Expeditors International of Washington (EXPD) 10-K risk factor changes: FY2023 vs FY2022

[removed: COVID-19] [added: Global health emergencies on the scale of the COVID-19 pandemic may] significantly [removed: impacted] [added: impact] worldwide economic conditions and global trade and [removed: may continue to] [added: can] have a disruptive effect on our operations, and the operations of our service providers and our customers, which may [removed: further] impact our business.

[removed: In early 2020, COVID-19 was declared a] [added: Significant] global health [removed: emergency and later declared a global pandemic by the World Health Organization, prompting] [added: emergencies may prompt] governments around the world to mandate lockdowns and [added: implement] other restrictions that [removed: had] [added: can have a] direct [removed: impacts] [added: impact] on international trade.

[removed: The COVID-19 pandemic and various] [added: Such] government [removed: reactions to it contributed] [added: restrictions may contribute] to shortages of [added: both] labor and [removed: capacity,] [added: capacity] and [removed: increased] [added: increase] costs that [removed: continue to] impact our operations.

Any significant [removed: disruption] [added: global health emergency] on the scale of the [removed: COVID-19] [added: COVID- 19] pandemic [removed: over an extended period] could negatively affect our business and our financial results.

Such a [removed: disruption] [added: disruptions] could also have the effect of heightening many of the other risks described [removed: below.][added: above.]

We rely on service providers, [removed: such as] [added: including] air, [removed: ocean and] [added: ocean,] ground freight [removed: carriers,] [added: carriers] and [added: others and] if they [removed: become financially unstable] [added: have insufficient capacity available relative to market demand] or have reduced capacity to provide [removed: service because of COVID-19 or other factors,] [added: service,] it may adversely impact our business and operating results.

During the [added: COVID-19] pandemic, air carriers [removed: have been] [added: were] particularly [removed: affected] [added: affected,] having to cancel flights due to travel restrictions resulting in dramatic drops in revenues, historical losses, high leverage and liquidity challenges.

[removed: Disruptions] [added: Major disruptions to carriers’ operations,] such as [removed: COVID-19] [added: caused by a global health emergency, could] place significant stress on our air, ocean and freight ground carriers, as well as other service providers, which may result in reduced carrier capacity or availability, pricing volatility or more limited carrier transportation schedules and other services that we utilize, which could adversely impact our operations and financial results.

Everything that affects international trade has the potential to expand or contract our primary [removed: market] [added: markets] and adversely impact our operating results.

In the long term, identifying, recruiting, hiring, training, and retaining employees is essential to our ability to operate and deliver our services, [added: our] ability to grow and ultimately our future profitability.

The global pandemic caused disruptions to our work environment by requiring the majority of [added: our] employees to work remotely during the height of the pandemic.

As a [removed: result, for] [added: result of] those individuals [removed: that] [added: who] prefer working remotely, we may experience a higher degree of turnover of key employees and lower employee satisfaction in the near future.

Though these disruptions substantially cleared by the fourth quarter of 2022, our number of employees at December 31, [removed: 2022, remain at historically] [added: 2023, remains] high [removed: levels.][added: relative to our volumes and our operating income.]

In the short term, any reductions in our workforce could result in [removed: significant] additional expenses.

Conversely, a failure to reduce compensation expense and other expenses in periods when the business environment does not support our workforce level will result in [removed: substantially] lower compensation earned by the majority of employees.

We cannot predict how management’s responses to these challenges will ultimately impact our Company culture, financial position, results of operations and cash flows [removed: nor] [added: or] our ability to successfully attract and retain key employees in the future.

We are continually enhancing our systems, including [removed: significant] [added: meaningful] upgrades to core operating and accounting systems.

These efforts are inherently complex [removed: and] [added: and,] if not managed [removed: properly] [added: properly,] could lead to disruptions in our operations or our ability to remain competitive.

As [removed: Expeditors,] our [added: employees, our] customers and suppliers continue to increase reliance on systems, and as additional features are added, the risks also increase.

When market demand significantly exceeds available capacity in a given market, which was the case for various services and markets at the beginning of the pandemic in 2020 and that continued through the first half of 2022, we may not always be able to find acceptable transportation or other service solutions to meet our customers’ [removed: needs] [added: needs,] or the routing and delivery of freight may be subject to delays that are outside of our control.

Quality customer service is a key element of the Company’s success, and such challenges in meeting our customers’ needs and requirements may result in loss of [removed: business and consequently negatively affect our operating results.][added: business.]

Any disruption of our business caused by a catastrophic [removed: event,] [added: event] could harm our ability to conduct normal business operations and impact our operating results.

A disruption or failure of Expeditors' systems or operations in the event of a major earthquake, weather event, cyber-attack, terrorist attack, strike, civil unrest, mass population [removed: dislocations,] [added: dislocation,] pandemic or other catastrophic event could cause delays in providing services or performing other mission-critical functions.

Our corporate headquarters and certain other critical business operations are in the [removed: Seattle, Washington area,] [added: Puget Sound area of Washington,] which is near major earthquake faults.

See [removed: “*Any] [added: “Any] significant disruptions to our network and systems continuity could have an adverse impact to our business and financial [removed: results”*] [added: results”] above*.*

We face risks associated with the handling of customer [removed: inventory][added: inventory.]

A significant portion of Expeditors' revenues is derived from customers in retail and technology industries whose shipping patterns are tied closely to consumer [removed: demand] [added: demand,] and from customers in industries whose shipping patterns are dependent upon just-in-time production schedules.

[removed: Our non-asset-based model gives us a flexibility and an ability to change locations, modes, and carriers based on evolving operating conditions, however,] [added: However,] such impacts may disrupt our operations by adversely affecting our ability to procure services that meet regulatory or customer requirements, depending on the availability of sufficient appropriate logistics solutions.

In addition, the increasing concern over climate change has resulted and may continue to result in more regulations relating to climate change, including regulating greenhouse gas emissions, restrictions on modes of transportation, alternative energy policies and sustainability initiatives, such as the FuelEU Maritime [removed: initiative.][added: initiative or the EU Emissions Trading System.]

[removed: If legislation or regulations are enacted or promulgated] [added: If,] in the United States or in any other jurisdictions in which we operate, [added: legislation or regulations are enacted or promulgated] that impose more stringent restrictions and requirements than our current legal or regulatory obligations, we may experience disruptions in, or increases in the costs associated with delivering our services, which may negatively affect our operating our results of operations, cash flows and financial condition.

[removed: The majority] [added: A material portion] of Expeditors' revenues and operating income comes from operations conducted outside the United States.

In addition, we operate in parts of the world where common business practices could constitute violations of the anti-corruption laws, rules, regulations and decrees of the United States and of other countries in which we conduct business, including the U.S. Foreign Corrupt Practices Act [removed: and the UK Bribery Act;] as well as trade and exchange control laws, or laws, regulations and Executive Orders imposing embargoes and sanctions; and anti-boycott laws and regulations.

The timing of the resolution of income and non-income tax examinations can be highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing [removed: authorities] [added: authorities, which] may differ from the amounts recorded.

We identified a material weakness in our internal control [added: over financial reporting] related to an ineffective information technology general control which, if not remediated appropriately or timely, could result in loss of investor confidence and adversely impact our stock price.

As a result, management concluded that our internal control over financial reporting was not effective as of December 31, [removed: 2022.][added: 2022 and 2023.]

As a result of identifying this issue, management will [removed: be implementing] [added: continue to implement] certain enhancements designed to strengthen IT program change management [removed: processes and will continue to conduct monthly supplemental lookback review procedures of direct database changes until improvements are fully in place.][added: processes.]

We expect that [removed: such] [added: necessary] enhancements will be completed prior to the end of [removed: 2023.][added: 2024.]

[removed: To] [added: However, to] the extent management is unable to remediate the identified [removed: issue timely,] [added: issue,] our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.

As pandemic restrictions eased, we required employees to return to the office, while other companies may have maintained fully or partially remote-work policies.

Our non-asset-based model gives us a flexibility and an ability to change locations, modes, and carriers based on evolving operating conditions.

The Organization for Economic Cooperation and Development (OECD) reached agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two.

Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two proposals.

We are continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available.

Some of these legislative changes could impact our effective tax rate and tax liabilities.

Given the numerous proposed tax law changes and the uncertainty regarding such proposed legislative changes, the impact of Pillar Two cannot be determined at this time.

The Indian tax authority (ITA) has asserted that additional tax applies principally related to transfer pricing and transactions between and amongst the Company and its Indian subsidiary and the applicability to an Indian service tax applicable to ocean and air imports and exports.

We believe that ITA’s positions are without merit, and we are defending our position vigorously in Indian courts.

If these matters are adversely resolved, we would recognize significant additional tax expense including interest and penalties.

We may be impacted by a global health emergency, similar to the scale of what we experienced during the COVID-19 pandemic.

Actions of activist investors could disrupt our business.

Public companies have been the target of activist investors.

In the event that a third party, such as an activist investor, proposes to change our governance policies, board of directors, or other aspects of our operations or strategy, our review and consideration of such proposals may create a significant distraction for our management and employees.

This could negatively impact our ability to execute various strategic initiatives and may require management to expend significant time and resources responding to such proposals.

Such proposals may also create uncertainties with respect to our financial position and operations and may adversely affect our ability to attract and retain key employees.

COVID-19 Risks

We may be impacted by residual effects of the COVID-19 pandemic or a new and similarly disruptive global health emergency.

While many of the COVID-19 restrictions have been eased or discontinued entirely, various protocols and policies continue to be implemented or contemplated in early 2023, as a resurgence of COVID-19 remains a possibility.

There is no guarantee that a continuation or resurgence of COVID-19 or a variant, or a similarly disruptive health emergency, would impact us similar to how COVID-19 has impacted our operations since 2020.

As a non-asset-based provider of global logistics services, Expeditors depends on a variety of carriers and other service providers, including air, ocean and ground freight carriers.

Uncertainty over recovery of demand for passenger air travel, in particular business travel, to pre-pandemic levels means air carriers’ operations and financial stability may be adversely affected long term.

Additionally, several industry service providers, including ocean carriers, have consolidated, with the potential for more to occur in the future.

16.

Global economic uncertainty impacted trade and could affect demand for our services or the financial stability of our service providers and customers.

The global economy entered a recession as a result of the pandemic, which initially affected trade and negatively affected demand for our services for a period of time, before rebounding in 2021 and continuing into 2022.

Future unfavorable economic conditions, rising interest rates and high inflation could result in lower freight volumes, reduced sell rates, higher operating expenses and may adversely affect Expeditors' revenues, operating results and cash flows.

These conditions, should they occur for an extended period of time, could adversely affect our customers and service providers.

Should our customers’ ability to pay deteriorate, additional credit losses may be incurred.

As pandemic restrictions eased, we required employees to return to the office.

We rely on service providers, including air, ocean, ground freight carriers and others, and if they have insufficient capacity available relative to market demand, or reduce our capacity allotments, it may adversely impact our business and operating results.

Subsequent to the identification of the material weakness and prior to the issuance of these financial statements included in this Form 10-K, the Company (i) performed a lookback review of all direct changes made to the database subject to the control operating ineffectiveness for the full year 2022, and (ii) conducted supplemental procedures and found no evidence of improper changes or changes with direct or consequential impact on internal controls over financial reporting.

When acting as an indirect carrier, we issue a House Airway Bill (HAWB), a House Ocean Bill of Lading (HOBL) or a House [removed: Seaway Bill] [added: Sea Waybill] to customers as the contract of carriage.

North Asia is our largest export-oriented region and accounted for [removed: 34%] [added: 23%] of revenues, [removed: 39%] [added: 28%] of directly related cost of transportation and other expenses and [removed: 25%] [added: 22%] of operating income for the year ended December 31, [removed: 2022.][added: 2023.]

Volumes transacted in [removed: most] [added: all] services were down due to [added: continued] softening customer demand [removed: and] from a slowdown in the global economy and [removed: retail] [added: international trade as] customers' inventory [removed: build-up early in the year.][added: levels remained high.]

Operating cash flows were [removed: $2,130] [added: $1,053] million and we returned [removed: $1,796] [added: $1,595] million to shareholders through common stock repurchases and dividends.

We do not have employees, assets, or operations in [removed: Russia] [added: Russia, Ukraine, Israel, the Gaza Strip] or [removed: Ukraine.][added: the West Bank.]

While [removed: very] limited, any shipment activity is conducted with independent agents in those countries in compliance with all applicable trade sanctions, laws and regulations.

The global economic and trade environments remain uncertain, including [removed: the potential future impacts of the pandemic,] higher inflation and oil prices, [removed: rising] [added: high] interest rates and the [removed: conflict] [added: conflicts] in [added: the Middle East and] Ukraine.

Starting in the second quarter [added: of 2002] and continuing [removed: through the fourth quarter,] [added: throughout 2023,] we saw a slowdown in the global economy and a softening of customer demand resulting in declines in average buy and sell rates.

As demand softened and [removed: pandemic restrictions subsided,] port congestion cleared, availability of labor and equipment eased resulting in excess carrier capacity over demand.

We also expect that pricing volatility will continue as carriers adapt to lower demand, changing fuel [removed: prices] [added: prices, security risks] and react to governmental trade policies and other regulations.

[removed: In] [added: Some customers have begun shifting manufacturing to other countries in] response to governments implementing higher tariffs on imports, [removed: as well as responses] to [removed: the pandemic’s disruptions, some customers have begun shifting manufacturing] [added: reduce their supply chain risks, and in response] to [removed: other countries] [added: pandemic disruptions, or geopolitical risks,] which could negatively impact us.

The total amount of our income and non-income tax contingencies may increase in [removed: 2023.][added: 2024.]

This section of this Form 10-K generally discusses year-to-year comparisons between the results of operations for the year ended December 31, [removed: 2022] [added: 2023] compared to the year ended December 31, [removed: 2021.][added: 2022.]

For a discussion of the year ended December 31, [removed: 2021] [added: 2022] compared to the year ended December 31, [removed: 2020,] [added: 2021,] please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, [removed: 2021.][added: 2022.]

The following table shows the revenues, the directly related cost of transportation and other expenses for our principal services and our overhead expenses for [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020.][added: 2021.]

| In thousands | | [removed: 2022] [added: 2023] | | | | [removed: 2021] [added: 2022] | | | | [removed: 2020] [added: 2021] | | | | [removed: 2022] [added: 2023] vs. [removed: 2021] [added: 2022] |

| Revenues | | $ | [removed: 5,886,886] [added: 3,246,527] | | | $ | [removed: 6,771,402] [added: 5,886,886] | | | $ | [removed: 4,274,026] [added: 6,771,402] | | | [removed: (13)%] [added: (45)%] |

| Expenses | | | [removed: 4,359,726] [added: 2,347,293] | | | | [removed: 5,067,380] [added: 4,359,726] | | | | [removed: 3,168,808] [added: 5,067,380] | | | [removed: (14)%] [added: (46)%] |

| Revenues | | | [removed: 6,544,559] [added: 2,363,243] | | | | [removed: 5,545,818] [added: 6,544,559] | | | | [removed: 2,342,344] [added: 5,545,818] | | | [removed: 18%] [added: (64)%] |

| Expenses | | | [removed: 5,188,066] [added: 1,634,947] | | | | [removed: 4,364,160] [added: 5,188,066] | | | | [removed: 1,751,850] [added: 4,364,160] | | | [removed: 19%] [added: (68)%] |

| Revenues | | | [removed: 4,639,839] [added: 3,690,340] | | | | [removed: 4,206,297] [added: 4,639,839] | | | | [removed: 2,968,023] [added: 4,206,297] | | | [removed: 10%] [added: (20)%] |

| Expenses | | | [removed: 3,029,105] [added: 2,071,760] | | | | [removed: 2,626,615] [added: 3,029,105] | | | | [removed: 1,736,044] [added: 2,626,615] | | | [removed: 15%] [added: (32)%] |

| Salaries and related costs | | | [removed: 2,056,387] [added: 1,700,516] | | | | [removed: 2,062,351] [added: 2,056,387] | | | | [removed: 1,538,104] [added: 2,062,351] | | | [removed: —] [added: (17)%] |

| Other | | | [removed: 613,629] [added: 605,661] | | | | [removed: 493,685] [added: 613,629] | | | | [removed: 449,150] [added: 493,685] | | | [removed: 24%] [added: (1)%] |

| Total overhead expenses | | | [removed: 2,670,016] [added: 2,306,177] | | | | [removed: 2,556,036] [added: 2,670,016] | | | | [removed: 1,987,254] [added: 2,556,036] | | | [removed: 4%] [added: (14)%] |

| Operating income | | | [removed: 1,824,371] [added: 939,933] | | | | [removed: 1,909,326] [added: 1,824,371] | | | | [removed: 940,437] [added: 1,909,326] | | | [removed: (4)%] [added: (48)%] |

| Other income, net | | | [removed: 11,520] [added: 75,095] | | | | [removed: 15,290] [added: 11,520] | | | | [removed: 16,127] [added: 15,290] | | | [removed: (25)%] [added: 552%] |

| Earnings before income taxes | | | [removed: 1,835,891] [added: 1,015,028] | | | | [removed: 1,924,616] [added: 1,835,891] | | | | [removed: 956,564] [added: 1,924,616] | | | [removed: (5)%] [added: (45)%] |

| Income tax expense | | | [removed: 475,286] [added: 263,249] | | | | [removed: 505,771] [added: 475,286] | | | | [removed: 258,350] [added: 505,771] | | | [removed: (6)%] [added: (45)%] |

| Net earnings | | | [removed: 1,360,605] [added: 751,779] | | | | [removed: 1,418,845] [added: 1,360,605] | | | | [removed: 698,214] [added: 1,418,845] | | | [removed: (4)%] [added: (45)%] |

| Less net [added: (losses)] earnings attributable to the noncontrolling interest | | | [removed: 3,206] [added: (1,104] | [added: )] | | | [removed: 3,353] [added: 3,206] | | | | [removed: 2,074] [added: 3,353] | | | [removed: (4)%] [added: (134)%] |

| Net earnings attributable to shareholders | | $ | [removed: 1,357,399] [added: 752,883] | | | $ | [removed: 1,415,492] [added: 1,357,399] | | | $ | [removed: 696,140] [added: 1,415,492] | | | [removed: (4)%] [added: (45)%] |

[removed: ][added: ]

Airfreight services revenues and expenses decreased [removed: 13%] [added: 45%] and [removed: 14%,] [added: 46%,] respectively, in [removed: 2022,] [added: 2023,] as compared with [removed: 2021,] [added: 2022,] due to [removed: a 17% decrease in tonnage offset by 3% increases] [added: 43% decreases] in both average sell and buy [removed: rates, respectively.][added: rates and a 10% decrease in tonnage.]

Tonnage decreased in almost all regions due to softening [removed: demand, pandemic related lockdowns in China and downtime caused by the cyber-attack] [added: demand] with the largest decrease coming from exports out of North Asia, [removed: South Asia] [added: down 17%] and North [removed: America.][added: America, down 8%.]

The [removed: continued] [added: historically] high average buy and sell rates caused by the pandemic and [added: unprecedented] supply chain disruptions [removed: have significantly] [added: which] contributed to the growth in our revenues, expenses and operating income in 2021 and [removed: 2022.][added: 2022 have significantly declined as supply chain operations normalized.]

Buy rates and sell rates have been declining since the second quarter of 2022 and [removed: are expected] [added: continued] to [removed: further] decline [removed: in 2023, which could result in further decrease in our revenues, expenses and operating income.][added: for the first three quarters of 2023.]

We are unable to predict how these uncertainties and any future disruptions will affect our [removed: future] operations or financial [removed: results.][added: results prospectively.]

Ocean freight and ocean services revenues and expenses [removed: increased 18%] [added: decreased 64%] and [removed: 19%,] [added: 68%,] respectively, in [removed: 2022,] [added: 2023,] as compared with [removed: 2021.][added: 2022.]

The largest component of our ocean freight and ocean services revenue is derived from ocean freight consolidation, which represented [removed: 85%] [added: 65%] and [removed: 82%] [added: 85%] of ocean freight and ocean services revenue in [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] respectively.

The following chart shows revenues by geographic areas of responsibility for the years ended December 31, 2023, 2022 and 2021:

Summary of 2023

Average buy and sell rates declined through most of the year, as available capacity for transportation exceeded demand.

As a result of volume and rate trends above, revenues and expenses in airfreight and ocean services were significantly down compared to 2022 and 2021, particularly affecting revenues in our North Asia region.

As port congestion has cleared our customs brokerage and other services revenues declined significantly but operating results benefited from lower costs and a reduction in costs related to the cyber-attack incurred in 2022.

Net earnings to shareholders decreased 45%.


Average sell rates decreased as a result of lower buy rates driven by declining market rates.

Buy rates declined as supply chain congestion cleared, shippers have shifted back to using ocean shipments and available capacity exceeds pre-pandemic levels while demand continued to soften.

Volumes were lower in 2023 as a result of softening demand and uncertainty in the economy.

Average sell and buy rates decreased in all regions in 2023, as compared with 2022 with most significant decreases on exports out of North Asia and South Asia due to excess available capacity over demand.

In 2023 air carriers added flights to meet strong passenger travel demand and freighter capacity remains high creating a supply and demand imbalance which resulted in continued pressure on rates.

Rates stabilized in the fourth quarter of 2023 due to an increase in seasonal demand.

Additionally, uncertainty in the economy including the impacts of inflation and interest rates together with the attractiveness of declining ocean transportation rates are expected to continue to negatively affect demand for airfreight services which could further reduce our volumes.

These conditions could result in further decreases in our revenues, expenses and operating income.

These factors drove a decline in average buy rates starting in the fourth quarter of 2022, which continued throughout most of 2023.

Containers shipped decreased as compared to 2022 as demand softened, customer inventory levels remained high and there are uncertainties in the global economy.

We also experienced exceptionally high ocean freight consolidation volumes in 2022 from customers transferring from direct carrier shipping due to lack of available capacity.

In 2023 customers have reverted back to utilizing direct carrier shipping as capacity became available.

Buy rates and sell rates started declining in the second half of 2022, decreased sharply beginning in the fourth quarter of 2022 and throughout 2023.

As customers seek lower pricing and react to governmental trade policies and other regulations, this could result in further decreases in our revenues and operating income.

Customs brokerage and other services revenues and expenses decreased 20% and 32%, respectively, in 2023 as compared with 2022, primarily due to declining shipments from a slowdown in the economy.

Expenses also decreased due to the impact of the cyber-attack which resulted in additional expenses in the first half of 2022.

Additionally, import services including charges at ports such as detention, drayage, terminal charges and delivery decreased significantly in 2023 as congestion at ports cleared compared to high levels in the first half of 2022.

North America revenues and expenses decreased 27% and 41%, respectively, in 2023 as compared with 2022, primarily as a result of declining shipments and significant decrease in detention, drayage, terminal charges and delivery charges.

While headcount decreased 9% in 2023, base salaries and benefits increased 1% primarily due to inflationary conditions.

In 2023 rent and occupancy costs were higher due to leasing additional space, depreciation expense increased related to software and leasehold improvements, and higher technology-related costs.

So long as the economic environment remains uncertain, we will be focused on aligning headcount and our overhead expenses commensurate with our transactional volumes.

These amounts were offset by the effect of higher foreign tax rates of the Company's international subsidiaries, when compared to the U.S. Federal income tax rate of 21%, as well as certain expenses that are no longer deductible under the 2017 Tax Act, including certain executive compensation in excess of amounts allowed.

36.

While buy rates for freight transportation capacity started declining in the second half of 2022, purchase prices for labor and other expenditures have continued to increase throughout 2023.

37.

This $1,077 million decrease is primarily due to lower net earnings and changes to working capital attributable to a slowdown in operations and declining sell and buy rates.

38.

26.

Highlights from 2022

Revenues and directly related operating expenses increased 3% and 4%, respectively, from higher average buy and sell rates, while operating income and net earnings to shareholders both declined 4% due to higher operating expenses.

Operational conditions remained challenging and uncertain in 2022.

The COVID-19 pandemic, including the effect of ongoing quarantine requirements in China and resulting disruptions on supply chains, continued to affect our business operations and financial results.

Imbalances between carrier available capacity and customer demand that were severe at the beginning of the year gradually eased throughout the year.

Congestion at destination ports, shortages in equipment, labor and warehouse space that were significant at the beginning of the year cleared by the fourth quarter.

Average buy and sell rates, while still higher than historical levels, progressively declined throughout the year as imbalances between available capacity for transportation and demand and major port congestion have dissipated.

In the first quarter of 2022, our company was the subject of a targeted cyber-attack which resulted in having to shut down most of our connectivity, operating and accounting systems globally to manage the safety of our entire global systems environment.

We had limited ability to conduct operations for a period of approximately three weeks, including but not limited to arranging for shipments of freight or managing customs and distribution activities for our customers’ shipments.

While we continued to navigate residual effects and incorporate learnings from the cyber-attack, our core systems were utilized to deliver our services from the second quarter and on.

We incurred additional expenses of $65 million, net of recoveries, and experienced a loss of revenues that cannot be quantified as a result of this attack.

Many air carriers are recovering from significant cash flow challenges and record operating losses incurred in 2020 and 2021 as a result of travel restrictions resulting in cancellation of flights.

Uncertainty over recovery of demand for trans-pacific passenger air travel, in particular business travel, compared to pre-pandemic levels may impact air carriers’ operations and financial stability long term.

27.

These conditions could result in further declines in average sell and buy rates in 2023.

Volumes were lower in 2022 as a result of softening overall demand and compared to strong volumes in the same period in 2021 from customers converting to air shipments due to ocean port congestion.

In 2022, demand for airfreight services softened compared to 2021 but rates remained high as available capacity was limited compared to pre-pandemic levels.

Airlines increased passenger flight schedules as restrictions were lifted which added available belly space throughout 2022.

Continued restrictions from the pandemic in China and other countries have resulted in airlines not increasing passenger flight schedules to pre-pandemic levels in certain lanes.

Additionally, capacity was further limited due to the conflict in Ukraine and the related route restrictions in Asia and Europe lanes and sanctions on Russian carriers.

In order to meet the transportation needs of our customers, we continued to purchase capacity in advance and on the spot market in the first half of the year.

Though we continued to process air shipments on a limited basis during the downtime caused by the cyber-attack, our volumes were negatively affected.

Subsequent to the downtime in March, our volumes began to recover as customers gradually returned but were negatively affected through the second quarter.

Average sell and buy rates started declining in the second half of the year and accelerated in the fourth quarter as demand softened from an overall slowdown in the economy and as more cargo capacity on passenger flights became available.

Compared to the fourth quarter of 2021, airfreight services revenues and expenses decreased 47% and 48%, respectively, due to 38% and 37% decreases in average sell and buy rates, respectively, and a 20% decrease in tonnage compared to high demand for airfreight while capacity was constrained in particular on exports from North Asia in 2021.

Declines in tonnage and rates were most significant on export out of North Asia and South Asia.

As air carriers bring back additional flights, in some cases ahead of passenger demand, supply and demand imbalances may occur, resulting in further pressure on rates.

As experienced in the fourth quarter of 2022, these unprecedented disruptions improved as supply chain operations normalized.

This resulted in a sharp decline in average buy rates in the fourth quarter of 2022 and average sell rates declined to adjust to market conditions.

The slowdown in the economy resulted in softening demand and a buildup of retail inventories that began in the second quarter of 2022 in the United States, negatively affected containers shipped.

When compared to the fourth quarter of 2021, ocean freight consolidation revenues and expenses decreased 44% and 46%, respectively, due to 34% and 37% decreases in average buy and sell rates, respectively and a 15% decrease in containers shipped.

While supply-chain congestion has cleared, uncertainty remains around labor, rail, truck and equipment shortages and pandemic related restrictions, which could result in volatility in average buy and sell rates.

As experienced in the fourth quarter of 2022, these unprecedented disruptions improved as supply chains operations normalized.

Buy rates and sell rates have been declining throughout 2022, sharply in the fourth quarter, and are expected to further decline in 2023, which could result in further decrease in our revenues, expenses and operating income.

Customs brokerage and other services revenues and expenses increased 10% and 15%, respectively, in 2022, as compared with 2021, primarily due to higher charges on import services due to supply chain congestion and costs related to the downtime caused by the cyber-attack.

Revenues and expenses for import services increased significantly due to high drayage, storage, delivery, demurrage, and detention costs incurred at destinations caused by supply chains congestion, shortages in warehousing space and delays in retrieving and delivering cargo and were partially offset by a decrease in revenue from customs clearance due to fewer shipments.

North America revenues and directly related expenses increased 16% and 22%, respectively in 2022, as compared with 2021, primarily as a result of higher charges on import services due to port congestion.

These costs comprised of various consulting services including cybersecurity experts, outside legal advisors, and other IT professional expenses; and estimated liabilities for potential shipment-related claims.

The remaining increases in other overhead expenses are the result of certain operational expenses, renting additional space to accommodate changing market conditions, increased technology-related costs and higher local tax expenses, including a non-income tax contingency of $22 million, and an increase in travel and entertainment expenses.

All other things being equal, an average 10% weakening of the U.S. dollar, throughout the year ended December 31, [removed: 2022,] [added: 2023,] would have had the effect of raising operating income by approximately [removed: $94] [added: $54] million.

An average 10% strengthening of the U.S. dollar, for the same period, would have the effect of reducing operating income by approximately [removed: $77] [added: $44] million.

Any such hedging activity throughout the year ended December 31, [removed: 2022,] [added: 2023,] was insignificant.

Net foreign currency losses were approximately [removed: $2] [added: $15] million and [removed: $12] [added: $2] million in [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] respectively.

We had no foreign currency derivatives outstanding at December 31, [removed: 2022] [added: 2023] and [removed: 2021.][added: 2022.]

As of December 31, [removed: 2022,] [added: 2023,] we had [removed: $73] [added: $82] million of net unsettled intercompany transactions.

At December 31, [removed: 2022,] [added: 2023,] we had cash and cash equivalents of [removed: $2,034] [added: $1,513] million, of which [removed: $995] [added: $912] million was invested at various short-term market interest rates.

We had no long-term debt at December 31, [removed: 2022.][added: 2023.]

A hypothetical change in the interest rate of 10 basis points at December 31, [removed: 2022] [added: 2023] would not have a significant impact on our earnings.

In management’s opinion, there has been no material change in our interest rate risk exposure between [removed: 2022] [added: 2023] and [removed: 2021.][added: 2022.]

39.

40.

36.

37.

*Warehousing and Distribution Services:* Expeditors’ services include inventory management, multi-channel order fulfillment, vendor [removed: management] [added: managed inventory] programs, and other value-added services.

The following chart shows our [removed: 2022] [added: 2023] revenues by service type:

[removed: ][added: ]

Expeditors has approximately [removed: 20,000] [added: 18,000] employees and provides a complete range of global logistics services to a diversified group of customers that vary in size, industry and geographic location.

When we have made acquisitions, it has generally been to obtain [removed: technology, increase geographic coverage by acquiring or establishing joint ventures with agents or others within the industry,] [added: technology] or gain specialized industry expertise that could be leveraged to benefit our entire network.

At Expeditors, we create our strategy and develop our global [removed: products, processes, technology] [added: products] and [added: services; processes; technology; and] compliance programs at the corporate level, in order to drive consistency across all levels of the organization.

[removed: In 2022, we completed a review of our] [added: Our] key strategic [removed: initiatives, which] [added: initiatives] include:

We utilize internally developed and third-party [removed: technology] [added: solutions] to perform our customs brokerage services, to address country and regional specifications.

We are continually enhancing our systems, including [removed: significant] [added: meaningful] upgrades to core operating and accounting systems.

Airfreight services accounted for approximately 35% [removed: and 41%] of Expeditors' total revenues in [removed: 2022] [added: 2023] and [removed: 2021, respectively.][added: 2022.]

We estimate that our average airfreight consolidation weighs approximately [removed: 3,900] [added: 3,600] pounds and that a typical consolidation includes merchandise from several shippers.

Normally that shipment will then arrive at the destination distribution point within [removed: 48] [added: 48-72] hours from the point of origin.

Such ancillary services we provide include preparation of shipping and customs documentation, packing, crating, insurance services, [removed: negotiation of letters of credit,] and the preparation of documentation to comply with local export laws.

Ocean freight services accounted for approximately [removed: 38%] [added: 25%] and [removed: 34%] [added: 38%] of Expeditors' total revenues in [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] respectively.

EIO issues a House Ocean Bill of Lading (HOBL) or a House [removed: Seaway Bill] [added: Sea Waybill] to customers as the contract of carriage and receives a separate Master Ocean Bill of Lading (MOBL) when freight is physically tendered.

In such arrangements, EIO does not issue a HOBL or House [removed: Seaway Bill.][added: Sea Waybill.]

*Order management*: Order management provides services that manage [removed: origin consolidation,] [added: consolidation of goods at origin,] supplier performance, carrier allocation, carrier performance, container management, document management, delivery management and Order/SKU visibility through our web-based portal.

Carriers also face changes in regulatory requirements such as requiring reductions in the sulfur in marine [removed: fuel,] [added: fuel and the EU emissions trading system,] which are increasing their operating and capital costs.

Consequently, when the market goes through seasonal peaks or [removed: any sort of] [added: significant] disruption and demand exceeds supply, the carriers react by increasing their pricing as quickly as [removed: possible to offset their previous losses.][added: possible.]

Customs brokerage and other services accounted for approximately [removed: 27%] [added: 40%] and [removed: 25%] [added: 27%] of Expeditors' total revenues in [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] respectively.

As a customs broker, we assist our customers in clearing shipments through customs by preparing and filing required information and documentation, calculating and providing for payment of duties and other taxes on behalf of the customer, arranging required inspections by governmental agencies, and providing import services such as pick up, storage and delivery [removed: services] [added: services, including value-added services,] at destinations.

Expeditors' warehousing and distribution services include inventory management, multi-channel order fulfillment, vendor [removed: management programs] [added: managed inventory programs,] and other industry-specific, value-added services.

Executive management, in limited circumstances, makes exceptions at the [removed: branch] [added: district] operating unit level.

At December 31, [removed: 2022,] [added: 2023,] Expeditors employed approximately [removed: 20,000] [added: 18,000] people, of which approximately [removed: 13,000] [added: 12,000] were employed in international locations.

District Managers are key individuals in our [removed: Company] [added: Company,] as sales, operational execution and business and expenditure decisions necessary to service our customers are the responsibility of management at each district.

We have summarized [added: below,] the number of employees based on individual headcount as of December 31, [removed: 2022 as follows:][added: 2023, including corporate and information services employees.]

| United States | | | [removed: 7,000] [added: 6,300] | |

| Other North America | | | [removed: 1,700] [added: 1,500] | |

| Latin America | | | [removed: 850] [added: 700] | |

| North Asia | | | [removed: 2,450] [added: 2,250] | |

| South Asia | | | [removed: 1,800] [added: 1,650] | |

Unlike many of our competitors, who have tended to grow by merger and acquisition, Expeditors operates fully integrated transportation, customs brokerage, and accounting systems, running on a common hardware platform, in all of our [removed: full-service locations.][added: districts.]

Historically, growth through aggressive acquisition has proven to be a challenge for many of our competitors and [added: typically involves the purchase of significant “goodwill.” In contrast, Expeditors has pursued a strategy emphasizing organic growth supplemented by certain strategic acquisitions.]

The significance of maintaining acceptable working relationships with these entities has gained increased importance as a result of [removed: the effect of the pandemic,] ongoing [removed: concern] [added: concerns] over terrorism, security, changes in governmental [removed: regulation] [added: regulations] and oversight of international trade.

In [removed: 2021 and continuing into] 2022, our business [removed: has] experienced rising labor costs, significant service provider rate increases, [added: and] higher rent and occupancy and other expenses.

Conversely, raising our prices to keep pace with inflationary pressure may result in a decrease in [added: volume and] customer [removed: demand.][added: demand for our services.]

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 was impacted in 2022 by the downtime caused by the [removed: cyber-attack,] [added: cyber-attack and] impacts of a slowing [removed: economy and the continued effects of the pandemic.][added: economy.]

Expeditors participates in various governmental supply chain security programs, such as the Air Cargo Advance Screening (ACAS), the Customs Trade Partnership Against Terrorism (CTPAT) in the United [removed: States,] [added: States] and Authorized Economic Operator (AEO) programs in other countries.

[removed: The] [added: Geopolitical risks, along with the] continuing global threats from pandemics, terrorism, cyber-attacks, smuggling, wars, and governments’ overriding concern for the safety of passengers and citizens who import and export goods into and out of their respective countries, have resulted in a proliferation of cargo security and other regulations.

As governments look for ways to tighten border controls and [removed: minimize the exposure of their citizens] [added: attempt] to [removed: contagious diseases,] [added: mitigate] criminal elements and potential terror-related incidents, our competitors in the transportation business and we may be required to incorporate security and other procedures within our respective scope of services to a far greater degree than has been required in the past.

*Transcon:* Expeditors' Transcon consists of intra-continental ground transportation, including time-definite less-than-truck and full-truck solutions.

Expeditors' Transcon consists of intra-continental ground transportation, including time-definite less-than-truck and full-truck solutions.

| | | 2023 | | |

| Europe | | | 3,800 | |

| Total | | | 18,100 | |

In 2021 and continuing in 2022 and 2023, many countries including the United States experienced increasing levels of inflation.

While buy rates for freight transportation capacity started declining in the second half of 2022, purchase prices for labor and other expenditures have continued to increase throughout 2023.

When providing customs brokerage services, Expeditors does not assume liability for lost or damaged shipments because we do not maintain care, custody, or control over the goods in our capacity as a customs broker.

Our liability for customs brokerage services is limited by contract to an amount generally equal to the lower of $50 per customs entry or the amount of brokerage fees paid to Expeditors for the customs entry.

| Kelly K. Blacker | | 52 | | President, Global Products |

Kelly K.

Blacker joined Expeditors in 1994 and was promoted to New York Branch Manager in 2001, Columbus District Manager in 2004, Memphis District Manager in 2007, and Atlanta Gateway Branch Manager in 2011.

Ms. Blacker was named Regional Vice President of the U.S. Mid-Atlantic region in 2015, and Senior Vice President of Global Air in May 2020.

In November 2023, Ms. Blacker was appointed President, Global Products, effective January 1, 2024.

16.

*Transcon:* Expeditors' Transcon consists of multi-modal, intra-continental ground transportation and delivery services and includes value-added, white glove, and time-definite services.

Supply Chain Disruptions and Ongoing COVID-19 Impact on our Business

In 2022, the COVID-19 pandemic, including the effect of ongoing quarantine requirements in China and resulting disruptions on supply chains continued to affect our business operations and financial results in particular in the first half of 2022.

As experienced in the fourth quarter of 2022, these unprecedented operating conditions dissipated as supply chains operations normalized.

Cyber-Attack Impact on our Business

In February 2022, we determined that our Company was the subject of a targeted cyber-attack which resulted in having to shut down most of our connectivity, operating and accounting systems globally to manage the safety of our entire global systems environment, and we initiated our cybersecurity incident response plan.

We had limited ability to conduct operations for a period of approximately three weeks, including but not limited to arranging for shipments of freight or managing customs and distribution activities for our customers’ shipments.

While we continued to navigate through the residual effects and incorporate learnings from the cyber-attack, our core systems were utilized to deliver our services from the second quarter and on.

We do not expect to have further material adverse impact on the Company’s business from this cyber-attack.

In the first half of 2022, as a result of limited availability in passenger aircraft capacity, we utilized chartered aircraft along with commercial capacity.

As air travel began to recover in 2022, along with lower demand for air cargo services, we reduced charter activity and anticipate low charter volumes in 2023.

Many passenger air carriers continue to recover from significant cash flow challenges and record operating losses incurred in 2020 and 2021.

Uncertainty over recovery of demand for transpacific passenger air travel compared to pre-pandemic levels and uncertainty related to jet fuel cost may impact air carriers’ operations and financial stability long term.

This environment requires that we be selective in determining which carriers to utilize.

Prior to 2021, many ocean carriers incurred substantial operating losses, and are still highly leveraged with debt.

Demand for ocean transportation increased sharply in the second half of 2020 and remained strong through the first half of 2022, resulting in severe port congestion and supply chain disruptions, in particular on transpacific and Asia-to-Europe trade lanes.

This created operational challenges for carriers including their ability to maintain sailing schedules.

Imbalances between available capacity and demand for transportation and port congestion started to ease in the second quarter of 2022.

Expeditors' Transcon consists of multi-modal, intra-continental ground transportation and delivery services and includes value-added, white glove, and time-definite services.

| | | 2022 | | |

| Europe | | | 4,200 | |

| Total | | | 19,900 | |

typically involves the purchase of significant “goodwill.” In contrast, Expeditors has pursued a strategy emphasizing organic growth supplemented by certain strategic acquisitions.

Our ability to attract, retain, and motivate highly qualified personnel with experience in global logistics services is an essential, if not the most important, element of Expeditors' ability to compete in the industry.

To this end, we have adopted incentive compensation programs that make percentages of an operating unit's revenues and operating income available to managers for distribution among key personnel.

We believe that these incentive compensation programs, combined with our experienced personnel and our ability to coordinate global marketing and business development efforts, provide a distinct competitive advantage.

However, starting in 2021, many countries including the United States experienced higher inflation than in recent years.

Expeditors' position is that any increased cost of compliance with security regulations will be passed through to beneficiaries of our services.

We are also attentive to our Scope 3 emissions (as defined by the Greenhouse Gas Protocol, Scope 3 emissions include all other indirect GHG emissions that are a consequence of the activities of the company, but occur from sources not owned or controlled by the company).

Transporte Limpio is a similar, voluntary program sponsored by the Mexican government.

| Richard H. Rostan | | 66 | | President, Global Geographies and Operations |

Richard H.

Rostan joined Expeditors in August 1985 and was promoted to District Manager in March 1987, Regional Vice President in January 1993, Senior Vice President of Global Distribution in July 2012 and Senior Vice President, Americas in January 2015.

Mr. Rostan was promoted to Executive Vice President, Americas in July 2015.

On February 17, 2023, Mr. Bell was promoted as President, Global Products.

Expeditors is involved in claims, lawsuits, government [removed: investigations] [added: investigations, income] and [added: indirect tax audits and] other legal matters that arise in the ordinary course of business and are subject to inherent uncertainties.

Currently, in management's opinion and based upon advice from legal advisors, none of these matters are expected to have a [removed: significant] [added: material] effect on our operations, cash flows or financial position.

In [removed: 2022,] [added: 2023,] amounts recorded for claims, lawsuits, government investigations and other legal matters are not significant to our operations, cash flows or financial position.

At this time, we are unable to estimate any additional loss or range of reasonably possible losses, if any, beyond the amounts recorded, that might result from the resolution of these [removed: matters, including potential claims resulting from a cyber-attack in February 2022.][added: matters.]

For the fiscal year ended December 31, [removed: 2022][added: 2023]

Commission File Number: [removed: 0-13468][added: 001-41871]

| Common Stock, par value $.01 per share | | EXPD | | [removed: NASDAQ Global Select Market] [added: New York Stock Exchange] |

The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant, based upon the closing price as of the last business day of the most recently completed second fiscal quarter ended June 30, [removed: 2022,] [added: 2023,] was approximately [removed: $15,790,525,926.][added: $17,717,749,906.]

At February [removed: 24, 2023,] [added: 16, 2024,] the number of shares outstanding of registrant’s Common Stock was [removed: 154,398,044.][added: 143,899,291.]

Portions of the definitive proxy statement for the Registrant’s Annual Meeting of Shareholders to be held on May [removed: 2, 2023] [added: 7, 2024] are incorporated by reference into Part III of this Form 10-K.

| | Item 1A | [Risk Factors](#item_1a_risk_factors) | [removed: 16] [added: 17] |

| | Item 2 | [Properties](#item_2___properties) | [removed: 22] [added: 24] |

| | Item 3 | [Legal Proceedings](#item_3___legal_proceedings) | [removed: 22] [added: 24] |

| | Item 4 | [Mine Safety Disclosures](#item_4___mine_safety_disclosures) | [removed: 22] [added: 24] |

| | Item 5 | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#item_5_market_for_registrants_common_equ) | [removed: 23] [added: 25] |

| | Item 6 | [\[Reserved\]](#item_6_reserved) | [removed: 25] [added: 27] |

| | Item 7 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#item_7___management_s_discussion_and_ana) | [removed: 26] [added: 28] |

| | Item 7A | [Quantitative and Qualitative Disclosures about Market Risk](#item_7a_quantitative_qualitative_disclos) | [removed: 36] [added: 39] |

| | Item 8 | [Financial Statements and Supplementary Data](#item_8_financial_statements_supplementar) | [removed: 38] [added: 41] |

| | Item 9 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#item_9_changes_in_disagreements_with_acc) | [removed: 39] [added: 42] |

| | Item 9A | [Controls and Procedures](#item_9a_controls_procedures) | [removed: 39] [added: 42] |

| | Item 9B | [Other Information](#item_9b_or_information) | [removed: 40] [added: 43] |

| | Item 9C | [Disclosures Regarding Foreign Jurisdictions That Prevent Inspections](#item_9c_disclosure_regarding_foreign_jur) | [removed: 40] [added: 43] |

| | Item 10 | [Directors, Executive Officers and Corporate Governance](#item_10_directors_executive_ficers_corpo) | [removed: 41] [added: 44] |

| | Item 11 | [Executive Compensation](#item_11_executive_compensation) | [removed: 41] [added: 44] |

| | Item 12 | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#item_12_security_ownership_certain_benef) | [removed: 41] [added: 44] |

| | Item 13 | [Certain Relationships and Related Transactions and Director Independence](#item_13_certain_relationships_related_tr) | [removed: 42] [added: 45] |

| | Item 14 | [Principal Accounting Fees and Services](#item_14_principal_accounting_fees_servic) | [removed: 42] [added: 45] |

| | Item 15 | [Exhibits, Financial Statement Schedules](#item_15_exhibits_financial_statement_sch) | [removed: 43] [added: 46] |

| | Item 16 | [Form 10-K Summary](#item_16_form_10k_summary) | [removed: 45] [added: 48] |

| | | [Signatures](#signatures) | [removed: 46] [added: 49] |

For the Fiscal Year Ended December 31, 2023

| | Item 1C | [Cybersecurity](#item_1c_cybersecurity) | 23 |

22.

Risk Management and Strategy

We and our customers and suppliers have an increasing reliance on our technology systems and infrastructure.

We aim to safeguard the digital infrastructure of Expeditors, enabling the highest levels of customer service while managing and minimizing risk and maintaining global compliance.

The cybersecurity and risk management program within Expeditors is defined through strategy, execution, management, and oversight, with continual assessments to verify the program’s overall effectiveness.

Identifying and assessing cybersecurity risks and threats is integrated into our overall enterprise risk management program.

Our Enterprise Cybersecurity Committee defines the strategy, prioritizes, and sets the expectations for execution of the cybersecurity program, leveraging an industry-standard cybersecurity framework, the National Institute of Standards and Technology cybersecurity framework (NIST CSF).

Our Cybersecurity and Risk Management program (CSRM) is designed around but not limited to five key pillars:

(i)

strategic development and continuous iteration of a risk strategy in line with our information services and business goals;

(ii)

engineering and architecture of cybersecurity preventative and response solutions and capabilities;

(iii)

governance, risk, and compliance defining policies, standards, and systems of control and measurement in line with industry best practices and regulatory requirements;

(iv)

cybersecurity operations designed to prepare, identify, contain, eradicate, and recover from cyber-related incidents; and

(v)

identity and access management defining global practices for access, authentication, and authorization to technology systems.

Our Cybersecurity and Information Services (IS) department executes and measures the delivery of the cybersecurity program and incorporates the program into the governance and internal controls framework for our Company.

We engage third parties such as consultants, auditors and specialists to support, evaluate, and improve the program, and utilize cybersecurity technologies and services to prevent, identify, detect, respond, and recover from cybersecurity threats and incidents.

We also maintain a third party security program to identify, prioritize, assess, mitigate and remediate third party risks, which is part of our overall cybersecurity risk management framework.

In February 2022, we determined that our Company was the subject of a targeted cyber-attack which resulted in having to shut down most of our connectivity, operating and accounting systems globally to manage the safety of our entire global systems environment, and we initiated our cybersecurity incident response plan.

We had limited ability to conduct operations for a period of approximately three weeks, including but not limited to arranging for shipments of freight or managing customs and distribution activities for our customers’ shipments.

While we continue to incorporate learnings from the cyber-attack, we do not expect to have a further material adverse impact on the Company’s business from this cyber-attack.

Since the cyber-attack, we have accelerated investments in our CSRM program, strengthened the security of our systems and networks and enhanced continued monitoring of the known information security environment.

We also added a Chief Information Security Officer (CISO) to our IS leadership.

Governance

Our Board of Directors provides direct oversight of and evaluates our CSRM at least annually.

The Board’s oversight is led by James Dubois, former CISO and Chief Information Officer (CIO) with the Microsoft Corporation, who communicates with cybersecurity leadership throughout the year.

The Board is provided updates via our Enterprise Risk Management program quarterly, while meeting with the CISO at least annually.

Our Enterprise Risk Management Committee includes a cross-functional team including the Chief Executive Officer, CIO, Chief Financial Officer and the General Counsel as members who are well versed in risk management.

In addition, the Enterprise Cybersecurity Committee includes the CIO, CISO, and Vice Presidents who have the relevant risk management and cybersecurity expertise.

The Cybersecurity and Information Services department is led by the CISO and includes cyber professionals who have the relevant cybersecurity expertise.

The CISO reports to the CIO and has over 20 years of experience, a graduate degree and several certifications in the field of cybersecurity.

Material risks are managed and monitored by persons or committees with relevant expertise and experience.

23.

The Company maintains a Cybersecurity incident response team and a Business Continuity Plan and has a well-established incident reporting protocol to inform management, the Board of Directors or third parties.

We conduct operations in approximately 440 locations worldwide, of which approximately [removed: 100] [added: 105] are in the United States and 19 are owned.

24.

22.

Expeditors' common stock trades on [removed: The NASDAQ Global Select Market] [added: the New York Stock Exchange] under the symbol EXPD.

There were [removed: 600] [added: 574] registered holders of record as of February [removed: 24, 2023.][added: 16, 2024.]

The Board of Directors last authorized repurchases from [removed: 150] [added: 140] million shares of common [removed: stock] [added: stock, as of December 31, 2023,] down to [removed: 140] [added: 130] million on February [removed: 20, 2023.][added: 19, 2024.]

The graph below compares Expeditors International of Washington, Inc.'s cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the S&P 500 [added: index, the NASDAQ Industrial Transportation] index [added: (NQUSB502060T)] and the [added: Dow Jones Transportation Average as a replacement for the] NASDAQ Industrial Transportation [removed: index (NQUSB502060T).][added: index.]

The graph assumes that the value of the investment in our common stock and in each of the indexes (including reinvestment of dividends) was $100 on [removed: 12/31/2017] [added: 12/31/2018] and tracks it through [removed: 12/31/2022.][added: 12/31/2023.]

[removed: ][added: ]

| June 15, 2023 | | $ | 0.69 | |

| December 15, 2023 | | $ | 0.69 | |

| October 1-31, 2023 | | | — | | | $ | — | | | | — | | | | 5,389 | |

| November 1-30, 2023 | | | 1,131 | | | $ | 118.90 | | | | 1,131 | | | | 4,803 | |

| December 1-31, 2023 | | | 493 | | | $ | 119.94 | | | | 493 | | | | 3,866 | |

| Total | | | 1,624 | | | $ | 119.22 | | | | 1,624 | | | | 3,866 | |

25.

The Company is making the modification as a result of having transferred the listing of its common stock to the New York Stock Exchange from the Nasdaq Stock Market on November 21, 2023.

| | | 12/18 | | | | 12/19 | | | | 12/20 | | | | 12/21 | | | | 12/22 | | | | 12/23 | | |

| Expeditors International of Washington, Inc. | | $ | 100.00 | | | | 116.18 | | | | 143.42 | | | | 204.41 | | | | 160.07 | | | | 198.29 | |

| Standard and Poor's 500 Index | | | 100.00 | | | | 131.47 | | | | 155.65 | | | | 200.29 | | | | 163.98 | | | | 207.04 | |

| NASDAQ Industrial Transportation (NQUSB502060T) | | | 100.00 | | | | 125.94 | | | | 164.80 | | | | 208.39 | | | | 176.34 | | | | 211.72 | |

| Dow Jones Transportation Average | | | 100.00 | | | | 120.83 | | | | 140.80 | | | | 187.56 | | | | 154.50 | | | | 186.15 | |

26.

| June 15, 2021 | | $ | 0.58 | |

| December 15, 2021 | | $ | 0.58 | |

| October 1-31, 2022 | | | — | | | $ | — | | | | — | | | | 9,134,478 | |

| November 1-30, 2022 | | | 4,345,240 | | | $ | 113.00 | | | | 4,345,240 | | | | 4,901,190 | |

| December 1-31, 2022 | | | 654,760 | | | $ | 111.14 | | | | 654,760 | | | | 4,312,871 | |

| Total | | | 5,000,000 | | | $ | 112.76 | | | | 5,000,000 | | | | 4,312,871 | |

23.

| | | 12/17 | | | | 12/18 | | | | 12/19 | | | | 12/20 | | | | 12/21 | | | | 12/22 | | |

| Expeditors International of Washington, Inc. | | $ | 100.00 | | | | 106.52 | | | | 123.75 | | | | 152.77 | | | | 217.73 | | | | 170.51 | |

| Standard and Poor's 500 Index | | | 100.00 | | | | 95.61 | | | | 125.70 | | | | 148.81 | | | | 191.48 | | | | 156.77 | |

| NASDAQ Industrial Transportation (NQUSB502060T) | | | 100.00 | | | | 90.96 | | | | 114.55 | | | | 149.90 | | | | 189.54 | | | | 160.39 | |

24.

Statements including those preceded by, followed by or that include the words or phrases [removed: “will”,] [added: “will] likely result”, “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 “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

27.

25.

| | | | [Balance Sheets as of December 31, [removed: 2022] [added: 2023] and [removed: 2021](#consolidated_balance_sheets)] [added: 2022](#consolidated_balance_sheets)] | | F-5 |

| | | | [Statements of Earnings for the Years Ended December 31, [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020](#consolidated_statements_earnings)] [added: 2021](#consolidated_statements_earnings)] | | F-6 |

| | | | [Statements of Comprehensive Income for the Years Ended December 31, [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020](#consolidated_statements_comprehensive_in)] [added: 2021](#consolidated_statements_comprehensive_in)] | | F-7 |

| | | | [Statements of Equity for the Years Ended December 31, [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020](#consolidated_statements_equity)] [added: 2021](#consolidated_statements_equity)] | | F-8 |

| | | | [Statements of Cash Flows for the Years Ended December 31, [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020](#consolidated_statements_of_cash_flows)] [added: 2021](#consolidated_statements_of_cash_flows)] | | F-9 |

41.

38.

We carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the Exchange Act [removed: Rule 13a-15(e))] [added: Rules 13a-15(e) and 15d-15(e)] as of [removed: the end of the period covered by this report.][added: December 31, 2023.]

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, [removed: 2022,] [added: 2023,] due to [removed: a] material [removed: weakness] [added: weaknesses] in internal control over financial reporting described below.

Management is responsible for establishing and maintaining adequate internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002 and as defined in Exchange Act [removed: Rule 13a-15(f).][added: Rules 13a-15(f) and 15d-15(f).]

Management, including the Chief Executive Officer and Chief Financial Officer, under the oversight of our Board of Directors, evaluated the effectiveness of the Company's internal control over financial reporting, as of December 31, [removed: 2022,] [added: 2023,] based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

[removed: A] [added: Management concluded that unauthorized changes to custom databases could have gone undetected as a] control to review and authorize direct changes to databases that support several key operational and accounting systems [removed: did not capture the complete population of] [added: excluded certain] database changes [removed: and,] [added: from review, and] as such did not operate effectively as designed.

The [removed: material weakness] [added: control deficiencies] did not result in any identified misstatements to the [added: consolidated] financial statements, and there were no changes to previously released financial results.

[removed: Based on this material weakness, the Company’s management] [added: Therefore, we] concluded that [removed: at December 31, 2022,] the [added: deficiencies represent material weaknesses in the] Company’s internal control over financial reporting [added: and our internal control over financial reporting] was not [removed: effective.][added: effective as of December 31, 2023.]

[removed: KPMG LLP, an] [added: Our] independent registered public accounting firm, [removed: has] [added: KPMG LLP, who audited the consolidated financial statements included in this Annual Report on Form 10-K,] issued an [removed: attestation report] [added: adverse opinion] on [removed: our] [added: the effectiveness of the Company’s] internal control over financial [removed: reporting as of December 31, 2022, which is included on page F-3.][added: reporting.]

Except for [added: on-going remediation related to] the material [removed: weakness identified during the quarter, as of December 31, 2022,] [added: weaknesses noted above,] there were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial [removed: reporting other than related to the cyber-attack as discussed below.][added: reporting.]

In light of the material weaknesses described below, management performed additional analysis and other procedures to ensure that our consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP).

Accordingly, management believes that the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented, in accordance with U.S. GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

In addition, the system logic used to record direct database changes excluded certain changes from being captured within the change logs used as the basis for population of the manual review.

These control deficiencies related to personnel without specific training and experience to fulfill internal control responsibilities related to information technology general controls over custom databases resulting in an ineffective information and communication process that identifies and assesses the source of and controls necessary to ensure the reliability of information used in financial reporting.

As a consequence of these control deficiencies, the Company concluded that it did not effectively design, implement and operate process-level controls across its financial reporting processes.

The control deficiencies described above created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.

42.

KPMG LLP’s report appears on page F-3 of this Annual Report on Form 10-K.

With respect to the material weaknesses identified, management with the oversight of the Audit Committee of the Board of Directors, has taken steps to remediate such material weaknesses, including:

Increasing the number of qualified personnel involved in the remediation process and the design and implementation of IT controls;

Performing supplemental procedures and implementing certain enhancements designed to strengthen IT program change management processes;

Conducting supplemental review procedures for direct database changes until the improvements are fully in place and operating;

Improving entity wide risk assessments conducted to identify relevant process risk points, IT systems and the information used in the operation of controls; and

Conducting additional training relative to information technology in the operation of controls.

These material weaknesses will not be considered fully remediated, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

We expect that necessary enhancements and remediation of these material weaknesses will be completed in 2024.

A system of internal control can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

In the fourth quarter of 2022, management identified a material weakness in internal control related to certain database changes made to an information technology (IT) system that supports the Company’s financial reporting processes.

Management concluded that unauthorized database changes could have gone undetected, could have resulted in errors in the financial statements for the year ended 2022 and could have had a direct or indirect impact on financial reporting controls, as there were no alternate information technology general control (ITGC) or processes operating at a sufficient level of precision that would have timely detected improper -- database changes.

Management believes that this control deficiency was a result of IT control processes lacking sufficient precision to support the successful operation of this ITGC and was overly dependent upon interpretation, knowledge and actions of certain individuals with IT expertise performing the control.

39.

Subsequent to the identification of the material weakness and prior to the issuance of these financial statements on Form 10-K, the Company (i) performed a lookback review of all direct changes made to the database subject to the control operating ineffectiveness for the full year 2022 and (ii) conducted supplemental procedures and found no evidence of improper changes or changes with direct or consequential impact on internal controls over financial reporting.

As a result of identifying this issue management will be implementing certain enhancements designed to strengthen IT program change management processes and will continue to conduct monthly supplemental lookback review procedures of direct database changes until improvements are fully in place.

We expect that such enhancements will be completed prior to the end of 2023.

With respect to the cyber-attack that is discussed in Note 11 to the consolidated financial statements in this report, starting on February 20, 2022, we shut down most of our operating systems globally, including our accounting information systems, to manage the safety of our entire global systems environment.

We engaged third-party cybersecurity experts to investigate and assist in the remediation.

Our Board of Directors was regularly apprised of, and directors with experience in cybersecurity participated in, the critical investigation and remediation activities.

Subsequently, we restored and strengthened the security of our systems and networks and enhanced the continuous monitoring of the entire information security environment.

Additionally, we have continued to implement various improvements to our network and processes to mitigate the risk of recurrence and severity of such incidents in the future.

During the disruption caused by the cyber-attack, we deployed interim procedures and controls to maintain our systems of internal control over financial reporting.

As a result of this cyber-attack and based on information known at this date, management determined that our disclosure controls and procedures were effective and the cyber-attack did not materially affect, nor was it reasonably likely to affect the effectiveness of the Company’s internal control over financial reporting.

Our management has confidence in our internal controls and procedures.

Nevertheless, our management, including Expeditors’ Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors or intentional fraud.

43.

40.

The information required by this item is set forth below or incorporated by reference to information under the caption “Proposal No. 1: Election of Directors” and to the information under the caption “Board Operations" in Expeditors' definitive Proxy Statement for its annual meeting of shareholders to be held on May [removed: 2, 2023.][added: 7, 2024.]

Polius, are the audit committee financial experts as defined by Item 407(d)(5) of Regulation S-K under the Exchange Act and that each member of the Audit Committee is independent under the [removed: NASDAQ] [added: NYSE] independence standards applicable to audit committee members.

The information required by this item is incorporated by reference to information under the captions “Director Compensation Program” and “Compensation Discussion and Analysis” in Expeditors' definitive Proxy Statement for its annual meeting of shareholders to be held on May [removed: 2, 2023.][added: 7, 2024.]

The information required by this item is incorporated by reference to information under the captions “Shareholder Engagement & Stock Ownership Information” in Expeditors' definitive Proxy Statement for its annual meeting of shareholders to be held on May [removed: 2, 2023.][added: 7, 2024.]

The following table provides information as of December 31, [removed: 2022,] [added: 2023,] regarding compensation plans under which equity securities of Expeditors are authorized for issuance.

Includes [removed: 1,131,713] [added: 491,466] available for issuance under the employee stock purchase [removed: plans] [added: plan] and [removed: 2,040,825] [added: 1,577,353] available for future grants of equity awards under the Amended and Restated 2017 Omnibus Incentive Plan.

44.

| Equity Compensation Plans Approved by Security Holders | | | 2,000,916 | | | $ | 46.46 | | | | 2,068,819 | |

| Total | | | 2,000,916 | | | $ | 46.46 | | | | 2,068,819 | |

41.

| Equity Compensation Plans Approved by Security Holders | | | 2,861,347 | | | $ | 44.86 | | | | 3,172,538 | |

| Total | | | 2,861,347 | | | $ | 44.86 | | | | 3,172,538 | |

The information required by this item is incorporated by reference to information under the captions “Certain Relationships and Related Transactions” in Expeditors' definitive Proxy Statement for its annual meeting of shareholders to be held on May [removed: 2, 2023.][added: 7, 2024.]

The information required by this item is incorporated by reference to information under the caption “Relationship with Independent Registered Public Accounting Firm” in Expeditors' definitive Proxy Statement for its annual meeting of shareholders to be held on May [removed: 2, 2023.][added: 7, 2024.]

45.

42.

| | | [Consolidated Balance Sheets as of December 31, [removed: 2022] [added: 2023] and [removed: 2021](#consolidated_balance_sheets)] [added: 2022](#consolidated_balance_sheets)] | | F-5 |

| | | [Consolidated Statements of Earnings for the Years Ended December 31, [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020](#consolidated_statements_earnings)] [added: 2021](#consolidated_statements_earnings)] | | F-6 |

| | | [Consolidated Statements of Comprehensive Income for the Years Ended December 31, [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020](#consolidated_statements_comprehensive_in)] [added: 2021](#consolidated_statements_comprehensive_in)] | | F-7 |

| | | [Consolidated Statements of Equity for the Years Ended December 31, [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020](#consolidated_statements_equity)] [added: 2021](#consolidated_statements_equity)] | | F-8 |

| | | [Consolidated Statements of Cash Flows for the Years Ended December 31, [removed: 2022, 2021] [added: 2023, 2022] and [removed: 2020](#consolidated_statements_of_cash_flows)] [added: 2021](#consolidated_statements_of_cash_flows)] | | F-9 |

| [removed: [21.1](https://www.sec.gov/Archives/edgar/data/746515/000095017023005412/expd-ex21_1.htm)] [added: [21.1](https://www.sec.gov/Archives/edgar/data/746515/000095017024019394/expd-ex21_1.htm)] | | Subsidiaries of the registrant. |

| [removed: [23.1](https://www.sec.gov/Archives/edgar/data/746515/000095017023005412/expd-ex23_1.htm)] [added: [23.1](https://www.sec.gov/Archives/edgar/data/746515/000095017024019394/expd-ex23_1.htm)] | | Consent of Independent Registered Public Accounting Firm. |

| [removed: [31.1](https://www.sec.gov/Archives/edgar/data/746515/000095017023005412/expd-ex31_1.htm)] [added: [31.1](https://www.sec.gov/Archives/edgar/data/746515/000095017024019394/expd-ex31_1.htm)] | | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |

| [removed: [31.2](https://www.sec.gov/Archives/edgar/data/746515/000095017023005412/expd-ex31_2.htm)] [added: [31.2](https://www.sec.gov/Archives/edgar/data/746515/000095017024019394/expd-ex31_2.htm)] | | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |

| [removed: [32](https://www.sec.gov/Archives/edgar/data/746515/000095017023005412/expd-ex32.htm)] [added: [32](https://www.sec.gov/Archives/edgar/data/746515/000095017024019394/expd-ex32.htm)] | | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

| 101.SCH | | Inline XBRL Taxonomy Extension Schema [removed: Document.] [added: With Embedded Linkbase Documents] |

| 104 | | The cover page from the Company’s Yearly Report on Form 10-K for the year ended December 31, [removed: 2022,] [added: 2023,] has been formatted in Inline XBRL. |

Incentive Compensation Recovery Policy

46.

47.

| [97](https://www.sec.gov/Archives/edgar/data/746515/000095017024019394/expd-ex97.htm) | | Incentive Compensation Recovery Policy |

Expeditors' 2012 Stock Option Plan.

See Exhibit 10.59.

Form of Stock Option Agreement used in connection with options granted under Expeditors' 2012 Stock Option Plan.

See Exhibit 10.60.

(18)

43.

| | | |

| [10.59](https://www.sec.gov/Archives/edgar/data/746515/000074651512000008/a2012def14a.htm) | | Expeditors' 2012 Stock Option Plan. (Incorporated by reference to Appendix A of Expeditors' Notice of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 20, 2012.) |

| [10.60](https://www.sec.gov/Archives/edgar/data/746515/000074651512000008/a2012def14a.htm) | | Form of Stock Option Agreement used in connection with options granted under Expeditors' 2012 Stock Option Plan. (Incorporated by reference to Appendix B of Expeditors' Notice of Annual Meeting of Shareholders and Proxy Statement pursuant to Regulation 14A filed on or about March 20, 2012.) |

44.

| 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |

| 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. |

| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |

| 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February [removed: 28, 2023.][added: 20, 2024.]

YEARS ENDED DECEMBER 31, [added: 2023,] 2022, [removed: 2021,] AND [removed: 2020][added: 2021]

We have audited the accompanying consolidated balance sheets of Expeditors International of Washington, Inc. and subsidiaries (the Company) as of December 31, [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, [removed: 2022,] [added: 2023,] and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, [removed: 2022,] [added: 2023,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, [removed: 2022,] [added: 2023,] based on criteria established in [removed: Internal *Control] [added: *Internal Control] – Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated [removed: March 1, 2023] [added: February 23, 2024] expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Complex auditor [removed: judgment] [added: judgement] was required in evaluating the Company’s interpretation of tax law and its estimate of the ultimate resolution of tax positions.

[removed: This included controls related to the interpretation of tax] law and its application in the liability estimation process.

| [removed: March 1,] [added: |] 2023 | [added: | | | | | | | | | | | |]

We have audited Expeditors International of Washington, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, [removed: 2022,] [added: 2023,] based on criteria established in *Internal Control – Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, because of the effect of the material [removed: weakness,] [added: weaknesses,] described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, [removed: 2022,] [added: 2023,] based on criteria established in *Internal Control – Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, [removed: 2022,] [added: 2023,] and the related notes (collectively, the consolidated financial statements), and our report dated [removed: March 1, 2023] [added: February 23, 2024] expressed an unqualified opinion on those consolidated financial statements.

[removed: A] [added: The material weaknesses related to unauthorized changes to custom databases could have gone undetected as a] control to review and authorize direct changes to databases that support several key operational and accounting systems [removed: did not capture the complete population of] [added: excluded certain] database changes [removed: and,] [added: from review, and] as such did not operate effectively as designed.

The material [removed: weakness was] [added: weaknesses were] considered in determining the nature, timing, and extent of audit tests applied in our audit of the [removed: 2022] [added: 2023] consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

| December 31, | | [removed: 2022] [added: 2023] | | | | [removed: 2021] [added: 2022] | | |

| Cash and cash equivalents [added: at beginning of period] | | [removed: $] | 2,034,131 | | | [removed: $] | 1,728,692 | | [added: | | 1,527,791 | |]

| Accounts receivable, net | | | [removed: 2,107,645] [added: 1,532,599] | | | | [removed: 3,810,286] [added: 2,107,645] | |

| Deferred contract costs | | | [removed: 257,545] [added: 218,807] | | | | [removed: 987,266] [added: 257,545] | |

| Other | | | [removed: 118,696] [added: 170,907] | | | | [removed: 108,801] [added: 118,696] | |

| Total current assets | | | [removed: 4,518,017] [added: 3,435,196] | | | | [removed: 6,635,045] [added: 4,518,017] | |

| Property and equipment, net | | | [removed: 501,916] [added: 479,225] | | | | [removed: 487,870] [added: 501,916] | |

| Operating lease right-of-use assets | | | [removed: 507,503] [added: 516,280] | | | | [removed: 459,158] [added: 507,503] | |

| Deferred federal and state income taxes, net | | | [removed: 37,449] [added: 63,690] | | | | [removed: 729] [added: 37,449] | |

| Other assets, net | | | [removed: 17,622] [added: 21,491] | | | | [removed: 19,200] [added: 17,622] | |

| Total assets | | $ | [removed: 5,590,434] [added: 4,523,809] | | | $ | [removed: 7,609,929] [added: 5,590,434] | |

| Accounts payable | | $ | [removed: 1,108,996] [added: 860,856] | | | $ | [removed: 2,012,461] [added: 1,108,996] | |

| Accrued expenses, primarily salaries and related costs | | | [removed: 479,262] [added: 447,336] | | | | [removed: 403,625] [added: 479,262] | |

| Contract liabilities | | | [removed: 323,101] [added: 280,909] | | | | [removed: 1,142,026] [added: 323,101] | |

| Current portion of operating lease liabilities | | | [removed: 95,621] [added: 99,749] | | | | [removed: 82,019] [added: 95,621] | |

| Federal, state and foreign income taxes | | | [removed: 47,075] [added: 15,562] | | | | [removed: 86,166] [added: 47,075] | |

| Total current liabilities | | | [removed: 2,054,055] [added: 1,704,412] | | | | [removed: 3,726,297] [added: 2,054,055] | |

| Noncurrent portion of operating lease liabilities | | | [removed: 422,844] [added: 427,984] | | | | [removed: 385,641] [added: 422,844] | |

| Common stock, par value $0.01 per share, authorized 640,000. Issued and outstanding: [removed: 154,313] [added: 143,866] shares and [removed: 167,210] [added: 154,313] shares at December 31, [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] respectively | | | [removed: 1,543] [added: 1,439] | | | | [removed: 1,672] [added: 1,543] | |

| Additional paid-in capital | | | [removed: 139] [added: —] | | | | [removed: 3,160] [added: 139] | |

| Retained earnings | | | [removed: 3,310,892] [added: 2,580,968] | | | | [removed: 3,620,008] [added: 3,310,892] | |

| Accumulated other comprehensive loss | | | [removed: (202,553] [added: (192,057] | ) | | | [removed: (130,414] [added: (202,553] | ) |

| Total shareholders’ equity | | | [removed: 3,110,021] [added: 2,390,350] | | | | [removed: 3,494,426] [added: 3,110,021] | |

| Noncontrolling interest | | | [removed: 3,514] [added: 1,063] | | | | [removed: 3,565] [added: 3,514] | |

| Total equity | | | [removed: 3,113,535] [added: 2,391,413] | | | | [removed: 3,497,991] [added: 3,113,535] | |

| Total liabilities and equity | | $ | [removed: 5,590,434] [added: 4,523,809] | | | $ | [removed: 7,609,929] [added: 5,590,434] | |

| Years ended December 31, | | [removed: 2022] [added: 2023] | | | | [removed: 2021] [added: 2022] | | | | [removed: 2020] [added: 2021] | | |

48.

Date: February 23, 2024

49.

50.

This included controls related to the interpretation of tax

| February 23, 2024 |

In addition, the system logic used to record direct database changes excluded certain changes from being captured within the change logs used as the basis for population of the manual review.

These control deficiencies related to personnel without specific training and experience to fulfill internal control responsibilities related to information technology general controls over custom databases resulting in an ineffective information and communication process that identifies and assesses the source of and controls necessary to ensure the reliability of information used in financial reporting.

As a consequence of these control deficiencies, the Company concluded that it did not effectively design, implement and operate process-level controls across its financial reporting processes.

| February 23, 2024 |

| Cash and cash equivalents | | $ | 1,512,883 | | | $ | 2,034,131 | |

| Shares repurchased under provisions of stock repurchase plan | | | (12,146 | ) | | | (121 | ) | | | (125,153 | ) | | | (1,279,529 | ) | | | — | | | | (1,404,803 | ) | | | — | | | | (1,404,803 | ) |

| Net earnings (losses) | | | — | | | | — | | | | — | | | | 752,883 | | | | — | | | | 752,883 | | | | (1,104 | ) | | | 751,779 | |

| Dividends and dividend equivalents paid ($1.38) | | | — | | | | — | | | | 1,249 | | | | (203,278 | ) | | | — | | | | (202,029 | ) | | | — | | | | (202,029 | ) |

| Distribution to noncontrolling interest | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,089 | ) | | | (1,089 | ) |

| Balance at December 31, 2023 | | | 143,866 | | | $ | 1,439 | | | $ | \- | | | $ | 2,580,968 | | | $ | (192,057 | ) | | $ | 2,390,350 | | | $ | 1,063 | | | $ | 2,391,413 | |

| Net earnings | | $ | 751,779 | | | $ | 1,360,605 | | | $ | 1,418,845 | |

| Depreciation and amortization | | | 67,760 | | | | 57,338 | | | | 51,312 | |

N.

| Recent Accounting Pronouncements

*Improvements to Reportable Segment Disclosures*

In November 2023, the Financial Accounting Standards Board (FASB) issued an Accounting Standard Update (ASU) which makes improvements to reportable segment disclosures, by requiring, among other things, the disclosure in interim periods about a reportable segment’s profit or loss and assets that are currently required annually, and disclosures of significant segment expenses and profit and loss measures provided to the chief operating decision maker.

The ASU does not change how the Company identifies its operating segments.

The Company expects to adopt this standard effective January 1, 2024 in its 2024 annual report on Form 10-K and for interim periods starting on January 1, 2025, including retrospective presentation to all prior periods presented in the financial statements.

The Company is currently evaluating the impact of this ASU on its segment disclosures and expects no impact on its consolidated financial statements, cash flows and financial condition.

*Improvements to Income Tax Disclosures*

In December 2023, the FASB issued an ASU which expands income tax disclosures by requiring the disclosure, on an annual basis, of a tabular rate reconciliation using both percentages and currency amounts, broken out by nature and jurisdiction to the extent those items exceed a specified threshold.

In addition, disclosure is required of income taxes paid, net of refunds received, disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received.

This standard will become effective for the Company on January 1, 2025.

The Company may apply this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods or may apply the amendments retrospectively by providing the revised disclosures for all period presented.

The Company expects this ASU to only impact its disclosures with no impacts to its consolidated financial statements, cash flows and financial condition.

| | | | 2023 | | | | 2022 | | |

| 2024 | | $ | 119,565 | |

| 2025 | | | 112,117 | |

| 2026 | | | 93,952 | |

| 2027 | | | 73,521 | |

| 2028 | | | 55,430 | |

| Thereafter | | | 150,445 | |

| Lease liability | | $ | 527,733 | |

| | | 2023 | | | | 2022 | | |

45.

Date: March 1, 2023

| | | |

46.

47.

A material weakness in internal control related to certain database changes made to an information technology (IT) system that supports the Company’s financial reporting process has been identified and included in management’s assessment.

Management concluded that unauthorized database changes could have gone undetected, could have resulted in errors in the financial statements for the year ended 2022 and could have had a direct or indirect impact on financial reporting controls, as there were no alternate ITGC controls or processes operating at a sufficient level of precision that would have timely detected improper database changes.

| Balance at December 31, 2019 | | | 169,622 | | | $ | 1,696 | | | $ | 3,203 | | | $ | 2,321,316 | | | $ | (131,187 | ) | | | 2,195,028 | | | $ | 2,191 | | | $ | 2,197,219 | |

| Cumulative adjustment for adoption of new accounting pronouncement | | | — | | | | — | | | | — | | | | 6,074 | | | | — | | | | 6,074 | | | | — | | | | 6,074 | |

| Shares repurchased under provisions of stock repurchase plan | | | (4,600 | ) | | | (46 | ) | | | (84,941 | ) | | | (247,400 | ) | | | — | | | | (332,387 | ) | | | — | | | | (332,387 | ) |

| Net earnings | | | — | | | | — | | | | — | | | | 696,140 | | | | — | | | | 696,140 | | | | 2,074 | | | | 698,214 | |

| Dividends and dividend equivalents paid ($1.04) | | | — | | | | — | | | | 1,000 | | | | (175,929 | ) | | | — | | | | (174,929 | ) | | | — | | | | (174,929 | ) |

| Cash and cash equivalents at beginning of period | | | 1,728,692 | | | | 1,527,791 | | | | 1,230,491 | |

Certain prior year amounts on the consolidated statements of earnings and consolidated statements of cash flows have been reclassified to conform to the current year presentation.

Effective January 1, 2020, the Company adopted a new accounting standard update related to the measurement of credit losses on financial instruments.

The Company determined that this new guidance is applicable to its accounts receivable, which are short term and for which the Company has not historically experienced significant credit losses.

The adoption had an immaterial effect on the Company’s consolidated financial statements and disclosures.

The Company adopted this standard using the modified retrospective transition method resulting in a $6 million adjustment to the opening balance of retained earnings and an $8 million reduction to the opening balance of allowance for credit loss.

See Note 11 for further information on estimates related to the cyber-attack.

Actual results could be materially different from the estimated provisions and accruals recorded.

| 2023 | | $ | 112,010 | |

| 2024 | | | 97,113 | |

| 2025 | | | 88,513 | |

| 2026 | | | 71,776 | |

| 2027 | | | 56,552 | |

| Thereafter | | | 159,363 | |

| Lease liability | | $ | 518,465 | |

| | Nonvested at December 31, 2021 | | | 794 | | | $ | 89.74 | |

| | RSUs granted | | | 372 | | | $ | 102.65 | |

| | RSUs vested | | | (439 | ) | | $ | 85.37 | |

| | Outstanding at December 31, 2021 | | | 2,329 | | | $ | 44.07 | | | | | | | | | |

| | Options exercised | | | (539 | ) | | $ | 41.48 | | | | | | | | | |

| | Exercisable at December 31, 2022 | | | 1,784 | | | $ | 44.86 | | | | 2.29 | | | $ | 105,400 | |

| | 2020 | | | | | | | | | | | | |

| | Basic earnings attributable to shareholders | | $ | 696,140 | | | | 168,333 | | | $ | 4.14 | |

| | Diluted earnings attributable to shareholders | | $ | 696,140 | | | | 170,896 | | | $ | 4.07 | |

| | 2020 | | | | | | | | | | | | | | | | |

| | Current | | $ | 37,551 | | | $ | 18,432 | | | $ | 193,996 | | | $ | 249,979 | |

| | Deferred | | | 8,440 | | | | (69 | ) | | | — | | | | 8,371 | |

| | | | $ | 45,991 | | | $ | 18,363 | | | $ | 193,996 | | | $ | 258,350 | |