United States

Securities and Exchange Commission

Washington, D.C. 20549

_____________________________________

Form 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2023~~March 31, 2024 or


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-15451

_____________________________________

United Parcel Service, Inc.

(Exact name of registrant as specified in its charter)

Delaware

58-2480149

(State or Other Jurisdiction of
Incorporation or Organization)

(IRS Employer
Identification No.)

55 Glenlake Parkway N.E. ,

Atlanta,

Georgia

30328

(Address of Principal Executive Offices)

(Zip Code)

(404) 828-6000

(Registrant’s telephone number, including area code)

____________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Class B common stock, par value $0.01 per share

UPS

~~New York Stock Exchange~~

~~0.375% Senior Notes due 2023~~

~~UPS23A~~

New York Stock Exchange

1.625% Senior Notes due 2025

UPS25

New York Stock Exchange

1% Senior Notes due 2028

UPS28

New York Stock Exchange

1.500% Senior Notes due 2032

UPS32

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

There were ~~131,174,099~~126,159,503 Class A shares, and ~~723,275,790~~729,399,444 Class B shares, with a par value of $0.01 per share, outstanding at ~~July 24, 2023.~~April 17, 2024.

Table of Contents

TABLE OF CONTENTS


PART I—FINANCIAL INFORMATION
	Cautionary Statement About Forward-Looking Statements	1
Item 1.	Financial Statements	2
	Consolidated Balance Sheets	2
	Statements of Consolidated Income	3
	Statements of Consolidated Comprehensive Income (Loss)	3
	Statements of Consolidated Cash Flows	4
	Notes to Unaudited, Consolidated Financial Statements	5
	Note 1—Basis of Presentation and Accounting Policies	5
	Note 2—Recent Accounting Pronouncements	76
	Note 3—Revenue Recognition	87
	Note 4—Stock-Based Compensation	109
	Note 5—Marketable Securities and Non-Current Investments	1211
	Note 6—Property, Plant and Equipment	1514
	Note 7—Employee Benefit Plans	1615
	Note 8—Goodwill and Intangible Assets	1817
	Note 9—Debt and Financing Arrangements	2019
	Note 10—Leases	2321
	Note 11—Legal Proceedings and Contingencies	2624
	Note 12—Shareowners’ Equity	2725
	Note 13—Segment Information	3329
	Note 14—Earnings Per Share	3430
	Note 15—Derivative Instruments and Risk Management	3531
	Note 16—Income Taxes	4035
	Note 17—Transformation ~~Strategy~~ Costs	41
	~~Note 18—Subsequent Events~~	4236
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4337
	Overview	4337
	Supplemental Information - Items Affecting Comparability	4539
	Results of Operations - Segment Review	4741
	U.S. Domestic Package Operations	4842
	International Package Operations	5145
	Supply Chain Solutions Operations	5448
	Consolidated Operating Expenses	5650
	Other Income ~~and~~ (Expense)	5953
	Income Tax Expense	6054
	Liquidity and Capital Resources	6155
	Cash Flows From Operating Activities	6155
	Cash Flows From Investing Activities	6256
	Cash Flows From Financing Activities	6357
	Sources of Credit	6458
	Contractual Commitments	6458
	Legal Proceedings and Contingencies	6458
	Collective Bargaining Agreements	6459
	Recent Accounting Pronouncements	6459
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6560
Item 4.	Controls and Procedures	6661
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	6762
Item 1A.	Risk Factors	6762
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6863
Item 5.	Other Information	6964
Item 6.	Exhibits	7065

Table of Contents

PART I. FINANCIAL INFORMATION

Cautionary Statement About Forward-Looking Statements

This report, our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 and our other filings with the Securities and Exchange Commission contain and in the future may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than those of current or historical fact, and all statements accompanied by terms such as “will,” “believe,” “project,” “expect,” “estimate,” “assume,” “intend,” “anticipate,” “target,” “plan,” and similar terms, are intended to be forward-looking statements. Forward-looking statements are made subject to the safe harbor provisions of the federal securities laws pursuant to Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

From time to time, we also include written or oral forward-looking statements in other publicly disclosed materials. Such statements may relate to our intent, belief, forecasts of, or current expectations about our strategic direction, prospects, future results, or future events; they do not relate strictly to historical or current facts. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any forward-looking statements because such statements speak only as of the date when made and the future, by its very nature, cannot be predicted with certainty.

Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or anticipated results. These risks and uncertainties include, but are not limited ~~to, the impact of: continued uncertainties arising from the COVID-19 pandemic;~~to: changes in general economic conditions in the United States ("U.S.") or internationally; ~~industry evolution~~significant competition on a local, regional, national and ~~significant competition;~~international basis; changes in our relationships with ~~any of~~ our significant customers; our ability to attract and retain qualified employees; strikes, work stoppages or slowdowns by our employees; ~~impacts arising from negotiations and ratifications of labor contracts;~~increased or more complex physical or operational security requirements; a significant cybersecurity incident, or increased data protection regulations; our ability to maintain our brand image and corporate reputation; ~~increased or more complex physical security requirements; a significant data breach or information technology system disruption;~~impacts from global climate change; interruptions in or impacts on our business from natural or man-made events or disasters including terrorist attacks, epidemics or pandemics; exposure to changing economic, political, regulatory and social developments in international and emerging markets; our ability to realize the anticipated benefits from acquisitions, dispositions, joint ventures or strategic alliances; the effects of changing prices of energy, including gasoline, diesel, ~~and~~ jet fuel orand other fuels, and interruptions in supplies of these commodities; changes in exchange rates or interest rates; our ability to accurately forecast our future capital investment needs; ~~significant~~increases in our expenses ~~and~~or funding obligations relating to employee health, retiree health and/or pension benefits; our ability to manage insurance and claims expenses; changes in business strategy, government regulations or economic or market conditions that may result in impairments of our assets; potential additional U.S. or international tax liabilities; increasingly stringent ~~laws and~~ regulations ~~including relating~~related to climate change; potential claims or litigation related to labor and employment, personal injury, property damage, business practices, environmental liability and other matters; and other risks discussed in our filings with the Securities and Exchange Commission from time to time, including our Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, and subsequently filed reports. You should consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements. We do not undertake any obligation to update forward-looking statements to reflect events, circumstances, changes in expectations, or the occurrence of unanticipated events after the date of those statements, except as required by law.

From time to time, we expect to participate in analyst and investor conferences. Materials provided or displayed at those conferences, such as slides and presentations, may be posted on our investor relations website at www.investors.ups.com under the heading "Presentations" when made available. These presentations may contain new material nonpublic information about our company and you are encouraged to monitor this site for any new posts, as we may use this mechanism as a public announcement.

Table of Contents

Item 1. Financial Statements

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

~~June 30, 2023~~March 31, 2024 (unaudited) and December 31, ~~2022~~2023 (in millions)


		June 30, 2023		December 31, 2022
	March 31, 2024					March 31, 2024	December 31, 2023
ASSETS	ASSETS
Current Assets:	Current Assets:
Current Assets:
Current Assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	4,812	$	5,602
Marketable securities	Marketable securities	3,071		1,993
Accounts receivable	Accounts receivable	9,738		12,729
Less: Allowance for credit losses	Less: Allowance for credit losses	(151)		(146)
Accounts receivable, net	Accounts receivable, net	9,587		12,583
Materials and supplies
Other current assets	Other current assets	1,969		2,039
Total Current Assets	Total Current Assets	19,439		22,217
Property, Plant and Equipment, Net	Property, Plant and Equipment, Net	35,501		34,719
Operating Lease Right-Of-Use Assets	Operating Lease Right-Of-Use Assets	4,219		3,755
Goodwill	Goodwill	4,250		4,223
Intangible Assets, Net	Intangible Assets, Net	2,890		2,796
Deferred Income Tax Assets	Deferred Income Tax Assets	137		139
Other Non-Current Assets	Other Non-Current Assets	3,911		3,275
Total Assets	Total Assets	$	70,347	$	71,124
LIABILITIES AND SHAREOWNERS’ EQUITY	LIABILITIES AND SHAREOWNERS’ EQUITY
Current Liabilities:	Current Liabilities:
Current Liabilities:
Current Liabilities:
Current maturities of long-term debt, commercial paper and finance leases
Current maturities of long-term debt, commercial paper and finance leases
Current maturities of long-term debt, commercial paper and finance leases	Current maturities of long-term debt, commercial paper and finance leases	$	1,412	$	2,341
Current maturities of operating leases	Current maturities of operating leases	673		621
Accounts payable	Accounts payable	6,085		7,515
Accrued wages and withholdings	Accrued wages and withholdings	2,962		4,049
Self-insurance reserves	Self-insurance reserves	1,101		1,069
Accrued group welfare and retirement plan contributions	Accrued group welfare and retirement plan contributions	1,200		1,078
Other current liabilities	Other current liabilities	1,253		1,467
Total Current Liabilities	Total Current Liabilities	14,686		18,140
Long-Term Debt and Finance Leases	Long-Term Debt and Finance Leases	19,351		17,321
Non-Current Operating Leases	Non-Current Operating Leases	3,680		3,238
Pension and Postretirement Benefit Obligations	Pension and Postretirement Benefit Obligations	4,635		4,807
Deferred Income Tax Liabilities	Deferred Income Tax Liabilities	4,421		4,302
Other Non-Current Liabilities	Other Non-Current Liabilities	3,537		3,513
Shareowners’ Equity:	Shareowners’ Equity:
Class A common stock (132 and 134 shares issued in 2023 and 2022, respectively)		2		2
Class B common stock (723 and 725 shares issued in 2023 and 2022, respectively)		7		7
Class A common stock (126 and 127 shares issued in 2024 and 2023, respectively)
Class A common stock (126 and 127 shares issued in 2024 and 2023, respectively)
Class A common stock (126 and 127 shares issued in 2024 and 2023, respectively)
Class B common stock (729 and 726 shares issued in 2024 and 2023, respectively)
Additional paid-in capital	Additional paid-in capital	—		—
Retained earnings	Retained earnings	21,584		21,326
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,574)		(1,549)
Deferred compensation obligations	Deferred compensation obligations	9		13
Less: Treasury stock (0.2 shares in both 2023 and 2022)		(9)		(13)
Less: Treasury stock (0.1 and 0.2 shares in 2024 and 2023, respectively)
Total Equity for Controlling Interests	Total Equity for Controlling Interests	20,019		19,786
Noncontrolling interests	Noncontrolling interests	18		17
Total Shareowners’ Equity	Total Shareowners’ Equity	20,037		19,803
Total Liabilities and Shareowners’ Equity	Total Liabilities and Shareowners’ Equity	$	70,347	$	71,124

See notes to unaudited, consolidated financial statements.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED INCOME

(In millions, except per share amounts)

(unaudited)




		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
		2023		2022		2023		2022			2024	2023
Revenue	Revenue	$	22,055	$	24,766	$	44,980	$	49,144
Operating Expenses:	Operating Expenses:
Compensation and benefits
Compensation and benefits
Compensation and benefits	Compensation and benefits	11,197		11,344		22,659		22,945
Repairs and maintenance	Repairs and maintenance	682		727		1,407		1,428
Depreciation and amortization	Depreciation and amortization	828		762		1,662		1,526
Purchased transportation	Purchased transportation	3,173		4,390		6,716		8,997
Fuel	Fuel	1,090		1,697		2,361		2,917
Other occupancy	Other occupancy	458		422		1,009		923
Other expenses	Other expenses	1,847		1,889		3,845		3,622
Total Operating Expenses	Total Operating Expenses	19,275		21,231		39,659		42,358
Operating Profit	Operating Profit	2,780		3,535		5,321		6,786
Other Income and (Expense):
Other Income (Expense):
Investment income and other
Investment income and other
Investment income and other	Investment income and other	131		333		300		648
Interest expense	Interest expense	(191)		(171)		(379)		(345)
Total Other Income and (Expense)		(60)		162		(79)		303
Total Other Income (Expense)
Income Before Income Taxes	Income Before Income Taxes	2,720		3,697		5,242		7,089
Income Tax Expense	Income Tax Expense	639		848		1,266		1,578
Net Income	Net Income	$	2,081	$	2,849	$	3,976	$	5,511
Basic Earnings Per Share	Basic Earnings Per Share	$	2.42	$	3.26	$	4.62	$	6.31
Diluted Earnings Per Share	Diluted Earnings Per Share	$	2.42	$	3.25	$	4.61	$	6.28

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(In millions)

(unaudited)






		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Net Income	Net Income	$	2,081	$	2,849	$	3,976	$	5,511
Net Income
Net Income
Change in foreign currency translation adjustment, net of tax
Change in foreign currency translation adjustment, net of tax
Change in foreign currency translation adjustment, net of tax	Change in foreign currency translation adjustment, net of tax	(18)		(245)		100		(285)
Change in unrealized gain (loss) on marketable securities, net of tax	Change in unrealized gain (loss) on marketable securities, net of tax	(16)		(1)		(9)		(7)
Change in unrealized gain (loss) on marketable securities, net of tax
Change in unrealized gain (loss) on marketable securities, net of tax
Change in unrealized gain (loss) on cash flow hedges, net of tax
Change in unrealized gain (loss) on cash flow hedges, net of tax
Change in unrealized gain (loss) on cash flow hedges, net of tax	Change in unrealized gain (loss) on cash flow hedges, net of tax	(80)		234		(157)		277
Change in unrecognized pension and postretirement benefit costs, net of tax	Change in unrecognized pension and postretirement benefit costs, net of tax	21		18		41		42
Comprehensive Income (Loss)		$	1,988	$	2,855	$	3,951	$	5,538
Change in unrecognized pension and postretirement benefit costs, net of tax
Change in unrecognized pension and postretirement benefit costs, net of tax
Comprehensive Income
Comprehensive Income
Comprehensive Income

See notes to unaudited, consolidated financial statements.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

(In millions)

(unaudited)


		Six Months Ended June 30,				Three Months Ended March 31,
		2023		2022		2024	2023
Cash Flows From Operating Activities:	Cash Flows From Operating Activities:
Net income	Net income	$	3,976	$	5,511
Net income
Net income
Adjustments to reconcile net income to net cash from operating activities:	Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	Depreciation and amortization	1,662		1,526
Pension and postretirement benefit (income) expense		486		433
Depreciation and amortization
Depreciation and amortization
Pension and postretirement benefit expense
Pension and postretirement benefit contributions	Pension and postretirement benefit contributions	(1,328)		(123)
Self-insurance reserves	Self-insurance reserves	64		112
Deferred tax (benefit) expense	Deferred tax (benefit) expense	168		360
Stock compensation expense	Stock compensation expense	165		617
Other (gains) losses	Other (gains) losses	(19)		11
Changes in assets and liabilities, net of effects of business acquisitions:	Changes in assets and liabilities, net of effects of business acquisitions:
Accounts receivable
Accounts receivable
Accounts receivable	Accounts receivable	2,898		820
Other assets	Other assets	187		(62)
Accounts payable	Accounts payable	(1,921)		(508)
Accrued wages and withholdings	Accrued wages and withholdings	(535)		(348)
Other liabilities	Other liabilities	(132)		22
Other operating activities	Other operating activities	(77)		(78)
Net cash from operating activities	Net cash from operating activities	5,594		8,293
Cash Flows From Investing Activities:	Cash Flows From Investing Activities:
Capital expenditures	Capital expenditures	(1,820)		(1,388)
Capital expenditures
Capital expenditures
Proceeds from disposal of businesses, property, plant and equipment	Proceeds from disposal of businesses, property, plant and equipment	50		9
Purchases of marketable securities	Purchases of marketable securities	(2,970)		(132)
Sales and maturities of marketable securities	Sales and maturities of marketable securities	1,903		130
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(34)		(99)
Other investing activities	Other investing activities	12		(19)
Net cash used in investing activities		(2,859)		(1,499)
Net cash (used in) from investing activities
Cash Flows From Financing Activities:	Cash Flows From Financing Activities:
Net change in short-term debt
Net change in short-term debt
Net change in short-term debt	Net change in short-term debt	—		—
Proceeds from long-term borrowings	Proceeds from long-term borrowings	2,503		—
Repayments of long-term borrowings	Repayments of long-term borrowings	(1,596)		(1,105)
Purchases of common stock	Purchases of common stock	(1,498)		(1,242)
Issuances of common stock	Issuances of common stock	119		136
Dividends	Dividends	(2,693)		(2,567)
Other financing activities	Other financing activities	(417)		(508)
Net cash used in financing activities		(3,582)		(5,286)
Net cash (used in) from financing activities
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	57		(28)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(790)		1,480
Cash, Cash Equivalents and Restricted Cash:	Cash, Cash Equivalents and Restricted Cash:
Beginning of period
Beginning of period
Beginning of period	Beginning of period	5,602		10,255
End of period	End of period	$	4,812	$	11,735

See notes to unaudited, consolidated financial statements.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Principles of Consolidation

The accompanying unaudited, consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited, consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly our financial position as of ~~June 30, 2023,~~March 31, 2024 and our results of operations ~~for the three~~ and ~~six months ended June 30, 2023 and 2022, and our~~ cash flows for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 and ~~2022.~~2023. The results reported in these unaudited, consolidated financial statements should not be regarded as indicative of results that may be expected for any other period or the entire year. The unaudited, consolidated financial statements should be read in conjunction with the audited, consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~

In the first six months of 2023, we reclassified certain operating expenses to better align with the manner in which we manage our operations. Substantially all of these costs were previously classified within operating expenses as ~~Other expenses~~ ~~and have now been classified within operating expenses as~~ ~~Repairs and maintenance~~ in the statements of consolidated income. The remaining line items within operating expenses impacted by this reclassification were inconsequential. As a result, the statements of consolidated income give effect to this reclassification as follows:

•~~For the three and six months ended June 30, 2023: decreasing~~ ~~Other expenses~~ ~~by $92 and $180 million, and increasing~~ ~~Repairs and maintenance~~ ~~by $93 and $176 million, respectively.~~

•~~For the three and six months ended June 30, 2022: decreasing~~ ~~Other expenses~~ ~~by $77 and $154 million, and increasing~~ ~~Repairs and maintenance~~ ~~by $84 and $159 million, respectively.~~

~~The reclassification had no impact on our reported revenue, operating profit, net income, or any internal performance measure on which management is compensated.~~2023.

Fair Value of Financial Instruments

The carrying amounts of our cash and cash equivalents, accounts receivable, finance receivables and accounts payable approximated fair value as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023. The fair values of our marketable securities are disclosed in note 5, our recognized multiemployer pension withdrawal liabilities in note 7, our short- and long-term debt in note 9 and our derivative instruments in note 15. We apply a fair value hierarchy (Levels 1, 2 and 3) when measuring and reporting items at fair value. Fair values are based on listed market prices (Level 1), when such prices are available. To the extent that listed market prices are not available, fair value is determined based on other relevant factors, including dealer price quotations (Level 2). If listed market prices or other relevant factors are not available, inputs are developed from unobservable data reflecting our own assumptions and include situations where there is little or no market activity for the asset or liability (Level 3).

Use of Estimates

The preparation of the accompanying unaudited, consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of these financial statements, as well as the reported amounts of revenues and expenses during the reporting period.

Although our estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. As a result, our accounting estimates and assumptions may change significantly over time.

~~Table of Contents~~

Supplier Finance Programs

As part of our working capital management, certain financial institutions offer a Supply Chain Finance ("SCF") program to certain of our suppliers. We agree to commercial terms with our suppliers, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the SCF program. Suppliers issue invoices to us based on the agreed-upon contractual terms. If they participate in the SCF program, our suppliers, at their sole discretion, determine which invoices, if any, to sell to the financial institutions. Our suppliers’ voluntary inclusion of invoices in the SCF program has no bearing on our payment terms. No guarantees are provided by us under the SCF program. We have no economic interest in a supplier’s decision to participate, and we have no direct financial relationship with the financial institutions, as it relates to the SCF program.

Amounts due to our suppliers that participate in the SCF program are included in Accounts payable in our consolidated balance sheets. We have been informed by the participating financial institutions that as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, suppliers sold them ~~$807~~$406 and ~~$806~~$504 million, respectively, of our outstanding payment obligations.

Restricted cash

As of March 31, 2024 and December 31, 2023, we had $93 and $37 million, respectively of restricted cash. As of March 31, 2024, this restricted cash is included in Other Non-Current Assets in our consolidated balance sheet and is included in Total cash, cash equivalents and restricted cash in our statement of consolidated cash flows. The restricted cash primarily relates to cash we have agreed to deposit in connection with a challenge by Italian tax authorities to the deductibility of Value Added Tax payments by UPS to certain third-party service providers, a review of which was launched in the fourth quarter of 2023. We are cooperating in this matter and believe that we have a number of meritorious defenses.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Standards

~~In September 2022, the Financial~~ Accounting Standards Board issued an Accounting Standards Update ("ASU") to enhance the disclosure of supplier finance programs. This ASU did not affect the recognition, measurement or financial statement presentation of obligations covered by supplier finance programs. We adopted the requirements of this ASU as of January 1, 2023 and have included required disclosures within note 1.

~~Other accounting~~ pronouncements adopted during the periods covered by the unaudited, consolidated financial statements did not have a material impact on our consolidated financial position, results of operations, cash flows or ~~cash flows.~~internal controls.

Accounting Standards Issued But Not Yet Effective

In November 2023, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") on segment reporting, which will require new disclosures, including significant segment expenses and additional qualitative information about how segment measures are used by management. The standard becomes effective for us beginning with our 2024 annual reporting and for both annual and interim periods thereafter. We are evaluating the impact of this ASU on our disclosures. We will be required to define significant segment expense categories and we anticipate providing additional qualitative information in accordance with this ASU. We do not expect this ASU will have a significant impact on our consolidated financial position, results of operations or cash flows.

In December 2023, the FASB issued an ASU to enhance tax-related disclosures. This update will require more standardized categories for tax rate reconciliation and additional detail for significant tax items. It will also require a breakdown of income taxes paid by jurisdiction exceeding 5% of total taxes and remove certain disclosure requirements for unremitted foreign earnings and uncertain tax positions. The standard becomes effective for us in the first quarter of 2025. We are evaluating its impact on our financial statements, disclosures and internal controls but do not expect this ASU will have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

Other accounting pronouncements issued before, but not effective until after, ~~June 30, 2023,~~March 31, 2024, are not expected to have a material impact on our consolidated financial position, results of operations, cash flows or internal controls.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3. REVENUE RECOGNITION

Revenue Recognition

Substantially all of our revenues are from contracts associated with the pickup, transportation and delivery of packages and freight ("transportation services"). These services may be carried out by or arranged by us and generally occur over a short period of time. Additionally, we provide value-added logistics services to customers through our global network of distribution centers and field stocking locations.

The vast majority of our contracts with customers are for transportation services that include only one performance obligation; the transportation services themselves. We generally recognize revenue over time, based on the extent of progress towards completion of the services in the contract. All of our major businesses act as a principal in their revenue arrangements and as such, we report revenue and the associated purchased transportation costs on a gross basis within our statements of consolidated income.

Disaggregation of Revenue


		Three Months Ended June 30,					Six Months Ended June 30,
		2023		2022			2023		2022
				Three Months Ended March 31,
				Three Months Ended March 31,
				Three Months Ended March 31,
						2024					2024	2023
Revenue:	Revenue:
Next Day Air
Next Day Air
Next Day Air	Next Day Air	$	2,407	$	2,656		$	4,868	$	5,250
Deferred	Deferred	1,169		1,392			2,363		2,812
Ground	Ground	10,820		11,411			22,152		22,521
U.S. Domestic Package	U.S. Domestic Package	14,396		15,459			29,383		30,583

Domestic	Domestic	763		829			1,557		1,680
Domestic
Domestic
Export	Export	3,468		3,976			7,020		7,754
Cargo & Other	Cargo & Other	184		268			381		515
International Package	International Package	4,415		5,073			8,958		9,949

Forwarding
Forwarding
Forwarding	Forwarding	1,376		2,389			2,890		4,978
Logistics	Logistics	1,431		1,290			2,841		2,541
Other	Other	437		555			908		1,093
Supply Chain Solutions	Supply Chain Solutions	3,244		4,234			6,639		8,612

Consolidated revenue	Consolidated revenue	$	22,055	$	24,766		$	44,980	$	49,144
Consolidated revenue
Consolidated revenue

Contract Assets and Liabilities

Contract assets include billed and unbilled amounts resulting from in-transit shipments, as we have an unconditional right to payment only when services have been completed (i.e. shipments have been delivered). Amounts do not exceed their net realizable value. Contract assets are generally classified as current and the full balance is converted each quarter based on the short-term nature of the transactions.

Contract liabilities consist of advance payments and billings in excess of revenue as well as deferred revenue. Advance payments and billings in excess of revenue represent payments received from our customers that will be earned over the contract term. Deferred revenue represents the amount due from customers related to in-transit shipments that has not yet been recognized as revenue based on our selected measure of progress. We classify advance payments and billings in excess of revenue as either current or long-term, depending on the period over which the amount will be earned. We classify deferred revenue as current based on the short-term nature of the transactions. Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that deferred revenue balance.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Contract assets and liabilities as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 were as follows (in millions):

Balance Sheet Location

June 30, 2023

December 31, 2022

Balance Sheet Location

March 31, 2024

December 31, 2023

Contract Assets:

Revenue related to in-transit packages

Other current assets

252

308

Contract Liabilities:

Short-term advance payments from customers

Other current liabilities

Long-term advance payments from customers

Other non-current liabilities

Accounts Receivable, Net

Accounts receivable, net,, include amounts billed and currently due from customers. The amounts due are stated at their net estimated realizable value. Losses on accounts receivable are recognized when reasonable and supportable forecasts affect the expected collectability. This requires us to make our best estimate of the current expected losses inherent in our accounts receivable at each balance sheet date. This estimate requires consideration of historical loss experience, adjusted for current conditions, forward looking indicators, trends in customer payment frequency and judgments about the probable effects of relevant observable data, including present and future economic conditions and the financial health of specific customers and market sectors. Our risk management process includes standards and policies for reviewing major account exposures and concentrations of risk.

Our allowance for credit losses as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 was ~~$151~~$144 and ~~$146~~$126 million, respectively. Amounts for credit losses charged to expense, before recoveries, during each of the three months ended ~~June 30,~~March 31, 2024 and 2023 were $73 and ~~2022, were $41 and $52 million, respectively, and for the six months ended June 30, 2023 and 2022, were $83 and $106~~$43 million, respectively.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. STOCK-BASED COMPENSATION

We issue share-based awards under various incentive compensation plans, including non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock units ("RSUs") and restricted performance shares and performance units ("RPUs", collectively with RSUs, "Restricted Units"). Upon vesting, Restricted Units result in the issuance of the equivalent number of UPS class A common shares after required tax withholdings. Dividends ~~accrued~~earned on Restricted Units are reinvested in additional Restricted Units at each dividend payable date ~~and are subject~~until conversion to ~~the same vesting and forfeiture conditions as the underlying Restricted Units.~~class A shares occurs.

Our primary equity compensation programs are the UPS Long-Term Incentive Performance ~~Program~~Award program (the "LTIP") and the UPS Stock Option program. We also grant Restricted Units to our Board of Directors (the "Board") as a component of their annual compensation and, from time to time, to individual employees as a retention mechanism. We also maintain an employee stock purchase plan which allows eligible employees to purchase shares of UPS class A common stock at a discount.

On November 2, 2022, we amended and restated the terms and conditions of the UPS Management Incentive Program (the "MIP") effective January 1, 2023, to provide that awards under the MIP will be fully electable in the form of cash or unrestricted shares of class A common stock.

Pre-tax compensation expense for ~~share-based~~stock compensation awards recognized in Compensation and benefits in the statements of consolidated income for the three months ended ~~June 30,~~March 31, 2024 and 2023 was $(27) and ~~2022 was $39 and $231 million, respectively, and for the six months ended June 30, 2023 and 2022 was $165 and $617~~$126 million, respectively.

Management Incentive Award Program

~~RPUs issued under~~The UPS Management Incentive Program (the "MIP") is an incentive-based compensation program, with awards based on annual Company performance. MIP awards are paid in cash, unless a participant elects to receive all or a portion of the ~~MIP prior to 2022 vested one year following~~award in unrestricted shares of class A common stock. As of March 31, 2024, the grant date subject to continued employment with the Company and were expensed on a straight-line basis (less estimated forfeitures) over the requisite service period. In cases of death, disability or retirement, RPUs vested and were expensed immediately.

~~RPUs issued under the~~ MIP ~~in 2022 vested on December 31, 2022. As a result, the award~~ was classified as a compensation obligation ~~and recorded in~~within Accrued wages and withholdings~~on the~~ in our consolidated balance sheet at that date. Based on the Compensation and Human Capital Committee of the UPS Board of Directors (the "Compensation Committee") approval of the 2022 MIP, we determined the award measurement date to be February 8, 2023 for U.S.-based employees and executive management, and March 20, 2023 for international employees. Each RPU issued under the MIP was valued using the closing New York Stock Exchange ("NYSE") prices of $186.36 and $183.49 on those dates. The compensation obligation recognized as of December 31, 2022 was relieved and the issuance of RPUs was recorded as ~~Additional Paid-in Capital~~ ~~on the measurement date.~~sheet.

Long-Term Incentive Performance Program

RPUs issued under the LTIP vest at the end of a three-year performance period, subject to continued employment with the Company (except in the case of death, disability or retirement, in which case immediate vesting occurs on a prorated basis). The actual number of RPUs earned is based on achievement of the performance targets established on the grant date.

The performance targets are equally weighted between adjusted earnings per share and cumulative free cash flow. The ~~actual~~final number of RPUs earned iswill then be subject to adjustment based on total shareholder return relative to the Standard & Poor's 500 ~~Index ("S&P 500").~~Index. We determine the grant date fair value of the RPUs using a Monte Carlo model and recognize compensation expense (less estimated forfeitures) ratably over the vesting period, based on the number of awards expected to be earned.

Based on the date of the Compensation ~~Committee's~~and Human Capital Committee of the Board's approval of the ~~2023~~2024 LTIP award performance targets, we determined March ~~22, 2023~~20, 2024 to be the award measurement date and each target RPU awarded was valued at ~~$200.01.~~$158.16.

The weighted-average assumptions used and the weighted-average fair values of the LTIP awards granted in 2024 and 2023 are as follows:


	2024			2023
Risk-free interest rate	4.45		%	3.81		%
Expected volatility	27.00		%	30.30		%
Weighted-average fair value of units granted	$	158.16		$	200.01
Share payout	102.20		%	107.80		%

There is no expected dividend yield as units earn dividend equivalents.

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~~The weighted-average assumptions used and the weighted-average fair values of the LTIP awards granted in 2023 and 2022 are as follows:~~
2023 2022
Risk-free interest rate 3.81 % 2.35 %
Expected volatility 30.30 % 31.92 %
Fair value of RPUs granted $ 199.95 $ 227.00
Share payout 107.80 % 107.37 %

~~There is no expected dividend yield as units earn dividend equivalents.~~

Non-Qualified Stock Options

We grant non-qualified stock options to a limited group of eligible senior management employees under the UPS Stock Option program. Stock option awards vest over a five-year period with approximately 20% of the award vesting at each anniversary of the grant date (except in the case of death, disability or retirement, in which case immediate vesting occurs). The option grants expire 10 years after the date of the grant. On March ~~22, 2023,~~20, 2024, we granted ~~0.1~~0.2 million stock options at an exercise price of ~~$185.54,~~$154.76, the ~~NYSE~~New York Stock Exchange closing price on that date.

The fair value of each option granted is estimated using a Black-Scholes option pricing model. The weighted-average assumptions used and the weighted-average fair values of options granted in ~~2023~~2024 and ~~2022~~2023 are as follows:
2023 2022
Expected dividend yield 3.54 % 2.35 %
Risk-free interest rate 3.70 % 2.39 %
Expected life (in years) 5.93 7.50
Expected volatility 28.31 % 25.04 %
Fair value of options granted $ 41.08 $ 48.45


	2024			2023
Expected dividend yield	3.96		%	3.54		%
Risk-free interest rate	4.25		%	3.70		%
Expected life (in years)	6.13			5.93
Expected volatility	28.94		%	28.31		%
Weighted-average fair value of options granted	$	34.76		$	41.08

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NOTE 5. MARKETABLE SECURITIES AND NON-CURRENT INVESTMENTS

The following is a summary of marketable securities classified as trading and ~~available-for-sale~~available for sale as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 (in millions):


	Cost										Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
March 31, 2024:
Current trading marketable securities:
Current trading marketable securities:
Current trading marketable securities:

		Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
June 30, 2023:
Current trading marketable securities:

Equity securities

Equity securities

Equity securities	Equity securities	$	6	$	—	$	—	$	6

Total trading marketable securities	Total trading marketable securities	6		—		—		6

Total trading marketable securities

Total trading marketable securities

Current available-for-sale securities:	Current available-for-sale securities:
Current available-for-sale securities:
Current available-for-sale securities:
U.S. government and agency debt securities
U.S. government and agency debt securities
U.S. government and agency debt securities	U.S. government and agency debt securities	975		—		(11)		964
Mortgage and asset-backed debt securities	Mortgage and asset-backed debt securities	8		—		—		8
Corporate debt securities	Corporate debt securities	2,059		—		(15)		2,044
U.S. state and local municipal debt securities		3		—		—		3

Non-U.S. government debt securities

Non-U.S. government debt securities

Non-U.S. government debt securities	Non-U.S. government debt securities	46		—		—		46

Total available-for-sale marketable securities	Total available-for-sale marketable securities	3,091		—		(26)		3,065

Total available-for-sale marketable securities

Total available-for-sale marketable securities

Total current marketable securities
Total current marketable securities
Total current marketable securities	Total current marketable securities	$	3,097	$	—	$	(26)	$	3,071

		Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
December 31, 2022:

										Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
December 31, 2023:
Current trading marketable securities:	Current trading marketable securities:
Current trading marketable securities:
Current trading marketable securities:

Equity securities

Equity securities

Equity securities	Equity securities	$	2	$	—	$	—	$	2

Total trading marketable securities	Total trading marketable securities	2		—		—		2

Total trading marketable securities

Total trading marketable securities

Current available-for-sale securities:	Current available-for-sale securities:
Current available-for-sale securities:
Current available-for-sale securities:
U.S. government and agency debt securities
U.S. government and agency debt securities
U.S. government and agency debt securities	U.S. government and agency debt securities	355		—		(8)		347
Mortgage and asset-backed debt securities	Mortgage and asset-backed debt securities	9		—		—		9
Corporate debt securities	Corporate debt securities	1,472		—		(6)		1,466
U.S. state and local municipal debt securities		4		—		—		4

Non-U.S. government debt securities

Non-U.S. government debt securities

Non-U.S. government debt securities	Non-U.S. government debt securities	165		—		—		165

Total available-for-sale marketable securities	Total available-for-sale marketable securities	2,005		—		(14)		1,991

Total available-for-sale marketable securities

Total available-for-sale marketable securities

Total current marketable securities
Total current marketable securities
Total current marketable securities	Total current marketable securities	$	2,007	$	—	$	(14)	$	1,993

Investment Impairments

We have concluded that no material impairment losses existed within marketable securities as of ~~June 30, 2023.~~March 31, 2024. In making this determination, we considered the financial condition and prospects of each issuer, the magnitude of the losses compared with the cost, the probability that we will be unable to collect all amounts due according to the contractual terms of the security, the credit rating of the security and our ability and intent to hold these investments until the anticipated recovery in market value occurs.

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Maturity Information

The amortized cost and estimated fair value of marketable securities as of ~~June 30, 2023~~March 31, 2024 by contractual maturity are shown below (in millions). Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations with or without prepayment penalties.


		Cost		Estimated Fair Value
	Cost					Cost	Estimated Fair Value
Due in one year or less	Due in one year or less	$	1,596	$	1,591
Due after one year through three years	Due after one year through three years	1,489		1,468
Due after three years through five years	Due after three years through five years	6		6
Due after five years	Due after five years	—		—
		3,091		3,065
	232
Equity securities	Equity securities	6		6
		$	3,097	$	3,071
	$

Non-Current Investments

We hold non-current investments that are reported within Other Non-Current Assets in our consolidated balance sheets. Cash paid for these investments is included inOther investing activities in our statements of consolidated cash flows.

•Equity method investments: As of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, equity securities accounted for under the equity method had a carrying value of ~~$252~~$293 and ~~$256~~$295 million, respectively.

•Other equity securities: Certain equity securities that do not have readily determinable fair values are reported in accordance with the measurement alternative in ASC Topic 321Investments - Equity Securities. AsEquity securities accounted for under the measurement alternative had a carrying value of ~~June 30, 2023~~$47 million as of both March 31, 2024 and December 31, ~~2022, we held equity securities accounted for using the measurement alternative of $33 and $31 million, respectively.~~2023.

•Other investments: We hold an investment in a variable life insurance policy to fund benefits for the UPS Excess Coordinating Benefit Plan. The investment had a fair market value of $19 ~~and $18~~ million as of ~~June 30, 2023~~both March 31, 2024 and December 31, ~~2022, respectively.~~2023.

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Fair Value Measurements

Marketable securities valued utilizing Level 1 inputs include active exchange-traded equity securities and equity index funds, and most U.S. government debt securities, as these securities all have quoted prices in active markets. Marketable securities valued utilizing Level 2 inputs include asset-backed securities, corporate bonds and municipal bonds. These securities are valued using market corroborated pricing, matrix pricing or other models that utilize observable inputs such as yield curves.

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~~UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

The following table presents information about our investments measured at fair value on a recurring basis as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value (in millions):


		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
June 30, 2023:
	Quoted Prices in Active Markets for Identical Assets (Level 1)									Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
March 31, 2024:
Marketable Securities:	Marketable Securities:
Marketable Securities:
Marketable Securities:
U.S. government and agency debt securities
U.S. government and agency debt securities
U.S. government and agency debt securities	U.S. government and agency debt securities	$	964	$	—	$	—	$	964
Mortgage and asset-backed debt securities	Mortgage and asset-backed debt securities	—		8		—		8
Corporate debt securities	Corporate debt securities	—		2,044		—		2,044
U.S. state and local municipal debt securities		—		3		—		3

Equity securities
Equity securities
Equity securities	Equity securities	—		6		—		6
Non-U.S. government debt securities	Non-U.S. government debt securities	—		46		—		46

Total marketable securities	Total marketable securities	964		2,107		—		3,071

Total marketable securities

Total marketable securities
Other non-current investments(1)	Other non-current investments(1)	—		19		—		19
Total	Total	$	964	$	2,126	$	—	$	3,090

(1) Represents a variable life insurance policy funding benefits for the UPS Excess Coordinating Benefit Plan.


December 31, 2022:		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
		Quoted Prices in Active Markets for Identical Assets (Level 1)
		Quoted Prices in Active Markets for Identical Assets (Level 1)
		Quoted Prices in Active Markets for Identical Assets (Level 1)								Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
December 31, 2023:
Marketable Securities:	Marketable Securities:
Marketable Securities:
Marketable Securities:
U.S. government and agency debt securities
U.S. government and agency debt securities
U.S. government and agency debt securities	U.S. government and agency debt securities	$	279	$	68	$	—	$	347
Mortgage and asset-backed debt securities	Mortgage and asset-backed debt securities	—		9		—		9
Corporate debt securities	Corporate debt securities	—		1,466		—		1,466
U.S. state and local municipal debt securities		—		4		—		4

Equity securities
Equity securities
Equity securities	Equity securities	—		2		—		2

Non-U.S. government debt securities	Non-U.S. government debt securities	—		165		—		165
Non-U.S. government debt securities
Non-U.S. government debt securities

Total marketable securities
Total marketable securities
Total marketable securities	Total marketable securities	279		1,714		—		1,993
Other non-current investments(1)	Other non-current investments(1)	—		18		—		18
Total	Total	$	279	$	1,732	$	—	$	2,011


(1) Represents a variable life insurance policy funding benefits for the UPS Excess Coordinating Benefit Plan.

There were no transfers of investments into or out of Level 3 during the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 or ~~2022.~~2023.

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NOTE 6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 consisted of the following (in millions):


		2023		2022
	2024					2024	2023
Vehicles	Vehicles	$	11,098	$	10,628
Aircraft	Aircraft	22,828		22,598
Land	Land	2,151		2,140
Buildings	Buildings	6,178		6,032
Building and leasehold improvements	Building and leasehold improvements	5,169		5,067
Plant equipment	Plant equipment	16,456		16,145
Technology equipment	Technology equipment	2,567		2,411
Construction-in-progress	Construction-in-progress	2,870		2,409
		69,317		67,430
	72,213
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization	(33,816)		(32,711)
Property, Plant and Equipment, Net	Property, Plant and Equipment, Net	$	35,501	$	34,719

Property, plant and equipment purchased on account was ~~$684~~$204 and ~~$176~~$309 million as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively.

~~For the three and six months ended June 30, 2023 and 2022, there~~There were no material impairment ~~charges.~~

charges for the three months ended March 31, 2024 or 2023.

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NOTE 7. EMPLOYEE BENEFIT PLANS

Company-Sponsored Benefit Plans

Information about the net periodic benefit cost ~~(income)~~ for our company-sponsored pension and postretirement benefit plans for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ is as follows (in millions):


		U.S. Pension Benefits				U.S. Postretirement Medical Benefits				International Pension Benefits				U.S. Pension Benefits		U.S. Postretirement Medical Benefits			International Pension Benefits
		2023		2022		2023		2022		2023		2022		2024	2023		2024	2023		2024	2023
Three Months Ended June 30:
Three Months Ended March 31:
Service cost
Service cost
Service cost	Service cost	$	293	$	506	$	5	$	7	$	11	$	17
Interest cost	Interest cost	627		487		29		21		16		11
Expected return on assets	Expected return on assets	(741)		(820)		(3)		(1)		(21)		(20)

Amortization of prior service cost	Amortization of prior service cost	26		23		1		—		—		1

Amortization of prior service cost

Net periodic benefit cost (income)		$	205	$	196	$	32	$	27	$	6	$	9
Amortization of prior service cost

		U.S. Pension Benefits				U.S. Postretirement Medical Benefits				International Pension Benefits
		2023		2022		2023		2022		2023		2022
Six Months Ended June 30:
Service cost		$	586	$	1,012	$	10	$	15	$	22	$	35
Interest cost		1,254		975		58		41		33		23
Expected return on assets		(1,483)		(1,640)		(6)		(2)		(42)		(40)
Amortization of prior service cost		53		46		1		—		—		1
Net periodic benefit cost

Settlement and curtailment (gain) loss		—		—		—		—		—		(33)
Net periodic benefit cost (income)		$	410	$	393	$	63	$	54	$	13	$	(14)

Net periodic benefit cost

Net periodic benefit cost

The components of net periodic benefit cost ~~(income)~~ other than current service cost are presented within Investment income and other in the statements of consolidated income.

During the first six months of 2022, we amended the UPS Canada Ltd. Retirement Plan to cease future benefit accruals effective December 31, 2023. We remeasured the plan's assets and benefit obligation, which resulted in a curtailment gain of $33 million ($24 million after-tax) for the sixthree months ended ~~June 30, 2022. The gain is included in~~ ~~Investment income and other~~ ~~in the statement of consolidated income.~~

~~During the six months ended June 30, 2023,~~March 31, 2024, we contributed ~~$1.2 billion~~$19 million and ~~$92~~$31 million to our company-sponsored pension and U.S. postretirement medical benefit plans, respectively. We expect to contribute approximately ~~$45 and $26~~$87 million over the remainder of the year to our ~~pension and~~ U.S. postretirement medical benefit ~~plans, respectively.~~plans.

Multiemployer Benefit Plans

We contribute to a number of multiemployer defined benefit and health and welfare plans under the terms of collective bargaining agreements that cover our union-represented employees. Our current collective bargaining agreements set forth the annual contribution increases allotted to the plans that we participate in, and we are in compliance with these contribution rates. These limitations on annual contribution rates will remain in effect throughout the terms of the existing collective bargaining agreements.

As of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, we had ~~$817~~$811 and ~~$821~~$813 million, respectively, recorded in Other Non-Current Liabilities in our consolidated balance sheets and $8$9 million as of ~~each of June 30, 2023~~both March 31, 2024 and December 31, ~~2022~~2023 recorded in Other current liabilities in our consolidated balance sheets associated with our previous withdrawal from the New England Teamsters and Trucking Industry Pension Fund. This liability is payable in equal monthly installments over a remaining term of approximately 39 years. Based on the borrowing rates currently available to us for long-term financing of a similar maturity, the fair value of this withdrawal liability as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 was ~~$705~~$685 and ~~$686~~$710 million, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of this liability.

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~~UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

UPS was a contributing employer to the Central States Pension Fund (“CSPF”) until 2007, at which time UPS withdrew from the CSPF. Under a collective bargaining agreement with the International Brotherhood of Teamsters (“IBT”), UPS agreed to provide coordinating benefits in the UPS/IBT Full Time Employee Pension Plan (“UPS/IBT Plan”) for UPS participants whose last employer was UPS and who had not retired as of January 1, 2008 (“the UPS Transfer Group”) in the event that benefits are reduced by the CSPF consistent with the terms of our withdrawal agreement with the CSPF. Under this agreement, benefits to the UPS Transfer Group cannot be reduced without our consent and can only be reduced in accordance with law.

Subsequent to our withdrawal, the CSPF incurred extensive asset losses and indicated that it was projected to become insolvent. In such event, the CSPF benefits would be reduced to the legally permitted Pension Benefit Guaranty Corporation ("PBGC") limits, triggering the coordinating benefits provision in the collective bargaining agreement.

In ~~March~~ 2021, the American Rescue Plan Act ~~(“ARPA”~~("ARPA") was enacted into law. The ARPA contains provisions that allow for qualifying multiemployer pension plans to apply for special financial assistance ("SFA") from the PBGC, which will be funded by the U.S. government. Following SFA approval, a qualifying multiemployer pension plan will receive a lump sum payment to enable it to continue paying unreduced pension benefits through 2051. The multiemployer plan is not obligated to repay the SFA. The ARPA is intended to prevent both the PBGC and certain financially distressed multiemployer pension plans, including the CSPF, from becoming insolvent through 2051. The CSPF submitted an application for SFA that was approved in December ~~2022 and, in~~2022. In January 2023, $35.8 billion was paid to the CSPF ~~received $35.8 billion from~~by the PBGC.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

We account for the potential obligation to pay coordinating benefits under ASC Topic 715, which requires us to provide a best estimate of various actuarial assumptions in measuring our pension benefit obligation at the December ~~31st~~31 measurement date. As of December 31, ~~2022,~~2023, our best estimate of coordinating benefits that may be required to be paid by the UPS/IBT Plan after SFA funds have been exhausted was immaterial.

The value of our estimate for future coordinating benefits will continue to be influenced by a number of factors, including interpretations of the ARPA, future legislative actions, actuarial assumptions and the ability of the CSPF to sustain its long-term commitments. Actual events may result in a change in our best estimate of the projected benefit obligation. We will continue to assess the impact of these uncertainties in accordance with ASC Topic 715.

Collective Bargaining Agreements

We have ~~more than 300,000~~approximately 310,000 employees in the U.S. employed under a national master agreement and various supplemental agreements with local unions affiliated with the Teamsters. These agreements ~~were~~are scheduled to expire on July 31, 2023. On July 25, 2023, we reached a new tentative national master agreement with the Teamsters. For additional information on these agreements and the ratification process, see note 18. No assurances of the timing of the ratification process can be provided. Customers may further reduce their business or stop doing business with us if they believe that such ratification process or the timing thereof may adversely affect our ability to provide services. In that event, we may permanently lose customers and this could materially adversely affect us. The terms of future collective bargaining agreements also may affect our competitive position and results of operations.2028.

We have approximately 10,000 employees in Canada employed under a collective bargaining agreement with the Teamsters which runs through July 31, 2025.

We have approximately ~~3,500~~3,300 pilots who are employed under a collective bargaining agreement with the Independent Pilots ~~Association ("IPA").~~Association. This collective bargaining agreement becomes amendable September 1, 2025.

We have approximately ~~1,800~~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 ~~3,100~~3,000 of our auto and maintenance mechanics who are not employed under agreements with the Teamsters are employed under collective bargaining agreements with the International Association of Machinists and Aerospace ~~Workers (“IAM”). The~~Workers. These collective bargaining ~~agreement with the IAM runs~~agreements run through July 31, 2024.

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NOTE 8. GOODWILL AND INTANGIBLE ASSETS

The following table indicates the allocation of goodwill as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 (in millions):

U.S. Domestic
Package International
Package Supply Chain Solutions Consolidated
December 31, 2022: $ 847 $ 492 $ 2,884 $ 4,223
Acquired — — 8 8
Impairments — — (8) (8)
Currency / Other — 3 24 27
June 30, 2023: $ 847 $ 495 $ 2,908 $ 4,250


	U.S. Domestic Package		International Package		Supply Chain Solutions		Consolidated
December 31, 2023:	$	847	$	503	$	3,522	$	4,872
Acquired	—		—		8		8

Currency / Other	—		(7)		(27)		(34)
March 31, 2024:	$	847	$	496	$	3,503	$	4,846

~~During~~Changes in goodwill during the ~~six~~three months ended ~~June 30, 2023:~~March 31, 2024 resulted from:

•~~We recorded an~~An increase in goodwill of $8 million, as part of purchase accounting ~~for~~allocations relating to our ~~November 2022 acquisition~~acquisitions of ~~Bomi Group.~~MNX Global Logistics and Happy Returns in the fourth quarter of 2023. Certain areas of purchase accounting, including our estimates of tax positions, remain preliminary as of ~~June 30, 2023.~~

•~~We recorded an immaterial impairment charge related to the closure of a trade management services business within Supply Chain Solutions.~~March 31, 2024.

•The remaining movements are due to the impact of changes in the value of the U.S. Dollar on the translation of non-U.S. Dollar goodwill balances.

~~We complete our annual goodwill impairment evaluation as~~As of July 1st on a reporting unit basis. Our 2022 annual impairment testing indicated that the fair value of goodwill associated with our Roadie reporting unit remained greater than its carrying value, although this excess was less than 10 percent. The goodwill associated with our Roadie reporting unit as of June 30, 2023 was $241 million.

~~For each~~March 31, 2024, none of our reporting units ~~and our indefinite-lived trade name, we continue to monitor the combined impact of macroeconomic conditions and business performance on our estimates of fair value. While we do not believe it is~~had indications that an impairment was more likely than not. Approximately $1.5 billion of our consolidated goodwill balance of $4.8 billion is represented by our Global Freight Forwarding, our truckload brokerage ("Coyote") and Roadie reporting units which, based on our quarterly monitoring, are exhibiting a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods. We do not expect any impairment would have a significant impact on our ~~reporting unit fair values are less than their respective carrying values as~~consolidated financial position, results of ~~June 30, 2023, actual~~operations or cash flows.

Actual reporting unit performance, revisions to our forecasts of ~~reporting unit~~future performance, market factors, changes in estimates or assumptions in connection with our annual testing, or a combination thereof could result in an impairment charge in one or more of our reporting units during ~~the third quarter of 2023 or another~~a future ~~period~~period. We continue to monitor business performance and external factors affecting our reporting units.

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The following is a summary of intangible assets as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 (in millions):
Gross Carrying
Amount Accumulated
Amortization Net Carrying
Value
June 30, 2023:
Capitalized software $ 5,507 $ (3,694) $ 1,813
Licenses 55 (38) 17
Franchise rights 260 (42) 218
Customer relationships 860 (472) 388
Trade name 126 (12) 114
Trademarks, patents and other 187 (51) 136
Amortizable intangible assets $ 6,995 $ (4,309) $ 2,686
Indefinite-lived intangible assets 204 — 204
Total Intangible Assets, Net $ 7,199 $ (4,309) $ 2,890
December 31, 2022:
Capitalized software $ 5,186 $ (3,500) $ 1,686
Licenses 55 (30) 25
Franchise rights 226 (37) 189
Customer relationships 872 (453) 419
Trade name 125 (8) 117
Trademarks, patents and other 183 (27) 156
Amortizable intangible assets $ 6,647 $ (4,055) $ 2,592
Indefinite-lived intangible assets 204 — 204
Total Intangible Assets, Net $ 6,851 $ (4,055) $ 2,796



	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
March 31, 2024:
Capitalized software	$	5,923	$	(4,007)	$	1,916
Licenses	45		(13)		32
Franchise rights	332		(48)		284
Customer relationships	1,114		(537)		577
Trade name	112		(19)		93
Trademarks, patents and other	377		(64)		313
Amortizable intangible assets	$	7,903	$	(4,688)	$	3,215
Indefinite-lived intangible assets	93		—		93
Total Intangible Assets, Net	$	7,996	$	(4,688)	$	3,308
December 31, 2023:
Capitalized software	$	5,839	$	(3,900)	$	1,939
Licenses	30		(7)		23
Franchise rights	291		(49)		242
Customer relationships	1,115		(516)		599
Trade name	172		(30)		142
Trademarks, patents and other	320		(53)		267
Amortizable intangible assets	$	7,767	$	(4,555)	$	3,212
Indefinite-lived intangible assets	93		—		93
Total Intangible Assets, Net	$	7,860	$	(4,555)	$	3,305

A trade name and licenses with carrying values of ~~$200~~$89 and $4 million, respectively, as of ~~June 30, 2023~~March 31, 2024 are deemed to be indefinite-lived intangible assets, and therefore are not amortized.

As of March 31, 2024, the estimated fair value of the indefinite-lived trade name associated with Coyote remained greater than its carrying value by less than 10 percent. The carrying value of this trade name is $89 million. Our truckload brokerage business continues to be negatively impacted by market conditions, which has resulted in revenue declines. We continue to monitor business performance and external factors affecting our valuation assumptions for this trade name. There were no events or changes in circumstances ~~during the six months ended June 30, 2023~~as of March 31, 2024 that would indicate the carrying ~~amount~~amounts of our indefinite-lived intangible assets may be impaired as of the date of this report.

~~Impairment tests for~~For the three months ended March 31, 2024, we recorded impairment charges related to finite-lived intangible assets ~~are performed when~~of $48 million ($35 million after tax, or $0.04 per diluted share) within Other Expenses in our statement of consolidated income. These charges represented capitalized software license impairments of $7 million and a ~~triggering event occurs that may indicate that~~$41 million charge to write down the ~~carrying~~ value of ~~the intangible asset may not be recoverable.~~certain trade names acquired as part of our acquisition of Bomi Group as we consolidate our brands. There were no impairment charges for finite-lived intangible assets ~~during~~for the ~~six~~three months ended ~~June 30, 2023 or 2022.~~March 31, 2023.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. DEBT AND FINANCING ARRANGEMENTS

The carrying value of our outstanding debt obligations as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 consisted of the following (in millions):


		Principal Amount					Carrying Value
				Maturity		2023			2022

				Principal Amount
		Principal Amount
				Principal Amount
					Maturity
				Maturity
				Maturity
Commercial paper
Commercial paper
Commercial paper

Fixed-rate senior notes:	Fixed-rate senior notes:
2.500% senior notes		$	—		2023		$	—		$	999

Fixed-rate senior notes:

Fixed-rate senior notes:
2.800% senior notes
2.800% senior notes
2.800% senior notes	2.800% senior notes	500			2024		499			499
2.200% senior notes	2.200% senior notes	400			2024		399			399
2.200% senior notes
2.200% senior notes
3.900% senior notes
3.900% senior notes
3.900% senior notes	3.900% senior notes	1,000			2025		998			997
2.400% senior notes	2.400% senior notes	500			2026		499			499
2.400% senior notes
2.400% senior notes
3.050% senior notes
3.050% senior notes
3.050% senior notes	3.050% senior notes	1,000			2027		995			995
3.400% senior notes	3.400% senior notes	750			2029		747			747
3.400% senior notes
3.400% senior notes
2.500% senior notes
2.500% senior notes
2.500% senior notes	2.500% senior notes	400			2029		398			397
4.450% senior notes	4.450% senior notes	750			2030		745			744
4.450% senior notes
4.450% senior notes
4.875% senior notes
4.875% senior notes
4.875% senior notes	4.875% senior notes	900			2033		894			—
6.200% senior notes	6.200% senior notes	1,500			2038		1,485			1,485
6.200% senior notes
6.200% senior notes
5.200% senior notes
5.200% senior notes
5.200% senior notes	5.200% senior notes	500			2040		494			494
4.875% senior notes	4.875% senior notes	500			2040		491			491
4.875% senior notes
4.875% senior notes
3.625% senior notes
3.625% senior notes
3.625% senior notes	3.625% senior notes	375			2042		369			369
3.400% senior notes	3.400% senior notes	500			2046		492			492
3.400% senior notes
3.400% senior notes
3.750% senior notes
3.750% senior notes
3.750% senior notes	3.750% senior notes	1,150			2047		1,138			1,137
4.250% senior notes	4.250% senior notes	750			2049		743			743
4.250% senior notes
4.250% senior notes
3.400% senior notes
3.400% senior notes
3.400% senior notes	3.400% senior notes	700			2049		688			688
5.300% senior notes	5.300% senior notes	1,250			2050		1,231			1,231
5.300% senior notes
5.300% senior notes
5.050% senior notes	5.050% senior notes	1,100			2053		1,082			—
5.050% senior notes
5.050% senior notes
Floating-rate senior notes:
Floating-rate senior notes:
Floating-rate senior notes:	Floating-rate senior notes:
Floating-rate senior notes	Floating-rate senior notes	—			2023		—			500
Floating-rate senior notes	Floating-rate senior notes	1,566			2049-2073		1,549			1,027

Floating-rate senior notes
Debentures:	Debentures:

Debentures:
Debentures:
7.620% debentures
7.620% debentures
7.620% debentures	7.620% debentures	276			2030		280			280
Pound Sterling notes:	Pound Sterling notes:
Pound Sterling notes:
Pound Sterling notes:
5.500% notes
5.500% notes
5.500% notes	5.500% notes	84			2031		83			79
5.125% notes	5.125% notes	573			2050		545			521
5.125% notes
5.125% notes
Euro senior notes:	Euro senior notes:
0.375% senior notes		763			2023		763			745
Euro senior notes:
Euro senior notes:
1.625% senior notes
1.625% senior notes
1.625% senior notes	1.625% senior notes	763			2025		761			744
1.000% senior notes	1.000% senior notes	545			2028		543			531
1.000% senior notes
1.000% senior notes
1.500% senior notes	1.500% senior notes	545			2032		542			530

1.500% senior notes
1.500% senior notes
Canadian senior notes:
Canadian senior notes:
Canadian senior notes:	Canadian senior notes:
2.125% senior notes	2.125% senior notes	566			2024		564			553
Finance lease obligations		416			2023-2046		416			390
2.125% senior notes
2.125% senior notes
Finance lease obligations (see note 10)
Finance lease obligations (see note 10)
Finance lease obligations (see note 10)
Facility notes and bonds
Facility notes and bonds
Facility notes and bonds	Facility notes and bonds	320			2029-2045		320			320
Other debt	Other debt	10			2023-2026		10			36
Other debt
Other debt
Total debt
Total debt
Total debt	Total debt	$	20,952				20,763			19,662
Less: current maturities	Less: current maturities						(1,412)			(2,341)
Less: current maturities
Less: current maturities
Long-term debt	Long-term debt						$	19,351		$	17,321
Long-term debt
Long-term debt

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Commercial Paper

We are authorized to borrow up to $10.0 billion under a U.S. commercial paper program and €5.0 billion (in a variety of currencies) under a European commercial paper program. ~~As of June 30, 2023, we had~~There was no ~~outstanding balances under our~~ commercial paper ~~programs.~~outstanding as of March 31, 2024. The amount of commercial paper outstanding under these programs in ~~2023~~2024 is expected to fluctuate.

Debt Classification

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

~~Debt Repayments~~

~~During the first quarter~~ As of ~~2023,~~March 31, 2024, we ~~repaid approximately $16 million of foreign-currency-denominated debt assumed in the Bomi Group acquisition.~~

~~On April 1, 2023,~~continued to classify our ~~2.500% Senior Notes with a principal balance of $1.0 billion and our floating rate~~2.200% senior notes with a principal balance of ~~$500~~$400 million ~~matured and were repaid in full.~~

~~Debt Issuances~~

On February 23, 2023, we issued two series of notes in the principal amounts of $900 million and $1.1 billion. These notes bear interest at 4.875% and 5.050%, respectively, and mature on March 3, 2033 and March 3, 2053, respectively. Interest on the notes is payable semi-annually, beginning September 2023. Each series of notes is callable at our option at a redemption price equal to the greater of 100% of the principal amount, or the sum of the present values of scheduled payments of principal and interest, plus accrued and unpaid interest.

On March 7, 2023, we issued floating rate senior notes with a principal balance of  $529 million. These notes bear interest at a rate equal to the compounded Secured Overnight Financing Rate ("SOFR") less 0.350% per year and mature on March 15, 2073. These notes are callable at various times after 30 years at a stated percentage of par value and are redeemable at the option of the note holders at various times after one year at a stated percentage of par value.

~~Reference Rate Reform~~

~~Our floating-rate senior notes~~ that mature ~~between 2049~~in September 2024 as long-term debt in our consolidated balance sheet due to our intent and ~~2067 bore interest at rates that referenced~~ability to refinance the London Interbank Offer Rate ("LIBOR") for U.S. Dollars. As part of a broader program of reference rate reform, U.S. Dollar LIBOR rates ceased to be published after June 2023. Beginning July 1, 2023, we transitioned these notes to an alternative reference rate, SOFR, which was adopted in accordance with recommendations of the Alternative Reference Rates Committee.debt.

Sources of Credit

We maintain two credit agreements with a consortium of banks. The first of these agreements provides revolving credit facilities of $1.0 billion, and expires on December ~~5, 2023.~~3, 2024. Amounts outstanding under this agreement bear interest at a periodic fixed rate equal to the term SOFR rate, plus 0.10% per annum and an applicable margin based on our then-current credit rating. The applicable margin from the credit pricing grid as of ~~June 30, 2023~~March 31, 2024 was 0.70%. Alternatively, a fluctuating rate of interest equal to the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in the United States; (2) the Federal Funds effective rate plus 0.50%; or (3) the Adjusted Term SOFR Rate for a one-month interest period plus 1.00%, may be used at our discretion.

The second agreement provides revolving credit facilities of $2.0 billion, and expires on December 7, 2026. Amounts outstanding under this facility bear interest at a periodic fixed rate equal to the term SOFR rate plus 0.10% per annum and an applicable margin based on our then-current credit rating. The applicable margin from the credit pricing grid as of ~~June 30, 2023~~March 31, 2024 was 0.875%. Alternatively, a fluctuating rate of interest equal to the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in the United States; (2) the Federal Funds effective rate plus 0.50%; or (3) the Adjusted Term SOFR Rate for a one-month interest period plus 1.00%, plus an applicable margin, may be used at our discretion.

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~~UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

If the credit ratings established by Standard & Poor's and Moody's differ, the higher rating will be used, except in cases where the lower rating is two or more levels lower. In these circumstances, the rating one step below the higher rating will be used. We are also able to request advances under these facilities based on competitive bids for the applicable interest rate.

There were no amounts outstanding under these facilities as of ~~June 30, 2023.~~March 31, 2024.

Debt Covenants

Our existing debt instruments and credit facilities subject us to certain financial covenants. As of ~~June 30, 2023,~~March 31, 2024, and for all prior periods presented, we have satisfied these financial covenants. These covenants limit the amount of secured indebtedness that we may incur, and limit the amount of attributable debt in sale-leaseback transactions, to 10% of net tangible assets. As of ~~June 30, 2023,~~March 31, 2024, 10% of net tangible assets was equivalent to ~~$4.9~~$4.5 billion and we had no covered sale-leaseback transactions or secured indebtedness outstanding. We do not expect these covenants to have a material impact on our ~~financial condition or~~ liquidity.

Fair Value of Debt

Based on the borrowing rates currently available to us for long-term debt with similar terms and maturities, the fair value of long-term debt, including current maturities, was approximately ~~$20.2~~$19.4 and ~~$18.2~~$22.1 billion as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of all of our debt instruments.

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NOTE 10. LEASES

We have finance and operating leases for real estate (primarily package centers, airport facilities and warehouses), aircraft and engines, information technology equipment, vehicles and various other equipment used in operating our business. Certain leases for real estate and aircraft contain options to purchase, extend or terminate the lease.

Aircraft

In addition to the aircraft that we own, we charter aircraft to handle package and cargo volume on certain international trade lanes and domestic routes. Due to the nature of these agreements, primarily being that either party can cancel the agreement with short notice, we have classified these as short-term leases. A majority of our long-term aircraft operating leases are operated by a third party to handle package and cargo volume in geographic regions where, due to government regulations, we are restricted from operating an airline.

Transportation equipment and other equipment

We enter into both long-term and short-term leases for transportation equipment to supplement our capacity or meet contractual demands. Some of these assets are leased on a month-to-month basis and the leases can be terminated without penalty. We also enter into equipment leases to increase capacity during periods of high demand. These leases are treated as short-term as the cumulative right of use is less than 12 months over the term of the contract.

Some of our transportation and technology equipment leases require us to make additional lease payments based on the underlying usage of the assets. Due to the variable nature of these costs, these are expensed as incurred and are not included in the right of use lease asset and associated lease obligation.

The components of lease expense for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ were as follows (in millions):


		Three Months Ended June 30,				Six Months Ended June 30,
		2024
		2023		2022		2023		2022
		2024

		2024
Operating lease costs
Operating lease costs
Operating lease costs	Operating lease costs	$	219	$	184	$	426	$	367
Finance lease costs:	Finance lease costs:
Finance lease costs:
Finance lease costs:
Amortization of assets
Amortization of assets
Amortization of assets	Amortization of assets	28		28		57		56
Interest on lease liabilities	Interest on lease liabilities	5		3		9		7
Interest on lease liabilities
Interest on lease liabilities
Total finance lease costs
Total finance lease costs
Total finance lease costs	Total finance lease costs	33		31		66		63
Variable lease costs	Variable lease costs	68		64		140		132
Variable lease costs
Variable lease costs
Short-term lease costs
Short-term lease costs
Short-term lease costs	Short-term lease costs	226		323		503		625
Total lease costs(1)	Total lease costs(1)	$	546	$	602	$	1,135	$	1,187
(1) This table excludes sublease income as it was not material to the three and six months ended June 30, 2023 or 2022.
Total lease costs(1)
Total lease costs(1)
(1) This table excludes sublease income as it was not material for the three months ended March 31, 2024 or 2023.
(1) This table excludes sublease income as it was not material for the three months ended March 31, 2024 or 2023.
(1) This table excludes sublease income as it was not material for the three months ended March 31, 2024 or 2023.

In addition to the lease costs disclosed in the table above, we monitor all lease categories for any indicators that the carrying value of the assets may not be recoverable. ~~We recognized $13 million of impairments during the three and six months ended June 30, 2023.~~ There were no material lease impairments recognized during the three ~~or six~~ months ended ~~June 30, 2022.~~March 31, 2024 or 2023.

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Supplemental information related to leases and location within our consolidated balance sheets is as follows (in millions, except lease term and discount rate):


		June 30, 2023			December 31, 2022
	March 31, 2024										March 31, 2024				December 31, 2023
Operating Leases:	Operating Leases:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	4,219		$	3,755
Operating lease right-of-use assets
Operating lease right-of-use assets

Current maturities of operating leases
Current maturities of operating leases
Current maturities of operating leases	Current maturities of operating leases	$	673		$	621
Non-current operating leases	Non-current operating leases	3,680			3,238
Total operating lease obligations	Total operating lease obligations	$	4,353		$	3,859

Finance Leases:	Finance Leases:
Finance Leases:
Finance Leases:
Property, plant and equipment, net
Property, plant and equipment, net
Property, plant and equipment, net	Property, plant and equipment, net	$	843		$	959

Current maturities of long-term debt, commercial paper and finance leases
Current maturities of long-term debt, commercial paper and finance leases
Current maturities of long-term debt, commercial paper and finance leases	Current maturities of long-term debt, commercial paper and finance leases	$	84		$	92
Long-term debt and finance leases	Long-term debt and finance leases	332			298
Total finance lease obligations	Total finance lease obligations	$	416		$	390

Weighted average remaining lease term (in years):	Weighted average remaining lease term (in years):
Weighted average remaining lease term (in years):
Weighted average remaining lease term (in years):
Operating leases
Operating leases
Operating leases	Operating leases	11.2			10.8			10.7				10.8
Finance leases	Finance leases	8.4			8.4			Finance leases	7.2				7.4

Weighted average discount rate:	Weighted average discount rate:
Weighted average discount rate:
Weighted average discount rate:
Operating leases
Operating leases
Operating leases	Operating leases	2.91		%	2.32		%	3.30	%			3.20	%
Finance leases	Finance leases	3.59		%	3.17		%	Finance leases	3.91	%			3.88	%

Supplemental cash flow information related to leases is as follows (in millions):


		Six Months Ended June 30,
		2023		2022
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
Cash paid for amounts included in measurement of obligations:	Cash paid for amounts included in measurement of obligations:
Operating cash flows from operating leases
Operating cash flows from operating leases
Operating cash flows from operating leases	Operating cash flows from operating leases	$	419	$	354
Operating cash flows from finance leases	Operating cash flows from finance leases	8		2
Financing cash flows from finance leases	Financing cash flows from finance leases	79		105

Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:
Right-of-use assets obtained in exchange for lease obligations:
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
Operating leases
Operating leases	Operating leases	$	826	$	345
Finance leases	Finance leases	$	106	$	72

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Maturities of lease obligations as of ~~June 30, 2023~~March 31, 2024 were as follows (in millions):


		Finance Leases		Operating Leases
2023		$	54	$	382
	Finance Leases					Finance Leases	Operating Leases
2024	2024	90		763
2025	2025	66		688
2026	2026	44		586
2027	2027	40		504
2028
Thereafter	Thereafter	207		2,249
Total lease payments	Total lease payments	501		5,172
Less: Imputed interest	Less: Imputed interest	(85)		(819)
Total lease obligations	Total lease obligations	416		4,353
Less: Current obligations	Less: Current obligations	(84)		(673)
Long-term lease obligations	Long-term lease obligations	$	332	$	3,680

As of ~~June 30, 2023,~~March 31, 2024, we had ~~$752~~$720 million of additional leases which had not commenced. These leases will commence ~~between 2023 and~~later in 2024 or in 2025 when we are granted access to the property, such as when leasehold improvements are completed by the lessor or a certificate of occupancy is obtained.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. LEGAL PROCEEDINGS AND CONTINGENCIES

We are involved in a number of judicial proceedings and other matters arising from the conduct of our business.

Although there can be no assurances as to the ultimate outcome, we have generally denied, or believe we have meritorious defenses and will deny, liability in ~~all~~ pending matters, including (except as may be otherwise noted herein) the matters described below, and we intend to vigorously defend each matter. We accrue amounts associated with ~~legal~~judicial proceedings and other contingencies when and to the extent a loss becomes probable and can be reasonably estimated. The actual costs of resolving legal proceedings may be substantially higher or lower than the amounts accrued on those claims.

For matters as to which we are not able to estimate a possible loss or range of losses, we are not able to determine whether any such loss will have a material impact on our operations or financial condition. For these matters, we have described the reasons that we are unable to estimate a possible loss or range of losses.

Judicial Proceedings

We are a defendant in a number of lawsuits filed in state and federal courts containing various class action allegations under state wage-and-hour laws. ~~At this time, we~~We do not believe that any loss associated with any such matter will have a material impact on our financial condition, results of operations or financial condition. One of these matters, Hughes v. UPS Supply Chain Solutions, Inc. and United Parcel Service, Inc. had previously been certified as a class action in Kentucky state court. In the second quarter of 2019, the court granted our motion for judgment on the pleadings related to the wage-and-hour claims. The plaintiffs' appeal of this decision was denied. However, they were granted a discretionary review by the Kentucky Supreme Court. In the first quarter of 2023, the Kentucky Supreme Court ruled in our favor. Plaintiffs have filed a motion for rehearing before the Kentucky Supreme Court.liquidity.

In July 2023, ~~another matter,~~ Baker v. United Parcel Service, Inc. (DE) and United Parcel Service, Inc. (OH) was certified as a class action in federal court in the Eastern District of Washington. The plaintiff in this matter alleges that UPS violated the Uniformed Services Employment and Reemployment Rights Act. We are vigorously defending ourselves in this matter and believe that we have a number of meritorious defenses, and there are unresolved questions of law and fact that could be important to the ultimate resolution of this matter. Accordingly, ~~at this time,~~ we are not able to estimate a possible loss or range of ~~losses~~loss that may result from this matter or to determine whether such loss, if any, would have a material adverse effect on our financial condition, results of operations or ~~financial condition.~~liquidity.

Other Matters

In August 2016, Spain’s National Markets and Competition Commission ("CNMC") announced an investigation into 10 companies in the commercial delivery and parcel industry, including UPS, related to alleged nonaggression agreements to allocate customers. In May 2017, we received a Statement of Objections issued by the CNMC. In July 2017, we received a Proposed Decision from the CNMC. In March 2018, the CNMC adopted a final decision, finding an infringement and imposing an immaterial fine on UPS. We appealed the decision. In December 2022, a trial court ruled against us. We have filed an appeal before the Spanish Supreme Court. We are vigorously defending ourselves and believe that we have a number of meritorious defenses. There are also unresolved questions of law that could be important to the ultimate resolution of this matter. We do not believe that any loss from this matter would have a material impact on our financial condition, results of operations or liquidity.

The Securities and Exchange Commission (the "SEC") has been investigating our controls and practices surrounding impairment analyses in connection with the sale of UPS Freight in April 2021. Such analysis led to a non-cash goodwill impairment charge being recorded during the quarter ended December 31, 2020. Since March 2024, when the SEC staff informed the Company that it disagreed with the timing of the impairment, the Company has been discussing with the SEC staff the possibility of reaching a negotiated resolution. Although the Company cannot predict the ultimate outcome of the investigation with certainty, it believes the resolution of the SEC investigation will not have a material effect on the Company's financial ~~condition.~~condition, results of operations or liquidity. An accrual representing our best estimate of the impact of this regulatory matter is included in our consolidated balance sheet at March 31, 2024.

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

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

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. SHAREOWNERS' EQUITY

Capital Stock, Additional Paid-In Capital, Retained Earnings and Non-Controlling ~~Minority~~ Interests

We are authorized to issue two classes of common stock, which are distinguished from each other primarily by their respective voting rights. Class A shares of UPS are entitled to 10 votes per share, whereas class B shares are entitled to one vote per share. Class A shares are primarily held by UPS employees and retirees, as well as trusts and descendants of the Company's founders, and these shares are fully convertible into class B shares at any time. Class B shares are publicly traded on the ~~NYSE~~New York Stock Exchange under the symbol ~~“UPS”~~"UPS". Class A and B shares both have a $0.01 par value, and as of ~~June 30, 2023,~~March 31, 2024, there were 4.6 billion class A shares and 5.6 billion class B shares authorized to be issued. Additionally, there are 200 million preferred shares authorized to be issued, with a par value of $0.01 per share. As of ~~June 30, 2023,~~March 31, 2024, no preferred shares had been issued.

The following is a rollforward of our common stock, additional paid-in capital, retained earnings and non-controlling ~~minority~~ interests accounts for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in millions, except per share amounts):


Three Months Ended March 31:	2024			2023
	Shares	Dollars		Shares	Dollars
Class A Common Stock:
Balance at beginning of period	127	$	2	134	$	2
Stock award plans	2	—		3	—
Common stock issuances	—	—		1	—
Conversions of class A to class B common stock	(3)	—		(3)	—
Class A shares issued at end of period	126	$	2	135	$	2
Class B Common Stock:
Balance at beginning of period	726	$	7	725	$	7
Common stock purchases	—	—		(4)	—
Conversions of class A to class B common stock	3	—		3	—
Class B shares issued at end of period	729	$	7	724	$	7
Additional Paid-In Capital:
Balance at beginning of period		$	—		$	—
Stock award plans		(118)			345
Common stock purchases		—			(492)
Common stock issuances		118			147

Balance at end of period		$	—		$	—
Retained Earnings:
Balance at beginning of period		$	21,055		$	21,326
Net income attributable to controlling interests		1,113			1,895
Dividends ($1.63 and $1.62 per share) (1)		(1,414)			(1,453)
Common stock purchases		—			(258)
Other (2)		(73)			—
Balance at end of period		$	20,681		$	21,510
Non-Controlling Interests:
Balance at beginning of period		$	8		$	17
Change in non-controlling interest		16			(2)
Balance at end of period		$	24		$	15
(1) The dividend per share amount is the same for both class A and class B common stock. Dividends include $66 and $105 million as of March 31, 2024 and 2023, respectively, that were settled in shares of class A common stock. (2) Includes adjustments related to certain stock-based awards.

Three Months Ended June 30: 2023 2022
Shares Dollars Shares Dollars
Class A Common Stock
Balance at beginning of period 135 $ 2 140 $ 2
Stock award plans — — 2 —
Common stock issuances — — — —
Conversions of class A to class B common stock (3) — (4) —
Class A shares issued at end of period 132 $ 2 138 $ 2
Class B Common Stock
Balance at beginning of period 724 $ 7 734 $ 7
Common stock purchases (4) — (6) —
Conversions of class A to class B common stock 3 — 4 —
Class B shares issued at end of period 723 $ 7 732 $ 7
Additional Paid-In Capital
Balance at beginning of period $ — $ 1,231
Stock award plans 32 212
Common stock purchases (135) (983)
Common stock issuances 108 113
Other (1)
(5) —
Balance at end of period $ — $ 573
Retained Earnings
Balance at beginning of period $ 21,510 $ 17,433
Net income attributable to common shareowners 2,081 2,849
Dividends ($1.62 and $1.52 per share) (2)
(1,393) (1,327)
Common stock purchases (615) —
Other 1 3
Balance at end of period $ 21,584 $ 18,958
Non-Controlling Minority Interest
Balance at beginning of period $ 15 $ 18
Change in non-controlling minority interest 3 3
Balance at end of period $ 18 $ 21
(1) Includes a 1% excise tax applicable to share repurchases.
(2) The dividend per share amount is the same for both class A and class B common stock. Dividends included $48 and $44 million as of June 30, 2023 and 2022, respectively, that were settled in shares of class A common stock.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30: 2023 2022
Shares Dollars Shares Dollars
Class A Common Stock:
Balance at beginning of period 134 $ 2 138 $ 2
Stock award plans 3 — 6 —
Common stock issuances 1 — 1 —
Conversions of class A to class B common stock (6) — (7) —
Class A shares outstanding at end of period 132 $ 2 138 $ 2
Class B Common Stock:
Balance at beginning of period 725 $ 7 732 $ 7
Common stock purchases (8) — (7) —
Conversions of class A to class B common stock 6 — 7 —
Class B shares outstanding at end of period 723 $ 7 732 $ 7
Additional Paid-In Capital:
Balance at beginning of period $ — $ 1,343
Stock award plans 377 177
Common stock purchases (627) (1,243)
Common stock issuances 255 296
Other (1)
(5) —
Balance at end of period $ — $ 573
Retained Earnings:
Balance at beginning of period $ 21,326 $ 16,179
Net income attributable to controlling interests 3,976 5,511
Dividends ($3.24 and $3.04 per share) (2)
(2,846) (2,733)
Common stock purchases (873) —
Other 1 1
Balance at end of period $ 21,584 $ 18,958
Non-Controlling Interests:
Balance at beginning of period $ 17 $ 16
Change in non-controlling interest 1 5
Balance at end of period $ 18 $ 21
(1) Includes a 1% excise tax applicable to share repurchases.
(2) The dividend per share amount is the same for both class A and class B common stock. Dividends include $153 and $166 million as of June 30, 2023 and 2022, respectively, that were settled in shares of class A common stock.

We did not repurchase any shares under our share repurchase program during the three months ended March 31, 2024. We repurchased ~~4.3 and 8.4~~4.1 million shares of class B common stock for $750 million ~~and $1.5 billion~~ during the three ~~and six~~ months ended ~~June 30, 2023, respectively. We repurchased 5.5 and 6.7 million shares of class B common stock for $983 million and $1.2 billion during the three and six months ended June 30, 2022, respectively.~~March 31, 2023. These repurchases were completed as follows:

•In August 2021, the Board of Directors authorized the company to repurchase up to $5.0 billion of class A and class B common stock (the "2021 Authorization"). For the ~~six~~three months ended ~~months ended June 30,~~March 31, 2023, we repurchased 0.5 million shares of class B common stock for $82 million ~~under this authorization. The share repurchases discussed above for the three and six months ended June 30, 2022, were completed~~ under this authorization.

•In January 2023, the Board of Directors terminated the 2021 Authorization and approved a new share repurchase authorization for $5.0 billion of class A and class B common stock (the "2023 Authorization"). For the three ~~and six~~ months ended ~~June 30,~~March 31, 2023, we repurchased ~~4.3 and 7.9~~3.6 million shares for $~~750~~668 million ~~and $1.4 billion, respectively,~~ under the 2023 Authorization.

As of ~~June 30, 2023,~~March 31, 2024, we had ~~$3.6~~$2.8 billion available under ~~this repurchase authorization.~~

the 2023 Authorization. We do not currently anticipate ~~our~~any share repurchases ~~will total approximately $3.0 billion~~ in ~~2023.~~

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~~UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

2024.

Future share repurchases may be in the form of accelerated share repurchase programs, open market purchases or other methods we deem appropriate. The timing of share repurchases will depend upon market conditions. Unless terminated earlier by the Board of Directors, this program will expire when we have purchased all shares authorized for repurchase under the program.

Movements in additional paid-in capital in respect of stock award plans comprise accruals for unvested awards, offset by adjustments for awards that vest during the period.

Accumulated Other Comprehensive Income (Loss)

We recognize activity in other comprehensive income (loss) for foreign currency translation adjustments, unrealized holding gains and losses on available-for-sale securities, unrealized gains and losses from derivatives that qualify as hedges of cash flows and unrecognized pension and postretirement benefit costs. The activity in accumulated other comprehensive income (loss) for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ was as follows (in millions):


Three Months Ended June 30:		2023		2022
Three Months Ended March 31:						Three Months Ended March 31:	2024	2023
Foreign Currency Translation Gain (Loss), Net of Tax:	Foreign Currency Translation Gain (Loss), Net of Tax:
Balance at beginning of period	Balance at beginning of period	$	(1,328)	$	(1,202)
Translation adjustment (net of tax effect of $2 and $7)		(18)		(245)
Balance at beginning of period
Balance at beginning of period
Translation adjustment (net of tax effect of $6 and $(15))
Reclassification to earnings (net of tax effect of $0 and $0)	Reclassification to earnings (net of tax effect of $0 and $0)	—		—
Balance at end of period	Balance at end of period	(1,346)		(1,447)
Unrealized Gain (Loss) on Marketable Securities, Net of Tax:	Unrealized Gain (Loss) on Marketable Securities, Net of Tax:
Balance at beginning of period	Balance at beginning of period	(4)		(7)
Current period changes in fair value (net of tax effect of $(5) and $0)		(16)		(1)
Reclassification to earnings (net of tax effect of $0 and $0)		—		—
Balance at beginning of period
Balance at beginning of period
Current period changes in fair value (net of tax effect of $0 and $1)
Reclassification to earnings (net of tax effect of $0 and $1)
Balance at end of period	Balance at end of period	(20)		(8)
Unrealized Gain (Loss) on Cash Flow Hedges, Net of Tax:	Unrealized Gain (Loss) on Cash Flow Hedges, Net of Tax:
Balance at beginning of period	Balance at beginning of period	90		26
Current period changes in fair value (net of tax effect of $(14) and $89)		(43)		283
Reclassification to earnings (net of tax effect of $(12) and $(16))		(37)		(49)
Balance at beginning of period
Balance at beginning of period
Current period changes in fair value (net of tax effect of $33 and $(8))
Reclassification to earnings (net of tax effect of $(10) and $(16))
Balance at end of period	Balance at end of period	10		260
Unrecognized Pension and Postretirement Benefit Costs, Net of Tax:	Unrecognized Pension and Postretirement Benefit Costs, Net of Tax:
Balance at beginning of period	Balance at beginning of period	(239)		(2,074)
Net actuarial gain (loss) resulting from remeasurements of plan assets and liabilities (net of tax effect of $0 and $0)		—		—
Reclassification to earnings (net of tax effect of $6 and $6)		21		18
Balance at beginning of period
Balance at beginning of period

Reclassification to earnings (net of tax effect of $8 and $7)
Reclassification to earnings (net of tax effect of $8 and $7)
Reclassification to earnings (net of tax effect of $8 and $7)
Balance at end of period	Balance at end of period	(218)		(2,056)
Accumulated other comprehensive income (loss) at end of period	Accumulated other comprehensive income (loss) at end of period	$	(1,574)	$	(3,251)

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~~UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

Six Months Ended June 30: 2023 2022
Foreign currency translation gain (loss), net of tax:
Balance at beginning of period $ (1,446) $ (1,162)
Translation adjustment (net of tax effect of $(13) and $7) 97 (285)
Reclassification to earnings (net of tax effect of $0 and $0) 3 —
Balance at end of period (1,346) (1,447)
Unrealized gain (loss) on marketable securities, net of tax:
Balance at beginning of period (11) (1)
Current period changes in fair value (net of tax effect of $(4) and $(2)) (11) (7)
Reclassification to earnings (net of tax effect of $1 and $0) 2 —
Balance at end of period (20) (8)
Unrealized gain (loss) on cash flow hedges, net of tax:
Balance at beginning of period 167 (17)
Current period changes in fair value (net of tax effect of $(22) and $112) (69) 355
Reclassification to earnings (net of tax effect of $(28) and $(25)) (88) (78)
Balance at end of period 10 260
Unrecognized pension and postretirement benefit costs, net of tax:
Balance at beginning of period (259) (2,098)
Net actuarial gain (loss) resulting from remeasurements of plan assets and liabilities (net of tax effect of $0 and $11) — 31
Reclassification to earnings (net of tax effect of $13 and $3) 41 11
Balance at end of period (218) (2,056)
Accumulated other comprehensive income (loss) at end of period $ (1,574) $ (3,251)

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Detail of the gains (losses) reclassified from accumulated other comprehensive income (loss) to the statements of consolidated income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ is as follows (in millions):


		Amount Reclassified from AOCI(1)				Affected Line Item in the Income Statement
Three Months Ended June 30:		2023		2022

	Amount Reclassified from AOCI(1)														Amount Reclassified from AOCI(1)								Affected Line Item in the Income Statement
Three Months Ended March 31:
Unrealized Gain (Loss) on Foreign Currency Translation:
Unrealized Gain (Loss) on Foreign Currency Translation:
Unrealized Gain (Loss) on Foreign Currency Translation:
Realized gain (loss) on business wind-down
Realized gain (loss) on business wind-down
Realized gain (loss) on business wind-down								$	—				$	(3)					Other expenses
Income tax (expense) benefit							Income tax (expense) benefit	—					—						Income tax expense
Impact on net income							Impact on net income	—					(3)						Net income
Unrealized Gain (Loss) on Marketable Securities:
Realized gain (loss) on sale of securities
Realized gain (loss) on sale of securities
Realized gain (loss) on sale of securities								—					(3)						Investment income and other
Income tax (expense) benefit							Income tax (expense) benefit	—					1						Income tax expense
Impact on net income							Impact on net income	—					(2)						Net income
Unrealized Gain (Loss) on Cash Flow Hedges:	Unrealized Gain (Loss) on Cash Flow Hedges:
Interest rate contracts
Interest rate contracts
Interest rate contracts	Interest rate contracts	$	(2)	$	(2)	Interest expense	(1)			(1)		(1)				Interest expense				Interest expense
Foreign currency exchange contracts	Foreign currency exchange contracts	51		67		Revenue	Foreign currency exchange contracts	41			68			68				Revenue				Revenue

Income tax (expense) benefit	Income tax (expense) benefit	(12)		(16)		Income tax expense
Income tax (expense) benefit
Income tax (expense) benefit								(10)					(16)						Income tax expense
Impact on net income	Impact on net income	37		49		Net income	Impact on net income	30			51			51				Net income				Net income
Unrecognized Pension and Postretirement Benefit Costs:	Unrecognized Pension and Postretirement Benefit Costs:
Prior service costs	Prior service costs	(27)		(24)		Investment income and other
Prior service costs
Prior service costs								(38)					(27)						Investment income and other

Income tax (expense) benefit

Income tax (expense) benefit

Income tax (expense) benefit	Income tax (expense) benefit	6		6		Income tax expense	8			7		7				Income tax expense				Income tax expense
Impact on net income	Impact on net income	(21)		(18)		Net income	Impact on net income	(30)			(20)			(20)				Net income				Net income
Total amount reclassified for the period	Total amount reclassified for the period	$	16	$	31	Net income	Total amount reclassified for the period	$	—		$		$	26			Net income				Net income
(1) Accumulated other comprehensive income (loss)	(1) Accumulated other comprehensive income (loss)

Amount Reclassified from AOCI(1)
Affected Line Item in the Income Statement
Six Months Ended June 30: 2023 2022
Unrealized Gain (Loss) on Foreign Currency Translation:
Realized gain (loss) on business wind-down $ (3) $ — Other expenses
Income tax (expense) benefit — — Income tax expense
Impact on net income (3) — Net income
Unrealized gain (loss) on marketable securities:
Realized gain (loss) on sale of securities (3) — Investment income and other
Income tax (expense) benefit 1 — Income tax expense
Impact on net income (2) — Net income
Unrealized gain (loss) on cash flow hedges:
Interest rate contracts (3) (5) Interest expense
Foreign currency exchange contracts 119 108 Revenue
Income tax (expense) benefit (28) (25) Income tax expense
Impact on net income 88 78 Net income
Unrecognized pension and postretirement benefit costs:
Prior service costs (54) (47) Investment income and other
Curtailment of benefit obligation — 33 Investment income and other
Income tax (expense) benefit 13 3 Income tax expense
Impact on net income (41) (11) Net income
Total amount reclassified for the period $ 42 $ 67 Net income
(1) Accumulated other comprehensive income (loss)

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Deferred Compensation Obligations and Treasury Stock

We maintain a deferred compensation plan whereby certain employees were previously able to elect to defer the gains on stock option exercises by deferring the shares received upon exercise into a rabbi trust. The shares held in this trust are classified as treasury stock, and the liability to participating employees is classified as ~~Deferred~~ a deferred compensation ~~obligations~~obligation within Shareowners’ Equity in the consolidated balance sheets. The number of shares needed to settle the liability for deferred compensation obligations is included in the denominator in both the basic and diluted earnings per share calculations. Employees are generally no longer able to defer the gains from stock options exercised.

Activity in the deferred compensation program for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ was as follows (in millions):


		2023			2022
Three Months Ended June 30:		Shares	Dollars		Shares	Dollars
	2024										2024		2023
Three Months Ended March 31:								Three Months Ended March 31:	Shares	Dollars		Shares		Dollars
Deferred Compensation Obligations:	Deferred Compensation Obligations:
Balance at beginning of period
Balance at beginning of period
Balance at beginning of period	Balance at beginning of period		$	9		$	12
Reinvested dividends	Reinvested dividends		—			1
Benefit payments	Benefit payments		—			(1)
Balance at end of period	Balance at end of period		$	9		$	12
Treasury Stock:	Treasury Stock:
Balance at beginning of period	Balance at beginning of period	—	$	(9)	—	$	(12)
Balance at beginning of period
Balance at beginning of period
Reinvested dividends	Reinvested dividends	—	—		—	(1)
Benefit payments	Benefit payments	—	—		—	1
Balance at end of period	Balance at end of period	—	$	(9)	—	$	(12)

2023 2022
Six Months Ended June 30: Shares Dollars Shares Dollars
Deferred Compensation Obligations:
Balance at beginning of period $ 13 $ 16
Reinvested dividends — 1
Benefit payments (4) (5)
Balance at end of period $ 9 $ 12
Treasury Stock:
Balance at beginning of period — $ (13) — $ (16)
Reinvested dividends — — — (1)
Benefit payments — 4 — 5
Balance at end of period — $ (9) — $ (12)

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13. SEGMENT INFORMATION

We have two reportable segments: U.S. Domestic Package and International Package, which are together referred to as our global small package operations. Our remaining businesses are reported as Supply Chain Solutions. Global small package operations represent our most significant ~~business and are broken down into regional operations around the world. Regional operations managers are responsible for both domestic and export products within their geographic area.~~business. Supply Chain Solutions comprises the results of non-reportable operating segments that do not meet the quantitative and qualitative criteria of a reportable segment as defined under ASC Topic 280 – Segment Reporting.

U.S. Domestic Package

U.S. Domestic Package operations include the time-definite delivery of letters, documents and packages throughout the United States.

International Package

International Package operations include delivery to more than ~~220~~200 countries and territories worldwide, including shipments wholly outside the United States, as well as shipments with either origin or destination outside the United States. ~~Our~~ International Package ~~reporting segment~~ includes our operations in ~~Asia,~~ Europe, the Indian sub-continent, ~~the~~ Middle East and Africa ("EMEA"), Canada and Latin ~~America.~~America (together "Americas") and Asia.

Supply Chain Solutions

Supply Chain Solutions includes our Forwarding, Logistics, ~~UPS Mail Innovations, Coyote, Healthcare~~digital and other businesses. Our Forwarding ~~Logistics~~ and ~~UPS Mail Innovations~~Logistics businesses provide services in more than 200 countries and territories worldwide and include international air and ocean freight forwarding, truckload brokerage, customs brokerage, mail services, healthcare logistics, distribution and post-sales services. Our digital businesses leverage technology to enable a range of on-demand services ~~mail~~such as same-day delivery, end-to-end return services and ~~consulting services. Coyote offers truckload brokerage services primarily in the United States. Our Healthcare businesses provide~~integrated supply chain ~~solutions to the healthcare~~ and ~~life sciences industries. Other businesses within Supply Chain Solutions include The UPS Store, UPS Capital, Roadie and Delivery Solutions.~~high-value shipment insurance solutions.

In evaluating financial performance, we focus on operating profit as a segment’s measure of profit or loss. Operating profit is before investment income ~~(expense)~~ and other, interest expense and income tax expense. Certain expenses are allocated between the segments using activity-based costing methods. These activity-based costing methods require us to make estimates that impact the amount of each expense category that is attributed to each segment. Changes in these estimates directly impact the amount of expense allocated to each segment, and therefore the operating profit of each reporting segment. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses. There were no significant changes to our allocation methodologies in the ~~second~~first quarter ~~or year-to-date periods.~~of 2024.

Results of operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022 are~~were as follows (in millions):


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
		2023		2022		2023		2022		2024	2023
Revenue:	Revenue:
U.S. Domestic Package
U.S. Domestic Package
U.S. Domestic Package	U.S. Domestic Package	$	14,396	$	15,459	$	29,383	$	30,583
International Package	International Package	4,415		5,073		8,958		9,949
Supply Chain Solutions	Supply Chain Solutions	3,244		4,234		6,639		8,612
Consolidated revenue	Consolidated revenue	$	22,055	$	24,766	$	44,980	$	49,144
Operating Profit:	Operating Profit:
U.S. Domestic Package	U.S. Domestic Package	$	1,602	$	1,829	$	3,068	$	3,491
U.S. Domestic Package
U.S. Domestic Package
International Package	International Package	883		1,193		1,711		2,309
Supply Chain Solutions	Supply Chain Solutions	295		513		542		986
Consolidated operating profit	Consolidated operating profit	$	2,780	$	3,535	$	5,321	$	6,786

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. EARNINGS PER SHARE

The earnings per share amounts are the same for class A and class B common shares as the holders of each class are legally entitled to equal per-share distributions whether through dividends or in liquidation.

The following table sets forth the computation of basic and diluted earnings per share for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in millions, except per share amounts):




		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
		2023		2022		2023		2022			2024	2023
Numerator:	Numerator:
Net income attributable to common shareowners	Net income attributable to common shareowners	$	2,081	$	2,849	$	3,976	$	5,511
Net income attributable to common shareowners
Net income attributable to common shareowners
Denominator:	Denominator:
Weighted average shares		857		871		858		871
Weighted-average shares
Weighted-average shares
Weighted-average shares

Vested portion of restricted units		3		3		3		3
Vested portion of restricted shares
Vested portion of restricted shares
Vested portion of restricted shares
Denominator for basic earnings per share	Denominator for basic earnings per share	860		874		861		874
Effect of dilutive securities:	Effect of dilutive securities:
Restricted units		1		1		1		3
Restricted performance units
Restricted performance units
Restricted performance units
Stock options	Stock options	—		1		1		1
Denominator for diluted earnings per share	Denominator for diluted earnings per share	861		876		863		878
Basic earnings per share		$	2.42	$	3.26	$	4.62	$	6.31
Diluted earnings per share		$	2.42	$	3.25	$	4.61	$	6.28
Basic earnings per share(1)
Diluted earnings per share(1)

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

Diluted earnings per share for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ excluded the effect of ~~0.2~~0.5 and ~~0.1~~0.2 million shares of common stock, respectively, that may be issued upon the exercise of employee stock options because such effect would be antidilutive.

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NOTE 15. DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT

Risk Management Policies

Changes in fuel prices, interest rates and foreign currency exchange rates impact our results of operations and we actively monitor these exposures. Where deemed appropriate, to manage the impact of these exposures on earnings and/or cash flows, we may enter into a variety of derivative financial instruments. We do not hold or issue derivative financial instruments for trading or speculative purposes.

Credit Risk Management

The forward contracts, swaps and options discussed below contain an element of risk that the counterparties may be unable to meet the terms of the agreements. We seek to minimize such risk exposures for these instruments by limiting the counterparties to banks and financial institutions that meet established credit guidelines. We may further manage credit risk through the use of ~~zero threshold~~ bilateral collateral provisions and/or early termination rights utilizing master netting arrangements, whereby cash is exchanged based on the net fair value of derivatives associated with each counterparty. The majority of these arrangements require exchange of collateral when positions exceed $250 million.

As of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, we held cash collateral of ~~$238~~$82 and ~~$534~~$103 million, respectively, under these agreements. This collateral is included in Cash and cash equivalents in the consolidated balance sheets and is unrestricted. As of ~~June 30, 2023, we were~~March 31, 2024, no collateral was required to ~~post $1 million~~be posted with our counterparties. As of December 31, ~~2022, no collateral was~~2023, we were required to ~~be posted~~post $13 million with our counterparties.

Types of Hedges

Commodity Risk Management

Currently, the fuel surcharges that we apply in our domestic and international package businesses are the primary means of reducing the risk of adverse fuel price changes on our business. In order to mitigate the impact of fuel surcharges imposed on us by outside carriers, we regularly adjust the rates we charge for our freight brokerage services.

Foreign Currency Risk Management

To protect against the reduction in value of forecasted foreign currency cash flows from our international package business, we maintain a foreign currency cash flow hedging program. Our most significant foreign currency exposures relate to the Euro, British Pound Sterling, Canadian Dollar, Chinese Renminbi and Hong Kong Dollar. We generally designate and account for these contracts as cash flow hedges of anticipated foreign currency denominated revenue.

We may also hedge portions of our anticipated cash settlements of principal and interest on certain foreign currency denominated debt. We generally designate and account for these contracts as cash flow hedges of forecasted foreign currency denominated transactions.

We hedge our net investment in certain foreign operations with foreign currency denominated debt instruments.

Interest Rate Risk Management

We may use a combination of derivative instruments to manage the fixed and floating interest rate mix of our total debt portfolio and related overall cost of borrowing.

We generally designate and account for interest rate swaps that convert fixed-rate interest payments into floating-rate interest payments as fair value hedges of the associated debt instruments. We designate and account for interest rate swaps that convert floating-rate interest payments into fixed-rate interest payments as cash flow hedges of the forecasted payment obligations.

We may periodically hedge the forecasted fixed-coupon interest payments associated with anticipated debt offerings by using forward starting interest rate swaps, interest rate locks or similar derivatives.

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Outstanding Positions

As of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the notional amounts of our outstanding derivative positions were as follows (in millions):

June 30,
2023

December 31,
2022

March 31,
2024

December 31,
2023

Currency hedges:

Euro

EUR

3,778

4,115

British Pound Sterling

GBP

733

856

Canadian Dollar

CAD

1,470

1,598

Hong Kong Dollar

HKD

3,553

4,261

Interest rate hedges:

Floating to Fixed Interest Rate Swaps

USD

As of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, we had no outstanding commodity hedge positions.

Balance Sheet Recognition

The following table indicates the location in the consolidated balance sheets where our derivative assets and liabilities have been recognized, the fair value hierarchy level applicable to each derivative type and the related fair values of those derivatives.

We have master netting arrangements with substantially all of our counterparties giving us the right of offset for our derivative positions. However, we have not elected to offset the fair value positions of our derivative contracts recorded in the consolidated balance sheets. The columns labeled Net Amounts if Right of Offset had been Applied indicate the potential net fair value positions by type of contract and location in the consolidated balance sheets had we elected to apply the right of offset as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 (in millions):

Fair Value Hierarchy Level

Gross Amounts Presented in Consolidated Balance Sheets

Net Amounts if Right of
Offset had been Applied

Fair Value Hierarchy Level

Gross Amounts Presented in Consolidated Balance Sheets

Net Amounts if Right of
Offset had been Applied

Asset Derivatives

Balance Sheet Location

Fair Value Hierarchy Level

June 30,
2023

December 31,
2022

June 30,
2023

December 31,
2022

Asset Derivatives

Balance Sheet Location

March 31,
2024

December 31,
2023

March 31,
2024

December 31,
2023

Derivatives designated as hedges:

Foreign currency exchange contracts

Other current assets

Level 2

116

174

100

171

Foreign currency exchange contracts

Other non-current assets

Level 2

127

250

226

Foreign currency exchange contracts

Derivatives not designated as hedges:

Foreign currency exchange contracts

Other current assets

Level 2

—

Total Asset Derivatives

243

425

189

398

Total Asset Derivatives

Fair Value Hierarchy Level Gross Amounts Presented in
Consolidated Balance Sheets Net Amounts if Right of
Offset had been Applied
Liability Derivatives Balance Sheet Location June 30,
2023 December 31,
2022 June 30,
2023 December 31,
2022
Derivatives designated as hedges:
Foreign currency exchange contracts Other current liabilities Level 2 $ 16 $ 3 $ — $ —
Foreign currency exchange contracts Other non-current liabilities Level 2 39 24 1 —
Interest rate contracts Other non-current liabilities Level 2 5 5 5 5
Derivatives not designated as hedges:
Foreign currency exchange contracts Other current liabilities Level 2 — — — —
Total Liability Derivatives $ 60 $ 32 $ 6 $ 5

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~~UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~


		Fair Value Hierarchy Level	Gross Amounts Presented in Consolidated Balance Sheets				Net Amounts if Right of Offset had been Applied
Liability Derivatives	Balance Sheet Location		March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023
Derivatives designated as hedges:
Foreign currency exchange contracts	Other current liabilities	Level 2	$	11	$	26	$	1	$	4


Foreign currency exchange contracts	Other non-current liabilities	Level 2	23		65		—		21

Derivatives not designated as hedges:



Foreign currency exchange contracts	Other non-current liabilities	Level 2	—		1		—		1

Total Liability Derivatives			$	34	$	92	$	1	$	26

Our foreign currency exchange rate ~~interest rate and investment market price~~ derivatives are largely comprised of over-the-counter derivatives, which are primarily valued using pricing models that rely on market observable inputs such as yield curves, foreign currency exchange rates and investment forward prices; therefore, these derivatives are classified as Level 2.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheet Location of Hedged Item in Fair Value Hedges

The following table indicates the amounts that were recorded in the consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 (in millions):

Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included

Carrying Amount
of Hedged Liabilities

Cumulative Amount
of Fair Value Hedge
Adjustments

Carrying Amount
of Hedged Liabilities

Cumulative Amount
of Fair Value Hedge
Adjustments

Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included

Carrying Amount
of Hedged Liabilities

Cumulative Amount
of Fair Value Hedge
Adjustments

Carrying Amount
of Hedged Liabilities

Cumulative Amount
of Fair Value Hedge
Adjustments

June 30, 2023

December 31, 2022

March 31, 2024

December 31, 2023

Long-term debt and finance leases

280

Long-term debt and finance leases

Income Statement and AOCI Recognition of Designated Hedges

The following table indicates the amount of gains (losses) that have been recognized in the statements of consolidated income for fair value and cash flow hedges, as well as the associated gain (loss) for the underlying hedged item for fair value hedges for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in millions):

Three Months Ended June 30,
Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships 2023 2022
Revenue Interest Expense Investment Income and Other Revenue Interest Expense Investment Income and Other
Gain or (loss) on fair value hedging relationships:
Interest Contracts:
Hedged items $ — $ — $ — $ — $ 3 $ —
Derivatives designated as hedging instruments — — — — (3) —
Gain or (loss) on cash flow hedging relationships:
Interest Contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income — (2) — — (2) —
Foreign Currency Exchange Contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income 51 — — 67 — —
Total amounts of income and expense line items presented in the statement of income in which the effects of fair value or cash flow hedges are recorded $ 51 $ (2) $ — $ 67 $ (2) $ —

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~~UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

Six Months Ended June 30,

2023 2022
Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships Revenue Interest Expense Investment Income and Other Revenue Interest Expense Investment Income and Other
Gain (loss) on fair value hedging relationships:
Interest Rate Contracts:
Hedged items $ — $ — $ — $ — $ 11 $ —
Derivatives designated as hedging instruments — — — — (11) —
Gain (loss) on cash flow hedging relationships:
Interest Rate Contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income — (3) — — (5) —
Foreign Currency Exchange Contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income 119 — — 108 — —
Total amounts of income and expense line items presented in the statement of income in which the effects of fair value or cash flow hedges are recorded $ 119 $ (3) $ — $ 108 $ (5) $ —



	Three Months Ended March 31,
Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships	2024						2023
	Revenue		Interest Expense		Investment Income and Other		Revenue		Interest Expense		Investment Income and Other




Gain or (loss) on cash flow hedging relationships:
Interest Contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income	—		(1)		—		—		(1)		—
Foreign Currency Exchange Contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income	41		—		—		68		—		—
Total amounts of income and expense line items presented in the statement of income in which the effects of fair value or cash flow hedges are recorded	$	41	$	(1)	$	—	$	68	$	(1)	$	—

The following table indicates the amount of gains (losses) that have been recognized in AOCI for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ for those derivatives designated as cash flow hedges (in millions):


Three Months Ended June 30:
Three Months Ended March 31:
Three Months Ended March 31:
Three Months Ended March 31:
Derivative Instruments in Cash Flow Hedging Relationships	Derivative Instruments in Cash Flow Hedging Relationships		Amount of Gain (Loss) Recognized in AOCI on Derivatives
			2023		2022
Interest rate contracts			$	—	$	1
Derivative Instruments in Cash Flow Hedging Relationships

		2024
		2024

Foreign currency exchange contracts

Foreign currency exchange contracts

Foreign currency exchange contracts	Foreign currency exchange contracts		(57)		371

Total	Total		$	(57)	$	372

Six Months Ended June 30:
Derivative Instruments in Cash Flow Hedging Relationships			Amount of Gain (Loss) Recognized in AOCI on Derivatives
			2023		2022
Interest rate contracts			$	—	$	4
Foreign currency exchange contracts			(91)		463
Total

Total	Total		$	(91)	$	467

As of ~~June 30, 2023,~~March 31, 2024, there were ~~$94~~$106 million of pre-tax gains related to cash flow hedges deferred in AOCI that are expected to be reclassified to income over the 12-month period ending ~~June 30, 2024.~~March 31, 2025. The actual amounts that will be reclassified to income over the next 12 months will vary from this amount as a result of changes in market conditions. The maximum term over which we are hedging exposures to the variability of cash flows is approximately 93 years.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table indicates the amount of gains (losses) that have been recognized in AOCI within foreign currency translation adjustment for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ for those instruments designated as net investment hedges (in millions):


Three Months Ended June 30:
Three Months Ended March 31:
Non-derivative Instruments in Net Investment Hedging Relationships

Non-derivative Instruments in Net Investment Hedging Relationships	Non-derivative Instruments in Net Investment Hedging Relationships	Amount of Gain (Loss) Recognized in AOCI on Debt				Non-derivative Instruments in Net Investment Hedging Relationships		Amount of Gain (Loss) Recognized in AOCI on Debt
		2023		2022			2024		2023
Foreign currency denominated debt	Foreign currency denominated debt	$	(25)	$	181
Total	Total	$	(25)	$	181

Six Months Ended June 30:
Non-derivative Instruments in Net Investment Hedging Relationships		Amount of Gain (Loss) Recognized in AOCI on Debt
		2023		2022
Foreign currency denominated debt		$	(98)	$	227
Total		$	(98)	$	227

Income Statement Recognition of Non-Designated Derivative Instruments

Derivative instruments that are not designated as hedges are recorded at fair value with unrealized gains and losses reported in earnings each period. Cash flows from the settlement of derivative instruments appear in the ~~statement~~statements of consolidated cash flows within the same categories as the cash flows of the hedged item.

We may periodically terminate interest rate swaps and foreign currency exchange forward contracts or enter into offsetting swap and foreign currency positions with different counterparties. As part of this process, we de-designate our original hedge relationship.

Amounts recorded in the statements of consolidated income related to fair value changes and settlements of ~~interest rate swaps and~~ foreign currency forward contracts not designated as hedges for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in millions) were as follows:

Derivative Instruments Not Designated in
Hedging Relationships Location of Gain (Loss)
Recognized in Income Amount of Gain (Loss) Recognized in Income
2023 2022
Three Months Ended June 30:
Foreign currency exchange contracts Investment income and other $ (1) $ (58)
Total $ (1) $ (58)
Six Months Ended June 30:
Foreign currency exchange contracts Investment income and other $ 3 $ (86)
Total $ 3 $ (86)


Derivative Instruments Not Designated in Hedging Relationships	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Income
		2024		2023
Three Months Ended March 31:



Foreign currency exchange contracts	Investment income and other	$	(5)	$	4


Total		$	(5)	$	4

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16. INCOME TAXES

Our effective tax rate ~~increased to 23.5% in~~for the ~~second quarter from 22.9% in the same period of 2022 (24.2% year to date compared to 22.3% in 2022).~~three months ended March 31, 2024 and 2023 was approximately 27.5% and 24.9%, respectively. The year-over-year increase in our effective tax rate was driven by ~~lower excess tax benefits related to~~ share-based compensation shortfalls, unfavorable changes in ~~jurisdictional earnings mix and~~ uncertain tax ~~positions.~~positions and a non-deductible expense related to a regulatory matter.

We have recognized liabilities for uncertain tax positions and we reevaluate these uncertain tax positions on a quarterly basis. A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months, however, an estimate of the range of reasonably possible outcomes cannot be made. Items that may cause changes to unrecognized tax benefits include the allowance or disallowance of deductions, the timing of deductions and the allocation of income and expense between tax jurisdictions. ~~These changes~~Changes could result from the settlement of ongoing litigation, the completion of ongoing examinations, the expiration of ~~the statute~~statutes of limitations or other unforeseen circumstances. ~~Over the next twelve months, it is reasonably possible that the amount of unrecognized tax benefits may decrease by up to $186 million.~~

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. TRANSFORMATION ~~STRATEGY~~ COSTS

We are undertaking an enterprise-wide transformation of our organization that includes initiatives, as well as changes in processes and technology, that impact global direct and indirect operating costs. ~~During~~In 2023, we announced our "fit to serve" initiative, which is intended to right-size our business for the ~~quarter, we began implementing staffing adjustment initiatives~~future through a workforce reduction of approximately 12,000 positions and create a more efficient operating model to ~~reduce our overhead cost and better align direct labor headcount with volumes.~~enhance responsiveness to changing market dynamics. As of ~~June 30,~~March 31, 2024 and December 31, 2023, ~~we recorded~~ an accrual for separation costs of ~~$85~~$87 and $205 million, ~~on the~~respectively, was included in our consolidated balance ~~sheet. We expect substantially~~sheets, all of ~~these costs will be paid by December 31, 2023.~~which we expect to pay during 2024.

The table below presents transformation ~~strategy~~ costs for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in millions):

Three Months Ended
June 30, Six Months Ended
June 30,
2023 2022 2023 2022
Transformation Strategy Costs:
Compensation and benefits $ 109 $ 23 $ 97 $ 56
Total other expenses 30 18 45 40
Total Transformation Strategy Costs $ 139 $ 41 $ 142 $ 96
Income Tax Benefit from Transformation Strategy Costs (33) (10) (33) (22)
After-Tax Transformation Strategy Costs $ 106 $ 31 $ 109 $ 74


	Three Months Ended March 31,
		2024		2023
Transformation Costs:
Compensation and benefits		$	31	$	(12)
Other expenses		15		15
Total Transformation Costs		$	46	$	3

Income Tax Benefit from Transformation Costs		(11)		—
After-Tax Transformation Costs		$	35	$	3

The income tax effects of transformation ~~strategy~~ costs are calculated by multiplying the amount of the adjustments by the statutory tax rates applicable in each tax jurisdiction.

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~~UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE 18. SUBSEQUENT EVENTS~~

On July 25, 2023, we reached a tentative new national master agreement with the Teamsters that provides us with the flexibility we need to continue to innovate and deliver industry-leading customer service. The economic provisions in the tentative new national master agreement include pay and benefit increases for both our part-time and full-time Teamster employees, as well as workplace enhancements for employees. Subject to ratification by our Teamster-represented employees, the new agreements will be retroactively effective as of August 1, 2023.

As of the date hereof, we cannot provide any assurances as to the timing or certainty of ratification. The Teamsters have indicated publicly, however, that the ratification voting process will conclude by August 22. The failure by Teamster employees to ratify the new national master agreement could have a material adverse effect on our business, financial condition and results of operations.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

As the world's premier package delivery company and a leading provider of global supply chain management solutions, we seek to provide industry-leading service to our customers by combining our digital capabilities with our global integrated network. UnderThrough our Customer First, People Led, Innovation Driven strategy we are ~~continuing~~investing to ~~invest~~grow in ~~our business to improve~~ the ~~customer experience, increase productivity~~premium parts of the market and drive ~~growth in targeted customer segments.~~

Inefficiency across our network. We are focused on the ~~second quarter, we continued~~parts of the ~~global expansion of~~market that value our ~~Digital Access Program to make it easier for e-commerce platforms~~end-to-end integrated network, including healthcare, commercial shippers and small- and medium-sized businesses ("SMBs") ~~to do business with us. We continued deploying~~. Through our ~~Smart Package-Smart~~Network of the Future ~~Facility~~ ~~technology, added to~~initiative, we are transforming our network by combining physical and digital capabilities, including our smart package smart facility RFID solution, to streamline our operations. We are also leveraging technology to add new capabilities and expand our addressable market.

During the first quarter, we took a number of ~~dedicated~~steps in furtherance of this strategy. For example, we expanded our no box, no label returns service that combines the reach and capabilities of The UPS Store and Happy Returns, and we launched Roadie XD, adding capabilities for big and bulky long-zone deliveries for items that are incompatible with our small package network. Additionally, we continued to develop capabilities to enhance our SMB customer experience. In furtherance of our healthcare ~~distribution facilities and continued~~strategy, we opened a new facility at our global air hub specifically designed for complex healthcare shipments. For the remainder of 2024, we expect to continue investment in our network to drive further operational efficiencies.

On April 1, 2024, we announced that we entered into an agreement to expand our ~~joint venture in India's domestic market.~~

~~Macroeconomic headwinds, including persistent global inflation, declines in U.S. manufacturing production and volume diversion resulting from our labor negotiations~~relationship with the ~~Teamsters, led~~U.S. Postal Service ("USPS"), providing for UPS to ~~a challenging operating environment in~~become the ~~second quarter and year-to-date periods. Internationally,~~USPS primary air cargo provider within the ~~economic recovery in Asia slowed during the second quarter, while conditions in Europe remained challenging throughout the period.~~

These factors led to volume declines in our global small package operations for both the quarter and year to date, and we anticipate that they will continue to impact us throughout the remainder of the year.

Notwithstanding the challenging external environment, we managed our network with agility, focused on productivity and controlled cost to deliver operating profit that was in line with our expectations. Additionally, we returned cash to shareowners through dividends and share repurchases and continued to make long-term investments to support our strategy.

On July 25, 2023, we reached a tentative new national master agreement with the International Brotherhood of Teamsters. For additional information, see note 18 to the accompanying unaudited, consolidated financial statements.United States.

We have two reportable segments: U.S. Domestic Package and International ~~Package.~~Package, which are together referred to as our global small package operations. Our remaining businesses are reported as Supply Chain Solutions.

During the first quarter of 2024, the macroeconomic environment remained challenging. Persistent soft demand, lack of growth in industrial production and continuing inflationary pressures contributed to volume declines in our global small package operations, although we experienced pockets of growth in certain markets and trade lanes. In Supply Chain Solutions, our freight forwarding businesses continued to be negatively impacted by soft demand and market overcapacity. Somewhat offsetting this was increased revenue in our logistics businesses, driven by growth in our healthcare operations and the impact of the acquisition of MNX Global Logistics in the fourth quarter of 2023.

We expect our second quarter earnings to be lower relative to 2023, primarily due to the higher labor costs associated with the first year of the Teamsters contract. However, we anticipate a return to operating profit growth during the second half of 2024.

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RESULTS OF OPERATIONS

Highlights of our consolidated results, which are discussed in more detail below, include:






		Three Months Ended June 30,						Change				Six Months Ended June 30,						Change
		2023			2022			$		%		2023			2022			$		%
Revenue (in millions)	Revenue (in millions)	$	22,055		$	24,766		$	(2,711)	(10.9)	%	$	44,980		$	49,144		$	(4,164)	(8.5)	%
Revenue (in millions)
Revenue (in millions)
Operating Expenses (in millions)
Operating Expenses (in millions)
Operating Expenses (in millions)	Operating Expenses (in millions)	19,275			21,231			(1,956)		(9.2)	%	39,659			42,358			(2,699)		(6.4)	%
Operating Profit (in millions)	Operating Profit (in millions)	$	2,780		$	3,535		$	(755)	(21.4)	%	$	5,321		$	6,786		$	(1,465)	(21.6)	%
Operating Profit (in millions)
Operating Profit (in millions)
Operating Margin
Operating Margin
Operating Margin	Operating Margin	12.6		%	14.3		%					11.8		%	13.8		%
Net Income (in millions)	Net Income (in millions)	$	2,081		$	2,849		$	(768)	(27.0)	%	$	3,976		$	5,511		$	(1,535)	(27.9)	%
Net Income (in millions)
Net Income (in millions)
Basic Earnings Per Share	Basic Earnings Per Share	$	2.42		$	3.26		$	(0.84)	(25.8)	%	$	4.62		$	6.31		$	(1.69)	(26.8)	%
Basic Earnings Per Share
Basic Earnings Per Share
Diluted Earnings Per Share
Diluted Earnings Per Share
Diluted Earnings Per Share	Diluted Earnings Per Share	$	2.42		$	3.25		$	(0.83)	(25.5)	%	$	4.61		$	6.28		$	(1.67)	(26.6)	%

Operating Days	Operating Days	64			64							128			128

Operating Days

Operating Days
Average Daily Package Volume (in thousands)
Average Daily Package Volume (in thousands)
Average Daily Package Volume (in thousands)	Average Daily Package Volume (in thousands)	20,902			23,071					(9.4)	%	21,445			23,175					(7.5)	%
Average Revenue Per Piece	Average Revenue Per Piece	$	13.92		$	13.72		$	0.20	1.5	%	$	13.83		$	13.49		$	0.34	2.5	%
Average Revenue Per Piece
Average Revenue Per Piece

•Average daily package volume ~~and revenue~~ in our global small package operations decreased, ~~for the quarter and year to date,~~ with declines in both commercial and residential shipments across all of our product segments. These declines were primarily ~~as a~~the result of the ~~external conditions~~challenging macroeconomic conditions.

•Revenue declined as well, driven by lower volume and ~~labor-related uncertainties described herein.~~relatively flat revenue per piece.

•Operating expenses decreased, ~~for the quarter and year~~due to ~~date, driven by~~ a reduction in purchased transportation in ~~Supply Chain Solutions~~all segments and reductions in fuel ~~expense~~expenses in our small package operations, as well as the impact of our ongoing productivity initiatives.

•Operating profit and operating margin decreased ~~for the quarter and year to date,~~ as revenue declines were greater than operating expense reductions.

•We reported ~~second quarter~~ net income of ~~$2.1~~$1.1 billion and diluted earnings per share of ~~$2.42 per share ($4.0 billion and $4.61 per share, year to date).~~$1.30. Adjusted diluted earnings per share were ~~$2.54 per share~~$1.43 after adjusting for ~~the second quarter, which includes~~ the after-tax impacts of of:

◦transformation ~~strategy~~and other costs of ~~$106~~$75 million, or ~~$0.12~~$0.09 per diluted ~~share. Year to date, adjusted diluted earnings per~~ share, ~~were $4.74 per share, including the after-tax impacts of transformation strategy costs~~ and ~~goodwill~~

◦asset impairment charges of ~~$115~~$35 million, or ~~$0.13~~$0.04 per diluted share.

~~In the~~Within our segments, U.S. Domestic Package revenues and expenses were primarily impacted by the matters described above, with expense decreases partially offset by increases in union workforce compensation and benefits expense.

International Package segment ~~revenue~~revenues were also impacted by declines ~~for the quarter~~in demand related surcharges and ~~year to date were driven by lower volume and fuel surcharge revenue. These were somewhat~~currency fluctuations, partially offset by revenue per piece growth due to increases in base rates ~~improvements~~and changes in ~~revenue quality~~product and customer mix. Expenses for the quarter and year to date decreased, primarily due to a reduction in hours for union employees, lower management compensation expense, and declines in fuel expense and purchased transportation.

In our International Package segment, revenue declines for the quarter and year to date were driven by lower volume and declines in fuel and demand-related surcharges. Expense decreases for the quarter and year to date were primarily driven by lower fuel expense and purchased transportation as a result of volume declines and lower fuel prices.

In Supply Chain Solutions, revenue decreases ~~for the quarter and year to date~~ were driven by volume and market rate declines in Forwarding, ~~that were slightly~~somewhat offset by growth in our Logistics ~~including the impact of the Bomi Group acquisition that occurred in the fourth quarter of 2022.~~businesses. Expenses decreased ~~for the quarter and year~~primarily due to ~~date, primarily driven by~~ lower purchased transportation expense in ~~Forwarding. This was slightly~~Forwarding, partially offset by expense increases within Logistics.

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Supplemental Information - Items Affecting Comparability

We supplement the reporting of our financial information determined under generally accepted accounting principles in the United States ("GAAP") with certain non-GAAP financial measures. Non-GAAP financial measures 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. As a result, we believe excluding the impact of these items better enables users of our financial statements to view and evaluate underlying business performance from the perspective of management.

Adjusted financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our 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.

Adjusted amounts reflect the following (in millions):
Three Months Ended
June 30, Six Months Ended
June 30,
Non-GAAP Adjustments 2023 2022 2023 2022
Operating Expenses:
Transformation Strategy Costs $ 139 $ 41 $ 142 $ 96
Goodwill and Asset Impairments, and Divestiture Charges — — 8 —
Total Adjustments to Operating Expenses $ 139 $ 41 $ 150 $ 96
Other Income and (Expense):
Defined Benefit Plan (Gains) Losses $ — $ — $ — $ (33)
Total Adjustments to Other Income and (Expense) $ — $ — $ — $ (33)
Total Adjustments to Income Before Income Taxes $ 139 $ 41 $ 150 $ 63
Income Tax (Benefit) Expense:
Transformation Strategy Costs $ (33) $ (10) $ (33) $ (22)
Goodwill and Asset Impairments, and Divestiture Charges — — (2) —
Defined Benefit Plan (Gains) Losses — — — 9
Total Adjustments to Income Tax (Benefit) Expense $ (33) $ (10) $ (35) $ (13)
Total Adjustments to Net Income $ 106 $ 31 $ 115 $ 50


	Three Months Ended March 31,
Non-GAAP Adjustments		2024		2023
Operating Expenses:
Transformation and Other Costs		$	86	$	3
Asset Impairment Charges		48		8
Total Adjustments to Operating Expenses		$	134	$	11




Total Adjustments to Income Before Income Taxes		$	134	$	11

Income Tax (Benefit) Expense:
Transformation and Other Costs		$	(11)	$	—
Asset Impairment Charges		(13)		(2)
Total Adjustments to Income Tax (Benefit) Expense		$	(24)	$	(2)

Total Adjustments to Net Income		$	110	$	9

The income tax impacts of these items are calculated at the statutory tax rates applicable in each tax jurisdiction.

Transformation ~~Charges,~~ and ~~Goodwill,~~Other Costs, and Asset Impairment ~~and Divestiture~~ Charges

We supplement the presentation of our operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of charges related to transformation and other activities, and ~~goodwill,~~ asset impairment and divestiture charges. We believe excluding the impact of these charges better enables users of our financial statements to view and evaluate underlying business performance from the perspective of management. We do not consider these costs when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards.impairments. For more information regarding transformation ~~activities,~~activity charges, see note 17 to the unaudited, consolidated financial statements, for other charges, see note 11 to the unaudited, consolidated financial statements, and for ~~goodwill~~asset impairment charges, see note 8 to the unaudited, consolidated financial statements.

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~~Foreign Currency Exchange Rate Changes~~Defined Benefit Pension and ~~Hedging Activities~~

We supplement the reporting of revenue, revenue per piece and operating profit with adjusted measures that exclude the period-over-period impact of foreign currency exchange rate changes and hedging activities. We believe currency-neutral revenue, revenue per piece and operating profit information allows users of our financial statements to understand growth trends in our products and results. We evaluate the performance of International Package and Supply Chain Solutions on this currency-neutral basis.

Currency-neutral revenue, revenue per piece and operating profit are calculated by dividing current period reported U.S. Dollar revenue, revenue per piece and operating profit by the current period average exchange rates to derive current period local currency revenue, revenue per piece and operating profit. The derived amounts are then multiplied by the average foreign currency exchange rates used to translate the comparable results for each month in the prior year period (including the period-over-period impact of foreign currency hedging activities). The difference between the current period reported U.S. Dollar revenue, revenue per piece and operating profit and the derived current period U.S. Dollar revenue, revenue per piece and operating profit is the period-over-period impact of currency fluctuations.

~~Defined Benefit~~Postretirement Medical Plan Gains and Losses

We incur certain employment-related expenses associated with pension and postretirement medical benefits. These pension and postretirement medical benefits costs for company-sponsored defined benefit plans are calculated using various actuarial assumptions and methodologies, including discount rates, expected returns on plan assets, healthcare cost trend rates, inflation, compensation increase rates, mortality rates and coordination of benefits with plans not sponsored by UPS. Actuarial assumptions are reviewed on an annual basis, unless circumstances require an interim remeasurement of any of our plans.

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 pension and postretirement defined benefit plans immediately as part of Investment income and other in the statements of consolidated income. We supplement the presentation of our income before income taxes, net income and earnings per share with 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 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.

During the first quarter of 2022, we amended the UPS Canada Ltd. Retirement Plan to cease future benefit accruals effective December 31, 2023. As a result, we remeasured the plan's assets and benefit obligation resulting in a curtailment~~gain of $33 million ($24 million after-tax) for the six months ended June 30, 2022.~~

For additional information, ~~refer to~~see note 7 to the unaudited, consolidated financial statements.

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Results of Operations - Segment Review

The results and discussions that follow are reflective of how management monitors and evaluates the performance of our segments as defined in note 13 to the unaudited, consolidated financial statements.

Certain operating expenses are allocated between our reporting segments using activity-based costing methods. These activity-based costing methods require us to make estimates that impact the amount of each expense category that is attributed to each segment. Changes in these estimates would directly impact the amount of expense allocated to each segment and therefore the operating profit of each reporting segment. Our allocation methodologies are refined periodically, or as necessary to reflect changes in our businesses. ~~There~~While there were no significant changes to our allocation methodologies in the first quarter of 2024, we expect additional air cargo volumes from our recently-announced agreement with the USPS will result in a greater share of air network expense being allocated to Supply Chain Solutions beginning in the second quarter ~~or year-to-date periods.~~of 2024.

As a normal part of managing of our air network, we routinely idle aircraft and engines temporarily for maintenance or to adjust network capacity. As a result of the reduction in volumes experienced induring the ~~first half of 2023,~~quarter, we ~~have identified additional opportunities to~~ temporarily ~~idle~~idled certain aircraft within our network in order to better match capacity with current demand. Temporarily idled assets are classified as held-and-used, and we continue to record depreciation expense for these assets. As of ~~June 30, 2023,~~March 31, 2024, we had ~~four~~eight aircraft temporarily idled for an average period of approximately ~~four~~two months. We expect these aircraft to return to revenue ~~service.~~service during 2024.

We test goodwill and other indefinite-lived intangible assets for impairment annually at July ~~1st~~1 and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the carrying value thereof may be impaired. Testing goodwill and other indefinite-lived intangible assets for impairment requires that we make a number of significant assumptions, including assumptions related to future revenues, costs, capital expenditures, working capital, our cost of capital and market comparables. We are also required to make assumptions relating to our overall business and operating strategy, and the regulatory and market environment.

~~Our business has been negatively impacted by~~Challenging macroeconomic and uncertain geopolitical conditions ~~including rising interest rates and inflationary pressures, that have reduced~~continue to impact demand for our services. While we do not believe it is more likely than not that our reporting units’ fair values are less than their carrying values as of ~~June 30, 2023, if challenging macroeconomic~~March 31, 2024, these external conditions ~~persist, then these~~ or other factors, including market comparables, may negatively impact certain estimates and assumptions that we use in developing our reporting units' fair values. Such impacts may be more pronounced for reporting units whose fair values do not significantly exceed their carrying values. ~~Within~~

As of March 31, 2024, none of our reporting units had indications that an impairment was more likely than not. Approximately $1.5 billion of our consolidated goodwill balance of ~~$4.3~~$4.8 billion ~~certain~~is represented by our Global Freight Forwarding, Coyote and Roadie reporting units ~~within Supply Chain Solutions, including Roadie, whose~~which, based on our quarterly monitoring, are exhibiting a limited excess of fair value ~~exceeded their~~above carrying value ~~by less than 10 percent as~~and reflect a greater risk of ~~the most recent valuation, represented approximately $300 million.~~an impairment occurring in future periods. We do not expect any impairment would have a significant impact on our consolidated financial position, results of operations or cash flows.

Actual reporting unit performance, revisions to our forecasts of ~~reporting unit~~future performance, market factors, changes in estimates or assumptions in connection with our annual testing, or a combination thereof could result in an impairment charge in one or more of our reporting units during ~~the third quarter of 2023 or another~~a future period. We continue to monitor business performance and external factors affecting our reporting units.

Additionally, as of March 31, 2024, the estimated fair value of the indefinite-lived trade name associated with our truckload brokerage business, Coyote, remained greater than its carrying value by less than 10 percent. The carrying value of this trade name is $89 million. During the quarter, our truckload brokerage business continued to be negatively impacted by market conditions, which resulted in revenue declines. We continue to monitor business performance and external factors affecting our valuation assumptions for this trade name. As previously disclosed, we are continuing to evaluate strategic alternatives relating to this business.

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U.S. Domestic Package


		Three Months Ended June 30,						Change				Six Months Ended June 30,						Change
		2023			2022			$		%		2023			2022			$		%


2024
2024
Average Daily Package Volume (in thousands):
Average Daily Package Volume (in thousands):
Average Daily Package Volume (in thousands):	Average Daily Package Volume (in thousands):
Next Day Air	Next Day Air	1,679			1,910					(12.1)	%	1,708			1,928					(11.4)	%
Next Day Air
Next Day Air
Deferred
Deferred
Deferred	Deferred	1,087			1,401					(22.4)	%	1,113			1,455					(23.5)	%
Ground	Ground	14,974			16,374					(8.6)	%	15,385			16,330					(5.8)	%
Ground
Ground
Total Average Daily Package Volume
Total Average Daily Package Volume
Total Average Daily Package Volume	Total Average Daily Package Volume	17,740			19,685					(9.9)	%	18,206			19,713					(7.6)	%
Average Revenue Per Piece:	Average Revenue Per Piece:
Average Revenue Per Piece:
Average Revenue Per Piece:
Next Day Air
Next Day Air
Next Day Air	Next Day Air	$	22.40		$	21.73		$	0.67	3.1	%	$	22.27		$	21.27		$	1.00	4.7	%
Deferred	Deferred	16.80			15.52			1.28		8.2	%	16.59			15.10			1.49		9.9	%
Deferred
Deferred
Ground
Ground
Ground	Ground	11.29			10.89			0.40		3.7	%	11.25			10.77			0.48		4.5	%
Total Average Revenue Per Piece	Total Average Revenue Per Piece	$	12.68		$	12.27		$	0.41	3.3	%	$	12.61		$	12.12		$	0.49	4.0	%
Total Average Revenue Per Piece
Total Average Revenue Per Piece
Operating Days in Period
Operating Days in Period
Operating Days in Period	Operating Days in Period	64			64							128			128
Revenue (in millions):	Revenue (in millions):
Revenue (in millions):
Revenue (in millions):
Next Day Air
Next Day Air
Next Day Air	Next Day Air	$	2,407		$	2,656		$	(249)	(9.4)	%	$	4,868		$	5,250		$	(382)	(7.3)	%
Deferred	Deferred	1,169			1,392			(223)		(16.0)	%	2,363			2,812			(449)		(16.0)	%
Deferred
Deferred
Ground
Ground
Ground	Ground	10,820			11,411			(591)		(5.2)	%	22,152			22,521			(369)		(1.6)	%
Total Revenue	Total Revenue	$	14,396		$	15,459		$	(1,063)	(6.9)	%	$	29,383		$	30,583		$	(1,200)	(3.9)	%
Total Revenue
Total Revenue
Operating Expenses (in millions):
Operating Expenses (in millions):
Operating Expenses (in millions):	Operating Expenses (in millions):
Operating Expenses	Operating Expenses	$	12,794		$	13,630		$	(836)	(6.1)	%	$	26,315		$	27,092		$	(777)	(2.9)	%
Transformation Strategy Costs		(79)			(26)			(53)		203.8	%	(101)			(69)			(32)		46.4	%
Operating Expenses
Operating Expenses
Transformation Costs
Transformation Costs
Transformation Costs
Asset Impairment Charges
Asset Impairment Charges
Asset Impairment Charges
Adjusted Operating Expense
Adjusted Operating Expense
Adjusted Operating Expense	Adjusted Operating Expense	$	12,715		$	13,604		$	(889)	(6.5)	%	$	26,214		$	27,023		$	(809)	(3.0)	%
Operating Profit (in millions) and Operating Margin:	Operating Profit (in millions) and Operating Margin:
Operating Profit (in millions) and Operating Margin:
Operating Profit (in millions) and Operating Margin:
Operating Profit
Operating Profit
Operating Profit	Operating Profit	$	1,602		$	1,829		$	(227)	(12.4)	%	$	3,068		$	3,491		$	(423)	(12.1)	%
Adjusted Operating Profit	Adjusted Operating Profit	$	1,681		$	1,855		$	(174)	(9.4)	%	$	3,169		$	3,560		$	(391)	(11.0)	%
Adjusted Operating Profit
Adjusted Operating Profit
Operating Margin
Operating Margin
Operating Margin	Operating Margin	11.1		%	11.8		%					10.4		%	11.4		%
Adjusted Operating Margin	Adjusted Operating Margin	11.7		%	12.0		%					10.8		%	11.6		%
Adjusted Operating Margin
Adjusted Operating Margin

Revenue

The change in revenue was due to the ~~following factors:~~following:
Volume Rates /
Product Mix Fuel
Surcharge Total Revenue
Change
Revenue Change Drivers:
Second quarter 2023 vs. 2022 (9.9) % 6.1 % (3.1) % (6.9) %
Year to date 2023 vs. 2022 (7.6) % 4.5 % (0.8) % (3.9) %


	Volume		Rates / Product Mix		Fuel Surcharge		Total Revenue Change
Revenue Change Drivers:
First quarter 2024 vs. 2023	(4.2)	%	0.4	%	(1.2)	%	(5.0)	%

Revenue was also negatively impacted by having one less operating day in the first quarter of 2024.

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Volume

Average daily volume decreased, ~~in the second quarter and year to date,~~ with reductions in both residential and commercial ~~shipments. In both periods, challenging external~~volume. Challenging macroeconomic conditions, including ~~persistent inflation, declines~~weakness in ~~U.S.~~ manufacturing ~~production and changes in consumer spending contributed to~~output, drove the overall volume ~~declines. During the second quarter, volume was also negatively impacted by uncertainty around the results of our labor negotiations with the Teamsters.~~decline. We ~~expect~~anticipate that year-over-year average daily volume towill increase each quarter for the remainder of 2024.

Business-to-consumer volume declined 1.5% in the ~~second half of 2023 compared to the first half of the year, and the year-over-year decline in average daily volume to be lower in the second half than in the first half.~~

~~Business-to-consumer shipments declined 11.5% in the second~~ quarter ~~(down 8.5% year to date), primarily due to a reduction in discretionary consumer spending~~ as a result of the ~~headwinds~~factors discussed above, ~~as well as~~with declines from both large customers and SMBs.

Business-to-business volume declined 5.5% in the ~~impact~~quarter for the reasons described above, driven by declines across a number of sectors including retail, technology and manufacturing. Returns volume increased in the quarter, partially attributable to our addressable market expansion with capabilities like no box, no label returns through Happy Returns and the convenience of our labor negotiations with the Teamsters. For both the quarter and year to date, residential volume declines from SMBs were lower than from our large customers, which was partially due to continued growth in our Digital Access Program. Volume from our largest customer declined for both the second quarter and year to date as planned under our contract terms.

Business-to-business shipments declined 7.7% (down 6.5% year to date) primarily as a result of declines across multiple industry sectors that are sensitive to the factors discussed above. Uncertainty around our labor contract also negatively impacted volume in the second quarter. Returns volume remained relatively flat for the second quarter, but increased year to date.The UPS Store locations.

Within our Air products, average daily volume ~~decreased across all customer segments for both the quarter and year to date. These declines resulted primarily from~~decreases were driven by continued execution under the contract terms with our largest customer ~~and from~~as planned, as well as by the impact of other customers making cost ~~trade offs and utilizing the enhanced speed in~~trade-offs to our ground network.

~~Ground residential and~~Average daily volumes for Ground commercial ~~average daily volume decreases of 9.6% and 7.3%~~shipments decreased by 5.6%, ~~respectively, for the quarter (down 5.8% and 5.7%, respectively, year to date), were primarily attributable to volume declines from a number of our large customers~~ due to the general economic ~~factors~~conditions discussed above. Overall Ground residential volumes were relatively flat, as the decreases were offset by a 10.8% increase in SurePost volume from large customers. We expect volume to increase in the second quarter, driven by anticipated volume from large customers.

~~Rates~~Revenue Per Piece

In December 2023, we implemented an average 5.9% net increase in base and ~~Product Mix~~

accessorial rates for both our Air and Ground ~~rates increased an average of 6.9% in December 2022.~~products. Revenue per piece from our Air ~~and Ground~~ products increased for the quarter, while revenue per piece from our Ground products declined. The increase in base and ~~year to date, resulting~~accessorial rates favorably impacted revenue per piece from ~~base rate increases~~both Air and ~~additional pricing actions, as well as favorable changes in customer mix. For both the quarter and year to date, these increases were~~Ground products, although it was partially offset by ~~the~~decreases in fuel surcharge revenues and average billable weight per piece, coupled with an unfavorable shift in product ~~mix. For the quarter, a decline in fuel surcharges also negatively impacted revenue per piece.~~mix within our Ground products.

We continue to execute on pricing and revenue quality initiatives within our strategy, and anticipate ~~the year-over-year~~ revenue per piece ~~growth rate~~ will ~~moderate~~remain relatively flat in the second quarter before returning to growth during the second half of ~~the year, primarily driven by further anticipated declines in fuel surcharge revenue.~~2024.

Fuel Surcharges

We apply a fuel surcharge on our domestic air and ground services that adjusts weekly. Our air fuel surcharge is based on the U.S. Department of Energy's ("DOE") Gulf Coast spot price for a gallon of kerosene-type fuel, and our ground fuel surcharge is based on the DOE's On-Highway Diesel Fuel price.

Fuel surcharge revenue decreased ~~$471~~$184 million for the quarter, driven by reductions in price per gallon and the impact of lower ~~volume. Year to date,~~volumes. We expect fuel surcharge revenue ~~decreased $265 million, as higher prices per gallon~~to increase in the second quarter, primarily due to volume growth and the ~~impacts~~impact of our pricing initiatives in the first quarter were more than offset by the second-quarter declines discussed above. Based on the current commodity market outlook, we expect a continued year-over-year reduction in fuelhigher surcharge ~~revenue for the remainder of 2023.~~modifiers.

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Operating Expenses

Operating expenses and adjusted operating expenses decreased for ~~both~~ the ~~quarter and year to date. Our pickup and delivery costs decreased $308 million in the second quarter (down $269 million year to date), the~~quarter. The costs of operating our integrated air and ground network decreased ~~$536~~$291 million, ~~in the second quarter (down $586 million year to date)~~ and ~~our package sorting~~other operating costs decreased ~~$86 million~~$224 million. In addition to the impact of one less operating day in 2024, the second quarter (down $110 million year to date). These decreases were partially offset by an increase of $41 million in other indirect operating costs in the second quarter (up $156 million year to date). The overall decrease in operating expenses was primarily due to:

•Lower compensation expense for both the quarter and year-to-date periods due to a reduction in direct union labor hours resulting from volume declines, as well as incentive compensation program design changes. These decreases were partially offset by contractual rate increases and cost of living adjustments for our union workforce.

•Lower employee benefits expense for our union workforce in the second quarter as service costs for our company-sponsored pension and postretirement plans decreased, driven by increases in the discount rates used to measure the projected benefit obligations of these plans.

•A reduction in purchased transportation costs ~~for both the quarter~~ and ~~year to date,~~aircraft block hours, resulting from lower overall volumes and the impact of network optimization initiatives, which drove a reduction in ground volume handled by third-party ~~carriers, as well as the impact of continued strategic productivity initiatives.~~carriers.

•Lower fuel expense driven by lower volume and decreases in the price of jet fuel, diesel and ~~gasoline during~~gasoline. We expect fuel expense to remain relatively flat in the second ~~quarter.~~quarter of 2024.

These reductions were partially offset by increases of $311 million in pickup and delivery costs and $100 million in sortation costs that were driven by increased compensation and benefits expense for our union workforce. Compensation expense increased due to the contractual rates under our Teamsters contract, partially offset by a reduction in direct labor hours. Contractual rate increases for contributions to multiemployer benefit plans drove the increase in benefits expense.

Total cost per piece increased 4.2% for the quarter ~~(up 5.1% year to date),~~ and adjusted cost per piece increased ~~3.7% for~~4.1%, as the ~~quarter (up 5.0% year to date), for~~reduction in volume more than offset the ~~reasons described above.~~decrease in overall expenses. We anticipate the cost per piece growth rate will increase further in the second quarter and then moderate for the ~~second half of 2023 will be consistent with that~~remainder of the first half of the year, as increased costs arising from the tentative new national master agreement with the Teamsters are expected to be largely offset by the impacts of average daily volume increases, network improvements and productivity initiatives, as well as reductions in fuel cost.year.

Operating Profit and Margin

As a result of the factors described above, revenue declines were greater than operating expense reductions and operating profit decreased ~~$227~~$641 million in the ~~second~~first quarter, ~~(down $423 million year to date),~~ with operating margin decreasing 70400 basis points to ~~11.1% (down 100 basis points to 10.4% year to date)~~5.8%. Adjusted operating profit decreased ~~$174~~$649 million, ~~in the second quarter (down $391 million year to date),~~ with adjusted operating margin decreasing 30400 basis points to ~~11.7% (down 80 basis points to 10.8% year to date)~~5.9%.

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International Package




		Three Months Ended June 30,						Change				Six Months Ended June 30,						Change					Three Months Ended March 31,	Change
		2023			2022			$		%		2023			2022			$		%							2024						2023							$						%
Average Daily Package Volume (in thousands):	Average Daily Package Volume (in thousands):
Domestic	Domestic	1,554			1,703					(8.7)	%	1,594			1,754					(9.1)	%
Domestic
Domestic																											1,503						1,635																(8.1)	%
Export	Export	1,608			1,683					(4.5)	%	1,645			1,708					(3.7)	%	Export					1,621			1,682				1,682								(3.6)									(3.6)	%
Total Average Daily Package Volume	Total Average Daily Package Volume	3,162			3,386					(6.6)	%	3,239			3,462					(6.4)	%	Total Average Daily Package Volume					3,124			3,317				3,317								(5.8)									(5.8)	%
Average Revenue Per Piece:	Average Revenue Per Piece:
Domestic
Domestic
Domestic	Domestic	$	7.67		$	7.61		$	0.06	0.8	%	$	7.63		$	7.48		$	0.15	2.0	%				$	8.01			$		$	7.59			$			$	0.42			5.5			5.5		%
Export	Export	33.70			36.91			(3.21)		(8.7)	%	33.34			35.47			(2.13)		(6.0)	%	Export					32.80			33.00				33.00			(0.20)					(0.20)		(0.6)					(0.6)	%
Total Average Revenue Per Piece	Total Average Revenue Per Piece	$	20.91		$	22.17		$	(1.26)	(5.7)	%	$	20.69		$	21.29		$	(0.60)	(2.8)	%	Total Average Revenue Per Piece					$	20.87		$			$	20.47		$				$	0.40		2.0				2.0		%
Operating Days in Period	Operating Days in Period	64			64							128			128
Revenue (in millions):	Revenue (in millions):
Revenue (in millions):
Revenue (in millions):
Domestic
Domestic
Domestic	Domestic	$	763		$	829		$	(66)	(8.0)	%	$	1,557		$	1,680		$	(123)	(7.3)	%				$	758			$		$	794			$			$	(36)			(4.5)			(4.5)		%
Export	Export	3,468			3,976			(508)		(12.8)	%	7,020			7,754			(734)		(9.5)	%	Export					3,350			3,552				3,552			(202)					(202)		(5.7)					(5.7)	%
Cargo and Other	Cargo and Other	184			268			(84)		(31.3)	%	381			515			(134)		(26.0)	%	Cargo and Other					148			197				197			(49)					(49)		(24.9)					(24.9)	%
Total Revenue	Total Revenue	$	4,415		$	5,073		$	(658)	(13.0)	%	$	8,958		$	9,949		$	(991)	(10.0)	%	Total Revenue					$	4,256		$			$	4,543		$				$	(287)		(6.3)				(6.3)		%
Operating Expenses (in millions):	Operating Expenses (in millions):
Operating Expenses	Operating Expenses	$	3,532		$	3,880		$	(348)	(9.0)	%	$	7,247		$	7,640		$	(393)	(5.1)	%
Transformation Strategy Costs		(19)			(11)			(8)		72.7	%	3			(15)			18		N/A
Operating Expenses
Operating Expenses																											$	3,600					$	3,715						$	(115)					(3.1)		%
Transformation Costs																						Transformation Costs					(24)						22							(46)						N/A
Asset Impairment Charges																						Asset Impairment Charges					(2)						—							(2)						N/A
Adjusted Operating Expenses	Adjusted Operating Expenses	$	3,513		$	3,869		$	(356)	(9.2)	%	$	7,250		$	7,625		$	(375)	(4.9)	%	Adjusted Operating Expenses					$	3,574		$			$	3,737		$				$	(163)		(4.4)				(4.4)		%
Operating Profit (in millions) and Operating Margin:	Operating Profit (in millions) and Operating Margin:
Operating Profit
Operating Profit
Operating Profit	Operating Profit	$	883		$	1,193		$	(310)	(26.0)	%	$	1,711		$	2,309		$	(598)	(25.9)	%				$	656			$		$	828			$			$	(172)			(20.8)			(20.8)		%
Adjusted Operating Profit	Adjusted Operating Profit	$	902		$	1,204		$	(302)	(25.1)	%	$	1,708		$	2,324		$	(616)	(26.5)	%	Adjusted Operating Profit					$	682		$			$	806		$				$	(124)		(15.4)				(15.4)		%
Operating Margin	Operating Margin	20.0		%	23.5		%					19.1		%	23.2		%
Adjusted Operating Margin	Adjusted Operating Margin	20.4		%	23.7		%					19.1		%	23.4		%
Adjusted Operating Margin
Adjusted Operating Margin
Currency Benefit / (Cost) – (in millions)*:
Currency Benefit / (Cost) – (in millions)*:
Currency Benefit / (Cost) – (in millions)*:	Currency Benefit / (Cost) – (in millions)*:
Revenue	Revenue							$	(34)									$	(195)
Revenue
Revenue
Operating Expenses
Operating Expenses
Operating Expenses	Operating Expenses							2										112
Operating Profit	Operating Profit							$	(32)									$	(83)
Operating Profit
Operating Profit
* Net of currency hedging; amount represents the change in currency translation compared to the prior year.
* Net of currency hedging; amount represents the change in currency translation compared to the prior year.
* Net of currency hedging; amount represents the change in currency translation compared to the prior year.

Revenue

The change in revenue was due to the following:
Volume Rates /
Product Mix Fuel
Surcharge Currency Total Revenue
Change
Revenue Change Drivers:
Second quarter 2023 vs. 2022 (6.6) % 0.6 % (6.3) % (0.7) % (13.0) %
Year to date 2023 vs. 2022 (6.4) % 1.1 % (2.7) % (2.0) % (10.0) %


	Volume		Rates / Product Mix		Fuel Surcharge		Currency		Total Revenue Change
Revenue Change Drivers:
First quarter 2024 vs. 2023	(6.0)	%	1.6	%	(1.3)	%	(0.6)	%	(6.3)	%

Revenue was also negatively impacted by having one less operating day in the first quarter of 2024.

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Volume

Average daily volume for both export and domestic products decreased ~~for~~in the quarter. Business-to-consumer volume decreased 11.1% and business-to-business volume decreased 3.7%. Challenging economic conditions and geopolitical factors contributed to the volume declines. Volume declines were primarily attributable to SMBs, although volume from large customers also declined, with declines driven by the retail and manufacturing sectors, while the technology sector exhibited moderate volume growth. We expect year-over-year average daily volume to be relatively flat in the second quarter and ~~year~~ to date for both domestic and export products. Volume from both large customers and SMBs declined, driven by declines from the retail and technology sectors. Business-to-consumer volume decreased 10.4% for the second quarter (down 9.1% year to date) as global macroeconomic headwinds, including high interest rates and persistent inflation, continued to impact consumer demand. These factors also negatively impacted business-to-business volume, which decreased 5.1% for the second quarter (down 5.4% year to date). We anticipate similar year-over-year declinesimprove in ~~average daily volume during~~ the second half of ~~2023.~~the year, dependent on an improvement in global macroeconomic conditions.

Export volume decreased for the quarter, ~~and year to date,~~primarily driven by declines ~~in intra-Europe and Asia activity. Declines~~ on intra-Europe trade lanes. These declines were partially offset by increases on the Americas to U.S. trade lanes, ~~were~~as manufacturing and distribution moves closer to the U.S. consumer market. We also experienced volume improvements on the China to U.S. trade lane during the quarter. The intra-Europe volume decline was primarily due to lower consumer spending as a result of economic conditions. Asia volume declines were highest on the Asia to U.S. and intra-Asia trade lanes, driven by the impact of overall economic conditions. The Asia to U.S. trade lane was also negatively impacted by rising inventory levels in the United States.

Our premium products ~~saw~~experienced volume ~~decline 11.9%~~declines of 9.6% for the ~~second~~ quarter, ~~(down 9.3% year to date),~~ primarily in our Worldwide and Transborder Express Saver products. These declines resulted from continuing shifts in customer product preferences. Volume in our non-premium products decreased ~~0.8%~~1.6% for the ~~second~~ quarter, ~~(down 1.0% year to date),~~ driven by declines in our Transborder Standard product, primarily within Europe. The declines in both our premium and ~~Worldwide Expedited. These~~non-premium products were due to the macroeconomic conditions described above.

Domestic volume declined in the quarter, with the largest declines ~~were largely driven by economic conditions. Additionally, weaker import demand from U.S. consumers further impacted our Worldwide products.~~

~~The~~in Germany, Canada and the United Kingdom as challenging economic conditions ~~also impacted Domestic volume, which declined for both the second quarter and year to date, driven by declines~~ in ~~Germany and Canada.~~those countries reduced consumer spending.

~~Rates and Product Mix~~Revenue Per Piece

In December ~~2022,~~2023, we implemented an average ~~6.9%~~5.9% net increase in base and accessorial rates for international shipments originating in the United States. Rate changes for shipments originating outside the U.S. are made throughout the year and vary by geographic market.

Total revenue per piece ~~decreased 5.7%~~increased 2.0% for the quarter, ~~(down 2.8% year to date),~~ primarily due to base rate increases. This was partially offset by declines in fuel and demand-related surcharges, ~~and volume reductions in our Worldwide products out of Asia. The impact of these factors were slightly offset by the impact of base rate increases.~~as well as unfavorable currency movements. Excluding the impact of currency, revenue per piece ~~decreased 4.9%~~increased 2.5% for the quarter. We anticipate overall revenue per piece growth will be relatively flat in the second quarter ~~(down 0.7% year to date). For~~and will decline in the second half of the year ~~we anticipate overall revenue per piece~~due to ~~be consistent with~~ the ~~same period last year.~~continued shift to non-premium products.

Export revenue per piece decreased ~~8.7%~~0.6% for the ~~quarter (down 6.0% year~~quarter. The decrease was primarily attributable to ~~date), driven~~changes in product mix due to the shifts in customer preferences. Declines in revenue per piece were mostly offset by ~~the impact from the decline in our Worldwide products.~~base rate increases. Excluding the impact of currency, export revenue per piece ~~decreased 8.1% in the quarter (down 4.3% year~~remained flat relative to ~~date).~~last year.

Domestic revenue per piece increased ~~0.8%~~5.5% for the quarter, ~~(up 2.0% year to date),~~primarily due to the ~~impact of base~~ rate increases ~~and favorable shifts in customer mix.This was largely offset by unfavorable currency movements.~~discussed above. Excluding the impact of currency, domestic revenue per piece increased ~~2.1%~~6.1% for the ~~quarter (up 6.3% year to date).~~quarter.

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.

~~During the quarter, total~~Total international fuel surcharge revenue decreased ~~$322~~$59 million ~~(down $294 million year~~for the quarter, due to ~~date), primarily driven by~~ a decrease in price per gallon~~as well as the impact from~~ and volume ~~declines.~~declines, partially offset by higher surcharge modifiers. Based on ~~the~~our current commodity market outlook, we expect fuel surcharge revenue will ~~remain stable for~~increase in the ~~remainder of the year.~~second quarter.

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Operating Expenses

Operating expenses and adjusted operating expenses decreased for ~~both~~ the ~~second~~ quarter, ~~and year to date. The principal drivers were:~~primarily due to:

•~~The costs~~Reductions in the cost of operating our integrated ~~international~~ air and ground network, which decreased ~~$343~~$125 million, ~~for the quarter (down $317 million year to date), primarily~~ driven by lower fuel prices and ~~a reduction~~reductions in air charters and aircraft block hours. ~~We anticipate the price paid for fuel will remain stable throughout the remainder of the year.~~

•~~Pickup~~Lower pickup and delivery costs, which decreased ~~$17~~$22 million ~~for~~as a result of lower volumes and the ~~quarter (down $38 million year~~impact of cost management initiatives.

On an unadjusted basis, these reductions were partially offset by the impact of year-over-year increases in employee separation costs as we continued to ~~date) due to the lower volume levels.~~right-size our business.

Operating Profit and Margin

As a result of the factors described above, operating profit decreased ~~$310~~$172 million for the ~~second~~ quarter, ~~(down $598 million year to date),~~ with operating margin decreasing ~~350~~280 basis points to ~~20.0% for the second quarter (down 410 basis points to 19.1% year to date)~~15.4%. Adjusted operating profit decreased ~~$302~~$124 million ~~for the second quarter (down $616 million year to date), while~~and adjusted operating margin decreased ~~330~~170 basis points to ~~20.4% for the second quarter (down 430 basis points~~16.0%.

Increased geopolitical uncertainty continues to ~~19.1% year to date).~~

~~Substantially~~impact volumes in our International Package segment. As previously disclosed, substantially all of our operations in Russia and Belarus ~~were~~have been suspended, ~~in March 2022~~ and ~~during 2023,~~ we ~~have commenced~~expect to complete the liquidation of our Small Package and Forwarding and Logistics subsidiaries in these ~~countries.~~countries by end of 2024. Substantially all of our operations in Ukraine remain indefinitely suspended. These actions have not had, and are not expected to have, a material impact on us.

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Supply Chain Solutions
Three Months Ended
June 30, Change Six Months Ended
June 30, Change
2023 2022 $ % 2023 2022 $ %
Revenue (in millions):
Forwarding $ 1,376 $ 2,389 $ (1,013) (42.4) % $ 2,890 $ 4,978 $ (2,088) (41.9) %
Logistics 1,431 1,290 141 10.9 % 2,841 2,541 300 11.8 %
Other 437 555 (118) (21.3) % 908 1,093 (185) (16.9) %
Total Revenue $ 3,244 $ 4,234 $ (990) (23.4) % $ 6,639 $ 8,612 $ (1,973) (22.9) %
Operating Expenses (in millions):
Operating Expenses $ 2,949 $ 3,721 $ (772) (20.7) % $ 6,097 $ 7,626 $ (1,529) (20.0) %
Transformation Strategy Costs (41) (4) (37) 925.0 % (44) (12) (32) 266.7 %
Goodwill and Asset Impairments, and Divestiture Charges — — — N/A (8) — (8) N/A
Adjusted Operating Expenses: $ 2,908 $ 3,717 $ (809) (21.8) % $ 6,045 $ 7,614 $ (1,569) (20.6) %
Operating Profit (in millions) and Operating Margin:
Operating Profit $ 295 $ 513 $ (218) (42.5) % $ 542 $ 986 $ (444) (45.0) %
Adjusted Operating Profit $ 336 $ 517 $ (181) (35.0) % $ 594 $ 998 $ (404) (40.5) %
Operating Margin 9.1 % 12.1 % 8.2 % 11.4 %
Adjusted Operating Margin 10.4 % 12.2 % 8.9 % 11.6 %
Currency Benefit / (Cost) – (in millions)*:
Revenue $ (7) $ (57)
Operating Expenses 10 65
Operating Profit $ 3 $ 8
* Amount represents the change in currency translation compared to the prior year.

Three Months Ended
June 30, Change Six Months Ended
June 30, Change
2023 2022 $ % 2023 2022 $ %
Adjustments to Operating Expenses (in millions):
Transformation Strategy Costs
Forwarding $ 23 $ 2 $ 21 1,050.0 % $ 24 $ 8 $ 16 200.0 %
Logistics 18 1 17 1,700.0 % 20 2 18 900.0 %
Other — 1 (1) (100.0) % — 2 (2) (100.0) %
Total Transformation Strategy Costs $ 41 $ 4 $ 37 925.0 % $ 44 $ 12 $ 32 266.7 %
Goodwill and Asset Impairments, and Divestiture Charges
Forwarding $ — $ — $ — N/A $ 8 $ — $ 8 N/A
Logistics — — — N/A — — — N/A
Other — — — N/A — — — N/A
Total Goodwill and Asset Impairments, and Divestitures Charges $ — $ — $ — N/A $ 8 $ — $ 8 N/A
Total Adjustments to Operating Expenses $ 41 $ 4 $ 37 925.0 % $ 52 $ 12 $ 40 333.3 %


	Three Months Ended March 31,	Change
		2024			2023			$		%
Revenue (in millions):
Forwarding		$	1,280		$	1,514		$	(234)	(15.5)	%
Logistics		1,542			1,410			132		9.4	%
Other		394			471			(77)		(16.3)	%
Total Revenue		$	3,216		$	3,395		$	(179)	(5.3)	%
Operating Expenses (in millions):
Operating Expenses		$	3,084		$	3,148		$	(64)	(2.0)	%
Transformation and Other Costs		(53)			(3)			(50)		N/M
Asset Impairment Charges		(41)			(8)			(33)		412.5	%
Adjusted Operating Expenses:		$	2,990		$	3,137		$	(147)	(4.7)	%
Operating Profit (in millions) and Operating Margin:
Operating Profit		$	132		$	247		$	(115)	(46.6)	%
Adjusted Operating Profit		$	226		$	258		$	(32)	(12.4)	%
Operating Margin		4.1		%	7.3		%
Adjusted Operating Margin		7.0		%	7.6		%
Currency Benefit / (Cost) – (in millions)*:
Revenue								$	(14)
Operating Expenses								20
Operating Profit								$	6
* Amount represents the change in currency translation compared to the prior year.


	Three Months Ended March 31,	Change
		2024		2023		$		%
Adjustments to Operating Expenses (in millions):
Transformation and Other Costs
Forwarding		$	7	$	1	$	6	600.0	%
Logistics		6		2		4		200.0	%
Other		40		—		40		N/A
Total Transformation and Other Costs		$	53	$	3	$	50	N/M
Asset Impairment Charges
Forwarding		$	—	$	8	$	(8)	(100.0)	%
Logistics		41		—		41		N/A
Other		—		—		—		—	%
Total Asset Impairment Charges		$	41	$	8	$	33	412.5	%
Total Adjustments to Operating Expenses		$	94	$	11	$	83	754.5	%

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Revenue

Total revenue in Supply Chain Solutions decreased for ~~both~~ the ~~second quarter and year to date.~~quarter. This was ~~driven by~~primarily due to declines in our Forwarding business, ~~as challenging economic conditions drove~~with both truckload brokerage and freight forwarding revenues decreasing, and declines within certain of our other businesses. These declines were partially offset by revenue growth in ~~customer activity, while increased capacity led to lower market rates.~~

•International airfreight revenue decreased approximately $365 million for the quarter (down $785 million year to date) as customer demand remained weak, particularly on Asia export lanes, and capacity growth continued to outpace demand. These factors drove down the rates we charge for services in both the quarter and year-to-date periods and we anticipate that they will continue to pressure rates through the second half of the year.our Logistics businesses.

•Revenue in our truckload brokerage business decreased ~~$372~~$148 million ~~for the quarter (down $775 million year to date)~~ due to lower ~~volume~~volumes and a ~~continued~~ decline in market rates. ~~We remained focused on~~These decreases were partially offset by volume increases from SMBs as a result of our revenue quality ~~initiatives~~initiatives.

•International airfreight revenue decreased approximately $53 million due to continued weakness in market demand, impacting both volumes and ~~experienced volume~~rates. We expect improvements in market demand and tightening capacity, particularly on Asia export lanes, which are expected to lead to revenue growth ~~from SMBs during~~in the second ~~quarter and year-to-date periods.~~half of 2024.

•The remaining reduction in revenue ~~for both the quarter and year to date,~~ was primarily attributable to our ocean freight forwarding ~~business. Market rates and~~business, driven by a change in product mix that drove growth in volume ~~declined in both periods, particularly on the Asia to U.S. lane, due to~~but at lower ~~demand, an increase in inventory levels and additional capacity entering the market.~~rates. We expect revenue to remain challenged in the second ~~half of 2023~~quarter as capacity increases are expected to continue to ~~outpace~~exceed demand.

Within our Logistics businesses, ~~healthcare logistics~~ revenue increased ~~$106 million for the second quarter (up $204 million year to date), primarily due to the impact from the~~$132 million. The acquisition of ~~Bomi Group~~MNX Global Logistics in the fourth quarter of ~~2022, as well as~~2023 contributed $90 million of the increase, with the remainder driven by growth in ~~our~~ clinical trials ~~business for the year.~~and pharmaceuticals within our healthcare operations. Revenue in mail services ~~increased $48 million for the quarter (up $103 million year to date)~~remained relatively flat as ~~a result of volume growth,~~ rate increases and a favorable shift in product ~~characteristics. The growth in healthcare and mail services was slightly~~characteristics were offset by ~~declines~~a decrease in ~~our other distribution operations for both the second quarter and year to date.~~volume.

Revenue from ~~the~~ other businesses within Supply Chain Solutions decreased, ~~for the quarter and year to date,~~ driven by ~~an expected~~a reduction of ~~$130~~$69 million ~~(down $215 million year to date) in~~from lower volumes under contracts with the USPS. Revenue from transition services provided to the acquirer of UPS Freight declined $34 million as we continue to wind down these arrangements. ~~This was~~These reductions were partially offset by higher revenue from our digital businesses ~~for both~~due to business growth and the impact of the acquisition of Happy Returns in the fourth quarter of 2023. We expect revenue from our other Supply Chain Solutions businesses will increase during the second ~~quarter and year~~half of 2024 as this is where we will report the revenue related to ~~date, driven by business growth.~~the additional air cargo volume under our recently announced agreement with the USPS.

Operating Expenses

Total operating expenses and ~~total~~ adjusted operating expenses ~~for~~within Supply Chain Solutions decreased for the ~~quarter and year to date.~~quarter.

Forwarding operating expenses decreased ~~$832~~$229 million, ~~for the quarter (down $1.7 billion year~~primarily due to ~~date). This primarily resulted from~~ a reduction of approximately ~~$785~~$196 million in purchased transportation expense ~~for the quarter (down $1.6 billion year to date) due to~~as a result of lower ~~volumes and~~ market rates across our ~~forwarding~~businesses, and decreased volumes in both the airfreight and truckload brokerage businesses. We expect ~~these conditions to persist as we move through~~our operating expenses will increase during the second half of ~~the year, resulting in lower purchased transportation costs.~~2024 driven by expected higher volumes.

Logistics operating expenses increased ~~$112~~$124 million, ~~for the quarter (up $267 million year to date),~~ driven by the impact of ~~acquiring Bomi Group. Mail services incurred higher purchased transportation cost~~the acquisition of MNX Global Logistics which contributed $88 million of the increase. Expenses in ~~both periods~~our healthcare operations increased $43 million, primarily due to ~~volume and rate increases and shifts~~higher rates for third-party transportation. Operating expenses in ~~product characteristics.~~mail services were relatively flat. On an unadjusted basis, Logistics operating expenses were also impacted by a charge to write down the value of certain trade names acquired as part of the Bomi Group acquisition.

Expenses in ~~the~~our other ~~businesses within~~ Supply Chain Solutions businesses decreased, ~~for both the quarter and year to date,~~ largely driven by athe reduction in transportation costs incurred to fulfill our obligations to the USPS under existing agreements. Costs incurred to procure transportation for, and provide transition services to, the acquirer of UPS ~~Freight. This was~~Freight also decreased as we continued to wind down these arrangements. These decreases were partially offset by higher operating costs within our digital businesses. On an unadjusted basis, these decreases were offset by the impact of transformation and other costs, including an expense related to a regulatory matter. We expect expenses in our other Supply Chain Solutions businesses ~~driven by year-over-year business growth.~~will increase during the second half of 2024, as this is where we will report expenses related to the additional air cargo volume under our recently announced agreement with the USPS.

Operating Profit and Margin

As a result of the factors described above, total operating profit decreased ~~$218~~$115 million, ~~for the second quarter (down $444 million year to date)~~ with operating margin decreasing ~~300 basis points to 9.1% for the second quarter (down~~ 320 basis points to ~~8.2% year to date)~~4.1%. On an adjusted basis, operating profit decreased ~~$181~~$32 million ~~for the second quarter (down $404 million year to date),~~ with adjusted operating margin decreasing ~~180~~60 basis points to ~~10.4% for the second quarter (down 270 basis points to 8.9% year to date)~~7.0%.

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Consolidated Operating Expenses






		Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
		2023		2022		$		%		2023		2022		$		%
Operating Expenses (in millions):	Operating Expenses (in millions):
Operating Expenses (in millions):
Operating Expenses (in millions):
Compensation and benefits	Compensation and benefits	$	11,197	$	11,344	$	(147)	(1.3)	%	$	22,659	$	22,945	$	(286)	(1.2)	%
Transformation Strategy Costs		(109)		(23)		(86)		373.9	%	(97)		(56)		(41)		73.2	%
Compensation and benefits
Compensation and benefits
Transformation and Other Costs
Transformation and Other Costs
Transformation and Other Costs
Adjusted Compensation and benefits
Adjusted Compensation and benefits
Adjusted Compensation and benefits	Adjusted Compensation and benefits	$	11,088	$	11,321	$	(233)	(2.1)	%	$	22,562	$	22,889	$	(327)	(1.4)	%

Repairs and maintenance	Repairs and maintenance	$	682	$	727	$	(45)	(6.2)	%	$	1,407	$	1,428	$	(21)	(1.5)	%

Repairs and maintenance

Repairs and maintenance
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	828		762		66		8.7	%	1,662		1,526		136		8.9	%
Purchased transportation	Purchased transportation	3,173		4,390		(1,217)		(27.7)	%	6,716		8,997		(2,281)		(25.4)	%
Purchased transportation
Purchased transportation
Fuel
Fuel
Fuel	Fuel	1,090		1,697		(607)		(35.8)	%	2,361		2,917		(556)		(19.1)	%
Other occupancy	Other occupancy	458		422		36		8.5	%	1,009		923		86		9.3	%
Other occupancy
Other occupancy
Other expenses
Other expenses
Other expenses	Other expenses	1,847		1,889		(42)		(2.2)	%	3,845		3,622		223		6.2	%
Total Other expenses	Total Other expenses	8,078		9,887		(1,809)		(18.3)	%	17,000		19,413		(2,413)		(12.4)	%
Transformation Strategy Costs		(30)		(18)		(12)		66.7	%	(45)		(40)		(5)		12.5	%
Goodwill and Asset Impairments, and Divestiture Charges		—		—		—		N/A		(8)		—		(8)		N/A
Total Other expenses
Total Other expenses
Transformation and Other Costs
Transformation and Other Costs
Transformation and Other Costs
Asset Impairment Charges
Asset Impairment Charges
Asset Impairment Charges
Adjusted Total Other expenses
Adjusted Total Other expenses
Adjusted Total Other expenses	Adjusted Total Other expenses	$	8,048	$	9,869	$	(1,821)	(18.5)	%	$	16,947	$	19,373	(2,426)		(12.5)	%

Total Operating Expenses	Total Operating Expenses	$	19,275	$	21,231	$	(1,956)	(9.2)	%	$	39,659	$	42,358	$	(2,699)	(6.4)	%

Total Operating Expenses

Total Operating Expenses
Adjusted Total Operating Expenses
Adjusted Total Operating Expenses
Adjusted Total Operating Expenses	Adjusted Total Operating Expenses	$	19,136	$	21,190	$	(2,054)	(9.7)	%	$	39,509	$	42,262	$	(2,753)	(6.5)	%

Currency (Benefit) / Cost - (in millions)*	Currency (Benefit) / Cost - (in millions)*					$	(12)							$	(177)

Currency (Benefit) / Cost - (in millions)*

Currency (Benefit) / Cost - (in millions)*
* Amount represents the change in currency translation compared to the prior year.	* Amount represents the change in currency translation compared to the prior year.
* Amount represents the change in currency translation compared to the prior year.
* Amount represents the change in currency translation compared to the prior year.






		Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
		2023		2022		$		%		2023		2022		$		%
Adjustments to Operating Expenses (in millions):	Adjustments to Operating Expenses (in millions):
Transformation Strategy Costs
Adjustments to Operating Expenses (in millions):
Adjustments to Operating Expenses (in millions):
Transformation and Other Costs
Transformation and Other Costs
Transformation and Other Costs
Compensation	Compensation	$	5	$	8	$	(3)	(37.5)	%	$	10	$	24	$	(14)	(58.3)	%
Compensation
Compensation
Benefits
Benefits
Benefits	Benefits	104		15		89		593.3	%	87		32		55		171.9	%

Other expenses	Other expenses	30		18		12		66.7	%	45		40		5		12.5	%
Total Transformation Strategy Costs		$	139	$	41	$	98	239.0	%	$	142	$	96	$	46	47.9	%
Goodwill and Asset Impairments, and Divestiture Charges

Other expenses

Other expenses
Total Transformation and Other Costs
Total Transformation and Other Costs
Total Transformation and Other Costs
Asset Impairment Charges
Asset Impairment Charges
Asset Impairment Charges
Other expenses
Other expenses
Other expenses	Other expenses	$	—	$	—	$	—	N/A		$	8	$	—	$	8	N/A
Total Adjustments to Operating Expenses	Total Adjustments to Operating Expenses	$	139	$	41	$	98	239.0	%	$	150	$	96	$	54	56.3	%
Total Adjustments to Operating Expenses
Total Adjustments to Operating Expenses

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Compensation and Benefits

Total compensation and benefits and adjusted total compensation and benefits ~~decreased~~increased in the first quarter. Compensation costs increased $97 million. The principal factors contributing to the increase were:

•Direct labor costs increased $199 million. Contractual wage rate increases for our U.S. union workforce resulted in an increase in costs of $328 million. This was partially offset by the impact of reductions in U.S. direct labor hours and administrative headcount due to volume declines, which reduced expense by $207 million. The remaining increase was driven by changes in seniority within our workforce. We expect wage rate growth to remain elevated on a year-over-year basis in the second quarter ~~and year to date. Compensation costs decreased $201 million for~~before moderating during the second ~~quarter (down $379 million year to date). On an adjusted basis, compensation costs decreased $197 million for~~half of 2024 as a result of the ~~second quarter (down $365 million year to date). The principal factors impacting~~terms of our contract with the ~~decreases were:~~Teamsters.

•Management compensation costs decreased ~~$112~~$73 million ~~for the second quarter (down $318 million year~~due to ~~date), driven by fourth quarter 2022 design changes to our~~a reduction in incentive compensation ~~programs, lower incentive compensation accruals~~expense and lower overall headcount.

•~~U.S. Domestic labor~~Benefits costs ~~decreased $102~~increased $78 million for the ~~second~~ quarter, ~~(down $56~~and increased $35 million ~~year to date)~~on an adjusted basis. The principal factors driving the increase were:

•Accruals for paid time off, payroll taxes and other costs increased $43 million, primarily due to ~~a reduction in direct labor hours resulting from volume declines and reductions in administrative labor. The decrease was partially offset by~~ contractual wage rate ~~increases and cost of living adjustments for our union workforce.~~growth.

•~~The acquisition of Bomi Group in the fourth quarter of 2022 resulted in additional compensation cost of $27 million for the second quarter ($51 million year to date).~~

Benefits costs increased $54 million for the second quarter (up $93 million year to date). On an adjusted basis, benefits costs decreased $36 million for the second quarter (up $38 million year to date). The principal factors impacting the changes were:

•Health and welfare costs increased ~~$46~~$39 million, ~~for the second quarter (up $135 million year to date),~~ driven by increased contributions to multiemployer plans as a result of contractually-mandated rate increases.

•Workers' compensation expense ~~increased $13~~decreased $29 million ~~for the second quarter (up $36 million year~~due to ~~date), driven by an increase in current year claims, partially offset by a decrease in overall hours worked and~~ favorable developments in ~~reserves for~~ prior ~~years' claims.~~year claims counts.

•Pension and other postretirement benefits ~~costs~~expense decreased ~~$75~~$12 million ~~for the second quarter ($123 million year to date):~~

◦~~The cost of company-sponsored defined benefit plans decreased $109 million for the second quarter (down $219 million year to date), driven by a reduction~~as reductions in participating headcount more than offset increases in service ~~cost~~costs under Company-sponsored plans due to ~~higher~~lower discount ~~rates. The cessation~~rates and benefit increases under the terms of ~~accruals for future service in~~ the ~~UPS Retirement Plan was offset by the cost of replacement contributions to the UPS 401(k) Savings Plan.~~

◦Contributions to multiemployer plans increased $25 million for the second quarter (up $64 million year to date) as the impact of contractually-mandated contribution increases was partially offset by a reduction in eligible headcount.

◦~~Year to date, expense for the UPS 401(k) Savings Plan increased $18 million, primarily due to demographic changes.~~Teamsters contract.

•Other employee benefits ~~primarily~~expense increased $37 million due to separation costs ~~related~~incurred as we continued to ~~employee separations, increased $89 million~~right-size our business for the ~~second quarter (up $55 million year to date) as we implemented staffing adjustment initiatives to reduce our overhead cost and better align direct labor headcount with volume.~~future. On an adjusted basis, other employee benefits expense remained relatively flat.

Repairs and Maintenance

The decrease in repairs and maintenance expense ~~for the second quarter and year-to-date periods~~ was primarily due to the deferral of aircraft engine maintenance, as the declines in volume resulted in the temporary idling of certain aircraft. This was partially offset by an increase in routine repairs to buildings and facilities. We expect these expense trends to continue in the second quarter.

Depreciation and Amortization

We incurred higher depreciation expense ~~during the second quarter and year-to-date periods~~ as a result of ~~additional facilities~~facility automation and expansion projects coming into ~~service, growth in the size of our vehicle and aircraft fleets and the reduction in estimated residual value of our MD-11 aircraft. We incurred higher amortization~~service. Amortization expense onfor capitalized software investments in support of our strategic initiatives ~~as well as~~increased, and we recorded additional amortization expense for intangible assets ~~recognized~~due to the acquisitions of MNX Global Logistics and Happy Returns in ~~connection with~~the fourth quarter of 2023.

Purchased Transportation

Third-party transportation expense charged to us by air, ocean and ground carriers decreased for the quarter. The changes were primarily driven by:

•Supply Chain Solutions expense decreased $123 million, driven by volume declines and lower market rates paid for services in our Forwarding businesses. This was partially offset by expense increases in our logistics operations due to business growth and the impact of the acquisition of ~~Bomi Group.~~MNX Global Logistics.

•U.S. Domestic expense decreased $116 million due to overall volume declines, a reduction in ground volume handled by third-party carriers and other network optimization initiatives. These decreases were partially offset by an increase in delivery costs for our SurePost product as a result of higher volume.

•International Package expense decreased $56 million, primarily due to declines in volume.

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~~Purchased Transportation~~

~~Third-party transportation expense charged to us by air, ocean and ground carriers decreased for the quarter and year-to-date periods. The changes were primarily driven by:~~

•~~Supply Chain Solutions expense decreased $851 million for the second quart~~er (down $1.7 billion year to date), driven by volume declines and lower market rates paid for services in our Forwarding businesses. This was slightly offset by increases in our logistics operations due to business growth, third-party rate increases in our mail services business and the acquisition of Bomi Group.

•~~U.S. Domestic expense decreased $243 million for the second quarter (down $337 million year to date), driven by a reduction in ground volume handled by third-party carriers as a result of our network optimization initiatives.~~

•~~International Package expense decreased $123 million for the second quarter (down $198 million year to date), primarily due to declines in volume.~~

Fuel

The ~~decrease~~reduction in fuel expense for the quarter ~~and year to date~~ was ~~primarily~~ driven by lower prices for jet fuel, diesel and gasoline, ~~as well as~~and the impact of lower ~~volume.~~volumes. 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.

Other Occupancy

Other occupancy expense increased for the quarter, ~~and year~~primarily due to ~~date~~increases in property rents. A decrease in utilities expense as a result of ~~additional operating facilities coming into service, increases~~declines in ~~rental~~ rates and usage was offset by higher ~~utilities costs. We expect inflation may continue~~costs related to ~~adversely impact these costs for the remainder of the year.~~

winter weather events.

Other Expenses

Other expenses decreased $30 million for the quarter. We recorded a $41 million charge to write down the value of certain trade names acquired as part of our acquisition of Bomi Group as we consolidate our brands, and a $7 million impairment charge related to software licenses. Additionally, we incurred $55 million of transformation and other costs, including an expense related to a regulatory matter. On an adjusted basis, other expenses decreased ~~for~~$110 million, primarily due to the ~~quarter but increased year to date. The~~following:

•A reduction in outsourcing and consulting fees of $50 million driven by a decrease ~~for the quarter was primarily the result of:~~in project-based engagements and higher capitalization of third-party software development costs.

•Reductions ~~of $33 million~~ in vehicle ~~leases and $18~~lease expense of $57 million ~~in operational supplies~~ due to ~~the decline in volumes.~~volume declines.

•~~Lower costs incurred under~~Claims expense decreased $20 million due to a reduction in the ~~transitional service agreements with the acquirer~~volume of ~~UPS Freight.~~customer claims.

These reductions were partly offset by:

•Credit loss increases of $47 million across our segments as a result of an increased number of customer bankruptcies and increases in reserves.

•~~A decrease in self-insured automobile liability expense of $14 million.~~

~~Other decreases~~RFID supplies for ~~the quarter were primarily attributable to the impact of lower volumes. The decreases were partially offset by increases in the following expenses:~~Smart Package Smart Facility increased $30 million as we expanded utilization.

•Hosted software application fees and other technology costs ~~increased $30 million in~~that support of ongoing investments in our digital ~~transformation.~~transformation increased $15 million.

•~~Outsourcing~~Other expense reductions during the quarter were primarily associated with volume declines, including employee-related expenses, airline operational expenses, advertising costs and ~~professional fees increased $29 million due to increased utilization of third-party services to support our business initiatives.~~

For the year-to-date period, the increase was driven by hosted software application fees and outsourcing and professional fees for the reasons discussed above. An increase in commissions paid for certain online shipments also contributed to the increase.insurance.

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Other Income ~~and~~ (Expense)

The following table sets forth investment income and other and interest expense for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in millions):
Three Months Ended
June 30, Change Six Months Ended
June 30, Change
2023 2022 $ % 2023 2022 $ %
Investment Income and Other $ 131 $ 333 $ (202) (60.7) % $ 300 $ 648 $ (348) (53.7) %
Defined Benefit Plan (Gains) Losses — — — N/A — (33) 33 (100.0) %
Adjusted Investment Income and Other $ 131 $ 333 $ (202) (60.7) % $ 300 $ 615 $ (315) (51.2) %
Interest Expense (191) (171) (20) 11.7 % (379) (345) (34) 9.9 %
Total Other Income and (Expense) $ (60) $ 162 $ (222) N/A $ (79) $ 303 $ (382) N/A
Adjusted Other Income and (Expense) $ (60) $ 162 $ (222) N/A $ (79) $ 270 $ (349) N/A


	Three Months Ended March 31,				Change
	2024		2023		$		%
Investment Income and Other	$	118	$	169	$	(51)	(30.2)	%



Interest Expense	(195)		(188)		(7)		3.7	%
Total Other Income (Expense)	$	(77)	$	(19)	$	(58)	305.3	%

Investment Income and Other

Investment income ~~and other~~ decreased ~~$202 and $348 million~~ for the ~~second~~ quarter, and year to date, respectively. Excluding the impact of a $33 million defined benefit plan curtailment gain that we recognized in the first quarter of 2022, adjusted investment income and other decreased $315 million year to date. These decreases were primarily due to a reduction in ~~other pension income and foreign currency losses, partially offset by higher yields on~~ invested balances and year-over-year changes in ~~the fair value of~~ certain non-current investments.

Other pension income ~~decreased $232 million for the quarter (down $464 million year to date) due to:~~

•~~Lower~~remained flat as higher expected returns on pension assets ~~for the quarter and year to date as a result of~~were ~~a lower asset base due to losses in 2022, partially~~ offset by an increase in ~~our rate of return assumption.~~

•~~Higher pension~~ interest cost ~~for the quarter and year to date due to higher discount rates~~as a result of plan growth and changes in demographic assumptions.

Interest Expense

Interest expense increased for the quarter ~~and year-to-date periods, driven by~~due to higher ~~effective interest rates on floating rate~~average outstanding debt ~~and an increase in our total debt. These impacts were~~balances, partially offset by an increase in capitalized interest.

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Income Tax Expense

The following table sets forth our income tax expense and effective tax rate for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in millions):






		Three Months Ended June 30,						Change				Six Months Ended June 30,						Change
		2023			2022			$		%		2023			2022			$		%
Income Tax Expense	Income Tax Expense	$	639		$	848		$	(209)	(24.6)	%	$	1,266		$	1,578		$	(312)	(19.8)	%
Income Tax Expense
Income Tax Expense
Income Tax Impact of:	Income Tax Impact of:
Transformation Strategy Costs		33			10			23		230.0	%	33			22			11		50.0	%
Goodwill and Asset Impairments, and Divestiture Charges		—			—			—		N/A		2			—			2		N/A
Defined Benefit Plan (Gains) Losses		—			—			—		N/A		—			(9)			9		(100.0)	%
Income Tax Impact of:
Income Tax Impact of:
Transformation and Other Costs
Transformation and Other Costs
Transformation and Other Costs
Asset Impairment Charges
Asset Impairment Charges
Asset Impairment Charges
Adjusted Income Tax Expense
Adjusted Income Tax Expense
Adjusted Income Tax Expense	Adjusted Income Tax Expense	$	672		$	858		$	(186)	(21.7)	%	$	1,301		$	1,591		$	(290)	(18.2)	%
Effective Tax Rate	Effective Tax Rate	23.5		%	22.9		%					24.2		%	22.3		%
Effective Tax Rate
Effective Tax Rate
Adjusted Effective Tax Rate
Adjusted Effective Tax Rate
Adjusted Effective Tax Rate	Adjusted Effective Tax Rate	23.5		%	22.9		%					24.1		%	22.2		%

For additional information on our income tax expense and effective tax rate, see note 16 to the unaudited, consolidated financial statements.

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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 ~~June 30, 2023,~~March 31, 2024, we had ~~$7.9~~$4.5 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, ~~and~~ pension contributions, planned acquisitions, transformation ~~strategy~~ costs, debt obligations and planned shareowner returns. We regularly evaluate opportunities to optimize our capital structure, including through issuances of debt to refinance existing debt and to fund operations.

Cash Flows From Operating Activities

The following is a summary of the significant sources (uses) of cash from operating activities (in millions):
Six Months Ended June 30,
2023 2022
Net income $ 3,976 $ 5,511
Non-cash operating activities (a)
2,526 3,059
Pension and postretirement medical benefit plan contributions (company-sponsored plans) (1,328) (123)
Hedge margin receivables and payables (298) 286
Income tax receivables and payables (61) 14
Changes in working capital and other non-current assets and liabilities 856 (376)
Other operating activities (77) (78)
Net cash from operating activities $ 5,594 $ 8,293

~~___________________~~


	Three Months Ended March 31,
	2024		2023
Net income	$	1,113	$	1,895
Non-cash operating activities (1)	1,308		1,226
Pension and postretirement medical benefit plan contributions (company-sponsored plans)	(50)		(1,277)
Hedge margin receivables and payables	(8)		(159)
Income tax receivables and payables	257		426
Changes in working capital and other non-current assets and liabilities	696		278
Other operating activities	—		(32)
Net cash from operating activities	$	3,316	$	2,357

~~(a)~~(1) Represents depreciation and amortization, gains and losses on derivative transactions and foreign currency exchange, deferred income taxes, allowances for expected credit losses, amortization of operating lease assets, pension and postretirement medical benefit plan (income) expense, stock compensation expense, changes in casualty self-insurance reserves, goodwill and other asset impairment charges and other non-cash items.

Net cash from operating activities ~~decreased $2.7 billion~~increased $959 million for the ~~2023 period, impacted by:~~

•~~The timing of~~quarter primarily due to a decrease in contributions to our company-sponsored, defined benefit pension and postretirement medical plans. We made discretionary contributions of $1.2 billion to our qualified U.S. pension plans during the six months ended June 30, 2023. There were no discretionary contributions to these plans in the comparative period.Net cash was also favorably impacted by:

•A ~~decrease~~reduction in ~~our net~~ hedge margin collateral ~~position~~outflows due to changes in the fair value of derivative contracts used in our currency hedging programs.

•~~Our working~~Working capital ~~benefited~~benefits from ~~an improvement~~lower incentive compensation payments and payment of deferred employer payroll taxes in ~~collections,~~2023 that did not repeat.

These factors were partially offset ~~by an increase in vendor payments.~~ by:

•The reduction in ~~volumes also reduced our overall working capital requirements, and we benefited from the timing of payroll and other compensation-related items relative to the comparative period.~~net income.

•~~During the first six months of 2023, we paid the remaining $323 million of employer payroll~~A decrease in income taxes ~~that were deferred under the Coronavirus Aid, Recovery and Economic Security (CARES) Act in 2020.~~payable, primarily driven by business performance.

As of ~~June 30, 2023,~~March 31, 2024, approximately ~~$2.8~~$2.0 billion of our total worldwide holdings of cash, cash equivalents and marketable securities were held by foreign subsidiaries. The amount of cash, cash equivalents and marketable securities held by our U.S. and foreign subsidiaries fluctuates throughout the year due to a variety of factors, including the timing of cash receipts, strategic operating needs and disbursements in the normal course of business. Cash provided by operating activities in the U.S. continues to be our primary source of funds to finance domestic operating needs, capital expenditures, share repurchases, pension contributions and dividend payments to shareowners. All cash, cash equivalents and marketable securities held by foreign subsidiaries are generally available for distribution to the U.S. without any U.S. federal income taxes. Any such distributions may be subject to foreign withholding and U.S. state taxes. When amounts earned by foreign subsidiaries are expected to be indefinitely reinvested, no accrual for taxes is provided. ~~We did not have any~~As of March 31, 2024, we had $93 million of restricted cash. For more information on restricted cash, ~~as of June 30, 2023 or 2022~~.see note 1 to the unaudited, consolidated financial statements.

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Cash Flows From Investing Activities

Our primary sources (uses) of cash from investing activities were as follows (in millions):
Six Months Ended June 30,
2023 2022
Net cash used in investing activities $ (2,859) $ (1,499)
Capital Expenditures:
Buildings, facilities and plant equipment $ (818) $ (524)
Aircraft and parts (272) (406)
Vehicles (277) (129)
Information technology (453) (329)
Total Capital Expenditures(1)
$ (1,820) $ (1,388)
Capital Expenditures as a % of revenue 4.0 % 2.8 %
Other Investing Activities:
Proceeds from disposal of businesses, property, plant and equipment $ 50 $ 9
Net (purchases)/sales and maturities of marketable securities $ (1,067) $ (2)
Acquisitions, net of cash acquired $ (34) $ (99)
Other investing activities $ 12 $ (19)

~~(1)~~ In addition to capital expenditures of $1.8 and $1.4 billion for the six months ended June 30, 2023 and 2022, respectively, there were principal repayments of finance lease obligations of $79 and $105 million, respectively. These are included in cash flows from financing activities.


	Three Months Ended March 31,
	2024			2023
Net cash (used in) from investing activities	$	1,566		$	(1,813)

Capital Expenditures:
Buildings, facilities and plant equipment	$	(327)		$	(368)
Aircraft and parts	(174)			(71)
Vehicles	(349)			(13)
Information technology	(185)			(157)
Total Capital Expenditures	$	(1,035)		$	(609)

Capital Expenditures as a % of revenue	4.8		%	2.7		%

Other Investing Activities:
Proceeds from disposal of businesses, property, plant and equipment	$	13		$	5
Net (purchases) sales and maturities of marketable securities	$	2,646		$	(1,192)
Acquisitions, net of cash acquired	$	(44)		$	(34)
Other investing activities	$	(14)		$	17

We have commitments for the purchase of aircraft, vehicles, equipment and real estate to provide for the replacement of existing capacity and anticipated future growth. Future capital spending for anticipated growth and replacement assets will depend on a variety of factors, including economic and industry conditions. Our ~~2023~~2024 investment program anticipates investments in technology initiatives and enhanced network capabilities, including approximately $1.0 billion of projects tothat support our environmental sustainability goals. It also provides for the maintenance of buildings, facilities and equipment and replacement of certain aircraft within our fleet. We currently expect that our capital expenditures will total approximately ~~$5.3~~$4.5 billion in ~~2023,~~2024, of which approximately 50 percent will be allocated to ~~strategic expansion projects.~~network enhancement projects and other technology initiatives.

For the ~~first six months of 2023 compared to 2022,~~quarter, total capital expenditures increased, primarily due to:

•~~Spending~~Vehicle expenditure increases, driven by the timing of payments and availability of vehicle replacements.

•Information technology expenditure increases due to additional deployments of technology equipment and capitalized software projects.

•Aircraft expenditure increases due to final payments associated with the delivery of aircraft.

These were partially offset by decreased spending on buildings, facilities and plant equipment, ~~increased due to facility maintenance and capacity expansion projects.~~

•~~Vehicle expenditures increased,~~ driven by the timing ~~and availability~~ of ~~vehicle replacements and continuing investments in our network.~~network enhancement projects.

•~~Information technology expenditures increased as a result~~We received cash proceeds of ~~continuing investments in our digital capabilities and network automation.~~

•~~Aircraft expenditures decreased~~$2.6 billion from the sale of marketable securities due to the ~~timing~~liquidation of ~~payments associated with open aircraft orders.~~

~~Proceeds from the disposal of businesses, property, plant~~our portfolio to provide additional resources for short-term and ~~equipment were higher relative to the comparative period as we sold surplus real estate properties during the second quarter of 2023.~~

~~Net purchases of marketable securities increased due to a continued shift to longer duration investments.~~strategic operating needs.

Cash paid for acquisitions in ~~the~~both 2024 and 2023 ~~period represents~~related to the purchase of development areas for The UPS Store. ~~In 2022, this also included our acquisition of Delivery Solutions in the second quarter.~~ Other investing activities were impacted by changes in our non-current investments, purchase contract deposits and various other immaterial items.

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UNITED PARCEL SERVICE, INC. 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 from financing activities were as follows ~~(amounts in~~(in millions, except per share data):


		Six Months Ended June 30,				Three Months Ended March 31,
		2023		2022		2024	2023
Net cash used in financing activities		$	(3,582)	$	(5,286)
Net cash (used in) from financing activities
Share Repurchases:	Share Repurchases:
Cash paid to repurchase shares
Cash paid to repurchase shares
Cash paid to repurchase shares	Cash paid to repurchase shares	$	(1,498)	$	(1,242)
Number of shares repurchased	Number of shares repurchased	(8.4)		(6.7)
Shares outstanding at period end	Shares outstanding at period end	855		870
Dividends:	Dividends:
Dividends declared per share	Dividends declared per share	$	3.24	$	3.04
Dividends declared per share
Dividends declared per share
Cash paid for dividends	Cash paid for dividends	$	(2,693)	$	(2,567)
Borrowings:	Borrowings:
Net borrowings (repayments) of debt principal	Net borrowings (repayments) of debt principal	$	907	$	(1,105)
Net borrowings (repayments) of debt principal
Net borrowings (repayments) of debt principal
Other Financing Activities:	Other Financing Activities:
Cash received for common stock issuances
Cash received for common stock issuances
Cash received for common stock issuances	Cash received for common stock issuances	$	119	$	136
Other financing activities	Other financing activities	$	(417)	$	(508)
Capitalization:	Capitalization:
Total debt outstanding at period end	Total debt outstanding at period end	$	20,763	$	20,576
Total debt outstanding at period end
Total debt outstanding at period end
Total shareowners’ equity at period end	Total shareowners’ equity at period end	20,037		16,310
Total capitalization	Total capitalization	$	40,800	$	36,886

We did not repurchase any shares under our stock repurchase program during first quarter of 2024, and we do not currently anticipate repurchasing any shares during the remainder of the year. We repurchased ~~8.4 and 6.7~~4.1 million shares of class B common stock for ~~$1.5 and $1.2 billion under our stock repurchase program~~$750 million during the ~~six months ended June 30, 2023 and 2022, respectively. We anticipate our share repurchases will total approximately $3.0 billion in~~first quarter of 2023. For additional information on our share repurchase activities, see note 12 to the unaudited, consolidated financial statements.

The declaration of dividends is subject to the discretion of the Board and depends on various factors, including our net income, financial condition, cash requirements, future prospects and other relevant factors. WeIn the first quarter, we increased our quarterly cash dividend from $1.62 to ~~$1.62~~$1.63 per ~~share in 2023, compared to $1.52 in 2022. On August 3, 2023,~~share.

There were no issuances of debt during the ~~Board approved a dividend of $1.62 per share, which is payable on August 31, 2023, to shareowners of record on August 14, 2023.~~

quarter. Issuances of debt during the ~~six months ended June 30,~~first quarter of 2023 consisted of ~~fixed-~~fixed and ~~floating-rate~~floating rate senior notes of varying maturities totaling $2.5 billion. We used proceeds from these debt issuances to repay $1.5 billion of fixed- and floating-rate senior notes during the second quarter and we expect to use substantially all of the remaining proceeds to repay additional outstanding debt at maturity during the second half of the year.

~~There were no issuances of debt in the six months ended June 30, 2022.~~ Repayments of debt ~~in 2022 included fixed-~~during the quarter consisted of $2.2 billion of short- and ~~floating-rate senior notes of varying maturities totaling $1.0 billion and~~long-term commercial paper as well as scheduled principal payments on our finance lease obligations. In the first quarter of 2023, we made scheduled principal payments on our finance lease obligations and repaid certain amounts assumed in the Bomi Group acquisition.

As of ~~June 30, 2023,~~March 31, 2024, we had ~~$763 million~~$1.5 billion of fixed-rate senior notes outstanding that mature in ~~2023.~~2024. We intend to repay or refinance these amounts when due. 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.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The amount of commercial paper outstanding fluctuates based on daily liquidity needs. The following is a summary of our commercial paper program (in millions):


	Outstanding balance at quarter end ($)		Average balance outstanding ($)		Average interest rate
2024
USD	$	—	$	552	5.45	%
Total	$	—

As of March 31, 2024, we had no outstanding balances under our U.S. or European commercial paper programs.

The variation in cash received from common stock issuances primarily resulted from activity within the UPS 401(k) Savings Plan and our employee stock purchase plan in both the current and comparative period.

Other financing activities includes cash used to repurchase shares to satisfy tax withholding obligations on vested employee stock awards. Cash outflows for this purpose were ~~$395~~$177 and ~~$512~~$363 million for the ~~six months ended June 30,~~first quarter of 2024 and 2023, ~~and 2022,~~ respectively. The decrease was driven by changes in required repurchase amounts.

~~Table of Contents~~

~~UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND~~

~~RESULTS OF OPERATIONS~~

Except as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, 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.

Sources of Credit

See note 9 to the unaudited, consolidated financial statements for a discussion of our available credit and the financial covenants that we are subject to as part of our credit agreements.

Contractual Commitments

There have been no material changes to the contractual commitments described in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2022, except as follows. On May 31, 2023 we entered into an accelerated share repurchase agreement for $250 million. The transaction commenced on July 7, 2023 and completed on July 31,~~ 2023.

~~For additional information on 2023 debt issuances, see note 9 to the unaudited, consolidated financial statements.~~

Legal Proceedings and Contingencies

See note 7 and note 11 to the unaudited, consolidated financial statements for a discussion of judicial proceedings and other matters arising from the conduct of our business activities, and note 16 for a discussion of income tax related matters.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Collective Bargaining Agreements

Status of Collective Bargaining Agreements

See note 7 ~~and note 18~~ to the unaudited, consolidated financial statements for a discussion of the status of our collective bargaining agreements.

Multiemployer Benefit Plans

See note 7 to the unaudited, consolidated financial statements for a discussion of our participation in multiemployer benefit plans.

Recent Accounting Pronouncements

Adoption of New Accounting Standards

See note 2 to the unaudited, consolidated financial statements for a discussion of recently adopted accounting standards.

Accounting Standards Issued But Not Yet Effective

See note 2 to the unaudited, consolidated financial statements for a discussion of accounting standards issued, but not yet effective.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in certain commodity prices, foreign currency exchange rates, interest rates and equity prices. All of these market risks arise in the normal course of business, as we do not engage in speculative trading activities. In order to manage the risk arising from these exposures, we may utilize a variety of commodity, foreign currency exchange and interest rate forward contracts, options and swaps. A discussion of our accounting policies for derivative instruments and further disclosures are provided in note 15 to the unaudited, consolidated financial statements.

The total net fair value asset (liability) of our derivative financial instruments is summarized in the following table (in millions):


	March 31, 2024					March 31, 2024	December 31, 2023
Currency Derivatives

		June 30, 2023		December 31, 2022
Currency Derivatives		$	188	$	398

Interest Rate Derivatives		(5)		(5)

		$	183	$	393

As of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, we had no outstanding commodity hedge positions.

The information concerning market risk in Item 7A under the caption "Quantitative and Qualitative Disclosures about Market Risk" of our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 is incorporated herein by reference.

Our market risks, hedging strategies and financial instrument positions as of ~~June 30, 2023~~March 31, 2024 have not materially changed from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023. In the ~~second~~first quarter of ~~2023,~~2024, we entered into foreign currency exchange forward contracts on the Euro, British Pound Sterling, Canadian Dollar and ~~Canadian~~Hong Kong Dollar, and had forward contracts expire. The fair value changes between December 31, ~~2022~~2023 and ~~June 30, 2023~~March 31, 2024 in the preceding table are primarily due to ~~interest rate and~~ foreign currency exchange rate fluctuations between those dates.

The foreign currency exchange forward contracts, swaps and options previously discussed contain an element of risk that the counterparties may be unable to meet the terms of the agreements; however, we seek to minimize such risk exposures for these instruments by limiting the counterparties to banks and financial institutions that meet established credit guidelines and by monitoring counterparty credit risk to prevent concentrations of credit risk with any single counterparty.

We have agreements with all of our active counterparties (covering all of our derivative positions) containing early termination rights and/or ~~zero threshold~~ bilateral collateral provisions whereby cash is required based on the net fair value of derivatives associated with those counterparties. The majority of these agreements require exchange of collateral when positions exceed $250 million.

Events such as a credit rating downgrade (depending on the ultimate rating level) could also allow us to take additional protective measures such as the early termination of trades. As of ~~June 30, 2023,~~March 31, 2024, we held cash collateral of ~~$238~~$82 million and were not required to post ~~$1 million~~any collateral with our counterparties under these agreements. We have not historically incurred, and do not expect to incur in the future, any losses as a result of counterparty default.

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Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, management, including our Principal Executive Officer and Principal Financial and Accounting Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")). Based upon, and as of the date of, the evaluation, our Principal Executive Officer and Principal Financial and Accounting Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~June 30, 2023~~March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

For a discussion of material legal proceedings affecting the Company, see note 11 to the unaudited, consolidated financial statements included in this report.

Item 1A.Risk Factors

There have been no material changes to the risk factors described in Part 1, Item 1A in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023. The occurrence of any of the risks described therein could materially affect us, including impacting our business, financial condition, results of operations, stock price or credit rating, as well as our reputation. These risks are not the only ones we face. We could also be materially adversely affected by other events, factors or uncertainties that are unknown to us, or that we do not currently consider to be material.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

~~(c) A summary of repurchases of our class A and class B common stock during the second quarter of 2023 is as follows (in millions, except per share amounts):~~

Total Number of Shares Purchased (1)
Average Price Paid Per Share Total Number of Shares Purchased as Part of a Publicly Announced Program Approximate Dollar Value of Shares that May Yet be Purchased Under the Program
April 1 - April 30, 2023 0.9 $ 185.10 0.9 $ 4,173
May 1 - May 31, 2023 3.2 171.90 3.2 3,620
June 1 - June 30, 2023 0.2 175.28 0.2 $ 3,582
Total April 1 - June 30, 2023 4.3 $ 174.71 4.3
(1) Includes shares repurchased through our publicly announced share repurchase programs and shares tendered to pay the exercise price and tax withholding on employee stock options.

We repurchased 4.3 and 8.4 million shares of class B common stock for $750 million and $1.5 billion during the three and six months ended June 30, 2023, respectively. These repurchases were completed as follows:

•In August 2021, the Board of Directors approved a share repurchase authorization of $5.0 billion of class A and class B common stock (the "2021 Authorization"). During the six months ended June 30, 2023, we repurchased 0.5 million shares of class B common stock for $82 million under this authorization.

•In January 2023, the Board of Directors ~~terminated the 2021 Authorization and~~ approved a ~~new~~ share repurchase authorization of $5.0 billion for class A and class B common stock. ~~During the three and six months ended June 30, 2023, we repurchased 4.3 and 7.9 million shares of class B common stock for $750 million and $1.4 billion, respectively, under this authorization.~~

We do not anticipate repurchasing ~~approximately $3.0 billion in~~any shares in ~~2023.~~2024. As of March 31, 2024, we had $2.8 billion of this share repurchase authorization available.

For additional information on our share repurchase activities, see note 12 to the unaudited, consolidated financial statements.

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Item 5. Other Information

~~Disclosures Required Pursuant to Section 13(r) of the Securities Exchange Act of 1934~~

The Company maintains robust economic sanctions compliance procedures designed to promote compliance with applicable sanctions laws. However, it is possible that from time to time the Company may inadvertently pick up packages from, or deliver packages to, individuals or entities that result in required disclosure under Section 13(r).

Between January 12, 2022 and the date of this filing, the Company inadvertently delivered to: the Iranian embassy in Germany (foil paper - revenue of $5.75, no profit); Ascotec – 2 shipments delivered (alarm device - revenue of $8.88, no profit); Bank Melli (toner cartridge - revenue of $5.92, no profit); Bank Saderat (printer toner - revenue of $4.45, no profit); the Iranian embassy in the U.K. (batteries - revenue of $3.77, no profit); Bank Sepah (document - revenue of $22.08, profit of $8.36); Europaisch Iranische Handelsbank (documents - revenue of $5.11, no profit); and Ibrahim Buisir (documents - revenue of $9.88, no profit). During this time the Company also delivered a single shipment from Iran Air (toner cartridge - revenue of $4.80, no profit).

UPS does not intend to further pick up from or deliver to these parties, and intends to continue to implement process improvements designed to better identify and prevent potential shipments to or from restricted parties.

Insider Trading Arrangements and Policies

None.

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Item 6. Exhibits



3.1	—	Restated Certificate of Incorporation of United Parcel Service, Inc. (incorporated by reference to Exhibit 3.3 to Form 8-K filed on May 12, 2010).

3.2	—	Amended and Restated Bylaws of United Parcel Service, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K, filed on May 9, 2023).

10.1	—	United Parcel Service, Inc. Key Employee Severance Plan, effective March 20, 2024.*

10.2	—	United Parcel Service, Inc. Management Incentive Program Amended and Restated Terms and Conditions, effective March 20, 2024.*

10.3	—	United Parcel Service, Inc. Long-Term Incentive Performance Program Amended and Restated Terms and Conditions, effective March 20, 2024.*

10.4	—	United Parcel Service, Inc. Stock Option Program Amended and Restated Terms and Conditions, effective March 20, 2024.*

31.1	—	Certification of the Principal Executive Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	—	Certification of the Principal Financial and Accounting Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	—	Certification of the Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	—	Certification of the Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	—	The following unaudited financial information from this Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2023~~March 31, 2024 is formatted in Inline XBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Statements of Consolidated Income, (iii) the Statements of Consolidated Comprehensive Income (Loss), (iv) the Statements of Consolidated Cash Flows, and (v) the Notes to the Consolidated Financial Statements.

104	—	Cover Page Interactive Data File - The cover page from this Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2023~~March 31, 2024 is formatted in Inline XBRL (included as Exhibit 101).

__________________________


*			Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UNITED PARCEL SERVICE, INC.
(Registrant)

Date:

~~August 8, 2023~~May 3, 2024

By:

/s/ BRIAN O. NEWMAN

Brian O. Newman

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

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	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program	Approximate Dollar Value of Shares that May Yet be Purchased Under the Program
April 1 - April 30, 2023	0.9	$	185.10	0.9	$	4,173
May 1 - May 31, 2023	3.2	171.90		3.2	3,620
June 1 - June 30, 2023	0.2	175.28		0.2	$	3,582
Total April 1 - June 30, 2023	4.3	$	174.71	4.3
(1) Includes shares repurchased through our publicly announced share repurchase programs and shares tendered to pay the exercise price and tax withholding on employee stock options.