UNITED PARCEL SERVICE INC - Quarter Report: 2024 September (Form 10-Q)

There is no expected dividend yield as units earn dividend equivalents.

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

period with approximately % 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 years after the date of the grant. On March 20, 2024, we granted million stock options at an exercise price of $, the New York Stock Exchange closing price on that date. % %Risk-free interest rate % %Expected life (in years)Expected volatility % %

Weighted-average fair value of options granted

$ $

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

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NOTE 5.

$— $— $ Total trading marketable securities — — Current available-for-sale securities:U.S. government and agency debt securities () Mortgage and asset-backed debt securities Corporate debt securities Non-U.S. government debt securities Total available-for-sale marketable securities () Total current marketable securities$ $ $()$ CostUnrealized
GainsUnrealized
LossesEstimated
Fair ValueDecember 31, 2023:Current trading marketable securities:Equity securities$ $— $— $ Total trading marketable securities — — Current available-for-sale securities:U.S. government and agency debt securities () Mortgage and asset-backed debt securities Corporate debt securities () Non-U.S. government debt securities

Investment Impairments

We have concluded that no material impairment losses existed within marketable securities as of September 30, 2024. 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

$ Due after one year through three years Due after three years through five years Due after five years Equity securities $ $

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: Equity securities accounted for under the equity method had a carrying value of $ and $ million as of September 30, 2024 and December 31, 2023, 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. Equity securities accounted for under the measurement alternative had a carrying value of $ million as of both September 30, 2024 and December 31, 2023.

•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 $ and $ million as of September 30, 2024 and December 31, 2023, respectively.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

$ $ $ Mortgage and asset-backed debt securities Corporate debt securities Equity securities Non-U.S. government debt securities Total marketable securities

Other non-current investments(1)

Total$ $ $ $

(1) Represents a variable life insurance policy funding benefits for the UPS Excess Coordinating Benefit Plan.

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total

December 31, 2023:

Marketable Securities:

U.S. government and agency debt securities

Mortgage and asset-backed debt securities

Corporate debt securities

Equity securities

Non-U.S. government debt securities

Total marketable securities

Other non-current investments(1)

Total

(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 nine months ended September 30, 2024 or 2023.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6.

$ Aircraft Land Buildings Building and leasehold improvements Plant equipment Technology equipment Construction-in-progress Less: Accumulated depreciation and amortization()()Property, Plant and Equipment, Net$ $

Property, plant and equipment purchased on account was $ and $ million as of September 30, 2024 and December 31, 2023, respectively.

There were no material impairment charges for the three or nine months ended September 30, 2024 or 2023.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7.

$ $ $ $ $ Interest cost Expected return on assets()()()()()()Amortization of prior service cost

Net periodic benefit cost

$ $ $ $ $ $ U.S. Pension BenefitsU.S. Postretirement
Medical BenefitsInternational
Pension Benefits202420232024202320242023Nine Months Ended September 30:Service cost$ $ $ $ $ $ Interest cost Expected return on assets()()()()()()Amortization of prior service cost

Net periodic benefit cost

$ $ $ $ $ $

Service cost and the remaining components of net periodic benefit cost are presented within Compensation and benefits and Investment income and other, respectively, in our statements of consolidated income.

During the nine months ended September 30, 2024, we contributed $ billion and $ million to our company-sponsored pension and U.S. postretirement medical benefit plans, respectively. We expect to contribute approximately $ and $ million over the remainder of the year to our company-sponsored 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 contribution rates to the plans that we participate in, and we are in compliance with these contribution rates.

As of September 30, 2024 and December 31, 2023, we had $ and $ million, respectively, recorded in Other Non-Current Liabilities in our consolidated balance sheets and $ million as of both September 30, 2024 and December 31, 2023 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 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 September 30, 2024 and December 31, 2023 was $ and $ 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.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

billion was paid to the CSPF by 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 31 measurement date. As of December 31, 2023, 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 employees in the U.S. employed under a national master agreement and various supplemental agreements with local unions affiliated with the IBT. These agreements are scheduled to expire on July 31, 2028.

We have approximately employees in Canada employed under a collective bargaining agreement with the IBT which runs through July 31, 2025.

We have approximately pilots who are employed under a collective bargaining agreement with the Independent Pilots Association. This collective bargaining agreement becomes amendable September 1, 2025.

We have approximately airline mechanics who are covered by a collective bargaining agreement with Teamsters Local 2727 which becomes amendable November 1, 2026. In addition, approximately of our auto and maintenance mechanics who are not represented by the IBT are employed under a collective bargaining agreement with the International Association of Machinists and Aerospace Workers ("IAM"). On July 21, 2024, the IAM ratified a new collective bargaining agreement that will expire on July 31, 2029.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8.

$ $ $ Acquired Gross Carrying
AmountAccumulated
AmortizationNet Carrying
ValueSeptember 30, 2024:Capitalized software$ $()$ Licenses () Franchise rights () Customer relationships () Trade name () Trademarks, patents and other () Amortizable intangible assets$ $()$ Indefinite-lived intangible assets — Total Intangible Assets, Net$ $()$ December 31, 2023:Capitalized software$ $()$ Licenses () Franchise rights () Customer relationships () Trade name () Trademarks, patents and other () Amortizable intangible assets$ $()$ Indefinite-lived intangible assets — Total Intangible Assets, Net$ $()$

The table as of September 30, 2024 above excludes intangible assets associated with Coyote, which was divested during the third quarter of 2024 as discussed in note 18.

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. For the three months ended September 30, 2024, there were material impairment charges for finite-lived intangible assets. For the nine months ended September 30, 2024, we recorded impairment charges of $ million ($ million after tax, or $ per diluted share) within Other Expenses in our statement of consolidated income. These charges represented capitalized software license impairments of $ million and a $ million charge to write down the value of certain trade names acquired as part of our acquisition of Bomi Group. For the three and nine months ended September 30, 2023, impairment charges for finite-lived intangible assets were $ million.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9.

$ $ Fixed-rate senior notes:

% senior notes

2024

% senior notes

2024

% senior notes

2025

% senior notes

2026

% senior notes

2027

% senior notes

2029

% senior notes

2029

% senior notes

2030

% senior notes

2033

% senior notes

2034

% senior notes

2038

% senior notes

2040

% senior notes

2040

% senior notes

2042

% senior notes

2046

% senior notes

2047

% senior notes

2049

% senior notes

2049

% senior notes

2050

% senior notes

2053

% senior notes

2054

% senior notes

2064 Floating-rate senior notes:Floating-rate senior notes 2049-2074 Debentures:

% debentures

2030 Pound Sterling notes:

% notes

2031

% notes

2050 Euro senior notes:

% senior notes

2025

% senior notes

2028

% senior notes

2032 Canadian senior notes:

% senior notes

2024

Finance lease obligations (see note 10)

2024-2046 Facility notes and bonds 2029-2045 Other debt 2024-2026 Total debt$ Less: current maturities()()Long-term debt$ $

Unrealized Gain (Loss) on Cash Flow Hedges:Interest rate contracts$()$()Interest expenseForeign currency exchange contracts RevenueIncome tax (expense) benefit()()Income tax expenseImpact on net income Net incomeUnrecognized Pension and Postretirement Benefit Costs:Prior service costs()()Investment income and otherIncome tax (expense) benefit Income tax expenseImpact on net income()()Net incomeTotal amount reclassified for the period$()$ Net income

Amount Reclassified from AOCI(1)

Affected Line Item in the Income Statement

Nine Months Ended September 30:

2024

2023

Unrealized gain (loss) on foreign currency translation:

Realized gain (loss) on business wind-down

()

Other expenses

Impact on net income

()

Net income

Unrealized gain (loss) on marketable securities:

Realized gain (loss) on sale of securities

()

Investment income and other

Income tax (expense) benefit

Income tax expense

Impact on net income

()

Net income

Unrealized gain (loss) on cash flow hedges:

Interest rate contracts

()

Interest expense

Foreign currency exchange contracts

Revenue

Income tax (expense) benefit

()

Income tax expense

Impact on net income

Net income

Unrecognized pension and postretirement benefit costs:

Prior service costs

()

Investment income and other

Income tax (expense) benefit

Income tax expense

Impact on net income

()

Net income

Total amount reclassified for the period

()

Net income

(1) Accumulated other comprehensive income (loss)

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

$ Reinvested dividends Benefit payments Balance at end of period$ $ Treasury Stock:Balance at beginning of period $() $()Reinvested dividends Benefit payments Balance at end of period $() $()



	2024			2023
Nine Months Ended September 30:	Shares	Dollars		Shares	Dollars
Deferred Compensation Obligations:
Balance at beginning of period		$			$
Reinvested dividends
Benefit payments		()			()
Balance at end of period		$			$
Treasury Stock:
Balance at beginning of period		$	()		$	()
Reinvested dividends
Benefit payments
Balance at end of period		$	()		$	()

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13.

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. 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 countries and territories worldwide, including shipments wholly outside the United States, as well as shipments with either origin or destination outside the United States. International Package includes our operations in Europe, the Indian sub-continent, Middle East and Africa ("EMEA"), Canada and Latin America (together "Americas") and Asia.

Supply Chain Solutions

Supply Chain Solutions includes our Forwarding, Logistics, digital and other businesses. Our Forwarding and Logistics businesses provide services in more than countries and territories worldwide and include international air and ocean freight forwarding, customs brokerage, mail services, healthcare logistics, distribution and post-sales services. Our digital businesses leverage technology to enable a range of on-demand services such as same-day delivery, end-to-end return services and integrated supply chain and high-value shipment insurance 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 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 third quarter of 2024.

$ $ $ International Package Supply Chain Solutions Consolidated revenue$ $ $ $ Operating Profit:U.S. Domestic Package$ $ $ $ International Package Supply Chain Solutions Consolidated operating profit$ $ $ $

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14.

$ $ $ Denominator:Weighted-average shares Vested portion of restricted shares Denominator for basic earnings per share Effect of dilutive securities:Restricted performance units Stock options Denominator for diluted earnings per share

Basic earnings per share(1)

$ $ $ $

Diluted earnings per share(1)

$ $ $ $

During the fourth quarter of 2024, we entered into contracts to hedge our exposure to the Chinese Renminbi. The associated notional amount outstanding is approximately billion Renminbi. We generally designate and account for these contracts as cash flow hedges of anticipated foreign currency denominated revenue. Additionally, as of September 30, 2024 and December 31, 2023 we had no outstanding commodity hedge positions.

Balance Sheet Recognition

$ $ $ Foreign currency exchange contractsOther non-current assetsLevel 2 Derivatives not designated as hedges:Foreign currency exchange contractsOther current assetsLevel 2 Total Asset Derivatives$ $ $ $

Fair Value Hierarchy Level

Gross Amounts Presented in
Consolidated Balance Sheets

Net Amounts if Right of
Offset had been Applied

Liability Derivatives

Balance Sheet Location

September 30,
2024

December 31,
2023

September 30,
2024

December 31,
2023

Derivatives designated as hedges:

Foreign currency exchange contracts

Other current liabilities

Level 2

Foreign currency exchange contracts

Other non-current liabilities

Level 2

Derivatives not designated as hedges:

Foreign currency exchange contracts

Other non-current liabilities

Level 2

Total Liability Derivatives

Our foreign currency exchange rate 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.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

$ $ $

Income Statement and AOCI Recognition of Designated Hedges

() () Foreign Currency Exchange Contracts:Amount of gain or (loss) reclassified from accumulated other comprehensive income 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$ $()$ $ $()$



	Nine Months Ended September 30,
	2024				2023
Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships	Revenue	Interest Expense		Investment Income and Other	Revenue	Interest Expense		Investment Income and Other




Gain (loss) on cash flow hedging relationships:
Interest Rate Contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income		()				()
Foreign Currency Exchange Contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income
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	$	$	()	$	$	$	()	$

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

) Total$()$ Nine Months Ended September 30:Derivative Instruments in Cash Flow Hedging RelationshipsAmount of Gain (Loss) Recognized in AOCI on Derivatives20242023Foreign currency exchange contracts Total$ $

As of September 30, 2024, there were $ 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 September 30, 2025. 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 years.

)$ Total$()$ Nine Months Ended September 30:Non-derivative Instruments in Net Investment Hedging RelationshipsAmount of Gain (Loss) Recognized in AOCI on Debt 20242023Foreign currency denominated debt$()$ Total$()$

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

)$()Total$()$()Nine Months Ended September 30:Foreign currency exchange contractsInvestment income and other$()$()Total $()$()

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16.

% in 2024 compared to % in the comparative period (% year to date compared to % in the comparative period). The year-over-year increase in our effective tax rate was driven by non-deductible expenses related to regulatory matters and share-based compensation shortfalls. In addition, in the prior year we had more favorable uncertain tax positions as a result of resolution of global tax audits and adjustments to our tax balances to reflect our tax returns filed.

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. It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months, however, an estimate of the range of reasonably possible outcomes cannot be made. 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. Changes could result from the settlement of ongoing litigation, the completion of ongoing examinations, the expiration of statutes of limitations or other unforeseen circumstances.

As discussed in note 18, in the third quarter of 2024 we completed the divestiture of Coyote and recorded a pre-tax gain of $ million. As a result, we recorded related income tax expense of $ million in the period. This income tax expense was generated at a lower average tax rate than the U.S. federal statutory tax rate due to the disposition generating capital losses for tax purposes that were not expected to be realized.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17.

million with potential opportunities to save up to an additional $ million through the reduction of spans and layers of management with an anticipation that these savings would be recurring. The business portfolio review was expanded in 2022. As a result thereof, we determined to exit certain businesses that were not aligned with our corporate strategy and determined to make new investments into certain businesses, including healthcare-focused businesses, better aligned to our strategic targets. In connection therewith, we incurred costs primarily consisting of outside professional fees related to these reviews and other costs related to these transactions. Lastly, our review of our systems and technologies identified certain areas of our business that were reliant on outdated technologies. Our reviews determined that continued use of these legacy technologies would likely increase maintenance costs and that investments into new technologies would enhance our ability to leverage our data and allow us to establish a more flexible system architecture. As of December 31, 2023, we substantially completed our initiatives to reduce spans and layers of management and achieved savings in line with our anticipated benefits. Our ongoing efforts under Transformation 2.0 include initiatives related to our financial systems and our business portfolio review. As of September 30, 2024, we have incurred $ million of costs as part of Transformation 2.0. Transformation 2.0 initiatives are expected to conclude during 2025, with anticipated remaining costs of approximately $ million primarily related to completion of our technology initiatives.

During 2023, we implemented our "Fit to Serve" initiative, which is intended to right-size our business for the future through a workforce reduction of approximately positions and create a more efficient operating model to enhance responsiveness to changing market dynamics.

Accruals for separation costs of $ and $ million within Fit to Serve were included in our consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively. Separations accrued as of December 31, 2023 have been substantially completed and we expect that amounts accrued as of September 30, 2024 will be paid through the first half of 2025. As of September 30, 2024, we have incurred total costs of $ million and anticipate that we will incur additional costs of approximately $ million under Fit to Serve. Fit to Serve is expected to conclude in 2025.

Compensation and benefit costs under these programs during the three and nine months ended September 30, 2024 are primarily related to severance costs incurred in conjunction with reductions in our workforce. We are primarily accounting for these separations under ASC Topic 712 as they have been, or will be, carried out under a plan which provides a contractual termination benefit to impacted employees. The nature of our separation initiatives has resulted in a relatively short period of time, typically less than one year, between the point at which the separation meets the criteria for recognition as an accrual and the point at which the separation is completed.

Other expenses incurred in furtherance of our transformation strategy have been primarily related to fees paid to third-party service providers that supported modernization of our corporate support functions, assisted in our strategic reviews and contributed to our financial systems transition and healthcare strategy and generally have not been incurred as a result of restructuring, exit or disposal activities and as period costs, have not given rise to restructuring, exit or disposal liabilities. During the three and nine months ended September 30, 2024, other expenses included impairment costs resulting from our business portfolio review and costs related to financial systems investments, both as part of Transformation 2.0. These costs, while not material to the three- or nine-month period, support the broader goals of our Transformation 2.0 program.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

$ $ $

Other expenses

Total Transformation Strategy Costs

$ $ $ $

Income Tax Benefit from Transformation Strategy Costs

()()()()

After-Tax Transformation Strategy Costs

$ $ $ $

The income tax effects of transformation strategy costs are calculated by multiplying the amount of the expense by the statutory tax rates applicable in each tax jurisdiction.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18.

billion, subject to working capital and other adjustments. We reported Coyote within our Forwarding businesses in Supply Chain Solutions.

On September 16, 2024, we completed the divestiture of Coyote, for cash proceeds, net of cash divested and direct transaction expenses of $ billion. These proceeds are recognized within Proceeds from disposal of businesses, property, plant and equipment in the statements of consolidated cash flows. In connection with the completion of this divestiture, we recorded a pre-tax gain of $ million ($ million after tax) during the three months ended September 30, 2024. The gain was recognized within Other expenses in the statements of consolidated income.

Accounts receivable, net Other current assets

Operating lease right-of-use assets

Goodwill

Intangible assets, net

Other non-current assets

Total assets divested

$ Liabilities:Accounts payable$ Other current liabilities

Non-current operating leases

Other non-current liabilities

Total liabilities divested

Net assets divested

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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 focusing on growth in the most attractive areas of the market and driving efficiency across our network. During the third quarter of 2024, our execution contributed to growth in volume, revenue and operating profit on a consolidated basis.

During the third quarter, we took a number of organic and inorganic steps in support of our strategic execution. On September 10, 2024, we entered into an agreement to acquire Frigo-Trans, an industry-leading, complex healthcare logistics provider based in Germany that is expected to further enhance our temperature-controlled and time-critical capabilities across Europe. This transaction is expected to close in 2025, subject to customary regulatory reviews and approvals. On September 16, 2024, we completed the previously announced divestiture of our truckload brokerage business ("Coyote").

Internationally, we expanded residential Saturday delivery to the eight largest markets in Europe and sped up deliveries to over 35 countries across Asia, Africa and the Middle East as we focus on our customers’ need for speed. Our Digital Access Program surpassed six million merchants globally, which supports our efforts to make our products and services even more accessible to small- and medium-sized businesses ("SMBs"). We saw revenue growth from our healthcare customers during the third quarter in both domestic and international markets. Separately, we have now completed the onboarding of new air cargo volumes from the United States Postal Service ("USPS") and under our agreement, UPS is the primary air cargo provider for the USPS within the United States.

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.

Despite continued weakness in the macro environment, we experienced volume growth in our global small package operations during both the third quarter and year-to-date periods. Within the U.S., we captured growth from Enterprise and SMB customers, including growth from several e-commerce customers and from our Digital Access Program which, together with our efforts to drive revenue quality by making strategic pricing adjustments to align with the value we provide and cost initiatives, including operational closures completed under our Network of the Future initiative, contributed to increases in operating profit for the quarter and helped offset year-to-date declines in operating profit. Internationally, we experienced declines in total average daily volume during both quarter and year-to-date periods due to challenging economic conditions and geopolitical factors, which were more prevalent during the first half of the year. However, we continued to see growth in key export markets worldwide, which drove increases in both revenue and operating profit for the quarter.

In Supply Chain Solutions, revenue increased in both quarter and year-to-date periods, driven primarily by the impact of the acquisition of MNX Global Logistics in the fourth quarter of 2023, additional air cargo volumes from our agreement with the USPS, and revenue growth in our freight forwarding business during the third quarter. Supply Chain Solutions operating profit increased during the third quarter and was flat year to date as a result of the gain recognized from the divestiture of Coyote.

During both the three and nine month periods of 2024, we continued to execute on various initiatives under our previously disclosed transformation strategy programs, Transformation 2.0 and Fit to Serve, which are contributing to fundamental changes to our back-office technologies and organizational structure. We realized benefits from our Fit to Serve initiative during the three and nine months ended September 30, 2024, which contributed to improvements in operating profit for the quarter, and year to date, helped offset declines in operating profit.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

We expect continued growth in consolidated revenue and operating profit in the fourth quarter due to anticipated volume growth and our focus on revenue quality in our global small package operations. During the third quarter, growth in our union wage-rate decreased from what we experienced in the first half of the year as we entered into the second year of our contract with the International Brotherhood of Teamsters ("IBT"). Additionally, we expect that we will further benefit from the impact of our Fit to Serve initiative. We anticipate using our network planning tools, leveraging our automated facilities and flexible staffing to manage our network during this year's holiday shipping season.

During the third quarter and year-to-date periods of 2024, we also returned cash to shareholders by completing our previously announced $500 million of share repurchases and paid dividends of $1.63 per share and $4.89 per share, respectively. Through September 30, 2024, total capital expenditures were approximately $2.8 billion. For the full year in 2024, capital expenditures are expected to be approximately $4.0 billion and total dividends are expected to be $5.4 billion, subject to Board approval.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

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 September 30,						Change				Nine Months Ended September 30,						Change
	2024			2023			$		%		2024			2023			$		%
Revenue (in millions)	$	22,245		$	21,061		$	1,184	5.6	%	$	65,769		$	66,041		$	(272)	(0.4)	%
Operating Expenses (in millions)	20,260			19,718			542		2.7	%	60,227			59,377			850		1.4	%
Operating Profit (in millions)	$	1,985		$	1,343		$	642	47.8	%	$	5,542		$	6,664		$	(1,122)	(16.8)	%
Operating Margin	8.9		%	6.4		%					8.4		%	10.1		%
Net Income (in millions)	$	1,539		$	1,127		$	412	36.6	%	$	4,061		$	5,103		$	(1,042)	(20.4)	%
Basic Earnings Per Share	$	1.80		$	1.31		$	0.49	37.4	%	$	4.74		$	5.93		$	(1.19)	(20.1)	%
Diluted Earnings Per Share	$	1.80		$	1.31		$	0.49	37.4	%	$	4.74		$	5.92		$	(1.18)	(19.9)	%

Operating Days	64			63							191			191
Average Daily Package Volume (in thousands)	21,527			20,425					5.4	%	21,220			21,109					0.5	%
Average Revenue Per Piece	$	13.58		$	13.81		$	(0.23)	(1.7)	%	$	13.66		$	13.82		$	(0.16)	(1.2)	%

•Average daily package volume in our global small package operations increased for the quarter and year-to-date periods for Enterprise and SMB customers, primarily as a result of new e-commerce customers and our Digital Access Program, in our U.S. Domestic package segment. Continued challenging macroeconomic conditions partially offset the overall volume increases and drove average daily package volume declines in our International package segment.

•Revenue increased for the quarter primarily driven by the impact of volume increases. Year-to-date declines in revenue were primarily due to decreased revenue per piece in U.S. Domestic Package due in part to unfavorable changes in product mix driven by customers selecting our economy products.

•Operating expenses increased in the quarter and year-to-date periods, primarily due to increased compensation and benefits expense in our U.S. Domestic Package segment as a result of higher wage and benefit rates specified in our IBT contract, as well as increases in purchased transportation as a result of additional SurePost volume. These increases were partially offset in the year-to-date period by decreases in fuel and workers compensation expenses, the impact of production initiatives and benefits from Fit to Serve, as well as a gain related to divestiture of Coyote.

•Operating profit and operating margin increased for the quarter, as revenue growth exceeded operating expense growth in this period. Operating profit and operating margin decreased year to date as revenue decreased and did not offset operating expense increases.

•We reported net income of $1.5 billion and diluted earnings per share of $1.80 ($4.1 billion and $4.74 per share, year to date) for the third quarter. Non-GAAP adjusted diluted earnings per share were $1.76 for the third quarter ($4.97 per share, year to date) after adjusting for the after-tax impacts of:

◦a gain on the divestiture of Coyote of $152 million or ($0.18) per diluted share in the quarter and year-to-date periods;

◦a payment to settle a one-time international regulatory matter of $94 million, or $0.11 per diluted share, including interest, in the year-to-date period;

◦non-cash asset impairment charges of $35 million, or $0.04 per diluted share in the year-to-date period;

◦transformation strategy costs of $116 million, or $0.14 per diluted share in the quarter ($172 million, or $0.21 per diluted share, year to date); and

◦an expense accrual related to a regulatory matter unrelated to our ongoing operations of $45 million, or $0.05 per diluted share in the year-to-date period.

For additional operational results for the quarter and year-to-date periods specific to our segments: U.S. Domestic Package, International Package and Supply Chain Solutions refer to Results of Operations - Segment Review below.

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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 adjusted financial measures. Management views and evaluates business performance on both a GAAP basis and by excluding costs and benefits associated with these non-GAAP adjusted financial measures. As a result, we believe the presentation and discussion of these non-GAAP adjusted financial measures better enables users of our financial information to view and evaluate underlying business performance from the same perspective as management.

Non-GAAP adjusted financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our non-GAAP 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. Non-GAAP adjusted amounts reflect the following (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
Non-GAAP Adjustments	2024		2023		2024		2023
Operating Expenses:
Transformation Strategy Costs:
Transformation 1.0	$	—	$	(3)	$	—	$	(10)

Transformation 2.0
Spans and Layers	—		—		—		(86)
Business Portfolio Review	(34)		(2)		(29)		(31)
Financial Systems	(12)		(12)		(41)		(30)
Other Initiatives	—		(1)		—		(3)
Transformation 2.0 Total	(46)		(15)		(70)		(150)

Fit to Serve	(108)		(76)		(157)		(76)
Total Transformation Strategy Costs	(154)		(94)		(227)		(236)
Gain on Divestiture of Coyote	156		—		156		—
One-Time Payment for International Regulatory Matter	—		—		(88)		—
Goodwill and Asset Impairment Charges	—		(117)		(48)		(125)
One-Time Compensation Payment	—		(61)		—		(61)
Expense for Regulatory Matter	—		—		(45)		—
Total Adjustments to Non-GAAP Operating Expenses	$	2	$	(272)	$	(252)	$	(422)

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	Three Months Ended September 30,				Nine Months Ended September 30,
Other Income and (Expense):	2024		2023		2024		2023
Interest Expense Associated with One-Time Payment for International Regulatory Matter	—		—		6		—
Total Adjustments to Non-GAAP Other Income and (Expense)	$	—	$	—	$	6	$	—

Total Adjustments to Non-GAAP Income Before Income Taxes	$	(2)	$	272	$	258	$	422

Income Tax (Benefit) Expense:
Transformation Strategy Costs:
Transformation 1.0	$	—	$	1	$	—	$	2

Transformation 2.0
Spans and Layers	—		—		—		21
Business Portfolio Review	8		1		7		7
Financial Systems	3		3		10		8
Other Initiatives	—		—		—		—
Transformation 2.0 Total	11		4		17		36

Fit to Serve	27		19		38		19
Total Transformation Strategy Costs	38		24		55		57
Gain on Divestiture of Coyote	(4)		—		(4)		—
One-Time Payment for International Regulatory Matter	—		—		—		—
Goodwill and Asset Impairment Charges	—		14		13		16
One-Time Compensation Payment	—		15		—		15
Expense for Regulatory Matter	—		—		—		—
Total Adjustments to Non-GAAP Income Tax (Benefit) Expense	$	34	$	53	$	64	$	88

Total Adjustments to Non-GAAP Net Income	$	(36)	$	219	$	194	$	334

The income tax impacts of these items are calculated at the statutory tax rates applicable in each tax jurisdiction.

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Transformation Strategy Costs

We supplement the presentation of 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 activities within our transformation strategy. Programs within our transformation strategy have been designed to fundamentally change our organization structure, processes, technologies and the composition of our business portfolio. Various circumstances have precipitated the projects and initiatives under these programs, including identification and reprioritization of investments as a result of executive leadership changes, developments and changes in competitive landscapes, inflationary pressures, consumer behaviors, and other factors including post-COVID normalization and volume diversions attributed to our 2023 labor negotiations. We do not consider the related costs to be ordinary because each program and its initiatives and projects involve separate and distinct activities that may span multiple periods and are strategic in nature as opposed to operational efforts to drive incremental profitability. These initiatives are in addition to ordinary, ongoing efforts to enhance business performance.

Our transformation strategy has included the following programs and initiatives:

Transformation 1.0: In the first quarter of 2018, we announced and began implementation of a multi-year, enterprise-wide program contemplating a reduction in non-operations management personnel, investments impacting global direct and indirect operating costs, and changes in processes and technology, which were undertaken and completed as multiple discrete initiatives (such projects, collectively, “Transformation 1.0”). In 2018, we announced that we expected to achieve approximately $1.0 billion in savings, which would benefit earnings, from Transformation 1.0. On a cumulative basis and net of amounts reinvested into the business, we had substantially achieved the expected benefits associated with Transformation 1.0 as of the second quarter of 2020. Transformation 1.0 was substantially completed in 2022.

Transformation 2.0: Based on a number of factors including evaluating efficiencies gained as a part of Transformation 1.0, and in connection with changes in our executive leadership in 2020, we identified and reprioritized certain then-current and future investments, including additional investments in our workforce, portfolio of businesses and technology (such projects, collectively, “Transformation 2.0”). Specifically, we undertook an organizational structure review designed to identify opportunities to reduce spans and layers of management, began a review of our business portfolio and identified opportunities to invest in certain technologies, including financial reporting and certain schedule, time and pay systems to reduce global indirect operating costs, provide better visibility, and reduce reliance on legacy systems and coding languages. Our organizational structure review indicated an opportunity to realize initial savings of approximately $400 million with potential opportunities to save up to an additional $240 million through the reduction of spans and layers of management with an anticipation that these savings would be recurring. The business portfolio review was expanded in 2022. As a result thereof, we determined to exit certain businesses that were not aligned with our corporate strategy and determined to make new investments into certain businesses, including healthcare-focused businesses, better aligned to our strategic targets. In connection therewith, we incurred costs primarily consisting of outside professional fees related to these reviews and other costs associated with these transactions. Lastly, our review of our systems and technologies identified certain areas of our business that were reliant on outdated technologies. Our reviews determined that continued use of these legacy technologies would likely increase maintenance costs and that investments into new technologies would enhance our ability to leverage our data and allow us to establish a more flexible system architecture. As of December 31, 2023, we substantially completed our initiatives to reduce spans and layers of management and achieved savings in line with our anticipated benefits. Our ongoing efforts under Transformation 2.0 include initiatives related to our financial systems and our business portfolio review. As of September 30, 2024, we have incurred $785 million of costs as part of Transformation 2.0. Transformation 2.0 initiatives are expected to conclude during 2025 with anticipated remaining costs of approximately $115 million primarily related to completion of our technology initiatives. Costs associated with Transformation 2.0 have primarily consisted of compensation and benefit costs related to reductions in our workforce and fees paid to third-party consultants. Additional detail relating to the projects, initiatives and timing of costs as a part of Transformation 2.0 are contained in the table above. Investments in technology are expected to provide enhanced quality of reporting for both internal and external purposes in part through simplification and standardization of data to better enable migration into cloud-based tools and automation of manual activities, including transitioning its general ledger, consolidation, and planning tools along with U.S. payroll from older programs and software supporting our freight forwarding business. These efforts to enhance our technology are expected to reduce the need for future investments; we expect to begin to realize benefits therefrom in 2025. Investments in our business portfolio review are expected to lead to better alignment of our businesses in support of our corporate strategy. We are realigning businesses within Supply Chain Solutions to better execute our strategy; the operational performance of these businesses is included in our GAAP and non-GAAP adjusted results.

Fit to Serve: In 2023, a number of factors, including macroeconomic headwinds and volume diversion resulting from our labor negotiations with the International Brotherhood of Teamsters, contributed to volume declines in our U.S. Domestic

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Package business. In addition, our International Package and Supply Chain Solutions businesses were also negatively impacted by a number of challenging macroeconomic conditions during 2023. In response to these factors, we announced and began to undertake our Fit to Serve initiative with the intent to right-size our business to create a more efficient operating model that was more responsive to market dynamics through a workforce reduction of approximately 12,000 positions throughout 2024. We have incurred total costs of approximately $370 million under Fit to Serve, which primarily consist of compensation and benefit costs related to reductions in our workforce. We expect to complete this initiative during 2025 with expected remaining costs of approximately $100 million to be incurred primarily during the fourth quarter of 2024 and first quarter of 2025. We have achieved savings of $625 million under Fit to Serve for the nine months ended September 30, 2024, and expect to realize savings of approximately $1.0 billion for the full year 2024 through reductions in our compensations and benefit expense. Incremental savings of approximately $100 million are expected when Fit to Serve is completed.

For more information regarding transformation strategy costs, see note 17 to the unaudited, consolidated financial statements.

Gain on Divestiture of Coyote

On September 16, 2024, we completed the previously announced divestiture of Coyote. In connection therewith, we recorded a pre-tax gain of $156 million ($152 million after tax) during the three and nine months ended September 30, 2024. The gain was recognized within Other expenses in the statements of consolidated income. We supplement the presentation of operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of this gain as it is not a component of our ongoing operations and is not expected to recur. For more information regarding the gain on divestiture of Coyote, see note 18 to the unaudited, consolidated financial statements.

One-Time Payment for International Regulatory Matter

In the second quarter of 2024, we made a payment of $94 million of previously restricted cash to settle a previously-disclosed challenge by Italian tax authorities to the deductibility of Value Added Tax payments by UPS to certain third-party service providers, a review of which was launched in the fourth quarter of 2023. We supplement the presentation of operating profit, operating margin, interest expense, total other income (expense), income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of this payment. We do not believe this is a component of our ongoing operations and we do not expect this or similar payments to recur.

Goodwill and Asset Impairment Charges

We supplement the presentation of operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of noncash goodwill and asset impairment charges. We believe excluding the impact of these charges provides management and investors with a measure that increases the comparability of underlying operating results. For more information regarding goodwill and current year asset impairment charges, see note 8 to the unaudited, consolidated financial statements.

One-Time Compensation Payment

We supplement the presentation of operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of a one-time payment made to certain U.S.-based, non-union part-time supervisors following the ratification of our labor agreement with the Teamsters in 2023. We do not expect this or similar payments to recur.

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Expense for Regulatory Matter

We supplement the presentation of operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of an accrual for a regulatory matter that we consider to be unrelated to our ongoing operations and that we do not expect to recur. For more information regarding this regulatory matter, see note 11 to the unaudited, consolidated financial statements.

Non-GAAP Adjusted Cost per Piece

We evaluate the efficiency of our operations using various metrics, including non-GAAP adjusted cost per piece. Non-GAAP adjusted cost per piece is calculated as non-GAAP adjusted operating expenses in a period divided by total volume for that period. Because non-GAAP adjusted operating expenses exclude costs or charges that we do not consider a part of underlying business performance when monitoring and evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards, we believe this is the appropriate metric on which to base reviews and evaluations of the efficiency of our operational performance.

Defined Benefit Pension and Postretirement Medical 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 pension and postretirement medical 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.

For additional information, see 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 would 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, or as necessary to reflect changes in our businesses. While there were no significant changes to our allocation methodologies in the third quarter of 2024, the costs allocated to Supply Chain Solutions increased. The air network expense allocated to Supply Chain Solutions increased by $182 million (up $204 million year to date) primarily driven by block hours associated with air cargo volume and associated ramp up costs from our previously-announced agreement with the USPS, as we continued to onboard this volume. We anticipate this expense will increase in the remainder of the year as the related volume attributable to this agreement increases.

As a normal part of managing our air network, we routinely idle aircraft and engines temporarily for maintenance or to adjust network capacity. As a result of the reduction in air volumes, we temporarily idled certain aircraft within our network in order to better match capacity with current demand. Temporarily idled assets are classified as held-and-used, and we continue to record depreciation expense for these assets. As of September 30, 2024, we had five aircraft temporarily idled for an average period of approximately six months. We expect these aircraft to return to revenue service in the fourth quarter of 2024.

We test goodwill for impairment annually at July 1 and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the carrying value thereof may be impaired. Testing goodwill for impairment requires that we make a number of significant assumptions, including assumptions related to future revenues, costs, capital expenditures, working capital, our cost of capital, long-term growth rates and market comparables. We are also required to make assumptions relating to our overall business and operating strategy, and the regulatory and market environment.

We conducted our most recent goodwill impairment testing as of July 1, 2024 and concluded that the fair values of our reporting units were in excess of their respective carrying values. Approximately $1.2 billion of our consolidated goodwill balance of $4.4 billion is represented by our Global Freight Forwarding, Roadie and Global Logistics and Distribution reporting units which, based on our annual impairment evaluation, are exhibiting a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods. We do not expect any impairment would have a significant impact on our consolidated financial position, results of operations or cash flows.

We continued to monitor our reporting units subsequent to the annual test and while we do not believe it is more likely than not that our reporting units' fair values are less than their carrying values as of September 30, 2024, challenging macroeconomic and uncertain geopolitical conditions, actual reporting unit performance, revisions to our forecasts of future performance or other factors, including market comparables, may negatively impact certain estimates and assumptions that we use in determining our reporting units' fair values. Such impacts may be more pronounced for reporting units whose fair values do not significantly exceed their carrying values. These factors or a combination thereof could result in an impairment charge in one or more of our reporting units during a future period. We continue to monitor business performance and external factors affecting our reporting units.

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U.S. Domestic Package


	Three Months Ended September 30,						Change				Nine Months Ended September 30,						Change
	2024			2023			$		%		2024			2023			$		%
Average Daily Package Volume (in thousands):
Next Day Air	1,596			1,679					(4.9)	%	1,582			1,699					(6.9)	%
Deferred	988			1,078					(8.3)	%	1,008			1,102					(8.5)	%
Ground	15,823			14,529					8.9	%	15,526			15,102					2.8	%
Total Average Daily Package Volume	18,407			17,286					6.5	%	18,116			17,903					1.2	%
Average Revenue Per Piece:
Next Day Air	$	23.46		$	22.42		$	1.04	4.6	%	$	23.24		$	22.31		$	0.93	4.2	%
Deferred	17.54			16.61			0.93		5.6	%	17.51			16.59			0.92		5.5	%
Ground	10.81			11.10			(0.29)		(2.6)	%	10.93			11.20			(0.27)		(2.4)	%
Total Average Revenue Per Piece	$	12.27		$	12.54		$	(0.27)	(2.2)	%	$	12.37		$	12.59		$	(0.22)	(1.7)	%
Operating Days in Period	64			63							191			191
Revenue (in millions):
Next Day Air	$	2,396		$	2,372		$	24	1.0	%	$	7,021		$	7,240		$	(219)	(3.0)	%
Deferred	1,109			1,128			(19)		(1.7)	%	3,372			3,491			(119)		(3.4)	%
Ground	10,945			10,160			785		7.7	%	32,410			32,312			98		0.3	%
Total Revenue	$	14,450		$	13,660		$	790	5.8	%	$	42,803		$	43,043		$	(240)	(0.6)	%
Operating Expenses (in millions):
Operating Expenses	$	13,552		$	13,089		$	463	3.5	%	$	40,091		$	39,404		$	687	1.7	%
Non-GAAP adjustments to operating expenses
Transformation Strategy Costs	(76)			(33)			(43)		130.3	%	(93)			(134)			41		(30.6)	%
One-Time Compensation Payment	—			(61)			61		(100.0)	%	—			(61)			61		(100.0)	%
Goodwill and Asset Impairment Charges	—			—			—		N/A		(5)			—			(5)		N/A
Non-GAAP Adjusted Operating Expenses	$	13,476		$	12,995		$	481	3.7	%	$	39,993		$	39,209		$	784	2.0	%
Operating Profit (in millions) and Operating Margin:
Operating Profit	$	898		$	571		$	327	57.3	%	$	2,712		$	3,639		$	(927)	(25.5)	%
Non-GAAP Adjusted Operating Profit	$	974		$	665		$	309	46.5	%	$	2,810		$	3,834		$	(1,024)	(26.7)	%
Operating Margin	6.2		%	4.2		%					6.3		%	8.5		%
Non-GAAP Adjusted Operating Margin	6.7		%	4.9		%					6.6		%	8.9		%

Revenue

The change in revenue was due to the following:


	Volume		Rates / Product Mix		Fuel Surcharge		Total Revenue Change
Revenue Change Drivers:
Third quarter 2024 vs. 2023	8.1	%	(2.4)	%	0.1	%	5.8	%
Year to date 2024 vs. 2023	1.2	%	(1.4)	%	(0.4)	%	(0.6)	%

Comparative results were impacted by one additional operating day in the third quarter of 2024.

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Volume

For the quarter, we had strong volume growth, the highest growth rate in more than three years. In addition, the average daily volume increased across all major customer segments, despite the expected decline of our largest customer. In both the quarter and year-to-date periods, the increase in volume occurred in multiple industries and was led by additional e-commerce customers and SMBs leveraging our Digital Access Program. Challenging macroeconomic conditions, including continued weakness in manufacturing output, partially offset the volume increases. We anticipate that average daily volume will increase in the fourth quarter relative to the comparative period, primarily driven by volume from SMBs, including those leveraging our Digital Access Program.

Business-to-consumer volume increased 11.0% in the quarter (up 4.5% year to date), due primarily to volume from the additional e-commerce customers noted above, and continued growth in online consumer spending.

Business-to-business volume increased 0.8% for the quarter (down 3.2% year to date). An increase in retail and healthcare volume drove the overall increase in business-to-business volume for the quarter but was more than offset year to date by declines in volume attributable to challenging macroeconomic factors and slowdown in manufacturing activity.

Within our Air products, average daily volume decreased in both the quarter and year-to-date periods, driven by the continued execution under the contract terms with our largest customer. The impact of other large customers making trade-offs to our ground products also contributed to the decline for the year-to-date period.

Ground commercial shipment average daily volume increased 1.1% for the quarter (down 3.1% year to date), primarily driven by an increase in volume from SMBs for the quarter, including continued growth within our Digital Access Program. Overall Ground residential volumes increased 15.4% for the quarter (up 7.6% year to date), primarily due to an increase in SurePost volume from new e-commerce customers.

Revenue Per Piece

Revenue per piece declined 2.2% for the quarter due to customer and product mix, lighter weight, and increase in shorter zone shipments. There was a 40-basis-point sequential improvement in the revenue per piece growth rate from the second quarter, supported by pricing actions we took to address revenue quality.

Revenue per piece from our Air products increased for both the quarter and year-to-date periods, while revenue per piece from our Ground products declined for both periods. In December 2023, we implemented an average 5.9% net increase in base and accessorial rates for both our Air and Ground products, which favorably impacted revenue per piece. In addition to these rate changes, revenue per piece for Air and Ground products were also impacted by decreases in average billable weight per piece for Air and Ground products and an increase in shorter zone shipments, unfavorable shifts in product mix and decreases in fuel surcharge revenue for Ground products.

We anticipate the year-over-year revenue per piece growth rate will improve in the fourth quarter due in part to delivery surcharges on both Air and Ground products, while base rates, fuel, and product and customer mix impact are expected to be neutral in total.

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 $12 million for the quarter (down $184 million year to date). Increases in volume and the impact of our pricing initiatives contributed to the increase in fuel surcharge revenue for the quarter, which were more than offset by the decrease in price per gallon for the year-to-date period.

Based on the current commodity market outlook, we expect fuel surcharge revenue to increase year over year during the fourth quarter of 2024.

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RESULTS OF OPERATIONS

Operating Expenses

Operating expenses and non-GAAP adjusted operating expenses increased for both the quarter and year-to-date periods. Pickup and delivery costs increased $401 million in the quarter (up $1.1 billion year to date), package sortation costs increased $101 million in the quarter (up $267 million year to date) and other operating costs increased $51 million for the quarter (down $201 million year to date). In addition to the impact from one additional operating day and the average daily volume increase of 6.5% during the third quarter, these increases were driven by:

•An increase in compensation and benefits expense in both periods (partially offset by a decrease in worker's compensation expense in both periods) which was driven by the impact of wage rate increases for our union workforce under our IBT contract (became effective August 1, 2023), as well as an increase in direct labor hours driven by additional volume. During the quarter, union wage-rate growth slowed to 5.2% year over year. We anticipate compensation and benefits expense growth will continue to moderate in the fourth quarter of 2024 as union wage rate increases in the IBT contract as of August 1, 2024 are lower than in the prior year period.

•An increase in purchased transportation expense primarily due to higher third-party delivery expense required to deliver increased SurePost volume.

These increases were partially offset by a decrease of $72 million in the costs of operating our integrated air and ground network in the quarter (down $370 million year to date), and a decrease in other operating costs of $200 million year to date. These reductions were primarily driven by:

•Actions we took to drive productivity partially offset the increase in compensation and benefits expense discussed above. For example, through our Network of the Future initiative, this year we have completed 45 operational closures, contributing to an improvement in pieces per workforce hour. Production improvements offset approximately 50% of the union wage rate increase.

•A reduction in aircraft block hours for both periods resulting from lower air volume and network optimization.

•The positive impact of our ground network optimization initiatives, for example, the enhancements we made to our proximity matching algorithm which enables us to redirect more SurePost packages into our network, driving delivery density which reduces the incremental cost of delivery.

•A reduction in fuel expense for both periods, driven by decreases in the cost and consumption for jet and ground fuels,

•Benefits from our Fit to Serve initiative, and a reduction in expenses allocated to the business in the year-to-date period, offset by a reduction in gains on real estate sales relative to the comparative period.

Our non-GAAP adjusted operating expenses exclude the impact of transformation strategy costs which were $76 million for the quarter ($93 million year to date) for U.S. Domestic Package. Transformation strategy costs reflected within U.S. Domestic during these periods are related to our Fit to Serve and Transformation 2.0 programs. Within both programs, we incurred compensation and benefits costs related to workforce reductions as we right-size our business. Within Transformation 2.0, we incurred fees paid to outside professional service providers. See Supplemental Information - Items Affecting Comparability for additional discussion of items excluded from our non-GAAP financial measures.

Cost per piece decreased 4.3% for the quarter (up 0.6% year to date), and non-GAAP adjusted cost per piece decreased 4.1% for the quarter (up 0.8% year to date). The decrease in cost per piece for the quarter was primarily driven by higher average daily volume compared to the same period of 2023, combined with slower union wage-rate growth under the terms of the IBT contract, additional benefits from the network optimization efforts and a decrease in workers' compensation as discussed above. For the year-to-date period, higher wage rate increases for our union workforce led to an increase in cost per piece, partially offset by decreases in workers' compensation and changes in average daily volume discussed above. We anticipate the cost per piece growth rate will moderate for the remainder of the year based on our anticipated increase in average daiily volume as discusses above and lower wage rate increases as compared to the prior period, now that we have entered the second year of the IBT contract.

Operating Profit and Margin

As a result of the factors described above, operating profit increased $327 million for the quarter (down $927 million year to date), with operating margin increasing 200 basis points to 6.2% (down 220 basis points to 6.3% year to date). Non-GAAP adjusted operating profit increased $309 million for the quarter (down $1.0 billion year to date), with non-GAAP adjusted operating margin increasing 180 basis points to 6.7% (down 230 basis points to 6.6% year to date). Non-GAAP adjusted operating profit excludes the impact of operating expense adjustments discussed above.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

International Package


	Three Months Ended September 30,						Change				Nine Months Ended September 30,						Change
	2024			2023			$		%		2024			2023			$		%
Average Daily Package Volume (in thousands):
Domestic	1,483			1,524					(2.7)	%	1,491			1,571					(5.1)	%
Export	1,637			1,615					1.4	%	1,613			1,635					(1.3)	%
Total Average Daily Package Volume	3,120			3,139					(0.6)	%	3,104			3,206					(3.2)	%
Average Revenue Per Piece:
Domestic	$	8.12		$	7.73		$	0.39	5.0	%	$	8.07		$	7.66		$	0.41	5.4	%
Export	33.24			33.09			0.15		0.5	%	33.33			33.26			0.07		0.2	%
Total Average Revenue Per Piece	$	21.30		$	20.78		$	0.52	2.5	%	$	21.20		$	20.72		$	0.48	2.3	%
Operating Days in Period	64			63							191			191
Revenue (in millions):
Domestic	$	771		$	742		$	29	3.9	%	$	2,299		$	2,299		$	—	—	%
Export	3,482			3,367			115		3.4	%	10,269			10,387			(118)		(1.1)	%
Cargo and Other	158			158			—		—	%	469			539			(70)		(13.0)	%
Total Revenue	$	4,411		$	4,267		$	144	3.4	%	$	13,037		$	13,225		$	(188)	(1.4)	%
Operating Expenses (in millions):
Operating Expenses	$	3,613		$	3,637		$	(24)	(0.7)	%	$	10,865		$	10,884		$	(19)	(0.2)	%
Non-GAAP adjustments to operating expenses
Transformation Strategy Costs	6			(45)			51		N/A		(36)			(42)			6		(14.3)	%
One-Time Payment for International Regulatory Matter	—			—			—		N/A		(88)			—			(88)		N/A
Asset Impairment Charges	—			—			—		N/A		(2)			—			(2)		N/A
Non-GAAP Adjusted Operating Expenses	$	3,619		$	3,592		$	27	0.8	%	$	10,739		$	10,842		$	(103)	(1.0)	%
Operating Profit (in millions) and Operating Margin:
Operating Profit	$	798		$	630		$	168	26.7	%	$	2,172		$	2,341		$	(169)	(7.2)	%
Non-GAAP Adjusted Operating Profit	$	792		$	675		$	117	17.3	%	$	2,298		$	2,383		$	(85)	(3.6)	%
Operating Margin	18.1		%	14.8		%					16.7		%	17.7		%
Non-GAAP Adjusted Operating Margin	18.0		%	15.8		%					17.6		%	18.0		%
Currency Benefit / (Cost) – (in millions)(1):
Revenue							$	(4)									$	(90)
Operating Expenses							6										38
Operating Profit							$	2									$	(52)

(1) 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:


	Volume		Rates / Product Mix		Fuel Surcharge		Currency		Total Revenue Change
Revenue Change Drivers:
Third quarter 2024 vs. 2023	1.5	%	2.1	%	(0.1)	%	(0.1)	%	3.4	%
Year to date 2024 vs. 2023	(3.2)	%	2.5	%	—	%	(0.7)	%	(1.4)	%

Comparative results were impacted by one additional operating day in the third quarter of 2024.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Volume

Total average daily volume decreased for both the quarter and year-to-date periods. Average daily volume increased in the quarter for our export products, with all regions having positive average daily volume growth, with the increase offset by declines in domestic products mainly in Europe. Year to date, average daily volumes for both export and domestic products declined, primarily impacted by challenging economic conditions more prevalent during the first half of the year and continue to be compressed due to geopolitical uncertainty. Increased customer demand in certain areas was primarily responsible for the third quarter growth in our export products. During the quarter, average daily volume from large customers increased while volume from SMBs declined 1.8% primarily in Europe domestic products. Year-to-date volumes from both large customers and SMBs declined primarily within the European retail sector and manufacturing sector in various regions, partially offset by growth from customers in the healthcare sector. Business-to-business volume decreased 3.6% for the quarter (down 3.7% year to date), while business-to-consumer volume increased 7.7% during the quarter (down 1.7% year to date) primarily in Europe. We expect year-over-year average daily volume to improve in the fourth quarter relative to the comparative period, due to expected improvements in macroeconomic conditions.

The increase in export volume during the quarter was primarily due to continued growth in the Asia to U.S. and U.S. export trade lanes. Growth in Asia to U.S. trade lanes was driven by additional volume from technology and retail customers while growth in the U.S. export trade lanes was driven by volume from retail customers. Improvements in the intra-Europe trade lanes also slightly contributed to the growth in export volume during the quarter, driven primarily by healthcare customers. Year to date, declines in the intra-Europe trade lanes offset the growth in the Asia to U.S. and Americas to U.S. trade lanes.

Premium product volume remained relatively flat for the quarter (down 5.2% year to date). The year-to-date decline was primarily driven by reductions in our Worldwide Express product volumes as customers made trade-offs toward our economy products, primarily in the earlier part of the year. The quarterly decline was mostly offset by growth in our Transborder and Worldwide Express Saver products. Volume in our non-premium products increased 4.0% for the quarter (increased 0.9% year to date), driven by increases in our Transborder Standard and Worldwide Expedited products. Increases in our Transborder Express Saver and Standard products were driven by customers in the diversified vehicles and parts and healthcare sectors in Europe. Increases in our Worldwide Express Saver and Worldwide Expedited products were driven by technology and retail customers in Asia, respectively.

Domestic volume decreased for both the quarter and year-to-date periods, driven by declines in several European markets, as economic conditions continued to impact consumer spending in the region. For the quarter, increases in Canada, driven by increased volume from retail customers, slightly offset these declines. Continued e-commerce growth in Mexico partially offset the declines in both the quarter and year-to-date periods.

Revenue Per Piece

Rate changes for shipments originating outside the U.S. are made throughout the year and vary by geographic market. For example, in December 2023, we implemented an average 5.9% net increase in base and accessorial rates for international shipments originating in the United States.

Total revenue per piece increased 2.5% for the quarter (up 2.3% year to date), primarily due to base rate increases and favorable shifts in product and geographic mix. These were partially offset by declines in demand-related surcharges. Currency had a negative impact of 10 basis points (70 basis points year to date) on revenue per piece. We anticipate overall revenue per piece will increase in the fourth quarter relative to the prior year as a result of our continuing revenue quality initiatives.

Export revenue per piece increased 0.5% for the quarter (up 0.2% year to date) driven by base rate increases and a favorable shift in product and geographic mix. Currency did not impact export revenue per piece for the quarter but had a negative impact of 60 basis points year to date.

Domestic revenue per piece increased 5.0% for the quarter (up 5.4% year to date), driven by base rate increases and favorable shifts in geographic mix. Currency had a negative impact of 70 basis points for the quarter (130 basis points year to date).

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

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 remained flat for the quarter, with the impacts of pricing initiatives and increased export volume mostly offsetting year-over-year fuel price declines. Year to date, fuel surcharge revenue decreased $8 million driven by volume declines in the first half of the year, partially offset by higher average fuel prices during the first quarter. We anticipate fuel surcharge revenue will decrease relative to the prior year fourth quarter, as lower fuel prices are expected to more than offset expected increases in year-over-year volume.

Operating Expenses

Operating expenses decreased slightly for both the third quarter and year-to-date periods. This quarterly decline was primarily due to a decrease in other benefits expense related to workforce reductions during the current period as compared to the prior year period and decreased other indirect costs from various transactions. This was somewhat offset by $47 million in higher pickup and delivery expenses, associated with increased volumes in certain regions and the impact of an additional operating day.

Year to date, the costs of operating our integrated air and ground network decreased $88 million due to lower average fuel prices and reductions in air charters and aircraft block hours in response to volume declines in the first half of the year. This decrease was mostly offset due to a payment to settle a one-time international regulatory matter in Italy.

Our non-GAAP adjusted operating expenses exclude the impact of activities associated with our transformation strategy, which were immaterial for the quarter (year to date $36 million). Transformation strategy activities reflected within International Package during these periods are primarily comprised of compensation and benefits related to workforce reductions under our Fit to Serve program. See Supplemental Information - Items Affecting Comparability for additional discussion.

We expect our operating expenses will increase during the fourth quarter of 2024, driven by expected volume growth.

Operating Profit and Margin

As a result of the factors described above, operating profit increased $168 million for the quarter (down $169 million year to date), with operating margin increasing 330 basis points to 18.1% (down 100 basis points to 16.7% year to date). Non-GAAP adjusted operating profit increased $117 million (down $85 million year to date) and non-GAAP adjusted operating margin increased 220 basis points to 18.0% (down 40 basis points to 17.6% year to date). Non-GAAP adjusted operating profit excludes the impact of operating expense adjustments discussed above.

During the third quarter, we completed the previously disclosed, pending liquidation of our Small Package subsidiaries in Russia and Belarus. The process to liquidate our Forwarding and Logistics subsidiaries in Russia are on-going and we expect to finalize the liquidation by the first quarter of 2025. 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.

On July 22, 2024, we announced that we have entered into an agreement to acquire Estafeta, a leading domestic small package provider in Mexico that is expected to enhance our logistics orchestration capabilities in this market. The acquisition is targeted to close in the first half of 2025, subject to customary closing conditions and regulatory approvals.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Supply Chain Solutions


	Three Months Ended September 30,						Change				Nine Months Ended September 30,						Change
	2024			2023			$		%		2024			2023			$		%
Revenue (in millions):
Forwarding	$	1,307		$	1,327		$	(20)	(1.5)	%	$	3,902		$	4,217		$	(315)	(7.5)	%
Logistics	1,550			1,430			120		8.4	%	4,638			4,271			367		8.6	%
Other	527			377			150		39.8	%	1,389			1,285			104		8.1	%
Total Revenue	$	3,384		$	3,134		$	250	8.0	%	$	9,929		$	9,773		$	156	1.6	%
Operating Expenses (in millions):
Operating Expenses	$	3,095		$	2,992		$	103	3.4	%	$	9,271		$	9,089		$	182	2.0	%
Gain on Divestiture of Coyote	156			—			156		N/A		156			—			156		N/A
Transformation Strategy Costs	(84)			(16)			(68)		425.0	%	(98)			(60)			(38)		63.3	%
Goodwill and Asset Impairment Charges	—			(117)			117		(100.0)	%	(41)			(125)			84		(67.2)	%
Expense for Regulatory Matter	—			—			—		N/A		(45)			—			(45)		N/A
Non-GAAP Adjusted Operating Expenses	$	3,167		$	2,859		$	308	10.8	%	$	9,243		$	8,904		$	339	3.8	%
Operating Profit (in millions) and Operating Margin:
Operating Profit	$	289		$	142		$	147	103.5	%	$	658		$	684		$	(26)	(3.8)	%
Non-GAAP Adjusted Operating Profit	$	217		$	275		$	(58)	(21.1)	%	$	686		$	869		$	(183)	(21.1)	%
Operating Margin	8.5		%	4.5		%					6.6		%	7.0		%
Non-GAAP Adjusted Operating Margin	6.4		%	8.8		%					6.9		%	8.9		%
Currency Benefit / (Cost) – (in millions)(1):
Revenue							$	(10)									$	(52)
Operating Expenses							13										62
Operating Profit							$	3									$	10

(1) Amount represents the change in currency translation compared to the prior year.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS


	Three Months Ended September 30,				Change				Nine Months Ended September 30,				Change
	2024		2023		$		%		2024		2023		$		%
Non-GAAP adjustments to Operating Expenses (in millions):
Transformation Strategy Costs
Forwarding	$	28	$	14	$	14	100.0	%	$	35	$	38	$	(3)	(7.9)	%
Logistics	56		1		55		5,500.0	%	63		21		42		200.0	%
Other SCS	—		1		(1)		(100.0)	%	—		1		(1)		(100.0)	%
Total Transformation Strategy Costs	$	84	$	16	$	68	425.0	%	$	98	$	60	$	38	63.3	%
Gain on Divestiture of Coyote
Forwarding	$	(156)	$	—	$	(156)	N/A		$	(156)	$	—	$	(156)	N/A

As of September 30, 2024 and December 31, 2023, 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, 2023 is incorporated herein by reference.

Our market risks, hedging strategies and financial instrument positions as of September 30, 2024 have not materially changed from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023. In the third quarter of 2024, 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, 2023 and September 30, 2024 in the preceding table are primarily due to 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 bilateral collateral provisions whereby cash is required based on the net fair value of derivatives associated with those counterparties when positions exceed $250 million.

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 September 30, 2024, we held no cash collateral and were not required to post any 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 September 30, 2024 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, 2023. 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 third quarter of 2024 is as follows (in millions, except per share amounts):


	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program	Approximate Dollar Value of Shares that May Yet be Purchased Under the Program
July 1 - July 31, 2024	3.3	$	127.62	3.3	$	2,407
August 1 - August 31, 2024	—	—		—	2,407
September 1 - September 30, 2024	0.6	127.62		0.6	$	2,332
Total July 1 - September 30, 2024	3.9	$	127.62	3.9
(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.

In January 2023, the Board of Directors approved a share repurchase authorization of $5.0 billion for class A and class B common stock. We repurchased 3.9 million shares of class B common stock for $500 million under an accelerated stock repurchase transaction during the three and nine months ended September 30, 2024. As of September 30, 2024, we had $2.3 billion of this share repurchase authorization available.

For additional information on our share repurchase activities, see note 12 to the unaudited, consolidated financial statements.

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Item 5. Other Information

Disclosures Required Pursuant to Section 13(r) of the Securities Exchange Act of 1934

UPS maintains robust economic sanctions compliance procedures designed to promote compliance with applicable sanctions laws. However, from time to time the Company may inadvertently pick up packages from, or deliver packages to, individuals or entities that result in required disclosure under Section 13(r). From the date of the Company’s most recent disclosure under this heading through the date of this filing, the Company inadvertently delivered a single shipment to or for the benefit of each of the vessel Fortune (item was not billed; no revenue or profit ) and the Embassy of Iran in the United Kingdom (revenue of $9.98, profit of $4.15).

UPS does not intend to further pick up from or deliver to these parties, and intends to continue to implement process improvements designed to better identify and prevent potential shipments to or from restricted parties.

Insider Trading Arrangements and Policies

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Item 6. Exhibits



3.1	—	Restated Certificate of Incorporation of United Parcel Service, Inc. (incorporated by reference to Exhibit 3.3 to Form 8-K filed on May 12, 2010).

3.2	—	Amended and Restated Bylaws of United Parcel Service, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K, filed on May 9, 2023).

31.1	—	Certification of the Principal Executive Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	—	Certification of the Principal Financial and Accounting Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	—	Certification of the Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	—	Certification of the Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	—	The following unaudited financial information from this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 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 September 30, 2024 is formatted in Inline XBRL (included as Exhibit 101).

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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:

November 6, 2024

By:

/s/ BRIAN DYKES

Brian Dykes

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

UNITED PARCEL SERVICE INC - Quarter Report: 2024 September (Form 10-Q)

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