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What changed in United Parcel Service's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of United Parcel Service's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+429 added−415 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-21)

Top changes in United Parcel Service's 2023 10-K

429 paragraphs added · 415 removed · 298 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

56 edited+16 added−15 removed24 unchanged
Biggest changeWe also must comply with safety and fitness regulations promulgated by the FMCSA, including those relating to drug and alcohol testing and hours of service for drivers. Ground transportation of packages outside of the U.S. is subject to similar regulatory schemes in the countries in which we transport those packages. The Postal Reorganization Act of 1970 created the U.S.
Biggest changeOur ground transportation of hazardous materials in the U.S. is subject to regulation by the DOT's Pipeline and Hazardous Materials Safety Administration. We also must comply with safety and fitness regulations promulgated by the FMCSA, including those relating to drug and alcohol testing and hours of service for drivers.
Coyote customers can also access UPS services such as airfreight, customs brokerage and global freight forwarding. Logistics & Distribution Our global logistics and distribution business provides value-added fulfillment and transportation management services. We leverage a network of facilities in over 120 countries to seek to ensure products and parts are in the right place at the right time.
Customers can also access UPS services such as airfreight, customs brokerage and global freight forwarding. Logistics Our global logistics and distribution business provides value-added fulfillment and transportation management services. We leverage a network of facilities in over 120 countries to seek to ensure products and parts are in the right place at the right time.
We have a significant presence in all of the world’s major economies, allowing us to effectively and efficiently operate around the world. Cutting-Edge Technologies. We are a global leader in developing technologies that help our customers enhance their shipping and logistics business processes to lower costs, improve service and increase efficiency.
We have a significant presence in all of the world’s major economies, allowing us to effectively and efficiently operate around the world. Cutting-Edge Technologies . We are a global leader in developing technologies that help customers enhance their shipping and logistics business processes to lower costs, improve service and increase efficiency.
We offer world-class technology, deep expertise and a highly sophisticated suite of services. With a strategic focus on serving the unique, priority-handling needs of healthcare and life sciences customers, we continue to increase our cold-chain logistics capabilities both in the U.S. and internationally.
We offer world-class technology, deep expertise and a highly sophisticated suite of healthcare logistics services. With a strategic focus on serving the unique, priority-handling needs of healthcare and life sciences customers, we continue to increase our complex cold-chain logistics capabilities both in the U.S. and internationally.
Our U.S. ground fleet serves all business and residential zip codes in the contiguous United States. • Our air portfolio offers time-definite, same day, next day, two day and three day delivery alternatives. • Our ground network enables customers to ship using our day-definite guaranteed ground service.
Our U.S. ground fleet serves all business and residential zip codes in the contiguous United States. • Our air portfolio offers time-definite, same-day, next-day, two-day and three-day delivery alternatives. • Our ground network enables customers to ship using our day-definite ground service.
We are continuing on the journey to execute our Customer First, People Led, Innovation Driven strategy as we evolve our business to be better and bolder. Customer First is about solving for the needs of our customers.
We are continuing on the journey to execute our Customer First, People Led, Innovation Driven strategy as we evolve our business to be better and bolder. Customer First is about anticipating and solving for the needs of our customers.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 are made available free of charge through our investor relations website under the heading "SEC Filings" as soon as reasonably practical after we electronically file or furnish the reports to the SEC.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 are made available free of charge on our investor relations website under the heading "Investors - SEC Filings" as soon as reasonably practical after we electronically file or furnish the reports to the SEC.
Our global smart logistics network offers approximately 197,000 entry points where customers can tender packages to us at locations and times convenient to them. This includes UPS drivers who can accept packages, UPS drop boxes, UPS Access Point locations, The UPS Store locations, authorized shipping outlets and commercial counters, alliance locations and customer centers attached to UPS facilities.
Our global smart logistics network offers approximately 180,000 entry points where customers can tender packages to us at locations and times convenient to them. This includes UPS drivers who can accept packages, UPS drop boxes, UPS Access Point locations, The UPS Store locations, authorized shipping outlets and commercial counters, alliance locations and customer centers attached to UPS facilities.
We offer a variety of digital tools that enable our customers to integrate UPS functionality into their distribution channels, deepening our customer relationships. These tools allow our customers to send, manage and track their shipments, and also provide their customers with value-added data. Broad Portfolio of Services. Our portfolio of services allows customers to choose their most appropriate delivery option.
We offer a variety of digital tools and capabilities that enable customers to integrate UPS functionality into their distribution channels, deepening customer relationships. These tools allow customers to send, manage and track their shipments, and also provide their customers with value-added data. Broad Portfolio of Services . Our service portfolio allows customers to choose their most appropriate delivery option.
We deliver more than 17 million ground packages per day, most within one to three business days. • UPS SurePost provides residential ground service for customers with non-urgent, lightweight residential shipments. It offers the consistency and reliability of the UPS ground network, with final delivery often provided by the U.S. Postal Service.
We deliver approximately 16 million ground packages per day, most within one to three business days. • UPS SurePost provides residential ground service for customers with non-urgent, lightweight residential shipments. It offers the consistency and reliability of the UPS ground network, with final delivery often provided by the U.S. Postal Service.
We continue to leverage technology and automation to deliver improvements to our network and unlock value for our customers through innovation. 1 Competitive Strengths Our competitive strengths include: Global Smart Logistics Network. We believe that our integrated global air and ground network is the most extensive in the industry.
We continue to leverage data and automation to deliver improvements to our network and unlock additional value for our customers through innovation. Competitive Strengths Our competitive strengths include: Global Smart Logistics Network . We believe that our integrated global air and ground network is the most extensive in the industry.
We operate one of the largest airlines and one of the largest fleets of alternative fuel vehicles under a global UPS brand. We deliver packages each business day for approximately 1.6 million shipping customers to 11.1 million delivery recipients in over 220 countries and territories.
We operate one of the largest airlines and one of the largest fleets of alternative fuel vehicles under a global UPS brand. We deliver packages each business day for approximately 1.6 million shipping customers to 10.2 million delivery recipients in over 200 countries and territories.
In addition, we are subject to non-U.S. government regulation of aviation rights involving non-U.S. jurisdictions and non-U.S. customs regulation. 6 UPS's aircraft maintenance programs and procedures, including aircraft inspection and repair at periodic intervals, are approved for all aircraft under FAA regulations.
In addition, we are subject to non-U.S. government regulation of aviation rights involving non-U.S. jurisdictions and non-U.S. customs regulation. 6 UPS's aircrew, dispatch and aircraft maintenance certification, training, programs and procedures, including aircraft inspection and repair at periodic intervals, are approved for all aircraft and carrier operations under FAA regulations.
Occupational Safety and Health Administration, could result in materially increased operating costs and capital expenditures, and negatively impact our ability to attract and retain employees. For additional information on governmental regulations and their potential impact on us generally, see “Risk Factors – Regulatory and Legal Risks”.
Occupational Safety and Health Administration and state agencies, could result in materially increased operating costs and capital expenditures, and negatively impact our ability to attract and retain employees. For additional information on governmental regulations and their potential impact on us generally, see "Risk Factors – Regulatory and Legal Risks".
Domestic Package segment. For additional information on our customers, see “Risk Factors - Business and Operating Risks - Changes in our relationships with any of our significant customers, including the loss or reduction in business from one or more of them, could have a material adverse effect on us” and note 14 to the audited, consolidated financial statements.
For additional information on our customers, see "Risk Factors - Business and Operating Risks - Changes in our relationships with any of our significant customers, including the loss or reduction in business from one or more of them, could have a material adverse effect on us" and note 14 to the audited, consolidated financial statements.
To assist with employee recruitment and retention, we continue to review the competitiveness of our employee value proposition, including benefits and pay, the range of continuous training, talent development and promotional opportunities.
To assist with employee recruitment and retention, we continue to review the competitiveness of our employee value proposition, including benefits and pay, training, talent development and promotion opportunities.
We operate both multi-client and dedicated facilities across our network, many of which are strategically located near UPS air and ground transportation hubs to support rapid delivery to consumer and business markets. We continue to invest in the automation of our facilities to meet customer demand. Healthcare logistics is one of our targeted growth areas.
We operate both multi-client and dedicated facilities across our network, many of which are strategically located near UPS air and ground transportation hubs to support rapid delivery to business and consumer markets. We continue to invest in the automation of our facilities to meet customer demand.
We focus on building and maintaining long-term customer relationships. Value-added services beyond package delivery, and connecting our small package, supply chain and digital services across our customer base, are important to our customer retention and growth. Brand Equity. We have built a leading and trusted brand that stands for quality, reliability and service innovation.
Value-added services beyond package delivery, and connecting our small package, supply chain and digital services across our customer base, are important to customer retention and growth. Brand Equity . We have built a leading and trusted brand that stands for service quality, reliability and product innovation.
International Package International Package consists of our small package operations in Europe, Asia, the Indian sub-continent, the Middle East, Africa, Canada and Latin America. International markets are one of our identified growth opportunities. We offer a wide selection of guaranteed day- and time-definite international shipping services, including more guaranteed time-definite express options than any other carrier.
International Package International Package consists of our small package operations in Europe, the Indian sub-continent, Middle East and Africa (together "EMEA"), Canada and Latin America (together "Americas") and Asia. We offer a wide selection of guaranteed day- and time-definite international shipping services, including more guaranteed time-definite express options than any other carrier.
Communications and Data Protection As we use radio and other communication facilities in our operations, we are subject to the Federal Communications Act of 1934, as amended. In addition, the Federal Communications Commission regulates and licenses our activities pertaining to satellite communications. We are also subject to similar regulation, such as the European Union General Data Protection Regulation, internationally.
Communications and Data Protection As we use radio and other communication facilities in our operations, we are subject to the Federal Communications Act of 1934, as amended. In addition, the Federal Communications Commission regulates and licenses our activities pertaining to satellite communications.
Postal Service, including postal rates, product offerings and service standards. We sometimes participate in proceedings before the Postal Regulatory Commission in an attempt to secure fair postal rates for competitive services. Our ground operations are also subject to compliance with various cargo-security and transportation regulations issued by the U.S.
We sometimes participate in proceedings before the Postal Regulatory Commission in an attempt to facilitate compliance with fair competition requirements for competitive services. Our ground operations are also subject to compliance with various cargo-security and transportation regulations issued by the U.S.
In addition, the Compensation and Human Capital Committee charter was recently expanded to include oversight of performance and talent management, diversity, equity and inclusion, work culture and employee development and retention.
In addition, the Compensation and Human Capital Committee charter has been expanded to include oversight responsibility for performance and talent management, diversity, equity and inclusion, work culture and employee development and retention.
These services are supported by numerous shipping, visibility and billing technologies. These include our Digital Access Program, which embeds our shipping solutions directly into leading e-commerce platforms, enabling us to more broadly reach SMB customers and e-commerce markets. All of our services (air, ground, domestic, international, commercial and residential) are managed through a single, global smart logistics network.
These services are supported by numerous shipping, visibility and billing technologies including our Digital Access Program, which embeds our shipping solutions directly into leading e-commerce platforms, enabling us to more broadly reach small- and medium-sized businesses and e-commerce markets. All of our services are managed through a single, global smart logistics network.
For additional information, see “Risk Factors – Business and Operating Risks – Increased security requirements impose substantial costs on us and we could be the target of an attack or have a security breach, which could materially adversely affect us”.
For additional information, see "Risk Factors – Business and Operating Risks – We maintain significant physical operations. Increases in operational security requirements impose substantial costs on us and we could be the target of an attack or have a security breach, which could materially adversely affect us".
We provide all types of package services (air, ground, domestic, international, commercial and residential) through a single pickup and delivery network. Our sophisticated engineering systems allow us to optimize network efficiency and asset utilization. Global Presence. We serve more than 220 countries and territories.
We provide all types of package services (air, ground, domestic, international, commercial and residential) through a single pickup and delivery network. Our sophisticated systems, including our RFID-enabled Smart Package, Smart Facility technology, allow us to optimize network efficiency and asset utilization, and enhance end-to-end shipment visibility. Global Presence . We serve more than 200 countries and territories.
For additional information regarding employees employed under collective bargaining agreements, see note 6 to the audited, consolidated financial statements. 5 Employee health and safety We seek to provide industry-leading employee health, safety and wellness programs across our growing workforce.
For additional information regarding employees employed under collective bargaining agreements, see note 6 to the audited, consolidated financial statements. 5 Employee health and safety We seek to provide industry-leading employee health, safety and wellness programs across our workforce. UPS's Comprehensive Health and Safety Program ("CHSP") is an occupational health and safety system tailored to our varied operational environments.
Our vehicles and the professional courtesy of our drivers are major contributors to our brand equity. Distinctive Culture. We believe that the dedication of our employees comes in large part from our purpose driven culture that fosters trust, appreciation and empowerment.
Our vehicles and the professional courtesy of our drivers are major contributors to our brand equity. Distinctive Culture . We believe that the dedication of our employees comes in large part from our purpose-driven culture that fosters trust, partnership and empowerment. We encourage our people to bring their unique perspectives, background, talents and skills to work every day.
Ground transportation also falls under state jurisdiction with respect to the regulation of operations, safety and insurance. Our ground transportation of hazardous materials in the U.S. is subject to regulation by the DOT's Pipeline and Hazardous Materials Safety Administration.
Ground Operations Our ground transportation of packages in the U.S. is subject to regulation by the DOT and its agency, the Federal Motor Carrier Safety Administration (the "FMCSA"). Ground transportation also falls under state jurisdiction with respect to the regulation of operations, safety and insurance.
We participate in works councils and associations outside the U.S., which allows us to respond to emerging regional issues. This work helps our operations to build and maintain productive relationships with our employees.
We frequently engage union leaders at the national level and at local chapters throughout the United States. We participate in works councils and associations outside the U.S., which allows us to respond to emerging issues abroad. This work helps our operations to build and maintain productive relationships with our employees.
Our aircraft fleet complies with current noise standards of the federal aviation regulations. Our international operations are also subject to noise regulations in certain other countries in which we operate. 7 For additional information, see “Risk Factors – Regulatory and Legal Risks – Increasingly stringent regulations related to climate change could materially increase our operating costs”.
Our international operations are also subject to noise regulations in certain other countries in which we operate. 7 For additional information, see "Risk Factors – Regulatory and Legal Risks – Increasingly stringent regulations related to climate change, including reporting obligations, could materially increase our operating costs".
This design enables cost-effective package processing using fewer, larger and more fuel-efficient aircraft. U.S. Domestic Package We are a leader in time-definite, guaranteed small package delivery services in the United States. We offer a full spectrum of U.S. domestic guaranteed air and ground package transportation services.
Domestic Package We are a leader in time-definite, guaranteed small package delivery services in the United States. We offer a full spectrum of U.S. domestic air and ground package transportation services.
The future cost of repairs pursuant to these programs may fluctuate according to aircraft condition, age and the enactment of additional FAA regulatory requirements. The TSA regulates various security aspects of air cargo transportation. Our airport and off-airport locations, as well as our personnel, facilities and procedures involved in air cargo transportation must comply with TSA regulations.
The future cost of changes and repairs pursuant to these programs and procedures may fluctuate according to aircraft condition, age and the enactment of additional FAA regulatory requirements. The TSA regulates various security aspects of air cargo transportation.
Increasingly, our customers benefit from UPS business solutions that integrate our services beyond package delivery. For example, supply chain services – such as global freight forwarding, truckload brokerage, customs brokerage, order fulfillment and returns management – are designed to help improve the efficiency and resilience of our customers’ entire supply chain management process. Customer Relationships.
Increasingly, our customers benefit from UPS business solutions that integrate our services beyond package delivery. For example, our supply chain services are designed to improve the efficiency and resilience of customers’ entire supply chain management process. Customer Relationships . We focus on building and maintaining long-term customer relationships.
Postal Service as an independent establishment of the executive branch of the federal government, and created the Postal Rate Commission, an independent agency, to recommend postal rates. The Postal Accountability and Enhancement Act of 2006 amended the 1970 Act to give the re-named Postal Regulatory Commission revised oversight authority over many aspects of the U.S.
The Postal Accountability and Enhancement Act of 2006 amended the 1970 Act to give the re-named Postal Regulatory Commission revised oversight authority over many aspects of the U.S. Postal Service, including postal rates, product offerings and service standards.
Innovation Driven is designed to optimize the volume that flows through our network to focus on increasing value share and to drive business growth from higher-yielding opportunities in our target markets.
We know successful outcomes are built from a strong culture and we believe that when we take care of our people, they take care of our customers. 1 Innovation Driven is designed to optimize the volume that flows through our network to focus on increasing value share and to drive business growth from higher-yielding opportunities in our target markets.
For additional information on the importance of our human capital efforts, see "Risk Factors - Business and Operating Risks - Failure to attract or retain qualified employees could materially adversely affect us" and “Strikes, work stoppages or slowdowns by our employees could materially adversely affect us.” Oversight and management We believe in creating an inclusive and equitable environment that represents a broad spectrum of diverse backgrounds, cultures and stakeholders.
For additional information on the importance of our human capital efforts, see "Risk Factors - Business and Operating Risks - Failure to attract or retain qualified employees could materially adversely affect us" and "- Strikes, work stoppages or slowdowns by our employees could materially adversely affect us".
We maintain site- and activity-specific environmental compliance and pollution prevention programs to address our environmental responsibilities and remain compliant. In addition, we maintain numerous programs which seek to minimize waste and prevent pollution within our operations. Pursuant to the Federal Aviation Act, the FAA, with the assistance of the Environmental Protection Agency is authorized to establish standards governing aircraft noise.
We maintain site- and activity-specific environmental compliance and pollution prevention programs to address our environmental responsibilities and remain compliant. In addition, we maintain numerous programs which seek to minimize waste and prevent pollution within our operations.
Our Corporate Governance Guidelines and the charters for our Audit, Compensation and Human Capital, Risk, and Nominating and Corporate Governance Committees are also available under the heading "ESG" on the Governance Documents page of our investor relations website.
Our Code of Business Conduct, which applies to all of our directors, officers and employees, including our principal executive and financial officers, our Corporate Governance Guidelines and the charters for our Audit, Compensation and Human Capital, Risk, and Nominating and Corporate Governance Committees are also available on our investor relations website under the heading "Investors – Sustainability – Governance Documents".
Domestic Package and International Package. Our remaining businesses are reported as Supply Chain Solutions. U.S. Domestic Package and International Package are together referred to as our global small package operations. Global Small Package Our global small package operations provide time-definite delivery services for express letters, documents, packages and palletized freight via air and ground services.
Global Small Package Our global small package operations provide time-definite delivery services for express letters, documents, packages and palletized freight via air and ground services.
We participate in the Civil Reserve Air Fleet ("CRAF") program. Our participation in this program allows the U.S. Department of Defense ("DOD") to requisition specified UPS aircraft for military use during a national defense emergency. The DOD is required to compensate us for any use of aircraft under the CRAF program.
Our airport and off-airport locations, as well as our personnel, facilities and procedures involved in air cargo transportation must comply with TSA regulations. We participate in the Civil Reserve Air Fleet ("CRAF") program. Our participation in this program allows the U.S. Department of Defense ("DOD") to requisition specified UPS aircraft for military use during a national defense emergency.
In 2022, we delivered an average of 24.3 million packages per day, totaling 6.2 billion packages during the year. Total revenue in 2022 was $100.3 billion. Strategy Our well-defined strategy focuses on growing in the parts of our market that value our end-to-end network, including small- and medium-sized businesses ("SMBs"), healthcare, international and certain large enterprise accounts.
In 2023, we delivered an average of 22.3 million packages per day, totaling 5.7 billion packages during the year. Total revenue in 2023 was $91.0 billion. Strategy Our well-defined strategy focuses on growing in the parts of our market that value our end-to-end network.
These technologies help reduce costs and improve efficiency in our customers' reverse logistics processes. Our global air operations hub is located in Louisville, Kentucky, and is supported by air hubs across the United States ("U.S.") and internationally. We operate international air hubs in Germany, China, Hong Kong, Canada and Florida (for Latin America and the Caribbean).
Our global air operations hub is located in Louisville, Kentucky, and is supported by air hubs across the United States ("U.S.") and internationally. We operate international air hubs in Germany, China, Hong Kong, Canada and Florida (for Latin America and the Caribbean). This design enables cost-effective package processing using fewer, larger and more fuel-efficient aircraft. U.S.
There has recently been increased regulatory and enforcement focus on data protection in the U.S. (at both the state and federal level) and in other countries. For additional information, see “Risk Factors – Business and Operating Risks – A significant data breach or information technology system disruption could materially adversely affect us”.
(at both the state and federal level) and in other countries. For additional information, see "Risk Factors – Business and Operating Risks – A significant cybersecurity incident, or increased data protection regulations, could materially adversely affect us".
We do not intend for any addresses to be active links or to otherwise incorporate the contents of any website into this or any other report we file with the SEC. 8
We do not intend for any addresses to be active links or to otherwise incorporate the contents of any website into this or any other report we file with the SEC. 8 Disclosures Required Pursuant to Section 13(r) of the Securities Exchange Act of 1934 We maintain robust economic sanctions compliance procedures designed to promote compliance with applicable sanctions laws.
Additionally, as one of the world’s leading non-vessel operating common carriers, we provide ocean freight full-container load, less-than-container load and multimodal transportation services between most major ports around the world. We are among the world’s largest customs brokers, measured by both the number of shipments processed annually and by the number of dedicated brokerage employees worldwide.
Forwarding We are one of the largest U.S. domestic airfreight carriers and airfreight forwarders globally. We offer a portfolio of guaranteed and non-guaranteed global airfreight services. Additionally, as one of the world’s leading non-vessel operating common carriers, we provide ocean freight full container load, less-than-container load and multimodal transportation services between most major ports around the world.
Other Supply Chain Solutions businesses Our other Supply Chain Solutions businesses provide a broad portfolio of services to meet customer needs. Technology-driven solutions, such as our Roadie same-day delivery business, provide flexibility and visibility for our customers. We also offer integrated supply chain and high-value shipment insurance solutions to both small and large businesses through UPS Capital.
Roadie offers customers the convenience of same-day delivery, while Happy Returns offers innovative end-to-end return services that leverage The UPS Store network. We also offer integrated supply chain and high-value shipment insurance solutions to both small and large businesses through UPS Capital, as well as a range of services through our other Supply Chain Solutions businesses.
We believe these services are important to meeting our customers' needs and deepening our customer relationships. 4 Human Capital Our success is dependent upon our people, working together with a common purpose. We have approximately 536,000 employees (excluding temporary seasonal employees), of which 443,000 are in the U.S. and 93,000 are located internationally.
We believe these services are important to meeting customers' needs and deepening customer relationships. 4 Human Capital Our success is dependent upon our people, working together with a common purpose. As we seek to capture new opportunities and pursue growth, we believe that transforming the UPS employee experience is foundational to our success.
Many of these employees are employed under a national master agreement and various supplemental agreements with local unions affiliated with the International Brotherhood of Teamsters which run through July 31, 2023. In addition, approximately 3,400 of our pilots are represented by the Independent Pilots Association (“IPA”).
More than 70% of our U.S. employees are represented by unions, primarily those employees handling or transporting packages. Many of these employees are employed under a national master agreement and various supplemental agreements with local unions affiliated with the International Brotherhood of Teamsters ("Teamsters").
In addition, participation in the CRAF program entitles us to bid for other U.S. Government opportunities including small package and airfreight. Ground Operations Our ground transportation of packages in the U.S. is subject to regulation by the DOT and its agency, the Federal Motor Carrier Safety Administration (the "FMCSA").
The DOD is required to compensate us for any use of aircraft under the CRAF program. In addition, participation in the CRAF program entitles us to bid for other U.S. Government opportunities including small package and airfreight.
This report is available under the heading "Social Impact" at www.about.ups.com . Collective bargaining We bargain in good faith with the unions that represent our employees. We frequently engage union leaders at the national level and at local chapters throughout the United States.
Additional information on our human capital efforts is contained in our annual sustainability report, which describes our activities that support our commitment to acting responsibly and contributing to society. This report is available under the heading "Social Impact" at www.about.ups.com . Collective bargaining We bargain in good faith with the unions that represent our employees.
Customers Building and maintaining long-term customer relationships is a competitive strength of UPS. In 2022, we served 1.6 million shipping customers and more than 11.1 million delivery recipients daily. For the year ended December 31, 2022, one customer, Amazon.com, Inc. and its affiliates, represented approximately 11.3% of our consolidated revenues, substantially all of which was within our U.S.
For the year ended December 31, 2023, one customer, Amazon.com, Inc. and its affiliates, represented approximately 11.8% of our consolidated revenues, substantially all of which was within our U.S. Domestic Package segment.
Our financial strength allows us to continue investing in digital technology, transportation equipment, facilities and employee development to generate value for shareholders. We pursue strategic opportunities that facilitate our growth and seek to maintain a strong credit rating to give us flexibility in running the business. Products and Services; Reporting Segments We have two reporting segments: U.S.
Our legacy of fairness and equity is the bedrock of our culture and of our relationships with those we serve. Financial Strength . Our financial strength allows us to continue to pursue strategic opportunities that facilitate our growth. This includes investing in digital technology, acquisitions, transportation equipment, facilities and employee development to generate value for shareholders.
This portfolio provides a range of cost-effective label and digital returns options and a broad network of consumer drop points. We also offer a selection of returns technologies, such as UPS Returns Manager, that promote systems integration, increase customer ease of use and visibility of inbound merchandise.
This portfolio provides a range of cost-effective label and digital returns options and a broad network of consumer drop points.
This requires a thoughtful balance between the culture we have cultivated over the years and new approaches to lead our business into the future. We are investing in capabilities that we believe will transform our business, including investments in employee opportunities to support growth.
This requires a thoughtful balance between the culture we have cultivated over the years and the new perspectives we need to take the business into the future. We believe that UPS employees are among the most motivated and highest performing in the industry and provide us a competitive advantage.
In addition to customs clearance services, we provide product classification, trade management, duty drawback and consulting services. Truckload Brokerage We provide truckload brokerage services in North America and Europe through our Coyote-branded subsidiaries. Access to the UPS fleet, combined with a broad third-party carrier network, creates customized capacity solutions for all markets and customers.
We provide brokerage services that coordinate a fleet of less-than-truckload and truckload vehicles for shipments requiring ground freight transportation in North America and Europe. Access to the UPS fleet, combined with a broad third-party carrier network, enables us to create capacity solutions for customers of all sizes across industries, delivered through a combination of people and technology.
By leveraging diversity with respect to gender, age, ethnicity, skills and other factors, and creating inclusive environments, we believe we can improve organizational effectiveness, cultivate innovation and drive growth. Our Board of Directors, directly and through the Board’s Compensation and Human Capital Committee, is responsible for oversight of human capital matters.
Oversight and management We seek to create an inclusive and equitable environment that brings together a broad spectrum of backgrounds, cultures and stakeholders. We believe leveraging diverse perspectives and creating inclusive environments improves our organizational effectiveness, cultivates innovation, and drives growth. Our board, directly and through the Compensation and Human Capital Committee, is responsible for oversight of human capital matters.
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We know successful outcomes are built from a strong culture, so we are striving to make UPS a great place to work. We believe that when we take care of our people, they take care of our customers.
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We seek to maintain a strong credit rating to give us additional flexibility in running the business. Products and Services; Reporting Segments We have two reporting segments: U.S. Domestic Package and International Package. Our remaining businesses are reported as Supply Chain Solutions. U.S. Domestic Package and International Package are together referred to as our global small package operations.
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We value the contribution of all of our people, encouraging everyone to bring their unique perspective, background, talents and skills to work every day. Our legacy of fairness and equity is the bedrock of our culture and of our relationships with those we serve. Financial Strength.
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To accelerate growth of this portfolio, in the fourth quarter of 2023 we acquired Happy Returns, a technology-focused company that is managed and reported within Supply Chain Solutions, to provide innovative end-to-end return services and a consolidated returns solution for our enterprise retail customers.
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UPS Worldwide Express Freight is a premium international service for urgent, palletized shipments over 150 pounds. Europe is our largest region outside of the U.S. by both revenue and package volume. We continue to make major European infrastructure investments to meet demand for our services and to improve transit times across the region.
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UPS Worldwide Express Freight is a premium international service for urgent, palletized shipments over 150 pounds. 3 Supply Chain Solutions Supply Chain Solutions consists of our forwarding, logistics, digital and other businesses. Serving more than 200 countries and territories, we strategically seek to provide integration across increasingly complex, specialized and fragmented supply chains.
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We have recently expanded hubs and gateways in France, Germany and Italy to increase efficiency for cross-border ground shipments and provide capacity for future growth.
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We are among the world’s largest customs brokers, measured by both the number of shipments processed annually and by the number of dedicated brokerage employees worldwide. In addition to customs clearance services, we provide product classification, trade management, duty drawback and consulting services.
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We serve more than 40 countries and territories in Asia through alliances with local delivery companies and our owned operations. 3 Supply Chain Solutions Supply Chain Solutions consists of our forwarding, truckload brokerage, logistics and distribution and other businesses.
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In furtherance of this strategy and to broaden our reach and services, we recently acquired Bomi Group and MNX Global Logistics. Digital and other Supply Chain Solutions businesses Our digital businesses leverage technology to enable a range of on-demand services.
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Supply chain complexity creates demand for a global service offering that incorporates transportation, distribution and international trade and brokerage services, with complementary financial and information services. Many companies see value in outsourcing certain logistics activity. With increased competition and growth opportunities in new markets, businesses require flexible and responsive supply chains to support their strategies.
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We have approximately 500,000 employees (excluding temporary seasonal employees), of which 414,000 are in the U.S. and 86,000 are located internationally. Our global workforce includes approximately 85,000 management employees (42% of whom are part-time) and 415,000 hourly employees (48% of whom are part-time).
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We aim to meet this demand by offering a broad array of supply chain services in more than 200 countries and territories. Forwarding We are one of the largest U.S. domestic airfreight carriers and among the top airfreight forwarders globally. We offer a portfolio of guaranteed and non-guaranteed global airfreight services.
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In the third quarter of 2023, the Teamsters fully ratified a new national master agreement that expires July 31, 2028. In addition, approximately 3,300 of our pilots are represented by the Independent Pilots Association ("IPA"). Our agreement with the IPA becomes amendable September 1, 2025.
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During 2022, we acquired Bomi Group to accelerate our growth by expanding our international presence and increasing our cold chain capabilities in major European and Latin American markets. With the addition of Bomi Group, our network provides customers access to specialized healthcare distribution space in more than 30 countries and territories.
Added
Our CHSP covers a wide array of roles, from package handling to administration, and spans geographical boundaries to include sorting facilities, mobile logistics, administrative offices, and other locations worldwide. UPS conducts audits to assess specific risks and hazards, including equipment safety, workplace environment, and emergency response protocols.
Removed
Our global workforce includes approximately 90,000 management employees (44% of whom are part-time) and 446,000 hourly employees (50% of whom are part-time). More than 70% of our U.S. employees are represented by unions, primarily those employees handling or transporting packages.
Added
We monitor our safety performance through various measurable targets, including lost time injury frequency and the number of recorded auto accidents. Customers Building and maintaining long-term customer relationships through superior service is a competitive strength of UPS. In 2023, we served 1.6 million shipping customers and more than 10.2 million delivery recipients daily.
Removed
During 2022, we extended our contract with the IPA for an additional two years beginning at the end of the current contract on September 1, 2023. We believe that UPS employees are among the most motivated, highest-performing people in the industry and provide us with a meaningful competitive advantage.
Added
Ground transportation of packages outside of the U.S. is subject to similar regulatory schemes in the countries in which we transport those packages. The Postal Reorganization Act of 1970 created the U.S. Postal Service as an independent establishment of the executive branch of the federal government, and created the Postal Rate Commission, an independent agency, to recommend postal rates.
Removed
Transformation As we expand and enter new markets, and seek to capture new opportunities and pursue growth, we need employees to grow and innovate along with us. We believe that transforming the UPS employee experience is foundational to our success.
Added
Pursuant to the Federal Aviation Act, the FAA - with the assistance of the Environmental Protection Agency - is authorized to establish standards governing aircraft noise. Our aircraft fleet complies with current noise standards of the federal aviation regulations.
Removed
We provide training for management employees on professionalism and performance, as well as unconscious bias and diversity and inclusion, to seek to ensure our actions align with our values. Additional information on our human capital efforts is contained in our annual sustainability report, which describes our activities that support our commitment to acting responsibly and contributing to society.
Added
We are subject to a variety of evolving laws and regulations in the U.S. and abroad regarding privacy, cybersecurity, data protection and data security, including the European Union General Data Protection Regulation and China's Personal Information Protection Law. There has recently been increased regulatory and enforcement focus on data protection in the U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

68 edited+19 added−17 removed37 unchanged
Biggest changeFor the year ended December 31, 2022, business from one customer, Amazon.com, Inc. and its affiliates, accounted for 11.3% of our consolidated revenues. Some of our other significant customers can account for a relatively significant portion of our revenues in a particular quarter or year.
Biggest changeChanges in our relationships with any of our significant customers, including the loss or reduction in business from one or more of them, could have a material adverse effect on us. For the year ended December 31, 2023, one customer, Amazon.com, Inc. and its affiliates, accounted for 11.8% of our consolidated revenues.
If we are unable to hire, properly train or retain qualified employees, we could experience higher labor costs, reduced revenues, further increased workers' compensation and automobile liability claims, regulatory noncompliance, customer losses and diminution of our brand value or company culture, which could materially adversely affect us.
If we are unable to hire, properly train or retain qualified employees, we could experience higher labor costs, reduced revenues, further increased workers' compensation and automobile liability claims costs, regulatory noncompliance, customer losses and diminution of our brand value or company culture, which could materially adversely affect us.
Our ability to meet our goals will depend in part on significant technological advancements with respect to the development and availability of reliable, affordable and sustainable alternative solutions that are outside of our control, including aviation fuel and alternative fuel vehicles.
Our ability to meet our goals will depend in part on significant technological advancements with respect to the development and availability of reliable, affordable and sustainable alternative solutions that are outside of our control, including sustainable aviation fuel and alternative fuel vehicles.
Our employee health, retiree health and pension benefit expenses are significant. In recent years, we have experienced significant increases in some of these costs, in particular, ongoing increases in healthcare costs in excess of the rate of inflation and historically low discount rates that we use to value our company-sponsored defined benefit plan obligations.
Our employee health, retiree health and pension benefit expenses are significant. In recent years, we have experienced increases in some of these costs, in particular, ongoing increases in healthcare costs in excess of the rate of inflation and historically low discount rates that we use to value our company-sponsored defined benefit plan obligations.
Also, adverse publicity or public sentiment surrounding labor relations, environmental, sustainability and governance ("ESG") concerns, physical or cyber security matters, political activities and similar matters, or attempts to connect our company to such issues, either in the U.S. or elsewhere, could materially adversely affect us.
Also, adverse publicity or public sentiment surrounding labor relations, environmental, sustainability and governance concerns, physical or cyber security matters, political activities and similar matters, or attempts to connect our company to such issues, either in the U.S. or elsewhere, could materially adversely affect us.
Regulatory and legislative requirements may change periodically in response to evolving threats. We cannot determine the effect that any new requirements will have on our operations, cost structure or operating results, and new rules or other future security requirements may increase our operating costs and reduce operating efficiencies.
Regulatory and legislative requirements may change periodically in response to evolving threats. We cannot determine the effect that any new requirements will have on our operations, cost structure or operating results, and new rules or other future security requirements may significantly increase our operating costs and reduce operating efficiencies.
Changes in general economic conditions, or our inability to accurately forecast these changes or mitigate the impact of these conditions on our business, could materially adversely affect us. 9 Our industry is rapidly evolving. We expect to continue to face significant competition, which could materially adversely affect us.
Changes in general economic conditions, or our inability to accurately forecast these changes or mitigate the impact of these conditions on our business, could materially adversely affect us. Our industry is rapidly evolving. We expect to continue to face significant competition, which could materially adversely affect us.
If we do not accurately forecast our future capital investment needs, we could under- or over-invest, or have excess capacity or insufficient capacity, any of which would negatively affect our revenues and profitability. 14 Employee health and retiree health and pension benefit costs represent a significant expense to us; further cost increases could materially adversely affect us.
If we do not accurately forecast our future capital investment needs, we could under- or over-invest, or have excess capacity or insufficient capacity, any of which could negatively affect our revenues and profitability. Employee health and retiree health and pension benefit costs represent a significant expense to us; further cost increases could materially adversely affect us.
We have invested and expect to continue to invest in IT security initiatives, IT risk management and disaster recovery plans. The costs and operational consequences of implementing, maintaining and enhancing further data or system protection measures could increase significantly to overcome increasingly frequent, complex and sophisticated cyber threats and regulatory requirements.
We have invested and expect to continue to invest in IT security initiatives, IT risk management and disaster recovery capabilities. The costs and operational consequences of implementing, maintaining and enhancing further data or system protection measures could increase significantly to overcome increasingly frequent, complex and sophisticated cyber threats and regulatory requirements.
Our failure to manage and anticipate these and other risks associated with our international operations could materially adversely affect us. 13 Our inability to effectively integrate any acquired operations and realize the anticipated benefits of any acquisitions, joint ventures, strategic alliances or dispositions could materially adversely affect us.
Our failure to manage and anticipate these and other risks associated with our international operations could materially adversely affect us. Our inability to effectively integrate any acquired businesses and realize the anticipated benefits of any acquisitions, joint ventures, strategic alliances or dispositions could materially adversely affect us.
A potential result of climate change is more frequent or more severe weather events or natural disasters. To the extent such weather events or natural disasters do become more frequent or severe, disruptions to our business and costs to repair damaged facilities or maintain or resume operations could increase.
A potential result of climate change is more frequent or more severe weather events or natural disasters. To the extent such weather events or natural disasters do become more frequent or severe, disruptions to our business and those of our customers and costs to repair damaged facilities or maintain or resume operations could increase.
Emerging markets are often more volatile than those in other countries, and any broad-based downturn in these markets from any of those developments could reduce our revenues and materially adversely affect our business, financial condition and results of operations.
Emerging markets are often more volatile than those in other countries, and any broad-based downturn in these markets could reduce our revenues and materially adversely affect our business, financial condition and results of operations.
Any failure to comply with applicable laws, regulations or policies in the U.S. or other countries could result in substantial fines or possible revocation of our authority to conduct our operations, which could materially adversely affect us. Increasingly stringent regulations related to climate change could materially increase our operating costs.
Any failure to comply with applicable laws, regulations or policies in the U.S. or other countries could result in substantial fines or possible revocation of our authority to conduct our operations, which could materially adversely affect us. Increasingly stringent regulations related to climate change, including reporting obligations, could materially increase our operating costs.
Security processes, protocols and standards that we implement and contractual provisions requiring security measures that we impose on such third-parties may not be sufficient or effective at preventing such events.
Security processes, protocols and standards that we implement and contractual provisions requiring security measures that we impose on such third parties may not be sufficient or effective at preventing such events or may not be adhered to.
For example, we rely on IT to receive package level information in advance of the physical receipt of packages, to move and track packages through our operations, to efficiently plan deliveries, to execute billing processes, and to track and report financial and operational data.
For example, we rely on these technologies to receive package level information in advance of the physical receipt of packages, to move and track packages through our operations, to efficiently plan deliveries, to execute billing processes, and to track and report financial and operational data.
Customers could choose, and have in the past chosen , to divert all or a portion of their business with us to one of our competitors, demand pricing concessions for our services, require us to provide enhanced services that increase our costs, or develop their own logistics capabilities.
Customers could choose, and have in the past chosen, to divert all or a portion of their business with us to one of our competitors, demand pricing concessions, request enhanced services that increase our costs, or develop their own logistics capabilities.
Customer impact on our revenue and profitability is based on factors such as: contractual volume amounts; pricing terms; product launches; e-commerce or other industry trends, including those related to the holiday season; business combinations and the overall growth of a customer's underlying business; as well as any disruptions to their businesses.
Customer impact on our revenue and profitability can vary based on a number of factors, including: contractual volume amounts; pricing terms; product launches; e-commerce or other industry trends, including those related to the holiday season; business combinations and the overall growth of a customer's underlying business; as well as any disruptions to their businesses.
In addition, the impact that the re-entry into the Paris climate accord may have on future U.S. policy regarding GHG emissions, on CORSIA and on other GHG regulation remains uncertain. The extent to which other countries implement that accord could also have a material adverse effect on us.
In addition, the impact that participation in the Paris Climate Accords may have on future U.S. policy regarding GHG emissions, on CORSIA and on other GHG regulation remains uncertain. The extent to which other countries implement that accord could also have a material adverse effect on us.
Any of these events could result in unauthorized access to, or disruptions or denials of access to, misuse or disclosure of, information or systems that are important to us, including proprietary information, sensitive or confidential data, and other information about our operations, customers, employees and suppliers, including personal information.
These events have in the past and could in the future result in unauthorized access to, or disruptions or denials of access to, misuse or disclosure of, information or systems that are important to us, including proprietary information, sensitive or confidential data, and other information about our operations, customers, employees and suppliers, including personal information.
We rely on information technology ("IT") networks and systems, including the internet and a number of internally-developed systems and applications, as well as certain technology systems from third-party vendors, to operate our business.
We rely on information technology networks and systems and other operational technologies, including the internet and a number of internally-developed systems and applications, as well as certain technology systems from third-party vendors (collectively referred to as "IT") to operate our business.
Accordingly, our financial results could be materially adversely affected by our failure to effectively integrate acquired operations, unanticipated performance or other issues or transaction-related charges. Financial Risks We are exposed to the effects of changing fuel and energy prices, including gasoline, diesel and jet fuel, and interruptions in supplies of these commodities.
Accordingly, our financial results could be materially adversely affected by our failure to effectively integrate acquired operations, unanticipated performance or other issues or transaction-related charges. Financial Risks Changing fuel and energy prices, including gasoline, diesel and jet fuel, and interruptions in supplies of these commodities could materially adversely affect us.
We have also been, and may in the future be, adversely impacted by changes in general economic conditions as a result of geopolitical uncertainty and/or conflicts in or arising from the countries and/or regions where we operate, including the United Kingdom, the European Union, the Ukraine, the Russian Federation and the Trans-Pacific region.
We have also been, and may in the future be, adversely impacted by changes in general economic conditions resulting from geopolitical uncertainty and/or conflicts in or arising from the countries and regions where we operate, including the United Kingdom, the European Union, Ukraine, the Russian Federation, the Middle East and the Trans-Pacific region.
In addition, we have been and may be required in the future to recognize increased depreciation and amortization charges if we determine the useful lives or salvage values of our assets are less than we originally estimated.
In addition, we have been and may be required in the future to recognize increased depreciation and amortization charges if we determine the useful lives or salvage values of our assets are less than we originally estimated. Such changes have in the past, and may in the future, reduce our net income.
Increased security requirements impose substantial costs on us and we could be the target of an attack or have a security breach, which could materially adversely affect us. As a result of concerns about global terrorism and homeland security, various governments have adopted and may continue to adopt stricter security requirements, resulting in increased operating costs.
Increases in operational security requirements impose substantial costs on us and we could be the target of an attack or have a security breach, which could materially adversely affect us. As a result of concerns about global terrorism and homeland security, various governments have adopted and may adopt additional heightened security requirements, resulting in significantly increased operating costs.
Failure to maintain our brand image and corporate reputation could materially adversely affect us. Our success depends in part on our ability to maintain the image of the UPS brand and our reputation. Service quality issues, actual or perceived, could tarnish the image of our brand and may cause customers not to use UPS services.
Our success depends in part on our ability to maintain the image of the UPS brand and our reputation. Service quality issues, actual or perceived, could tarnish the image of our brand and may cause customers not to use UPS services.
Furthermore, methodologies for reporting climate-related information may be updated and previously reported information may be adjusted to reflect improvement in the availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations and other changes in circumstances.
Furthermore, methodologies for reporting climate-related information may change and previously reported information may be adjusted to reflect new reporting protocols or regulations, improvements in the availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations and other changes in circumstances.
We seek to mitigate our exposure to changing fuel prices through our pricing strategy and may utilize hedging transactions from time to time. If we are unable to maintain or increase our fuel surcharges, higher fuel costs could materially adversely impact our operating results.
We seek to mitigate our exposure to changing fuel prices through our pricing strategy and may utilize hedging transactions from time to time. There can be no assurance that this strategy will be effective. If we are unable to maintain or increase our fuel surcharges, higher fuel costs could materially adversely impact our operating results.
For example, in 2016, the International Civil Aviation Organization ("ICAO") adopted the Carbon Offsetting and Reduction Scheme for International Aviation ("CORSIA"), which is a global, market-based emissions offset program to encourage carbon-neutral growth. A voluntary participation pilot phase began in 2021, and full mandatory participation is scheduled to begin in 2027.
For example, the Carbon Offsetting and Reduction Scheme for International Aviation ("CORSIA"), a global, market-based emissions offset program to encourage carbon-neutral growth began a voluntary pilot phase in 2021, with mandatory participation scheduled to begin in 2027.
Even if we are able to offset changes in fuel costs with surcharges, high fuel surcharges have in the past, and may in the future result in a shift from our higher-yielding products to lower-yielding products or an overall reduction in volume, revenue and profitability. There can also be no assurance that our strategy will be effective.
Even if we are able to offset changes in fuel costs with surcharges, high fuel surcharges have in the past, and may in the future result in a shift from our higher-yielding products to lower-yielding products or an overall reduction in volume, revenue and profitability.
Our industry is rapidly evolving, including demands for faster deliveries and increased visibility into shipments. We expect to continue to face significant competition on a local, regional, national and international basis.
Our industry continues to rapidly evolve, including demands for faster deliveries, increased visibility into shipments and development of other services. We expect to continue to face significant competition on a local, regional, national and international basis.
IT systems (ours, as well as those of our franchisees, acquired businesses, and third-party service providers) are susceptible to damage, disruptions and shutdowns due to programming errors, defects or other vulnerabilities, power outages, hardware failures, computer viruses, cyber-attacks, ransomware or malware attacks, attacks by foreign governments and state-sponsored actors, theft, misconduct by employees or other insiders, telecommunications failures, misuse, human errors or other catastrophic events.
IT and other systems (ours, as well as those of our franchisees, acquired businesses, and third-party service providers) have been and will continue in the future to be susceptible to damage, disruptions and shutdowns due to programming errors, defects or other vulnerabilities, power outages, hardware failures, misconfigurations, computer viruses, cyber-attacks, encryption caused by ransomware or malware attacks, exfiltration of data, attacks by foreign governments, state-sponsored actors, or criminal groups, theft, misconduct by employees or other insiders, telecommunications failures, misuse, human errors or other catastrophic events.
We also depend on and interact with the IT networks and systems of third-parties for many aspects of our operations, including our customers, franchisees and service providers such as cloud service providers and third-party delivery services.
We utilize and interact with the IT networks and systems of third parties for many aspects of our business, including related to our customers, franchisees and service providers such as cloud service providers and third-party delivery services.
Even in the absence of such legislation, the Environmental Protection Agency could determine to regulate GHG emissions, especially aircraft or diesel engine emissions, and this could impose substantial costs on us.
Nevertheless, we believe some form of federal climate change legislation is possible in the future. Even in the absence of such legislation, the Environmental Protection Agency could determine to regulate GHG emissions, especially aircraft or diesel engine emissions, and this could impose substantial costs on us.
We also may not discover the occurrence of any of the events described above for a significant period of time after the event occurs. Hybrid and remote working arrangements may heighten these risks.
We also may not discover the occurrence of any of the events described above for a significant period of time after the event occurs.
Our ability to control labor costs has in the past been, and is expected to continue to be, subject to numerous factors, including turnover, training costs, regulatory changes, market pressures, inflation, unemployment levels and healthcare and other benefit costs.
Our ability to control labor costs has in the past been, and is expected to continue to be, subject to numerous factors, including labor-related contractual obligations, turnover, training costs, regulatory changes, market pressures, inflation, unemployment levels and healthcare and other benefit costs. In addition, we strive to lower our cost to serve, including labor costs, through various strategic initiatives.
Competitors have cost, operational and organizational structures that differ from ours and may offer services or pricing terms that we are not willing or able to offer.
New technologies may also create additional sources of competition. Competitors have cost, operational and organizational structures that differ from ours and may offer services or pricing terms that we are not willing to offer.
Such changes have in the past, and may in the future, reduce our net income. 15 We may have significant additional tax liabilities that could materially adversely affect us. We are subject to income taxes in the U.S. and many foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes.
We may have significant additional tax liabilities that could materially adversely affect us. We are subject to income taxes in the U.S. and many foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. There are many transactions and calculations where the ultimate tax determination is uncertain.
We have made several public statements regarding our intended reduction of carbon emissions, including our goal to achieve carbon neutrality in our global operations by 2050 and our other short- and mid-term environmental sustainability goals.
The effects of climate change present financial and operational risks to our business, both directly and indirectly. We have made public statements regarding our intended reduction of carbon emissions, including our goal to achieve carbon neutrality in our global operations by 2050 and our other short- and mid-term environmental sustainability goals.
We monitor and manage foreign currency exchange rate and interest rate exposures, and use derivative instruments to mitigate the impact of changes in these rates on our financial condition and results of operations; however, changes in foreign currency exchange rates and interest rates cannot always be predicted or effectively hedged, and may have a material adverse effect on us .
We monitor and manage foreign currency exchange rate and interest rate exposures, and use derivative instruments to mitigate the impact of changes in these rates on our financial condition and results of operations; however, changes in foreign currency exchange rates and interest rates cannot always be predicted or effectively hedged, and may have a material adverse effect on us. 14 Our business requires significant capital and other investments; if we do not accurately forecast our future investment needs, we could be materially adversely affected.
Competitors include the U.S. and other international postal services, various motor carriers, express companies, freight forwarders, air couriers, large transportation and e-commerce companies that have made and continue to make significant investments in their own logistics capabilities, some of whom are currently our customers.
Competitors include the U.S. and international postal services, various motor carriers, express companies, freight forwarders, air couriers, large transportation and e-commerce companies that continue to make significant investments in their own logistics capabilities, some of whom are currently our customers. We also face competition from start-ups and other smaller companies that combine technologies with flexible labor solutions such as crowdsourcing.
These third parties may have access to information we maintain about our company, operations, customers, employees and vendors, or operating systems that are critical to or can significantly impact our business operations.
These third parties have access to information we maintain about our company, operations, customers, employees and vendors, or operating systems that are critical to or can significantly impact our business operations. These third parties are subject to risks described above, and other risks, that could damage, disrupt or close down their networks or systems.
The terms of future collective bargaining agreements also may affect our competitive position and results of operations. Furthermore, our actions or responses to any such negotiations, labor disputes, strikes or work stoppages could negatively impact how our brand is perceived and our corporate reputation and have adverse effects on our business, including our results of operations.
Furthermore, our actions or responses to any such negotiations, labor disputes, strikes or work stoppages could negatively impact how our brand is perceived and our reputation and have adverse effects on our business, including our results of operations. We maintain significant physical operations.
Regulation of greenhouse gas ("GHG") emissions exposes us to potentially significant new taxes, fees and other costs. Compliance with such regulation, and any increased or additional regulation, or the associated costs is further complicated by the fact that various countries and regions may adopt different approaches to climate change regulation.
Compliance with such regulation, and any increased or additional regulation, or the associated costs is further complicated by the fact that various countries and regions may adopt different approaches to climate change regulation and disclosures.
In addition to forecasting our capital investment requirements, we adjust other elements of our operations and cost structure in response to economic and regulatory conditions, and consistent with our long-term strategy and commitments. These investments support both our existing business and anticipated growth.
Our business requires significant capital investments, including in aircraft, vehicles, technology, facilities and sortation and other equipment. In addition to forecasting our capital investment requirements, we adjust other elements of our operations and cost structure in response to economic and regulatory conditions. These investments support both our existing business and anticipated growth.
Moreover, even without such regulation, increased awareness and any adverse publicity in the global marketplace about the GHGs emitted by companies in the airline and transportation industries could harm our reputation and reduce customer demand for our services, especially our air services. 16 We may be subject to various claims and lawsuits that could result in significant expenditures which may materially adversely affect us.
Moreover, even without such regulation, increased awareness and any adverse publicity in the global marketplace about the GHGs emitted by companies in the airline and transportation industries could harm our reputation and reduce customer demand for our services, especially our air services.
These agreements run through July 31, 2023. Our airline pilots, airline mechanics, ground mechanics and certain other employees are employed under other collective bargaining agreements. In addition, some of our international employees are employed under collective bargaining or similar agreements.
Our airline pilots, airline mechanics, ground mechanics and certain other employees are employed under other collective bargaining agreements. In addition, some of our international employees are employed under collective bargaining or similar agreements. Other employees may choose to organize in the future.
Changes in general economic conditions are beyond our control, and it may be difficult for us to adjust our business model to mitigate the impact of these factors. For example, we are affected by levels of industrial production, inflation, unemployment levels, consumer spending and retail activity. We could be materially affected by adverse developments in these aspects of the economy.
Our operations are subject to national and international economic factors, as well as the local economic environments in which we operate. Changes in general economic conditions are beyond our control, and it may be difficult for us to adjust our business model. For example, we are affected by industrial production, inflation, unemployment, consumer spending and retail activity levels.
The nature of our business exposes us to the potential for various claims and litigation related to labor and employment, personal injury, property damage, business practices, environmental liability and other matters. Any material litigation or a catastrophic accident or series of accidents could result in significant expenditures and have a material adverse effect on us.
We may be subject to various claims and lawsuits that could result in significant expenditures which may materially adversely affect us. The nature of our business exposes us to the potential for various claims and litigation related to labor and employment, personal injury, property damage, business practices, environmental liability and other matters.
ICAO continues to develop details regarding implementation, but compliance with CORSIA will increase our operating costs. In the U.S., Congress has considered but, to date, not passed various bills that would regulate GHG emissions. Nevertheless, we believe some form of federal climate change legislation is possible in the future.
The International Civil Aviation Organization, which adopted CORSIA, continues to develop details regarding implementation, but compliance with CORSIA is expected to increase our operating costs, potentially significantly. 16 In the U.S., Congress has considered but, to date, not passed various bills that would regulate GHG emissions.
Although to date we are unaware of any material data breach or system disruption, including a cyber-attack, we cannot provide any assurances that such events and impacts will not occur and be material in the future. Our efforts to deter, identify, mitigate and/or eliminate future breaches may require significant additional effort and expense and may not be successful.
Although to date we are unaware of any material data breach or cybersecurity incident, including an information system disruption, we cannot provide any assurances that such material events and impacts will not occur in the future.
If the number or severity of claims for which we are retaining risk continues to increase, our financial condition and results of operations could be materially adversely affected. If we lose our ability to, or decide not to, self-insure these risks, our insurance cost could materially increase and we may find it difficult to obtain adequate levels of insurance coverage.
If the number, severity or cost of claims for which we retain risk continues to increase, our financial condition and results of operations could be materially adversely affected.
In addition, certain of our significant customer contracts include termination rights of either party upon the occurrence of certain events or without cause upon advance notice to the other party. If all or a portion of our business relationships with one or more significant customers were to terminate or significantly change, this could materially adversely affect us.
In addition, certain of our significant customer contracts include termination rights of either party upon the occurrence of certain events or without cause upon advance notice to the other party.
Regardless of our compliance with security requirements or the steps we take to secure our facilities or fleet, we could also be the target of an attack or security breaches could occur, which could materially adversely affect us. A significant data breach or information technology system disruption could materially adversely affect us.
Regardless of our compliance with security requirements or our own security measures, we could also be the target of an attack or security breaches could occur, which could materially adversely affect one or more of our operations, or our business. A significant cybersecurity incident, or increased data protection regulations, could materially adversely affect us.
For example, damage to our reputation or loss of brand equity could require the allocation of resources to rebuild our reputation and restore the value of our brand. 12 Global climate change presents challenges to our business which could materially adversely affect us. The effects of climate change present financial and operational risks to our business, both directly and indirectly.
For example, damage to our reputation or loss of brand equity could require the allocation of resources to rebuild our reputation and restore the value of our brand. The proliferation of social media may increase the likelihood, speed, and magnitude of negative brand events. Global climate change could materially adversely affect us.
If we do not timely and appropriately respond to competitive pressures, including replacing any lost volume or maintaining our profitability, we could be materially adversely affected. Continued transportation market growth may further increase competition. As a result, competitors may improve their financial capacity and strengthen their competitive positions.
Additionally, from time to time we have raised, and may in the future raise, prices and our customers may not be willing to accept these higher prices. If we do not appropriately respond to competitive pressures, including replacing any lost volume or maintaining our profitability, we could be materially adversely affected. Transportation market growth may further increase competition.
There are many transactions and calculations where the ultimate tax determination is uncertain. We are regularly under audit by tax authorities in many jurisdictions. Economic and political pressures to increase tax revenue may make resolving tax disputes more difficult.
We are regularly under audit by tax authorities in many jurisdictions. Economic and political pressures to increase tax revenue may make resolving tax disputes more difficult. The final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals.
In addition, our customers’ confidence in our ability to protect data and systems and to provide services consistent with their expectations could be impacted, further disrupting our operations. Similarly, an actual or alleged failure to comply with increasingly challenging U.S. and foreign data protection regulations or other data protection standards may expose us to litigation, fines, sanctions or other penalties.
In addition, our customers’ confidence in our ability to protect data and systems and to provide services consistent with their expectations could be impacted, further disrupting our operations.
Customers may reduce their business or stop doing business with us if they believe that such actions or threatened actions may adversely affect our ability to provide services. We may permanently lose customers if we are unable to provide uninterrupted service, and this could materially adversely affect us.
Actual or threatened strikes, work stoppages or slowdowns by our employees could adversely affect our ability to meet our customers' needs. As a result, customers have reduced, and in the future may reduce, their business or stop doing business with us if they believe that such actions or threatened actions may adversely affect our ability to provide services.
Our inability to continue to retain experienced and motivated employees may also materially adversely affect us. 10 Strikes, work stoppages or slowdowns by our employees could materially adversely affect us. Many of our U.S. employees are employed under a national master agreement and various supplemental agreements with local unions affiliated with the International Brotherhood of Teamsters (the "Teamsters").
Our inability to continue to retain experienced and motivated employees through the execution of these initiatives may also materially adversely affect us. Strikes, work stoppages or slowdowns by our employees could materially adversely affect us.
Failure to attract or retain qualified employees could materially adversely affect us. We maintain a large workforce. We necessarily depend on the skills and continued service of our employees. We also regularly seek to hire a large number of part-time and seasonal workers.
If all or a portion of our business relationships with one or more significant customers were to terminate or significantly change, this could materially adversely affect us. 10 Failure to attract or retain qualified employees could materially adversely affect us. We depend on the skills and continued service of our large workforce.
Economic, political, or social developments and other risks associated with international operations could materially adversely affect us. We have significant international operations. We are exposed to changing economic, political and social developments that are beyond our control.
We have significant international operations and, as a result, we are exposed to changing economic, political and social developments in a number of countries, all of which are beyond our control.
We could also be affected by other unknown events, factors, uncertainties, or risks that we do not currently consider to be material. Business and Operating Risks The consequences of the COVID-19 pandemic have had, and may continue to have, a significant impact on us, as well as on the operations of many of our customers.
We could also be affected by other unknown events, factors, uncertainties, or risks that we do not currently consider to be material. Business and Operating Risks Changes in general economic conditions, in the U.S. and internationally, may adversely affect us. We conduct operations in over 200 countries and territories.
Changes in markets and our business plans have resulted, and may in the future result, in substantial impairments of the carrying value of our assets, thereby reducing our net income. We regularly assess the carrying values of our assets relative to their estimated fair values.
If we lose our ability to, or decide not to, self-insure these risks, our insurance cost could materially increase and we may find it difficult to obtain adequate levels of insurance coverage. 15 Changes in markets and our business plans have resulted, and may in the future result, in substantial impairments of the carrying value of our assets, thereby reducing our net income.
Business combinations could also result in competitors providing a wider variety of services and products at competitive prices, which could materially adversely affect us. Changes in our relationships with any of our significant customers, including the loss or reduction in business from one or more of them, could have a material adverse effect on us.
As a result, competitors may improve their financial capacity and strengthen their competitive positions. Business combinations could also result in competitors providing a wider variety of services and products at competitive prices, which could also materially adversely affect us.
We must be able to attract, engage, develop and retain a large and diverse global workforce and maintain an environment that supports our core values.
We also regularly hire a large number of part-time and seasonal workers. We must be able to attract, develop and retain a large and diverse global workforce.
In recent periods, the frequency and sophistication of cyber-attacks has increased, including as a result of state-sponsored cybersecurity attacks during periods of geopolitical conflict, such as the ongoing conflict in Ukraine. Accordingly, we may be unable to anticipate these techniques or to implement adequate measures to recognize, detect or prevent the occurrence of any of the events described above.
In recent periods, the frequency and sophistication of cyber-attacks have increased and are expected to continue to increase, including as a result of state-sponsored cybersecurity attacks during periods of geopolitical conflict, such as the ongoing conflicts in Ukraine and the Middle East. In addition, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.
Our franchise locations and subsidiaries also rely on IT systems to manage their business processes and activities. In addition, our services, and the operation of our networks and systems involve the collection, storage and transmission of significant amounts of proprietary information and sensitive or confidential data, including personal information of customers, employees and others.
Our franchise locations and subsidiaries also rely on IT systems to manage their business processes and activities.
In addition, the occurrence of any of these events could expose us, our customers, franchisees, service providers or others, to a risk of loss, disclosure or misuse of proprietary information and sensitive or confidential data, including personally identifiable information. 11 The techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently.
However, cybersecurity incidents have in the past and may in the future expose us, our customers, franchisees, service providers or others, to loss, disclosure or misuse of proprietary information and sensitive or confidential data or result in disruptions to our operations or those of our customers, franchisees, service providers or others.
Removed
The consequences of the COVID-19 pandemic have had a substantial impact on business and consumer activity, including contributing to a curtailment of certain business activities (including a decrease in demand for a broad variety of goods and services), significant ongoing supply chain disruptions, economic uncertainty and volatility in global financial markets.
Added
We have been, and may in the future be, materially affected by adverse developments in these aspects of the economy.
Removed
These consequences have significantly impacted, and may continue to significantly impact us, and have had, and may continue to have, a material adverse impact on the operations, financial performance and liquidity of many of our customers.
Added
Some of our other significant customers can account for a relatively significant portion of our revenues in a particular quarter or year.
Removed
Because of ongoing uncertainty with respect to the consequences of the COVID-19 pandemic, the future impact on our operations, financial condition and liquidity also remains uncertain and difficult to predict. This impact will continue to depend on evolving factors, many of which are not within our control, and to which we may not be able to effectively respond.
Added
Many of our U.S. employees are employed under a national master agreement and various supplemental agreements with local unions affiliated with the International Brotherhood of Teamsters (the "Teamsters"). In the third quarter of 2023, a new national master agreement with the Teamsters, which runs through July 31, 2028, was ratified.
Removed
These risks include, but are not limited to: a significant reduction in revenue due to renewed or extended curtailment of business activities; a significant increase in our expenses or a reduction in our operating margins due to long-term changes in the mix of our products and services; effects from governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including workforce pressures); reductions in operating effectiveness due to employees working remotely or in hybrid models; unavailability of personnel; the delay or cancellation of capital projects and related delays in, or loss of, expected benefits therefrom; limited access to liquidity; increased volatility and pricing in the capital markets; further disruption of global supply chains; impairments in the fair value of our assets; increases in pension funding obligations; and reductions in our customers’ credit-worthiness.
Added
We may permanently lose customers if we are unable to provide uninterrupted service, and this could materially adversely affect us. The terms of collective bargaining agreements also may affect our competitive position and results of operations.
Removed
Changes in general economic conditions, in the U.S. and internationally, may adversely affect us. We conduct operations in over 220 countries and territories. Our operations are subject to cyclicality affecting national and international economies in general, as well as the local economic environments in which we operate.
Added
Accordingly, we may be unable to anticipate these techniques or to implement adequate measures to recognize, detect or prevent the occurrence of any of the events described 11 above. In addition, our security processes, protocols and standards may not prove to be sufficient, effective or may not be complied with, either intentionally or inadvertently.
Removed
We also face competition from start-ups and other smaller companies that combine technologies with flexible labor solutions such as crowdsourcing to focus on local market needs. Competition may also come from other sources in the future as new technologies are developed.
Added
To date, we have not experienced a material cybersecurity incident.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe own and operate a logistics campus consisting of approximately 4 million square feet in Louisville, Kentucky. 17 Fleet Aircraft The following table shows information about our aircraft fleet as of December 31, 2022: Description Owned & Finance Leases Operating Leases & Charters From Others On Order Under Option Boeing 757-200 75 — — — Boeing 767-300 72 — 28 — Boeing 767-300BCF 5 — — — Boeing 767-300BDSF 4 — — — Airbus A300-600 52 — — — Boeing MD-11 (1) 42 — — — Boeing 747-400F 11 — — — Boeing 747-400BCF 2 — — — Boeing 747-8F 28 — 2 — Other — 295 — — Total 291 295 30 — (1) Six MD-11 aircraft are expected to be retired from operational use during 2023.
Biggest changeWe also own a number of ancillary properties that support our global operations. 18 Fleet Aircraft The following table shows information about our aircraft fleet as of December 31, 2023: Description UPS Owned and/or Operated Charters & Leases Operated by Others On Order Under Option Boeing 757-200 75 — — — Boeing 767-300 78 — 21 — Boeing 767-300BCF 6 — — — Boeing 767-300BDSF 4 — — — Airbus A300-600 52 — — — Boeing MD-11 (1) 38 — — — Boeing 747-400F 11 — — — Boeing 747-400BCF 2 — — — Boeing 747-8F 28 — 2 — Other — 269 — — Total 294 269 23 — (1) Two of the MD-11 aircraft shown above have been retired from operational use as of December 31, 2023.
We own or lease over 1,000 package operating facilities in the U.S., with approximately 85 million square feet of floor space. These facilities have vehicles and drivers stationed for the pickup and delivery of packages, and capacity to sort and transfer packages.
We own or lease over 1,000 package operating facilities in the U.S., with approximately 90 million square feet of floor space. These facilities have vehicles and drivers stationed for the pickup and delivery of packages, and capacity to sort and transfer packages.
Our larger facilities also service our vehicles and equipment, and employ specialized mechanical equipment for the sorting and handling of packages. We own or lease approximately 800 facilities that support our international package operations, with approximately 21 million square feet of floor space.
Our larger facilities also service our vehicles and equipment, and employ specialized mechanical equipment for the sorting and handling of packages. We own or lease approximately 800 facilities in our international package operations, with approximately 21 million square feet of floor space.
Item 2. Properties Operating Facilities We own our corporate headquarters in Atlanta, Georgia, our UPS Supply Chain Solutions headquarters, located in Alpharetta, Georgia and our information technology headquarters, located in Parsippany, New Jersey. Our primary information technology operations are consolidated in an owned facility in New Jersey and we own a backup facility in Georgia.
Item 2. Properties Operating Facilities We own our corporate headquarters in Atlanta, Georgia and our information technology headquarters, located in Parsippany, New Jersey. Our primary information technology operations are consolidated in an owned facility in New Jersey and we own a backup facility in Georgia.
We own or lease more than 600 facilities, with approximately 47 million square feet of floor space, which support our freight forwarding and logistics operations. This includes approximately 17 million square feet of healthcare-compliant warehousing.
We own or lease more than 600 facilities, with approximately 46 million square feet of floor space, which support our freight forwarding and logistics operations. This includes approximately 17 million square feet of healthcare-compliant warehousing. We own and operate a logistics campus consisting of approximately 4 million square feet in Louisville, Kentucky.
Vehicles We operate a global ground fleet of approximately 125,000 package cars, vans, tractors and motorcycles, including more than 15,000 alternative fuel and advanced technology vehicles.
We anticipate retiring an additional nine of these aircraft during 2024. Vehicles We operate a global ground fleet of approximately 135,000 package cars, vans, tractors and motorcycles, including more than 17,000 alternative fuel and advanced technology vehicles.
Removed
During the fourth quarter of 2022, we reduced the estimated salvage value of our MD-11 fleet. For additional information see "Critical Accounting Estimates" within Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II of this report.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn January 2023, the Board of Directors terminated this authorization and approved a new share repurchase authorization of $5.0 billion for class A and class B common stock. We anticipate repurchasing approximately $3.0 billion in shares in 2023.
Biggest changeDuring the year ended December 31, 2023, we repurchased 12.3 million shares of class B common stock for $2.2 billion under this authorization. We did not repurchase any shares during the fourth quarter of 2023 and do not anticipate repurchasing any shares in 2024. As of December 31, 2023, we had $2.8 billion available under our share repurchase authorization.
For additional information on our share repurchase activities, see note 12 to the audited, consolidated financial statements. 19 Shareowner Return Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates such information by reference into such filing.
For additional information on our share repurchase activities, see note 12 to the audited, consolidated financial statements. 20 Shareowner Return Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates such information by reference into such filing.
Our class B common stock is listed on the New York Stock Exchange under the symbol “UPS”. As of February 3, 2023, there were 162,173 and 20,119 shareowners of record of class A and class B common stock, respectively. Our practice has been to pay dividends on a quarterly basis.
Our class B common stock is listed on the New York Stock Exchange under the symbol “UPS”. As of February 2, 2024, there were 157,276 and 19,971 shareowners of record of class A and class B common stock, respectively. Our practice has been to pay dividends on a quarterly basis.
In August 2021, the Board of Directors approved a share repurchase authorization of $5.0 billion of class A and class B common stock. During the year ended December 31, 2022, we repurchased 19.0 million shares of class B common stock for $3.5 billion under this program. We had approximately $1.0 billion available under this authorization as of December 31, 2022.
During the year ended December 31, 2023, we repurchased 0.5 million shares of class B common stock for $0.1 billion under this authorization. In January 2023, the Board of Directors terminated this authorization and approved a new share repurchase authorization for $5.0 billion of class A and class B common stock.
The comparison of the total cumulative return on investment, which is the change in the stock price plus reinvested dividends for each of the quarterly periods, assumes that $100 was invested on December 31, 2017 in the Standard & Poor’s 500 Index, the Dow Jones Transportation Average and our class B common stock. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 United Parcel Service, Inc. $ 100.00 $ 84.52 $ 106.07 $ 157.72 $ 205.07 $ 171.71 Standard & Poor’s 500 Index $ 100.00 $ 95.61 $ 126.79 $ 150.11 $ 193.16 $ 158.14 Dow Jones Transportation Average $ 100.00 $ 87.67 $ 106.65 $ 124.27 $ 165.54 $ 136.36 For information regarding our equity compensation plans, see Item 12 of this report. 20
The comparison of the total cumulative return on investment, which is the change in the stock price plus reinvested dividends for each of the quarterly periods, assumes that $100 was invested on December 31, 2018 in the Standard & Poor’s 500 Index, the Dow Jones Transportation Average and our class B common stock. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 United Parcel Service, Inc. $ 100.00 $ 125.49 $ 184.83 $ 242.91 $ 203.72 $ 191.59 Standard & Poor’s 500 Index $ 100.00 $ 132.61 $ 157.00 $ 202.02 $ 165.40 $ 169.87 Dow Jones Transportation Average $ 100.00 $ 121.65 $ 143.76 $ 185.91 $ 159.48 $ 178.50 For information regarding our equity compensation plans, see Item 12 of this report. 21
On January 25, 2023, our Board declared a dividend of $1.62 per share, which is payable on March 10, 2023 to shareowners of record on February 21, 2023.
On January 25, 2024, our Board declared a dividend of $1.63 per share, which is payable on March 8, 2024 to shareowners of record on February 20, 2024. In August 2021, the Board of Directors approved a share repurchase authorization of $5.0 billion of class A and class B common stock.
Removed
A summary of repurchases of our class B common stock during the fourth quarter of 2022 is as follows (in millions, except per share amounts): Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of a Publicly Announced Program Approximate Dollar Value of Shares that May Yet be Purchased Under the Program October 1 - October 31, 2022 0.6 $ 165.02 0.6 $ 2,210 November 1 - November 30, 2022 0.8 171.39 0.8 2,073 December 1 - December 31, 2022 6.0 180.57 6.0 $ 1,000 Total October 1 - December 31, 2022 7.4 $ 178.33 7.4 (1) Includes shares repurchased through our publicly announced share repurchase programs and shares tendered to pay the exercise price and tax withholding on employee stock options.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeHighlights of our results for the years ended December 31, 2022 and 2021, which are discussed in more detail in the sections that follow, include: Year Ended December 31, Change 2022 2021 $ % Revenue (in millions) $ 100,338 $ 97,287 $ 3,051 3.1 % Operating Expenses (in millions) 87,244 84,477 2,767 3.3 % Operating Profit (in millions) $ 13,094 $ 12,810 $ 284 2.2 % Operating Margin 13.0 % 13.2 % Net Income (in millions) $ 11,548 $ 12,890 $ (1,342) (10.4) % Basic Earnings Per Share $ 13.26 $ 14.75 $ (1.49) (10.1) % Diluted Earnings Per Share $ 13.20 $ 14.68 $ (1.48) (10.1) % Operating Days 255 254 Average Daily Package Volume (in thousands) 24,291 25,250 (3.8) % Average Revenue Per Piece $ 13.38 $ 12.32 $ 1.06 8.6 % 22 UNITED PARCEL SERVICE, INC.
Biggest changeAND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Highlights of our results for the years ended December 31, 2023 and 2022, which are discussed in more detail in the sections that follow, include: Year Ended December 31, Change 2023 2022 $ % Revenue (in millions) $ 90,958 $ 100,338 $ (9,380) (9.3) % Operating Expenses (in millions) 81,817 87,244 (5,427) (6.2) % Operating Profit (in millions) $ 9,141 $ 13,094 $ (3,953) (30.2) % Operating Margin 10.0 % 13.0 % Net Income (in millions) $ 6,708 $ 11,548 $ (4,840) (41.9) % Basic Earnings Per Share $ 7.81 $ 13.26 $ (5.45) (41.1) % Diluted Earnings Per Share $ 7.80 $ 13.20 $ (5.40) (40.9) % Operating Days 254 255 Average Daily Package Volume (in thousands) 22,290 24,291 (8.2) % Average Revenue Per Piece $ 13.62 $ 13.38 $ 0.24 1.8 % • Revenue and average daily package volume in our global small package operations decreased for the year, with declines in both commercial and residential shipments across all of our products.
Item 6. [Reserved] 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We continue to execute our Customer First, People Led, Innovation Driven strategy, focusing on the parts of our market that value our integrated global network and building capabilities that matter to our customers.
Item 6. [Reserved] 22 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We continue to focus on executing our strategy of Customer First, People Led and Innovation Driven by making it quicker and easier for customers to do business with us.
In Supply Chain Solutions, the decrease in revenue was driven by volume and market rate declines in Forwarding, as well as the impact of divesting UPS Freight in 2021. These decreases were partially offset by growth in our healthcare operations and in a number of our other businesses.
These were partially offset by the impact of base rate increases. Expenses decreased year over year, driven by lower fuel and third-party transportation expense as a result of volume declines and lower fuel prices. In Supply Chain Solutions, revenue decreases for the year were driven by volume and market rate declines in Forwarding.
See note 8 to the audited, consolidated financial statements for additional information on business acquisitions. We have two reportable segments: U.S. Domestic Package and International Package, which are together referred to as our global small package operations. Our remaining businesses are reported as Supply Chain Solutions.
Domestic Package and International Package, which are together referred to as our global small package operations. Our remaining businesses are reported as Supply Chain Solutions. 23 UNITED PARCEL SERVICE, INC.
Adjusted diluted earnings per share was $12.94 after adjusting for the after-tax impacts of: ◦ defined benefit pension and postretirement medical benefit plan mark-to-market gains outside of a 10% corridor, together with defined benefit pension plan curtailment gains, totaling $806 million, or $0.92 per diluted share; ◦ a one-time, non-cash charge related to the accelerated vesting of certain equity awards in connection with an incentive compensation program design change of $384 million, or $0.44 per diluted share; ◦ a one-time, non-cash charge in connection with a reduction in the estimated residual value of our MD-11 aircraft of $58 million, or $0.07 per diluted share; and ◦ transformation strategy costs of $142 million, or $0.15 per diluted share.
Adjusted diluted earnings per share were $8.78 after adjusting for the after-tax impacts of: ◦ defined benefit pension and postretirement medical benefit plan mark-to-market loss outside of a 10% corridor of $274 million, or $0.32 per diluted share; ◦ Transformation Strategy Costs of $333 million, or $0.39 per diluted share; ◦ goodwill and asset impairment charges of $193 million, or $0.22 per diluted share; and ◦ a one-time compensation payment of $46 million, or $0.05 per diluted share.
Expenses increased due to higher fuel prices and higher compensation and benefits costs, which were partially offset by declines in purchased transportation costs and higher productivity as we executed our strategy. In our International Package segment, revenue increased slightly, driven by fuel revenue, revenue quality actions and favorable shifts in customer and product mix.
Expenses decreased for the year, primarily due to declines in fuel prices and reductions in purchased transportation. Higher direct union labor costs were offset by a reduction in hours and lower management compensation expense. In our International Package segment, revenue declines for the year were driven by lower volume and declines in fuel and demand-related surcharges.
Domestic Package segment and Supply Chain Solutions, while operating profit and operating margin declined in the International Package segment. • We reported net income of $11.5 billion and diluted earnings per share of $13.20.
Domestic Package segment wage rate increases in the second half of 2023 due to the new Teamsters contract. • Operating profit and operating margin decreased, as revenue declines were greater than operating expense reductions. • We reported net income of $6.7 billion and diluted earnings per share of $7.80.
Expenses decreased, driven by lower transportation costs in Forwarding and a reduction in operating expenses due to the divestiture of UPS Freight. These decreases were partially offset by higher operating costs in Logistics. 2021 compared to 2020 See
Expenses decreased for the year, primarily due to a reduction in purchased transportation in Forwarding. 2022 compared to 2021 See
Removed
We are shifting our strategic framework to Better and Bolder by seeking to enhance customer engagement through combining our network with digital capabilities to drive new services, while at the same time increasing efficiencies and remaining disciplined with capital allocation.
Added
We continue to enhance customer engagement through combining our network with digital capabilities and to invest in the most attractive parts of the market, including healthcare, Asia trade lanes and small- and medium-sized businesses ("SMBs").
Removed
A number of macroeconomic factors contributed to a challenging operating environment in 2022, including global inflation and rising interest rates, recessionary forecasts, wage and labor market pressures, geopolitical uncertainties and foreign currency exchange rates relative to the United States ("U.S.") Dollar. We continued to be affected by COVID-19 lockdowns in China that impacted both manufacturing and supply chains.
Added
In furtherance of our strategy, during 2023 we acquired MNX Global Logistics, a global time-critical and temperature-sensitive logistics provider, and Happy Returns, a technology-focused company that provides innovative end-to-end return services. We opened our state-of-the-art UPS Velocity fulfillment center in the U.S. and announced plans to build a new air hub in Hong Kong.
Removed
In addition, consumers returned to more pre-pandemic shopping patterns. These factors resulted in disruptions to certain parts of our business, negatively impacted demand for our services and contributed to increases in certain of our operating costs. We anticipate these factors will continue to impact us into 2023.
Added
These initiatives, together with continued growth in our Digital Access Program and deployment of our Smart Package Smart Facility technology within U.S. small package operations, are intended to allow us to reach new markets and customers, and better serve our current customer base.
Removed
We expect we may experience additional uncertainty related to the upcoming renegotiation of certain of our union labor agreements. Despite the challenging macroeconomic environment, our strategic execution strengthened our balance sheet and resulted in the generation of strong cash flows for the year.
Added
During the year, macroeconomic headwinds, including inflationary pressures and changes in consumer behavior, together with volume diversion resulting from our labor negotiations with the International Brotherhood of Teamsters ("Teamsters"), contributed to volume declines in our U.S. small package business.
Removed
We retired $2.0 billion of debt, reinvested in the business and returned cash to shareowners through dividends and share repurchases.
Added
Internationally, the challenging macroeconomic environment, coupled with geopolitical tensions, drove a decline in demand for our small package services in Europe and Asia. Our freight forwarding businesses, including truckload brokerage, were negatively impacted by soft demand and market overcapacity.
Removed
We also completed the acquisition of Delivery Solutions, a digital platform that optimizes customer deliveries across multiple networks, and the acquisition of Bomi Group, which will accelerate our growth in healthcare logistics by expanding our footprint and bringing additional expertise in cold chain logistics. Neither acquisition had a material impact on our results of operations for the year.
Added
We expect global economic conditions to improve gradually during 2024, and therefore expect volume and revenue growth to increase in the second half of the year. In the third quarter of 2023, our Teamsters employees ratified a new national master agreement.
Removed
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Average daily package volume in our global small package operations decreased, primarily due to lower levels of business-to-consumer shipping. • Revenue increased due to strong revenue per piece growth, with most of the increase in our U.S. Domestic Package segment.
Added
Under the agreement, wage and benefit rates, combined with all other contract provisions, will increase union cost at a 3.3% compounded annual growth rate over the five-year term of the contract, with the majority of the increase in the first and fifth years.
Removed
Revenue in Supply Chain Solutions decreased. • Operating expenses increased, driven by higher fuel prices and higher compensation and benefits expense, primarily in our U.S. Domestic Package segment. • Operating profit and operating margin increased, with the increases coming from the U.S.
Added
We experienced higher year-over-year labor costs in the second half of the year as a result of these contractual increases, which we expect to persist through the first half of 2024. Faced with a challenging external environment, we remain focused on our strategy.
Removed
In the U.S. Domestic Package segment, revenue growth resulted from higher fuel revenue, driven by increases in both price per gallon and in fuel surcharge rates as part of our pricing initiatives, as well as improvements in revenue quality and customer mix.
Added
We are taking action intended to right-size our business for the future and focus on key enablers of growth. These moves include exploring strategic alternatives for our truckload brokerage business and reducing headcount through our "fit to serve" initiative to create a more efficient operating model and enhance responsiveness to changing market dynamics. We have two reportable segments: U.S.
Removed
These increases were mostly offset by lower volume, the impact of the strengthening U.S. Dollar and reductions in demand-related surcharges, primarily in the fourth quarter. Expense increases were primarily driven by higher fuel prices, partially offset by favorable currency impacts and volume declines.
Added
These declines were primarily the result of the macroeconomic conditions and union labor-related uncertainties described above, as well as reductions in fuel and demand-related surcharges. • Operating expenses decreased for the year, driven by a reduction in purchased transportation in Supply Chain Solutions and reductions in fuel expense in our small package operations, as well as the impact of our ongoing productivity initiatives and reductions in operating costs; these reductions were partially offset by U.S.
Added
In the U.S. Domestic Package segment, revenue declines for the year were driven by lower volume, a shift in product mix, and lower fuel and demand-related surcharges. These were somewhat offset by revenue per piece growth due to increases in base rates and changes in customer mix.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2021 - $3.3 billion pre-tax defined benefit plan gain, primarily due to the impact of the interim remeasurement of the UPS/IBT Plan in the first quarter of 2021 as described in note 5 to the audited, consolidated financial statements: • Discount Rates ($1.9 billion pre-tax gain): This gain was largely attributable to an increase in the discount rate for the UPS/IBT Plan from 2.98% as of December 31, 2020 to 3.70% as of March 31, 2021, driven by an increase in U.S. treasury yields in 2021. • Return on Assets ($0.3 billion pre-tax loss): This loss was driven by the actual rate of return on plan assets being approximately 220 basis points lower than our expected rate of return as of March 31, 2021, primarily due to weak global equity and U.S. bond market performance. • Demographic and Other Assumption Changes ($0.1 billion pre-tax loss): This loss was due to the differences between actual and estimated participant data and demographic factors, including healthcare cost trends, compensation rate increases and rates of termination, retirement and mortality. • Coordinating benefits attributable to the Central States Pension Fund ($1.8 billion pre-tax gain): This represents a reduction of the liability for potential coordinating benefits that may be required to be paid related to the Central States Pension Fund.
Biggest changeAND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2022 - $1.1 billion pre-tax defined benefit plan gain: • Discount Rates ($5.2 billion pre-tax gain): The weighted-average discount rate for our pension and postretirement medical plans increased from 3.11% as of December 31, 2021 to 5.77% as of December 31, 2022, primarily due to an increase in U.S. treasury yields as well as an increase in credit spreads on AA-rated corporate bonds in 2022. • Return on Assets ($4.1 billion pre-tax loss): The actual rate of return on plan assets was lower than our expected rate of return, primarily due to weaker global equity and U.S. bond market performance. • Demographic and Other Assumption Changes ($0.1 billion pre-tax loss): This loss was due to differences between actual and estimated participant data and demographic factors, including healthcare cost trends, compensation rate increases and rates of termination, retirement and mortality.
We recognize changes in the fair value of plan assets and net actuarial gains and losses in excess of a 10% corridor (defined as 10% of the greater of the fair value of plan assets or the plan's projected benefit obligation), as well as gains and losses resulting from plan curtailments and settlements, for our defined benefit pension and postretirement medical plans immediately as part of Investment income (expense) and other in the statements of consolidated income.
We recognize changes in the fair value of plan assets and net actuarial gains and losses in excess of a 10% corridor (defined as 10% of the greater of the fair value of plan assets or the plan's projected benefit obligation), as well as gains and losses resulting from plan curtailments and settlements, for our defined benefit pension and postretirement medical plans immediately as part of Investment income and other in the statements of consolidated income.
Our current investment program anticipates investments in technology initiatives and enhanced network capabilities, including over $1.0 billion of projects to support our environmental sustainability goals. It also provides for maintenance of buildings, facilities and equipment and replacement of certain aircraft within our fleet.
Our current investment program anticipates investments in technology initiatives and enhanced network capabilities, including over $1.0 billion of projects to support our environmental sustainability goals in 2024. It also provides for maintenance of buildings, facilities and equipment and replacement of certain aircraft within our fleet.
We base our estimates on prior experience, current trends, various other assumptions and third-party input that we consider reasonable to our circumstances. Actual results could differ materially from our estimates, which would affect the related amounts reported in our consolidated financial statements.
We base our estimates and judgments on prior experience, current trends, various other assumptions and third-party input that we consider reasonable to our circumstances. Actual results could differ materially from our estimates, which would affect the related amounts reported in our consolidated financial statements.
If circumstances are present that indicate the carrying value of our long-lived assets may not be recoverable, we then perform impairment testing at the asset group level. Asset groups represent the lowest level at which independent cash flows can be identified.
If circumstances are present that indicate the carrying value of our long-lived assets may not be recoverable, we perform impairment testing at the asset group level. Asset groups represent the lowest level at which independent cash flows can be identified.
Transformation Charges, and Goodwill, Asset Impairment and Divestiture Charges We supplement the presentation of our operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of charges related to transformation activities, and goodwill, asset impairment and divestiture charges.
Transformation Charges, and Goodwill and Asset Impairment Charges We supplement the presentation of our operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of charges related to transformation activities, and goodwill and asset impairment charges.
Other components of pension expense (referred to as "ongoing net periodic benefit cost"), primarily service and interest costs and the expected return on plan assets, are reported on a quarterly basis.
Other components of pension expense (referred to as "net periodic benefit cost"), primarily service and interest costs and the expected return on plan assets, are reported on a quarterly basis.
For more information regarding transformation activities, see note 18 to the audited, consolidated financial statements. For more information regarding goodwill and asset impairment charges, and divestitures, see note 1 and note 7 to the audited, consolidated financial statements.
For more information regarding transformation activities, see note 18 to the audited, consolidated financial statements. For more information regarding goodwill and asset impairment charges, see note 1 and note 7.
Dollar revenue, revenue per piece and operating profit is the period over period impact of currency fluctuations. 25 UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Defined Benefit Pension and Postretirement Medical Plan Gains and Losses We incur certain employment-related expenses associated with pension and postretirement medical benefits.
Dollar revenue, revenue per piece and operating profit is the period-over-period impact of currency fluctuations. 26 UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Defined Benefit Pension and Postretirement Medical Plan Gains and Losses We incur certain employment-related expenses associated with pension and postretirement medical benefits.
We supplement the presentation of our operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of these changes. We believe excluding the impacts of such changes allows users of our financial statements to more appropriately identify underlying growth trends in compensation and benefits expense.
We supplement the presentation of our operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of these changes. We believe excluding the impacts of such changes allows users of our financial statements to identify underlying growth trends in compensation and benefits expense.
We believe excluding the impact of these charges better enables users of our financial statements to view underlying business performance from the perspective of management. We do not consider these costs when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards .
We believe excluding the impact of these charges better enables users of our financial statements to view and evaluate underlying business performance from the perspective of management. We do not consider these costs when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards.
In order to estimate NAV, we evaluate audited and unaudited financial reports from fund managers and make adjustments for investment activity between the date of the financial reports and December 31st. These investments are not actively traded, and their values can only be estimated using these assumptions.
In order to estimate NAV, we evaluate audited and unaudited financial reports from fund managers and make adjustments for investment activity between the date of the financial reports and December 31. These investments are not actively traded, and their values can only be estimated using these assumptions.
Furthermore, claims may emerge in a future year for events that occurred in a prior policy period at a rate that differs from actuarial projections. All these factors can result in revisions to actuarial projections and produce a material difference between estimated and actual operating results.
Furthermore, claims may emerge in future years for events that occurred in a prior policy period at a rate that differs from actuarial projections. All these factors can result in revisions to actuarial projections and produce a material difference between estimated and actual operating results.
In connection therewith, we reduced the estimated residual value of our MD-11 fleet, incurring a one-time, non-cash charge on our fully-depreciated aircraft. This charge was allocated between our domestic package and international package segments.
In connection therewith, we reduced the estimated residual value of our MD-11 fleet, incurring a one-time, non-cash charge on our fully-depreciated aircraft. This charge was allocated between our U.S. Domestic Package and International Package segments.
Except as disclosed in note 10 to the audited, consolidated financial statements, contingent losses that were probable and estimable were not material to our financial position or results of operations as of, or for the year ended, December 31, 2022.
Except as disclosed in note 10 to the audited, consolidated financial statements, contingent losses that were probable and estimable were not material to our financial position or results of operations as of, or for the year ended, December 31, 2023.
New Accounting Pronouncements Recently Adopted Accounting Standards See note 1 to the audited, consolidated financial statements for a discussion of recently adopted accounting standards. Accounting Standards Issued But Not Yet Effective See note 1 to the audited, consolidated financial statements for a discussion of accounting standards issued, but not yet effective. 48 UNITED PARCEL SERVICE, INC.
New Accounting Pronouncements Recently Adopted Accounting Standards See note 1 to the audited, consolidated financial statements for a discussion of recently adopted accounting standards. Accounting Standards Issued But Not Yet Effective See note 1 to the audited, consolidated financial statements for a discussion of accounting standards issued, but not yet effective. 50 UNITED PARCEL SERVICE, INC.
The likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a reasonable estimate of the loss or a range of loss may not be practicable based on the information available.
The likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a reasonable estimate of the loss or a range of potential losses may not be practicable based on the information available.
Our pension and postretirement plan assets include investments in hedge funds, as well as private debt, private equity and real estate funds, which are primarily measured using net asset value ("NAV") as a practical expedient for fair value, as appropriate. These investments were valued at $9.6 billion as of December 31, 2022.
Our pension and postretirement plan assets include investments in hedge funds, as well as private debt, private equity and real estate funds, which are primarily measured using net asset value ("NAV") as a practical expedient for fair value, as appropriate. These investments were valued at $9.9 billion as of December 31, 2023.
Significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period. We assess the likelihood that we will be able to recover our deferred tax assets.
Significant changes in these estimates may result in an increase or decrease to our tax expense in a subsequent period. We assess the likelihood that we will be able to recover our deferred tax assets.
For information regarding incentive compensation program design changes, see note 13 to the audited, consolidated financial statements. Long-lived Asset Estimated Residual Value Changes During the fourth quarter of 2022, we determined to retire six of our existing MD-11 aircraft from operational use in 2023.
For more information regarding incentive compensation program design changes, see note 13 to the audited, consolidated financial statements. Long-lived Asset Estimated Residual Value Changes During 2022, we determined to retire six of our existing MD-11 aircraft from operational use in 2023.
The events that may impact our contingent liabilities are often unique and generally are not predictable. At the time a contingency is identified, we consider all relevant facts as part of our evaluation. We apply judgment when establishing a range of reasonably possible losses for our contingencies.
The events that may impact our contingent liabilities are often unique and generally are not predictable. At the time a contingency is identified, we consider all relevant facts as part of our evaluation. We apply judgment when establishing a range of reasonably possible losses arising from contingencies.
These estimates and judgments occur in the calculation of income by legal entity and jurisdiction, tax credits, benefits and deductions, and in the calculation of deferred tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as tax, interest and penalties related to uncertain tax positions.
These estimates and judgments occur in the calculation of income by legal entity and jurisdiction, tax credits, benefits and deductions, and in the calculation of deferred tax assets and liabilities arising from timing differences in the recognition of revenue and expense for tax and financial statement purposes, as well as tax, interest and penalties related to uncertain tax positions.
Due to the complexity and inherent uncertainty associated with the estimation of our workers’ compensation, automobile and general liability claims, the third-party actuary develops a range of expected losses.
Due to the complexity and inherent uncertainty associated with the estimation of our workers’ compensation, automobile and general claims liabilities, the third-party actuary develops a range of expected losses.
If recovery is not likely, we must increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. We believe that we will ultimately recover a substantial majority of the deferred tax assets recorded on our consolidated balance sheets.
If recovery is not likely, we increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. We believe that we will ultimately recover a substantial majority of the deferred tax assets recorded in our consolidated balance sheets.
We anticipate making discretionary contributions to our company-sponsored U.S. defined benefit pension and postretirement medical plans of approximately $1.2 billion in 2023, which are included within Expected employer contributions to plan trusts shown in note 5 to the audited, consolidated financial statements. There are currently no anticipated required minimum cash contributions to our qualified U.S. pension plans.
We anticipate making discretionary contributions to our company-sponsored U.S. defined benefit pension and postretirement medical benefit plans of approximately $1.3 billion in 2024, which are included within Expected employer contributions to plan trusts shown in note 5 to the audited, consolidated financial statements. There are currently no anticipated required minimum cash contributions to our qualified U.S. pension plans in 2024.
Determining the asset group requires judgment and changes in the way asset groups are defined could have material impact to the results of impairment testing. We perform recoverability testing by comparing the undiscounted cash flows of the asset group to the carrying value of the asset group.
Determining asset groups requires judgment and changes in the way asset groups are defined could have a material impact on the results of impairment testing. We perform recoverability testing by comparing the undiscounted cash flows of the asset group to its carrying value.
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 for 2022 relative to 2021. 27 UNITED PARCEL SERVICE, INC.
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 for 2023 relative to 2022. 28 UNITED PARCEL SERVICE, INC.
For such accruals, we record the amount we consider to be the best estimate within a range of potential losses; however, when there appears to be a range of equally possible losses, our accrual is based on the low end of this range.
For such accruals, we record the amount we consider to be the best estimate within a range of potential losses; however, when there appears to be a range of equally possible losses, our accrual is at the low end of this range.
We initially evaluate qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive, we quantitatively assess the fair value of a reporting unit to test goodwill for impairment.
We initially evaluate qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive, or at our election, we quantitatively assess the fair value of a reporting unit to test goodwill for impairment.
Contribution rates to these multiemployer pension and health and welfare plans are established through the collective bargaining process. We have outstanding letters of credit and surety bonds that are discussed in note 9 to the audited, consolidated financial statements. Additionally, we have $2.2 billion of fixed- and floating-rate senior notes that mature in 2023.
Contribution rates to these multiemployer pension and health and welfare plans are established through the collective bargaining process. We have outstanding letters of credit and surety bonds that are discussed in note 9 to the audited, consolidated financial statements. Additionally, we have $1.5 billion of fixed- and floating-rate senior notes that mature in 2024.
Further information on our accounting polices relating to fair value measurements can be found in note 1 to the audited, consolidated financial statements. As of December 31, 2022, the majority of our financial instruments were categorized as either Level 1 or Level 2.
Further information on our accounting policies relating to fair value measurements can be found in note 1 to the audited, consolidated financial statements. As of December 31, 2023, the majority of our financial instruments were categorized as either Level 1 or Level 2.
These are included in cash flows from financing activities. We have commitments for the purchase of aircraft, vehicles, equipment and real estate to provide for the replacement of existing capacity and anticipated future growth. Future capital spending for anticipated growth and replacement assets will depend on a variety of factors, including regulatory, economic and industry conditions.
These are included in cash flows from financing activities. We have commitments for the purchase of aircraft, vehicles, equipment and real estate to provide for the replacement and enhancement of existing capacity and targeted growth. Future capital spending will depend on a variety of factors, including economic and industry conditions.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources We deploy a disciplined and balanced approach to capital allocation, including returns to shareowners through dividends and share repurchases. As of December 31, 2022, we had $7.6 billion in cash, cash equivalents and marketable securities.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources We deploy a disciplined and balanced approach to capital allocation, including returns to shareowners through dividends and share repurchases. As of December 31, 2023, we had $6.1 billion in cash, cash equivalents, restricted cash and marketable securities.
We evaluate the indefinite-lived trade name associated with our truckload brokerage business for impairment using the relief from royalty method. This valuation approach requires that we make a number of assumptions to estimate fair value, including projections of future revenues, market royalty rates, tax rates, discount rates and other relevant variables.
We test the indefinite-lived Coyote trade name associated with our truckload brokerage business for impairment in accordance with GAAP using the relief from royalty method. This valuation approach requires that we make a number of assumptions to estimate fair value, including projections of future revenues, market royalty rates, tax rates, discount rates and other relevant variables.
If the carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows or external appraisals, as appropriate. Details of long-lived asset impairments are included in note 4 to the audited, consolidated financial statements. 52 UNITED PARCEL SERVICE, INC.
If the carrying amount of the asset group is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows or external appraisals, as appropriate. Details of long-lived asset impairments are included in note 4 to the audited, consolidated financial statements.
Collective Bargaining Agreements Status of Collective Bargaining Agreements See note 6 to the audited, consolidated financial statements for a discussion of the status of collective bargaining agreements and "Risk Factors - Business and Operating Risks - Strikes, work stoppages or slowdowns by our employees could materially adversely affect us" in Part I, Item 1A of this report.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Collective Bargaining Agreements Status of Collective Bargaining Agreements See note 6 to the audited, consolidated financial statements for a discussion of the status of collective bargaining agreements and "Risk Factors - Business and Operating Risks - Strikes, work stoppages or slowdowns by our employees could materially adversely affect us" in Part I, Item 1A of this report.
(2) Amount calculated based on 25 basis point increase / decrease in the actual return on assets. Refer to note 5 to the audited, consolidated financial statements for information on our potential liability for coordinating benefits related to the Central States Pension Fund.
(2) Amount calculated based on 25 basis point increase / decrease in the actual return on assets. Refer to note 5 to the audited, consolidated financial statements for information on our potential liability for coordinating benefits related to the Central States Pension Fund. 54 UNITED PARCEL SERVICE, INC.
We believe that these positions, expected cash from operations, access to commercial paper programs and capital markets and other available liquidity options will be adequate to fund our material short- and long-term cash requirements, including our business operations, planned capital expenditures and pension contributions, transformation strategy costs, debt obligations and planned shareowner returns.
We believe that these positions, expected cash from operations, access to commercial paper programs and capital markets and other available liquidity options will be adequate to fund our material short- and long-term cash requirements, including our business operations, planned capital expenditures, anticipated pension contributions, potential acquisitions, debt obligations and planned shareowner returns.
Changes in any of these assumptions may materially impact the amount we recognize for identifiable assets and liabilities, in addition to the residual amount allocated to goodwill. Income Taxes We make certain estimates and judgments in determining income tax expense for financial statement purposes.
Changes in any of these assumptions may materially impact the amount we recognize for identifiable assets and liabilities, in addition to the residual amount allocated to goodwill. Income Taxes We make certain estimates and judgments in determining income tax expense within our financial statements.
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).
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).
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on February 22, 2022. 23 UNITED PARCEL SERVICE, INC.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on February 21, 2023. 24 UNITED PARCEL SERVICE, INC.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As of December 31, 2022, approximately $2.2 billion of our total worldwide holdings of cash, cash equivalents and marketable securities were held by foreign subsidiaries.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As of December 31, 2023, approximately $1.9 billion of our total worldwide holdings of cash, cash equivalents and marketable securities were held by foreign subsidiaries.
Contractual Commitments We have material cash requirements for known contractual obligations and commitments in the form of finance leases, operating leases, debt obligations, purchase commitments and certain other liabilities that are disclosed in the notes to the audited, consolidated financial statements and discussed below.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Contractual Commitments We have material cash requirements for known contractual obligations and commitments in the form of finance leases, operating leases, debt obligations, purchase commitments and certain other liabilities that are disclosed in the notes to the audited, consolidated financial statements and discussed below.
A five percent deterioration or improvement in both the assumed claim severity and claim frequency rates used to estimate our self-insurance reserves would result in an increase or decrease of approximately $290 million, respectively, in our reserves and expenses as of, and for the year ended, December 31, 2022.
A five percent deterioration or improvement in both the assumed claim severity and claim frequency rates used to estimate our self-insurance reserves would result in an increase or a decrease, respectively, of approximately $300 million in our reserves and expenses as of, and for the year ended, December 31, 2023. 53 UNITED PARCEL SERVICE, INC.
Sources of Credit See note 9 to the audited, consolidated financial statements for a discussion of our available credit and our debt covenants.
Sources of Credit See note 9 to the audited, consolidated financial statements for a discussion of our available credit and our debt covenants. 48 UNITED PARCEL SERVICE, INC.
We believe that they are reasonable, based on information as to historical experience and performance as well as other factors that might cause future expectations to differ from past trends. Differences in actual experience or changes in assumptions may affect our pension and postretirement medical benefit obligations and future expenses.
The assumptions utilized in recording the obligations under our plans represent our best estimates. We believe that they are reasonable based on historical experience and performance, as well as factors that might cause future expectations to differ from past trends. Differences in actual experience or changes in assumptions may affect our pension and postretirement medical benefit obligations and future expenses.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incentive Compensation Program Design Changes During 2022, we completed certain structural changes to the design of our incentive compensation programs that resulted in a one-time, non-cash charge in connection with the accelerated vesting of certain equity incentive awards that we do not expect to repeat.
Incentive Compensation Program Design Changes During 2022, we completed certain structural changes to the design of our incentive compensation programs that resulted in a one-time, non-cash charge in connection with the accelerated vesting of certain equity incentive awards that we do not expect to repeat.
Cash Flows From Operating Activities The following is a summary of the significant sources (uses) of cash from operating activities (in millions): 2022 2021 Net income $ 11,548 $ 12,890 Non-cash operating activities (a) 5,261 3,335 Pension and postretirement medical benefit plan contributions (company-sponsored plans) (2,342) (576) Hedge margin receivables and payables 274 272 Income tax receivables and payables 154 170 Changes in working capital and other non-current assets and liabilities (797) (1,106) Other operating activities 6 22 Net cash from operating activities $ 14,104 $ 15,007 (a) Represents depreciation and amortization, gains and losses on derivative transactions and foreign currency exchange, deferred income taxes, allowances for expected credit losses, amortization of operating lease assets, pension and postretirement medical benefit plan (income) expense, stock compensation expense, changes in casualty self-insurance reserves, goodwill and other asset impairment charges and other non-cash items.
Cash Flows From Operating Activities The following is a summary of the significant sources (uses) of cash from operating activities (in millions): 2023 2022 Net income $ 6,708 $ 11,548 Non-cash operating activities (1) 5,437 5,261 Pension and postretirement medical benefit plan contributions (company-sponsored plans) (1,393) (2,342) Hedge margin receivables and payables (444) 274 Income tax receivables and payables (294) 154 Changes in working capital and other non-current assets and liabilities 366 (797) Other operating activities (142) 6 Net cash from operating activities $ 10,238 $ 14,104 (1) Represents depreciation and amortization, gains and losses on derivative transactions and foreign currency exchange, deferred income taxes, allowances for expected credit losses, pension and postretirement medical benefit plan (income) expense, stock compensation expense, changes in casualty self-insurance reserves, goodwill and other asset impairment charges and other non-cash items.
Revenue The change in revenue was due to the following: Revenue Change Drivers: Volume Rates / Product Mix Fuel Surcharges Currency Total Revenue Change 2022 vs. 2021 (7.2) % 6.5 % 6.9 % (5.4) % 0.8 % 31 UNITED PARCEL SERVICE, INC.
Revenue The change in revenue was due to the following: Revenue Change Drivers: Volume Rates / Product Mix Fuel Surcharges Currency Total Revenue Change 2023 vs. 2022 (7.3) % 1.1 % (2.7) % (0.6) % (9.5) % 32 UNITED PARCEL SERVICE, INC.
While estimates and judgments are applied in arriving at many reported amounts, we believe that the following critical accounting estimates involve a higher degree of judgment and complexity. Contingencies From time to time, we are involved in various legal proceedings and have exposure to various other contingent obligations.
While estimates and judgments are applied in arriving at many reported amounts, we believe that the following critical accounting estimates involve a higher degree of judgment and complexity. Contingencies From time to time, we are involved in various judicial proceedings and other matters arising from the conduct of our business that result in exposure to various contingent liabilities.
The blended average effective income tax rates for the years ended December 31, 2022 and 2021 were 26.5% and 23.8%, respectively. 24 UNITED PARCEL SERVICE, INC.
The blended average effective income tax rates for the years ended December 31, 2023 and 2022 were 22.5% and 26.5%, respectively. 25 UNITED PARCEL SERVICE, INC.
In addition, we have certain contingent liabilities that have not been recognized as of, or for the year ended, December 31, 2022, because a loss was not reasonably estimable. Obligations relating to income taxes and self-insurance are discussed below. Goodwill and Intangible Asset Impairments We assess goodwill for impairment at the reporting unit level.
In addition, we have certain contingent liabilities that have not been recognized as of, or for the year ended, December 31, 2023, because a loss was not reasonably estimable. Contingent obligations relating to income taxes and self-insurance are discussed below.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In accounting for business acquisitions, we allocate the fair value of purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values.
In accounting for business acquisitions, we allocate the fair value of purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash Flows From Financing Activities Our primary sources (uses) of cash for financing activities were as follows (amounts in millions, except per share data): 2022 2021 Net cash used in financing activities $ (11,185) $ (6,823) Share Repurchases: Cash paid to repurchase shares $ (3,500) $ (500) Number of shares repurchased (19.0) (2.6) Shares outstanding at period end 859 870 Dividends: Dividends declared per share $ 6.08 $ 4.08 Cash paid for dividends $ (5,114) $ (3,437) Borrowings: Net borrowings (repayments) of debt principal $ (2,304) $ (2,773) Other Financing Activities: Cash received for common stock issuances $ 262 $ 251 Other financing activities $ (529) $ (364) Capitalization: Total debt outstanding at year end $ 19,662 $ 21,915 Total shareowners’ equity at year end 19,803 14,269 Total capitalization $ 39,465 $ 36,184 We repurchased 19.0 and 2.6 million shares of class B common stock for $3.5 billion and $500 million under our stock repurchase program for the years ended December 31, 2022 and 2021, respectively.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash Flows From Financing Activities Our primary sources (uses) of cash for financing activities were as follows (amounts in millions, except per share data): 2023 2022 Net cash used in financing activities $ (5,534) $ (11,185) Share Repurchases: Cash paid to repurchase shares $ (2,250) $ (3,500) Number of shares repurchased (12.8) (19.0) Shares outstanding at year end 853 859 Dividends: Dividends declared per share $ 6.48 $ 6.08 Cash paid for dividends $ (5,372) $ (5,114) Borrowings: Net borrowings (repayments) of debt principal $ 2,272 $ (2,304) Other Financing Activities: Cash received for common stock issuances $ 248 $ 262 Other financing activities $ (432) $ (529) Capitalization: Total debt outstanding at year end $ 22,264 $ 19,662 Total shareowners’ equity at year end 17,314 19,803 Total capitalization $ 39,578 $ 39,465 We repurchased 12.8 and 19.0 million shares of class B common stock for $2.3 and $3.5 billion under our stock repurchase program for the years ended December 31, 2023 and 2022, respectively.
Self-insurance reserves as of December 31, 2022 and 2021 were as follows (in millions): 2022 2021 Current self-insurance reserves $ 1,069 $ 1,048 Non-current self-insurance reserves (1) 1,818 1,855 Total self-insurance reserves $ 2,887 $ 2,903 (1) Included within Other Non-Current Liabilities in the consolidated balance sheets.
Self-insurance reserves as of December 31, 2023 and 2022 were as follows (in millions): 2023 2022 Current self-insurance reserves $ 1,320 $ 1,069 Non-current self-insurance reserves (1) 1,626 1,818 Total self-insurance reserves $ 2,946 $ 2,887 (1) Included within Other Non-Current Liabilities in our consolidated balance sheets.
Rates and Product Mix In December 2021, we implemented an average 5.9% net increase in base and accessorial rates for international shipments originating in the United States. Rate changes for shipments originating outside the U.S. are made throughout the year and vary by geographic market. We continue to apply demand-related surcharges on certain lanes.
Rates and Product Mix In December 2022, we implemented an average 6.9% net increase in base and accessorial rates for international shipments originating in the United States. Rate changes for shipments originating outside the U.S. are made throughout the year and vary by geographic market.
The remeasurement of our defined benefit pension and postretirement medical plans' assets and liabilities resulted in gains of $1.1 and $3.3 billion for the years ended December 31, 2022 and 2021, respectively.
The remeasurement of our defined benefit pension and postretirement medical plans' assets and liabilities resulted in a loss of $0.4 billion and a gain of $1.1 billion for the years ended December 31, 2023 and 2022, respectively.
The table below shows the amounts associated with each component of these gains, as well as the weighted-average actuarial assumptions used to determine our net periodic benefit cost, for each year: Year Ended December 31, Components of defined benefit plan gain (loss) (in millions): 2022 2021 Discount rates $ 5,210 $ 1,871 Return on assets (4,130) (269) Demographic and other assumption changes (53) (97) Coordinating benefits attributable to the Central States Pension Fund — 1,767 Total mark-to-market gain (loss) 1,027 3,272 Curtailment gain 34 — Total defined benefit plan gain (loss) $ 1,061 $ 3,272 Year Ended December 31, Weighted-average actuarial assumptions: 2022 2021 Expected rate of return on plan assets used in determining net periodic benefit cost 5.83 % 6.40 % Actual rate of return on plan assets (24.11) % 9.11 % Discount rate used in determining net periodic benefit cost 3.11 % 2.87 % Discount rate at measurement date 5.77 % 3.11 % The pre-tax defined benefit plan gains and losses for the years ended December 31, 2022 and 2021 consisted of the following: 2022 - $1.1 billion pre-tax defined benefit plan gain: • Discount Rates ($5.2 billion pre-tax gain): The weighted-average discount rate for our pension and postretirement medical plans increased from 3.11% as of December 31, 2021 to 5.77% as of December 31, 2022, primarily due to an increase in U.S. treasury yields as well as an increase in credit spreads on AA-rated corporate bonds in 2022. • Return on Assets ($4.1 billion pre-tax loss): In 2022, the actual rate of return on plan assets was lower than our expected rate of return, primarily due to weaker global equity and U.S. bond market performance. • Demographic and Other Assumption Changes ($0.1 billion pre-tax loss): This loss was due to the differences between actual and estimated participant data and demographic factors, including healthcare cost trends, compensation rate increases and rates of termination, retirement and mortality. 26 UNITED PARCEL SERVICE, INC.
The table below shows the amounts associated with each component of the loss and gain, as well as the weighted-average actuarial assumptions used to determine our net periodic benefit cost, for each year: Year Ended December 31, Components of defined benefit plan gain (loss) (in millions): 2023 2022 Discount rates $ (384) $ 5,210 Return on assets 37 (4,130) Demographic and other assumption changes (4) (53) Total mark-to-market gain (loss) (351) 1,027 Curtailment and settlement gain (loss) (8) 34 Total defined benefit plan gain (loss) $ (359) $ 1,061 Year Ended December 31, Weighted-average actuarial assumptions: 2023 2022 Expected rate of return on plan assets used in determining net periodic benefit cost 6.99 % 5.83 % Actual rate of return on plan assets 6.64 % (24.11) % Discount rate used in determining net periodic benefit cost 5.77 % 3.11 % Discount rate at measurement date 5.40 % 5.77 % The pre-tax defined benefit plan gains and losses for the years ended December 31, 2023 and 2022 consisted of the following: 2023 - $0.4 billion pre-tax defined benefit plan loss: • Discount Rates ($384 million pre-tax loss): The weighted-average discount rate for our pension and postretirement medical plans decreased from 5.77% as of December 31, 2022 to 5.40% as of December 31, 2023, primarily due to a decrease in credit spreads on AA-rated corporate bonds in 2023. • Return on Assets ($37 million pre-tax gain): The actual rate of return on plan assets in certain of our international pension plans was higher than our expected rate of return, primarily due to strong global equity market performance. • Demographic and Other Assumption Changes ($4 million pre-tax loss): This loss was due to differences between actual and estimated participant data and demographic factors, including healthcare cost trends, compensation rate increases and rates of termination, retirement and mortality. 27 UNITED PARCEL SERVICE, INC.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash Flows From Investing Activities Our primary sources (uses) of cash from investing activities for the years ended December 31, 2022 and 2021 were as follows (in millions): 2022 2021 Net cash used in investing activities $ (7,472) $ (3,818) Capital Expenditures: Buildings, facilities and plant equipment $ (1,708) $ (1,635) Aircraft and parts (1,267) (1,185) Vehicles (1,067) (807) Information technology (727) (567) Total Capital Expenditures (1) : $ (4,769) $ (4,194) Capital Expenditures as a % of revenue 4.8 % 4.3 % Other Investing Activities: Proceeds from disposals of businesses, property, plant and equipment $ 12 $ 872 Net change in finance receivables $ 24 $ 34 Net (purchases), sales and maturities of marketable securities $ (1,651) $ 54 Acquisitions, net of cash acquired $ (755) $ (602) Other investing activities $ (333) $ 18 (1) In addition to capital expenditures of $4.8 and $4.2 billion for the years ended December 31, 2022 and 2021, respectively, there were principal repayments of finance lease obligations of $149 and $208 million, respectively.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash Flows From Investing Activities Our primary sources (uses) of cash from investing activities for the years ended December 31, 2023 and 2022 were as follows (in millions): 2023 2022 Net cash used in investing activities $ (7,133) $ (7,472) Capital Expenditures: Buildings, facilities and plant equipment $ (2,211) $ (1,708) Aircraft and parts (585) (1,267) Vehicles (1,485) (1,067) Information technology (877) (727) Total Capital Expenditures (1) : $ (5,158) $ (4,769) Capital Expenditures as a % of revenue 5.7 % 4.8 % Other Investing Activities: Proceeds from disposals of businesses, property, plant and equipment $ 193 $ 12 Net (purchases)/sales and maturities of marketable securities $ (820) $ (1,651) Acquisitions, net of cash acquired $ (1,329) $ (755) Other investing activities $ (19) $ (309) (1) In addition to capital expenditures of $5.2 and $4.8 billion for the years ended December 31, 2023 and 2022, respectively, there were principal repayments of finance lease obligations of $126 and $149 million, respectively.
These impacts were slightly offset by expense increases in our logistics operations due to business growth and third-party rate increases in our mail services business. The UPS Freight divestiture in 2021 drove a decrease of $260 million. • U.S.
These impacts were slightly offset by expense increases in our logistics operations due to business growth, third-party rate increases in our mail services business and the impact of acquisitions. • U.S.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Income Tax Expense The following table sets forth income tax expense and our effective tax rate for the years ended December 31, 2022 and 2021 (in millions): Year Ended December 31, Change 2022 2021 $ % Income Tax Expense: $ 3,277 $ 3,705 $ (428) (11.6) % Income Tax Impact of: Defined Benefit Pension and Postretirement Medical Plan (Gains) and Losses (255) (784) 529 (67.5) % Incentive Compensation Program Design Changes 121 — 121 N/A Long-Lived Asset Estimated Residual Value Changes 18 — 18 N/A Transformation Strategy Costs 36 95 (59) (62.1) % Goodwill and Asset Impairment Charges, and Divestitures — (11) 11 (100.0) % Adjusted Income Tax Expense $ 3,197 $ 3,005 $ 192 6.4 % Effective Tax Rate 22.1 % 22.3 % Adjusted Effective Tax Rate 22.0 % 22.0 % For additional information on income tax expense and our effective tax rate, see note 15 to the audited, consolidated financial statements. 41 UNITED PARCEL SERVICE, INC.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Income Tax Expense The following table sets forth income tax expense and our effective tax rate for the years ended December 31, 2023 and 2022 (in millions): Year Ended December 31, Change 2023 2022 $ % Income Tax Expense: $ 1,865 $ 3,277 $ (1,412) (43.1) % Income Tax Impact of: One-Time Compensation Payment 15 — 15 N/A Transformation Strategy Costs 102 36 66 183.3 % Goodwill and Asset Impairment Charges 43 — 43 N/A Incentive Compensation Program Design Changes — 121 (121) (100.0) % Long-Lived Asset Estimated Residual Value Changes — 18 (18) (100.0) % Defined Benefit Pension and Postretirement Medical Plan (Gains) and Losses 85 (255) 340 N/A Adjusted Income Tax Expense $ 2,110 $ 3,197 $ (1,087) (34.0) % Effective Tax Rate 21.8 % 22.1 % Adjusted Effective Tax Rate 21.8 % 22.0 % For additional information on income tax expense and our effective tax rate, see note 15 to the audited, consolidated financial statements. 42 UNITED PARCEL SERVICE, INC.
The declaration of dividends is subject to the discretion of the Board and depends on various factors, including our net income, financial condition, cash requirements, future prospects and other relevant factors. In the first quarter of 2023, we increased our quarterly dividend from $1.52 to $1.62 per share. There were no issuances of debt in 2022.
The declaration of dividends is subject to the discretion of the Board and will depend on various factors, including our net income, financial condition, cash requirements, future prospects and other relevant factors. We paid quarterly cash dividends of $1.62 and $1.52 per share in 2023 and 2022, respectively.
Repayments of debt in 2022 included scheduled principal payments on our finance lease obligations, payment of amounts assumed in the Bomi Group acquisition and repayment at maturity of senior notes as follows: • $1.0 billion 2.450% senior notes; • $600 million 2.350% senior notes; and • $400 million floating rate senior notes.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Repayments of debt in 2022 included scheduled principal payments on our finance lease obligations and repayment of senior notes at maturity as follows: • $1.0 billion 2.450% senior notes; • $600 million 2.350% senior notes; and • $400 million floating rate senior notes.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The increase in cash paid for acquisitions in 2022 was primarily attributable to the acquisitions of Bomi Group and Delivery Solutions, and the purchase of development areas for The UPS Store.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash paid for acquisitions in 2023 was primarily attributable to the acquisitions of MNX Global Logistics and Happy Returns, and the purchase of development areas for The UPS Store.
Included within these purchase commitments are firm commitments to purchase seven new and used Boeing 767-300 aircraft to be delivered in 2023, 21 new Boeing 767-300 aircraft to be delivered between 2024 and 2026, and two used Boeing 747-8F aircraft to be delivered in 2024.
Included within these purchase commitments are firm commitments to purchase 21 new Boeing 767-300 aircraft to be delivered between 2024 and 2026 and two used Boeing 747-8F aircraft to be delivered in 2024. Additionally, we anticipate purchasing approximately 3,000 alternative fuel vehicles in 2024.
We believe our estimated reserves for such claims are adequate; however, actual experience in claims frequency and/or severity of claims could materially differ from our estimates and affect our results of operations. 50 UNITED PARCEL SERVICE, INC.
We believe our estimated reserves for such claims are adequate; however, actual experience in claims frequency and/or severity of claims could materially differ from our estimates and affect our results of operations. We also sponsor several health and welfare insurance plans for our employees.
Adjusted amounts reflect the following (in millions): Year Ended December 31, Non-GAAP Adjustments 2022 2021 Operating Expenses: Incentive Compensation Program Design Changes $ 505 $ — Long-Lived Asset Estimated Residual Value Changes 76 — Transformation Strategy Costs 178 380 Goodwill and Asset Impairment Charges, and Divestitures — (46) Total Adjustments to Operating Expenses $ 759 $ 334 Other Income and (Expense): Defined Benefit Pension and Postretirement Medical Plan (Gains) and Losses $ (1,061) $ (3,272) Total Adjustments to Other Income and (Expense) $ (1,061) $ (3,272) Total Adjustments to Income Before Income Taxes $ (302) $ (2,938) Income Tax (Benefit) Expense: Incentive Compensation Program Design Changes $ (121) $ — Long-Lived Asset Estimated Residual Value Changes (18) — Transformation Strategy Costs (36) (95) Goodwill and Asset Impairment Charges, and Divestitures — 11 Defined Benefit Pension and Postretirement Medical Plan (Gains) and Losses 255 784 Total Adjustments to Income Tax Expense $ 80 $ 700 Total Adjustments to Net Income $ (222) $ (2,238) These items have been excluded from the following discussions of "adjusted" compensation and benefits, operating expenses, operating profit, operating margin, other income and (expense), income tax expense and effective tax rate.
Adjusted amounts reflect the following (in millions): Year Ended December 31, Non-GAAP Adjustments 2023 2022 Operating Expenses: One-Time Compensation Payment $ 61 $ — Transformation Strategy Costs 435 178 Goodwill and Asset Impairment Charges 236 — Incentive Compensation Program Design Changes — 505 Long-Lived Asset Estimated Residual Value Changes — 76 Total Adjustments to Operating Expenses $ 732 $ 759 Other Income and (Expense): Defined Benefit Pension and Postretirement Medical Plan (Gains) and Losses $ 359 $ (1,061) Total Adjustments to Other Income and (Expense) $ 359 $ (1,061) Total Adjustments to Income Before Income Taxes $ 1,091 $ (302) Income Tax (Benefit) Expense: One-Time Compensation Payment $ (15) $ — Transformation Strategy Costs (102) (36) Goodwill and Asset Impairment Charges (43) — Incentive Compensation Program Design Changes — (121) Long-Lived Asset Estimated Residual Value Changes — (18) Defined Benefit Pension and Postretirement Medical Plan (Gains) and Losses (85) 255 Total Adjustments to Income Tax Expense $ (245) $ 80 Total Adjustments to Net Income $ 846 $ (222) These items have been excluded from the following discussions of "adjusted" results.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating Expenses Operating expenses and adjusted operating expenses increased year over year. The increase includes the impact of one additional operating day. The cost of operating our integrated air and ground network increased $858 million and pickup and delivery costs increased $1.5 billion.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating Expenses Operating expenses and adjusted operating expenses decreased year over year. The costs of operating our integrated air and ground network decreased $1.5 billion, our pickup and delivery costs decreased $641 million and our package sorting costs decreased $216 million.
We reevaluate uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity.
We reevaluate uncertain tax positions quarterly based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Such a change in recognition or measurement could result in the recognition of a tax benefit or additional tax expense.
Foreign Currency Exchange Rate Changes and Hedging Activities We supplement the reporting of revenue, revenue per piece and operating profit with adjusted measures that exclude the period over period impact of foreign currency exchange rate changes and hedging activities.
For more information regarding residual values, see note 4 to the audited, consolidated financial statements. Foreign Currency Exchange Rate Changes and Hedging Activities We supplement the reporting of revenue, revenue per piece and operating profit with adjusted measures that exclude the period over period impact of foreign currency exchange rate changes and hedging activities.
Pension and Other Postretirement Medical Benefits Our pension and postretirement medical benefit costs are calculated using various actuarial assumptions and methodologies. These assumptions include discount rates, healthcare cost trend rates, inflation, compensation increases, expected returns on plan assets, mortality rates, regulatory requirements and other factors. The assumptions utilized in recording the obligations under our plans represent our best estimates.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Pension and Other Postretirement Medical Benefits Our pension and postretirement medical benefit costs are calculated using various actuarial assumptions and methodologies. These assumptions include discount rates, healthcare cost trend rates, inflation, compensation increases, expected returns on plan assets, mortality rates, regulatory requirements and other factors.
In the fourth quarter of 2022, we reduced the estimated residual value of our MD-11 aircraft and associated engines to zero based on updated operational plans for these aircraft and our expectations for their eventual disposal.
In 2022, we reduced the estimated residual value of our MD-11 aircraft and associated engines to zero based on updated operational plans for these aircraft and our expectations for their eventual disposal. In connection with this change in estimate, in 2022 we recorded a one-time depreciation charge to adjust the residual value of our fully-depreciated MD-11 aircraft.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Revenue Total revenue within Supply Chain Solutions decreased for the year. Lower volume and revenue in forwarding and the impact of divesting UPS Freight in the second quarter of 2021 more than offset strong revenue growth in logistics and a number of our other businesses.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Revenue Total revenue within Supply Chain Solutions decreased for the year, primarily due to lower revenue and volumes across our forwarding businesses. The declines in forwarding and certain of our other businesses more than offset the impact of revenue growth in logistics and our digital businesses.
Consequently, actuarial estimates are required to project the ultimate cost that will be incurred to resolve a claim. Several factors can affect the actual cost, or severity, of a claim, including: • Length of time a claim remains open; • Trends in healthcare costs; • Results of any related litigation; and • Changes in legislation.
Several factors can affect the actual cost, or severity, of a claim, including: • Risk retention limits; • Length of time a claim remains open; • Trends in healthcare costs; • Results of any related litigation; and • Changes in legislation.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In estimating the useful lives and expected residual values of aircraft, we consider actual experience with the same or similar aircraft types and volume projections for our air products.
In estimating the useful lives and expected residual values of aircraft, we consider actual experience with the same or similar aircraft types, multi-year volume projections for our air products and the types of aircraft required to efficiently operate our network.
Contingencies See note 5 to the audited, consolidated financial statements for a discussion of pension-related matters, note 10 to the audited, consolidated financial statements for a discussion of judicial proceedings and other matters arising from the conduct of our business activities and note 15 to the audited, consolidated financial statements for a discussion of income-tax-related matters.
We anticipate this balance will increase by approximately $61 million in 2024. Contingencies See note 5 and note 15 to the audited, consolidated financial statements for a discussion of pension-related matters and income-tax-related matters, respectively. See note 10 for a discussion of judicial proceedings and other matters arising from the conduct of our business activities. 49 UNITED PARCEL SERVICE, INC.
Any such distributions may be subject to foreign withholding and U.S. state taxes. When amounts earned by foreign subsidiaries are expected to be indefinitely reinvested, no accrual for taxes is provided. 43 UNITED PARCEL SERVICE, INC.
Any such distributions may be subject to foreign withholding and U.S. state taxes. When amounts earned by foreign subsidiaries are expected to be indefinitely reinvested, no accrual for taxes is provided. As of December 31, 2023, we had $37 million of restricted cash related to certain tax and regulatory matters and acquisitions. 44 UNITED PARCEL SERVICE, INC.
We evaluate the useful lives of our property, plant and equipment based on our usage, maintenance and replacement policies, and taking into account physical and economic factors that may affect the useful lives of the assets. Our accounting policy for property, plant and equipment is set out in note 1 to the audited, consolidated financial statements.
In accounting for property, plant and equipment, we make estimates of the expected useful lives and residual values to arrive at depreciation expense. We evaluate the useful lives of our property, plant and equipment based on our usage, maintenance and replacement policies, and taking into account physical and economic factors that may affect the useful lives of the assets.
Adverse changes in volume forecasts, or a shortfall in our actual volume compared with our projections, could result in our current aircraft capacity exceeding current or projected demand. This situation could lead to an excess of aircraft, resulting in an impairment charge or reduction in expected useful life that may result in increased depreciation expense.
Over a longer period, continued adverse changes in volume forecasts could lead to an excess of aircraft, resulting in an impairment charge or reduction in expected useful life that may result in increased depreciation expense.
The process incorporates actual loss experience and judgments about expected future development based on historical experience, recent and projected trends in claim frequency and severity, and changes in claims handling practices, among other factors. Workers' compensation, automobile liability and general liability insurance claims may take a number of years to resolve.
The process incorporates actual loss experience and judgments about expected future development based on historical experience, recent and projected trends in claim frequency and severity, changes in the level of risk retained under our programs and changes in claims handling practices, among other factors.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

13 edited+0 added−2 removed8 unchanged
Biggest changeWe may also utilize forward starting swaps and similar instruments to lock in all or a portion of the borrowing cost of anticipated debt issuances. Our floating-rate debt and interest rate swaps subject us to risk resulting from changes in short-term interest rates.
Biggest changeWe may use interest rate swaps as part of our program to manage the fixed and floating interest rate mix of our total debt portfolio and related overall cost of borrowing. We may also utilize forward starting swaps and similar instruments to lock in all or a portion of the borrowing cost of anticipated debt issuances.
As of December 31, 2022 and 2021, we had no commodity contracts outstanding. Foreign Currency Exchange Rate Risk We have foreign currency risks related to our revenue, operating expenses and financing transactions in currencies other than the local currencies in which we operate.
As of December 31, 2023 and 2022, we had no commodity contracts outstanding. Foreign Currency Exchange Rate Risk We have foreign currency risks related to our revenue, operating expenses and financing transactions in currencies other than the local currencies in which we operate.
This will result in changes to the amount of pension and postretirement benefit expense recognized in future periods and may also result in us being required to make contributions to the plans. We hold investments in debt securities, as well as cash-equivalent instruments, some of which accrue income at variable rates of interest.
This will result in changes to the amount of pension and postretirement benefit expense recognized in future periods and may also result in us being required to make contributions to the plans. We hold investments in debt securities, as well as cash-equivalent instruments, some of which accrue income at variable rates of interest. 57 UNITED PARCEL SERVICE, INC.
We may use forward contracts as well as a combination of purchased and written options to hedge forecasted cash flow currency exposures. These derivative instruments generally cover forecasted foreign currency exposures for periods of 12 to 48 months.
We may use forward contracts as well as a combination of purchased and written options to hedge forecasted cash flow currency exposures. These derivative instruments generally cover forecasted foreign currency exposures for periods of 3 to 36 months.
Shock-Test Result as of December 31, (in millions) 2022 2021 Change in Fair Value: Currency Derivatives (1) $ (770) $ (766) Change in Annual Interest Expense: Variable Rate Debt (2) $ 18 $ 22 Interest Rate Derivatives (2) $ — $ 10 Change in Annual Interest Income: Marketable Securities (3) $ 1 $ — (1) The potential change in fair value from a hypothetical 10% weakening of the U.S.
Shock-Test Result as of December 31, (in millions) 2023 2022 Change in Fair Value: Currency Derivatives (1) $ (649) $ (770) Change in Annual Interest Expense: Variable Rate Debt (2) $ 41 $ 18 Change in Annual Interest Income: Marketable Securities (3) $ 1 $ 1 (1) The potential change in fair value from a hypothetical 10% weakening of the U.S.
(3) The potential change in interest income resulting from a hypothetical 100 basis point increase in short-term interest rates, applied to our variable rate investment holdings. The sensitivity of our defined benefit pension and postretirement plan obligations to changes in interest rates is quantified in "Critical Accounting Estimates". 56
(3) The potential change in interest income resulting from a hypothetical 100 basis point increase in short-term interest rates, applied to our variable rate investment holdings. The sensitivity of our defined benefit pension and postretirement benefit plan obligations to changes in interest rates is discussed in "Critical Accounting Estimates - Pension and Other Postretirement Medical Benefits". 58
We are also subject to interest rate risk with respect to our defined benefit pension and postretirement medical plan obligations, as changes in interest rates will effectively increase or decrease the obligations associated with these plans.
These instruments subject us to risk resulting from changes in short-term interest rates. We are also subject to interest rate risk with respect to our defined benefit pension and postretirement medical benefit plan obligations, as changes in interest rates will effectively increase or decrease the obligations associated with these plans.
Dollar against foreign currency exchange rates across all maturities. (2) The potential change in annual interest expense resulting from a hypothetical 100 basis point increase in short-term interest rates, applied to our variable rate debt and swap instruments (excluding hedges of anticipated debt issuances).
Dollar against foreign currency exchange rates across all maturities. (2) The potential change in annual interest expense resulting from a hypothetical 100 basis point increase in short-term interest rates, applied to our variable rate debt.
Sensitivity Analysis The following analysis provides quantitative information regarding our exposure to foreign currency exchange rate risk, interest rate risk and equity price risk embedded in our existing financial instruments.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Sensitivity Analysis The following analysis provides quantitative information regarding our exposure to foreign currency exchange rate risk, interest rate risk and equity price risk embedded in our existing financial instruments.
We utilize valuation models to evaluate the sensitivity of the fair value of financial instruments with exposure to market risk that assume instantaneous, parallel shifts in exchange rates, interest rate yield curves and commodity and equity prices.
We utilize valuation models to evaluate the sensitivity of the fair value of financial instruments with exposure to market risk that assume instantaneous, parallel shifts in exchange rates, interest rate yield curves and commodity and equity prices. For options and instruments with non-linear returns, models appropriate to the instrument are utilized to determine the impact of market shifts.
We adjust the fixed and floating interest rate mix of our interest-rate-sensitive assets and liabilities in response to changes in market conditions. Additionally, changes in the fair value of foreign currency derivatives and commodity derivatives are offset by changes in the cash flows of the underlying hedged foreign currency and commodity transactions.
Additionally, changes in the fair value of foreign currency derivatives and commodity derivatives are offset by changes in the cash flows of the underlying hedged foreign currency and commodity transactions.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS There are certain limitations inherent in the sensitivity analyses presented, primarily due to the assumption that foreign currency exchange rates change in a parallel fashion and that interest rates change instantaneously.
There are certain limitations inherent in the sensitivity analyses presented, primarily due to the assumption that foreign currency exchange rates change in a parallel fashion and that interest rates change instantaneously. In addition, the analyses are unable to reflect the complex market reactions that normally would arise from the market shifts modeled.
In addition, the analyses are unable to reflect the complex market reactions that normally would arise from the market shifts modeled. While this is our best estimate of the impact of the specified scenarios, these estimates should not be viewed as forecasts.
While this is our best estimate of the impact of the specified scenarios, these estimates should not be viewed as forecasts. We adjust the fixed and floating interest rate mix of our interest-rate-sensitive assets and liabilities in response to changes in market conditions.
Removed
We use interest rate swaps as part of our program to manage the fixed and floating interest rate mix of our total debt portfolio and related overall cost of borrowing. The notional amount, interest payment and maturity dates of the swaps match the terms of the associated debt.
Removed
For options and instruments with non-linear returns, models appropriate to the instrument are utilized to determine the impact of market shifts. 55 UNITED PARCEL SERVICE, INC.

Other UPS 10-K year-over-year comparisons