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 2026," "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," "provisional," "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 25, 2026. 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 2026," "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," "provisional," "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 25, 2026. 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

The significant impacts are discussed within “Results of Operations” and summarized below.

Current wording

The significant impacts as compared to second quarter of 2025 are discussed within “Results of Operations” and summarized below.

Previous wording

Customs brokerage and other services revenues increased 17% and airfreight services revenues increased 14%.

Current wording

Airfreight services revenues increased 57% and customs brokerage and other services revenues increased 27%.

Previous wording

Airfreight services, road freight and warehousing and distribution services (included with customs brokerage and other services) all benefited from continued strong demand from our technology customers investing in artificial intelligence infrastructure.

Current wording

Airfreight services, road freight and warehousing and distribution services (included with customs brokerage and other services) all benefited from continued strong demand from our technology customers investing in artificial intelligence (AI) infrastructure.

Previous wording

Operating income increased 11% and net earnings to shareholders increased 13%, as compared to the first quarter of 2025.

Current wording

Operating income increased 41% and net earnings to shareholders increased 45%, as compared to the second quarter of 2025.

Previous wording

Earnings per share increased 16% to $1.71.

Current wording

Earnings per share increased 51% to $2.03.

Previous wording

Cash from operating activities was $309 million, down from $343 million in the first quarter of 2025.

Current wording

Cash from operating activities was $179 million for both the second quarter of 2026 and 2025.

Previous wording

We returned $288 million to shareholders through common stock repurchases.

Current wording

We returned $461 million to shareholders through common stock repurchases and dividends.

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. Governments periodically consider changes to tariffs and impose trade restrictions and accords. Starting in the first quarter of 2025, the United States Government undertook a substantial global trade rebalancing effort resulting in significantly higher tariffs on imports. Throughout 2025 additional tariffs on imports into the United States for certain sectors and many countries became effective. There are currently threatened or actual retaliatory tariffs and trade actions from several countries, including China. On February 20, 2026, the United States Supreme Court issued a ruling on certain tariffs imposed in the United States under the International Emergency

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. Governments periodically consider changes to tariffs and impose trade restrictions and accords. Starting in the first quarter of 2025, the United States Government undertook a substantial global trade rebalancing effort resulting in significantly higher tariffs on imports. Throughout 2025 additional tariffs on imports into the United States for certain sectors and many countries became effective. There are currently threatened or actual retaliatory tariffs and trade actions from several countries, including China and Canada. On February 20, 2026, the United States Supreme Court issued a ruling on certain tariffs imposed in the United States under the International Emergency Economic Powers Act (IEEPA). The ruling invalidates the IEEPA tariffs imposed on imports to the United States in 2025, however it does not invalidate sectoral tariffs such as metals, auto parts, timber, lumber, and derivative products. The decision also allows for potential refunds; and, starting in April 2026 U.S. Customs and Border Protection implemented procedures for importers and their brokers to submit refund requests. In addition, ongoing and potential future trade actions, including sector-based and country specific and broader action-based measures continue to create uncertainty with respect to current and future U.S. trade policy and impact global trade flows. New U.S. tariffs have been broadly imposed across a variety of countries in July 2026. We cannot predict how other countries will respond to these tariffs or how changes in tariffs and trade restrictions will affect our business. Additionally, changes in trade and customs brokerage regulations continue to add 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, conflicts, political unrest and security concerns in the nations and on the trade shipping routes in which we conduct business. Starting in late February 2026 the operations of our offices in Qatar, Bahrain, Kuwait, Lebanon, Oman, Saudi Arabia and United Arab Emirates were disrupted by the conflict with Iran and the closure of the Strait of Hormuz. The conflict has affected available airfreight capacity beyond the Middle East, prevented cargo ships from navigating through the Persian Gulf and delayed expected resumption of traffic through the Suez Canal. The impact on capacity and oil prices resulted in air and ocean carriers implementing surcharges in March 2026. The financial impact on our MAIR region operations in the first quarter 2026 is not material and is mitigated by our ability to adjust the routing of our customers' shipments. 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.

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, conflicts, political unrest and security concerns in the nations and on the trade shipping routes in which we conduct business. Starting in late February 2026 the operations of our offices in Qatar, Bahrain, Kuwait, Lebanon, Oman, Saudi Arabia and United Arab Emirates were disrupted by the conflict with Iran and the closure of the Strait of Hormuz. The conflict has affected available airfreight capacity beyond the Middle East, prevented cargo ships from navigating through the Persian Gulf, and substantial resumption of traffic through the Suez Canal. The impact on capacity and oil prices resulted in air and ocean carriers implementing surcharges and fuel related increases starting in March 2026. The financial impact on our MAIR region operations in the first half of 2026 is not material and is mitigated by our ability to adjust the routing of our customers' shipments. 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.

Previous wording

The global economic and trade environments remain highly uncertain; including inflation remaining high, increases in oil prices, 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 rates where demand exceeded carrier capacity. In the first quarter of 2026 we saw excess available capacity compared to demand for ocean freight which continued to put pressure on ocean sell and buy rates. Additional ocean and air transportation capacity will become available as demand softens due to uncertainty in geopolitical, economic conditions and trade regulations. These conditions have resulted in pricing volatility that we expect to 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 high, increases in oil prices, 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 rates where demand exceeded carrier capacity. In the first quarter of 2026 we saw excess available capacity compared to demand for ocean freight which put pressure on ocean sell and buy rates whereas in the second quarter that imbalance lessened on exports out of Asia. Additional ocean and air transportation capacity will become available as demand softens due to uncertainty in geopolitical, economic conditions and trade regulations. These conditions have resulted in pricing volatility that we expect to continue as carriers adapt to changes in demand, changing fuel prices, available capacity, security risks and reacting 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

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 months ended March 31, 2026 and 2025, including the respective percentage changes comparing 2026 and 2025.

Current wording

The following table shows the revenues, directly related cost of transportation and other expenses for our principal services and our salaries and other expenses for the three and six months ended June 30, 2026 and 2025, including the respective percentage changes comparing 2026 and 2025.

Previous wording

Airfreight services revenues and expenses increased 14% and 19%, respectively, during the three months ended March 31, 2026, as compared with the same period in 2025, due to 9% and 14% increases in average sell and buy rates, respectively, and a 5% increase in tonnage. Tonnage improved in 2026 as a result of increased market demand by the technology sector compared to the first quarter of 2025.

Current wording

Airfreight services revenues and expenses increased 57% and 62%, respectively, during the three months ended June 30, 2026, as compared to the same periods in 2025, due to 44% and 45% increases in average sell and buy rates, respectively, and a 14% increase in tonnage. Airfreight services revenues and expenses increased 36% and 41%, respectively, during the six months ended June 30, 2026, as compared to the same periods in 2025, due to 28% and 31% increases in average sell and buy rates, respectively, and a 10% increase in tonnage. Tonnage improved in 2026 as a result of increased market demand by the technology sector compared to the first half of 2025.

Previous wording

Tonnage increased on exports from North Asia, South Asia and MAIR during the three months ended March 31, 2026, as compared with the same period in 2025, as demand from technology customers remained strong while being partially offset by lower volumes from North America and Europe.

Current wording

Tonnage increased primarily on exports from North Asia and South Asia during the three and six months ended June 30, 2026, as compared to the same periods in 2025, as demand from technology customers remained strong.

Previous wording

Average sell rates increased during the three months ended March 31, 2026 as compared to the same period in 2025 on exports out of North Asia and Europe as higher carrier buy rates from the fourth quarter of 2025 were passed on to customers in the first quarter of 2026. Average buy rates increased during the three months ended March 31, 2026 compared with the same period in 2025, most significantly on exports out of North Asia and Europe as demand from technology customers remained strong. During the latter part of March and continuing in the first few weeks of the second quarter growth in sell rates has outpaced growth in buy rates amid capacity constraints caused by the conflict in the Middle East.

Current wording

Average sell rates increased during the three and six months ended June 30, 2026, as compared to the same periods in 2025 on exports out of North Asia and South Asia as higher carrier buy rates were passed on to customers starting in the first quarter of 2026. Average buy rates increased during the three and six months ended June 30, 2026 compared to the same periods in 2025, most significantly on exports out of North Asia, South Asia and Europe as demand remained strong, the conflict in the Middle East constrained available capacity and jet fuel prices soared.

Previous 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 23% and 28%, respectively, for the three months ended March 31, 2026, as compared with the same period in 2025. The largest component of our ocean freight and ocean services revenue is derived from ocean freight consolidation, which represented 60% and 71% of ocean freight and ocean services revenue for the three months ended March 31, 2026 and 2025, 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 increased 5% and 10%, respectively, for the three months ended June 30, 2026, as compared to the same period in 2025. Ocean freight and ocean services revenues and expenses both decreased 10%, respectively, for the six months ended June 30, 2026, as compared to the same period in 2025. The largest component of our ocean freight and ocean services revenue is derived from ocean freight consolidation, which represented 62% and 69% of ocean freight and ocean services revenue for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Ocean freight consolidation revenues and expense decreased 35% and 37%, respectively, for the three months ended March 31, 2026, as compared with the same period in 2025, primarily due to 33% and 32% decreases in average sell and buy rates and a 4% decrease in containers shipped. Containers shipped decreased most significantly on exports out of North Asia which was partially offset by increases in South Asia. The declines in average buy rates and sell rates are due to continued available capacity exceeding demand. Sell and buy rates in the first quarter of 2026 were comparable to the fourth quarter of 2025.

Current wording

Ocean freight consolidation revenues and expenses decreased 18% and 16%, respectively, for the six months ended June 30, 2026, as compared to the same period in 2025, primarily due to 17% and 14% decreases in average sell and buy rates and a 2% decrease in containers shipped. The declines in average buy rates and sell rates are due to available capacity exceeding demand, especially in the first quarter of 2026.

Previous wording

Order management revenues and expenses increased 13%, and 12%, respectively, for the three months ended March 31, 2026, respectively, as compared to the same period in 2025 due to higher volumes from new and existing customers. Direct ocean freight forwarding revenues and expenses remained relatively flat for the three months ended March 31, 2026, as compared to the same period in 2025.

Current wording

Order management revenues increased 21%, and 17%, respectively, for the three and six months ended June 30, 2026,and expenses increased 23%, and 17%, respectively, for the three and six months ended June 30, 2026, respectively, as compared to the same period in 2025 due to higher volumes from new and existing customers, coupled with continued customer expansion in South Asia.

Previous wording

The global economic and trade environment are increasingly volatile with uncertainty in trade tariffs and inter-governmental disputes. Recent geopolitical tensions, most notably the Iran conflict and the closure of the Strait of Hormuz, have introduced additional risks. Further, carriers are expected to add new vessels in 2026 and 2027. 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 long-term 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 decreases in our revenues and operating income, depending on how carriers adapt to conditions and manage available capacity.

Current wording

The global economic and trade environment are increasingly volatile with uncertainty in trade tariffs and inter-governmental disputes. Recent geopolitical tensions, most notably the Iran conflict and the closure of the Strait of Hormuz, have introduced additional risks. Further, carriers are expected to add new vessels in 2026 and 2027. 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 long-term impact on volumes might be. As passage through the Red Sea resumes, additional capacity may become available due to shorter transit times. These conditions could further affect sell and buy rates and our revenues and operating income, depending on how carriers adapt to conditions and manage available capacity.

Previous wording

Customs brokerage and other services revenues increased 17% and expenses increased 13% for the three months ended March 31, 2026, as compared with the same period in 2025. These changes are primarily due to increases in the number and complexity of customs clearances, road freight and warehousing and distribution. The continued complexity in customs brokerage due to the dynamic trade environment has resulted in higher fees and growing demand for our brokerage services from customers across many business sectors. Our road freight and warehousing and distribution services continued to be sustained by demand from the technology sector, leading to higher shipment volumes, principally in North America and Europe.

Current wording

Customs brokerage and other services revenues increased 27% and 22% and expenses increased 31% and 22% for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. These changes are primarily due to increases in the number and complexity of customs clearances, road freight and warehousing and distribution. The continued complexity in customs brokerage due to the dynamic trade environment has resulted in higher fees and growing demand for our brokerage services from customers across many business sectors. Our road freight and warehousing and distribution services continued to be sustained by demand from technology customers and their investment in AI infrastructure, leading to higher shipment volumes and revenues from specialized services with higher rates, principally in North America and Europe.

Previous wording

North America revenues increased 18% and expenses increased 13% for the three months ended March 31, 2026, as compared with the same period in 2025. Europe revenues increased 20% and expenses increased 16%, respectively, for the three months ended March 31, 2026, as compared with the same period in 2025.

Current wording

North America revenues increased 33% and 26% and expenses increased 42% and 28% for the three and six months ended June 30, 2026, respectively, as compared to the same period in 2025. Europe revenues increased 14% and 17% and expenses increased 11% and 14%, respectively, for the three and six months ended June 30, 2026, as compared to the same period in 2025.

Previous wording

Customers value our brokerage services due to an increasingly dynamic and complex trade environment, and its impact on the declaration process. They seek knowledgeable customs brokers with operational capacity and sophisticated systems 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 or there is substantial removal of tariffs, our revenues and operating income could be negatively impacted.

Current wording

Customers value our customs brokerage services due to an increasingly dynamic and complex trade environment, and its impact on the declaration process, which often leads to the adoption of additional transportation and distribution services. Customers seek knowledgeable customs brokers with operational capacity and sophisticated systems 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 or there is substantial removal of tariffs, our revenues and operating income could be negatively impacted.

Previous wording

Salaries and related costs increased 9% for the three months ended March 31, 2026 as compared with the same period in 2025, principally due to a 6% increase in headcount, increases in base salaries and higher incentive compensation from improved operating results.

Current wording

Salaries and related costs increased 22% and 15% for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025, principally due to a 4% increase in headcount, increases in base salaries, higher incentive compensation from improved operating results and termination costs incurred for the Global Technology restructuring.

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, 2026, increased 4%, when compared to the same period in 2025, 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 increased 21% for the six months ended June 30, 2026, when compared to the same period in 2025, primarily due to higher operating income.

Previous wording

Our effective tax rate is subject to variation and the effective tax rate may be more or less volatile based on the amounts of pre-tax income. Total consolidated foreign income tax expense is composed of the income tax expense of our non-U.S. subsidiaries as well as income based withholding taxes paid by our non-U.S. subsidiaries on behalf of its parent for intercompany payments, including the remittance of dividends, some of which do not qualify for tax credits under U.S. income tax laws and regulations. The tax benefit associated with non-qualified stock option and restricted stock unit grants is recorded when the related compensation expense is recorded (excess tax benefits are recorded upon the exercise of non-qualified stock options and vesting of restricted stock units and performance share units), while the tax benefit received for employee stock purchase plan shares cannot be anticipated and are therefore recognized if and when a disqualifying disposition occurs.

Current wording

Our tax rates depend on current tax laws, which could change through new legislative action, as well as additional interpretations and guidance issued by tax authorities. Our effective tax rate is subject to variation, and the effective tax rate may be more or less volatile based on the amounts of pre-tax income in various tax jurisdictions. Total consolidated foreign income tax expense reflects both the income taxes of our non-U.S. subsidiaries and the withholding taxes they pay on dividends that do not qualify for tax credits.

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 March 31, 2026 and December 31, 2025. For the three months ended March 31, 2026, net foreign currency transactional gains were approximately $2 million compared to net foreign currency losses of approximately $5 million in the same period in 2025. The net impact of foreign exchange rate fluctuation on the translation of our foreign operations, as included in other comprehensive income, was a loss of $12 million and an income of $13 million, net of taxes, in the three months ended March 31, 2026, and 2025, respectively.

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 June 30, 2026 and December 31, 2025. For the three and six months ended June 30, 2026, net foreign currency transactional losses were approximately $8 million and $6 million compared to net foreign currency losses of approximately $12 million and $17 million in the same periods in 2025. The net impact of foreign exchange rate fluctuation on the translation of our foreign operations, as included in other comprehensive income, was income of $4 million and loss of $8 million, net of taxes, in the three months and six months ended June 30, 2026, respectively, and income of $33 million and $47 million, net of taxes, in the three and six months ended June 30, 2025, respectively.

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, 2026 was $309 million as compared with $343 million for the same period in 2025. The decrease of $34 million for the three months ended March 31, 2026, was primarily due changes in working capital due to increase in revenue activity in the latter part of the quarter. At March 31, 2026, working capital was $1,611 million, including cash and cash equivalents of $1,316 million. Other than our recorded lease liabilities, we had no long-term obligations or debt at March 31, 2026. 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, 2026 was $179 million and $488 million as compared to $179 million and $522 million for the same periods in 2025. Net cash provided by operating activities in the three months ended June 30, 2026 was comparable to the same period in 2025 while the decrease of $34 million for the six months ended June 30, 2026, respectively, was primarily due to changes in working capital due to growth in activity in the second quarter of 2026. At June 30, 2026, working capital was $1,448 million, including cash and cash equivalents of $1,031 million. Other than our recorded lease liabilities, we had no long-term obligations or debt at June 30, 2026. 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 months ended March 31, 2026 was $12 million as compared with $13 million for the same period in 2025, primarily for capital expenditures. Capital expenditures in the three months ended March 31, 2026 were primarily related to continuing investments in building and leasehold improvements and technology and facilities equipment. Total anticipated capital expenditures in 2026 are currently estimated to be approximately $80 million. This includes investments in technology infrastructure, leasehold and building improvements and routine capital expenditures.

Current wording

Cash provided by investing activities for the three months ended June 30, 2026 was $9 million compared to $16 million in cash used by investing activities for the same period in 2025 due to the recognition of proceeds from the sale of a property. Cash used in investing activities for the six months ended June 30, 2026 was $3 million as compared to $29 million for the same period in 2025, for the same reason as for the three months. Capital expenditures in the three and six months ended June 30, 2026 were primarily related to continuing investments in building and leasehold improvements and technology and facilities equipment. Total anticipated capital expenditures in 2026 are currently estimated to be approximately $60 million. This includes investments in technology infrastructure, leasehold and building improvements and routine capital expenditures.

Previous wording

Cash used in financing activities during the three months ended March 31, 2026 was $290 million as compared with $166 million for the same period in 2025. We have a Discretionary Stock Repurchase Plan under which management is allowed to repurchase shares to reduce the issued and outstanding stock to 130 million shares of common stock. A new repurchase program has been adopted as authorized by the Board of Directors in February 2026, as described in Part II, Item 2 of this report. 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 months ended March 31, 2026, we used cash to repurchase 2.0 million shares of common stock at an average price of $145.90 per share compared to 1.5 million shares of common stock at an average price of $117.29 during the same period in 2025.

Current wording

Cash used in financing activities during the three and six months ended June 30, 2026 was $474 million and $764 million as compared to $340 million and $506 million, respectively, for the same periods in 2025. We have a Discretionary Stock Repurchase Plan under which management is allowed to repurchase shares to reduce the issued and outstanding stock to 130 million shares of common stock. A new repurchase program has been adopted as authorized by the Board of Directors in February 2026, as described in Part II, Item 2 of this report. 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 six months ended June 30, 2026, we used cash to repurchase 2.3 million and 4.3 million shares of common stock at an average price of $151.50 and $148.87 per share compared to 2.0 million and 3.5 million shares of common stock at an average price of $112.05 and $114.31, respectively, during the same periods in 2025.

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, 2026, borrowings under these credit lines were $33 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 June 30, 2026, borrowings under these credit lines were $32 million and we were contingently liable for $81 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 March 31, 2026, cash and cash equivalent balances of $518 million were held by our non-United States subsidiaries, of which $1 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 June 30, 2026, cash and cash equivalent balances of $598 million were held by our non-United States subsidiaries, of which $7 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.