Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Safe Harbor for Forward-Looking Statements Under Private Securities Litigation Reform Act Of 1995; Certain Cautionary Statements

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.

Overview

Expeditors International of Washington, Inc. (herein referred to as "Expeditors," the "Company," "we," "us," "our") provides a full suite of global logistics services. Our services include air and ocean freight consolidation and forwarding, customs brokerage, warehousing and distribution, purchase order management, vendor consolidation, time-definite transportation services, temperature-controlled transit, cargo insurance, specialized cargo monitoring and tracking, and other supply chain solutions. We do not compete for overnight courier or small parcel business. As a non-asset-based carrier, we do not own or operate transportation assets.

We derive our revenues by entering into agreements that are generally comprised of a single performance obligation, which is that freight is shipped for and received by our customer. Each performance obligation is comprised of one or more of the Company's services. We typically satisfy our 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. Our principal services are the revenue categories presented in our financial statements: 1) airfreight services, 2) ocean freight and ocean services, and 3) customs brokerage and other services. The most significant drivers of changes in gross revenues and related transportation expenses are volume, sell rates and buy rates. Volume has a similar effect on the change in both gross revenues and related transportation expenses in each of our three primary sources of revenue.

We generate the major portion of our air and ocean freight revenues by purchasing transportation services on a volume basis from direct (asset-based) carriers and then reselling that space to our customers. The rate billed to our customers (the sell rate) is recognized as revenues and the rate we pay to the carrier (the buy rate) is recognized in operating expenses as the directly related cost of transportation and other expenses. By consolidating shipments from multiple customers and concentrating our buying power, we are able to negotiate favorable buy rates from the direct carriers, while at the same time offering lower sell rates than customers would otherwise be able to negotiate themselves.

In most cases, we act as an indirect carrier. When acting as an indirect carrier, we issue a House Air Waybill (HAWB), a House Ocean Bill of Lading (HOBL) or a House Sea Waybill to customers as the contract of carriage. In turn, when the freight is physically tendered to a direct carrier, we receive a contract of carriage known as a Master Air Waybill for airfreight shipments and a Master Ocean Bill of Lading for ocean shipments.

Customs brokerage and other services involve providing services at destination, such as helping customers clear shipments through customs by preparing and filing required documentation, calculating, and providing for payment of duties and other taxes on behalf of customers as well as arranging for any required inspections by governmental agencies, and import services such as arranging for local pick up, storage and delivery at destination. These are complicated functions requiring technical knowledge of customs rules and regulations in the multitude of countries in which we have offices. We also provide other value-added services at destination, such as warehousing and distribution, time-definitive transportation services and consulting.

We manage our company along geographic areas of responsibility: Americas; North Asia; South Asia; Europe; and Middle East, Africa and India (MAIR). Each area is divided into sub-regions that are composed of operating units with individual profit and loss responsibility. Our business involves shipments between operating units and typically touches more than one geographic area. The nature of the international logistics business necessitates a high degree of communication and cooperation among operating units. Because of this inter-relationship between operating units, it is very difficult to examine any one geographic area and draw meaningful conclusions as to its contribution to our overall success on a stand-alone basis.

Our operating units share revenue using the same arm's-length pricing methodologies that we use when our 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. Our strategy closely links compensation with operating unit profitability, which includes shared revenues and allocated costs. Therefore, individual success is closely linked to cooperation with other operating units within our network. The mix of services varies by segment based primarily on the import or export orientation of local operations in each of our regions.

Summary of Third Quarter 2026

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

Industry Trends, Trade Conditions and Competition

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.

Additionally, changes in trade regulations, customs requirements, supply chain transparency initiatives, export control requirements and enforcement activities continue to add complexity to the customs declarations process, making compliance with regulations increasingly challenging. These developments require importers and other participants in global supply chains to provide more detailed information and maintain enhanced compliance processes, increasing the importance of customs expertise, technology and regulatory compliance in the movement of goods worldwide.

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.

Our ability to provide services to our customers is highly dependent on good working relationships with a variety of entities, including airlines, ocean carriers and ground transportation providers, as well as governmental agencies. We select and engage with best-in-class, compliance-focused, efficiently run, growth-oriented partners, based upon defined value elements and are intentional in our relationship and performance management activity. We consider our current working relationships with these entities to be satisfactory. However, changes in the financial stability; operating capabilities, and the capacity of asset-based carriers; capacity allotments available from carriers; governmental regulation or deregulation efforts; modernization of the regulations governing customs brokerage; and/or changes in governmental restrictions, quota restrictions or trade accords could affect our business in unpredictable ways. When the market experiences seasonal peaks or any sort of disruption, the carriers often increase their pricing suddenly. This carrier behavior creates pricing volatility that could impact Expeditors' ability to maintain historical unitary profitability.

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.

Seasonality

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

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

To the extent that a shortfall in revenues or earnings was not expected by securities analysts or investors, any such shortfall from levels predicted by securities analysts or investors could have an immediate and adverse effect on the trading price of our stock. We cannot accurately forecast many of these factors, nor can we estimate accurately the relative influence of any particular factor and, as a result, there can be no assurance that historical patterns will continue in future periods.

Critical Accounting Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and judgments. We base our estimates on historical experience and on assumptions that we believe are reasonable. Our critical accounting estimates are discussed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our annual report on Form 10-K for the year ended December 31, 2025, filed on February 25, 2026. There have been no material changes to the critical accounting estimates previously disclosed in that report.

Results of Operations

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.

The table and the accompanying discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes thereto in this quarterly report.

Airfreight services:

Airfreight services revenues and expenses increased 51% and 53%, respectively, during the three months ended September 30, 2026, as compared to the same period in 2025, due to increases of 38% and 37% in average sell and buy rates, respectively, and a 13% increase in tonnage. For the nine months ended September 30, 2026, airfreight services revenues and expenses increased 42% and 45%, respectively, due to increases of 32% and 33% in average sell and buy rates, respectively, and an 11% increase in tonnage.

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.

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.

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.

Ocean freight and ocean services:

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.

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.

South Asia ocean freight and ocean services revenues and expenses increased 51% and 57%, respectively, for the three months ended September 30, 2026 and 23% and 24%, respectively, for the nine months ended September 30, 2026, as compared to the same periods in 2025 primarily due to higher container volumes, which increased 16% and 11%, respectively, and higher average sell rates resulting from increases in average buy rates.

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.

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.

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.

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.

Customs brokerage and other services:

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.

North America revenues increased 38% and 30% and expenses increased 51% and 36% for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in 2025. Costs outpaced revenue growth due to an increase in high value technology road freight shipments, requiring specialized services, which generate a higher per-shipment profitability but lower margin percentages.

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.

Salaries and other expenses:

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.

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.

Historically, the relatively consistent relationship between salaries and operating income has been the result of a compensation philosophy that has been maintained since the inception of our company: offer a modest base salary and the opportunity to share in a fixed and determinable percentage of the operating profit of the business unit controlled by each key employee. Using this compensation model, changes in individual incentive compensation occur in proportion to changes in our operating income, creating an alignment between branch and corporate performance and shareholder interests.

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.

Generally, no management bonuses can be paid unless the relevant business unit is profitable. Any operating losses must be offset in their entirety by operating profits before management is eligible for a bonus. Executive management, in limited circumstances, makes exceptions at the branch operating unit level. Since the most significant portion of management compensation comes from the incentive bonus programs, we believe that this cumulative feature is a disincentive to excessive risk taking by our managers. The outcome of any higher risk transactions, such as overriding established credit limits, would be known in a relatively short time frame. Management believes that when the potential and certain impact on the bonus is fully considered in light of the short operating cycle of our services, the potential for short-term gains that could be generated by engaging in risky business practices is sufficiently mitigated to discourage excessive and inappropriate risk taking. Management believes that both the stability and the long-term growth in revenues, operating income and net earnings are a result of the incentives inherent in our compensation programs.

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.

Income tax expense:

Our 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 tax rates primarily reflected 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.

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.

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.

Currency and Other Risk Factors

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.

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.

There is uncertainty as to how supply and volatility in oil prices will continue to impact future buy rates and available airfreight capacity. Because fuel is an integral part of carriers' costs and impacts both our buy rates and sell rates, we expect our revenues and costs to be impacted as carriers adjust rates for the effect of changing fuel prices. To the extent that future fuel prices increase, and we are unable to pass through the increase to our customers, fuel price increases could adversely affect our operating income.

Liquidity and Capital Resources

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.

As a customs broker, we make significant short-term cash advances for a select group of our credit-worthy customers. These cash advances are for customer obligations such as the payment of duties and taxes to customs authorities in various countries throughout the world. Higher duty rates have resulted in increases in the amounts we advance on behalf of our customers. Given the short time frame until we are reimbursed, we do not expect these outlays to have a significant effect on our liquidity. Cash advances are a "pass through" and are not recorded as a component of revenue and expense, except for fees associated with this service charged to customers. The billings of such advances to customers are accounted for as a direct increase in accounts receivable from the customer and a corresponding increase in accounts payable to governmental customs authorities. As a result of these "pass through" billings, the conventional Days Sales Outstanding or DSO calculation does not directly measure collection efficiency.

For customers that meet certain criteria, we have agreed to extend payment terms beyond our customary terms. Management believes that it has established effective credit control procedures and historically has experienced relatively insignificant collection problems.

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

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.

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.

We follow established guidelines relating to credit quality, diversification and maturities of our investments to preserve principal and maintain liquidity. Historically, our investment portfolio has not been adversely impacted by disruptions occurring in the credit markets. However, there can be no assurance that our investment portfolio will not be adversely affected in the future.

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

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.

We have lease arrangements primarily for office and warehouse space in all districts where we conduct business. As of September 30, 2026, we had fixed lease payment obligations of $814 million, including $151 million payable within 12 months.

We typically enter into unconditional purchase obligations with asset-based providers (generally short-term in nature) reserving space on a guaranteed basis. The pricing of these obligations varies to some degree with market conditions. We only enter into agreements that management believes we can fulfill. In the regular course of business, we also enter into agreements with service providers to maintain or operate equipment, facilities or software that can be longer than one year. We also regularly have contractual obligations for specific projects related to improvements of our owned or leased facilities and information technology infrastructure. Purchase obligations outstanding as of September 30, 2026 totaled $302 million.

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.