Item 2. Management's Discussion and Analysis of

Financial Condition and Results of Operations

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

Certain portions of this report on Form 10-Q including the sections entitled "Overview," "Summary of Second Quarter 2024," "Industry Trends, Trade Conditions and Competition," "Seasonality," "Critical Accounting Estimates," "Results of Operations," "Income tax expense," "Currency and Other Risk Factors" and "Liquidity and Capital Resources" contain forward-looking statements. Words such as "will likely result," "expects", "are expected to," "would expect," "would not expect," "will continue," "is anticipated," "estimate," "project," "plan," "believe," "probable," "reasonably possible," "may," "could," "should," "would," "intends," "foreseeable future" or similar expressions are intended to identify such forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, any statements that refer to projections of future financial performance, our anticipated growth and trends in the Company's businesses, signs of a slowing economy and drop in demand, future supply chain and transportation disruptions and other characterizations of disruptive events or circumstances are forward-looking statements. In addition, forward-looking statements are subject to certain risks and uncertainties, including risks associated with tax audits and other contingencies, that could cause actual results to differ materially from our historical experience and our present expectations or projections. These statements must be considered in connection with the discussion of the important factors that could cause actual results to differ materially from the forward-looking statements. Attention should be given to the risk factors identified and discussed in Part I, Item 1A in the Company's annual report on Form 10-K filed on February 23, 2024 and in Part II, Item 1A in this report. Management believes that these forward-looking statements are reasonable as of this filing date and we do not assume any obligations to update these statements except as required by law.

Overview

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

We derive our revenues by entering into agreements that are generally comprised of a single performance obligation, which is that freight is shipped for and received by our customer. Each performance obligation is comprised of one or more of the Company's services. We typically satisfy our performance obligations as services are rendered over time. A typical shipment would include services rendered at origin, such as pick-up and delivery to port, freight services from origin to destination port and destination services, such as customs clearance and final delivery. Our three principal services are the revenue categories presented in our financial statements: 1) airfreight services, 2) ocean freight and ocean services, and 3) customs brokerage and other services. The most significant drivers of changes in gross revenues and related transportation expenses are volume, sell rates and buy rates. Volume has a similar effect on the change in both gross revenues and related transportation expenses in each of our three primary sources of revenue.

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

In most cases, we act as an indirect carrier. When acting as an indirect carrier, we issue a House 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, we receive a contract of carriage known as a Master Airway Bill for airfreight shipments and a Master Ocean Bill of Lading for ocean shipments.

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

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

Our operating units share revenue using the same arms-length pricing methodologies that we use when our offices transact business with independent agents. Certain costs are allocated among the segments based on the relative value of the underlying services, which can include allocation based on actual costs incurred or estimated cost plus a profit margin. Our strategy closely links compensation with operating unit profitability, which includes shared revenues and allocated costs. Therefore, individual success is closely linked to cooperation with other operating units within our network. The mix of services varies by segment based primarily on the import or export orientation of local operations in each of our regions.

Summary of Second Quarter 2024

The significant impacts are discussed within "Results of Operations" and summarized below.

• Air and ocean average buy rates increased sharply out of Asia in the second quarter of 2024 due to capacity constraints from longer ocean transit time, resulting from the Red Sea disruptions, and e-commerce business demand on airfreight. Overall average buy rate increases outpaced average sell rate changes, negatively affecting profitability.

• Volumes transacted in airfreight were up 15% compared to a slow second quarter in 2023 and to some extent from shippers shifting from ocean transportation.

• Ocean containers shipped declined 3% primarily due to declines on exports from North Asia partially due to ports congestion and capacity constraints.

• As a result of the rates and volumes noted above, revenues and expenses in airfreight and ocean services were up compared to the second quarter of 2023, while margins and operating income declined.

• Net earnings to shareholders decreased 18% from the second quarter of 2023 and increased 4% from the first quarter of 2024.

• Cash from operations was $127 million and we returned $205 million to shareholders in common stock repurchases and dividends.

Industry Trends, Trade Conditions and Competition

We operate in over 60 countries in the competitive global logistics industry and our activities are closely tied to the global economy. International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange rates, laws and policies relating to tariffs, trade restrictions, foreign investment and taxation. Periodically, governments consider a variety of changes to tariffs and impose trade restrictions and accords. Currently, the United States and China have increased concerns affecting certain imports and exports and are considering additional tariffs. We cannot predict the outcome of changes in tariffs, or interpretations, and trade restrictions and accords and the effects they will have on our business. As governments implement restrictions on imports and exports, manufacturers may change sourcing patterns, to the extent possible, and, over time, may shift manufacturing to other countries. Doing business in foreign locations also subjects us to a variety of risks and considerations not normally encountered by domestic enterprises. In addition to being influenced by governmental policies and inter-governmental disputes concerning international trade, our business may also be negatively affected by political developments and changes in government personnel or policies in the United States and other countries, as well as economic turbulence, political unrest and security concerns in the nations and on the trade shipping lanes in which we conduct business and the future impact that these events may have on international trade, oil prices and security costs. We do not have employees, assets, or operations in Russia, Ukraine, Israel, the Gaza Strip or the West Bank. While limited, any shipment activity is conducted with independent agents in those countries in compliance with all applicable trade sanctions, laws and regulations.

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

The global economic and trade environments remain uncertain, including inflation remaining higher than historical levels, greater volatility in oil prices, high interest rates and the conflicts in the Middle East and Ukraine. In the second quarter of 2024, we saw capacity constraints on exports out of Asia resulting in increases in average buy and sell rates. However, if demand remains soft, if disruptions in the Red Sea improve, then additional ocean transportation capacity will become available. These conditions could result in declines in average sell and buy rates. We also expect that pricing volatility will continue as carriers adapt to lower demand, changing fuel prices, security risks and react to governmental trade policies and other regulations. Additionally, we cannot predict the direct or indirect impact that further changes in purchasing behavior, such as the evolution of international direct e-commerce platforms, could have on our business. Some customers have begun shifting manufacturing to other countries in response to governments implementing higher tariffs on imports, to reduce their supply chain risks, and in response to pandemic disruptions or geopolitical risks, which could negatively impact us.

Seasonality

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

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

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

Critical Accounting Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and judgments. We base our estimates on historical experience and on assumptions that we believe are reasonable. Our critical accounting estimates are discussed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our annual report on Form 10-K for the year ended December 31, 2023, filed on February 23, 2024 to the critical accounting estimates previously disclosed in that report.

Results of Operations

The following table shows the revenues, the directly related cost of transportation and other expenses for our principal services and our overhead expenses for the three and six months ended June 30, 2024 and 2023, including the respective percentage changes comparing 2024 and 2023.

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

Three months ended June 30,
(in thousands) 2024 Percentage Percentage
change change
───────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────
Airfreight services:
Revenues $ 860,323 751,171 15% 1,619,697 1,656,074 (2)%
Expenses 645,168 525,027 23 1,182,759 1,191,049 (1)
Ocean freight services and ocean services:
Revenues 651,675 593,801 10 1,222,461 1,291,108 (5)
Expenses 478,121 405,807 18 892,104 889,489 -
Customs brokerage and other services:
Revenues 927,003 894,780 4 1,803,521 1,885,159 (4)
Expenses 516,119 488,349 6 997,825 1,057,747 (6)
Overhead expenses:
Salaries and related costs 426,431 428,558 - 839,593 878,406 (4)
Other 149,243 143,514 4 294,703 291,184 1
Total overhead expenses 575,674 572,072 1 1,134,296 1,169,590 (3)
Operating income 223,919 248,497 (10) 438,695 524,466 (16)
Other income, net 12,002 17,686 (32) 30,408 42,295 (28)
Earnings before income taxes 235,921 266,183 (11) 469,103 566,761 (17)
Income tax expense 60,770 70,390 (14) 123,552 144,970 (15)
Net earnings 175,151 195,793 (11) 345,551 421,791 (18)
Less net (losses) earnings attributable to (318 (1,007 (68) 930 (1,020 (191)
Net earnings attributable to shareholders $ 175,469 196,800 (11)% 344,621 422,811 (18)%

Airfreight services:

Airfreight services revenues and expenses increased 15% and 23%, respectively, during the three months ended June 30, 2024, as compared with the same period in 2023, due to 2% and 9% increases in average sell and buy rates, respectively, and a 15% increase in tonnage. Average sell rates increases were outpaced by rapidly increasing buy rates resulting from capacity constraints in Asia.

Airfreight services revenues and expenses decreased 2% and 1%, respectively, during the six months ended June 30, 2024, as compared with the same period in 2023, due to 11% and 9% decreases in average sell and buy rates, respectively, offset by a 10% increase in tonnage. Average sell rates decreased during the six months ended June 30, 2024 as a result of lower buy rates. Buy rates declined from still high rates in the first quarter of 2023 due to residual impacts from supply chain congestion and continued to decline until stabilizing in the fourth quarter of 2023.

Tonnage improved for the three and six months in 2024 as a result of increased market demand compared to a slow first half of 2023 and some transportation shifting in the second quarter of 2024 from ocean shipping due to the conflicts in the Middle East.

Average buy rates increased during the three months ended June 30, 2024 on exports out of North Asia due to high demand from international direct e-commerce. Average buy rates also increased on exports out of South Asia and India as demand for airfreight grew from manufacturing relocations in that region and shippers shifting to airfreight due to longer transits in ocean as a result of the conflicts in the Middle East. Average sell and buy rates decreased during the three months and six months ended June 30, 2024 on exports out of North America and Europe due to excess available capacity over slower demand and still high buy rates in the first quarter of 2023. Tonnage increased in all regions during the three and six months ended June 30, 2024, respectively, with the largest increases coming from exports out of North Asia, South Asia and Europe.

Seasonal changes in demand, impact from disruptions in the ocean market due to security concerns and variable demand for airfreight capacity from e-commerce business cause volatility in average buy rates on certain lanes. Additionally, continued uncertainty in the economy including the impacts of inflation and interest rates could negatively affect demand for airfreight services which could reduce our volumes and average sell rates. These conditions could result in further decreases in our revenues, expenses and operating income. We are unable to predict how these uncertainties and any future disruptions will affect our operations or financial results prospectively.

Ocean freight and ocean services:

Ocean freight consolidation, direct ocean forwarding, and order management are the three basic services that constitute and are collectively referred to as ocean freight and ocean services. Ocean freight and ocean services revenues and expense increased 10% and 18%, respectively, for the three months ended June 30, 2024 as compared with the same periods in 2023. Ocean freight and ocean services revenues decreased 5% while expenses remained flat for the six months ended June 30, 2024 as compared with the same periods in 2023. The largest component of our ocean freight and ocean services revenue is derived from ocean freight consolidation, which represented 66% and 68% of ocean freight and ocean services revenue for the six months ended June 30, 2024 and 2023, respectively.

Ocean freight consolidation revenues and expenses increased 13% and 22%, respectively for the three months ended June 30, 2024, as compared with the same period in 2023, primarily due to 16% and 25% increases in average sell and buy rates, respectively, offset by a 3% decline in containers shipped. Average buy rates per container increased due to longer transit times, congestion and capacity issues caused by the disruptions in the Red Sea and outpaced average sell rates increases. Ocean freight consolidation revenues decreased 8% while expenses remained flat for the six months ended June 30, 2024, as compared with the same period in 2023, primarily due to an 8% decrease in average sell rates while average buy rates and containers shipped remained flat. As supply chain congestion cleared and excess available capacity exceeded demand, average buy rates declined throughout 2023. Overall, average sell rate reductions exceeded buy rate declines driven by North America and Europe in response to market conditions. We expect carrier capacity to grow more than customer demand for the remainder of the year which could result in lower buy and sell rates. If utilization of the Red Sea passage returns to historical levels, additional capacity will become available as a result of shorter transit times which will put additional pressure on pricing.

North Asia and South Asia ocean freight and ocean services revenues increased 28% and 45% and expenses increased 34% and 63%, respectively, for the three months ended June 30, 2024, compared to the same period in 2023. North Asia and South Asia ocean freight and ocean services revenues increased 15% and 20% and expenses increased 22% and 31%, respectively, for the six months ended June 30, 2024, compared to the same periods in 2023. Increases were primarily due to higher average sell and buy rates due to the factors above.

North America and Europe ocean freight and ocean services revenues decreased 16% and 19% and expenses decreased 14% and 20%, respectively, for the three months ended June 30, 2024, compared to the same period in 2023. North America and Europe ocean freight and ocean services revenues decreased 24% and 31% and expenses decreased 22% and 33%, respectively, for the six months ended June 30, 2024, compared to the same period in 2023. Decreases were primarily due to lower average sell and buy rates.

Order management revenues increased 20% and 19%, respectively, and expenses increased 22% and 19%, respectively, for the three and six months ended June 30, 2024, due to increases in volumes from new and existing customers. Direct ocean freight forwarding revenues decreased 4% while expenses remained flat for the three months ended June 30, 2024, principally due to lower volumes and lower rates for ancillary services in the United States. Direct ocean freight forwarding revenues and expenses decreased 8% and 6%, respectively, for the six months ended June 30, 2024.

Global economic conditions remain uncertain. Further, carriers are adding new vessels which will increase capacity. In addition, if the conflicts in the Middle East improve, additional capacity will become available due to shorter transit times. These conditions could depress sell and buy rates. We expect that pricing volatility will continue as carriers adapt to fluctuations in fuel prices, new regulations, security risks and manage available capacity. 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:

Customs brokerage and other services revenues increased 4% and expenses increased 6% for the three months ended June 30, 2024, respectively, as compared with the same period in 2023, primarily due to increases in customs clearances and road freight shipments, principally in North America.

Customs brokerage and other services revenues decreased 4% and expenses decreased 6% for the six months ended June 30, 2024, respectively, as compared with the same period in 2023, primarily due to lower volumes for local drayage and storage and warehouse and distribution services in the first quarter of 2024, principally in North America. Import services, including charges at ports such as detention, drayage, terminal charges and delivery, decreased significantly in the first quarter 2024 as compared to the first quarter of 2023 that still had residual effects from the supply chain congestion. Road freight, warehousing and distribution services also declined in the first quarter of 2024 due to lower volumes and decreased trucking, storage and labor costs.

While customers continue to value our brokerage services due to changing tariffs and increasing complexity in the declaration process, some customers are opting to use back up customs brokerage service providers as a risk reduction strategy. Customers continue to seek knowledgeable customs brokers with sophisticated computerized capabilities critical to an overall logistics management program that are necessary to rapidly respond to changes in the regulatory and security environment. Should international trade slow, volumes shipped and pricing could further negatively impact our revenues and expenses.

Overhead expenses:

Salaries and related costs remained flat for the three months ended June 30, 2024, but decreased 4% for the six months ended June 30, 2024, as compared with the same periods in 2023. Decreases in commissions and bonuses earned from lower revenues and operating income and a 4% decrease in headcount were partially offset by increases in salaries.

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

Our management compensation programs have always been incentive-based and performance driven. Total bonuses to field and executive management for the six months ended June 30, 2024, decreased 15% when compared to the same periods in 2023, primarily due to the 16% decrease in operating income.

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

Other overhead expenses increased 4% and 1% for the three and six months ended June 30, 2024, as compared with the same periods in 2023 due to higher rental expenses, bad debt and technology related expenses.

So long as the economic environment remains uncertain, we will be focused on aligning operational headcount and our overhead expenses commensurate with our transactional volumes. We expect to continue to enhance the effectiveness and security of our systems and deploy additional protection technologies and processes which will result in increased expenses in the future. We will also continue to make important investments in people, processes and technology, as well as to invest in our strategic efforts to explore new areas for profitable growth.

Income tax expense:

Our consolidated effective income tax rate was 25.8% and 26.3% for the three and six months ended June 30, 2024, as compared to 26.4% and 25.6% in the comparable periods of 2023. For the three and six months ended June 30, 2024, and 2023, there was no BEAT expense and GILTI expense was insignificant. All periods benefited from U.S. income tax deductions for FDII as well as available U.S. Federal foreign tax credits principally from withholding taxes related to our foreign operations. We have no liability as of June 30, 2024, for the 15% corporate alternative minimum tax based on financial statement income (BMT), which became effective in 2023 in the U.S., under the Inflation Reduction Act. Some elements of the recorded impacts of the Inflation Reduction Act could be impacted by further legislative action as well as additional interpretations and guidance issued by the Internal Revenue Service or Treasury which could impact the estimates of the amounts the Company would be required to record for BMT in the future.

Currency and Other Risk Factors

The nature of our worldwide operations necessitates transacting in a multitude of currencies other than the U.S. dollar. That exposes us to the inherent risks of volatile international currency markets and governmental interference. Some of the countries where we maintain offices and/or have agency relationships maintain strict currency control regulations that influence our ability to hedge foreign currency exposure. We try to compensate for these exposures by accelerating international currency settlements among our offices and agents. We may enter into foreign currency hedging transactions where there are regulatory or commercial limitations on our ability to move money freely around the world or the short-term financial outlook in any country is such that hedging is the most time-sensitive way to mitigate short-term exchange losses. Any such hedging activity during the three and six months ended June 30, 2024 and 2023 was insignificant. We had no foreign currency derivatives outstanding at June 30, 2024 and December 31, 2023. For the three months ended June 30, 2024, net foreign currency gains were approximately $5 million compared to net foreign currency losses of approximately $3 million in the same period in 2023. During the six months ended June 30, 2024, net foreign currency gains were approximately $12 million compared to net foreign currency losses of approximately $6 million in the same period in 2023.

Historically, our business has not been adversely affected by inflation. Beginning in 2021 and continuing through 2024, many countries including the United States experienced increasing levels of inflation. As a result our business continues to experience rising labor costs, service provider rate increases, higher rent and occupancy and other expenses. 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. Due to the high degree of competition in the marketplace we may not be able to increase our prices to our customers to offset this inflationary pressure, which could lead to an erosion in our margins and operating income in the future. Conversely, raising our prices to keep pace with inflationary pressure may result in a decrease in volume and customer demand for our services. As we are not required to purchase or maintain extensive property and equipment and have not otherwise incurred substantial interest rate-sensitive indebtedness, we currently have limited direct exposure to increased costs resulting from increases in interest rates.

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

Liquidity and Capital Resources

Our principal source of liquidity is cash and cash equivalents and cash generated from operating activities. Net cash provided by operating activities for the three and six months ended June 30, 2024 was $127 million and $384 million as compared with $158 million and $705 million for the same period in 2023. The decreases of $31 million and $321 million for the three and six months ended June 30, 2024, were primarily due to lower net earnings and changes in working capital. At June 30, 2024, working capital was $1,536 million, including cash and cash equivalents of $1,272 million. Other than our recorded lease liabilities, we had no long-term obligations or debt at June 30, 2024. Management believes that our current cash position and operating cash flows will be sufficient to meet our capital and liquidity requirements for at least the next 12 months and thereafter for the foreseeable future, including meeting any contingent liabilities related to standby letters of credit and other obligations.

As a customs broker, we make significant cash advances for a select group of our credit-worthy customers. These cash advances are for customer obligations such as the payment of duties and taxes to customs authorities in various countries throughout the world. Increases in duty rates could result in increases in the amounts we advance on behalf of our customers. Cash advances are a "pass through" and are not recorded as a component of revenue and expense. The billings of such advances to customers are accounted for as a direct increase in accounts receivable from the customer and a corresponding increase in accounts payable to governmental customs authorities. As a result of these "pass through" billings, the conventional Days Sales Outstanding or DSO calculation does not directly measure collection efficiency. For customers that meet certain criteria, we have agreed to extend payment terms beyond our customary terms. Management believes that it has established effective credit control procedures, and historically has experienced relatively insignificant collection problems.

Our business historically has been subject to seasonal fluctuations, and this is expected to continue in the future. Cash flows fluctuate as a result of this seasonality. Historically, the first quarter shows an excess of customer collections over customer billings. This results in positive cash flow. The increased activity associated with periods of higher demand (typically commencing late second or early third quarter and continuing well into the fourth quarter) causes an excess of customer billings over customer collections. This cyclical growth in customer receivables consumes available cash. However, there is no assurance that this seasonal trend will occur in the future or to what degree it will continue to be impacted in 2024 by an uncertain global economy.

Cash used in investing activities for the three and six months ended June 30, 2024 was $8 million and $18 million as compared with $11 million and $21 million for the same periods in 2023, primarily for capital expenditures. Capital expenditures in the three and six months ended June 30, 2024 were primarily related to continuing investments in building and leasehold improvements and technology and facilities equipment. Total anticipated capital expenditures in 2024 are currently estimated to be $60 million. This includes routine capital expenditures, leasehold and building improvements and investments in technology.

Cash used in financing activities during the three and six months ended June 30, 2024 was $207 million and $582 million as compared with $792 million and $1,018 million for the same period in 2023. We use the proceeds from stock option exercises and available cash to repurchase our common stock on the open market to reduce outstanding shares. During the three and six months ended June 30, 2024, we used cash to repurchase 0.9 million and 3.9 million shares of common stock, compared to 6.0 million and 8.0 million shares of common stock during the same period in 2023.

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

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

We maintain international unsecured bank lines of credit for short-term working capital purposes. A few of these credit lines are supported by standby letters of credit issued by a United States bank or guarantees issued by the Company to the foreign banks issuing the credit line. At June 30, 2024, borrowings under these credit lines were $36 million and we were contingently liable for $95 million from standby letters of credit and guarantees. The standby letters of credit and guarantees primarily relate to obligations of our foreign subsidiaries for credit extended in the ordinary course of business by direct carriers, primarily airlines, and for duty and tax deferrals available from governmental entities responsible for customs and value-added-tax (VAT) taxation. The total underlying amounts due and payable for transportation and governmental excises are properly recorded as obligations in the accounting records of the respective foreign subsidiaries, and there would be no need to record additional expense in the unlikely event the parent company is required to perform.

Our foreign subsidiaries regularly remit dividends to the U.S. parent company after evaluating their working capital requirements and funds necessary to finance local capital expenditures. In some cases, our ability to repatriate funds from foreign operations may be subject to foreign exchange controls. At June 30, 2024, cash and cash equivalent balances of $572 million were held by our non-United States subsidiaries, of which $2 million was held in banks in the United States. Earnings of our foreign subsidiaries are not considered to be indefinitely reinvested outside of the United States.

Item 3. Quantitative and Qualitati ve Disclosures About Market Risk