filings.toolsItem 16. FORM 10-K SUMMARY
90K characters. Original on sec.gov · Markdown
Item 16. FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 25, 2026
| EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. | |||
| By: | /s/ David A. Hackett | ||
| David A. Hackett | |||
| Senior Vice President and Chief Financial Officer |
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 23, 2026.
| Signature | Title | |
| /s/ Daniel R. Wall | President, Chief Executive Officer and Director | |
| (Daniel R. Wall) | (Principal Executive Officer) | |
| /s/ David A. Hackett | Senior Vice President and Chief Financial Officer | |
| (David A. Hackett) | (Principal Financial and Accounting Officer) | |
| /s/ Robert P. Carlile | Chairman of the Board and Director | |
| (Robert P. Carlile) | ||
| /s/ Glenn M. Alger | Director | |
| (Glenn M. Alger) | ||
| /s/ James M. DuBois | Director | |
| (James M. DuBois) | ||
| /s/ Mark A. Emmert | Director | |
| (Mark A. Emmert) | ||
| /s/ Diane H. Gulyas | Director | |
| (Diane H. Gulyas) | ||
| /s/ Brandon S. Pedersen | Director | |
| (Brandon S. Pedersen) | ||
| /s/ Liane J. Pelletier | Director | |
| (Liane J. Pelletier) | ||
| /s/ Olivia D. Polius February 24, 2026 | Director | |
| (Olivia D. Polius) |
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
COMPRISING ITEM 8
ANNUAL REPORT ON FORM 10-K
TO SECURITIES AND EXCHANGE COMMISSION FOR THE
YEARS ENDED DECEMBER 31, 2025, 2024, AND 2023
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors Expeditors International of Washington, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Expeditors International of Washington, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, 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, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, 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, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of gross unrecognized tax benefits
As discussed in Note 7 to the consolidated financial statements, the Company is under, or may be subject to, audit or examination and assessments by relevant tax authorities in many jurisdictions. The Company estimates additional tax expense, as well as interest and penalties that could arise from certain tax audits.
We identified the assessment of certain gross unrecognized tax benefits as a critical audit matter. Complex auditor judgement was required in evaluating the Company’s interpretation of tax law and its estimate of the ultimate resolution of tax positions.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s unrecognized tax benefit process. This included controls related to the interpretation of tax
F-1
law and its application in the liability estimation process. Since tax law is complex and often subject to interpretations, we involved tax professionals with specialized skills and knowledge, who assisted in:
evaluating the Company’s interpretation of tax laws
assessing transfer pricing positions for compliance with applicable laws and regulations
inspecting settlement documents with applicable taxing authorities and appeals documents with applicable tax courts
assessing the expiration of statutes of limitations
comparing historical gross unrecognized tax benefits to actual results upon conclusion of tax audits or expiration of the statute of limitations
performing an independent assessment of the Company’s tax positions and comparing the results to the Company’s assessment.
In addition, we assessed the responses received directly from the Company’s external legal counsel regarding tax positions for which they had been engaged.
| /s/ KPMG LLP |
| We have served as the Company's auditor since 1982. |
| Seattle, Washington |
| February 25, 2026 |
F-2
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors Expeditors International of Washington, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Expeditors International of Washington, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, 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, 2025 and 2024, 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, 2025, and the related notes (collectively, the consolidated financial statements), and our report dated February 25, 2026 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting.Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
F-3
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.
| /s/ KPMG LLP |
| Seattle, Washington |
| February 25, 2026 |
F-4
Consolidated Balance Sheets
In thousands, except per share data
| December 31, | 2025 | 2024 | ||||||
| Assets: | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 1,314,285 | $ | 1,148,320 | ||||
| Accounts receivable, net | 2,021,889 | 1,997,840 | ||||||
| Deferred contract costs | 283,281 | 349,343 | ||||||
| Other | 136,167 | 164,272 | ||||||
| Total current assets | 3,755,622 | 3,659,775 | ||||||
| Property and equipment, net | 462,122 | 449,404 | ||||||
| Operating lease right-of-use assets | 550,162 | 551,652 | ||||||
| Goodwill | 7,927 | 7,927 | ||||||
| Deferred income tax asset, net | 101,671 | 70,671 | ||||||
| Other assets, net | 16,134 | 15,029 | ||||||
| Total assets | $ | 4,893,638 | $ | 4,754,458 | ||||
| Liabilities: | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 1,123,429 | $ | 1,036,749 | ||||
| Accrued expenses, primarily salaries and related costs | 448,055 | 451,921 | ||||||
| Contract liabilities | 358,386 | 441,927 | ||||||
| Current portion of operating lease liabilities | 110,891 | 106,736 | ||||||
| Federal, state and foreign income taxes payable | 32,046 | 29,140 | ||||||
| Total current liabilities | 2,072,807 | 2,066,473 | ||||||
| Noncurrent portion of operating lease liabilities | 459,698 | 462,201 | ||||||
| Deferred income tax liability, net | 3,040 | — | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ Equity: | ||||||||
| Preferred stock, par value $0.01 per share, authorized 2,000 shares; none issued | — | — | ||||||
| Common stock, par value $0.01 per share authorized 640,000. Issued and outstanding: 133,884 shares and 138,003 shares at December 31, 2025 and 2024, respectively | 1,339 | 1,380 | ||||||
| Additional paid-in capital | — | — | ||||||
| Retained earnings | 2,538,455 | 2,455,132 | ||||||
| Accumulated other comprehensive loss | (184,161 | ) | (233,500 | ) | ||||
| Total shareholders’ equity | 2,355,633 | 2,223,012 | ||||||
| Noncontrolling interest | 2,460 | 2,772 | ||||||
| Total equity | 2,358,093 | 2,225,784 | ||||||
| Total liabilities and equity | $ | 4,893,638 | $ | 4,754,458 |
See accompanying notes to consolidated financial statements.
F-5
Consolidated Statements of Earnings
In thousands, except per share data
| Years ended December 31, | 2025 | 2024 | 2023 | |||||||||
| Revenues: | ||||||||||||
| Airfreight services | $ | 3,982,882 | $ | 3,669,673 | $ | 3,246,527 | ||||||
| Ocean freight and ocean services | 2,814,960 | 3,148,514 | 2,363,243 | |||||||||
| Customs brokerage and other services | 4,271,167 | 3,782,328 | 3,690,340 | |||||||||
| Total revenues | 11,069,009 | 10,600,515 | 9,300,110 | |||||||||
| Operating Expenses: | ||||||||||||
| Airfreight services | 2,979,993 | 2,731,552 | 2,347,293 | |||||||||
| Ocean freight and ocean services | 2,029,847 | 2,356,952 | 1,634,947 | |||||||||
| Customs brokerage and other services | 2,392,241 | 2,098,214 | 2,071,760 | |||||||||
| Salaries and related costs | 1,915,932 | 1,762,654 | 1,700,516 | |||||||||
| Rent and occupancy costs | 263,891 | 241,013 | 232,358 | |||||||||
| Depreciation and amortization | 56,769 | 61,090 | 67,760 | |||||||||
| Selling and promotion | 40,099 | 33,331 | 27,913 | |||||||||
| Other | 337,691 | 274,386 | 277,630 | |||||||||
| Total operating expenses | 10,016,463 | 9,559,192 | 8,360,177 | |||||||||
| Operating income | 1,052,546 | 1,041,323 | 939,933 | |||||||||
| Other Income: | ||||||||||||
| Interest income | 35,715 | 46,706 | 70,451 | |||||||||
| Other, net | 5,802 | 6,771 | 4,644 | |||||||||
| Other income, net | 41,517 | 53,477 | 75,095 | |||||||||
| Earnings before income taxes | 1,094,063 | 1,094,800 | 1,015,028 | |||||||||
| Income tax expense | 282,015 | 283,167 | 263,249 | |||||||||
| Net earnings | 812,048 | 811,633 | 751,779 | |||||||||
| Less net earnings (losses) attributable to the noncontrolling interest | 1,716 | 1,560 | (1,104 | ) | ||||||||
| Net earnings attributable to shareholders | $ | 810,332 | $ | 810,073 | $ | 752,883 | ||||||
| Diluted earnings attributable to shareholders per share | $ | 5.95 | $ | 5.72 | $ | 5.01 | ||||||
| Basic earnings attributable to shareholders per share | $ | 5.97 | $ | 5.75 | $ | 5.05 | ||||||
| Weighted average diluted shares outstanding | 136,249 | 141,722 | 150,186 | |||||||||
| Weighted average basic shares outstanding | 135,810 | 140,992 | 149,141 |
See accompanying notes to consolidated financial statements.
F-6
Consolidated Statements of Comprehensive Income
In thousands
| Years ended December 31, | 2025 | 2024 | 2023 | |||||||||
| Net earnings | $ | 812,048 | $ | 811,633 | $ | 751,779 | ||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||
| Foreign currency translation adjustments, net of tax expense (benefit) of $1,315 in 2025, ($2,573) in 2024, and ($5,205) in 2023 | 49,156 | (41,294 | ) | 10,238 | ||||||||
| Other comprehensive income (loss), net of tax | 49,156 | (41,294 | ) | 10,238 | ||||||||
| Comprehensive income | 861,204 | 770,339 | 762,017 | |||||||||
| Less comprehensive income (loss) attributable to the noncontrolling interest | 1,533 | 1,709 | (1,362 | ) | ||||||||
| Comprehensive income attributable to shareholders | $ | 859,671 | $ | 768,630 | $ | 763,379 |
See accompanying notes to consolidated financial statements.
F-7
Consolidated Statements of Equity
In thousands, except per share data
| Years ended December 31, | 2025 | 2024 | 2023 | |||||||||
| Total Shareholders' Equity, Beginning of Period | $ | 2,223,012 | $ | 2,390,350 | $ | 3,110,021 | ||||||
| Common Stock Par Value | ||||||||||||
| Beginning of period | 1,380 | 1,439 | 1,543 | |||||||||
| Shares issued under employee stock plans, net | 15 | 12 | 17 | |||||||||
| Shares repurchased | (56 | ) | (71 | ) | (121 | ) | ||||||
| End of period | 1,339 | 1,380 | 1,439 | |||||||||
| Additional Paid-In Capital | ||||||||||||
| Beginning of period | — | — | 139 | |||||||||
| Shares issued under employee stock plans, net | 77,809 | 53,897 | 65,366 | |||||||||
| Shares repurchased | (147,903 | ) | (119,288 | ) | (125,153 | ) | ||||||
| Stock compensation expense | 69,231 | 64,364 | 58,399 | |||||||||
| Dividend equivalents paid | 863 | 1,027 | 1,249 | |||||||||
| End of period | — | — | — | |||||||||
| Retained Earnings | ||||||||||||
| Beginning of period | 2,455,132 | 2,580,968 | 3,310,892 | |||||||||
| Shares repurchased | (518,709 | ) | (730,795 | ) | (1,279,529 | ) | ||||||
| Net earnings | 810,332 | 810,073 | 752,883 | |||||||||
| Dividend and dividend equivalents paid ($1.54, $1.46, $1.38) | (208,300 | ) | (205,114 | ) | (203,278 | ) | ||||||
| End of period | 2,538,455 | 2,455,132 | 2,580,968 | |||||||||
| Accumulated Other Comprehensive Loss | ||||||||||||
| Beginning of period | (233,500 | ) | (192,057 | ) | (202,553 | ) | ||||||
| Other comprehensive income (loss) | 49,339 | (41,443 | ) | 10,496 | ||||||||
| End of period | (184,161 | ) | (233,500 | ) | (192,057 | ) | ||||||
| Total Shareholders' Equity | ||||||||||||
| End of period | 2,355,633 | 2,223,012 | 2,390,350 | |||||||||
| Noncontrolling Interest | ||||||||||||
| Beginning of period | 2,772 | 1,063 | 3,514 | |||||||||
| Net earnings (losses) | 1,716 | 1,560 | (1,104 | ) | ||||||||
| Other comprehensive (loss) income | (183 | ) | 149 | (258 | ) | |||||||
| Distribution to noncontrolling interest | (1,845 | ) | — | (1,089 | ) | |||||||
| End of period | 2,460 | 2,772 | 1,063 | |||||||||
| Total Equity | ||||||||||||
| End of period | $ | 2,358,093 | $ | 2,225,784 | $ | 2,391,413 | ||||||
| Common Shares Outstanding | ||||||||||||
| Beginning of period | 138,003 | 143,866 | 154,313 | |||||||||
| Shares issued under employee stock plans, net | 1,488 | 1,194 | 1,699 | |||||||||
| Shares repurchased | (5,607 | ) | (7,057 | ) | (12,146 | ) | ||||||
| End of period | 133,884 | 138,003 | 143,866 |
See accompanying notes to consolidated financial statements.
F-8
Consolidated Statements of Cash Flows
In thousands
| Years ended December 31, | 2025 | 2024 | 2023 | |||||||||
| Operating Activities: | ||||||||||||
| Net earnings | $ | 812,048 | $ | 811,633 | $ | 751,779 | ||||||
| Adjustments to reconcile net earnings to net cash from operating activities: | ||||||||||||
| Provisions for losses on accounts receivable | 3,597 | 3,447 | 3,943 | |||||||||
| Deferred income tax benefit | (13,712 | ) | (5,138 | ) | (22,916 | ) | ||||||
| Stock compensation expense | 69,231 | 64,364 | 58,399 | |||||||||
| Depreciation and amortization | 56,769 | 61,090 | 67,760 | |||||||||
| Other, net | 15,154 | (3,359 | ) | 8,461 | ||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Decrease (increase) in accounts receivable | 41,802 | (531,616 | ) | 573,724 | ||||||||
| Increase (decrease) in accounts payable and accrued expenses | 20,589 | 259,310 | (300,345 | ) | ||||||||
| Decrease (increase) in deferred contract costs | 81,152 | (147,685 | ) | 36,952 | ||||||||
| (Decrease) increase in contract liabilities | (100,166 | ) | 179,553 | (40,076 | ) | |||||||
| Increase (decrease) in income taxes payable, net | 27,099 | 26,388 | (77,298 | ) | ||||||||
| (Increase) decrease in other, net | (7,062 | ) | 5,374 | (7,192 | ) | |||||||
| Net cash from operating activities | 1,006,501 | 723,361 | 1,053,191 | |||||||||
| Investing Activities: | ||||||||||||
| Purchase of property and equipment | (53,101 | ) | (40,466 | ) | (39,314 | ) | ||||||
| Other, net | 8,398 | (57 | ) | (119 | ) | |||||||
| Net cash from investing activities | (44,703 | ) | (40,523 | ) | (39,433 | ) | ||||||
| Financing Activities: | ||||||||||||
| Proceeds from borrowings on lines of credit | 5,590 | 15,000 | 32,199 | |||||||||
| Payments on borrowings on lines of credit | (9,303 | ) | (35,058 | ) | (38,143 | ) | ||||||
| Proceeds from issuance of common stock | 88,177 | 69,257 | 84,889 | |||||||||
| Repurchases of common stock | (667,306 | ) | (855,061 | ) | (1,392,886 | ) | ||||||
| Dividends paid | (207,437 | ) | (204,087 | ) | (202,029 | ) | ||||||
| Payments for taxes related to net share settlement of equity awards | (10,353 | ) | (15,348 | ) | (19,506 | ) | ||||||
| Distribution to noncontrolling interest | (1,845 | ) | — | (1,089 | ) | |||||||
| Net cash from financing activities | (802,477 | ) | (1,025,297 | ) | (1,536,565 | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 6,644 | (22,104 | ) | 1,559 | ||||||||
| Change in cash and cash equivalents | 165,965 | (364,563 | ) | (521,248 | ) | |||||||
| Cash and cash equivalents at beginning of period | 1,148,320 | 1,512,883 | 2,034,131 | |||||||||
| Cash and cash equivalents at end of period | $ | 1,314,285 | $ | 1,148,320 | $ | 1,512,883 | ||||||
| Supplemental Cash Flow Information: | ||||||||||||
| Cash paid for income taxes | $ | 265,035 | $ | 257,170 | $ | 356,380 |
See accompanying notes to consolidated financial statements.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. | Basis of Presentation
Expeditors International of Washington, Inc. (the "Company”) is a non-asset-based provider of global logistics services operating through a worldwide network of offices and exclusive or non-exclusive agents. The Company serves a worldwide, diverse clientele in the technology sector, including cloud & data center services; hyperscalers; semiconductor; personal computers and compute hardware, and industries such as healthcare, automotive, aviation, aerospace, retail and high fashion.
International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange rates, laws and policies relating to tariffs, trade restrictions, foreign investments and taxation. Periodically, governments consider a variety of changes to tariffs and trade restrictions and accords. The Company cannot predict the outcome of ongoing proposals or negotiations, nor can the Company predict the effects adoption of any such proposal will have on the Company’s business. Doing business in foreign locations also subjects the Company to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to being influenced by governmental policies and inter-governmental disputes concerning international trade, the Company’s business may also be affected by political developments and changes in government personnel or policies as well as economic turbulence, natural disasters and pandemics, political unrest and security concerns in the nations and on the shipping routes in which it does business and the future impact that these events may have on international trade, oil prices and security costs.
The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The consolidated financial statements include the accounts of the Company and its subsidiaries stated in U.S. dollars, the Company’s reporting currency. In addition, the consolidated financial statements also include the accounts of operating entities where the Company maintains a parent-subsidiary relationship through unilateral control over assets and operations together with responsibility for payment of all liabilities, notwithstanding a lack of technical majority ownership of the subsidiary's common stock.
All significant intercompany accounts and transactions have been eliminated in consolidation. All dollar amounts in the notes are presented in thousands except for per share data or unless otherwise specified.
B. | Cash Equivalents
All highly liquid investments with a maturity of three months or less at date of purchase are considered to be cash equivalents.
C. | Allowance for Credit Losses
A valuation allowance reduces the accounts receivable balance for credit losses expected to be incurred over the assets' contractual term. The Company’s trade accounts receivable present similar credit risk characteristics and the allowance for credit loss is estimated on a collective basis, using a credit loss-rate method that uses historical credit loss information and considers the current economic environment. Additional allowances may be necessary in the future if changes in economic conditions are significant enough to affect expected credit losses. The Company has recorded an allowance for credit loss in the amounts of $7,241 and $6,878 as of December 31, 2025 and 2024, respectively. Additions and write-offs have not been significant in the periods presented.
F-10
D. | Long-Lived Assets, Depreciation and Amortization
Property and equipment are recorded at cost and are depreciated or amortized on the straight-line method over the shorter of the assets’ estimated useful lives or lease terms. Useful lives for major categories of property and equipment are as follows:
| Buildings and land improvements | 30 to 40 years | ||
| Building improvements | 3 to 10 years | ||
| Furniture, fixtures, equipment and purchased software | 3 to 10 years |
Expenditures for maintenance, repairs, and replacements of minor items are charged to expenses as incurred. Major upgrades and improvements that extend the life of the asset are capitalized. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in income for the period.
For the years ended December 31, 2025 and 2024, the Company performed the required goodwill annual impairment test during the fourth quarter and determined that no impairment had occurred.
E. | Leases
The Company determines if an arrangement is a lease at inception. Right-of-use (ROU) assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. All ROU assets and lease liabilities are recognized at the commencement date at the present value of lease payments over the lease term. ROU assets are adjusted for lease incentives and initial direct costs. The lease term includes renewal options exercisable at the Company's sole discretion when the Company is reasonably certain to exercise that option. As the Company's leases generally do not have an implicit rate, the Company uses an estimated incremental borrowing rate based on market information available at the commencement date to determine the present value. Certain of our leases include variable payments, which may vary based upon changes in facts or circumstances after the start of the lease. The Company excludes variable payments from ROU assets and lease liabilities to the extent not considered fixed, and instead expenses variable payments as incurred. Lease expense is recognized on a straight-line basis over the lease term and is included in rent and occupancy expenses on the consolidated statement of earnings.
Additionally, the Company elected to apply the short-term lease exemption for leases with a non-cancelable period of twelve months or less and has chosen not to separate non-lease components from lease components and instead to account for each as a single lease component.
F. | Revenues and Revenue Recognition
The Company provides global logistics services, including air and ocean freight consolidation and forwarding, customs brokerage, warehousing and distribution, purchase order management, vendor consolidation, time-definite transportation services, temperature-controlled transit, cargo insurance, specialized cargo monitoring and tracking and other logistics solutions. As a non-asset-based carrier, the Company does not own transportation assets.
The Company derives its revenues by entering into agreements that are generally comprised of a single performance obligation, which is that freight is shipped for and received by the customer. Each performance obligation is comprised of one or more of the Company’s services. The Company's three principal services are the revenue categories presented in the Consolidated Statements of Earnings: 1) airfreight services, 2) ocean freight and ocean services, and 3) customs brokerage and other services. The most significant drivers of changes in gross revenues and related transportation expenses are volume, sell rates and buy rates. Volume has a similar effect on the change in both gross revenues and related transportation expenses in each of the Company's three primary sources of revenue.
The major portion of the Company's air and ocean freight revenues are generated by purchasing transportation services on a volume basis from direct (asset-based) carriers and then reselling that space to customers on a retail basis. The rate billed to our customers (the sell rate) is recognized as revenues and the rate we pay to the carrier (the buy rate) is recognized in operating expenses as the directly related cost of transportation and other expenses.
F-11
Revenue is recognized upon transfer of control of promised services to customers, which occurs over time. The Company has determined that in general each shipment transaction or service order constitutes a separate contract with the customer. However, when the Company provides multiple services to a customer, different contracts may be present for different services. The Company combines the contracts, which form a single performance obligation, and accounts for the contracts as a single contract when certain criteria are met.
The Company typically satisfies its performance obligations as services are rendered over time. A typical shipment would include services rendered at origin, such as pick-up and delivery to port, freight services from origin to destination port and destination services, such as customs clearance and final delivery. The Company measures the performance of its obligations as services are completed over the life of a shipment, including services at origin, freight and destination.
This method of measurement of progress depicts the pattern of the Company's actual performance under the contracts with the customer. There are no significant judgments involved in measuring the progress of the performance obligations. Amounts allocated to the services for each performance obligation are typically based on standalone selling prices. The Company does not have significant variable consideration in its contracts. Taxes assessed concurrently with a specific revenue-producing transaction that are collected by the Company from a customer are excluded from revenues.
Typically, the transaction price for each of the Company's services are quoted as separate components; however, customers on occasion will request an all-inclusive rate for a set of services known in the industry as “door-to-door service.” This means that the customer is billed a single rate for all services from pickup at origin to delivery at destination. In these instances, the transaction price is allocated to each service on a relative selling price basis.
The Company fulfills nearly all of its performance obligations within a one to two month-period and contracts with customers have an original expected duration of less than one year. The Company generally has an unconditional right to consideration when the services are initiated or soon thereafter. The amount due from the customer is recorded as accounts receivable. The amounts related to services that are not yet completed at the reporting date are presented as contract liabilities, with corresponding direct costs to fulfill the performance obligation that will be satisfied in the future presented as deferred contract costs. The Company generally does not incur incremental costs to obtain the contract with the customer. The Company may incur costs to fulfill the contract with the customers, such as set-up costs. However, the amount incurred is insignificant to the Company’s consolidated financial statements.
The Company evaluates whether amounts billed to customers should be reported as revenues on a gross or net basis. Generally, revenue is recorded on a gross basis when the Company is primarily responsible for fulfilling the promise to provide the services, when it assumes the risk of loss, when it has discretion in setting the prices for the services to the customers, and when the Company has the ability to direct the use of the services provided by the third party. In most cases the Company acts as an indirect carrier. When acting as an indirect carrier, the Company issues a House Airway Bill (HAWB), a House Ocean Bill of Lading (HOBL) or a House Sea Waybill to customers as the contract of carriage. In turn, when the freight is physically tendered to a direct carrier, the Company receives a contract of carriage known as a Master Airway Bill for airfreight shipments and a Master Ocean Bill of Lading for ocean shipments. When revenue is recorded on a net basis, the amounts earned are determined using a fixed fee, a per unit of activity fee or a combination thereof. For revenues earned in other capacities, for instance, when the Company does not issue a HAWB, a HOBL, or a House Sea Waybill or otherwise act solely as an agent for the shipper, only the commissions and fees earned for such services are included in revenues.
The Company disaggregates its revenues by its three primary service categories in the consolidated financial statements: airfreight, ocean freight and ocean services and customs brokerage and other. Revenues by geographic location are presented within business segment information in Note 10.
G. | Income Taxes
Income taxes are accounted for under the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, the tax effect of loss carryforwards and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.
F-12
The Company uses a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating its tax positions and estimating our tax benefits, which may require periodic adjustments and which may not match the ultimate future outcome. The Company recognizes interest expense related to unrecognized tax benefits or underpayment of income taxes in interest expense included in other income (expense) and recognizes penalties in other operating expenses.
U.S. corporate income tax laws and regulations include a territorial tax framework and provisions for Global Intangible Low-Taxed Income (GILTI) under which taxes on foreign income are imposed on the excess of a deemed return on tangible assets of certain foreign subsidiaries, Base Erosion and Anti-Abuse Tax (BEAT) under which taxes are imposed on certain base eroding payments to affiliated foreign companies as well as U.S. income tax deductions for Foreign-derived intangible income (FDII). The Company treats BEAT and GILTI as discrete adjustments as components of current income tax expense.
Earnings of the Company's foreign subsidiaries are not considered to be indefinitely reinvested outside of the United States.
H | Net Earnings Attributable to Shareholders per Common Share
Diluted earnings attributable to shareholders per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding. Dilutive potential common shares represent outstanding stock options, stock purchase rights and unvested restricted stock units. Basic earnings attributable to shareholders per share is calculated using the weighted average number of common shares outstanding without taking into consideration dilutive potential common shares outstanding.
I. | Stock Plans
The Company maintains several equity incentive plans under which the Company has granted stock options, director restricted stock, restricted stock units (RSUs), performance stock units (PSUs) and employee stock purchase rights to employees or directors. The Company recognizes stock compensation expense based on the fair value of awards granted to employees and directors under the Company’s Amended and Restated 2017 Omnibus Plan and employee stock purchase rights plans. This expense, adjusted for expected performance and forfeitures, is recognized in net earnings on a straight-line basis over the service periods as salaries and related costs on the consolidated statements of earnings. Expense for PSUs is recognized over the service period when it is probable the performance goal will be achieved and based on the most probable outcome of performance conditions at the reporting date. RSUs and PSUs awarded to certain employees meeting specific retirement eligibility criteria at the time of grant are expensed immediately, as there is no substantive service period associated with those awards.
J. | Foreign Currency
Foreign currency amounts attributable to foreign operations have been translated into U.S. dollars using year-end exchange rates for assets and liabilities, historical rates for equity, and weighted average rates for revenues and expenses. Currency fluctuations are a normal operating factor in the conduct of the Company’s business and foreign exchange transaction gains and losses are included in revenues and operating expenses. Also, the Company is exposed to foreign currency exchange fluctuations on monetary assets and liabilities denominated in currencies that are not the local functional currency. Foreign exchange gains and losses on such balances are recognized in net earnings within customs brokerage and other services costs. Net foreign currency transactional losses in 2025 were $28,233, net foreign currency transactional gains in 2024 were $11,556, and net foreign currency transactional losses in 2023 were $14,943.
The Company follows a policy of accelerating international currency settlements to manage its foreign exchange exposure. Historically, derivative financial instruments have not been used to manage foreign currency risk. Accordingly, the Company may enter into foreign currency hedging transactions only in limited locations where there are regulatory or commercial limitations on the Company’s ability to move money freely. The Company had no foreign currency derivatives outstanding at December 31, 2025 and 2024.
F-13
K. | Comprehensive Income
Comprehensive income consists of net earnings and other gains and losses affecting equity that, under U.S. GAAP, are excluded from net earnings. For the Company, these consist of foreign currency translation gains and losses, net of related income tax effects and comprehensive income or loss attributable to the noncontrolling interests. Upon the complete or substantially complete liquidation of the Company's investment in a foreign entity, cumulative translation adjustments are recorded as reclassification adjustments in other comprehensive income and recognized in net earnings.
Accumulated other comprehensive loss consisted entirely of foreign currency translation adjustments, net of related income tax effects, as of December 31, 2025 and 2024.
L. | Segment Reporting
The Company is organized functionally in geographic operating segments. Accordingly, when evaluating the operating effectiveness of geographic segments, management focuses its attention on revenues, directly related cost of transportation and other expenses for each of the Company’s three primary sources of revenues as well as salaries and related costs, other operating expenses, depreciation and amortization, operating income, identifiable assets, capital expenditures, and equity generated in each of these geographical areas when evaluating the effectiveness of geographic management. The President and Chief Executive Officer was determined to be the Chief Operating Decision Maker (CODM), as in his capacity he is responsible for setting company strategies and initiatives, establishing company policies, allocating company resources and assessing the performance of the Company’s business segments. Operating income is the primary measure of business segments' profit or loss that is most consistent with the measurement principles of U.S. GAAP and no items below operating income are allocated to segments. The CODM uses operating income to review financial performance, progress of the Company's strategic initiatives and to determine compensation of segment managers. Transactions among the Company’s various offices are conducted using the same arms-length pricing methodologies the Company uses when its offices transact business with independent agents. Certain costs are allocated among the segments based on the relative value of the underlying services, which can include allocation based on actual costs incurred or estimated cost plus a profit margin. There were no significant changes to allocate or measure expenses used to determine segment profit or loss.
M. | Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. The Company uses estimates primarily in the following areas: accounts receivable valuation, measurement of progress towards completion of revenue-related performance obligations, accrual of costs related to ancillary services the Company performs, typically at the destination location, self-insured liabilities, accrual of various tax liabilities, accrual of loss contingencies, calculation of share-based compensation expense and estimates related to determining the lease term and discount rate when measuring ROU assets and lease liabilities.
N. | Recent Accounting Pronouncements
Improvements to Income Tax Disclosures
The Company prospectively adopted the FASB’s ASU No. 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures (ASU 2023-09), for the 2025 annual period beginning January 1, 2025, which requires 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. The Company has applied this ASU prospectively by providing the new disclosures for the period ended December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods.
F-14
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2025-01 Disaggregation of Income Statement Expenses (Subtopic 220-40) Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (ASU 2025-01) which requires disaggregated disclosures of certain costs and expenses on the income statement on an annual and interim basis. This standard will become effective for the Company on January 1, 2027 with early adoption permitted. The amendment can be applied either on a prospective or retrospective basis. The Company expects this ASU to only impact its disclosures with no impacts to its consolidated financial statements, cash flows and financial condition.
Targeted Improvements to the Accounting for Internal-Use Software
In September 2025, the FASB issued ASU 2025-06 Targeted Improvements to the Accounting for Internal-Use Software (Subtopic 350-40) Intangibles—Goodwill and Other—Internal-Use requires entities to start capitalizing software costs when management has authorized and committed to funding the project, and it is probable that the project will be completed and used as intended. This standard will become effective for the Company on January 1, 2028 with early adoption permitted. The amendment can be applied either on a prospective or retrospective basis. The Company is currently evaluating the impact of the adoption of this ASU.
NOTE 2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments, other than cash, consist primarily of cash equivalents, accounts receivable, accounts payable and accrued expenses. The carrying value of these financial instruments approximates their fair value.
Cash and cash equivalents consist of the following:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||
| Cost | Fair Value | Cost | Fair Value | ||||||||||||||
| Cash and cash equivalents: | |||||||||||||||||
| Cash and overnight deposits | $ | 551,899 | $ | 551,899 | $ | 623,561 | $ | 623,561 | |||||||||
| Corporate commercial paper | 700,978 | 701,591 | 498,185 | 498,742 | |||||||||||||
| Time deposits and money market funds | 61,408 | 61,408 | 26,574 | 26,574 | |||||||||||||
| Total cash and cash equivalents | $ | 1,314,285 | $ | 1,314,898 | $ | 1,148,320 | $ | 1,148,877 |
The fair value of corporate commercial paper and time deposits is based on the use of market interest rates for identical or similar assets (Level 2 fair value measurement).
NOTE 3. PROPERTY AND EQUIPMENT
The components of property and equipment are as follows:
| 2025 | 2024 | ||||||||
| Land | $ | 146,824 | $ | 140,421 | |||||
| Buildings and leasehold improvements | 537,356 | 517,179 | |||||||
| Furniture, fixtures, equipment and purchased software | 422,151 | 404,915 | |||||||
| Construction in progress | 6,878 | 2,422 | |||||||
| Property and equipment, at cost | 1,113,209 | 1,064,937 | |||||||
| Less accumulated depreciation and amortization | 651,087 | 615,533 | |||||||
| Property and equipment, net | $ | 462,122 | $ | 449,404 |
F-15
NOTE 4. LEASES
The Company enters into lease agreements primarily for office and warehouse space in all districts where it conducts business. As of December 31, 2025, all of the Company's leases are operating leases. Lease terms are either on a month-to-month basis or terminate at various times through 2040. The Company also has two long-term operating lease arrangements to use land, for which the usage rights were entirely prepaid. Usage rights for those arrangements are recognized in rent expense over the lease terms up to 2057.
Lease cost is recorded under rent and occupancy expenses in the consolidated statements of earnings and is comprised of the following for the year-ended December 31:
| 2025 | 2024 | 2023 | ||||||||||
| Operating lease cost | $ | 145,772 | $ | 131,970 | $ | 123,411 | ||||||
| Variable lease cost | 54,074 | 50,614 | 50,508 | |||||||||
| Total lease cost | $ | 199,846 | $ | 182,584 | $ | 173,919 |
Variable lease cost includes short-term lease expenses, which are insignificant.
Maturities of lease liabilities as of December 31, 2025 are as follows:
| 2026 | $ | 138,158 | ||
| 2027 | 118,846 | |||
| 2028 | 99,454 | |||
| 2029 | 81,613 | |||
| 2030 | 66,704 | |||
| Thereafter | 178,115 | |||
| Total minimum lease payments | 682,890 | |||
| Less imputed interest | 112,301 | |||
| Lease liability | $ | 570,589 |
As of December 31, 2025, the Company had $51 million in operating lease obligations with maturities through 2036 for several office and warehouse locations not included in the lease liabilities, as the lease had not yet commenced.
The weighted-average remaining lease term and weighted-average discount rate are as follows:
| 2025 | 2024 | |||||||
| Weighted-average remaining lease term (in years) | 6.56 | 6.79 | ||||||
| Weighted-average discount rate | 5.67 | % | 5.11 | % |
Other information related to the Company's operating leases are as follows:
| 2025 | 2024 | 2023 | ||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 100,629 | $ | 154,197 | $ | 105,888 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | 141,784 | $ | 128,481 | $ | 120,793 |
F-16
NOTE 5. SHAREHOLDERS’ EQUITY
A. | Stock Repurchase Plan
The Company has a Discretionary Stock Repurchase Plan, originally approved by the Board of Directors in November 2001 and amended from time to time, under which management as of December 31, 2025 is authorized to repurchase shares down to 130,000 shares of common stock outstanding. On February 23, 2026, the Board of Directors authorized a new share repurchase program that permits the repurchase of up to $3 billion of the Company's common stock, effective upon the expiration of the current program, which will occur when the outstanding shares of common stock reach 130,000.
Cumulative shares of common stock repurchased since inception of the above plan and a previous now expired plan were 162,309.
B. | Omnibus Incentive Plan
On May 5, 2020, the shareholders approved the Company's Amended and Restated 2017 Omnibus Incentive Plan (Amended 2017 Plan), which made available 5,500 shares of the Company's common stock in aggregate to be issued under any award type allowed by the Amended 2017 Plan. The RSUs granted in 2025, 2024 and 2023 generally vest annually over three years based on continued employment and are settled upon vesting in shares of the Company's common stock on a one-for-one basis.
The Amended 2017 Plan also provides for annual equity awards to non-employee directors. The Amended 2017 Plan provides for an annual grant of equity awards to each participant with a fair market value that may not exceed $600, or $800 with respect to the Chairman of the Board. Restricted shares granted to non-employee directors in 2025, 2024 and 2023 vested at the time of grant and there were no unvested restricted shares as of December 31, 2025. In 2025, 15 fully vested restricted shares with a weighted average grant date fair value per share of $106.18 were granted to non-employee directors.
The following table summarizes information about RSUs and restricted shares:
| Number of shares | Weighted average grant date fair value | ||||||||
| Nonvested at December 31, 2024 | 654 | $ | 112.36 | ||||||
| RSUs granted | 400 | $ | 106.24 | ||||||
| RSUs vested | (368 | ) | $ | 110.27 | |||||
| RSUs forfeited | (18 | ) | $ | 112.10 | |||||
| Nonvested at December 31, 2025 | 668 | $ | 110.03 |
In 2025, 2024 and 2023, the Company also awarded 94, 78 and 78 PSUs, respectively, under the Amended 2017 Plan. Nonvested PSUs include performance conditions to be finally measured based on financial results at December 31, 2026 and 2027. The final number of PSUs will be determined using an adjustment factor of up to 2 times or down to 0.5 of the targeted PSU grant, depending on the degree of achievement of the designated performance targets. If the minimum performance thresholds are not achieved, no shares will be issued. Each PSU will convert to one share of the Company's common stock upon vesting.
At December 31, 2025, there were 175 shares of nonvested PSUs at target levels, with a weighted-average grant date fair value of $110.14. At December 31, 2025, 149 PSUs with a grant date fair value of $113.24 became vested based on satisfaction of performance goals but had not settled.
RSUs and PSUs granted under the Amended 2017 Plan have dividend equivalent rights, which entitle holders of RSUs and PSUs to the same dividend value per share as holders of common stock. Dividend equivalent rights are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs and PSUs and are accumulated and paid in shares when the underlying awards is released.
At December 31, 2025, there are approximately 679 shares available for grant under the Amended 2017 Plan.
F-17
When restrictions on employee RSUs or PSUs lapse the Company derives a tax deduction in certain countries based on the fair market value of the award upon vesting and subject to the limits allowed under each jurisdiction’s tax regulations. Until vesting, a deferred tax asset is recognized and measured based on the fair value of the award at the date of grant (consistent with measurement for stock compensation expense). Any excess or shortfall in the tax deduction resulting from the difference between fair market value of the award between the date of grant and the date of vesting is recognized in income tax expense upon vesting.
C. | Stock Option Plans
Prior to 2017, the Company granted stock options under stock option plans approved annually by shareholders. Those plans generally allowed for the grant of qualified and non-qualified grants and outstanding options expire no more than ten years from the date of grant. All options were fully vested as of December 31, 2020. No additional shares can be granted under any of the Company's stock option plans other than the Amended 2017 Plan and any outstanding options will expire in May 2026 if not exercised by the holder.
Upon the exercise of non-qualified stock options and disqualifying dispositions of incentive stock options, the Company derives a tax deduction measured by the excess of the market value over the option price at the date of exercise or disqualifying disposition. The portion of the benefit from the deduction, which equals the estimated fair value of the options (previously recognized as compensation expense) is recorded as a credit to the deferred tax asset for non-qualified stock options and is recorded as a credit to current tax expense for any disqualified dispositions of incentive stock options. For disqualifying dispositions, when the amount of the tax deduction is less than the cumulative amount of compensation expense recognized for the award, the amount credited to current tax expense is limited to the tax benefit associated with the tax deduction.
The following table summarizes information about stock options:
| Number of shares | Weighted average exercise price per share | Weighted average remaining contractual life | Aggregate intrinsic value | ||||||||||||||
| Outstanding at December 31, 2024 | 739 | $ | 47.35 | ||||||||||||||
| Options granted | — | $ | — | ||||||||||||||
| Options exercised | (647 | ) | $ | 47.34 | |||||||||||||
| Options canceled | — | $ | — | ||||||||||||||
| Outstanding at December 31, 2025 | 92 | $ | 47.39 | 0.34 | $ | 9,353 | |||||||||||
| Exercisable at December 31, 2025 | 92 | $ | 47.39 | 0.34 | $ | 9,353 |
D. | Stock Purchase Plan
In May 2002, the shareholders approved the Company’s 2002 Employee Stock Purchase Plan (the 2002 Plan), which became effective August 1, 2002. As last amended in May 2024, the Company’s 2002 Plan provides for 19,305 shares of the Company’s common stock to be reserved for issuance upon exercise of purchase rights granted to employees who elect to participate through regular payroll deductions beginning August 1 of each year. The purchase rights are exercisable on July 31 of the following year at a price equal to the lesser of (1) 85% of the fair market value of the Company’s stock on the last trading day in July or (2) 85% of the fair market value of the Company’s stock on the first trading day in August of the preceding year. A total of 15,884 shares have been issued under the 2002 Plan since inception and $28,893 has been withheld from employees at December 31, 2025 in connection with the plan year ending July 31, 2026.
F-18
E. | Share-Based Compensation Expense
The fair value of employee stock purchase rights granted under the 2002 Plan is estimated on the date of grant using the Black-Scholes Model with the following assumptions:
| For the years ended December 31, | |||||||||||||
| 2025 | 2024 | 2023 | |||||||||||
| Dividend yield | 1.40 | % | 1.20 | % | 1.20 | % | |||||||
| Volatility | 26 | % | 20 | % | 28 | % | |||||||
| Risk-free interest rates | 4.08 | % | 4.90 | % | 5.37 | % | |||||||
| Expected life (years) | 1 | 1 | 1 | ||||||||||
| Weighted average fair value | $ | 27.94 | $ | 27.97 | $ | 31.56 |
The Company’s expected volatility assumptions are based on the historical volatility of the Company’s stock over a period of time commensurate to the expected life. The expected life assumption is based on the one-year offering period. The risk-free interest rate for the expected term of the option is based on the corresponding yield curve in effect at the time of grant for U.S. Treasury bonds having the same term as the expected life of the option. The expected dividend yield is based on the Company’s historical experience. The forfeiture assumption used to calculate compensation expense is primarily based on historical pre-vesting employee forfeiture patterns.
The compensation expense for employee RSUs and PSUs is based on the fair market value of the Company’s share of common stock on the date of grant. RSUs and PSUs awarded in 2025, 2024 and 2023 were granted at a weighted-average grant date fair value of $106.24, $114.90 and $113.28, respectively.
The total intrinsic value of options exercised during the years ended December 31, 2025, 2024 and 2023 was approximately $50 million, $30 million and $46 million, respectively.
As of December 31, 2025, the total unrecognized compensation cost related to stock awards is $55 million and the weighted average period over which that cost is expected to be recognized is 1.6 years.
Shares issued as a result of stock option exercises, restricted stock awards, vested RSUs, vested PSUs and employee stock plan purchases are issued as new shares outstanding by the Company.
F-19
NOTE 6. BASIC AND DILUTED EARNINGS PER SHARE
Diluted earnings attributable to shareholders per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding. Dilutive potential shares represent outstanding stock options, including purchase options under the Company's employee stock purchase plan and unvested RSUs. Basic earnings attributable to shareholders per share is calculated using the weighted average number of common shares outstanding without taking into consideration dilutive potential common shares outstanding.
The following table reconciles the numerator and the denominator of the basic and diluted per share computations for earnings attributable to shareholders.
| 2025 | 2024 | 2023 | |||||||||||
| Numerator: | |||||||||||||
| Net earnings attributable to shareholders | $ | 810,332 | $ | 810,073 | $ | 752,883 | |||||||
| Denominator: | |||||||||||||
| Weighted-average basic shares outstanding | 135,810 | 140,992 | 149,141 | ||||||||||
| Effect of dilutive share-based awards | 439 | 730 | 1,045 | ||||||||||
| Weighted-average diluted shares | $ | 136,249 | $ | 141,722 | $ | 150,186 | |||||||
| Basic earnings per share | $ | 5.97 | $ | 5.75 | $ | 5.05 | |||||||
| Diluted earnings per share | $ | 5.95 | $ | 5.72 | $ | 5.01 |
Potential common shares of 308, 696 and 771 were excluded from the computation of diluted earnings per share because the effect would have been antidilutive in 2025, 2024 and 2023, respectively.
F-20
NOTE 7. TAXES
Income Taxes
Income tax expense (benefit) includes the following components:
| Federal | State | Foreign | Total | ||||||||||||||
| 2025 | |||||||||||||||||
| Current | $ | 73,566 | $ | 25,520 | $ | 196,641 | $ | 295,727 | |||||||||
| Deferred | (11,069 | ) | 360 | (3,003 | ) | (13,712 | ) | ||||||||||
| $ | 62,497 | $ | 25,880 | $ | 193,638 | $ | 282,015 | ||||||||||
| 2024 | |||||||||||||||||
| Current | $ | 64,040 | $ | 35,032 | $ | 189,233 | $ | 288,305 | |||||||||
| Deferred | (2,746 | ) | (2,392 | ) | — | (5,138 | ) | ||||||||||
| $ | 61,294 | $ | 32,640 | $ | 189,233 | $ | 283,167 | ||||||||||
| 2023 | |||||||||||||||||
| Current | $ | 87,461 | $ | 24,481 | $ | 174,223 | $ | 286,165 | |||||||||
| Deferred | (20,795 | ) | (2,121 | ) | — | (22,916 | ) | ||||||||||
| $ | 66,666 | $ | 22,360 | $ | 174,223 | $ | 263,249 |
The components of earnings before income taxes are as follows:
| 2025 | 2024 | 2023 | |||||||||||
| United States | $ | 543,918 | $ | 514,125 | $ | 512,682 | |||||||
| Foreign | 550,145 | 580,675 | 502,346 | ||||||||||
| $ | 1,094,063 | $ | 1,094,800 | $ | 1,015,028 |
F-21
On January 1, 2025, the Company prospectively adopted ASU 2023-09. Following the new ASU required disclosures for the year ended December 31, 2025, the reconciling items between the income tax expense computed by applying the U.S. Federal income tax rate of 21% and reported income tax expense are as follows:
| 2025 | |||||||
| Amount | Percent | ||||||
| US federal statutory income tax rate | $ | 229,753 | 21% | ||||
| Domestic state and local income taxes, net of federal effect1 | 20,446 | 1.9% | |||||
| Foreign tax effects: | |||||||
| People's Republic of China | |||||||
| Statutory tax rate difference between China and United States | 3,781 | 0.3% | |||||
| Chinese withholding taxes on income to non-residents | 12,184 | 1.0% | |||||
| Other foreign jurisdictions | 65,241 | 6.0% | |||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | |||||
| Effect of cross-border tax laws: | |||||||
| Foreign-derived intangible income | (21,107 | ) | (1.9)% | ||||
| Other | 1,429 | 0.1% | |||||
| Tax credits: | |||||||
| Foreign tax credits | (30,056 | ) | (2.7)% | ||||
| Other | (989 | ) | (0.1)% | ||||
| Changes in valuation allowances | (96 | ) | — | ||||
| Nontaxable or nondeductible items | 2,858 | 0.3% | |||||
| Worldwide changes in unrecognized tax benefits | — | — | |||||
| Other adjustments | (1,429 | ) | (0.1)% | ||||
| Effective Tax Rate | $ | 282,015 | 25.8% |
1State taxes in California, Illinois, New York and Pennsylvania made up the majority (greater than 50 percent) of the tax effect in this category.
The components of income taxes paid are as follows:
Income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions:
| 2025 | ||||||
| Federal | $ | 45,347 | ||||
| State | 30,977 | |||||
| Foreign: | ||||||
| People's Republic of China | 52,495 | |||||
| Taiwan | 17,391 | |||||
| Mexico | 15,637 | |||||
| Vietnam | 14,431 | |||||
| Other foreign | 88,757 | |||||
| Total | $ | 265,035 |
F-22
Prior to the adoption of ASU 2023-09, for the years ending December 2024 and 2023, income tax expense differs from amounts computed by applying the U.S. Federal income tax rate of 21% as a result of the following:
| 2024 | 2023 | ||||||||
| Computed “expected” tax expense | $ | 229,908 | $ | 213,156 | |||||
| Increase (decrease) in income taxes resulting from: | |||||||||
| Effect of foreign taxes | 22,146 | 27,711 | |||||||
| State income taxes, net of Federal income tax benefit | 25,787 | 17,665 | |||||||
| Nondeductible executive compensation | 4,327 | 4,965 | |||||||
| Stock compensation expense, net | 2,215 | (1,321 | ) | ||||||
| Other, net | (1,216 | ) | 1,073 | ||||||
| $ | 283,167 | $ | 263,249 |
In 2025, 2024 and 2023, the Company benefited from U.S. Federal tax credits totaling $31.0 million, $32.5 million and $24.1 million, respectively, principally because of withholding taxes related to the Company's foreign operations, as well as U.S. income tax benefits for FDII of $21.1 million, $21.6 million, $16.2 million, respectively. 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. For the years 2025, 2024, and 2023 there was no BEAT expense and GILTI expense was insignificant.
The tax effects of temporary differences and tax credits that give rise to deferred tax assets and deferred tax liabilities are as follows:
| Years ended December 31, | 2025 | 2024 | |||||||
| Deferred Tax Assets: | |||||||||
| Deductible stock compensation expense, net | $ | 7,737 | $ | 6,243 | |||||
| Operating lease liabilities | 138,375 | 95,895 | |||||||
| Capitalized R&D expenses | 66,563 | 54,969 | |||||||
| Accrued third party obligations, deductible for taxes upon economic performance | 17,557 | 6,382 | |||||||
| Excess of financial statement over tax depreciation | 14,410 | 13,679 | |||||||
| Foreign currency translation adjustments | 15,630 | 17,198 | |||||||
| Retained liability for cargo claims | 1,465 | 1,391 | |||||||
| Provision for credit losses on accounts receivable | 3,255 | 1,672 | |||||||
| Other | 3,826 | — | |||||||
| Total gross deferred tax assets | 268,818 | 197,429 | |||||||
| Deferred Tax Liabilities: | |||||||||
| Unremitted foreign earnings, net of related foreign tax credits | 38,507 | 36,583 | |||||||
| Operating lease assets | 131,680 | 90,175 | |||||||
| Total gross deferred tax liabilities | 170,187 | 126,758 | |||||||
| Net deferred tax assets | $ | 98,631 | $ | 70,671 |
Based on management’s review of the Company’s tax positions, the Company had no significant unrecognized tax benefits as of December 31, 2025 and 2024.
On July 4, 2025, the United States enacted into law the 2025 Tax Act which provides for several corporate tax changes including, but not limited to, restoring an election to recognize full expensing of domestic research and development costs, restoring immediate deductibility of certain capital expenditures, and changes to the computations of U.S. taxation on international earnings. The 2025 Tax Act does not have a material impact to consolidated tax expense and cash flows for 2025.
F-23
Elements of enacted tax laws and regulations could be impacted by further legislative action as well as additional interpretations and guidance issued by the Internal Revenue Service or the U.S. Department of the Treasury and by similar governmental bodies in jurisdictions outside of the U.S. Such changes could impact the estimates of the amounts the Company has recorded.
The Company is subject to taxation in various states and many foreign jurisdictions around the world. The Company believes that its tax positions, including intercompany transfer pricing policies, are reasonable and consistent with established tax laws and regulations. The Company is under, or may be subject to, audit or examination and assessments by relevant authorities for years 2005 and thereafter where the ultimate resolution could require significant additional tax, penalties and interest payments. The Indian tax authority (ITA) has asserted that additional income tax applies on transactions between and amongst the Company and its Indian subsidiary, as well as additional service tax applicable to ocean and air imports and exports. We believe that ITA’s positions are without merit and we have thus far been successful in defending our position in Indian courts. However, if these matters are adversely resolved, we would recognize significant additional tax expense, including interest and penalties. The Company establishes liabilities when, despite its belief that the tax filing positions are appropriate and consistent with tax law, it concludes that it may not be successful in realizing the tax position. In evaluating a tax position, the Company determines whether it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position and in consultation with qualified legal and tax advisors.
The total amount of the Company’s tax contingencies may increase in the future. In addition, changes in state, federal, and foreign tax laws, including transfer pricing and changes in interpretations of these laws may increase the Company’s tax contingencies. The timing of the resolution of income tax examinations can be highly uncertain, and the amounts ultimately paid including interest and penalties, if any, upon resolution of the issues raised by the taxing authorities may differ significantly from the amounts recorded. It is reasonably possible that within the next twelve months the Company or its subsidiaries will undergo further audits and examinations by various tax authorities and possibly may reach resolution related to income tax and indirect tax examinations in one or more jurisdictions. These assessments or settlements could result in changes to the Company’s contingencies related to positions on tax filings in future years. The estimate of any ultimate tax liability contains assumptions based on experiences, judgments about potential actions by taxing jurisdictions as well as judgments about the likely outcome of issues that have been raised by the taxing jurisdiction. The Company cannot currently provide an estimate of the range of possible outcomes. Any interest and penalties expensed in relation to the underpayment of income taxes were insignificant for the years ended December 31, 2025, 2024, and 2023. The Company has no liability as of December 31, 2025, for the 15% corporate alternative minimum tax (CAMT), which became effective in 2023 in the U.S. under the Inflation Reduction Act. For the year ended December 31, 2025 and 2024, the amount of Pillar Two income tax expense was insignificant.
Other Taxes
The Company is subject to multiple examinations for value added, service, payroll, or other non-income taxes in various jurisdictions. In certain cases, the Company has received assessments from the authorities. Possible losses or range of possible losses associated with these matters are either immaterial or remote. If certain matters or a group of matters were to be decided adversely to the Company, it could result in a charge that might be material to the results of operations.
NOTE 8. COMMITMENTS
A. | Unconditional Purchase Obligations
The Company enters into short-term unconditional purchase obligations with asset-based providers reserving space on a guaranteed basis. The pricing of these obligations varies to some degree with market conditions. Historically, the Company has met these obligations in the normal course of business within one year. In the regular course of business, the Company also enters into agreements with service providers to maintain or operate equipment, facilities or software that can be longer than one year. We also regularly have contractual obligations for specific projects related to improvements of our owned or leased facilities and information technology infrastructure. Purchase obligations outstanding as of December 31, 2025 totaled $192 million.
F-24
B. | Employee Benefits
The Company has employee savings plans under which the Company provides a discretionary matching contribution. In 2025, 2024 and 2023, the Company’s contributions under the plans were $24,572, $23,507 and $24,241, respectively.
C. | Credit Arrangements
Certain of the Company’s foreign subsidiaries maintain bank lines of credit for short-term working capital purposes. A few of these credit lines are supported by standby letters of credit issued by a United States bank or guarantees issued by the Company to the foreign banks issuing the credit line. At December 31, 2025, and 2024 borrowings under these credit lines were $30,263 and $30,660, respectively. At December 31, 2025, the Company was contingently liable for approximately $80,719 under outstanding standby letters of credit and guarantees. At December 31, 2025, the Company was in compliance with all restrictive covenants of these credit lines and the associated credit facilities.
The standby letters of credit and guarantees relate to obligations of the Company’s foreign subsidiaries for credit extended in the ordinary course of business by direct carriers, primarily airlines, and for duty and tax deferrals available from governmental entities responsible for customs and value-added-tax (VAT) taxation. The total underlying amounts due and payable for transportation and governmental excise taxes are properly recorded as obligations in the books of the respective foreign subsidiaries, and there would be no need to record additional expense in the unlikely event the parent company were to be required to perform.
NOTE 9. CONTINGENCIES
The Company is involved in claims, lawsuits, government investigations, income, transfer pricing and indirect tax audits and other legal matters that arise in the ordinary course of business and are subject to inherent uncertainties. Currently, in management's opinion and based upon advice from legal advisors, none of these matters are expected to have a material effect on the Company's operations, cash flows or financial position. As of December 31, 2025, amounts recorded for claims, lawsuits, government investigations and other legal matters are not significant to the Company's operations, cash flows or financial position. At this time, the Company is unable to estimate any additional loss or range of reasonably possible losses, if any, beyond the amounts recorded, that might result from the resolution of these matters.
F-25
NOTE 10. BUSINESS SEGMENT INFORMATION
Financial information regarding 2025, 2024 and 2023 operations by the Company’s designated geographic areas is as follows:
| UNITED STATES | OTHER NORTH AMERICA | LATIN AMERICA | NORTH ASIA | SOUTH ASIA | EUROPE | MIDDLE EAST, AFRICA AND INDIA | ELIMINATIONS | CONSOLIDATED | ||||||||||
| 2025 | ||||||||||||||||||
| Revenues | $3,583,826 | 470,612 | 262,439 | 2,737,513 | 1,555,189 | 1,829,248 | 638,771 | (8,589) | 11,069,009 | |||||||||
| Directly related cost of transportation and other expenses 1 | $1,880,586 | 295,043 | 158,309 | 2,210,147 | 1,214,598 | 1,183,664 | 465,596 | (5,862) | 7,402,081 | |||||||||
| Salaries and related costs | $1,066,878 | 83,591 | 44,769 | 159,947 | 118,522 | 361,448 | 80,777 | - | 1,915,932 | |||||||||
| Other operating expenses2 | $116,151 | 62,799 | 37,548 | 150,287 | 102,798 | 174,995 | 56,636 | (2,764) | 698,450 | |||||||||
| Operating income | $520,211 | 29,179 | 21,813 | 217,132 | 119,271 | 109,141 | 35,762 | 37 | 1,052,546 | |||||||||
| Identifiable assets at period end | $2,681,989 | 163,328 | 101,107 | 460,856 | 379,262 | 818,822 | 299,375 | (11,101) | 4,893,638 | |||||||||
| Capital expenditures | $28,391 | 845 | 863 | 6,015 | 4,437 | 6,356 | 6,194 | - | 53,101 | |||||||||
| Depreciation and amortization | $32,085 | 2,001 | 993 | 5,076 | 2,599 | 11,246 | 2,769 | - | 56,769 | |||||||||
| Equity | $1,574,358 | 37,914 | 37,821 | 219,503 | 145,078 | 271,816 | 167,652 | (96,049) | 2,358,093 | |||||||||
| 2024 | ||||||||||||||||||
| Revenues | $3,251,998 | 429,280 | 214,999 | 2,934,353 | 1,391,131 | 1,700,919 | 683,191 | (5,356) | 10,600,515 | |||||||||
| Directly related cost of transportation and other expenses 1 | $1,733,087 | 248,425 | 126,413 | 2,383,627 | 1,098,448 | 1,092,478 | 506,482 | (2,242) | 7,186,718 | |||||||||
| Salaries and related costs | $974,911 | 79,481 | 38,337 | 158,201 | 106,183 | 329,757 | 75,784 | - | 1,762,654 | |||||||||
| Other operating expenses2 | $64,558 | 59,863 | 31,454 | 154,322 | 84,267 | 166,119 | 52,371 | (3,134) | 609,820 | |||||||||
| Operating income | $479,442 | 41,511 | 18,795 | 238,203 | 102,233 | 112,565 | 48,554 | 20 | 1,041,323 | |||||||||
| Identifiable assets at period end | $2,565,372 | 171,872 | 104,172 | 582,331 | 338,759 | 753,064 | 270,356 | (31,468) | 4,754,458 | |||||||||
| Capital expenditures | $24,249 | 2,393 | 487 | 1,250 | 4,239 | 5,977 | 1,871 | - | 40,466 | |||||||||
| Depreciation and amortization | $36,240 | 2,120 | 1,104 | 5,032 | 2,016 | 11,277 | 3,301 | - | 61,090 | |||||||||
| Equity | $1,500,901 | 43,155 | 42,535 | 228,747 | 119,823 | 174,536 | 156,748 | (40,661) | 2,225,784 | |||||||||
| 2023 | ||||||||||||||||||
| Revenues | $3,311,327 | 436,331 | 197,344 | 2,180,808 | 865,261 | 1,808,624 | 505,194 | (4,779) | 9,300,110 | |||||||||
| Directly related cost of transportation and other expenses 1 | $1,809,526 | 270,080 | 117,376 | 1,700,025 | 612,606 | 1,200,753 | 345,873 | (2,239) | 6,054,000 | |||||||||
| Salaries and related costs | $946,527 | 76,398 | 37,689 | 145,166 | 95,895 | 329,403 | 69,438 | - | 1,700,516 | |||||||||
| Other operating expenses2 | $91,470 | 66,839 | 31,906 | 127,908 | 79,875 | 163,932 | 46,272 | (2,541) | 605,661 | |||||||||
| Operating income | $463,804 | 23,014 | 10,373 | 207,709 | 76,885 | 114,536 | 43,611 | 1 | 939,933 | |||||||||
| Identifiable assets at period end | $2,595,576 | 174,509 | 109,380 | 449,529 | 237,470 | 721,259 | 256,199 | (20,113) | 4,523,809 | |||||||||
| Capital expenditures | $23,845 | 1,247 | 442 | 1,534 | 971 | 7,830 | 3,445 | - | 39,314 | |||||||||
| Depreciation and amortization | $44,039 | 1,879 | 1,123 | 4,597 | 1,940 | 11,313 | 2,869 | - | 67,760 | |||||||||
| Equity | $1,774,874 | 19,222 | 54,581 | 158,329 | 103,573 | 167,141 | 154,038 | (40,345) | 2,391,413 |
1Directly related cost of transportation and other expenses totals operating expenses from airfreight services, ocean freight and ocean services and customs brokerage and other services as shown in the consolidated statements of earnings.
2Other operating expenses totals rent and occupancy, depreciation and amortization, selling and promotion and other as shown in the consolidated statements of earnings.
Other than the United States, only the People’s Republic of China, including Hong Kong, represented more than 10% of the Company’s total revenue, total operating income, total identifiable assets or equity in any period presented as noted in the table below.
| 2025 | 2024 | 2023 | |||||||||||
| Revenues | 19 | % | 22 | % | 18 | % | |||||||
| Operating income | 15 | % | 17 | % | 17 | % | |||||||
| Identifiable assets at year end | 7 | % | 10 | % | 8 | % | |||||||
| Equity | 8 | % | 9 | % | 5 | % |
F-26
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
ANNUAL REPORT
ON
FORM 10-K
FOR FISCAL YEAR ENDED
December 31, 2025
EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.
EXHIBITS
| Exhibit Number | Description | |
| 21.1 | Subsidiaries of the Registrant | |
| 23.1 | Consent of Independent Registered Public Accounting Firm | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents | |
| 104 | The cover page from the Company’s Yearly Report on Form 10-K for the year ended December 31, 2025, has been formatted in Inline XBRL |
F-27
Previous: Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES