Item 16. FORM 10-K SUMMARY

None.

| 32.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 23, 2017

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
	By:	/s/ Bradley S. Powell
		Bradley S. Powell
		Senior Vice President and Chief Financial Officer

| 33.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 23, 2017.

Signature		Title
/s/ Jeffrey S. Musser		President, Chief Executive Officer and Director
(Jeffrey S. Musser)		(Principal Executive Officer)
/s/ Bradley S. Powell		Senior Vice President and Chief Financial Officer
(Bradley S. Powell)		(Principal Financial and Accounting Officer)
/s/ Robert R. Wright		Chairman of the Board and Director
(Robert R. Wright)
/s/ James M. DuBois		Director
(James M. DuBois)
/s/ Mark A. Emmert		Director
(Mark A. Emmert)
/s/ Diane H. Gulyas		Director
(Diane H. Gulyas)
/s/ Dan P. Kourkoumelis		Director
(Dan P. Kourkoumelis)
/s/ Michael J. Malone		Director
(Michael J. Malone)
/s/ Richard B. McCune		Director
(Richard B. McCune)
/s/ Liane J. Pelletier		Director
(Liane J. Pelletier)
/s/ James Li Kou Wang		Director
(James Li Kou Wang)
/s/ Tay Yoshitani		Director
(Tay Yoshitani)

| 34.

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

COMPRISING ITEM 8

ANNUAL REPORT ON FORM 10-K

TO SECURITIES AND EXCHANGE COMMISSION FOR THE

YEARS ENDED DECEMBER 31, 2016, 2015, AND 2014

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Expeditors International of Washington, Inc.:

We have audited the accompanying consolidated balance sheets of Expeditors International of Washington, Inc. and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the years in the three‑year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Expeditors International of Washington, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three‑year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Expeditors International of Washington, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 23, 2017 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP
Seattle, Washington
February 23, 2017

|F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Expeditors International of Washington, Inc.:

We have audited Expeditors International of Washington, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Expeditors International of Washington, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting under Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Expeditors International of Washington, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Expeditors International of Washington, Inc. and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2016, and our report dated February 23, 2017 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP
Seattle, Washington
February 23, 2017

|F-2

Consolidated Balance Sheets

In thousands except per share data

December 31,	2016				2015
Current Assets:
Cash and cash equivalents	$	974,435			807,796
Accounts receivable, less allowance for doubtful accounts of $9,247 in 2016 and $7,820 in 2015	1,190,130				1,112,260
Other	54,014				56,453
Total current assets	2,218,579				1,976,509
Property and equipment, net	536,572				524,724
Goodwill	7,927				7,927
Other assets, net	27,793				56,417
Total assets	$	2,790,871			2,565,577
Current Liabilities:
Accounts payable	$	726,571			645,304
Accrued expenses, primarily salaries and related costs	185,502				186,571
Federal, state and foreign income taxes	17,858				29,498
Total current liabilities	929,931				861,373
Deferred Federal and state income taxes, net	13,727				9,528
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, par value $0.01 per share, authorized 2,000 shares; none issued	—				—
Common stock, par value $0.01 per share, authorized 640,000 shares;
issued and outstanding 179,857 shares at December 31, 2016
and 182,067 shares at December 31, 2015	1,799				1,821
Additional paid-in capital	2,642				31
Retained earnings	1,944,789				1,771,379
Accumulated other comprehensive loss	(104,592		)		(81,238	)
Total shareholders’ equity	1,844,638				1,691,993
Noncontrolling interest	2,575				2,683
Total equity	1,847,213				1,694,676
Total liabilities and equity	$	2,790,871			2,565,577

See accompanying notes to consolidated financial statements.

|F-3.

Consolidated Statements of Earnings

In thousands, except per share data

Years ended December 31,		2016				2015			2014
Revenues:
Airfreight services		$	2,453,347			2,740,583			2,780,840
Ocean freight and ocean services		1,917,494				2,194,004			2,174,394
Customs brokerage and other services		1,727,196				1,682,045			1,609,487
Total revenues		6,098,037				6,616,632			6,564,721
Operating Expenses:
Airfreight services		1,752,167				1,987,690			2,103,777
Ocean freight and ocean services		1,378,699				1,648,993			1,712,795
Customs brokerage and other services		803,135				792,172			766,722
Salaries and related costs		1,157,635				1,143,511			1,065,329
Rent and occupancy costs		108,812				102,470			102,810
Depreciation and amortization		46,796				46,012			49,292
Selling and promotion		41,763				41,990			38,125
Other		138,867				132,310			131,223
Total operating expenses		5,427,874				5,895,148			5,970,073
Operating income		670,163				721,484			594,648
Other Income (Expense):
Interest income		11,580				10,421			10,773
Other, net		5,113				4,784			5,468
Other income, net		16,693				15,205			16,241
Earnings before income taxes		686,856				736,689			610,889
Income tax expense		254,323				277,192			231,429
Net earnings		432,533				459,497			379,460
Less net earnings attributable to the noncontrolling interest		1,726				2,274			2,572
Net earnings attributable to shareholders		$	430,807			457,223			376,888
Diluted earnings attributable to shareholders per share		$	2.36			2.40			1.92
Basic earnings attributable to shareholders per share		$	2.38			2.42			1.92
Weighted average diluted shares outstanding		182,704				190,223			196,768
Weighted average basic shares outstanding		181,282				188,941			196,147

See accompanying notes to consolidated financial statements.

|F-4.

Consolidated Statements of Comprehensive Income

In thousands

Years ended December 31,		2016				2015			2014
Net earnings		$	432,533			459,497			379,460
Other comprehensive loss, net of tax:
Foreign currency translation adjustments, net of tax of $12,687 in 2016, $23,801 in 2015 and $17,348 in 2014		(23,743		)		(44,090	)		(32,080	)
Reclassification adjustments for foreign currency realized losses, net of tax of $61 in 2014		—				—			111
Other comprehensive loss		(23,743		)		(44,090	)		(31,969	)
Comprehensive income		408,790				415,407			347,491
Less comprehensive income attributable to the noncontrolling interest		1,337				1,605			2,155
Comprehensive income attributable to shareholders		$	407,453			413,802			345,336

See accompanying notes to consolidated financial statements.

|F-5.

Consolidated Statements of Equity

In thousands except per share data

Years ended December 31, 2016, 2015 and 2014

	Common Stock
	Shares			Par Value
Balance at December 31, 2013	202,553			$	2,025
Exercise of stock options and release of restricted shares	1,529			15
Issuance of shares under stock purchase plan	672			7
Shares repurchased under provisions of stock repurchase plans	(13,098	)		(131		)
Stock compensation expense	—			—
Tax benefits from stock plans, net	—			—
Net earnings	—			—
Other comprehensive loss	—			—
Dividends paid ($0.64 per share)	—			—
Purchase of noncontrolling interest	—			—
Distributions of dividends to noncontrolling interest	—			—
Balance at December 31, 2014	191,656			1,916
Exercise of stock options and release of restricted shares	2,851			29
Issuance of shares under stock purchase plan	699			7
Shares repurchased under provisions of stock repurchase plans	(13,139	)		(131		)
Stock compensation expense	—			—
Tax benefits from stock plans, net	—			—
Net earnings	—			—
Other comprehensive loss	—			—
Dividends paid ($0.72 per share)	—			—
Distributions of dividends to noncontrolling interest	—			—
Balance at December 31, 2015	182,067			1,821
Exercise of stock options and release of restricted shares	3,769			38
Issuance of shares under stock purchase plan	703			7
Shares repurchased under provisions of stock repurchase plans	(6,682	)		(67		)
Stock compensation expense	—			—
Tax benefits from stock plans, net	—			—
Net earnings	—			—
Other comprehensive loss	—			—
Dividends paid ($0.80 per share)	—			—
Purchase of noncontrolling interest	—			—
Distributions of dividends to noncontrolling interest	—			—
Balance at December 31, 2016	179,857			$	1,799

|F-6.

	Additional paid-in capital				Retained earnings			Accumulated other comprehensive loss			Total shareholders’ equity			Noncontrolling interest			Total equity
Balance at December 31, 2013	$	1,647			2,087,376			(6,265	)		2,084,783			1,548			2,086,331
Exercise of stock options and release of restricted shares	45,454				—			—			45,469			—			45,469
Issuance of shares under stock purchase plan	23,793				—			—			23,800			—			23,800
Shares repurchased under provisions of stock repurchase plans	(114,216		)		(436,434	)		—			(550,781	)		—			(550,781	)
Stock compensation expense	42,533				—			—			42,533			—			42,533
Tax benefits from stock plans, net	1,061				—			—			1,061			—			1,061
Net earnings	—				376,888			—			376,888			2,572			379,460
Other comprehensive loss	—				—			(31,552	)		(31,552	)		(417	)		(31,969	)
Dividends paid ($0.64 per share)	—				(124,634	)		—			(124,634	)		—			(124,634	)
Purchase of noncontrolling interest	841				—			—			841			—			841
Distributions of dividends to noncontrolling interest	—				—			—			—			(503	)		(503	)
Balance at December 31, 2014	1,113				1,903,196			(37,817	)		1,868,408			3,200			1,871,608
Exercise of stock options and release of restricted shares	105,085				—			—			105,114			—			105,114
Issuance of shares under stock purchase plan	25,843				—			—			25,850			—			25,850
Shares repurchased under provisions of stock repurchase plans	(176,493		)		(453,367	)		—			(629,991	)		—			(629,991	)
Stock compensation expense	43,415				—			—			43,415			—			43,415
Tax benefits from stock plans, net	1,068				—			—			1,068			—			1,068
Net earnings	—				457,223			—			457,223			2,274			459,497
Other comprehensive loss	—				—			(43,421	)		(43,421	)		(669	)		(44,090	)
Dividends paid ($0.72 per share)	—				(135,673	)		—			(135,673	)		—			(135,673	)
Distributions of dividends to noncontrolling interest	—				—			—			—			(2,122	)		(2,122	)
Balance at December 31, 2015	31				1,771,379			(81,238	)		1,691,993			2,683			1,694,676
Exercise of stock options and release of restricted shares	157,139				—			—			157,177			—			157,177
Issuance of shares under stock purchase plan	28,129				—			—			28,136			—			28,136
Shares repurchased under provisions of stock repurchase plans	(225,317		)		(112,274	)		—			(337,658	)		—			(337,658	)
Stock compensation expense	45,217				—			—			45,217			—			45,217
Tax benefits from stock plans, net	(2,664		)		—			—			(2,664	)		—			(2,664	)
Net earnings	—				430,807			—			430,807			1,726			432,533
Other comprehensive loss	—				—			(23,354	)		(23,354	)		(389	)		(23,743	)
Dividends paid ($0.80 per share)	—				(145,123	)		—			(145,123	)		—			(145,123	)
Purchase of noncontrolling interest	107				—			—			107			(110	)		(3	)
Distributions of dividends to noncontrolling interest	—				—			—			—			(1,335	)		(1,335	)
Balance at December 31, 2016	$	2,642			1,944,789			(104,592	)		1,844,638			2,575			1,847,213

See accompanying notes to consolidated financial statements.

|F-7.

Consolidated Statements of Cash Flows

In thousands

Years ended December 31,		2016				2015			2014
Operating Activities:
Net earnings		$	432,533			459,497			379,460
Adjustments to reconcile net earnings to net cash from operating activities:
Provision for losses on accounts receivable		2,607				2,173			763
Deferred income tax expense (benefit)		15,835				17,999			(6,576	)
Excess tax benefits from stock plans		(386		)		(1,850	)		(1,115	)
Stock compensation expense		45,217				43,415			42,533
Depreciation and amortization		46,796				46,012			49,292
Other		(3,540		)		(24	)		340
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(102,297		)		62,619			(206,887	)
Increase (decrease) in accounts payable and accrued expenses		102,716				(84,164	)		153,424
(Decrease) increase in income taxes payable, net		(12,370		)		18,382			(12,998	)
Decrease (increase) in other current assets		1,988				653			(3,270	)
Net cash from operating activities		529,099				564,712			394,966
Investing Activities:
Purchase of short-term investments		(54		)		(47,026	)		(136,726	)
Proceeds from maturities of short-term investments		17				87,320			122,726
Purchase of property and equipment		(59,316		)		(44,383	)		(37,472	)
Escrow deposit for land acquisition		—				—			(27,101	)
Other, net		6,157				(3,337	)		(338	)
Net cash from investing activities		(53,196		)		(7,426	)		(78,911	)
Financing Activities:
Proceeds from issuance of common stock		185,313				130,964			69,269
Repurchases of common stock		(337,658		)		(629,991	)		(550,781	)
Excess tax benefits from stock plans		386				1,850			1,115
Dividends paid		(145,123		)		(135,673	)		(124,634	)
Distributions to noncontrolling interest		(1,335		)		(2,122	)		(503	)
Net cash from financing activities		(298,417		)		(634,972	)		(605,534	)
Effect of exchange rate changes on cash and cash equivalents		(10,847		)		(41,625	)		(31,066	)
Increase (decrease) in cash and cash equivalents		166,639				(119,311	)		(320,545	)
Cash and cash equivalents at beginning of year		807,796				927,107			1,247,652
Cash and cash equivalents at end of year		$	974,435			807,796			927,107
Taxes Paid:
Income taxes		$	254,312			239,367			254,439

See accompanying notes to consolidated financial statements

|F-8.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. | Basis of Presentation

Expeditors International of Washington, Inc. (“the Company”) is a non-asset based provider of global logistics services operating through a worldwide network of offices and exclusive or non-exclusive agents. The Company’s customers include retailing and wholesaling, electronics, industrial and manufacturing companies around the world.

International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange rates and currency control regulations, regulatory environments, cargo and other security concerns, laws and policies relating to tariffs, trade and quota restrictions, foreign investments and taxation. Periodically, governments consider a variety of changes to current tariffs and trade restrictions and accords. The Company cannot predict which, if any, of these proposals may be adopted, nor can the Company predict the effects adoption of any such proposal will have on the Company’s business. Doing business in foreign locations also subjects the Company to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to being influenced by governmental policies concerning international trade and commerce, the Company’s business may also be affected by political developments and changes in government personnel or policies as well as economic turbulence, political unrest and security concerns in the nations in which it does business and the future impact that these events may have on international trade including impact on oil prices.

The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The consolidated financial statements include the accounts of the Company and its subsidiaries stated in U.S. dollars, the Company’s reporting currency. In addition, the consolidated financial statements also include the accounts of operating entities where the Company maintains a parent-subsidiary relationship through unilateral control over assets and operations together with responsibility for payment of all liabilities, notwithstanding a lack of technical majority ownership of the subsidiary's common stock.

All significant intercompany accounts and transactions have been eliminated in consolidation. All dollar amounts in the notes are presented in thousands except for per share data or unless otherwise specified. Certain prior year amounts have been reclassified to conform to the 2016 presentation. See Note 1.F below for further information.

B. | Cash Equivalents and Short-term Investments

All highly liquid investments with a maturity of three months or less at date of purchase are considered to be cash equivalents. Short-term investments have a maturity of greater than three months at the date of purchase.

C. | Accounts Receivable

The Company maintains an allowance for doubtful accounts, which is reviewed at least monthly for estimated losses resulting from the inability of its customers to make required payments for services and advances. Additional allowances may be necessary in the future if the ability of its customers to pay deteriorates. The Company has recorded an allowance for doubtful accounts in the amounts of $9,247, $7,820 and $7,119 as of December 31, 2016, 2015 and 2014, respectively. Additions and write-offs have not been significant in any of these years.

D. | Long-Lived Assets, Depreciation and Amortization

Property and equipment are recorded at cost and are depreciated or amortized on the straight-line method over the shorter of the assets’ estimated useful lives or lease terms. Useful lives for major categories of property and equipment are as follows:

Land improvements	50 years
Buildings	28 to 40 years
Building improvements and fixtures	3 to 10 years
Furniture, equipment and purchased software	3 to 5 years

Expenditures for maintenance, repairs, and replacements of minor items are charged to earnings as incurred. Major upgrades and improvements that extend the life of the asset are capitalized. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in income for the period.

For the years ended December 31, 2016 and 2015, the Company performed the required goodwill annual impairment test during the fourth quarter and determined that no impairment had occurred.

E. | Revenues and Revenue Recognition

The Company derives its revenues from three principal sources: 1) airfreight services, 2) ocean freight and ocean services, and 3) customs brokerage and other services. These are the revenue categories presented in the financial statements.

As a non-asset based carrier, the Company does not own transportation assets. Rather, the Company generates the major portion of its air and ocean freight revenues by purchasing transportation services from direct (asset-based) carriers and reselling those services to its customers. The difference between the rate billed to customers (the sell rate), and the rate paid to the carrier (the buy rate) is termed “net revenue” (a non-GAAP measure), “yield” or "margin." By consolidating shipments from multiple customers and concentrating its buying power, the Company is able to negotiate favorable buy rates from the direct carriers, while at the same time offering lower sell rates than customers would otherwise be able to negotiate themselves.

|F-9.

Airfreight services revenues include the charges to the Company for carrying the shipments when the Company acts as a freight consolidator. Ocean freight services revenues include the charges to the Company for carrying the shipments when the Company acts as a Non-Vessel Operating Common Carrier (NVOCC). In each case the Company is acting as an indirect carrier. When acting as an indirect carrier, the Company will issue a House Airway Bill (HAWB), 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, the Company receives a contract of carriage known as a Master Airway Bill for airfreight shipments and a Master Ocean Bill of Lading for ocean shipments. At this point, the risk of loss passes to the carrier, however, in order to claim for any such loss, the customer is first obligated to pay the freight charges. In these transactions, the Company evaluates whether it is appropriate to record the gross or net amount as revenue. Generally, when the Company is the primary obligor, it is obligated to compensate direct carriers for services performed regardless of whether customers accept the service, has latitude in establishing price, has discretion in selecting the direct carrier, has credit risk or has several but not all of these indicators, revenue is recorded on a gross basis. Revenue is generally recorded on a net basis where the Company is not primarily obligated and does not have latitude in establishing prices. Such amounts earned are determined using a fixed fee, a per unit of activity fee or a combination thereof.

Based upon the terms in the contract of carriage, revenues related to shipments where the Company issues a HAWB, a HOBL or a House Seaway Bill are recognized at the time the freight is tendered to the direct carrier at origin. Costs related to the shipments are also recognized at this same time.

Revenues earned in other capacities, for instance, when the Company acts as an agent for the shipper, and does not issue a HAWB, a HOBL or a House Seaway Bill, include only the commissions and fees earned for the services performed. In these transactions, the Company is not a principal and reports only commissions and fees earned in revenue. These revenues are recognized upon completion of the services.

Customs brokerage and other services involves providing services at destination, such as helping customers clear shipments through customs by preparing required documentation, calculating and providing for payment of duties and other taxes on behalf of the customers as well as arranging for any required inspections by governmental agencies, and arranging for delivery. This is a complicated function requiring technical knowledge of customs rules and regulations in the multitude of countries in which the Company has offices. Revenues related to customs brokerage and other services are recognized upon completion of the services. Arranging international shipments is a complex task. Each actual movement can require multiple services. In some instances, the Company is asked to perform only one of these services. However, in most instances, the Company performs multiple services. These services include ancillary services such as local transportation, export customs formalities, distribution services and logistics management. Each of these services has an associated fee which is recognized as revenue upon completion of the service.

Typically, the fees for each of these services are quoted as separate components, however, customers on occasion will request an all-inclusive rate for a set of services known in the industry as “door-to-door service.” This means that the customer is billed a single rate for all services from pickup at origin to delivery at destination. In these instances, the revenue for origin and destination services, as well as revenue that will be characterized as freight charges, is allocated to branches as set by preexisting Company policy modified as agreed upon by customer specific negotiations between the offices involved. Each of the Company’s branches are separate profit centers and the primary compensation for the branch management group comes in the form of incentive-based compensation calculated directly from the operating income of that branch. This compensation structure ensures that the allocation of revenue and expense among components of services, when provided under an all-inclusive rate, is done in an objective manner on a relative selling price basis.

The Company presents revenues net of sales and value-added taxes.

F. | Income Taxes

Income taxes are accounted for under the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, the tax effect of loss carryforwards and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Earnings of the Company's foreign subsidiaries are not considered to be indefinitely reinvested outside of the United States and, accordingly, U.S. Federal and State income taxes have been provided for all undistributed earnings net of related foreign tax credits. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized. The Company recognizes interest expense related to unrecognized tax benefits or underpayment of income taxes in interest expense and recognizes penalties in operating expenses. In the fourth quarter of 2016, the Company adopted accounting guidance that retroactively changed the presentation of deferred tax assets and liabilities to be classified as non-current. As a result, the Company retrospectively reclassified previously reported current deferred income tax assets totaling $16,861 at December 31, 2015 to a reduction of noncurrent deferred tax liabilities, presented as Deferred Federal and state income taxes, net on the Consolidated Balance Sheets.

G | Net Earnings Attributable to Shareholders per Common Share

Diluted earnings attributable to shareholders per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding. Dilutive potential common shares represent outstanding stock options, stock purchase rights and unvested restricted shares. 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.

|F-10.

H. | Stock Plans

The Company recognizes stock compensation expense based on an estimate of the fair value of awards granted to employees and directors under the Company’s stock option, director restricted stock and employee stock purchase rights plans. This expense, adjusted for expected forfeitures, is recognized in net earnings on a straight-line basis over the stock awards' vesting periods as salaries and related costs.

I. | Foreign Currency

Foreign currency amounts attributable to foreign operations have been translated into U.S. dollars using year-end exchange rates for assets and liabilities, historical rates for equity, and weighted average rates for revenues and expenses. Translation adjustments resulting from this process are recorded as components of other comprehensive income until complete or substantially complete liquidation by the Company of its investment in a foreign entity. Currency fluctuations are a normal operating factor in the conduct of the Company’s business and foreign exchange transaction gains and losses are included in revenues and operating expenses. Also, the Company is exposed to foreign currency exchange fluctuations on monetary assets and liabilities denominated in currencies that are not the local functional currency. Foreign exchange gains and losses on such balances are recognized in net earnings within airfreight services costs, customs brokerage and other services costs and other income, net. Net foreign currency gains in 2016, 2015 and 2014 were $7,955, $7,820, and $1,517, respectively.

The Company follows a policy of accelerating international currency settlements to manage its foreign exchange exposure. Accordingly, the Company enters into foreign currency hedging transactions only in limited locations where there are regulatory or commercial limitations on the Company’s ability to move money freely. Such hedging activity during 2016, 2015, and 2014 was insignificant. The Company had no foreign currency derivatives outstanding at December 31, 2016 and 2015.

J. | Comprehensive Income

Comprehensive income consists of net earnings and other gains and losses affecting equity that, under U.S. GAAP, are excluded from net earnings. For the Company, these consist of foreign currency translation gains and losses, net of related income tax effects and comprehensive income or loss attributable to the noncontrolling interests. Upon the complete or substantially complete liquidation of the Company's investment in a foreign entity, cumulative translation adjustments are recorded as reclassification adjustments in other comprehensive income and recognized in net earnings as other income, net.

Accumulated other comprehensive loss consisted entirely of foreign currency translation adjustments, net of related income tax effects, as of December 31, 2016 and 2015.

K. | Segment Reporting

The Company is organized functionally in geographic operating segments. Accordingly, management focuses its attention on revenues, net revenues, operating income, identifiable assets, capital expenditures, depreciation and amortization and equity generated in each of these geographical areas when evaluating 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.

L. | Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. The Company uses estimates primarily in the following areas: accounts receivable valuation, accrual of costs related to ancillary services the Company provides, accrual of liabilities for the portion of the related exposure which the Company has self-insured, accrual of various tax liabilities, accrual of loss contingencies and calculation of share-based compensation expense. Actual results could differ from those estimates.

NOTE 2.	PROPERTY AND EQUIPMENT

The components of property and equipment are as follows:

		Years ended December 31,
		2016				2015
Land		$	172,310			162,923
Buildings and leasehold improvements		467,096				468,607
Furniture, fixtures, equipment and purchased software		296,214				274,723
Construction in progress		7,604				3,494
Property and equipment, at cost		943,224				909,747
Less accumulated depreciation and amortization		406,652				385,023
Property and equipment, net		$	536,572			524,724

In 2016, the Company completed a land acquisition in Europe, utilizing funds that had been placed in escrow in 2014. In January 2017, the Company formally approved a plan to sell land and buildings in Miami, Florida. The sale of the property is anticipated to occur in 2017 and the Company believes that the estimated selling price, less selling costs, will exceed the net book value of $80 million.

|F-11.

NOTE 3.	SHAREHOLDERS’ EQUITY

A. | Stock Repurchase Plans

The Company has a Non-Discretionary Stock Repurchase Plan, originally approved by the Board of Directors in November 1993, under which management is authorized to repurchase up to 40,000 shares of the Company’s common stock in the open market with the proceeds received from the exercise of employee and director stock options.

The Company has a Discretionary Stock Repurchase Plan originally approved by the Board of Directors in November 2001, and amended from time to time under which management as of December 31, 2016 is authorized to repurchase shares down to 170,000 shares of common stock outstanding.

The following table summarizes by repurchase plan the Company’s repurchasing activity:

		Cumulative shares repurchased			Average price per share
Non-Discretionary Plan (1994 through 2016)		33,674			$	29.92
Discretionary Plan (2001 through 2016)		57,710			$	40.57

B. | Stock Option Plans

At December 31, 2016, the Company had one stock option plan (the 2016 Plan) under which the Board of Directors may grant officers and employees options to purchase common stock at prices equal to or greater than market value on the date of grant. On May 3, 2016, the shareholders approved the Company’s 2016 Plan, which made available a total of 3 million shares of the Company’s common stock for purchase upon exercise of options granted. The 2016 Plan provides for qualified and non-qualified grants, which are limited to 100 shares per person. As of December 31, 2016, there are 76 shares available for grant under the 2016 Plan. No additional shares can be granted under the 2016 Plan after April 30, 2017. Stock options granted under the 2016 Plan vest over three years from the date of grant as compared to five years for options granted in prior years. Outstanding options expire no more than ten years from the date of grant.

Upon the exercise of non-qualified stock options and disqualifying dispositions of incentive stock options, the Company derives a tax deduction measured by the excess of the market value over the option price at the date of exercise or disqualifying disposition. The portion of the benefit from the deduction which equals the estimated fair value of the options (previously recognized as compensation expense) is recorded as a credit to the deferred tax asset for non-qualified stock options and is recorded as a credit to current tax expense for any disqualified dispositions of incentive stock options. For disqualifying dispositions, when the amount of the tax deduction is less than the cumulative amount of compensation expense recognized for the award, the amount credited to current tax expense is limited to the tax benefit associated with the tax deduction. All of the tax benefit received upon option exercise for the tax deduction in excess of the estimated fair value of the options is credited to additional paid-in capital. Commencing in 2017, in connection with the new requirements and adoption of accounting guidance issued in March 2016, these tax amounts will no longer be recorded in additional paid-in capital and instead will be reflected as components of income tax expense.

C. | Stock Purchase Plan

In May 2002, the shareholders approved the Company’s 2002 Employee Stock Purchase Plan (the 2002 Plan), which became effective August 1, 2002. On May 7, 2014, the shareholders approved an amendment to the 2002 Plan to increase the Company's common stock available for purchase under that plan by 3 million shares. The Company’s amended 2002 Plan provides for 12,305 shares of the Company’s common stock to be reserved for issuance upon exercise of purchase rights granted to employees who elect to participate through regular payroll deductions beginning August 1 of each year. The purchase rights are exercisable on July 31 of the following year at a price equal to the lesser of (1) 85% of the fair market value of the Company’s stock on the last trading day in July or (2) 85% of the fair market value of the Company’s stock on the first trading day in August of the preceding year. A total of 10,214 shares have been issued under the 2002 Plan and $14,000 has been withheld from employees at December 31, 2016 in connection with the plan year ending July 31, 2017.

D. | Director Restricted Stock Plan

On May 7, 2014, the shareholders approved the Company’s 2014 Directors’ Restricted Stock Plan (the 2014 Directors’ Plan), which provides for annual awards of restricted stock to non-employee directors and makes 250 shares of the Company’s common stock available for grant. The plan provides for an annual grant of restricted stock awards with a fair market value equal to $200 to each participant on June 1 of each year. There are 144 shares available for grant under this plan as of December 31, 2016. Each restricted stock award under the 2014 Directors’ Plan vests either at the time of grant or with a vesting schedule, as determined by the Compensation Committee of the Board of Directors. Restricted shares granted in 2015 and 2016 vested at the time of grant and there were no unvested restricted shares as of December 31, 2016. Restricted shares entitle the grantees to all shareholder rights, including cash dividends and transfer rights once vested. If a non-employee director’s service is terminated, any unvested portion of an award would be forfeited.

|F-12.

E. | Stock Option Activity

The following table summarizes information about stock options:

		Number of shares			Weighted average exercise price per share				Weighted average remaining contractual life		Aggregate intrinsic value
Outstanding at December 31, 2015		18,732			$	43.39
Options granted		2,973			$	47.39
Options exercised		(3,732	)		$	42.17
Options forfeited		(351	)		$	43.48
Options canceled		(248	)		$	49.38
Outstanding at December 31, 2016		17,374			$	44.25			6.19		$	151,274
Exercisable at December 31, 2016		7,334			$	44.21			3.69		$	64,181

F. | Share-Based Compensation Expense

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

		For the years ended December 31,
		2016				2015				2014
Dividend yield		1.70		%		1.60		%		1.50 - 1.51%
Volatility – stock option plans		24 - 25%				29 - 34%				35 - 36%
Volatility – stock purchase rights plans		20		%		20		%		20		%
Risk-free interest rates		0.51 - 1.42%				0.30 - 2.04%				0.11 - 2.27%
Expected life (years) – stock option plans		5.5 - 6.5				6.41 - 7.47				6.52 - 7.43
Expected life (years) – stock purchase rights plans		1				1				1
Weighted average fair value of stock options granted during the period		$	9.57			$	13.44			$	14.44
Weighted average fair value of stock purchase rights granted during the period		$	10.99			$	10.45			$	9.60

The Company’s expected volatility assumptions are based on the historical volatility of the Company’s stock over a period of time commensurate to the expected life. The expected life assumption is primarily based on historical employee exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the corresponding yield curve in effect at the time of grant for U.S. Treasury bonds having the same term as the expected life of the option. The expected dividend yield is based on the Company’s historical experience. The forfeiture assumption used to calculate compensation expense is primarily based on historical pre-vesting employee forfeiture patterns.

The compensation for restricted stock awards is based on the fair market value of the Company’s share of common stock on the date of grant. In 2016, restricted shares totaling 41 were granted with a fair value per share of $48.43.

The total intrinsic value of options exercised during the years ended December 31, 2016, 2015 and 2014 was approximately $29 million, $31 million and $18 million, respectively.

As of December 31, 2016, the total unrecognized compensation cost related to unvested stock options and stock purchase rights is $81 million and the weighted average period over which that cost is expected to be recognized is 2.5 years.

Total stock compensation expense and the total related tax benefit recognized are as follows:

		For the years ended December 31,
		2016				2015			2014
Stock compensation expense		$	45,217			43,415			42,533
Recognized tax benefit		$	8,178			6,010			4,356

Shares issued as a result of stock option exercises, restricted stock awards and employee stock plan purchases are issued as new shares outstanding by the Company.

|F-13.

NOTE 4.	BASIC AND DILUTED EARNINGS PER SHARE

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

		Net earnings attributable to shareholders				Weighted average shares			Earnings per share
2016
Basic earnings attributable to shareholders		$	430,807			181,282			$	2.38
Effect of dilutive potential common shares		—				1,422			—
Diluted earnings attributable to shareholders		$	430,807			182,704			$	2.36
2015
Basic earnings attributable to shareholders		$	457,223			188,941			$	2.42
Effect of dilutive potential common shares		—				1,282			—
Diluted earnings attributable to shareholders		$	457,223			190,223			$	2.40
2014
Basic earnings attributable to shareholders		$	376,888			196,147			$	1.92
Effect of dilutive potential common shares		—				621			—
Diluted earnings attributable to shareholders		$	376,888			196,768			$	1.92

The following potential common shares have been excluded from the computation of diluted earnings per share because the effect would have been antidilutive:

Years ended December 31,		2016			2015			2014
Shares		9,211			8,330			16,952

NOTE 5.	INCOME TAXES

Income tax expense (benefit) includes the following components:

		Federal				State			Foreign			Total
2016
Current		$	85,330			16,082			137,076			238,488
Deferred		16,903				(1,068	)		—			15,835
		$	102,233			15,014			137,076			254,323
2015
Current		$	95,046			16,973			147,174			259,193
Deferred		17,631				368			—			17,999
		$	112,677			17,341			147,174			277,192
2014
Current		$	93,345			17,093			127,567			238,005
Deferred		(6,023		)		(553	)		—			(6,576	)
		$	87,322			16,540			127,567			231,429

Income tax expense differs from amounts computed by applying the United States Federal income tax rate of 35% to earnings before income taxes as a result of the following:

		2016				2015			2014
Computed “expected” tax expense		$	240,400			257,841			213,811
Increase in income taxes resulting from:
State income taxes, net of Federal income tax benefit		9,759				11,272			10,751
Nondeductible stock compensation expense, net		3,629				5,241			8,069
Other, net		535				2,838			(1,202	)
		$	254,323			277,192			231,429

The components of earnings before income taxes are as follows:

		2016				2015			2014
United States		$	243,754			236,932			211,588
Foreign		443,102				499,757			399,301
		$	686,856			736,689			610,889

|F-14.

The tax effects of temporary differences and tax credits that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows:

Years ended December 31,		2016				2015
Deferred Tax Assets:
Accrued third party obligations, deductible for taxes upon economic performance		$	15,153			14,473
Provision for doubtful accounts receivable		497				1,041
Excess of financial statement over tax depreciation		10,650				10,349
Deductible stock compensation expense, net		21,758				18,910
Foreign currency translation adjustment		57,207				44,519
Retained liability for cargo claims		1,178				1,350
Total gross deferred tax assets		106,443				90,642
Deferred Tax Liabilities:
Unremitted foreign earnings, net of related foreign tax credits		120,170				100,170
Total gross deferred tax liabilities		$	120,170			100,170
Net deferred tax liabilities		$	13,727			9,528

Based on management’s review of the Company’s tax positions, the Company had no significant unrecognized tax benefits as of December 31, 2016 and 2015.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to 2013. With respect to state and local jurisdictions and countries outside of the United States, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax audits for years prior to 2001. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that may result from these open tax years. Any interest and penalties expensed in relation to the underpayment of income taxes were insignificant for the years ended December 31, 2016, 2015 and 2014.

NOTE 6.	FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments, other than cash, consist primarily of cash equivalents, short-term investments, accounts receivable, accounts payable and accrued expenses. The carrying value of these financial instruments approximates their fair value. Cash, cash equivalents and short-term investments consist of the following:

		December 31, 2016								December 31, 2015
		Cost				Fair Value				Cost				Fair Value
Cash and cash equivalents:
Cash and overnight deposits		$	406,787			406,787				445,582				445,582
Corporate commercial paper		507,777				507,889				302,433				302,480
Time deposits		59,871				59,871				59,781				59,781
Total cash and cash equivalents		974,435				974,547				807,796				807,843
Short-term investments:
Time deposits		35				35				40				40
Total		$	974,470			$	974,582			$	807,836			$	807,883

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 7.	CREDIT ARRANGEMENTS

Certain of the Company’s foreign subsidiaries maintain bank lines of credit for short-term working capital purposes. These credit lines are supported by standby letters of credit issued by a United States bank, or guarantees issued by the Company to the foreign banks issuing the credit line. At December 31, 2016, the Company was contingently liable for approximately $63,968 under outstanding standby letters of credit and guarantees. At December 31, 2016, the Company was in compliance with all restrictive covenants of these credit lines and the associated credit facilities.

The standby letters of credit and guarantees relate to obligations of the Company’s foreign subsidiaries for credit extended in the ordinary course of business by direct carriers, primarily airlines, and for duty and tax deferrals available from governmental entities responsible for customs and value-added-tax (VAT) taxation. The total underlying amounts due and payable for transportation and governmental excise taxes are properly recorded as obligations in the books of the respective foreign subsidiaries, and there would be no need to record additional expense in the unlikely event the parent company were to be required to perform.

|F-15.

NOTE 8.	COMMITMENTS

A. | Leases

The Company occupies office and warehouse facilities under terms of operating leases expiring up to 2028. The Company also has two long term operating lease arrangements to use land, for which the usage rights were entirely prepaid. Usage rights for those arrangements are recognized in rent expense over the lease terms up to 2057. Total rent expense for all operating leases in 2016, 2015 and 2014 was $62,294, $58,133 and $58,050, respectively.

At December 31, 2016, future minimum annual lease payments under all noncancelable leases are as follows:

2017	$	58,502
2018	46,642
2019	35,986
2020	28,056
2021	16,847
Thereafter	28,224
	$	214,257

B. | Unconditional Purchase Obligations

The Company enters into short-term unconditional purchase obligations with asset-based providers reserving space on a guaranteed basis. The pricing of these obligations varies to some degree with market conditions. Historically, the Company has met these obligations in the normal course of business within one year. Purchase obligations outstanding as of December 31, 2016 totaled $76,306.

C. | Employee Benefits

The Company has employee savings plans under which the Company provides a discretionary matching contribution. In 2016, 2015 and 2014, the Company’s contributions under the plans were $9,681, $8,658, and $8,262, respectively.

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 December 31, 2016, 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.

|F-16.

NOTE 10.	BUSINESS SEGMENT INFORMATION

Financial information regarding 2016, 2015 and 2014 operations by the Company’s designated geographic areas is as follows:

	United States				Other North America
2016
Revenues from unaffiliated customers	$	1,683,006			226,561
Transfers between geographic areas	106,076				10,778
Total revenues	$	1,789,082			237,339
Net revenues1	$	918,110			119,492
Operating income	$	250,715			32,530
Identifiable assets at year end	$	1,455,722			104,804
Capital expenditures	$	39,531			1,727
Depreciation and amortization	$	29,939			1,479
Equity	$	1,166,582			46,448
2015
Revenues from unaffiliated customers	$	1,763,361			226,284
Transfers between geographic areas	118,884				13,383
Total revenues	$	1,882,245			239,667
Net revenues1	$	906,780			124,381
Operating income	$	245,257			46,846
Identifiable assets at year end	$	1,185,671			111,549
Capital expenditures	$	26,807			3,915
Depreciation and amortization	$	29,532			1,331
Equity	$	986,330			70,932
2014
Revenues from unaffiliated customers	$	1,694,819			218,735
Transfers between geographic areas	97,028				10,891
Total revenues	$	1,791,847			229,626
Net revenues1	$	823,111			108,631
Operating income	$	221,166			36,475
Identifiable assets at year end	$	1,388,319			111,324
Capital expenditures	$	19,610			1,439
Depreciation and amortization	$	31,553			1,170
Equity	$	1,165,488			54,338

|F-17.

		Latin America			North Asia			South Asia			Europe			Middle East, Africa and India			Elimi-nations			Consoli-dated
2016
Revenues from unaffiliated customers		84,665			2,242,670			603,980			918,561			338,594			—			6,098,037
Transfers between geographic areas		15,037			21,212			24,251			41,102			21,876			(240,332	)		—
Total revenues		99,702			2,263,882			628,231			959,663			360,470			(240,332	)		6,098,037
Net revenues1		56,066			471,275			171,033			304,429			123,335			296			2,164,036
Operating income		13,321			230,777			64,967			42,195			35,672			(14	)		670,163
Identifiable assets at year end		49,231			511,851			120,300			351,960			190,902			6,101			2,790,871
Capital expenditures		1,038			3,889			3,038			7,554			2,539			—			59,316
Depreciation and amortization		1,187			5,455			2,177			4,576			1,983			—			46,796
Equity		27,164			327,672			91,983			108,430			112,633			(33,699	)		1,847,213
2015
Revenues from unaffiliated customers		94,229			2,557,398			677,628			958,827			338,905			—			6,616,632
Transfers between geographic areas		19,158			21,722			25,018			42,787			21,322			(262,274	)		—
Total revenues		113,387			2,579,120			702,646			1,001,614			360,227			(262,274	)		6,616,632
Net revenues1		65,017			493,235			179,110			308,301			110,953			—			2,187,777
Operating income		19,656			245,854			69,643			65,024			29,204			—			721,484
Identifiable assets at year end		48,678			446,914			127,014			421,590			221,835			2,326			2,565,577
Capital expenditures		1,756			2,203			2,383			5,222			2,097			—			44,383
Depreciation and amortization		1,041			5,425			2,110			4,931			1,642			—			46,012
Equity		33,161			253,097			99,220			154,174			130,105			(32,343	)		1,694,676
2014
Revenues from unaffiliated customers		89,058			2,576,350			657,189			1,012,389			316,181			—			6,564,721
Transfers between geographic areas		20,634			23,020			26,579			39,541			19,654			(237,347	)		—
Total revenues		109,692			2,599,370			683,768			1,051,930			335,835			(237,347	)		6,564,721
Net revenues1		65,016			407,410			163,383			313,325			100,551			—			1,981,427
Operating income		19,855			177,496			52,596			62,101			24,959			—			594,648
Identifiable assets at year end		53,815			513,649			141,499			447,349			208,684			5,987			2,870,626
Capital expenditures		1,574			5,955			3,118			4,246			1,530			—			37,472
Depreciation and amortization		911			5,938			2,295			5,690			1,735			—			49,292
Equity		34,386			262,295			99,234			169,117			121,520			(34,770	)		1,871,608

---

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 net revenues:

Years ended December 31,		2016				2015			2014
Revenues:
Total revenues		$	6,098,037			6,616,632			6,564,721
Expenses:
Airfreight services		1,752,167				1,987,690			2,103,777
Ocean freight and ocean services		1,378,699				1,648,993			1,712,795
Customs brokerage and other services		803,135				792,172			766,722
Net revenues		$	2,164,036			2,187,777			1,981,427

|F-18.

Other than the United States, only the People’s Republic of China, including Hong Kong, represented more than 10% of the Company’s total revenue, net revenue, total identifiable assets or equity in any period presented as noted in the table below.

		2016			2015			2014
Total revenues		31	%		32	%		33	%
Net revenues		18	%		19	%		16	%
Identifiable assets at year end		15	%		13	%		14	%
Equity		13	%		10	%		9	%

NOTE 11.	QUARTERLY RESULTS (UNAUDITED)

		1st				2nd			3rd			4th
2016
Revenues		$	1,418,472			1,475,164			1,562,394			1,642,007
Net revenues		517,069				553,117			545,259			548,591
Net earnings		97,047				116,439			107,949			111,098
Net earnings attributable to shareholders		96,584				116,052			107,581			110,590
Diluted earnings attributable to shareholders per share		0.53				0.63			0.59			0.61
Basic earnings attributable to shareholders per share		0.53				0.64			0.59			0.61
2015
Revenues		$	1,677,526			1,691,553			1,651,332			1,596,221
Net revenues		529,486				552,141			569,981			536,169
Net earnings		107,332				118,329			118,736			115,100
Net earnings attributable to shareholders		106,704				117,760			118,310			114,449
Diluted earnings attributable to shareholders per share		0.55				0.61			0.62			0.61
Basic earnings attributable to shareholders per share		0.56				0.62			0.63			0.62

Net earnings in the fourth quarter of 2016 include a $6 million foreign exchange gain recorded in customs brokerage and other services expenses that resulted from the devaluation of the Egyptian pound. Net earnings in the fourth quarter of 2015 include a $6 million recovery of legal and related fees. The sum of quarterly per share data may not equal the per share total reported for the year.

|F-19.

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

ANNUAL REPORT

ON

FORM 10-K

FOR FISCAL YEAR ENDED

December 31, 2016

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

EXHIBITS

Exhibit Number		Description
21.1		Subsidiaries of the Registrant
23.1		Consent of Independent Registered Public Accounting Firm
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		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document