filings.toolsItem 1. Financial Statements
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Item 1. Financial Statements
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2026 (unaudited) and December 31, 2025 (in millions)
| June 30, 2026 | December 31, 2025 | ||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 4,653 | $ | 5,887 | |||||||
| Accounts receivable, Net | 10,710 | 11,209 | |||||||||
| Other current assets | 2,182 | 1,949 | |||||||||
| Total Current Assets | 17,545 | 19,045 | |||||||||
| Property, Plant and Equipment, Net | 37,894 | 37,731 | |||||||||
| Operating Lease Right-Of-Use Assets | 4,016 | 4,263 | |||||||||
| Goodwill | 5,770 | 5,837 | |||||||||
| Intangible Assets, Net | 3,954 | 4,021 | |||||||||
| Deferred Income Tax Assets | 155 | 140 | |||||||||
| Other Non-Current Assets | 1,933 | 2,053 | |||||||||
| Total Assets | $ | 71,267 | $ | 73,090 | |||||||
| LIABILITIES AND SHAREOWNERS' EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Current maturities of long-term debt and finance leases | $ | 634 | $ | 608 | |||||||
| Current maturities of operating leases | 729 | 763 | |||||||||
| Accounts payable | 5,976 | 6,633 | |||||||||
| Accrued wages and withholdings | 3,383 | 3,715 | |||||||||
| Self-insurance reserves | 1,123 | 1,137 | |||||||||
| Accrued group welfare and retirement plan contributions | 1,073 | 1,389 | |||||||||
| Other current liabilities | 1,963 | 1,375 | |||||||||
| Total Current Liabilities | 14,881 | 15,620 | |||||||||
| Long-Term Debt and Finance Leases | 23,850 | 23,519 | |||||||||
| Non-Current Operating Leases | 3,460 | 3,700 | |||||||||
| Pension and Postretirement Benefit Obligations | 6,341 | 6,567 | |||||||||
| Deferred Income Tax Liabilities | 3,882 | 3,690 | |||||||||
| Other Non-Current Liabilities | 3,754 | 3,739 | |||||||||
| Shareowners' Equity: | |||||||||||
| Class A common stock (102 and 106 shares issued in 2026 and 2025, respectively) | 1 | 1 | |||||||||
| Class B common stock (749 and 743 shares issued in 2026 and 2025, respectively) | 8 | 8 | |||||||||
| Additional paid-in capital | 482 | 275 | |||||||||
| Retained earnings | 18,830 | 20,151 | |||||||||
| Accumulated other comprehensive loss | (4,254) | (4,208) | |||||||||
| Deferred compensation obligations | 3 | 5 | |||||||||
| Less: Treasury stock (0.1 shares in 2026 and 2025) | (3) | (5) | |||||||||
| Total Equity for Controlling Interests | 15,067 | 16,227 | |||||||||
| Noncontrolling interests | 32 | 28 | |||||||||
| Total Shareowners' Equity | 15,099 | 16,255 | |||||||||
| Total Liabilities and Shareowners' Equity | $ | 71,267 | $ | 73,090 |
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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | $ | 22,834 | $ | 21,221 | $ | 44,036 | $ | 42,767 | |||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||
| Compensation and benefits | 12,654 | 11,626 | 24,199 | 23,453 | |||||||||||||||||||
| Repairs and maintenance | 789 | 755 | 1,581 | 1,487 | |||||||||||||||||||
| Depreciation and amortization | 980 | 936 | 1,965 | 1,848 | |||||||||||||||||||
| Purchased transportation | 3,187 | 2,522 | 5,951 | 5,252 | |||||||||||||||||||
| Fuel | 1,697 | 1,058 | 2,780 | 2,116 | |||||||||||||||||||
| Other occupancy | 557 | 544 | 1,231 | 1,151 | |||||||||||||||||||
| Other expenses | 2,040 | 1,958 | 4,132 | 3,972 | |||||||||||||||||||
| Total Operating Expenses | 21,904 | 19,399 | 41,839 | 39,279 | |||||||||||||||||||
| Operating Profit | 930 | 1,822 | 2,197 | 3,488 | |||||||||||||||||||
| Other Income (Expense): | |||||||||||||||||||||||
| Investment income and other | 103 | 78 | 226 | 157 | |||||||||||||||||||
| Interest expense | (272) | (238) | (538) | (460) | |||||||||||||||||||
| Total Other Income (Expense) | (169) | (160) | (312) | (303) | |||||||||||||||||||
| Income Before Income Taxes | 761 | 1,662 | 1,885 | 3,185 | |||||||||||||||||||
| Income Tax Expense | 157 | 379 | 417 | 715 | |||||||||||||||||||
| Net Income | $ | 604 | $ | 1,283 | $ | 1,468 | $ | 2,470 | |||||||||||||||
| Basic Earnings Per Share | $ | 0.71 | $ | 1.51 | $ | 1.73 | $ | 2.91 | |||||||||||||||
| Diluted Earnings Per Share | $ | 0.71 | $ | 1.51 | $ | 1.73 | $ | 2.91 | |||||||||||||||
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(In millions)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net Income | $ | 604 | $ | 1,283 | $ | 1,468 | $ | 2,470 | |||||||||||||||
| Change in foreign currency translation adjustment, net of tax | (75) | 372 | (226) | 501 | |||||||||||||||||||
| Change in unrealized gain (loss) on cash flow hedges, net of tax | 43 | (289) | 124 | (428) | |||||||||||||||||||
| Change in unrecognized pension and postretirement benefit costs, net of tax | 28 | 30 | 56 | 60 | |||||||||||||||||||
| Change in other | — | — | — | 1 | |||||||||||||||||||
| Comprehensive Income | $ | 600 | $ | 1,396 | $ | 1,422 | $ | 2,604 |
See notes to unaudited, consolidated financial statements.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions, unaudited)
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash Flows From Operating Activities: | |||||||||||
| Net income | $ | 1,468 | $ | 2,470 | |||||||
| Adjustments to reconcile net income to net cash from operating activities: | |||||||||||
| Depreciation and amortization | 1,965 | 1,848 | |||||||||
| Pension and postretirement benefit expense | 429 | 514 | |||||||||
| Pension and postretirement benefit contributions | (581) | (921) | |||||||||
| Self-insurance reserves | 105 | 169 | |||||||||
| Deferred tax (benefit) expense | 144 | (84) | |||||||||
| Stock compensation expense | 58 | 16 | |||||||||
| Other (gains) losses | 90 | 64 | |||||||||
| Changes in assets and liabilities, net of effects of acquisitions: | |||||||||||
| Accounts receivable | 330 | 540 | |||||||||
| Other assets | (272) | (140) | |||||||||
| Accounts payable | (302) | (442) | |||||||||
| Accrued wages and withholdings | (306) | (447) | |||||||||
| Other liabilities | (44) | (909) | |||||||||
| Other operating activities | (1) | (12) | |||||||||
| Net cash from operating activities | 3,083 | 2,666 | |||||||||
| Cash Flows From Investing Activities: | |||||||||||
| Capital expenditures | (1,724) | (1,999) | |||||||||
| Proceeds from disposal of businesses, property, plant and equipment | 198 | 91 | |||||||||
| Purchases of marketable securities | — | (90) | |||||||||
| Sales and maturities of marketable securities | — | 205 | |||||||||
| Acquisitions, net of cash acquired | — | (479) | |||||||||
| Other investing activities | 16 | (6) | |||||||||
| Net cash used in investing activities | (1,510) | (2,278) | |||||||||
| Cash Flows From Financing Activities: | |||||||||||
| Proceeds from long-term borrowings | — | 4,153 | |||||||||
| Repayments of long-term borrowings | (85) | (1,062) | |||||||||
| Purchases of common stock | — | (1,000) | |||||||||
| Issuances of common stock | 60 | 102 | |||||||||
| Dividends | (2,708) | (2,697) | |||||||||
| Other financing activities | (24) | (15) | |||||||||
| Net cash used in financing activities | (2,757) | (519) | |||||||||
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | (50) | 213 | |||||||||
| Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | (1,234) | 82 | |||||||||
| Cash, Cash Equivalents and Restricted Cash: | |||||||||||
| Beginning of period | 5,887 | 6,112 | |||||||||
| End of period | $ | 4,653 | $ | 6,194 |
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 June 30, 2026, and our results of operations and cash flows for the three and six months ended June 30, 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 "six months ended", "year-to-date period" and "first half" refer to the six months ended June 30.
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 June 30, 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 six months ended June 30, 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 June 30, 2026 and December 31, 2025, suppliers sold $365 and $435 million, respectively, of our outstanding payment obligations during the relevant period.
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):
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash paid for amounts included in measurement of obligations: | |||||||||||
| Operating cash flows from operating leases | $ | 501 | $ | 472 | |||||||
| Operating cash flows from finance leases | 20 | 7 | |||||||||
| Financing cash flows from finance leases | 80 | 58 | |||||||||
| Noncash transactions: | |||||||||||
| Accrued capital expenditures | $ | 255 | $ | 279 | |||||||
| Property, plant and equipment recognized during the construction period of build-to-suit financing arrangement | 72 | 30 | |||||||||
| Right-of-use assets obtained in exchange for operating lease obligations | 205 | 107 | |||||||||
| Right-of-use assets obtained in exchange for finance lease obligations | 631 | 236 |
During the six months ended June 30, 2026 and 2025, aircraft finance lease arrangements resulted in $376 and $117 million, respectively, of noncash investing and financing activities.
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.
In May 2026, the FASB issued an ASU on accounting for and disclosure of environmental credits and credit obligations. This ASU provides recognition, measurement, presentation and disclosure requirements for all entities that generate, purchase, or receive environmental credits or have a regulatory compliance obligation that may be settled with environmental credits. This ASU becomes effective for us beginning in the first quarter of 2028 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, June 30, 2026, 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") 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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Next Day Air | $ | 2,578 | $ | 2,293 | $ | 4,932 | $ | 4,654 | |||||||||||||||
| Deferred | 1,102 | 1,024 | 2,147 | 2,073 | |||||||||||||||||||
| Ground | 10,908 | 10,484 | 21,346 | 21,193 | |||||||||||||||||||
| Cargo and Other | 342 | 282 | 630 | 623 | |||||||||||||||||||
| U.S. Domestic Package | 14,930 | 14,083 | 29,055 | 28,543 | |||||||||||||||||||
| Domestic | 869 | 830 | 1,704 | 1,601 | |||||||||||||||||||
| Export | 3,962 | 3,484 | 7,510 | 6,928 | |||||||||||||||||||
| Cargo and Other | 213 | 171 | 370 | 329 | |||||||||||||||||||
| International Package | 5,044 | 4,485 | 9,584 | 8,858 | |||||||||||||||||||
| Forwarding | 791 | 732 | 1,447 | 1,458 | |||||||||||||||||||
| Logistics | 1,540 | 1,476 | 2,949 | 3,048 | |||||||||||||||||||
| Other | 529 | 445 | 1,001 | 860 | |||||||||||||||||||
| Supply Chain Solutions ("SCS") | 2,860 | 2,653 | 5,397 | 5,366 | |||||||||||||||||||
| Consolidated revenue | $ | 22,834 | $ | 21,221 | $ | 44,036 | $ | 42,767 |
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 and, as of June 30, 2026, $410 million was available. 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 sheets. As of June 30, 2026 and December 31, 2025 cash collections of $109 and $59 million, respectively, 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 June 30, 2026 and December 31, 2025, accounts receivable outstanding under our factoring program were $450 and $491 million, respectively.
Our allowance for credit losses as of June 30, 2026 and December 31, 2025 was $213 and $180 million, respectively. Amounts for credit losses charged to expense, before recoveries, during the three months ended June 30, 2026 and 2025 were $102 and $103 million, respectively, and during the six months ended June 30, 2026 and 2025 were $201 and $172 million, respectively.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Contract Assets and Liabilities
Contract assets were $289 and $275 million as of June 30, 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 Liabilities were $43 and $49 million as of June 30, 2026 and December 31, 2025, respectively. Short-term contract liabilities were immaterial as of June 30, 2026 and December 31, 2025.
NOTE 4. STOCK-BASED COMPENSATION
Pre-tax compensation expense (benefit) for equity-classified stock compensation awards recorded within Compensation and benefits in our statements of consolidated income for the three months ended June 30, 2026 and 2025 was $34 and $(5) million, respectively, and for the six months ended June 30, 2026 and 2025 was $58 and $16 million, respectively.
Our UPS Management Incentive Award Program ("MIP") awards are 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 awards are reflected as activity in Accrued wages and withholdings in our statements of consolidated cash flows for the six months ended June 30, 2026 and 2025, respectively.
During the six months ended June 30, 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 Program ("LTIP")
On May 6, 2026, the Compensation and Human Capital Committee of the Board (the "Compensation Committee") approved awards under the Company's 2026 LTIP award. The 2026 LTIP award contains both a restricted stock unit ("RSU") component and a restricted performance unit ("RPU") component. RPU performance targets are equally weighted between adjusted revenue growth and non-GAAP adjusted 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 based on Company performance and subject to modification based on the Company's total shareholder return relative to the Standard & Poor's 500 Index. We determined the grant date fair value of the RPUs using a Monte Carlo model. Each target RPU awarded on May 6, 2026 was valued at $106.08. RSUs were valued using the closing NYSE price on the May 6, 2026 grant date of $99.89, 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).
The weighted-average assumptions used and the weighted-average fair values of the LTIP RPU awards granted during the six months ended June 30, 2026 and 2025 are as follows:
| 2026 | 2025 | ||||||||||
| Risk-free interest rate | 3.88 | % | 3.86 | % | |||||||
| Expected volatility | 28.90 | % | 28.39 | % | |||||||
| Weighted-average fair value of units granted | $ | 106.08 | $ | 94.52 | |||||||
| Share payout | 106.20 | % | 98.13 | % |
There is no expected dividend yield as RPUs earn dividend equivalents.
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 during the six months ended June 30, 2026 and 2025 are as follows:
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| 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 |
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of June 30, 2026 and December 31, 2025 consisted of the following (in millions):
| 2026 | 2025 | ||||||||||
| Vehicles | $ | 11,735 | $ | 11,787 | |||||||
| Aircraft(1) | 24,605 | 24,149 | |||||||||
| Land | 2,027 | 2,046 | |||||||||
| Buildings | 6,969 | 6,906 | |||||||||
| Building and leasehold improvements | 5,711 | 5,686 | |||||||||
| Plant equipment | 20,403 | 19,817 | |||||||||
| Technology equipment | 2,694 | 2,635 | |||||||||
| Construction-in-progress | 2,320 | 2,136 | |||||||||
| 76,464 | 75,162 | ||||||||||
| Less: Accumulated depreciation and amortization(1) | (38,570) | (37,431) | |||||||||
| Property, Plant and Equipment, Net | $ | 37,894 | $ | 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 six months ended June 30, 2026 and 2025 was $1.6 and $1.5 billion, respectively. As of June 30, 2026 and December 31, 2025, we determined that $74 and $54 million, respectively, of assets within our U.S. Domestic Package segment met the criteria to be classified as held for sale and, as a result, are presented within Other current assets in our consolidated balance sheets.
Network Reconfiguration and Efficiency Reimagined
During the six months ended June 30, 2026, as part of our Network Reconfiguration and Efficiency Reimagined initiatives, we closed 45 leased and owned buildings, 44 of which have been permanently closed. We will continue to review 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 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.
Disposals
For the three months ended June 30, 2026 and 2025, we recorded $101 and $20 million, respectively, and for the six months ended June 30, 2026 and 2025, we recorded $168 and $55 million, respectively, primarily related to gains on sales of properties and aircraft parts. These gains were primarily within our U.S. Domestic Package segment and are included within Other expenses in our unaudited, statements of consolidated income. For additional information, see note 16.
Impairment
There were no material impairment charges to property, plant and equipment during the six months ended June 30, 2026 or 2025. We will continue to monitor our long-lived asset groups for impairment.
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 and six months ended June 30, 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 June 30: | |||||||||||||||||||||||||||||||||||
| Service cost | $ | 267 | $ | 282 | $ | 4 | $ | 4 | $ | 9 | $ | 9 | |||||||||||||||||||||||
| Interest cost | 700 | 680 | 25 | 27 | 17 | 16 | |||||||||||||||||||||||||||||
| Expected return on assets | (822) | (778) | (1) | (2) | (22) | (21) | |||||||||||||||||||||||||||||
| Amortization of prior service cost | 37 | 39 | — | — | — | 1 | |||||||||||||||||||||||||||||
| Net periodic benefit cost | $ | 182 | $ | 223 | $ | 28 | $ | 29 | $ | 4 | $ | 5 | |||||||||||||||||||||||
| U.S. Pension Benefits | U.S. Postretirement Medical Benefits | International Pension Benefits | |||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||
| Six Months Ended June 30: | |||||||||||||||||||||||||||||||||||
| Service cost | $ | 536 | $ | 563 | $ | 8 | $ | 8 | $ | 18 | $ | 18 | |||||||||||||||||||||||
| Interest cost | 1,400 | 1,359 | 50 | 54 | 34 | 32 | |||||||||||||||||||||||||||||
| Expected return on assets | (1,645) | (1,555) | (2) | (3) | (44) | (41) | |||||||||||||||||||||||||||||
| Amortization of prior service cost | 74 | 78 | — | — | — | 1 | |||||||||||||||||||||||||||||
| Net periodic benefit cost | $ | 365 | $ | 445 | $ | 56 | $ | 59 | $ | 8 | $ | 10 |
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 six months ended June 30, 2026, we contributed $434 million and $147 million to our company-sponsored pension and U.S. postretirement medical benefit plans, respectively. We expect to contribute approximately $693 million and $40 million over the remainder of the year to our company-sponsored pension and U.S. postretirement medical benefit plans, respectively.
Multiemployer Benefit Plans
We contribute to a number of multiemployer defined benefit and health and welfare plans under the terms of collective bargaining agreements that cover our union-represented employees. Our current collective bargaining agreements set forth the contribution rates to the plans that we participate in, and we are in compliance with these contribution rates.
As of June 30, 2026 and December 31, 2025, we had $790 and $795 million, respectively, recorded in Other Non-Current Liabilities in our consolidated balance sheets and $9 million as of both June 30, 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 36 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 June 30, 2026 and December 31, 2025 was $654 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.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.
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. On June 26, 2026, the mechanics ratified a contract extension that will make the contract amendable on November 1, 2029. 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.
NOTE 7. GOODWILL AND INTANGIBLE ASSETS
The following table indicates the allocation of goodwill as of June 30, 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 | — | (12) | (55) | (67) | |||||||||||||||||||
| Balance as of June 30, 2026 | $ | 847 | $ | 584 | $ | 4,339 | $ | 5,770 |
Changes in goodwill during the six months ended June 30, 2026 resulted from:
-
The impact of U.S. Dollar exchange rate movements on non‑U.S. Dollar goodwill balances.
-
An increase in goodwill as part of purchase accounting allocations relating to our acquisition of Andlauer Healthcare Group ("AHG") in the fourth quarter of 2025. Certain areas of purchase accounting, including our estimates of tax positions, remain preliminary as of June 30, 2026.
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 six months ended June 30, 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, included in SCS. Based on our 2025 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.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes intangible assets as of June 30, 2026 and December 31, 2025 (in millions):
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | |||||||||||||||
| June 30, 2026: | |||||||||||||||||
| Capitalized software | $ | 7,148 | $ | (4,855) | $ | 2,293 | |||||||||||
| Customer relationships | 1,390 | (337) | 1,053 | ||||||||||||||
| Trademarks, patents and other | 370 | (178) | 192 | ||||||||||||||
| Franchise rights | 378 | (73) | 305 | ||||||||||||||
| Trade name | 116 | (48) | 68 | ||||||||||||||
| Licenses | 86 | (48) | 38 | ||||||||||||||
| Amortizable intangible assets | $ | 9,488 | $ | (5,539) | $ | 3,949 | |||||||||||
| Indefinite-lived intangible assets | 5 | — | 5 | ||||||||||||||
| Total Intangible Assets | $ | 9,493 | $ | (5,539) | $ | 3,954 | |||||||||||
| 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 six months ended June 30, 2026, there were no impairment charges for finite-lived intangible assets.
For the six months ended June 30, 2025, we recorded impairment charges of $33 million ($25 million after tax) within Other expenses in our statement of consolidated income. These charges primarily consisted of software impairment charges related to the divestiture of a business within SCS.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 June 30, 2026, we had $1.8 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 and six months ended June 30, 2026 and 2025 were as follows (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating lease costs | $ | 250 | $ | 232 | $ | 494 | $ | 463 | |||||||||||||||
| Finance lease costs: | |||||||||||||||||||||||
| Amortization of assets | 45 | 27 | 89 | 62 | |||||||||||||||||||
| Interest on lease obligations | 13 | 5 | 24 | 12 | |||||||||||||||||||
| Total finance lease costs | 58 | 32 | 113 | 74 | |||||||||||||||||||
| Variable lease costs | 108 | 118 | 210 | 190 | |||||||||||||||||||
| Short-term lease costs | 302 | 207 | 635 | 419 | |||||||||||||||||||
| Total lease costs | $ | 718 | $ | 589 | $ | 1,452 | $ | 1,146 |
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 June 30, 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 | 1,139 | 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 | 1,083 | 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 | 1,880 | 2049-2075 | 1,859 | 1,863 | |||||||||||||||||||||||||||||||||||||||||||
| Debentures: | |||||||||||||||||||||||||||||||||||||||||||||||
| 7.620% debentures | 276 | 2030 | 279 | 279 | |||||||||||||||||||||||||||||||||||||||||||
| Pound Sterling notes: | |||||||||||||||||||||||||||||||||||||||||||||||
| 5.500% notes | 88 | 2031 | 88 | 89 | |||||||||||||||||||||||||||||||||||||||||||
| 5.125% notes | 603 | 2050 | 574 | 585 | |||||||||||||||||||||||||||||||||||||||||||
| Euro senior notes: | |||||||||||||||||||||||||||||||||||||||||||||||
| 1.000% senior notes | 570 | 2028 | 569 | 587 | |||||||||||||||||||||||||||||||||||||||||||
| 1.500% senior notes | 570 | 2032 | 568 | 586 | |||||||||||||||||||||||||||||||||||||||||||
| Finance lease obligations | 1,190 | 2026-2118 | 1,190 | 781 | |||||||||||||||||||||||||||||||||||||||||||
| Facility notes, bonds and other | 321 | 2026-2045 | 320 | 321 | |||||||||||||||||||||||||||||||||||||||||||
| Total debt | $ | 24,723 | $ | 24,484 | $ | 24,127 | |||||||||||||||||||||||||||||||||||||||||
| Less: current maturities | (634) | (608) | |||||||||||||||||||||||||||||||||||||||||||||
| Long-term debt | $ | 23,850 | $ | 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 June 30, 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.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 June 30, 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 June 30, 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 June 30, 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 six months ended June 30, 2026, we entered into five 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 June 30, 2026 and December 31, 2025 we recognized $204 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.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 alleged that UPS violated the Uniformed Services Employment and Reemployment Rights Act. We have settled this matter for an immaterial amount.
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. In June 2026, the Spanish Supreme Court affirmed the decision. We intend to further appeal. 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.
In November 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 June 30, 2026, we recorded contingencies of $104 million related to environmental remediation in Other current liabilities with corresponding insurance recoveries in Accounts receivable, Net in our consolidated balance sheets. Amounts recorded as of December 31, 2025 were immaterial. 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 related to these matters will have a material adverse effect on our financial condition, 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 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
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 filed and received CBP approval for approximately $500 million of IEEPA tariffs paid for entries eligible for refund under this Phase, which are included in Other current liabilities in our consolidated balance sheet as of June 30, 2026. As of that date, we had received approximately $200 million of approved refunds from CBP and have recorded approximately $300 million in Accounts receivable, Net. Entries are now being reconciled to original payment for pass-through to our customers. We continue to monitor developments and evaluate options for pursuing the balance of IEEPA tariff refunds which CBP is not currently processing.
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.
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.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 June 30, 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 June 30, 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 and six months ended June 30, 2026 and 2025 (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Class A Common Stock: | |||||||||||||||||||||||
| Balance at beginning of period | $ | 1 | $ | 2 | $ | 1 | $ | 2 | |||||||||||||||
| Class A shares issued at end of period | $ | 1 | $ | 2 | $ | 1 | $ | 2 | |||||||||||||||
| Class B Common Stock: | |||||||||||||||||||||||
| Balance at beginning of period | $ | 8 | $ | 7 | $ | 8 | $ | 7 | |||||||||||||||
| Class B shares issued at end of period | $ | 8 | $ | 7 | $ | 8 | $ | 7 | |||||||||||||||
| Additional Paid-In Capital: | |||||||||||||||||||||||
| Balance at beginning of period | $ | 382 | $ | — | $ | 275 | $ | 136 | |||||||||||||||
| Stock award plans | 29 | (4) | 69 | 35 | |||||||||||||||||||
| Common stock purchases(1) | — | — | — | (262) | |||||||||||||||||||
| Common stock issuances | 73 | 87 | 138 | 183 | |||||||||||||||||||
| Other | (2) | 1 | — | (8) | |||||||||||||||||||
| Balance at end of period | $ | 482 | $ | 84 | $ | 482 | $ | 84 | |||||||||||||||
| Retained Earnings: | |||||||||||||||||||||||
| Balance at beginning of period | $ | 19,622 | $ | 19,939 | $ | 20,151 | $ | 20,882 | |||||||||||||||
| Net income | 604 | 1,283 | 1,468 | 2,470 | |||||||||||||||||||
| Dividends ($1.64 per share for both the three months ended June 30, 2026 and 2025 and $3.28 per share for both the six months ended June 30, 2026 and 2025(2) | (1,396) | (1,390) | (2,789) | (2,782) | |||||||||||||||||||
| Common stock purchases(1) | — | — | — | (738) | |||||||||||||||||||
| Balance at end of period | $ | 18,830 | $ | 19,832 | $ | 18,830 | $ | 19,832 | |||||||||||||||
| Noncontrolling Interests: | |||||||||||||||||||||||
| Balance at beginning of period | $ | 28 | $ | 24 | $ | 28 | $ | 25 | |||||||||||||||
| Change in non-controlling interest | 4 | 3 | 4 | 2 | |||||||||||||||||||
| Balance at end of period | $ | 32 | $ | 27 | $ | 32 | $ | 27 |
(1) In the six months ended June 30, 2025 we repurchased 8.6 million shares of class B common stock for $1.0 billion under our 2023 share repurchase authorization. No shares were repurchased during the six months ended June 30, 2026.
(2) The dividend per share amount is the same for both class A and class B common stock. Dividends include $40 and $41 million for the three months ended June 30, 2026 and 2025, respectively, and $81 and $85 million for the six months ended June 30, 2026 and 2025, respectively, that were settled in shares of class A common stock.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The activity in accumulated other comprehensive income (loss) ("AOCI") was as follows (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Foreign Currency Translation Loss, Net of Tax: | |||||||||||||||||||||||
| Balance at beginning of period | $ | (1,209) | $ | (1,457) | $ | (1,058) | $ | (1,586) | |||||||||||||||
| Translation adjustment (net of tax effect of $(5) and $4 for the three months ended June 30, 2026 and 2025, respectively $(10) and $3 for the six months ended June 30, 2026 and 2025, respectively ) | (75) | 372 | (226) | 501 | |||||||||||||||||||
| Balance at end of period | (1,284) | (1,085) | (1,284) | (1,085) | |||||||||||||||||||
| Unrealized (Loss) Gain on Cash Flow Hedges, Net of Tax: | |||||||||||||||||||||||
| Balance at beginning of period | (172) | (48) | (253) | 91 | |||||||||||||||||||
| Current period changes in fair value (net of tax effect of $8 and $(91) for the three months ended June 30, 2026 and 2025, respectively $28 and $(121) for the six months ended June 30, 2026 and 2025, respectively ) | 29 | (288) | 91 | (384) | |||||||||||||||||||
| Reclassification to earnings (net of tax effect of $4 and $(1) for the three months ended June 30, 2026 and 2025, respectively and $10 and $(14) for the six months ended June 30, 2026 and 2025, respectively ) | 14 | (1) | 33 | (44) | |||||||||||||||||||
| Balance at end of period | (129) | (337) | (129) | (337) | |||||||||||||||||||
| Unrecognized Pension and Postretirement Benefit Costs, Net of Tax: | |||||||||||||||||||||||
| Balance at beginning of period | (2,869) | (2,783) | (2,897) | (2,813) | |||||||||||||||||||
| Reclassification to earnings (net of tax effect of $9 and $10 for the three months ended June 30, 2026 and 2025, respectively and $18 and $19 for the six months ended June 30, 2026 and 2025, respectively ) | 28 | 30 | 56 | 60 | |||||||||||||||||||
| Balance at end of period | (2,841) | (2,753) | (2,841) | (2,753) | |||||||||||||||||||
| Other activity: | |||||||||||||||||||||||
| Balance at beginning of period | — | — | — | (1) | |||||||||||||||||||
| Current period other activity | — | — | — | 1 | |||||||||||||||||||
| Accumulated other comprehensive loss at end of period | $ | (4,254) | $ | (4,175) | $ | (4,254) | $ | (4,175) | |||||||||||||||
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 June 30, | Six Months Ended June 30, | Affected Line Item in | |||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | the Income Statement | |||||||||||||||||||||||||
| Unrealized (Loss) Gain on Cash Flow Hedges: | |||||||||||||||||||||||||||||
| Foreign currency exchange contracts | $ | (16) | $ | 4 | $ | (40) | $ | 61 | Revenue | ||||||||||||||||||||
| Interest rate contracts | (2) | (2) | (3) | (3) | Interest expense | ||||||||||||||||||||||||
| Income tax (expense) benefit | 4 | (1) | 10 | (14) | Income tax expense | ||||||||||||||||||||||||
| Impact on net income | (14) | 1 | (33) | 44 | Net income | ||||||||||||||||||||||||
| Unrecognized Pension and Postretirement Benefit Costs: | |||||||||||||||||||||||||||||
| Prior service costs | (37) | (40) | (74) | (79) | Investment income and other | ||||||||||||||||||||||||
| Income tax benefit | 9 | 10 | 18 | 19 | Income tax expense | ||||||||||||||||||||||||
| Impact on net income | (28) | (30) | (56) | (60) | Net income | ||||||||||||||||||||||||
| Total amount reclassified for the period | $ | (42) | $ | (29) | $ | (89) | $ | (16) | Net income | ||||||||||||||||||||
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 second 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.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Segment results of operations for the three and six months ended June 30, 2026 and 2025 were as follows (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| U.S. Domestic Package: | |||||||||||||||||||||||
| Revenue | $ | 14,930 | $ | 14,083 | $ | 29,055 | $ | 28,543 | |||||||||||||||
| Less: | |||||||||||||||||||||||
| Compensation | 4,794 | 4,903 | 9,568 | 10,001 | |||||||||||||||||||
| Benefits | 5,153 | 4,180 | 9,254 | 8,349 | |||||||||||||||||||
| Other segment items(1) | 4,967 | 4,084 | 9,702 | 8,298 | |||||||||||||||||||
| U.S. Domestic Package Operating profit/(loss) | $ | 16 | $ | 916 | $ | 531 | $ | 1,895 | |||||||||||||||
| International Package: | |||||||||||||||||||||||
| Revenue | $ | 5,044 | $ | 4,485 | $ | 9,584 | $ | 8,858 | |||||||||||||||
| Less: | |||||||||||||||||||||||
| Compensation and benefits | 1,041 | 995 | 2,077 | 1,952 | |||||||||||||||||||
| Purchased transportation | 1,090 | 944 | 2,039 | 1,849 | |||||||||||||||||||
| Other segment items(1) | 2,290 | 1,874 | 4,298 | 3,744 | |||||||||||||||||||
| International Package Operating profit/(loss) | $ | 623 | $ | 672 | $ | 1,170 | $ | 1,313 | |||||||||||||||
| Reconciliation of revenue: | |||||||||||||||||||||||
| Total U.S. Domestic Package and International Package Revenue | $ | 19,974 | $ | 18,568 | $ | 38,639 | $ | 37,401 | |||||||||||||||
| Other revenues(2) | 2,860 | 2,653 | 5,397 | 5,366 | |||||||||||||||||||
| Total Consolidated Revenue | $ | 22,834 | $ | 21,221 | $ | 44,036 | $ | 42,767 | |||||||||||||||
| Reconciliation of segment operating profit to income before income taxes: | |||||||||||||||||||||||
| Total U.S. Domestic Package and International Package Operating profit/(loss) | $ | 639 | $ | 1,588 | $ | 1,701 | $ | 3,208 | |||||||||||||||
| Other profit/(loss)(2) | 291 | 234 | 496 | 280 | |||||||||||||||||||
| Other pension income (expense) | 66 | 38 | 133 | 75 | |||||||||||||||||||
| Investment income and other | 37 | 40 | 93 | 82 | |||||||||||||||||||
| Interest expense | (272) | (238) | (538) | (460) | |||||||||||||||||||
| Total Consolidated Income Before Income Taxes | $ | 761 | $ | 1,662 | $ | 1,885 | $ | 3,185 |
(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 and six months ended June 30, 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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| U.S. Domestic Package | $ | 680 | $ | 636 | $ | 1,363 | $ | 1,259 | |||||||||||||||
| International Package | 191 | 209 | 385 | 411 | |||||||||||||||||||
| Other depreciation and amortization(1) | 109 | 91 | 217 | 178 | |||||||||||||||||||
| Consolidated Depreciation and Amortization | $ | 980 | $ | 936 | $ | 1,965 | $ | 1,848 |
(1) Depreciation and amortization 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
Assets by reportable segment as of June 30, 2026 and December 31, 2025 consisted of the following (in millions):
| 2026 | 2025 | ||||||||||
| Segment Assets | |||||||||||
| U.S. Domestic Package | $ | 38,082 | $ | 38,359 | |||||||
| International Package | 18,360 | 18,214 | |||||||||
| Other assets(1) | 12,483 | 12,693 | |||||||||
| Unallocated assets(2) | 2,342 | 3,824 | |||||||||
| Consolidated Assets | $ | 71,267 | $ | 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
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 six months ended June 30, 2026 and 2025 (in millions, except per share amounts):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | 604 | $ | 1,283 | $ | 1,468 | $ | 2,470 | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares | 850 | 847 | 850 | 848 | |||||||||||||||||||
| Vested portion of restricted shares | 1 | — | — | 1 | |||||||||||||||||||
| Denominator for basic earnings per share | 851 | 847 | 850 | 849 | |||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Restricted performance units | — | — | 1 | — | |||||||||||||||||||
| Denominator for diluted earnings per share | 851 | 847 | 851 | 849 | |||||||||||||||||||
| Basic earnings per share**(1)** | $ | 0.71 | $ | 1.51 | $ | 1.73 | $ | 2.91 | |||||||||||||||
| Diluted earnings per share**(1)** | $ | 0.71 | $ | 1.51 | $ | 1.73 | $ | 2.91 | |||||||||||||||
(1) Earnings per share is computed using unrounded amounts.
Diluted earnings per share for the three months ended June 30, 2026 and 2025 excluded the effect of 5.1 and 1.7 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 six months ended June 30, 2026 and 2025 were 4.9 and 1.1 million, respectively.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 June 30, 2026 and December 31, 2025, the notional amounts of our outstanding derivative positions were as follows (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Currency hedges: | ||||||||||||||
| Euro | EUR | 2,947 | 2,764 | |||||||||||
| British Pound Sterling | GBP | 441 | 410 | |||||||||||
| Canadian Dollar | CAD | 1,377 | 1,574 | |||||||||||
| Hong Kong Dollar | HKD | 5,217 | 4,317 | |||||||||||
| Chinese Renminbi | CNH | 7,678 | 6,743 | |||||||||||
As of June 30, 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.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 June 30, 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 | June 30, 2026 | December 31, 2025 | June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||
| Derivatives designated as hedges: | ||||||||||||||||||||||||||||||||||||||
| Foreign currency exchange contracts | Other current assets | Level 2 | $ | 33 | $ | 5 | $ | 11 | $ | — | ||||||||||||||||||||||||||||
| Foreign currency exchange contracts | Other non-current assets | Level 2 | 42 | 4 | 16 | — | ||||||||||||||||||||||||||||||||
| Total Asset Derivatives | $ | 75 | $ | 9 | $ | 27 | $ | — | ||||||||||||||||||||||||||||||
| 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 | June 30, 2026 | December 31, 2025 | June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||
| Derivatives designated as hedges: | ||||||||||||||||||||||||||||||||||||||
| Foreign currency exchange contracts | Other current liabilities | Level 2 | $ | 37 | $ | 83 | $ | 15 | $ | 78 | ||||||||||||||||||||||||||||
| Foreign currency exchange contracts | Other non-current liabilities | Level 2 | 40 | 91 | 14 | 87 | ||||||||||||||||||||||||||||||||
| Total Liability Derivatives | $ | 77 | $ | 174 | $ | 29 | $ | 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 June 30, 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 | |||||||||||||||||||||||||
| June 30, 2026 | June 30, 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 and six months ended June 30, 2026 and 2025 (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 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 | $ | (16) | $ | 4 | $ | (40) | $ | 61 | |||||||||||||||||||||||||||
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table indicates the amount of gains (losses) that were recognized in AOCI for the three and six months ended June 30, 2026 and 2025 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 | |||||||||||||
| 2026 | 2025 | |||||||||||||
| Three Months Ended June 30: | ||||||||||||||
| Foreign currency exchange contracts | $ | 37 | $ | (379) | ||||||||||
| Total | $ | 37 | $ | (379) | ||||||||||
| Six Months Ended June 30: | ||||||||||||||
| Foreign currency exchange contracts | $ | 119 | $ | (505) | ||||||||||
| Total | $ | 119 | $ | (505) |
As of June 30, 2026, there were $10 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 June 30, 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 three 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 six months ended June 30, 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 June 30: | ||||||||||||||
| Foreign currency denominated debt | $ | 6 | $ | (189) | ||||||||||
| Total | $ | 6 | $ | (189) | ||||||||||
| Six Months Ended June 30: | ||||||||||||||
| Foreign currency denominated debt | $ | 49 | $ | (270) | ||||||||||
| Total | $ | 49 | $ | (270) |
NOTE 15. INCOME TAXES
Our effective tax rate for the three months ended June 30, 2026, decreased to 20.6% compared to 22.8% in the same period of 2025 (22.1% year to date compared to 22.4% in 2025). The year-over-year decrease in our effective tax rate in the quarter and year-to-date periods was driven by favorable tax impacts related to the One Big Beautiful Bill Act ("OBBBA"), creditable foreign taxes in the U.S. and discrete tax items, partially offset by the 2025 benefit from a nonrecurring valuation allowance release discussed below.
During the six months ended June 30, 2025, we released $18 million of the valuation allowance on our capital loss carryforward, including an $8 million benefit recognized during the second quarter of 2025.
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 and six months ended June 30, 2026 and 2025 (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Transformation Strategy Costs: | |||||||||||||||||||||||
| Compensation and benefits | $ | 1,117 | $ | 50 | $ | 1,148 | $ | 74 | |||||||||||||||
| Total Other expenses | 55 | 24 | 79 | 58 | |||||||||||||||||||
| Total Transformation Strategy Costs | $ | 1,172 | $ | 74 | $ | 1,227 | $ | 132 | |||||||||||||||
| Income Tax Benefit from Transformation Strategy Costs (1) | (281) | (17) | (294) | (31) | |||||||||||||||||||
| After-Tax Transformation Strategy Costs | $ | 891 | $ | 57 | $ | 933 | $ | 101 |
(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 primarily consist of 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. In the six months ended June 30, 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.
Accruals for separation costs of $180 and $117 million were included in Other current liabilities in our consolidated balance sheets as of June 30, 2026 and December 31, 2025, respectively. During the six months ended June 30, 2026, we recognized additional separation costs, including payroll taxes, of approximately $1.1 billion and made payments of approximately $1.0 billion. We expect to record approximately $100 million in related separation costs, including payroll taxes, in the third quarter of 2026.
Other costs incurred in furtherance of our transformation strategy are primarily fees paid to third-party service providers. Any costs incurred as a result of restructuring, exit or disposal activities were not significant and, as period costs, do not give rise to significant 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 initiatives. Total costs by initiative are shown in the table below for the three and six months ended June 30, 2026 and 2025 (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Transformation Strategy Costs: | |||||||||||||||||||||||
| Transformation 2.0 | $ | — | $ | (3) | $ | — | $ | 13 | |||||||||||||||
| Fit to Serve | — | 9 | — | 28 | |||||||||||||||||||
| Network Reconfiguration and Efficiency Reimagined | 1,172 | 68 | 1,227 | 91 | |||||||||||||||||||
| Total Transformation Strategy Costs | $ | 1,172 | $ | 74 | $ | 1,227 | $ | 132 |
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 has included initiatives within our Transformation 2.0, Fit to Serve, and Network Reconfiguration and Efficiency
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Reimagined initiatives. 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.
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 Package 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 will continue to lead to further reductions in our facilities, vehicles, 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 and enhance our business performance and profitability beyond ordinary ongoing efforts. In connection therewith, we have closed daily operations at 45 leased and owned buildings, 44 of which have been permanently closed during the first six months of 2026. As of June 30, 2026, we had incurred costs to date of $1.8 billion, including $1.2 billion 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 initiative 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 six months ended June 30, 2026, we recorded $60 million in gains on sales of properties related to this initiative. We expect the costs and benefits associated with these actions may increase should we determine to close additional buildings.
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