Item 1. Financial Statements

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

March 31, 2026 (unaudited) and December 31, 2025 (in millions)

			March 31, 2026						December 31, 2025
ASSETS
Current Assets:
Cash and cash equivalents			$	5,802					$	5,887
Accounts receivable, Net			9,948						11,209
Other current assets			2,044						1,949
Total Current Assets			17,794						19,045
Property, Plant and Equipment, Net			38,029						37,731
Operating Lease Right-Of-Use Assets			4,084						4,263
Goodwill			5,796						5,837
Intangible Assets, Net			3,981						4,021
Deferred Income Tax Assets			154						140
Other Non-Current Assets			1,971						2,053
Total Assets			$	71,809					$	73,090
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Current maturities of long-term debt, commercial paper and finance leases			$	637					$	608
Current maturities of operating leases			742						763
Accounts payable			5,913						6,633
Accrued wages and withholdings			3,238						3,715
Self-insurance reserves			1,095						1,137
Accrued group welfare and retirement plan contributions			1,414						1,389
Other current liabilities			1,635						1,375
Total Current Liabilities			14,674						15,620
Long-Term Debt and Finance Leases			23,749						23,519
Non-Current Operating Leases			3,534						3,700
Pension and Postretirement Benefit Obligations			6,665						6,567
Deferred Income Tax Liabilities			3,772						3,690
Other Non-Current Liabilities			3,624						3,739
Shareowners' Equity:
Class A common stock (104 and 106 shares issued in 2026 and 2025, respectively)			1						1
Class B common stock (746 and 743 shares issued in 2026 and 2025, respectively)			8						8
Additional paid-in capital			382						275
Retained earnings			19,622						20,151
Accumulated other comprehensive loss			(4,250)						(4,208)
Deferred compensation obligations			5						5
Less: Treasury stock (0.1 shares in 2026 and 2025)			(5)						(5)
Total Equity for Controlling Interests			15,763						16,227
Noncontrolling interests			28						28
Total Shareowners' Equity			15,791						16,255
Total Liabilities and Shareowners' Equity			$	71,809					$	73,090

See notes to unaudited, consolidated financial statements.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED INCOME

(In millions, except per share amounts)

(unaudited)

			Three Months Ended March 31,
			2026						2025
Revenue			$	21,202					$	21,546
Operating Expenses:
Compensation and benefits			11,545						11,827
Repairs and maintenance			792						732
Depreciation and amortization			985						912
Purchased transportation			2,764						2,730
Fuel			1,083						1,058
Other occupancy			674						607
Other expenses			2,092						2,014
Total Operating Expenses			19,935						19,880
Operating Profit			1,267						1,666
Other Income (Expense):
Investment income and other			123						79
Interest expense			(266)						(222)
Total Other Income (Expense)			(143)						(143)
Income Before Income Taxes			1,124						1,523
Income Tax Expense			260						336
Net Income			$	864					$	1,187
Basic Earnings Per Share			$	1.02					$	1.40
Diluted Earnings Per Share			$	1.02					$	1.40

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(In millions)

(unaudited)

									Three Months Ended March 31,
															2026						2025
Net Income															$	864					$	1,187
Change in foreign currency translation adjustment, net of tax															(151)						129
Change in unrealized gain (loss) on cash flow hedges, net of tax															81						(139)
Change in unrecognized pension and postretirement benefit costs, net of tax															28						30
Change in other															—						1
Comprehensive Income															$	822					$	1,208

See notes to unaudited, consolidated financial statements.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

(In millions, unaudited)

			Three Months Ended March 31,
			2026						2025
Cash Flows From Operating Activities:
Net income			$	864					$	1,187
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization			985						912
Pension and postretirement benefit expense			215						257
Pension and postretirement benefit contributions			(79)						(67)
Self-insurance reserves			16						1
Deferred tax (benefit) expense			45						(40)
Stock compensation expense			24						21
Other (gains) losses			73						22
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable			1,085						960
Other assets			(27)						7
Accounts payable			(495)						(906)
Accrued wages and withholdings			(453)						(370)
Other liabilities			29						301
Other operating activities			(58)						33
Net cash from operating activities			2,224						2,318
Cash Flows From Investing Activities:
Capital expenditures			(1,031)						(876)
Proceeds from disposal of businesses, property, plant and equipment			82						65
Purchases of marketable securities			—						(90)
Sales and maturities of marketable securities			—						34
Acquisitions, net of cash acquired			—						(478)
Other investing activities			5						(10)
Net cash used in investing activities			(944)						(1,355)
Cash Flows From Financing Activities:
Proceeds from long-term borrowings			—						25
Repayments of long-term borrowings			(46)						(32)
Purchases of common stock			—						(1,000)
Issuances of common stock			28						55
Dividends			(1,352)						(1,348)
Other financing activities			42						(13)
Net cash used in financing activities			(1,328)						(2,313)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash			(37)						40
Net Decrease in Cash, Cash Equivalents and Restricted Cash			(85)						(1,310)
Cash, Cash Equivalents and Restricted Cash:
Beginning of period			5,887						6,112
End of period			$	5,802					$	4,802

See notes to unaudited, consolidated financial statements.

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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 March 31, 2026, and our results of operations and cash flows for the three months ended March 31, 2026 and 2025. 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, 2025.

Throughout the document, the terms "three months ended" and "year-to-date period" refer to the three months ended March 31.

Fair Value of Financial Instruments

The carrying amounts of our cash and cash equivalents, marketable securities, accounts receivable, finance receivables and accounts payable approximated fair value as of March 31, 2026 and December 31, 2025. The fair values of our recognized multiemployer pension withdrawal liabilities are disclosed in note 6, our short- and long-term debt in note 9 and our derivative instruments in note 14. 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 readily determinable fair values are reported in accordance with the measurement alternative in Accounting Standards Codification ("ASC") Topic 321. 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, 2025.

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 three months ended March 31, 2026, 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, 2025.

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 March 31, 2026 and December 31, 2025, suppliers sold $365 and $435 million, respectively, of our outstanding payment obligations during the relevant period.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Cash Flow Information

The following table presents supplemental cash flow information (in millions):

			Three Months Ended March 31,
			2026						2025
Cash paid for amounts included in measurement of obligations:
Operating cash flows from operating leases			$	252					$	238
Financing cash flows from finance leases			44						30
Noncash transactions:
Accrued capital expenditures			$	371					$	160
Property, plant and equipment recognized during the construction period of build-to-suit financing arrangement			32						—
Right-of-use assets obtained in exchange for operating lease obligations			63						16
Right-of-use assets obtained in exchange for finance lease obligations(1)			425						32

(1) Three months ended March 31, 2026 includes $305 million related to aircraft leases that commenced in the period, which were accounted for as finance leases.

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 on our consolidated financial position, results of operations, cash flows or internal controls.

Accounting Standards Issued But Not Yet Effective

In November 2024, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("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 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, and early adoption is permitted. 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 December 2025, the FASB issued an ASU on accounting for government grants. The ASU defines the scope of government grants and permits recognition only when it is probable that the entity will comply with the grant’s conditions and the grant will be received. It also provides guidance on presentation approaches for both asset‑related and income‑related grants and expands related disclosure requirements. This ASU becomes effective for us beginning in the first quarter of 2029 and for annual periods thereafter, and early adoption is permitted. 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, March 31, 2026, are not expected to have a material impact on our consolidated financial position, results of operations, cash flows or internal controls.

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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") that include only one performance obligation: the transportation services themselves. These services may be carried out by or arranged by us and generally occur over a short period of time. 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 March 31,
															2026						2025
Revenue:
Next Day Air															$	2,354					$	2,361
Deferred															1,045						1,049
Ground															10,438						10,709
Cargo and Other															288						341
U.S. Domestic Package															14,125						14,460
Domestic															835						771
Export															3,548						3,444
Cargo and Other															157						158
International Package															4,540						4,373
Forwarding															656						726
Logistics															1,409						1,572
Other															472						415
Supply Chain Solutions ("SCS")															2,537						2,713
Consolidated revenue															$	21,202					$	21,546

Accounts Receivable, Net

As part of our working capital management, we have an accounts receivable factoring program with third parties, in which we may sell certain customer receivables on a revolving basis. Any such transactions are accounted for as sales and accordingly, receivables sold are removed from Accounts receivable, Net in our consolidated balance sheets and the proceeds are reflected in Cash Flows from Operating Activities in our 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 $860 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 our applicable consolidated balance sheet. As of March 31, 2026 and December 31, 2025, cash collections of $114 and $59 million were not yet remitted to third-party purchasers. These obligations are included within Other current liabilities in our consolidated balance sheets, with changes in such obligations reflected within Cash Flows from Financing Activities in our statements of consolidated cash flows. As of March 31, 2026 and December 31, 2025, accounts receivable outstanding under our factoring programs was $448 and $491 million, respectively.

Our allowance for credit losses as of March 31, 2026 and December 31, 2025 was $188 and $180 million, respectively. Amounts for credit losses charged to expense, before recoveries, during the three months ended March 31, 2026 and 2025 were $99 and $69 million, respectively.

Contract Assets and Liabilities

Contract assets were $284 and $275 million as of March 31, 2026 and December 31, 2025, respectively, and were recorded within Other current assets in our consolidated balance sheets. Contract liabilities recorded within Other Non-Current

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Liabilities were $46 and $49 million as of March 31, 2026 and December 31, 2025, respectively. Short-term contract liabilities were immaterial as of March 31, 2026 and December 31, 2025.

NOTE 4. STOCK-BASED COMPENSATION

Pre-tax compensation expense for equity-classified stock compensation awards recognized in Compensation and benefits in our statements of consolidated income for the three months ended March 31, 2026 and 2025 was $24 and $21 million, respectively.

As of March 31, 2026 and December 31, 2025, 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 2025 MIP and 2024 MIP are reflected as activity in Accrued wages and withholdings in our statements of consolidated cash flows for the three months ended March 31, 2026 and 2025, respectively.

During the three months ended March 31, 2026, 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, 2025, except as described below.

Long-Term Incentive Award Program ("LTIP")

On May 6, 2026, the Compensation and Human Capital Committee of the Board (the "Compensation Committee") approved the Company's 2026 LTIP award. The 2026 LTIP award contains both a restricted performance unit ("RPU") and a restricted stock unit ("RSU") component. RPU performance targets are equally weighted between adjusted revenue growth and non-GAAP adjusted operating return on invested capital ("ROIC"). The RPUs vest at the end of a three-year performance period, assuming continued employment with the Company (except in the case of death, disability or retirement, in which case immediate vesting occurs on a prorated basis). The final number of RPUs earned is subject to modification based on total shareholder return relative to the Standard & Poor's 500 Index. The RPU grant date fair value is not yet determinable, but will be determined using a Monte Carlo model. RSUs are valued using the closing New York Stock Exchange ("NYSE") price on the May 6, 2026 grant date, and will generally vest ratably over three years on each anniversary of the grant date, assuming continued employment with the Company (except in the case of disability or retirement, in which case vesting will continue, or death, in which case immediate vesting will occur).

Non-qualified Stock Options

On February 4, 2026, we granted a total of 4.0 million stock options to approximately 460 employees. Options were granted at an exercise price of $116.74 per share, the closing NYSE price of our class B common stock on that date.

The fair value of each option granted was estimated using a Black-Scholes option pricing model. The weighted-average assumptions used and the weighted-average fair values of options granted in 2026 and 2025 are as follows:

			2026						2025
Expected dividend yield			6.65		%				5.21		%
Risk-free interest rate			3.94		%				4.08		%
Expected life (in years)			6.25						6.11
Expected volatility			30.38		%				30.35		%
Weighted-average fair value of options granted			$	18.37					$	18.72

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of March 31, 2026 and December 31, 2025 consisted of the following (in millions):

			2026						2025
Vehicles			$	11,762					$	11,787
Aircraft(1)			24,458						24,149
Land			2,038						2,046
Buildings			6,960						6,906
Building and leasehold improvements			5,687						5,686
Plant equipment			20,183						19,817
Technology equipment			2,671						2,635
Construction-in-progress			2,241						2,136
			76,000						75,162
Less: Accumulated depreciation and amortization(1)			(37,971)						(37,431)
Property, Plant and Equipment, Net			$	38,029					$	37,731

(1) Includes MD-11 airframes and engines that were fully depreciated as of December 31, 2025.

Depreciation and amortization expense for property, plant and equipment during the first quarters of 2026 and 2025 was $791 and $743 million, respectively. As of March 31, 2026, we determined that $50 million of assets within our U.S. Domestic Package segment met the criteria to be classified as held for sale and are presented within Other current assets in our consolidated balance sheet.

Network Reconfiguration and Efficiency Reimagined

In the first quarter of 2026, as part of our Network Reconfiguration and Efficiency Reimagined initiatives, we closed 23 leased and owned buildings, 22 of which have been permanently closed. We have identified 27 additional buildings for closure in 2026. We will continue to review expected changes in volume in our integrated air and ground network and may identify additional buildings for closure. 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 16 to the unaudited, consolidated financial statements.

We recorded $47 million in gains on sales of properties during the three months ended March 31, 2026. These gains were primarily within our U.S. Domestic Package segment and are included within Other expenses in our unaudited statement of consolidated income. For additional information, see note 16 to the unaudited, consolidated financial statements.

Impairments

There were no material impairment charges to property, plant and equipment during the three months ended March 31, 2026 or 2025. We will continue to monitor our long-lived asset groups for impairment.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6. 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 months ended March 31, 2026 and 2025 is as follows (in millions):

			U.S. Pension Benefits												U.S. Postretirement Medical Benefits												International Pension Benefits
2026						2025						2026						2025						2026						2025
Three Months Ended March 31:
Service cost			$	269					$	281					$	4					$	4					$	9					$	9
Interest cost			700						679						25						27						17						16
Expected return on assets			(823)						(777)						(1)						(1)						(22)						(20)
Amortization of prior service cost			37						39						—						—						—						—
Net periodic benefit cost			$	183					$	222					$	28					$	30					$	4					$	5

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.

During the three months ended March 31, 2026, we contributed $12 million and $67 million to our company-sponsored pension and U.S. postretirement medical benefit plans, respectively. We expect to contribute approximately $1.1 billion and $120 million over the remainder of the year to both our company-sponsored pension and U.S. postretirement medical benefit plans, respectively.

In the first quarter of 2026, we offered a voluntary separation program, the Driver Choice Program, to all full-time drivers in the United States. For additional information, see note 16 of the unaudited, consolidated financial statements.

Multiemployer Benefit Plans

We contribute to a number of multiemployer defined benefit and health and welfare plans under the terms of collective bargaining agreements that cover our union-represented employees. Our current collective bargaining agreements set forth the contribution rates to the plans that we participate in, and we are in compliance with these contribution rates.

As of March 31, 2026 and December 31, 2025, we had $792 and $795 million, respectively, recorded in Other Non-Current Liabilities in our consolidated balance sheets and $9 million as of both March 31, 2026 and December 31, 2025 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 March 31, 2026 and December 31, 2025 was $645 and $662 million, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of this liability.

UPS was a contributing employer to the Central States Pension Fund ("CSPF") until 2007, at which time UPS withdrew from the CSPF. Under a collective bargaining agreement with the International Brotherhood of Teamsters ("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, 2025, our best estimate of coordinating benefits that may be required to be paid by the UPS/IBT Plan was immaterial.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

In the U.S., we have certain employees covered by a national master agreement and various supplemental agreements with local unions affiliated with the Teamsters which run through July 31, 2028. In Canada, certain employees are covered by a collective bargaining agreement with the Teamsters which runs through July 31, 2030.

Certain of our pilots are employed under a collective bargaining agreement with the Independent Pilots Association ("IPA") which became amendable September 1, 2025. We are currently engaged in negotiations with the IPA.

Certain of our airline mechanics are covered by a collective bargaining agreement with Teamsters Local 2727 which becomes amendable on November 1, 2026. In addition, certain auto and maintenance mechanics are employed under a collective bargaining agreement with the International Association of Machinists and Aerospace Workers which runs through July 31, 2029.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. GOODWILL AND INTANGIBLE ASSETS

The following table indicates the allocation of goodwill as of March 31, 2026 and December 31, 2025 (in millions):

			U.S. Domestic Package						International Package						SCS						Consolidated
Balance as of December 31, 2025			$	847					$	596					$	4,394					$	5,837
Currency / Other			—						(8)						(33)						(41)
Balance as of March 31, 2026			$	847					$	588					$	4,361					$	5,796

Changes during the three months ended March 31, 2026 reflect the impact of U.S. Dollar exchange rate movements on non‑U.S. Dollar goodwill balances.

For each of our reporting units, we continue to monitor the impact of macroeconomic conditions and business performance on our estimates of fair value. During the three months ended March 31, 2026, none of our reporting units had indications that an impairment was more likely than not. As of our July 1, 2025 testing date, approximately $877 and $738 million of our $4.8 billion consolidated goodwill balance was represented by our Global Freight Forwarding ("GFF") and Healthcare Logistics and Distribution ("HLD") reporting units, respectively. Based on our most recent annual impairment evaluation, both reporting units exhibited a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods. 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. An interim quantitative test for goodwill impairment was performed in the fourth quarter of 2025 on the GFF reporting unit which resulted in no impairment. For further discussion see note 7 to the audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes intangible assets as of March 31, 2026 and December 31, 2025 (in millions):

			Gross Carrying Amount						Accumulated Amortization						Net Carrying Value
March 31, 2026:
Capitalized software			$	6,963					$	(4,717)					$	2,246
Customer relationships			1,416						(317)						1,099
Trademarks, patents and other			369						(165)						204
Franchise rights			377						(68)						309
Trade name			116						(42)						74
Licenses			90						(46)						44
Amortizable intangible assets			$	9,331					$	(5,355)					$	3,976
Indefinite-lived intangible assets			5						—						5
Total Intangible Assets			$	9,336					$	(5,355)					$	3,981
December 31, 2025:
Capitalized software			$	6,810					$	(4,593)					$	2,217
Customer relationships			1,438						(293)						1,145
Trademarks, patents and other			368						(154)						214
Franchise rights			382						(68)						314
Trade name			116						(39)						77
Licenses			88						(39)						49
Amortizable intangible assets			$	9,202					$	(5,186)					$	4,016
Indefinite-lived intangible assets			5						—						5
Total Intangible Assets			$	9,207					$	(5,186)					$	4,021

Impairment tests for finite-lived intangible assets are performed when a triggering event occurs that may indicate that the carrying value of the intangible asset may not be recoverable. For the three months ended March 31, 2026, there were no impairment charges for finite-lived intangible assets.

For the three months ended March 31, 2025, we recorded an impairment charge of $32 million ($24 million after tax) within Other expenses in our statement of consolidated income. This charge represented software impairment within our digital businesses.

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NOTE 8. 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.

As of March 31, 2026, we had $1.9 billion of additional leases which had not commenced and are expected to commence later in 2026 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.

The components of lease expense for the three months ended March 31, 2026 and 2025 were as follows (in millions):

			Three Months Ended March 31,
			2026						2025
Operating lease costs			$	244					$	231
Finance lease costs:
Amortization of assets			44						35
Interest on lease obligations			11						7
Total finance lease costs			55						42
Variable lease costs			102						72
Short-term lease costs			333						212
Total lease costs			$	734					$	557

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NOTE 9. DEBT AND FINANCING ARRANGEMENTS

The carrying value of our outstanding debt obligations as of March 31, 2026 and December 31, 2025 consisted of the following (in millions):

			Principal Amount												Carrying Value
						Maturity						2026						2025
Fixed-rate senior notes:
2.400% senior notes			$	500					2026						$	500					$	500
3.050% senior notes			1,000						2027						998						998
3.400% senior notes			750						2029						748						748
2.500% senior notes			400						2029						399						399
4.450% senior notes			750						2030						747						747
4.650% senior notes			500						2030						498						498
4.875% senior notes			900						2033						896						896
5.150% senior notes			900						2034						894						894
5.250% senior notes			1,250						2035						1,240						1,240
6.200% senior notes			1,500						2038						1,487						1,487
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						493
3.750% senior notes			1,150						2047						1,138						1,138
4.250% senior notes			750						2049						744						744
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						1,082						1,083
5.500% senior notes			1,100						2054						1,087						1,087
5.950% senior notes			1,250						2055						1,232						1,232
5.600% senior notes			600						2064						590						590
6.050% senior notes			1,000						2065						985						985
Floating-rate senior notes:
Floating-rate senior notes			1,883						2049-2075						1,861						1,863
Debentures:
7.620% debentures			276						2030						279						279
Pound Sterling notes:
5.500% notes			88						2031						87						89
5.125% notes			600						2050						571						585
Euro senior notes:
1.000% senior notes			575						2028						574						587
1.500% senior notes			575						2032						573						586
Finance lease obligations			1,085						2026-2118						1,085						781
Facility notes, bonds and other			321						2026-2045						321						321
Total debt			$	24,628											$	24,386					$	24,127
Less: current maturities															(637)						(608)
Long-term debt															$	23,749					$	23,519

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 March 31, 2026 or December 31, 2025. The amount of commercial paper outstanding under these programs in the remainder of 2026 is expected to fluctuate.

Debt Classification

We have classified certain floating-rate senior notes that are redeemable at the option of the note holder as long-term debt in our consolidated balance sheets, due to our intent and ability to refinance the debt if the put option is exercised.

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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, expires on November 23, 2026 and bears interest at a periodic fixed rate equal to the term Secured Overnight Financing Rate ("SOFR"), plus an applicable margin based on our then-current credit rating. The second agreement provides revolving credit facilities of $2.0 billion, expires on November 25, 2029 and bears 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 March 31, 2026 for both agreements was 0.70%. 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 March 31, 2026 or December 31, 2025. For further discussion see note 9 to the audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.

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. We were in compliance with these financial covenants for all periods presented.

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 $22.4 and $22.8 billion as of March 31, 2026 and December 31, 2025, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of all of our debt instruments.

Other Arrangements

During the three months ended March 31,2026, we entered into three new aircraft leases under an existing financing arrangement. The structure of this arrangement required parent company guarantees of approximately $1.8 billion.

In 2025 we entered into a real estate transaction for the development of a facility and recognized a financing obligation, which will continue to increase as construction progresses. As of March 31, 2026 and December 31, 2025 we recognized $164 and $132 million, respectively, within Other Non-Current Liabilities in our consolidated balance sheets. For further discussion see note 9 to the audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.

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NOTE 10. 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.

In December 2025, Malone et al. v. United Parcel Service Inc. (OH) was certified as a class action in federal court in the Eastern District of Pennsylvania. The plaintiffs filed this action alleging entitlement to overtime under the Pennsylvania Minimum Wage Act, seeking allegedly unpaid wages. We are vigorously defending ourselves in this matter. We believe that we have 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.

On November 4, 2025, one of our cargo aircraft was involved in an accident at Louisville Muhammad Ali International Airport. We maintain industry-standard insurance coverage for this incident and are continuing to assess the impact on the environment and our business. As of March 31, 2026 and December 31, 2025, we recorded immaterial contingencies related to environmental remediation and other claims in Other current liabilities with corresponding insurance recoveries in Accounts receivable, net in our consolidated balance sheets. In addition, we are subject to a number of claims, litigation and other proceedings arising out of this incident. It is reasonably possible the resolution of these matters could result in additional charges and related insurance recoveries in future periods, the amount of which cannot be reasonably estimated at this time. We do not believe the financial impact will be material to our results of operations or liquidity.

On February 20, 2026, the U.S. Supreme Court (the "Court") issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). The Court’s ruling did not address the manner or timing of any potential IEEPA tariff refunds. From time to time, we act as an intermediary for cross‑border shipments and, in certain circumstances, may pay customs tariffs, duties, taxes or other governmental charges on behalf of customers. Such

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amounts are generally passed through to customers in accordance with our contract terms and may be reflected as outstanding receivables in our consolidated balance sheets. On February 24, 2026, U.S. Customs and Border Protection ("CBP") stopped collecting IEEPA tariffs and we stopped paying IEEPA tariffs for new entries. On April 20, 2026, CBP launched Phase 1 of an administrative IEEPA tariff refund process. UPS has begun to file refund requests for the approximately $500 million of IEEPA tariffs paid for entries eligible for refund under this Phase. This Phase does not presently cover all types of entries for which IEEPA tariffs were paid. Subsequent phases of the IEEPA tariff refund process may become available, but additional details are not known at this time.

The future impact resulting from this matter will continue to be influenced by multiple factors, including the interpretation and implementation of the Supreme Court’s decision by other courts, potential developments at CBP and other regulatory authorities, as well as potential legislative responses, related litigation and the recoverability of receivables from customers. Any tariffs previously paid that are determined to be recoverable from CBP on behalf of our customers or amounts refundable to customers for tariffs previously paid will be recognized when realization is probable and the amounts can be reasonably estimated. As of March 31, 2026, no amounts related to potential tariff refunds or amounts refundable to customers for tariffs previously paid have been recognized.

We will continue to monitor and evaluate the financial statement impact of related developments.

We are a party to various other matters that arose in the normal course of business. These include disputes with government authorities in various jurisdictions over the imposition of duties, fines, taxes and assessments from time to time. We are vigorously defending ourselves and believe that we have a number of meritorious defenses in these disputes. There are also unresolved questions of law that could be important to the ultimate resolution of these disputes. Accordingly, we are not able to estimate a possible loss or range of losses that may result from these disputes or to determine whether such losses, if any, would have a material impact on our financial condition, results of operations or liquidity.

We do not believe that the eventual resolution of any other matters (either individually or in the aggregate), including any reasonably possible losses in excess of current accruals, will have a material impact on our operations or financial condition.

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NOTE 11. 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 each have a $0.01 par value and, as of March 31, 2026, 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 March 31, 2026, no preferred shares had been issued.

The following is a rollforward of our common stock, additional paid-in capital, retained earnings and non-controlling interests accounts for the three months ended March 31, 2026 and 2025 (in millions):

									Three Months Ended March 31,
															2026						2025
Class A Common Stock:
Balance at beginning of period															$	1					$	2
Class A shares issued at end of period															$	1					$	2
Class B Common Stock:
Balance at beginning of period															$	8					$	7
Class B shares issued at end of period															$	8					$	7
Additional Paid-In Capital:
Balance at beginning of period															$	275					$	136
Stock award plans															40						39
Common stock purchases(1)															—						(262)
Common stock issuances															65						96
Other															2						(9)
Balance at end of period															$	382					$	—
Retained Earnings:
Balance at beginning of period															$	20,151					$	20,882
Net income															864						1,187
Dividends ($1.64 per share for both the three months ended March 31, 2026 and 2025) (2)															(1,393)						(1,392)
Common stock purchases(1)															—						(738)
Balance at end of period															$	19,622					$	19,939
Noncontrolling Interests:
Balance at beginning of period															$	28					$	25
Change in non-controlling interest															—						(1)
Balance at end of period															$	28					$	24

(1) In the three months ended March 31, 2025 we repurchased 8.6 million shares of class B common stock for $1.0 billion under our 2023 share repurchase authorization.

(2) The dividend per share amount is the same for both class A and class B common stock. Dividends include $41 and $44 million for the three months ended March 31, 2026 and 2025, respectively, that were settled in shares of class A common stock.

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The activity in accumulated other comprehensive income (loss) ("AOCI") was as follows (in millions):

			Three Months Ended March 31,
			2026						2025
Foreign Currency Translation Loss, Net of Tax:
Balance at beginning of period			$	(1,058)					$	(1,586)
Translation adjustment (net of tax effect of $(5) and $(1) for the three months ended March 31, 2026 and 2025, respectively)			(151)						129
Balance at end of period			(1,209)						(1,457)
Unrealized (Loss) Gain on Cash Flow Hedges, Net of Tax:
Balance at beginning of period			(253)						91
Current period changes in fair value (net of tax effect of $20 and $(30) for the three months ended March 31, 2026 and 2025, respectively)			62						(96)
Reclassification to earnings (net of tax effect of $6 and $(13) for the three months ended March 31, 2026 and 2025, respectively)			19						(43)
Balance at end of period			(172)						(48)
Unrecognized Pension and Postretirement Benefit Costs, Net of Tax:
Balance at beginning of period			(2,897)						(2,813)
Reclassification to earnings (net of tax effect of $9 and $9 for the three months ended March 31, 2026 and 2025, respectively)			28						30
Balance at end of period			(2,869)						(2,783)
Other activity:
Balance at beginning of period			—						(1)
Current period other activity			—						1
Accumulated other comprehensive loss at end of period			$	(4,250)					$	(4,288)

Detail of the gains (losses) reclassified from accumulated other comprehensive loss to the statements of consolidated income was as follows (in millions):

			Three Months Ended March 31,																		Affected Line Item in
			2026						2025																		the Income Statement
Unrealized (Loss) Gain on Cash Flow Hedges:
Foreign currency exchange contracts			$	(24)					$	57																	Revenue
Other			(1)						(1)																		Interest expense
Income tax (expense) benefit			6						(13)																		Income tax expense
Impact on net income			(19)						43																		Net income
Unrecognized Pension and Postretirement Benefit Costs:
Prior service costs			(37)						(39)																		Investment income and other
Income tax (expense) benefit			9						9																		Income tax expense
Impact on net income			(28)						(30)																		Net income
Total amount reclassified for the period			$	(47)					$	13																	Net income

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NOTE 12. 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 SCS. 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. SCS 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.

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 an origin or destination outside the United States. We offer a wide selection of guaranteed day- and time-definite international transportation services supported by our brokerage capabilities that facilitate cross‑border clearance for international shipments. International Package includes our operations in Europe, Middle East and Africa ("EMEA"), Canada and Latin America (together "Americas") and Asia.

SCS

SCS includes our Forwarding, Logistics, digital and other businesses. Our Forwarding and Logistics businesses operate globally, offering international air and ocean freight forwarding, customs brokerage, mail services, healthcare logistics, 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 chief operating decision maker ("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 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 and benefits for the Domestic Package segment and compensation, benefits and purchased transportation for the International Package segment, 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.

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 first quarter of 2026.

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.

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Segment results of operations for the three months ended March 31, 2026 and 2025 were as follows (in millions):

									Three Months Ended March 31,
												2026						2025
U.S. Domestic Package:
Revenue															$	14,125					$	14,460
Less:
Compensation															4,774						5,098
Benefits															4,101						4,169
Other segment items(1)															4,735						4,214
U.S. Domestic Operating profit/(loss)															$	515					$	979
International Package:
Revenue															$	4,540					$	4,373
Less:
Compensation and benefits															1,036						957
Purchased transportation															949						905
Other segment items(1)															2,008						1,870
International Operating profit/(loss)															$	547					$	641
Reconciliation of revenue:
Total U.S. Domestic Package and International Package Revenue															$	18,665					$	18,833
Other revenues(2)															2,537						2,713
Total Consolidated Revenue															$	21,202					$	21,546
Reconciliation of segment operating profit to income before income taxes:
Total U.S. Domestic Package and International Package Operating profit/(loss)															$	1,062					$	1,620
Other profit/(loss)(2)															205						46
Other pension income (expense)															67						37
Investment income and other															56						42
Interest expense															(266)						(222)
Total Consolidated Income Before Income Taxes															$	1,124					$	1,523

(1) Other segment items include purchased transportation (applicable only to our U.S. Domestic Package 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.

The amounts of depreciation and amortization by reportable segment disclosed for the three months ended March 31, 2026 and 2025 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 March 31,
												2026						2025
Depreciation and amortization
U.S. Domestic Package															$	683					$	623
International Package															194						202
Other depreciation and amortization(1)															108						87
Consolidated Depreciation and Amortization															$	985					$	912

(1) Depreciation and amortization from segments below the quantitative thresholds are attributable to operating segments which provide supply chain solutions.

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Assets by reportable segment as of March 31, 2026 and December 31, 2025 consisted of the following (in millions):

			2026						2025
Segment Assets
U.S. Domestic Package			$	37,667					$	38,359
International Package			18,079						18,214
Other assets(1)			12,356						12,693
Unallocated assets(2)			3,707						3,824
Consolidated Assets			$	71,809					$	73,090

(1) Assets from segments below the quantitative thresholds are attributable to operating segments which provide supply chain solutions.

(2) Unallocated assets consist primarily of cash held by our centralized investment entity.

NOTE 13. 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 months ended March 31, 2026 and 2025 (in millions, except per share amounts):

									Three Months Ended March 31,
												2026						2025
Numerator:
Net income															$	864					$	1,187
Denominator:
Weighted-average shares															849						849
Vested portion of restricted shares															1						1
Denominator for basic earnings per share															850						850
Denominator for diluted earnings per share															850						850
Basic earnings per share**(1)**															$	1.02					$	1.40
Diluted earnings per share**(1)**															$	1.02					$	1.40

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

Diluted earnings per share for the three months ended March 31, 2026 and 2025 excluded the effect of 4.6 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.

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NOTE 14. DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT

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.

Outstanding Positions

As of March 31, 2026 and December 31, 2025, the notional amounts of our outstanding derivative positions were as follows (in millions):

						March 31, 2026						December 31, 2025
Currency hedges:
Euro			EUR			2,887						2,764
British Pound Sterling			GBP			433						410
Canadian Dollar			CAD			1,546						1,574
Hong Kong Dollar			HKD			4,767						4,317
Chinese Renminbi			CNH			7,236						6,743

As of March 31, 2026 and December 31, 2025, 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

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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 March 31, 2026 and December 31, 2025 (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									March 31, 2026						December 31, 2025						March 31, 2026						December 31, 2025
Derivatives designated as hedges:
Foreign currency exchange contracts						Other current assets						Level 2						$	16					$	5					$	5					$	—
Foreign currency exchange contracts						Other non-current assets						Level 2						28						4						6						—
Total Asset Derivatives																		$	44					$	9					$	11					$	—

												Fair Value Hierarchy Level						Gross Amounts Presented in Consolidated Balance Sheets												Net Amounts if Right of Offset had been Applied
Liability Derivatives						Balance Sheet Location									March 31, 2026						December 31, 2025						March 31, 2026						December 31, 2025
Derivatives designated as hedges:
Foreign currency exchange contracts						Other current liabilities						Level 2						$	51					$	83					$	40					$	78
Foreign currency exchange contracts						Other non-current liabilities						Level 2						51						91						29						87
Total Liability Derivatives																		$	102					$	174					$	69					$	165

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.

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 March 31, 2026 and December 31, 2025 (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
			March 31, 2026						March 31, 2026						December 31, 2025						December 31, 2025
Long-term debt and finance leases									$	279					$	3					$	279					$	3

Income Statement and AOCI Recognition of Designated Hedges

The following table indicates the amount of gains (losses) that were recognized in Revenue in our statements of consolidated income for cash flow hedges, for the three months ended March 31, 2026 and 2025 (in millions):

						Three Months Ended March 31,
						2026									2025
Gain or (loss) on cash flow hedging relationships:
Foreign currency exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income						$	(24)																	$	57
Total amount of income presented in the statement of income						$	(24)																	$	57

The following table indicates the amount of gains (losses) that were recognized in AOCI for the three months ended March 31, 2026 and 2025 for those derivatives designated as cash flow hedges (in millions):

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Derivative Instruments in Cash Flow Hedging Relationships						Amount of Gain (Loss) Recognized in AOCI on Derivatives
			2026						2025
Three Months Ended March 31:
Foreign currency exchange contracts						$	82					$	(126)
Total						$	82					$	(126)

As of March 31, 2026, there were $41 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 March 31, 2027. 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 months ended March 31, 2026 and 2025 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
			2026						2025
Three Months Ended March 31:
Foreign currency denominated debt						$	43					$	(81)
Total						$	43					$	(81)

NOTE 15. INCOME TAXES

Our effective tax rate for the three months ended March 31, 2026, increased to 23.1% compared to 22.1% in the same period of 2025. The year-over-year increase in our effective tax rate was mainly driven by the 2025 valuation allowance release described below. In addition, unfavorable changes in our jurisdictional earnings mix are being offset by favorable changes from the One Big Beautiful Bill Act ("OBBBA") and creditable foreign taxes in the U.S.

As of December 31, 2024, we maintained a full valuation allowance of $105 million against our U.S. capital loss deferred tax asset. During the first quarter of 2025, we released $10 million of this valuation allowance and by the third quarter of 2025, we released all of this valuation allowance as a result of net capital gains from property sales transactions.

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NOTE 16. 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 months ended March 31, 2026 and 2025 (in millions):

									Three Months Ended March 31,
															2026						2025
Transformation Strategy Costs:
Compensation and benefits															$	31					$	24
Total Other expenses															24						34
Total Transformation Strategy Costs															$	55					$	58
Income Tax Benefit from Transformation Strategy Costs (1)															(13)						(14)
After-Tax Transformation Strategy Costs															$	42					$	44

(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 $51 and $117 million were included in Other current liabilities in our consolidated balance sheets as of March 31, 2026 and December 31, 2025, respectively. During the three months ended March 31, 2026, we made payments of $91 million and recognized additional separation costs of $25 million.

In the first quarter of 2026, we offered a voluntary separation program, the Driver Choice Program, to all full-time drivers in the United States. The program election window closed in the first quarter of 2026, and final acceptances were determined and communicated to impacted employees in the second quarter of 2026. As a result of this program, we expect to record approximately $1.2 billion in separation costs and related payroll taxes in 2026, the majority of which will be recognized in the second quarter.

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 months ended March 31, 2026 and 2025 (in millions):

			Three Months Ended March 31,
			2026						2025
Transformation Strategy Costs:
Transformation 2.0			$	—					$	16
Fit to Serve			—						19
Network Reconfiguration and Efficiency Reimagined			55						23
Total Transformation Strategy Costs			$	55					$	58

Our transformation strategy activities have spanned several years and are designed to fundamentally change the spans and layers of our organization structure, processes, technologies and the composition of our business portfolio. Our transformation strategy includes initiatives within our Transformation 2.0, Fit to Serve, and Network Reconfiguration and Efficiency Reimagined programs. Previously completed initiatives within Transformation 2.0 and Fit to Serve 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, 2025.

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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 continue to 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 closed daily operations at 23 leased and owned buildings, 22 of which have been permanently closed during the first three months of 2026. We have identified 27 additional buildings for closure in 2026. We will continue to review expected changes in volume in our integrated air and ground network and may identify additional workforce reductions and buildings for closure. As of March 31, 2026, we had incurred program costs to date of $599 million, including $55 million in 2026. These initiatives are expected to conclude by 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 three months ended March 31, 2026, we recorded $47 million in gains on sales of properties. We expect the costs and benefits associated with these actions may increase should we determine to close additional buildings.

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