UNITED PARCEL SERVICE INC - Quarter Report: 2024 March (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

$ $

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 March 31, 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.

Table of Contents

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: As of March 31, 2024 and December 31, 2023, equity securities accounted for under the equity method had a carrying value of $ and $ million, respectively.

•Other equity securities: Certain equity securities that do not have readily determinable fair values are reported in accordance with the measurement alternative in ASC Topic 321 Investments - Equity Securities. Equity securities accounted for under the measurement alternative had a carrying value of $ million as of both March 31, 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 March 31, 2024 and December 31, 2023.

Table of Contents

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 three months ended March 31, 2024 or 2023.

Table of Contents

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 March 31, 2024 and December 31, 2023, respectively.

There were no material impairment charges for the three months ended March 31, 2024 or 2023.

Table of Contents

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

$ $ $ $ $ $

The components of net periodic benefit cost other than current service cost are presented within Investment income and other in the statements of consolidated income.

During the three months ended March 31, 2024, we contributed $ million and $ million to our company-sponsored pension and U.S. postretirement medical benefit plans, respectively. We expect to contribute approximately $ million over the remainder of the year to our U.S. postretirement medical benefit plans.

Multiemployer Benefit Plans

We contribute to a number of multiemployer defined benefit and health and welfare plans under the terms of collective bargaining agreements that cover our union-represented employees. Our current collective bargaining agreements set forth the annual contribution increases allotted to the plans that we participate in, and we are in compliance with these contribution rates. These limitations on annual contribution rates will remain in effect throughout the terms of the existing collective bargaining agreements.

As of March 31, 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 March 31, 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 March 31, 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.

Subsequent to our withdrawal, the CSPF incurred extensive asset losses and indicated that it was projected to become insolvent. In such event, the CSPF benefits would be reduced to the legally permitted Pension Benefit Guaranty Corporation ("PBGC") limits, triggering the coordinating benefits provision in the collective bargaining agreement.

In 2021, the American Rescue Plan Act ("ARPA") was enacted into law. The ARPA contains provisions that allow for qualifying multiemployer pension plans to apply for special financial assistance ("SFA") from the PBGC, which will be funded by the U.S. government. Following SFA approval, a qualifying multiemployer pension plan will receive a lump sum payment to enable it to continue paying unreduced pension benefits through 2051. The multiemployer plan is not obligated to repay the SFA. The ARPA is intended to prevent both the PBGC and certain financially distressed multiemployer pension plans, including the CSPF, from becoming insolvent through 2051. The CSPF submitted an application for SFA that was approved in December 2022. In January 2023, $ billion was paid to the CSPF by the PBGC.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 employed under agreements with the Teamsters are employed under collective bargaining agreements with the International Association of Machinists and Aerospace Workers. These collective bargaining agreements run through July 31, 2024.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8.

$ $ $ Acquired Currency / Other ()()()March 31, 2024:$ $ $ $

Changes in goodwill during the three months ended March 31, 2024 resulted from:

•An increase in goodwill of $ million, as part of purchase accounting allocations relating to our acquisitions of MNX Global Logistics and Happy Returns in the fourth quarter of 2023. Certain areas of purchase accounting, including our estimates of tax positions, remain preliminary as of March 31, 2024.

•The remaining movements are due to the impact of changes in the value of the U.S. Dollar on the translation of non-U.S. Dollar goodwill balances.

As of March 31, 2024, none of our reporting units had indications that an impairment was more likely than not. Approximately $ billion of our consolidated goodwill balance of $ billion is represented by our Global Freight Forwarding, our truckload brokerage ("Coyote") and Roadie reporting units which, based on our quarterly monitoring, 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.

Actual reporting unit performance, revisions to our forecasts of future performance, market factors, changes in estimates or assumptions in connection with our annual testing, 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.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

$()$ 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$ $()$

A trade name and licenses with carrying values of $ and $ million, respectively, as of March 31, 2024 are deemed to be indefinite-lived intangible assets, and therefore are not amortized.

As of March 31, 2024, the estimated fair value of the indefinite-lived trade name associated with Coyote remained greater than its carrying value by less than 10 percent. The carrying value of this trade name is $ million. Our truckload brokerage business continues to be negatively impacted by market conditions, which has resulted in revenue declines. We continue to monitor business performance and external factors affecting our valuation assumptions for this trade name. There were no events or changes in circumstances as of March 31, 2024 that would indicate the carrying amounts of our indefinite-lived intangible assets may be impaired as of the date of this report.

For the three months ended March 31, 2024, we recorded impairment charges related to finite-lived intangible assets 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 as we consolidate our brands. There were impairment charges for finite-lived intangible assets for the three months ended March 31, 2023.

Table of Contents

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

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 Floating-rate senior notes:Floating-rate senior notes 2049-2073 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 2024-2025 Total debt$ Less: current maturities()()Long-term debt$ $

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 March 31, 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. As of March 31, 2024, we continued to classify our % senior notes with a principal balance of $ million that mature in September 2024 as long-term debt in our consolidated balance sheet due to our intent and ability to refinance the debt.

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 March 31, 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 March 31, 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 March 31, 2024.

Debt Covenants

Our existing debt instruments and credit facilities subject us to certain financial covenants. As of March 31, 2024, and for all prior periods presented, we have satisfied these financial covenants. These covenants limit the amount of secured indebtedness that we may incur, and limit the amount of attributable debt in sale-leaseback transactions, to % of net tangible assets. As of March 31, 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 March 31, 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.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 months ended March 31, 2024 or 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 months ended March 31, 2024 or 2023.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

$ 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$ $

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

$ 2025 2026 2027 2028 Thereafter Total lease payments Less: Imputed interest()()Total lease obligations Less: Current obligations()()Long-term lease obligations$ $

As of March 31, 2024, we had $ million of additional leases which had not commenced. These leases will commence later in 2024 or in 2025 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.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

The Securities and Exchange Commission (the "SEC") has been investigating our controls and practices surrounding impairment analyses in connection with the sale 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 sheet at March 31, 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.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 March 31, 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 March 31, 2024, preferred shares had been issued. $ $ Stock award plans Common stock issuances Conversions of class A to class B common stock() ()

Class A shares issued at end of period

$ $ Class B Common Stock:Balance at beginning of period $ $ Common stock purchases () Conversions of class A to class B common stock

Class B shares issued at end of period

$ $ Additional Paid-In Capital:Balance at beginning of period$ $ Stock award plans() Common stock purchases ()Common stock issuances Balance at end of period$ $ Retained Earnings:Balance at beginning of period$ $ Net income attributable to controlling interests

Dividends ($ and $ per share) (1)

()()Common stock purchases ()

Other (2)

() Balance at end of period$ $ Non-Controlling Interests:Balance at beginning of period$ $ Change in non-controlling interest ()Balance at end of period$ $

(1) The dividend per share amount is the same for both class A and class B common stock. Dividends include $ and $ million as of March 31, 2024 and 2023, respectively, that were settled in shares of class A common stock.

(2) Includes adjustments related to certain stock-based awards.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

repurchase any shares under our share repurchase program during the three months ended March 31, 2024. We repurchased million shares of class B common stock for $ million during the three months ended March 31, 2023. These repurchases were completed as follows:

•In August 2021, the Board of Directors authorized the company to repurchase up to $ billion of class A and class B common stock (the "2021 Authorization"). For the three months ended March 31, 2023, we repurchased million shares of class B common stock for $ million under this authorization.

•In January 2023, the Board of Directors terminated the 2021 Authorization and approved a new share repurchase authorization for $ billion of class A and class B common stock (the "2023 Authorization"). For the three months ended March 31, 2023, we repurchased million shares for $ million under the 2023 Authorization.

As of March 31, 2024, we had $ billion available under the 2023 Authorization. We do not currently anticipate any share repurchases in 2024.

Future share repurchases may be in the form of accelerated share repurchase programs, open market purchases or other methods we deem appropriate. The timing of share repurchases will depend upon market conditions. Unless terminated earlier by the Board of Directors, this program will expire when we have purchased all shares authorized for repurchase under the program.

Movements in additional paid-in capital in respect of stock award plans comprise accruals for unvested awards, offset by adjustments for awards that vest during the period.

Accumulated Other Comprehensive Income (Loss)

We recognize activity in other comprehensive income (loss) for foreign currency translation adjustments, unrealized holding gains and losses on available-for-sale securities, unrealized gains and losses from derivatives that qualify as hedges of cash flows and unrecognized pension and postretirement benefit costs. )$()

Translation adjustment (net of tax effect of $ and $())

()

Reclassification to earnings (net of tax effect of $ and $)

Balance at end of period()()Unrealized Gain (Loss) on Marketable Securities, Net of Tax:Balance at beginning of period()()

Current period changes in fair value (net of tax effect of $ and $)

()

Reclassification to earnings (net of tax effect of $ and $)

Balance at end of period()()Unrealized Gain (Loss) on Cash Flow Hedges, Net of Tax:Balance at beginning of period()

Current period changes in fair value (net of tax effect of $ and $())

()

Reclassification to earnings (net of tax effect of $() and $())

()()Balance at end of period() Unrecognized Pension and Postretirement Benefit Costs, Net of Tax:Balance at beginning of period()()

Reclassification to earnings (net of tax effect of $ and $)

Balance at end of period()()Accumulated other comprehensive income (loss) at end of period$()$()

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

$()Other expensesIncome tax (expense) benefit Income tax expenseImpact on net income ()Net incomeUnrealized Gain (Loss) on Marketable Securities:Realized gain (loss) on sale of securities ()Investment income and otherIncome tax (expense) benefit Income tax expenseImpact on net income ()Net incomeUnrealized Gain (Loss) on Cash Flow Hedges:Interest rate contracts()()Interest expenseForeign currency exchange contracts RevenueIncome tax (expense) benefit()()Income tax expenseImpact on net income Net incomeUnrecognized Pension and Postretirement Benefit Costs:Prior service costs()()Investment income and otherIncome tax (expense) benefit Income tax expenseImpact on net income()()Net incomeTotal amount reclassified for the period$ $ Net income

(1) Accumulated other comprehensive income (loss)

Table of Contents

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 $() $()

(1) Earnings per share is computed using unrounded amounts.

Diluted earnings per share for the three months ended March 31, 2024 and 2023 excluded the effect of and million shares of common stock, respectively, that may be issued upon the exercise of employee stock options because such effect would be antidilutive.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15.

million.

As of March 31, 2024 and December 31, 2023, we held cash collateral of $ and $ million, respectively, under these agreements. This collateral is included in Cash and cash equivalents in the consolidated balance sheets and is unrestricted. As of March 31, 2024, collateral was required to be posted with our counterparties. As of December 31, 2023, we were required to post $ million with our counterparties.

Types of Hedges

Commodity Risk Management

Currently, the fuel surcharges that we apply in our domestic and international package businesses are the primary means of reducing the risk of adverse fuel price changes on our business. In order to mitigate the impact of fuel surcharges imposed on us by outside carriers, we regularly adjust the rates we charge for our freight brokerage services.

Foreign Currency Risk Management

To protect against the reduction in value of forecasted foreign currency cash flows from our international package business, we maintain a foreign currency cash flow hedging program. Our most significant foreign currency exposures relate to the Euro, British Pound Sterling, Canadian Dollar, Chinese Renminbi and Hong Kong Dollar. We generally designate and account for these contracts as cash flow hedges of anticipated foreign currency denominated revenue.

We may also hedge portions of our anticipated cash settlements of principal and interest on certain foreign currency denominated debt. We generally designate and account for these contracts as cash flow hedges of forecasted foreign currency denominated transactions.

We hedge our net investment in certain foreign operations with foreign currency denominated debt instruments.

Interest Rate Risk Management

We may use a combination of derivative instruments to manage the fixed and floating interest rate mix of our total debt portfolio and related overall cost of borrowing.

We generally designate and account for interest rate swaps that convert fixed-rate interest payments into floating-rate interest payments as fair value hedges of the associated debt instruments. We designate and account for interest rate swaps that convert floating-rate interest payments into fixed-rate interest payments as cash flow hedges of the forecasted payment obligations.

We may periodically hedge the forecasted fixed-coupon interest payments associated with anticipated debt offerings by using forward starting interest rate swaps, interest rate locks or similar derivatives.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

British Pound SterlingGBP Canadian DollarCAD Hong Kong DollarHKD

As of March 31, 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

March 31,
2024

December 31,
2023

March 31,
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.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

$ $ $

Income Statement and AOCI Recognition of Designated Hedges

()Total$ $()

As of March 31, 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 March 31, 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.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

$()Total$ $()Income Statement Recognition of Non-Designated Derivative Instruments

Derivative instruments that are not designated as hedges are recorded at fair value with unrealized gains and losses reported in earnings each period. Cash flows from the settlement of derivative instruments appear in the statements of consolidated cash flows within the same categories as the cash flows of the hedged item.

We may periodically terminate interest rate swaps and foreign currency exchange forward contracts or enter into offsetting swap and foreign currency positions with different counterparties. As part of this process, we de-designate our original hedge relationship.

)$ Total$()$ ) $

Table of Contents

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Through our Customer First, People Led, Innovation Driven strategy we are investing to grow in the premium parts of the market and drive efficiency across our network. We are focused on the parts of the market that value our end-to-end integrated network, including healthcare, commercial shippers and small- and medium-sized businesses ("SMBs"). Through our Network of the Future initiative, we are transforming our network by combining physical and digital capabilities, including our smart package smart facility RFID solution, to streamline our operations. We are also leveraging technology to add new capabilities and expand our addressable market.

During the first quarter, we took a number of steps in furtherance of this strategy. For example, we expanded our no box, no label returns service that combines the reach and capabilities of The UPS Store and Happy Returns, and we launched Roadie XD, adding capabilities for big and bulky long-zone deliveries for items that are incompatible with our small package network. Additionally, we continued to develop capabilities to enhance our SMB customer experience. In furtherance of our healthcare strategy, we opened a new facility at our global air hub specifically designed for complex healthcare shipments. For the remainder of 2024, we expect to continue investment in our network to drive further operational efficiencies.

On April 1, 2024, we announced that we entered into an agreement to expand our relationship with the U.S. Postal Service ("USPS"), providing for UPS to become the USPS primary air cargo provider 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.

During the first quarter of 2024, the macroeconomic environment remained challenging. Persistent soft demand, lack of growth in industrial production and continuing inflationary pressures contributed to volume declines in our global small package operations, although we experienced pockets of growth in certain markets and trade lanes. In Supply Chain Solutions, our freight forwarding businesses continued to be negatively impacted by soft demand and market overcapacity. Somewhat offsetting this was increased revenue in our logistics businesses, driven by growth in our healthcare operations and the impact of the acquisition of MNX Global Logistics in the fourth quarter of 2023.

We expect our second quarter earnings to be lower relative to 2023, primarily due to the higher labor costs associated with the first year of the Teamsters contract. However, we anticipate a return to operating profit growth during the second half of 2024.

Table of Contents

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 March 31,						Change
	2024			2023			$		%
Revenue (in millions)	$	21,706		$	22,925		$	(1,219)	(5.3)	%
Operating Expenses (in millions)	20,093			20,384			(291)		(1.4)	%
Operating Profit (in millions)	$	1,613		$	2,541		$	(928)	(36.5)	%
Operating Margin	7.4		%	11.1		%
Net Income (in millions)	$	1,113		$	1,895		$	(782)	(41.3)	%
Basic Earnings Per Share	$	1.30		$	2.20		$	(0.90)	(40.9)	%
Diluted Earnings Per Share	$	1.30		$	2.19		$	(0.89)	(40.6)	%

Operating Days	63			64
Average Daily Package Volume (in thousands)	21,199			21,989					(3.6)	%
Average Revenue Per Piece	$	13.73		$	13.74		$	(0.01)	(0.1)	%

134 $11 134 $11 110 $9

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

Transformation and Other Costs, and Asset Impairment Charges

We supplement the presentation of our operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of charges related to transformation and other activities, and asset impairments. For more information regarding transformation activity charges, see note 17 to the unaudited, consolidated financial statements, for other charges, see note 11 to the unaudited, consolidated financial statements, and for asset impairment charges, see note 8 to the unaudited, consolidated financial statements.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

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.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

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 first quarter of 2024, we expect additional air cargo volumes from our recently-announced agreement with the USPS will result in a greater share of air network expense being allocated to Supply Chain Solutions beginning in the second quarter of 2024.

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 volumes experienced during the quarter, 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 March 31, 2024, we had eight aircraft temporarily idled for an average period of approximately two months. We expect these aircraft to return to revenue service during 2024.

We test goodwill and other indefinite-lived intangible assets 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 and other indefinite-lived intangible assets for impairment requires that we make a number of significant assumptions, including assumptions related to future revenues, costs, capital expenditures, working capital, our cost of capital and market comparables. We are also required to make assumptions relating to our overall business and operating strategy, and the regulatory and market environment.

Challenging macroeconomic and uncertain geopolitical conditions continue to impact demand for our services. 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 March 31, 2024, these external conditions or other factors, including market comparables, may negatively impact certain estimates and assumptions that we use in developing our reporting units' fair values. Such impacts may be more pronounced for reporting units whose fair values do not significantly exceed their carrying values.

As of March 31, 2024, none of our reporting units had indications that an impairment was more likely than not. Approximately $1.5 billion of our consolidated goodwill balance of $4.8 billion is represented by our Global Freight Forwarding, Coyote and Roadie reporting units which, based on our quarterly monitoring, 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.

Additionally, as of March 31, 2024, the estimated fair value of the indefinite-lived trade name associated with our truckload brokerage business, Coyote, remained greater than its carrying value by less than 10 percent. The carrying value of this trade name is $89 million. During the quarter, our truckload brokerage business continued to be negatively impacted by market conditions, which resulted in revenue declines. We continue to monitor business performance and external factors affecting our valuation assumptions for this trade name. As previously disclosed, we are continuing to evaluate strategic alternatives relating to this business.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

U.S. Domestic Package


	Three Months Ended March 31,						Change
	2024			2023			$		%
Average Daily Package Volume (in thousands):
Next Day Air	1,590			1,737					(8.5)	%
Deferred	1,047			1,139					(8.1)	%
Ground	15,438			15,796					(2.3)	%
Total Average Daily Package Volume	18,075			18,672					(3.2)	%
Average Revenue Per Piece:
Next Day Air	$	23.12		$	22.14		$	0.98	4.4	%
Deferred	17.53			16.38			1.15		7.0	%
Ground	11.07			11.21			(0.14)		(1.2)	%
Total Average Revenue Per Piece	$	12.50		$	12.54		$	(0.04)	(0.3)	%
Operating Days in Period	63			64
Revenue (in millions):
Next Day Air	$	2,316		$	2,461		$	(145)	(5.9)	%
Deferred	1,156			1,194			(38)		(3.2)	%
Ground	10,762			11,332			(570)		(5.0)	%
Total Revenue	$	14,234		$	14,987		$	(753)	(5.0)	%
Operating Expenses (in millions):
Operating Expenses	$	13,409		$	13,521		$	(112)	(0.8)	%
Transformation Costs	(9)			(22)			13		(59.1)	%
Asset Impairment Charges	(5)			—			(5)		N/A
Adjusted Operating Expense	$	13,395		$	13,499		$	(104)	(0.8)	%
Operating Profit (in millions) and Operating Margin:
Operating Profit	$	825		$	1,466		$	(641)	(43.7)	%
Adjusted Operating Profit	$	839		$	1,488		$	(649)	(43.6)	%
Operating Margin	5.8		%	9.8		%
Adjusted Operating Margin	5.9		%	9.9		%

Revenue

The change in revenue was due to the following:


	Volume		Rates / Product Mix		Fuel Surcharge		Total Revenue Change
Revenue Change Drivers:
First quarter 2024 vs. 2023	(4.2)	%	0.4	%	(1.2)	%	(5.0)	%

(27)* 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:
First quarter 2024 vs. 2023	(6.0)	%	1.6	%	(1.3)	%	(0.6)	%	(6.3)	%

94 $11 $83 754.5 %

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Revenue

Total revenue in Supply Chain Solutions decreased for the quarter. This was primarily due to declines in our Forwarding business, with both truckload brokerage and freight forwarding revenues decreasing, and declines within certain of our other businesses. These declines were partially offset by revenue growth in our Logistics businesses.

•Revenue in our truckload brokerage business decreased $148 million due to lower volumes and a decline in market rates. These decreases were partially offset by volume increases from SMBs as a result of our revenue quality initiatives.

•International airfreight revenue decreased approximately $53 million due to continued weakness in market demand, impacting both volumes and rates. We expect improvements in market demand and tightening capacity, particularly on Asia export lanes, which are expected to lead to revenue growth in the second half of 2024.

•The remaining reduction in revenue was primarily attributable to our ocean freight forwarding business, driven by a change in product mix that drove growth in volume but at lower rates. We expect revenue to remain challenged in the second quarter as capacity increases are expected to continue to exceed demand.

Within our Logistics businesses, revenue increased $132 million. The acquisition of MNX Global Logistics in the fourth quarter of 2023 contributed $90 million of the increase, with the remainder driven by growth in clinical trials and pharmaceuticals within our healthcare operations. Revenue in mail services remained relatively flat as rate increases and a favorable shift in product characteristics were offset by a decrease in volume.

Revenue from other businesses within Supply Chain Solutions decreased, driven by a reduction of $69 million from lower volumes under contracts with the USPS. Revenue from transition services provided to the acquirer of UPS Freight declined $34 million as we continue to wind down these arrangements. These reductions were partially offset by higher revenue from our digital businesses due to business growth and the impact of the acquisition of Happy Returns in the fourth quarter of 2023. We expect revenue from our other Supply Chain Solutions businesses will increase during the second half of 2024 as this is where we will report the revenue related to the additional air cargo volume under our recently announced agreement with the USPS.

Operating Expenses

Total operating expenses and adjusted operating expenses within Supply Chain Solutions decreased for the quarter.

Forwarding operating expenses decreased $229 million, primarily due to a reduction of approximately $196 million in purchased transportation expense as a result of lower market rates across our businesses, and decreased volumes in both the airfreight and truckload brokerage businesses. We expect our operating expenses will increase during the second half of 2024 driven by expected higher volumes.

Logistics operating expenses increased $124 million, driven by the impact of the acquisition of MNX Global Logistics which contributed $88 million of the increase. Expenses in our healthcare operations increased $43 million, primarily due to higher rates for third-party transportation. Operating expenses in mail services were relatively flat. On an unadjusted basis, Logistics operating expenses were also impacted by a charge to write down the value of certain trade names acquired as part of the Bomi Group acquisition.

Expenses in our other Supply Chain Solutions businesses decreased, largely driven by the reduction in transportation costs incurred to fulfill our obligations to the USPS under existing agreements. Costs incurred to procure transportation for, and provide transition services to, the acquirer of UPS Freight also decreased as we continued to wind down these arrangements. These decreases were partially offset by higher operating costs within our digital businesses. On an unadjusted basis, these decreases were offset by the impact of transformation and other costs, including an expense related to a regulatory matter. We expect expenses in our other Supply Chain Solutions businesses will increase during the second half of 2024, as this is where we will report expenses related to the additional air cargo volume under our recently announced agreement with the USPS.

Operating Profit and Margin

As a result of the factors described above, total operating profit decreased $115 million, with operating margin decreasing 320 basis points to 4.1%. On an adjusted basis, operating profit decreased $32 million with adjusted operating margin decreasing 60 basis points to 7.0%.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Consolidated Operating Expenses


	Three Months Ended March 31,				Change
	2024		2023		$		%
Operating Expenses (in millions):
Compensation and benefits	$	11,639	$	11,464	$	175	1.5	%
Transformation and Other Costs	(31)		12		(43)		N/A
Adjusted Compensation and benefits	$	11,608	$	11,476	$	132	1.2	%

Repairs and maintenance	$	718	$	725	$	(7)	(1.0)	%
Depreciation and amortization	898		834		64		7.7	%
Purchased transportation	3,246		3,541		(295)		(8.3)	%
Fuel	1,060		1,271		(211)		(16.6)	%
Other occupancy	564		551		13		2.4	%
Other expenses	1,968		1,998		(30)		(1.5)	%
Total Other expenses	8,454		8,920		(466)		(5.2)	%
Transformation and Other Costs	(55)		(15)		(40)		266.7	%
Asset Impairment Charges	(48)		(8)		(40)		500.0	%
Adjusted Total Other expenses	$	8,351	$	8,897	$	(546)	(6.1)	%

Total Operating Expenses	$	20,093	$	20,384	$	(291)	(1.4)	%
Adjusted Total Operating Expenses	$	19,959	$	20,373	$	(414)	(2.0)	%

Currency (Benefit) / Cost - (in millions)*					$	(18)
* Amount represents the change in currency translation compared to the prior year.


	Three Months Ended March 31,				Change
	2024		2023		$		%
Adjustments to Operating Expenses (in millions):
Transformation and Other Costs
Compensation	$	5	$	5	$	—	—	%
Benefits	26		(17)		43		N/A


Other expenses	55		15		40		266.7	%
Total Transformation and Other Costs	$	86	$	3	$	83	N/M
Asset Impairment Charges
Other expenses	$	48	$	8	$	40	500.0	%
Total Adjustments to Operating Expenses	$	134	$	11	$	123	N/M

Investment Income and Other

Investment income decreased for the quarter, primarily due to a reduction in invested balances and year-over-year changes in certain non-current investments. Other pension income remained flat as higher expected returns on pension assets were offset by an increase in interest cost as a result of plan growth and changes in demographic assumptions.

Interest Expense

Interest expense increased for the quarter due to higher average outstanding debt balances, partially offset by an increase in capitalized interest.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Income Tax Expense

The following table sets forth our income tax expense and effective tax rate for the three months ended March 31, 2024 and 2023 (in millions):


	Three Months Ended March 31,						Change
	2024			2023			$		%
Income Tax Expense	$	423		$	627		$	(204)	(32.5)	%
Income Tax Impact of:
Transformation and Other Costs	11			—			11		N/A
Asset Impairment Charges	13			2			11		550.0	%
Adjusted Income Tax Expense	$	447		$	629		$	(182)	(28.9)	%
Effective Tax Rate	27.5		%	24.9		%
Adjusted Effective Tax Rate	26.8		%	24.8		%

For additional information on our income tax expense and effective tax rate, see note 16 to the unaudited, consolidated financial statements.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Liquidity and Capital Resources

We deploy a disciplined and balanced approach to capital allocation, including returns to shareowners through dividends and share repurchases. As of March 31, 2024, we had $4.5 billion in cash, cash equivalents and marketable securities. We believe that these positions, expected cash from operations, access to commercial paper programs and capital markets and other available liquidity options will be adequate to fund our material short- and long-term cash requirements, including our business operations, planned capital expenditures, pension contributions, planned acquisitions, transformation costs, debt obligations and planned shareowner returns. We regularly evaluate opportunities to optimize our capital structure, including through issuances of debt to refinance existing debt and to fund operations.

Cash Flows From Operating Activities

The following is a summary of the significant sources (uses) of cash from operating activities (in millions):


	Three Months Ended March 31,
	2024		2023
Net income	$	1,113	$	1,895
Non-cash operating activities (1)	1,308		1,226
Pension and postretirement medical benefit plan contributions (company-sponsored plans)	(50)		(1,277)
Hedge margin receivables and payables	(8)		(159)
Income tax receivables and payables	257		426
Changes in working capital and other non-current assets and liabilities	696		278
Other operating activities	—		(32)
Net cash from operating activities	$	3,316	$	2,357

(1) Represents depreciation and amortization, gains and losses on derivative transactions and foreign currency exchange, deferred income taxes, allowances for expected credit losses, amortization of operating lease assets, pension and postretirement medical benefit plan (income) expense, stock compensation expense, changes in casualty self-insurance reserves, goodwill and other asset impairment charges and other non-cash items.

Net cash from operating activities increased $959 million for the quarter primarily due to a decrease in contributions to our company-sponsored, defined benefit pension and postretirement medical plans. Net cash was also favorably impacted by:

•A reduction in hedge margin collateral outflows due to changes in the fair value of derivative contracts used in our currency hedging programs.

•Working capital benefits from lower incentive compensation payments and payment of deferred employer payroll taxes in 2023 that did not repeat.

These factors were partially offset by:

•The reduction in net income.

•A decrease in income taxes payable, primarily driven by business performance.

As of March 31, 2024, approximately $2.0 billion of our total worldwide holdings of cash, cash equivalents and marketable securities were held by foreign subsidiaries. The amount of cash, cash equivalents and marketable securities held by our U.S. and foreign subsidiaries fluctuates throughout the year due to a variety of factors, including the timing of cash receipts, strategic operating needs and disbursements in the normal course of business. Cash provided by operating activities in the U.S. continues to be our primary source of funds to finance domestic operating needs, capital expenditures, share repurchases, pension contributions and dividend payments to shareowners. All cash, cash equivalents and marketable securities held by foreign subsidiaries are generally available for distribution to the U.S. without any U.S. federal income taxes. Any such distributions may be subject to foreign withholding and U.S. state taxes. When amounts earned by foreign subsidiaries are expected to be indefinitely reinvested, no accrual for taxes is provided. As of March 31, 2024, we had $93 million of restricted cash. For more information on restricted cash, see note 1 to the unaudited, consolidated financial statements.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Cash Flows From Investing Activities

Our primary sources (uses) of cash from investing activities were as follows (in millions):


	Three Months Ended March 31,
	2024			2023
Net cash (used in) from investing activities	$	1,566		$	(1,813)

Capital Expenditures:
Buildings, facilities and plant equipment	$	(327)		$	(368)
Aircraft and parts	(174)			(71)
Vehicles	(349)			(13)
Information technology	(185)			(157)
Total Capital Expenditures	$	(1,035)		$	(609)

Capital Expenditures as a % of revenue	4.8		%	2.7		%

Other Investing Activities:
Proceeds from disposal of businesses, property, plant and equipment	$	13		$	5
Net (purchases) sales and maturities of marketable securities	$	2,646		$	(1,192)
Acquisitions, net of cash acquired	$	(44)		$	(34)
Other investing activities	$	(14)		$	17

We have commitments for the purchase of aircraft, vehicles, equipment and real estate to provide for the replacement of existing capacity and anticipated future growth. Future capital spending for anticipated growth and replacement assets will depend on a variety of factors, including economic and industry conditions. Our 2024 investment program anticipates investments in technology initiatives and enhanced network capabilities, including approximately $1.0 billion of projects that support our environmental sustainability goals. It also provides for the maintenance of buildings, facilities and equipment and replacement of certain aircraft within our fleet. We currently expect that our capital expenditures will total approximately $4.5 billion in 2024, of which approximately 50 percent will be allocated to network enhancement projects and other technology initiatives.

For the quarter, total capital expenditures increased, primarily due to:

•Vehicle expenditure increases, driven by the timing of payments and availability of vehicle replacements.

•Information technology expenditure increases due to additional deployments of technology equipment and capitalized software projects.

•Aircraft expenditure increases due to final payments associated with the delivery of aircraft.

These were partially offset by decreased spending on buildings, facilities and plant equipment, driven by the timing of network enhancement projects.

We received cash proceeds of $2.6 billion from the sale of marketable securities due to the liquidation of our portfolio to provide additional resources for short-term and strategic operating needs.

Cash paid for acquisitions in both 2024 and 2023 related to the purchase of development areas for The UPS Store. Other investing activities were impacted by changes in our non-current investments, purchase contract deposits and various other immaterial items.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Cash Flows From Financing Activities

Our primary sources (uses) of cash from financing activities were as follows (in millions, except per share data):


	Three Months Ended March 31,
	2024		2023
Net cash (used in) from financing activities	$	(3,666)	$	4
Share Repurchases:
Cash paid to repurchase shares	$	—	$	(751)
Number of shares repurchased	—		(4.1)
Shares outstanding at period end	855		859
Dividends:
Dividends declared per share	$	1.63	$	1.62
Cash paid for dividends	$	(1,348)	$	(1,348)
Borrowings:
Net borrowings (repayments) of debt principal	$	(2,198)	$	2,438
Other Financing Activities:
Cash received for common stock issuances	$	54	$	49
Other financing activities	$	(174)	$	(384)
Capitalization:
Total debt outstanding at period end	$	20,013	$	22,188
Total shareowners’ equity at period end	16,933		20,053
Total capitalization	$	36,946	$	42,241

As of March 31, 2024, we had no outstanding balances under our U.S. or European commercial paper programs.

The variation in cash received from common stock issuances primarily resulted from activity within the UPS 401(k) Savings Plan and our employee stock purchase plan in both the current and comparative period.

Other financing activities includes cash used to repurchase shares to satisfy tax withholding obligations on vested employee stock awards. Cash outflows for this purpose were $177 and $363 million for the first quarter of 2024 and 2023, respectively. The decrease was driven by changes in required repurchase amounts.

Except as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, we do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity.

Sources of Credit

See note 9 to the unaudited, consolidated financial statements for a discussion of our available credit and the financial covenants that we are subject to as part of our credit agreements.

Contractual Commitments

There have been no material changes to the contractual commitments described in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.

Legal Proceedings and Contingencies

See note 7 and note 11 to the unaudited, consolidated financial statements for a discussion of judicial proceedings and other matters arising from the conduct of our business activities, and note 16 for a discussion of income tax related matters.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Collective Bargaining Agreements

Status of Collective Bargaining Agreements

See note 7 to the unaudited, consolidated financial statements for a discussion of the status of our collective bargaining agreements.

Multiemployer Benefit Plans

See note 7 to the unaudited, consolidated financial statements for a discussion of our participation in multiemployer benefit plans.

Recent Accounting Pronouncements

Adoption of New Accounting Standards

See note 2 to the unaudited, consolidated financial statements for a discussion of recently adopted accounting standards.

Accounting Standards Issued But Not Yet Effective

See note 2 to the unaudited, consolidated financial statements for a discussion of accounting standards issued, but not yet effective.

Table of Contents

Item 3.Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in certain commodity prices, foreign currency exchange rates, interest rates and equity prices. All of these market risks arise in the normal course of business, as we do not engage in speculative trading activities. In order to manage the risk arising from these exposures, we may utilize a variety of commodity, foreign currency exchange and interest rate forward contracts, options and swaps. A discussion of our accounting policies for derivative instruments and further disclosures are provided in note 15 to the unaudited, consolidated financial statements.

The total net fair value asset (liability) of our derivative financial instruments is summarized in the following table (in millions):


	March 31, 2024		December 31, 2023
Currency Derivatives	$	161	$	66

As of March 31, 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 March 31, 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 first 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 March 31, 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. The majority of these agreements require exchange of collateral 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 March 31, 2024, we held cash collateral of $82 million 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.

Table of Contents

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, management, including our Principal Executive Officer and Principal Financial and Accounting Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")). Based upon, and as of the date of, the evaluation, our Principal Executive Officer and Principal Financial and Accounting Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

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.

Table of Contents

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. We do not anticipate repurchasing any shares in 2024. As of March 31, 2024, we had $2.8 billion of this share repurchase authorization available.

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

Table of Contents

Item 5. Other Information

Insider Trading Arrangements and Policies

Table of Contents

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).

10.1	—	United Parcel Service, Inc. Key Employee Severance Plan, effective March 20, 2024.*

10.2	—	United Parcel Service, Inc. Management Incentive Program Amended and Restated Terms and Conditions, effective March 20, 2024.*

10.3	—	United Parcel Service, Inc. Long-Term Incentive Performance Program Amended and Restated Terms and Conditions, effective March 20, 2024.*

10.4	—	United Parcel Service, Inc. Stock Option Program Amended and Restated Terms and Conditions, effective March 20, 2024.*

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 March 31, 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 March 31, 2024 is formatted in Inline XBRL (included as Exhibit 101).

__________________________


*			Management contract or compensatory plan or arrangement.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UNITED PARCEL SERVICE, INC.
(Registrant)

Date:

May 3, 2024

By:

/s/ BRIAN O. NEWMAN

Brian O. Newman

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

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

Similar companies