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

Current wording

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

Previous wording

Revenues increased 32% due to strong performance and volumes in most services.

Current wording

Revenues increased 42% and operating income increased 55% due to strong performance and volumes across all our services.

Previous wording

Earnings per share increased 51% to $2.03.

Current wording

Net earnings to shareholders increased 55% and earnings per share increased 62% to $2.65.

Previous wording

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

Current wording

Cash from operating activities was $213 million for the third quarter of 2026 compared to $201 million for the same period in 2025.

Previous wording

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

Current wording

We returned $197 million to shareholders through common stock repurchases during the third quarter.

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 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.

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, and laws and policies relating to tariffs, trade restrictions, foreign investment and taxation. Governments periodically consider changes to tariffs and impose trade restrictions and accords. Beginning in 2025, the United States initiated significant tariff actions affecting imports from various countries and industries. Additional tariff measures, retaliatory actions, enforcement initiatives, and legal challenges continued throughout 2026. Although refund programs associated with tariffs imposed under the International Emergency Economic Powers Act (IEEPA), following the February 2026 Supreme Court ruling invalidating those tariffs, are substantially complete or in the later stages of processing, trade compliance obligations, customs administration and enforcement requirements continue to evolve. In July 2026, new U.S. tariffs were broadly imposed across a variety of countries. Ongoing and potential future trade actions, including sector-based, country-specific and broader measures, continue to create uncertainty with respect to current and future U.S. trade policy and may affect global trade flows, customer supply chains and demand for our services. We cannot predict how other countries will respond to these tariffs or how changes in tariffs and trade restrictions will affect our business.

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 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.

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. Beginning 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 has not been material and is mitigated by our ability to adjust the routing of our customers' shipments. While these disruptions often have a favorable impact on our revenues and operating income as a result of increased pricing, further or prolonged disruptions could adversely affect the flow of trade and our operating results. 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 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.

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 of 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. This began changing in the second quarter, continuing in the third quarter and resulting in an increase in average sell and buy rates on exports out of Asia. Pricing volatility may 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 and 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 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.

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 nine months ended September 30, 2026 and 2025, including the respective percentage changes comparing 2026 and 2025.

Previous 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.

Current wording

Tonnage increased primarily on exports from South Asia, North Asia and MAIR, during the three and nine months ended September 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 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.

Current wording

Average sell rates increased across all regions during the three and nine months ended September 30, 2026, as compared to the same periods in 2025 as higher carrier buy rates were passed on to the customers. Average buy rates increased during the three and nine months ended September 30, 2026, as demand remained strong, the conflict in the Middle East constrained available capacity and jet fuel prices increased. Additionally, we continue to increase our utilization of air charter arrangements to meet the demand out of Asia from our technology customers.

Previous wording

Seasonal changes in demand, impact from disruptions in the ocean market due to security concerns, jet fuel prices and supply disruptions, and variable demand for airfreight capacity from direct e-commerce business could cause volatility in average buy rates on certain routes. Additionally, geopolitical concerns, the conflict in the Middle East, inter-governmental trade disputes and the dynamic trade environment on imports to the U.S. create uncertainty in the economy. As shippers and carriers react to these volatile conditions, it may negatively affect demand for airfreight services, which could significantly reduce our volumes 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, jet fuel prices and supply disruptions, and variable demand for airfreight capacity from direct e-commerce business and hyperscalers could cause volatility in average buy rates on certain routes. Additionally, geopolitical concerns, the conflict in the Middle East, inter-governmental trade disputes and the dynamic trade environment on imports to the U.S. create uncertainty in the economy. As shippers and carriers react to these volatile conditions, it may negatively affect demand for airfreight services, which could significantly reduce our volumes 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 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.

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 increased 48% and 9%, respectively, and expenses increased 59% and 13%, respectively, for the three and nine months ended September 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 67% and 68% of ocean freight and ocean services revenue for the nine months ended September 30, 2026 and 2025, respectively.

Previous wording

Ocean freight consolidation revenues and expenses increased 3% and 10%, respectively, for the three months ended June 30, 2026, as compared to the same period in 2025, primarily due to 3% and 10% increases in average sell and buy rates, while ocean containers shipped remained flat. Average buy and sell rates increased compared to the first quarter of 2026. Average buy rates and sell rates increases resulted from demand recovery in North and South Asia beginning in May as customers accelerated shipments to manage exposure to potential tariff impacts and ongoing geopolitical disruptions. Increases in our average buy rates outpaced our ability to pass through higher sell rates during the quarter, as a result of timing and our buy rate mix. The growth in demand coupled with carrier-driven capacity constraints such as blank sailings and other restrictive measures created a more balanced supply demand environment which led to increased buy rates.

Current wording

Ocean freight consolidation revenues and expenses increased 63% and 73%, respectively, for the three months ended September 30, 2026, as compared to the same period in 2025, primarily due to increases of 52% and 61% in average sell and buy rates, respectively, and a 7% increase in containers shipped. For the nine months ended September 30, 2026, ocean freight consolidation revenues and expenses increased 8% and 13%, respectively, primarily due to increases of 7% and 13% in average sell and buy rates, respectively, and a 1% increase in containers shipped. Average sell and buy rates began to recover in May 2026, driven by increased demand in North and South Asia as customers accelerated shipments to manage exposure to potential tariff impacts and ongoing geopolitical disruptions. Increases in our average buy rates outpaced our ability to pass through higher sell rates during the first half of 2026, as a result of timing and our buy rate mix. The growth in demand coupled with carrier-driven capacity constraints such as blank sailings and other restrictive measures created a more balanced supply demand environment which led to increased buy rates. Average buy and sell rates continued to increase significantly in the third quarter of 2026, up 58% and 57%, respectively, as compared to the second quarter of 2026, driven by strong customer demand, capacity constraints and port congestion out of North Asia and South Asia.

Previous wording

North Asia ocean freight and ocean services revenues decreased 4% and 1%, respectively, for the three months ended June 30, 2026, as compared to the same period in 2025, due to average lower sell rates and buy rates in the first part of the quarter, partially offset by a 2% increase in containers shipped. North Asia ocean freight and ocean services revenues and expenses decreased 24% and 25%, respectively, for the six months ended June 30, 2026 as compared to the same periods in 2025, due to a 5% decline in containers shipped and lower average sell and buy rates due to soft demand in the first five months of 2026 as compared to strong growth in the first half of 2025 as customers accelerated shipments in anticipation of tariff changes.

Current wording

North Asia ocean freight and ocean services revenues and expenses increased 51% and 58% for the three months ended September 30, 2026 as compared to the same periods in 2025 primarily due to an 11% increase in container volumes and higher average sell rates resulting from increases in average buy rates. For the nine months ended September 30, 2026, North Asia revenues and expenses increased 1% and 3%, respectively, as soft demand during the first five months of 2026 substantially offset third-quarter growth, compared to stronger demand in the first half of 2025 when customers accelerated shipments in anticipation of tariff changes.

Previous 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.

Current wording

Order management revenues increased 17% for both the three and nine months ended September 30, 2026, while expenses increased 19% and 18%, respectively, compared to the same periods in 2025 due to higher volumes from new and existing customers, particularly across Asia and Europe, reflecting sourcing shifts from China to South Asia.

Previous wording

Direct ocean freight forwarding revenues increased 2%, and 1%, respectively, for the three and six months ended June 30, 2026, and expenses increased 4%, and 2%, respectively, for the three and six months ended June 30, 2026, as compared to the same periods in 2025.

Current wording

Direct ocean freight forwarding revenues increased 19%, and 8%, respectively, for the three and nine months ended September 30, 2026, while expenses increased 24%, and 10%, respectively, compared to the same periods in 2025 due to higher shipment volumes from new and existing customers and stronger demand.

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. 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.

Current wording

The global economic and trade environment is 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 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 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.

Current wording

Customs brokerage and other services revenues increased 29% and 25% and expenses increased 37% and 27% for the three and nine months ended September 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.

Previous 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.

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 tariffs be substantially removed, our revenues and operating income could be negatively impacted.

Previous 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.

Current wording

Salaries and related costs increased 20% and 17% for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in 2025, principally due to higher incentive compensation from improved operating results and termination costs incurred for the Global Technology restructuring, a 1% increase in headcount and increases in non-executive base salaries.

Previous wording

The Company recorded $25 million in expenses in connection with the Global Technology restructuring in the second quarter of 2026, which represents the majority of the expected restructuring costs. The remaining costs are expected to be recognized over the second half of 2026 as certain employees are required to provide service through specified dates. See Note 9 for additional information.

Current wording

The Company recorded $25 million in expenses, primarily in the second quarter of 2026, in connection with the Global Technology restructuring. See Note 9 for additional information.

Previous 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.

Current wording

Our management compensation programs have always been incentive-based and performance driven. Total bonuses to field and executive management increased 36% for the nine months ended September 30, 2026, when compared to the same period in 2025, primarily due to higher operating income.

Previous wording

Other expenses decreased 10% and 2%, respectively, for the three and six months ended June 30, 2026, as compared to the same periods in 2025. This decrease is primarily due to the recognition of a $16 million gain on the sale of a property in the second quarter 2026 and reduction in indirect taxes, offset by higher technology related expenses, and rent and occupancy expenses.

Current wording

Other expenses increased 2% and remained flat, respectively, for the three and nine months ended September 30, 2026, as compared to the same periods in 2025. This increase is primarily due to higher technology related expenses and rent and occupancy expenses. For the nine months ended September 30, 2026, increases were offset by the recognition of a $16 million gain on the sale of a property in the second quarter of 2026 and a reduction in indirect taxes.

Previous wording

The Company’s consolidated effective tax rate for the three and six months ended June 30, 2026, is higher than the U.S. federal statutory income tax rate of 21% primarily because of foreign withholding taxes on our international operations, state and local income taxes, and the higher rates applied to certain foreign subsidiaries. Foreign tax credits and the deduction for Foreign-Derived Deduction-Eligible Income (FDDEI) partially offset these costs.

Current wording

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 our international operations, including taxes withheld on certain cross-border payments, higher income tax rates in certain foreign countries and states 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.

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, 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.

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, 2026 and December 31, 2025. For the three and nine months ended September 30, 2026, net foreign currency transactional losses were approximately $5 million and $10 million compared to net foreign currency losses of approximately $3 million and $20 million in the same periods in 2025. The net impact of foreign exchange rate fluctuations on the translation of our foreign operations, as included in other comprehensive income, were losses of $1 million and $9 million, net of taxes, in the three and nine months ended September 30, 2026, respectively, and a loss of $3 million and income of $44 million, net of taxes, in the three and nine months ended September 30, 2025, respectively.

Previous wording

Historically, our business has not been adversely affected by inflation. Beginning in 2021 and continuing through 2025, many countries including the United States experienced elevated levels of inflation. As a result, our business continues to experience rising labor costs, service provider rate increases, higher rent and occupancy and other expenses. Due to the high degree of competition in the marketplace, we may not be able to increase our prices to our customers to offset this inflationary pressure, which could lead to an erosion in our margins and operating income in the future. Conversely, raising our prices to keep pace with inflationary pressure may result in a decrease in volume and customer demand for our services. As we are not required to purchase or maintain extensive property and equipment and have not otherwise incurred substantial interest rate-sensitive indebtedness, we currently have limited direct exposure to increased interest expense resulting from increases in interest rates.

Current wording

Historically, our business has not been adversely affected by inflation. Beginning in 2021 and continuing into 2026, many countries including the United States experienced elevated levels of inflation. As a result, our business continues to experience rising labor costs, service provider rate increases, higher rent and occupancy and other expenses. Due to the high degree of competition in the marketplace, we may not be able to increase our prices to our customers to offset this inflationary pressure, which could lead to an erosion in our margins and operating income in the future. Conversely, raising our prices to keep pace with inflationary pressure may result in a decrease in volume and customer demand for our services. As we are not required to purchase or maintain extensive property and equipment and have not otherwise incurred substantial interest rate-sensitive indebtedness, we currently have limited direct exposure to increased interest expense resulting from increases in interest rates.

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, 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.

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, 2026 was $213 million and $700 million as compared to $201 million and $723 million for the same periods in 2025. The increase of $12 million for the three months ended September 30, 2026 was driven by higher net earnings and partially offset by growth in working capital. The decrease of $23 million for the nine months ended September 30, 2026, was primarily due to changes in working capital. At September 30, 2026, working capital was $1,662 million, including cash and cash equivalents of $1,092 million. Other than our recorded lease liabilities, we had no long-term obligations or debt at September 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 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.

Current wording

Cash used in investing activities for the three months ended September 30, 2026 was $18 million compared to $10 million in cash used by investing activities for the same period in 2025 primarily for capital expenditures. Cash used in investing activities for the nine months ended September 30, 2026 was $21 million as compared to $39 million for the same period in 2025, due to the recognition of proceeds from the sale of a property in 2026. Capital expenditures in the three and nine months ended September 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 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.

Current wording

Cash used in financing activities during the three and nine months ended September 30, 2026 was $132 million and $896 million as compared to $150 million and $655 million, respectively, for the same periods in 2025. We have a Discretionary Stock Repurchase Plan under which management is allowed to repurchase shares up to $3.0 billion of the Company's common stock. This new repurchase program was 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 nine months ended September 30, 2026, we used cash to repurchase 1.1 million and 5.4 million shares of common stock at an average price of $178.36 and $154.87 per share compared to 1.8 million and 5.3 million shares of common stock at an average price of $119.65 and $116.10, 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 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.

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, 2026, borrowings under these credit lines were $37 million and we were contingently liable for $88 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, 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.

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, 2026, cash and cash equivalent balances of $656 million were held by our non-United States subsidiaries, of which $13 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.