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What changed in United Parcel Service's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of United Parcel Service's 2024 and 2025 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 2025 report.

+440 added−489 removedSource: 10-K (2026-02-17) vs 10-K (2025-02-18)

Top changes in United Parcel Service's 2025 10-K

440 paragraphs added · 489 removed · 311 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

56 edited+13 added−12 removed25 unchanged
Biggest changeOur network provides unique operational and capital efficiencies that also have a smaller environmental impact than single service network designs. 2 We offer same-day pickup of air and ground packages seven days a week through a broad variety of network access points including, UPS drop boxes, UPS Access Point locations and The UPS Store locations.
Biggest changeWe offer same-day pickup of air and ground packages seven days a week through a broad variety of network access points including, UPS Access Points, The UPS Stores and UPS drop boxes. UPS drivers can also directly accept packages. We offer returns services in approximately 150 countries, addressing customers' needs for efficient and reliable returns.
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 7 Human Capital, Risk, and Nominating and Corporate Governance Committees are also available on our investor relations website under the heading "Investors – Corporate Governance".
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 – Corporate Governance".
Continued compliance with increasingly stringent laws, regulations and policies in the U.S. and in the other countries in which we operate may result in materially increased costs, or we could be subject to substantial fines or possible revocation of our authority to conduct our operations. 5 Air Operations The U.S.
Continued compliance with increasingly stringent laws, regulations and policies in the U.S. and in the other countries in which we operate may result in materially increased costs, or we could be subject to substantial fines or possible revocation of our authority to conduct our operations. Air Operations The U.S.
Our activities in the U.S., 6 including customs brokerage and freight forwarding, are subject to regulation by the Bureau of Customs and Border Protection, the TSA, the U.S. Federal Maritime Commission and the DOT. Our international operations are subject to similar regulatory structures in their respective jurisdictions.
Our activities in the U.S., including customs brokerage and freight forwarding, are subject to regulation by the Bureau of Customs and Border Protection, the TSA, the U.S. Federal Maritime Commission and the DOT. Our international operations are subject to similar regulatory structures in their respective jurisdictions.
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". 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.
For additional information, see "Risk Factors – Regulatory and Legal Risks –Regulations related to climate change, including reporting obligations, could materially increase our operating costs" . 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.
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 cybersecurity incident, or increased data protection regulations, could materially adversely affect us".
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 cybersecurity incident, increased data protection regulations, or other information technology related risks, could materially adversely affect us".
Oversight and management Our board, directly and through the Compensation and Human Capital Committee, is responsible for oversight of human capital matters.
Oversight and management Our Board of Directors (the "Board"), directly and through the Compensation and Human Capital Committee, is responsible for oversight of human capital matters.
We operate both multi-client and dedicated facilities across our network, many of which are strategically located near UPS air 3 and ground transportation hubs to support rapid delivery to business and consumer markets. We continue to invest in facility automation to enhance operational efficiency. We offer world-class technology, deep expertise and a highly sophisticated suite of healthcare logistics services.
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 facility automation to enhance operational efficiency. We offer world-class technology, deep expertise and highly sophisticated healthcare logistics services.
We believe the board’s oversight of these matters helps identify and mitigate exposure to labor and human capital management risks and is part of the broader framework that guides how we attract, retain and develop a workforce that aligns with our values and strategies.
We believe the Board’s oversight of these matters, directly and through its committees, helps identify and mitigate exposure to labor and human capital management risks and is part of the broader framework that guides how we attract, retain and develop a workforce that aligns with our values and strategies.
For additional information on our competitive environment, see "Risk Factors - Business and Operating Risks - Our industry is rapidly evolving. We expect to continue to face significant competition, which could materially adversely affect us". Government Regulation We are subject to numerous laws and regulations in the countries in which we operate.
For additional information on our competitive environment, see "Risk Factors - Business and Operating Risks - Our industry continues to rapidly evolve. We expect to continue to face significant competition, which could materially adversely affect us". 5 Government Regulation We are subject to numerous laws and regulations in the countries in which we operate.
More than 75% 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"). Our national master agreement with the Teamsters expires on July 31, 2028.
Nearly 80% 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"). Our national master agreement with the Teamsters expires on July 31, 2028.
Our sophisticated systems, including our RFID-enabled Smart Package Smart Facility technology, enable us to optimize network efficiency, asset utilization and enhance end-to-end visibility. Global Presence . We serve more than 200 countries and territories. 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 .
Our sophisticated systems, including our RFID-enabled Smart Package Smart Facility technology, enable us to optimize network efficiency asset utilization, and to enhance end-to-end visibility. Global Presence . We serve more than 200 countries and territories. We have a significant presence in all major economies, allowing us to effectively and efficiently operate globally. Cutting-Edge Technologies .
We also offer integrated supply chain and high-value shipment insurance solutions through UPS Capital, as well as a range of services through our other Supply Chain Solutions businesses. We believe these services better enable us to meet customers' needs and deepen customer relationships. Human Capital Our success is dependent upon our people, working together with a shared purpose.
We also offer integrated supply chain and high-value shipment insurance solutions through UPS Capital, as well as a range of services through our other SCS businesses. We believe these services better enable us to meet customers' needs and deepen customer relationships. Human Capital Our success comes from our people working together with a shared purpose.
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 reach SMBs and e-commerce markets more broadly. We combine all packages within our single, global network, unless dictated by specific service commitments.
These services are supported by numerous shipping, visibility and billing technologies including our Digital Access Program ("DAP"), which embeds our shipping solutions directly into leading e-commerce platforms, enabling us to reach SMBs and e-commerce markets more broadly. All packages flow through our single, global network, unless dictated by specific service commitments.
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. We have approximately 1,900 airline mechanics who are covered by a collective bargaining agreement with Teamsters Local 2727 which becomes amendable November 1, 2026.
In addition, approximately 3,400 of our pilots are represented by the Independent Pilots Association ("IPA"). Our agreement with the IPA became amendable September 1, 2025. We have approximately 2,000 airline mechanics who are covered by a collective bargaining agreement with Teamsters Local 2727 which becomes amendable November 1, 2026.
As we seek to capture new opportunities and pursue growth, we are focused on maintaining the culture we have cultivated over our nearly 118-year history and incorporating the new perspectives we need to take the business into the future.
As we seek to capture new opportunities and pursue growth, we are focused on maintaining the strengths we have cultivated over our nearly 119-year history while incorporating the new perspectives we need to take the business into the future.
For additional information on this and other 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 this and other customers, see "Risk Factors - Business and Operating Risks - Changes in our relationships with any of our significant customers, including as a result of our strategy to reduce volume from our largest customer or the loss or reduction in business from one or more other customers, could have a material adverse effect on us" and note 14 to the audited, consolidated financial statements.
In addition, approximately 3,000 of our auto and maintenance mechanics who are not represented by the IBT are employed under a collective bargaining agreement with the International Association of Machinists and Aerospace Workers ("IAM"). In July 2024, the IAM ratified a new collective bargaining agreement that will expire on July 31, 2029.
In addition, approximately 3,000 of our auto and maintenance mechanics who are not represented by the IBT are employed under a collective bargaining agreement with the International Association of Machinists and Aerospace Workers ("IAM"), which expires on July 31, 2029.
In furtherance of this strategy, we have continued to grow organically, making investments in facilities to expand our network, and inorganically, including through the acquisitions of Frigo-Trans and Biotech & Pharma Logistics in January 2025. Digital and other Supply Chain Solutions businesses Our digital businesses leverage technology to enable a range of on-demand services.
In furtherance of this strategy, we have continued to grow organically, making investments in facilities to expand our network, and inorganically, including through the acquisitions of Frigo-Trans in January 2025 and AHG in November 2025. Digital and Other SCS Businesses Our digital and other SCS businesses leverage technology to enable a range of on-demand services.
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 as well as air cargo services. • Our ground network enables customers to ship using our day-definite ground service.
We offer a full spectrum of air and ground package transportation services. Our ground fleet serves substantially all business and residential zip codes in the contiguous U.S. • Our air portfolio offers time-definite, same-day, next-day, two-day and three-day delivery alternatives as well as air cargo services. • Our ground network enables customers to ship using our day-definite ground service.
We believe that our integrated global air and ground network is the most extensive in the industry. We provide all types of package services (air, ground, domestic, international, commercial and residential) through a single pickup and delivery network that can be configured to meet customers' needs.
Competitive Strengths Our competitive strengths include: Global Smart Logistics Network . We believe that our integrated global air and ground network is the broadest in the industry. We provide all types of package services (air, ground, domestic, international, commercial and residential) through a single pickup and delivery network that is configured to meet customers' needs.
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 strong, 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.
Our vehicles and the professional courtesy of our drivers are major contributors to our brand equity. Distinctive Culture . Our strong, purpose-driven culture fosters trust, partnership and empowerment among our dedicated employees. We encourage our people to bring their unique perspectives, background, talents and skills to work every day. Financial Strength .
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. In addition, participation in the CRAF program entitles us to bid for other U.S. Government opportunities including small package and airfreight.
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.
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.
We frequently engage union leaders at the national level and at local chapters throughout the U.S. and Canada. We participate in works councils and associations outside the U.S., allowing us to respond to emerging issues abroad. These engagements help build and maintain productive relationships with our employees.
We have approximately 490,000 employees (excluding temporary seasonal employees), of which 406,000 are in the U.S. and 84,000 are located internationally. Our global workforce includes approximately 78,000 management employees (38% of whom are part-time) and 412,000 hourly employees (50% of whom are part-time).
We have approximately 460,000 employees (excluding temporary seasonal employees), of which 370,000 are in the U.S. and 90,000 are located internationally. Our global workforce includes approximately 75,000 management employees (nearly 35% of whom are part-time) and approximately 385,000 hourly employees (nearly 50% of whom are part-time).
Effective oversight is accomplished through a variety of methods and processes including regular updates and discussions around human capital transformation efforts, technology initiatives impacting the workforce, health and safety matters, employee survey results related to culture and other matters, hiring and retention, employee backgrounds, labor relations and contract negotiations, compensation and benefits, succession planning and employee training initiatives. 4 In addition, the Compensation and Human Capital Committee charter includes oversight responsibility for performance and talent management, workforce representation, work culture and employee development and retention.
Effective oversight is accomplished through a variety of methods and processes including regular updates and discussions around risks and benefits of strategic and technology initiatives impacting 4 the workforce, health and safety matters, employee survey results related to culture and other matters, hiring and retention, labor relations and contract negotiations, compensation and benefits, succession planning and employee training initiatives.
Customs We are subject to the customs laws regarding the import and export of shipments in the countries in which we operate, including those related to the filing of documents on behalf of client importers and exporters.
Department of Homeland Security, including regulation by the TSA in the U.S., and similar regulations issued by foreign governments in other countries. Customs We are subject to the customs laws regarding the import and export of shipments in the countries in which we operate, including those related to the filing of documents on behalf of client importers and exporters.
Item 1. Business Overview United Parcel Service, Inc. ("UPS"), founded in 1907, is a global package delivery and logistics provider. We offer a broad range of industry-leading products and services through our extensive global presence, serving over 200 countries and territories.
Item 1. Business Overview UPS, founded in 1907, is a global package delivery and logistics provider. We offer a broad range of industry-leading products and services through our extensive global presence, serving over 200 countries and territories. Our services include transportation and delivery through our integrated air and ground network, distribution, contract logistics, ocean freight, airfreight, customs brokerage and insurance.
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. We participate in the Civil Reserve Air Fleet ("CRAF") program. Our participation in this program allows the U.S.
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.
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.
International Package International Package consists of our small package operations in Europe, 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 transportation services supported by our brokerage capabilities that facilitate cross‑border clearance for international shipments.
We also provide customs brokerage as well as various related services. In September 2024, we completed the divestiture of our truckload brokerage business ("Coyote"). For additional information on this divestiture, see note 8 to the audited, consolidated financial statements. Logistics Our global logistics and distribution business provides value-added fulfillment and transportation management services.
For additional information on this divestiture, see note 8 to the audited, consolidated financial statements. Logistics Our global logistics and distribution business provides value-added fulfillment and transportation management services.
Strategy Our strategy focuses on growing in the parts of our market that value our end-to-end network, including healthcare, business to business (“B2B”), small- and medium-sized businesses (“SMBs”), and international. We are continuing our journey to execute our Customer First, People Led, Innovation Driven strategy.
Strategy We are continuing to execute our Customer First, People Led, Innovation Driven strategy, which focuses on growing in the parts of our market that value our end-to-end solutions, including healthcare, business-to-business ("B2B"), small- and medium-sized businesses ("SMBs"), and international. Customer First is about reducing friction in the customer experience by anticipating and solving for customers' needs.
We believe value-added services beyond package delivery and connecting our small package, supply chain, digital and on-demand 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 innovation.
We seek to build and maintain long-term customer relationships. As customer needs evolve, UPS continues to develop value-added services beyond package delivery. Connecting our small package, supply chain, digital and on-demand services across our customer base is important to customer retention and growth. Brand Equity . Our leading and trusted brand stands for service quality, reliability and innovation.
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. Our international operations are also subject to noise regulations in certain other countries in which we operate.
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. We are also subject to increasing environmental compliance and reporting obligations in the European Union and elsewhere.
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".
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.
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. We seek to maintain a strong credit rating to give us additional flexibility in running the business.
Our financial strength enables us to pursue strategic growth opportunities. This includes investing in digital technology, acquisitions, equipment, facilities and employee development to generate value for shareholders. Our strong credit rating provides additional flexibility in running the business. 2 Products and Services; Reporting Segments We have two reporting segments: U.S. Domestic Package and International Package.
Customer First is about reducing friction in the customer experience by anticipating and solving for customers' needs. We are focused on providing differentiated value through our capabilities and service. We strive to enable our customers to better compete and succeed by delivering what they tell us matters the most: speed, ease and service reliability.
We are focused on providing differentiated value through our capabilities and service. We strive to enable our customers to better 1 compete and succeed by taking complexity out of their business and delivering what they tell us matters to them the most: speed, ease and service reliability.
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.
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. Domestic Package We are a leader in time-definite, guaranteed small package delivery services in the U.S.
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. 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.
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.
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.
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 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.
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.
Our remaining businesses are reported as Supply Chain Solutions ("SCS"). 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.
Where You Can Find More Information We maintain websites for business and customer matters at www.ups.com , and for investor relations matters at www.investors.ups.com .
For additional information on governmental regulations and their potential impact on us generally, see "Risk Factors – Regulatory and Legal Risks". 7 Where You Can Find More Information We maintain websites for business and customer matters at www.ups.com , and for investor relations matters at www.investors.ups.com .
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 a variety of digital tools and capabilities that enable customers to integrate UPS functionality into their distribution channels, intended to deepen customer relationships.
We develop technologies that help customers enhance their shipping and logistics business processes, lowering costs, improving service and increasing efficiency. We leverage advanced and emerging technologies, including artificial intelligence ("AI"), and offer a variety of digital tools and capabilities that enable customers to integrate UPS functionality into their distribution channels.
UPS Worldwide Express Freight is a premium international service for urgent, palletized shipments over 150 pounds. 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.
UPS Worldwide Express Freight is a premium international service for urgent, palletized shipments over 150 pounds. SCS SCS consists of our Forwarding, Logistics, digital and other businesses.
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. Disclosures Required Pursuant to Section 13(r) of the Securities Exchange Act of 1934 The Company had no reportable transactions during the quarter ended December 31, 2024.
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 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. Through 2024, final delivery was often provided by the United States Postal Service ("USPS").
We deliver approximately 15 million ground packages per day, most within one to three business days. • Ground Saver (formerly UPS SurePost) provides residential ground service for customers with non-urgent, lightweight residential shipments. In December 2025, we entered into an agreement with the USPS to support final-mile delivery for a portion of Ground Saver volume beginning in 2026.
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.
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 also provide customs brokerage as well as various related services. In 2024, we completed the divestiture of our truckload brokerage business ("Coyote").
For additional information regarding employees employed under collective bargaining agreements, see note 6 to the audited, consolidated financial statements. 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.
For additional information regarding employees employed under collective bargaining agreements, see note 6 to the audited, consolidated financial statements. Employee health and safety Our Comprehensive Health and Safety Process ("CHSP") is the foundation of our proactive risk management approach.
We continually seek to improve the productivity and efficiency of our global integrated network by using technology to move from a scanning to a sensing network, including using RFID technology in our Smart Package Smart Facilities . 1 In the first quarter of 2025, we entered into an agreement in principle with our largest customer to significantly reduce the volume we deliver for them.
Innovation Driven is our focus on leveraging technology to optimize the volume that flows through our network. We continually seek to improve the productivity and efficiency of our global integrated network by using technology to move from a scanning to a sensing network, including using RFID technology in our Smart Package Smart Facilities initiative .
We monitor our safety performance through various measurable targets, including recordable injury frequency, 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 2024, we served 1.6 million shipping customers and more than 10.1 million delivery recipients daily.
These measures provide visibility into emerging trends and facilitate continuous improvement across the enterprise. Customers Building and maintaining long-term customer relationships through superior service is a competitive strength of UPS. In 2025, we served 1.6 million shipping customers and more than 10.7 million delivery recipients daily.
We continue to invest in specialized capabilities like our cold chain and thermal monitoring technologies, which we believe allow us to better serve our healthcare customers. Customer Relationships . We focus on building and maintaining long-term customer relationships.
Our service portfolio offers customers of all sizes services to meet their logistics needs. Increasingly, our customers benefit from UPS services beyond package delivery. We continue to invest in specialized services like cold chain and thermal monitoring technologies, which we believe allow us to better serve our healthcare customers. Customer Relationships .
For the year ended December 31, 2024, 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.
In 2025, one customer, Amazon.com, Inc. and its affiliates, represented approximately 10.6% of our consolidated revenues, substantially all of which was within our U.S. Domestic Package segment. As previously disclosed, our strategy involves reducing volumes from this customer by more than 50% by June 2026 from 2024 levels.
Our ground operations are also subject to compliance with various cargo-security and transportation regulations issued by the U.S. Department of Homeland Security, including regulation by the TSA in the U.S., and similar regulations issued by foreign governments in other countries.
We sometimes participate in proceedings before the Postal Regulatory Commission in an attempt to facilitate compliance with fair competition requirements for competitive services. 6 Our ground operations are also subject to compliance with various cargo-security and transportation regulations issued by the U.S.
Our services include transportation and delivery through our integrated air and ground network, distribution, contract logistics, ocean freight, airfreight, customs brokerage and insurance. In 2024, we delivered an average of 22.4 million packages per day, totaling 5.7 billion packages during the year. Total revenue in 2024 was $91.1 billion.
In 2025, we delivered an average of 20.8 million packages per day, totaling 5.2 billion packages during the year. Total revenue in 2025 was $88.7 billion.
This enables efficiently scheduled pick ups for any service level.
This enables efficiently scheduled pick ups for any service level. Our network provides unique operational and capital efficiencies and has a smaller environmental impact than single service network designs.
In January 2025, we announced a reconfiguration of our U.S. network and Efficiency Reimagined initiatives. We expect these actions to result in decreases in the size of our operational and management workforce. For additional information on the expected operational and financial impacts of these initiatives, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
For additional information on the operational and financial impacts arising from these actions, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations".
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Innovation Driven is our focus on leveraging technology to optimize the volume that flows through our network.
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In 2025, we took several steps in furtherance of this strategy, including continuing to deliberately shift our business to increase our focus on higher yielding volume, which allowed us to increase SMB penetration to over 30% of total U.S. volume from 2024.
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We are making a deliberate shift to increase our focus on growing higher yielding volume. For additional information on the expected operational and financial impacts of this agreement, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Competitive Strengths Our competitive strengths include: Global Smart Logistics Network .
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We also completed the acquisitions of Frigo-Trans and Biotech & Pharma Logistics ("Frigo-Trans") and Andlauer Healthcare Group ("AHG"), further expanding our healthcare cold chain capabilities. In 2025, our global healthcare portfolio generated more than $11 billion in revenue, furthering our progress towards our goal to become the number one complex healthcare logistics provider in the world.
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These tools allow customers to send, manage and track their shipments, and also provide their customers with value-added data about their shipments. Broad Portfolio of Services . Our service portfolio allows customers of all sizes to choose their most appropriate option. Increasingly, our customers benefit from UPS capabilities and solutions that integrate our services beyond package delivery.
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Additionally, we extended our RFID labeling solution to 5,500 UPS store locations and completed the installation of RFID readers across U.S. package cars. This label technology allows customers to generate shipping labels with embedded RFID, streamlining processes and improving tracking capabilities.
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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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Furthermore, in December 2025, we entered into an agreement with the United States Postal Service ("USPS") to support final-mile delivery for a portion of our Ground Saver and Mail Innovations volumes starting in 2026. This agreement is expected to allow us to more cost efficiently serve our customers across these offerings while maintaining our industry-leading service levels.
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UPS drivers can also directly accept packages. We offer a portfolio of returns services in approximately 150 countries. These returns services are driven by the continued prevalence of e-commerce that has increased our customers' needs for efficient and reliable returns and are designed to promote efficiency and a friction-free consumer experience.
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Our digital and automated tools support shipment creation, tracking and data management, and enable data‑analysis automation, automated agents, personalization and customized pricing. Service. We consistently deliver industry‑leading service, through engineering and operational excellence, particularly during peak times when our customers need reliability the most. Broad Service Portfolio .
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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.
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These services have been driven by e-commerce growth and are designed to promote efficiency and a friction-free consumer experience. Our global air operations hub is located in Louisville, Kentucky, and is supported by air hubs across the United States ("U.S.") and internationally.
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Beginning January 1, 2025, in order to have more control over our ability to provide our customers industry-leading service, we have insourced this product. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
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As a global service provider, we strategically seek to provide integration across increasingly complex, specialized and fragmented supply chains. 3 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.
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During 2024, we executed under our "Fit to Serve" initiative, intended to right-size our business and create a more efficient operating model to enhance responsiveness to changing market dynamics. During 2024, we reduced our workforce by approximately 14,000 positions, primarily within management. Fit to Serve is expected to conclude in 2025.
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In addition, the Compensation and Human Capital Committee charter includes oversight responsibility for performance and talent management, workforce representation, work culture and employee development and retention.
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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.
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This approach includes physical safety and mental-health considerations, spans job functions from package handling to management roles, and is applied worldwide, from package sorting facilities to our executive offices. Through the CHSP, we seek to systematically identify, evaluate, and mitigate health and safety risks in a number of ways.
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In the first quarter of 2025, we entered into an agreement in principle with this customer that will provide for a reduction in their volume by more than 50% by June 2026. For additional information on the expected operational and financial impacts arising from this agreement, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
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We use internal safety committees to identify and mitigate hazards in the workplace, and we routinely audit critical risk areas such as equipment integrity, environmental conditions and emergency preparedness.
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As a result of recent changes in the USPS operating model, in January 2025 we announced that we have begun delivering 100% of our SurePost volume. We sometimes participate in proceedings before the Postal Regulatory Commission in an attempt to facilitate compliance with fair competition requirements for competitive services.
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We support employee health and well-being through various programs, which focus on physical conditioning, nutrition and fatigue management, in addition to providing extensive programming and training designed to reduce stress-related risks, strengthen resilience and support employees’ mental-health. Other programs include affinity-based business resource groups, opportunities to provide feedback through confidential employee surveys, and access to confidential counselling.
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The information provided pursuant to Section 13(r) of the Exchange Act in Item 5 of Part II of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 is incorporated by reference herein. 8
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We provide extensive training in safe work methods, risk identification and resource availability, all designed to mitigate risk. We monitor our health and safety performance against established metrics, including recordable injury frequency, lost-time injury frequency, and the number of reported vehicular incidents alongside a range of predictive indicators.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditionally, 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 retaining or replacing volume lost to competitors or maintaining our profitability, we could be materially adversely affected.
Biggest changeCompetitors have cost, operational and organizational structures that differ from ours and may offer services or pricing terms that we are not willing to offer. 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.
We also may not discover the occurrence of any of the events described above for a significant period of time after the event occurs. Additionally, it may take considerable time for us to investigate and evaluate the full impact of incidents, particularly for sophisticated attacks.
We also may not discover the occurrence of any of the events described above for a significant period after the event occurs. Additionally, it may take considerable time for us to investigate and evaluate the full impact of incidents, particularly for sophisticated attacks.
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 or strategic alliances 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. Inability to effectively integrate acquired businesses and realize the anticipated benefits of any acquisitions, joint ventures or strategic alliances could materially adversely affect 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.
We may be subject to various other 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.
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.
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 business.
Our efforts to deter, identify, mitigate and/or eliminate future breaches or cybersecurity incidents may require significant additional effort and expense and may not be successful. In addition, there has recently been heightened regulatory and enforcement focus relating to the collection, use, retention, transfer, and processing of personal data in the U.S.
Our efforts to deter, 11 identify, mitigate and/or eliminate future breaches or cybersecurity incidents may require significant additional effort and expense and may not be successful. In addition, there has recently been heightened regulatory and enforcement focus relating to the collection, use, retention, transfer, and processing of personal data in the U.S.
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 the U.S., Congress has considered but, to date, not passed various bills that would regulate GHG emissions.
Compliance with such regulations, and any increased or additional regulations, 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 the U.S., Congress has considered but, to date, not passed various bills that would regulate GHG emissions.
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 13 currency exchange rates and interest rates cannot always be predicted or effectively hedged, and may have a material adverse effect on us.
However, in future collective bargaining negotiations, we could agree to make significantly higher future contributions to one or more of these plans. At this time, we are unable to determine the amount of additional future contributions, if any, or whether any material adverse effect on us could result from our participation in these plans.
In future collective bargaining negotiations we could agree to make significantly higher contributions to one or more of these plans. At this time, we are unable to determine the amount of additional future contributions, if any, or whether any material adverse effect on us could result from our participation in these plans.
Such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or our ability to achieve such goals in the future. Changes in regulation or technology impacting our business could require us to write down the carrying value of assets, which could result in material impairment charges.
Such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or our ability to achieve such goals. Changes in regulation or technology impacting our business could require us to write down the carrying value of assets, which could result in material impairment charges.
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.
Regulatory and legislative requirements may change 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.
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.
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. The effects of global climate change could materially adversely affect us.
Increased regulation relating to GHG emissions in the U.S. or abroad, especially aircraft, gasoline or diesel engine emissions, could, among other things, increase the cost of fuel and other energy we purchase and the capital costs associated with updating or replacing our aircraft or vehicles prematurely.
Increased regulation relating to GHG emissions in the U.S. or abroad, especially aircraft, gasoline or diesel engine emissions, could, among other things, increase the cost of fuel and other energy we purchase and the costs associated with updating or replacing our aircraft or vehicles prematurely.
Customers could choose, and have in the past chosen, to divert all or a portion of their business 9 with us to one of our competitors, demand pricing concessions, request 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.
While we maintain cyber insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
While we maintain cyber insurance, we cannot be certain that our coverage will be adequate for any liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any claim.
However, cybersecurity incidents have in the past and may in the future expose us, our customers, employees, 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.
Cybersecurity incidents have in the past and may in the future expose us, our customers, employees, 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.
Customers may reduce shipments, supply chains may be disrupted, demand may be negatively impacted, property may be damaged, employees may be injured, or our costs to operate our business may increase, any of which could have a material adverse effect on us.
Customers may reduce shipments, supply chains may be disrupted, demand may be negatively impacted, property may be 12 damaged, employees may be injured, or our costs to operate our business may increase, any of which could have a material adverse effect on us.
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.
The security processes, protocols and standards that we implement, and the 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.
Our national master agreement with the Teamsters includes provisions that are designed to mitigate certain healthcare expenses, but there can be no assurance that our efforts will be successful or that these efforts will not materially adversely affect us. We participate in various trustee-managed multiemployer pension and health and welfare plans for employees covered under collective bargaining agreements.
Our national master agreement with the Teamsters includes provisions that are designed to mitigate certain healthcare expenses, but there can be no assurance that our efforts will be successful or that these expense increases will not materially adversely affect us. We participate in various trustee-managed multiemployer pension and health and welfare plans for employees covered under collective bargaining agreements.
The increased severity or frequency of certain weather conditions (including as a result of climate change) or other natural or man-made disasters, including storms, floods, fires, wind gusts, earthquakes, rising temperatures, epidemics, pandemics, conflicts, civil or political unrest, or terrorist attacks, have in the past and may in the future disrupt our business.
The increased severity or frequency of certain weather conditions (including as a result of climate change) or other natural or man-made disasters, including storms, floods, fires, wind gusts, earthquakes, rising temperatures, epidemics, pandemics, conflicts, civil or political unrest, safety failures or terrorist attacks, have in the past and may in the future disrupt our business.
Moreover, we could experience a disruption in energy supplies as a result of new or increased regulation, war or other conflicts, weather-related events or natural disasters, actions by producers (including as part of their own sustainability efforts) or other factors beyond our control, which could have a material adverse effect on us.
Moreover, we could experience a disruption in energy supplies as a result of new or increased regulations, war or other conflicts, weather-related events or natural disasters, actions by producers (including as part of their own sustainability efforts) or other factors beyond our control, which could have a material adverse effect on us.
We are subject to many laws governing our international operations, including those that prohibit improper payments to government officials and commercial customers, govern our environmental impact or labor matters, restrict where we can do business, regulate our shipments to certain countries and limit information that we can provide to non-U.S. governments.
We are subject to many laws governing our international operations, including those that prohibit improper payments to government officials and commercial customers, govern our environmental impact or labor matters, restrict where we can do business, regulate our services to certain countries and limit information that we can provide to non-U.S. governments.
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.
Accordingly, our financial results could be materially adversely affected by our delay or failure to effectively integrate acquired operations, unanticipated performance or other issues or transaction or other integration-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.
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.
If we are unable to hire, properly train or retain qualified employees, we could experience increased labor costs, reduced revenues, 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, many of which are outside of our control. This includes the development and availability of reliable, affordable and low emission energy solutions, including sustainable aviation fuel and alternative fuel and battery electric vehicles.
Our ability to meet our goals will depend in part on significant technological advancements, many of which are beyond our control. This includes the development and availability of reliable, affordable and low emission energy solutions, including sustainable aviation fuel and alternative fuel and battery electric vehicles.
If the carrying value of an asset exceeds its estimated fair value, we may be required to incur charges to reduce the carrying value thereof.
If the carrying value of an asset exceeds its estimated fair value, we may be required to incur charges to reduce its carrying value.
As part of the overall collective bargaining process for wage and benefit levels, we have agreed to contribute certain amounts to the multiemployer benefit plans during the contract period. The multiemployer benefit plans set benefit levels and are responsible for benefit delivery to participants. Future contribution amounts to multiemployer benefit plans will be determined through collective bargaining.
As part of the collective bargaining process, we have agreed to contribute certain amounts to the multiemployer benefit plans during the contract period. The multiemployer benefit plans set benefit levels and are responsible for benefit delivery to participants. Future contribution amounts to multiemployer benefit plans will be determined through collective bargaining.
Changes in foreign currency exchange rates or interest rates may have a material adverse effect on us. We conduct business in a number of countries, with a significant portion of our revenue derived from operations outside the United States.
Changes in foreign currency exchange rates or interest rates may have a material adverse effect on us. We conduct business in many countries, with a significant portion of our revenue derived from operations outside the United States.
Furthermore, 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.
Furthermore, we have been and may be required in the future to recognize accelerated depreciation and amortization charges if we determine the useful lives or salvage values of our assets are less than we originally estimated.
Our franchise locations and subsidiaries also rely on IT systems to manage their business processes and activities.
Our franchise locations and subsidiaries also rely on IT to manage their business processes and activities.
These factors may inhibit our ability to provide prompt, full, and reliable information about the incident to our customers, regulators and the public. 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.
These factors may inhibit our ability to provide prompt, full, and reliable information about the incident to our customers, regulators and the public. We utilize and interact with the IT 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 service providers.
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.
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 data or system protection measures could increase significantly to mitigate increasingly frequent, complex and sophisticated cyber threats and regulatory requirements.
(at both the state and federal level) and internationally, including the EU’s General Data Protection Regulation, the California Privacy Rights Act, the Virginia Consumer Data Protection Act, and other similar laws that have been or are expected to be enacted by other jurisdictions. In addition, China and certain other jurisdictions have enacted more stringent data localization requirements.
(at both the state and federal level) and internationally. This includes the EU’s General Data Protection Regulation, the California Privacy Rights Act, the Virginia Consumer Data Protection Act, and other similar laws that have been or are expected to be enacted by other jurisdictions. In addition, China and certain other jurisdictions have enacted more stringent data localization requirements.
Furthermore, methodologies for reporting climate-related information may change and previously reported information may be adjusted to reflect new reporting protocols or regulations. Other changes could include 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.
Furthermore, methodologies for reporting climate-related information may change and previously reported information may need to be adjusted to reflect new reporting protocols or regulations. These could include changes 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.
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 10 actors, or criminal groups, theft, misconduct by employees or other insiders, telecommunications failures, misuse, human errors or other catastrophic events.
IT (ours, as well as those of our franchisees, acquired businesses, and third-party service providers) have been and will continue 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 seek to mitigate our exposure to changing fuel prices through our pricing strategy and have in the past and may in the future utilize hedging transactions. 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.
We seek to mitigate our exposure to changing fuel prices through pricing strategies and have in the past and may in the future utilize hedging transactions. There can be no assurance that these strategies will be effective. If we are unable to maintain or increase our fuel surcharges, higher fuel costs could materially adversely impact our operating results.
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 physical security, various governments have adopted and may adopt additional heightened security requirements, resulting in significantly 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 physical security, various governments have adopted and may adopt additional heightened security requirements, significantly increasing our operating costs.
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.
We rely on information technology networks and systems and other operational technologies to operate our business, including the internet and internally developed systems and applications, as well as certain technology systems from third-party vendors (collectively referred to as "IT").
Our international operations are affected by changes in the exchange rates for local currencies, in particular the Euro, British Pound Sterling, Canadian Dollar, Chinese Renminbi and Hong Kong Dollar. We are exposed to changes in interest rates, primarily on our short-term debt and that portion of our long-term debt that carries floating interest rates.
Our international operations are affected by changes in the exchange rates for local currencies, particularly the Euro, British Pound Sterling, Canadian Dollar, Chinese Renminbi and Hong Kong Dollar. We are affected by changes in interest rates, primarily on our short-term debt and that portion of our long-term debt that carries floating interest rates.
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 European Union, Ukraine, the Russian Federation, the Middle East 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, tensions and/or conflicts in or arising from various countries and regions, including the European Union, Ukraine, the Russian Federation, the Middle East and the Trans-Pacific region.
For example, we rely on these technologies to receive package level information in advance of the physical receipt of packages, move and track packages through our operations, efficiently plan deliveries, execute billing processes, provide information to package recipients, manage employee data and track and report financial and operational data.
For example, we rely on IT to receive package level information in advance of the 10 physical receipt of packages, move and track packages through our operations, efficiently plan deliveries, execute billing processes, provide information to package recipients, manage employee data and track and report financial and operational data.
From time to time we acquire businesses, form joint ventures and enter into strategic alliances. Whether we realize the anticipated benefits from these transactions depends, in part, upon successful integration between the businesses involved, the performance of the underlying operations, capabilities or technologies and the management of the acquired operations.
As part of our strategy, from time to time we acquire businesses, form joint ventures and enter strategic alliances. Whether we realize the anticipated benefits from these transactions depends, in part, upon successful integration between the businesses involved, the performance of the underlying operations, capabilities or technologies and the management of the acquired operations.
Our airline pilots, airline mechanics, ground mechanics and certain other employees are employed under other collective bargaining agreements that expire at various times. In addition, some of our international employees are employed under collective bargaining or similar agreements. Other employees may choose to organize in the future.
Our airline pilots, airline mechanics, ground mechanics and certain other employees are employed under other collective bargaining agreements that expire at various times. In addition, some of our international employees are employed under collective bargaining or similar agreements. Employees who are not employed under a collective bargaining agreement may choose to organize in the future.
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. 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 increases, 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 costs could materially increase and it could be difficult to obtain adequate levels of insurance coverage.
There can be no assurances that our goals and strategic plans to achieve those goals will be successful, that the related costs will not be higher than expected, that the necessary technological advancements will occur in the timeframe we expect, or at all, that the severity of and or the pace of negative climate-related effects will not accelerate faster than expected, or that proposed regulation or deregulation related to climate change will not have a negative competitive impact, any one of which could have a material adverse effect on our capital expenditures or other expenses, revenue or results of operations.
There can be no assurances that our goals and strategic plans to achieve those goals will be successful, that the related costs will not be higher than expected, that the necessary technological advancements will occur in the timeframe we expect, or at all, that the severity of and or the pace of negative climate-related effects will not accelerate faster than expected, or that proposed regulation or deregulation related to climate change will not have a negative competitive impact, any one of which could have a material adverse effect on us.
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, increases in healthcare costs in excess of the rate of inflation and 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, including increased healthcare costs exceeding the rate of inflation and discount rates that we use to value our company-sponsored defined benefit plan obligations.
Moreover, we may determine that it is in our best interests to prioritize other business, social, governance or sustainable investments over the achievement of our current goals based on economic, regulatory or social factors, business strategy or other factors.
Moreover, we may determine that it is in our best interests to prioritize other investments over the achievement of our goals based on economic, regulatory, business strategy or other factors.
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.
In addition to forecasting our capital investment requirements, we adjust other elements of our operations and cost structure in response to strategic initiatives, and economic and regulatory conditions. These investments support both our existing business and our strategic initiatives.
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. 13 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, which could materially adversely affect us. Employee health and retiree health and pension benefit costs represent a significant expense to us; further cost increases could materially adversely affect us.
We cannot predict the impact any future regulation will have on our cost structure or our operating results. It is likely that such regulation could significantly increase our operating costs and 15 that we may not be willing or able to pass such costs along to our customers.
We cannot predict the impact any future regulation will have on our cost structure or our operating results. It is likely that such regulation could significantly increase our operating costs and that we may not be willing or able to offset such costs.
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.
Changes or uncertainty 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 continues to rapidly evolve. We expect to continue to face significant competition, which could materially adversely affect us.
Changes in our business plans, including anticipated changes to our network in 2025, have previously and may in the future lead to revisions in our estimates of useful lives or salvage values of our assets. Such charges have in the past, and may in the future, reduce our net income, potentially materially.
Changes in our business plans, including network changes that began in 2025, have led to and may in the future lead to revisions in our estimates of useful lives or salvage values of our assets. Such charges have in the past, and may in the future, reduce our net income, potentially materially.
In addition, we are impacted by laws, regulations and policies that affect global trade, including tariff and trade policies, export requirements, embargoes, sanctions, taxes, monetary policies and other restrictions and charges.
In addition, we are and expect to continue to be impacted by laws, regulations and policies that affect global trade, including tariff and trade policies, export requirements, embargoes, sanctions, taxes, monetary policies and other restrictions and charges.
We have been, and may in the future be, materially affected by adverse developments in these aspects of the economy.
We have been, and may in the future be, materially affected by adverse developments or uncertainty in these and other aspects of the economy.
The effects of climate change present financial and operational risks to our business, both directly and indirectly. We have publicly stated our intention to reduce our 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 have presented and will continue to present financial and operational risks to our business, both directly and indirectly. We have disclosed an intention to reduce our 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.
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. International regulations also continue to increase and could materially increase our operating costs.
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 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 our ultimate tax liability is uncertain.
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.
Even if we can offset changes in fuel costs with surcharges, high fuel surcharges have in the past, and may in the future, result in customers shifting from our higher-yielding products to lower-yielding products or an overall reduction in volume, revenue and profitability.
Trade discussions and arrangements between the U.S. and various of its trading partners are fluid, and existing and future trade agreements are, and are expected to continue to be, subject to a number of uncertainties, including the imposition of new tariffs or adjustments and changes to the products covered by existing tariffs.
Trade discussions and arrangements between the U.S. and various of its trading partners are unpredictable, and existing and future trade agreements are, and are expected to continue to be, subject to a number of uncertainties, including the imposition of new tariffs or adjustments and changes to existing tariff policies.
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.
To date we are unaware of any material data breach or cybersecurity incident, including an information system disruption, although we cannot provide any assurances that a material event or impact will not occur in the future.
Our success depends in part on our reputation and our ability to maintain the image of the UPS brand. Service quality issues, actual or perceived, could tarnish the image of our brand and may cause customers not to use UPS services.
Failure to maintain our brand image and corporate reputation could materially adversely affect us. Our success depends in part on our reputation and our ability to maintain a positive image of the UPS brand. Service quality issues, actual or perceived, could tarnish the image of our brand and may cause customers not to use our services.
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.
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. Regulations related to climate change, including reporting obligations, could materially increase our operating costs.
Consequently, compliance with applicable regulations in the various jurisdictions in which we do business may present material obligations and risks to our business, including significantly expanded compliance burdens, costs, and enforcement risks which are expected to increase over time; require us to make extensive system or operational changes; or adversely affect the cost or attractiveness of the services we offer. 11 Failure to maintain our brand image and corporate reputation could materially adversely affect us.
Consequently, compliance with applicable regulations may present material obligations and risks to our business, including significantly expanded compliance burdens, costs, and enforcement risks which are expected to increase over time; require us to make extensive system or operational changes; or adversely affect the cost or attractiveness of the services we offer.
The cost of SAF can be higher than conventional jet fuel, and these suppliers can pass this cost along to purchasers, which can increase our operating costs, potentially significantly.
The cost of SAF can be higher than conventional jet fuel, and SAF suppliers can pass this cost along to purchasers, which can increase our operating costs, potentially significantly. This initiative has also mandated increased reporting requirements.
Our processes and controls for reporting climate-related information across our operations are evolving along with multiple disparate standards for identifying, measuring and reporting sustainability metrics, including disclosures that may be required by the SEC, European and other regulators.
Our processes and controls for reporting climate-related information across our operations are evolving along with multiple disparate standards for identifying, measuring and reporting sustainability metrics, including disclosures that may be required by U.S. federal or state, or international, regulators.
Compliance with security requirements or our own security measures may not prevent attacks or security breaches, 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.
Compliance with security requirements or our own security measures may not prevent attacks or security breaches, which could materially adversely affect us. A significant cybersecurity incident, increased data protection regulations, or other information technology related risks, could materially adversely affect us.
In addition, 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. Details regarding implementation of CORSIA continue to develop, and compliance may increase our operating costs, potentially significantly.
In addition, 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.
Compliance with these disclosure requirements may increase our operating costs or require significant management time and attention. Any failure to comply with applicable disclosure regulations in the U.S. (at either the federal or state level) or other countries could result in substantial fines or other penalties, which could materially adversely affect us.
These requirements may differ or conflict from jurisdiction to jurisdiction. Compliance with these requirements may increase our operating costs or require significant management time and attention. Any failure to comply with applicable regulations could result in substantial fines or other penalties, which could materially adversely affect us.
For example, the ReFuelEU Aviation initiative, a European regulation, mandates jet fuel suppliers in Europe supply a target percentage of sustainable aviation fuel (“SAF”) at airports inside the European Union. The SAF target percentage starts at 2% in 2025 and increases to 70% by 2050.
International regulations also continue to increase and could materially increase our operating and other costs. For example, the ReFuelEU Aviation initiative, a European regulation, mandates jet fuel suppliers in Europe supply a target percentage of sustainable aviation fuel ("SAF") at airports inside the European Union. The SAF target percentage started at 2% in 2025 and increases to 70% by 2050.
If we do not meet these goals or there is perception that we failed to meet these goals, then, in addition to regulatory and legal risks related to compliance, we could incur adverse publicity and reaction, which could adversely impact our reputation, and in turn adversely impact our results of operations.
If we do not meet our goals or there is perception that we failed to meet these goals, then, in addition to regulatory and legal risks related to compliance, we could incur adverse publicity and reaction, which could materially adversely impact us. Severe weather or other natural or man-made disasters could materially adversely affect us.
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.
Changes or continued uncertainty 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, retail activity levels and international trade policies.
As a result, customers have in the past 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. 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 could adversely affect our ability to meet our customers' needs. As a result, customers have in the past reduced, and in the future may reduce, their business or stop doing business with us if they believe that such actions may adversely affect our ability to provide services.
An actual or alleged failure to comply with applicable data protection laws, regulations, or other data protection standards has in the past and may in the future expose us to litigation, fines, sanctions, or other penalties, which could harm our reputation and adversely affect our business, results of operations, and financial condition.
An actual or alleged failure to comply with applicable data protection laws, regulations, or other data protection standards has in the past and may in the future expose us to litigation, fines, sanctions, or other penalties, which could harm our reputation and materially adversely affect us. The regulatory environment is increasingly challenging, based on discretionary factors, and difficult to predict.
In the event we are not able to successfully reduce our costs in connection therewith, our profitability could be materially impacted. For additional information on the expected operational and financial impacts arising from this agreement, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
In the event we are not able to successfully make appropriate adjustments or control related costs, our profitability could be materially impacted. For 9 additional information on the operational and financial impacts arising from this strategy, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations".
The determination of fair value is dependent on a significant number of estimates and assumptions that could be impacted by a variety of factors, including changes in business strategy, revenue, expenses, government regulations, including regulation related to climate change, costs of capital and economic or market conditions.
Fair value determinations are dependent on a significant number of estimates and assumptions that could be impacted by a variety of factors, including changes in business strategy, revenues, expenses, acquisition integration activities, government regulations, costs of capital and economic or market conditions. The use of different estimates or assumptions could also result in different fair value estimates.
For example, cyber criminals have in the past gained access, and are expected to continue to try to gain access to customer accounts. The type of activity includes fraudulently inserting, diverting and misappropriating items being transported in our network, fraudulently charging shipment fees to customer or franchisee accounts, and fraudulently sending text messages to recipients purporting to be from UPS.
Criminal activity includes fraudulently inserting, diverting and misappropriating items being transported in our network, fraudulently charging shipment fees to customer or franchisee accounts, and fraudulently sending text messages to recipients purporting to be from UPS.
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 national master agreement with the Teamsters runs through July 31, 2028.
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 with the Teamsters and various supplemental agreements with affiliated local unions. Our national master agreement with the Teamsters expires on July 31, 2028.
The terms of 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 reputation and could have adverse effects on our business, including our results of operations. We maintain significant physical 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 could materially adversely affect us. We maintain significant physical operations.
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.
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. In addition, we are increasing our utilization of artificial intelligence ("AI") to optimize our operations, improve the customer experience and support decision-making.
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFor additional information on cybersecurity risks and the impact they may have on our business strategy, results of operations or financial condition see "Risk Factors – Business and Operating Risks – A significant cybersecurity incident, or increased data protection regulations, could materially adversely affect us". 17
Biggest changeFor additional information on cybersecurity risks and the impact they may have on our business strategy, results of operations or financial condition see "Risk Factors – Business and Operating Risks – A significant cybersecurity incident, increased data protection regulations, or other information technology related risks, could materially adversely affect us". 17
The Board has appointed a Risk Committee, consisting entirely of independent directors, whose responsibilities include assisting the Board in overseeing management’s identification and evaluation of strategic enterprise risks, including risks associated with privacy, technology, information security, cybersecurity and cyber incident response and business continuity. The Risk Committee regularly updates the Board on these activities.
The Board has appointed a Risk Committee, consisting entirely of independent directors, whose responsibilities include assisting the Board in overseeing management’s identification and evaluation of strategic enterprise risks, including risks associated with privacy, technology, information security, AI, cybersecurity and cyber incident response and business continuity. The Risk Committee regularly updates the Board on these activities.
The Company's management, including the CISO, also participates on the Company's Information Security & Privacy Governance Council (“ISPGC”). The ISPGC meets periodically to consider information security and privacy matters. The Company utilizes various technical and qualitative processes to assist in identifying, assessing and managing cybersecurity risks. The Company's processes include periodic discussions and risk reviews with management.
The Company's management, including the CISO, also participates on the Company's Information Security & Privacy Governance Council ("ISPGC"). The ISPGC meets periodically to consider information security and privacy matters. The Company utilizes various technical and qualitative processes to assist in identifying, assessing and managing cybersecurity risks. The Company's processes include periodic discussions and risk reviews with management.
The Risk Committee oversees the Company’s approach to cybersecurity risk assessment and mitigation by, among other things, (i) reviewing the Company’s cybersecurity insurance program, (ii) reviewing the Company’s cybersecurity budget, (iii) discussing the results of various internal cybersecurity audits and periodic independent third-party assessments of the Company’s cybersecurity programs, (iv) being briefed on cybersecurity matters by outside experts, and (v) receiving regular updates from the Company’s Chief Information Security Officer (“CISO”) and others on cybersecurity risks, operational metrics, compliance and regulatory developments, training programs, risk mitigation activities, key projects and industry developments.
The Risk Committee oversees the Company’s approach to cybersecurity risk assessment and mitigation by, among other things, (i) reviewing the Company’s cybersecurity insurance program, (ii) reviewing the Company’s cybersecurity budget, (iii) discussing the results of various internal cybersecurity audits and periodic independent third-party assessments of the Company’s cybersecurity programs, (iv) being briefed on cybersecurity matters by outside experts, and (v) receiving regular updates from the Company’s Chief Information Security Officer ("CISO") and others on cybersecurity risks, operational metrics, compliance and regulatory developments, training programs, risk mitigation activities, key projects and industry developments.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFleet Aircraft The following table shows information about our aircraft fleet as of December 31, 2024: Description UPS Owned and/or Operated Charters & Leases Operated by Others On Order Under Option Boeing 757-200 75 — — — Boeing 767-300 82 — 25 — Boeing 767-300BCF 6 — — — Boeing 767-300BDSF 4 — — — Airbus A300-600 52 — — — Boeing MD-11 29 — — — Boeing 747-400F 11 — — — Boeing 747-400BCF 2 — — — Boeing 747-8F 30 — — — Other — 243 — — Total 291 243 25 — Vehicles As of December 31, 2024, we operated a global ground fleet of approximately 128,000 package cars, vans, tractors and motorcycles, including approximately 19,000 alternative fuel and advanced technology vehicles.
Biggest changeFleet Aircraft The following table shows information about our aircraft fleet as of December 31, 2025: Description UPS Owned and/or Operated Charters & Leases Operated by Others On Order Under Option Boeing 757-200 75 — — — Boeing 767-300 89 — 18 — Boeing 767-300BCF 6 — — — Boeing 767-300BDSF 4 — — — Airbus A300-600 52 — — — Boeing MD-11 (1) 26 — — — Boeing 747-400F 11 — — — Boeing 747-400BCF 2 — — — Boeing 747-8F 30 — — — Other — 221 — — Total 295 221 18 — (1) During the fourth quarter of 2025, we permanently grounded and subsequently retired our MD-11 fleet.
We own or lease approximately 800 facilities in our international package operations, with approximately 22 million square feet of floor space. Our aircraft are operated in a hub and spoke pattern in the U.S., with our principal air hub, Worldport, located in Louisville, Kentucky.
We own or lease approximately 800 facilities in our international package operations, with approximately 23 million square feet of floor space. Our aircraft are operated in a hub and spoke pattern in the U.S., with our principal air hub, Worldport, located in Louisville, Kentucky.
Our major air hub in Europe is located in Germany, and in Asia we operate multiple major air hubs in China and Hong Kong. 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 16 million square feet of healthcare-compliant warehousing.
Our major air hub in Europe is located in Germany, and in Asia we operate multiple major air hubs in China and Hong Kong. We own or lease approximately 600 facilities, with approximately 50 million square feet of floor space, which support our freight forwarding and logistics operations. This includes approximately 22 million square feet of healthcare-compliant warehousing.
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For additional information, see note 4 to the audited, consolidated financial statements. We do not expect this action to have a material impact on our business, financial condition or results of operations.
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Vehicles As of December 31, 2025, we operated a global ground fleet of approximately 125,000 package cars, vans, tractors and motorcycles, including approximately 19,000 alternative fuel and advanced technology vehicles.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis agreement is expected to settle in the first quarter of 2025. We do not anticipate further share repurchases in 2025. As of December 31, 2024, we had $2.3 billion available under our share repurchase authorization.
Biggest changeDuring 2025, we repurchased 8.6 million shares of class B common stock for $1.0 billion under this authorization. As of December 31, 2025, we had $1.3 billion available under our share repurchase authorization. We do not anticipate further share repurchases in 2026.
The declaration of dividends is subject to the discretion of the Board of Directors and will depend on various factors, including our net income, financial condition, cash requirements, future prospects and other relevant factors.
The declaration of dividends is subject to the discretion of the Board of Directors (the "Board") and depends on various factors, including our net income, financial condition, cash requirements, future prospects and other relevant factors.
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.
On February 5, 2025, our Board declared a dividend of $1.64 per share, which is payable on March 6, 2025 to shareowners of record on February 18, 2025. In January 2023, the Board of Directors approved a share repurchase authorization for $5.0 billion of class A and class B common stock.
On January 27, 2026, the Board approved a $1.64 per share dividend, which is payable on March 5, 2026 to shareowners of record on February 17, 2026. In January 2023, the Board approved a share repurchase authorization for up to $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, 2019 in the Standard & Poor’s 500 Index, the Dow Jones Transportation Average and our class B common stock. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 United Parcel Service, Inc. $ 100.00 $ 147.28 $ 193.56 $ 162.33 $ 152.66 $ 127.43 Standard & Poor’s 500 Index $ 100.00 $ 118.39 $ 152.34 $ 124.73 $ 128.09 $ 160.11 Dow Jones Transportation Average $ 100.00 $ 118.18 $ 152.83 $ 131.11 $ 146.74 $ 152.33 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, 2020 in the Standard & Poor’s 500 Index, the Dow Jones Transportation Average and our class B common stock. 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 United Parcel Service, Inc. $ 100.00 $ 133.61 $ 111.96 $ 105.29 $ 87.89 $ 74.69 Standard & Poor’s 500 Index $ 100.00 $ 128.68 $ 105.35 $ 133.02 $ 166.27 $ 195.97 Dow Jones Transportation Average $ 100.00 $ 129.04 $ 108.02 $ 121.34 $ 120.71 $ 136.89 For information regarding our equity compensation plans, see Item 13 of this Annual Report. 21
Our class B common stock is listed on the New York Stock Exchange under the symbol “UPS”. As of February 3, 2025, there were 155,418 and 19,626 shareowners of record of our 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, 2026, there were 152,776 and 19,392 shareowners of record of our class A and class B common stock, respectively. Historically we have declared and paid dividends on a quarterly basis.
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We did not repurchase any shares during the fourth quarter of 2024. During the year ended December 31, 2024, we repurchased 3.9 million shares of class B common stock for $500 million under this authorization. On February 3, 2025, we entered into an accelerated share repurchase agreement for $1.0 billion worth of shares.

Item 6. [Reserved]

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

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Item 6. [Reserved] 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We are executing our Customer First, People Led and Innovation Driven strategy to grow in the most attractive parts of the market including healthcare, small and medium-sized businesses (“SMBs”) and International. During 2024, we took several steps in furtherance of our strategy.
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Item 6. [Reserved] 22 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the consolidated financial statements and related notes included in Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K (this "Annual Report" or "this report").
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We continued to focus on providing excellent service to our customers, delivering industry-leading on-time performance during 2024. Our Digital Access Program grew year over year, contributing to our consolidated volume growth and continued expansion within the United States ("U.S.") SMB market.
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This section of this Annual Report includes a discussion of 2025 and 2024 items and year-over-year comparisons between those years. For a discussion of year-over-year comparisons between 2024 and 2023 that are not included in this Annual Report see
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Also in 2024, we executed on our Network of the Future initiatives, which are intended to enhance the efficiency of our network through automation and operational sort consolidation.
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For example, we are moving from a scanning to a sensing network through our Smart Package Smart Facility RFID initiative, which is helping us reduce manual scans and enhance package visibility for our customers. Additionally, we completed the onboarding of air cargo volumes from the United States Postal Service ("USPS").
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Under our agreement with the USPS, UPS is the primary air cargo provider for the USPS within the United States.
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Within our international and healthcare operations, we expect to grow both organically and inorganically, having previously announced that we entered into agreements to acquire Estafeta, a leading domestic small package provider in Mexico, and Frigo-Trans, an industry-leading, complex healthcare logistics provider based in Germany.
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The acquisitions of Frigo-Trans and related entities were completed during January 2025, and the acquisition of Estafeta is expected to close in the first half of 2025, subject to customary regulatory reviews and approvals. In September 2024, we finalized the previously announced divestiture of our truckload brokerage business ("Coyote").
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Effective January 1, 2025, we insourced the delivery of all SurePost volume, which we expect to result in additional deliveries within our network. We made this change in order to have greater operational control and maintain the service quality of this product. Also in January 2025, we implemented a 9.9% average rate increase on this product.
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In the first quarter of 2025, as previously disclosed, we entered into an agreement in principle with our largest customer to significantly reduce the volume we deliver for them. We expect volume from this customer to decline to approximately 50% of year-end 2024 levels by mid-2026.
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We are making a deliberate shift in our business to increase our focus on growing higher yielding volume. We expect that these actions will result in a reduction in revenue within our U.S. Domestic Package segment, as described below, during 2025 relative to 2024.
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In conjunction therewith, as disclosed on January 30, 2025, we are beginning a network reconfiguration within the U.S. which is expected to lead to consolidations of our facilities and workforce as well as an end-to-end process redesign through 2027.
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This network reconfiguration, which is an expansion of our Network of the Future program, is expected to result in exit activities that could result in the closure of up to 10% of our buildings in 2025, a reduction in the size of our vehicle and aircraft fleets, and a decrease in the size of our workforce, which we expect will lead to additional expense.
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We are not yet able to determine the specific assets or extent of our workforce that will be impacted by this network reconfiguration, the timing of those changes or any associated charges and expenses and therefore are not currently able to provide an estimate of the total cost or the cost by period.
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We expect that impacted assets will remain in use during some or all of the periods of our network reconfiguration. We expect to partially offset the anticipated costs associated with this network reconfiguration through our Efficiency Reimagined initiatives. Efficiency Reimagined initiatives are an end-to-end process redesign being undertaken to align our organizational processes to the network reconfiguration.
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These initiatives are expected to yield approximately $1.0 billion in annualized savings, which we expect to begin realizing during 2025. We incurred related costs of $35 million for the three months ended December 31, 2024.
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We expect to incur related costs of approximately $300 to $400 million during 2025 and incremental costs in 2026 and 2027 to complete Efficiency Reimagined , primarily relating to outside professional service fees and severance costs. We have two reportable segments: U.S. Domestic Package and International Package, which are together referred to as our global small package operations.
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Our remaining businesses are reported as Supply Chain Solutions. As of the fourth quarter of 2024 based on a change in our management reporting structure, U.S. Air Cargo is presented within our U.S. Domestic Package segment and prior periods have been recast. This recast did not have any impact on previously reported consolidated results.
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We experienced volume and revenue growth in our global small package operations during the year, primarily the result of a strong second half of 2024. Within our U.S. Domestic Package operations, we captured growth through additional e- 22 UNITED PARCEL SERVICE, INC.
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AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS commerce customers and SMBs that leveraged our Digital Access Program. In our International Package operations, we experienced average daily volume growth in our export products, which drove a year-over-year revenue increase.
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In Supply Chain Solutions, revenue decreased for the year, driven by the impact of the divestiture of Coyote, partially offset by revenue growth in our other Supply Chain Solutions businesses.
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This growth was primarily due to the impact of the acquisition of MNX Global Logistics in the fourth quarter of 2023 and revenue growth in our freight forwarding business driven by continued strong market demand out of Asia.
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During the year, we continued to execute on various initiatives under our previously announced transformation strategy programs, Transformation 2.0 and Fit to Serve, which are contributing to fundamental changes to our back-office technologies and organizational structure. We realized benefits from our Fit to Serve initiative during the year, which helped offset declines in operating profit.
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For additional information on these programs and the benefits, see “Supplemental Information - Items Affecting Comparability". During 2024, we also returned cash to shareholders in the form of dividends of $6.52 per share, for a total of $5.4 billion, and $500 million of share repurchases. For the year, capital expenditures were $3.9 billion. 23 UNITED PARCEL SERVICE, INC.
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AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Highlights of our results for the years ended December 31, 2024 and 2023, which are discussed in more detail in the sections that follow, include (dollars in millions, except per share and per piece amounts): Year Ended December 31, Change 2024 2023 $ % Revenue $ 91,070 $ 90,958 $ 112 0.1 % Operating Expenses 82,602 81,817 785 1.0 % Operating Profit $ 8,468 $ 9,141 $ (673) (7.4) % Operating Margin 9.3 % 10.0 % Net Income $ 5,782 $ 6,708 $ (926) (13.8) % Basic Earnings Per Share $ 6.76 $ 7.81 $ (1.05) (13.4) % Diluted Earnings Per Share $ 6.75 $ 7.80 $ (1.05) (13.5) % Operating Days 253 254 Average Daily Package Volume (in thousands) 22,418 22,290 0.6 % Average Revenue Per Piece $ 13.60 $ 13.62 $ (0.02) (0.1) % • Average daily package volume in our global small package operations increased for the year primarily in our U.S.
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Domestic Package segment due to growth in our SurePost product, with those increases partially offset by the impact of planned volume reductions from our largest customer under the terms of our contract with them. Within our International package segment, challenging macroeconomic conditions led to a slight volume decline. • Revenue was relatively flat for the year. Within our U.S.
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Domestic Package segment, revenue growth was attributable to air cargo and overall volume growth, but was largely offset by unfavorable shifts in product mix and declines in fuel surcharge revenue. In our International Package segment, revenue benefited from growth in our export products and increases in revenue per piece for our domestic products.
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Revenue in our Supply Chain Solutions businesses declined primarily as a result of the September 2024 divestiture of Coyote, with the decline partially offset by growth in Logistics and our other businesses. • Operating expenses increased for the year, primarily due to increased compensation expense in our U.S.
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Domestic Package segment as a result of higher wage rates paid to our Teamster employees.
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These increases were partially offset by decreases in the costs of operating our integrated air and ground network, benefits from our Fit to Serve initiative, as well as a gain related to the divestiture of Coyote. • Operating profit and operating margin decreased for the year as revenue increases only partly offset the operating expense increases. • Net income was $5.8 billion and diluted earnings per share were $6.75 for the year.
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Non-GAAP adjusted diluted earnings per share were $7.72 for the year after adjusting for the after-tax impacts of: ◦ a gain on the divestiture of Coyote of $152 million or $0.18 per diluted share; ◦ a payment, including interest, to settle a one-time international regulatory matter of $94 million, or $0.11 per diluted share; ◦ non-cash asset impairment charges of $81 million, or $0.09 per diluted share; ◦ total transformation strategy costs of $245 million, or $0.29 per diluted share; ◦ a charge related to a regulatory matter unrelated to our ongoing operations of $45 million, or $0.05 per diluted share; ◦ an expense to withdraw from a multiemployer pension plan of $14 million, or $0.02 per diluted share; and ◦ defined benefit pension and postretirement medical benefit plan mark-to-market loss outside of a 10% corridor of $506 million, or $0.59 per diluted share.
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For additional operational results for the quarter and year-to-date periods specific to our segments: U.S. Domestic Package, International Package and Supply Chain Solutions refer to the respective segment discussions below. 24 UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2023 compared to 2022 See

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe table below shows the amounts associated with each component of the loss, 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 pension and postretirement medical plan loss (gain) (in millions): 2024 2023 Discount rates $ (127) $ 384 Return on assets 672 (37) Demographic and other assumption changes 120 4 Total mark-to-market loss 665 351 Curtailment and settlement loss — 8 Total defined benefit pension and postretirement medical plan loss $ 665 $ 359 Year Ended December 31, Weighted-average actuarial assumptions: 2024 2023 Expected rate of return on plan assets used in determining net periodic benefit cost 7.06 % 6.99 % Actual rate of return on plan assets (1.29) % 6.64 % Discount rate used in determining net periodic benefit cost 5.40 % 5.77 % Discount rate at measurement date 5.85 % 5.40 % Pre-tax defined benefit plan gains and losses for the years ended December 31, 2024 and 2023 consisted of the following: 2024 - $0.7 billion pre-tax defined benefit plan loss: • Discount Rates ($127 million pre-tax gain): The weighted-average discount rate for our pension and postretirement medical plans increased from 5.40% as of December 31, 2023 to 5.85% as of December 31, 2024, primarily due to an increase in treasury yields on AA-rated corporate bonds. • Return on Assets ($672 million pre-tax loss): The actual rate of return on plan assets in our U.S. pension plans was lower than our expected rate of return, primarily due to weaker than expected bond market performance. • Demographic and Other Assumption Changes ($120 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. 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 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. 31 UNITED PARCEL SERVICE, INC.
Biggest changeAND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2025 2024 Weighted-average actuarial assumptions Expected rate of return on plan assets used in determining net periodic benefit cost 7.52 % 7.06 % Actual rate of return on plan assets 8.79 % (1.29) % Discount rate used in determining net periodic benefit cost 5.85 % 5.40 % Discount rate at measurement date 5.79 % 5.85 % Pre-tax defined benefit plan gains and losses for 2024 consisted of the following: • Discount Rates ($127 million pre-tax gain): The weighted-average discount rate for our pension and postretirement medical plans increased from 5.40% as of December 31, 2023 to 5.85% as of December 31, 2024, primarily due to an increase in treasury yields on AA-rated corporate bonds. • Return on Assets ($672 million pre-tax loss): The actual rate of return on plan assets in our U.S. pension plans was lower than our expected rate of return, primarily due to weaker than expected bond market performance. • Demographic and Other Assumption Changes ($120 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.
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 (expense) and other in our statements of consolidated income.
The primary factors contributing to actuarial gains and losses each year are: • Changes in the discount rate used to value pension and postretirement medical benefit obligations as of the measurement date; • Differences between expected and actual returns on plan assets; • Changes in demographic assumptions, including mortality; • Differences in participant experience from demographic assumptions; and • Changes in coordinating benefits with plans not sponsored by UPS.
The primary factors contributing to actuarial gains and losses each year are: • Changes in the discount rate used to value pension and postretirement medical benefit obligations as of the measurement date. • Differences between expected and actual returns on plan assets. • Changes in demographic assumptions, including mortality. • Differences in participant experience from demographic assumptions. • Changes in coordinating benefits with plans not sponsored by UPS.
Except as disclosed in note 9 to the audited, consolidated financial statements, we do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity.
Except as disclosed in note 9 to the audited, consolidated financial statements, we do not have other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity.
Cash provided by operating activities in the U.S. continues to be our primary source of funds to finance our business operations, planned capital expenditures, pension contributions, potential and planned acquisitions, transformation strategy costs, debt obligations and planned shareowner returns.
Cash provided by operating activities in the U.S. continues to be our primary source of funds to finance our business operations, planned capital expenditures, pension contributions, planned acquisitions, transformation strategy costs, debt obligations and planned shareowner returns.
Our judgment is influenced by our understanding of currently available information and potential outcomes of these actions, including the advice from our internal counsel, external counsel and other senior management. We accrue amounts associated with judicial proceedings and other contingencies when and to the extent a loss becomes probable and can be reasonably estimated.
Our judgment is influenced by our understanding of currently available information and potential outcomes of these matters, including the advice from our internal counsel, external counsel and other senior management. We accrue amounts associated with judicial proceedings and other contingencies when and to the extent a loss becomes probable and can be reasonably estimated.
We apply judgment to select appropriate comparison companies based on the business operations, size and operating results of our reporting units. Changes to our selection of comparable companies or market multiples may result in changes to the estimates of fair value of our reporting units. In 2024, we performed our annual goodwill impairment testing using both qualitative and quantitative methods.
We apply judgment to select appropriate comparison companies based on the business operations, size and operating results of our reporting units. Changes to our selection of comparable companies or market multiples may result in changes to the estimates of fair value of our reporting units. In 2025, we performed our annual goodwill impairment testing using both qualitative and quantitative methods.
The amount of any minimum funding requirement, as applicable, for these plans could change significantly in future periods depending on many factors, including plan asset returns, discount rates, other actuarial assumptions, changes to pension plan funding regulations and the discretionary contributions that we make.
The amount of any applicable minimum funding requirement for these plans could change significantly in future periods depending on many factors, including plan asset returns, discount rates, other actuarial assumptions, changes to pension plan funding regulations and any discretionary contributions we make.
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, 2024.
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, 2025.
We periodically evaluate our estimates and assumptions, and adjust them, as necessary, on a prospective basis through depreciation expense. Refer to note 4 for further considerations. Fair Value Measurements In the normal course of business, we hold and issue financial instruments that contain elements of market risk, including derivatives, marketable securities and debt.
We periodically evaluate our estimates and assumptions, and adjust them, as necessary, on a prospective basis through depreciation expense. Refer to note 4 to the audited, consolidated financial statements for further considerations. Fair Value Measurements In the normal course of business, we hold and issue financial instruments that contain elements of market risk, including derivatives, marketable securities and debt.
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.
For such matters, 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.
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. 53 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. 47 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, 2024, because a loss was not reasonably estimable. Contingent obligations relating to income taxes and self-insurance are discussed below.
In addition, we have certain contingent liabilities that have not been recognized as of, or for the year ended, December 31, 2025, because a loss was not reasonably estimable. Contingent obligations relating to income taxes and self-insurance are discussed separately below.
When amounts earned by foreign subsidiaries are expected to be indefinitely reinvested, no accrual for taxes is provided. 48 UNITED PARCEL SERVICE, INC.
When amounts earned by foreign subsidiaries are expected to be indefinitely reinvested, no accrual for taxes is provided. 42 UNITED PARCEL SERVICE, INC.
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 $10.1 billion as of December 31, 2024.
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 $10.0 billion as of December 31, 2025.
Because non-GAAP adjusted operating expenses exclude costs or charges that we do not consider a part of underlying business performance when monitoring and evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards, we believe this is the appropriate metric on which to base reviews and evaluations of the efficiency of our operational performance.
Because non-GAAP adjusted operating expenses exclude costs or charges that we do not consider a part of underlying business performance when monitoring and evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards, we believe this is the appropriate metric on which to base reviews and evaluations of the efficiency of our operational performance. 29 UNITED PARCEL SERVICE, INC.
For example, estimating the fair value of identified intangible assets may require us to develop valuation assumptions, including but not limited to, future expected cash flows from these assets, synergies and the cost of capital. Certain inputs require us to determine assumptions that are reflective of a market participant view of fair value.
For example, estimating the fair value of identified intangible assets may require us to develop valuation assumptions, including but not limited to, future expected cash flows from these assets, synergies and the discount rate. Certain inputs require us to determine assumptions that are reflective of a market participant view of fair value.
These temporary fluctuations in volume have in the past and are expected to continue to result in the temporary idling of aircraft to better match our capacity with demand. Temporarily idled assets are classified as held-and-used, and we continue to record depreciation expense for these assets.
We routinely monitor the utilization of our assets and volume levels. Temporary fluctuations in volume have in the past and are expected to continue to result in the temporary idling of aircraft to better match our capacity with demand. Temporarily idled assets are classified as held and used, and we continue to record depreciation expense for these assets.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Fit to Serve: In 2023, a number of factors, including macroeconomic headwinds and volume diversion resulting from our labor negotiations with the International Brotherhood of Teamsters, contributed to volume declines in our U.S. Domestic Package business.
Fit to Serve: In 2023, a number of factors, including macroeconomic headwinds and volume diversion resulting from our labor negotiations with the International Brotherhood of Teamsters, contributed to volume declines in our U.S. Domestic 26 UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Package business.
Actual contributions made in future years could materially differ and consequently required minimum contributions beyond 2025 cannot be reasonably estimated. We expect contributions to the UPS 401(k) Savings Plan to be approximately $614 million in 2025.
Actual contributions made in future years could materially differ and consequently required minimum contributions beyond 2026 cannot be reasonably estimated. We expect contributions to the UPS 401(k) Savings Plan to be approximately $574 million in 2026.
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.
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. 51 UNITED PARCEL SERVICE, INC.
(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. 57 UNITED PARCEL SERVICE, INC.
(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.
In addition, a reduction in expected useful life, or a decision to sell or abandon an intangible asset before the end of its useful life, may increase amortization expense, which could have a material impact on our results of operations.
In addition, a reduction in expected useful life, or a decision to sell or abandon an intangible asset before the end of its useful life, may increase amortization expense, which could have a material impact on our results of operations. 49 UNITED PARCEL SERVICE, INC.
Market prices and the manner in which we purchase fuel influence our costs. The majority of our fuel purchases utilize index-based pricing formulas plus or minus a fixed locational/supplier differential. While many of the indices are correlated, each index may respond differently to changes in underlying prices, which in turn can drive variability in our costs.
The majority of our fuel purchases utilize index-based pricing formulas plus or minus a fixed locational/supplier differential. While many of the indices are correlated, each index may respond differently to changes in underlying prices, which in turn can drive variability in our costs.
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, 2024, we had $6.3 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, 2025, we had $5.9 billion in cash, cash equivalents, and marketable securities.
We believe that these positions, expected cash from operations, access to commercial paper programs and capital markets and other available liquidity options will be adequate to fund our material short- and long-term cash requirements, including our business operations, planned capital expenditures, anticipated pension contributions, planned and potential acquisitions, 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, pension contributions, planned acquisitions, transformation strategy costs, including voluntary separation programs, debt obligations and planned shareowner returns.
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, 2024. 56 UNITED PARCEL SERVICE, INC.
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, respectively, of approximately $300 million in our reserves and expenses as of, and for the year ended, December 31, 2025.
Various circumstances precipitated these initiatives, including identification and prioritization of investments as a result of executive leadership changes, developments and changes in competitive landscapes, inflationary pressures, consumer behaviors, and other factors including post-COVID normalization and volume diversions attributed to our 2023 labor negotiations.
Various circumstances precipitated these initiatives, including identification and prioritization of certain investments, developments and changes in competitive landscapes, inflationary pressures, consumer behaviors, and other factors including post-COVID normalization and volume diversions attributed to our 2023 labor negotiations.
As discussed in note 6 to the audited, consolidated financial statements, we are not currently subject to any surcharges or minimum contributions outside of our agreed-upon contractual rates with respect to the multiemployer pension and health and welfare plans in which we participate.
As discussed in note 6 to the audited, consolidated financial statements, we are not currently subject to any surcharges or minimum contributions outside of our agreed-upon contractual rates with respect to the multiemployer pension and health and welfare plans in which we participate. Contribution rates to these plans are established through the collective bargaining process.
As of December 31, 2024 approximately $2.5 billion of our total worldwide holdings of cash, cash equivalents and marketable securities were held by foreign subsidiaries.
As of December 31, 2025 approximately $2.0 billion of our total worldwide holdings of cash, cash equivalents and marketable securities were held by foreign subsidiaries.
In addition, our International Package and Supply Chain Solutions businesses were also negatively impacted by a number of challenging macroeconomic conditions during 2023.
In addition, our International Package and SCS businesses were also negatively impacted by a number of challenging macroeconomic conditions during 2023.
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.
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 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.
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.
As a result of the reduction in air volumes experienced during 2024, we temporarily idled 12 aircraft for an average of approximately six months. As of December 31, 2024 all of these aircraft had re-entered operational service.
As a result of the reduction in air volumes experienced during 2025, we temporarily idled eight aircraft for an average of approximately seven months. As of December 31, 2025, all of these aircraft had re-entered operational service.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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.
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.
Our total reserves related to prior year claims decreased by $144 million in 2024 and increased by $39 million in 2023 as a result of changes in estimated claim costs.
Total reserves related to prior year claims increased by $11 million in 2025 and decreased by $144 million in 2024 as a result of changes in estimated claim costs.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We supplement the presentation of operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of the following items: Transformation Strategy Costs We exclude the impact of charges related to activities within our transformation strategy.
We supplement the presentation of operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of the following items: Transformation Strategy Costs We exclude the impact of charges related to activities within our transformation strategy.
Sources of Credit See note 9 to the audited, consolidated financial statements for a discussion of our available credit and our debt covenants. 51 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.
Cash Flows From Operating Activities The following is a summary of the significant sources (uses) of cash from operating activities (in millions): 2024 2023 Net income $ 5,782 $ 6,708 Non-cash operating activities (1) 5,622 5,437 Pension and postretirement medical benefit plan contributions (Company-sponsored plans) (1,524) (1,393) Hedge margin receivables and payables (90) (444) Income tax receivables and payables 313 (294) Changes in working capital and other non-current assets and liabilities 33 366 Other operating activities (14) (142) Net cash from operating activities $ 10,122 $ 10,238 (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.
Cash Flows From Operating Activities The following is a summary of significant sources (uses) of cash from operating activities (in millions): 2025 2024 Net income $ 5,572 $ 5,782 Non-cash operating activities (1) 5,169 5,622 Pension and postretirement medical benefit plan contributions (Company-sponsored plans) (1,361) (1,524) Hedge margin receivables and payables — (90) Income tax receivables and payables (330) 313 Changes in working capital and other non-current assets and liabilities (667) 33 Other operating activities 67 (14) Net cash from operating activities $ 8,450 $ 10,122 (1) Represents depreciation and amortization, gains and losses on derivative transactions and foreign currency exchange, disposals of assets and businesses, 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.
Details of long-lived asset impairments are included in note 4 to the audited, consolidated financial statements.
Details of long-lived asset impairments are included in note 4 to the audited, consolidated financial statements. 52 UNITED PARCEL SERVICE, INC.
Self-insurance reserves as of December 31, 2024 and 2023 were as follows (in millions): 2024 2023 Current self-insurance reserves $ 1,086 $ 1,320 Non-current self-insurance reserves (1) 1,895 1,626 Total self-insurance reserves $ 2,981 $ 2,946 (1) Included within Other Non-Current Liabilities in our consolidated balance sheets.
Self-insurance reserves as of December 31, 2025 and 2024 were as follows (in millions): 2025 2024 Current self-insurance reserves $ 1,137 $ 1,086 Non-current self-insurance reserves (1) 1,935 1,895 Total self-insurance reserves $ 3,072 $ 2,981 (1) Included within Other Non-Current Liabilities in our consolidated balance sheets.
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 events that may impact our contingent liabilities are often unique and generally are not predictable.
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. Events that may result in contingent liabilities are often unique and generally are not predictable, including general commercial matters, governmental actions, employment-related claims, and other contractual disputes.
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, 2024 and 2023 were as follows (in millions): 2024 2023 Net cash used in investing activities $ (217) $ (7,133) Capital Expenditures: Buildings, facilities and plant equipment $ (1,563) $ (2,211) Aircraft and parts (742) (585) Vehicles (779) (1,485) Information technology (825) (877) Total Capital Expenditures (1) : $ (3,909) $ (5,158) Capital Expenditures as a % of revenue 4.3 % 5.7 % Other Investing Activities: Proceeds from disposals of businesses, property, plant and equipment $ 1,115 $ 193 Net (purchases)/sales and maturities of marketable securities $ 2,672 $ (820) Acquisitions, net of cash acquired $ (71) $ (1,329) Other investing activities $ (24) $ (19) (1) In addition to capital expenditures of $3.9 and $5.2 billion for the years ended December 31, 2024 and 2023, respectively, there were principal repayments of finance lease obligations of $136 and $126 million in these years, 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 were as follows (in millions): 2025 2024 Net cash used in investing activities $ (4,735) $ (217) Capital Expenditures: Buildings, facilities and plant equipment $ (2,206) $ (1,563) Aircraft and parts (171) (742) Vehicles (245) (779) Information technology (1,063) (825) Total capital expenditures (1) : $ (3,685) $ (3,909) Capital expenditures as a % of revenue 4.2 % 4.3 % Other Investing Activities: Proceeds from disposal of businesses, property, plant and equipment $ 700 $ 1,115 Net (purchases) sales and maturities of marketable securities $ 203 $ 2,672 Acquisitions, net of cash acquired $ (1,968) $ (71) Other investing activities $ 15 $ (24) (1) In addition to capital expenditures of $3.7 and $3.9 billion for 2025 and 2024, respectively, there were principal repayments of finance lease obligations of $133 and $136 million in these years, respectively.
In estimating the useful lives and expected residual values of aircraft, which we evaluate at the network level, 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. We routinely monitor the utilization of our assets and volume levels.
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, which we evaluate at the network level, 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.
We have not yet identified the specific assets that will be impacted by our network reconfiguration. In addition to our network reconfiguration, revisions to estimates of useful lives and residual values could also be caused by changes to our maintenance programs, governmental regulations, operational intentions, or market prices.
These future impacts may also relate to specific assets that have not yet been identified. In addition to our Network Reconfiguration and Efficiency Reimagined initiatives, revisions to estimates of useful lives and residual values could also be caused by changes to our maintenance programs, governmental regulations, operational intentions, or market prices.
Revenue The change in revenue was due to the following: Revenue Change Drivers: Volume Rates / Product Mix Fuel Surcharges Currency Total Revenue Change 2024 vs. 2023 (0.6) % 1.9 % — % (0.6) % 0.7 % Comparative results were impacted by having one less operating day in 2024 compared to 2023. 36 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 2025 vs. 2024 2.1 % 0.4 % 0.2 % 0.7 % 3.4 % Comparative results were impacted by having one less operating day in 2025 compared to 2024.
In response to these factors, we began to undertake our Fit to Serve initiative with the intent to right-size our business to create a more efficient operating model that was more responsive to market dynamics through a workforce reduction of approximately 14,000 positions, primarily within management, throughout 2024.
In response to these factors, we undertook our Fit to Serve initiative with the intent to right-size our business to create a more efficient operating model that was more responsive to market dynamics through a workforce reduction of approximately 14,000 positions, primarily within management. Fit to Serve was completed in 2025, and total related costs were $463 million.
The following sensitivity analysis shows the impact of a 25 basis point change in the assumed discount rate and return on assets for our pension and postretirement benefit plans, and the resulting increase (decrease) in our obligations and expense as of, and for the year ended, December 31, 2024 (in millions): Pension Plans 25 Basis Point Increase 25 Basis Point Decrease Discount Rate: Effect on ongoing net periodic benefit cost $ (16) $ 16 Effect on net periodic benefit cost for amounts recognized outside the 10% corridor (583) 592 Effect on projected benefit obligation (1,420) 1,496 Return on Assets: Effect on ongoing net periodic benefit cost (1) (112) 112 Effect on net periodic benefit cost for amounts recognized outside the 10% corridor (2) $ (55) $ 55 Postretirement Medical Benefit Plans Discount Rate: Effect on ongoing net periodic benefit cost $ 2 $ (2) Effect on net periodic benefit cost for amounts recognized outside the 10% corridor — — Effect on accumulated postretirement benefit obligation (31) 35 Healthcare Cost Trend Rate: Effect on ongoing net periodic benefit cost 1 (1) Effect on net periodic benefit cost for amounts recognized outside the 10% corridor — — Effect on accumulated postretirement benefit obligation $ 8 $ (9) (1) Amount calculated based on 25 basis point increase / decrease in the expected return on assets.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following sensitivity analysis shows the impact of a 25 basis point change in the assumed discount rate and return on assets for our pension and postretirement benefit plans, and the resulting increase (decrease) in our obligations and expense as of, and for the year ended, December 31, 2025 (in millions): Pension Plans 25 Basis Point Increase 25 Basis Point Decrease Discount Rate: Effect on ongoing net periodic benefit cost $ (13) $ 14 Effect on net periodic benefit cost for amounts recognized outside the 10% corridor (16) 323 Effect on projected benefit obligation (1,446) 1,523 Return on Assets: Effect on ongoing net periodic benefit cost (1) (106) 106 Effect on net periodic benefit cost for amounts recognized outside the 10% corridor (2) $ — $ — Postretirement Medical Benefit Plans Discount Rate: Effect on ongoing net periodic benefit cost $ 2 $ (2) Effect on net periodic benefit cost for amounts recognized outside the 10% corridor — — Effect on accumulated postretirement benefit obligation (31) 36 Healthcare Cost Trend Rate: Effect on ongoing net periodic benefit cost 1 (1) Effect on net periodic benefit cost for amounts recognized outside the 10% corridor — — Effect on accumulated postretirement benefit obligation $ 8 $ (9) (1) Amount calculated based on 25 basis point increase / decrease in the expected return on assets.
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, 2023 filed with the Securities and Exchange Commission on February 20, 2024. 25 UNITED PARCEL SERVICE, INC.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission on February 18, 2025.
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 59 UNITED PARCEL SERVICE, INC.
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.
Transformation 2.0: Based on a number of factors including evaluating efficiencies gained as a part of Transformation 1.0, and in connection with changes in our executive leadership in 2020, we identified and reprioritized certain then-current and future investments, including additional investments in our workforce, portfolio of businesses and technology (such projects, collectively, “Transformation 2.0”).
Our transformation strategy includes the following programs and initiatives: Transformation 2.0: Based on a number of factors, including evaluating the efficiencies previously achieved, and in connection with changes in 2020, we identified and reprioritized certain then-current and future investments, including additional investments in our workforce, portfolio of businesses and technology (such projects, collectively, "Transformation 2.0").
Non-GAAP adjusted financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our non-GAAP adjusted financial measures do not represent a comprehensive basis of accounting and therefore may not be comparable to similarly titled measures reported by other companies.
Our non-GAAP adjusted financial measures do not represent a comprehensive basis of accounting and therefore may not be comparable to similarly titled measures reported by other companies.
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.
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.
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): 2024 2023 Net cash used in financing activities $ (6,850) $ (5,534) Share Repurchases: Cash paid to repurchase shares $ (500) $ (2,250) Number of shares repurchased (3.9) (12.8) Shares outstanding at year end 854 853 Dividends: Dividends declared per share $ 6.52 $ 6.48 Cash paid for dividends $ (5,399) $ (5,372) Borrowings: Net borrowings (repayments) of debt principal $ (974) $ 2,272 Other Financing Activities: Cash received for common stock issuances $ 232 $ 248 Other financing activities $ (209) $ (432) Capitalization: Total debt outstanding at year end $ 21,284 $ 22,264 Total shareowners’ equity at year end 16,743 17,314 Total capitalization $ 38,027 $ 39,578 We repurchased 3.9 and 12.8 million shares of class B common stock for $500 million and $2.3 billion under our stock repurchase program for the years ended December 31, 2024 and 2023, respectively.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash Flows From Financing Activities Our primary uses of cash for financing activities were as follows (amounts in millions, except per share data): 2025 2024 Net cash used in financing activities $ (4,141) $ (6,850) Share Repurchases: Cash paid to repurchase shares $ (1,000) $ (500) Number of shares repurchased (8.6) (3.9) Shares outstanding at year end 849 854 Dividends: Dividends declared per share $ 6.56 $ 6.52 Cash paid for dividends $ (5,398) $ (5,399) Borrowings: Net borrowings (repayments) of debt principal $ 2,084 $ (974) Other Financing Activities: Cash received for common stock issuances $ 159 $ 232 Other financing activities $ 14 $ (209) Capitalization: Total debt outstanding at year end $ 24,127 $ 21,284 Total shareowners’ equity at year end 16,255 16,743 Total capitalization $ 40,382 $ 38,027 We repurchased 8.6 and 3.9 million shares of class B common stock for $1.0 billion and $500 million under our share repurchase authorization in 2025 and 2024, respectively.
Goodwill and Intangible Asset Impairments We test goodwill and indefinite-lived intangible assets for impairment annually as of July 1, or more frequently if circumstances require. We assess goodwill for impairment at the reporting unit level.
Goodwill and Intangible Asset Impairments We test goodwill and indefinite-lived intangible assets for impairment annually as of July 1, or more frequently if circumstances require. We assess goodwill for impairment at the reporting unit level. To determine whether goodwill is impaired, we are required to assess the fair value of each reporting unit and compare it to its carrying value.
We expect to incur additional costs under our Network Reconfiguration and Efficiency Reimagined initiatives during 2025. See "Supplemental Information - Items Affecting Comparability" for additional discussion. 45 UNITED PARCEL SERVICE, INC.
We expect to incur additional other expenses under our Network Reconfiguration and Efficiency Reimagined initiatives during 2026. See Supplemental Information - Items Affecting Comparability for additional discussion on the types, amounts and timing thereof. 39 UNITED PARCEL SERVICE, INC.
These are included in cash flows from financing activities. In 2024, capital expenditures were $3.9 billion and approximately $1.3 billion was spent related to projects which support our environmental sustainability goals.
These are included in cash flows from financing activities. In 2025, capital expenditures were $3.7 billion, of which approximately $430 million was related to projects supporting our environmental sustainability goals.
These assumptions include projections of future revenue, costs, capital expenditures, working capital, long-term growth rates and the cost of capital. During periods of time in which macroeconomic conditions are uncertain or volatile, these assumptions are subject to a greater degree of uncertainty.
These assumptions include projections of future revenue, costs, capital expenditures, working capital, long-term growth rates and the discount rate. During periods in which macroeconomic conditions are uncertain or volatile, these assumptions are subject to a greater degree of uncertainty. We are also required to make assumptions relating to our overall business and operating strategy, and the regulatory and market environment.
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.
Significant changes in these estimates may result in an increase or decrease to our tax expense in a subsequent period. 50 UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We assess the likelihood that we will be able to recover our deferred tax assets.
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.
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.
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 2025, 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 minimum required cash contributions to our qualified U.S. pension plans in 2025.
We anticipate making contributions to our company-sponsored U.S. defined benefit pension and postretirement medical benefit plans of approximately $1.3 billion in 2026, which are included within Expected employer contributions to plan trusts in note 5 to the audited, consolidated financial statements. Contributions are sufficient to cover Internal Revenue Service minimums and required funding in accordance with applicable law.
We believe excluding these defined benefit pension and postretirement medical plan gains and losses provides important supplemental information by removing the volatility associated with plan amendments and short-term changes in market interest rates, equity values and similar factors. 30 UNITED PARCEL SERVICE, INC.
We supplement the presentation non-GAAP adjusted measures that exclude the impact of these gains and losses and the related income tax effects. We believe excluding these defined benefit pension and postretirement medical plans gains and losses provides important supplemental information by removing the volatility associated with plan amendments and short-term changes in market interest rates, equity values and similar factors.
For the years ended December 31, 2024 and 2023, dividends reported within shareowners' equity include $195 and $239 million, respectively, of non-cash dividends that were settled in shares of class A common stock. Issuances of debt in 2024 consisted of borrowings of fixed- and floating-rate senior notes.
During 2025 and 2024, dividends reported within shareowners' equity include $167 and $195 million, respectively, of non-cash dividends that were settled in shares of class A common stock. Issuances of debt during 2025 consisted of fixed-rate and floating-rate senior notes of varying maturities totaling $4.2 billion.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Other Income and (Expense): Defined Benefit Pension and Postretirement Medical Plan Loss $ 665 $ 359 Interest Expense Associated with One-Time Payment for International Regulatory Matter 6 — Total Adjustments to Non-GAAP Other Income and (Expense) $ 671 $ 359 Total Adjustments to Non-GAAP Income Before Income Taxes $ 1,097 $ 1,091 Income Tax (Benefit) Expense: Transformation Strategy Costs: Transformation 1.0 $ — $ 3 Transformation 2.0 Spans and Layers — 21 Business Portfolio Review 7 15 Financial Systems 13 10 Other Initiatives — 1 Transformation 2.0 Total 20 47 Fit to Serve 49 52 Network Reconfiguration and Efficiency Reimagined 8 — Total Transformation Strategy Costs 77 102 Gain on Divestiture of Coyote (4) — One-Time Payment for International Regulatory Matter — — Goodwill and Asset Impairment Charges 27 43 One-Time Compensation Payment — 15 Expense for Regulatory Matter — — Multiemployer Pension Plan Withdrawal Expense 5 — Defined Benefit Pension and Postretirement Medical Plan Loss 159 85 Total Adjustments to Non-GAAP Income Tax Expense $ 264 $ 245 Total Adjustments to Non-GAAP Net Income $ 833 $ 846 The income tax impacts of these items are calculated by multiplying the statutory tax rates applicable in each tax jurisdiction, including the U.S. federal jurisdiction and various U.S. state and non-U.S. jurisdictions, by the tax-deductible adjustments.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Non-GAAP Adjustments 2025 2024 Income Tax (Benefit) Expense: Transformation Strategy Costs: Transformation 2.0 Business Portfolio Review $ (5) $ 7 Financial Systems 14 13 Transformation 2.0 Total 9 20 Fit to Serve 10 49 Network Reconfiguration and Efficiency Reimagined 122 8 Total Transformation Strategy Costs 141 77 Reversal of Income Tax Valuation Allowance 109 — Goodwill and Asset Impairment Charges 45 27 Net Loss (Gain) on Divestiture 4 (4) Defined Benefit Pension and Postretirement Medical Plan Loss — 159 Multiemployer Pension Plan Withdrawal Expense — 5 Total Non-GAAP Adjustments to Income Tax (Benefit) Expense $ 299 $ 264 Total Non-GAAP Adjustments to Net Income $ 514 $ 833 The income tax effects of adjustments to income before income taxes are calculated by multiplying the statutory tax rates applicable in each tax jurisdiction, including the U.S. federal jurisdiction and various U.S. state and non-U.S. jurisdictions, by the tax-deductible adjustments.
The projections that we use in our DCF model are updated annually, or more often if necessary, and will change over time based on the historical performance and changing business conditions for each of our reporting units. • The market approach uses observable market data of comparable public companies to estimate fair value utilizing financial metrics (such as enterprise value to net sales).
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and change over time based on the historical performance and changing business conditions and strategy for each of our reporting units. • The market approach uses observable market data of comparable public companies to estimate fair value utilizing financial metrics (such as enterprise value to net sales).
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. 52 UNITED PARCEL SERVICE, INC.
See note 10 for a discussion of judicial proceedings and other matters arising from the conduct of our business activities. 46 UNITED PARCEL SERVICE, INC.
A quantitative sensitivity analysis of our exposure to changes in foreign currency exchange rates and interest rates is presented in the Quantitative and Qualitative Disclosures about Market Risk section of this report.
Refer to notes 3, 9 and 17 to the audited, consolidated financial statements for further information on these instruments. A quantitative sensitivity analysis of our exposure to changes in foreign currency exchange rates and interest rates is presented in the Quantitative and Qualitative Disclosures A bout Market Risk section of this report.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS International Package Year Ended December 31, Change 2024 2023 $ % Average Daily Package Volume (in thousands): Domestic 1,554 1,591 (2.3) % Export 1,703 1,669 2.0 % Total Average Daily Package Volume 3,257 3,260 (0.1) % Average Revenue Per Piece: Domestic $ 8.10 $ 7.78 $ 0.32 4.1 % Export 32.82 33.03 (0.21) (0.6) % Total Average Revenue Per Piece $ 21.03 $ 20.71 $ 0.32 1.5 % Operating Days in Period 253 254 Revenue (in millions): Domestic $ 3,186 $ 3,144 $ 42 1.3 % Export 14,142 14,003 139 1.0 % Cargo & Other 632 684 (52) (7.6) % Total Revenue $ 17,960 $ 17,831 $ 129 0.7 % Operating Expenses (in millions): Operating Expenses $ 14,769 $ 14,600 $ 169 1.2 % Non-GAAP adjustments to operating expenses One-Time Payment for Int'l Regulatory Matter (88) — (88) N/A Asset Impairment Charges (2) — (2) N/A Transformation Strategy Costs (79) (51) (28) 54.9 % Non-GAAP Adjusted Operating Expenses $ 14,600 $ 14,549 $ 51 0.4 % Operating Profit (in millions) and Operating Margin: Operating Profit $ 3,191 $ 3,231 $ (40) (1.2) % Non-GAAP Adjusted Operating Profit $ 3,360 $ 3,282 $ 78 2.4 % Operating Margin 17.8 % 18.1 % Non-GAAP Adjusted Operating Margin 18.7 % 18.4 % Currency Translation Benefit / (Cost)—(in millions)*: Revenue $ (115) Operating Expenses 67 Operating Profit $ (48) * Net of currency hedging; amount represents the change compared to the prior year.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS International Package Operations 2025 2024 $ Change % Change Average Daily Package Volume (in thousands): Domestic 1,575 1,554 1.4 % Export 1,762 1,703 3.5 % Total Average Daily Package Volume 3,337 3,257 2.5 % Average Revenue Per Piece: Domestic $ 8.57 $ 8.10 $ 0.47 5.8 % Export 32.61 32.82 (0.21) (0.6) % Total Average Revenue Per Piece $ 21.26 $ 21.03 $ 0.23 1.1 % Operating Days in Period 252 253 Revenue (in millions): Domestic $ 3,401 $ 3,186 $ 215 6.7 % Export 14,479 14,142 337 2.4 % Cargo & Other 696 632 64 10.1 % Total Revenue $ 18,576 $ 17,960 $ 616 3.4 % Operating Expenses (in millions): Operating Expenses $ 15,703 $ 14,769 $ 934 6.3 % Non-GAAP Adjustments to Operating Expenses Transformation Strategy Costs (53) (79) 26 (32.9) % Goodwill and Asset Impairment Charges (9) (2) (7) 350.0 % One-Time Payment for International Regulatory Matter — (88) 88 (100.0) % Non-GAAP Adjusted Operating Expenses $ 15,641 $ 14,600 $ 1,041 7.1 % Operating Profit (in millions) and Operating Margin: Operating Profit $ 2,873 $ 3,191 $ (318) (10.0) % Non-GAAP Adjusted Operating Profit $ 2,935 $ 3,360 $ (425) (12.6) % Operating Margin 15.5 % 17.8 % Non-GAAP Adjusted Operating Margin 15.8 % 18.7 % Currency Translation Benefit / (Cost)—(in millions) 1 : Revenue $ 140 Operating Expenses (191) Operating Profit $ (51) (1) Net of currency hedging; amount represents the change compared to the prior year.
Based on current volume projections, we anticipate that certain aircraft may be temporarily idled during part of 2025 as part of our normal operations and will return to service.
Based on current volume projections, we anticipate that certain aircraft may be temporarily idled during part of 2026 as part of our normal operations and will return to service. During the fourth quarter of 2025, we recognized a $182 million charge related to the retirement of our MD-11 fleet, primarily for aircraft and parts inventory.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Supply Chain Solutions Year Ended December 31, Change 2024 2023 $ % Revenue (in millions): Forwarding $ 4,728 $ 5,534 $ (806) (14.6) % Logistics 6,437 5,927 510 8.6 % Other 1,569 1,461 108 7.4 % Total Revenue $ 12,734 $ 12,922 $ (188) (1.5) % Operating Expenses (in millions): Operating Expenses $ 11,802 $ 12,168 $ (366) (3.0) % Transformation Strategy Costs (96) (118) 22 (18.6) % Gain on Divestiture of Coyote 156 — 156 N/A Goodwill and Asset Impairment Charges (101) (236) 135 (57.2) % Expense for Regulatory Matter (45) — (45) N/A Non-GAAP Adjusted Operating Expenses $ 11,716 $ 11,814 $ (98) (0.8) % Operating Profit (in millions) and Operating Margins: Operating Profit $ 932 $ 754 $ 178 23.6 % Non-GAAP Adjusted Operating Profit 1,018 1,108 (90) (8.1) % Operating Margin 7.3 % 5.8 % Non-GAAP Adjusted Operating Margin 8.0 % 8.6 % Currency Translation Benefit / (Cost)—(in millions)*: Revenue (68) Operating Expenses 86 Operating Profit 18 * Amount represents the change in currency translation compared to the prior year. 39 UNITED PARCEL SERVICE, INC.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Supply Chain Solutions Operations 2025 2024 $ Change % Change Revenue (in millions): Forwarding $ 2,916 $ 4,728 $ (1,812) (38.3) % Logistics 5,855 6,437 (582) (9.0) % Other SCS 1,795 1,569 226 14.4 % Total Revenue $ 10,566 $ 12,734 $ (2,168) (17.0) % Operating Expenses (in millions): Operating Expenses $ 9,498 $ 11,802 $ (2,304) (19.5) % Non-GAAP Adjustments to Operating Expenses Transformation Strategy Costs (35) (96) 61 (63.5) % Net (Loss) Gain on Divestiture (19) 156 (175) N/A Goodwill and Asset Impairment Charges — (101) 101 (100.0) % Expense for Regulatory Matter — (45) 45 (100.0) % Non-GAAP Adjusted Operating Expenses $ 9,444 $ 11,716 $ (2,272) (19.4) % Operating Profit (in millions) and Operating Margin: Operating Profit $ 1,068 $ 932 $ 136 14.6 % Non-GAAP Adjusted Operating Profit 1,122 1,018 104 10.2 % Operating Margin 10.1 % 7.3 % Non-GAAP Adjusted Operating Margin 10.6 % 8.0 % Currency Benefit / (Cost)—(in millions) 1 : Revenue 55 Operating Expenses (49) Operating Profit 6 (1) Amount represents the change in currency translation compared to the prior year. 2025 2024 $ Change Non-GAAP Adjustments to Operating Expenses (in millions): Transformation Strategy Costs Forwarding $ 31 $ 39 $ (8) Logistics 4 57 (53) Total Transformation Strategy Costs 35 96 (61) Net Loss (Gain) on Divestiture Forwarding — (156) 156 Other SCS 19 — 19 Total Loss (Gain) on Divestiture 19 (156) 175 Goodwill and Asset Impairment Charges Logistics — 101 (101) Total Goodwill and Asset Impairment Charges — 101 (101) Expense for Regulatory Matter Other SCS — 45 (45) Total Expense for Regulatory Matter — 45 (45) Total Non-GAAP Adjustments to Operating Expenses $ 54 $ 86 $ (32) 35 UNITED PARCEL SERVICE, INC.
The growth in rates / product mix shown above includes the growth we experienced in our air cargo product during 2024 as we onboarded more air cargo under our contract with the USPS. Air cargo is measured by weight, not on a per piece basis, and therefore does not impact the volume and revenue per piece discussions below.
Rates and product mix include our air cargo product, which volume was fully onboarded under a contract with the USPS during the fourth quarter of 2024. Air cargo is measured by dimensional weight, not on a per piece basis, and therefore does not impact the volume and revenue per piece discussions below. 30 UNITED PARCEL SERVICE, INC.
It is reasonably possible that these actions may result in reductions to the expected useful lives of certain assets, including early retirement, and related increases in depreciation expense during future periods. In addition, revisions to the salvage values of aircraft and other assets have in the past and may in the future result in impairment charges or increased depreciation expense.
These actions have resulted in, and may continue to result in reductions to the expected useful lives of certain assets, including early retirement, and related increases in depreciation expense during future periods.
Domestic Package Year Ended December 31, Change 2024 2023 $ % Average Daily Package Volume (in thousands): Next Day Air 1,651 1,757 (6.0) % Deferred 1,058 1,224 (13.6) % Ground 16,452 16,049 2.5 % Total Average Daily Package Volume 19,161 19,030 0.7 % Average Revenue Per Piece: Next Day Air $ 23.23 $ 22.17 $ 1.06 4.8 % Deferred 17.77 16.38 1.39 8.5 % Ground 10.89 11.03 (0.14) (1.3) % Total Average Revenue Per Piece $ 12.34 $ 12.40 $ (0.06) (0.5) % Operating Days in Period 253 254 Revenue (in millions): Next Day Air $ 9,703 $ 9,894 $ (191) (1.9) % Deferred 4,757 5,093 (336) (6.6) % Ground 45,347 44,971 376 0.8 % Cargo and Other 569 247 322 130.4 % Total Revenue $ 60,376 $ 60,205 $ 171 0.3 % Operating Expenses (in millions): Operating Expenses $ 56,031 $ 55,049 $ 982 1.8 % Non-GAAP adjustments to operating expenses Transformation Strategy Costs (147) (266) 119 (44.7) % Goodwill and Asset Impairment Charges (5) — (5) N/A One-Time Compensation Payment — (61) 61 (100.0) % Multiemployer Pension Plan Withdrawal Expense (19) — (19) N/A Non-GAAP Adjusted Operating Expenses $ 55,860 $ 54,722 $ 1,138 2.1 % Operating Profit (in millions) and Operating Margin: Operating Profit $ 4,345 $ 5,156 $ (811) (15.7) % Non-GAAP Adjusted Operating Profit $ 4,516 $ 5,483 $ (967) (17.6) % Operating Margin 7.2 % 8.6 % Non-GAAP Adjusted Operating Margin 7.5 % 9.1 % Revenue The change in revenue was due to the following factors: Revenue Change Drivers: Volume Rates / Product Mix Fuel Surcharge Total Revenue Change 2024 vs. 2023 0.3 % 0.5 % (0.5) % 0.3 % Comparative results were impacted by having one less operating day in 2024 compared to 2023.
Domestic Package Operations 2025 2024 $ Change % Change Average Daily Package Volume (in thousands): Next Day Air 1,499 1,651 (9.2) % Deferred 892 1,058 (15.7) % Ground 15,119 16,452 (8.1) % Total Average Daily Package Volume 17,510 19,161 (8.6) % Average Revenue Per Piece: Next Day Air $ 25.55 $ 23.23 $ 2.32 10.0 % Deferred 19.78 17.77 2.01 11.3 % Ground 11.60 10.89 0.71 6.5 % Total Average Revenue Per Piece $ 13.21 $ 12.34 $ 0.87 7.1 % Operating Days in Period 252 253 Revenue (in millions): Next Day Air $ 9,652 $ 9,703 $ (51) (0.5) % Deferred 4,446 4,757 (311) (6.5) % Ground 44,183 45,347 (1,164) (2.6) % Cargo and Other 1,238 569 669 117.6 % Total Revenue $ 59,519 $ 60,376 $ (857) (1.4) % Operating Expenses (in millions): Operating Expenses $ 55,593 $ 56,031 $ (438) (0.8) % Non-GAAP Adjustments to Operating Expenses Transformation Strategy Costs (505) (147) (358) 243.5 % Goodwill and Asset Impairment Charges (173) (5) (168) N/M Multiemployer Pension Plan Withdrawal Expense — (19) 19 (100.0) % Non-GAAP Adjusted Operating Expenses $ 54,915 $ 55,860 $ (945) (1.7) % Operating Profit (in millions) and Operating Margin: Operating Profit $ 3,926 $ 4,345 $ (419) (9.6) % Non-GAAP Adjusted Operating Profit $ 4,604 $ 4,516 $ 88 1.9 % Operating Margin 6.6 % 7.2 % Non-GAAP Adjusted Operating Margin 7.7 % 7.5 % Revenue The change in revenue was due to the following factors: Revenue Change Drivers: Volume Rates / Product Mix Fuel Surcharge Total Revenue Change 2025 vs. 2024 (9.0) % 7.1 % 0.5 % (1.4) % Comparative results were impacted by one less operating day in 2025 compared to 2024.
We consider the overall fixed and floating interest rate mix of our portfolio and the related overall cost of borrowing when planning for future issuances and non-scheduled repayments of debt. Other financing activities included cash used to repurchase shares to satisfy tax withholding obligations on vested employee stock awards.
We consider the overall fixed and floating interest rate mix of our portfolio and the related overall cost of borrowing when planning for future issuances and non-scheduled repayments of debt.
Non-GAAP adjusted amounts reflect the following (in millions): Year Ended December 31, Non-GAAP Adjustments 2024 2023 Operating Expenses: Transformation Strategy Costs: Transformation 1.0 $ — $ 13 Transformation 2.0 Spans and Layers — 86 Business Portfolio Review 29 84 Financial Systems 54 36 Other Initiatives — 4 Transformation 2.0 Total 83 210 Fit to Serve 204 212 Network Reconfiguration and Efficiency Reimagined 35 — Total Transformation Strategy Costs 322 435 Gain on Divestiture of Coyote (156) — One-Time Payment for International Regulatory Matter 88 — Goodwill and Asset Impairment Charges 108 236 One-Time Compensation Payment — 61 Expense for Regulatory Matter 45 — Multiemployer Pension Plan Withdrawal Expense 19 — Total Adjustments to Non-GAAP Operating Expenses $ 426 $ 732 26 UNITED PARCEL SERVICE, INC.
Non-GAAP adjusted amounts reflect the following (in millions): Non-GAAP Adjustments 2025 2024 Operating Expenses: Transformation Strategy Costs: Transformation 2.0 Business Portfolio Review $ (18) $ 29 Financial Systems 55 54 Transformation 2.0 Total 37 83 Fit to Serve 47 204 Network Reconfiguration and Efficiency Reimagined 509 35 Total Transformation Strategy Costs 593 322 Goodwill and Asset Impairment Charges 182 108 Net Loss (Gain) on Divestiture 19 (156) One-Time Payment for International Regulatory Matter — 88 Expense for Regulatory Matter — 45 Multiemployer Pension Plan Withdrawal Expense — 19 Total Non-GAAP Adjustments to Operating Expenses $ 794 $ 426 Non-GAAP Adjustments 2025 2024 Other Income and (Expense): Defined Benefit Pension and Postretirement Medical Plan Loss $ — $ 665 Goodwill and Asset Impairment Charges 19 — Interest Expense Associated with One-Time Payment for International Regulatory Matter — 6 Total Adjustments to Non-GAAP Other Income and (Expense) $ 19 $ 671 Total Adjustments to Non-GAAP Income Before Income Taxes $ 813 $ 1,097 25 UNITED PARCEL SERVICE, INC.
For the reporting units we have identified as having limited cushion above, if the cost of capital were increased by 100 basis points or our projected cash flows were reduced by 10 percent, it is reasonably possible that these reporting units would be impaired.
For the GFF and HLD reporting units, if the discount rates were increased by 100 basis points or our projected cash flows were reduced by 10 percent, it is reasonably possible that these reporting units would be impaired. We believe the fair values of these reporting units continue to exceed their respective carrying values.
We intend to repay or refinance these amounts when due. Estimated future interest payments on our outstanding debt total approximately $16.7 billion. This amount was calculated using the contractual interest payments due on our fixed- and variable-rate debt based on interest rates as of December 31, 2024. For debt denominated in a foreign currency, the U.S.
This amount was calculated using the contractual interest payments due on our fixed- and variable-rate debt based on interest rates as of December 31, 2025. For debt denominated in a foreign currency, the U.S. Dollar equivalent principal amount of the debt at the end of the year was used as the basis to project future interest payments.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Goodwill and Asset Impairment Charges We exclude the impact of goodwill and asset impairment charges which we do not consider when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards.
We do not consider these non-cash charges when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards. For more information regarding Goodwill and Asset Impairment Charges, see note 4 and note 7 to the audited, consolidated financial statements.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Consolidated Operating Expenses Year Ended December 31, Change 2024 2023 $ % Operating Expenses (in millions): Compensation and benefits $ 48,093 $ 47,092 $ 1,001 2.1 % Transformation Strategy Costs (213) (337) 124 (36.8) % Multiemployer Pension Plan Withdrawal Expense (19) — (19) N/A One-Time Compensation Payment — (61) 61 (100.0) % Non-GAAP Adjusted Compensation and Benefits 47,861 46,694 1,167 2.5 % Repairs and maintenance 2,940 2,828 112 4.0 % Depreciation and amortization 3,609 3,366 243 7.2 % Purchased transportation 13,589 13,640 (51) (0.4) % Fuel 4,366 4,775 (409) (8.6) % Other occupancy 2,117 2,019 98 4.9 % Other expenses 7,888 8,097 (209) (2.6) % Total Other expenses 34,509 34,725 (216) (0.6) % Transformation Strategy Costs (109) (98) (11) 11.2 % Gain on Divestiture of Coyote 156 — 156 N/A One-Time Payment for International Regulatory Matter (88) — (88) N/A Goodwill and Asset Impairment Charges (108) (236) 128 (54.2) % Expense for Regulatory Matter (45) — (45) N/A Non-GAAP Adjusted Total Other Expenses $ 34,315 $ 34,391 $ (76) (0.2) % Total Operating Expenses $ 82,602 $ 81,817 $ 785 1.0 % Non-GAAP Adjusted Total Operating Expenses $ 82,176 $ 81,085 $ 1,091 1.3 % Currency (Benefit) / Cost - (in millions)* (152) * Amount represents the change in currency translation compared to the prior year. 42 UNITED PARCEL SERVICE, INC.
AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Consolidated Operating Expenses 2025 2024 $ Change % Change Operating Expenses (in millions): Compensation and benefits $ 48,605 $ 48,093 $ 512 1.1 % Transformation Strategy Costs (420) (213) (207) 97.2 % Multiemployer Pension Plan Withdrawal Expense — (19) 19 (100.0) % Non-GAAP Adjusted Compensation and Benefits 48,185 47,861 324 0.7 % Repairs and maintenance 3,107 2,940 167 5.7 % Depreciation and amortization 3,746 3,609 137 3.8 % Purchased transportation 10,588 13,589 (3,001) (22.1) % Fuel 4,316 4,366 (50) (1.1) % Other occupancy 2,269 2,117 152 7.2 % Other expenses 8,163 7,888 275 3.5 % Total Other expenses 32,189 34,509 (2,320) (6.7) % Transformation Strategy Costs (173) (109) (64) 58.7 % Net (Loss) Gain on Divestiture (19) 156 (175) N/A One-Time Payment for International Regulatory Matter — (88) 88 (100.0) % Goodwill and Asset Impairment Charges (182) (108) (74) 68.5 % Expense for Regulatory Matter — (45) 45 (100.0) % Non-GAAP Adjusted Total Other Expenses 31,815 34,315 (2,500) (7.3) % Total Operating Expenses $ 80,794 $ 82,602 $ (1,808) (2.2) % Non-GAAP Adjusted Total Operating Expenses $ 80,000 $ 82,176 $ (2,176) (2.6) % Currency (Benefit) / Cost - (in millions) 1 240 (1) Amount represents the change in currency translation compared to the prior year. 2025 2024 $ Change % Change Non-GAAP Adjustments to Operating Expenses (in millions): Transformation Strategy Costs: Compensation $ 13 $ 21 $ (8) (38.1) % Benefits 407 192 215 112.0 % Other expenses 173 109 64 58.7 % Total Transformation Strategy Costs 593 322 271 84.2 % Other expenses: Net Loss (Gain) on Divestiture 19 (156) 175 N/A One-Time Payment for International Regulatory Matter — 88 (88) (100.0) % Goodwill and Asset Impairment Charges 182 108 74 68.5 % Expense for Regulatory Matter — 45 (45) (100.0) % Benefits: Multiemployer Pension Plan Withdrawal Expense — 19 (19) (100.0) % Total Non-GAAP Adjustments to Operating Expenses $ 794 $ 426 $ 368 86.4 % 37 UNITED PARCEL SERVICE, INC.
Demand-related surcharges are expected to decline in 2025, subject to market conditions. Currency had a negative impact of 50 basis points on export revenue per piece. Fuel Surcharges The fuel surcharge we apply to international air services originating inside or outside the U.S. is largely indexed to the DOE's Gulf Coast spot price for a gallon of kerosene-type jet fuel.
Fuel Surcharges The fuel surcharge we apply to international air services originating inside or outside the U.S. is largely indexed to the DOE's Gulf Coast spot price for a gallon of kerosene-type jet fuel. The fuel surcharges for ground services originating outside the U.S. are indexed to fuel prices in the region or country where the shipment originates.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWhile 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.
Biggest changeAND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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.
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 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 prices. For options and instruments with non-linear returns, models appropriate to the instrument are utilized to determine the impact of market shifts.
We are exposed to currency risk from the potential changes in functional currency values of our foreign currency-denominated assets, liabilities and cash flows. Our most significant foreign currency exposures relate to the Euro, British Pound Sterling, Canadian Dollar, Chinese Renminbi and Hong Kong Dollar.
We are exposed to currency risk from the potential changes in functional currency values of our foreign currency-denominated assets, liabilities and cash flows. Our most significant foreign currency exchange exposures relate to the Euro, British Pound Sterling, Canadian Dollar, Chinese Renminbi and Hong Kong Dollar.
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.
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 exchange exposures for periods of 3 to 36 months.
As of December 31, 2024 and 2023, 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, 2025 and 2024, we had no commodity contracts outstanding. Foreign Currency Exchange Rate Risk We have foreign currency exchange 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. 61 UNITED PARCEL SERVICE, INC.
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 may hold investments in debt securities, as well as cash-equivalent instruments, some of which accrue income at variable rates of interest.
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.
Sensitivity Analysis The following analysis provides quantitative information regarding our exposure to foreign currency exchange rate risk, and interest rate risk embedded in our existing financial instruments.
Shock-Test Result as of December 31, (in millions) 2024 2023 Change in Fair Value: Currency Derivatives (1) $ (749) $ (649) Change in Annual Interest Expense: Variable Rate Debt (2) $ 21 $ 41 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.
The following table shows the shock-test results as of December 31, 2025 and 2024 (in millions): 2025 2024 Change in Fair Value: Currency Derivatives (1) $ (647) $ (749) Change in Annual Interest Expense: Variable-Rate Debt (2) $ 22 $ 21 (1) The potential change in fair value from a hypothetical 10% weakening of the U.S.
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.
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 55 UNITED PARCEL SERVICE, INC.
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.
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.
(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". 62
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". 56

Other UPS 10-K year-over-year comparisons