EXPEDITORS INTERNATIONAL OF WASHINGTON INC

Previous wording

Certain portions of this report on Form 10-Q including the sections entitled "Overview," "Summary of Second Quarter 2025," "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 the impact of tariffs or other government actions on global trade volumes and economies, and 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 21, 2025 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 Third Quarter 2025," "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 the impact of tariffs or other government actions on global trade volumes and economies, and 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 21, 2025 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

Cash from operating activities was $179 million, up from $127 million from the second quarter 2024.

Current wording

Cash from operating activities was $201 million, up from $90 million in the third quarter of 2024.

Previous wording

We returned $335 million to shareholders in common stock repurchases and dividends.

Current wording

We returned $212 million to shareholders through common stock repurchases.

Previous wording

We operate in over 60 countries in the competitive global logistics industry and our activities are closely tied to the global economy. International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange rates, laws and policies relating to tariffs, trade restrictions, foreign investment and taxation. Periodically, governments consider changes to tariffs, impose trade restrictions and accords. Currently, the United States has undertaken a substantial global trade policies rebalancing effort resulting in significantly higher tariffs on imports. Increased tariffs on certain sectors for Canada, China, and Mexico took effect in the first quarter of 2025. Additionally, reciprocal tariffs on certain countries were expected to take effect in April 2025, but were later postponed to July and are now paused until August 2025, while trade negotiations by country are taking place. The United States has also imposed significantly higher tariffs on goods made in China, which are in effect. These measures have led to threatened or actual retaliatory tariffs and trade actions from several countries, including China and Canada. The potential for further tariff changes and trade restrictions remains high, creating an unpredictable environment for international trade. In addition, the "de minimis exemption", which exempted shipments of goods made in China and Hong Kong of less than $800 from tariffs, was terminated on May 2, 2025. Changes in import and export regulations may further impact the flow of trade and the global economy. We cannot predict how changes in tariffs and trade restrictions will affect our business. As governments impose import and export restrictions, shippers may adjust their sourcing patterns on a temporary or longer-term basis and potentially shift manufacturing to other countries over time. Additionally, the constant changes in trade regulations since the beginning of 2025 are adding complexity to the customs declarations process, making compliance with regulations increasingly challenging.

Current wording

We operate in over 60 countries in the competitive global logistics industry and our activities are closely tied to the global economy. International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange rates, laws and policies relating to tariffs, trade restrictions, foreign investment and taxation. Periodically, governments consider changes to tariffs, impose trade restrictions and accords. Currently, the United States Government has undertaken a substantial global trade rebalancing effort resulting in significantly higher tariffs on imports. Increased tariffs on certain sectors for Canada, China, and Mexico took effect in the first quarter of 2025. Additionally, reciprocal tariffs on certain countries were expected to take effect in April 2025, and were later postponed to July and August 2025, while trade negotiations by country were taking place. In the third quarter additional tariffs were imposed on imports from most countries including India, Brazil, and Japan. The United States has also imposed significantly higher tariffs on goods made in China. Additionally, sectoral tariffs on steel, aluminum and their derivative products, as well as investigations were launched on other commodities since the second quarter of 2025. These measures have led to threatened or actual retaliatory tariffs and trade actions from several countries, including China and Canada. The "de minimis" exemption, which exempted goods made in China and Hong Kong of less than $800 in commercial value from tariffs and entry submission, was terminated on May 2, 2025, and expanded to all countries on August 29, 2025. The potential for further tariff changes and trade restrictions remains high, creating an unpredictable environment for international trade. Changes in import and export regulations may further impact the flow of trade and the global economy. We cannot predict how changes in tariffs and trade restrictions will affect our business. As governments impose import and export restrictions, shippers may adjust their sourcing patterns on a temporary or longer-term basis and potentially shift manufacturing to other countries over time. Additionally, the constant changes in trade regulations since the beginning of 2025 are adding complexity to the customs declarations process, making compliance with regulations increasingly challenging.

Previous wording

Doing business in foreign locations also subjects us to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to being influenced by governmental policies and inter-governmental disputes concerning international trade, our business may also be negatively affected by political developments and changes in government personnel or policies in the United States and other countries, as well as economic turbulence, political unrest and security concerns in the nations and on the trade shipping lanes in which we conduct business. The future impact that these events may have on international trade, oil prices and security costs is uncertain. We do not have employees, assets, or operations in Russia, Ukraine, Israel, the Gaza Strip or the West Bank. While limited, any shipment activity is conducted with independent agents in those countries in compliance with all applicable trade sanctions, laws and regulations. We have a branch and employees in Lebanon but no significant assets.

Current wording

Doing business in foreign locations also subjects us to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to being influenced by governmental policies and inter-governmental disputes concerning international trade, our business may also be negatively affected by political developments and changes in government personnel or policies in the United States and other countries, as well as economic turbulence, political unrest and security concerns in the nations and on the trade shipping routes in which we conduct business. The future impact that these events may have on international trade, oil prices and security costs is uncertain. We do not have employees, assets, or operations in Russia, Ukraine, Israel, the Gaza Strip or the West Bank. While limited, any shipment activity is conducted with independent agents in those countries in compliance with all applicable trade sanctions, laws and regulations. We have a branch and employees in Lebanon but no significant assets.

Previous wording

The global economic and trade environments remain highly uncertain; including inflation remaining higher than historical levels, volatility in oil prices, high interest rates and the conflicts in the Middle East and Ukraine. In the first quarter of 2025, we saw high demand on exports out of Asia and continued to see high demand on exports out of South Asia in the second quarter 2025, resulting in high average buy and sell rates where demand exceeded carrier capacity. However, we believe additional ocean and air transportation capacity will become available if demand softens due to uncertainty in economic and trade regulations, safe passage through the Red Sea resumes, and the capacity made available by the revocation of the de minimis tariff exemption for low-value goods made in China and Hong Kong. These conditions could result in declines in average sell and buy rates. We also expect that pricing volatility will continue as carriers adapt to changes in demand, changing fuel prices, available capacity, 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 are relocating manufacturing to other countries to mitigate the impact of higher tariffs on imports, reduce their supply chain risks, address disruptions caused by pandemics and geopolitical issues. These changes could negatively affect our business.

Current wording

The global economic and trade environments remain highly uncertain; including inflation remaining higher than historical levels, volatility in oil prices, high interest rates and the conflicts in the Middle East and Ukraine. In the first quarter of 2025, we saw high demand on exports out of Asia and continued to see high demand on exports out of South Asia in the second quarter 2025, resulting in high average sell and buy sell rates where demand exceeded carrier capacity. However, softening demand and additional available capacity for ocean freight resulted in declines in ocean sell and buy rates starting in the second quarter. Additional ocean and air transportation capacity will become available if demand softens due to uncertainty in economic and trade regulations and safe passage through the Red Sea resumes. These conditions could result in declines in average sell and buy rates. We also expect that pricing volatility will continue as carriers adapt to changes in demand, changing fuel prices, available capacity, 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 are relocating manufacturing to other countries to mitigate the impact of higher tariffs on imports, reduce their supply chain risks, address disruptions caused by pandemics and geopolitical issues. These changes could negatively affect our business.

Previous wording

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

Current wording

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

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 and six months ended June 30, 2025 and 2024, including the respective percentage changes comparing 2025 and 2024.

Current wording

The following table shows the revenues, directly related cost of transportation and other expenses for our principal services and our overhead expenses for the three and nine months ended September 30, 2025 and 2024, including the respective percentage changes comparing 2025 and 2024.

Previous wording

Airfreight services revenues and expenses increased 11% and 8%, respectively, during the three months ended June 30, 2025, as compared with the same periods in 2024, due to a 7% increase in tonnage and 4% and 3% increases in average sell and buy rates, respectively. Airfreight services revenues and expenses both increased 14%, respectively, during the six months ended June 30, 2025, as compared with the same periods in 2024, due to an 8% increase in tonnage and 7% increases in both average sell and buy rates, respectively.

Current wording

Airfreight services revenues and expenses increased 3% and 4%, respectively, during the three months ended September 30, 2025, as compared with the same period in 2024, due to a 4% increase in tonnage, partially offset by 2% and 1% decreases in average sell and buy rates, respectively. Airfreight services revenues and expenses both increased 10%, respectively, during the nine months ended September 30, 2025, as compared with the same period in 2024, due to a 6% increase in tonnage and 4% increases in both the average sell and buy rates, respectively.

Previous wording

Seasonal changes in demand, impact from disruptions in the ocean market due to security concerns, variable demand for airfreight capacity from direct e-commerce business, including the effects of the elimination of low-value de minimis exemption on shipments from China could cause volatility in average buy rates on certain lanes. Additionally, geopolitical concerns, inter-governmental trade disputes, new tariffs on imports into the US and retaliatory actions from other countries create uncertainty in the economy and the trade environment. As shippers and carriers react to these volatile conditions, it may negatively affect demand for airfreight services, which could significantly reduce our volumes and average sell and buy rates in the coming quarters. Though we are unable to predict how these uncertainties and any future disruptions may affect our operations or financial results prospectively, these conditions could result in significant decreases in our revenues and operating income.

Current wording

Seasonal changes in demand, impact from disruptions in the ocean market due to security concerns and variable demand for airfreight capacity from direct e-commerce business could cause volatility in average buy rates on certain routes. Additionally, geopolitical concerns, inter-governmental trade disputes, new tariffs on imports into the U.S. and retaliatory actions from other countries create uncertainty in the economy and the trade environment. As shippers and carriers react to these volatile conditions, it may negatively affect demand for airfreight services, which could significantly reduce our volumes and average sell and buy rates in the coming quarters. Though we are unable to predict how these uncertainties and any future disruptions may affect our operations or financial results prospectively, these conditions could result in significant decreases in our revenues and operating income.

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 increased 4% and 1%, respectively, for the three months ended June 30, 2025 as compared with the same period in 2024. Ocean freight and ocean services revenues and expense both increased 19%, for the six months ended June 30, 2025 as compared with the same period in 2024. The largest component of our ocean freight and ocean services revenue is derived from ocean freight consolidation, which represented 69% and 66% of ocean freight and ocean services revenue for the six months ended June 30, 2025 and 2024, respectively.

Current wording

Ocean freight and ocean services consists of three basic services: ocean freight consolidation, order management and direct ocean forwarding. Ocean freight and ocean services revenues and expense decreased 27% and 31%, respectively, for the three months ended September 30, 2025 and 2% and 5%, respectively, for the nine months ended September 30, 2025 as compared with the same periods in 2024. The largest component of our ocean freight and ocean services revenue is derived from ocean freight consolidation, which represented 68% and 70% of ocean freight and ocean services revenue for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

Ocean freight consolidation revenues increased 1% while expenses decreased 2%, respectively, for the three months ended June 30, 2025, as compared with the same period in 2024, primarily due to 6% and 9% decreases in average sell and buy rates, offset by a 7% increase in containers shipped. Ocean freight consolidation revenues and expenses increased 24% and 21%, respectively, for the six months ended June 30, 2025, as compared with the same period in 2024, primarily due to 15% and 13% increases in average sell and buy rates and an 8% increase in containers shipped. The declines in average buy rates and sell rates in the second quarter 2025 are due to a softening demand and an increase in available carrier capacity. This decline could continue for the remainder of 2025 if demand softens and additional vessels are brought into service. For the six months ended June 30, 2025, the average buy and sell rates increased compared to the same period in 2024 due to a sharp decrease in rates in the first quarter of 2024 versus an uptick in the first quarter 2025 resulting from high demand out of Asia in advance of anticipated increases in tariffs.

Current wording

Ocean freight consolidation revenues and expense decreased 35% and 38%, respectively, for the three months ended September 30, 2025, as compared with the same period in 2024, primarily due to 33% and 36% decreases in average sell and buy rates and a 3% decrease in containers shipped primarily from retail customers. Ocean freight consolidation revenues and expenses decreased 5% and 8%, respectively, for the nine months ended September 30, 2025, as compared with the same period in 2024, primarily due to 8% and 11% decreases in average sell and buy rates, offset by a 4% increase in containers shipped. The declines in average buy rates and sell rates are due to a softening demand primarily on exports out of Asia and an increase in available carrier capacity. This decline could continue for the remainder of 2025 and beyond if demand softens and additional vessels are brought into service.

Previous wording

North Asia ocean freight and ocean services revenues and expenses decreased 8% and 10%,respectively, for the three months ended June 30, 2025, while they both increased 16% for the six months ended June 30, 2025. The decreases in the second quarter are due to declining containers shipped and average sell and buy rates compared to a strong first quarter 2025 when customers front loaded shipments out of China in anticipation of higher tariffs. For the three and six months ended June 30, 2025, North America ocean freight and ocean services revenues increased 10% and 16%, compared to the same periods in 2024, primarily due to higher revenues on imports while expenses only increased 8% and 7%.

Current wording

South Asia ocean freight and ocean services revenues and expenses decreased 23% and 28%, respectively, for the three months ended September 30, 2025, while they increased 10% and 7%, respectively, for the nine months ended September 30, 2025. The decreases in the third quarter are due to declining average sell and buy rates compared to a strong first half of 2025 when customers front loaded shipments in anticipation of higher tariffs.

Previous wording

The global economic and trade environment are increasingly uncertain and dynamic, with increases in trade tariffs and inter-governmental disputes. As shippers and carriers react to these volatile conditions, it may negatively affect demand, which could reduce our volumes and average sell and buy rates in the coming quarters. Further, carriers are adding new vessels which will increase capacity and which may also put downward pressure on rates. Sequentially, ocean containers shipped out of North Asia declined 11% in the second quarter compared to the first quarter of 2025. While some of those volumes are shifting to other lanes, as customers look to mitigate their exposure to U.S./China-specific tariffs, it is too early to know what the overall decline in volumes might be. These conditions could result in significant decreases in our revenues and operating income.

Current wording

The global economic and trade environment are increasingly uncertain and dynamic, with increases in trade tariffs and inter-governmental disputes. As shippers and carriers reacted to these volatile conditions, it negatively affected demand, which reduced our volumes and average sell and buy rates. Further, carriers have added new vessels which increased capacity and substantially decreased average sell and buy rates. While some volumes are shifting to other routes and as customers look to mitigate their exposure to U.S./China-specific tariffs, it is too early to know what the overall impact on volumes might be. If safe passage through the Red Sea resumes, additional capacity will become available due to shorter transit times. These conditions could further depress sell and buy rates and cause further decreases in our revenues and operating income.

Previous wording

Customs brokerage and other services revenues increased 10% and 11% and expenses increased 11% and 13% for the three and six months ended June 30, 2025, respectively, as compared with the same periods in 2024. These changes are primarily due to increases in customs clearances, import services, road freight and warehousing and distribution from higher shipment volumes, principally from shipments into North America and Europe.

Current wording

Customs brokerage and other services revenues increased 13% and 12% and expenses increased 11% and 12% for the three and nine months ended September 30, 2025, respectively, as compared with the same periods in 2024. These changes are primarily due to increases in customs clearances, import services, road freight and warehousing and distribution from higher shipment volumes, principally from shipments into North America and Europe.

Previous wording

Import services, including charges at ports such as detention, drayage, terminal charges and delivery, and road freight services increased significantly in the first half of 2025 because of higher volumes from shippers front loading deliveries in anticipation of higher tariffs.

Current wording

Import services, including charges at ports such as detention, drayage, terminal charges and delivery increased significantly in 2025 because of higher volumes in part from shippers front loading deliveries in anticipation of higher tariffs. Road freight and warehousing and distribution services benefited from high demand from our technology customers.

Previous wording

Salaries and related costs increased 11% for both the three and six months ended June 30, 2025 as compared with the same periods in 2024, principally due to increase in salaries & benefits and incentive compensation from improved operating results. Headcount increased 6% in 2025 compared to 2024 primarily in our operations and information technology. We hired employees in operations to support the added complexity and higher demand for customs brokerage services, primarily in North America, and support the growth in volumes transacted in certain regions such as South Asia, Europe and Latin America. We also continued to hire IT personnel to support essential investments which further strengthens our critical information systems.

Current wording

Salaries and related costs increased 9% for the three months ended September 30, 2025 as compared with the same periods in 2024, principally due to a 7% increase in headcount, and increases in base salaries and benefits, partially offset by decreases in incentive compensation commensurate with lower operating income. For the nine months ended September 30, 2025 salaries and related costs increased 10%, principally due to a 7% increase in headcount and increases in base salaries and benefits. Headcount increased in 2025 compared to 2024, primarily in our operations and information technology. We hired employees in operations to support the added complexity and higher demand for customs brokerage services, primarily in North America, and support the growth in volumes transacted in certain services and regions such as South Asia, Europe and Latin America. We also continued to hire IT personnel to support essential investments which further strengthens our critical information systems.

Previous 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, 2025, increased 21% and 16%, respectively, when compared to the same period in 2024, primarily due to higher 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 nine months ended September 30, 2025, increased 10%, respectively, when compared to the same period in 2024, primarily due to higher operating income.

Previous wording

Other overhead expenses increased 20% and 17% for the three and six months ended June 30, 2025, respectively, as compared with the same periods in 2024. This increase is primarily due to technology related expenses, increased consulting, higher rental and occupancy expenses, and indirect taxes.

Current wording

Other overhead expenses increased 14% and 16% for the three and nine months ended September 30, 2025, respectively, as compared with the same periods in 2024. This increase is primarily due to technology related expenses, increased consulting, and higher rental and occupancy expenses. Additionally, for the nine months ended September 30, 2025, we incurred higher expenses related to indirect tax contingencies.

Previous wording

Our consolidated effective income tax rate increased to 28.7% and 27.3% for the three and six months ended June 30, 2025, as compared to 25.8% and 26.3% in the comparable periods of 2024 principally from higher foreign tax expense driven by changes in foreign currency exchange ratesand certain non-deductible expenses. For the three and six months ended June 30, 2025 and 2024, 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, 2025 and December 31, 2024 for the 15% corporate alternative minimum tax based on financial statement income (BMT), which became effective in 2023. For the periods ended June 30, 2025 and 2024, the amount of Pillar Two income tax expense was insignificant.

Current wording

Our consolidated effective income tax rate was 25.2% and 26.6% for the three and nine months ended September 30, 2025, as compared to 26.4% in both comparable periods of 2024. The decrease during the three months ended September 30, 2025 was principally from an increase in Foreign-derived intangible income (FDII) deductions. 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 not incurred any significant expenses for any period presented for either the 15% corporate alternative minimum tax, nor for the global minimum tax regime (also known as Pillar Two).

Previous wording

On July 4, 2025, the 2025 Tax Act was enacted. The Act provides for several corporate tax changes including, but not limited to, restoring full expensing of domestic research and development costs, restoring immediate deductibility of certain capital expenditures, and changes in the computations of U.S. taxation on international earnings. We are in the process of evaluating the provisions of the 2025 Tax Act but do not expect that it will have a material impact to consolidated tax expense and cash flows for 2025. Elements of the enacted tax laws and regulations could be impacted by further legislative action as well as additional interpretations and guidance issued by the Internal Revenue Service or Treasury and by similar governmental bodies in jurisdictions outside of the U.S. Such changes could impact the estimates of the amounts the Company has recorded.

Current wording

On July 4, 2025, the United States enacted into law the 2025 Tax Act. The 2025 Tax Act provides for several corporate tax changes including, but not limited to, restoring an election to recognize full expensing of domestic research and development costs, restoring immediate deductibility of certain capital expenditures, and changes to the computations of U.S. taxation on international earnings. We are in the process of evaluating the provisions of the 2025 Tax Act, including which elections we may or may not make. While we expect that the 2025 Tax Act may have a positive impact on consolidated tax expense and cash flows, we do not expect it to be material. Elements of the enacted tax laws and regulations could be impacted by further legislative action as well as additional interpretations and guidance issued by the Internal Revenue Service or Treasury and by similar governmental bodies in jurisdictions outside of the U.S. Such changes could impact the estimates of the amounts the Company has recorded.

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. Historically, derivative financial instruments have not been used to manage foreign currency risk. In lieu of the use of foreign currency derivatives we instead try to compensate for these exposures by accelerating international currency settlements among our offices and agents. In the future, we may enter into foreign currency hedging transactions to manage our foreign currency risk. There are also regulatory or commercial limitations on our ability to move money freely, which could be impacted by inter-governmental disputes or new trade restrictions. We had no foreign currency derivatives outstanding at June 30, 2025 and December 31, 2024. For the three months ended June 30, 2025, net foreign currency losses were approximately $12 million compared to net foreign currency gains of approximately $5 million in the same period in 2024. During the six months ended June 30, 2025, net foreign currency losses were approximately $17 million compared to net foreign currency gains of approximately $12 million in the same period in 2024.

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. Historically, derivative financial instruments have not been used to manage foreign currency risk. In lieu of the use of foreign currency derivatives we instead try to compensate for these exposures by accelerating international currency settlements among our offices and agents. In the future, we may enter into foreign currency hedging transactions to manage our foreign currency risk. There are also regulatory or commercial limitations on our ability to move money freely, which could be impacted by inter-governmental disputes or new trade restrictions. We had no foreign currency derivatives outstanding at September 30, 2025 and December 31, 2024. For the three months ended September 30, 2025, net foreign currency transactional losses were approximately $3 million compared to net foreign currency losses of approximately $11 million in the same period in 2024. During the nine months ended September 30, 2025, net foreign currency transactional losses were approximately $20 million compared to net foreign currency transactional gains of less than $1 million in the same period in 2024.

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 and six months ended June 30, 2025 was $179 million and $522 million as compared with $127 million and $384 million for the same periods in 2024. The increases of $52 million and $138 million for the three and six months ended June 30, 2025, were primarily due changes in working capital and higher net earnings. At June 30, 2025, working capital was $1,535 million, including cash and cash equivalents of $1,156 million. Other than our recorded lease liabilities, we had no long-term obligations or debt at June 30, 2025. 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 nine months ended September 30, 2025 was $201 million and $723 million as compared with $90 million and $474 million for the same periods in 2024. The increases of $111 million and $249 million for the three and nine months ended September 30, 2025, were primarily due changes in working capital. At September 30, 2025, working capital was $1,627 million, including cash and cash equivalents of $1,190 million. Other than our recorded lease liabilities, we had no long-term obligations or debt at September 30, 2025. 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

Cash used in investing activities for the three and six months ended June 30, 2025 was $16 million and $29 million as compared with $8 million and $18 million for the same periods in 2024, primarily for capital expenditures. Capital expenditures in the three and six months ended June 30, 2025 were primarily related to continuing investments in building and leasehold improvements, technology and equipment. Total anticipated capital expenditures in 2025 are currently estimated to be approximately $60 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 nine months ended September 30, 2025 was $10 million and $39 million as compared with $13 million and $30 million for the same periods in 2024, primarily for capital expenditures. Capital expenditures in the three and nine months ended September 30, 2025 were primarily related to continuing investments in building and leasehold improvements, technology and equipment. Total anticipated capital expenditures in 2025 are currently estimated to be approximately $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 and six months ended June 30, 2025 was $340 million and $506 million as compared with $207 million and $582 million for the same periods in 2024. 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, 2025, we used cash to repurchase 2.0 million and 3.5 million shares of common stock, compared to 0.9 million and 3.9 million shares of common stock during the same periods in 2024.

Current wording

Cash used in financing activities during the three and nine months ended September 30, 2025 was $150 million and $655 million as compared with $76 million and $659 million for the same periods in 2024. We use the proceeds from stock option exercises, employee stock purchases and available cash to repurchase our common stock on the open market to reduce outstanding shares. During the three and nine months ended September 30, 2025, we used cash to repurchase 1.8 million and 5.3 million shares of common stock, compared to 1.2 million and 5.1 million shares of common stock during the same periods in 2024.

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 June 30, 2025, borrowings under these credit lines were $34 million and we were contingently liable for $80 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 September 30, 2025, borrowings under these credit lines were $36 million and we were contingently liable for $80 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, or could be impacted by inter-governmental disputes or new trade restrictions. At June 30, 2025, cash and cash equivalent balances of $541 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.

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 or could be impacted by inter-governmental disputes or new trade restrictions. At September 30, 2025, cash and cash equivalent balances of $515 million were held by our non-United States subsidiaries, of which $18 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.