EXPEDITORS INTERNATIONAL OF WASHINGTON INC

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Earnings

Condensed Consolidated Statem ents of Comprehensive Income

Condensed Consolidated Statements of Cash Flows

Condensed Consolidated Statements of Equity

Notes to Condensed Consoli dated Financial Statements

Note 1. Summary of Significant Accounting Policies

A.

Basis of Presentation

Expeditors International of Washington, Inc. (the Company) is a non-asset-based provider of global logistics services operating through a worldwide network of offices and exclusive or non-exclusive agents. The Company serves a diverse clientele in the technology sector - including cloud & data center services; hyperscalers; semiconductor; personal computers and compute hardware - and industries such as healthcare, automotive, aviation, aerospace, retail and high fashion.

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. As a result, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted. The Company believes that the disclosures made are adequate to make the information presented not misleading. The condensed consolidated financial statements reflect all adjustments, consisting of normal recurring items, which are, in the opinion of management, necessary for the fair presentation of the results for the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Form 10-K as filed with the Securities and Exchange Commission on February 25, 2026.

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

B.

Revenue Recognition

The Company derives its revenues by entering into agreements that are generally comprised of a single performance obligation, which is that freight is shipped for and received by the customer. Each performance obligation is comprised of one or more of the Company’s services. The Company's principal services are the revenue categories presented in the condensed consolidated statements of earnings: 1) airfreight services, 2) ocean freight and ocean services, and 3) customs brokerage and other services.

The Company typically satisfies its performance obligations as services are rendered over time. A typical shipment would include services rendered at origin, such as pick-up and delivery to port, freight services from origin to destination port and destination services, such as customs clearance and final delivery. The Company measures the performance of its obligations as services are completed over the life of a shipment, including services at origin, freight and destination. The Company fulfills nearly all of its performance obligations within a one to two-month period and contracts with customers have an original expected duration of less than one year. The Company satisfied nearly all performance obligations for the contract liabilities recorded as of June 30, 2026 and December 31, 2025.

The Company evaluates whether amounts billed to customers should be reported as revenues on a gross or net basis. Generally, revenue is recorded on a gross basis when the Company is primarily responsible for fulfilling the promise to provide the services, when it assumes the risk of loss, when it has discretion in setting the prices for the services to the customers, and when the Company has the ability to direct the use of the services provided by the third party. When revenue is recorded on a net basis, the amounts earned are determined using a fixed fee, a per unit of activity fee or a combination thereof. For revenues earned in other capacities, for instance, when the Company does not issue a House Air Waybill (HAWB), a House Ocean Bill of Lading (HOBL) or a House Sea Waybill or otherwise acts solely as an agent for the shipper. In these transactions, the Company is not a principal and reports only the commissions and fees earned in revenues.

C.

Leases

The Company determines if an arrangement is a lease at inception. Right-of-use (ROU) assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. All ROU assets and lease liabilities are recognized at the commencement date at the present value of lease payments over the lease term. ROU assets are adjusted for lease incentives and initial direct costs. The lease term includes renewal options exercisable at the Company's sole discretion when the Company is reasonably certain to exercise that option. As the Company's leases generally do not have an implicit rate, the Company uses an estimated incremental borrowing rate based on market information available at the commencement date to determine the present value. Certain of our leases include variable payments, which may vary based upon changes in facts or circumstances after the start of the lease. The Company excludes variable payments from ROU assets and lease liabilities to the extent not considered fixed, and instead expenses variable payments as incurred. Lease expense is recognized on a straight-line basis over the lease term and is included in rent and occupancy expenses in the condensed consolidated statements of earnings.

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

D.

Accounts Receivable

The Company’s trade accounts receivable present similar credit risk characteristics and the allowance for credit loss is estimated on a collective basis, using a credit loss-rate method that uses historical credit loss information and considers the current economic environment. Additional allowances may be necessary in the future if changes in economic conditions are significant enough to affect expected credit losses. The Company has recorded an allowance for credit loss in the amounts of $7,740 as of September 30, 2026 and $7,241 as of December 31, 2025. Additions and write-offs have not been significant in the periods presented.

E.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. The Company uses estimates primarily in the following areas: accounts receivable valuation, accrual of costs related to ancillary services the Company performs, typically at the destination location, self-insured liabilities, accrual of various tax liabilities and accrual of loss contingencies, calculation of share-based compensation expense and estimates related to determining the lease term and discount rate when measuring ROU assets and lease liabilities.

F. Recent Accounting Pronouncements

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses which requires disaggregated disclosures of certain costs and expenses on the income statement on an annual and interim basis. This standard will become effective for the Company for annual periods beginning on January 1, 2027 and for interim periods beginning January 1, 2028, with early adoption permitted. The amendment can be applied either on a prospective or retrospective basis. The Company expects this ASU to only impact its disclosures with no impacts to its consolidated financial statements, cash flows and financial condition.

Intangibles - Goodwill and Other—Internal‑Use Software

In September 2025, the FASB issued ASU 2025‑06, Intangibles—Goodwill and Other—Internal‑Use Software (Subtopic 350‑40): Targeted Improvements to the Accounting for Internal‑Use Software, which removes references to software development project stages and clarifies the threshold for capitalization of internal‑use software costs. The standard is effective for the Company for annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

Note 2. Share-Based Compensation

The Company has historically granted the majority of its share-based awards during the second quarter of each fiscal year.

In the nine months ended September 30, 2026 and 2025, the Company awarded 274 and 381 restricted stock units (RSUs), respectively. The RSUs were granted at a weighted-average fair value of$154.98 in 2026 and$106.21 in 2025, respectively. The RSUs vest annually over 3 years based on continued employment and are settled upon vesting in shares of the Company's common stock on aone-for-one basis. The value of an RSU award is based on the Company's stock price on the date of grant. Additionally, in the second quarter of 2026 and 2025, respectively,10 and 15 fully vested restricted stock awards were granted to non-employee directors.

The Company also awarded 64 and 94 performance stock units (PSUs) in 2026 and 2025, respectively. Outstanding PSUs include performance conditions to be finally measured in 2026, 2027 and 2028. The final number of PSUs will be determined using an adjustment factor of up to 2 times or down to 0.5 of the targeted PSU grant. If the minimum performance thresholds are not achieved, no shares will be issued. Each PSU will convert toone share of the Company's common stock upon vesting.

The grant of employee stock purchase rights and the issuance of shares under the employee stock purchase plan are made in the third quarter of each fiscal year and 630 and 583 shares were issued in the three and nine months ended September 30, 2026 and 2025, respectively. The fair value of the employee stock purchase rights granted was$44.71 and$27.94 per share in 2026 and 2025, respectively.

The Company recognizes stock compensation expense based on the fair value of awards granted to employees and directors under the Company’s Amended and Restated 2017 Omnibus Plan and employee stock purchase rights plans. This expense, adjusted for expected performance and forfeitures, is recognized in net earnings on a straight-line basis over the service periods as salaries and related costs on the condensed consolidated statements of earnings. RSUs and PSUs awarded to certain employees meeting specific retirement eligibility criteria at the time of grant are recognized as expense immediately as there is no substantive service period associated with those awards.

Note 3. Taxes

The Company is subject to taxation in the U.S. and many foreign jurisdictions. The Company's tax positions, including its intercompany transfer pricing policies, are reasonable and consistent with accepted methodologies. The Company is subject to review by taxing authorities for tax years 2005 and thereafter, and those reviews could result in additional tax, interest and penalties. For example, the Indian tax authority (ITA) has claimed that additional income tax applies to transactions between the Company and its Indian subsidiary, and that additional service tax applies to ocean and air imports and exports. The Company maintains that the ITA’s positions are without merit. The Company has successfully defended its positions in India's courts, including a favorable ruling from the Supreme Court of India during the second quarter that dismissed a significant portion of the ITA's claims. If the remaining matters are resolved unfavorably, the Company could recognize additional significant tax expense, including interest and penalties.

The Company records liabilities for uncertain tax positions when, despite having supportable positions in its tax return, it concludes that those positions may not be sustained upon examination by tax authorities. To make that judgment, the Company assesses whether the position is more likely than not to be upheld if challenged, including through any related appeals or litigation, based on the technical strength of the position and advice from qualified legal and tax advisors.

The Company’s consolidated effective income tax rate was 23.1% and 24.4% for the three and nine months ended September 30, 2026, respectively, compared with 25.2% and 26.6% in the same periods of 2025. The lower effective income tax rates resulted primarily from a greater U.S. tax benefit related to licensing income earned from foreign markets, higher U.S. research and development tax credits and lower state taxes. These benefits were partially offset by $12 million of additional tax expense, for the three and nine months ended September 30, 2026, related primarily to uncertainty surrounding such U.S. research and development tax credits and state tax positions.

The Company’s consolidated effective income tax rate for the three and nine months ended September 30, 2026 is higher than the U.S. federal statutory income tax rate of 21% primarily because of taxes on the Company’s international operations, including taxes withheld on certain cross-border payments, higher income tax rates in certain foreign countries, and state taxes. These additional taxes were partially offset by U.S. tax benefits related to licensing income earned from foreign markets, foreign tax credits and U.S. research and development tax credits.

Note 4. Basic and Diluted Earnings per Share

Basic earnings attributable to shareholders per share is calculated using the weighted average number of common shares outstanding without taking into consideration dilutive potential common shares outstanding. Diluted earnings attributable to shareholders per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding. Dilutive potential shares represent outstanding stock options, including purchase options under the Company's employee stock purchase plan, and unvested RSUs.

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

Potential common shares excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive were not material for the three and nine months ended September 30, 2026 and 2025.

Note 5. Shareholders' Equity

Under a Board-authorized discretionary share repurchase plan, the Company was authorized to repurchase common stock until outstanding shares reached 130 million. During the nine months ended September 30, 2026, the Company repurchased 5,406 shares of common stock at an average price of$154.87 per share, compared to 5,286 shares at an average price of$116.10 during the same period in 2025. On February 23, 2026, the Board of Directors authorized a new share repurchase program permitting the repurchase of up to $3.0 billion of the Company's common stock. The new program became effective on July 1, 2026, after the prior program expired when the outstanding common shares reached 130 million. The new program has no expiration date and may be terminated at any time.

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

On May 4, 2026, the Board of Directors declared a semi-annual dividend of $0.81 per share payable on June 15, 2026 to shareholders of record as of June 1, 2026. On May 6, 2025, the Board of Directors declared a semi-annual dividend of $0.77 per share payable on June 16, 2025 to shareholders of record as of June 2, 2025.

Subsequent to the end of the third quarter of 2026, on November 2, 2026, the Board of Directors declared a semi-annual dividend of $0.81 per share payable on December 15, 2026 to shareholders of record as of December 1, 2026.

Note 6. Fair Value of Financial Instruments

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

Cash and cash equivalents consist of the following:

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

Note 7. Contingencies

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

Note 8. Business Segment Information

The Company is organized functionally in geographic operating segments. Accordingly, when evaluating the effectiveness of geographic segments, management focuses its attention on revenues, directly related cost of transportation and other expenses foreach of the Company’s three primary sources of revenues, as well as, salaries and related costs, other operating expenses, depreciation and amortization, operating income, identifiable assets, capital expenditures and equity generated in each of these geographical areas. The President and Chief Executive Officer was determined to be the Chief Operating Decision Maker (CODM), as in his capacity he is responsible for setting company strategies and initiatives, establishing company policies, allocating company resources and assessing the performance of the Company’s business segments. Operating income is the primary measure of business segments' profit or loss that is most consistent with the measurement principles of U.S. GAAP and no items below operating income are allocated to segments. The CODM uses operating income to review financial performance, progress of the Company's strategic initiatives and to determine compensation of segment managers. Transactions among the Company’s various offices are conducted using the same arm's-length pricing methodologies the Company uses when its offices transact business with independent agents. Certain costs are allocated among the segments based on the relative value of the underlying services, which can include allocation based on actual costs incurred or estimated cost plus a profit margin. There were no significant changes to allocate or measure expenses used to determine segment profit or loss.

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

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

2 Other operating expenses totals rent and occupancy, depreciation and amortization, selling and promotion and other as shown in the condensed consolidated statements of earnings.

Note 9. Global Technology Restructuring

In June 2026, the Company announced a restructuring of its Global Technology group resulting in a workforce reduction. The purpose of the restructuring is to modernize and reshape our Global Technology function to meet the increasing needs of the Company and its customers.

The Company incurred employee termination costs including cash severance payments, employer payroll taxes, and other benefits provided to affected employees. These charges are accounted for as one-time employee termination benefits under ASC 420, Exit or Disposal Cost Obligations. A portion of the termination benefits requires a small number of affected employees to remain employed through specified dates. Accordingly, these charges are being recognized ratably over the applicable service periods, while charges for employees not subject to future service requirements were recognized at the communication date. Total expected charges associated with the plan are approxim ately $25 million, most of which was recognized in the second quarter of 2026 within salaries and related expenses inthe condensed consolidated statements of earnings. The remaining accrual associated with the restructuring is expected to be paid during the first quarter of 2027.

The following table summarizes activity related to our restructuring liability, which was included in accrued expenses in the condensed consolidated balance sheets: