filings.toolsItem 1. Financial Statements
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Item 1. Financial Statements
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2025 (unaudited) and December 31, 2024 (in millions)
| September 30, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 6,764 | $ | 6,112 | |||||||
| Accounts receivable, net | 9,967 | 10,871 | |||||||||
| Other current assets | 2,254 | 2,327 | |||||||||
| Total Current Assets | 18,985 | 19,310 | |||||||||
| Property, Plant and Equipment, Net | 37,743 | 37,179 | |||||||||
| Operating Lease Right-Of-Use Assets | 4,217 | 4,149 | |||||||||
| Goodwill | 4,810 | 4,300 | |||||||||
| Intangible Assets, Net | 3,455 | 3,064 | |||||||||
| Deferred Income Tax Assets | 158 | 112 | |||||||||
| Other Non-Current Assets | 2,024 | 1,956 | |||||||||
| Total Assets | $ | 71,392 | $ | 70,070 | |||||||
| LIABILITIES AND SHAREOWNERS' EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Current maturities of long-term debt, commercial paper and finance leases | $ | 932 | $ | 1,838 | |||||||
| Current maturities of operating leases | 742 | 733 | |||||||||
| Accounts payable | 5,784 | 6,302 | |||||||||
| Accrued wages and withholdings | 3,476 | 3,655 | |||||||||
| Self-insurance reserves | 1,024 | 1,086 | |||||||||
| Accrued group welfare and retirement plan contributions | 1,221 | 1,390 | |||||||||
| Other current liabilities | 1,373 | 1,437 | |||||||||
| Total Current Liabilities | 14,552 | 16,441 | |||||||||
| Long-Term Debt and Finance Leases | 23,850 | 19,446 | |||||||||
| Non-Current Operating Leases | 3,687 | 3,635 | |||||||||
| Pension and Postretirement Benefit Obligations | 6,187 | 6,859 | |||||||||
| Deferred Income Tax Liabilities | 3,581 | 3,595 | |||||||||
| Other Non-Current Liabilities | 3,687 | 3,351 | |||||||||
| Shareowners' Equity: | |||||||||||
| Class A common stock (110 and 121 shares issued in 2025 and 2024, respectively) | 2 | 2 | |||||||||
| Class B common stock (738 and 733 shares issued in 2025 and 2024, respectively) | 7 | 7 | |||||||||
| Additional paid-in capital | 178 | 136 | |||||||||
| Retained earnings | 19,753 | 20,882 | |||||||||
| Accumulated other comprehensive loss | (4,117) | (4,309) | |||||||||
| Deferred compensation obligations | 5 | 7 | |||||||||
| Less: Treasury stock (0.1 shares in 2025 and 2024) | (5) | (7) | |||||||||
| Total Equity for Controlling Interests | 15,823 | 16,718 | |||||||||
| Noncontrolling interests | 25 | 25 | |||||||||
| Total Shareowners' Equity | 15,848 | 16,743 | |||||||||
| Total Liabilities and Shareowners' Equity | $ | 71,392 | $ | 70,070 | |||||||
See notes to unaudited, consolidated financial statements.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In millions, except per share amounts)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue | $ | 21,415 | $ | 22,245 | $ | 64,182 | $ | 65,769 | |||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||
| Compensation and benefits | 12,118 | 11,955 | 35,571 | 35,097 | |||||||||||||||||||
| Repairs and maintenance | 803 | 713 | 2,290 | 2,165 | |||||||||||||||||||
| Depreciation and amortization | 926 | 905 | 2,774 | 2,690 | |||||||||||||||||||
| Purchased transportation | 2,463 | 3,375 | 7,715 | 9,894 | |||||||||||||||||||
| Fuel | 1,071 | 1,068 | 3,187 | 3,254 | |||||||||||||||||||
| Other occupancy | 548 | 517 | 1,699 | 1,573 | |||||||||||||||||||
| Other expenses | 1,682 | 1,727 | 5,654 | 5,554 | |||||||||||||||||||
| Total Operating Expenses | 19,611 | 20,260 | 58,890 | 60,227 | |||||||||||||||||||
| Operating Profit | 1,804 | 1,985 | 5,292 | 5,542 | |||||||||||||||||||
| Other Income (Expense): | |||||||||||||||||||||||
| Investment income and other | 94 | 155 | 251 | 410 | |||||||||||||||||||
| Interest expense | (291) | (230) | (751) | (637) | |||||||||||||||||||
| Total Other Income (Expense) | (197) | (75) | (500) | (227) | |||||||||||||||||||
| Income Before Income Taxes | 1,607 | 1,910 | 4,792 | 5,315 | |||||||||||||||||||
| Income Tax Expense | 296 | 371 | 1,011 | 1,254 | |||||||||||||||||||
| Net Income | $ | 1,311 | $ | 1,539 | $ | 3,781 | $ | 4,061 | |||||||||||||||
| Basic Earnings Per Share | $ | 1.55 | $ | 1.80 | $ | 4.46 | $ | 4.74 | |||||||||||||||
| Diluted Earnings Per Share | $ | 1.55 | $ | 1.80 | $ | 4.46 | $ | 4.74 | |||||||||||||||
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(In millions)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net Income | $ | 1,311 | $ | 1,539 | $ | 3,781 | $ | 4,061 | |||||||||||||||
| Change in foreign currency translation adjustment, net of tax | (46) | 211 | 455 | 28 | |||||||||||||||||||
| Change in unrealized gain (loss) on marketable securities, net of tax | (1) | 2 | — | 1 | |||||||||||||||||||
| Change in unrealized gain (loss) on cash flow hedges, net of tax | 75 | (139) | (353) | (63) | |||||||||||||||||||
| Change in unrecognized pension and postretirement benefit costs, net of tax | 30 | 29 | 90 | 88 | |||||||||||||||||||
| Comprehensive Income | $ | 1,369 | $ | 1,642 | $ | 3,973 | $ | 4,115 |
See notes to unaudited, consolidated financial statements.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions, unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash Flows From Operating Activities: | |||||||||||
| Net income | $ | 3,781 | $ | 4,061 | |||||||
| Adjustments to reconcile net income to net cash from operating activities: | |||||||||||
| Depreciation and amortization | 2,774 | 2,690 | |||||||||
| Pension and postretirement benefit expense | 763 | 774 | |||||||||
| Pension and postretirement benefit contributions | (1,338) | (1,434) | |||||||||
| Self-insurance reserves | 76 | 14 | |||||||||
| Deferred tax (benefit) expense | (34) | 24 | |||||||||
| Stock compensation expense (benefit) | 41 | (21) | |||||||||
| Other (gains) losses | (155) | 61 | |||||||||
| Changes in assets and liabilities, net of effects of acquisitions: | |||||||||||
| Accounts receivable | 854 | 1,395 | |||||||||
| Other assets | (80) | 116 | |||||||||
| Accounts payable | (801) | (829) | |||||||||
| Accrued wages and withholdings | (202) | 348 | |||||||||
| Other liabilities | (528) | (335) | |||||||||
| Other operating activities | (3) | (57) | |||||||||
| Net cash from operating activities | 5,148 | 6,807 | |||||||||
| Cash Flows From Investing Activities: | |||||||||||
| Capital expenditures | (2,969) | (2,811) | |||||||||
| Proceeds from disposal of businesses, property, plant and equipment | 585 | 1,070 | |||||||||
| Purchases of marketable securities | (90) | (52) | |||||||||
| Sales and maturities of marketable securities | 229 | 2,725 | |||||||||
| Acquisitions, net of cash acquired | (479) | (66) | |||||||||
| Other investing activities | (10) | (26) | |||||||||
| Net cash (used in) from investing activities | (2,734) | 840 | |||||||||
| Cash Flows From Financing Activities: | |||||||||||
| Net change in short-term debt | — | (1,272) | |||||||||
| Proceeds from long-term borrowings | 4,153 | 2,785 | |||||||||
| Repayments of long-term borrowings | (1,145) | (1,944) | |||||||||
| Purchases of common stock | (1,000) | (500) | |||||||||
| Issuances of common stock | 133 | 184 | |||||||||
| Dividends | (4,045) | (4,049) | |||||||||
| Other financing activities | (43) | (207) | |||||||||
| Net cash used in financing activities | (1,947) | (5,003) | |||||||||
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | 185 | 5 | |||||||||
| Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | 652 | 2,649 | |||||||||
| Cash, Cash Equivalents and Restricted Cash: | |||||||||||
| Beginning of period | 6,112 | 3,206 | |||||||||
| End of period | $ | 6,764 | $ | 5,855 |
See notes to unaudited, consolidated financial statements.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Principles of Consolidation
The accompanying unaudited, consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited, consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly our financial position as of September 30, 2025, and our results of operations and cash flows for the three and nine months ended September 30, 2025 and 2024. The results reported in these unaudited, consolidated financial statements should not be regarded as indicative of results that may be expected for any other period or the entire year. The unaudited, consolidated financial statements should be read in conjunction with the audited, consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024.
Throughout the document, the terms "nine months ended" and "year-to-date period" refer to the nine months ended September 30.
Fair Value of Financial Instruments
The carrying amounts of our cash and cash equivalents, accounts receivable, finance receivables and accounts payable approximated fair value as of September 30, 2025 and December 31, 2024. The fair values of our marketable securities are disclosed in note 5, our recognized multiemployer pension withdrawal liabilities in note 7, our short-and long-term debt in note 9 and our derivative instruments in note 15. We apply a fair value hierarchy (Levels 1, 2 and 3) when measuring and reporting items at fair value. Fair values are based on listed market prices (Level 1), when such prices are available. To the extent that listed market prices are not available, fair value is determined based on other relevant factors, including dealer price quotations (Level 2). If listed market prices or other relevant factors are not available, inputs are developed from unobservable data reflecting our own assumptions and include situations where there is little or no market activity for the asset or liability (Level 3).
Certain investments that do not have a readily determinable fair value are measured at net asset value ("NAV") using NAV as a practical expedient, or an equivalent developed consistent with the measurement principles in Accounting Standards Codification ("ASC") Topic 820. Assets that are measured using NAV as a practical expedient are excluded from the fair value hierarchy. For further discussion on these investments, see note 1 to the audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024.
Use of Estimates
The preparation of the accompanying unaudited, consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of these financial statements, as well as the reported amounts of revenues and expenses during the reporting period.
Although our estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. As a result, our accounting estimates and assumptions may change significantly over time.
Supplier Finance Programs
As part of our working capital management, certain financial institutions offer a Supply Chain Finance ("SCF") program to certain of our suppliers. During the nine months ended September 30, 2025, there were no material changes to the SCF program described in note 1 to the audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024.
Amounts due to our suppliers that participate in the SCF program are included in Accounts payable in our consolidated balance sheets. We have been informed by the participating financial institutions that as of September 30, 2025 and December 31, 2024, suppliers had sold them $374 and $515 million, respectively, of our outstanding payment obligations during the relevant period.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
Adoption of New Accounting Standards
Accounting pronouncements adopted during the periods covered by the unaudited, consolidated financial statements did not have a material impact in our consolidated financial position, results of operations, cash flows or internal controls.
In December 2023, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") to enhance tax-related disclosures. The ASU became effective for us beginning in the first quarter of 2025 and, beginning with our annual reporting, it will require more standardized categories for tax rate reconciliation and additional detail for significant tax items. It will also require a breakdown of income taxes paid by jurisdiction exceeding 5% of total taxes and removes certain disclosure requirements for unremitted foreign earnings and uncertain tax positions. The adoption of this ASU did not have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.
Accounting Standards Issued But Not Yet Effective
In November 2024, the FASB issued an ASU on expense disaggregation disclosures, which will require tabular disclosure in the notes to financial statements for specific expense categories. The standard becomes effective for us beginning with our 2027 annual report and for interim and annual periods thereafter. This ASU provides for additional expense disclosures. We are evaluating the impact of adoption, but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.
In July 2025, the FASB issued an ASU on measurement of credit losses for accounts receivable and contract assets, which introduces a practical expedient for estimating expected credit losses on eligible current assets. The practical expedient permits entities to assume credit loss conditions existing at the balance sheet date will continue. Adoption of the practical expedient is optional and, if adopted, would become effective for us beginning in the first quarter of 2026. We are evaluating the impact of adoption, but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.
In September 2025, the FASB issued an ASU on targeted improvements to the accounting for internal‑use software, which modernizes accounting guidance for costs incurred in developing internal-use software. This ASU removes references to development stages, and instead requires capitalization to begin based on a "probable-to-complete" threshold. This ASU becomes effective for us beginning with our 2028 annual report and for interim and annual periods thereafter. We are evaluating the impact of adoption, but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.
Other accounting pronouncements issued before, but not effective until after, September 30, 2025, are not expected to have a material impact on our consolidated financial position, results of operations, cash flows or internal controls.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. REVENUE RECOGNITION
Revenue Recognition
Substantially all of our revenues are from contracts associated with the pickup, transportation and delivery of packages and freight ("transportation services"). These services may be carried out by or arranged by us and generally occur over a short period of time. Additionally, we provide value-added logistics services to customers through our global network of distribution centers and field stocking locations.
The vast majority of our contracts with customers are for transportation services that include only one performance obligation: the transportation services themselves. We generally recognize revenue over time, based on the extent of progress towards completion of the services in the contract. All of our major businesses act as a principal in their revenue arrangements and as such, we report revenue and the associated purchased transportation costs on a gross basis within our statements of consolidated income.
Disaggregation of Revenue
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Next Day Air | $ | 2,381 | $ | 2,396 | $ | 7,035 | $ | 7,021 | |||||||||||||||
| Deferred | 1,020 | 1,109 | 3,093 | 3,372 | |||||||||||||||||||
| Ground | 10,525 | 10,945 | 31,718 | 32,410 | |||||||||||||||||||
| Cargo and Other | 294 | 147 | 917 | 261 | |||||||||||||||||||
| U.S. Domestic Package | 14,220 | 14,597 | 42,763 | 43,064 | |||||||||||||||||||
| Domestic | 847 | 771 | 2,448 | 2,299 | |||||||||||||||||||
| Export | 3,646 | 3,482 | 10,574 | 10,269 | |||||||||||||||||||
| Cargo and Other | 180 | 158 | 509 | 469 | |||||||||||||||||||
| International Package | 4,673 | 4,411 | 13,531 | 13,037 | |||||||||||||||||||
| Forwarding | 730 | 1,307 | 2,188 | 3,902 | |||||||||||||||||||
| Logistics | 1,363 | 1,550 | 4,411 | 4,638 | |||||||||||||||||||
| Other | 429 | 380 | 1,289 | 1,128 | |||||||||||||||||||
| Supply Chain Solutions | 2,522 | 3,237 | 7,888 | 9,668 | |||||||||||||||||||
| Consolidated revenue | $ | 21,415 | $ | 22,245 | $ | 64,182 | $ | 65,769 |
Accounts Receivable, Net
During the third quarter of 2025, we entered into an accounts receivable factoring program with a third party, in which we may sell certain customer receivables to the third party on a revolving periodic basis. Any such transactions are accounted for as sales and accordingly, receivables sold are removed from Accounts receivable, net in the consolidated balance sheets and the proceeds are reflected in Cash Flows from Operating Activities in the statements of consolidated cash flows. Our continuing involvement in these receivables is primarily limited to servicing and under limited circumstances, recourse.
Total accounts which may be outstanding under the program are $395 million. During the three and nine months ended September 30, 2025, we sold $248 million of accounts receivable for net cash proceeds of $246 million. In connection with this program, we recognized a liability, measured at fair value, related to our estimated recourse obligations recorded within Other current liabilities in the consolidated balance sheet. During the three and nine months ended September 30, 2025, we recorded an immaterial loss associated with the transactions within Other Income (Expense) in the statements of consolidated income. As of September 30, 2025, $147 million was available to be factored under this program.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
During the nine months ended September 30, 2025, there were no material changes to our accounting policy for accounts receivable or how we estimate expected credit losses, as described in note 2 to the audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024.
Our allowance for credit losses as of September 30, 2025 and December 31, 2024 was $176 and $136 million, respectively. Amounts for credit losses charged to expense, before recoveries, during the three months ended September 30, 2025 and 2024 were $95 and $75 million, respectively, and during the nine months ended September 30, 2025 and 2024 were $267 and $211 million, respectively.
Contract Assets and Liabilities
During the nine months ended September 30, 2025, there were no material changes to our accounting policy for contract assets and liabilities described in note 2 to the audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024.
Contract assets and liabilities as of September 30, 2025 and December 31, 2024 were as follows (in millions):
| Balance Sheet Location | September 30, 2025 | December 31, 2024 | ||||||||||||||||||
| Contract Assets: | ||||||||||||||||||||
| Revenue related to in-transit packages | Other current assets | $ | 281 | $ | 307 | |||||||||||||||
| Contract Liabilities: | ||||||||||||||||||||
| Short-term advance payments from customers | Other current liabilities | $ | 15 | $ | 13 | |||||||||||||||
| Long-term advance payments from customers | Other non-current liabilities | $ | 52 | $ | 27 |
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. STOCK-BASED COMPENSATION
Pre-tax compensation expense (benefit) for equity-classified stock compensation awards recognized in Compensation and benefits in our statements of consolidated income for the three months ended September 30, 2025 and 2024 was $25 and $(24) million, respectively, and for the nine months ended September 30, 2025 and 2024 was $41 and $(21) million, respectively.
As of September 30, 2025 and December 31, 2024, UPS Management Incentive Award Program ("MIP") awards were classified as a compensation obligation within Accrued wages and withholdings in our consolidated balance sheets. Substantially all MIP awards are settled in cash, subject to participant elections. Cash payments related to the 2024 MIP and 2023 MIP are reflected as activity in Accrued wages and withholdings in our statements of consolidated cash flows for the nine months ended September 30, 2025 and 2024, respectively.
During the nine months ended September 30, 2025, there were no material changes to our stock-based compensation plans described in note 13 to the audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024, except as described below.
Long-Term Incentive Performance Program ("LTIP")
On May 7, 2025, the Compensation and Human Capital Committee of the Board (the "Compensation Committee") approved the 2025 LTIP award performance targets and determined May 9, 2025 to be the award measurement date. Each target restricted performance unit ("RPU") awarded under the LTIP was valued at $94.07. The performance targets for the 2025 LTIP award are equally weighted between adjusted revenue growth and adjusted operating return on invested capital. The actual number of RPUs earned is subject to adjustment based on total shareholder return relative to the Standard & Poor's 500 Index. RPUs to be issued under the 2025 LTIP will vest at the end of a three-year performance period, assuming continued employment with the Company (except in the case of death, disability or retirement, in which case immediate vesting occurs on a prorated basis). We determined the grant date fair value of the RPUs using a Monte Carlo model and recognize compensation expense (less estimated forfeitures) ratably over the vesting period, based on the number of awards expected to be earned.
The weighted-average assumptions used and the weighted-average fair values of the LTIP awards granted in the nine months ended September 30, 2025 and 2024 are as follows:
| 2025 | 2024 | |||||||||||||
| Risk-free interest rate | 3.86 | % | 4.45 | % | ||||||||||
| Expected volatility | 28.39 | % | 27.00 | % | ||||||||||
| Weighted-average fair value of units granted | $ | 94.54 | $ | 157.37 | ||||||||||
| Share payout | 98.13 | % | 102.18 | % |
There is no expected dividend yield as units earn dividend equivalents.
Restricted Units
On May 7, 2025, the Compensation Committee approved 0.4 million of special restricted stock unit awards ("RSUs") for certain of the Company’s employees, excluding the Chief Executive Officer. We determined the May 9, 2025 grant date fair value using the closing New York Stock Exchange ("NYSE") price of $95.89. The RSUs will generally vest as follows: 25% on May 9, 2026; 25% on May 9, 2027; and 50% on May 9, 2028. The awards issued under these programs are considered to be equity classified. The weighted-average grant date fair value using the closing NYSE price for the RSUs granted in the nine months ended September 30, 2025 was $95.91.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Non-Qualified Stock Options
On May 9, 2025, we granted 0.3 million stock options at an exercise price of $95.89, the NYSE closing price on that date.
The fair value of each option granted is estimated using a Black-Scholes option pricing model. The weighted-average assumptions used and the weighted-average fair values of options granted in the nine months ended September 30, 2025 and 2024 are as follows:
| 2025 | 2024 | ||||||||||
| Expected dividend yield | 5.21 | % | 3.96 | % | |||||||
| Risk-free interest rate | 4.08 | % | 4.25 | % | |||||||
| Expected life (in years) | 6.11 | 6.13 | |||||||||
| Expected volatility | 30.35 | % | 28.94 | % | |||||||
| Weighted-average fair value of options granted | $ | 18.72 | $ | 34.76 |
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. MARKETABLE SECURITIES AND NON-CURRENT INVESTMENTS
Our marketable securities are recorded in Other current assets within our consolidated balance sheets. The following is a summary of marketable securities classified as trading and available for sale as of September 30, 2025 and December 31, 2024 (in millions):
| Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| September 30, 2025: | |||||||||||||||||||||||
| Current trading marketable securities: | |||||||||||||||||||||||
| Equity securities | $ | 3 | $ | — | $ | (1) | $ | 2 | |||||||||||||||
| Current available-for-sale securities: | |||||||||||||||||||||||
| U.S. government and agency debt securities | 66 | — | — | 66 | |||||||||||||||||||
| Corporate debt securities | — | — | — | — | |||||||||||||||||||
| Total available-for-sale marketable securities | 66 | — | — | 66 | |||||||||||||||||||
| Total current marketable securities | $ | 69 | $ | — | $ | (1) | $ | 68 | |||||||||||||||
| Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| December 31, 2024: | |||||||||||||||||||||||
| Current trading marketable securities: | |||||||||||||||||||||||
| Equity securities | $ | 3 | $ | — | $ | — | $ | 3 | |||||||||||||||
| Current available-for-sale securities: | |||||||||||||||||||||||
| U.S. government and agency debt securities | 165 | — | (1) | 164 | |||||||||||||||||||
| Corporate debt securities | 39 | — | — | 39 | |||||||||||||||||||
| Total available-for-sale marketable securities | 204 | — | (1) | 203 | |||||||||||||||||||
| Total current marketable securities | $ | 207 | $ | — | $ | (1) | $ | 206 | |||||||||||||||
Investment Impairments
We have concluded that no material impairment losses existed within marketable securities as of September 30, 2025. In making this determination, we considered the financial condition and prospects of each issuer, the magnitude of the losses compared with the cost, the probability that we will be unable to collect all amounts due according to the contractual terms of the security, the credit rating of the security and our ability and intent to hold these investments until the anticipated recovery in market value occurs.
Maturity Information
The amortized cost and estimated fair value of marketable securities as of September 30, 2025 by contractual maturity are shown below (in millions). Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations with or without prepayment penalties.
| Cost | Estimated Fair Value | ||||||||||
| Due in one year or less | $ | 66 | $ | 66 | |||||||
| Due after one year through three years | — | — | |||||||||
| Due after three years through five years | — | — | |||||||||
| Due after five years | — | — | |||||||||
| 66 | 66 | ||||||||||
| Equity securities | 3 | 2 | |||||||||
| $ | 69 | $ | 68 |
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Non-Current Investments
We hold non-current investments that are reported within Other Non-Current Assets in our consolidated balance sheets. Cash paid for these investments is included in Other investing activities in our statements of consolidated cash flows.
-
Equity method investments: Equity securities accounted for under the equity method had a carrying value of $249 and $304 million as of September 30, 2025 and December 31, 2024, respectively.
-
Other equity securities: Certain equity securities that do not have readily determinable fair values are reported in accordance with the measurement alternative in ASC Topic 321. Equity securities accounted for under this measurement alternative had a carrying value of $47 and $42 million as of September 30, 2025 and December 31, 2024, respectively.
Fair Value Measurements
Marketable securities valued utilizing Level 1 inputs include most U.S. government debt securities, as these securities have quoted prices in active markets. Marketable securities valued utilizing Level 2 inputs include equity securities and corporate bonds. These securities are valued using market corroborated pricing, matrix pricing or other models that utilize observable inputs such as yield curves.
The following table presents information about our investments measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value (in millions):
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
| September 30, 2025: | |||||||||||||||||||||||
| Marketable Securities: | |||||||||||||||||||||||
| U.S. government and agency debt securities | $ | 66 | $ | — | $ | — | $ | 66 | |||||||||||||||
| Corporate debt securities | — | — | — | — | |||||||||||||||||||
| Equity securities | — | 2 | — | 2 | |||||||||||||||||||
| Total marketable securities | 66 | 2 | — | 68 | |||||||||||||||||||
| Other non-current investments(1) | — | 20 | — | 20 | |||||||||||||||||||
| Total | $ | 66 | $ | 22 | $ | — | $ | 88 |
(1) Represents a variable life insurance policy funding benefits for the UPS Excess Coordinating Benefit Plan.
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
| December 31, 2024: | |||||||||||||||||||||||
| Marketable Securities: | |||||||||||||||||||||||
| U.S. government and agency debt securities | $ | 164 | $ | — | $ | — | $ | 164 | |||||||||||||||
| Corporate debt securities | 25 | 14 | — | 39 | |||||||||||||||||||
| Equity securities | — | 3 | — | 3 | |||||||||||||||||||
| Total marketable securities | 189 | 17 | — | 206 | |||||||||||||||||||
| Other non-current investments(1) | — | 19 | — | 19 | |||||||||||||||||||
| Total | $ | 189 | $ | 36 | $ | — | $ | 225 |
(1) Represents a variable life insurance policy funding benefits for the UPS Excess Coordinating Benefit Plan.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of September 30, 2025 and December 31, 2024 consisted of the following (in millions):
| 2025 | 2024 | ||||||||||
| Vehicles | $ | 11,855 | $ | 11,912 | |||||||
| Aircraft | 24,017 | 23,768 | |||||||||
| Land | 2,054 | 2,104 | |||||||||
| Buildings | 6,865 | 6,714 | |||||||||
| Building and leasehold improvements | 5,749 | 5,601 | |||||||||
| Plant equipment | 19,219 | 18,495 | |||||||||
| Technology equipment | 2,908 | 2,735 | |||||||||
| Construction-in-progress | 2,451 | 1,967 | |||||||||
| 75,118 | 73,296 | ||||||||||
| Less: Accumulated depreciation and amortization | (37,375) | (36,117) | |||||||||
| Property, Plant and Equipment, Net | $ | 37,743 | $ | 37,179 |
Property, plant and equipment purchased on account was $378 and $227 million as of September 30, 2025 and December 31, 2024, respectively.
During the nine months ended September 30, 2025, we entered into a build-to-suit financing obligation and recognized $64 million in non-cash additions to construction-in-progress, with a corresponding increase within Other Non-Current Liabilities of the unaudited consolidated balance sheet.
As part of our Network Reconfiguration and Efficiency Reimagined initiatives, we incurred $45 million in accelerated depreciation and asset retirement obligations related to closed facilities and abandoned equipment, and recorded $54 million in gains on sale of properties during the nine months ended September 30, 2025. We have also determined that $47 million of certain long-lived assets meet the criteria to be classified as held for sale and have presented the carrying value of these assets within Other current assets of the unaudited, consolidated balance sheet as of September 30, 2025.
We continue to review expected changes in volume in our integrated air and ground network to identify additional buildings for closure, and it is reasonably possible that our plans will also result in further revisions to our estimates of the useful lives and salvage values of certain of our long-lived assets. Any further revisions to these plans could further accelerate depreciation expense and lead to the recognition of additional charges related to early retirements in future periods. For additional information, see note 17 to the unaudited, consolidated financial statements.
There were no material impairment charges for the nine months ended September 30, 2025 or 2024. We will continue to monitor our long-lived asset groups for impairment.
In the nine months ended September 30, 2025, we entered into sale-leaseback transactions, involving a data center and real estate properties. We concluded that each qualified as a sale; accordingly, we derecognized the carrying amounts of the properties and recognized the related operating lease right-of-use assets and lease liabilities at lease commencement. During the three months ended September 30, 2025, we received cash proceeds of approximately $415 million and recognized gains of $330 million. During the nine months ended September 30, 2025, we received cash proceeds of approximately $465 million and recognized gains of $362 million. These gains were recognized within Other (gains) losses in the unaudited, statement of consolidated cash flows and within Other expenses in the unaudited, statement of consolidated income during the nine months ended September 30, 2025.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. EMPLOYEE BENEFIT PLANS
Company-Sponsored Benefit Plans
Information about the net periodic benefit cost for our company-sponsored pension and postretirement benefit plans for the three and nine months ended September 30, 2025 and 2024 is as follows (in millions):
| U.S. Pension Benefits | U.S. Postretirement Medical Benefits | International Pension Benefits | |||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||
| Three Months Ended September 30: | |||||||||||||||||||||||||||||||||||
| Service cost | $ | 281 | $ | 309 | $ | 5 | $ | 5 | $ | 10 | $ | 10 | |||||||||||||||||||||||
| Interest cost | 679 | 644 | 28 | 27 | 17 | 16 | |||||||||||||||||||||||||||||
| Expected return on assets | (787) | (770) | (2) | (1) | (21) | (22) | |||||||||||||||||||||||||||||
| Amortization of prior service cost | 39 | 37 | — | — | — | 1 | |||||||||||||||||||||||||||||
| Net periodic benefit cost | $ | 212 | $ | 220 | $ | 31 | $ | 31 | $ | 6 | $ | 5 | |||||||||||||||||||||||
| U.S. Pension Benefits | U.S. Postretirement Medical Benefits | International Pension Benefits | |||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||
| Nine Months Ended September 30: | |||||||||||||||||||||||||||||||||||
| Service cost | $ | 844 | $ | 929 | $ | 13 | $ | 15 | $ | 28 | $ | 32 | |||||||||||||||||||||||
| Interest cost | 2,038 | 1,932 | 82 | 81 | 49 | 50 | |||||||||||||||||||||||||||||
| Expected return on assets | (2,342) | (2,313) | (5) | (3) | (62) | (64) | |||||||||||||||||||||||||||||
| Amortization of prior service cost | 117 | 114 | — | — | 1 | 1 | |||||||||||||||||||||||||||||
| Net periodic benefit cost | $ | 657 | $ | 662 | $ | 90 | $ | 93 | $ | 16 | $ | 19 |
Service cost and the remaining components of net periodic benefit cost are presented within Compensation and benefits and Investment income and other, respectively, in our statements of consolidated income.
In connection with our Network Reconfiguration and Efficiency Reimagined initiatives, we continue to review expected changes in volume in our integrated air and ground network to identify additional buildings for closure, which we expect would result in further reductions in our operational workforce. In addition, in the third quarter of 2025, we offered a voluntary separation program to all full-time drivers in the United States and expect to continue to incur costs associated with contractual termination benefits. For additional information, see note 17 to the unaudited, consolidated financial statements.
During the nine months ended September 30, 2025, we contributed $1.2 billion and $172 million to our company-sponsored pension and U.S. postretirement medical benefit plans, respectively. We expect to contribute approximately $9 million over the remainder of the year to both our company-sponsored pension and U.S. postretirement medical benefit plans, respectively.
Multiemployer Benefit Plans
We contribute to a number of multiemployer defined benefit and health and welfare plans under the terms of collective bargaining agreements that cover our union-represented employees. Our current collective bargaining agreements set forth the contribution rates to the plans that we participate in, and we are in compliance with these contribution rates.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2025 and December 31, 2024, we had $797 and $804 million, respectively, recorded in Other Non-Current Liabilities in our consolidated balance sheets and $9 million as of both September 30, 2025 and December 31, 2024 recorded in Other current liabilities in our consolidated balance sheets associated with our previous withdrawal from the New England Teamsters and Trucking Industry Pension Fund. This liability is payable in equal monthly installments over a remaining term of approximately 37 years. Based on the borrowing rates currently available to us for long-term financing of a similar maturity, the fair value of this withdrawal liability as of September 30, 2025 and December 31, 2024 was $671 and $651 million, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of this liability.
As of December 31, 2024, we had $19 million recorded in Other current liabilities in our consolidated balance sheets associated with our 2024 withdrawal from the District 9 International Association of Machinists and Aerospace Workers Pension Trust. The withdrawal liability was settled on April 1, 2025.
UPS was a contributing employer to the Central States Pension Fund ("CSPF") until 2007, at which time UPS withdrew from the CSPF. Under a collective bargaining agreement with the International Brotherhood of Teamsters ("Teamsters"), UPS agreed to provide coordinating benefits in the UPS/IBT Full Time Employee Pension Plan ("UPS/IBT Plan") for UPS participants whose last employer was UPS and who had not retired as of January 1, 2008 ("the UPS Transfer Group") in the event that benefits are reduced by the CSPF consistent with the terms of our withdrawal agreement with the CSPF. Under this agreement, benefits to the UPS Transfer Group cannot be reduced without our consent and can only be reduced in accordance with law.
In the event CSPF were to become insolvent, CSPF benefits would be reduced to the legally permitted Pension Benefit Guaranty Corporation limits, triggering the coordinating benefits provision in the collective bargaining agreement.
We account for the potential obligation to pay coordinating benefits under ASC Topic 715, which requires us to provide a best estimate of various actuarial assumptions in measuring our pension benefit obligation at the December 31 measurement date. As of December 31, 2024, our best estimate of coordinating benefits that may be required to be paid by the UPS/IBT Plan was immaterial.
The value of our estimate for future coordinating benefits will continue to be influenced by a number of factors, including interpretations of law, future legislative actions, actuarial assumptions and the ability of the CSPF to sustain its long-term commitments. Actual events may result in a change in our best estimate of the projected benefit obligation. We will continue to assess the impact of these uncertainties in accordance with ASC Topic 715.
Collective Bargaining Agreements
We have approximately 300,000 employees in the U.S. employed under a national master agreement and various supplemental agreements with local unions affiliated with the Teamsters which runs through July 31, 2028.
We have approximately 11,000 employees in Canada employed under a collective bargaining agreement with the Teamsters ("Teamsters Canada"). On August 29, 2025, UPS employees represented by Teamsters Canada ratified a new collective bargaining agreement. Terms of the agreement became effective August 1, 2025 and run through July 31, 2030. The economic provisions in the agreement included wage, healthcare and pension enhancements.
We have approximately 3,300 pilots who are employed under a collective bargaining agreement with the Independent Pilots Association ("IPA"). This collective bargaining agreement became amendable September 1, 2025. We are currently in negotiations with the IPA.
We have approximately 1,900 airline mechanics who are covered by a collective bargaining agreement with Teamsters Local 2727 which becomes amendable November 1, 2026. In addition, approximately 3,000 of our auto and maintenance mechanics who are not employed under agreements with the Teamsters are employed under a collective bargaining agreement with the International Association of Machinists and Aerospace Workers. This collective bargaining agreement becomes amendable July 31, 2029.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. GOODWILL AND INTANGIBLE ASSETS
The following table indicates the allocation of goodwill as of September 30, 2025 and December 31, 2024 (in millions):
| U.S. Domestic Package | International Package | Supply Chain Solutions | Consolidated | ||||||||||||||||||||
| December 31, 2024: | $ | 847 | $ | 487 | $ | 2,966 | $ | 4,300 | |||||||||||||||
| Acquired | — | — | 345 | 345 | |||||||||||||||||||
| Currency / Other | — | 27 | 138 | 165 | |||||||||||||||||||
| September 30, 2025: | $ | 847 | $ | 514 | $ | 3,449 | $ | 4,810 |
During the nine months ended September 30, 2025:
-
We recorded an increase in goodwill of $345 million as a part of the purchase accounting allocation for our January 2025 acquisition of Frigo-Trans and Biotech & Pharma Logistics ("Frigo-Trans").
-
The remaining changes were due to the impact of changes in the value of the U.S. Dollar on the translation of non-U.S. Dollar goodwill balances.
Frigo-Trans is reported in Supply Chain Solutions as part of our Healthcare Logistics and Distribution ("HLD") reporting unit.
We conducted our most recent annual goodwill impairment testing as of July 1, 2025 using both qualitative and quantitative methods. Our quantitative tests utilize a combination of the income and market approaches. We concluded that the fair values of our reporting units were in excess of their respective carrying values.
Approximately $877 and $726 million of our $4.8 billion consolidated goodwill balance is represented by our Global Freight Forwarding ("GFF") and HLD reporting units, respectively, which, based on our annual impairment evaluation, are exhibiting a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods. Both GFF and HLD are showing limited excess of fair value over their carrying values, primarily driven by current market conditions, volatility in global markets, early stages of our healthcare growth strategy and ongoing integration of recent acquisitions. Both GFF and HLD reporting units are included in Supply Chain Solutions.
Additionally, beginning in the first quarter of 2025, our Mail Innovations reporting unit experienced cost increases in excess of our expectations due to increases in purchased transportation rates, resulting from the expiration of a contract with our primary vendor. These cost increases began to dissipate in the second quarter of 2025 as we started utilizing alternative vendors. In the second quarter of 2025, we also took action to address the revenue quality in this business, and began to experience improvements therein. 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 included in Supply Chain Solutions.
For each of our reporting units, we continue to monitor the impact of macroeconomic conditions and business performance on our estimates of fair value. Subsequent to our annual testing date and as of September 30, 2025, none of our reporting units had indications that an impairment was more likely than not. Actual reporting unit performance, revisions to our forecasts of future performance, market factors, changes in global trade policy, changes in estimates or assumptions in future impairment testing, or a combination thereof could result in a non-cash impairment charge in one or more of our reporting units during a future period.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of intangible assets as of September 30, 2025 and December 31, 2024 (in millions):
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | |||||||||||||||
| September 30, 2025: | |||||||||||||||||
| Capitalized software | $ | 6,673 | $ | (4,499) | $ | 2,174 | |||||||||||
| Licenses | 87 | (34) | 53 | ||||||||||||||
| Franchise rights | 371 | (53) | 318 | ||||||||||||||
| Customer relationships | 871 | (269) | 602 | ||||||||||||||
| Trade name | 110 | (34) | 76 | ||||||||||||||
| Trademarks, patents and other | 372 | (145) | 227 | ||||||||||||||
| Amortizable intangible assets | $ | 8,484 | $ | (5,034) | $ | 3,450 | |||||||||||
| Indefinite-lived intangible assets | 5 | — | 5 | ||||||||||||||
| Total Intangible Assets | $ | 8,489 | $ | (5,034) | $ | 3,455 | |||||||||||
| December 31, 2024: | |||||||||||||||||
| Capitalized software | $ | 6,088 | $ | (4,159) | $ | 1,929 | |||||||||||
| Licenses | 30 | (12) | 18 | ||||||||||||||
| Franchise rights | 348 | (55) | 293 | ||||||||||||||
| Customer relationships | 677 | (206) | 471 | ||||||||||||||
| Trade name | 109 | (26) | 83 | ||||||||||||||
| Trademarks, patents and other | 369 | (103) | 266 | ||||||||||||||
| Amortizable intangible assets | $ | 7,621 | $ | (4,561) | $ | 3,060 | |||||||||||
| Indefinite-lived intangible assets | 4 | — | 4 | ||||||||||||||
| Total Intangible Assets | $ | 7,625 | $ | (4,561) | $ | 3,064 |
Impairment tests for finite-lived intangible assets are performed when a triggering event occurs that may indicate that the carrying value of the intangible asset may not be recoverable. For the three months ended September 30, 2025, there were no impairment charges for finite-lived intangible assets. For the nine months ended September 30, 2025, we recorded impairment charges of $33 million within Other Expenses in our statement of consolidated income. These charges primarily consisted of software impairment charges related to a business within UPS Digital.
For the three months ended September 30, 2024, there were no material impairment charges for finite-lived intangible assets. For the nine months ended September 30, 2024, we recorded impairment charges of $48 million within Other Expenses in our statement of consolidated income. These charges represented trade name and capitalized software license impairments.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. DEBT AND FINANCING ARRANGEMENTS
The carrying value of our outstanding debt obligations as of September 30, 2025 and December 31, 2024 consisted of the following (in millions):
| Principal Amount | Carrying Value | ||||||||||||||||||||||||||||||||||||||||||||||
| Maturity | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||||
| Fixed-rate senior notes: | |||||||||||||||||||||||||||||||||||||||||||||||
| 3.900% senior notes | $ | — | 2025 | $ | — | $ | 1,000 | ||||||||||||||||||||||||||||||||||||||||
| 2.400% senior notes | 500 | 2026 | 500 | 499 | |||||||||||||||||||||||||||||||||||||||||||
| 3.050% senior notes | 1,000 | 2027 | 998 | 997 | |||||||||||||||||||||||||||||||||||||||||||
| 3.400% senior notes | 750 | 2029 | 748 | 748 | |||||||||||||||||||||||||||||||||||||||||||
| 2.500% senior notes | 400 | 2029 | 398 | 398 | |||||||||||||||||||||||||||||||||||||||||||
| 4.450% senior notes | 750 | 2030 | 747 | 746 | |||||||||||||||||||||||||||||||||||||||||||
| 4.650% senior notes | 500 | 2030 | 498 | — | |||||||||||||||||||||||||||||||||||||||||||
| 4.875% senior notes | 900 | 2033 | 895 | 895 | |||||||||||||||||||||||||||||||||||||||||||
| 5.150% senior notes | 900 | 2034 | 894 | 894 | |||||||||||||||||||||||||||||||||||||||||||
| 5.250% senior notes | 1,250 | 2035 | 1,240 | — | |||||||||||||||||||||||||||||||||||||||||||
| 6.200% senior notes | 1,500 | 2038 | 1,486 | 1,486 | |||||||||||||||||||||||||||||||||||||||||||
| 5.200% senior notes | 500 | 2040 | 495 | 495 | |||||||||||||||||||||||||||||||||||||||||||
| 4.875% senior notes | 500 | 2040 | 492 | 492 | |||||||||||||||||||||||||||||||||||||||||||
| 3.625% senior notes | 375 | 2042 | 369 | 369 | |||||||||||||||||||||||||||||||||||||||||||
| 3.400% senior notes | 500 | 2046 | 493 | 492 | |||||||||||||||||||||||||||||||||||||||||||
| 3.750% senior notes | 1,150 | 2047 | 1,138 | 1,138 | |||||||||||||||||||||||||||||||||||||||||||
| 4.250% senior notes | 750 | 2049 | 744 | 743 | |||||||||||||||||||||||||||||||||||||||||||
| 3.400% senior notes | 700 | 2049 | 689 | 689 | |||||||||||||||||||||||||||||||||||||||||||
| 5.300% senior notes | 1,250 | 2050 | 1,232 | 1,232 | |||||||||||||||||||||||||||||||||||||||||||
| 5.050% senior notes | 1,100 | 2053 | 1,083 | 1,083 | |||||||||||||||||||||||||||||||||||||||||||
| 5.500% senior notes | 1,100 | 2054 | 1,087 | 1,087 | |||||||||||||||||||||||||||||||||||||||||||
| 5.950% senior notes | 1,250 | 2055 | 1,232 | — | |||||||||||||||||||||||||||||||||||||||||||
| 5.600% senior notes | 600 | 2064 | 590 | 590 | |||||||||||||||||||||||||||||||||||||||||||
| 6.050% senior notes | 1,000 | 2065 | 985 | — | |||||||||||||||||||||||||||||||||||||||||||
| Floating-rate senior notes: | |||||||||||||||||||||||||||||||||||||||||||||||
| Floating-rate senior notes | 1,888 | 2049-2075 | 1,867 | 1,755 | |||||||||||||||||||||||||||||||||||||||||||
| Debentures: | |||||||||||||||||||||||||||||||||||||||||||||||
| 7.620% debentures | 276 | 2030 | 279 | 279 | |||||||||||||||||||||||||||||||||||||||||||
| Pound Sterling notes: | |||||||||||||||||||||||||||||||||||||||||||||||
| 5.500% notes | 89 | 2031 | 89 | 83 | |||||||||||||||||||||||||||||||||||||||||||
| 5.125% notes | 611 | 2050 | 581 | 544 | |||||||||||||||||||||||||||||||||||||||||||
| Euro senior notes: | |||||||||||||||||||||||||||||||||||||||||||||||
| 1.625% senior notes | 822 | 2025 | 822 | 731 | |||||||||||||||||||||||||||||||||||||||||||
| 1.000% senior notes | 587 | 2028 | 586 | 521 | |||||||||||||||||||||||||||||||||||||||||||
| 1.500% senior notes | 587 | 2032 | 585 | 521 | |||||||||||||||||||||||||||||||||||||||||||
| Finance lease obligations (see note 10) | 618 | 2025-2118 | 618 | 455 | |||||||||||||||||||||||||||||||||||||||||||
| Facility notes and bonds | 320 | 2029-2045 | 320 | 320 | |||||||||||||||||||||||||||||||||||||||||||
| Other debt | 2 | 2025-2026 | 2 | 2 | |||||||||||||||||||||||||||||||||||||||||||
| Total debt | $ | 25,025 | $ | 24,782 | $ | 21,284 | |||||||||||||||||||||||||||||||||||||||||
| Less: current maturities | (932) | (1,838) | |||||||||||||||||||||||||||||||||||||||||||||
| Long-term debt | $ | 23,850 | $ | 19,446 |
Commercial Paper
We are authorized to borrow up to $10.0 billion under a U.S. commercial paper program and €5.0 billion (in a variety of currencies) under a European commercial paper program. There was no commercial paper outstanding as of September 30, 2025 or December 31, 2024. The amount of commercial paper outstanding under these programs in the remainder of 2025 is expected to fluctuate.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Debt Classification
We have classified certain floating-rate senior notes that are redeemable at the option of the note holder as long-term debt in our consolidated balance sheets, due to our intent and ability to refinance the debt if the put option is exercised.
Debt Repayments
On April 1, 2025, our 3.900% Senior Notes with a principal balance of $1.0 billion matured and were repaid in full.
Debt Issuances
In the second quarter of 2025, we issued four series of notes in the principal amounts of $500 million, $1.3 billion, $1.3 billion and $1.0 billion. These notes bear interest at 4.650%, 5.250%, 5.950% and 6.050%, respectively, and mature on October 15, 2030, May 14, 2035, May 14, 2055 and May 14, 2065, respectively. Interest on the notes is payable semi-annually, beginning October 15, 2025 with respect to the 4.650% notes due October 15, 2030 and November 14, 2025 with respect to each other series of notes. Each series of notes is callable at our option at a redemption price equal to the greater of 100% of the principal amount, or the sum of the present values of scheduled payments of principal and interest, plus accrued and unpaid interest.
Also in the second quarter of 2025, we issued floating rate senior notes with a principal balance of $171 million. These notes bear interest at a rate equal to the compounded Secured Overnight Financing Rate ("SOFR") less 0.350% per year and mature on June 1, 2075. Interest on the notes is payable quarterly, beginning September 1, 2025. These notes are callable at various times after 30 years at a stated percentage of par value and are redeemable at the option of the note holders at various times after one year at a stated percentage of par value.
Other Arrangements
During the nine months ended September 30, 2025, we entered into new aircraft leases. The structure of this arrangement required a parent company guarantee of approximately $1.3 billion. For additional information, see note 10 to the unaudited, consolidated financial statements.
During the nine months ended September 30, 2025, we entered into a real estate transaction for the development of a facility and recognized a financing obligation included in Other Non-Current Liabilities in our unaudited, consolidated balance sheet of $89 million. The financing obligation will increase as construction progresses.
Sources of Credit
We maintain two credit agreements with a consortium of banks. The first of these agreements provides revolving credit facilities of $1.0 billion, and expires on November 24, 2025. Amounts outstanding under this agreement bear interest at a periodic fixed rate equal to the term SOFR rate, plus 0.10% per annum and an applicable margin based on our then-current credit rating. The applicable margin from the credit pricing grid as of September 30, 2025 was 0.70%. Alternatively, a fluctuating rate of interest equal to the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in the United States; (2) the Federal Funds effective rate plus 0.50%; or (3) the Adjusted Term SOFR Rate for a one-month interest period plus 1.00%, may be used at our discretion. We expect to amend this agreement to extend its expiration date prior to its expiration, although no assurances of our ability to do so can be provided.
The second agreement provides revolving credit facilities of $2.0 billion, and expires on November 25, 2029. Amounts outstanding under this facility bear interest at a periodic fixed rate equal to the term SOFR rate plus 0.10% per annum and an applicable margin based on our then-current credit rating. The applicable margin from the credit pricing grid as of September 30, 2025 was 0.70%. Alternatively, a fluctuating rate of interest equal to the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in the United States; (2) the Federal Funds effective rate plus 0.50%; or (3) the Adjusted Term SOFR Rate for a one-month interest period plus 1.00%, plus an applicable margin, may be used at our discretion.
If the credit ratings established by Standard & Poor's and Moody's differ, the higher rating will be used, except in cases where the lower rating is two or more levels lower. In these circumstances, the rating one step below the higher rating will be used. We are also able to request advances under these facilities based on competitive bids for the applicable interest rate.
There were no amounts outstanding under these facilities as of September 30, 2025.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Debt Covenants
Our existing debt instruments and credit facilities subject us to certain financial covenants. These covenants limit the amount of secured indebtedness that we may incur, and limit the amount of attributable debt in sale-leaseback transactions. As of September 30, 2025, and for all prior periods presented, we have satisfied these financial covenants.
Fair Value of Debt
Based on the borrowing rates currently available to us for long-term debt with similar terms and maturities, the fair value of long-term debt, including current maturities and excluding leases, was approximately $23.7 and $19.8 billion as of September 30, 2025 and December 31, 2024, respectively. As of December 31, 2024, the fair value of long-term and short-term debt, inclusive of finance leases, was $20.3 billion. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of all of our debt instruments.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. LEASES
We have finance and operating leases for real estate (primarily package centers, airport facilities and warehouses), aircraft and engines, information technology equipment, vehicles and various other equipment used in operating our business. Certain leases for real estate and aircraft contain options to purchase, extend or terminate the lease.
We recognize a right-of-use asset and lease obligation for all leases greater than twelve months, inclusive of renewal or purchase options that are reasonably certain to be exercised. In 2025, we defined a new lease asset class, data centers, and elected to account for the lease and non-lease components separately. For all other lease arrangements, we account for lease and non-lease components as a single lease component.
Aircraft
In addition to the aircraft that we own, we charter aircraft to handle package and cargo volume on certain international trade lanes and domestic routes. Due to the nature of these agreements, primarily being that either party can cancel the agreement with short notice, we have classified these as short-term leases. A majority of our long-term aircraft operating leases are operated by a third party to handle package and cargo volume in geographic regions where, due to government regulations, we are restricted from operating an airline.
We also have long-term finance leases for aircraft that we operate. In the nine months ended September 30, 2025, we entered into new aircraft leases. The leases that have commenced were accounted for as finance leases and represent $312 million of noncash investing and financing activities during the nine months ended September 30, 2025. Subsequent to September 30, 2025, we entered into six additional aircraft leases which we expect will be treated as finance leases.
Transportation equipment and other equipment
We enter into both long-term and short-term leases for transportation equipment to supplement our capacity or meet contractual demands. Some of these assets are leased on a month-to-month basis and the leases can be terminated without penalty. We also enter into equipment leases to increase capacity during periods of high demand. These leases are treated as short-term as the cumulative right of use is less than 12 months over the term of the contract.
Some of our transportation and technology equipment leases require us to make additional lease payments based on the underlying usage of the assets. Due to the variable nature of these costs, these are expensed as incurred and are not included in the right-of-use lease asset and associated lease obligation.
Sale-leaseback transactions
In the nine months ended September 30, 2025, we entered into sale-leaseback transactions involving a data center and real estate properties.
The real estate transactions were entered into under triple-net operating lease agreements with initial terms ranging from 15 to 20 years, which may be renewed. The leases include increases to base rent at rates ranging from 2.5% to 3.0% over the remaining terms of the leases.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The components of lease expense for the three and nine months ended September 30, 2025 and 2024 were as follows (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Operating lease costs | $ | 246 | $ | 220 | $ | 709 | $ | 682 | |||||||||||||||
| Finance lease costs: | |||||||||||||||||||||||
| Amortization of assets | 42 | 38 | 104 | 104 | |||||||||||||||||||
| Interest on lease obligations | 6 | 6 | 18 | 16 | |||||||||||||||||||
| Total finance lease costs | 48 | 44 | 122 | 120 | |||||||||||||||||||
| Variable lease costs | 97 | 81 | 287 | 235 | |||||||||||||||||||
| Short-term lease costs | 220 | 221 | 639 | 612 | |||||||||||||||||||
| Total lease costs(1) | $ | 611 | $ | 566 | $ | 1,757 | $ | 1,649 |
(1) This table excludes sublease income as it was not material for the three and nine months ended September 30, 2025 and 2024.
In addition to the lease costs in the table above, we monitor all lease categories for any indicators that the carrying value of the assets may not be recoverable. We recognized certain immaterial impairments, primarily within our Supply Chain Solutions businesses, during the three and nine months ended September 30, 2025 and September 30, 2024.
Supplemental information related to leases and location within our consolidated balance sheets is as follows (in millions):
| September 30, 2025 | December 31, 2024 | ||||||||||
| Operating Leases: | |||||||||||
| Operating lease right-of-use assets | $ | 4,217 | $ | 4,149 | |||||||
| Current maturities of operating leases | $ | 742 | $ | 733 | |||||||
| Non-current operating leases | 3,687 | 3,635 | |||||||||
| Total operating lease obligations | $ | 4,429 | $ | 4,368 | |||||||
| Finance Leases: | |||||||||||
| Property, plant and equipment, net | $ | 973 | $ | 657 | |||||||
| Current maturities of long-term debt, commercial paper and finance leases | $ | 108 | $ | 104 | |||||||
| Long-term debt and finance leases | 510 | 351 | |||||||||
| Total finance lease obligations | $ | 618 | $ | 455 | |||||||
Supplemental cash flow information related to leases is as follows (in millions):
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash paid for amounts included in measurement of obligations: | |||||||||||
| Operating cash flows from operating leases | $ | 716 | $ | 657 | |||||||
| Operating cash flows from finance leases | 12 | 13 | |||||||||
| Financing cash flows from finance leases | 93 | 93 | |||||||||
| Right-of-use assets obtained in exchange for lease obligations: | |||||||||||
| Operating leases | $ | 561 | $ | 403 | |||||||
| Finance leases | 472 | 58 |
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Maturities of lease obligations as of September 30, 2025 were as follows (in millions):
| Finance Leases | Operating Leases | ||||||||||
| 2025 | $ | 38 | $ | 201 | |||||||
| 2026 | 119 | 893 | |||||||||
| 2027 | 79 | 775 | |||||||||
| 2028 | 72 | 602 | |||||||||
| 2029 | 62 | 467 | |||||||||
| Thereafter | 448 | 2,449 | |||||||||
| Total lease payments | 818 | 5,387 | |||||||||
| Less: Imputed interest | (200) | (958) | |||||||||
| Total lease obligations | 618 | 4,429 | |||||||||
| Less: Current obligations | (108) | (742) | |||||||||
| Long-term lease obligations | $ | 510 | $ | 3,687 |
As of September 30, 2025, we had $2.2 billion of additional leases which had not commenced and are expected to commence later in 2025 through 2027. These leases are primarily related to aircraft and will commence when the related aircraft is delivered. Other leases will commence when we are granted access to the property, such as when leasehold improvements are completed or a certificate of occupancy is obtained.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. LEGAL PROCEEDINGS AND CONTINGENCIES
We are involved in a number of judicial proceedings and other matters arising from the conduct of our business.
Although there can be no assurances as to the ultimate outcome, we have generally denied, or believe we have meritorious defenses and will deny, liability in pending matters, including (except as may be otherwise noted herein) the matters described below, and we intend to vigorously defend each matter. We accrue amounts associated with judicial proceedings and other contingencies when and to the extent a loss becomes probable and can be reasonably estimated. The actual costs of resolving legal proceedings may be substantially higher or lower than the amounts accrued on those claims.
For matters as to which we are not able to estimate a possible loss or range of losses, we are not able to determine whether any such loss will have a material impact on our operations or financial condition. For these matters, we have described the reasons that we are unable to estimate a possible loss or range of losses.
Judicial Proceedings
We are a defendant in a number of lawsuits filed in state and federal courts containing various class action allegations under state wage-and-hour laws. We do not believe that any loss associated with any such matter will have a material impact on our financial condition, results of operations or liquidity.
In July 2023, Baker v. United Parcel Service, Inc. (DE) and United Parcel Service, Inc. (OH) was certified as a class action in federal court in the Eastern District of Washington. The plaintiff in this matter alleges that UPS violated the Uniformed Services Employment and Reemployment Rights Act. We are vigorously defending ourselves in this matter and believe that we have a number of meritorious defenses, and there are unresolved questions of law and fact that could be important to the ultimate resolution of this matter. Accordingly, we are not able to estimate a possible loss or range of loss that may result from this matter or to determine whether such loss, if any, would have a material adverse effect on our financial condition, results of operations or liquidity.
Other Matters
In August 2016, Spain’s National Markets and Competition Commission ("CNMC") announced an investigation into 10 companies in the commercial delivery and parcel industry, including UPS, related to alleged nonaggression agreements to allocate customers. In May 2017, we received a Statement of Objections issued by the CNMC. In July 2017, we received a Proposed Decision from the CNMC. In March 2018, the CNMC adopted a final decision, finding an infringement and imposing an immaterial fine on UPS. We appealed the decision. In December 2022, a trial court ruled against us. We have filed an appeal before the Spanish Supreme Court. We are vigorously defending ourselves and believe that we have a number of meritorious defenses. There are also unresolved questions of law that could be important to the ultimate resolution of this matter. We do not believe that any loss from this matter would have a material impact on our financial condition, results of operations or liquidity.
We are a party to various other matters that arose in the normal course of business. These include disputes with government authorities in various jurisdictions over the imposition of duties, fines, taxes and assessments from time to time. We are vigorously defending ourselves and believe that we have a number of meritorious defenses in these disputes. There are also unresolved questions of law that could be important to the ultimate resolution of these disputes. Accordingly, we are not able to estimate a possible loss or range of losses that may result from these disputes or to determine whether such losses, if any, would have a material impact on our financial condition, results of operations or liquidity.
We do not believe that the eventual resolution of any other matters (either individually or in the aggregate), including any reasonably possible losses in excess of current accruals, will have a material impact on our operations or financial condition.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. SHAREOWNERS' EQUITY
Capital Stock, Additional Paid-In Capital, Retained Earnings and Noncontrolling Interests
We are authorized to issue two classes of common stock, which are distinguished from each other primarily by their respective voting rights. Class A shares of UPS are entitled to 10 votes per share, whereas class B shares are entitled to one vote per share. Class A shares are primarily held by UPS employees and retirees, as well as trusts and descendants of the Company's founders, and these shares are fully convertible into class B shares at any time. Class B shares are publicly traded on the NYSE under the symbol "UPS". Class A and B shares both have a $0.01 par value and, as of September 30, 2025, there were 4.6 billion class A shares and 5.6 billion class B shares authorized to be issued. Additionally, there are 200 million preferred shares authorized to be issued, with a par value of $0.01 per share. As of September 30, 2025, no preferred shares had been issued.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following is a rollforward of our common stock, additional paid-in capital, retained earnings and non-controlling interests accounts for the three and nine months ended September 30, 2025 and 2024 (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Class A Common Stock: | |||||||||||||||||||||||
| Balance at beginning of period | $ | 2 | $ | 2 | $ | 2 | $ | 2 | |||||||||||||||
| Stock award plans | — | — | — | — | |||||||||||||||||||
| Common stock issuances | — | — | — | — | |||||||||||||||||||
| Conversions of class A to class B common stock | — | — | — | — | |||||||||||||||||||
| Class A shares issued at end of period | $ | 2 | $ | 2 | $ | 2 | $ | 2 | |||||||||||||||
| Class B Common Stock: | |||||||||||||||||||||||
| Balance at beginning of period | $ | 7 | $ | 7 | $ | 7 | $ | 7 | |||||||||||||||
| Common stock purchases | — | — | — | — | |||||||||||||||||||
| Conversions of class A to class B common stock | — | — | — | — | |||||||||||||||||||
| Class B shares issued at end of period | $ | 7 | $ | 7 | $ | 7 | $ | 7 | |||||||||||||||
| Additional Paid-In Capital: | |||||||||||||||||||||||
| Balance at beginning of period | $ | 84 | $ | 136 | $ | 136 | $ | — | |||||||||||||||
| Stock award plans | 22 | (20) | 57 | (123) | |||||||||||||||||||
| Common stock purchases | — | (212) | (262) | (212) | |||||||||||||||||||
| Common stock issuances | 71 | 96 | 254 | 335 | |||||||||||||||||||
| Other | 1 | — | (7) | — | |||||||||||||||||||
| Balance at end of period | $ | 178 | $ | — | $ | 178 | $ | — | |||||||||||||||
| Retained Earnings: | |||||||||||||||||||||||
| Balance at beginning of period | $ | 19,832 | $ | 20,692 | $ | 20,882 | $ | 21,055 | |||||||||||||||
| Net income | 1,311 | 1,539 | 3,781 | 4,061 | |||||||||||||||||||
| Dividends ($1.64 and $1.63 per share for the three months ended September 30, 2025 and 2024, respectively, and $4.92 and $4.89 per share for the nine months ended September 30, 2025 and 2024, respectively) (1) | (1,390) | (1,391) | (4,172) | (4,203) | |||||||||||||||||||
| Common stock purchases | — | (288) | (738) | (288) | |||||||||||||||||||
| Other (2) | — | — | — | (73) | |||||||||||||||||||
| Balance at end of period | $ | 19,753 | $ | 20,552 | $ | 19,753 | $ | 20,552 | |||||||||||||||
| Noncontrolling Interests: | |||||||||||||||||||||||
| Balance at beginning of period | $ | 27 | $ | 23 | $ | 25 | $ | 8 | |||||||||||||||
| Change in non-controlling interest | (2) | 4 | — | 19 | |||||||||||||||||||
| Balance at end of period | $ | 25 | $ | 27 | $ | 25 | $ | 27 |
(1) The dividend per share amount is the same for both class A and class B common stock. Dividends include $42 and $88 million for the three months ended September 30, 2025 and 2024, respectively, and $127 and $154 million for the nine months ended September 30, 2025 and 2024, respectively that were settled in shares of class A common stock.
(2) Includes adjustments related to certain stock-based awards.
In January 2023, the Board of Directors approved a share repurchase authorization for $5.0 billion of class A and class B common stock. This share repurchase authorization has no expiration date. We repurchased 8.6 million shares of class B common stock for $1.0 billion under the share repurchase program during the nine months ended September 30, 2025. We repurchased 3.9 million shares of class B common stock for $500 million under our share repurchase program during the nine months ended September 30, 2024.
As of September 30, 2025, we had $1.3 billion available under the share repurchase authorization. We do not anticipate further share repurchases in 2025.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
We recognize activity in other comprehensive income (loss) for foreign currency translation adjustments, unrealized holding gains and losses on available-for-sale securities, unrealized gains and losses from derivatives that qualify as cash flow hedges and unrecognized pension and postretirement benefit costs. The activity in accumulated other comprehensive income (loss) was as follows (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Foreign Currency Translation Gain (Loss), Net of Tax: | |||||||||||||||||||||||
| Balance at beginning of period | $ | (1,085) | $ | (1,431) | $ | (1,586) | $ | (1,248) | |||||||||||||||
| Translation adjustment (net of tax effect of $(3) and $(5) for the three months ended September 30, 2025 and 2024, respectively, and $0 and $(2) for the nine months ended September 30, 2025 and 2024, respectively) | (46) | 211 | 455 | 28 | |||||||||||||||||||
| Balance at end of period | (1,131) | (1,220) | (1,131) | (1,220) | |||||||||||||||||||
| Unrealized Gain (Loss) on Marketable Securities, Net of Tax: | |||||||||||||||||||||||
| Balance at beginning of period | — | (3) | (1) | (2) | |||||||||||||||||||
| Current period changes in fair value (net of tax effect of $0 and $0 for the three and nine months ended September 30, 2025 and 2024, respectively) | (1) | 2 | — | 1 | |||||||||||||||||||
| Balance at end of period | (1) | (1) | (1) | (1) | |||||||||||||||||||
| Unrealized Gain (Loss) on Cash Flow Hedges, Net of Tax: | |||||||||||||||||||||||
| Balance at beginning of period | (337) | — | 91 | (76) | |||||||||||||||||||
| Current period changes in fair value (net of tax effect of $19 and $(37) for the three months ended September 30, 2025 and 2024, respectively, and $(102) and $7 for the nine months ended September 30, 2025 and 2024, respectively) | 61 | (117) | (323) | 24 | |||||||||||||||||||
| Reclassification to earnings (net of tax effect of $5 and $(7) for the three months ended September 30, 2025 and 2024, respectively, and $(9) and $(27) for the nine months ended September 30, 2025 and 2024, respectively) | 14 | (22) | (30) | (87) | |||||||||||||||||||
| Balance at end of period | (262) | (139) | (262) | (139) | |||||||||||||||||||
| Unrecognized Pension and Postretirement Benefit Costs, Net of Tax: | |||||||||||||||||||||||
| Balance at beginning of period | (2,753) | (2,373) | (2,813) | (2,432) | |||||||||||||||||||
| Reclassification to earnings (net of tax effect of $9 and $9 for the three months ended September 30, 2025 and 2024, respectively, and $28 and $27 for the nine months ended September 30, 2025 and 2024, respectively) | 30 | 29 | 90 | 88 | |||||||||||||||||||
| Balance at end of period | (2,723) | (2,344) | (2,723) | (2,344) | |||||||||||||||||||
| Accumulated other comprehensive income (loss) at end of period | $ | (4,117) | $ | (3,704) | $ | (4,117) | $ | (3,704) | |||||||||||||||
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Detail of the gains (losses) reclassified from accumulated other comprehensive income (loss) to the statements of consolidated income is as follows (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | Affected Line Item in | |||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | the Income Statement | |||||||||||||||||||||||||
| Unrealized Gain (Loss) on Cash Flow Hedges: | |||||||||||||||||||||||||||||
| Interest rate contracts | $ | (1) | $ | (1) | $ | (4) | $ | (4) | Interest expense | ||||||||||||||||||||
| Foreign currency exchange contracts | (17) | 30 | 44 | 118 | Revenue | ||||||||||||||||||||||||
| Foreign currency exchange contracts | (1) | — | (1) | — | Investment income and other | ||||||||||||||||||||||||
| Income tax (expense) benefit | 5 | (7) | (9) | (27) | Income tax expense | ||||||||||||||||||||||||
| Impact on net income | (14) | 22 | 30 | 87 | Net income | ||||||||||||||||||||||||
| Unrecognized Pension and Postretirement Benefit Costs: | |||||||||||||||||||||||||||||
| Prior service costs | (39) | (38) | (118) | (115) | Investment income and other | ||||||||||||||||||||||||
| Income tax (expense) benefit | 9 | 9 | 28 | 27 | Income tax expense | ||||||||||||||||||||||||
| Impact on net income | (30) | (29) | (90) | (88) | Net income | ||||||||||||||||||||||||
| Total amount reclassified for the period | $ | (44) | $ | (7) | $ | (60) | $ | (1) | Net income | ||||||||||||||||||||
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. SEGMENT INFORMATION
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. Global small package operations represent our most significant business and are broken down into regional operations around the world. Regional operations managers are responsible for both domestic and export products within their geographic area. Supply Chain Solutions comprises the results of non-reportable operating segments that do not meet the quantitative and qualitative criteria of a reportable segment as defined under ASC Topic 280.
U.S. Domestic Package
U.S. Domestic Package operations include the time-definite delivery of letters, documents and packages throughout the United States.
During the quarter ended December 31, 2024, based on a change in our management reporting structure, we began presenting our U.S. air cargo results within our U.S. Domestic Package segment. This activity was previously reported within Supply Chain Solutions. This change aligns with how our chief operating decision maker ("CODM") reviews operating results to assess performance and allocate resources. Prior periods have been recast to conform to current presentation with no changes to consolidated results.
International Package
International Package operations include delivery to more than 200 countries and territories worldwide, including shipments wholly outside the United States, as well as shipments with either origin or destination outside the United States. International Package includes our operations in Europe, Middle East and Africa ("EMEA"), Canada and Latin America (together "Americas") and Asia.
Supply Chain Solutions
Supply Chain Solutions includes our Forwarding, Logistics, digital and other businesses. Our Forwarding and Logistics businesses provide services in more than 200 countries and territories worldwide, including international air and ocean freight forwarding, customs brokerage, mail services, healthcare logistics and transportation, distribution and post-sales services. Our digital businesses leverage technology to enable a range of on-demand services such as same-day delivery, end-to-end return services and integrated supply chain and high-value shipment insurance solutions.
Segment information
We consider our Chief Executive Officer to be our CODM. The CODM is responsible for setting the Company's strategic direction, managing overall operations, and is the main point of communication between the Board of Directors and key operational personnel within the organization.
The CODM utilizes operating profit as a primary measure of segment performance because it reflects the underlying business performance and provides the CODM with a basis for making resource allocation decisions. Operating profit is defined as income before investment income and other, interest expense and income tax expense.
The CODM regularly reviews segment-level expense details which include compensation, benefits and purchased transportation when assessing operating segment performance. These expense categories represent the primary metrics used by the CODM to assess segment performance. For the Domestic Package segment, compensation and benefits are evaluated separately, whereas for the International Package segment, these categories are assessed in aggregate. Beginning with the second quarter of 2025, purchased transportation expense for the U.S. Domestic Package segment was no longer provided to the CODM when assessing the operating segment's performance.
Certain expenses are allocated between the segments using activity-based costing methods. These activity-based costing methods require us to make estimates that impact the amount of each expense category that is attributed to each segment. Changes in these estimates directly impact the amount of expense allocated to each segment, and therefore the operating profit of each reporting segment. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses. There were no significant changes to our allocation methodologies in the third quarter of 2025.
As we operate an integrated, global multimodal network, we evaluate many of our capital expenditure decisions at a network level. Accordingly, expenditures on property, plant and equipment by segment are not presented.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Results of operations for the three and nine months ended September 30, 2025 and 2024 were as follows (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| U.S. Domestic Package: | |||||||||||||||||||||||
| Revenue | $ | 14,220 | $ | 14,597 | $ | 42,763 | $ | 43,064 | |||||||||||||||
| Less: | |||||||||||||||||||||||
| Compensation | 5,000 | 5,057 | 15,001 | 14,725 | |||||||||||||||||||
| Benefits | 4,462 | 4,261 | 12,811 | 12,612 | |||||||||||||||||||
| Other segment items(1) | 4,155 | 4,436 | 12,453 | 13,063 | |||||||||||||||||||
| U.S. Domestic Operating profit/(loss) | $ | 603 | $ | 843 | $ | 2,498 | $ | 2,664 | |||||||||||||||
| International Package: | |||||||||||||||||||||||
| Revenue | $ | 4,673 | $ | 4,411 | $ | 13,531 | $ | 13,037 | |||||||||||||||
| Less: | |||||||||||||||||||||||
| Compensation and benefits | 1,017 | 926 | 2,969 | 2,790 | |||||||||||||||||||
| Purchased transportation | 1,018 | 866 | 2,867 | 2,475 | |||||||||||||||||||
| Other segment items(1) | 1,962 | 1,821 | 5,706 | 5,600 | |||||||||||||||||||
| International Operating profit/(loss) | $ | 676 | $ | 798 | $ | 1,989 | $ | 2,172 | |||||||||||||||
| Reconciliation of revenue: | |||||||||||||||||||||||
| Total U.S. Domestic Package and International Package Revenue | $ | 18,893 | $ | 19,008 | $ | 56,294 | $ | 56,101 | |||||||||||||||
| Other revenues(2) | 2,522 | 3,237 | 7,888 | 9,668 | |||||||||||||||||||
| Total Consolidated Revenue | $ | 21,415 | $ | 22,245 | $ | 64,182 | $ | 65,769 | |||||||||||||||
| Reconciliation of segment operating profit to income before income taxes: | |||||||||||||||||||||||
| Total U.S. Domestic Package and International Package Operating profit/(loss) | $ | 1,279 | $ | 1,641 | $ | 4,487 | $ | 4,836 | |||||||||||||||
| Other profit/(loss)(2) | 525 | 344 | 805 | 706 | |||||||||||||||||||
| Investment income and other | 94 | 155 | 251 | 410 | |||||||||||||||||||
| Interest expense | (291) | (230) | (751) | (637) | |||||||||||||||||||
| Total Consolidated Income Before Income Taxes | $ | 1,607 | $ | 1,910 | $ | 4,792 | $ | 5,315 |
(1) Other segment items include purchased transportation (applicable only to our U.S Domestic segment), repairs and maintenance, depreciation and amortization, fuel, other occupancy, and allocated costs for our air network, information services, and general and administrative service expenses.
(2) Revenue and Operating profit/(loss) from segments below the quantitative thresholds are attributable to operating segments which provide supply chain solutions.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The amounts of depreciation and amortization by reportable segment disclosed for the three and nine months ended September 30, 2025 and 2024 are included within the other segment items captions in the table above. These totals are presented after applying activity-based costing methods to allocate expenses between segments as noted above.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| U.S. Domestic Package | $ | 619 | $ | 629 | $ | 1,878 | $ | 1,825 | |||||||||||||||
| International Package | 215 | 189 | 626 | 584 | |||||||||||||||||||
| Other depreciation and amortization(1) | 92 | 87 | 270 | 281 | |||||||||||||||||||
| Consolidated Depreciation and Amortization | $ | 926 | $ | 905 | $ | 2,774 | $ | 2,690 |
(1) Depreciation and amortization from segments below the quantitative thresholds are attributable to operating segments which provide supply chain solutions.
Assets by reportable segment as of September 30, 2025 and December 31, 2024 consisted of the following (in millions):
| 2025 | 2024 | ||||||||||
| Segment Assets | |||||||||||
| U.S. Domestic Package | $ | 37,625 | $ | 38,657 | |||||||
| International Package | 20,008 | 18,300 | |||||||||
| Other assets(1) | 11,004 | 9,850 | |||||||||
| Unallocated assets(2) | 2,755 | 3,263 | |||||||||
| Consolidated Assets | $ | 71,392 | $ | 70,070 |
(1) Assets from segments below the quantitative thresholds are attributable to operating segments which provide supply chain solutions.
(2) Unallocated assets are comprised primarily of cash held by our centralized investment entity.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. EARNINGS PER SHARE
The earnings per share amounts are the same for class A and class B common shares as the holders of each class are legally entitled to equal per-share distributions whether through dividends or in liquidation.
The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2025 and 2024 (in millions, except per share amounts):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | 1,311 | $ | 1,539 | $ | 3,781 | $ | 4,061 | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares | 848 | 854 | 848 | 854 | |||||||||||||||||||
| Vested portion of restricted shares | — | 1 | 1 | 2 | |||||||||||||||||||
| Denominator for basic earnings per share | 848 | 855 | 849 | 856 | |||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Stock options | — | — | — | — | |||||||||||||||||||
| Denominator for diluted earnings per share | 848 | 855 | 849 | 856 | |||||||||||||||||||
| Basic earnings per share**(1)** | $ | 1.55 | $ | 1.80 | $ | 4.46 | $ | 4.74 | |||||||||||||||
| Diluted earnings per share**(1)** | $ | 1.55 | $ | 1.80 | $ | 4.46 | $ | 4.74 | |||||||||||||||
(1) Earnings per share is computed using unrounded amounts.
Diluted earnings per share for the three months ended September 30, 2025 and 2024 excluded the effect of 1.7 and 0.5 million shares of common stock, respectively, that may be issued upon the exercise of employee stock options because such effect would be antidilutive. Antidilutive shares of common stock for the nine months ended September 30, 2025 and 2024 were 1.3 and 0.5 million, respectively.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT
Risk Management Policies
Changes in fuel prices, interest rates and foreign currency exchange rates impact our results of operations and we actively monitor these exposures. Where deemed appropriate, to manage the impact of these exposures on earnings and/or cash flows, we may enter into a variety of derivative financial instruments. We do not hold or issue derivative financial instruments for trading or speculative purposes.
Credit Risk Management
The forward contracts, swaps and options discussed below contain an element of risk that the counterparties may be unable to meet the terms of the agreements. We seek to minimize such risk exposures for these instruments by limiting the counterparties to banks and financial institutions that meet established credit guidelines. We may further manage credit risk through the use of bilateral collateral provisions and/or early termination rights utilizing master netting arrangements, whereby cash is exchanged based on the net fair value of derivatives associated with each counterparty when positions exceed $250 million.
As of September 30, 2025 and December 31, 2024, we did not hold any cash collateral and no collateral was required to be posted with our counterparties.
Types of Hedges
Commodity Risk Management
The fuel surcharges that we apply in our domestic and international package businesses are the primary means we employ to reduce the risk of adverse fuel price changes on our business. In order to mitigate the impact of fuel surcharges imposed on us by outside carriers, we regularly adjust the rates we charge for our freight brokerage services.
Foreign Currency Risk Management
To protect against the reduction in value of forecasted foreign currency cash flows from our international package business, we maintain a foreign currency cash flow hedging program. Our most significant foreign currency exposures relate to the Euro, British Pound Sterling, Canadian Dollar, Chinese Renminbi and Hong Kong Dollar. We generally designate and account for these contracts as cash flow hedges of anticipated foreign currency denominated revenue.
We may also hedge portions of our anticipated cash settlements of principal and interest on certain foreign currency denominated debt. We generally designate and account for these contracts as cash flow hedges of forecasted foreign currency denominated transactions.
We hedge our net investment in certain foreign operations with foreign currency denominated debt instruments.
Interest Rate Risk Management
We may use a combination of derivative instruments to manage the fixed and floating interest rate mix of our total debt portfolio and related overall cost of borrowing.
We generally designate and account for interest rate swaps that convert fixed-rate interest payments into floating-rate interest payments as fair value hedges of the associated debt instruments. We designate and account for interest rate swaps that convert floating-rate interest payments into fixed-rate interest payments as cash flow hedges of the forecasted payment obligations.
We may periodically hedge the forecasted fixed-coupon interest payments associated with anticipated debt offerings by using forward starting interest rate swaps, interest rate locks or similar derivatives.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Outstanding Positions
As of September 30, 2025 and December 31, 2024, the notional amounts of our outstanding derivative positions were as follows (in millions):
| September 30, 2025 | December 31, 2024 | |||||||||||||
| Currency hedges: | ||||||||||||||
| Euro | EUR | 2,851 | 3,222 | |||||||||||
| British Pound Sterling | GBP | 416 | 536 | |||||||||||
| Canadian Dollar | CAD | 1,671 | 1,623 | |||||||||||
| Hong Kong Dollar | HKD | 4,292 | 4,160 | |||||||||||
| Chinese Renminbi | CNH | 6,928 | 6,065 | |||||||||||
As of September 30, 2025 and December 31, 2024, we had no outstanding commodity hedge positions.
Balance Sheet Recognition
The following table indicates the location in our consolidated balance sheets where our derivative assets and liabilities have been recognized, the fair value hierarchy level applicable to each derivative type and the related fair values of those derivatives.
We have master netting arrangements with substantially all of our counterparties giving us the right of offset for our derivative positions. However, we have not elected to offset the fair value positions of our derivative contracts recorded in our consolidated balance sheets. The columns labeled Net Amounts if Right of Offset had been Applied indicate the potential net fair value positions by type of contract and location in our consolidated balance sheets had we elected to apply the right of offset as of September 30, 2025 and December 31, 2024 (in millions):
| Fair Value Hierarchy Level | Gross Amounts Presented in Consolidated Balance Sheets | Net Amounts if Right of Offset had been Applied | ||||||||||||||||||||||||||||||||||||
| Asset Derivatives | Balance Sheet Location | September 30, 2025 | December 31, 2024 | September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||
| Derivatives designated as hedges: | ||||||||||||||||||||||||||||||||||||||
| Foreign currency exchange contracts | Other current assets | Level 2 | $ | 17 | $ | 157 | $ | 1 | $ | 152 | ||||||||||||||||||||||||||||
| Foreign currency exchange contracts | Other non-current assets | Level 2 | 10 | 134 | 2 | 131 | ||||||||||||||||||||||||||||||||
| Total Asset Derivatives | $ | 27 | $ | 291 | $ | 3 | $ | 283 | ||||||||||||||||||||||||||||||
| Fair Value Hierarchy Level | Gross Amounts Presented in Consolidated Balance Sheets | Net Amounts if Right of Offset had been Applied | ||||||||||||||||||||||||||||||||||||
| Liability Derivatives | Balance Sheet Location | September 30, 2025 | December 31, 2024 | September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||
| Derivatives designated as hedges: | ||||||||||||||||||||||||||||||||||||||
| Foreign currency exchange contracts | Other current liabilities | Level 2 | $ | 96 | $ | 5 | $ | 80 | $ | — | ||||||||||||||||||||||||||||
| Foreign currency exchange contracts | Other non-current liabilities | Level 2 | 107 | 3 | 99 | — | ||||||||||||||||||||||||||||||||
| Total Liability Derivatives | $ | 203 | $ | 8 | $ | 179 | $ | — |
Our foreign currency exchange rate derivatives are largely comprised of over-the-counter derivatives, which are primarily valued using pricing models that rely on market observable inputs such as yield curves, foreign currency exchange rates and investment forward prices; therefore, these derivatives are classified as Level 2.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet Location of Hedged Item in Fair Value Hedges
The following table indicates the amounts that were recorded in our consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of September 30, 2025 and December 31, 2024 (in millions):
| Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included | Carrying Amount of Hedged Liabilities | Cumulative Amount of Fair Value Hedge Adjustments | Carrying Amount of Hedged Liabilities | Cumulative Amount of Fair Value Hedge Adjustments | |||||||||||||||||||||||||
| September 30, 2025 | September 30, 2025 | December 31, 2024 | December 31, 2024 | ||||||||||||||||||||||||||
| Long-term debt and finance leases | $ | 279 | $ | 3 | $ | 279 | $ | 4 |
Income Statement and AOCI Recognition of Designated Hedges
The following table indicates the amount of gains (losses) that have been recognized in our statements of consolidated income for fair value and cash flow hedges, as well as the associated gain (loss) for the underlying hedged item for fair value hedges for the three and nine months ended September 30, 2025 and 2024 (in millions):
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
| Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||
| Revenue | Interest Expense | Investment Income and Other | Revenue | Interest Expense | Investment Income and Other | |||||||||||||||||||||||||||||||||
| Gain or (loss) on cash flow hedging relationships: | ||||||||||||||||||||||||||||||||||||||
| Interest Contracts: | ||||||||||||||||||||||||||||||||||||||
| Amount of gain or (loss) reclassified from accumulated other comprehensive income | $ | — | $ | (1) | $ | — | $ | — | $ | (1) | $ | — | ||||||||||||||||||||||||||
| Foreign currency exchange Contracts: | ||||||||||||||||||||||||||||||||||||||
| Amount of gain or (loss) reclassified from accumulated other comprehensive income | (17) | — | (1) | 30 | — | — | ||||||||||||||||||||||||||||||||
| Total amounts of income and expense line items presented in the statement of income in which the effects of fair value or cash flow hedges are recorded | $ | (17) | $ | (1) | $ | (1) | $ | 30 | $ | (1) | $ | — |
| Nine Months Ended September 30: | ||||||||||||||||||||||||||||||||||||||
| Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||
| Revenue | Interest Expense | Investment Income and Other | Revenue | Interest Expense | Investment Income and Other | |||||||||||||||||||||||||||||||||
| Gain or (loss) on cash flow hedging relationships: | ||||||||||||||||||||||||||||||||||||||
| Interest Contracts: | ||||||||||||||||||||||||||||||||||||||
| Amount of gain or (loss) reclassified from accumulated other comprehensive income | $ | — | $ | (4) | $ | — | $ | — | $ | (4) | $ | — | ||||||||||||||||||||||||||
| Foreign currency exchange Contracts: | ||||||||||||||||||||||||||||||||||||||
| Amount of gain or (loss) reclassified from accumulated other comprehensive income | 44 | — | (1) | 118 | — | — | ||||||||||||||||||||||||||||||||
| Total amounts of income and expense line items presented in the statement of income in which the effects of fair value or cash flow hedges are recorded | $ | 44 | $ | (4) | $ | (1) | $ | 118 | $ | (4) | $ | — |
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table indicates the amount of gains (losses) that have been recognized in AOCI for the three and nine months ended September 30, 2025 and 2024 for those derivatives designated as cash flow hedges (in millions):
| Derivative Instruments in Cash Flow Hedging Relationships | Amount of Gain (Loss) Recognized in AOCI on Derivatives | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Three Months Ended September 30: | ||||||||||||||
| Foreign currency exchange contracts | $ | 80 | $ | (154) | ||||||||||
| Total | $ | 80 | $ | (154) | ||||||||||
| Nine Months Ended September 30: | ||||||||||||||
| Foreign currency exchange contracts | $ | (425) | $ | 31 | ||||||||||
| Total | $ | (425) | $ | 31 |
As of September 30, 2025, there were $85 million of pre-tax losses related to cash flow hedges deferred in AOCI that are expected to be reclassified to income over the 12-month period ending September 30, 2026. The actual amounts that will be reclassified to income over the next 12 months will vary from this amount as a result of changes in market conditions. The maximum term over which we are hedging exposures to the variability of cash flows is approximately 3 years.
The following table indicates the amount of gains (losses) that have been recognized in AOCI within foreign currency translation adjustment for the three and nine months ended September 30, 2025 and 2024 for those instruments designated as net investment hedges (in millions):
| Non-derivative Instruments in Net Investment Hedging Relationships | Amount of Gain (Loss) Recognized in AOCI on Debt | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Three Months Ended September 30: | ||||||||||||||
| Foreign currency denominated debt | $ | 10 | $ | (120) | ||||||||||
| Total | $ | 10 | $ | (120) | ||||||||||
| Nine Months Ended September 30: | ||||||||||||||
| Foreign currency denominated debt | $ | (260) | $ | (36) | ||||||||||
| Total | $ | (260) | $ | (36) |
Income Statement Recognition of Non-Designated Derivative Instruments
Derivative instruments that are not designated as hedges are recorded at fair value with unrealized gains and losses reported in earnings each period. Cash flows from the settlement of derivative instruments appear in our statements of consolidated cash flows within the same categories as the cash flows of the hedged item.
We may periodically terminate interest rate swaps and foreign currency exchange forward contracts or enter into offsetting swap and foreign currency positions with different counterparties. As part of this process, we de-designate our original hedge relationship.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Amounts recorded in our statements of consolidated income related to fair value changes and settlements of foreign currency forward contracts not designated as hedges for the three and nine months ended September 30, 2025 and 2024 (in millions) were as follows:
| Derivative Instruments Not Designated in Hedging Relationships | Location of Gain (Loss) Recognized in Income | Amount of Gain (Loss) Recognized in Income | ||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| Three Months Ended September 30: | ||||||||||||||||||||
| Foreign currency exchange contracts | Investment income and other | $ | 1 | $ | (4) | |||||||||||||||
| Total | $ | 1 | $ | (4) | ||||||||||||||||
| Nine Months Ended September 30: | ||||||||||||||||||||
| Foreign currency exchange contracts | Investment income and other | $ | (8) | $ | (8) | |||||||||||||||
| Total | $ | (8) | $ | (8) |
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. INCOME TAXES
Our effective tax rate for the three months ended September 30, 2025 decreased to 18.4% compared to 19.4% in the same period of 2024 (21.1% year to date compared to 23.6% in 2024). The year-over-year decrease in our effective tax rate was driven by the valuation allowance release discussed below, prior year share-based compensation shortfalls, prior year unfavorable changes in uncertain tax positions and non-deductible expenses related to regulatory matters that did not recur in the current period.
As discussed in note 18, in the third quarter of 2024 we completed the divestiture of Coyote and recorded a pre-tax gain of $156 million. As a result, we recorded related income tax expense of $4 million in the period. This income tax expense was generated at a lower average tax rate than the U.S. federal statutory tax rate due to the disposition's generation of capital losses for tax purposes that were not expected to be realized.
As of December 31, 2024, we maintained a full valuation allowance of $105 million against our U.S. capital loss deferred tax asset. Each quarter, we assess the available positive and negative evidence to determine whether it is more likely than not that the capital losses will be realized. As of September 30, 2025, we have released all of this valuation allowance ($86 million during the three months ended September 30, 2025) as a result of net capital gains from the property sales transactions discussed in note 6 of the unaudited, consolidated financial statements.
In July 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. The estimated impact of the OBBBA is not material to our overall effective tax rate for the current year and has been reflected in our unaudited, consolidated financial statements during the three and nine months ended September 30, 2025.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. TRANSFORMATION STRATEGY COSTS
As previously disclosed, we are undertaking an enterprise-wide transformation of our organization that includes various projects and initiatives, including workforce reductions and changes in processes and technology, that impact our global direct and indirect operating costs.
The table below presents transformation strategy costs for the three and nine months ended September 30, 2025 and 2024 (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Transformation Strategy Costs: | |||||||||||||||||||||||
| Compensation and benefits | $ | 284 | $ | 110 | $ | 358 | $ | 161 | |||||||||||||||
| Total Other expenses | 44 | 44 | 102 | 66 | |||||||||||||||||||
| Total Transformation Strategy Costs | $ | 328 | $ | 154 | $ | 460 | $ | 227 | |||||||||||||||
| Income Tax Benefit from Transformation Strategy Costs (1) | (78) | (38) | (109) | (55) | |||||||||||||||||||
| After-Tax Transformation Strategy Costs | $ | 250 | $ | 116 | $ | 351 | $ | 172 |
(1) The income tax effects of transformation strategy costs are calculated by multiplying the amount of the adjustments by the statutory tax rates applicable in each tax jurisdiction.
Compensation and benefit costs under these programs are primarily related to severance costs incurred in conjunction with reductions in our workforce. We are primarily accounting for these reductions in workforce under ASC Topic 712 as they have been, or will be, carried out under a plan which provides a contractual termination benefit to impacted employees. The nature of our separation initiatives has resulted in a relatively short period of time, typically less than one year, between the point at which the separation meets the criteria for recognition as an accrual and the point at which the separation is completed.
Accruals for separation costs of $152 and $45 million were included in our consolidated balance sheets as of September 30, 2025 and December 31, 2024, respectively. During the nine months ended September 30, 2025, we made payments of $223 million and recognized additional separation costs of $330 million. An additional $81 million of separation costs is expected to be incurred for the remaining participants in our voluntary separation programs over the employees' remaining term of service through the second quarter of 2026.
Other costs incurred in furtherance of our transformation strategy are primarily related to fees paid to third-party service providers and are not incurred as a result of restructuring, exit or disposal activities and, as period costs, do not give rise to restructuring, exit or disposal liabilities.
Transformation strategy costs during the periods presented related to our Transformation 2.0, Fit to Serve, and Network Reconfiguration and Efficiency Reimagined programs. Total costs by program are shown in the table below for the three and nine months ended September 30, 2025 and 2024 (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Transformation Strategy Costs: | |||||||||||||||||||||||
| Transformation 2.0 | |||||||||||||||||||||||
| Business portfolio review | $ | — | $ | 34 | $ | (18) | $ | 29 | |||||||||||||||
| Financial systems | 13 | 12 | 44 | 41 | |||||||||||||||||||
| Transformation 2.0 total | 13 | 46 | 26 | 70 | |||||||||||||||||||
| Fit to Serve | 19 | 108 | 47 | 157 | |||||||||||||||||||
| Network Reconfiguration and Efficiency Reimagined | 296 | — | 387 | — | |||||||||||||||||||
| Total Transformation Strategy Costs | $ | 328 | $ | 154 | $ | 460 | $ | 227 |
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Transformation 2.0: Based on a number of factors including evaluating efficiencies previously gained, and in connection with changes 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 September 30, 2025, our remaining efforts under Transformation 2.0 include initiatives related to our financial systems. Previously completed initiatives within Transformation 2.0 are described in note 18 to the audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024. As of September 30, 2025, we have incurred $824 million of costs as part of Transformation 2.0. Transformation 2.0 initiatives are expected to conclude during 2025 with anticipated remaining costs of approximately $15 million primarily related to completion of our technology initiatives. Costs associated with Transformation 2.0 have primarily consisted of compensation and benefit costs related to reductions in our workforce and fees paid to third-party consultants. 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; and we began realizing benefits during the nine months ended September 30, 2025.
Fit to Serve: During 2023, we began our "Fit to Serve" initiative, which is intended to right-size our business for the future through a workforce reduction of approximately 14,000 positions and create a more efficient operating model to enhance responsiveness to changing market dynamics. As of September 30, 2025, we have incurred total costs of $463 million and anticipate that we will incur additional costs of approximately $10 million under Fit to Serve. Fit to Serve is expected to conclude in 2025.
Network Reconfiguration and Efficiency Reimagined: Our Network of the Future initiative is intended to enhance the efficiency of our network through automation and operational sort consolidation in our U.S. Domestic network. In connection with our strategic execution of planned volume declines from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future and has led and could lead to a reduction in the number of our facilities, vehicles and aircraft 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. In connection therewith, we have reduced our U.S. operational workforce by approximately 34,000 positions and closed daily operations at 93 leased and owned buildings, 85 of which have been permanently closed during the first nine months of 2025. We continue to review expected changes in volume in our integrated air and ground network to identify additional buildings for closure.
In connection with the Network Reconfiguration and Efficiency Reimagined programs, we expect to exclude between $400 and $650 million in non-GAAP adjusted expense during 2025, related primarily to third-party consulting fees, employee separation benefits and certain programmatic expenses. We expect the costs associated with these actions may increase should we determine to close additional buildings. As of September 30, 2025, we have incurred program costs to date of $422 million, including $387 million year to date. These initiatives are expected to conclude in 2027.
In addition, we have incurred and expect to continue to incur other costs and benefits associated with our Network Reconfiguration programs and anticipated lower volumes, including early asset retirement, lease related costs and gains from the sale of properties. It is our intention to exit or abandon leases, sell property and transfer or dispose of equipment associated with closed facilities. During the first nine months of 2025, we incurred $45 million in accelerated depreciation and asset retirement obligations related to closed facilities and abandoned equipment and $54 million in gains on sale of properties. We expect the costs associated with these actions may increase should we determine to close additional buildings.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. ACQUISITIONS AND DISPOSITIONS
In the first quarter of 2025, we acquired 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. During 2025, we also acquired franchise development areas for The UPS Store.
The aggregate purchase price for all acquisitions during the nine months ended September 30, 2025 was approximately $479 million, net of cash acquired, which are recorded within Supply Chain Solutions. Acquisitions were funded using cash from operations.
The estimated fair values of assets acquired and liabilities assumed are subject to change based on completion of our purchase accounting. Certain items, including our estimates of tax positions, are preliminary as of September 30, 2025. The preliminary purchase price allocation for acquired companies can be modified for up to one year from the date of acquisition. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in millions):
| 2025 | |||||
| Cash and cash equivalents | $ | 5 | |||
| Accounts receivable | 20 | ||||
| Other current assets | 1 | ||||
| Property, plant and equipment | 84 | ||||
| Operating lease right-of-use assets | 18 | ||||
| Goodwill | 345 | ||||
| Intangible assets(1) | 180 | ||||
| Other non-current assets | 1 | ||||
| Current maturities of operating leases | (4) | ||||
| Accounts payable and other current liabilities | (18) | ||||
| Non-current operating lease | (14) | ||||
| Deferred income tax liabilities | (46) | ||||
| Other non-current liabilities | (88) | ||||
| Total purchase price | $ | 484 |
(1) Includes $40 million for acquisitions of development areas for The UPS Store.
Goodwill recognized upon acquisition of approximately $345 million is attributable to expected synergies from future growth, and has been assigned to Supply Chain Solutions. This goodwill is not expected to be deductible for income tax purposes.
Intangible assets acquired of approximately $180 million are primarily comprised of $137 million of customer relationships (amortized over a weighted average of 15 years). Other intangible assets acquired include franchise rights, licenses and trade names. The carrying value of accounts receivable approximates fair value.
In the second quarter of 2025, we completed the divestiture of a business within UPS Digital. In connection with this divestiture, we recorded a pre-tax gain of approximately $20 million ($14 million after tax) during the nine months ended September 30, 2025. The gain was recognized within Other expenses in our statement of consolidated income.
In the nine months ended September 30, 2024, we completed the divestiture of Coyote, for cash proceeds, net of cash divested and direct transaction expenses, of $1.0 billion. These proceeds were recognized within Proceeds from disposal of businesses, property, plant and equipment in the statements of consolidated cash flows. In connection with the completion of that divestiture, we recorded a pre-tax gain of $156 million ($152 million after tax). The gain was recognized within Other expenses in the statements of consolidated income.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. SUBSEQUENT EVENTS
On November 1, 2025, we completed the acquisition of Andlauer Healthcare Group Inc., a leading North American supply chain management company headquartered in Canada offering customized third-party logistics and specialized cold chain transportation solutions for a total purchase price of approximately C$2.2 billion ($1.6 billion).
On November 4, 2025, one of our MD-11 cargo aircraft was involved in an accident at Louisville Muhammad Ali International Airport. The National Transportation Safety Board is actively investigating. At this time, we do not believe the financial impact will be material to our business, financial position, results of operations or cash flows.
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