United Parcel Service (UPS) 8-K Ups Releases 2Q 2020 Earnings

Exhibit 99.2

United Parcel Service, Inc.

Selected Financial Data - Second Quarter

(unaudited)

	Three Months Ended
	June 30
	2020			2019			Change		% Change
(amounts in millions, except per share data)
Statement of Income Data:
Revenue:
U.S. Domestic Package	$	13,074		$	11,150		$	1,924	17.3	%
International Package	3,705			3,505			200		5.7	%
Supply Chain & Freight	3,680			3,393			287		8.5	%
Total revenue	20,459			18,048			2,411		13.4	%
Operating expenses:
Compensation and benefits	10,843			9,299			1,544		16.6	%
Other	7,404			6,606			798		12.1	%
Total operating expenses	18,247			15,905			2,342		14.7	%
Operating profit:
U.S. Domestic Package	1,182			1,208			(26)		(2.2)	%
International Package	771			663			108		16.3	%
Supply Chain & Freight	259			272			(13)		(4.8)	%
Total operating profit	2,212			2,143			69		3.2	%
Other income (expense):
Other pension income (expense)	327			192			135		70.3	%
Investment income and other	1			28			(27)		(96.4)	%
Interest expense	(183)			(159)			(24)		15.1	%
Total other income (expense)	145			61			84		137.7	%
Income before income taxes	2,357			2,204			153		6.9	%
Income tax expense (benefit)	589			519			70		13.5	%
Net income	$	1,768		$	1,685		$	83	4.9	%
Net income as a percentage of revenue	8.6		%	9.3		%
Per share amounts:
Basic earnings per share	$	2.04		$	1.95		$	0.09	4.6	%
Diluted earnings per share	$	2.03		$	1.94		$	0.09	4.6	%
Weighted-average shares outstanding:
Basic	866			865			1		0.1	%
Diluted	869			869			—		0.0	%
As adjusted income data (1):
Operating profit:
U.S. Domestic Package	$	1,215		$	1,226		$	(11)	(0.9)	%
International Package	842			665			177		26.6	%
Supply Chain & Freight	267			273			(6)		(2.2)	%
Total operating profit	2,324			2,164			160		7.4	%
Income before income taxes	$	2,469		$	2,225		$	244	11.0	%
Net income	$	1,851		$	1,702		$	149	8.8	%
Basic earnings per share	$	2.14		$	1.97		$	0.17	8.6	%
Diluted earnings per share	$	2.13		$	1.96		$	0.17	8.7	%

(1) See Non-GAAP Schedules for detail of Transformation costs.

Certain prior year amounts have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.

Selected Operating Data - Second Quarter

(unaudited)

	Three Months Ended
	June 30
	2020		2019		Change		% Change
Revenue (in millions):
U.S. Domestic Package:
Next Day Air	$	1,984	$	2,173	$	(189)	(8.7)	%
Deferred	1,298		1,157		141		12.2	%
Ground	9,792		7,820		1,972		25.2	%
Total U.S. Domestic Package	13,074		11,150		1,924		17.3	%
International Package:
Domestic	719		690		29		4.2	%
Export	2,824		2,668		156		5.8	%
Cargo and Other	162		147		15		10.2	%
Total International Package	3,705		3,505		200		5.7	%
Supply Chain & Freight:
Forwarding	1,771		1,496		275		18.4	%
Logistics	977		833		144		17.3	%
Freight	724		861		(137)		(15.9)	%
Other	208		203		5		2.5	%
Total Supply Chain & Freight	3,680		3,393		287		8.5	%
Consolidated	$	20,459	$	18,048	$	2,411	13.4	%
Consolidated volume (in millions)	1,564		1,294		270		20.9	%
Operating weekdays	64		64		—		—	%
Average Daily Package Volume (in thousands):
U.S. Domestic Package:
Next Day Air	1,865		1,855		10		0.5	%
Deferred	1,702		1,380		322		23.3	%
Ground	17,560		13,972		3,588		25.7	%
Total U.S. Domestic Package	21,127		17,207		3,920		22.8	%
International Package:
Domestic	1,764		1,626		138		8.5	%
Export	1,545		1,387		158		11.4	%
Total International Package	3,309		3,013		296		9.8	%
Consolidated	24,436		20,220		4,216		20.9	%
Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air	$	16.62	$	18.30	$	(1.68)	(9.2)	%
Deferred	11.92		13.10		(1.18)		(9.0)	%
Ground	8.71		8.75		(0.04)		(0.5)	%
Total U.S. Domestic Package	9.67		10.12		(0.45)		(4.4)	%
International Package:
Domestic	6.37		6.63		(0.26)		(3.9)	%
Export	28.56		30.06		(1.50)		(5.0)	%
Total International Package	16.73		17.41		(0.68)		(3.9)	%
Consolidated	$	10.63	$	11.21	$	(0.58)	(5.2)	%

Certain prior year amounts have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.

Detail of Other Operating Expenses - Second Quarter

(unaudited)

	Three Months Ended
	June 30
	2020		2019		Change		% Change
(in millions)
Repairs and maintenance	$	554	$	473	$	81	17.1	%
Depreciation and amortization	661		575		86		15.0	%
Purchased transportation	3,716		3,000		716		23.9	%
Fuel	499		857		(358)		(41.8)	%
Other occupancy	355		322		33		10.2	%
Other expenses	1,619		1,379		240		17.4	%
Total other operating expenses	$	7,404	$	6,606	$	798	12.1	%

Earnings Per Share and Share Data - Second Quarter

(unaudited)

	Three Months Ended
	June 30
	2020		2019
(amounts in millions, except per share data)
Numerator:
Net income	$	1,768	$	1,685
Denominator:
Weighted-average shares	862		860
Deferred compensation obligations	—		—
Vested portion of restricted units	4		5
Denominator for basic earnings per share	866		865
Effect of dilutive securities:
Restricted units	3		4
Stock options	—		—
Denominator for diluted earnings per share	869		869
Basic earnings per share	$	2.04	$	1.95
Diluted earnings per share	$	2.03	$	1.94
Detail of shares outstanding as of June 30, 2020:
Class A shares	157
Class B shares	706
Total shares outstanding	863

Certain prior year amounts have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.

Selected Financial Data - Year to Date

(unaudited)

	Six Months Ended
	June 30
	2020			2019			Change		% Change
(amounts in millions, except per share data)
Statement of Income Data:
Revenue:
U.S. Domestic Package	$	24,530		$	21,630		$	2,900	13.4	%
International Package	7,088			6,964			124		1.8	%
Supply Chain & Freight	6,876			6,614			262		4.0	%
Total revenue	38,494			35,208			3,286		9.3	%
Operating expenses:
Compensation and benefits	20,929			18,616			2,313		12.4	%
Other	14,281			13,055			1,226		9.4	%
Total operating expenses	35,210			31,671			3,539		11.2	%
Operating profit:
U.S. Domestic Package	1,546			1,874			(328)		(17.5)	%
International Package	1,322			1,191			131		11.0	%
Supply Chain & Freight	416			472			(56)		(11.9)	%
Total operating profit	3,284			3,537			(253)		(7.2)	%
Other income (expense):
Other pension income (expense)	654			383			271		70.8	%
Investment income and other	19			52			(33)		(63.5)	%
Interest expense	(350)			(328)			(22)		6.7	%
Total other income (expense)	323			107			216		N/A
Income before income taxes	3,607			3,644			(37)		(1.0)	%
Income tax expense (benefit)	874			848			26		3.1	%
Net income	$	2,733		$	2,796		$	(63)	(2.3)	%
Net income as a percentage of revenue	7.1		%	7.9		%
Per share amounts:
Basic earnings per share	$	3.16		$	3.23		$	(0.07)	(2.2)	%
Diluted earnings per share	$	3.14		$	3.22		$	(0.08)	(2.5)	%
Weighted-average shares outstanding:
Basic	865			866			(1)		(0.1)	%
Diluted	869			869			—		—	%
As adjusted income data(1):
Operating profit:
U.S. Domestic Package	$	1,616		$	1,920		$	(304)	(15.8)	%
International Package	1,400			1,277			123		9.6	%
Supply Chain & Freight	425			484			(59)		(12.2)	%
Total operating profit	3,441			3,681			(240)		(6.5)	%
Income before income taxes	$	3,764		$	3,788		$	(24)	(0.6)	%
Net income	$	2,851		$	2,906		$	(55)	(1.9)	%
Basic earnings per share	$	3.30		$	3.36		$	(0.06)	(1.8)	%
Diluted earnings per share	$	3.28		$	3.34		$	(0.06)	(1.8)	%

(1) See Non-GAAP Schedules for detail of Transformation costs.

Certain prior year amounts have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.

Selected Operating Data - Year to Date

(unaudited)

	Six Months Ended
	June 30
	2020		2019		Change		% Change
Revenue (in millions):
U.S. Domestic Package:
Next Day Air	$	4,039	$	4,014	$	25	0.6	%
Deferred	2,495		2,246		249		11.1	%
Ground	17,996		15,370		2,626		17.1	%
Total U.S. Domestic Package	24,530		21,630		2,900		13.4	%
International Package:
Domestic	1,407		1,380		27		2.0	%
Export	5,385		5,299		86		1.6	%
Cargo and Other	296		285		11		3.9	%
Total International Package	7,088		6,964		124		1.8	%
Supply Chain & Freight:
Forwarding	3,144		2,912		232		8.0	%
Logistics	1,822		1,665		157		9.4	%
Freight	1,490		1,634		(144)		(8.8)	%
Other	420		403		17		4.2	%
Total Supply Chain & Freight	6,876		6,614		262		4.0	%
Consolidated	$	38,494	$	35,208	$	3,286	9.3	%
Consolidated volume (in millions)	2,916		2,540		376		14.8	%
Operating weekdays	128		127		1		0.8	%
Average Daily Package Volume (in thousands):
U.S. Domestic Package:
Next Day Air	1,874		1,710		164		9.6	%
Deferred	1,597		1,382		215		15.6	%
Ground	16,114		13,829		2,285		16.5	%
Total U.S. Domestic Package	19,585		16,921		2,664		15.7	%
International Package:
Domestic	1,716		1,657		59		3.6	%
Export	1,479		1,419		60		4.2	%
Total International Package	3,195		3,076		119		3.9	%
Consolidated	22,780		19,997		2,783		13.9	%
Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air	$	16.84	$	18.48	$	(1.64)	(8.9)	%
Deferred	12.21		12.80		(0.59)		(4.6)	%
Ground	8.72		8.75		(0.03)		(0.3)	%
Total U.S. Domestic Package	9.79		10.07		(0.28)		(2.8)	%
International Package:
Domestic	6.41		6.56		(0.15)		(2.3)	%
Export	28.45		29.40		(0.95)		(3.2)	%
Total International Package	16.61		17.10		(0.49)		(2.9)	%
Consolidated	$	10.74	$	11.15	$	(0.41)	(3.7)	%

Certain prior year amounts have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.

Detail of Other Operating Expenses - Year to Date

(unaudited)

	Six Months Ended
	June 30
	2020		2019		Change		% Change
(in millions)
Repairs and maintenance	$	1,117	$	907	$	210	23.2	%
Depreciation and amortization	1,309		1,143		166		14.5	%
Purchased transportation	6,647		5,966		681		11.4	%
Fuel	1,260		1,627		(367)		(22.6)	%
Other occupancy	738		693		45		6.5	%
Other expenses	3,210		2,719		491		18.1	%
Total other operating expenses	$	14,281	$	13,055	$	1,226	9.4	%

Earnings Per Share and Share Data - Year to Date

(unaudited)

	Six Months Ended
	June 30
	2020		2019
(amounts in millions, except per share data)
Numerator:
Net income	$	2,733	$	2,796
Denominator:
Weighted-average shares	860		860
Deferred compensation obligations	—		1
Vested portion of restricted units	5		5
Denominator for basic earnings per share	865		866
Effect of dilutive securities:
Restricted units	4		3
Stock options	—		—
Denominator for diluted earnings per share	869		869
Basic earnings per share	$	3.16	$	3.23
			—
Diluted earnings per share	$	3.14	$	3.22

Certain prior year amounts have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.

Consolidated Balance Sheets

June 30, 2020 (unaudited) and December 31, 2019

	June 30, 2020		December 31, 2019
(amounts in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	8,813	$	5,238
Marketable securities	403		503
Accounts receivables	9,383		9,645
Less: Allowance for credit losses	(153)		(93)
Accounts receivable, net	9,230		9,552
Other current assets	1,780		1,810
Total Current Assets	20,226		17,103
Property, Plant and Equipment, Net	31,439		30,482
Operating Lease Right-Of-Use Assets	2,998		2,856
Goodwill	3,787		3,813
Intangible Assets, Net	2,207		2,167
Investments and Restricted Cash	24		24
Deferred Income Tax Assets	277		330
Other Non-Current Assets	1,099		1,082
Total Assets	$	62,057	$	57,857
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Current maturities of long-term debt, commercial paper and finance leases	$	3,749	3,420
Current maturities of operating leases	534		538
Accounts payable	5,271		5,555
Accrued wage and withholdings	2,922		2,552
Self-insurance reserves	1,080		914
Accrued group welfare and retirement plan contributions	794		793
Other current liabilities	1,921		1,641
Total Current Liabilities	16,271		15,413
Long-Term Debt and Finance Leases	23,199		21,818
Non-Current Operating Leases	2,463		2,391
Pension and Postretirement Benefit Obligations	10,554		10,601
Deferred Income Tax Liabilities	1,918		1,632
Other Non-Current Liabilities	3,276		2,719
Shareowners' Equity:
Class A common stock	2		2
Class B common stock	7		7
Additional paid-in capital	255		150
Retained earnings	10,032		9,105
Accumulated other comprehensive loss	(5,933)		(5,997)
Deferred compensation obligations	20		26
Less: Treasury stock	(20)		(26)
Total Equity for Controlling Interest	4,363		3,267
Noncontrolling interests	13		16
Total Shareowners' Equity	4,376		3,283
Total Liabilities and Sharewoners' Equity	$	62,057	$	57,857

Amounts are subject to reclassification.

United Parcel Service, Inc.

Statements of Consolidated Cash Flows

(unaudited)

(amounts in millions)				Six Months Ended
		June 30,
		2020			2019
Cash Flows From Operating Activities:
	Net income	2,733			2,796
	Adjustments to reconcile net income to net cash from operating activities:
	Depreciation and amortization	1,309			1,143
	Pension and postretirement benefit expense	321			376
	Pension and postretirement benefit contributions	(263)			(1,108)
	Self-insurance reserves	293			(98)
	Deferred tax (benefit) expense	284			275
	Stock compensation expense	368			513
	Other (gains) losses	97			108
	Changes in assets and liabilities, net of effects of business acquisitions:
	Accounts receivable	105			817
	Other assets	301			398
	Accounts payable	(617)			(782)
	Accrued wages and withholdings	771			(256)
	Other liabilities	239			57
	Other operating activities	6			(32)
	Net cash from operating activities	5,947			4,207
Cash Flows From Investing Activities:
	Capital expenditures			(2,065)			(2,861)
	Proceeds from disposals of property, plant and equipment			2			6
	Purchases of marketable securities			(131)			(383)
	Sales and maturities of marketable securities			241			480
	Net change in finance receivables			16			8
	Cash paid for business acquisitions, net of cash and cash equivalents acquired			—			(1)
	Other investing activities			(6)			(96)
	Net cash used in investing activities	(1,943)			(2,847)
Cash Flows From Financing Activities:
	Net change in short-term debt			(892)			(51)
	Proceeds from long-term borrowings			4,436			2,653
	Repayments of long-term borrowings			(1,826)			(1,988)
	Purchases of common stock			(231)			(503)
	Issuances of common stock			131			129
	Dividends			(1,683)			(1,599)
	Other financing activities			(334)			(175)
	Net cash used in financing activities	(399)			(1,534)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash					(29)			23
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash					3,576			(151)
Cash, Cash Equivalents and Restricted Cash:
	Beginning of period	5,238			4,367
	End of period	$	8,814		$	4,216

Certain prior year amounts have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.

Supplemental Analysis of Currency and Pension Discount Rates - Second Quarter

Currency Neutral Revenue Per Piece, Revenue and Operating Profit
(unaudited)
	Three Months Ended										Currency
	June 30								Neutral
	2020		2019		% Change		Currency		2020 (1)		% Change
Average Revenue Per Piece:
International Package:
Domestic	$	6.37	$	6.63	(3.9)	%	$	0.16	$	6.53	(1.5)	%
Export	28.56		30.06		(5.0)	%	0.18		28.74		(4.4)	%
Total International Package	$	16.73	$	17.41	(3.9)	%	$	0.17	$	16.90	(2.9)	%
Consolidated	$	10.63	$	11.21	(5.2)	%	$	0.02	$	10.65	(5.0)	%
	Three Months Ended										Currency
	June 30								Neutral
	2020		2019		% Change		Currency		2020(1)		% Change
Revenue (in millions):
U.S. Domestic Package	$	13,074	$	11,150	17.3	%	$	—	$	13,074	17.3	%
International Package	3,705		3,505		5.7	%	38		3,743		6.8	%
Supply Chain & Freight	3,680		3,393		8.5	%	52		3,732		10.0	%
Total revenue	$	20,459	$	18,048	13.4	%	$	90	$	20,549	13.9	%
	Three Months Ended										Currency
	June 30										Neutral
	2020(2)		2019(2)		% Change		Currency		2020(3)		% Change
As-Adjusted Operating Profit (in millions):
U.S. Domestic Package	$	1,215	$	1,226	(0.9)	%	$	—	$	1,215	(0.9)	%
International Package	842		665		26.6	%	(8)		834		25.4	%
Supply Chain & Freight	267		273		(2.2)	%	(7)		260		(4.8)	%
Total operating profit	$	2,324	$	2,164	7.4	%	$	(15)	$	2,309	6.7	%

Pension Discount Rate Neutral Operating Profit and Margin

(unaudited)

	Three Months Ended June 30,														Pension Discount Rate Neutral
	2020(2)			2019(2)			% Change		Pension			2020(4)			% Change
As-Adjusted Operating profit (in millions):
U.S. Domestic Package	$	1,215		$	1,226		(0.9)	%	$	63		$	1,278		4.2	%
International Package	842			665			26.6	%	4			846			27.2	%
Supply Chain & Freight	267			273			(2.2)	%	6			273			—	%
Total operating profit	$	2,324		$	2,164		7.4	%	$	73		$	2,397		10.8	%
	Three Months Ended June 30,														Pension Discount Rate Neutral
	2020(2)			2019(2)			% Change		Pension			2020(4)			% Change
As- Adjusted Operating margin:
U.S. Domestic Package	9.3		%	11.0		%	(1.7)	%	0.5		%	9.8		%	(1.2)	%
International Package	22.7		%	19.0		%	3.7	%	0.1		%	22.8		%	3.8	%
Supply Chain & Freight	7.3		%	8.0		%	(0.7)	%	0.1		%	7.4		%	(0.6)	%
Total operating margin	11.4		%	12.0		%	(0.6)	%	0.3		%	11.7		%	(0.3)	%
(1) Amounts adjusted for period over period foreign currency exchange rate and hedging differences
(2) Amounts adjusted for transformation strategy costs
(3) Amounts adjusted for transformation strategy costs and period over period foreign currency exchange rate and hedging differences
(4) Amounts adjusted for transformation strategy costs and period over period impact of discount rates on pension service cost

Certain prior year have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.

Supplemental Analysis of Currency and Pension Discount Rates - Year to Date

Currency Neutral Revenue Per Piece, Revenue and Operating Profit
(unaudited)
	Six Months Ended										Currency
	June 30								Neutral
	2020		2019		% Change		Currency		2020(1)		% Change
Average Revenue Per Piece:
International Package:
Domestic	$	6.41	$	6.56	(2.3)	%	$	0.13	$	6.54	(0.3)	%
Export	28.45		29.40		(3.2)	%	0.13		28.58		(2.8)	%
Total International Package	$	16.61	$	17.1	(2.9)	%	$	0.13	$	16.74	(2.1)	%
Consolidated	$	10.74	$	11.15	(3.7)	%	$	0.02	$	10.76	(3.5)	%
	Six Months Ended										Currency
	June 30								Neutral
	2020		2019		% Change		Currency		2020(1)		% Change
Revenue (in millions):
U.S. Domestic Package	$	24,530	$	21,630	13.4	%	$	—	$	24,530	13.4	%
International Package	7,088		6,964		1.8	%	57		7,145		2.6	%
Supply Chain & Freight	6,876		6,614		4.0	%	100		6,976		5.5	%
Total revenue	$	38,494	$	35,208	9.3	%	$	157	$	38,651	9.8	%
	Six Months Ended										Currency
	June 30										Neutral
	2020(2)		2019(2)		% Change		Currency		2020(3)		% Change
As-Adjusted Operating Profit (in millions):
U.S. Domestic Package	$	1,616	$	1,920	(15.8)	%	$	—	$	1,616	(15.8)	%
International Package	1,400		1,277		9.6	%	(30)		1,370		7.3	%
Supply Chain & Freight	425		484		(12.2)	%	(6)		419		(13.4)	%
Total operating profit	$	3,441	$	3,681	(6.5)	%	$	(36)	$	3,405	(7.5)	%

Pension Discount Rate Neutral Operating Profit and Margin

(unaudited)

	Six Months Ended June 30,														Pension Discount Rate Neutral
	2020(2)			2019(2)			% Change		Pension			2020(4)			% Change
As-Adjusted Operating profit (in millions):
U.S. Domestic Package	$	1,616		$	1,920		(15.8)	%	$	125		$	1,741		(9.3)	%
International Package	1,400			1,277			9.6	%	8			1,408			10.3	%
Supply Chain & Freight	425			484			(12.2)	%	14			439			(9.3)	%
Total operating profit	$	3,441		$	3,681		(6.5)	%	$	147		$	3,588		(2.5)	%
	Six Months Ended June 30,														Pension Discount Rate Neutral
	2020(2)			2019(2)			% Change		Pension			2020(4)			% Change
As- Adjusted Operating margin:
U.S. Domestic Package	6.6		%	8.9		%	(2.3)	%	0.5		%	7.1		%	(1.8)	%
International Package	19.8		%	18.3		%	1.5	%	0.1		%	19.9		%	1.6	%
Supply Chain & Freight	6.2		%	7.3		%	(1.1)	%	0.2		%	6.4		%	(0.9)	%
Total operating margin	8.9		%	10.5		%	(1.6)	%	0.4		%	9.3		%	(1.2)	%
(1) Amounts adjusted for period over period foreign currency exchange rate and hedging differences
(2) Amounts adjusted for transformation strategy costs
(3) Amounts adjusted for transformation strategy costs and period over period foreign currency exchange rate and hedging differences
(4) Amounts adjusted for transformation strategy costs and period over period impact of discount rates on pension service cost

Certain prior year have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.

Non-GAAP Schedules

Reconciliation of GAAP and Non-GAAP Income Statement Data

(in millions, except per share amounts):

Three Months Ended June 30,
	2020												2019
	As-Reported (GAAP)		Transformation Strategy Costs(1)		As-Adjusted (Non-GAAP)		As-Reported (GAAP)		Transformation Strategy Costs(2)		As-Adjusted (Non-GAAP)
Operating profit:
U.S. Domestic Package	$	1,182	$	33	$	1,215	$	1,208	$	18	$	1,226
International Package	771		71		842		663		2		665
Supply Chain & Freight	259		8		267		272		1		273
Total operating profit	$	2,212	$	112	$	2,324	$	2,143	$	21	$	2,164
Income before income taxes	$	2,357	$	112	$	2,469	$	2,204	$	21	$	2,225
Income tax expense	$	589	$	29	$	618	$	519	$	4	$	523
Net income	$	1,768	$	83	$	1,851	$	1,685	$	17	$	1,702
Diluted earnings per share	$	2.03	$	0.10	$	2.13	$	1.94	$	0.02	$	1.96

(1) Transformation costs of $112 million reflect other employee benefits costs of $81 million and other costs of $31 million.

(2) Transformation costs of $21 million reflect other employee benefits costs of $2 million and other costs of $19 million.

Six Months Ended June 30,
	2020												2019
	As-Reported (GAAP)		Transformation Strategy Costs(1)		As-Adjusted (Non-GAAP)		As-Reported (GAAP)		Transformation Strategy Costs(2)		As-Adjusted (Non-GAAP)
Operating profit:
U.S. Domestic Package	$	1,546	$	70	$	1,616	$	1,874	$	46	$	1,920
International Package	1,322		78		1,400		1,191		86		1,277
Supply Chain & Freight	416		9		425		472		12		484
Total operating profit	$	3,284	$	157	$	3,441	$	3,537	$	144	$	3,681
Income before income taxes	$	3,607	$	157	$	3,764	$	3,644	$	144	$	3,788
Income tax expense	$	874	$	39	$	913	$	848	$	34	$	882
Net income	$	2,733	$	118	$	2,851	$	2,796	$	110	$	2,906
Diluted earnings per share	$	3.14	$	0.14	$	3.28	$	3.22	$	0.12	$	3.34

(1) Transformation costs of $157 million reflect other employee benefits costs of $93 million and other costs of $64 million.

(2) Transformation costs of $144 million reflect other employee benefits costs of $108 million and other costs of $36 million.

Reconciliation of Adjusted Capital Expenditures and Free Cash Flow (Non-GAAP measures)
(in millions):
Six Months Ended June 30,
	2020		2019
Cash flows from operating activities	$	5,947	$	4,207
Capital expenditures	(2,065)		(2,861)
Principal repayments of finance lease obligations	(33)		(85)
Adjusted Capital Expenditures (Non-GAAP measure)	$	(2,098)	$	(2,946)
Proceed from disposal of PP&E	2		6
Net change in finance receivables	16		8
Other investing activities	(6)		(96)
Adjusted free cash flow (Non-GAAP measure)	$	3,861	$	1,179
Discretionary pension contributions	—		1,005
Adjusted Free cash flow (Non-GAAP measure) excluding discretionary pension contributions	$	3,861	$	2,184

Amounts are subject to reclassification.

United Parcel Service, Inc.

Aircraft Fleet - as of June 30, 2020

(unaudited)

Description	Owned and Finance Leases	Operating Leases & Charters from Others	On Order	Under Option
Operating:
Boeing 757-200	75	—	—	—
Boeing 767-300	66	—	6	—
Boeing 767-300BCF	4	—	—	—
Boeing 767-300BDSF	2	—	2	—
Airbus A300-600	52	—	—	—
Boeing MD-11	39	—	3	—
Boeing 747-400F	11	—	—	—
Boeing 747-400BCF	2	—	—	—
Boeing 747-8F	16	—	12	—
Other	—	294	—	—
Total	267	294	23	—