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UNITED PARCEL SERVICE INC - Quarter Report: 2023 March (Form 10-Q)

Table of Contents
United States
Securities and Exchange Commission
Washington, D.C. 20549
_____________________________________ 
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             
Commission file number 001-15451
_____________________________________ 
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United Parcel Service, Inc.
(Exact name of registrant as specified in its charter)
Delaware 58-2480149
(State or Other Jurisdiction of
Incorporation or Organization)
 (IRS Employer
Identification No.)
55 Glenlake Parkway N.E. ,Atlanta, Georgia30328
(Address of Principal Executive Offices) (Zip Code)
(404) 828-6000
(Registrant’s telephone number, including area code)
____________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Class B common stock, par value $0.01 per shareUPSNew York Stock Exchange
0.375% Senior Notes due 2023UPS23ANew York Stock Exchange
1.625% Senior Notes due 2025UPS25New York Stock Exchange
1% Senior Notes due 2028UPS28New York Stock Exchange
1.500% Senior Notes due 2032UPS32New York Stock Exchange
  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ☐   No  
There were 134,106,663 Class A shares, and 724,779,682 Class B shares, with a par value of $0.01 per share, outstanding at April 24, 2023.


Table of Contents
TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II—OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 6.



Table of Contents
PART I. FINANCIAL INFORMATION

Cautionary Statement About Forward-Looking Statements
This report, our Annual Report on Form 10-K for the year ended December 31, 2022 and our other filings with the Securities and Exchange Commission contain and in the future may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than those of current or historical fact, and all statements accompanied by terms such as “will,” “believe,” “project,” “expect,” “estimate,” “assume,” “intend,” “anticipate,” “target,” “plan,” and similar terms, are intended to be forward-looking statements. Forward-looking statements are made subject to the safe harbor provisions of the federal securities laws pursuant to Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
From time to time, we also include written or oral forward-looking statements in other publicly disclosed materials. Such statements may relate to our intent, belief, forecasts of, or current expectations about our strategic direction, prospects, future results, or future events; they do not relate strictly to historical or current facts. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any forward-looking statements because such statements speak only as of the date when made and the future, by its very nature, cannot be predicted with certainty.
Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or anticipated results. These risks and uncertainties include, but are not limited to, the impact of: continued uncertainties related to the COVID-19 pandemic; changes in general economic conditions, in the U.S. or internationally; industry evolution and significant competition; changes in our relationships with any of our significant customers; our ability to attract and retain qualified employees; strikes, work stoppages or slowdowns by our employees; results of negotiations and ratifications of labor contracts; our ability to maintain our brand image and corporate reputation; increased or more complex physical security requirements; a significant data breach or information technology system disruption; global climate change; interruptions in or impacts on our business from natural or man-made events or disasters including terrorist attacks, epidemics or pandemics; exposure to changing economic, political and social developments in international markets; our ability to realize the anticipated benefits from acquisitions, dispositions, joint ventures or strategic alliances; changing prices of energy, including gasoline, diesel and jet fuel, or interruptions in supplies of these commodities; changes in exchange rates or interest rates; our ability to accurately forecast our future capital investment needs; significant expenses and funding obligations relating to employee health, retiree health and/or pension benefits; our ability to manage insurance and claims expenses; changes in business strategy, government regulations, or economic or market conditions that may result in impairments of our assets; potential additional U.S. or international tax liabilities; increasingly stringent laws and regulations, including relating to climate change; potential claims or litigation related to labor and employment, personal injury, property damage, business practices, environmental liability and other matters; and other risks discussed in our filings with the Securities and Exchange Commission from time to time, including our Annual Report on Form 10-K for the year ended December 31, 2022, and subsequently filed reports. You should consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements. We do not undertake any obligation to update forward-looking statements to reflect events, circumstances, changes in expectations, or the occurrence of unanticipated events after the date of those statements, except as required by law.

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Item 1. Financial Statements
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2023 (unaudited) and December 31, 2022 (in millions)
March 31,
2023
December 31,
2022
ASSETS
Current Assets:
Cash and cash equivalents$6,190 $5,602 
Marketable securities3,208 1,993 
Accounts receivable10,448 12,729 
Less: Allowance for credit losses(149)(146)
Accounts receivable, net 10,299 12,583 
Other current assets2,028 2,039 
Total Current Assets21,725 22,217 
Property, Plant and Equipment, Net34,995 34,719 
Operating Lease Right-Of-Use Assets4,089 3,755 
Goodwill4,249 4,223 
Intangible Assets, Net2,811 2,796 
Deferred Income Tax Assets155 139 
Other Non-Current Assets4,165 3,275 
Total Assets$72,189 $71,124 
LIABILITIES AND SHAREOWNERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt, commercial paper and finance leases$2,332 $2,341 
Current maturities of operating leases668 621 
Accounts payable6,302 7,515 
Accrued wages and withholdings3,012 4,049 
Self-insurance reserves1,069 1,069 
Accrued group welfare and retirement plan contributions1,196 1,078 
Other current liabilities1,683 1,467 
Total Current Liabilities16,262 18,140 
Long-Term Debt and Finance Leases19,856 17,321 
Non-Current Operating Leases3,539 3,238 
Pension and Postretirement Benefit Obligations4,602 4,807 
Deferred Income Tax Liabilities4,345 4,302 
Other Non-Current Liabilities3,532 3,513 
Shareowners’ Equity:
Class A common stock (135 and 134 shares issued in 2023 and 2022, respectively)
Class B common stock (724 and 725 shares issued in 2023 and 2022, respectively)
Additional paid-in capital— — 
Retained earnings21,510 21,326 
Accumulated other comprehensive loss(1,481)(1,549)
Deferred compensation obligations13 
Less: Treasury stock (0.2 shares in both 2023 and 2022)
(9)(13)
Total Equity for Controlling Interests20,038 19,786 
Noncontrolling interests15 17 
Total Shareowners’ Equity20,053 19,803 
Total Liabilities and Shareowners’ Equity$72,189 $71,124 
See notes to unaudited, consolidated financial statements.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In millions, except per share amounts)
(unaudited)
 
 Three Months Ended
 March 31,
20232022
Revenue$22,925 $24,378 
Operating Expenses:
Compensation and benefits11,462 11,601 
Repairs and maintenance725 701 
Depreciation and amortization834 764 
Purchased transportation3,543 4,607 
Fuel1,271 1,220 
Other occupancy551 501 
Other expenses1,998 1,733 
Total Operating Expenses20,384 21,127 
Operating Profit2,541 3,251 
Other Income and (Expense):
Investment income and other169 315 
Interest expense(188)(174)
Total Other Income and (Expense)(19)141 
Income Before Income Taxes2,522 3,392 
Income Tax Expense627 730 
Net Income$1,895 $2,662 
Basic Earnings Per Share$2.20 $3.05 
Diluted Earnings Per Share$2.19 $3.03 

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(In millions)
(unaudited)
 
 Three Months Ended
 March 31,
 20232022
Net Income$1,895 $2,662 
Change in foreign currency translation adjustment, net of tax118 (40)
Change in unrealized gain (loss) on marketable securities, net of tax(6)
Change in unrealized gain (loss) on cash flow hedges, net of tax(77)43 
Change in unrecognized pension and postretirement benefit costs, net of tax20 24 
Comprehensive Income (Loss)$1,963 $2,683 
                
See notes to unaudited, consolidated financial statements.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions)
(unaudited)
 Three Months Ended
 March 31,
 20232022
Cash Flows From Operating Activities:
Net income$1,895 $2,662 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization834 764 
Pension and postretirement benefit (income) expense243 201 
Pension and postretirement benefit contributions(1,277)(45)
Self-insurance reserves(20)(45)
Deferred tax (benefit) expense56 209 
Stock compensation expense126 386 
Other (gains) losses(13)44 
Changes in assets and liabilities, net of effects of business acquisitions:
Accounts receivable2,254 1,227 
Other assets62 
Accounts payable(1,668)(743)
Accrued wages and withholdings(508)(343)
Other liabilities405 173 
Other operating activities(32)(17)
Net cash from operating activities2,357 4,480 
Cash Flows From Investing Activities:
Capital expenditures(609)(548)
Proceeds from disposal of businesses, property, plant and equipment— 
Purchases of marketable securities(2,371)(68)
Sales and maturities of marketable securities1,179 60 
Acquisitions, net of cash acquired(34)
Other investing activities17 (17)
Net cash used in investing activities(1,813)(572)
Cash Flows From Financing Activities:
Net change in short-term debt— — 
Proceeds from long-term borrowings2,503 — 
Repayments of long-term borrowings(65)(18)
Purchases of common stock(751)(254)
Issuances of common stock49 67 
Dividends(1,348)(1,284)
Other financing activities(384)(481)
Net cash from/(used in) financing activities(1,970)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash40 15 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash588 1,953 
Cash, Cash Equivalents and Restricted Cash:
Beginning of period5,602 10,255 
End of period$6,190 $12,208 
                
See notes to unaudited, consolidated financial statements.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Principles of Consolidation
The accompanying interim unaudited, consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. These interim unaudited, consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly our financial position as of March 31, 2023 and our results of operations and cash flows for the three months ended March 31, 2023 and 2022. The results reported in these interim unaudited, consolidated financial statements should not be regarded as indicative of results that may be expected for any other period or the entire year. The interim unaudited, consolidated financial statements should be read in conjunction with the audited, consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022.
During the first quarter of 2023, we reclassified certain operating expenses to better align with the manner in which we manage our operations. Substantially all of these costs were previously classified within operating expenses as Other expenses and have now been classified within operating expenses as Repairs and maintenance in the statements of consolidated income. The remaining line items within operating expenses impacted by this reclassification were inconsequential. As a result, the statements of consolidated income for the three months ended March 31, 2023 and 2022 give effect to this reclassification by decreasing Other expenses by $88 and $77 million, respectively, and increasing Repairs and maintenance by $83 and $75 million, respectively. The reclassification had no impact on our reported revenue, operating profit, net income, or any internal performance measure on which management is compensated.
Fair Value of Financial Instruments
The carrying amounts of our cash and cash equivalents, accounts receivable, finance receivables and accounts payable approximated fair value as of March 31, 2023 and December 31, 2022. The fair values of our marketable securities are disclosed in note 5, our recognized multiemployer pension withdrawal liabilities in note 7, our short- and long-term debt in note 9 and our derivative instruments in note 15. We apply a fair value hierarchy (Levels 1, 2 and 3) when measuring and reporting items at fair value. Fair values are based on listed market prices (Level 1), when such prices are available. To the extent that listed market prices are not available, fair value is determined based on other relevant factors, including dealer price quotations (Level 2). If listed market prices or other relevant factors are not available, inputs are developed from unobservable data reflecting our own assumptions and include situations where there is little or no market activity for the asset or liability (Level 3).
Use of Estimates
The preparation of the accompanying interim unaudited, consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of these financial statements, as well as the reported amounts of revenues and expenses during the reporting period.
Although our estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. As a result, our accounting estimates and assumptions may change significantly over time.
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Supplier Finance Programs
As part of our working capital management, certain financial institutions offer a Supply Chain Finance ("SCF") program to certain of our suppliers. We agree to commercial terms with our suppliers, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the SCF program. Suppliers issue invoices to us based on the agreed-upon contractual terms. If they participate in the SCF program, our suppliers, at their sole discretion, determine which invoices, if any, to sell to the financial institutions. Our suppliers’ voluntary inclusion of invoices in the SCF program has no bearing on our payment terms. No guarantees are provided by us under the SCF program. We have no economic interest in a supplier’s decision to participate, and we have no direct financial relationship with the financial institutions, as it relates to the SCF program.
Amounts due to our suppliers that participate in the SCF program are included in Accounts payable in our consolidated balance sheets. We have been informed by the participating financial institutions that as of March 31, 2023 and December 31, 2022, suppliers sold them $628 and $806 million, respectively, of our outstanding payment obligations.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
Adoption of New Accounting Standards
In September 2022, the Financial Accounting Standards Board issued an Accounting Standards Update ("ASU") to enhance the disclosure of supplier finance programs. This ASU did not affect the recognition, measurement or financial statement presentation of obligations covered by supplier finance programs. We adopted the requirements of this ASU as of January 1, 2023 and have included required disclosures within note 1.
Other accounting pronouncements adopted during the periods covered by the unaudited, consolidated financial statements did not have a material impact on our consolidated financial position, results of operations or cash flows.
Accounting Standards Issued But Not Yet Effective
Accounting pronouncements issued before, but not effective until after, March 31, 2023, are not expected to have a material impact on our consolidated financial position, results of operations, cash flows or internal controls.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. REVENUE RECOGNITION
Revenue Recognition
Substantially all of our revenues are from contracts associated with the pickup, transportation and delivery of packages and freight (“transportation services”). These services may be carried out by or arranged by us and generally occur over a short period of time. Additionally, we provide value-added logistics services to customers through our global network of distribution centers and field stocking locations.
The vast majority of our contracts with customers are for transportation services that include only one performance obligation; the transportation services themselves. We generally recognize revenue over time, based on the extent of progress towards completion of the services in the contract. All of our major businesses act as a principal in their revenue arrangements and as such, we report revenue and the associated purchased transportation costs on a gross basis within our statements of consolidated income.
Disaggregation of Revenue
Three Months Ended
 March 31,
20232022
Revenue:
Next Day Air$2,461 $2,594 
Deferred 1,194 1,420 
Ground11,332 11,110 
     U.S. Domestic Package14,987 15,124 
Domestic794 851 
Export3,552 3,778 
Cargo & Other197 247 
    International Package4,543 4,876 
Forwarding1,514 2,589 
Logistics1,410 1,251 
Other471 538 
    Supply Chain Solutions3,395 4,378 
Consolidated revenue$22,925 $24,378 
Contract Assets and Liabilities
Contract assets include billed and unbilled amounts resulting from in-transit shipments, as we have an unconditional right to payment only when services have been completed (i.e. shipments have been delivered). Amounts do not exceed their net realizable value. Contract assets are generally classified as current and the full balance is converted each quarter based on the short-term nature of the transactions.
Contract liabilities consist of advance payments and billings in excess of revenue as well as deferred revenue. Advance payments and billings in excess of revenue represent payments received from our customers that will be earned over the contract term. Deferred revenue represents the amount due from customers related to in-transit shipments that has not yet been recognized as revenue based on our selected measure of progress. We classify advance payments and billings in excess of revenue as either current or long-term, depending on the period over which the amount will be earned. We classify deferred revenue as current based on the short-term nature of the transactions. Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that deferred revenue balance.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Contract assets and liabilities as of March 31, 2023 and December 31, 2022 were as follows (in millions):
Balance Sheet Location
March 31, 2023
December 31, 2022
Contract Assets:
Revenue related to in-transit packagesOther current assets$267 $308 
Contract Liabilities:
Short-term advance payments from customersOther current liabilities$10 $11 
Long-term advance payments from customersOther non-current liabilities$25 $26 
Accounts Receivable, Net
Accounts receivable, net, include amounts billed and currently due from customers. The amounts due are stated at their net estimated realizable value. Losses on accounts receivable are recognized when reasonable and supportable forecasts affect the expected collectability. This requires us to make our best estimate of the current expected losses inherent in our accounts receivable at each balance sheet date. This estimate requires consideration of historical loss experience, adjusted for current conditions, forward looking indicators, trends in customer payment frequency and judgments about the probable effects of relevant observable data, including present and future economic conditions and the financial health of specific customers and market sectors. Our risk management process includes standards and policies for reviewing major account exposures and concentrations of risk.
Amounts for credit losses charged to expense, before recoveries, during each of the three months ended March 31, 2023 and 2022, were $43 and $54 million, respectively.


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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. STOCK-BASED COMPENSATION
We issue share-based awards under various incentive compensation plans, including non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock units ("RSUs") and restricted performance shares and performance units ("RPUs", collectively with RSUs, "Restricted Units"). Upon vesting, Restricted Units result in the issuance of the equivalent number of UPS class A common shares after required tax withholdings. Dividends accrued on Restricted Units are reinvested in additional Restricted Units at each dividend payable date and are subject to the same vesting and forfeiture conditions as the underlying Restricted Units.
Our primary equity compensation programs are the UPS Management Incentive Program (the "MIP"), the UPS Long-Term Incentive Performance Program (the "LTIP") and the UPS Stock Option program. We also maintain an employee stock purchase plan which allows eligible employees to purchase shares of UPS class A common stock at a discount.
Pre-tax compensation expense for share-based awards recognized in Compensation and benefits in the statements of consolidated income for the three months ended March 31, 2023 and 2022 was $126 and $386 million, respectively.
Management Incentive Program
RPUs issued under the MIP prior to 2022 vested one year following the grant date based on continued employment with the Company and were expensed on a straight-line basis (less estimated forfeitures) over the requisite service period. In cases of death, disability or retirement, RPUs vested and were expensed immediately.
On November 2, 2022, the Compensation and Human Capital Committee of the UPS Board of Directors (the "Compensation Committee") amended and restated the terms and conditions of the MIP effective January 1, 2023, such that awards earned will be fully electable in the form of cash or unrestricted shares of class A common stock. The terms and conditions governing the 2022 MIP were also amended and restated to fully vest RPUs to be issued in connection therewith as of December 31, 2022. As a result, the award was classified as a compensation obligation and recorded in Accrued wages and withholdings on the consolidated balance sheet at that date.
Based on the Compensation Committee's approval of the 2022 MIP, we determined the award measurement date to be February 8, 2023 for U.S.-based employees and executive management, and March 20, 2023 for international employees. Each RPU issued under the MIP was valued using the closing New York Stock Exchange ("NYSE") prices of $186.36 and $183.49 on those dates. The compensation obligation recognized as of December 31, 2022 was relieved and the issuance of RPUs was recorded as Additional Paid-in Capital on the measurement date.
Long-Term Incentive Performance Program
RPUs issued under the LTIP vest at the end of a three-year performance period, assuming continued employment with the Company (except in the case of death, disability or retirement, in which case immediate vesting occurs on a prorated basis). The actual number of RPUs earned is based on achievement of the performance targets established on the grant date.
The performance targets are equally weighted between adjusted earnings per share and cumulative free cash flow. The actual number of RPUs earned is subject to adjustment based on total shareholder return relative to the Standard & Poor's 500 Index ("S&P 500"). We determine the grant date fair value of the RPUs using a Monte Carlo model and recognize compensation expense (less estimated forfeitures) ratably over the vesting period, based on the number of awards expected to be earned.
Based on the Compensation Committee's approval of the 2023 LTIP award performance targets, we determined March 22, 2023 to be the award measurement date and each target RPU awarded was valued at $200.01.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The weighted-average assumptions used and the weighted-average fair values of the LTIP awards granted in 2023 and 2022 are as follows:
20232022
Risk-free interest rate3.81 %2.35 %
Expected volatility30.30 %31.92 %
Weighted-average fair value of RPUs granted $200.01 $227.00 
Share payout107.80 %107.37 %
There is no expected dividend yield as units earn dividend equivalents.
Non-Qualified Stock Options
We grant non-qualified stock options to a limited group of eligible senior management employees under the UPS Stock Option program. Stock option awards vest over a five-year period with approximately 20% of the award vesting at each anniversary of the grant date (except in the case of death, disability or retirement, in which case immediate vesting occurs). The option grants expire 10 years after the date of the grant. On March 22, 2023, we granted 0.1 million stock options at an exercise price of $185.54, the NYSE closing price on that date.
The fair value of each option granted is estimated using a Black-Scholes option pricing model. The weighted-average assumptions used and the weighted-average fair values of options granted in 2023 and 2022 are as follows:
20232022
Expected dividend yield3.54 %2.35 %
Risk-free interest rate3.70 %2.39 %
Expected life (in years)5.937.5
Expected volatility28.31 %25.04 %
Weighted-average fair value of options granted$41.08 $48.45 
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. MARKETABLE SECURITIES AND NON-CURRENT INVESTMENTS
The following is a summary of marketable securities classified as trading and available-for-sale as of March 31, 2023 and December 31, 2022 (in millions):
CostUnrealized
Gains
Unrealized
Losses
Estimated
Fair Value
March 31, 2023:
Current trading marketable securities:
Equity securities$$— $— $
Total trading marketable securities— — 
Current available-for-sale securities:
U.S. government and agency debt securities761 (4)759 
Mortgage and asset-backed debt securities— — 
Corporate debt securities2,279 (6)2,276 
U.S. state and local municipal debt securities— — 
Non-U.S. government debt securities155 — — 155 
Total available-for-sale marketable securities3,207 (10)3,202 
Total current marketable securities$3,213 $$(10)$3,208 
 CostUnrealized
Gains
Unrealized
Losses
Estimated
Fair Value
December 31, 2022:
Current trading marketable securities:
Equity securities$$— $— $
Total trading marketable securities— — 
Current available-for-sale securities:
U.S. government and agency debt securities355 — (8)347 
Mortgage and asset-backed debt securities— — 
Corporate debt securities1,472 — (6)1,466 
U.S. state and local municipal debt securities— — 
Non-U.S. government debt securities165 — — 165 
Total available-for-sale marketable securities2,005 — (14)1,991 
Total current marketable securities$2,007 $— $(14)$1,993 
Investment Impairments
We have concluded that no material impairment losses existed as of March 31, 2023. In making this determination, we considered the financial condition and prospects of each issuer, the magnitude of the losses compared with the cost, the probability that we will be unable to collect all amounts due according to the contractual terms of the security, the credit rating of the security and our ability and intent to hold these investments until the anticipated recovery in market value occurs.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Maturity Information
The amortized cost and estimated fair value of marketable securities as of March 31, 2023 by contractual maturity are shown below (in millions). Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations with or without prepayment penalties.
CostEstimated
Fair Value
Due in one year or less$1,727 $1,726 
Due after one year through three years1,478 1,474 
Due after three years through five years
Due after five years— — 
3,207 3,202 
Equity securities
$3,213 $3,208 
Non-Current Investments
We hold non-current investments that are reported within Other Non-Current Assets in our consolidated balance sheets. Cash paid for these investments is included in Other investing activities in our statements of consolidated cash flows.
Equity method investments: As of March 31, 2023 and December 31, 2022, equity securities accounted for under the equity method had a carrying value of $257 and $256 million, respectively.
Other equity securities: Certain equity securities that do not have readily determinable fair values are reported in accordance with the measurement alternative in ASC Topic 321 Investments - Equity Securities. As of March 31, 2023 and December 31, 2022, we held equity securities accounted for using the measurement alternative of $33 and $31 million, respectively.
Other investments: We hold an investment in a variable life insurance policy to fund benefits for the UPS Excess Coordinating Benefit Plan. The investment had a fair market value of $19 and $18 million as of March 31, 2023 and December 31, 2022, respectively.
Fair Value Measurements
Marketable securities valued utilizing Level 1 inputs include active exchange-traded equity securities and equity index funds, and most U.S. government debt securities, as these securities all have quoted prices in active markets. Marketable securities valued utilizing Level 2 inputs include asset-backed securities, corporate bonds and municipal bonds. These securities are valued using market corroborated pricing, matrix pricing or other models that utilize observable inputs such as yield curves.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents information about our investments measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value (in millions):
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total 
March 31, 2023:
Marketable Securities:
U.S. government and agency debt securities$759 $— $— $759 
Mortgage and asset-backed debt securities— — 
Corporate debt securities— 2,276 — 2,276 
U.S. state and local municipal debt securities— — 
Equity securities— — 
Non-U.S. government debt securities— 155 — 155 
Total marketable securities759 2,449 — 3,208 
Other non-current investments(1)
— 19 — 19 
Total$759 $2,468 $— $3,227 
(1) Represents a variable life insurance policy funding benefits for the UPS Excess Coordinating Benefit Plan.

December 31, 2022:Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Marketable Securities:
U.S. government and agency debt securities$279 $68 $— $347 
Mortgage and asset-backed debt securities— — 
Corporate debt securities— 1,466 — 1,466 
U.S. state and local municipal debt securities— — 
Equity securities— — 
Non-U.S. government debt securities— 165 — 165 
Total marketable securities279 1,714 — 1,993 
Other non-current investments(1)
— 18 — 18 
Total$279 $1,732 $— $2,011 
(1) Represents a variable life insurance policy funding benefits for the UPS Excess Coordinating Benefit Plan.
There were no transfers of investments into or out of Level 3 during the three months ended March 31, 2023 or 2022.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of March 31, 2023 and December 31, 2022 consisted of the following (in millions):
20232022
Vehicles$10,840 $10,628 
Aircraft22,638 22,598 
Land2,143 2,140 
Buildings6,122 6,032 
Building and leasehold improvements5,142 5,067 
Plant equipment16,454 16,145 
Technology equipment2,445 2,411 
Construction-in-progress2,544 2,409 
68,328 67,430 
Less: Accumulated depreciation and amortization(33,333)(32,711)
Property, Plant and Equipment, Net$34,995 $34,719 
Property, plant and equipment purchased on account was $626 and $176 million as of March 31, 2023 and December 31, 2022, respectively. 
There were no material impairment charges during the three months ended March 31, 2023 or 2022.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. EMPLOYEE BENEFIT PLANS
Company-Sponsored Benefit Plans
Information about the net periodic benefit cost (income) for our company-sponsored pension and postretirement benefit plans for the three months ended March 31, 2023 and 2022 is as follows (in millions):
 U.S. Pension BenefitsU.S. Postretirement
Medical Benefits
International
Pension Benefits
202320222023202220232022
Three Months Ended March 31:
Service cost$293 $506 $$$11 $18 
Interest cost627 488 29 20 17 12 
Expected return on assets(742)(820)(3)(1)(21)(20)
Amortization of prior service cost27 23 — — — — 
Settlement and curtailment (gain) loss— — — — — (33)
Net periodic benefit cost (income)$205 $197 $31 $27 $$(23)
The components of net periodic benefit cost (income) other than current service cost are presented within Investment income and other in the statements of consolidated income.
During the first quarter of 2022, we amended the UPS Canada Ltd. Retirement Plan to cease future benefit accruals effective December 31, 2023. We remeasured plan assets and benefit obligations for this plan, which resulted in a curtailment gain of $33 million ($24 million after-tax) during the three-month period. The gain is included in Investment income and other in the statement of consolidated income.
During the first quarter of 2023, we contributed $1.2 billion and $74 million to our company-sponsored pension and U.S. postretirement medical benefit plans, respectively. We expect to contribute approximately $78 and $44 million over the remainder of the year to our pension and U.S. postretirement medical benefit plans, respectively.
Multiemployer Benefit Plans
We contribute to a number of multiemployer defined benefit and health and welfare plans under the terms of collective bargaining agreements that cover our union-represented employees. Our current collective bargaining agreements set forth the annual contribution increases allotted to the plans that we participate in, and we are in compliance with these contribution rates. These limitations on annual contribution rates will remain in effect throughout the terms of the existing collective bargaining agreements.
As of March 31, 2023 and December 31, 2022, we had $819 and $821 million, respectively, recorded in Other Non-Current Liabilities in our consolidated balance sheets and $8 million as of March 31, 2023 and December 31, 2022 recorded in Other current liabilities in our consolidated balance sheets associated with our previous withdrawal from the New England Teamsters and Trucking Industry Pension Fund. This liability is payable in equal monthly installments over a remaining term of approximately 40 years. Based on the borrowing rates currently available to us for long-term financing of a similar maturity, the fair value of this withdrawal liability as of March 31, 2023 and December 31, 2022 was $710 and $686 million, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of this liability.
UPS was a contributing employer to the Central States Pension Fund (“CSPF”) until 2007 at which time UPS withdrew from the CSPF. Under a collective bargaining agreement with the International Brotherhood of Teamsters (“IBT”), UPS agreed to provide coordinating benefits in the UPS/IBT Full Time Employee Pension Plan (“UPS/IBT Plan”) for UPS participants whose last employer was UPS and who had not retired as of January 1, 2008 (“the UPS Transfer Group”) in the event that benefits are reduced by the CSPF consistent with the terms of our withdrawal agreement with the CSPF. Under this agreement, benefits to the UPS Transfer Group cannot be reduced without our consent and can only be reduced in accordance with law. Subsequent to our withdrawal, the CSPF incurred extensive asset losses and indicated that it was projected to become insolvent. In such event, the CSPF benefits would be reduced to the legally permitted Pension Benefit Guaranty Corporation ("PBGC") limits, triggering the coordinating benefits provision in the collective bargaining agreement.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In March 2021, the American Rescue Plan Act (“ARPA”) was enacted into law. The ARPA contains provisions that allow for qualifying multiemployer pension plans to apply for special financial assistance ("SFA") from the PBGC, which will be funded by the U.S. government. Following SFA approval, a qualifying multiemployer pension plan will receive a lump sum payment to enable it to continue paying unreduced pension benefits through 2051. The multiemployer plan is not obligated to repay the SFA. The ARPA is intended to prevent both the PBGC and certain financially distressed multiemployer pension plans, including the CSPF, from becoming insolvent through 2051. The CSPF submitted an application for SFA that was approved in December 2022 and, in January 2023, the CSPF received $35.8 billion from the PBGC.
We account for the potential obligation to pay coordinating benefits under ASC Topic 715, which requires us to provide a best estimate of various actuarial assumptions in measuring our pension benefit obligation at the December 31st measurement date. As of December 31, 2022, our best estimate of coordinating benefits that may be required to be paid by the UPS/IBT Plan after SFA funds have been exhausted was immaterial.
The value of our estimate for future coordinating benefits will continue to be influenced by a number of factors, including interpretations of the ARPA, future legislative actions, actuarial assumptions and the ability of the CSPF to sustain its long-term commitments. Actual events may result in a change in our best estimate of the projected benefit obligation. We will continue to assess the impact of these uncertainties in accordance with ASC Topic 715.
Collective Bargaining Agreements
We have approximately 330,000 employees in the U.S. employed under a national master agreement and various supplemental agreements with local unions affiliated with the Teamsters. These agreements run through July 31, 2023. We have begun negotiating successor agreements with the Teamsters. We are negotiating in good faith in an effort to reach an agreement that is in the best interests of our employees, the Teamsters and UPS; however, no assurances of our ability to do so, or the timing or terms thereof, can be provided. Customers may reduce their business or stop doing business with us if they believe that such actions or threatened actions may adversely affect our ability to provide services. We may permanently lose customers if we are unable to provide uninterrupted service, and this could materially adversely affect us. The terms of future collective bargaining agreements also may affect our competitive position and results of operations. Furthermore, our actions or responses to any such negotiations, labor disputes, strikes or work stoppages could negatively impact how our brand is perceived and our corporate reputation and have adverse effects on our business, including our results of operations.
We have approximately 10,000 employees in Canada employed under a collective bargaining agreement with the
Teamsters which runs through July 31, 2025.
We have approximately 3,500 pilots who are employed under a collective bargaining agreement with the Independent Pilots Association ("IPA"). This collective bargaining agreement becomes amendable September 1, 2025.
We have approximately 1,800 airline mechanics who are covered by a collective bargaining agreement with Teamsters Local 2727 which becomes amendable November 1, 2026. In addition, approximately 3,100 of our auto and maintenance mechanics who are not employed under agreements with the Teamsters are employed under collective bargaining agreements with the International Association of Machinists and Aerospace Workers (“IAM”). The collective bargaining agreement with the IAM runs through July 31, 2024.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. GOODWILL AND INTANGIBLE ASSETS
The following table indicates the allocation of goodwill as of March 31, 2023 and December 31, 2022 (in millions):
U.S. Domestic
Package
International
Package
Supply Chain SolutionsConsolidated
December 31, 2022:$847 $492 $2,884 $4,223 
Acquired— — 
Impairments— — (8)(8)
Currency / Other— 19 25 
March 31, 2023:$847 $498 $2,904 $4,249 
During the three months ended March 31, 2023, we recorded goodwill adjustments of $9 million relating to our November 2022 acquisition of Bomi Group. Certain areas, including our estimates of tax positions for Bomi Group, remain preliminary as of March 31, 2023.
Additionally, we recorded an immaterial impairment charge related to the closure of a trade management services business within Supply Chain Solutions. The remaining movements are due to the impact of changes in the value of the U.S. Dollar on the translation of non-U.S. Dollar goodwill balances.
We complete our annual goodwill impairment evaluation as of July 1st on a reporting unit basis. Our 2022 annual impairment testing indicated that the fair value of goodwill associated with our Roadie reporting unit remained greater than its carrying value, although this excess was less than 10 percent. The goodwill associated with our Roadie reporting unit as of March 31, 2023 was $241 million. There were no events or changes in circumstances during the first quarter of 2023 that would indicate the carrying amount of Roadie goodwill may be impaired as of the date of this report.
For each of our reporting units and our indefinite-lived trade name, we continue to monitor the combined impact of macroeconomic conditions and business performance on our estimates of fair value.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of intangible assets as of March 31, 2023 and December 31, 2022 (in millions):
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Value
March 31, 2023:
Capitalized software$5,300 $(3,598)$1,702 
Licenses55 (34)21 
Franchise rights261 (39)222 
Customer relationships880 (474)406 
Trade name126 (10)116 
Trademarks, patents and other177 (37)140 
Amortizable intangible assets$6,799 $(4,192)$2,607 
Indefinite-lived intangible assets204 — 204 
Total Intangible Assets, Net$7,003 $(4,192)$2,811 
December 31, 2022:
Capitalized software$5,186 $(3,500)$1,686 
Licenses55 (30)25 
Franchise rights226 (37)189 
Customer relationships872 (453)419 
Trade name125 (8)117 
Trademarks, patents and other183 (27)156 
Amortizable intangible assets$6,647 $(4,055)$2,592 
Indefinite-lived intangible assets204 — 204 
Total Intangible Assets, Net$6,851 $(4,055)$2,796 
A trade name and licenses with carrying values of $200 and $4 million, respectively, as of March 31, 2023 are deemed to be indefinite-lived intangible assets, and therefore are not amortized. There were no events or changes in circumstances during the three months ended March 31, 2023 that would indicate the carrying amount of our indefinite-lived intangible assets may be impaired as of the date of this report.
Impairment tests for finite-lived intangible assets are performed when a triggering event occurs that may indicate that the carrying value of the intangible asset may not be recoverable. There were no impairment charges for finite-lived intangible assets during the three months ended March 31, 2023 or 2022.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. DEBT AND FINANCING ARRANGEMENTS
The carrying value of our outstanding debt obligations as of March 31, 2023 and December 31, 2022 consists of the following (in millions):
Principal
Amount
Carrying Value
Maturity20232022
Fixed-rate senior notes:
2.500% senior notes
$1,000 2023$1,000 $999 
2.800% senior notes
500 2024499 499 
2.200% senior notes
400 2024399 399 
3.900% senior notes
1,000 2025998 997 
2.400% senior notes
500 2026499 499 
3.050% senior notes
1,000 2027995 995 
3.400% senior notes
750 2029747 747 
2.500% senior notes
400 2029398 397 
4.450% senior notes
750 2030745 744 
4.875% senior notes
900 2033894 — 
6.200% senior notes
1,500 20381,485 1,485 
5.200% senior notes
500 2040494 494 
4.875% senior notes
500 2040491 491 
3.625% senior notes
375 2042369 369 
3.400% senior notes
500 2046492 492 
3.750% senior notes
1,150 20471,137 1,137 
4.250% senior notes
750 2049743 743 
3.400% senior notes
700 2049688 688 
5.300% senior notes
1,250 20501,231 1,231 
5.050% senior notes
1,100 20531,083 — 
Floating-rate senior notes:
Floating-rate senior notes500 2023500 500 
Floating-rate senior notes1,566 2049-20731,548 1,027 
Debentures:
7.620% debentures
276 2030280 280 
Pound Sterling notes:
5.500% notes
82 203182 79 
5.125% notes
563 2050535 521 
Euro senior notes:
0.375% senior notes
762 2023761 745 
1.625% senior notes
762 2025760 744 
1.000% senior notes
544 2028542 531 
1.500% senior notes
544 2032542 530 
Canadian senior notes:
2.125% senior notes
555 2024553 553 
Finance lease obligations365 2023-2046365 390 
Facility notes and bonds320 2029-2045320 320 
Other debt13 2023-202613 36 
Total debt$22,377 22,188 19,662 
Less: current maturities(2,332)(2,341)
Long-term debt$19,856 $17,321 

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Commercial Paper
We are authorized to borrow up to $10.0 billion under a U.S. commercial paper program and €5.0 billion (in a variety of currencies) under a European commercial paper program. As of March 31, 2023, we had no outstanding balances under our commercial paper programs. The amount of commercial paper outstanding under these programs in 2023 is expected to fluctuate.
Debt Classification
We have classified certain floating-rate senior notes that are redeemable at the option of the note holder as long-term liabilities in our consolidated balance sheets, due to our intent and ability to refinance the debt if the put option is exercised.
Debt Repayments
During the first quarter of 2023, we repaid approximately $16 million of foreign currency-denominated debt assumed in the Bomi Group acquisition.
On April 1, 2023, our 2.500% Senior Notes with a principal balance of $1.0 billion and our floating rate senior notes with a principal balance of $500 million matured and were repaid in full.
Debt Issuances
On February 23, 2023 we issued two series of notes in the principal amounts of $900 million and $1.1 billion. These notes bear interest at 4.875% and 5.050%, respectively, and mature on March 3, 2033 and March 3, 2053, respectively. Interest on the notes is payable semi-annually, beginning September 2023. Each series of notes is callable at our option at a redemption price equal to the greater of 100% of the principal amount, or the sum of the present values of scheduled payments of principal and interest, plus accrued and unpaid interest.
On March 7, 2023 we issued floating rate senior notes with a principal balance of  $529 million. These notes bear interest at a rate equal to the compounded Secured Overnight Financing Rate ("SOFR") less 0.350% per year and mature on March 15, 2073. These notes are callable at various times after 30 years at a stated percentage of par value and are redeemable at the option of the note holders at various times after one year at a stated percentage of par value.
Reference Rate Reform
Our floating-rate senior notes that mature between 2049 and 2067 bear interest at rates that reference the London Interbank Offer Rate ("LIBOR") for U.S. Dollars. As part of a broader program of reference rate reform, it is expected that U.S. Dollar LIBOR rates will cease to be published after June 2023. We are currently working to transition these notes to an alternative reference rate, and we anticipate that the SOFR will be adopted in accordance with recommendations of the Alternative Reference Rates Committee.
Sources of Credit
We maintain two credit agreements with a consortium of banks. The first of these agreements provides revolving credit facilities of $1.0 billion, and expires on December 5, 2023. Amounts outstanding under this agreement bear interest at a periodic fixed rate equal to the term SOFR rate, plus 0.10% per annum and an applicable margin based on our then-current credit rating. The applicable margin from the credit pricing grid as of March 31, 2023 was 0.70%. Alternatively, a fluctuating rate of interest equal to the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in the United States; (2) the Federal Funds effective rate plus 0.50%; or (3) the Adjusted Term SOFR Rate for a one-month interest period plus 1.00%, may be used at our discretion.
The second agreement provides revolving credit facilities of $2.0 billion, and expires on December 7, 2026. Amounts outstanding under this facility bear interest at a periodic fixed rate equal to the term SOFR rate plus 0.10% per annum and an applicable margin based on our then-current credit rating. The applicable margin from the credit pricing grid as of March 31, 2023 was 0.875%. Alternatively, a fluctuating rate of interest equal to the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in the United States; (2) the Federal Funds effective rate plus 0.50%; or (3) the Adjusted Term SOFR Rate for a one-month interest period plus 1.00%, plus an applicable margin, may be used at our discretion.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
If the credit ratings established by Standard & Poor's and Moody's differ, the higher rating will be used, except in cases where the lower rating is two or more levels lower. In these circumstances, the rating one step below the higher rating will be used. We are also able to request advances under these facilities based on competitive bids for the applicable interest rate.
There were no amounts outstanding under these facilities as of March 31, 2023.
Debt Covenants
Our existing debt instruments and credit facilities subject us to certain financial covenants. As of March 31, 2023, and for all prior periods presented, we have satisfied these financial covenants. These covenants limit the amount of secured indebtedness that we may incur, and limit the amount of attributable debt in sale-leaseback transactions, to 10% of net tangible assets. As of March 31, 2023, 10% of net tangible assets was equivalent to $4.9 billion and we had no covered sale-leaseback transactions or secured indebtedness outstanding. We do not expect these covenants to have a material impact on our financial condition or liquidity.
Fair Value of Debt
Based on the borrowing rates currently available to us for long-term debt with similar terms and maturities, the fair value of long-term debt, including current maturities, was approximately $21.9 and $18.2 billion as of March 31, 2023 and December 31, 2022, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of all of our debt instruments.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. LEASES
We have finance and operating leases for real estate (primarily package centers, airport facilities and warehouses), aircraft and engines, information technology equipment, vehicles and various other equipment used in operating our business. Certain leases for real estate and aircraft contain options to purchase, extend or terminate the lease.
Aircraft
In addition to the aircraft that we own, we charter aircraft to handle package and cargo volume on certain international trade lanes and domestic routes. Due to the nature of these agreements, primarily being that either party can cancel the agreement with short notice, we have classified these as short-term leases. A majority of our long-term aircraft operating leases are operated by a third party to handle package and cargo volume in geographic regions where, due to government regulations, we are restricted from operating an airline.
Transportation equipment and other equipment
We enter into both long-term and short-term leases for transportation equipment to supplement our capacity or meet contractual demands. Some of these assets are leased on a month-to-month basis and the leases can be terminated without penalty. We also enter into equipment leases to increase capacity during periods of high demand. These leases are treated as short-term as the cumulative right of use is less than 12 months over the term of the contract.
Some of our transportation and technology equipment leases require us to make additional lease payments based on the underlying usage of the assets. Due to the variable nature of these costs, these are expensed as incurred and are not included in the right of use lease asset and associated lease obligation.
The components of lease expense for the three months ended March 31, 2023 and 2022 were as follows (in millions):
20232022
Operating lease costs$207 $183 
Finance lease costs:
Amortization of assets29 28 
Interest on lease liabilities
Total finance lease costs33 32 
Variable lease costs72 68 
Short-term lease costs277 302 
Total lease costs(1)
$589 $585 
(1) This table excludes sublease income as it was not material to the three months ended March 31, 2023 or 2022.
In addition to the lease costs disclosed in the table above, we monitor all lease categories for any indicators that the carrying value of the assets may not be recoverable. There were no material impairments recognized during the three months ended March 31, 2023 or 2022.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Supplemental information related to leases and location within our consolidated balance sheets is as follows (in millions, except lease term and discount rate):
March 31,
2023
December 31,
2022
Operating Leases:
Operating lease right-of-use assets$4,089 $3,755 
Current maturities of operating leases$668 $621 
Non-current operating leases3,539 3,238 
Total operating lease obligations$4,207 $3,859 
Finance Leases:
Property, plant and equipment, net$869 $959 
Current maturities of long-term debt, commercial paper and finance leases$68 $92 
Long-term debt and finance leases297 298 
Total finance lease obligations$365 $390 
Weighted average remaining lease term (in years):
Operating leases11.210.8
Finance leases8.88.4
Weighted average discount rate:
Operating leases2.73 %2.32 %
Finance leases3.28 %3.17 %

Supplemental cash flow information related to leases is as follows (in millions):
Three Months Ended
 March 31,
20232022
Cash paid for amounts included in measurement of obligations:
Operating cash flows from operating leases$212 $176 
Operating cash flows from finance leases
Financing cash flows from finance leases48 18 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$498 $119 
Finance leases$30 $59 

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Maturities of lease obligations as of March 31, 2023 were as follows (in millions):
Finance LeasesOperating Leases
2023$73 $576 
202462 705 
202548 632 
202639 543 
202738 472 
Thereafter183 2,038 
Total lease payments443 4,966 
Less: Imputed interest(78)(759)
Total lease obligations365 4,207 
Less: Current obligations(68)(668)
Long-term lease obligations$297 $3,539 
As of March 31, 2023, we had $771 million of additional leases which had not commenced. These leases will commence between 2023 and 2024 when we are granted access to the property, such as when leasehold improvements are completed by the lessor or a certificate of occupancy is obtained.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. LEGAL PROCEEDINGS AND CONTINGENCIES
We are involved in a number of judicial proceedings and other matters arising from the conduct of our business.
Although there can be no assurances as to the ultimate outcome, we have generally denied, or believe we have meritorious defenses and will deny, liability in all pending matters, including (except as otherwise noted herein) the matters described below, and we intend to vigorously defend each matter. We accrue amounts associated with legal proceedings when and to the extent a loss becomes probable and can be reasonably estimated. The actual costs of resolving legal proceedings may be substantially higher or lower than the amounts accrued on those claims.
For matters as to which we are not able to estimate a possible loss or range of losses, we are not able to determine whether any such loss will have a material impact on our operations or financial condition. For these matters, we have described the reasons that we are unable to estimate a possible loss or range of losses.
Judicial Proceedings
We are a defendant in a number of lawsuits filed in state and federal courts containing various class action allegations under state wage-and-hour laws. At this time, we do not believe that any loss associated with any such matter will have a material impact on our operations or financial condition. One of these matters, Hughes v. UPS Supply Chain Solutions, Inc. and United Parcel Service, Inc. had previously been certified as a class action in Kentucky state court. In the second quarter of 2019, the court granted our motion for judgment on the pleadings related to the wage-and-hour claims. The plaintiffs' appeal of this decision was denied. However, they were granted a discretionary review by the Kentucky Supreme Court. In the first quarter of 2023, the Kentucky Supreme Court ruled in our favor. Plaintiffs have filed a motion for rehearing before the Kentucky Supreme Court.
Other Matters
In August 2016, Spain’s National Markets and Competition Commission ("CNMC") announced an investigation into 10 companies in the commercial delivery and parcel industry, including UPS, related to alleged nonaggression agreements to allocate customers. In May 2017, we received a Statement of Objections issued by the CNMC. In July 2017, we received a Proposed Decision from the CNMC. In March 2018, the CNMC adopted a final decision, finding an infringement and imposing an immaterial fine on UPS. We appealed the decision. In December 2022, a trial court ruled against us. We have filed an appeal before the Spanish Supreme Court. We do not believe that any loss from this matter would have a material impact on our operations or financial condition. We are vigorously defending ourselves and believe that we have a number of meritorious legal defenses. There are also unresolved questions of law that could be important to the ultimate resolution of this matter.
We are a party in various other matters that arose in the normal course of business. We do not believe that the eventual resolution of these other matters (either individually or in the aggregate), including any reasonably possible losses in excess of current accruals, will have a material impact on our operations or financial condition.


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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. SHAREOWNERS' EQUITY
Capital Stock, Additional Paid-In Capital, Retained Earnings and Non-Controlling Minority Interests
We are authorized to issue two classes of common stock, which are distinguished from each other primarily by their respective voting rights. Class A shares of UPS are entitled to 10 votes per share, whereas class B shares are entitled to one vote per share. Class A shares are primarily held by UPS employees and retirees, as well as trusts and descendants of the Company's founders, and these shares are fully convertible into class B shares at any time. Class B shares are publicly traded on the NYSE under the symbol “UPS”. Class A and B shares both have a $0.01 par value, and as of March 31, 2023, there were 4.6 billion class A shares and 5.6 billion class B shares authorized to be issued. Additionally, there are 200 million preferred shares authorized to be issued, with a par value of $0.01 per share. As of March 31, 2023, no preferred shares had been issued.
The following is a rollforward of our common stock, additional paid-in capital, retained earnings and non-controlling minority interests accounts for the three months ended March 31, 2023 and 2022 (in millions, except per share amounts):
Three Months Ended March 31:20232022
 SharesDollarsSharesDollars
Class A Common Stock:
Balance at beginning of period134 $138 $
Stock award plans— — 
Common stock issuances— — 
Conversions of class A to class B common stock(3)— (3)— 
Class A shares outstanding at end of period135 $140 $
Class B Common Stock:
Balance at beginning of period725 $732 $
Common stock purchases(4)— (1)— 
Conversions of class A to class B common stock— — 
Class B shares outstanding at end of period724 $734 $
Additional Paid-In Capital:
Balance at beginning of period$— $1,343 
Stock award plans345 (35)
Common stock purchases(492)(260)
Common stock issuances147 183 
Balance at end of period$— $1,231 
Retained Earnings:
Balance at beginning of period$21,326 $16,179 
Net income attributable to controlling interests1,895 2,662 
Dividends ($1.62 and $1.52 per share) (1)
(1,453)(1,406)
Common stock purchases(258)— 
Other— (2)
Balance at end of period$21,510 $17,433 
Non-Controlling Interests:
Balance at beginning of period$17 $16 
Change in non-controlling interest(2)
Balance at end of period$15 $18 
(1) The dividend per share amount is the same for both class A and class B common stock. Dividends include $105 and $122 million as of March 31, 2023 and 2022, respectively, that were settled in shares of class A common stock.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
We repurchased 4.1 and 1.2 million shares of class B common stock for $750 and $260 million during the three months ended March 31, 2023 and 2022, respectively. Repurchases of $751 and $254 million, respectively, are reported on the statements of consolidated cash flows due to the timing of settlements. These repurchases were completed as follows:
In August 2021, the Board of Directors authorized the company to repurchase up to $5.0 billion of class A and class B common stock (the "2021 Authorization"). For the three months ended March 31, 2023 and 2022, we repurchased 0.5 and 1.2 million shares of class B common stock for $82 and $260 million, respectively, under this authorization.
In January 2023, the Board of Directors terminated the 2021 Authorization and approved a new share repurchase authorization for $5.0 billion of class A and class B common stock (the "2023 Authorization"). For the three months ended March 31, 2023, we repurchased 3.6 million shares for $668 million under the 2023 Authorization. As of March 31, 2023, we had $4.3 billion available under this repurchase authorization.
We anticipate our share repurchases will total approximately $3.0 billion in 2023.
Future share repurchases may be in the form of accelerated share repurchase programs, open market purchases or other methods we deem appropriate. The timing of share repurchases will depend upon market conditions. Unless terminated earlier by the Board of Directors, this program will expire when we have purchased all shares authorized for repurchase under the program.
Movements in additional paid-in capital in respect of stock award plans comprise accruals for unvested awards, offset by adjustments for awards that vest during the period.
Accumulated Other Comprehensive Income (Loss)
We recognize activity in other comprehensive income for foreign currency translation adjustments, unrealized holding gains and losses on available-for-sale securities, unrealized gains and losses from derivatives that qualify as hedges of cash flows and unrecognized pension and postretirement benefit costs. The activity in accumulated other comprehensive income (loss) for the three months ended March 31, 2023 and 2022 was as follows (in millions):
Three Months Ended March 31:20232022
Foreign currency translation gain (loss), net of tax:
Balance at beginning of period$(1,446)$(1,162)
Translation adjustment (net of tax effect of $(15) and $0)
115 (40)
Reclassification to earnings (net of tax effect of $0 and $0)
— 
Balance at end of period(1,328)(1,202)
Unrealized gain (loss) on marketable securities, net of tax:
Balance at beginning of period(11)(1)
Current period changes in fair value (net of tax effect of $1 and $(2))
(6)
Reclassification to earnings (net of tax effect of $1 and $0)
— 
Balance at end of period(4)(7)
Unrealized gain (loss) on cash flow hedges, net of tax:
Balance at beginning of period167 (17)
Current period changes in fair value (net of tax effect of $(8) and $23)
(26)72 
Reclassification to earnings (net of tax effect of $(16) and $(9))
(51)(29)
Balance at end of period90 26 
Unrecognized pension and postretirement benefit costs, net of tax:
Balance at beginning of period(259)(2,098)
Net actuarial gain (loss) resulting from remeasurements of plan assets and liabilities (net of tax effect of $0 and $11)
— 31 
Reclassification to earnings (net of tax effect of $7 and $(3))
20 (7)
Balance at end of period(239)(2,074)
Accumulated other comprehensive income (loss) at end of period$(1,481)$(3,257)
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Detail of the gains (losses) reclassified from accumulated other comprehensive income (loss) to the statements of consolidated income for the three months ended March 31, 2023 and 2022 is as follows (in millions):
Amount Reclassified from AOCI(1)
Affected Line Item in the Income Statement
Three Months Ended March 31:20232022
Unrealized Gain (Loss) on Foreign Currency Translation:
Realized gain (loss) on business wind-down$(3)$— Other expenses
Income tax (expense) benefit— — Income tax expense
Impact on net income(3)— Net income
Unrealized gain (loss) on marketable securities:
Realized gain (loss) on sale of securities(3)— Investment income and other
Income tax (expense) benefit— Income tax expense
Impact on net income(2)— Net income
Unrealized gain (loss) on cash flow hedges:
Interest rate contracts(1)(3)Interest expense
Foreign currency exchange contracts68 41 Revenue
Income tax (expense) benefit(16)(9)Income tax expense
Impact on net income51 29 Net income
Unrecognized pension and postretirement benefit costs:
Prior service costs(27)(23)Investment income and other
Curtailment of benefit obligation— 33 Investment income and other
Income tax (expense) benefit(3)Income tax expense
Impact on net income(20)Net income
Total amount reclassified for the period$26 $36 Net income
(1) Accumulated other comprehensive income (loss)
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Deferred Compensation Obligations and Treasury Stock
We maintain a deferred compensation plan whereby certain employees were previously able to elect to defer the gains on stock option exercises by deferring the shares received upon exercise into a rabbi trust. The shares held in this trust are classified as treasury stock, and the liability to participating employees is classified as Deferred compensation obligations within Shareowners’ Equity in the consolidated balance sheets. The number of shares needed to settle the liability for deferred compensation obligations is included in the denominator in both the basic and diluted earnings per share calculations. Employees are generally no longer able to defer the gains from stock options exercised subsequent to December 31, 2004.
Activity in the deferred compensation program for the three months ended March 31, 2023 and 2022 was as follows (in millions):
20232022
Three Months Ended March 31:SharesDollarsSharesDollars
Deferred Compensation Obligations:
Balance at beginning of period$13 $16 
Reinvested dividends— — 
Benefit payments(4)(4)
Balance at end of period$$12 
Treasury Stock:
Balance at beginning of period— $(13)— $(16)
Reinvested dividends— — — — 
Benefit payments— — 
Balance at end of period— $(9)— $(12)

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. SEGMENT INFORMATION
We have two reportable segments: U.S. Domestic Package and International Package, which are together referred to as our global small package operations. Our remaining businesses are reported as Supply Chain Solutions. Global small package operations represent our most significant business and are broken down into regional operations around the world. Regional operations managers are responsible for both domestic and export products within their geographic area. Supply Chain Solutions comprises the results of non-reportable operating segments that do not meet the quantitative and qualitative criteria of a reportable segment as defined under ASC Topic 280 – Segment Reporting.
U.S. Domestic Package
U.S. Domestic Package operations include the time-definite delivery of letters, documents and packages throughout the United States.
International Package
International Package operations include delivery to more than 220 countries and territories worldwide, including shipments wholly outside the United States, as well as shipments with either origin or destination outside the United States. Our International Package reporting segment includes our operations in Europe, Asia, the Indian sub-continent, the Middle East, Africa, Canada and Latin America.
Supply Chain Solutions
Supply Chain Solutions includes our Forwarding, Logistics, Coyote, Marken, UPS Mail Innovations and other businesses. Our Forwarding, Logistics and UPS Mail Innovations businesses provide services in more than 200 countries and territories worldwide and include international air and ocean freight forwarding, customs brokerage, distribution and post-sales services, healthcare logistics, mail and consulting services. Coyote offers truckload brokerage services primarily in the United States. Marken provides supply chain solutions to the life sciences industry. Other businesses within this segment include The UPS Store, UPS Capital, Roadie, and Delivery Solutions.
In evaluating financial performance, we focus on operating profit as a segment’s measure of profit or loss. Operating profit is before investment income (expense) and other, interest expense and income tax expense. Certain expenses are allocated between the segments using activity-based costing methods. These activity-based costing methods require us to make estimates that impact the amount of each expense category that is attributed to each segment. Changes in these estimates directly impact the amount of expense allocated to each segment, and therefore the operating profit of each reporting segment. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses. There were no significant changes to our allocation methodologies in the first quarter.
Results of operations for the three months ended March 31, 2023 and 2022 are as follows (in millions):
 Three Months Ended
 March 31,
 20232022
Revenue:
U.S. Domestic Package$14,987 $15,124 
International Package4,543 4,876 
Supply Chain Solutions3,395 4,378 
Consolidated revenue$22,925 $24,378 
Operating Profit:
U.S. Domestic Package$1,466 $1,662 
International Package828 1,116 
Supply Chain Solutions247 473 
Consolidated operating profit$2,541 $3,251 

 
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. EARNINGS PER SHARE
The earnings per share amounts are the same for class A and class B common shares as the holders of each class are legally entitled to equal per-share distributions whether through dividends or in liquidation.
The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2023 and 2022 (in millions, except per share amounts):
 Three Months Ended
 March 31,
20232022
Numerator:
Net income attributable to common shareowners$1,895 $2,662 
Denominator:
Weighted average shares858 871 
Vested portion of restricted units
Denominator for basic earnings per share862 874 
Effect of dilutive securities:
Restricted units
Stock options
Denominator for diluted earnings per share865 879 
Basic earnings per share$2.20 $3.05 
Diluted earnings per share$2.19 $3.03 
Diluted earnings per share for the three months ended March 31, 2023 and 2022 excluded the effect of 0.2 and 0.1 million shares of common stock that may be issued upon the exercise of employee stock options because such effect would be antidilutive.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT
Risk Management Policies
Changes in fuel prices, interest rates and foreign currency exchange rates impact our results of operations and we actively monitor these exposures. Where deemed appropriate, to manage the impact of these exposures on earnings and/or cash flows, we may enter into a variety of derivative financial instruments. We do not hold or issue derivative financial instruments for trading or speculative purposes.
Credit Risk Management
The forward contracts, swaps and options discussed below contain an element of risk that the counterparties may be unable to meet the terms of the agreements. We seek to minimize such risk exposures for these instruments by limiting the counterparties to banks and financial institutions that meet established credit guidelines. We may further manage credit risk through the use of zero threshold bilateral collateral provisions and/or early termination rights utilizing master netting arrangements, whereby cash is exchanged based on the net fair value of derivatives associated with each counterparty.
As of March 31, 2023 and December 31, 2022, we held cash collateral of $375 and $534 million, respectively, under these agreements. This collateral is included in Cash and cash equivalents in the consolidated balance sheets and is unrestricted. As of March 31, 2023 and December 31, 2022, no collateral was required to be posted with our counterparties.
Types of Hedges
Commodity Risk Management
Currently, the fuel surcharges that we apply in our domestic and international package businesses are the primary means of reducing the risk of adverse fuel price changes on our business. In order to mitigate the impact of fuel surcharges imposed on us by outside carriers, we regularly adjust the rates we charge for our freight brokerage services.
Foreign Currency Risk Management
To protect against the reduction in value of forecasted foreign currency cash flows from our international package business, we maintain a foreign currency cash flow hedging program. Our most significant foreign currency exposures relate to the Euro, British Pound Sterling, Canadian Dollar, Chinese Renminbi and Hong Kong Dollar. We generally designate and account for these contracts as cash flow hedges of anticipated foreign currency denominated revenue.
We also hedge portions of our anticipated cash settlements of principal and interest on certain foreign currency denominated debt. We generally designate and account for these contracts as cash flow hedges of forecasted foreign currency denominated transactions.
We hedge our net investment in certain foreign operations with foreign currency denominated debt instruments.
Interest Rate Risk Management
Our indebtedness under our various financing arrangements creates interest rate risk. We use a combination of derivative instruments as part of our program to manage the fixed and floating interest rate mix of our total debt portfolio and related overall cost of borrowing.
We have designated and account for the majority of our interest rate swaps that convert fixed-rate interest payments into floating-rate interest payments as fair value hedges of the associated debt instruments. We have designated and account for interest rate swaps that convert floating-rate interest payments into fixed-rate interest payments as cash flow hedges of the forecasted payment obligations.
We may periodically hedge the forecasted fixed-coupon interest payments associated with anticipated debt offerings by using forward starting interest rate swaps, interest rate locks or similar derivatives.



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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Outstanding Positions
As of March 31, 2023 and December 31, 2022, the notional amounts of our outstanding derivative positions were as follows (in millions):
 March 31,
2023
December 31,
2022
Currency hedges:
EuroEUR3,880 4,115 
British Pound SterlingGBP776 856 
Canadian DollarCAD1,515 1,598 
Hong Kong DollarHKD4,552 4,261 
Interest rate hedges:
Floating to Fixed Interest Rate SwapsUSD28 28 
As of March 31, 2023 and December 31, 2022, we had no outstanding commodity hedge positions.
Balance Sheet Recognition
The following table indicates the location in the consolidated balance sheets where our derivative assets and liabilities have been recognized, the fair value hierarchy level applicable to each derivative type and the related fair values of those derivatives.
We have master netting arrangements with substantially all of our counterparties giving us the right of offset for our derivative positions. However, we have not elected to offset the fair value positions of our derivative contracts recorded in the consolidated balance sheets. The columns labeled Net Amounts if Right of Offset had been Applied indicate the potential net fair value positions by type of contract and location in the consolidated balance sheets had we elected to apply the right of offset as of March 31, 2023 and December 31, 2022 (in millions):
Fair Value Hierarchy LevelGross Amounts Presented in Consolidated Balance SheetsNet Amounts if Right of
Offset had been Applied
Asset DerivativesBalance Sheet LocationMarch 31,
2023
December 31,
2022
March 31,
2023
December 31,
2022
Derivatives designated as hedges:
Foreign currency exchange contractsOther current assetsLevel 2$143 $174 $135 $171 
Foreign currency exchange contractsOther non-current assetsLevel 2188 250 159 226 
Derivatives not designated as hedges:
Foreign currency exchange contractsOther current assetsLevel 2— — 
Total Asset Derivatives$331 $425 $294 $398 
Fair Value Hierarchy LevelGross Amounts Presented in
Consolidated Balance Sheets
Net Amounts if Right of
Offset had been Applied
Liability DerivativesBalance Sheet LocationMarch 31,
2023
December 31,
2022
March 31,
2023
December 31,
2022
Derivatives designated as hedges:
Foreign currency exchange contractsOther current liabilitiesLevel 2$$$— $— 
Foreign currency exchange contractsOther non-current liabilitiesLevel 229 24 — — 
Interest rate contractsOther non-current liabilitiesLevel 2
Derivatives not designated as hedges:
Foreign currency exchange contractsOther current liabilitiesLevel 2— — 
Total Liability Derivatives$43 $32 $$
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Our foreign currency exchange rate, interest rate and investment market price derivatives are largely comprised of over-the-counter derivatives, which are primarily valued using pricing models that rely on market observable inputs such as yield curves, foreign currency exchange rates and investment forward prices; therefore, these derivatives are classified as Level 2.
Balance Sheet Location of Hedged Item in Fair Value Hedges    
The following table indicates the amounts that were recorded in the consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of March 31, 2023 and December 31, 2022 (in millions):
Line Item in the Consolidated Balance Sheets in Which the Hedged Item is IncludedCarrying Amount
of Hedged Liabilities
Cumulative Amount
of Fair Value Hedge
Adjustments
Carrying Amount
of Hedged Liabilities
Cumulative Amount
 of Fair Value Hedge
Adjustments
March 31, 2023March 31, 2023December 31, 2022December 31, 2022
Long-term debt and finance leases$280 $$280 $
Income Statement and AOCI Recognition of Designated Hedges
The following table indicates the amount of gains (losses) that have been recognized in the statements of consolidated income for fair value and cash flow hedges, as well as the associated gain (loss) for the underlying hedged item for fair value hedges for the three months ended March 31, 2023 and 2022 (in millions):
Three Months Ended March 31,

20232022
Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging RelationshipsRevenueInterest ExpenseInvestment Income and OtherRevenueInterest ExpenseInvestment Income and Other
Gain (loss) on fair value hedging relationships:
Interest Rate Contracts:
Hedged items$— $— $— $— $$— 
Derivatives designated as hedging instruments— — — — (8)— 
Gain (loss) on cash flow hedging relationships:
Interest Rate Contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income— (1)— — (3)— 
Foreign Currency Exchange Contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income68 — — 41 — — 
Total amounts of income and expense line items presented in the statement of income in which the effects of fair value or cash flow hedges are recorded$68 $(1)$— $41 $(3)$— 
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table indicates the amount of gains (losses) that have been recognized in AOCI for the three months ended March 31, 2023 and 2022 for those derivatives designated as cash flow hedges (in millions):
Three Months Ended March 31:
Derivative Instruments in Cash Flow Hedging RelationshipsAmount of Gain (Loss) Recognized in AOCI on Derivatives
20232022
Interest rate contracts$— $
Foreign currency exchange contracts(34)92 
Total$(34)$95 
As of March 31, 2023, there were $130 million of pre-tax gains related to cash flow hedges deferred in AOCI that are expected to be reclassified to income over the 12-month period ending March 31, 2024. The actual amounts that will be reclassified to income over the next 12 months will vary from this amount as a result of changes in market conditions. The maximum term over which we are hedging exposures to the variability of cash flows is approximately 9 years.
The following table indicates the amount of gains (losses) that have been recognized in AOCI within foreign currency translation adjustment for the three months ended March 31, 2023 and 2022 for those instruments designated as net investment hedges (in millions):
Three Months Ended March 31:
Non-derivative Instruments in Net Investment Hedging RelationshipsAmount of Gain (Loss) Recognized in AOCI on Debt
20232022
Foreign currency denominated debt$(73)$46 
Total$(73)$46 
Income Statement Recognition of Non-Designated Derivative Instruments
Derivative instruments that are not designated as hedges are recorded at fair value with unrealized gains and losses reported in earnings each period. Cash flows from the settlement of derivative instruments appear in the statement of consolidated cash flows within the same categories as the cash flows of the hedged item.
We may periodically terminate interest rate swaps and foreign currency exchange forward contracts or enter into offsetting swap and foreign currency positions with different counterparties. As part of this process, we de-designate our original hedge relationship.
Amounts recorded in the statements of consolidated income related to fair value changes and settlements of interest rate swaps and foreign currency forward contracts not designated as hedges for the three months ended March 31, 2023 and 2022 (in millions) were as follows:
Derivative Instruments Not Designated in
Hedging Relationships
Location of Gain (Loss)
Recognized in Income
Amount of Gain (Loss) Recognized in Income
20232022
Three Months Ended March 31:
Foreign currency exchange contractsInvestment income and other$$(28)
Total $$(28)

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. INCOME TAXES
Our effective tax rate for the three months ended March 31, 2023 and 2022 was approximately 24.9% and 21.5%, respectively. The year-over-year increase in our effective tax rate was driven by lower excess tax benefits related to share-based compensation, unfavorable changes in jurisdictional earnings mix and uncertain tax positions.
We have recognized liabilities for uncertain tax positions and we reevaluate these uncertain tax positions on a quarterly basis. A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. Items that may cause changes to unrecognized tax benefits include the allowance or disallowance of deductions, the timing of deductions and the allocation of income and expense between tax jurisdictions. These changes could result from the settlement of ongoing litigation, the completion of ongoing examinations, the expiration of the statute of limitations, or other unforeseen circumstances. Over the next twelve months, it is reasonably possible that the amount of unrecognized tax benefits may decrease by up to $180 million.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. TRANSFORMATION STRATEGY COSTS
We are undertaking an enterprise-wide transformation of our organization. The program includes initiatives, as well as changes in processes and technology, that impact global direct and indirect operating costs.
The table below presents transformation strategy costs for the three months ended March 31, 2023 and 2022 (in millions):
Three Months Ended
 March 31,
20232022
Transformation Strategy Costs:
Compensation and benefits$(12)$33 
Total other expenses15 22 
Total Transformation Strategy Costs$$55 
Income Tax Benefit from Transformation Strategy Costs— (12)
After-Tax Transformation Strategy Costs$$43 
The income tax effects of transformation strategy costs are calculated by multiplying the amount of the adjustments by the statutory tax rates applicable in each tax jurisdiction.
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview
We continue to execute our Customer First, People Led, Innovation Driven strategy by investing to improve the customer experience and drive growth in our targeted customer segments, including small- and medium-sized businesses ("SMBs") and healthcare. We seek to provide industry-leading service to our customers by combining our digital capabilities with our global integrated network.
During the quarter, we continued the expansion of our Digital Access Program and other technology-driven initiatives to make it faster and easier for SMBs to do business with us. We expanded our global footprint of dedicated healthcare facilities, accelerated deployment of our smart package-smart facility technology and continued to pursue initiatives to drive further productivity improvements and better serve our customers.
Macroeconomic headwinds, including global inflation and a decline in U.S. manufacturing production, led to a challenging operating environment in the first quarter of 2023. In the U.S., consumer spending continued to shift towards services and discretionary spending slowed. Internationally, exports out of Asia remained weak and inflationary pressures persisted in Europe. These factors negatively impacted demand for our services, resulting in volume declines in our global small package operations. We anticipate these factors will continue to impact us throughout the remainder of 2023. We may also be negatively impacted by the ongoing negotiation of our labor contract with the Teamsters. For additional information on the status of these negotiations, see note 7 to the accompanying unaudited financial statements.
Notwithstanding the challenging macroeconomic environment in the first quarter, we managed our network with agility, focused on productivity, controlled cost and generated operating profit that was in line with our expectations. Additionally, we returned cash to shareowners through dividends and share repurchases, and continued to make long-term investments to support our strategy.
We have two reportable segments: U.S. Domestic Package and International Package, which are together referred to as our global small package operations. Our remaining businesses are reported as Supply Chain Solutions.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



Highlights of our consolidated results, which are discussed in more detail below, include:
 Three Months Ended
 March 31,
Change
 20232022$%
Revenue (in millions)$22,925 $24,378 $(1,453)(6.0)%
Operating Expenses (in millions)20,384 21,127 (743)(3.5)%
Operating Profit (in millions)$2,541 $3,251 $(710)(21.8)%
Operating Margin11.1 %13.3 %
Net Income (in millions)$1,895 $2,662 $(767)(28.8)%
Basic Earnings Per Share$2.20 $3.05 $(0.85)(27.9)%
Diluted Earnings Per Share$2.19 $3.03 $(0.84)(27.7)%
Operating Days64 64 
Average Daily Package Volume (in thousands)21,989 23,278 (5.5)%
Average Revenue Per Piece$13.74 $13.26 $0.48 3.6 %
Average daily package volume and revenue in our global small package operations decreased, with declines in both commercial and residential shipments, primarily as a result of the macroeconomic conditions described herein.
Operating expenses decreased, driven by a reduction in purchased transportation in Supply Chain Solutions.
Operating profit and operating margin decreased, as revenue declines were greater than operating expense reductions.
We reported net income of $1.9 billion and diluted earnings per share of $2.19. Adjusted diluted earnings per share was $2.20, which includes the after-tax impacts of transformation strategy costs and goodwill impairment charges of $9 million, or $0.01 per diluted share.
In the U.S. Domestic Package segment, revenue declines were driven by lower volume. These were somewhat offset by revenue per piece growth due to improvements in revenue quality and customer mix, together with higher fuel revenue as a result of increases in price per gallon and pricing initiatives. Expenses increased primarily due to higher wages and benefits costs for our union employees, partially offset by lower management compensation expense, increased productivity and declines in purchased transportation costs.
In our International Package segment, revenue declines were driven by lower volume, unfavorable fluctuations in foreign currency exchange rates and declines in demand-related surcharges. These declines were partially offset by the impact of revenue quality initiatives and increased fuel revenue. Expense decreases were primarily driven by favorable currency impacts and the impact of volume declines, partially offset by higher fuel prices.
In Supply Chain Solutions, revenue decreases were driven by volume and market rate declines in Forwarding that were slightly offset by growth in Logistics, including the impact of the Bomi Group acquisition that occurred in the fourth quarter of 2022. Expenses decreased, driven by lower transportation costs in Forwarding. These were partially offset by increases in transportation and other costs within Logistics.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



Supplemental Information - Items Affecting Comparability
We supplement the reporting of our financial information determined under generally accepted accounting principles in the United States ("GAAP") with certain non-GAAP financial measures.
Adjusted financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our adjusted financial measures do not represent a comprehensive basis of accounting and therefore may not be comparable to similarly titled measures reported by other companies.
Adjusted amounts reflect the following (in millions):
Three Months Ended
 March 31,
Non-GAAP Adjustments20232022
Operating Expenses:
Transformation Strategy Costs$$55 
Goodwill and Asset Impairments, and Divestiture Charges— 
Total Adjustments to Operating Expenses$11 $55 
Other Income and (Expense):
Defined Benefit Plan (Gains) Losses$— $(33)
Total Adjustments to Other Income and (Expense)$— $(33)
Total Adjustments to Income Before Income Taxes$11 $22 
Income Tax (Benefit) Expense:
Transformation Strategy Costs$— $(12)
Goodwill and Asset Impairments, and Divestiture Charges(2)— 
Defined Benefit Plan (Gains) Losses— 
Total Adjustments to Income Tax (Benefit) Expense$(2)$(3)
Total Adjustments to Net Income$$19 
Transformation Charges, and Goodwill, Asset Impairment and Divestiture Charges
We supplement the presentation of our operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of charges related to transformation activities, and goodwill, asset impairment and divestiture charges. We believe excluding the impact of these charges better enables users of our financial statements to view and evaluate underlying business performance from the perspective of management. We do not consider these costs when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards. For more information regarding transformation activities, see note 17 to the unaudited, consolidated financial statements. For more information regarding goodwill impairment charges, see note 8 to our unaudited, consolidated financial statements.
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Foreign Currency Exchange Rate Changes and Hedging Activities
We supplement the reporting of revenue, revenue per piece and operating profit with adjusted measures that exclude the period over period impact of foreign currency exchange rate changes and hedging activities. We believe currency-neutral revenue, revenue per piece and operating profit information allows users of our financial statements to understand growth trends in our products and results. We evaluate the performance of International Package and Supply Chain Solutions on this currency-neutral basis.
Currency-neutral revenue, revenue per piece and operating profit are calculated by dividing current period reported U.S. Dollar revenue, revenue per piece and operating profit by the current period average exchange rates to derive current period local currency revenue, revenue per piece and operating profit. The derived amounts are then multiplied by the average foreign currency exchange rates used to translate the comparable results for each month in the prior year period (including the period over period impact of foreign currency hedging activities). The difference between the current period reported U.S. Dollar revenue, revenue per piece and operating profit and the derived current period U.S. Dollar revenue, revenue per piece and operating profit is the period over period impact of currency fluctuations.
Defined Benefit Plan Gains and Losses
We incur certain employment-related expenses associated with pension and postretirement medical benefits. These pension and postretirement medical benefits costs for company-sponsored defined benefit plans are calculated using various actuarial assumptions and methodologies, including discount rates, expected returns on plan assets, healthcare cost trend rates, inflation, compensation increase rates, mortality rates and coordination of benefits with plans not sponsored by UPS. Actuarial assumptions are reviewed on an annual basis, unless circumstances require an interim remeasurement of any of our plans.
We recognize changes in the fair value of plan assets and net actuarial gains and losses in excess of a 10% corridor (defined as 10% of the greater of the fair value of plan assets or the plan's projected benefit obligation), as well as gains and losses resulting from plan curtailments and settlements, for our pension and postretirement defined benefit plans immediately as part of Investment income and other in the statements of consolidated income. We supplement the presentation of our income before income taxes, net income and earnings per share with adjusted measures that exclude the impact of these gains and losses and the related income tax effects. We believe excluding these defined benefit plan gains and losses provides important supplemental information by removing the volatility associated with plan amendments and short-term changes in market interest rates, equity values and similar factors.
During the first quarter of 2022, we amended the UPS Canada Ltd. Retirement Plan to cease future benefit accruals effective December 31, 2023. As a result, we remeasured the plan's assets and benefit obligation resulting in a curtailment gain of $33 million ($24 million after-tax) in the three months ended March 31, 2022.
For additional information, refer to note 7 to the unaudited, consolidated financial statements.
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Results of Operations - Segment Review
The results and discussions that follow are reflective of how management monitors and evaluates the performance of our segments as defined in note 13 to the unaudited, consolidated financial statements.
Certain operating expenses are allocated between our reporting segments using activity-based costing methods. These activity-based costing methods require us to make estimates that impact the amount of each expense category that is attributed to each segment. Changes in these estimates directly impact the amount of expense allocated to each segment and therefore the operating profit of each reporting segment. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses. There were no significant changes to our allocation methodologies in the first quarter of 2023.
We test goodwill and other indefinite-lived intangible assets for impairment annually at July 1st and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the carrying amount may be impaired.
Testing goodwill and other indefinite-lived intangible assets for impairment requires that we make a number of significant assumptions, including assumptions related to future revenues, costs, capital expenditures, working capital and our cost of capital. We are also required to make assumptions relating to our overall business and operating strategy, and the regulatory and market environment.
Our 2022 annual impairment testing of goodwill indicated that the fair value of our Roadie reporting unit remained greater than its carrying value, although this excess was less than 10 percent. The carrying value of goodwill associated with our Roadie reporting unit is $241 million. There were no events or changes in circumstances during the first quarter of 2023 that would indicate the carrying value of Roadie goodwill may be impaired as of the date of this report.
Future actual results, transactions or other events, or changes in estimates or assumptions, whether due to unexpected impacts on our business, our transformation activities, or the continuing evaluation of our business portfolio, could result in an impairment charge in one or more of our reporting units or to our indefinite-lived intangible assets in a future period.
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U.S. Domestic Package
 Three Months Ended March 31,Change
20232022$%
Average Daily Package Volume (in thousands):
Next Day Air1,737 1,945 (10.7)%
Deferred1,139 1,509 (24.5)%
Ground15,796 16,287 (3.0)%
Total Average Daily Package Volume18,672 19,741 (5.4)%
Average Revenue Per Piece:
Next Day Air$22.14 $20.84 $1.30 6.2 %
Deferred16.38 14.70 1.68 11.4 %
Ground11.21 10.66 0.55 5.2 %
Total Average Revenue Per Piece$12.54 $11.97 $0.57 4.8 %
Operating Days in Period64 64 
Revenue (in millions):
Next Day Air$2,461 $2,594 $(133)(5.1)%
Deferred1,194 1,420 (226)(15.9)%
Ground11,332 11,110 222 2.0 %
Total Revenue$14,987 $15,124 $(137)(0.9)%
Operating Expenses (in millions):
Operating Expenses$13,521 $13,462 $59 0.4 %
Transformation Strategy Costs(22)(43)21 (48.8)%
Adjusted Operating Expense$13,499 $13,419 $80 0.6 %
Operating Profit (in millions) and Operating Margin:
Operating Profit $1,466 $1,662 $(196)(11.8)%
Adjusted Operating Profit$1,488 $1,705 $(217)(12.7)%
Operating Margin9.8 %11.0 %
Adjusted Operating Margin9.9 %11.3 %
Revenue
The change in revenue was due to the following factors:
VolumeRates /
Product Mix
Fuel
Surcharge
Total Revenue
Change
Revenue Change Drivers:
First quarter 2023 vs. 2022(5.4)%3.1 %1.4 %(0.9)%
Volume
Average daily volume decreased, with reductions in both residential and commercial shipments as a result of challenging macroeconomic conditions, including high inflation, declines in U.S. manufacturing production and changes in consumer spending. We anticipate a continued decline in average daily volume throughout the remainder of the year.
Business-to-consumer shipments declined 5.5% in the first quarter, driven by the continued shift in consumer spending towards services and a reduction in discretionary spending. We experienced smaller declines in residential volume from SMBs than from our large customers, which was partially due to additional volume generated through our Digital Access Program. Volume from our largest customer declined as we continued to execute within agreed-upon contract terms.
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Business-to-business shipments declined 5.4%, primarily as a result of declines across multiple industry sectors that are sensitive to the macroeconomic factors discussed above. We experienced an increase in returns volume in the first quarter.
Within our Air products, average daily volume decreased across all customer segments. These decreases were driven by customers making cost trade offs and taking advantage of enhanced speed in our ground network. Additionally, continued execution of the agreed-upon contract terms with our largest customer also contributed to the overall decline in air volume.
Ground residential and Ground commercial average daily volume decreases of 2.1% and 4.2%, respectively, were primarily attributable to declines from a number of our large customers due to the economic factors discussed above. Within Ground residential, we experienced growth from SMBs. SurePost volume from our larger customers increased as a result of the shift in volume from our Air products discussed above.
Rates and Product Mix
Revenue per piece in our Air and Ground products increased in the quarter, resulting from base rate increases and additional pricing actions, as well as favorable changes in customer mix. These increases were partially offset by the shift in product mix discussed above. Rates for Air and Ground products increased an average of 6.9% in December 2022. In our Next Day Air and Deferred products, revenue per piece growth was negatively impacted by a reduction in average billable weight per piece.
We anticipate moderate revenue per piece growth in 2023 which is expected to somewhat offset the expected decline in volume as we continue to focus on revenue quality.
Fuel Surcharges
We apply a fuel surcharge on our domestic air and ground services that adjusts weekly. Our air fuel surcharge is based on the U.S. Department of Energy's ("DOE") Gulf Coast spot price for a gallon of kerosene-type fuel, and our ground fuel surcharge is based on the DOE's On-Highway Diesel Fuel price.
Fuel surcharge revenue increased $206 million, driven by increases in price per gallon and increases in fuel surcharges as part of our pricing initiatives, partially offset by the impact of lower volume. We expect a reduction in fuel surcharge through the remainder of 2023 based on the current commodity market outlook and as we wrap fuel pricing initiatives that were introduced last year.
Operating Expenses
Operating expenses and adjusted operating expenses increased. Our pickup and delivery costs and other indirect operating costs increased $39 and $115 million, respectively. These increases were partially offset by cost reductions of $50 million in our integrated air and ground network and a $24 million decrease in package sorting costs in the first quarter of 2023. The overall increase in operating expenses was primarily due to:
Higher employee benefits expense for our union workforce, due to contractual rate increases for contributions to multiemployer benefit plans, as well as increases in workers' compensation and auto liability expenses that were driven by claims experience. Service costs for our company-sponsored pension and postretirement plans decreased, primarily attributable to higher discount rates used to measure the projected benefit obligations of these plans.
Additional facilities coming into service, coupled with inflationary pressures, contributed to cost increases in repairs and maintenance and facility operating costs.
These increases were partially offset by:
Lower compensation expense, primarily resulting from incentive compensation program design changes. Contractual rate increases and cost of living adjustments for our union workforce were somewhat offset by a reduction in direct union labor hours.
Lower purchased transportation costs, primarily due to a reduction in ground volume handled by third-party carriers, and the impact of continued productivity initiatives as we executed within our strategy.
Fuel expense remained relatively flat, as the impact of lower volume for the quarter mostly offset increases in jet fuel, diesel and gasoline prices. We expect fuel expense to continue to decline throughout the remainder of 2023.
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Total cost per piece increased 6.1%, and adjusted cost per piece increased 6.4% in the quarter, for the reasons described above. We anticipate that the cost per piece growth rate will decline through the remainder of 2023 as we manage our costs, adjust our operating network, and as efficiency initiatives are realized.
Operating Profit and Margin
As a result of the factors described above, operating profit decreased $196 million in the first quarter, with operating margin decreasing 120 basis points to 9.8%. Adjusted operating profit decreased $217 million, with adjusted operating margin decreasing 140 basis points to 9.9%.
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International Package
 Three Months Ended
 March 31,
Change
 20232022$%
Average Daily Package Volume (in thousands):
Domestic1,635 1,806 (9.5)%
Export1,682 1,731 (2.8)%
Total Average Daily Package Volume3,317 3,537 (6.2)%
Average Revenue Per Piece:
Domestic$7.59 $7.36 $0.23 3.1 %
Export33.00 34.10 (1.10)(3.2)%
Total Average Revenue Per Piece$20.47 $20.45 $0.02 0.1 %
Operating Days in Period64 64 
Revenue (in millions):
Domestic$794 $851 $(57)(6.7)%
Export3,552 3,778 (226)(6.0)%
Cargo and Other197 247 (50)(20.2)%
Total Revenue$4,543 $4,876 $(333)(6.8)%
Operating Expenses (in millions):
Operating Expenses$3,715 $3,760 $(45)(1.2)%
Transformation Strategy Costs22 (4)26 N/A
Adjusted Operating Expenses$3,737 $3,756 $(19)(0.5)%
Operating Profit (in millions) and Operating Margin:
Operating Profit $828 $1,116 $(288)(25.8)%
Adjusted Operating Profit$806 $1,120 $(314)(28.0)%
Operating Margin18.2 %22.9 %
Adjusted Operating Margin17.7 %23.0 %
Currency Benefit / (Cost) – (in millions)*:
Revenue$(161)
Operating Expenses110 
Operating Profit$(51)
* Net of currency hedging; amount represents the change in currency translation compared to the prior year.
Revenue
The change in revenue was due to the following:
VolumeRates /
Product Mix
Fuel
Surcharge
CurrencyTotal Revenue
Change
Revenue Change Drivers:
First quarter 2023 vs. 2022(6.2)%1.5 %1.2 %(3.3)%(6.8)%
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Volume
Average daily volume decreased in both domestic and export products. Volume from both large customers and SMBs declined, primarily in the retail and technology sectors. Business-to-consumer volume decreased 7.7% as challenging global economic conditions, including rising interest rates, high inflation and geopolitical uncertainty, impacted consumer demand. These factors also impacted business-to-business volume, which decreased 5.6%. We anticipate declines in average daily volume will moderate, but will persist into the second half of 2023.
Export volume decreased in the quarter, driven by declines in intra-Europe, Asia and U.S. trade lanes. Declines on the intra-Europe and U.S. export trade lanes were due to lower consumer spending as a result of the challenging macroeconomic conditions. Asia volume declines were highest on the Asia to U.S. trade lane as a result of rising inventory levels and softening U.S. consumer demand.
Our premium products saw volume decline 6.7%, primarily in our Worldwide Express Saver product. Volume in our non-premium products decreased 1.1%, driven by declines in Transborder Standard and Worldwide Expedited. The decline in our Worldwide products was largely attributable to softening import demand from U.S. consumers, while the decline in our Transborder products was driven by the economic factors outlined above.
Domestic volume also declined in the first quarter, primarily within Europe and Canada, as a result of economic conditions discussed above.
Rates and Product Mix
In December 2022, we implemented an average 6.9% net increase in base and accessorial rates for international shipments originating in the United States. Rate changes for shipments originating outside the U.S. are made throughout the year and vary by geographic market.
Total revenue per piece increased slightly for the quarter, primarily due to favorable shifts in customer and product mix, fuel surcharges and base rate increases. These increases were mostly offset by unfavorable currency movements and declines in demand-related surcharges. Excluding the impact of currency, revenue per piece increased 3.8%. For the remainder of the year, we expect overall revenue per piece to decrease relative to prior year periods as trends in fuel and demand-related surcharges are expected to continue to be unfavorable.
Export revenue per piece decreased 3.2%, driven by declines in our Worldwide products and unfavorable currency movements. Excluding the impact of currency, export revenue per piece decreased 0.4%.
Domestic revenue per piece increased 3.1%, primarily due to rate increases and favorable shifts in customer mix. This was partially offset by unfavorable currency movements. Excluding the impact of currency, domestic revenue per piece increased 10.2%.
Fuel Surcharges
The fuel surcharge we apply to international air services originating inside or outside the U.S. is largely indexed to the DOE's Gulf Coast spot price for a gallon of kerosene-type jet fuel. The fuel surcharges for ground services originating outside the U.S. are indexed to fuel prices in the region or country where the shipment originates.
Total international fuel surcharge revenue increased $28 million in the quarter, primarily due to increases in price per gallon. These increases were slightly offset by unfavorable currency movements and volume declines. Based on the current commodity market outlook, we expect fuel surcharge revenue will decline during the remainder of the year.
Operating Expenses
Operating expenses, and adjusted operating expenses, decreased in the first quarter. The principal drivers were:
Pickup and delivery costs decreased $21 million and other indirect costs decreased $22 million as inflationary pressures were more than offset by favorable currency movements and the impact of volume declines.
The costs of operating our integrated international air and ground network increased $26 million, primarily due to higher fuel prices, which we expect to decline through the remainder of the year.
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Operating Profit and Margin
As a result of the factors described above, operating profit decreased $288 million for the first quarter, with operating margin decreasing 470 basis points to 18.2%. Adjusted operating profit decreased $314 million in the quarter, while adjusted operating margin decreased 530 basis points to 17.7%.
Substantially all of our operations in Russia and Belarus were suspended in March 2022 and, during the first quarter of 2023, we commenced liquidation of our Small Package and Forwarding and Logistics subsidiaries. Substantially all of our operations in Ukraine remain indefinitely suspended. These actions have not had, and are not expected to have, a material impact on us.
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Supply Chain Solutions
 Three Months Ended
 March 31,
Change
 20232022$%
Revenue (in millions):
Forwarding$1,514 $2,589 $(1,075)(41.5)%
Logistics1,410 1,251 159 12.7 %
Other471 538 (67)(12.5)%
Total Revenue$3,395 $4,378 $(983)(22.5)%
Operating Expenses (in millions):
Operating Expenses$3,148 $3,905 $(757)(19.4)%
Transformation Strategy Costs(3)(8)(62.5)%
Goodwill and Asset Impairments, and Divestiture Charges(8)— (8)N/A
Adjusted Operating Expenses:$3,137 $3,897 $(760)(19.5)%
Operating Profit (in millions) and Operating Margin:
Operating Profit $247 $473 $(226)(47.8)%
Adjusted Operating Profit$258 $481 $(223)(46.4)%
Operating Margin7.3 %10.8 %
Adjusted Operating Margin7.6 %11.0 %
Currency Benefit / (Cost) – (in millions)*:
Revenue$(50)
Operating Expenses55 
Operating Profit$
* Amount represents the change in currency translation compared to the prior year.
 Three Months Ended
 March 31,
Change
 20232022$%
Adjustments to Operating Expenses (in millions):
Transformation Strategy Costs
Forwarding$$$(5)(83.3)%
Logistics100.0 %
Other— (1)(100.0)%
Total Transformation Strategy Costs$$$(5)(62.5)%
Goodwill and Asset Impairments, and Divestiture Charges
Forwarding$$— $N/A
Logistics— — — N/A
Other— — — N/A
Total Goodwill and Asset Impairments, and Divestitures Charges$$— $N/A
Total Adjustments to Operating Expenses$11 $$37.5 %
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Revenue
Total revenue in Supply Chain Solutions decreased in the first quarter. This was driven by declines in our Forwarding business as challenging economic conditions drove declines in customer activity, while increased capacity led to lower market rates.
International airfreight revenue decreased approximately $415 million as customer demand declined, particularly on Asia export lanes. This volume decline also resulted in a reduction in the rates we charge for services. We anticipate that lower demand, coupled with higher market capacity, will continue to pressure rates throughout the remainder of the year.
Revenue in our truckload brokerage business decreased $403 million due to lower volume and a continued decline in market rates. We remained focused on our revenue quality initiatives and experienced volume growth from SMBs during the quarter, which partially offset the decline.
The remaining reduction in revenue was attributable to ocean freight forwarding. Market rates and volume declined, particularly on the Asia to U.S. lane, due to lower demand, an increase in inventory levels and additional capacity entering the market. We expect revenue to remain challenged in the rest of 2023 as capacity increases are expected to outweigh demand.
Within our Logistics businesses, healthcare logistics revenue increased $98 million in the first quarter, primarily driven by the impact of the 2022 acquisition of Bomi Group with additional growth from our clinical trials business. Revenue in mail services increased $55 million as a result of volume from new customers, rate increases, and a favorable shift in product characteristics.
Revenue from the other businesses within Supply Chain Solutions decreased in the quarter, driven by a reduction of $85 million in transition services provided to the acquirer of UPS Freight as we begin to wind down these arrangements. This was partially offset by year-over-year revenue increases from our digital businesses, driven by business growth.
Operating Expenses
Total operating expenses and total adjusted operating expenses for Supply Chain Solutions decreased in the quarter.
Forwarding operating expenses decreased $881 million. This primarily resulted from a reduction of approximately $845 million in purchased transportation expense due to lower volumes and market rates in truckload brokerage, international airfreight and ocean freight forwarding. We expect these conditions to persist as we move through the year, which will reduce our purchased transportation costs.
Logistics operating expenses increased $155 million in the first quarter, driven by the impact of the acquisition of Bomi Group and higher purchased transportation costs for mail services due to rate increases and shifts in product characteristics.
Expenses in the other businesses within Supply Chain Solutions decreased in the quarter, largely driven by a reduction in costs incurred to procure transportation for, and provide transition services to, the acquirer of UPS Freight. This was partially offset by increased transportation costs, as well as higher compensation and benefits, incurred by our digital businesses.
Operating Profit and Margin
As a result of the factors described above, total operating profit decreased $226 million, with operating margin decreasing 350 basis points to 7.3%. On an adjusted basis, operating profit decreased $223 million, with operating margin decreasing 340 basis points to 7.6%.
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Consolidated Operating Expenses
 Three Months Ended
 March 31,
Change
 20232022$%
Operating Expenses (in millions):
Compensation and benefits$11,462 $11,601 $(139)(1.2)%
Transformation Strategy Costs12 (33)45 N/A
Adjusted Compensation and benefits$11,474 $11,568 $(94)(0.8)%
Repairs and maintenance$725 $701 $24 3.4 %
Depreciation and amortization834 764 70 9.2 %
Purchased transportation3,543 4,607 (1,064)(23.1)%
Fuel1,271 1,220 51 4.2 %
Other occupancy551 501 50 10.0 %
Other expenses1,998 1,733 265 15.3 %
Total Other expenses8,922 9,526 (604)(6.3)%
Transformation Strategy Costs(15)(22)(31.8)%
Goodwill and Asset Impairments, and Divestiture Charges(8)— (8)N/A
Adjusted Total Other expenses$8,899 $9,504 $(605)(6.4)%
Total Operating Expenses$20,384 $21,127 $(743)(3.5)%
Adjusted Total Operating Expenses$20,373 $21,072 $(699)(3.3)%
Currency (Benefit) / Cost - (in millions)*$(165)
* Amount represents the change in currency translation compared to the prior year.
 Three Months Ended
 March 31,
Change
 20232022$%
Adjustments to Operating Expenses (in millions):
Transformation Strategy Costs
Compensation$$16 $(11)(68.8)%
Benefits(17)17 (34)N/A
Other expenses15 22 (7)(31.8)%
Total Transformation Strategy Costs$$55 $(52)(94.5)%
Goodwill and Asset Impairments, and Divestiture Charges
Other expenses$$— $N/A
Total Adjustments to Operating Expenses$11 $55 $(44)(80.0)%
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Compensation and Benefits
Total compensation and benefits and adjusted total compensation and benefits decreased in the first quarter of 2023 compared to the 2022 period. Compensation costs decreased $178 million, and decreased $168 million on an adjusted basis. The principal factors impacting the change were:
Management compensation decreased $206 million, driven by fourth quarter 2022 design changes to our incentive compensation programs and lower incentive compensation accruals.
U.S. Domestic direct labor costs increased $57 million due to contractual rate increases for our union workforce that occurred in August 2022, as well as cost of living adjustments driven by inflation and other market factors. These increases were largely offset by a reduction in labor hours, primarily due to volume declines.
The November 2022 acquisition of Bomi Group increased compensation cost by $15 million.
Benefits costs increased $39 million and increased $74 million on an adjusted basis, primarily as a result of:
Health and welfare costs increased $89 million for the quarter, driven by increased contributions to multiemployer plans as a result of contractually-mandated rate increases, partially offset by a reduction in eligible headcount.
Workers' compensation expense increased $23 million, driven by an increase in current year claims, partially offset by a decrease in overall hours worked and favorable developments in reserves for prior years' claims.
Pension and other postretirement benefits costs decreased $48 million for the quarter:
The cost of company-sponsored defined benefit plans decreased $110 million, driven by a reduction in service cost due to higher discount rates. The cessation of accruals for future service in the UPS Retirement Plan was offset by the cost of replacement contributions to the UPS 401(k) Savings Plan.
An increase in expense for the UPS 401(k) Savings Plan of $22 million resulted from demographic changes.
Contributions to multiemployer plans increased $39 million as the impact of contractually-mandated contribution increases was partially offset by a reduction in eligible headcount.
Repairs and Maintenance
The increase in repairs and maintenance expense during the quarter was primarily due to increases in the cost of materials and supplies, increased vehicle maintenance and an increase in routine repairs to buildings and facilities. We expect these increases will persist for the remainder of 2023.
Depreciation and Amortization
We incurred higher depreciation and amortization expense as a result of additional facilities coming into service, growth in the size of our vehicle and aircraft fleets and the reduction in estimated residual value of our MD-11 aircraft.
Purchased Transportation
Third-party transportation expense charged to us by air, ocean and ground carriers decreased for the quarter. The changes were primarily driven by:
Supply Chain Solutions expense decreased by $890 million for the quarter, driven by volume declines and lower market rates paid for services in our Forwarding businesses. This was partially offset by increases in our logistics operations due to business growth, third-party rate increases in our mail services business and the acquisition of Bomi Group, which was not present in the comparative period.
U.S. Domestic expense decreased $99 million for the quarter, driven by a reduction in ground volume handled by third-party carriers as a result of our network optimization initiatives.
International Package expense decreased $75 million for the quarter, as market rate and fuel surcharge increases were more than offset by the impact of lower volumes and favorable currency movements.
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Fuel
The increase in fuel expense for the quarter was primarily driven by higher prices for jet fuel, diesel and gasoline, partially offset by the impact of lower volume. Market prices and the manner in which we purchase fuel influence our costs. The majority of our fuel purchases utilize index-based pricing formulas plus or minus a fixed locational/supplier differential. While many of the indices are correlated, each index may respond differently to changes in underlying prices, which in turn can drive variability in our costs.
Other Occupancy
Other occupancy expense increased for the quarter as a result of additional operating facilities coming into service, higher utilities costs and increases in rental rates. We expect inflation may continue to adversely impact these costs for the remainder of the year.
Other Expenses
Other expenses and adjusted other expenses increased for the quarter, primarily as a result of:
Outsourcing and professional fees increased $60 million due to increased utilization of third-party services to support our strategic initiatives.
An increase of $39 million in commissions paid for certain online shipments.
Favorable changes in reserves for legal and tax contingencies in 2022 drove a year-over-year increase in expense of $29 million.
Hosted software application fees and other technology costs increased $28 million in support of ongoing investments in our digital transformation.
Other increases for the quarter included employee-related expenses, advertising costs, facility security and self-insured automobile liability expense. These increases were partially offset by a reduction of costs incurred under transitional service agreements to the acquirer of UPS Freight.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



Other Income and (Expense)
The following table sets forth investment income and other and interest expense for the three months ended March 31, 2023 and 2022 (in millions):
 Three Months Ended
 March 31,
Change
 20232022$%
Investment Income and Other$169 $315 $(146)(46.3)%
Defined Benefit Plan (Gains) Losses— (33)33 (100.0)%
Adjusted Investment Income and Other$169 $282 $(113)(40.1)%
Interest Expense(188)(174)(14)8.0 %
Total Other Income and (Expense)$(19)$141 $(160)(113.5)%
Adjusted Other Income and (Expense)$(19)$108 $(127)(117.6)%
Investment Income and Other
Investment income and other decreased $146 million. We recognized a $33 million defined benefit plan curtailment gain in the first quarter of 2022. Excluding the impact of this defined benefit plan gain, adjusted investment income and other decreased $113 million, with decreases in other pension income partially offset by higher yields on invested balances and year-over-year changes in the fair value of certain non-current investments.
Other pension income decreased $232 million due to:
Lower expected returns on pension assets as a result of a smaller asset base due to losses in 2022, partially offset by an increase in our rate of return assumption.
Higher pension interest cost due to higher discount rates and changes in demographic assumptions.
Interest expense increased due to the impact of higher effective interest rates on floating rate debt, as well as higher debt balances due to debt issuances in the first quarter of 2023, partially offset by higher capitalized interest.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



Income Tax Expense
The following table sets forth our income tax expense and effective tax rate for the three months ended March 31, 2023 and 2022 (in millions):
 Three Months Ended
 March 31,
Change
 20232022$%
Income Tax Expense$627 $730 $(103)(14.1)%
   Income Tax Impact of:
Transformation Strategy Costs— 12 (12)(100.0)%
Goodwill and Asset Impairments, and Divestiture Charges— N/A
Defined Benefit Plan (Gains) Losses— (9)(100.0)%
Adjusted Income Tax Expense$629 $733 $(104)(14.2)%
Effective Tax Rate24.9 %21.5 %
Adjusted Effective Tax Rate24.8 %21.5 %
For additional information on our income tax expense and effective tax rate, see note 16 to the unaudited, consolidated financial statements.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



Liquidity and Capital Resources
We deploy a disciplined and balanced approach to capital allocation, including returns to shareowners through dividends and share repurchases. As of March 31, 2023, we had $9.4 billion in cash, cash equivalents and marketable securities. We believe that these positions, expected cash from operations, access to commercial paper programs and capital markets and other available liquidity options will be adequate to fund our material short- and long-term cash requirements, including our business operations, planned capital expenditures and pension contributions, transformation strategy costs, debt obligations and planned shareowner returns. We regularly evaluate opportunities to optimize our capital structure, including through issuances of debt to refinance existing debt and to fund operations.
Cash Flows From Operating Activities
The following is a summary of the significant sources (uses) of cash from operating activities (in millions):
 Three Months Ended March 31,
 20232022
Net income$1,895 $2,662 
Non-cash operating activities (a)
1,226 1,559 
Pension and postretirement medical benefit plan contributions (company-sponsored plans)(1,277)(45)
Hedge margin receivables and payables(159)(9)
Income tax receivables and payables426 379 
Changes in working capital and other non-current assets and liabilities278 (49)
Other operating activities(32)(17)
Net cash from operating activities$2,357 $4,480 
___________________ 
(a)Represents depreciation and amortization, gains and losses on derivative transactions and foreign currency exchange, deferred income taxes, allowances for expected credit losses, amortization of operating lease assets, pension and postretirement medical benefit plan (income) expense, stock compensation expense, changes in casualty self-insurance reserves, goodwill and other asset impairment charges and other non-cash items.
Net cash from operating activities decreased $2.1 billion in the first quarter, impacted by:
The timing of contributions to our company-sponsored, defined benefit pension and postretirement medical plans that included $1.2 billion in discretionary contributions to our qualified U.S. pension plans. There were no discretionary contributions to these plans in the first quarter of 2022.
A decrease in our net hedge margin collateral position due to changes in the fair value of derivative contracts used in our currency hedging programs.
Our working capital primarily benefited from an improvement in collections partially offset by an increase in vendor payments. Working capital was also impacted by the timing of payroll and other compensation-related payments. Additionally, in the first quarter of 2023, we paid the remaining $323 million of employer payroll taxes that were deferred under the Coronavirus Aid, Recovery and Economic Security (CARES) Act in 2020.
As of March 31, 2023, approximately $2.5 billion of our total worldwide holdings of cash, cash equivalents and marketable securities were held by foreign subsidiaries. The amount of cash, cash equivalents and marketable securities held by our U.S. and foreign subsidiaries fluctuates throughout the year due to a variety of factors, including the timing of cash receipts and disbursements in the normal course of business. Cash provided by operating activities in the U.S. continues to be our primary source of funds to finance domestic operating needs, capital expenditures, share repurchases, pension contributions and dividend payments to shareowners. All cash, cash equivalents and marketable securities held by foreign subsidiaries are generally available for distribution to the U.S. without any U.S. federal income taxes. Any such distributions may be subject to foreign withholding and U.S. state taxes. When amounts earned by foreign subsidiaries are expected to be indefinitely reinvested, no accrual for taxes is provided. We did not have any restricted cash as of March 31, 2023 or 2022.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



Cash Flows From Investing Activities
Our primary sources (uses) of cash from investing activities were as follows (in millions):
 Three Months Ended March 31,
 20232022
Net cash used in investing activities$(1,813)$(572)
Capital Expenditures:
Buildings, facilities and plant equipment$(368)$(169)
Aircraft and parts(71)(206)
Vehicles(13)(10)
Information technology(157)(163)
Total Capital Expenditures(1)
$(609)$(548)
Capital Expenditures as a % of revenue2.7 %2.2 %
Other Investing Activities:
Proceeds from disposal of businesses, property, plant and equipment$$— 
Net (purchases)/sales and maturities of marketable securities$(1,192)$(8)
Acquisitions, net of cash acquired$(34)$
Other investing activities$17 $(17)
(1) In addition to capital expenditures of $609 and $548 million for the three months ended March 31, 2023 and 2022, respectively, there were principal repayments of finance lease obligations of $48 and $18 million, respectively. These are included in cash flows from financing activities.
We have commitments for the purchase of aircraft, vehicles, equipment and real estate to provide for the replacement of existing capacity and anticipated future growth. Future capital spending for anticipated growth and replacement assets will depend on a variety of factors, including economic and industry conditions. Our current investment program anticipates investments in technology initiatives and enhanced network capabilities, including over $1.0 billion of projects to support our environmental sustainability goals. It also provides for the maintenance of buildings, facilities and equipment and replacement of certain aircraft within our fleet. We currently expect that our capital expenditures will total approximately $5.3 billion in 2023, of which approximately 50 percent will be allocated to strategic expansion projects.
Total capital expenditures increased in the first quarter of 2023 compared to the 2022 period, primarily due to increased spending on buildings, facilities and plant equipment for facility maintenance and capacity expansion projects. This was partially offset by a decrease in expenditures associated with the delivery of aircraft.
Net purchases of marketable securities increased due to a continued shift to longer duration investments.
Cash paid for acquisitions in the first quarter of 2023 was related to the purchase of development areas for The UPS Store. Other investing activities were impacted by changes in our non-current investments, purchase contract deposits and various other immaterial items.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



Cash Flows From Financing Activities
Our primary sources (uses) of cash from financing activities were as follows (amounts in millions, except per share data):
 Three Months Ended March 31,
20232022
Net cash from/(used in) financing activities$$(1,970)
Share Repurchases:
Cash paid to repurchase shares(751)(254)
Number of shares repurchased(4.1)(1.2)
Shares outstanding at period end859 874 
Dividends:
Dividends declared per share$1.62 $1.52 
Cash paid for dividends$(1,348)$(1,284)
Borrowings:
Net borrowings (repayments) of debt principal$2,438 $(18)
Other Financing Activities:
Cash received for common stock issuances$49 $67 
Other financing activities$(384)$(481)
Capitalization:
Total debt outstanding at period end$22,188 $21,881 
Total shareowners’ equity at period end20,053 15,434 
Total capitalization$42,241 $37,315 
We repurchased 4.1 and 1.2 million shares of class B common stock for $750 million and $260 million under our stock repurchase program during the three months ended March 31, 2023 and 2022, respectively ($751 and $254 million in repurchases for 2023 and 2022, respectively, are reported on the statements of consolidated cash flows due to the timing of settlements). We anticipate our share repurchases will total approximately $3.0 billion in 2023. For additional information on our share repurchase activities, see note 12 to the unaudited, consolidated financial statements.
The declaration of dividends is subject to the discretion of the Board and depends on various factors, including our net income, financial condition, cash requirements, future prospects and other relevant factors. In the first quarter of 2023, we increased our quarterly cash dividend from $1.52 to $1.62 per share.
Issuances of debt during the three months ended March 31, 2023 consisted of fixed and floating rate senior notes of varying maturities totaling $2.5 billion. We expect to use substantially all of the proceeds from these debt issuances to repay outstanding debt at maturity in 2023. There were no issuances of debt in the first quarter of 2022.
Repayments of debt in the first quarter of 2023 included scheduled principal payments on our finance lease obligations and payment of amounts assumed in the Bomi Group acquisition. In the first quarter of 2022, we made scheduled principal payments on our finance lease obligations.
As of March 31, 2023, we had $2.3 billion of fixed- and floating-rate senior notes outstanding that mature in 2023. We repaid $1.5 billion of these senior notes in April 2023. We consider the overall fixed and floating interest rate mix of our portfolio and the related overall cost of borrowing when planning for future issuances and non-scheduled repayments of debt.
The variation in cash received from common stock issuances resulted from activity within the UPS 401(k) Savings Plan and our employee stock purchase plan in both the current and comparative period.
Other financing activities includes cash used to repurchase shares to satisfy tax withholding obligations on vested employee stock awards. Cash outflows for this purpose were $363 and $479 million for the three months ended March 31, 2023 and 2022, respectively. The decrease was driven by changes in required repurchase amounts.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



Except as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, we do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity.
Sources of Credit
See note 9 to the unaudited, consolidated financial statements for a discussion of our available credit and the financial covenants that we are subject to as part of our credit agreements.
Contractual Commitments
There have been no material changes to the contractual commitments described in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.
For additional information on the first quarter 2023 debt issuances, see note 9 to the unaudited, consolidated financial statements.
Legal Proceedings and Contingencies
See note 7 and note 11 to the unaudited, consolidated financial statements for a discussion of judicial proceedings and other matters arising from the conduct of our business activities, and note 16 for a discussion of income tax related matters.
Collective Bargaining Agreements
Status of Collective Bargaining Agreements
See note 7 to the unaudited, consolidated financial statements for a discussion of the status of our collective bargaining agreements.
Multiemployer Benefit Plans
See note 7 to the unaudited, consolidated financial statements for a discussion of our participation in multiemployer benefit plans.
Recent Accounting Pronouncements
Adoption of New Accounting Standards
See note 2 to the unaudited, consolidated financial statements for a discussion of recently adopted accounting standards.
Accounting Standards Issued But Not Yet Effective
See note 2 to the unaudited, consolidated financial statements for a discussion of accounting standards issued, but not yet effective.
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Item 3.Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in certain commodity prices, foreign currency exchange rates, interest rates and equity prices. All of these market risks arise in the normal course of business, as we do not engage in speculative trading activities. In order to manage the risk arising from these exposures, we may utilize a variety of commodity, foreign currency exchange and interest rate forward contracts, options and swaps. A discussion of our accounting policies for derivative instruments and further disclosures are provided in note 15 to the unaudited, consolidated financial statements.
The total net fair value asset (liability) of our derivative financial instruments is summarized in the following table (in millions):
March 31,
2023
December 31,
2022
Currency Derivatives$293 $398 
Interest Rate Derivatives(5)(5)
$288 $393 
As of March 31, 2023 and December 31, 2022, we had no outstanding commodity hedge positions.
The information concerning market risk in Item 7A under the caption "Quantitative and Qualitative Disclosures about Market Risk" of our Annual Report on Form 10-K for the year ended December 31, 2022 is incorporated herein by reference.
Our market risks, hedging strategies and financial instrument positions as of March 31, 2023 have not materially changed from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. In the first quarter of 2023, we entered into foreign currency exchange forward contracts on the Euro, British Pound Sterling, Canadian Dollar and Hong Kong Dollar, and had forward contracts expire. The fair value changes between December 31, 2022 and March 31, 2023 in the preceding table are primarily due to interest rate and foreign currency exchange rate fluctuations between those dates.
The foreign currency exchange forward contracts, swaps and options previously discussed contain an element of risk that the counterparties may be unable to meet the terms of the agreements; however, we seek to minimize such risk exposures for these instruments by limiting the counterparties to banks and financial institutions that meet established credit guidelines and by monitoring counterparty credit risk to prevent concentrations of credit risk with any single counterparty.
We have agreements with all of our active counterparties (covering all of our derivative positions) containing early termination rights and/or zero threshold bilateral collateral provisions whereby cash is required based on the net fair value of derivatives associated with those counterparties. Events such as a credit rating downgrade (depending on the ultimate rating level) could also allow us to take additional protective measures such as the early termination of trades. As of March 31, 2023, we held cash collateral of $375 million and were not required to post cash collateral with our counterparties under these agreements. We have not historically incurred, and do not expect to incur in the future, any losses as a result of counterparty default.
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Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, management, including our Principal Executive Officer and Principal Financial and Accounting Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")). Based upon, and as of the date of, the evaluation, our Principal Executive Officer and Principal Financial and Accounting Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION

Item 1.Legal Proceedings
For a discussion of material legal proceedings affecting the Company, see note 11 to the unaudited, consolidated financial statements included in this report.
Item 1A.Risk Factors
There have been no material changes to the risk factors described in Part 1, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2022. The occurrence of any of the risks described therein could materially affect us, including impacting our business, financial condition, results of operations, stock price or credit rating, as well as our reputation. These risks are not the only ones we face. We could also be materially adversely affected by other events, factors or uncertainties that are unknown to us, or that we do not currently consider to be material.
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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
(c) A summary of repurchases of our class A and class B common stock during the first quarter of 2023 is as follows (in millions, except per share amounts):
Total Number of Shares Purchased (1)
Average Price Paid Per ShareTotal Number of Shares Purchased as Part of a Publicly Announced ProgramApproximate Dollar Value of Shares that May Yet be Purchased Under the Program
January 1 - January 31, 20230.5 $178.40 0.5 $4,985 
February 1 - February 28, 20233.3 182.69 3.3 4,393 
March 1 - March 31, 20230.3 182.69 0.3 $4,332 
Total January 1 - March 31, 20234.1 $182.12 4.1 
___________________ 
(1)Includes shares repurchased through our publicly announced share repurchase programs and shares tendered to pay the exercise price and tax withholding on employee stock options.
We repurchased 4.1 million shares of class B common stock for $750 million during the three months ended March 31, 2023. These repurchases were completed as follows:
In August 2021, the Board of Directors approved a share repurchase authorization of $5.0 billion of class A and class B common stock (the "2021 Authorization"). During the three months ended March 31, 2023, we repurchased 0.5 million shares of class B common stock for $82 million under this authorization.
In January 2023, the Board of Directors terminated the 2021 Authorization and approved a new share repurchase authorization of $5.0 billion for class A and class B common stock. During the three months ended March 31, 2023, we repurchased 3.6 million shares of class B common stock for $668 million under this authorization.
We anticipate repurchasing approximately $3.0 billion in shares in 2023.
For additional information on our share repurchase activities, see note 12 to the unaudited, consolidated financial statements.
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Item 6. Exhibits
3.1
3.2
4.01
4.02
4.03
10.1
10.2
10.3
10.4
31.1
31.2
32.1
32.2
101
The following unaudited financial information from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 is formatted in Inline XBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Statements of Consolidated Income, (iii) the Statements of Consolidated Comprehensive Income (Loss), (iv) the Statements of Consolidated Cash Flows, and (v) the Notes to the Consolidated Financial Statements.
104
Cover Page Interactive Data File - The cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 is formatted in Inline XBRL (included as Exhibit 101).
__________________________
*
Management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements 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.
 
 
UNITED PARCEL SERVICE, INC.
(Registrant)
Date:May 3, 2023By:  /s/ BRIAN O. NEWMAN
  Brian O. Newman
  Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)


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