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

Average daily package volume in our global small package operations decreased, driven by planned volume declines from our largest customer, as well as challenging macroeconomic conditions. The overall decrease in the U.S. Domestic Package segment was partially offset by growth in SMBs and commercial shipments in that segment as well as growth in all regions of the International Package segment.
Revenue decreased for the quarter, driven by the impact of the third quarter 2024 divestiture of Coyote, which contributed $563 million of revenue in the 2024 period. This reduction was partially offset by an increase in revenue in our global small package operations. U.S. Domestic Package segment revenue growth was driven by increases in air cargo.
Operating expenses decreased, driven by decreases in purchased transportation, attributable to the absence of Coyote in the 2025 period and the insourcing of our Ground Saver product, partially offset by increases in compensation and benefit expense.
Operating profit and operating margin increased for the quarter, as growth in the U.S. Domestic Package segment more than offset declines in the International Package segment and Supply Chain Solutions.
We recorded net income of $1.2 billion and diluted earnings per share of $1.40 in the first quarter of 2025. Non-GAAP adjusted diluted earnings per share for the quarter were $1.49 after adjusting for the after-tax impacts of:

◦transformation strategy costs of $44 million, or $0.05 per diluted share;

◦goodwill and asset impairment charges of $49 million, or $0.05 per diluted share; and

◦the reversal of an income tax valuation allowance of $10 million, or $0.01 per diluted share.

For additional operational results for the quarter specific to our segments, refer to Results of Operations - Segment Review below.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Supplemental Information - Items Affecting Comparability

We supplement the reporting of our financial information determined under generally accepted accounting principles ("GAAP") with certain non-GAAP adjusted financial measures.

Non-GAAP adjusted financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our non-GAAP adjusted financial measures do not represent a comprehensive basis of accounting and therefore may not be comparable to similarly titled measures reported by other companies.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Non-GAAP adjusted amounts reflect the following (in millions):


	Three Months Ended March 31,
Non-GAAP Adjustments		2025		2024
Operating Expenses:
Transformation Strategy Costs:
Transformation 2.0

Business Portfolio Review		$	—	$	5
Financial Systems		16		16

Transformation 2.0 Total		16		21

Fit to Serve		19		25

Network Reconfiguration and Efficiency Reimagined		23		—
Total Transformation Strategy Costs		58		46
Goodwill and Asset Impairment Charges		39		48
Expense for Regulatory Matter		—		40





Total Adjustments to Non-GAAP Operating Expenses		$	97	$	134

	Three Months Ended March 31,
Other Income and (Expense):		2025		2024
Goodwill and Asset Impairment Charges		$	19	$	—
Total Adjustments to Non-GAAP Other Income and (Expense)		19		—

Total Adjustments to Non-GAAP Income Before Income Taxes		116		134

Income Tax (Benefit) Expense:
Transformation Strategy Costs:
Transformation 2.0

Business Portfolio Review		—		1
Financial Systems		4		4

Transformation 2.0 Total		4		5

Fit to Serve		4		6

Network Reconfiguration and Efficiency Reimagined		6		—
Total Transformation Strategy Costs		14		11
Goodwill and Asset Impairment Charges		9		13

Reversal of Income Tax Valuation Allowance		10		—
Total Adjustments to Non-GAAP Income Tax (Benefit) Expense		33		24

Total Adjustments to Non-GAAP Net Income		$	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	%

Comparative results were impacted by one less operating day in the first quarter of 2025. We expect overall revenue to decrease for the second quarter driven by uncertainty surrounding global trade policies and lower demand-related surcharges.

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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 increased for the quarter, driven by increases in both our domestic and export products.

Domestic volume increased for the quarter driven primarily by growth within Canada as well as moderate growth across several European markets. Retail customers drove growth within Canada and increases across the European markets were largely driven by retail and professional services customers.

Export volume increased for the quarter driven primarily by growth in the intra-Europe and Asia trade lanes. The increases were slightly offset by declines in Canada to U.S. transborder trade, primarily as a result of changes in trade patterns. Improvements in the intra-Europe trade lanes were driven by volume growth from enterprise customers within the retail, healthcare and auto industries. Growth in the Asia to U.S. trade lanes was driven by increased SMB volumes primarily as a result of anticipated tariff changes.

Export premium products increased 10.4% for the quarter driven by Worldwide and Transborder Express products. Worldwide Express product volume increased as a result of accelerated U.S. inbound services in anticipation of tariff changes. Export non-premium product volumes increased 11.5%, primarily driven by Transborder Standard products from retail SMBs.

Revenue Per Piece

Total revenue per piece decreased 2.6% for the quarter primarily due to non-premium product growth outpacing premium products, decreases in demand related surcharges and unfavorable currency fluctuations. These decreases were partially offset by the impact of base rate increases. Currency had a negative impact of 190 basis points on revenue per piece. Rate changes for shipments originating outside the U.S. are made throughout the year and vary by geographic market.

Domestic revenue per piece decreased 1.4%, primarily due to unfavorable currency movements, partially offset by the impact of base and accessorial rate increases. Currency had a negative impact of 460 basis points on domestic revenue per piece.

Export revenue per piece decreased 4.4%, primarily due to non-premium product growth outpacing premium product growths and decreases in demand related surcharges, partially offset by the impact of base rate increases. Currency had a negative impact of 140 basis points on export revenue per piece.

Fuel Surcharges

The fuel surcharge we apply to international air services originating inside or outside the U.S. is largely indexed to the DOE's Gulf Coast spot price for a gallon of kerosene-type jet fuel. The fuel surcharges for ground services originating outside the U.S. are indexed to fuel prices in the region or country where the shipment originates.

Operating Expenses

Operating expenses increased for the quarter. Pickup and delivery expenses increased $87 million, driven by increased volumes and the impact of the implementation of weekend operations within Europe. Costs of operating our integrated air and ground network increased $40 million primarily due to increased air charters and block hours as we aligned our network to meet higher volume demands. This was partially offset by lower average fuel prices and the impact of currency movements.

Our non-GAAP adjusted operating expenses exclude the impact of activities associated with our transformation strategy, which were $13 and $24 million within the International Package segment in the first quarters of 2025 and 2024, respectively. Transformation strategy costs reflected within the International Package segment during both periods were related to our Fit to Serve program. The first quarter of 2025 also includes transformation strategy costs related to our Efficiency Reimagined program. 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.

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Operating Profit and Margin

As a result of the factors described above, operating profit decreased $15 million for the quarter, with operating margin decreasing 70 basis points to 14.7%. Non-GAAP adjusted operating profit decreased $28 million and non-GAAP adjusted operating margin decreased 100 basis points to 15.0%.

During the quarter, we completed the liquidations of all operations in Russia. Substantially all of our operations in Ukraine remain indefinitely suspended. These actions have not had, and are not expected to have, a material impact on us.

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Supply Chain Solutions


	Three Months Ended March 31,	Change
		2025			2024			$		%
Revenue (in millions):
Forwarding		$	726		$	1,280		$	(554)	(43.3)	%
Logistics		1,572			1,542			30		1.9	%
Other SCS		415			362			53		14.6	%
Total Revenue		$	2,713		$	3,184		$	(471)	(14.8)	%
Operating Expenses (in millions):
Operating Expenses		$	2,667		$	3,060		$	(393)	(12.8)	%
Transformation Strategy Costs		(13)			(13)			—		—	%
Goodwill and Asset Impairment Charges		(39)			(41)			2		(4.9)	%
Expense for Regulatory Matter		—			(40)			40		(100.0)	%
Non-GAAP Adjusted Operating Expenses		$	2,615		$	2,966		$	(351)	(11.8)	%
Operating Profit (in millions) and Operating Margin:
Operating Profit		$	46		$	124		$	(78)	(62.9)	%
Non-GAAP Adjusted Operating Profit		$	98		$	218		$	(120)	(55.0)	%
Operating Margin		1.7		%	3.9		%
Non-GAAP Adjusted Operating Margin		3.6		%	6.8		%
Currency Benefit / (Cost) – (in millions)(1):
Revenue								$	(47)
Operating Expenses								56
Operating Profit								$	9

(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
Forwarding		$	6	$	7	$	(1)	(14.3)	%
Logistics		7		6		1		16.7	%
Total Transformation Strategy Costs		13		13		—		—	%
Goodwill and Asset Impairment Charges
Logistics		—		41		(41)		(100.0)	%
Other SCS		39		—		39		N/A
Total Goodwill and Asset Impairment Charges		39		41		(2)		(4.9)	%
Expense for Regulatory Matter
Other SCS		—		40		(40)		(100.0)	%
Total Expense for Regulatory Matter		—		40		(40)		(100.0)	%
Total non-GAAP Adjustments to Operating Expenses		$	52	$	94	$	(42)	(44.7)	%

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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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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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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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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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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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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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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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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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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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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

We repurchased 8.6 million shares of class B common stock for $1.0 billion under our stock repurchase program during the first quarter of 2025. We do not currently anticipate further repurchases in 2025. We did not repurchase any shares under our stock repurchase program during the first quarter of 2024. For additional information on our share repurchase activities, see note 12 to the unaudited, consolidated financial statements.

The declaration of dividends is subject to the discretion of the Board and depends on various factors, including our net income, financial condition, cash requirements, future prospects and other relevant factors. In the first quarter of 2025, we increased our quarterly cash dividend to $1.64 per share, compared to $1.63 in the 2024 period.

Repayments of debt during the quarter consisted of $32 million of senior notes and finance lease obligations. We received $25 million in proceeds related to other financing arrangements during the first quarter of 2025. Repayments of debt in the 2024 period consisted of $2.2 billion of short- and long-term commercial paper as well as scheduled principal payments on our finance lease obligations. There were no issuances of debt during the first quarter of 2024.

As of March 31, 2025, we had $1.8 billion of fixed-rate senior notes outstanding that mature in 2025. We repaid $1.0 billion of these notes at maturity in April 2025 with cash from operations and intend to repay or refinance the remaining amounts when due. We consider the overall fixed and floating interest rate mix of our portfolio and the related overall cost of borrowing when planning for future issuances and non-scheduled repayments of debt. Subsequent to March 31, 2025, we entered into six aircraft leases which we expect will be treated as finance leases.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The amount of commercial paper outstanding fluctuates based on daily liquidity needs. The following is a summary of our commercial paper program (in millions):


	Outstanding balance at quarter end ($)		Average balance outstanding ($)		Average interest rate
2025
USD	$	—	$	52	4.08	%
Total	$	—

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.

Table of Contents

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Collective Bargaining Agreements

Status of Collective Bargaining Agreements

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

Multiemployer Benefit Plans

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

Recent Accounting Pronouncements

Adoption of New Accounting Standards

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

Accounting Standards Issued But Not Yet Effective

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

Table of Contents

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