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 section entitled "Currency and Other Risk Factors" and "Liquidity and Capital Resources" contain forward-looking statements, which 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. In addition to risk factors identified elsewhere in this report, attention should be given to the factors identified and discussed in the report on Form 10-K filed on February 27, 2009.

EXECUTIVE SUMMARY

Expeditors International of Washington, Inc. is engaged in the business of global logistics management, including international freight forwarding and consolidation, for both air and ocean freight. The Company acts as a customs broker in all domestic offices, and in many of its international offices. The Company also provides additional services for its customers including value-added distribution, purchase order management, vendor consolidation and other logistics solutions. The Company does not compete for overnight courier or small parcel business. The Company does not own or operate aircraft or steamships.

International trade is influenced by many factors, including economic and political conditions in the United States and abroad, currency exchange rates, and United States and foreign laws and policies relating to tariffs, trade restrictions, foreign investments and taxation and regional and global conflicts. Periodically, governments consider a variety of changes to current tariffs and trade restrictions. The Company cannot predict which, if any, of these proposals may be adopted, nor can the Company predict the effects the 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

The Company derives its revenues from three principal sources: 1) airfreight services, 2) ocean freight and ocean services, and 3) customs brokerage and other services. These are the revenue categories presented in the financial statements.

As a non-asset based carrier, the Company does not own transportation assets. Rather, the Company generates the major portion of its air and ocean freight revenues by purchasing transportation services from direct (asset-based) carriers and reselling those services to its customers. The difference between the rate billed to customers (the sell rate), and the rate paid to the carrier (the buy rate) is termed "net revenue" or "yield." By consolidating shipments from multiple customers and concentrating its buying power, the Company is 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.

Customs brokerage and other services involves providing services at destination, such as helping customers clear shipments through customs by preparing required documentation, calculating and providing for payment of duties and other taxes on behalf of the customers as well as arranging for any required inspections by governmental agencies, and arranging for delivery. This is a complicated function requiring technical knowledge of customs rules and regulations in the multitude of countries in which the Company has offices.

The Company's ability to provide services to its customers is highly dependent on good working relationships with a variety of entities including airlines, ocean steamship lines, and governmental agencies. The significance of maintaining acceptable working relationships with governmental agencies and asset-based providers involved in global trade has gained increased importance as a result of ongoing concern over terrorism. As each carrier labors to comply with governmental regulations implementing security policies and procedures, inherent conflicts emerge which can and do affect global trade to some degree. A good reputation helps to develop practical working understandings that will effectively meet security requirements while minimizing potential international trade obstacles. The Company considers its current working relationships with these entities to be satisfactory. However, changes in the financial stability and operating capabilities of asset-based carriers, space allotments available from carriers, governmental regulation or deregulation efforts, "modernization" of the regulations governing customs brokerage, and/or changes in governmental quota restrictions could affect the Company's business in unpredictable ways.

Historically, the Company's operating results have been subject to a seasonal trend when measured on a quarterly basis. The first quarter has traditionally been the weakest and the third and fourth quarters have traditionally been the strongest. This pattern is the result of, or is influenced by, numerous factors including climate, national holidays, consumer demand, economic conditions and a myriad of other similar and subtle forces. In addition, this historical quarterly trend has been influenced by the growth and diversification of the Company's international network and service offerings. The Company cannot accurately forecast many of these factors nor can the Company estimate accurately the relative influence of any particular factor and, as a result, there can be no assurance that historical patterns, if any, will continue in future periods.

Primarily as a result of the global economic downturn, the Company's air and ocean freight volumes were lower in the first quarter of 2009 as compared to the same period in 2008. This decline in volumes started in the second half of 2008. At this point in time, the Company cannot predict the ongoing impact of the current global economic downturn or whether various governmental stimulus plans will be effective.

A significant portion of the Company's revenues are derived from customers in retail 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 the Company's revenues are, to a large degree, impacted by factors out of the Company's control, such as a sudden change in consumer demand for retail goods 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, the Company 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, any such shortfall from levels predicted by securities analysts could have an immediate and adverse effect on the trading price of the Company's stock.

In terms of the opportunities, challenges and risks that management is focused on in 2009, the Company operates in 60 countries throughout the world in the competitive global logistics industry and Company activities are tied directly to the global economy. From the inception of the Company, management has believed that the elements required for a successful global service organization can only be assured through recruiting, training, and ultimately retaining superior personnel. The Company's greatest challenge is now and always has been perpetuating a consistent global culture which demands:

• Total dedication, first and foremost, to providing superior customer service;

• Aggressive marketing of all of the Company's service offerings;

• Ongoing development of key employees and management personnel via formal and informal means;

• Creation of unlimited advancement opportunities for employees dedicated to hard work, personal growth and continuous improvement;

• Individual commitment to the identification and mentoring of successors for every key position so that when inevitable change is required, a qualified and well-trained internal candidate is ready to step forward; and

• Continuous identification, design and implementation of system solutions, both technological and otherwise, to meet and exceed the needs of our customers while simultaneously delivering tools to make our employees more efficient and more effective.

The Company has reinforced these values with a compensation system that rewards employees for profitably managing the things they can control. There is no limit to how much a key manager can be compensated for success. The Company believes in a "real world" environment in every operating unit where individuals are not sheltered from the profit implications of their decisions. At the same time, the Company insists

Any failure to perpetuate this unique culture on a self-sustained basis throughout the Company, provides a greater threat to the Company's continued success than any external force, which would be largely beyond our control. Consequently, management spends the majority of its time focused on creating an environment where employees can learn and develop while also building systems and taking preventative action to reduce exposure to negative events. The Company strongly believes that it is nearly impossible to predict events that, in the aggregate, could have a positive or a negative impact on future operations. As a result our focus is on building and maintaining a global culture of well-trained employees and managers that are prepared to identify and react to subtle changes as they develop and thereby help the Company adapt and thrive as major trends emerge.

Critical Accounting Estimates

Management believes that the nature of the Company's business is such that there are few complex measurement issues or challenges in accounting for operations.

While judgments and estimates are a necessary component of any system of accounting, the Company's use of estimates is limited primarily to the following areas that in the aggregate are not a major component of the Company's statement of earnings:

• accounts receivable valuation;

• the useful lives of long-term assets;

• the accrual of costs related to ancillary services the Company provides;

• establishment of adequate insurance liabilities for the portion of the freight related exposure which the Company has self-insured;

• accrual of various tax liabilities; and

• calculation of share-based compensation expense .

These estimates, other than the calculation of share-based compensation expense, are not highly uncertain and have not historically been subject to significant change. Management believes that the methods utilized in all of these areas are non-aggressive in approach and consistent in application. Management believes that there are limited, if any, alternative accounting principles or methods which could be applied to the Company's transactions. While the use of estimates means that actual future results may be different from those contemplated by the estimates, the Company believes that alternative principles and methods used for making such estimates would not produce materially different results than those reported.

As described in Note 3 in the condensed consolidated financial statements in this quarterly report, the Company accounts for share-based compensation based on an estimate of the fair value of options granted to employees and directors under the Company's stock option and employee stock purchase plans. The stock compensation expense, adjusted for expected forfeitures, is recognized on a straight-line basis over the vesting period.

Determining the appropriate option pricing model to use to estimate stock compensation expense requires judgment. Any option pricing model requires assumptions that are subjective and these assumptions also require judgment. Examples include assumptions about long-term stock price volatility, employee exercise patterns, pre-vesting option forfeitures, post-vesting option terminations, future interest rates and dividend yields. The Company uses the Black-Scholes model for estimating the fair value of stock options.

For the three month periods ended March 31, 2009 and 2008, no options were granted by the Company.

Management believes that the assumptions used are appropriate based upon the Company's historical and currently expected future experience. Looking to future events, management has been strongly influenced by historical patterns which may not be valid predictors of future developments and any future deviation may be material.

The Company's expected volatility assumptions are based on the historical volatility of the Company's stock. The expected life assumption is primarily based on historical employee exercise patterns and employee post-vesting termination behavior. 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,
i.e. a ten year bond rate is used for valuing an option with a ten year expected life. The expected dividend yield is based on the Company's historical experience. The forfeiture rate used to calculate compensation expense is primarily based on historical pre-vesting employee forfeiture patterns.

The use of different assumptions would result in different amounts of stock compensation expense. Keeping all other variables constant, the indicated change in each of the assumptions below increases or decreases the fair value of an option (and the resulting stock compensation expense), as follows:

  Assumption                Change in assumption   Impact of fair value of options
  Expected volatility              Higher                      Higher
  Expected life of option          Higher                      Higher
  Risk-free interest rate          Higher                      Higher
  Expected dividend yield          Higher                       Lower

Results of Operations

The following table shows the consolidated net revenues (revenues less transportation expenses) attributable to the Company's principal services and the Company's expenses for the three-month periods ended March 31, 2009 and 2008, expressed as percentages of net revenues. Management believes that net revenues are a better measure than total revenues of the relative importance of the Company's principal services since total revenues earned by the Company as a freight consolidator include the carriers' charges to the Company for carrying the shipment whereas revenues earned by the Company in its other capacities include only the commissions and fees actually earned by the Company.

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

                                                            Three months ended March 31,
                                                      2009                                 2008
                                                         Percent of net                       Percent of net
                                          Amount            revenues           Amount            revenues
                                                               (Amounts in thousands)
Net Revenues:
Airfreight services                      $ 124,087                   37 %     $ 138,664                   37 %
Ocean freight and ocean services            80,408                   24          86,352                   23
Customs brokerage and other services       132,020                   39         149,312                   40

Net revenues                               336,515                  100         374,328                  100

Overhead Expenses:
Salaries and related costs                 187,209                   56         205,815                   55
Other                                       57,832                   17          62,949                   17

Total overhead expenses                    245,041                   73         268,764                   72

Operating income                            91,474                   27         105,564                   28
Other income, net                            8,144                    3           6,167                    2

Earnings before income taxes                99,618                   30         111,731                   30
Income tax expense                          40,249                   12          45,210                   12

Net earnings                                59,369                   18          66,521                   18
Net earnings attributable to
noncontrolling interest                       (109 )                 -              (49 )                 -

Net earnings attributable to
shareholders                             $  59,260                   18 %     $  66,472                   18 %

Airfreight services net revenues decreased 11% for the three-month period ended March 31, 2009, as compared with the same period for 2008. Asian airfreight services net revenues decreased less than 1% and North American and European airfreight services net revenues decreased 18% and 17%, respectively, for the first quarter of 2009 as compared with the same period in 2008. The decrease in global airfreight services net revenues was primarily due to a 29% decline in airfreight tonnage, which was partially offset by an overall 35% increase in net revenue per kilo. This decrease in airfreight tonnage is primarily due to the global economic downturn which began in the second half of 2008. The increase in net revenue per kilo resulted from favorable buying opportunities that developed in a number of short-term spot markets and an improved freight mix.

Ocean freight and ocean services net revenues decreased 7% for the three-month period ended March 31, 2009, as compared with the same period for 2008. North America, Asia and Europe ocean freight net revenues decreased approximately 5%, 9% and 8%, respectively, for the first quarter of 2009 as compared with the same period in 2008.

Ocean freight net revenues are comprised of three basic services: ocean freight consolidation, direct ocean forwarding and order management. The majority of the Company's ocean freight net revenue is derived from ocean freight consolidation which represented 55% and 58% of ocean freight net revenue for the three-month periods ended March 31, 2009 and 2008, respectively. Ocean freight consolidation net revenue decreased 12%, on an aggregate basis, for the first quarter of 2009 as compared with the same period in 2008 primarily due to a 20% decrease in volume as measured in terms of forty-foot container equivalent units (FEUs), partially offset by a 7% increase in net revenue per container. The increase in net revenue per container was largely due to a favorable spot market. Direct ocean freight forwarding, which is primarily fee-based, decreased 4% due to a decrease in volume. The decrease in ocean volumes is primarily due to the global economic downturn.

Customs brokerage and other services net revenues decreased 12% for the three-month period ended March 31, 2009, as compared with the same period for 2008, primarily as a result of declines in air and ocean freight volumes. Consolidation within the customs brokerage market is continuing as customers seek out customs brokers with more sophisticated computerized capabilities critical to an overall logistics management program. The Company's emphasis on providing high quality services and focus on regulatory compliance continues to benefit customs brokerage services.

Salaries and related costs decreased 9% during the three-month period ended March 31, 2009, as compared with the same period in 2008, primarily as a result of (i) an overall decrease in average base salaries, (ii) smaller bonuses due to lower operating income, and (iii) a reduction in stock compensation expense.

The effects of including stock-based compensation expense in salaries and related costs for the three months ended March 31, 2009 and 2008 are as follows:

                                                Three months ended March 31,
                                                  2009                 2008
      Salaries and related costs             $      187,209       $      205,815
      As a % of net revenue                            55.6 %               55.0 %
      Stock compensation expense             $        6,900       $       11,280
      As a % of salaries and related costs              3.7 %                5.5 %
      As a % of net revenue                             2.1 %                3.0 %

Excluding stock compensation expense, salaries and related costs as a percentage of net revenue increased 161 basis points for the three months ended March 31, 2009, as compared with the same period for 2008. This increase is largely due to the fixed nature of base salaries. Stock compensation expense declined 39% for the three-month period ended March 31, 2009, as compared with the same period for 2008, primarily a result of a $4 million "true up" credit for the difference between the higher actual pre-vesting forfeiture experience and the pre-vesting forfeiture assumptions used to calculate stock option expense. This credit relates primarily to stock option grants made in 2006, the majority of which begin vesting in May 2009. The net impact on salaries and related costs was $3 million after consideration of the effect on bonuses.

Historically, the relatively consistent relationship between salaries and net revenues is the result of a compensation philosophy that has been maintained since the inception of the 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 compensation will occur in proportion to changes in Company profits. Management believes that long term growth in revenues, net revenues and net earnings, are a result of the incentives inherent in the Company's compensation program.

Other overhead expenses decreased 8% for the three-month period ended March 31, 2009, as compared with the same period in 2008, primarily as a result of several cost reduction measures, including cutbacks on travel and entertainment expenses, which were partially offset by a $3 million increase in bad debt expense. Also, legal and related expenses during this same period decreased approximately $2 million, primarily attributable to lower activity related to governmental regulatory agencies' ongoing investigations of air cargo freight forwarders and related legal proceedings as described further in Part II - Item 1 of this report on Form 10-Q entitled "Legal Proceedings". The Company will continue to incur substantial legal costs, which could include fines and/or penalties, until these proceedings are concluded. If the governmental regulatory agencies conclude that the Company has engaged in anti-competitive behavior, such fines and/or penalties could have a material impact on the Company's financial condition, results of operations and operating cash flows. Other overhead expenses as a percentage of net revenues remained constant for the three-month period ended March 31, 2009, as compared with the same period in 2008.

Other income, net, increased slightly as a percentage of net revenues for the three-month period ended March 31, 2009, as compared with the same period in 2008.

The Company pays income taxes in the United States and other jurisdictions, as well as other taxes which are typically included in costs of operations. The Company's consolidated effective income tax rate remained constant at approximately 40.5% for the three-month periods ended March 31, 2009 and 2008.

Currency and Other Risk Factors

International air/ocean freight forwarding and customs brokerage are intensively competitive and are expected to remain so for the foreseeable future. There are a large number of entities competing in the international logistics industry; however, the Company's primary competition is confined to a relatively small number of companies within this group. While there is currently a marked trend within the industry toward consolidation into large firms with multinational offices and agency networks, regional and local broker/forwarders remain a competitive force.

Developing these systems and a worldwide network has added a considerable indirect cost to the services provided to customers. Smaller and middle-tier competitors, in general, do not have the resources available to develop customized systems and a worldwide network. As a result, there is a significant amount of consolidation currently taking place in the industry. Management expects that this trend toward consolidation will continue for the short- to medium-term.

The nature of the Company's worldwide operations necessitates the Company dealing with a multitude of currencies other than the U.S. dollar. This results in the Company being exposed to the inherent risks of the international currency markets and governmental interference. Some of the countries where the Company maintains offices and/or agency relationships have strict currency control regulations which influence the Company's ability to hedge foreign currency . . .