482		86,156		28,151		(438	)		467,806
Operating income	$	92,208		10,937		804		64,746		18,742		13,464		5,654		(5	)		206,550
Identifiable assets at period end	$	2,059,345		128,336		72,029		489,322		164,976		563,289		226,657		2,499			3,706,453
Capital expenditures	$	7,644		513		833		523		631		5,119		258		—			15,521
Equity	$	1,578,682		60,526		27,217		216,061		77,733		169,450		111,355		(31,737	)		2,209,287
For the three months ended September 30, 2018:
Revenues¹	$	629,043		92,875		43,443		748,589		205,392		327,212		118,047		(73,654	)		2,090,947
Directly related cost of transportation and other expenses²	$	345,236		58,464		27,635		601,699		158,226		227,418		83,992		(73,037	)		1,429,633
Salaries and other operating expenses³	$	204,240		23,935		13,399		74,067		31,623		84,136		27,384		(624	)		458,160
Operating income	$	79,567		10,476		2,409		72,823		15,543		15,658		6,671		7			203,154
Identifiable assets at period end	$	1,694,556		174,402		53,322		540,465		156,887		508,855		212,817		(6,504	)		3,334,800
Capital expenditures	$	6,889		301		227		1,280		910		751		1,375		—			11,733
Equity	$	1,334,952		66,399		25,663		197,939		86,048		157,973		119,718		(31,360	)		1,957,332

	UNITED STATES		OTHER NORTH AMERICA		LATIN AMERICA		NORTH ASIA		SOUTH ASIA		EUROPE		MIDDLE EAST, AFRICA AND INDIA		ELIMI- NATIONS			CONSOLI- DATED
For the nine months ended September 30, 2019:
Revenues¹	$	2,033,088		265,035		111,277		1,879,155		555,128		952,790		336,383		(2,371	)		6,130,485
Directly related cost of transportation and other expenses²	$	1,142,701		157,997		64,149		1,475,395		407,642		657,720		236,184		(1,468	)		4,140,320
Salaries and other operating expenses³	$	636,243		76,283		41,342		208,781		97,324		258,339		86,385		(884	)		1,403,813
Operating income	$	254,144		30,755		5,786		194,979		50,162		36,731		13,814		(19	)		586,352
Identifiable assets at period end	$	2,059,345		128,336		72,029		489,322		164,976		563,289		226,657		2,499			3,706,453
Capital expenditures	$	23,544		1,509		1,071		1,167		1,235		8,015		1,402		—			37,943
Equity	$	1,578,682		60,526		27,217		216,061		77,733		169,450		111,355		(31,737	)		2,209,287
For the nine months ended September 30, 2018:
Revenues¹	$	1,790,869		257,206		122,170		2,065,405		560,070		977,967		342,589		(213,508	)		5,902,768
Directly related cost of transportation and other expenses²	$	957,997		157,599		75,694		1,640,724		423,612		677,167		242,208		(211,931	)		3,963,070
Salaries and other operating expenses³	$	620,029		70,036		38,996		211,576		92,409		248,906		79,782		(1,592	)		1,360,142
Operating income	$	212,843		29,571		7,480		213,105		44,049		51,894		20,599		15			579,556
Identifiable assets at period end	$	1,694,556		174,402		53,322		540,465		156,887		508,855		212,817		(6,504	)		3,334,800
Capital expenditures	$	16,092		4,020		899		2,623		1,934		9,167		2,907		—			37,642
Equity	$	1,334,952		66,399		25,663		197,939		86,048		157,973		119,718		(31,360	)		1,957,332

In 2019, the Company revised its process to record the transfer, between its geographic operating segments, of revenues and the directly related cost of transportation and other expenses for freight service transactions between Company origin and destination locations. This change better aligns revenue reporting with the location where the services are performed, as well as the transactional reporting being developed as part of the Company’s new accounting systems and processes. The change in presentation had no impact on consolidated or segment operating income. The 2019 results also include the effect of changing the presentation of certain import services from a net to a gross basis, which increased segment revenues and directly related operating expenses but did not change operating income. The impact of these changes on reported segment revenues was immaterial and prior year segment revenues have not been revised.

²	Directly related cost of transportation and other expenses totals operating expenses from airfreight services, ocean freight and ocean services and customs brokerage and other services as shown in the condensed consolidated statements of earnings.

(in thousands)
UNITED
STATES

OTHER
NORTH
AMERICA

LATIN
AMERICA
NORTH ASIA SOUTH ASIA EUROPE MIDDLE EAST, AFRICA AND INDIA
ELIMI-
NATIONS

CONSOLI-
DATED
Three months ended September 30, 2018:
Revenues from unaffiliated customers $ 597,183
88,877
39,389
741,997
198,537
312,724
112,240
—
2,090,947
Transfers between geographic areas 31,860
3,998
4,054
6,592
6,855
14,488
5,807
(73,654 ) —
Total revenues $ 629,043
92,875
43,443
748,589
205,392
327,212
118,047
(73,654 ) 2,090,947
Net revenues¹
$ 283,807
34,411
15,808
146,890
47,166
99,794
34,055
(617 ) 661,314
Operating income $ 79,567
10,476
2,409
72,823
15,543
15,658
6,671
7
203,154
Identifiable assets at period end $ 1,694,556
174,402
53,322
540,465
156,887
508,855
212,817
(6,504 ) 3,334,800
Capital expenditures $ 6,889
301
227
1,280
910
751
1,375
—
11,733
Depreciation and amortization $ 8,185
497
375
1,319
554
1,958
447
—
13,335
Equity $ 1,334,952
66,399
25,663
197,939
86,048
157,973
119,718
(31,360 ) 1,957,332
Three months ended September 30, 2017:
Revenues from unaffiliated customers $ 476,575
65,544
24,181
686,915
170,225
273,606
105,120
—
1,802,166
Transfers between geographic areas 26,888
2,782
3,679
5,253
5,681
10,302
5,318
(59,903 ) —
Total revenues $ 503,463
68,326
27,860
692,168
175,906
283,908
110,438
(59,903 ) 1,802,166
Net revenues¹
$ 257,030
30,664
14,710
138,667
41,411
85,390
29,956
1,314
599,142
Operating income $ 74,645
9,215
2,652
72,070
11,697
11,124
5,495
(3 ) 186,895
Identifiable assets at period end $ 1,636,293
100,651
52,238
446,826
143,893
473,509
212,210
3,261
3,068,881
Capital expenditures $ 7,398
263
2,436
589
390
23,138
248
—
34,462
Depreciation and amortization $ 7,905
405
310
1,313
569
1,309
461
—
12,272
Equity $ 1,345,266
52,212
25,709
231,831
102,477
139,688
119,649
(35,751 ) 1,981,081

(in thousands) UNITED
STATES
OTHER
NORTH
AMERICA
LATIN
AMERICA
NORTH ASIA
SOUTH ASIA
EUROPE
MIDDLE EAST, AFRICA AND INDIA
ELIMI-
NATIONS
CONSOLI-
DATED
Nine months ended September 30, 2018:

Revenues from unaffiliated customers $ 1,699,323

245,670

110,808

2,046,670

539,833

934,466

325,998

—

5,902,768
Transfers between geographic areas 91,546

11,536

11,362

18,735

20,237

43,501

16,591

(213,508 )
—
Total revenues $ 1,790,869

257,206

122,170

2,065,405

560,070

977,967

342,589

(213,508 )
5,902,768
Net revenues¹
$ 832,872

99,607

46,476

424,681

136,458

300,800

100,381

(1,577 )
1,939,698
Operating income $ 212,843

29,571

7,480

213,105

44,049

51,894

20,599

15

579,556
Identifiable assets at period end $ 1,694,556

174,402

53,322

540,465

156,887

508,855

212,817

(6,504 )
3,334,800
Capital expenditures $ 16,092

4,020

899

2,623

1,934

9,167

2,907

—

37,642
Depreciation and amortization $ 25,397

1,368

1,138

3,998

1,679

5,889

1,364

—

40,833
Equity $ 1,334,952

66,399

25,663

197,939

86,048

157,973

119,718

(31,360 )
1,957,332
Nine months ended September 30, 2017:

Revenues from unaffiliated customers $ 1,354,811

187,997

69,747

1,873,393

475,163

764,596

293,870

—

5,019,577
Transfers between geographic areas 79,356

8,246

11,073

15,139

16,520

29,288

15,316

(174,938 )
—
Total revenues $ 1,434,167

196,243

80,820

1,888,532

491,683

793,884

309,186

(174,938 )
5,019,577
Net revenues¹
$ 737,842

84,630

43,634

371,459

117,634

242,244

89,973

2,964

1,690,380
Operating income $ 191,256

26,583

8,349

183,515

37,434

36,189

17,928

(5 )
501,249
Identifiable assets at period end $ 1,636,293

100,651

52,238

446,826

143,893

473,509

212,210

3,261

3,068,881
Capital expenditures $ 19,492

1,066

3,648

2,492

1,172

38,717

1,016

—

67,603
Depreciation and amortization $ 23,389

1,163

930

3,995

1,656

3,707

1,401

—

36,241
Equity $ 1,345,266

52,212

25,709

231,831

102,477

139,688

119,649

(35,751 )
1,981,081

~~_______________________~~

³	Salaries and other operating expenses totals salaries and related, rent and occupancy, depreciation and amortization, selling and promotion and other as shown in the condensed consolidated statements of earnings.

¹Net revenues are a non-GAAP measure calculated as revenues less directly related operating expenses attributable to the Company's principal services. The Company's management believes that net revenues are a better measure than total revenues when evaluating the Company's operating segment performance since total revenues earned as a freight consolidator include the carriers' charges for carrying the shipment, whereas revenues earned in other capacities include primarily the commissions and fees earned by the Company. Net revenue is one of the Company's primary operational and financial measures and demonstrates the Company's ability to concentrate and leverage purchasing power through effective consolidation of shipments from customers utilizing a variety of transportation carriers and optimal routings.

~~The following table presents the calculation of consolidated net revenues:~~

Three months ended Nine months ended
September 30, September 30,
2018 2017 2018 2017
Total revenues $ 2,090,947
$ 1,802,166
$ 5,902,768
$ 5,019,577
Expenses:
Airfreight services 620,554
547,595
1,727,383
1,490,417
Ocean freight and ocean services 435,313
411,061
1,199,887
1,163,051
Customs brokerage and other services 373,766
244,368
1,035,800
675,729
Net revenues $ 661,314
$ 599,142
$ 1,939,698
$ 1,690,380

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995; CERTAIN CAUTIONARY STATEMENTS

Certain portions of this report on Form 10-Q including the sections entitled "Overview," "Expeditors' Culture and Strategy," "International Trade and Competition," "Seasonality," "Critical Accounting Estimates," "Results of Operations," "Income tax expense," "Currency and Other Risk Factors" and "Liquidity and Capital Resources" contain forward-looking statements. Words such as "will likely result," "expects", "are expected to," "would expect," "would not expect," "will continue," "is anticipated," "estimate," "project," "plan," "believe," "probable," "reasonably possible," "may," "could," "should," "intends," "foreseeable future" and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of future financial performance, our anticipated growth and trends in the Company's businesses, and other characterizations of future events or circumstances are forward-looking statements. These statements must be considered in connection with the discussion of the important factors that could cause actual results to differ materially from the forward-looking statements. Attention should be given to the factors identified and discussed in the Company's annual report on Form 10-K filed on February ~~23, 2018.~~

22, 2019.

Overview

Expeditors International of Washington, Inc. (herein referred to as "Expeditors," the "Company," "we," "us," "our") provides a full suite of global logistics services. Our services include air and ocean freight consolidation and forwarding, customs brokerage, warehousing and distribution, purchase order management, vendor consolidation, time-definite transportation services, temperature-controlled transit, cargo insurance, specialized cargo monitoring and tracking, and other logistics solutions. We do not compete for overnight courier or small parcel business. As a non-asset based carrier, we do not own or operate transportation assets.

We derive our revenues by entering into agreements that are generally comprised of a single performance obligation, which is that freight is shipped for and received by our customer. Each performance obligation is comprised of one or more of the Company's services. We typically satisfy our performance obligations as services are rendered over time. A typical shipment would include services rendered at origin, such as pick-up and delivery to port, freight services from origin to destination port and destination services, such as customs clearance and final delivery. Our three principal services are the revenue categories presented in our financial statements: 1) airfreight services, 2) ocean freight and ocean services, and 3) customs brokerage and other services. The most significant drivers of changes in gross revenues and related transportation expenses are volume, sell rates and buy rates. Volume has a similar effect on the change in both gross revenues and related transportation expenses in each of our three primary sources of revenue.

We generate the major portion of our air and ocean freight revenues by purchasing transportation services on a wholesale basis from direct (asset-based) carriers and then reselling those services to our customers on a retail basis. The ~~difference between the~~ rate billed to our customers (the sell rate) is recognized as revenues and the rate we pay to the carrier (the buy rate) is ~~termed “net revenue” (a non-GAAP measure), “yield” or “margin.”~~recognized in operating expenses as the directly related cost of transportation and other expenses. By consolidating shipments from multiple customers and concentrating our buying power, we are 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.

In most cases, we act as an indirect carrier. When acting as an indirect carrier, we issue a House Airway Bill (HAWB), a House Ocean Bill of Lading (HOBL) or a House Seaway Bill to customers as the contract of carriage. In turn, when the freight is physically tendered to a direct carrier, we receive a contract of carriage known as a Master Airway Bill for airfreight shipments and a Master Ocean Bill of Lading for ocean shipments.

Customs brokerage and other services involve 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 customers as well as arranging for any required inspections by governmental agencies, and import services such as arranging for delivery. These are complicated functions requiring technical knowledge of customs rules and regulations in the multitude of countries in which we have offices. We also provide other value added services at destination, such as warehousing and distribution, time-definitive transportation services and consulting.

In these transactions, we evaluate whether it is appropriate to record the gross or net amount as revenue. Generally, revenue is recorded on a gross basis when we are primarily responsible for fulfilling the promise to provide the services, when we assume risk of loss, when we have discretion in setting the prices for the services to the customers, and we have the ability to direct the use of the services provided by the third party. When revenue is recorded on a net basis, the amounts earned are determined using a fixed fee, a per unit of activity fee or a combination thereof. For revenues earned in other capacities, for instance, when we do not issue a HAWB, a HOBL or a House Seaway Bill or otherwise act solely as an agent for the shipper, only the commissions and fees earned for such services are included in revenues. In these transactions, we are not a principal and report only commissions and fees earned in revenue.

We manage our company along five geographic areas of responsibility: Americas; North Asia; South Asia; Europe; and Middle East, Africa and India (MAIR). Each area is divided into sub-regions that are composed of operating units with individual profit and loss responsibility. Our 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 examine any one geographic area and draw meaningful conclusions as to its contribution to our overall success on a stand-alone basis.

Our operating units share revenue using the same arms-length pricing methodologies that we use when our offices transact business with independent agents. Certain costs are allocated among the segments based on the relative value of the underlying services, which can include allocation based on actual costs incurred or estimated cost plus a profit margin. Our strategy closely links compensation with operating unit profitability, which includes shared revenues and allocated costs. Therefore, individual success is closely linked to cooperation with other operating units within our network.

The mix of services varies by segment based primarily on the import or export orientation of local operations in each of our regions. ~~In accordance with our revenue recognition policy (see Notes 1B and 2~~ ~~to the condensed consolidated financial statements in this report~~), almost all freight revenues and related expenses are recorded at origin and shipment profits are split between origin and destination offices by recording a commission fee or profit share revenue at destination and a corresponding commission or profit share expense as a component of origin consolidation costs.

Expeditors' Culture and Strategy

From the inception of our 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. We believe that our greatest challenge is now and always has been perpetuating a consistent global corporate culture, which demands:

•

Total dedication to providing superior customer service;

~~Total dedication to providing superior customer service;~~

•

Compliance with our policies and procedures and government regulations;

~~Compliance with our policies and procedures and government regulations;~~

•

Aggressive marketing of all of our service offerings;

~~Aggressive marketing of all of our service offerings;~~

•

A positive, safe work environment that is inclusive and free from discrimination and harassment;

~~A positive, safe work environment that is inclusive and free from discrimination and harassment;~~

•

Ongoing development of key employees and management personnel;

~~Ongoing development of key employees and management personnel;~~

•

Creation of unlimited advancement opportunities for employees dedicated to hard work, personal growth and continuous improvement;

~~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 change occurs, a qualified and well-trained internal candidate is ready to step forward; and

Individual commitment to the identification and mentoring of successors for every key position so that when change occurs, at least one qualified and well-trained internal candidate is ready to step forward;

•

Continuous identification, design and implementation of system solutions and differentiated service offerings, both technological and otherwise, to meet and exceed the needs of our customers while simultaneously delivering tools to make our employees more efficient and effective.

We reinforce 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 we became a publicly traded company. There is no limit to how much a key manager can be compensated for success. We believe in a “real world” environment where the employees of our operating units are held accountable for the profit implications of their decisions. If these decisions result in operating losses, management generally must make up these losses with future operating profits, in the aggregate, before any cash incentive compensation can be earned. Executive management, in limited circumstances, makes exceptions at the branch operating unit level. At the same time, our policies, processes and relevant training focus on such things as cargo management, risk mitigation, compliance, accounts receivable collection, cash flow and credit soundness in an attempt to help managers avoid the kinds of errors that might end a career.

We believe that our unique culture is a critical component to our continued success. We strongly believe that it is nearly impossible to predict all events that, individually or in the aggregate, could have a positive or a negative impact on our future operations. As a result, management's focus is on building and maintaining a global corporate culture and an environment where well-trained employees and managers are prepared to identify and react to changes as they develop and thereby help us adapt and thrive as major trends emerge.

Our business growth strategy emphasizes a focus on the right markets and, within each market, on the right customers that lead to profitable business growth. Expeditors' teams are aligned on the specific markets; on the targeted accounts within those markets; and on ways that we can continue to differentiate ourselves from our competitors.

Our ability to provide services to customers is highly dependent on good working relationships with a variety of entities including airlines, ocean carriers, ground transportation providers and governmental agencies. The significance of maintaining acceptable working relationships with these entities has gained increased importance as a result of ongoing concern over terrorism, security, changes in governmental regulation and oversight of international 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. We consider our current working relationships with these entities to be satisfactory.

Our business is also highly dependent on the financial stability and operational capabilities of the carriers we utilize. Although airline profitability has improved, many ~~air~~ carriers remain highly leveraged with debt. Moreover, the ocean carrier industry has incurred substantial losses in recent years. Many carriers are highly leveraged with debt and certain carriers are facing significant liquidity challenges. This environment requires that we be selective in determining which carriers to utilize. Further changes in the financial stability, operating capabilities and capacity of asset-based carriers, ~~space~~capacity allotments available from carriers, governmental regulations, and/or trade accords could adversely affect our business in unpredictable ways.

International Trade and Competition

We operate in over 60 countries in the competitive global logistics industry and our activities are closely tied to the global economy. International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange rates, ~~and~~ laws and policies relating to tariffs, trade restrictions, foreign investments and taxation. Periodically, governments consider a variety of changes to tariffs and trade restrictions and ~~accords, such as we~~accords. Currently, the United States and China have significantly increased tariffs on certain imports and are ~~currently experiencing.~~engaged in trade negotiations. The United Kingdom and the European Union are negotiating the terms of the United Kingdom's exit from the European Union. We cannot predict ~~which, if any,~~the outcome of these proposals ~~may be adopted,~~or negotiations, or the effects ~~the adoption of any such proposal~~they will have on our business. As governments implement higher tariffs on imports, manufacturers may accelerate, to the extent possible, shipments to avoid higher tariffs and, over time, may shift manufacturing to other countries. Doing business in foreign locations also subjects us to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to being influenced by governmental policies and inter-governmental disputes concerning international trade, our business may also be negatively affected by political developments and changes in government personnel or policies in the United States and other countries, as well as economic turbulence, political unrest and security concerns in the nations and on the trade shipping lanes in which we conduct business and the future impact that these events may have on international trade, oil prices and ~~oil prices.~~

security costs.

The global logistics services industry is intensely competitive and is expected to remain so for the foreseeable future. Our pricing and terms continue to be pressured by uncertainty in global trade and economic conditions, concerns over volatile fuel costs, disruptions in port services, political unrest and fluctuating currency exchange rates. We expect these operating and competitive conditions to continue.

Ocean carriers have incurred substantial operating losses in recent years, and many are highly leveraged with debt. These financial challenges have resulted in multiple carrier acquisitions and carrier alliance formations. Additionally, ~~while overall global demand has recently increased,~~ carriers continue to take delivery of new and larger ships, which ~~creates additional~~may increase capacity. Carriers also face new regulatory requirements that become effective in 2020 ~~to reduce~~requiring reductions in the ~~use of~~sulfur in marine fuel, ~~sulfur,~~ which ~~is expected to increase~~are increasing their operating and capital costs. When the market experiences seasonal peaks or any sort of disruption, the carriers often increase their pricing suddenly. This carrier behavior creates pricing volatility that could impact Expeditors' ability to maintain historical unitary profitability.

~~Currently, there~~

There is uncertainty as to how new regulatory requirements and changes in oil prices will continue to impact future buy rates. Because fuel is an integral part of carriers' costs and impacts both our ~~cargo space~~ buy rates and ~~our~~ sell rates, ~~to customers,~~ we would expect our ~~gross~~ revenues and costs to be impacted as carriers adjust rates for the effect of changing fuel prices. To the extent that we are unable to pass through any increases to our customers, this could adversely affect our ~~net revenues.~~

operating income.

The global economic ~~environment~~ and trade ~~growth~~environments remain uncertain. We cannot predict the impact of future changes in global trade on our operating results, freight volumes, pricing, changes in consumer demand, carrier stability and capacity, customers’ abilities to pay or on changes in competitors' behavior. Additionally, we cannot predict the direct or indirect impact that further changes in consumer purchasing behavior, such as online shopping, could have on our business.

In response to governments implementing higher tariffs on imports, some customers have begun shifting manufacturing to other countries which could negatively impact us.

Seasonality

Historically, our operating results have been subject to seasonal demand trends with the first quarter being the weakest and the third and fourth quarters being the strongest; however, there is no assurance this seasonal trend will occur in the future. This pattern has been the result of, or influenced by, numerous factors, including weather patterns, national holidays, consumer demand, new product launches, economic conditions, governmental policies and inter-governmental disputes and a myriad of other similar and subtle forces. In addition, this historical quarterly trend has been influenced by the growth and diversification of our international network and service offerings.

A significant portion of our revenues is derived from customers in the retail and technology industries whose shipping patterns are tied closely to consumer demand, and from customers in industries whose shipping patterns are dependent upon just-in-time production schedules. Therefore, the timing of our revenues are, to a large degree, impacted by factors out of our control, such as a sudden change in consumer demand for retail goods, changes in trade tariffs, product launches and/or manufacturing production delays. Additionally, many customers ship a significant portion of their goods at or near the end of a quarter and, therefore, we may not learn of a shortfall in revenues until late in a quarter.

To the extent that a shortfall in revenues or earnings was not expected by securities analysts or investors, any such shortfall from levels predicted by securities analysts or investors could have an immediate and adverse effect on the trading price of our stock. We cannot accurately forecast many of these factors, nor can we estimate accurately the relative influence of any particular factor and, as a result, there can be no assurance that historical patterns will continue in future periods.

Critical Accounting Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and judgments. We base our estimates on historical experience and on assumptions that we believe are reasonable. Our critical accounting estimates are discussed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our annual report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed on February ~~23, 2018.~~22, 2019. There have been no material changes to the critical accounting estimates previously disclosed in that report.

Results of Operations

The following table shows the revenues, ~~and~~the directly related cost of transportation and other expenses for our principal services and ~~total net revenues (a non-GAAP measure calculated as revenues less directly related operating expenses attributable to~~ our ~~principal services) and our~~overhead expenses for the three and ~~nine-month periods~~nine months ended September 30, ~~2018~~2019 and ~~2017, expressed as percentages of net revenues. Management believes that net revenues are a better measure than total revenues when analyzing~~2018, including the respective percentage changes comparing 2019 and discussing management's effectiveness in managing our principal services since total revenues earned by Expeditors as a freight consolidator include the carriers’ charges to us for carrying the shipment, whereas revenues earned by Expeditors in our other capacities include primarily the commissions and fees actually earned by us. Net revenue is one of our primary operational and financial measures and demonstrates our ability to manage sell rates to customers with our ability to concentrate and leverage our purchasing power through effective consolidation of shipments from multiple customers utilizing a variety of transportation carriers and optimal routings. Using net revenue also provides a commonality for comparison among various services.2018.

The table and the accompanying discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes thereto in this quarterly report.

	Three months ended September 30,					Nine months ended September 30,
(in thousands)	2019		2018		Percentage change	2019		2018		Percentage change
Airfreight services:
Revenues	$	715,450	$	833,338	(14)%	$	2,171,928	$	2,366,326	(8)%
Expenses		522,868		620,554	(16)		1,574,717		1,727,383	(9)
Ocean freight services and ocean services:
Revenues		585,374		585,810	—		1,697,824		1,636,701	4
Expenses		424,215		435,313	(3)		1,234,845		1,199,887	3
Customs brokerage and other services:
Revenues		774,031		671,799	15		2,260,733		1,899,741	19
Expenses		453,416		373,766	21		1,330,758		1,035,800	28
Overhead expenses:
Salaries and related costs		356,331		351,577	1		1,069,592		1,042,420	3
Other		111,475		106,583	5		334,221		317,722	5
Total overhead expenses		467,806		458,160	2		1,403,813		1,360,142	3
Operating income		206,550		203,154	2		586,352		579,556	1
Other income (expense), net		7,396		5,270	40		23,945		16,528	45
Earnings before income taxes		213,946		208,424	3		610,297		596,084	2
Income tax expense		53,319		45,357	18		156,029		155,871	—
Net earnings		160,627		163,067	(1)		454,268		440,213	3
Less net earnings attributable to the noncontrolling interest		406		375	8		1,199		1,224	(2)
Net earnings attributable to shareholders	$	160,221	$	162,692	(2)%	$	453,069	$	438,989	3%

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
Amount
Percent
of net
revenues
Amount
Percent
of net
revenues
Amount
Percent
of net
revenues
Amount
Percent
of net
revenues

(in thousands)
Airfreight services:
Revenues $ 833,338
$ 735,164
$ 2,366,326
$ 2,022,577

Expenses 620,554
547,595
1,727,383
1,490,417

Net revenues 212,784
32 % 187,569
31 % 638,943
33 % 532,160
31 %
Ocean freight services and ocean services:
Revenues 585,810
563,386
1,636,701
1,585,730

Expenses 435,313
411,061
1,199,887
1,163,051

Net revenues 150,497
23
152,325
26
436,814
23
422,679
25

Customs brokerage and other services:
Revenues 671,799
503,616
1,899,741
1,411,270

Expenses 373,766
244,368
1,035,800
675,729

Net revenues 298,033
45
259,248
43
863,941
44
735,541
44

Total net revenues 661,314
100
599,142
100
1,939,698
100
1,690,380
100

Overhead expenses:
Salaries and related costs 351,577
53
319,050
53
1,042,420
54
930,159
55

Other 106,583
16
93,197
16
317,722
16
258,972
15

Total overhead expenses 458,160
69
412,247
69
1,360,142
70
1,189,131
70

Operating income 203,154
31
186,895
31
579,556
30
501,249
30

Other income (expense), net 5,270
1
3,540
1
16,528
1
12,149
1

Earnings before income taxes 208,424
32
190,435
32
596,084
31
513,398
31

Income tax expense 45,357
7
69,829
12
155,871
8
190,470
12

Net earnings 163,067
25
120,606
20
440,213
23
322,928
19

Less net earnings attributable to the noncontrolling interest 375
—
343
—
1,224
—
550
—

Net earnings attributable to shareholders $ 162,692
25 % $ 120,263
20 % $ 438,989
23 % $ 322,378
19 %

Airfreight services:

Airfreight services revenues ~~increased 13%~~decreased 14% and ~~17%, respectively,~~ in8% during the three and ~~nine-month periods~~nine months ended September 30, ~~2018~~,2019, respectively, as compared with the same periods for ~~2017,~~2018, primarily due to ~~higher~~7% and 5% declines in tonnage and lower average sell rates ~~in response to increased buy rates resulting~~ from ~~higher overall~~the softening of market demand due to slowing of the global economy and ~~tonnage growth of 1%~~continuing inter-governmental trade disputes. North Asia and 3%North America revenues decreased 22% and 17%, ~~respectively.~~ respectively, for the three months ended September 30, 2019 and 13% each for the nine months ended September 30, 2019.

Airfreight services expenses ~~increased 13%~~decreased 16% and ~~16% in~~9% during the three and ~~nine-month periods~~nine months ended September 30, 2019, respectively, as compared with the same periods for 2018, principally as a result of ~~the increase~~7% and 5% declines in tonnage and ~~higher~~lower average buy rates due to ~~tighter~~available carrier capacity ~~and increased fuel prices.~~

~~Airfreight services net revenues increased 13% in the three-month period ended~~ ~~September 30, 2018, as compared with the same period for 2017. This was due~~relative to ~~a 1% growth in tonnage and a 10% increase in net revenue per kilo, resulting from adjustments to average sell rates that increased commensurate with higher average buy rates. North America, Europe,~~market demand. North Asia and ~~South Asia net revenues increased by 14%~~North America directly related expenses decreased 24% and 21%, 16%, 10% and 19%. These increases were primarily due to higher average sell rates that outpaced increased buy rates in all regions other than South Asia. Tonnage also grew in each of these geographical segments except North Asia, which decreased 5%.

~~Airfreight services net revenues increased 20%~~respectively, for the ~~nine-month period~~three months ended September 30, ~~2018, as compared with the same period for 2017. This was principally due to a 19% increase in net revenue per kilo~~2019 and 3% growth in tonnage. Average net revenue per kilo increased in most regions primarily due to higher average sell rates that increased commensurate with higher average buy rates. North America, Europe and South Asia net revenues increased by 20%, 20%14% and 16%, respectively, ~~while tonnage increased 8%, 7%, and 3%, respectively.~~ for the nine months ended September 30, 2019.

Most regions experienced decreases in tonnage. North Asia ~~net revenues increased by 23% despite~~and North America had decreases in tonnage ~~decreases~~at 11% and 7%, respectively, for the three months ended September 30, 2019 and 9% and 5%, respectively, for the nine months ended September 30, 2019. The largest declines in tonnage were exports out of ~~3%. In 2017, carriers significantly increased pricing in~~ North Asia to Europe and the United States as ~~a result of higher demand relative~~well as exports from the United States to ~~available capacity.~~

~~Since late 2016, the~~North Asia.

The global airfreight market has been experiencing imbalances between carrier capacity and demand in certain lanes, which is resulting in ~~higher average~~lower buy and sell rates. These conditions are exacerbated by on-going inter-governmental trade disputes and uncertainties. Customers remain focused on improving supply-chain efficiency, reducing overall logistics costs by negotiating lower rates and utilizing ocean freight whenever possible. At the same time, customers are increasingly utilizing airfreight to improve speed to market. We expect these trends to continue in conjunction with carriers' efforts to manage available capacity and the evolution of consumer purchasing behavior, such as online shopping. These conditions could be affected by new product launches and customer responses to governmental trade policies during periods that have historically experienced higher demand. These conditions, should they continue to occur, could create a higher degree of volatility in volumes and, ultimately, buy and sell rates.

Ocean freight and ocean services:

Ocean freight consolidation, direct ocean forwarding and order management are the three basic services that constitute and are collectively referred to as ocean freight and ocean services. Ocean freight and ocean services revenues remained flat while expenses decreased 3% for the three months ended September 30, 2019 as compared with the same period in 2018. Ocean freight and ocean services revenues and expenses increased 4% and 3%, respectively, for the ~~three and nine-month periods~~nine months ended September 30, 2018, as compared with the same periods in 2017. The increases in the third quarter and first nine months of the year resulted primarily from 8% and 4% growth in container volume, respectively. Ocean freight and ocean services expenses increased 6% and 3%, respectively, for the three and nine-month periods ended September 30, 2018, due primarily to growth in container volume.

~~Ocean freight and ocean services net revenues decreased 1% and increased 3%, respectively, for the three and nine-month periods ended September 30, 2018, as compared with the same periods in 2017.~~2019. The largest component of our ocean freight ~~net~~ revenue was derived from ocean freight consolidation, which represented ~~43%~~65% and ~~46%~~67% of the ocean freight ~~net revenue~~revenues for the ~~nine-month periods~~nine months ended September 30, 2019 and 2018, ~~and 2017,~~ respectively.

Ocean freight consolidation ~~net~~ revenues and expenses decreased ~~13% in~~4% and 6%, respectively, for the ~~third quarter of~~ ~~2018~~,three months ended September 30, 2019 as compared with the same period in ~~2017, due primarily to a 19% decline in net revenue per container,~~2018, primarily due to ~~lowering our sell rates~~a 2% decline in ~~response to competitive market conditions,~~containers shipped, which was partially offset by ~~an 8%~~ increase in ~~volume.~~ sell and buy rates, respectively.Ocean freight consolidation ~~net~~ revenues ~~decreased 3% in~~and expenses both increased 1% for the ~~first~~ nine months of ~~2018~~,ended September 30, 2019, primarily due ~~primarily~~ to a ~~6% decrease~~1% increase in ~~net revenue per container, partially offset by a 4% growth~~containers shipped and higher average sell and buy rates, respectively.The changes in ~~container volume.~~ freight consolidation revenues and directly related expenses include the revised presentation of destination services in 2019, which decreased revenues and directly related operating expenses in ocean freight consolidation but did not change consolidated operating income.

Direct ocean freight forwarding ~~net~~revenues increased 9% and 8%, respectively, while expenses increased 10% for both the three and nine months ended September 30, 2019 primarily due to higher volumes in North America and Europe. Order management revenues increased ~~15%~~7% and 8%, respectively, expenses increased 8% and 10%, respectively, for the three and nine months ended September 30, 2019 primarily due to higher volumes in South Asia.

North Asia ocean freight and ocean services revenues decreased 13% and 5%, respectively, and directly related expenses decreased 16% and 7%, respectively, for the three and ~~nine-month periods~~nine months ended September 30, ~~2018,~~ 2019 primarily due to ~~higher volumes~~decrease in ~~North~~container volume. This was partially offset by an increase in South Asia and Europe. Order management net revenues increased 5% and 10%, respectively, in the third quarter and the nine-month period ended September 30, 2018, mostly resulting from higher volumes with new and existing customers primarily in North Asia and North America.

~~North America~~ ocean freight and ocean services ~~net~~ revenues, ~~remained flat~~up 20% and ~~increased 2%~~19%, respectively, and directly related expenses up 16% for both the three and ~~nine-month periods~~nine months ended September 30, ~~2018,~~2019 primarily due to an increase in container volume and higher ~~export volumes, largely offset by higher average export costs. Europe~~sell and North Asia net revenues decreased 2% and 4%, respectively, in the third quarter due primarily to lower net revenue per container, partially offset by growth in direct ocean freight forwarding. Europe net revenues increased 12% for the nine-month period ended September 30, 2018 due primarily to growth in direct ocean freight forwarding. North Asia net revenues increased 1% for the nine-month period ended September 30, 2018 as growth in direct ocean forwarding and order management was largely offset by lower net revenue per container. South Asia net revenues increased 4% in both the third quarter and nine-month period due principally to growth in order management.

buy rates.

We expect that pricing volatility will continue as customers solicit bids, react to governmental trade policies, and carriers adapt to changes in capacity and market demand, merge or create alliances with other carriers. Carriers also face new regulatory requirements that become effective in 2020 to reduce the use of sulfur in marine fuel, which are increasing their operating and capital costs, which could result in higher costs for us. These conditions could result in lower ~~margins.~~

operating income.

Customs brokerage and other services:

Customs brokerage and other services revenues increased ~~33%~~15% and ~~35%~~19% and expenses increased 21% and 28%, ~~respectively,~~ for the three and ~~nine-month periods~~nine months ended September 30, ~~2018,~~2019, respectively, as compared with the same periods in ~~2017,~~2018, primarily ~~as a result of higher volumes in customs~~due to increased demand for brokerage services and time-definite value added road freight ~~and warehouse and distribution~~ services. Customs brokerage and other services expenses increased 53% for both the three and nine-month periods ended September 30, 2018, as compared with the same periods in 2017, principally as a result of higher volumes. In conjunction with the adoption of the new revenue recognition standard, we analyzed contracts with customers in our warehouse and distribution business. In 2018, we changed our presentation of certain warehouse and distribution revenues from a net to a gross basis, which increased both revenues and operating expenses by approximately $50 million in each of the first three quarters of 2018.

Customs brokerage and other services net revenues increased 15% and 17%, respectively, for the three and nine-month periods ended September 30, 2018, as compared with the same periods in 2017, primarily as a result of an increase in customs brokerage, road freight and distribution volumes, particularly in North America, Europe and North Asia. Customers ~~continue to seek out~~are seeking knowledgeable customs brokers ~~such as Expeditors,~~ with sophisticated computerized capabilities critical to an overall logistics management program, ~~including rapid responses~~necessary to rapidly respond to changes in the regulatory and security environment.

The 2019 results include the effect of changing our presentation of certain import services from a net to a gross basis and our revised presentation of destination services, which increased revenues and directly related operating expenses in customs brokerage and other services but did not change operating income.

North America ~~net~~ revenues increased ~~13%~~23% and ~~14%~~30% and directly related expenses increased 31% and 45%, ~~respectively,~~ for the three and ~~nine-month periods~~nine months ended September 30, ~~2018,~~2019, respectively, as compared with the same periods for ~~2017,~~ 2018, primarily as a result of higher volumes in customs brokerage and road freight and ~~distribution~~the effect of the change in presentation of certain import services. Europe net revenues increased 26% and 32% primarily due to higher customs brokerage, road freight and distributions services net revenues. North Asia net revenues increased 26% and 28% primarily due to higher customs brokerage volumes.

Overhead expenses:

Salaries and related costs increased ~~10%~~1% and ~~13%, respectively,~~ 3% for the three and ~~nine-month periods~~nine months ended September 30, ~~2018,~~ 2019, respectively, as compared with the same periods in ~~2017,~~2018, principally due ~~principally~~ to an increase in the number of employees, primarily in North America and Europe, and higher base salaries and ~~benefits and increased bonuses from higher operating income.~~sales commissions. The number of employees increased primarily to support increased activity in our business operations.

Historically, the relatively consistent relationship between salaries and ~~net revenues~~revenue has been the result of a compensation philosophy that has been maintained since the inception of our company: offer a modest base salary and the opportunity to share in a fixed and determinable percentage of the operating profit of the business unit controlled by each key employee. Using this compensation model, changes in individual incentive compensation occur in proportion to changes in our operating income, creating an alignment between branch and corporate performance and shareholder interests. ~~Bonuses to field and executive management for the nine-month period ended September 30, 2018 were up 17% while operating income increased 16%.~~

Our management compensation programs have always been incentive-based and performance driven. ~~Salaries and related costs as a percentage of net revenues decreased from 55%~~Bonuses to ~~54%~~field management for the ~~nine-month period~~nine months ended September 30, ~~2018, as~~2019 were up 2% when compared to the same period in ~~2017.~~

2018. Bonuses under the executive incentive compensation plan were down 7%, primarily due to a3% reduction made to senior executive management bonus allocations, as well as unused bonus allocations available for future investments in the development of key personnel.

Because our management incentive compensation programs are also cumulative, generally no management bonuses can be paid unless the relevant business unit is, from inception, cumulatively profitable. Any operating losses must be offset in their entirety by operating profits before management is eligible for a bonus. Executive management, in limited circumstances, makes exceptions at the branch operating unit level. Since the most significant portion of management compensation comes from the incentive bonus programs, we believe that this cumulative feature is a disincentive to excessive risk taking by our managers. ~~Due to the nature of our 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~~the short operating cycle of our services, the potential for short-term gains that could be generated by engaging in risky business practices is sufficiently mitigated to discourage excessive and inappropriate risk taking. Management believes that both the stability and the long-term growth in revenues, ~~net revenues~~operating income and net earnings are a result of the incentives inherent in our compensation programs.

Other overhead expenses increased ~~14% and 23%, respectively,~~5% for the three and ~~nine-month periods~~nine months ended September 30, ~~2018,~~2019, as compared with the same periods in ~~2017.~~ 2018. The increase in expenses was due to renting additional space, ~~and~~occupancy costs, technology-related fees, claims expense and consulting expenses, partially offset by lower ~~claims. In the second quarter of 2017, we recovered certain legal~~depreciation and ~~related costs totaling $8 million and had a favorable resolution of an indirect tax contingency of $6 million.~~amortization expense. We will continue to make important investments in people, processes and technology, as well as to invest in our strategic efforts to explore new areas for profitable growth. Other overhead expenses as a percentage of net revenues for the nine-month period ended September 30, 2018 increased 1% to 16% compared to the same period in 2017, principally as a result of the events in 2017 discussed above.

Income tax expense:

Our consolidated effective income tax rate was ~~21.8%~~ 24.9%and ~~26.1%, respectively,~~25.6% for the three and ~~nine-month periods~~nine months ended September 30, ~~2018~~,2019, respectively, as compared to ~~36.7%~~21.8% and ~~37.1%~~26.1% for the comparable periods in ~~2017.~~2018. The effect of higher average tax rates of our international subsidiaries, when compared to U.S. federal and state tax rates, were partially offset by U.S. foreign tax credits and U.S. income tax deductions for Foreign-derived intangible income (FDII). In addition, to the ~~lower U.S. federal tax rate that resulted from the 2017 Tax Act, the effective tax rate in~~three months ended September 30, 2018 benefited from ~~significant share-based compensation deductions principally as a result of stock option exercises occurring during the second quarter of 2018,~~ required discrete adjustments as a result of interpretations issued related to the 2017 Tax Act ~~that included the recording of certain~~for foreign tax credits earned as a result of withholding taxes paid on repatriated foreign earnings ~~that totaled~~totaling $7 million and a state income tax refund oftotaling $4 million that settled during the ~~third~~same quarter ofin 2018. ~~These amounts were partially offset by certain expenses that are no longer deductible under the 2017 Tax Act.~~

Some elements of the recorded impacts of the 2017 Tax Act ~~are provisional as of September 30, 2018. The final amounts of provisional~~could be impacted by further legislative action as well as ~~other recorded income tax amounts may differ, possibly materially, due to various factors.~~additional interpretations and guidance issued by the IRS or Treasury. See Note 4 to the ~~condensed~~ consolidated financial statements for additional information.

Currency and Other Risk Factors

The nature of our worldwide operations necessitates dealing with a multitude of currencies other than the U.S. dollar. This results in our being exposed to the inherent risks of volatile international currency markets and governmental interference. Some of the countries where we maintain offices and/or agency relationships have strict currency control regulations, which influence our ability to hedge foreign currency exposure. We try to compensate for these exposures by accelerating international currency settlements among our offices and agents. We may enter into foreign currency hedging transactions where there are regulatory or commercial limitations on our ability to move money freely around the world or the short-term financial outlook in any country is such that hedging is the most time-sensitive way to mitigate short-term exchange losses. Any such hedging activity during the three and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 was insignificant. We had no foreign currency derivatives outstanding at September 30, ~~2018~~2019 and December 31, ~~2017~~.2018. During the three and ~~nine-month periods~~nine months ended September 30, 2019, net foreign currency losses were approximately $1 million and $5 million, respectively. During the three and nine months ended September 30, 2018, net foreign currency losses were approximately $3 million and $1 million, respectively. ~~During the three and nine-month periods ended September 30, 2017, net foreign currency losses were approximately $3 million and $12 million, respectively.~~

International air and ocean freight forwarding and customs brokerage are ~~intensively~~intensely competitive and are expected to remain so for the foreseeable future. There are a large number of entities competing in the international logistics industry, including new technology-based competitors entering the industry, many of which have significantly more resources than us; however, our primary competition is confined to a relatively small number of companies within this group. Expeditors 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 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. We emphasize quality customer service and believe that our prices are competitive with those of others in the industry. Customers regularly solicit bids from competitors in order to improve service, pricing and contractual terms such as seeking longer payment terms, higher or unlimited liability limits and performance penalties. Increased competition and competitors' acceptance of expanded contractual terms could result in reduced revenues, reduced ~~margins,~~operating income, higher operating costs, higher claims or loss of market share, any of which would damage our results of operations and financial condition.

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. We believe 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

Our principal source of liquidity is cash and cash equivalents and cash generated from operating activities. Net cash provided by operating activities for the three and nine months ended September 30, ~~2018~~2019 was ~~$87~~$161 million and ~~$471~~$607 million, respectively, as compared with ~~$85~~$87 million and ~~$362~~$471 million for the same periods in ~~2017.~~2018. The increases of $2$74 million and ~~$109~~$136 million ~~respectively,~~ in the ~~third quarter~~three and ~~first~~ nine months ~~of 2018 are~~ended September 30, 2019, respectively, were primarily due to ~~higher earnings, offset by~~ changes in working capital. At September 30, ~~2018,~~2019, working capital was ~~$1,369~~$1,586 million, including cash and cash equivalents of ~~$991 million. We~~$1,216 million. Other than our recorded lease liabilities, we had no long-term obligations or debt at September 30, ~~2018~~.2019. Management believes that our current cash position and operating cash flows will be sufficient to meet our capital and liquidity requirements for at least the next 12 months and thereafter for the foreseeable future, including meeting any contingent liabilities related to standby letters of credit and other obligations.

As a customs broker, we make significant cash advances for a select group of our credit-worthy customers. These cash advances are for customer obligations such as the payment of duties and taxes to customs authorities in various countries throughout the world. Increases in duty rates could result in increases in the amounts we advance on behalf of our customers. Cash advances are a “pass through” and are not recorded as a component of revenue and expense. The billings of such advances to customers are accounted for as a direct increase in accounts receivable from the customer and a corresponding increase in accounts payable to governmental customs authorities. As a result of these “pass through” billings, the conventional Days Sales Outstanding or DSO calculation does not directly measure collection efficiency. For customers that meet certain criteria, we have agreed to extend payment terms beyond our customary terms. Management believes that it has established effective credit control procedures, and historically has experienced relatively insignificant collection problems.

Our business historically has been subject to seasonal fluctuations and this is expected to continue in the future. Cash flows fluctuate as a result of this seasonality. Historically, the first quarter shows an excess of customer collections over customer billings. This results in positive cash flow. The increased activity associated with periods of higher demand (typically commencing late second or early third quarter and continuing well into the fourth quarter) causes an excess of customer billings over customer collections. This cyclical growth in customer receivables consumes available cash.

Cash used in investing activities for the three and nine months ended September 30, ~~2018~~2019 was $15 million and $36 million, respectively, as compared with $11 million and $39 million ~~respectively, as compared with $35 million and $68 million~~ in the same ~~period~~periods of ~~2017. We had~~2018, primarily for capital ~~expenditures of $12 million and $38 million for the three and nine-month periods ended September 30, 2018, respectively, as compared with $34 million and $68 million for the same periods in 2017.~~expenditures. Capital expenditures in the three and nine months ended September 30, ~~2018~~2019 were related primarily to continuing investments in technology ~~building construction,~~and building and leasehold improvements. Occasionally, we elect to purchase buildings to house staff and to facilitate the staging of customers’ freight. Total anticipated capital expenditures in ~~2018~~2019 are currently estimated to be ~~$55~~$50 million. This includes routine capital expenditures and investments in technology.

Cash used in financing activities during the three and nine months ended September 30, ~~2018~~2019 was ~~$101~~$1 million and ~~$470~~$269 million, respectively, as compared with ~~$137~~$101 million and ~~$254~~$470 million for the same periods in ~~2017~~.2018. We use the proceeds from stock option exercises, employee stock purchases and available cash to repurchase our common stock on the open market to limit the growth in issued and outstanding shares. During the three and nine months ended September 30, ~~2018,~~2019, we used cash to repurchase ~~2.0~~0.9 million and ~~7.8~~4.1 million shares, respectively, to reduce the number of total outstanding shares, compared to ~~3.6~~2.0 million and ~~6.1~~7.8 million shares ~~respectively,~~ in the same periods in ~~2017.~~

2018.

We follow established guidelines relating to credit quality, diversification and maturities of our investments to preserve principal and maintain liquidity. Historically, our investment portfolio has not been adversely impacted by disruptions occurring in the credit markets. However, there can be no assurance that our investment portfolio will not be adversely affected in the future.

We cannot predict what impact ongoing uncertainties in the global economy and political uncertainty may have on our operating results, freight volumes, pricing, amounts advanced on behalf of our customers, changes in consumer demand, carrier stability and capacity, customers’ abilities to pay or on changes in competitors' behavior.

We maintain international unsecured bank lines of credit. At September 30, ~~2018~~,2019, we were contingently liable for ~~$71~~$69 million from standby letters of credit and guarantees. The standby letters of credit and guarantees relate to obligations of our foreign subsidiaries for credit extended in the ordinary course of business by direct carriers, primarily airlines, and for duty and tax deferrals available from governmental entities responsible for customs and value-added-tax (VAT) taxation. The total underlying amounts due and payable for transportation and governmental excises are properly recorded as obligations in the ~~books~~accounting records of the respective foreign subsidiaries, and there would be no need to record additional expense in the unlikely event the parent company is required to perform.

As of September 30, ~~2018,~~2019, our contractual obligations are as follows:

			Payments due by period
In thousands	Total		Less than 1 year		1 - 3 years		3 - 5 years		After 5 years
Contractual Obligations:
Operating leases, including imputed interest	$	451,996		79,216		132,699		98,798		141,283
Unconditional purchase obligations		91,729		91,729		—		—		—
Construction, equipment and technology purchase obligations		51,264		25,612		23,213		2,207		232
Total contractual cash obligations	$	594,989		196,557		155,912		101,005		141,515

Payments due by period
In thousands Total

Less than
1 year

1 - 3
years

3 - 5
years

After
5 years
Contractual Obligations:
Operating leases $ 294,050
74,839
107,123
56,706
55,382
Unconditional purchase obligations 90,169
90,169
—

Construction, services and technology purchase obligations 59,502
26,397
22,553
10,552
—
Total contractual cash obligations $ 443,721
191,405
129,676
67,258
55,382

We typically enter 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. We only enter into agreements that management believes we can fulfill.

Our foreign subsidiaries regularly remit dividends to the U.S. parent company after evaluating their working capital requirements and ~~needs~~funds necessary to finance local capital expenditures. In some cases, our ability to repatriate funds from foreign operations may be subject to foreign exchange controls. At September 30, ~~2018~~,2019, cash and cash equivalent balances of ~~$467~~$419 millionwere held by our non-United States subsidiaries, of which $8$13 million was held in banks in the United States. Earnings of our foreign subsidiaries are not considered to be indefinitely reinvested outside of the United States.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. These risks are primarily related to foreign exchange risk and changes in short-term interest rates. The potential impact of our exposure to these risks is presented below:

Foreign Exchange Risk

We conduct business in many different countries and currencies. Our business often results in billings issued in a country and currency that differs from that where the expenses related to the service are incurred. In the ordinary course of business, we create numerous intercompany transactions and may have receivables, payables and currencies that are not denominated in the local functional currency. This brings foreign exchange risk to our earnings. The principal foreign exchange risks to which Expeditors is exposed ~~are in~~include Chinese Yuan, Euro, Mexican Peso, Canadian Dollar and British Pound.

Foreign exchange rate sensitivity analysis can be quantified by estimating the impact on our earnings as a result of hypothetical changes in the value of the U.S. dollar, our functional currency, relative to the other currencies in which we transact business. All other things being equal, an average 10% weakening of the U.S. dollar, throughout the nine months ended September 30, ~~2018,~~2019, would have had the effect of raising operating income by approximately ~~$42 million.~~$38 million. An average 10% strengthening of the U.S. dollar, for the same period, would have the effect of reducing operating income by approximately ~~$34~~$31 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.

We currently do not use derivative financial instruments to manage foreign currency risk and only enter into foreign currency hedging transactions in limited locations where regulatory or commercial limitations restrict our ability to move money freely. Any such hedging activity throughout the three and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 was insignificant. During the three and ~~nine-month periods~~nine months ended September 30, 2019, foreign currency losses were approximately $1 million and $5 million, respectively. During the three and nine months ended September 30, 2018, foreign currency losses were approximately $3 million and $1 million, respectively. ~~During the three and nine-month periods ended September 30, 2017, foreign currency losses were approximately $3 million and $12 million.~~ We had no foreign currency derivatives outstanding at September 30, ~~2018~~2019 and December 31, ~~2017~~.2018. We instead follow a policy of accelerating international currency settlements to manage foreign exchange risk relative to intercompany billings. As of September 30, ~~2018~~,2019, we had approximately ~~$25~~$35 millionof net unsettled intercompany transactions. The majority of intercompany billings are resolved within 30 days.

Interest Rate Risk

At September 30, ~~2018~~,2019, we had cash and cash equivalents of ~~$991~~$1,216 million,, of which ~~$546~~$818 million was invested at various short-term market interest rates. WeOther than our recorded lease liabilities, we had no long-term obligations or debt at September 30, ~~2018~~.2019. A hypothetical change in the interest rate of 10 basis points at September 30, ~~2018~~2019 would not have a significant impact on our earnings. In management’s opinion, there has been no material change in our interest rate risk exposure in the third quarter of ~~2018~~.

2019.

Item 4. Controls and Procedures

~~Evaluation of Controls and Procedures~~

We carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were 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 our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are developing a new accounting system, which is being implemented on a worldwide basis over the next several years. This system is expected to improve the efficiency of certain financial and transactional processes and reporting. This transition affects the processes that constitute our internal control over financial reporting and requires testing for operating effectiveness.

In 2018, we adopted new accounting standard Topic 606 Revenue from Contracts with Customers. The adoption of this standard resulted in changes to existing processes and systems. In particular, to capture information to measure the progress of completion of performance obligations under contracts with customers ~~both at transition and~~ on an on-going ~~basis.~~basis and these changes are continuing in 2019 as further enhancements to our accounting information systems are introduced. In 2019, we ~~will adopt a~~adopted the new accounting standard ~~related to accounting for leases.~~Topic 842 Leases. The adoption of ~~these~~this accounting ~~standards will require further~~standard resulted in continued changes to existing processes and systems, ~~that are an integral part~~including the implementation of ~~our internal controls~~a new leasing tracking and ~~will require testing for operating effectiveness.~~

accounting system, processes and procedures associated with properly identifying and classifying leases, and the calculation and recording of leasehold right-of-use assets and lease liabilities.

Our management has confidence in our internal controls and procedures. Nevertheless, our management, including Expeditors’ Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our 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 of our control issues and instances of fraud, if any, have been detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Expeditors is involved in claims, lawsuits, government investigations and other legal matters that arise in the ordinary course of business and are subject to inherent uncertainties. Currently, in management's opinion and based upon advice from legal advisors, none of these matters are expected to have a significant effect on our operations, cash flows or financial position. As of September 30, ~~2018,~~2019, the amounts accrued for these claims, lawsuits, government investigations and other legal matters are not significant to our operations, cash flows or financial position. At this time, we are unable to estimate any additional loss or range of reasonably possible losses, if any, beyond the amounts recorded, that might result from the resolution of these matters.

Item 1A. Risk Factors

In addition to the other information set forth in this report, careful consideration should be given to the risk factors under Item 1A Risk Factors in our Annual Report on Form 10-K filed on February 22, 2019. There have been no material changes in Expeditors' risk factors from those disclosed under Item 1A Risk Factors in our annual report on Form 10-K filed on February ~~23, 2018 other than the following:~~



~~International Trade~~		Expeditors primarily provides services to customers engaged in international commerce. Everything that affects international trade has the potential to expand or contract our primary market and adversely impact our operating results, cash flows or financial position. For example, international trade is influenced by:
		~~• currency exchange rates and currency control regulations;~~
		~~• interest rate fluctuations;~~
		• changes and uncertainties in governmental policies and inter-governmental disputes, which could result in increased tariff rates, quota restrictions, trade barriers and other types of restrictions;
		~~• changes in and application of international and domestic customs, trade and security regulations;~~
		~~• wars, strikes, civil unrest, acts of terrorism, and other conflicts;~~
		~~• changes in labor and other costs;~~
		~~• 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 working conditions and environmental sustainability.~~

22, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans		Maximum number of shares that may yet be purchased under the plans
July 1-31, 2019		—	$	—		—		11,025,843
August 1-31, 2019		881,474		69.50		881,474		9,949,780
September 1-30, 2019		10,454		70.02		10,454		10,243,147
Total		891,928	$	69.51		891,928		10,243,147

Period
Total number of
shares purchased

Average price
paid per share

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
July 1-31, 2018 —
$ —
—
5,753,457
August 1-31, 2018 1,614,336
73.10
1,614,336
3,608,635
September 1-30, 2018 397,709
74.99
397,709
2,822,424
Total 2,012,045
$ 73.47
2,012,045
2,822,424

In November ~~1993,~~2001, Expeditors' Board of Directors authorized a ~~Non-Discretionary~~Discretionary Stock Repurchase Plan for the purpose of repurchasing our 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 our common stock. This authorization has no expiration date. This plan was initially disclosed in our annual report on Form 10-K filed on March 31, 1995. In the ~~third~~ ~~quarter of~~ ~~2018~~, ~~944,378~~ ~~shares of common stock were repurchased under the Non-Discretionary Stock Repurchase Plan.~~

~~In November 2001, under a Discretionary Stock Repurchase Plan, Expeditors' Board of Directors authorized the repurchase of~~ our common stock in the open market to reduce the issued and outstanding stock down to 200 million shares. In February 2014, the Board of Directors authorized repurchases down to 190 million shares of common stock. In February and August 2015, May 2016 and November 2018, the Board of Directors further authorized repurchases down to 188 million, 180 million, 170 million and 160 million, respectively. The maximum number of shares available for repurchase under this plan will increase as the total number of outstanding shares increases. This authorization has no expiration date. ~~In the~~ ~~third~~ ~~quarter of~~ ~~2018~~, ~~1,067,667~~ ~~shares of common stock were repurchased under the Discretionary Stock Repurchase Plan.~~

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)
~~(a)~~	Not ~~applicable~~applicable.

(b)
~~(b)~~	Not ~~applicable~~applicable.

Item 6. Exhibits

Exhibits required by Item 601 of Regulation S-K.

Exhibit Number		Description
31.1
~~Exhibit Number~~		~~Description~~

~~31.1~~		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, has been formatted in Inline XBRL.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

November ~~7, 2018~~6, 2019		/s/ JEFFREY S. MUSSER
		Jeffrey S. Musser, President, Chief Executive Officer and Director

November ~~7, 2018~~6, 2019		/s/ BRADLEY S. POWELL
		Bradley S. Powell, Senior Vice President and Chief Financial Officer

Washington		91-1069248

~~Washington~~		~~91-1069248~~
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

1015 Third Avenue, Seattle, Washington		98104
(Address of principal executive offices)		(Zip Code)



x ☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



o ☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	September 30, 2018			December 31, 2017
Current Assets:
Cash and cash equivalents	$	990,612		$	1,051,099
Accounts receivable, less allowance for doubtful accounts of $13,696 at September 30, 2018 and $12,858 at December 31, 2017	1,528,524			1,414,741
Deferred contract costs	168,090			—
Other	59,247			75,612
Total current assets	2,746,473			2,541,452
Property and equipment, less accumulated depreciation and amortization of $441,433 at September 30, 2018 and $420,282 at December 31, 2017	510,328			525,203
Goodwill	7,927			7,927
Deferred Federal and state income taxes, net	43,293			13,207
Other assets, net	26,779			29,219
Total assets	$	3,334,800		$	3,117,008
Current Liabilities:
Accounts payable	$	934,509		$	866,305
Accrued expenses, primarily salaries and related costs	228,785			206,320
Contract liabilities	195,035			—
Federal, state and foreign income taxes	19,139			20,494
Total current liabilities	1,377,468			1,093,119
Noncurrent Federal income taxes payable	—			29,516

Commitments and contingencies

Shareholders’ Equity:
Preferred stock, none issued	—			—
Common stock, par value $0.01 per share. Issued and outstanding 172,564 shares at September 30, 2018 and 176,374 shares at December 31, 2017	1,726			1,764
Additional paid-in capital	1,832			546
Retained earnings	2,053,389			2,063,512
Accumulated other comprehensive loss	(101,098		)	(73,964		)
Total shareholders’ equity	1,955,849			1,991,858
Noncontrolling interest	1,483			2,515
Total equity	1,957,332			1,994,373
Total liabilities and equity	$	3,334,800		$	3,117,008



	Three months ended				Nine months ended
	September 30,				September 30,
	2018		2017		2018		2017
Revenues:
Airfreight services	$	833,338	$	735,164	$	2,366,326	$	2,022,577
Ocean freight and ocean services	585,810		563,386		1,636,701		1,585,730
Customs brokerage and other services	671,799		503,616		1,899,741		1,411,270
Total revenues	2,090,947		1,802,166		5,902,768		5,019,577
Operating Expenses:
Airfreight services	620,554		547,595		1,727,383		1,490,417
Ocean freight and ocean services	435,313		411,061		1,199,887		1,163,051
Customs brokerage and other services	373,766		244,368		1,035,800		675,729
Salaries and related costs	351,577		319,050		1,042,420		930,159
Rent and occupancy costs	38,202		30,533		113,186		87,826
Depreciation and amortization	13,335		12,272		40,833		36,241
Selling and promotion	10,632		10,608		32,385		32,476
Other	44,414		39,784		131,318		102,429
Total operating expenses	1,887,793		1,615,271		5,323,212		4,518,328
Operating income	203,154		186,895		579,556		501,249
Other Income (Expense):
Interest income	4,704		3,444		14,171		9,565
Other, net	566		96		2,357		2,584
Other income (expense), net	5,270		3,540		16,528		12,149
Earnings before income taxes	208,424		190,435		596,084		513,398
Income tax expense	45,357		69,829		155,871		190,470
Net earnings	163,067		120,606		440,213		322,928
Less net earnings attributable to the noncontrolling interest	375		343		1,224		550
Net earnings attributable to shareholders	$	162,692	$	120,263	$	438,989	$	322,378
Diluted earnings attributable to shareholders per share	$	0.92	$	0.66	$	2.46	$	1.77
Basic earnings attributable to shareholders per share	$	0.94	$	0.67	$	2.51	$	1.79
Dividends declared and paid per common share	$	—	$	—	$	0.45	$	0.42
Weighted average diluted shares outstanding	177,173		181,788		178,447		181,951
Weighted average basic shares outstanding	173,394		179,416		174,675		179,827



	Three months ended
	September 30,
(Amounts in thousands, except per share amounts)	Net earnings attributable to shareholders		Weighted average shares	Earnings per share
2018
Basic earnings attributable to shareholders	$	162,692	173,394	$	0.94
Effect of dilutive potential common shares	—		3,779	—
Diluted earnings attributable to shareholders	$	162,692	177,173	$	0.92
2017
Basic earnings attributable to shareholders	$	120,263	179,416	$	0.67
Effect of dilutive potential common shares	—		2,372	—
Diluted earnings attributable to shareholders	$	120,263	181,788	$	0.66



	Shareholders’ equity			Noncontrolling interest		Total equity
Balance at December 31, 2017	$	1,991,858		2,515		1,994,373
Cumulative effect of accounting change	(22,357		)	(105	)	(22,462	)
Exercise of stock options and release of restricted awards, net of shares withheld for employee taxes	133,060			—		133,060
Issuance of shares under stock purchase plan	33,292			—		33,292
Shares repurchased under provisions of stock repurchase plans	(555,760		)	—		(555,760	)
Stock compensation expense	43,171			—		43,171
Net earnings	438,989			1,224		440,213
Other comprehensive loss	(27,135		)	(994	)	(28,129	)
Dividends paid ($0.45 per share)	(79,180		)			(79,180	)
Purchase of noncontrolling interest	(89		)	(524	)	(613	)
Distributions to noncontrolling interest	—			(633	)	(633	)
Balance at September 30, 2018	$	1,955,849		1,483		1,957,332

Balance at December 31, 2016	$	1,844,638		2,575		1,847,213
Exercise of stock options	134,014			—		134,014
Issuance of shares under stock purchase plan	28,767					28,767
Shares repurchased under provisions of stock repurchase plans	(340,736		)	—		(340,736	)
Stock compensation expense	39,036			—		39,036
Net earnings	322,378			550		322,928
Other comprehensive income	25,632			(47	)	25,585
Dividends paid ($0.42 per share)	$	(75,726	)			(75,726	)
Balance at September 30, 2017	$	1,978,003		3,078		1,981,081



2018	$	19,731
2019	70,736
2020	58,479
2021	41,107
2022	31,585
Thereafter	72,412
	$	294,050



Period	Total number of shares purchased	Average price paid per share		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
July 1-31, 2018	—	$	—	—	5,753,457
August 1-31, 2018	1,614,336	73.10		1,614,336	3,608,635
September 1-30, 2018	397,709	74.99		397,709	2,822,424
Total	2,012,045	$	73.47	2,012,045	2,822,424