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


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

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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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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 June 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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 $ 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 June 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 June 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 $ million as of both June 30, 2024 and December 31, 2023.














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 $ $ $ 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 six months ended June 30, 2024 or 2023.

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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 June 30, 2024 and December 31, 2023, respectively.
There were no material impairment charges for the three or six months ended June 30, 2024 or 2023.

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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 Benefits202420232024202320242023Six Months Ended June 30:Service cost$ $ $ $ $ $ Interest cost      Expected return on assets()()()()()()Amortization of prior service cost      Net periodic benefit cost (income)$ $ $ $ $ $ 
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 six months ended June 30, 2024, we contributed $ and $ million to our company-sponsored pension and U.S. postretirement medical benefit plans, respectively. We expect to contribute approximately $ billion 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 June 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 June 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 June 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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 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 Teamsters. These agreements are scheduled to expire on July 31, 2028.
We have approximately employees in Canada employed under a collective bargaining agreement with the Teamsters 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 Teamsters 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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NOTE 8.
 $ $ $ Acquired    Gross Carrying
AmountAccumulated
AmortizationNet Carrying
ValueJune 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 above excludes intangible assets associated with our Coyote business that were classified as held for sale as of June 30, 2024. These assets include an indefinite-lived trade name with a carrying value of $ million and finite-lived intangibles with a carrying value of $ million. Prior to reclassification, we tested the indefinite-lived trade name for impairment. This analysis did not indicate impairment.
For the three months ended June 30, 2024, there were impairment charges for finite-lived intangible assets. For the six months ended June 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. There were impairment charges for finite-lived intangible assets for the three or six months ended June 30, 2023.
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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$ $ 

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billion under a U.S. commercial paper program and € billion (in a variety of currencies) under a European commercial paper program. There was commercial paper outstanding as of June 30, 2024. The amount of commercial paper outstanding under these programs in 2024 is expected to fluctuate.
Debt Classification
We have classified certain floating-rate senior notes that are redeemable at the option of the note holder as long-term debt in our consolidated balance sheets, due to our intent and ability to refinance the debt if the put option is exercised.
Debt Repayments
On May 21, 2024, our % Canadian Dollar senior notes with a principal balance of C$ million ($ million) matured and were repaid in full.
Debt Issuances
On May 22, 2024 we issued three series of notes in the principal amounts of $ million, $ billion and $ million. These notes bear interest at %, % and %, respectively, and mature on May 22, 2034, May 22, 2054 and May 22, 2064, respectively. Interest on the notes is payable semi-annually, beginning November 22, 2024. Each series of notes is callable at our option at a redemption price equal to the greater of % of the principal amount, or the sum of the present values of scheduled payments of principal and interest, plus accrued and unpaid interest.
On May 28, 2024 we issued floating rate senior notes with a principal balance of $ million. These notes bear interest at a rate equal to the compounded Secured Overnight Financing Rate ("SOFR") less % per year and mature on June 1, 2074. These notes are callable at various times after years at a stated percentage of par value and are redeemable at the option of the note holders at various times after one year at a stated percentage of par value.
Sources of Credit
We maintain credit agreements with a consortium of banks. The first of these agreements provides revolving credit facilities of $ billion, and expires on December 3, 2024. Amounts outstanding under this agreement bear interest at a periodic fixed rate equal to the term SOFR rate, plus % per annum and an applicable margin based on our then-current credit rating. The applicable margin from the credit pricing grid as of June 30, 2024 was %. Alternatively, a fluctuating rate of interest equal to the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in the United States; (2) the Federal Funds effective rate plus %; or (3) the Adjusted Term SOFR Rate for a one-month interest period plus %, may be used at our discretion.
The second agreement provides revolving credit facilities of $ billion, and expires on December 7, 2026. Amounts outstanding under this facility bear interest at a periodic fixed rate equal to the term SOFR rate plus % per annum and an applicable margin based on our then-current credit rating. The applicable margin from the credit pricing grid as of June 30, 2024 was %. Alternatively, a fluctuating rate of interest equal to the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in the United States; (2) the Federal Funds effective rate plus %; or (3) the Adjusted Term SOFR Rate for a one-month interest period plus %, plus an applicable margin, may be used at our discretion.
If the credit ratings established by Standard & Poor's and Moody's differ, the higher rating will be used, except in cases where the lower rating is two or more levels lower. In these circumstances, the rating one step below the higher rating will be used. We are also able to request advances under these facilities based on competitive bids for the applicable interest rate.
There were amounts outstanding under these facilities as of June 30, 2024.

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% of net tangible assets. As of June 30, 2024, % of net tangible assets was equivalent to $ billion and we had covered sale-leaseback transactions or secured indebtedness outstanding. We do not expect these covenants to have a material impact on our liquidity.
Fair Value of Debt    
Based on the borrowing rates currently available to us for long-term debt with similar terms and maturities, the fair value of long-term debt, including current maturities, was approximately $ and $ billion as of June 30, 2024 and December 31, 2023, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of all of our debt instruments.
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NOTE 10.
 $ $ $ Finance lease costs:Amortization of assets    Interest on lease liabilities    Total finance lease costs    Variable lease costs    Short-term lease costs    
Total lease costs(1)
$ $ $ $ 
(1)    This table excludes sublease income as it was not material for the three and six months ended June 30, 2024 and 2023.
In addition to the lease costs disclosed in the table above, we monitor all lease categories for any indicators that the carrying value of the assets may not be recoverable. There were material lease impairments recognized during the three or six months ended June 30, 2024 or 2023.
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 $ Current maturities of operating leases$ $ Non-current operating leases  Total operating lease obligations$ $ Finance Leases:Property, plant and equipment, net$ $ Current maturities of long-term debt, commercial paper and finance leases$ $ Long-term debt and finance leases  Total finance lease obligations$ $ Weighted average remaining lease term (in years):Operating leasesFinance leasesWeighted average discount rate:Operating leases % %Finance leases % %

 $ Operating cash flows from finance leases  Financing cash flows from finance leases  Right-of-use assets obtained in exchange for lease obligations:Operating leases$ $ Finance leases$ $ 

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 $ 2025  2026  2027  2028  Thereafter  Total lease payments  Less: Imputed interest()()Total lease obligations  Less: Current obligations()()Long-term lease obligations$ $ 
As of June 30, 2024, we had $ million of additional leases which had not commenced. These leases will commence later in 2024 through 2026 when we are granted access to the property, such as when leasehold improvements are completed by the lessor or a certificate of occupancy is obtained.
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NOTE 11.
companies in the commercial delivery and parcel industry, including UPS, related to alleged nonaggression agreements to allocate customers. In May 2017, we received a Statement of Objections issued by the CNMC. In July 2017, we received a Proposed Decision from the CNMC. In March 2018, the CNMC adopted a final decision, finding an infringement and imposing an immaterial fine on UPS. We appealed the decision. In December 2022, a trial court ruled against us. We have filed an appeal before the Spanish Supreme Court. We are vigorously defending ourselves and believe that we have a number of meritorious defenses. There are also unresolved questions of law that could be important to the ultimate resolution of this matter. We do not believe that any loss from this matter would have a material impact on our financial condition, results of operations or liquidity.
As previously disclosed, the Securities and Exchange Commission (the "SEC") has been investigating our controls and practices surrounding impairment analyses in connection with the divestiture of UPS Freight in April 2021. Such analysis led to a non-cash goodwill impairment charge being recorded during the quarter ended December 31, 2020. Since March 2024, when the SEC staff informed the Company that it disagreed with the timing of the impairment, the Company has been discussing with the SEC staff the possibility of reaching a negotiated resolution. Although the Company cannot predict the ultimate outcome of the investigation with certainty, it believes the resolution of the SEC investigation will not have a material effect on the Company's financial condition, results of operations or liquidity. An accrual representing our best estimate of the impact of this regulatory matter is included in our consolidated balance sheets as of June 30, 2024.
We are a party to various other matters that arose in the normal course of business. These include disputes with government authorities in various jurisdictions over the imposition of duties, fines, taxes and assessments from time to time. We are vigorously defending ourselves and believe that we have a number of meritorious defenses in these disputes. There are also unresolved questions of law that could be important to the ultimate resolution of these disputes. Accordingly, we are not able to estimate a possible loss or range of losses that may result from these disputes or to determine whether such losses, if any, would have a material impact on our financial condition, results of operations or liquidity.
We do not believe that the eventual resolution of any other matters (either individually or in the aggregate), including any reasonably possible losses in excess of current accruals, will have a material impact on our operations or financial condition.


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NOTE 12.
classes of common stock, which are distinguished from each other primarily by their respective voting rights. Class A shares of UPS are entitled to votes per share, whereas class B shares are entitled to vote per share. Class A shares are primarily held by UPS employees and retirees, as well as trusts and descendants of the Company's founders, and these shares are fully convertible into class B shares at any time. Class B shares are publicly traded on the New York Stock Exchange under the symbol "UPS". Class A and B shares both have a $ par value, and as of June 30, 2024, there were billion class A shares and billion class B shares authorized to be issued. Additionally, there are  million preferred shares authorized to be issued, with a par value of $ per share. As of June 30, 2024, preferred shares had been issued. $  $ 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
Six Months Ended June 30:20242023
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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 $ 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 $() $()
20242023
Six Months Ended June 30:SharesDollarsSharesDollars
Deferred Compensation Obligations:
Balance at beginning of period$ $ 
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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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, truckload brokerage, 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 second 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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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)
$ $ $ $ 
As of June 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 LevelGross Amounts Presented in
Consolidated Balance Sheets		Net Amounts if Right of
Offset had been Applied
Liability DerivativesBalance Sheet LocationJune 30,
2024		December 31,
2023		June 30,
2024		December 31,
2023
Derivatives designated as hedges:
Foreign currency exchange contractsOther current liabilitiesLevel 2$ $ $ $ 
Foreign currency exchange contractsOther non-current liabilitiesLevel 2    
Derivatives not designated as hedges:
Foreign currency exchange contracts
Other non-current liabilitiesLevel 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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 $ $ $ 
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$ $()$ $ $()$ 

Six Months Ended June 30,

20242023
Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging RelationshipsRevenueInterest ExpenseInvestment Income and OtherRevenueInterest ExpenseInvestment Income and Other
Gain (loss) on 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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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


 ()Total$ $()Six Months Ended June 30:Derivative Instruments in Cash Flow Hedging RelationshipsAmount of Gain (Loss) Recognized in AOCI on Derivatives20242023Foreign currency exchange contracts ()Total$ $()
As of June 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 June 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.
 $()Total$ $()Six Months Ended June 30:Non-derivative Instruments in Net Investment Hedging RelationshipsAmount of Gain (Loss) Recognized in AOCI on Debt 20242023Foreign currency denominated debt$ $()Total$ $()

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


 $()Total$ $()Six Months Ended June 30:Foreign currency exchange contractsInvestment income and other$()$ Total $()$ 
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 16.
% in 2024 compared to % in 2023 (% year to date compared to % in 2023). The year-over-year increase in our effective tax rate was driven by share-based compensation shortfalls, unfavorable changes in uncertain tax positions and non-deductible expenses related to regulatory matters.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 17.
and $ million was included in our consolidated balance sheets as of June 30, 2024 and December 31, 2023, respectively, all of which we expect to pay during 2024. $ $ $ 
Other expenses
    
Total Transformation Costs
$ $ $ $ 
Income Tax Benefit from Transformation Costs
()()()()
After-Tax Transformation Costs
$ $ $ $ 

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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 report Coyote within our Forwarding businesses in Supply Chain Solutions. Accounts receivable, net Other current assets 
Goodwill
 
Intangible assets, net
 Other non-current assets Total assets held for sale$ Liabilities:Accounts payable$ Other current liabilities Other non-current liabilities Total liabilities to be disposed of$ Net assets held for sale$ 
We expect the transaction, which is subject to customary closing conditions and regulatory approval, to close in the second half of 2024.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 19.
% of operating income.
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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are pursuing our goal of becoming the premium small package provider, logistics orchestrator and leading complex healthcare logistics provider in the world under our Customer First, People Led, Innovation Driven strategy. We are investing to grow in the most attractive parts of the market and transforming our integrated network through automation. Together, our Smart Package, Smart Facility and Network of the Future initiatives are providing enhanced shipment visibility for our customers and driving efficiency.
During the first half of the year, we took a number of steps in furtherance of our strategy. We continued to grow our healthcare logistics capabilities, including opening our first dedicated healthcare facility in Ireland. We also expanded the size of our flagship facility in the Netherlands, including additional ultra-cold storage capabilities to support the growing market for complex biopharma products. We continued adding partners to our Digital Access Program, expanded weekend service to six additional U.S. markets and launched an enhanced Worldwide Economy product globally.
We also continue to pursue inorganic opportunities. On June 23, 2024, we announced that we have entered into an agreement to divest our truckload brokerage business, Coyote, and 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.
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.
After volume declined in the first quarter of 2024, our global small package operations experienced growth during the second quarter. Within the U.S., volume growth was driven by residential volume from several new e-commerce customers. This growth occurred primarily in our SurePost product, which led to a decline in revenue per piece for the quarter. Internationally, we experienced declines in total average daily volume, but we experienced increased demand in certain export markets. This export volume growth occurred on several of our higher yielding trade lanes, contributing to an increase in revenue per piece in both the quarter and year-to-date periods.
In Supply Chain Solutions, revenue declines in the first quarter were largely offset by revenue growth during the second quarter, driven primarily by growth in our logistics businesses. This growth included the impact of the acquisition of MNX Global Logistics in the fourth quarter of 2023 as well as continued growth in our healthcare operations. Our digital businesses also saw revenue increase for the second quarter, and we began onboarding the new U.S. Postal Service ("USPS") air cargo business, which we expect to be fully implemented before our fourth-quarter peak period.
We expect revenue and operating profit growth in the second half of 2024 due to anticipated volume growth in our global small package operations. Additionally, wage-rate growth will decrease as we enter into the second year of the Teamsters contract beginning in the third quarter and we will further benefit from the impact of our Fit to Serve initiative. As a result of lower than originally planned capital expenditures and the anticipated divestiture of Coyote, we intend to return additional cash to shareowners by targeting approximately $500 million of share repurchases in the second half of the year.
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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
 June 30,		ChangeSix Months Ended
 June 30,		Change
 20242023$%20242023$%
Revenue (in millions)$21,818 $22,055 $(237)(1.1)%$43,524 $44,980 $(1,456)(3.2)%
Operating Expenses (in millions)19,874 19,275 599 3.1 %39,967 39,659 308 0.8 %
Operating Profit (in millions)$1,944 $2,780 $(836)(30.1)%$3,557 $5,321 $(1,764)(33.2)%
Operating Margin8.9 %12.6 %8.2 %11.8 %
Net Income (in millions)$1,409 $2,081 $(672)(32.3)%$2,522 $3,976 $(1,454)(36.6)%
Basic Earnings Per Share$1.65 $2.42 $(0.77)(31.8)%$2.95 $4.62 $(1.67)(36.1)%
Diluted Earnings Per Share$1.65 $2.42 $(0.77)(31.8)%$2.94 $4.61 $(1.67)(36.2)%
Operating Days64 64 127 128 
Average Daily Package Volume (in thousands)20,933 20,902 0.1 %21,065 21,445 (1.8)%
Average Revenue Per Piece$13.68 $13.92 $(0.24)(1.7)%$13.71 $13.83 $(0.12)(0.9)%

•Average daily package volume in our global small package operations increased slightly in the quarter, primarily as a result of new e-commerce customers in our U.S. Domestic package segment. Year to date, continued challenging external conditions drove average daily package volume declines across all products in our global small package operations.
•Revenue declined in both the quarter and year-to-date periods primarily as a result of unfavorable changes in product mix driven by customers trading down to lower cost options. Year to date, volume declines also contributed to the revenue decrease.
•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 under our Teamsters contract. These increases were partially offset year to date by decreases in purchased transportation and fuel expenses as well as the impact of productivity initiatives.
•Operating profit and operating margin decreased for both the quarter and year-to-date periods as efficiency initiatives were not enough to offset operating expense increases.
•We reported quarterly net income of $1.4 billion and diluted earnings per share of $1.65 ($2.5 billion and $2.94 per share, year to date). Adjusted diluted earnings per share were $1.79 ($3.21 per share, year to date) after adjusting for the after-tax impacts of:
◦transformation and other costs of $26 million, or $0.03 per diluted share in the quarter ($101 million, or $0.12 per share, year to date);
◦a payment to settle a one-time international regulatory matter, including interest, of $94 million, or $0.11 per diluted share in the quarter and year-to-date periods; and
◦asset impairment charges of $35 million, or $0.04 per diluted share in the year-to-date period.
Within our segments, U.S. Domestic Package revenues and expenses were primarily impacted by the matters described above.
International Package revenues were impacted by lower volumes in both periods as described above, as well as fluctuations in currency exchange rates, all of which were partially offset by revenue per piece growth. Expense increased for the quarter, primarily driven by higher fuel prices and the impact of a payment to settle a one-time international regulatory matter. Year to date, expense was relatively flat.
In Supply Chain Solutions, revenue increases for the quarter were primarily driven by growth in Logistics, while year-to-date revenue declines were driven by Forwarding, particularly our truckload brokerage business. Logistics drove the overall increase in segment expense for both periods, partially offset by lower purchased transportation in Forwarding in both periods.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



Supplemental Information - Items Affecting Comparability
We supplement the reporting of our financial information determined under generally accepted accounting principles in the United States ("GAAP") with certain non-GAAP financial measures. Non-GAAP financial measures 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. As a result, we believe excluding the impact of these items better enables users of our financial statements to view and evaluate underlying business performance from the perspective of management.
Adjusted financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our adjusted financial measures do not represent a comprehensive basis of accounting and therefore may not be comparable to similarly titled measures reported by other companies. Adjusted amounts reflect the following (in millions):
Three Months Ended
 June 30,		Six Months Ended
 June 30,
Non-GAAP Adjustments2024202320242023
Operating Expenses:
Transformation and Other Costs
$32 $139 $118 $142 
Asset Impairment Charges— — 48 8 
One-Time International Regulatory Matter
88 — 88 — 
Total Adjustments to Operating Expenses$120 $139 $254 $150 
Other Income and (Expense):
Interest Expense associated with One-Time International Regulatory Matter
$6 $— $6 $— 
Total Adjustments to Other Income and (Expense)$6 $— $6 $— 
Total Adjustments to Income Before Income Taxes$126 $139 $260 $150 
Income Tax (Benefit) Expense:
Transformation and Other Costs$(6)$(33)$(17)$(33)
Asset Impairment Charges— — (13)(2)
As of June 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 June 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 second 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 June 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 June 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 June 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
In January 2023, the Board of Directors approved a share repurchase authorization of $5.0 billion for class A and class B common stock. As of June 30, 2024, we had $2.8 billion of this share repurchase authorization available. We did not repurchase any shares under our share repurchase program during the second quarter of 2024. We anticipate our share repurchases will total approximately $500 million in 2024.
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
Insider Trading Arrangements and Policies
.
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Item 6. Exhibits
3.1—
3.2—
4.1—
4.2—
4.3—
4.4—
10.1—
31.1—
31.2—
32.1—
32.2—
101—
The following unaudited financial information from this Quarterly Report on Form 10-Q for the quarter ended June 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 June 30, 2024 is formatted in Inline XBRL (included as Exhibit 101).
__________________________
*
Management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 		UNITED PARCEL SERVICE, INC.
(Registrant)
Date:August 7, 2024By:  /s/ BRIAN DYKES
  Brian Dykes
  Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)


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