UNITED PARCEL SERVICE INC - Quarter Report: 2025 March (Form 10-Q)

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

$ Contract Liabilities:Short-term advance payments from customersOther current liabilities$ $ Long-term advance payments from customersOther non-current liabilities$ $

Our allowance for credit losses as of March 31, 2025 and December 31, 2024 was $ and $ million, respectively. Amounts for credit losses charged to expense, before recoveries, during each of the three months ended March 31, 2025 and 2024 were $ and $ million, respectively.

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NOTE 4.

and $() million, respectively.

As of March 31, 2025 and December 31, 2024, UPS Management Incentive Award Program ("MIP") awards were classified as a compensation obligation within Accrued wages and withholdings in our consolidated balance sheets. Substantially all MIP awards are settled in cash, subject to participant elections. Cash payments related to the 2024 MIP and 2023 MIP are reflected as activity in Accrued wages and withholdings in our statements of consolidated cash flows for the three months ended March 31, 2025 and 2024, respectively.

On May 7, 2025, the Compensation and Human Capital Committee of the Board (the "Compensation Committee") approved the 2025 LTIP award performance targets. The performance targets for the 2025 LTIP award are equally weighted between adjusted revenue growth and non-GAAP adjusted operating return on invested capital (“ROIC”). Restricted performance units (“RPUs”) that will be issued under the 2025 LTIP vest at the end of a three-year performance period, assuming continued employment with the Company (except in the case of death, disability or retirement, in which case immediate vesting occurs on a prorated basis). The final number of RPUs earned will then be subject to adjustment based on total shareholder return relative to the Standard & Poor's 500 Index. The grant date fair value is not yet available and will be determined using a Monte Carlo model.

Additionally, on May 7, 2025, the Compensation Committee approved special awards of time-based restricted stock units (“RSUs”) for certain of the Company’s employees, excluding the Chief Executive Officer. The RSUs that will be issued will be valued using the closing New York Stock Exchange ("NYSE") price of May 9, 2025 and will generally vest as follows: % on May 9, 2026; % on May 9, 2027; and % on May 9, 2028.

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NOTE 5.

$ $()$ Total trading marketable securities () Current available-for-sale securities:U.S. government and agency debt securities Corporate debt securities Total available-for-sale marketable securities Total current marketable securities$ $ $()$ CostUnrealized
GainsUnrealized
LossesEstimated
Fair ValueDecember 31, 2024:Current trading marketable securities:Equity securities$ $ $ $ Total trading marketable securities Current available-for-sale securities:U.S. government and agency debt securities () Corporate debt securities

Investment Impairments

We have concluded that no material impairment losses existed within marketable securities as of March 31, 2025. 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 March 31, 2025 and December 31, 2024, respectively. During the first quarter, we recorded a $ million asset impairment charge within Investment income and other in our statement of consolidated income related to an equity method investment.

•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. Equity securities accounted for under the measurement alternative had a carrying value of $ million as of March 31, 2025 and December 31, 2024.

•Other investments: We hold an investment in a variable life insurance policy to fund benefits for the UPS Excess Coordinating Benefit Plan. The investment is recorded at fair market value of $ million as of March 31, 2025 and December 31, 2024.

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$ $ $ Corporate debt securities Equity 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, 2024:

Marketable Securities:

U.S. government and agency debt securities

Corporate debt securities

Equity 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, 2025 or 2024.

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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 March 31, 2025 and December 31, 2024, respectively.

There were no material impairment charges for the three months ended March 31, 2025 or 2024. We will continue to monitor our long-lived asset groups for impairment.

Our Network of the Future initiative is intended to enhance our efficiency through automation and operational sort consolidation in our U.S. Domestic network. In connection with our plan for lower volumes from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future and will lead to a reduction in the number of buildings, vehicles and aircraft in our network. As of March 31, 2025, accelerated depreciation and early retirements were not material. We continue to evaluate our network and it is reasonably possible that these plans will continue to result in revisions to our estimates of the useful lives and salvage values of certain of our long-lived assets. Any revision to these plans could accelerate depreciation expense and lead to the recognition of charges related to early retirements in future periods. For additional information, see note 17 to the unaudited, consolidated financial statements.

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NOTE 7.

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

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

Our Network of the Future initiative is intended to enhance our efficiency through automation and operational sort consolidation in our U.S. Domestic network. In connection with our plan for lower volumes from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future. In connection therewith, we expect to permanently close certain facilities and reduce our operational workforce during 2025. As a result, certain U.S. pension and postretirement benefit plan obligations and assets may be subject to remeasurement at an interim date. We are not yet able to estimate the timing and will continue to monitor the impact of these uncertainties on our projected benefit obligation in accordance with ASC Topic 715. For additional information, see note 17 to the unaudited, consolidated financial statements.

During the three months ended March 31, 2025, we contributed $ million 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 March 31, 2025 and December 31, 2024, we had $ and $ million, respectively, recorded in Other Non-Current Liabilities in our consolidated balance sheets and $ million as of both March 31, 2025 and December 31, 2024 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, 2025 and December 31, 2024 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.

As of March 31, 2025 and December 31, 2024, we had $ and $ million, respectively, recorded in Other current liabilities in our consolidated balance sheets associated with our 2024 withdrawal from the District 9 International Association of Machinists and Aerospace Workers Pension Trust. The withdrawal liability was settled on April 1, 2025.

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 ("Teamsters"), 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

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employees in the U.S. employed under a national master agreement and various supplemental agreements with local unions affiliated with the Teamsters which runs through 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 a collective bargaining agreement with the International Association of Machinists and Aerospace Workers. This collective bargaining agreement becomes amendable July 31, 2029.

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NOTE 8.

$ $ $ Acquired Gross Carrying
AmountAccumulated
AmortizationNet Carrying
ValueMarch 31, 2025:Capitalized software$ $()$ Licenses () Franchise rights () Customer relationships () Trade name () Trademarks, patents and other () Amortizable intangible assets$ $()$ Indefinite-lived intangible assets —

Total Intangible Assets

$ $()$ December 31, 2024:Capitalized software$ $()$ Licenses () Franchise rights () Customer relationships () Trade name () Trademarks, patents and other () Amortizable intangible assets$ $()$ Indefinite-lived intangible assets —

Total Intangible Assets

$ $()$

Impairment tests for finite-lived intangible assets are performed when a triggering event occurs that may indicate that the carrying value of the intangible asset may not be recoverable. For the three months ended March 31, 2025, we recorded an impairment charge of $ million ($ million after tax) within Other Expenses in our statement of consolidated income. This charge represented software impairment associated with one of our Supply Chain Solutions businesses.

For the three months ended March 31, 2024, we recorded impairment charges of $ million ($ million after tax) within Other Expenses in our statement of consolidated income. These charges represented trade name and capitalized software license impairments.

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NOTE 9.

$ $ Fixed-rate senior notes:

% 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

Finance lease obligations (see note 10)

2025-2118 Facility notes and bonds 2029-2045 Other debt 2025-2028 Total debt$ Less: current maturities()()Long-term debt$ $ 20252024Operating lease costs$ $ 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, 2025 and 2024.

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. We recognized certain impairments, primarily within our Supply Chain Solutions segment, during the three months ended March 31, 2025. There were impairments recognized during the three months ended March 31, 2024.

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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$ $

$ 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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$ 2026 2027 2028 2029 Thereafter Total lease payments Less: Imputed interest()()Total lease obligations Less: Current obligations()()Long-term lease obligations$ $

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

The Company has received a letter from the San Bernardino County District Attorney’s Office, in cooperation with certain other California District Attorneys, notifying the Company of an investigation into alleged violations with respect to the management and disposal of hazardous waste in California. Following discussions with those parties, the Company expects to settle this matter for an immaterial amount and without admitting or denying the accusations.

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 March 31, 2025, 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, 2025, 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

Other

() 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$ $

Noncontrolling 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, 2025 and 2024, respectively, that were settled in shares of class A common stock.

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

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billion of class A and class B common stock. This share repurchase authorization has no expiration date. We repurchased million shares of class B common stock for $ billion under the share repurchase program during the three months ended March 31, 2025. We did repurchase any shares under the share repurchase program during the three months ended March 31, 2024.

As of March 31, 2025, we had $ billion available under the share repurchase authorization. We do not anticipate further share repurchases in 2025.

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 $)

()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 $)

()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$()$()

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

(1) Other segment items for each reportable segment include repairs and maintenance, depreciation and amortization, fuel, other occupancy, allocated costs for our air network, information service, and general and administrative service expenses.

(2) Revenue, Operating profit/(loss), Assets, and Depreciation and Amortization from segments below the quantitative thresholds are attributable to operating segments which provide supply chain solutions. These operating segments include our Forwarding, Logistics, and Other businesses.

(3) The amounts of depreciation and amortization disclosed by reportable segment are included within the other segment items captions. These totals are presented after applying activity-based costing methods to allocate expenses between segments as noted above.

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$ $ Reconciliation of revenue:

Other revenues(2)

Total consolidated$ Less:Compensation and benefits Compensation Benefits Purchased transportation

Other segment items(1)

Segment Operating profit/(loss)$ $ $ Reconciliation of segment operating profit to income before income taxes:

Other profit/(loss)(2)

$ Other pension income (expense)

Investment income and other

Interest expense()Income Before Income Taxes$ Other Segment Disclosures:Segment assets$ $ $

Other assets(2)

Unallocated assets Consolidated Assets$

Depreciation and amortization(3)

$ $ $

Other depreciation and amortization(2)

Consolidated Depreciation and Amortization$

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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:Stock options Denominator for diluted earnings per share

Basic earnings per share(1)

$ $

Diluted earnings per share(1)

$ $

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

Diluted earnings per share for the three months ended March 31, 2025 and 2024 excluded the effect of million shares of common stock that may be issued upon the exercise of employee stock options because such effect would be antidilutive.

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NOTE 15.

million.

As of March 31, 2025 and December 31, 2024, we did t hold any cash collateral and collateral was required to be posted with our counterparties.

Types of Hedges

Commodity Risk Management

The fuel surcharges that we apply in our domestic and international package businesses are our primary means that we employ to reduce 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.

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British Pound SterlingGBP Canadian DollarCAD Hong Kong DollarHKD Chinese RenminbiCNH

As of March 31, 2025 and December 31, 2024 we had no outstanding commodity hedge positions.

Balance Sheet Recognition

$ $ $ Foreign currency exchange contractsOther non-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,
2025

December 31,
2024

March 31,
2025

December 31,
2024

Derivatives designated as hedges:

Foreign currency exchange contracts

Other current liabilities

Level 2

Foreign currency exchange contracts

Other non-current liabilities

Level 2

Total Liability Derivatives

Our foreign currency exchange rate derivatives are largely comprised of over-the-counter derivatives, which are primarily valued using pricing models that rely on market observable inputs such as yield curves, foreign currency exchange rates and investment forward prices; therefore, these derivatives are classified as Level 2.

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$ $ $

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$ $()$ $ $()$ )$ Total$()$

As of March 31, 2025, 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, 2026. 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.

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)$ 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 our 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.

)$()Total$()$() ) $

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

Other expenses incurred in furtherance of our transformation strategy have been primarily related to fees paid to third-party service providers that supported end-to-end process redesign, assisted in our strategic reviews and contributed to our financial systems transition and healthcare strategy.

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

$ Financial systems Transformation 2.0 total Fit to Serve

Network Reconfiguration and Efficiency Reimagined

Total Transformation Strategy Costs$ $

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million of costs as part of Transformation 2.0. Transformation 2.0 initiatives are expected to conclude during 2025 with anticipated remaining costs of approximately $ million primarily related to completion of our technology initiatives. Costs associated with Transformation 2.0 have primarily consisted of compensation and benefit costs related to reductions in our workforce and fees paid to third-party consultants. Investments in technology are expected to provide enhanced quality of reporting for both internal and external purposes in part through simplification and standardization of data to better enable migration into cloud-based tools and automation of manual activities, including transitioning general ledger, consolidation, and planning tools along with U.S. payroll from older programs and software supporting our freight forwarding business. These efforts to enhance our technology are expected to reduce the need for future investments; we expect to realize benefits therefrom beginning during the second quarter of 2025.

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

Accruals for separation costs of $ and $ million within Fit to Serve were included in our consolidated balance sheets as of March 31, 2025 and December 31, 2024, respectively. During the first quarter, we made payments of $ million and accrued additional separation costs of $ million. As of March 31, 2025, we have incurred total costs of $ million and anticipate that we will incur additional costs of approximately $ million under Fit to Serve. Fit to Serve is expected to conclude in 2025.

Network Reconfiguration and Efficiency Reimagined: As previously disclosed, our Network of the Future initiative is intended to enhance our efficiency through automation and operational sort consolidation in our U.S. Domestic network. In connection with our plan for lower volumes from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future and is expected to lead to consolidations of our facilities and workforce as well as an end-to-end process redesign. We launched our Efficiency Reimagined initiatives to undertake the end-to-end process redesign effort which will align our organizational processes to the network reconfiguration. We expect to reduce our operational workforce by million hours and by approximately positions during 2025 and close leased and owned buildings by the end of June 2025. We are continuing to review our network and may identify additional buildings for closure. As of March 31, 2025, we continue to evaluate the impact of expected changes in volume on our air network. We anticipate $ billion of total cost savings will be delivered this year from Network Reconfiguration and Efficiency Reimagined and, through March 31, 2025 we had realized approximately $ million in cost savings and incurred related costs of $ million from these initiatives. These initiatives are expected to end in 2027.

In connection with the Network Reconfiguration and Efficiency Reimagined programs described above, we expect to record between $ and $ million in expense during 2025, related to early asset retirements, lease related costs, third-party consulting fees and employee separation benefits. We expect the costs associated with these actions may increase should we determine to close additional buildings. It is our intention to sell the property and equipment associated with closed facilities; however, as of the date hereof, we have not yet formalized plans of sale. In addition, we believe that workforce reductions may require a remeasurement of certain U.S. pension and postretirement benefit plan obligations and assets at an interim date. We are not yet able to estimate the timing or potential impact of such an event.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18.

million, net of cash acquired. Acquisitions were funded using cash from operations.

The estimated fair values of assets acquired and liabilities assumed are subject to change based on completion of our purchase accounting. Certain items, including property, plant and equipment, and our estimates of tax positions, are preliminary as of March 31, 2025. The preliminary purchase price allocation for acquired companies can be modified for up to one year from the date of acquisition.

Accounts receivable Other current assets

Property, plant and equipment

Operating lease right-of-use assets

Goodwill

Intangible assets(1)

Other non-current assets

Current maturities of operating leases

()

Accounts payable and other current liabilities

()

Non-current operating lease

()

Deferred income tax liabilities

()

Other non-current liabilities

()Total purchase price$

(1) Includes $ million for acquisitions of development areas for The UPS Store.

Goodwill recognized upon acquisition of approximately $ million is attributable to expected synergies from future growth, and has been assigned to Supply Chain Solutions. Goodwill acquired is not expected to be deductible for income tax purposes.

Intangible assets acquired of approximately $ million are primarily comprised of $ million of customer relationships (amortized over a weighted average of years). Other intangible assets acquired include franchise rights, licenses and trade names. The carrying value of accounts receivable approximates fair value.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19.

per share in cash, representing a total purchase price of approximately CAD $ billion (USD $ billion). The acquisition is not expected to be material to our consolidated financial position or results of operations.

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

Overview

We continue to execute our Customer First, People Led and Innovation Driven strategy to grow in the most attractive parts of the market including healthcare, small and medium-sized businesses (“SMBs”) and International.

During the first quarter of 2025, we took several steps in furtherance of this strategy, including deliberately shifting our business to increase our focus on higher yielding volume. We entered into an agreement with our largest customer that, as previously disclosed, provides for reductions to the volume they ship with us, relative to 2024, by more than 50% by June 2026. We insourced our former SurePost product, using the UPS network for final mile delivery, and now replaced it with Ground Saver, a new domestic economy service. We also announced our Ground with Freight Pricing product to provide for shipments weighing more than 150 pounds.

In January 2025, we completed the previously announced acquisition of Frigo-Trans and Biotech & Pharma Logistics ("Frigo-Trans"), an industry-leading, complex healthcare logistics provider based in Germany. The acquisition is expected to increase our complex cold-chain logistics capabilities internationally. In the second quarter of 2025, we entered into an agreement to acquire Andlauer Healthcare Group ("AHG"), a leading North American supply chain management company headquartered in Canada that offers customized third-party logistics and specialized cold chain transportation solutions for the healthcare sector. This acquisition is expected to close in the second half of 2025, subject to AHG’s shareholder approval, customary regulatory reviews and approvals, and other customary closing conditions.

As previously disclosed, our Network of the Future initiative is intended to enhance our efficiency through automation and operational sort consolidation in our U.S. Domestic network. In connection with our plan for lower volumes from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future and is expected to lead to consolidations of our facilities and workforce as well as an end-to-end process redesign. We launched our Efficiency Reimagined initiatives to undertake the end-to-end process redesign effort which will align our organizational processes to the network reconfiguration. We expect to reduce our operational workforce by 25 million hours and by approximately 20,000 positions during 2025 and close 73 leased and owned buildings by the end of June 2025. We are continuing to review our network and may identify additional buildings for closure. As of March 31, 2025, we continue to evaluate the impact of expected changes in volume on our air network. We anticipate $3.5 billion of total cost savings will be delivered this year from Network Reconfiguration and Efficiency Reimagined and, through March 31, 2025 we had realized approximately $500 million in cost savings and incurred related costs of $23 million from these initiatives. These initiatives are expected to end in 2027.

In connection with the Network Reconfiguration and Efficiency Reimagined programs described above, we expect to record between $400 and $600 million in expense during 2025, related to early asset retirements, lease related costs, third-party consulting fees and employee separation benefits. We expect the costs associated with these actions may increase should we determine to close additional buildings. It is our intention to sell the property and equipment associated with closed facilities; however, as of the date hereof, we have not yet formalized plans of sale. In addition, we believe that workforce reductions may require a remeasurement of certain U.S. pension and postretirement benefit plan obligations and assets at an interim date. We are not yet able to estimate the timing or potential impact of such an event.

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.

Our global small package operations experienced planned volume decreases during the quarter. Volumes declined in the U.S. due to the planned glide down of volume with our largest customer, partially offset by volume growth in our International business, driven by our domestic and export products. Decreases in package volume were largely offset by growth in revenue per piece. Revenue in our global small package operations increased slightly due to growth in air cargo revenue as we fully onboarded volume under our contract with the U.S. Postal Service ("USPS") during the fourth quarter of 2024.

Supply Chain Solutions revenue decreased, driven by the impact of the third quarter 2024 divestiture of Coyote, partially offset by growth in our mail services and certain of our digital businesses.

During the first quarter of 2025, we returned cash to shareholders in the form of $1.0 billion in share repurchases and dividends per share of $1.64.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The macro environment is highly uncertain due to changing trade policies and tariff uncertainty. As a global carrier, the eventual outcomes could result in pressure in some parts of our business and create new opportunities in others.

Highlights of our consolidated results, which are discussed in more detail below, include:


	Three Months Ended March 31,						Change
	2025			2024			$		%
Revenue (in millions)	$	21,546		$	21,706		$	(160)	(0.7)	%
Operating Expenses (in millions)	19,880			20,093			(213)		(1.1)	%
Operating Profit (in millions)	$	1,666		$	1,613		$	53	3.3	%
Operating Margin	7.7		%	7.4		%
Net Income (in millions)	$	1,187		$	1,113		$	74	6.6	%
Basic Earnings Per Share	$	1.40		$	1.30		$	0.10	7.7	%
Diluted Earnings Per Share	$	1.40		$	1.30		$	0.10	7.7	%

Operating Days	62			63
Average Daily Package Volume (in thousands)	20,789			21,199					(1.9)	%
Average Revenue Per Piece	$	14.22		$	13.73		$	0.49	3.6	%

16 40 4 13 83 $110

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

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

We supplement the presentation of operating profit, operating margin, other income and (expense), income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of the following items:

Transformation Strategy Costs

We exclude the impact of charges related to activities within our transformation strategy. Our transformation strategy activities have spanned several years and are designed to fundamentally change the spans and layers of our organization structure, processes, technologies and the composition of our business portfolio. Our transformation strategy includes initiatives within our Transformation 2.0, Fit to Serve, Network Reconfiguration and Efficiency Reimagined programs. Various circumstances from time to time have precipitated these initiatives, including identification and prioritization of investments as a result of executive leadership changes, developments and changes in competitive landscapes, inflationary pressures, consumer behaviors, and other factors including post-COVID normalization and volume diversions attributed to our 2023 labor negotiations.

Our transformation strategy includes the following programs and initiatives:

Transformation 2.0: Based on a number of factors including evaluating efficiencies previously gained, and in connection with changes in our executive leadership in 2020, we identified and reprioritized certain then-current and future investments, including additional investments in our workforce, portfolio of businesses and technology (such projects, collectively, “Transformation 2.0”). Specifically, we identified opportunities to reduce spans and layers of management, began a review of our business portfolio and identified opportunities to invest in certain technologies, including financial reporting and certain schedule, time and pay systems, to reduce global indirect operating costs, provide better visibility, and reduce reliance on legacy systems and coding languages. As of March 31, 2025, our remaining efforts under Transformation 2.0 include technology initiatives related to our financial systems. Previously completed initiatives within Transformation 2.0 are described in Supplemental Information - Items Affecting Comparability in our Annual Report on Form 10-K for the year ended December 31, 2024. Costs associated with Transformation 2.0 have primarily consisted of compensation and benefit costs related to reductions in our workforce and fees paid to third-party consultants. As of March 31, 2025, we have incurred $814 million of costs as part of Transformation 2.0, with anticipated remaining costs of approximately $75 million primarily related to completion of our technology initiatives. We expect any remaining costs to be incurred during 2025. These technology initiatives are expected to provide enhanced reporting quality for both internal and external purposes in part through simplification and standardization of data to better enable migration into cloud-based tools and automation, including transitioning general ledger, consolidation, and planning tools along with U.S. payroll from older programs and software supporting our freight forwarding business. These efforts are expected to reduce the need for future investments; we expect to realize benefits therefrom beginning during the second quarter of 2025.

Fit to Serve: In 2023, a number of factors, including macroeconomic headwinds and volume diversion resulting from our labor negotiations with the International Brotherhood of Teamsters, contributed to volume declines in our U.S. Domestic Package business. In addition, our International Package and Supply Chain Solutions businesses were also negatively impacted by a number of challenging macroeconomic conditions during 2023. In response to these factors, we undertook our Fit to Serve initiative with the intent to right-size our business to create a more efficient operating model that was more responsive to market dynamics through a workforce reduction of approximately 14,000 positions, primarily within management. As of March 31, 2025, we have incurred total costs of $435 million under Fit to Serve, which primarily consist of benefit costs related to reductions in our workforce. We expect to incur remaining costs of approximately $25 million in 2025 as a part of this initiative, which should be complete in 2025. We have achieved savings of approximately $1.0 billion through this program via reductions in our compensation and benefit expense.

Network Reconfiguration and Efficiency Reimagined: Our Network of the Future initiative is intended to enhance our efficiency through automation and operational sort consolidation in our U.S. Domestic network. In connection with our plan for lower volumes from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future and is expected to lead to consolidations of our facilities and workforce as well as an end-to-end process redesign. We launched our Efficiency Reimagined initiatives to undertake the end-to-end process redesign effort which will align our organizational processes to the network reconfiguration. We expect to reduce our operational workforce by 25 million hours and by approximately 20,000 positions during 2025 and close 73 leased and owned buildings by the end of June 2025. We are continuing to review our network and may identify additional buildings for closure. As of March 31, 2025, we continue to evaluate the impact of expected changes in volume on our air network. We anticipate $3.5 billion of total cost savings will be delivered this year from Network Reconfiguration and Efficiency Reimagined and, through March 31, 2025 we had realized approximately $500 million in cost savings and incurred related costs of $23 million from these initiatives. These initiatives are expected to end in 2027.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

We do not consider the related costs to be ordinary because each program involves separate and distinct activities that may span multiple periods and are not expected to drive incremental revenue, and because the scope of the programs exceeds that of routine, ongoing efforts to enhance profitability. These initiatives are in addition to ordinary, ongoing efforts to enhance our business performance.

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

Goodwill and Asset Impairment Charges

We exclude the impact of goodwill and asset impairment charges, including impairments of long-lived assets and equity method investments, which we do not consider when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards. For more information regarding goodwill and asset impairment charges, see note 5 and note 8 to the unaudited, consolidated financial statements.

Expense for Regulatory Matter

We exclude the impact of a charge to settle a regulatory matter that we consider to be unrelated to our ongoing operations and that we do not expect to recur. For more information regarding this regulatory matter, see note 10 in our Annual Report on Form 10-K for the year ended December 31, 2024.

Reversal of Income Tax Valuation Allowance

We previously recorded non-GAAP adjustments for transactions that resulted in capital loss deferred tax assets not expected to be realized. We now expect a portion of these capital losses to be realized in future periods. We supplement our presentation with non-GAAP measures that exclude the impact of subsequent changes in the valuation allowances against these deferred tax assets as we believe such treatment is consistent with how the valuation allowance was initially established.

Non-GAAP Adjusted Cost per Piece

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

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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.

As a normal part of managing our air network, we routinely idle aircraft and engines temporarily for maintenance or to adjust network capacity. As a result of the reduction in air volumes, as of March 31, 2025, we had three aircraft temporarily idled for an average period of approximately eight months 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. We expect these aircraft to return to revenue service during 2025. We continue to evaluate possible retirements within our MD-11 fleet and during the remainder of 2025, we expect to retire three fully depreciated MD-11s from operational service.

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

Approximately $1.1 billion of our consolidated goodwill balance of $4.7 billion is represented by our Global Freight Forwarding, Roadie and Global Logistics and Distribution reporting units which, based on our annual impairment evaluation, exhibited a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods. During the first quarter of 2025, our Mail Innovations reporting unit experienced cost increases inconsistent with our expectations due to increases in purchased transportation rates which resulted from the expiration of our previous contract with our primary vendor. We are evaluating additional vendors for this business. We are also addressing the revenue quality in the business. Depending on the outcome of these actions, our expectations for the future performance of this reporting unit could be materially affected. Approximately $295 million in goodwill is represented by our Mail Innovations reporting unit. Additionally, Frigo-Trans, which was acquired during the first quarter of 2025, will be reported as part of our Healthcare Logistics and Distribution ("HLD") reporting unit.

We continue to monitor all of our reporting units subsequent to the most recent annual test and, while we do not believe it is more likely than not that our reporting units' fair values are less than their carrying values as of March 31, 2025, challenging macroeconomic and uncertain geopolitical conditions, actual reporting unit performance, revisions to our forecasts of future performance or other factors, including market comparables, may negatively impact certain estimates and assumptions that we use in determining our reporting units' fair values. Such impacts may be more pronounced for reporting units whose fair values do not significantly exceed their carrying values. Any of these factors or a combination thereof could result in an impairment charge in one or more of our reporting units during a future period. We continue to monitor business performance and external factors affecting our reporting units.

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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
	2025			2024			$		%
Average Daily Package Volume (in thousands):
Next Day Air	1,520			1,590					(4.4)	%
Deferred	866			1,047					(17.3)	%
Ground	15,057			15,438					(2.5)	%
Total Average Daily Package Volume	17,443			18,075					(3.5)	%
Average Revenue Per Piece:
Next Day Air	$	25.05		$	23.12		$	1.93	8.3	%
Deferred	19.54			17.53			2.01		11.5	%
Ground	11.47			11.07			0.40		3.6	%
Total Average Revenue Per Piece	$	13.06		$	12.50		$	0.56	4.5	%
Operating Days in Period	62			63
Revenue (in millions):
Next Day Air	$	2,361		$	2,316		$	45	1.9	%
Deferred	1,049			1,156			(107)		(9.3)	%
Ground	10,709			10,762			(53)		(0.5)	%
Cargo and Other	341			32			309		965.6	%
Total Revenue	$	14,460		$	14,266		$	194	1.4	%
Operating Expenses (in millions):
Operating Expenses	$	13,481		$	13,433		$	48	0.4	%
Non-GAAP adjustments to Operating Expenses
Transformation Strategy Costs	(32)			(9)			(23)		255.6	%
Goodwill and Asset Impairment Charges	—			(5)			5		(100.0)	%
Non-GAAP Adjusted Operating Expenses	$	13,449		$	13,419		$	30	0.2	%
Operating Profit (in millions) and Operating Margin:
Operating Profit	$	979		$	833		$	146	17.5	%
Non-GAAP Adjusted Operating Profit	$	1,011		$	847		$	164	19.4	%
Operating Margin	6.8		%	5.8		%
Non-GAAP Adjusted Operating Margin	7.0		%	5.9		%

Revenue

The change in revenue was due to the following:


	Volume		Rates / Product Mix		Fuel Surcharge		Total Revenue Change
Revenue Change Drivers:
First quarter 2025 vs. 2024	(5.1)	%	6.6	%	(0.1)	%	1.4	%

Comparative results were impacted by one additional operating day in the first quarter of 2024. The growth in rates / product mix shown above includes the growth we experienced in our air cargo product during the first quarter of 2025, as air cargo under our contract with the USPS was fully onboarded during the fourth quarter of 2024. Air cargo is measured by dimensional weight, not on a per piece basis, and therefore does not impact the volume and revenue per piece discussions below. We expect revenue in the second quarter to be down due to planned volume decreases, partially offset by continued growth in air cargo.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Volume

Average daily volume decreased in line with our expectations for the quarter, driven by glide down of volume with our largest customer and challenging macroeconomic conditions. Decreases in residential volume were partially offset by an increase in commercial volume and continued volume growth from SMBs leveraging our Digital Access Program.

Business-to-consumer volume decreased 7.0%, as a result of the factors discussed above, with declines from both large customers and SMBs, partially offset by continued growth within our Digital Access Program.

Business-to-business volume increased 1.5%. Volume growth was driven by returns and increases across a number of sectors including healthcare and technology.

Within our Air products, average daily volume decreased 9.5%, driven by the continued execution under the contract terms with our largest customer, partially offset by increased demand from the healthcare and technology sectors.

Ground average daily volume decreased 2.5% driven by a decrease in residential volume of 5.7%, primarily due to pricing actions we took on lower yielding e-commerce customer volumes and the planned glide down from our largest customer. This decrease was partially offset by an increase in commercial volume of 2.0%, primarily driven by increases across certain large customers.

Revenue Per Piece

Revenue per piece increased 4.5% due to favorable trends in customer mix, base rates and package characteristics.

Revenue per piece from our Air and Ground products increased. In December 2024, we implemented an average 5.9% net increase in base and accessorial rates for both our Air and Ground products, which favorably impacted revenue per piece.

Fuel Surcharges

We apply a fuel surcharge on our domestic air and ground services that adjusts weekly. Our air fuel surcharge is based on the U.S. Department of Energy's ("DOE") Gulf Coast spot price for a gallon of kerosene-type fuel, and our ground fuel surcharge is based on the DOE's On-Highway Diesel Fuel price.

Operating Expenses

Operating expenses and non-GAAP adjusted operating expenses increased for the quarter. The costs of operating our integrated air and ground network increased by approximately $110 million. These increases were partially offset by a decrease of approximately $60 million in pickup and delivery costs and a decrease in package sortation costs of approximately $20 million. These changes were primarily driven by:

•An increase in compensation and benefits expense which was driven by increased stops associated with insourcing the delivery of our Ground Saver product and the impact of wage rate increases for our union workforce.

•A reduction in purchased transportation expense driven by insourcing the delivery of our Ground Saver product.

•A reduction in expense due to the impact of one less operating day, average daily volume decrease of 3.5% and our Network Reconfiguration and Efficiency Reimagined initiatives.

Our non-GAAP adjusted operating expenses exclude the impact of transformation strategy costs which were $32 and $9 million within the U.S. Domestic Package segment in the first quarter of 2025 and 2024, respectively. Transformation strategy costs reflected within the U.S. Domestic Package segment during both periods were related to our Fit to Serve and Transformation 2.0 programs. The first quarter of 2025 also reflects transformation strategy costs related to our Network Reconfiguration and Efficiency Reimagined programs. Within these programs, we incurred compensation and benefits costs, as well as fees paid to outside professional service providers. See Supplemental Information - Items Affecting Comparability for additional discussion of transformation strategy costs excluded from our non-GAAP financial measures.

Cost per piece and non-GAAP adjusted cost per piece both increased 3.7% in the 2025 period. The increase in cost per piece was primarily driven by lower average daily volume, due primarily to the planned volume reductions from our largest customer as discussed above, which were not fully offset by the benefits of our cost saving initiatives. We anticipate cost per piece will show year-over-year growth in the second quarter.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Operating Profit and Margin

As a result of the factors described above, operating profit increased $146 million, with operating margin increasing 100 basis points to 6.8%. Non-GAAP adjusted operating profit increased $164 million, with non-GAAP adjusted operating margin increasing 110 basis points to 7.0%. Non-GAAP adjusted operating profit excludes the impact of operating expense adjustments discussed above.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

International Package


	Three Months Ended March 31,						Change
	2025			2024			$		%
Average Daily Package Volume (in thousands):
Domestic	1,575			1,503					4.8	%
Export	1,771			1,621					9.3	%
Total Average Daily Package Volume	3,346			3,124					7.1	%
Average Revenue Per Piece:
Domestic	$	7.90		$	8.01		$	(0.11)	(1.4)	%
Export	31.37			32.80			(1.43)		(4.4)	%
Total Average Revenue Per Piece	$	20.32		$	20.87		$	(0.55)	(2.6)	%
Operating Days in Period	62			63
Revenue (in millions):
Domestic	$	771		$	758		$	13	1.7	%
Export	3,444			3,350			94		2.8	%
Cargo and Other	158			148			10		6.8	%
Total Revenue	$	4,373		$	4,256		$	117	2.7	%
Operating Expenses (in millions):
Operating Expenses	$	3,732		$	3,600		$	132	3.7	%
Non-GAAP Adjustments to Operating Expenses
Transformation Strategy Costs	(13)			(24)			11		(45.8)	%

Asset Impairment Charges	—			(2)			2		(100.0)	%
Non-GAAP Adjusted Operating Expenses	$	3,719		$	3,574		$	145	4.1	%
Operating Profit (in millions) and Operating Margin:
Operating Profit	$	641		$	656		$	(15)	(2.3)	%
Non-GAAP Adjusted Operating Profit	$	654		$	682		$	(28)	(4.1)	%
Operating Margin	14.7		%	15.4		%
Non-GAAP Adjusted Operating Margin	15.0		%	16.0		%
Currency Benefit / (Cost) – (in millions)(1):
Revenue							$	(85)
Operating Expenses							75
Operating Profit							$	(10)

(1) Net of currency hedging; amount represents the change in currency translation compared to the prior year.

Revenue

The change in revenue was due to the following:


	Volume		Rates / Product Mix		Fuel Surcharge		Currency		Total Revenue Change
Revenue Change Drivers:
First quarter 2025 vs. 2024	5.1	%	(1.0)	%	0.6	%	(2.0)	%	2.7	%

52 $94 $(42)(44.7)%

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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, primarily driven by the impact of the third quarter 2024 divestiture of Coyote within our Forwarding business. These reductions were partially offset by growth in Logistics and certain of our other businesses.

Within our Forwarding businesses revenue decreased $554 million for the quarter, primarily driven by the impact of the divestiture of Coyote, which contributed $563 million of revenue in the 2024 quarter. Revenue across our other Forwarding businesses was relatively flat.

Within our Logistics businesses, revenue increased $30 million for the quarter. Revenue in our mail services business increased $55 million, driven by rate increases, partially offset by revenue decreases in our other Logistics businesses.

Revenue from our other businesses within Supply Chain Solutions increased $53 million for the quarter. This was primarily driven by growth in our digital businesses, including a $38 million increase driven by volume growth at Roadie.

Operating Expenses

Total operating expenses and non-GAAP adjusted operating expenses within Supply Chain Solutions decreased for the quarter for the reasons described below.

Forwarding operating expenses, and non-GAAP adjusted operating expenses, decreased $548 million and $547 million respectively, driven by the impact of the divestiture of Coyote in the third quarter of 2024. Expenses in our freight forwarding businesses increased for the quarter, primarily due to higher market rates charged for third-party ocean transportation. Non-GAAP adjusted operating expense in our Forwarding business excludes expense related to financial systems and other projects undertaken as part of our transformation strategy as shown in the table above.

Logistics operating expenses increased $135 million for the quarter and, on a non-GAAP adjusted basis, increased $175 million for the quarter. Operating expenses in our Mail Innovations business increased $175 million primarily driven by higher purchased transportation rates which resulted from the expiration of our contract with our primary vendor. We are evaluating additional vendors for this business. We are also addressing the revenue quality in the business. Operating expenses within our other logistics businesses were relatively flat for the quarter. Non-GAAP adjusted operating expenses within Logistics in the first quarter of 2025 exclude the impact of $7 million primarily related to projects undertaken as part of our transformation strategy as described below. Non-GAAP adjusted operating expenses within Logistics in the first quarter of 2024 included a $41 million write-down related to certain trade names and $6 million related to projects undertaken as part of our transformation strategy as described below.

Expenses in our other Supply Chain Solutions businesses increased $20 million for the quarter and, on a non-GAAP adjusted basis, increased $21 million for the quarter. Within our digital businesses, operating expenses increased $21 million primarily driven by volume growth at Roadie. In the first quarter of 2025, non-GAAP adjusted operating expense in our other Supply Chain Solutions businesses excluded $39 million related to the impairment of certain assets related to a business within UPS Digital. In the first quarter of 2024, non-GAAP adjusted operating expense in these businesses excluded a $40 million impact related to a regulatory matter.

As discussed above, non-GAAP adjusted operating expenses within Supply Chain Solutions excluded the impact of transformation strategy costs, which were $13 million for the first quarters of 2025 and 2024. Transformation strategy costs reflected within Supply Chain Solutions during these periods are related to our Fit to Serve, Transformation 2.0 and Network Reconfiguration and Efficiency Reimagined programs. Within Transformation 2.0, we incurred costs related to financial system investments in Forwarding. Within Fit to Serve, we incurred severance costs as we right-size our business. Within Efficiency Reimagined, we incurred costs related to end-to-end process redesign. See Supplemental Information - Items Affecting Comparability for additional discussion of items excluded from our non-GAAP financial measures.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Operating Profit and Margin

As a result of the factors described above, total operating profit decreased $78 million for the quarter, with operating margin decreasing 220 basis points to 1.7%. On a non-GAAP adjusted basis, operating profit decreased $120 million for the quarter with non-GAAP adjusted operating margin decreasing 320 basis points to 3.6%. Non-GAAP adjusted operating profit excludes the impact of operating expense adjustments discussed above. The macro environment is highly uncertain due to changing trade policies and tariff uncertainty, the eventual outcomes could result in pressure in some parts of our business.

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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
	2025		2024		$		%
Operating Expenses (in millions):
Compensation and benefits	$	11,827	$	11,639	$	188	1.6	%
Transformation Strategy Costs	(24)		(31)		7		(22.6)	%
Non-GAAP Adjusted Compensation and Benefits	$	11,803	$	11,608	$	195	1.7	%

Repairs and maintenance	$	732	$	718	$	14	1.9	%
Depreciation and amortization	912		898		14		1.6	%
Purchased transportation	2,730		3,246		(516)		(15.9)	%
Fuel	1,058		1,060		(2)		(0.2)	%
Other occupancy	607		564		43		7.6	%
Other expenses	2,014		1,968		46		2.3	%
Total Other Expenses	8,053		8,454		(401)		(4.7)	%
Transformation Strategy Costs	(34)		(15)		(19)		126.7	%
Goodwill and Asset Impairment Charges	(39)		(48)		9		(18.8)	%
Expense for Regulatory Matter	—		(40)		40		(100.0)	%
Non-GAAP Adjusted Total Other Expenses	$	7,980	$	8,351	$	(371)	(4.4)	%

Total Operating Expenses	$	19,880	$	20,093	$	(213)	(1.1)	%
Non-GAAP Adjusted Total Operating Expenses	$	19,783	$	19,959	$	(176)	(0.9)	%

Currency (Benefit) / Cost - (in millions)(1)					$	(131)

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


	Three Months Ended March 31,				Change
	2025		2024		$		%
Non-GAAP Adjustments to Operating Expenses (in millions):
Transformation Strategy Costs:
Compensation	$	3	$	5	$	(2)	(40.0)	%
Benefits	21		26		(5)		(19.2)	%
Other expenses	34		15		19		126.7	%
Total Transformation Strategy Costs	58		46		12		26.1	%
Goodwill and Asset Impairment Charges
Other expenses	39		48		(9)		(18.8)	%
Total Asset Impairment Charges	39		48		(9)		(18.8)	%
Expense for Regulatory Matter
Other expenses	—		40		(40)		(100.0)	%
Total Expense for Regulatory Matter	—		40		(40)		(100.0)	%
Total Non-GAAP Adjustments to Operating Expenses	$	97	$	134	$	(37)	(27.6)	%

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Compensation and Benefits

Total compensation and benefits and non-GAAP adjusted total compensation and benefits increased for the quarter.

Compensation costs increased $235 million for the quarter, and on a non-GAAP adjusted basis increased $236 million for the quarter. The principal factors contributing to the overall increase were:

•Direct labor costs increased $274 million. Additional stops driven by the impact of insourcing our Ground Saver product increased direct labor costs by $298 million for the quarter. Wage rate growth increased $132 million driven by increased seniority within our union workforce, contractual wage rate increases for our U.S. union workforce and higher overtime. These increases were partially offset by the impact of decreases in volume, which reduced direct labor expense by $199 million. Growth in compensation expense is expected to be partially offset by the anticipated impact from workforce reductions as we execute on our Network Reconfiguration and Efficiency Reimagined initiatives.

•Management compensation costs decreased $29 million for the quarter due to lower overall headcount, partially offset by higher long-term incentive compensation expense, which was lower in the 2024 period.

Benefits costs decreased $47 million and on a non-GAAP adjusted basis decreased $41 million. The principal factors driving the change were:

•Pension and other postretirement benefits costs decreased $81 million. These reductions were driven by demographic updates and workforce reductions, a decrease in the cost of company-sponsored defined benefit plans, driven by lower service cost resulting from higher discount rates, and decreased expense for multiemployer plans.

•Accruals for paid time off, payroll taxes and other costs increased $23 million primarily due to the impact of insourcing our Ground Saver product.

•Health and welfare costs increased $18 million, driven by increased contributions to multiemployer plans as a result of contractually-mandated rate increases.

Non-GAAP adjusted operating expenses in both periods exclude the impact of costs incurred under our transformation strategy programs, Fit to Serve, Transformation 2.0 and Network Reconfiguration and Efficiency Reimagined, and primarily impacted other employee benefits expense and related payroll tax expense. Compensation and benefits expenses under these programs during the first quarter of 2025 were $24 million, a decrease of $7 million as compared to the same period of 2024. See Supplemental Information - Items Affecting Comparability for additional discussion of items excluded from our non-GAAP financial measures.

Repairs and Maintenance

Increased expense incurred for repairs and maintenance was driven by increased network usage.

Depreciation and Amortization

Depreciation and Amortization expense increased due to capital asset additions.

Purchased Transportation

Third-party transportation expense charged to us by air, ocean and ground carriers decreased $516 million for the quarter. The decreases were primarily driven by a decrease of $468 million attributable to the impact of the disposition of Coyote in the third quarter of 2024, and a $344 million decrease relating to the impact of insourcing our Ground Saver product.

These decreases were partially offset by an increase of $182 million driven by higher rates in our mail services business and an increase of $108 million in our International Package segment expense, driven by higher volumes.

Fuel Expense

Fuel expense was relatively flat as decreases due to reduced rates for jet fuel, diesel and gasoline were largely offset by the impact of increases in air volumes. Market prices and the manner in which we purchase fuel influence our costs. The majority of our fuel purchases utilize index-based pricing formulas plus or minus a fixed locational/supplier differential. While many of the indices are correlated, each index may respond differently to changes in underlying prices, which in turn can drive variability in our costs.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Other Occupancy

Other occupancy expense increased $43 million for the quarter, primarily due to increases in weather-related costs, primarily snow removal.

Other Expenses

Other expenses increased $46 million, and on a non-GAAP adjusted basis, increased $76 million. The principal factors contributing to the increases were:

•Commissions paid increased $48 million primarily due to growth in our Digital Access Program.

•Auto liability insurance increased $42 million driven by the unfavorable development of old claims.

•Expenses related to our airline operations increased $26 million, primarily due to increased flight activity.

•Claims expense increased $18 million due to an increase in the volume of customer claims.

These increases were offset in part by a decrease of $25 million in credit losses as a result of changes in the composition of our accounts receivable and improved customer collections, and a $32 million gain related to the sale of a property which we subsequently leased.

Non-GAAP adjusted operating expenses exclude the impact of:

•Transformation strategy costs of $34 million, an increase of $19 million compared to the first quarter of 2024.

•Goodwill and asset impairment charges of $39 million, a decrease of $9 million compared to the first quarter of 2024. During the quarter we recognized expense of $39 million related to the write down in the value of certain assets within one of our Supply Chain Solutions businesses. In 2024 we recognized expense of $48 million related to the impairment of trade names and software.

•In the first quarter of 2024 we incurred a $40 million expense related to a regulatory matter. We did not have any similar charges in the first quarter of 2025.

We expect to incur additional other expenses under our Fit to Serve, Transformation 2.0, Network Reconfiguration and Efficiency Reimagined programs during the remainder of 2025. See Supplemental Information - Items Affecting Comparability for additional discussion on the types, amounts and timing thereof.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Other Income (Expense)

The following table sets forth investment income and other and interest expense for the three months ended March 31, 2025 and 2024 (in millions):


	Three Months Ended March 31,				Change
	2025		2024		$		%
Investment Income and Other	$	79	$	118	$	(39)	(33.1)	%
Goodwill and Asset Impairment Charges	19		—		19		N/A
Non-GAAP Adjusted Investment Income and Other	98		118		(20)		(16.9)	%

Interest Expense	(222)		(195)		(27)		13.8	%



Total Other Income (Expense)	$	(143)	$	(77)	$	(66)	85.7	%
Non-GAAP Adjusted Total Other Income (Expense)	$	(124)	$	(77)	$	(47)	61.0	%

Investment Income and Other

Investment income and other decreased by $39 million in the first quarter of 2025 compared to the 2024 period. Investment income in the 2025 period included a $19 million asset impairment charge related to an equity method investment. Excluding the impact of this asset impairment, non-GAAP adjusted investment income and other decreased $20 million due to a reduction in pension income partially offset by the change in foreign currency exchange rates relative to the prior year period. The reduction in pension income was driven by an increase in interest cost from overall plan growth and higher discount rates, slightly offset by higher expected returns on pension assets.

Interest Expense

Interest expense increased for the first quarter due to higher average outstanding debt balances and a decrease in capitalized interest.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Income Tax Expense

The following table sets forth our income tax expense and effective tax rate for the three months ended March 31, 2025 and 2024 (in millions):


	Three Months Ended March 31,						Change
	2025			2024			$		%
Income Tax Expense	$	336		$	423		$	(87)	(20.6)	%
Income Tax Impact of:
Transformation Strategy Costs:
Transformation 2.0
Business Portfolio Review	—			1			(1)		(100.0)	%
Financial Systems	4			4			—		—	%
Transformation 2.0 Total	4			5			(1)		(20.0)	%

Fit to Serve	4			6			(2)		(33.3)	%

Network Reconfiguration and Efficiency Reimagined	6			—			6		N/A
Total Transformation Strategy Costs	14			11			3		27.3	%

Goodwill and Asset Impairment Charges	9			13			(4)		(30.8)	%
Expense for Regulatory Matter	—			—			—		N/A
Reversal of income tax valuation allowance	10			—			10		N/A
Non-GAAP Adjusted Income Tax Expense	$	369		$	447		$	(78)	(17.4)	%
Effective Tax Rate	22.1		%	27.5		%
Non-GAAP Adjusted Effective Tax Rate	22.5		%	26.8		%

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

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Liquidity and Capital Resources

We deploy a disciplined and balanced approach to capital allocation, including returns to shareowners through dividends and share repurchases. As of March 31, 2025, we had $5.1 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 strategy costs, debt obligations and planned shareowner returns. We regularly evaluate opportunities to optimize our capital structure, including through issuances of debt to refinance existing debt and to fund operations.

Cash Flows From Operating Activities

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


	Three Months Ended March 31,
	2025		2024
Net income	$	1,187	$	1,113
Non-cash operating activities (1)	1,173		1,308
Pension and postretirement medical benefit plan contributions (company-sponsored plans)	(67)		(50)
Hedge margin receivables and payables	—		(8)
Income tax receivables and payables	211		257
Changes in working capital and other non-current assets and liabilities	(219)		696
Other operating activities	33		—
Net cash from operating activities	$	2,318	$	3,316

(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 decreased $1.0 billion for the quarter, driven by:

•Higher incentive compensation payments.

•An increase in accounts receivable driven by higher pass-through tariffs, duties and taxes.

These factors were partially offset by a slight improvement in net income.

As of March 31, 2025, approximately $1.7 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 our business operations, planned capital expenditures, pension contributions, planned acquisitions, transformation strategy costs, debt obligations and planned shareowner returns. 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.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Cash Flows From Investing Activities

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


	Three Months Ended March 31,
	2025			2024
Net cash (used in) from investing activities	$	(1,355)		$	1,566

Capital Expenditures:
Buildings, facilities and plant equipment	$	(428)		$	(327)
Aircraft and parts	(70)			(174)
Vehicles	(119)			(349)
Information technology	(259)			(185)
Total Capital Expenditures	$	(876)		$	(1,035)

Capital Expenditures as a % of revenue	4.1		%	4.8		%

Other Investing Activities:
Proceeds from disposal of businesses, property, plant and equipment	$	65		$	13
Net (purchases) sales and maturities of marketable securities	$	(56)		$	2,646
Acquisitions, net of cash acquired	$	(478)		$	(44)
Other investing activities	$	(10)		$	(14)

For the three months ended March 31, 2025, total capital expenditures decreased compared to the 2024 period, primarily due to:

•Reduced spending on vehicles due to a focus on end-of-life replacements.

•Decreased aircraft expenditures driven by fewer deliveries and reduced aircraft payments during the quarter.

These decreases were partially offset by increased spending on buildings, facilities, plant equipment and information technology, as we execute our Network of the Future initiative.

Proceeds from the disposal of businesses, property, plant and equipment were higher primarily due to the impact of a real estate sale-lease back transaction executed during the quarter.

Changes in marketable securities were largely driven by the liquidation of our portfolio of $2.6 billion during 2024 to provide additional resources for short-term and strategic operating needs.

Cash paid for acquisitions in the 2025 period was primarily attributable to the acquisition of Frigo-Trans, and reacquired development area rights for The UPS Store. In the 2024 period, cash paid for acquisitions related to the purchase of development areas for The UPS Store.

We have commitments for pending acquisitions and for the purchase of aircraft, vehicles, equipment and real estate to provide for the replacement and enhancement of existing capacity and targeted growth. Our 2025 investment program anticipates investments in technology initiatives and enhanced network capabilities, including approximately $500 million of projects to support our environmental sustainability goals. It also provides for maintenance of buildings, facilities and equipment and replacement of certain aircraft within our fleet. We currently expect our capital expenditures will be approximately $3.5 billion in 2025, of which approximately 80 percent will be allocated to network enhancement projects and other technology initiatives. We regularly evaluate opportunities for cost effective financing of assets in order to reduce our capital spending. Future capital spending will depend on a variety of factors, including economic and industry conditions, and financing alternatives.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Cash Flows From Financing Activities

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


	Three Months Ended March 31,
	2025		2024
Net cash (used in) from financing activities	$	(2,313)	$	(3,666)
Share Repurchases:
Cash paid to repurchase shares	$	(1,000)	$	—
Number of shares repurchased	(8.6)		—
Shares outstanding at period end	847		855
Dividends:
Dividends declared per share	$	1.64	$	1.63
Cash paid for dividends	$	(1,348)	$	(1,348)
Borrowings:
Net borrowings (repayments) of debt principal	$	(7)	$	(2,198)
Other Financing Activities:
Cash received for common stock issuances	$	55	$	54
Other financing activities	$	(13)	$	(174)
Capitalization:
Total debt outstanding at period end	$	21,369	$	20,013
Total shareowners' equity at period end	15,684		16,933
Total capitalization	$	37,053	$	36,946

As of March 31, 2025, we had no outstanding balances under our U.S. or European commercial paper programs.

Cash outflows from other financing activities decreased driven by lower tax withholdings on employee stock compensation as a result of previously disclosed changes to the payout structure of our management incentive award program. Cash outflows for this purpose were approximately $12 and $177 million for the three months ended March 31, 2025 and 2024, respectively.

Except as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, 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 in our Annual Report on Form 10-K for the year ended December 31, 2024, except as described below.

Purchase commitments represent contractual agreements for certain capital expenditures and pending acquisitions, that are legally binding, including contracts for aircraft, vehicles and facility construction projects. We continue to evaluate available financing alternatives with respect to our aircraft purchase commitments.

The following table summarizes the expected cash outflows to satisfy our total purchase commitments as of March 31, 2025 (in millions):


Commitment Type	2025(1)		2026		2027		2028		2029		After 2029(4)		Total
Purchase Commitments(2)(3)	$	2,760	$	2,277	$	849	$	200	$	64	$	668	$	6,818

(1) Purchase commitments for 2025 include amounts related to the pending acquisition of Estafeta. Completion of the acquisition is subject to customary closing conditions and regulatory approvals.

(2) In addition to the purchase commitments presented above, during the second quarter of 2025, we entered into an agreement to acquire Andlauer Healthcare Group for approximately CAD $2.2 billion (USD $1.6 billion).

(3) Subsequent to March 31, 2025, we entered into six new aircraft leases which we expect to be treated as finance leases. We expect the existing aircraft purchase commitments included above will decrease and be reflected as leases.

(4) This includes a financing arrangement to be paid over 17 years.

For additional information on 2025 debt issuances and repayments, see note 9 to the unaudited, consolidated financial statements.

Legal Proceedings and Contingencies

See 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.

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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.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

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

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


	March 31, 2025		December 31, 2024
Currency Derivatives	$	103	$	283

As of March 31, 2025 and December 31, 2024, 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" in our Annual Report on Form 10-K for the year ended December 31, 2024 is incorporated herein by reference.

Our market risks, hedging strategies and financial instrument positions as of March 31, 2025 have not materially changed from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024. In the first quarter of 2025, we entered into foreign currency exchange forward contracts on the Euro, British Pound Sterling, Canadian Dollar, Hong Kong Dollar, and Chinese Renminbi and had forward contracts expire. The fair value changes between December 31, 2024 and March 31, 2025 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 March 31, 2025, 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 March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Subsequently during April 2025, the Company deployed a new enterprise-wide general ledger and related technologies as part of a broader finance technology modernization program. As a result, the Company has made changes to its internal control over financial reporting to reflect the changes in its system environment and related processes.

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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, 2024. The occurrence of any of the risks described therein could materially affect us, including impacting our business, financial condition, results of operations, stock price or credit rating, as well as our reputation. These risks are not the only ones we face. We could also be materially adversely affected by other events, factors or uncertainties that are unknown to us, or that we do not currently consider to be material.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

(c) A summary of repurchases of our class A and class B common stock during the first quarter of 2025 is as follows (in millions, except per share amounts):


	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program	Approximate Dollar Value of Shares that May Yet be Purchased Under the Program
January 1 - January 31, 2025	—	$	—	—	$	2,332
February 1 - February 28, 2025	7.4	115.36		7.4	1,482
March 1 - March 31, 2025	1.2	115.36		1.2	$	1,332
Total January 1 - March 31, 2025	8.6	$	115.36	8.6
(1) Includes shares repurchased through our publicly announced share repurchase programs and shares tendered to pay the exercise price and tax withholding on employee stock options.

In January 2023, the Board of Directors approved a share repurchase authorization of $5.0 billion for class A and class B common stock. We repurchased 8.6 million shares of class B common stock for $1.0 billion under an accelerated stock repurchase transaction during the three months ended March 31, 2025. As of March 31, 2025, we had $1.3 billion of this share repurchase authorization available.

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

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Item 5. Other Information

On May 7, 2025, the Compensation and Human Capital Committee of the Board of Directors of the Company approved special awards of time-based restricted stock units (“RSUs”) for certain of the Company’s employees, including RSUs at the following targeted values to the following individuals who were identified as “named executive officers” in the Company’s Proxy Statement on Schedule 14A filed on March 17, 2025: $1,125,571 for Brian Dykes; $1,274,094 for Nando Cesarone; $1,274,094 for Kate Gutmann; and $1,107,333 for Bala Subramanian. Each such RSU award will be effective on May 9, 2025 and will generally vest as follows: 25% on May 9, 2026; 25% on May 9, 2027; and 50% on May 9, 2028.

Insider Trading Arrangements and Policies

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Item 6. Exhibits



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

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

10.1	—	UPS Long-Term Incentive Performance Program Amended and Restated Terms and Conditions, effective as of May 7, 2025*

10.2	—	UPS Special Restricted Stock Unit Grant Terms and Conditions, effective as of May 7, 2025*

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, 2025 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, 2025 is formatted in Inline XBRL (included as Exhibit 101).

__________________


*			Management contract or compensatory plan or arrangement.

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SIGNATURES

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

UNITED PARCEL SERVICE, INC.
(Registrant)

Date:

May 7, 2025

By:

/s/ BRIAN DYKES

Brian Dykes

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

UNITED PARCEL SERVICE INC - Quarter Report: 2025 March (Form 10-Q)

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