United Parcel Service (UPS) 10-K risk factor changes: FY2020 vs FY2019

Our business, financial condition and results [added: of operations] are subject to numerous risks and uncertainties.

In connection with any investment decision, you should carefully consider the following [removed: significant] [added: risk] factors, which [added: may have materially affected or] could materially affect us, including impacting our business, financial condition, results of operations, stock price or credit rating, as well as our reputation.

We could also be affected by other events, factors or uncertainties that are unknown to us, or that we do not currently consider to be [removed: significant] [added: material] risks.

In particular, [removed: our business is] [added: we are] affected by levels of industrial production, consumer spending and retail activity and we could be materially affected by adverse developments in these aspects of the [removed: economy.][added: economy, including without limitation the impact of the ongoing COVID-19 pandemic.]

In addition, there remains substantial economic uncertainty arising from the United Kingdom’s [removed: decision to leave] [added: departure from] the European Union.

The U.K. and the E.U. continue to negotiate [removed: the] [added: their] future [removed: relationship between themselves,] [added: relationship,] which could take several years to finalize.

The outcome of these negotiations could result in, among other things, transportation delays, [added: increased costs,] fewer goods being transported globally, additional volatility in currency exchange rates and further regulations relating to, among other things, trade, aviation and the transport of goods.

We expect to continue to face significant competition, which could [added: materially] adversely affect us.

Our industry is rapidly evolving, including [added: in response to] demand for faster deliveries and increased visibility into shipments.

We expect [removed: continued] [added: to continue to face] significant competition on a local, regional, national and international basis.

[removed: Our] [added: Current] competitors include the postal services of the U.S. and other nations, various motor carriers, express companies, freight forwarders, air couriers, large transportation and e-commerce companies that are making significant investments in their capabilities, and start ups and other companies that combine technologies with crowdsourcing to focus on local market needs, some of whom [removed: may] [added: are] currently [removed: be] our customers.

Additionally, to [removed: remain competitive,] [added: sustain the level of services and value that we deliver to our customers,] from time to time we may [removed: have to] raise prices and our customers may not be willing to accept these higher prices.

If we are unable to timely and appropriately respond to competitive pressures, we could be [added: materially] adversely affected.

Business combinations could also result in competitors providing a wider variety of services and products at competitive prices, which could [added: materially] adversely affect us.

For the year ended December 31, [removed: 2019,] [added: 2020, business from] one customer, [removed: Amazon.com] [added: Amazon.com, Inc.] and its affiliates, accounted for [removed: 11.6%] [added: 13.3%] of our consolidated revenues.

[removed: These customers can] [added: Customer] impact [added: on] our [removed: revenues] [added: revenue is] based on factors such as: [removed: customer] product launches; e-commerce or other industry trends, [removed: such as the seasonality associated with] [added: including those related to] the fourth quarter holiday season; business combinations and the overall growth of a customer's underlying business; as well as any disruptions to their businesses.

If all or a portion of our business relationships with one or more significant customers were to [removed: terminate] [added: terminate, significantly change] or be [removed: canceled it] [added: canceled, this] could materially adversely affect us.

[removed: Our business is subject to] [added: Increasingly] complex and stringent laws, regulations and policies [removed: which] could [added: materially] increase our operating costs.

Recently, trade discussions between the U.S. and various of its trading partners have been fluid, and existing and future trade agreements [removed: are] [added: are,] and are expected to continue to [removed: be] [added: be,] subject to a number of uncertainties, including the imposition of new tariffs or adjustments and changes to the products covered by existing tariffs.

Compliance with any new [removed: laws or] [added: laws,] regulations [added: or policies] may increase our operating costs or require significant capital expenditures.

We cannot determine the effect that any new requirements will have on our cost structure or our operating results, and new rules or other future security requirements may increase our [added: operating] costs [removed: of operations] and reduce operating efficiencies.

For example, in [removed: 2009] [added: 2009,] the European Commission approved the extension to the airline industry of the [removed: European Union] [added: E.U.] Emissions Trading Scheme (“ETS”) for GHG emissions.

Under this decision, all of our flights operating within the [removed: European Union] [added: E.U.] are covered by the ETS requirements, and we are required annually to purchase emission allowances in an amount exceeding the number of free allowances allocated to us under the ETS.

Even in the absence of such legislation, the Environmental Protection Agency [removed: (“EPA”), spurred by judicial interpretation of the Clean Air Act,] could determine to regulate GHG emissions, especially aircraft or diesel engine emissions, and this could impose substantial costs on us.

[removed: The effect of] [added: In addition, the impact] that [removed: withdrawal] [added: the recent re-entry into the Paris climate accord may have] on future U.S. policy regarding GHG emissions, on CORSIA and on other GHG regulation is uncertain.

[removed: Nevertheless, the] [added: The] extent to which other countries implement that [removed: agreement] [added: accord] could [added: also] have an adverse direct or indirect effect on us.

Potential costs to us of increased regulation regarding GHG [removed: emissions,] [added: emissions in the U.S. or abroad,] especially aircraft or diesel engine emissions, include an increase in the cost of the fuel and other energy we purchase and capital costs associated with updating or replacing our aircraft or vehicles prematurely.

Strikes, work stoppages and slowdowns by our employees could [added: materially] adversely affect us.

Many of our U.S. employees are employed under a national master agreement and various supplemental agreements with local unions affiliated with the [removed: Teamsters.][added: International Brotherhood of Teamsters ("the Teamsters").]

We may [removed: face a permanent loss of] [added: permanently lose] customers if we are unable to provide uninterrupted service, and this could materially adversely affect us.

We mitigate our exposure to changing fuel prices through our indexed fuel surcharges and [removed: through] [added: we utilize] hedging transactions from time to time.

Even if we are able to offset changes in fuel costs with surcharges, high fuel surcharges may result in a [removed: mix] shift from our higher-yielding [removed: air] products to lower-yielding [removed: ground] products or an overall reduction in volume.

Moreover, we could experience a disruption in energy supplies as a result of war, [added: weather-related events or natural disasters,] actions by producers or other factors beyond our control, which could have a material adverse effect on us.

Our operations in international markets are affected by changes in the exchange rates for local currencies, [removed: and] in particular the Euro, British Pound Sterling, Canadian Dollar, Chinese Renminbi and Hong Kong Dollar.

The impact of a 100-basis-point change in interest rates affecting our debt is discussed in [removed: the “Quantitative] [added: Part II, “Item 7A - Quantitative] and Qualitative Disclosures about Market Risk” section of this report.

Additionally, changes in interest rates impact the valuation of our pension and postretirement benefit obligations and the related benefit cost recognized in the [removed: income statement.][added: statements of consolidated income.]

The impact of changes in interest rates on our pension and postretirement benefit obligations and costs is discussed further in [removed: the "Critical] [added: Part I, "Item 7 - Critical] Accounting Policies and Estimates" section of this report.

We monitor and manage our exposures to changes in currency exchange rates and interest rates, and use derivative instruments to mitigate the impact of changes in these rates on our financial [removed: position] [added: condition] and results of operations; however, changes in exchange rates and interest rates cannot always be predicted or hedged and may have a material adverse effect on us.

The proposed phase out of the London Interbank Offer Rate ("LIBOR") could have [removed: an] [added: a material] adverse effect on us.

[removed: In addition, any] [added: Any] further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on extensions of credit held by us and could have a material adverse effect on us.

Business and Operating Risks

The outbreak and spread of the novel strain of coronavirus COVID-19 has had a significant impact on us, as well as on the operations, financial performance and liquidity of many of our customers.

We are unable to predict the full extent to which the coronavirus will continue to adversely impact us.

The COVID-19 pandemic resulted in, and is expected to continue to result in, a substantial curtailment of business activities (including the decrease in demand for a broad variety of goods and services), weakened economic conditions, supply chain disruptions, significant economic uncertainty and volatility in the financial markets, both in the United States and abroad.

The pandemic has significantly impacted, and is expected to continue to significantly impact us, and has had, and is expected to continue to have, a material adverse impact on the operations, financial performance and liquidity of many of our customers.

Because the ongoing severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the future impact on our operations, financial condition and liquidity remains uncertain and difficult to predict.

The impact of the pandemic will depend on evolving factors, many of which are not within our control, and to which we may not be able to effectively respond.

These risks include, but are not limited to: a significant reduction in revenue due to curtailment of business from our customers; a significant increase in our expenses or a reduction in our operating margins due to long-term changes in the mix of our products and services; effects from governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on travel and transportation and workforce pressures); reductions in operating effectiveness due to employees working remotely; unavailability of personnel; the delay or cancellation of capital projects and related delays in, or loss of, expected benefits therefrom; limited access to liquidity; increased volatility and pricing in the capital and commercial paper markets; further disruption of our global supply chains; an impairment in the fair value of our assets; an increase in our pension funding obligations; and the effect of the pandemic on the credit-worthiness of our customers.

Further, the COVID-19 pandemic, and the volatile regional and global economic conditions stemming from it, could also precipitate or aggravate risk factors that we identify herein or affect our operations and financial performance in a manner that is not presently known to us or that we currently do not consider material.

Changes in general economic conditions, or our inability to accurately forecast these changes, could materially adversely affect us.

Failure to attract or retain qualified employees could materially adversely affect us.

We maintain a large workforce, and necessarily depend on the skills and continued service of our employees, including our experienced management team.

We also regularly hire a large number of part-time and seasonal workers.

We must be able to attract, engage, develop and retain a large and diverse global workforce, while controlling related labor costs and maintaining an environment that supports our core values.

Our ability to control labor costs is subject to numerous factors, including turnover, training costs, regulatory changes, market pressures, unemployment levels and healthcare and other benefit costs.

If we are unable to hire, properly train and retain qualified employees, we could experience higher employment costs, reduced sales, further increased workers' compensation and automobile liability claims, regulatory noncompliance, losses of customers and diminution of our brand value or company culture, which could materially adversely affect us.

In addition, our strategic initiatives, including transformation, have and may in the future lead to the creation of fewer, more impactful jobs as we strive to lower our cost to serve.

Our inability to continue to retain experienced and motivated employees may also materially adversely affect us.

For example, in connection with our entry into a definitive agreement to divest our UPS Freight business, we recognized a $629 million after-tax impairment charge as of December 31, 2020.

Insurance and claims expense could materially affect us.

Financial Risks

The Chief Executive of the United Kingdom Financial Conduct Authority (“FCA”), which regulates LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021.

However, the ICE Benchmark Administration, in its capacity as administrator of U.S. Dollar LIBOR, has announced that it intends to extend publication of certain U.S. Dollar LIBOR rates to June 2023.

Notwithstanding this possible extension, a joint statement by key regulatory authorities calls on banks to cease entering into new contracts that use U.S. Dollar LIBOR as a reference rate after 2021.

At this time, it is not possible to predict the effect any discontinuance, modification or other reforms to LIBOR, or the establishment of alternative reference rates, may have on our cost of capital.

Regulatory and Legal Risks

Any of the foregoing could materially adversely affect us.

In November 2019, the U.S. began the process to withdraw from the Paris climate accord, an agreement among 196 countries to reduce GHG emissions.

We may face additional regulations regarding GHG emissions internationally and in the United States.

The head of the United Kingdom Financial Conduct Authority has announced the desire to phase out the use of LIBOR by the end of 2021.

There is currently no definitive information regarding the future utilization of LIBOR or any particular replacement rate.

As such, the potential effect of any such event on our cost of capital cannot be determined.

Our regular review of the carrying value of our assets has resulted, from time to time, in significant impairments, and we may in the future be required to recognize additional impairment charges.

For example, compliance with the 2017 United States Tax Cuts and Jobs Act (the “Tax Act”) may require the collection of information not regularly produced within our company and the exercise of significant judgment in accounting for its provisions.

Many aspects of the Tax Act remain unclear and may not be clarified for some time.

In addition, many state jurisdictions continue to issue guidance on the state treatment of certain aspects of the Tax Act.

As regulations and guidance evolve with respect to the Tax Act, our results may differ from previous estimates and may materially affect our tax rates and our financial position.

| | |

| --- | --- |

| | [added: | |] Year Ended December 31, | | | | | | | | [removed: $ Change] | | | | [removed: % Change] [added: Change] | | [added: | | | | | | |]

[removed: | | 2019 | | | | 2018 | | | | 2019/2018 | | | | 2019/2018 | |][added: *2019 compared to 2018*]

| [removed: Operating] [added: Operating] Expenses (in [removed: millions)] [added: millions):] | [removed: 66,296] | | | | [removed: 64,837] | | | | [removed: 1,459] | | | | [removed: 2.3] | [removed: %] | [added: | | | | | | | | |]

| Operating Profit (in millions) | [added: | |] $ | [removed: 7,798] [added: 7,684] | | | [added: | |] $ | [removed: 7,024] [added: 7,798] | | | [added: | |] $ | [removed: 774] [added: (114)] | | | [removed: 11.0] | [added: | (1.5) | |] % |

| Operating Margin | [removed: 10.5] | | [added: 9.1 | |] % | | [removed: 9.8] | | [added: 10.5 | |] % | | | | | | | | [added: | | | | |]

| Net Income (in millions) | [added: | |] $ | [removed: 4,440] [added: 1,343] | | | [added: | |] $ | [removed: 4,791] [added: 4,440] | | | [added: | |] $ | [removed: (351] [added: (3,097)] | [removed: )] | | [removed: (7.3] | [removed: )%] | [added: (69.8) | | % |]

| Basic Earnings Per Share | [added: | |] $ | [removed: 5.14] [added: 1.55] | | | [added: | |] $ | [removed: 5.53] [added: 5.14] | | | [added: | |] $ | [removed: (0.39] [added: (3.59)] | [removed: )] | | [removed: (7.1] | [removed: )%] | [added: (69.8) | | % |]

| Diluted Earnings Per Share | [added: | |] $ | [removed: 5.11] [added: 1.54] | | | [added: | |] $ | [removed: 5.51] [added: 5.11] | | | [added: | |] $ | [removed: (0.40] [added: (3.57)] | [removed: )] | | [removed: (7.3] | [removed: )%] | [added: (69.9) | | % |]

| [removed: Average] [added: Average] Daily Package Volume (in [removed: thousands)] [added: thousands):] | [removed: 21,880] | | | | [removed: 20,677] | | | | | | | | [removed: 5.8] | [removed: %] | [added: | | | | | | | | |]

| [removed: Average] [added: Average] Revenue Per [removed: Piece] [added: Piece:] | [removed: $] | [removed: 10.87] | | | [removed: $] | [removed: 10.98] | | | [removed: $] | [removed: (0.11] | [removed: )] | | [removed: (1.0] | [removed: )%] | [added: | | | | | | | | |]

[removed: | • | We reported net income of $4.440 billion and diluted earnings per share of $5.11.] Adjusted diluted earnings per share was [removed: $7.53] [added: $8.23] after adjusting for the after-tax impacts [removed: of the following: |][added: of:]

[removed: ◦transformation] [added: | Transformation] strategy [removed: costs of $196 million;][added: costs: | | | | | | | | | | | | | | | | | | | | | | | |]

[removed: ◦legal contingencies and expenses of $91 million;] [added: | Legal Contingencies] and [added: Expenses | | | — | | | | | | 97 | | |]

◦pension mark-to-market losses recognized outside of a 10% corridor of [removed: $1.816 billion.][added: $4.9 billion or $5.66 per share.]

Management's Discussion and Analysis of Financial Condition and Results of Operations* of the Company's Annual Report on Form 10-K for the year ended December 31, [removed: 2018] [added: 2019] filed with the Securities and Exchange Commission on February [removed: 21, 2019.][added: 20, 2020.]

We supplement the reporting of our financial information determined under generally accepted accounting principles in the United States ("GAAP") with certain non-GAAP financial measures [removed: including, as applicable,] [added: including] "adjusted" compensation and benefits, operating expenses, operating profit, operating margin, other income and (expense), income before income taxes, income tax expense, effective tax rate, net income and earnings per share.

Adjusted financial measures may exclude the impact of period over period exchange rate changes and hedging activities, amounts related to mark-to-market gains or losses, [removed: recognition of contingencies and] [added: restructuring costs, including] transformation strategy costs, [added: and costs related to certain legal contingencies and expenses,] as described below.

We believe that these adjusted financial measures provide [added: additional] meaningful information to assist [removed: investors and analysts] [added: users of our financial statements] in understanding our financial results and [added: cash flows and] assessing our [removed: prospects for future] [added: ongoing] performance.

We believe these adjusted financial measures are important indicators of our recurring results of operations because they exclude items that may not be indicative of, or are unrelated to, our underlying [removed: operating results,] [added: operations,] and [added: may] provide a useful baseline for analyzing trends in our underlying businesses.

Additionally, these adjusted financial measures are used internally by management for [removed: the determination of incentive compensation awards,] business unit operating performance [removed: analysis and] [added: analysis,] business unit resource [removed: allocation.][added: allocation and in connection with incentive compensation award determination.]

[removed: Non-GAAP] [added: Adjusted] financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.

Our [removed: non-GAAP] [added: adjusted] financial [removed: information does] [added: measures do] not represent a comprehensive basis of accounting.

Therefore, our [removed: non-GAAP] [added: adjusted] financial [removed: information] [added: measures] may not be comparable to similarly titled measures reported by other companies.

[removed: The year] [added: Year] over year comparisons of our financial results are affected by the following [removed: items] (in millions):

| | [added: | |] Year Ended December 31, | | | | | | | [added: | |]

| Non-GAAP Adjustments | [removed: 2019] | | [added: 2020] | | [removed: 2018] | | | [added: | 2019 | | |]

| Operating Expenses: | | | | | | | | [added: | | | |]

| Transformation Strategy Costs | [added: | |] $ | [removed: 255] [added: 348] | | | [added: | |] $ | [removed: 360] [added: 255] | |

| Legal Contingencies and Expenses | [added: | | — | | | | | | (97) | | | | | |] 97 | | | | [removed: —] | | [added: N/M] | [added: | |]

| Total Adjustments to Operating Expenses | [added: | |] $ | [removed: 352] [added: 1,034] | | | [added: | |] $ | [removed: 360] [added: 352] | |

| Other Income and (Expense): | | | | | | | | [added: | | | |]

| Defined Benefit Plans Mark-to-Market Charges | [added: | |] $ | [removed: 2,387] [added: 6,484] | | | [added: | |] $ | [removed: 1,627] [added: 2,387] | |

| Total Adjustments to Other Income and (Expense) | [added: | |] $ | [removed: 2,387] [added: 6,484] | | | [added: | |] $ | [removed: 1,627] [added: 2,387] | |

| Total Adjustments to Income Before Income Taxes | [added: | |] $ | [removed: 2,739] [added: 7,518] | | | [added: | |] $ | [removed: 1,987] [added: 2,739] | |

| Income Tax Benefit from [removed: the] [added: Defined Benefit Plans] Mark-to-Market Charges | [added: | |] $ | [removed: (571] [added: (1,555)] | [removed: )] | | [added: | |] $ | [removed: (390] [added: (571)] | [removed: )] |

| Income Tax Benefit from Transformation Strategy Costs | [removed: (59] | | [removed: )] [added: (83)] | | [removed: (87] | | [removed: )] | [added: | (59) | | |]

| Income Tax Benefit from Legal Contingencies and Expenses | [removed: (6] | | [removed: )] [added: —] | | [removed: —] | | | [added: | (6) | | |]

| Total Adjustments to Income Tax Expense | [added: | |] $ | [removed: (636] [added: (1,695)] | [removed: )] | | [added: | |] $ | [removed: (477] [added: (636)] | [removed: )] |

| Total Adjustments to Net Income | [added: | |] $ | [removed: 2,103] [added: 5,823] | | | [added: | |] $ | [removed: 1,510] [added: 2,103] | |

The income tax benefit from [removed: transformation strategy] [added: restructuring and other] costs, legal contingencies and expenses and [removed: the] mark-to-market charges are calculated by multiplying the statutory tax rates applicable in each tax jurisdiction, including the U.S. federal jurisdiction and various U.S. state and non-U.S. jurisdictions, by the [removed: tax deductible] [added: tax-deductible] adjustments.

As described above, during 2020 we began implementing our *Customer First, People Led, Innovation Driven* strategy, as we seek to transform nearly every aspect of our business, improve our financial performance, provide the best customer experience and benefit our shareowners.

We focused on, among other things, enhancing the capabilities that we believe our customers value the most; speed and ease of access to our services.

We completed enhancements to our U.S. ground network to improve time-in-transit and continued to deploy our digital access program into e-commerce platforms.

Beginning in the first quarter of 2020, unexpected business shutdowns and government restrictions implemented in many countries in response to the COVID-19 pandemic have significantly impacted the mix of demand for our services.

In our global small package business, business-to-business activity has declined, while we continue to experience a significant increase in the level of business-to-consumer shipping, which we partially attribute to the capability enhancements described above.

While business-to-business activity began to recover in the latter part of 2020, we believe that the market shift towards e-commerce will persist, with a continuing high level of residential deliveries that may continue to increase demand, but also drive higher operating costs.

The pandemic also resulted in a reduction in global air cargo capacity.

This caused market rates in the industry to increase and we experienced increased demand for our services.

On January 24, 2021, we entered into a definitive agreement to divest our UPS Freight business.

This will allow us to be even more focused on the core parts of our business that drive the greatest value for our shareholders.

The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to close during the second quarter of 2021.

We expect this divestiture to result in an improvement to our operating margin and return on invested capital.

We believe that we are well positioned for long-term growth, however we cannot reasonably estimate the duration or severity of the COVID-19 pandemic or the timing and extent of the anticipated economic recovery, and the resulting impacts on our business results or liquidity.

For additional information on these risks and uncertainties, see Part I, "Item 1A.

Risk Factors" of this report.

Highlights of our results for the years ended December 31, 2020 and 2019, which are discussed in more detail in the sections that follow, include:

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Revenue (in millions) | | | $ | 84,628 | | | | | $ | 74,094 | | | | | $ | 10,534 | | | | | 14.2 | | % |

| Operating Expenses (in millions) | | | 76,944 | | | | | | 66,296 | | | | | | 10,648 | | | | | | 16.1 | | % |

| | | | | | | | | | | | | | | | | | | | | | | | |

| Operating Days | | | 255 | | | | | | 253 | | | | | | | | | | | | | | |

| Average Daily Package Volume (in thousands) | | | 24,676 | | | | | | 21,880 | | | | | | | | | | | | 12.8 | | % |

| Average Revenue Per Piece | | | $ | 10.94 | | | | | $ | 10.87 | | | | | $ | 0.07 | | | | | 0.6 | | % |

- Revenue increased in all segments.

- Average daily package volume increased due to increases in business-to-consumer shipping.

- Operating expenses increased due to volume growth.

- Operating profit and operating margin were relatively flat, and included goodwill and other asset impairment charges of $686 million related to the anticipated divestiture of UPS Freight.

- We reported net income of $1.3 billion and diluted earnings per share of $1.54.

◦goodwill and other asset impairment charges of $629 million or $0.72 per share;

◦transformation strategy costs of $265 million or $0.31 per share; and

In the U.S. Domestic Package segment, volume and revenue growth was highest in our residential ground products.

The increase in residential delivery volume drove increases in headcount, delivery stops per day, average daily miles driven and average daily union labor hours, all of which increased expense and compressed operating margins as described below.

Operating expenses also increased as a result of the investments we made to improve our ground network.

The International Package segment experienced volume and revenue growth, driven by strong outbound demand from Asia as well as growth from e-commerce within Europe.

Residential delivery volume growth drove an increase in third-party pickup and delivery expense.

In the Supply Chain & Freight segment, growth was primarily driven by our Forwarding and mail services businesses.

The Forwarding business benefited from strong outbound demand from Asia and the implementation of capacity surcharges as COVID-19 led to reduced capacity in the air cargo market.

Mail services benefited from the increase in e-commerce activity and favorable changes in shipment characteristics.

We also experienced growth in demand for our healthcare logistics and distribution solutions, partly driven by the impacts of the COVID-19 pandemic.

Highlights of our annual results follow:

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Revenue (in millions) | $ | 74,094 | | | $ | 71,861 | | | $ | 2,233 | | | 3.1 | % |

| | |

| --- | --- |

| • | Consolidated revenue increased 3.1%. |

| • | Average daily package volume increased 5.8% primarily driven by our U.S. Domestic Package segment, which experienced growth from SMBs as well as several large customers, led by our largest customer, Amazon. |

| • | Average revenue per piece is dependent upon base rates, customer and product mix, average billable weight per piece, fuel surcharge rates and currency. Average revenue per piece decreased as a result of changes in customer and product mix, and lower average billable weight per piece in our U.S. Domestic Package segment. Currency movements negatively impacted revenue per piece in our International Package segment. |

| • | Operating profit and operating margin increased with growth and margin expansion in all segments. |

*2018 compared to 2017*

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

This refinement decreased the projected benefit obligation on our consolidated balance sheet by approximately $900 million as of December 31, 2019, decreased the pre-tax mark-to-market charge by approximately $810 million and increased net income by $616 million, or $0.71 per share on a basic and diluted basis.

This change did not have an impact on adjusted net income or adjusted earnings per share.

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Deferred | 1,622 | | | | 1,432 | | | | | | | | 13.3 | % |

| Ground | 15,176 | | | | 14,498 | | | | | | | | 4.7 | % |

| Deferred | 12.62 | | | | 13.12 | | | | (0.50 | | ) | | (3.8 | )% |

| Ground | 8.55 | | | | 8.51 | | | | 0.04 | | | | 0.5 | % |

| Deferred | 5,180 | | | | 4,752 | | | | 428 | | | | 9.0 | % |

| Ground | 32,834 | | | | 31,223 | | | | 1,611 | | | | 5.2 | % |

| Total Revenue | $ | 46,493 | | | $ | 43,593 | | | $ | 2,900 | | | 6.7 | % |

| Operating Expenses | $ | 42,329 | | | $ | 39,950 | | | $ | 2,379 | | | 6.0 | % |

| Operating Profit | $ | 4,164 | | | $ | 3,643 | | | $ | 521 | | | 14.3 | % |

The change in overall revenue was due to the following factors for the year ended December 31, 2019 versus 2018:

| Revenue Change Drivers: | | | | | | | | | | | |

| 2019/2018 | 7.0 | % | | (0.6 | )% | | 0.3 | % | | 6.7 | % |

Our overall volume increased across all products, led by strong growth in our Next Day Air and Deferred driven by the structural shift to faster delivery in retail and e-commerce, and from additional customer volume.

This growth was enabled by our on-going investment in automated facilities and other transformation initiatives.

Volume grew across all products, with particularly strong growth in our Air products.

Business-to-business shipments increased 2.2% for the year with volume increases in both air and ground services.

Strong air volume growth continued primarily in residential Next Day Air and Second Day package products, as consumers and businesses continue to demand faster delivery options, which we expect will persist.

We experienced year over year growth in both residential and commercial ground products.

Growth in residential ground volume was driven by changes in customer mix resulting from the continued growth in e-commerce, while growth in commercial ground products was primarily driven by an increase in retail return services.

Revenue per piece for ground and air products was positively impacted by a base rate increase on December 26, 2018.

Revenue per piece for our ground products increased primarily due to base rate increases and customer and product mix, partially offset by a decrease in average billable weight per piece.

| | 2019 | | | 2018 | | | 2019/2018 | |

| Ground | 7.2 | % | | 7.0 | % | | 0.2 | % |

In order to manage the risk arising from these exposures, we [added: may] utilize a variety of commodity, foreign [added: currency] exchange [added: rate] and interest rate forward contracts, options and swaps.

Because of this, our operating results may be affected should the market price of fuel suddenly change by a significant amount or change by amounts that do not result in an adjustment in our fuel surcharges, which can significantly affect our [removed: earnings] [added: results] either positively or negatively in the short-term.

As of December 31, [removed: 2019] [added: 2020] and [removed: 2018, however,] [added: 2019,] we had no commodity contracts outstanding.

*Foreign Currency Exchange [added: Rate] Risk*

We use [removed: forwards] [added: forward contracts] as well as a combination of purchased and written options to hedge forecasted cash flow currency exposures.

Our floating-rate debt and interest rate swaps subject us to risk resulting from changes in short-term [removed: (primarily LIBOR)] interest rates.

For a discussion of the risks associated with the anticipated cessation of LIBOR, see [removed: Item] [added: Part I, "Item] 1A.

Risk Factors - [removed: "The] [added: Financial Risks - The] proposed phase out of the London Interbank Offer Rate ("LIBOR") could have [removed: an] [added: a material] adverse effect on us".

There are certain limitations inherent in the sensitivity analyses presented, primarily due to the assumption that [added: foreign currency] exchange rates change in a parallel fashion and that interest rates change instantaneously.

| | [added: | |] Shock-Test [removed: Result As] [added: Result As] of December 31, | | | | | | | [added: | |]

| (in millions) | [removed: 2019] | | [added: 2020] | | [removed: 2018] | | | [added: | 2019 | | |]

| Change in Fair Value: | | | | | | | | [added: | | | |]

| Currency Derivatives(1) | [added: | |] $ | [removed: (786] [added: (809)] | [removed: )] | | [added: | |] $ | [removed: (743] [added: (786)] | [removed: )] |

| Change in Annual Interest Expense: | | | | | | | | [added: | | | |]

| Variable Rate Debt(2) | [added: | |] $ | [removed: 64] [added: 26] | | | [added: | |] $ | [removed: 58] [added: 64] | |

| Interest Rate Derivatives(2) | [added: | |] $ | [removed: 37] [added: 33] | | | [added: | |] $ | [removed: 47] [added: 37] | |

[removed: | (1) | The] [added: (1)The] potential change in fair value from a hypothetical 10% weakening of the U.S. Dollar against local currency exchange rates across all maturities. [removed: |]

[removed: | (2) | The] [added: (2)The] potential change in annual interest expense resulting from a hypothetical 100 basis point increase in short-term interest rates, applied to our variable rate debt and swap instruments (excluding hedges of anticipated debt issuances). [removed: |]

The sensitivity of our pension and postretirement benefit obligations to changes in interest rates is quantified in “Critical Accounting [removed: Policies and] Estimates”.

The sensitivity in the fair value and interest income of our finance receivables [added: and marketable securities] due to changes in interest rates was not material as of December 31, [removed: 2019 and 2018.][added: 2020 or 2019.]

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| | | | | | | | | | | | |

Additionally, we periodically use a combination of option, forward and futures contracts to provide partial protection from changing fuel and energy prices.

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| Change in Annual Interest Income: | | | | | | | |

| Marketable Securities(3) | $ | — | | | $ | 1 | |

| | |

| --- | --- |

| (3) | The potential change in interest income resulting from a hypothetical 100 basis point increase in short-term interest rates, applied to our variable rate investment holdings. |

[removed: Today, we are] [added: United Parcel Service, Inc. (“UPS”), founded in 1907, is] the world’s largest package delivery [removed: company, a leader in the U.S. less-than-truckload industry] [added: company] and a premier provider of global supply chain management solutions.

[removed: The global market for these] [added: Our] services [removed: includes] [added: include] transportation, distribution, contract logistics, ground freight, ocean freight, air freight, customs [removed: brokerage, insurance] [added: brokerage] and [removed: financing.][added: insurance.]

We operate one of the largest airlines in the world, as well as the world’s largest fleet of [removed: alternative-powered] [added: alternative fuel] vehicles.

We deliver packages each business day for [removed: 1.6] [added: approximately 1.7] million shipping customers to [removed: 9.9] [added: 11.8] million delivery customers in over 220 countries and territories.

Total revenue in [removed: 2019] [added: 2020] was [removed: $74.094] [added: $84.6] billion.

We have three reporting segments: U.S. Domestic [removed: Package and International] Package, [removed: which together we refer to as our global small package operations,] [added: International Package] and Supply Chain & [removed: Freight, all of which are described below.][added: Freight.]

[removed: Customers are able to leverage our] [added: We offer a] broad [removed: portfolio] [added: range] of [removed: logistics capabilities comprised of:] [added: industry-leading products and services through] our extensive presence in North [removed: America, Europe,] [added: America; Europe; the Indian sub-continent,] Middle [removed: East, Africa,] [added: East and Africa (“ISMEA”);] Asia Pacific and Latin [removed: America; our reliability; and our industry-leading technologies and solutions.][added: America.]

Our global small package operations provide time-definite delivery services for express letters, documents, [removed: small] packages and palletized freight via air and ground services.

All [removed: types of service] [added: services] (air, ground, domestic, international, commercial and residential) are managed through a single, global [removed: integrated pickup and delivery] [added: smart logistics] network.

This enables [removed: one UPS driver] [added: us] to [added: efficiently] pick up customers’ shipments for any services at a scheduled time each day.

Our integrated network [removed: uniquely] provides [added: unique] operational and capital efficiencies that have [removed: less of an] [added: a lower environmental] impact [removed: on the environment] than single service network designs.

Our global network offers approximately 150,000 entry points where customers can tender [removed: a package] [added: packages] to us at [removed: a location or time] [added: locations and times] convenient to them.

This [removed: integrated network] includes UPS drivers who can accept packages, UPS drop boxes, UPS Access Point locations, The UPS Store locations, authorized shipping outlets and commercial counters, alliance locations and customer centers attached to UPS facilities.

[removed: The UPS Access Point network, which includes local small businesses, national retailers and self-serve lockers,] [added: This network] allows consumers to ship or redirect packages to an alternate delivery location or [added: to] drop off pre-labeled packages, including returns.

We have expanded the UPS Access Point network to [removed: total] approximately 21,000 locations within the U.S. and 40,000 globally.

[removed: We have developed a robust portfolio of returns] [added: These] services [removed: in more than 145 countries resulting from] [added: are driven by] the continued growth of online and mobile shopping that has increased our customers’ need for efficient and reliable [removed: returns.][added: returns, and is designed to promote efficiency and a friction-free consumer experience.]

This portfolio provides a range of cost-effective label [added: and digital returns] options and a broad network of consumer drop [removed: points, as well as a selection of returns technologies that promote efficiency and a friction-free consumer experience.][added: points.]

[removed: Our technologies, such as UPS Returns Manager promote systems integration, customer ease of use and visibility of inbound merchandise, which] [added: These technologies] help reduce costs and improve efficiency in our customers' reverse logistics processes.

This network design [removed: creates] [added: enables] cost-effective package processing in our most technology-enabled facilities, which allows us to use fewer, larger and more fuel-efficient aircraft.

[added: *U.S.] Domestic [removed: Package Reporting Segment*][added: Package*]

[removed: We offer a full spectrum of U.S. domestic guaranteed air and ground package transportation services, and our] [added: Our] U.S. ground fleet serves all business and residential zip codes in the contiguous United States.

[removed: | • | UPS's Air] [added: - Our air] portfolio offers [removed: options enabling customers to specify a time-of-day guarantee for their delivery (e.g. by 8:00 A.M., 10:30 A.M., noon, end of day, etc.), while selecting from] [added: time specific,] same day, next day, two day and three day delivery alternatives. [removed: |]

[removed: | • | Customers can also leverage our extensive ground network to ship using our day-definite guaranteed Ground service.] We deliver more ground packages in the U.S. than any other carrier, with average daily package volume of [removed: 15] [added: more than 17] million, most within one to three business days. [removed: |]

[removed: | • | We offer] UPS [removed: SurePost, an economy residential ground service for customers with non-urgent, lightweight residential shipments. UPS] SurePost [removed: is a residential ground service that] combines the consistency and reliability of the UPS ground [removed: network] [added: network,] with final delivery often provided by the U.S. Postal Service. [removed: |]

*International [removed: Package Reporting Segment*][added: Package*]

[removed: Our] International Package [removed: reporting segment] consists of our small package operations in Europe, Asia Pacific, Canada, Latin America and [removed: the Indian sub-continent, Middle East and Africa ("ISMEA").][added: ISMEA.]

We offer a wide selection of guaranteed day- and time-definite international shipping [removed: services.][added: services, including more guaranteed time-definite express options than any other carrier.]

For cross-border ground package delivery, we offer UPS Standard delivery services within Europe, between the U.S. and [removed: Canada] [added: Canada,] and between the U.S. and Mexico.

[removed: Europe,] [added: Europe is] our largest region outside of the [removed: U.S., accounts] [added: U.S. and, in 2020, accounted] for approximately half of our international [removed: small] package segment [removed: revenue and is one of the primary drivers of our growth.][added: revenue.]

International [removed: high-growth] [added: high growth] markets [removed: remain] [added: are] one of our strategic imperatives.

[removed: Our] [added: The introduction of a] direct flight from the U.S. [removed: to Dubai] has improved time-in-transit to key destinations in ISMEA for shippers throughout the U.S., Canada and [removed: the Americas.][added: Latin America.]

Supply Chain & Freight consists of our forwarding, truckload brokerage, [removed: logistics,] [added: logistics and distribution,] UPS Freight, UPS Capital and other businesses.

We are one of the largest U.S. domestic air freight carriers and among the top [removed: international] air freight forwarders globally.

[removed: Coyote's access] [added: Access] to [removed: our] [added: the UPS] fleet, combined with [removed: its] [added: a] broad [added: third-party] carrier network, [removed: has created a] [added: creates] customized capacity [removed: solution] [added: solutions] for all [removed: markets, customers] [added: markets] and [removed: situations.][added: customers.]

[removed: In addition,] Coyote [removed: provides] [added: customers can also] access [removed: to] UPS services [removed: (such] [added: such] as air freight, customs brokerage and global freight [removed: forwarding) for its customer base.][added: forwarding.]

[removed: *Logistics*][added: *Logistics & Distribution*]

We leverage a [removed: global] network of more than 1,000 facilities in [removed: more than] [added: over] 100 countries to ensure products and parts are in the right place at the right time.

[removed: Our distribution centers] [added: We operate both multi-client and dedicated facilities across our network, many of which] are strategically located near UPS air and ground transportation hubs [removed: for] [added: to support] rapid delivery to consumer and business markets.

[removed: Key features in the new] [added: These] facilities [removed: include] [added: are] climate [removed: controls] [added: controlled] and [added: offer] validated coolers and freezers for [removed: customer] products requiring strict temperature-controlled environments.

[removed: User friendly] [added: User-friendly] shipping, visibility and billing technology offerings, including UPS WorldShip, Quantum View and UPS Billing Center, allow [removed: freight] customers to create electronic bills of lading, monitor shipment progress and reconcile shipping charges.

In 2020, we delivered an average of 24.7 million packages per day, totaling 6.3 billion during the year.

Our business sits at the intersection of major economic and societal trends, such as rapid urbanization and e-commerce growth.

As we look ahead, we recognize that our customers are changing, our competitors are changing, and the rate of change is accelerating.

We are guided by our strategy, *Customer First, People Led, Innovation Driven*, as we transform nearly every aspect of our business.

*Customer First* is about reducing the friction of doing business.

We seek to help our customers seize new opportunities, compete, and succeed by delivering the capabilities that they tell us matter the most; speed and ease.

We believe that our best opportunities are captured in, and we are focusing on, our three strategic growth initiatives: small- and medium-sized businesses (“SMBs”), healthcare and international markets.

We seek to grow in these areas by providing the best digital experience powered by our global smart logistics network.

We will measure our success in this area through improvements in our net promoter score.

*People Led* specifically focuses on how likely an employee is to recommend UPS employment to a friend or family member.

We know successful outcomes are built from a strong culture, so we are striving to make UPS a great place to work.

Through our transformation initiatives, we are creating fewer but more impactful jobs.

We are also enhancing the employee value proposition to align with evolving market practices.

We will measure our success on this strategic initiative through the employee experience.

*Innovation Driven* is designed to optimize the volume that flows through our network, to focus on increasing value share and drive business growth from higher-yielding opportunities in our target markets.

In the United States, our aim is to improve revenue mix and lower our cost to serve in the U.S. Domestic Package segment.

Within the International Package and Supply Chain & Freight segments, our focus is on growing operating profit.

We will measure our success on this strategic initiative through our returns on invested capital and operating margins.

We offer a variety of online tools that enable our customers to integrate UPS functionality into their own websites, deepening our customer relationships.

U.S. Domestic Package and International Package are together referred to as our global small package operations.

Our UPS Access Point network includes local small businesses, national retailers and self-serve lockers.

We offer a portfolio of returns services in more than 140 countries.

We also offer a selection of returns technologies, such as UPS Returns Manager, that promote systems integration, increase customer ease of use and visibility of inbound merchandise.

Our global air operations are based in Louisville, Kentucky, and are supported by air hubs across the United States and internationally.

We operate international air hubs in Germany, China, Hong Kong, Canada and Florida (for Latin America and the Caribbean).

We offer a full spectrum of U.S. domestic guaranteed air and ground package transportation services.

- Our ground network enables customers to ship using our day-definite guaranteed ground service.

- UPS SurePost provides residential ground service for customers with non-urgent, lightweight residential shipments.

During 2020, as a component of our strategic initiatives focused on SMBs and to increase speed and ease for our customers, we successfully completed our weekend expansion, enabling broader market coverage.

We are the only carrier that provides both commercial and residential pickup and delivery services on Saturdays as a general service offering.

We also improved ground transit times between millions of zip codes in the most populous U.S. markets and expanded our Digital Access Program by connecting UPS directly to more e-commerce platforms, improving access to our network.

UPS Worldwide Express Freight is a premium international service for urgent, palletized shipments over 150 pounds.

We continue to make major European infrastructure investments to meet growing demand for our services and to improve transit times across the region.

Customers can now reach more than 80% of Europe's population within two business days using UPS Standard.

Since 2017, we have doubled our air capacity to Dubai.

In India, we are investing in our network to improve transit times and extend pickup times, allowing businesses to gain faster access to markets in Europe and the United States.

Many companies see value in outsourcing non-core logistics activity.

We provide truckload brokerage services in the U.S. and Europe through our Coyote-branded subsidiaries.

Our Logistics & Distribution business provides value-added fulfillment and transportation management services.

Each of our U.S. distribution centers can be designated as a Foreign Trade Zone ("FTZ"), allowing businesses the opportunity to defer or reduce tariff burdens on imported and exported goods.

United Parcel Service, Inc. (“UPS”) was founded in 1907 as a private messenger and delivery service in Seattle, Washington.

In 2019, we delivered an average of 21.9 million pieces per day, or a total of 5.5 billion packages.

Our strategy is to provide advanced logistics solutions made possible by a broad portfolio of differentiated services and capabilities integrated into our customers’ businesses.

This strategy, supported by our efficient global multimodal network, enables us to deliver value to, and build lasting relationships with, our customers.

We offer a full range of industry-leading products, services and capabilities across a growing geographical and industry footprint.

Achieving our objectives has required new methods and innovative approaches to develop and implement logistics services that address customer needs for speed to market, visibility, reliability and greater control.

Recent examples include:

| | |

| --- | --- |

| • | the acquisition or creation of platform-based offerings such as UPS e-fulfillment and Ware2Go; |

| • | specialized healthcare solutions such as UPS Premier, which offers prioritized handling and visibility for critical healthcare shipments; |

| • | a full range of global customs brokerage and shipment insurance services; and |

| • | offerings such as UPS My Choice for business that give small- and medium-sized businesses ("SMBs") greater control, visibility and data access to improve their customer service. |

We monitor global trade, economic, geopolitical, regulatory and environmental factors, as well as other factors impacting the business environment.

We quickly implement measures to convert risk to opportunity and help our customers adjust their supply chains to a fast-moving world.

We have a long history of joint ventures and partnerships that provide operational flexibility and the ability to acquire new capabilities as we build scale, and we also forge new marketplace alliances to stay at the cutting edge of business.

We are a disciplined and focused business that purposefully reinvests capital to achieve both long-term strategic benefits and favorable returns.

In September 2018, we communicated our commitment to continuous transformation and to invest to modernize our business and operations through state-of-the art technology.

We see transformation as an ongoing commitment to enhance quality and efficiency as we deliver innovative capabilities and services.

Our strategic investments are primarily focused in areas we believe will drive growth and lasting profit potential:

| • | services and solutions for SMBs; |

| • | international growth markets; |

| • | global Business to Consumer (“B2C”) and Business to Business (“B2B”) e-commerce; |

| • | healthcare and life-sciences logistics; and |

| • | operational improvements to drive greater productivity and the use of automation to enhance the efficiency of our network. |

In recent periods, we have added approximately ten million square feet of highly automated capacity in more than forty new and remodeled facilities globally.

We have also continued to implement numerous new technologies to help control the network and ensure resources are in the right place at the right time.

We handle packages up to 108 inches in length that weigh up to 150 pounds and are up to 165 inches in combined length and girth, as well as palletized shipments weighing more than 150 pounds.

These options include solutions such as UPS Returns, as well as more-specialized services such as UPS Returns Exchange.

Our global air operations are centered at our Worldport hub in Louisville, Kentucky.

Our U.S. regional air hubs in Dallas, Texas; Ontario, California; Philadelphia, Pennsylvania and Rockford, Illinois support Worldport.

Our European air hub is located in Cologne, Germany, and we maintain Asia Pacific air hubs in Shanghai, China; Shenzhen, China and Hong Kong.

Our regional air hub in Canada is located in Hamilton, Ontario and our regional air hub for Latin America and the Caribbean is in Miami, Florida.

U.*S.

We offer more guaranteed time-definite express options (Express Plus, Express and Express Saver) than any other carrier.

In recent years we have continued the expansion of our Express time-definite portfolio, with certain products now reaching as many as 220 countries and territories.

The service is now available from more than 80 origin countries to more than 220 countries and territories.

By expanding our time-definite services, we are better able to offer customers the services they need in the places they do business.

For businesses with time-sensitive shipments, these upgrades can help replenish inventories quicker, improve time to market and meet urgent delivery requirements.

We continue to make major European infrastructure investments, including new hubs in London, Paris and Eindhoven, the Netherlands.

See note [removed: 5] [added: 6] to the audited, consolidated financial statements for a discussion of pension related matters and note [removed: 9] [added: 10] to the audited, consolidated financial statements for a discussion of judicial proceedings and other matters arising from the conduct of our business activities.

| | |

| --- | --- |

[removed: Form 10-K][added: Form 10-K]

| ☒ | [added: | |] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

For the fiscal year ended December 31, [removed: 2019][added: 2020]

| ☐ | [added: | |] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

[removed: ][added: ]

| Delaware | | [added: | | | |] 58-2480149 | [added: | |]

| (State or Other Jurisdiction [removed: of Incorporation] [added: of Incorporation] or Organization) | | [added: | | | |] (I.R.S. [removed: Employer Identification] [added: Employer Identification] No.) | [added: | |]

55 Glenlake Parkway, [removed: N.E. Atlanta, Georgia 30328][added: N.E. Atlanta, Georgia 30328]

[removed: (404) 828-6000][added: (404) 828-6000]

| Title of Each Class | [added: | |] Trading Symbol | [added: | |] Name of Each Exchange on Which Registered | [added: | |]

| Class B common stock, par value $.01 per share | [added: | |] UPS | [added: | |] New York Stock Exchange | [added: | |]

| [removed: Floating-Rate] [added: 1%] Senior Notes due [removed: 2020] [added: 2028] | [removed: UPS20A] | [added: | UPS28 | | |] New York Stock Exchange | [added: | |]

| 1.625% Senior Notes due 2025 | [added: | |] UPS25 | [added: | |] New York Stock Exchange | [added: | |]

| [removed: 1%] [added: 0.375%] Senior Notes due [removed: 2028] [added: 2023] | [removed: UPS28] | [added: | UPS23A | | |] New York Stock Exchange | [added: | |]

| [removed: 0.375%] [added: 1.500%] Senior Notes due [removed: 2023] [added: 2032] | [removed: UPS23A] | [added: | UPS32 | | |] New York Stock Exchange | [added: | |]

| Large accelerated filer | [added: | |] x | | [added: | | | |] Accelerated filer ¨ | | [added: | | | |] Non-accelerated filer ¨ | | [added: | | | |] Smaller reporting company | [added: | |] ☐ | | [added: | | | |] Emerging growth company | [added: | |] ☐ | [added: | |]

The aggregate market value of the class B common stock held by non-affiliates of the registrant was [removed: $72,097,367,231] [added: $78,510,244,191] as of June 30, [removed: 2019.][added: 2020.]

As of February [removed: 6, 2020,] [added: 5, 2021,] there were [removed: 156,399,660] [added: 147,531,933] outstanding shares of class A common stock and [removed: 702,088,016] [added: 719,506,596] outstanding shares of class B common stock.

Portions of the registrant’s definitive proxy statement for its annual meeting of shareowners scheduled for May [removed: 14, 2020] [added: 13, 2021] are incorporated by reference into Part III of this report.

| | [added: | |] PART I | | [added: | | | |]

| Item 1. | [removed: [Business](#s685FDC361F7F5698800A1D289F789728)] | [removed: [1](#s685FDC361F7F5698800A1D289F789728)] | [added: [Business](#if61289eb540c4dc68037b1b406075734_13) | | | [1](#if61289eb540c4dc68037b1b406075734_13) | | |]

| | [added: | |] [Products and Services; Reporting [removed: Segments](#sA4263385C4B05A35BE2F5C8029A6C509)] [added: Segments](#if61289eb540c4dc68037b1b406075734_22)] | [removed: [2](#sA4263385C4B05A35BE2F5C8029A6C509)] | [added: | [2](#if61289eb540c4dc68037b1b406075734_22) | | |]

| | [added: | |] [Competitive [removed: Strengths](#sB7D5E95750955CAFB63E4DBFD86FF3A5)] [added: Strengths](#if61289eb540c4dc68037b1b406075734_34)] | [removed: [6](#sB7D5E95750955CAFB63E4DBFD86FF3A5)] | [added: | [2](#if61289eb540c4dc68037b1b406075734_34) | | |]

| | [added: | |] [Government [removed: Regulation](#s6A8F34379CD85B92B790B41F2F753E84)] [added: Regulation](#if61289eb540c4dc68037b1b406075734_37)] | [removed: [7](#s6A8F34379CD85B92B790B41F2F753E84)] | [added: | [6](#if61289eb540c4dc68037b1b406075734_37) | | |]

| | [added: | |] [Where You Can Find More [removed: Information](#sB31B2C0CFE6B557E9163E2E63C33E66A)] [added: Information](#if61289eb540c4dc68037b1b406075734_40)] | [removed: [8](#sB31B2C0CFE6B557E9163E2E63C33E66A)] | [added: | [8](#if61289eb540c4dc68037b1b406075734_40) | | |]

| Item 1A. | [added: | |] [Risk [removed: Factors](#s6A8F3EDF85EE5AFCB9B751A138AA1539)] [added: Factors](#if61289eb540c4dc68037b1b406075734_43)] | [removed: [10](#s6A8F3EDF85EE5AFCB9B751A138AA1539)] | [added: | [9](#if61289eb540c4dc68037b1b406075734_43) | | |]

| Item 1B. | [added: | |] [Unresolved Staff [removed: Comments](#s5817152DBFA35F7CADA317C81F09C6AB)] [added: Comments](#if61289eb540c4dc68037b1b406075734_46)] | [removed: [17](#s5817152DBFA35F7CADA317C81F09C6AB)] | [added: | [16](#if61289eb540c4dc68037b1b406075734_46) | | |]

| Item 2. | [removed: [Properties](#s563F34C5CFA359DD9B27CE5B5D1AC7AB)] | [removed: [17](#s563F34C5CFA359DD9B27CE5B5D1AC7AB)] | [added: [Properties](#if61289eb540c4dc68037b1b406075734_49) | | | [17](#if61289eb540c4dc68037b1b406075734_49) | | |]

| | [added: | |] [Operating [removed: Facilities](#s01B7EDAF7DA55773B923B2CFFAB78D3C)] [added: Facilities](#if61289eb540c4dc68037b1b406075734_52)] | [removed: [17](#s01B7EDAF7DA55773B923B2CFFAB78D3C)] | [added: | [17](#if61289eb540c4dc68037b1b406075734_52) | | |]

| Item 3. | [added: | |] [Legal [removed: Proceedings](#s964A059D0DD55934976705223A54A1BB)] [added: Proceedings](#if61289eb540c4dc68037b1b406075734_58)] | [removed: [18](#s964A059D0DD55934976705223A54A1BB)] | [added: | [18](#if61289eb540c4dc68037b1b406075734_58) | | |]

| Item 4. | [added: | |] [Mine Safety [removed: Disclosures](#s30B08DFB19705C7B878169F475A05C92)] [added: Disclosures](#if61289eb540c4dc68037b1b406075734_61)] | [removed: [18](#s30B08DFB19705C7B878169F475A05C92)] | [added: | [18](#if61289eb540c4dc68037b1b406075734_61) | | |]

| | [added: | |] PART II | | [added: | | | |]

| Item 5. | [added: | |] [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s3180AD8C3BE45AAA9CD9A8CA2DF473C1)] [added: Securities](#if61289eb540c4dc68037b1b406075734_67)] | [removed: [19](#s3180AD8C3BE45AAA9CD9A8CA2DF473C1)] | [added: | [19](#if61289eb540c4dc68037b1b406075734_67) | | |]

| | [added: | |] [Shareowner Return Performance [removed: Graph](#sA75D7C6EBD9654E08E9541B27035A830)] [added: Graph](#if61289eb540c4dc68037b1b406075734_70)] | [removed: [20](#sA75D7C6EBD9654E08E9541B27035A830)] | [added: | [20](#if61289eb540c4dc68037b1b406075734_70) | | |]

| Item 6. | [removed: [Selected] [added: | | Selected] Financial [removed: Data](#s0BD5DABF10B1543BA659FB6EA8C0CF64)] [added: Data] | [removed: [21](#s0BD5DABF10B1543BA659FB6EA8C0CF64)] | [added: | [21](#if61289eb540c4dc68037b1b406075734_2485) | | |]

| Item 7. | [added: | |] [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s4365FB1C2E4C5A419DE0EDEEEDB4F6B0)] [added: Operations](#if61289eb540c4dc68037b1b406075734_76)] | [removed: [22](#s4365FB1C2E4C5A419DE0EDEEEDB4F6B0)] | [added: | [22](#if61289eb540c4dc68037b1b406075734_76) | | |]

| | [added: | |] [Supplemental Information - Items Affecting [removed: Comparability](#sB33DC1A264D65CCDBAAEE68446A8D29E)] [added: Comparability](#if61289eb540c4dc68037b1b406075734_82)] | [removed: [23](#sB33DC1A264D65CCDBAAEE68446A8D29E)] | [added: | [24](#if61289eb540c4dc68037b1b406075734_82) | | |]

| | [added: | |] [U.S. Domestic Package [removed: Operations](#sC62FB15C3BC757AAAF633AF723725637)] [added: Operations](#if61289eb540c4dc68037b1b406075734_85)] | [removed: [27](#sC62FB15C3BC757AAAF633AF723725637)] | [added: | [28](#if61289eb540c4dc68037b1b406075734_85) | | |]

| | [added: | |] [International Package [removed: Operations](#s8A91F12FC4E85BEF99AB12EDB65CF70C)] [added: Operations](#if61289eb540c4dc68037b1b406075734_88)] | [removed: [30](#s8A91F12FC4E85BEF99AB12EDB65CF70C)] | [added: | [31](#if61289eb540c4dc68037b1b406075734_88) | | |]

| | [added: | |] [Supply Chain & Freight [removed: Operations](#s27A592A260965B9383E99311C47E1E4D)] [added: Operations](#if61289eb540c4dc68037b1b406075734_91)] | [removed: [33](#s27A592A260965B9383E99311C47E1E4D)] | [added: | [34](#if61289eb540c4dc68037b1b406075734_91) | | |]

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Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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| | | | [Overview](#if61289eb540c4dc68037b1b406075734_16) | | | [1](#if61289eb540c4dc68037b1b406075734_16) | | |

| | | | [Strategy](#if61289eb540c4dc68037b1b406075734_19) | | | [2](#if61289eb540c4dc68037b1b406075734_34) | | |

| | | | [Human Capital](#if61289eb540c4dc68037b1b406075734_25) | | | [5](#if61289eb540c4dc68037b1b406075734_25) | | |

| | | | [Customers](#if61289eb540c4dc68037b1b406075734_28) | | | [6](#if61289eb540c4dc68037b1b406075734_28) | | |

| | | | [Competition](#if61289eb540c4dc68037b1b406075734_31) | | | [6](#if61289eb540c4dc68037b1b406075734_31) | | |

| | | | [Fleet](#if61289eb540c4dc68037b1b406075734_55) | | | [18](#if61289eb540c4dc68037b1b406075734_55) | | |

| | | | [Overview](#if61289eb540c4dc68037b1b406075734_79) | | | [22](#if61289eb540c4dc68037b1b406075734_79) | | |

| | | | [Critical Accounting](#if61289eb540c4dc68037b1b406075734_115) [Estimates](#if61289eb540c4dc68037b1b406075734_115) | | | [49](#if61289eb540c4dc68037b1b406075734_115) | | |

| Item 16. | | | [Form 10-K Summary](#if61289eb540c4dc68037b1b406075734_277) | | | [136](#if61289eb540c4dc68037b1b406075734_274) | | |

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| --- | --- |

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| 1.500% Senior Notes due 2032 | UPS32 | New York Stock Exchange |

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| | [Overview](#s5D046C3FDD9A5051A1085775698B9554) | [1](#s5D046C3FDD9A5051A1085775698B9554) |

| | [Strategy](#sBB99F34AC1C55B6B9D9B292331BA5B13) | [1](#sBB99F34AC1C55B6B9D9B292331BA5B13) |

| | [People](#s08244A29E2AE5A1F8E68BE649863B7CB) | [6](#s08244A29E2AE5A1F8E68BE649863B7CB) |

| | [Customers](#s128e8202faae4893a17136d42809a941) | [6](#s128e8202faae4893a17136d42809a941) |

| | [Competition](#sEC5E177B7A575199A617131862438DA8) | [6](#sEC5E177B7A575199A617131862438DA8) |

| | [Fleet](#s30F5565E21165C6AA68A4AA36886C6EE) | [18](#s30F5565E21165C6AA68A4AA36886C6EE) |

| | [Overview](#sAFD7BD4D5ED651C3899E07F10F0952FC) | [22](#sAFD7BD4D5ED651C3899E07F10F0952FC) |

| | [Critical Accounting Policies and Estimates](#s6324B30CE5B0549CA6E97024CAE1E8A9) | [45](#s6324B30CE5B0549CA6E97024CAE1E8A9) |

| Item 16. | [Form 10-K Summary](#sAB2E0158B4155CF29CC7ADE8BBE0BC10) | [132](#sA8C04D7886AB53018676105509D1432A) |

Information About Our Executive Officers

For information about our executive officers, see Part III, "Item 10.

Directors, Executive Officers and Corporate Governance".

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| --- | --- |

Our primary information technology operations are consolidated in [removed: a 444,000 square foot] [added: an] owned facility in New [removed: Jersey.][added: Jersey and we own a backup facility in Georgia.]

We own or lease over 1,000 package operating facilities in the U.S., with approximately [removed: 80] [added: 81] million square feet of floor space.

These facilities have vehicles and drivers stationed for the [removed: pick-up] [added: pickup] and delivery of packages, and capacity to sort and transfer packages.

Our larger facilities also service our vehicles and equipment, and employ specialized mechanical [removed: installations] [added: equipment] for the sorting and handling of packages.

We own or lease approximately 800 facilities that support our international package operations, with approximately [removed: 24] [added: 23] million square feet of [added: floor] space.

Our major air hub in Europe is located in [removed: Cologne,] Germany, and [added: in Asia] we operate [removed: three] [added: two major] air hubs in [removed: Asia in Shanghai, China; Shenzhen, China;] [added: China] and [added: one in] Hong Kong.

We own or lease more than 500 facilities, with approximately [removed: 38] [added: 40] million square feet of floor [removed: space that] [added: space, which] support our freight forwarding and logistics operations.

[removed: We] [added: In addition, we] own or lease approximately 200 UPS Freight service centers with approximately 6 million square feet of floor [removed: space.][added: space which are classified as held for sale in the consolidated balance sheet as of December 31, 2020.]

The following table shows information about our aircraft fleet as of December 31, [removed: 2019:][added: 2020:]

| Description | [added: | |] Owned & Finance Leases | | | [added: | | |] Operating Leases [removed: & Chartered] [added: & Charters] From Others | | | [added: | | |] On Order | | | [added: | | |] Under Option | | [added: |]

| Boeing 757-200 | [added: | |] 75 | | | [added: | | |] — | | | [added: | | |] — | | | [added: | | |] — | | [added: |]

| Boeing [removed: 767-200] [added: 767-300] | [removed: —] | | [added: 69] | [added: | | | | |] — | | | | | | [added: 3] | | [added: | | | | — | | |]

| Boeing [removed: 767-300] [added: 767-300BCF] | [removed: 64] | | [added: 4] | [removed: 2] | | | [removed: 8] | | [added: —] | [added: | | | | |] — | | [added: | | | | — | | |]

| Boeing [removed: 767-300BCF] [added: 767-300BDSF] | [removed: 3] | | [added: 4] | [added: | | | | |] — | | | [removed: 1] | | | — | | [added: | | | | | | |]

| Airbus A300-600 | [added: | |] 52 | | | [added: | | |] — | | | [added: | | |] — | | | [added: | | |] — | | [added: |]

| Boeing MD-11 | [removed: 37] | | [added: 40] | [added: | | | | |] — | | | [removed: 5] | | | [added: 2 | | | | | |] — | | [added: |]

| Boeing 747-400F | [added: | |] 11 | | | [added: | | |] — | | | [added: | | |] — | | | [added: | | |] — | | [added: |]

| Boeing 747-400BCF | [added: | |] 2 | | | [added: | | |] — | | | [added: | | |] — | | | [added: | | |] — | | [added: |]

| Boeing 747-8F | [removed: 15] | | [added: 20] | [added: | | | | |] — | | | [removed: 13] | | | [added: 8 | | | | | |] — | | [added: |]

| Total | [removed: 261] | | [added: 277] | [added: | | | | |] 311 | | | [removed: 29] | | | [added: 13 | | | | | |] — | | [added: |]

Our ground support fleet consists of [removed: 36,000] [added: 38,000] pieces of equipment designed specifically to support our aircraft fleet, ranging from non-powered container dollies and racks to powered aircraft main deck loaders and cargo tractors.

We also have [removed: 52,000] [added: 58,000] containers used to transport cargo in our aircraft.

We own our corporate headquarters in Atlanta, Georgia, our UPS Supply Chain Solutions headquarters, located in Alpharetta, Georgia and our information technology headquarters, located in Parsippany, New Jersey.

For additional information see note 4 to the audited, consolidated financial statements.

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| Other | | | — | | | | | | 311 | | | | | | — | | | | | | — | | |

We operate a global ground fleet of approximately 127,000 package cars, vans, tractors and motorcycles, of which approximately 5,700 tractors used in our UPS Freight operations are classified as held for sale in the consolidated balance sheet as of December 31, 2020.

We own our headquarters, which is located in Atlanta, Georgia and consists of approximately 745,000 square feet of space in an office campus, and our UPS Supply Chain Solutions group’s headquarters, which is located in Alpharetta, Georgia and consists of approximately 310,000 square feet of office space.

Our information technology headquarters is located in Parsippany, New Jersey, consisting of about 200,000 square feet of owned office space.

We also own a 175,000 square foot facility in Georgia, which serves as a backup to the main information technology operations facility in New Jersey.

The Worldport facility consists of over 5 million square feet and includes high-speed conveyor and computer control systems.

For additional information on our air hubs, see “Item 1 - Business - Products and Services; Reporting Segments - Global Small Package”.

The main offices of UPS Freight in Richmond, Virginia, consist of approximately 217,000 square feet of office space.

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| Boeing 767-300BDSF | 2 | | | | | | 2 | | | | |

| Other | — | | | 309 | | | | | | — | |

We operate a global ground fleet of approximately 125,000 package cars, vans, tractors and motorcycles.

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| --- | --- |

Information about our Executive Officers

The information under the heading "Information about our Executive Officers" in Item 10 hereof is incorporated by reference into this Part 1.

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| --- | --- |

As of February [removed: 7, 2020,] [added: 8, 2021,] there were [removed: 155,914] [added: 159,333] and [removed: 19,196] [added: 19,412] shareowners of record of class A and class B common stock, respectively.

On February [removed: 13, 2020,] [added: 10, 2021,] our Board declared a dividend of [removed: $1.01] [added: $1.02] per share, which is payable on March 10, [removed: 2020] [added: 2021] to shareowners of record on February [removed: 25, 2020.][added: 22, 2021.]

For additional information on our share repurchase activities, see note [removed: 11] [added: 12] to the audited, consolidated financial [removed: statements included in this report.][added: statements.]

The comparison of the total cumulative return on investment, which is the change in the stock price plus reinvested dividends for each of the quarterly periods, assumes that $100 was invested on December 31, [removed: 2014] [added: 2015] in the Standard & Poor’s 500 Index, the Dow Jones Transportation Average and our class B common stock.

[removed: ][added: ]

| | [removed: 12/31/2014] | | [added: 12/31/2015] | | [removed: 12/31/2015] | | | | 12/31/2016 | | | | [added: | |] 12/31/2017 | | | | [added: | |] 12/31/2018 | | | | [added: | |] 12/31/2019 | | | [added: | | | 12/31/2020 | | |]

In the first quarter of 2020, our share repurchases totaled approximately $217 million.

On April 28, 2020, we announced our intention to suspend share repurchases under our stock repurchase program.

There were no repurchases of class A or class B common stock during the last nine months of 2020 and we do not currently anticipate any share repurchases in 2021.

As of December 31, 2020, we had $2.1 billion available under our share repurchase authorization.

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| United Parcel Service, Inc. | | | $ | 100.00 | | | | | $ | 122.71 | | | | | $ | 131.47 | | | | | $ | 111.12 | | | | | $ | 139.45 | | | | | $ | 207.36 | |

| Standard & Poor’s 500 Index | | | $ | 100.00 | | | | | $ | 111.95 | | | | | $ | 136.38 | | | | | $ | 130.40 | | | | | $ | 172.92 | | | | | $ | 204.72 | |

| Dow Jones Transportation Average | | | $ | 100.00 | | | | | $ | 121.86 | | | | | $ | 145.04 | | | | | $ | 127.15 | | | | | $ | 154.68 | | | | | $ | 180.23 | |

This represents a 5.2% increase from the previous $0.96 per share quarterly dividend paid in December 2019.

A summary of repurchases of our class A and class B common stock during the fourth quarter of 2019 is as follows (in millions, except per share amounts):

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | Total Number of Shares Purchased(1) | | | Total Number of Shares Purchased as Part of Publicly Announced Program | | | Average Price Paid Per Share | | | | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (as of month-end) | | |

| October 1—October 31 | 0.8 | | | 0.8 | | | $ | 115.96 | | | $ | 2,495 | |

| November 1—November 30 | 0.6 | | | 0.6 | | | 121.81 | | | | 2,416 | | |

| December 1—December 31 | 0.7 | | | 0.7 | | | 117.99 | | | | 2,334 | | |

| Total October 1—December 31 | 2.1 | | | 2.1 | | | $ | 118.59 | | | | | |

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| --- | --- |

| (1) | Includes shares repurchased through our publicly announced share repurchase program and shares tendered to pay the exercise price and tax withholding on employee stock awards. |

We anticipate repurchasing approximately $1.0 billion of shares in 2020.

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| United Parcel Service, Inc. | $ | 100.00 | | | $ | 93.50 | | | $ | 114.74 | | | $ | 122.93 | | | $ | 103.90 | | | $ | 130.39 | |

| Standard & Poor’s 500 Index | $ | 100.00 | | | $ | 101.37 | | | $ | 113.49 | | | $ | 138.26 | | | $ | 132.19 | | | $ | 175.30 | |

| Dow Jones Transportation Average | $ | 100.00 | | | $ | 83.24 | | | $ | 101.44 | | | $ | 120.73 | | | $ | 105.85 | | | $ | 128.76 | |

The following table sets forth selected financial data for each of the five years in the period ended December 31, [removed: 2019] [added: 2020] (in millions, except per share amounts).

| | [added: | |] Years Ended December 31, | | | | | | | | | | | | | | | | | | | [added: | | | | | | | |]

| | [added: | | 2020 | | | | | |] 2019 | | | | [added: | |] 2018 | | | | [removed: 2017] | | [added: 2017] | | [removed: 2016] | | | | [removed: 2015] [added: 2016] | | |

| Selected Income Statement Data | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Revenue: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| U.S. Domestic Package | [added: | |] $ | [removed: 46,493] [added: 53,499] | | | [added: | |] $ | [removed: 43,593] [added: 46,493] | | | [added: | |] $ | [removed: 40,761] [added: 43,593] | | | [added: | |] $ | [removed: 38,284] [added: 40,761] | | | [added: | |] $ | [removed: 36,744] [added: 38,284] | |

| International Package | [added: | | 15,945 | | | | | |] 14,220 | | | | [added: | |] 14,442 | | | | [removed: 13,342] | | [added: 13,342] | | [removed: 12,346] | | | | [removed: 12,142] [added: 12,346] | | |

| Supply Chain & Freight | [added: | | 15,184 | | | | | |] 13,381 | | | | [added: | |] 13,826 | | | | [removed: 12,482] | | [added: 12,482] | | [removed: 10,980] | | | | [removed: 10,300] [added: 10,980] | | |

| Total Revenue | [added: | | 84,628 | | | | | |] 74,094 | | | | [added: | |] 71,861 | | | | [removed: 66,585] | | [added: 66,585] | | [removed: 61,610] | | | | [removed: 59,186] [added: 61,610] | | |

| Operating Expenses: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Compensation and benefits | [added: | | 44,529 | | | | | |] 38,908 | | | | [added: | |] 37,235 | | | | [removed: 34,577] | | [added: 34,577] | | [removed: 32,534] | | | | [removed: 31,448] [added: 32,534] | | |

| Other | [added: | | 32,415 | | | | | |] 27,388 | | | | [added: | |] 27,602 | | | | [removed: 24,479] | | [added: 24,479] | | [removed: 21,388] | | | | [removed: 20,495] [added: 21,388] | | |

| Total Operating Expenses | [added: | | 76,944 | | | | | |] 66,296 | | | | [added: | |] 64,837 | | | | [removed: 59,056] | | [added: 59,056] | | [removed: 53,922] | | | | [removed: 51,943] [added: 53,922] | | |

| Operating Profit: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| U.S. Domestic Package | [added: | | 3,891 | | | | | |] 4,164 | | | | [added: | |] 3,643 | | | | [removed: 4,303] | | [added: 4,303] | | [removed: 4,628] | | | | [removed: 4,427] [added: 4,628] | | |

| International Package | [added: | | 3,436 | | | | | |] 2,657 | | | | [added: | |] 2,529 | | | | [removed: 2,429] | | [added: 2,429] | | [removed: 2,417] | | | | [removed: 2,123] [added: 2,417] | | |

| Supply Chain [removed: and] [added: &] Freight | [added: | | 357 | | | | | |] 977 | | | | [added: | |] 852 | | | | [removed: 797] | | [added: 797] | | [removed: 643] | | | | [removed: 693] [added: 643] | | |

| Total Operating Profit | [added: | | 7,684 | | | | | |] 7,798 | | | | [added: | |] 7,024 | | | | [removed: 7,529] | | [added: 7,529] | | [removed: 7,688] | | | | [removed: 7,243] [added: 7,688] | | |

| Other Income and (Expense): | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Investment income (expense) and other | [removed: (1,493] | | [removed: )] [added: (5,139)] | | [removed: (400] | | [removed: )] | | [removed: 61] [added: (1,493)] | | | | [removed: (2,186] | | [removed: )] [added: (400)] | | [removed: 435] | | | [added: | 61 | | | | | | (2,186) | | |]

| Interest expense | [removed: (653] | | [removed: )] [added: (701)] | | [removed: (605] | | [removed: )] | | [removed: (453] [added: (653)] | | [removed: )] | | [removed: (381] | | [removed: )] [added: (605)] | | [removed: (341] | | [removed: )] | [added: | (453) | | | | | | (381) | | |]

| Income Before Income Taxes | [added: | | 1,844 | | | | | |] 5,652 | | | | [added: | |] 6,019 | | | | [removed: 7,137] | | [added: 7,137] | | [removed: 5,121] | | | | [removed: 7,337] [added: 5,121] | | |

| Income Tax Expense | [added: | | 501 | | | | | |] 1,212 | | | | [added: | |] 1,228 | | | | [removed: 2,232] | | [added: 2,232] | | [removed: 1,699] | | | | [removed: 2,497] [added: 1,699] | | |

| Net Income | [added: | |] $ | [removed: 4,440] [added: 1,343] | | | [added: | |] $ | [removed: 4,791] [added: 4,440] | | | [added: | |] $ | [removed: 4,905] [added: 4,791] | | | [added: | |] $ | [removed: 3,422] [added: 4,905] | | | [added: | |] $ | [removed: 4,840] [added: 3,422] | |

| Per Share Amounts: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Basic Earnings Per Share | [added: | |] $ | [removed: 5.14] [added: 1.55] | | | [added: | |] $ | [removed: 5.53] [added: 5.14] | | | [added: | |] $ | [removed: 5.63] [added: 5.53] | | | [added: | |] $ | [removed: 3.88] [added: 5.63] | | | [added: | |] $ | [removed: 5.37] [added: 3.88] | |

| Diluted Earnings Per Share | [added: | |] $ | [removed: 5.11] [added: 1.54] | | | [added: | |] $ | [removed: 5.51] [added: 5.11] | | | [added: | |] $ | [removed: 5.61] [added: 5.51] | | | [added: | |] $ | [removed: 3.86] [added: 5.61] | | | [added: | |] $ | [removed: 5.34] [added: 3.86] | |

| Dividends Declared Per Share | [added: | |] $ | [removed: 3.84] [added: 4.04] | | | [added: | |] $ | [removed: 3.64] [added: 3.84] | | | [added: | |] $ | [removed: 3.32] [added: 3.64] | | | [added: | |] $ | [removed: 3.12] [added: 3.32] | | | [added: | |] $ | [removed: 2.92] [added: 3.12] | |

| Weighted Average Shares Outstanding: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Basic | [added: | | 867 | | | | | |] 864 | | | | [added: | |] 866 | | | | [removed: 871] | | [added: 871] | | [removed: 883] | | | | [removed: 901] [added: 883] | | |

| Diluted | [added: | | 871 | | | | | |] 869 | | | | [added: | |] 870 | | | | [removed: 875] | | [added: 875] | | [removed: 887] | | | | [removed: 906] [added: 887] | | |

| | [added: | |] As of December 31, | | | | | | | | | | | | | | | | | | | [added: | | | | | | | |]

| Selected Balance Sheet Data: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Cash and marketable securities | [added: | |] $ | [removed: 5,741] [added: 6,316] | | | [added: | |] $ | [removed: 5,035] [added: 5,741] | | | [added: | |] $ | [removed: 4,069] [added: 5,035] | | | [added: | |] $ | [removed: 4,567] [added: 4,069] | | | [added: | |] $ | [removed: 4,726] [added: 4,567] | |

| Total assets | [added: | | 62,408 | | | | | |] 57,857 | | | | [added: | |] 50,016 | | | | [removed: 45,574] | | [added: 45,574] | | [removed: 40,545] | | | | [removed: 38,497] [added: 40,545] | | |

| Long-term debt [added: and finance leases] | [added: | | 22,031 | | | | | |] 21,818 | | | | [added: | |] 19,931 | | | | [removed: 20,278] | | [added: 20,278] | | [removed: 12,394] | | | | [removed: 11,316] [added: 12,394] | | |

| Shareowners’ equity | [added: | | 669 | | | | | |] 3,283 | | | | [added: | |] 3,037 | | | | [removed: 1,024] | | [added: 1,024] | | [removed: 430] | | | | [removed: 2,501] [added: 430] | | |

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| [Report of Independent Registered Public Accounting [removed: Firm](#sDA039524CCF45501932C0841DAFE67D1)] [added: Firm](#if61289eb540c4dc68037b1b406075734_124)] | [removed: [53](#sDA039524CCF45501932C0841DAFE67D1)] | [added: | [57](#if61289eb540c4dc68037b1b406075734_124) | | |]

| [Consolidated Balance [removed: Sheets](#sD410C1446D4C5887A44D1971A8F5B950)] [added: Sheets](#if61289eb540c4dc68037b1b406075734_127)] | [removed: [57](#sD410C1446D4C5887A44D1971A8F5B950)] | [added: | [61](#if61289eb540c4dc68037b1b406075734_127) | | |]

| [Statements of Consolidated [removed: Income](#sFD076C1A327856DE917A2D31C69AE3A1)] [added: Income](#if61289eb540c4dc68037b1b406075734_133)] | [removed: [58](#sFD076C1A327856DE917A2D31C69AE3A1)] | [added: | [62](#if61289eb540c4dc68037b1b406075734_133) | | |]

| [Statements of Consolidated Comprehensive Income [removed: (Loss)](#s9CDBD5BB53E75315908D994F7B7F5414)] [added: (Loss)](#if61289eb540c4dc68037b1b406075734_136)] | [removed: [58](#s9CDBD5BB53E75315908D994F7B7F5414)] | [added: | [62](#if61289eb540c4dc68037b1b406075734_136) | | |]

| [Statements of Consolidated Cash [removed: Flows](#s6B67DE30826D5EDEBAC2B133AA0D169A)] [added: Flows](#if61289eb540c4dc68037b1b406075734_139)] | [removed: [59](#s6B67DE30826D5EDEBAC2B133AA0D169A)] | [added: | [63](#if61289eb540c4dc68037b1b406075734_139) | | |]

| [Notes to Consolidated Financial [removed: Statements](#s7E771FF1F67459A59349C65C8CB4A1A9)] [added: Statements](#if61289eb540c4dc68037b1b406075734_142)] | [removed: [60](#s7E771FF1F67459A59349C65C8CB4A1A9)] | [added: | [64](#if61289eb540c4dc68037b1b406075734_142) | | |]

[removed: | [Note 1—Summary of Accounting Policies](#s9777704D2055553885195A8DF17E1335) | [60](#s9777704D2055553885195A8DF17E1335) |][added: SUMMARY OF ACCOUNTING POLICIES]

[removed: | [Note 2—Revenue Recognition](#sFE977B82F22C55B0A107F619898E84E6) | [68](#sFE977B82F22C55B0A107F619898E84E6) |][added: NOTE 2. REVENUE RECOGNITION]

| [removed: [Note 3—Investments] [added: Investments] and Restricted [removed: Cash](#sF6D0BDF39217594E809A7E3914AF063B)] [added: Cash] | [removed: [71](#sF6D0BDF39217594E809A7E3914AF063B)] | [added: | 25 | | | | | | 24 | | |]

[removed: | [Note 4—Property, Plant and Equipment](#s39F93774425453BAA9320DC2E1B85210) | [75](#s39F93774425453BAA9320DC2E1B85210) |][added: PROPERTY, PLANT AND EQUIPMENT]

[removed: | [Note 5—Company Sponsored Employee Benefit Plans](#s0595C72F0B0255DE991A8B089178EC17) | [76](#s0595C72F0B0255DE991A8B089178EC17) |][added: COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS]

[removed: | [Note 6—Multiemployer Employee Benefit Plans](#s428C2FE70A8F5534A2C814A7C7F52215) | [88](#s428C2FE70A8F5534A2C814A7C7F52215) |][added: MULTIEMPLOYER EMPLOYEE BENEFIT PLANS]

[removed: | [Note 7—Goodwill and Intangible Assets](#s646B6DF095C959EC840022B11D611BBC) | [91](#s646B6DF095C959EC840022B11D611BBC) |][added: GOODWILL AND INTANGIBLE ASSETS]

[removed: | [Note 8—Debt and Financing Arrangements](#s1A466E5212BA5E33B6F118FC76D842A4) | [93](#s1A466E5212BA5E33B6F118FC76D842A4) |][added: DEBT AND FINANCING ARRANGEMENTS]

[removed: | [Note 9—Legal Proceedings and Contingencies](#sBCB2EBF9CD4F57998B7CB006747BDB23) | [99](#sBCB2EBF9CD4F57998B7CB006747BDB23) |][added: LEGAL PROCEEDINGS AND CONTINGENCIES]

| [removed: [Note 11—Shareowners’ Equity](#sA9A37E11FD195883918EEB509F6DACF8)] [added: Shareowners’ Equity:] | [removed: [105](#sA9A37E11FD195883918EEB509F6DACF8)] | [added: | | | | | | | | | |]

[removed: | [Note 12—Stock-Based Compensation](#sC2A2DD0B2AE157568EC1C27A06C68D85) | [109](#sC2A2DD0B2AE157568EC1C27A06C68D85) |][added: STOCK - BASED COMPENSATION]

[removed: | [Note 13—Segment and Geographic Information](#s3DB2FCF67A595D4C95F15A0EFF3B898D) | [112](#s3DB2FCF67A595D4C95F15A0EFF3B898D) |][added: SEGMENT AND GEOGRAPHIC INFORMATION]

[removed: | [Note 14—Income Taxes](#sDE9526D7D75D5E5B86E5DDA358BF827C) | [115](#sDE9526D7D75D5E5B86E5DDA358BF827C) |][added: INCOME TAXES]

[removed: | [Note 15—Earnings Per Share](#s148253B4A3175112BA1CAD78B679B35A) | [120](#s148253B4A3175112BA1CAD78B679B35A) |][added: EARNINGS PER SHARE]

[removed: | [Note 16—Derivative Instruments and Risk Management](#sEAC9086C226254C4842B68C8790EF4C4) | [121](#sEAC9086C226254C4842B68C8790EF4C4) |][added: DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT]

[removed: | [Note 17—Transformation Strategy Costs](#sAABA1195F84D5B64A58C7A6ED30DA470) | [126](#sAABA1195F84D5B64A58C7A6ED30DA470) |][added: TRANSFORMATION STRATEGY COSTS]

[removed: | [Note 18—Quarterly Information (Unaudited)](#sF97E3D5ED5075F8BAEE997D96423E691) | [126](#sF97E3D5ED5075F8BAEE997D96423E691) |][added: NOTE 19. QUARTERLY INFORMATION (UNAUDITED)]