EXPEDITORS INTERNATIONAL OF WASHINGTON INC

Previous wording

Certain portions of this report on Form 10-Q including the sections entitled "Overview," "Summary of First Quarter 2024," "Industry Trends, Trade Conditions 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," "would," "intends," "foreseeable future" or similar expressions are intended to identify such forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, any statements that refer to projections of future financial performance, our anticipated growth and trends in the Company's businesses, signs of a slowing economy and drop in demand, future supply chain and transportation disruptions and other characterizations of disruptive events or circumstances are forward-looking statements. In addition, forward-looking statements are subject to certain risks and uncertainties, including risks associated with tax audits and other contingencies, that could cause actual results to differ materially from our historical experience and our present expectations or projections. 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 risk factors identified and discussed in Part I, Item 1A in the Company’s annual report on Form 10-K filed on February 23, 2024 and in Part II, Item 1A in this report. Management believes that these forward-looking statements are reasonable as of this filing date and we do not assume any obligations to update these statements except as required by law.

Current wording

Certain portions of this report on Form 10-Q including the sections entitled "Overview," "Summary of Second Quarter 2024," "Industry Trends, Trade Conditions 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," "would," "intends," "foreseeable future" or similar expressions are intended to identify such forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, any statements that refer to projections of future financial performance, our anticipated growth and trends in the Company's businesses, signs of a slowing economy and drop in demand, future supply chain and transportation disruptions and other characterizations of disruptive events or circumstances are forward-looking statements. In addition, forward-looking statements are subject to certain risks and uncertainties, including risks associated with tax audits and other contingencies, that could cause actual results to differ materially from our historical experience and our present expectations or projections. 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 risk factors identified and discussed in Part I, Item 1A in the Company’s annual report on Form 10-K filed on February 23, 2024 and in Part II, Item 1A in this report. Management believes that these forward-looking statements are reasonable as of this filing date and we do not assume any obligations to update these statements except as required by law.

Previous wording

Volumes transacted in airfreight and ocean freight services were up compared to a slow first quarter in 2023.

Current wording

Volumes transacted in airfreight were up 15% compared to a slow second quarter in 2023 and to some extent from shippers shifting from ocean transportation.

Previous wording

As a result of rate trends above, revenues and expenses in airfreight and ocean services were significantly down compared to the first quarter of 2023.

Current wording

As a result of the rates and volumes noted above, revenues and expenses in airfreight and ocean services were up compared to the second quarter of 2023, while margins and operating income declined.

Previous wording

Net earnings to shareholders decreased 25% from the first quarter of 2023 and increased 7% from the fourth quarter of 2023.

Current wording

Net earnings to shareholders decreased 18% from the second quarter of 2023 and increased 4% from the first quarter of 2024.

Previous wording

Cash from operations was $257 million and we returned $361 million to shareholders in common stock repurchases.

Current wording

Cash from operations was $127 million and we returned $205 million to shareholders in common stock repurchases and dividends.

Previous wording

The global economic and trade environments remain uncertain, including inflation remaining higher than historical levels, greater volatility in oil prices, high interest rates and the conflicts in the Middle East and Ukraine. Starting in the second quarter of 2022 and continuing through most of 2023, we saw a slowdown in the global economy and a softening of customer demand resulting in declines in average buy and sell rates. As demand remains soft, available transportation capacity continues to exceed demand. These conditions could result in further declines in average sell and buy rates in 2024. We also expect that pricing volatility will continue as carriers adapt to lower demand, changing fuel prices, security risks and react to governmental trade policies and other regulations. Additionally, we cannot predict the direct or indirect impact that further changes in and purchasing behavior, such as online shopping, could have on our business. Some customers have begun shifting manufacturing to other countries in response to governments implementing higher tariffs on imports, to reduce their supply chain risks, and in response to pandemic disruptions or geopolitical risks, which could negatively impact us.

Current wording

The global economic and trade environments remain uncertain, including inflation remaining higher than historical levels, greater volatility in oil prices, high interest rates and the conflicts in the Middle East and Ukraine. In the second quarter of 2024, we saw capacity constraints on exports out of Asia resulting in increases in average buy and sell rates. However, if demand remains soft, if disruptions in the Red Sea improve, then additional ocean transportation capacity will become available. These conditions could result in declines in average sell and buy rates. We also expect that pricing volatility will continue as carriers adapt to lower demand, changing fuel prices, security risks and react to governmental trade policies and other regulations. Additionally, we cannot predict the direct or indirect impact that further changes in purchasing behavior, such as the evolution of international direct e-commerce platforms, could have on our business. Some customers have begun shifting manufacturing to other countries in response to governments implementing higher tariffs on imports, to reduce their supply chain risks, and in response to pandemic disruptions or geopolitical risks, which could negatively impact us.

Previous wording

Historically, our operating results have been subject to seasonal demand trends with the first quarter being the weakest and the third and fourth quarters being the strongest; however, there is no assurance that this seasonal trend will occur in the future or to what degree it will be impacted by a slowing economy. This historical pattern has been the result of, or influenced by, numerous factors, including weather patterns, national holidays, consumer demand, new product launches, just-in-time inventory models, economic conditions, pandemics, governmental policies and inter-governmental disputes and a myriad of other similar and subtle forces.

Current wording

Historically, our operating results have been subject to seasonal demand trends with the first quarter being the weakest and the third and fourth quarters being the strongest; however, there is no assurance that this seasonal trend will occur in the future or to what degree it will be impacted by an uncertain economy. This historical pattern has been the result of, or influenced by, numerous factors, including weather patterns, national holidays, consumer demand, new product launches, just-in-time inventory models, economic conditions, pandemics, governmental policies and inter-governmental disputes and a myriad of other similar and subtle forces.

Previous wording

The following table shows the revenues, the directly related cost of transportation and other expenses for our principal services and our overhead expenses for the three months ended March 31, 2024 and 2023, including the respective percentage changes comparing 2024 and 2023.

Current wording

The following table shows the revenues, the directly related cost of transportation and other expenses for our principal services and our overhead expenses for the three and six months ended June 30, 2024 and 2023, including the respective percentage changes comparing 2024 and 2023.

Previous wording

Airfreight services revenues and expenses decreased 16% and 19%, respectively, during the three months ended March 31, 2024, as compared with the same period in 2023, due to 22% and 24% decreases in average sell and buy rates, respectively, offset by a 4% increase in tonnage. Average sell rates decreased as a result of lower buy rates driven by declining market rates. Buy rates declined due to residual impacts from supply chain congestion in the first quarter of 2023 and as available capacity continues to exceed demand. Tonnage improved in 2024 as a result of increased market demand compared to a slow first quarter in 2023.

Current wording

Airfreight services revenues and expenses decreased 2% and 1%, respectively, during the six months ended June 30, 2024, as compared with the same period in 2023, due to 11% and 9% decreases in average sell and buy rates, respectively, offset by a 10% increase in tonnage. Average sell rates decreased during the six months ended June 30, 2024 as a result of lower buy rates. Buy rates declined from still high rates in the first quarter of 2023 due to residual impacts from supply chain congestion and continued to decline until stabilizing in the fourth quarter of 2023.

Previous wording

Buy rates and sell rates stabilized in the fourth quarter of 2023 as compared to 2021 and 2022 as supply chain operations normalized. However, seasonal demand, impact from disruptions in the ocean market due to security concerns and variable demand for airfreight capacity from e-commerce business cause volatility in average buy rates on certain lanes. Additionally, continued uncertainty in the economy including the impacts of inflation and interest rates together with the attractive ocean transportation rates are expected to continue to negatively affect demand for airfreight services which could reduce our volumes or average sell rates. These conditions could result in further decreases in our revenues, expenses and operating income. We are unable to predict how these uncertainties and any future disruptions will affect our operations or financial results prospectively.

Current wording

Seasonal changes in demand, impact from disruptions in the ocean market due to security concerns and variable demand for airfreight capacity from e-commerce business cause volatility in average buy rates on certain lanes. Additionally, continued uncertainty in the economy including the impacts of inflation and interest rates could negatively affect demand for airfreight services which could reduce our volumes and average sell rates. These conditions could result in further decreases in our revenues, expenses and operating income. We are unable to predict how these uncertainties and any future disruptions will affect our operations or financial results prospectively.

Previous wording

Ocean freight consolidation, direct ocean forwarding, and order management are the three basic services that constitute and are collectively referred to as ocean freight and ocean services. Ocean freight and ocean services revenues and expense decreased 18% and 14%, respectively, for the three months ended March 31, 2024 as compared with the same period in 2023. The largest component of our ocean freight and ocean services revenue is derived from ocean freight consolidation, which represented 65% and 71% of ocean freight and ocean services revenue for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Ocean freight consolidation, direct ocean forwarding, and order management are the three basic services that constitute and are collectively referred to as ocean freight and ocean services. Ocean freight and ocean services revenues and expense increased 10% and 18%, respectively, for the three months ended June 30, 2024 as compared with the same periods in 2023. Ocean freight and ocean services revenues decreased 5% while expenses remained flat for the six months ended June 30, 2024 as compared with the same periods in 2023.The largest component of our ocean freight and ocean services revenue is derived from ocean freight consolidation, which represented 66% and 68% of ocean freight and ocean services revenue for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

Direct ocean freight forwarding revenues and expenses decreased 12% and 11%, respectively, for the three months ended March 31, 2024, principally due to lower volumes and lower rates for ancillary services in the United States. Order management revenues and expenses increased 17% and 16%, respectively, for the three months ended March 31, 2024, due to increases in volumes from new and existing customers.

Current wording

Order management revenues increased 20% and 19%, respectively, and expenses increased 22% and 19%, respectively, for the three and six months ended June 30, 2024, due to increases in volumes from new and existing customers. Direct ocean freight forwarding revenues decreased 4% while expenses remained flat for the three months ended June 30, 2024, principally due to lower volumes and lower rates for ancillary services in the United States. Direct ocean freight forwarding revenues and expenses decreased 8% and 6%, respectively, for the six months ended June 30, 2024.

Previous wording

Buy rates and sell rates started declining in the second half of 2022, decreased sharply beginning in the fourth quarter of 2022 and through 2023. As global economic conditions remain uncertain and carriers add new vessels, available capacity may continue to exceed demand and may depress sell and buy rates into 2024. We also expect that pricing volatility will continue as carriers adapt to fluctuations in fuel prices, new regulations, security risks and manage available capacity. As customers seek lower pricing and react to governmental trade policies and other regulations, this could result in further decreases in our revenues and operating income.

Current wording

Global economic conditions remain uncertain. Further, carriers are adding new vessels which will increase capacity. In addition, if the conflicts in the Middle East improve, additional capacity will become available due to shorter transit times. These conditions could depress sell and buy rates. We expect that pricing volatility will continue as carriers adapt to fluctuations in fuel prices, new regulations, security risks and manage available capacity. As customers seek lower pricing and react to governmental trade policies and other regulations, this could result in further decreases in our revenues and operating income.

Previous wording

Customs brokerage and other services revenues decreased 11% and expenses decreased 15% for the three months ended March 31, 2024, respectively, as compared with the same period in 2023, primarily due to declining demand for ancillary services, principally in North America.

Current wording

Customs brokerage and other services revenues increased 4% and expenses increased 6% for the three months ended June 30, 2024, respectively, as compared with the same period in 2023, primarily due to increases in customs clearances and road freight shipments, principally in North America.

Previous wording

Import services including charges at ports such as detention, drayage, terminal charges and delivery decreased significantly as compared to the first quarter of 2023 that still had residual effects from the supply chain congestion. Road freight, warehousing and distribution services also declined due to lower volumes and decreased trucking, storage and labor costs. While customers continue to value our brokerage services due to changing tariffs and increasing complexity in the declaration process, some customers are opting to use multiple customs brokerage service providers to reduce their risk. Customers continue to seek knowledgeable customs brokers with sophisticated computerized capabilities critical to an overall logistics management program that are necessary to rapidly respond to changes in the regulatory and security environment. Should international trade slow, volumes shipped and pricing could further negatively impact our revenues and expenses.

Current wording

While customers continue to value our brokerage services due to changing tariffs and increasing complexity in the declaration process, some customers are opting to use back up customs brokerage service providers as a risk reduction strategy. Customers continue to seek knowledgeable customs brokers with sophisticated computerized capabilities critical to an overall logistics management program that are necessary to rapidly respond to changes in the regulatory and security environment. Should international trade slow, volumes shipped and pricing could further negatively impact our revenues and expenses.

Previous wording

Salaries and related costs decreased 8% for the three months ended March 31, 2024, as compared with the same period in 2023, principally due to decreases in commissions and bonuses earned from lower revenues and operating income and a 7% decrease in headcount, partially offset by increases in base salaries.

Current wording

Salaries and related costs remained flat for the three months ended June 30, 2024, but decreased 4% for the six months ended June 30, 2024, as compared with the same periods in 2023. Decreases in commissions and bonuses earned from lower revenues and operating income and a 4% decrease in headcount were partially offset by increases in salaries.

Previous wording

Our management compensation programs have always been incentive-based and performance driven. Total bonuses to field and executive management for the three months ended March 31, 2024, decreased 22% when compared to the same period in 2023, primarily due to the 22% decreasein operating income.

Current wording

Our management compensation programs have always been incentive-based and performance driven. Total bonuses to field and executive management for the six months ended June 30, 2024, decreased 15% when compared to the same periods in 2023, primarily due to the 16% decreasein operating income.

Previous wording

So long as the economic environment remains uncertain, we will be focused on aligning headcount and our overhead expenses commensurate with our transactional volumes. We expect to continue to enhance the effectiveness and security of our systems and deploy additional protection technologies and processes which will result in increased expenses in the future. We will also continue to make important investments in people, processes and technology, as well as to invest in our strategic efforts to explore new areas for profitable growth.

Current wording

So long as the economic environment remains uncertain, we will be focused on aligning operational headcount and our overhead expenses commensurate with our transactional volumes. We expect to continue to enhance the effectiveness and security of our systems and deploy additional protection technologies and processes which will result in increased expenses in the future. We will also continue to make important investments in people, processes and technology, as well as to invest in our strategic efforts to explore new areas for profitable growth.

Previous wording

Our consolidated effective income tax rate was 26.9% for the three months ended March 31, 2024, as compared to 24.8% in the comparable period of 2023. For the three months ended March 31, 2024, and 2023, there was no BEAT expense and GILTI expense was insignificant. Though both periods benefited from U.S. income tax deductions for FDII as well as available U.S. Federal foreign tax credits principally from withholding taxes related to our foreign operations, we were negatively impacted by higher foreign income tax expense that exceeded available U.S. Federal foreign tax credits in the three months ended March 31, 2024, when compared to the same period in the prior year. We have no liability as of March 31, 2024, for the 15% corporate alternative minimum tax based on financial statement income (BMT), which became effective in 2023 in the U.S., under the Inflation Reduction Act. Some elements of the recorded impacts of the Inflation Reduction Act could be impacted by further legislative action as well as additional interpretations and guidance issued by the Internal Revenue Service or Treasury which could impact the estimates of the amounts we would be required to record for BMT in the future.

Current wording

Our consolidated effective income tax rate was 25.8% and 26.3% for the three and six months ended June 30, 2024, as compared to 26.4% and 25.6% in the comparable periods of 2023. For the three and six months ended June 30, 2024, and 2023, there was no BEAT expense and GILTI expense was insignificant. All periods benefited from U.S. income tax deductions for FDII as well as available U.S. Federal foreign tax credits principally from withholding taxes related to our foreign operations. We have no liability as of June 30, 2024, for the 15% corporate alternative minimum tax based on financial statement income (BMT), which became effective in 2023 in the U.S., under the Inflation Reduction Act. Some elements of the recorded impacts of the Inflation Reduction Act could be impacted by further legislative action as well as additional interpretations and guidance issued by the Internal Revenue Service or Treasury which could impact the estimates of the amounts the Company would be required to record for BMT in the future.

Previous wording

The nature of our worldwide operations necessitates transacting in a multitude of currencies other than the U.S. dollar. That exposes us to the inherent risks of volatile international currency markets and governmental interference. Some of the countries where we maintain offices and/or have agency relationships maintain strict currency control regulations that influence our ability to hedge foreign currency exposure. We try to compensate for these exposures by accelerating international currency settlements among our offices and agents. We may enter into foreign currency hedging transactions where there are regulatory or commercial limitations on our ability to move money freely around the world or the short-term financial outlook in any country is such that hedging is the most time-sensitive way to mitigate short-term exchange losses. Any such hedging activity during the three months ended March 31, 2024 and 2023 was insignificant. We had no foreign currency derivatives outstanding at March 31, 2024 and December 31, 2023. For the three months ended March 31, 2024, net foreign currency gains were approximately $7 million compared to net foreign currency losses of approximately $3 million in the same period in 2023.

Current wording

The nature of our worldwide operations necessitates transacting in a multitude of currencies other than the U.S. dollar. That exposes us to the inherent risks of volatile international currency markets and governmental interference. Some of the countries where we maintain offices and/or have agency relationships maintain strict currency control regulations that influence our ability to hedge foreign currency exposure. We try to compensate for these exposures by accelerating international currency settlements among our offices and agents. We may enter into foreign currency hedging transactions where there are regulatory or commercial limitations on our ability to move money freely around the world or the short-term financial outlook in any country is such that hedging is the most time-sensitive way to mitigate short-term exchange losses. Any such hedging activity during the three and six months ended June 30, 2024 and 2023 was insignificant. We had no foreign currency derivatives outstanding at June 30, 2024 and December 31, 2023. For the three months ended June 30, 2024, net foreign currency gains were approximately $5 million compared to net foreign currency losses of approximately $3 million in the same period in 2023. During the six months ended June 30, 2024, net foreign currency gains were approximately $12 million compared to net foreign currency losses of approximately $6 million in the same period in 2023.

Previous wording

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 months ended March 31, 2024 was $257 million as compared with $546 million for the same period in 2023. The decrease of $289 million for the three months ended March 31, 2024, was primarily due to lower net earnings and changes in working capital, principally as a result of the excess of customer collections over customer billings in the first quarter of 2023. At March 31, 2024, working capital was $1,547 million, including cash and cash equivalents of $1,370 million. Other than our recorded lease liabilities, we had no long-term obligations or debt at March 31, 2024. Management believes that our current cash position and operating cash flows will be sufficient to meet our capital and liquidity requirements for at least the next 12 months and thereafter for the foreseeable future, including meeting any contingent liabilities related to standby letters of credit and other obligations.

Current wording

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 six months ended June 30, 2024 was $127 million and $384 million as compared with $158 million and $705 million for the same period in 2023. The decreases of $31 million and $321 million for the three and six months ended June 30, 2024, were primarily due to lower net earnings and changes in working capital. At June 30, 2024, working capital was $1,536 million, including cash and cash equivalents of $1,272 million. Other than our recorded lease liabilities, we had no long-term obligations or debt at June 30, 2024. Management believes that our current cash position and operating cash flows will be sufficient to meet our capital and liquidity requirements for at least the next 12 months and thereafter for the foreseeable future, including meeting any contingent liabilities related to standby letters of credit and other obligations.

Previous wording

Our business historically has been subject to seasonal fluctuations, and this is expected to continue in the future. Cash flows fluctuate as a result of this seasonality. Historically, the first quarter shows an excess of customer collections over customer billings. This results in positive cash flow. The increased activity associated with periods of higher demand (typically commencing late second or early third quarter and continuing well into the fourth quarter) causes an excess of customer billings over customer collections. This cyclical growth in customer receivables consumes available cash. However, there is no assurance that this seasonal trend will occur in the future or to what degree it will continue to be impacted in 2023 by the softening of the global economy.

Current wording

Our business historically has been subject to seasonal fluctuations, and this is expected to continue in the future. Cash flows fluctuate as a result of this seasonality. Historically, the first quarter shows an excess of customer collections over customer billings. This results in positive cash flow. The increased activity associated with periods of higher demand (typically commencing late second or early third quarter and continuing well into the fourth quarter) causes an excess of customer billings over customer collections. This cyclical growth in customer receivables consumes available cash. However, there is no assurance that this seasonal trend will occur in the future or to what degree it will continue to be impacted in 2024 by an uncertain global economy.

Previous wording

Cash used in investing activities for the three months ended March 31, 2024 and 2023 was $10 million, primarily for capital expenditures. Capital expenditures in the three months ended March 31, 2024 were primarily related to continuing investments in building and leasehold improvements and technology and facilities equipment. Total anticipated capital expenditures in 2024 are currently estimated to be $100 million. This includes routine capital expenditures, leasehold and building improvements and investments in technology.

Current wording

Cash used in investing activities for the three and six months ended June 30, 2024 was $8 million and $18 million as compared with $11 million and $21 million for the same periods in 2023, primarily for capital expenditures. Capital expenditures in the three and six months ended June 30, 2024 were primarily related to continuing investments in building and leasehold improvements and technology and facilities equipment. Total anticipated capital expenditures in 2024 are currently estimated to be $60 million. This includes routine capital expenditures, leasehold and building improvements and investments in technology.

Previous wording

Cash used in financing activities during the three months ended March 31, 2024 was $375 million as compared with $227 million for the same period in 2023. We use the proceeds from stock option exercises and available cash to repurchase our common stock on the open market to reduce outstanding shares. During the three months ended March 31, 2024, we used cash to repurchase 3.0 million shares of common stock, compared to 2.0 million shares of common stock during the same period in 2023.

Current wording

Cash used in financing activities during the three and six months ended June 30, 2024 was $207 million and $582 million as compared with $792 million and $1,018 million for the same period in 2023. We use the proceeds from stock option exercises and available cash to repurchase our common stock on the open market to reduce outstanding shares. During the three and six months ended June 30, 2024, we used cash to repurchase 0.9 million and 3.9 million shares of common stock, compared to 6.0 million and 8.0 million shares of common stock during the same period in 2023.

Previous wording

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

Current wording

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

Previous wording

We maintain international unsecured bank lines of credit for short-term working capital purposes. A few of these credit lines are supported by standby letters of credit issued by a United States bank or guarantees issued by the Company to the foreign banks issuing the credit line. At March 31, 2024, borrowings under these credit lines were $35 million and we were contingently liable for $85 million from standby letters of credit and guarantees. The standby letters of credit and guarantees primarily relate to obligations of our foreign subsidiaries for credit extended in the ordinary course of business by direct carriers, primarily airlines, and for duty and tax deferrals available from governmental entities responsible for customs and value-added-tax (VAT) taxation. The total underlying amounts due and payable for transportation and governmental excises are properly recorded as obligations in the accounting records of the respective foreign subsidiaries, and there would be no need to record additional expense in the unlikely event the parent company is required to perform.

Current wording

We maintain international unsecured bank lines of credit for short-term working capital purposes. A few of these credit lines are supported by standby letters of credit issued by a United States bank or guarantees issued by the Company to the foreign banks issuing the credit line. At June 30, 2024, borrowings under these credit lines were $36 million and we were contingently liable for $95 million from standby letters of credit and guarantees. The standby letters of credit and guarantees primarily relate to obligations of our foreign subsidiaries for credit extended in the ordinary course of business by direct carriers, primarily airlines, and for duty and tax deferrals available from governmental entities responsible for customs and value-added-tax (VAT) taxation. The total underlying amounts due and payable for transportation and governmental excises are properly recorded as obligations in the accounting records of the respective foreign subsidiaries, and there would be no need to record additional expense in the unlikely event the parent company is required to perform.

Previous wording

Our foreign subsidiaries regularly remit dividends to the U.S. parent company after evaluating their working capital requirements and funds necessary to finance local capital expenditures. In some cases, our ability to repatriate funds from foreign operations may be subject to foreign exchange controls. At March 31, 2024, cash and cash equivalent balances of $573 million were held by our non-United States subsidiaries, of which $12 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.

Current wording

Our foreign subsidiaries regularly remit dividends to the U.S. parent company after evaluating their working capital requirements and funds necessary to finance local capital expenditures. In some cases, our ability to repatriate funds from foreign operations may be subject to foreign exchange controls. At June 30, 2024, cash and cash equivalent balances of $572 million were held by our non-United States subsidiaries, of which $2 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.