What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-18 compared with 2024-02-20 · 581 added, 455 removed, 2048 unchanged (34% of the section changed)

Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Report of Independent Registered Public Accounting Firm (PCAOB ID N o.

Consolidated Balance Sheets

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Note 7—Goodwill and Intangible Assets

Note 8—Acquisitions

Note 8—Acquisitions and Dispositions

Note 9—Debt and Financing Arrangements

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Valuation of U.S.

hedge fund, private debt, private equity and real estate investments — Refer to Note 5, Company-Sponsored Employee Benefit Plans (Fair Value Measurements), to the financial statements

hedge fund, risk parity, private debt, private equity and real estate investments — Refer to Note 5, Company-Sponsored Employee Benefit Plans (Fair Value Measurements), to the financial statements

Critical Audit Matter Description

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The Company determines the reported values of the U.S.

Plans’ investments in hedge, private debt, private equity and real estate funds primarily based on the estimated net asset value ("NAV") of the fund.

Plans’ investments in hedge fund, private debt, private equity and real estate funds primarily based on the estimated net asset value ("NAV") of the fund.

In order to estimate NAV, the Company evaluates audited and unaudited financial reports from fund managers, and makes adjustments, as appropriate, for investment activity between the date of the financial reports and December 31.

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Our audit procedures related to the inputs used by management to estimate the NAV of the U.S.

Plans’ hedge fund, private debt, private equity and real estate investments included the following, among others:

• For certain investments, we confirmed directly with the respective fund manager its preliminary estimate of the fund’s NAV as of December 31, 2023.

Plans’ hedge fund, private debt, private equity and real estate investments (collectively, the “funds”) included the following, among others:

• We tested the effectiveness of controls, including those related to the reliability of values reported by fund managers, the relevance of asset class benchmark returns, and the completeness and accuracy of unobservable inputs related to the underlying assets of the funds, including certain controls for which the control design was modified following the transition of the UPS Group Trust’s investment management function to Goldman Sachs.

• For a selection of investments, we evaluated certain inputs and recalculated ending values in accordance with management’s processes and confirmed directly with the respective fund manager its preliminary estimate of the fund’s NAV as of December 31, 2024.

• We evaluated the Company’s historical ability to accurately estimate NAV for these funds by comparing each fund’s recorded valuation as of its prior fiscal year end to the NAV per the audited fund financial statements (which are received in arrears of the Company’s reporting timetable).

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Deferred compensation obligations 7 9

Treasury stock ( 0.2 in 2023 and 2022)

Treasury stock ( 0.1 and 0.2 in 2024 and 2023, respectively)

Total Equity for Controlling Interests 16,718 17,306

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Other Income and (Expense):

Investment income and other

Investment income (expense) and other

( 160 ) 219 2,435

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Other (gains) losses 262 265 123

Changes in assets and liabilities, net of effects of acquisitions:

Changes in assets and liabilities, net of effects of business acquisitions and dispositions:

Accounts receivable ( 566 ) 1,256 ( 322 )

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All intercompany balances and transactions have been eliminated.

We provide transportation services, primarily domestic and international letter and package delivery.

We provide transportation services, primarily domestic and international letter, package and air cargo delivery.

Through our Supply Chain Solutions subsidiaries, we are also a global provider of transportation, logistics and related services.

In 2024, 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.

These reclassifications were inconsequential and substantially all of these costs were previously classified within operating expenses as Purchased transportation and have now been classified within operating expenses within Other expenses in the statements of consolidated income.

The remaining line items within operating expenses and Other Income and (Expense) that were impacted by this reclassification were inconsequential.

As a result, the statements of consolidated income give effect to this reclassification as follows:

• Other expenses decreased by $ 381 , $ 356 and $ 301 million for 2023, 2022 and 2021, respectively.

• Repairs and maintenance increased by $ 363 , $ 369 and $ 326 million for 2023, 2022 and 2021, respectively.

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

• Purchased transportation decreased by $ 11 and $ 9 million for 2023 and 2022, respectively.

• Other expenses increased by $ 7 and $ 5 million for 2023 and 2022, respectively.

The amounts for 2024 were not reported under this legacy basis but are also immaterial.

The reclassification had no impact on our reported revenue, operating profit, Other Income and (Expense) , net income, or any internal performance measure on which management is compensated.

Use of Estimates

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Revenue is recognized over time as we perform the services in the contract.

Freight forwarding revenue, including truckload brokerage revenue, and expenses related to the transportation of freight are recognized over time as we perform the services.

Freight forwarding revenue, and expenses related to the transportation of freight are recognized over time as we perform the services.

Customs brokerage revenue is recognized upon completing documents necessary for customs entry purposes.

In our Logistics business we have a right to consideration from customers in an amount that corresponds directly with the value to the customers of our performance completed to date, and as such we recognize revenue in the amount to which we have a right to invoice the customer.

In our Logistics businesses we have a right to consideration from customers in an amount that corresponds directly with the value to the customers of our performance completed to date, and as such we recognize revenue in the amount to which we have a right to invoice the customer.

Cash and Cash Equivalents

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The carrying amount of these securities approximates fair value because of the short-term maturity of these instruments.

As of December 31, 2023, we had $ 37 million of restricted cash related to certain tax and regulatory matters and acquisitions.

We had no restricted cash as of December 31, 2022.

As of December 31, 2024, we did no t have any restricted cash.

As of December 31, 2023, we had $ 37 million of restricted cash that was primarily related to cash we had agreed to deposit in connection with a previously disclosed challenge by Italian tax authorities to the deductibility of Value Added Tax payments by UPS to certain third-party service providers.

We designated additional amounts as restricted cash during the first quarter of 2024 and, during the second quarter of 2024, we

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

made a voluntary payment, including interest, of approximately $ 94 million to settle this matter and recorded a corresponding charge against income which is reflected in Other expenses in our statements of consolidated income.

Marketable Securities and Non-Current Investments

Debt securities are classified as either trading or available-for-sale securities and are carried at fair value.

Unrealized gains and losses on trading securities are reported as Investment income and other on the statements of consolidated income.

Unrealized gains and losses on trading securities are reported as Investment income (expense) and other on the statements of consolidated income.

Unrealized gains and losses on available-for-sale securities are reported within other comprehensive income, a separate component of shareowners’ equity.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity.

Such amortization and accretion is included in Investment income and other , together with interest and dividends.

Such amortization and accretion is included in Investment income (expense) and other , together with interest and dividends.

The cost of securities sold is based on the specific identification method;

realized gains and losses resulting from such sales are included in Investment income and other .

realized gains and losses resulting from such sales are included in Investment income (expense) and other .

We periodically review our available-for-sale investments for indications of other-than-temporary impairment considering many factors, including the extent and duration to which a security’s fair value has been less than its cost, overall economic and market conditions and the financial condition and specific prospects for the issuer.

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We record the investment at cost and subsequently increase or decrease the carrying amount of the investment by our proportionate share of the net earnings or losses and other comprehensive income of the investee.

Gains and losses from equity method investments are reported in Investment income and other on the statements of consolidated income.

Gains and losses from equity method investments are reported in Investment income (expense) and other on the statements of consolidated income.

We record dividends or other equity distributions as reductions of the carrying value of the investment.

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For substantially all of our aircraft, the costs of major airframe and engine overhauls, as well as routine maintenance and repairs, are charged to expense as incurred.

Interest incurred during the construction of property, plant and equipment is capitalized until the underlying assets are placed in service, at which time amortization of the capitalized interest begins, straight-line, over the estimated useful lives of the related assets.

Capitalized interest was $ 118 and $ 60 million for the years ended December 31, 2023 and 2022, respectively.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We monitor our property, plant and equipment for any indicators that the carrying value of the assets may not be recoverable, at which time we review long-lived assets for impairment based on undiscounted future cash flows.

Capitalized interest was $ 121 and $ 118 million for the years ended December 31, 2024 and 2023, respectively.

We monitor our property, plant and equipment for any indicators that the carrying value of our asset groups may not be recoverable, at which time we review the asset group for impairment based on undiscounted future cash flows.

If the carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded.

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We test long-lived assets for impairment at the asset group level, which is the lowest level at which independent cash flows can be identified.

We evaluate long-lived assets within our global small package operations at a network level given the cash flows associated with individual assets therein are not independent.

Refer to note 4 for a discussion of impairments of property, plant and equipment.

During the first quarter of 2025, we entered into an agreement in principle with our largest customer that will provide for a significant reduction in their volume.

In connection therewith, we will be reconfiguring our U.S.

network and expect this reconfiguration to lead to a reduction in the number of buildings, vehicles and aircraft in our network.

We are not yet able to identify the specific assets which will be impacted by these actions;

however, it is reasonably possible that revisions to our estimates of the useful life and salvage values of certain of our long-lived assets will accelerate depreciation expense and charges related to early retirements may be recognized during future periods.

We recognize a right-of-use ("ROU") asset and lease obligation for all leases greater than twelve months, including reasonably certain renewal or purchase options.

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If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, we record the excess amount as goodwill impairment, not to exceed the total amount of goodwill allocated to the reporting unit.

When performing impairment tests of indefinite-lived intangible assets, we use a combination of income- and market-based approaches to estimate fair value.

If the carrying value of the indefinite-lived asset exceeds its estimated fair value, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds its fair value.

Finite-lived intangible assets, including trademarks, licenses, patents, customer lists, non-compete agreements and franchise rights are amortized on a straight-line basis over their estimated useful lives, which range from 1 to 21 years.

Capitalized software is generally amortized over 7 years.

Finite-lived intangible assets are assessed for impairment as part of asset groups whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitalized software is generally amortized over 7 years.

Finite-lived intangible assets are assessed for impairment as part of asset groups whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

Assets Held for Sale

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As of December 31, 2024 and 2023, suppliers sold $ 515 and $ 504 million, respectively, of our outstanding payment obligations to participating institutions.

A rollforward of obligations confirmed and paid during the year is presented below (in millions):

A rollforward of obligations confirmed and paid during the year is presented below (dollars in millions):

Confirmed obligations outstanding at the beginning of the year $ 504 $ 806

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Trends in actual experience are a significant factor in the determination of our reserves.

In the fourth quarter of 2023, we transferred a portion of our workers' compensation liability related to policy years 2001 through 2006 and policy year 2017 to a third-party insurer.

We paid $ 151 million to transfer a portfolio of claims for which we carried reserves of $ 153 million, recognizing a pre-tax gain of $ 2 million that was recorded in Other expenses in the statement of consolidated income for the year ended December 31, 2023.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 2022, we transferred a portion of our workers' compensation liability related to policy years 2007 through 2016 to a third-party insurer.

We paid $ 341 million to transfer a portfolio of claims for which we carried reserves of $ 332 million, recognizing a pre-tax loss of $ 9 million that was recorded in Other expenses in the statement of consolidated income for the year ended December 31, 2022.

In 2024, we transferred a portion of our workers' compensation liability related to policy years 1994 through 2000 and policy year 2018 to a third-party insurer.

We paid $ 114 million to transfer a portfolio of claims for which we carried reserves of $ 114 million.

In 2023, we transferred a portion of our workers' compensation liability related to policy years 2001 through 2006 and policy year 2017 to a third-party insurer.

We also sponsor a number of health and welfare insurance plans for our employees.

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Actuarial assumptions are reviewed on an annual basis, unless circumstances require an interim measurement of any of our plans.

We recognize changes in the fair value of plan assets and net actuarial gains or losses in excess of a corridor (defined as 10 % of the greater of the fair value of plan assets or the plan's projected benefit obligation) in Investment income and other upon remeasurement of a plan.

We recognize changes in the fair value of plan assets and net actuarial gains or losses in excess of a corridor (defined as 10% of the greater of the fair value of plan assets or the plan's projected benefit obligation) in Investment income (expense) and other, in the statement of consolidated income, upon remeasurement of a plan.

The remaining components of pension expense, primarily service and interest costs and the expected return on plan assets, are recorded ratably on a quarterly basis.

We recognize expense for required contributions to defined contribution plans quarterly, and we recognize a liability for any contributions due and unpaid within Accrued group welfare and retirement plan contributions .

We participate in a number of trustee-managed multiemployer pension and health and welfare plans for employees covered under collective bargaining agreements.

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Such a change in recognition or measurement could result in the recognition of a tax benefit or an additional charge to the tax provision.

Foreign Currency Translation and Remeasurement

We translate the results of operations of our foreign subsidiaries using average exchange rates for each period, whereas balance sheet accounts are translated using exchange rates at the end of each period.

Balance sheet currency translation adjustments are recorded in other comprehensive income.

Pre-tax foreign currency transaction gains (losses) from remeasurement, net of hedging, included in Investment income and other were $( 53 ), $ 72 and $( 36 ) million in 2023, 2022 and 2021, respectively.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency Translation and Remeasurement

Balance sheet currency translation adjustments are recorded in other comprehensive income.

Pre-tax foreign currency transaction gains (losses) from remeasurement, net of hedging, included in Investment income (expense) and other were $( 38 ), $( 53 ) and $ 72 million in 2024, 2023 and 2022, respectively.

Stock-Based Compensation

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We have issued employee share-based awards under various incentive compensation plans that contain vesting conditions, including service conditions, where the awards cliff vest after one or three years or vest ratably over periods up to five years (the "nominal vesting period") or at the date the employee retires (as defined by the plan), if earlier.

As of December 31, 2023, we have no outstanding share-based awards cliff vesting after one year.

As of December 31, 2023, we had no outstanding share-based awards cliff vesting after one year.

See note 13 for further discussion of our share-based awards.

Compensation cost is generally recognized immediately for awards granted to retirement-eligible employees, or over the period from the grant date to the date retirement eligibility is achieved, if that is expected to occur during the nominal vesting period.

Compensation cost is generally recognized immediately for certain awards granted to retirement-eligible employees, or over the period from the grant date to the date retirement eligibility is achieved, if that is expected to occur during the nominal vesting period.

For awards with a performance-based condition, expense is recognized based on probability of performance achievement.

We estimate forfeiture rates based on historical rates of forfeitures for awards with similar characteristics, historical and projected rates of employee turnover and the nature and terms of the vesting conditions of the awards.

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Level 3 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.

Certain investments described further in note 5, that do not have a readily determinable fair value, are measured at net asset value ("NAV") using NAV as a practical expedient or an equivalent developed consistent with the measurement principles in Accounting Standards Codification Topic 820.

Plan assets that are measured using NAV as a practical expedient are excluded from the fair value hierarchy.

Certain non-financial assets and liabilities are measured at fair value on a nonrecurring basis, including property, plant, and equipment, goodwill and intangible assets.

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The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Following the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

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For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative instrument is reported as a component of other comprehensive income, and reclassified into earnings in the period during which the hedged transaction affects earnings.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• A fair value hedge refers to hedging the exposure to changes in the fair value of an existing asset or liability that is attributable to a particular risk.

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For instruments that meet the hedge accounting requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in the foreign currency translation adjustment within other comprehensive income, and are recorded in the income statement when the hedged item affects earnings.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Adoption of New Accounting Standards

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848), and in December 2022 subsequently issued ASU 2022-06, to temporarily ease the potential burden in accounting for reference rate reform.

The standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform and can generally be applied through December 31, 2024.

As of December 31, 2023, we have transitioned our affected debt instruments and contracts to an alternative reference rate, the Secured Overnight Financing Rate ("SOFR"), which was adopted in accordance with recommendations of the Alternative Reference Rates Committee.

We did not elect to apply the practical expedients provided under Topic 848 to these transitions, but we will continue to assess transactions for any potential impact during 2024.

In September 2022, the FASB issued an 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.

It did not have a material impact on our consolidated financial position, results of operations, cash flows or internal controls.

As of December 31, 2023, we had transitioned our affected debt instruments and contracts to an alternative reference rate and, as a result, we did not elect to apply the practical expedients provided under Topic 848 to these transitions, and we did not observe any further impact as of December 31, 2024.

In November 2023, the FASB issued an ASU on segment reporting.

The standard requires new disclosures reconciling significant segment expenses to segment profit measures and additional qualitative information about how segment measures are used by management.

Effective December 31, 2024, we adopted this ASU retrospectively for all prior periods presented.

The adoption did not have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

See note 14 for our segment disclosures.

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

Accounting Standards Issued But Not Yet Effective

In November 2023, the FASB issued an ASU on segment reporting, which will require new disclosures including relating to significant segment expenses and additional qualitative information including how segment measures are used by management.

The standard becomes effective for us beginning with our 2024 annual reporting for both annual and interim periods.

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 to 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.

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We are evaluating its impact on our financial statements, disclosures and internal controls but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

In November 2024, the FASB issued an ASU on expense disaggregation disclosures, which will require tabular disclosure in the notes to financial statements for specific expense categories.

The standard becomes effective for us beginning with our 2027 annual report and for interim and annual periods thereafter.

This ASU provides for additional expense disclosures.

Other accounting pronouncements issued, but not effective until after December 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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Ground 45,347 44,971 47,542

Cargo & Other

Domestic Package $ 60,376 $ 60,205 $ 64,611

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Logistics 6,437 5,927 5,351

Freight — — 1,064

Other 1,569 1,461 1,735

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We account for a contract when both parties have approved the contract and are committed to perform their obligations, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

As of the fourth quarter of 2024, based on a change in our management reporting structure, U.S.

Air Cargo revenue is presented within our U.S.

Domestic Package segment and prior periods have been recast.

Refer to note 14 for further information.

Performance Obligations

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In certain business units, such as Logistics, we sell customized, customer-specific solutions in which we integrate a complex set of tasks and components into a single capability that is accounted for as one performance obligation.

Satisfaction of Performance Obligations

We generally recognize revenue over time as we perform services in the contract because our customers receive the benefit of our services as goods are transported from one location to another.

Further, if we were unable to complete delivery to the final location, those services would not need to be re-performed.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Satisfaction of Performance Obligations

We generally recognize revenue over time as we perform services in the contract because our customers receive the benefit of our services as goods are transported from one location to another.

Further, if we were unable to complete delivery to the final location, those services would not need to be re-performed.

We recognize revenue based on the extent of progress towards completion of our services.

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This requires us to make our best estimate of the current expected losses inherent in our accounts receivable at each balance sheet date.

These estimates require 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.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our allowance for expected credit losses decreased by $ 20 million during 2023 as lower volumes decreased our total accounts receivable balance.

market sectors.

Our risk management process includes standards and policies for reviewing major account exposures and concentrations of risk.

Our allowance for expected credit losses increased by $ 10 million during 2024 as a result of changes in the composition of invoice aging and certain customers' behaviors.

Our allowance for credit losses as of December 31, 2024 and 2023 was $ 136 and $ 126 million, respectively.

Amounts for credit losses charged to expense before recoveries during the twelve months ended December 31, 2023 and 2022 were $ 205 and $ 214 million, respectively.

Amounts for credit losses charged to expense before recoveries during the years ended December 31, 2024 and 2023 were $ 311 and $ 205 million, respectively.

Contract Assets and Liabilities

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Corporate debt securities 39 — — 39

state and local municipal debt securities — — — —

government debt securities — — — —

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Corporate debt securities 1,891 4 ( 4 ) 1,891

state and local municipal debt securities 4 — — 4

government debt securities 7 — — 7

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government and agency debt securities $ — $ — $ 162 $ ( 1 ) $ 162 $ ( 1 )

Corporate debt securities 751 ( 2 ) 475 ( 2 ) 1,226 ( 4 )

Total marketable securities $ — $ — $ 162 $ ( 1 ) $ 162 $ ( 1 )

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Equity securities 3 3

$ 2,868 $ 2,866

Non-Current Investments

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• Equity method investments :

As of December 31, 2023 and 2022, equity securities accounted for under the equity method had a carrying value of $ 295 and $ 256 million, respectively.

As of December 31, 2024 and 2023, equity securities accounted for under the equity method had carrying values of $ 304 and $ 295 million, respectively.

In 2023, we obtained an equity method investment as part of our acquisition of MNX Global Logistics.

See note 8 for further discussion of business acquisitions.

See note 8 for a further discussion of business acquisitions.

Cash paid for this investment is included in Acquisitions, net of cash acquired in our statement of consolidated cash flows.

In 2022, we invested $ 252 million in the parent company of CommerceHub, Inc., a software provider connecting retailers and brands with marketplaces, drop ship solutions and delivery providers.

We determined there is no amortizable basis difference between the purchase price for our investment and the underlying books and records of the investee.

• Other equity securities :

Certain equity securities that do not have readily determinable fair values are reported in accordance with the measurement alternative in Accounting Standards Codification Topic 321 Investments – Equity Securities .

As of December 31, 2023 and 2022, we had equity securities of $ 47 and $ 31 million, respectively, accounted for under the measurement alternative.

As of December 31, 2024 and 2023, we had equity securities of $ 42 and $ 47 million, respectively, accounted for under this measurement alternative.

• 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 December 31, 2023 and 2022, respectively.

The investment had a fair market value of $ 19 million as of December 31, 2024 and 2023, respectively.

UNITED PARCEL SERVICE, INC.

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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.

Marketable securities valued utilizing Level 1 inputs include active exchange-traded equity securities and equity index funds, certificates of deposits, 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.

Marketable securities valued utilizing Level 2 inputs include asset-backed securities, most 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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Property, plant and equipment purchased on account was $ 227 and $ 309 million as of December 31, 2024 and 2023, respectively.

There were no material impairment charges to property, plant or equipment during the years ended December 31, 2023 or 2022.

In 2022, we reduced the estimated residual value of our MD-11 aircraft to zero, incurring a one-time charge on our fully-depreciated aircraft.

This resulted in an increase in depreciation expense of $ 76 million, and a decrease in net income of $ 58 million, or $ 0.07 per share on a basic and diluted basis, for the year ended December 31, 2022.

The change in estimate for the remainder of our MD-11 fleet is being accounted for over the remaining useful lives.

There were no material impairment charges to property, plant and equipment during the years ended December 31, 2024 or 2023.

We will continue to monitor our long-lived asset groups for impairment.

During the first quarter of 2025, we entered into an agreement in principle with our largest customer that will provide for a significant reduction in their volume.

In connection therewith, we will be reconfiguring our U.S.

network and expect this reconfiguration to lead to a reduction in the number of buildings, vehicles and aircraft in our network.

We are not yet able to identify the specific assets which will be impacted by these actions;

UNITED PARCEL SERVICE, INC.

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COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS

We sponsor various retirement and pension plans, including defined benefit and defined contribution plans, which cover our employees worldwide.

We sponsor various retirement, postretirement and pension plans, including defined benefit and defined contribution plans, which cover our employees worldwide.

Pension Benefits

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The plan ceased accruals of additional benefits for future service and compensation for non-union participants effective January 1, 2023

In the third quarter of 2023, our Teamsters employees ratified a new five-year national master agreement that contained wage and benefit rate increases for Teamsters employees in the UPS Pension Plan and UPS/IBT Full-Time Employee Pension Plan.

The impacts of these increases were recognized as part of the year end measurement of these plans.

The divestiture of UPS Freight in 2021 triggered an interim remeasurement of the plan assets and benefit obligations of the UPS Pension Plan, UPS Retirement Plan and UPS Retired Employee Health Care Plan as of April 30, 2021.

The interim remeasurement resulted in an actuarial gain of $ 2.1 billion, reflecting updated actuarial assumptions, and was recorded in other comprehensive income within the equity section of the consolidated balance sheet during the second quarter of 2021.

An actuarial gain of $ 69 million ($ 52 million after tax) for a prior service credit related to the divested group and a $ 66 million loss ($ 50 million after tax) for certain plan amendments to the UPS Pension Plan were immediately recognized within Other expenses in the statement of consolidated income for the year ended December 31, 2021.

During 2021, we remeasured the UPS/IBT Full-Time Employee Pension Plan following the enactment into law of the American Rescue Plan Act, which is discussed below.

The interim remeasurement resulted in a pre-tax mark-to-market gain of $ 3.3 billion ($ 2.5 billion after tax) during the year.

The gain was included within Investment income and other in the statement of consolidated income for the year ended December 31, 2021.

Refer to note 6 for the status of our collective bargaining agreements.

International Pension Benefits

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We remeasured plan assets and benefit obligations for the plans, which resulted in curtailment gains of $ 34 million ($ 24 million after tax).

These gains were included in Investment income and other in our statement of consolidated income for the year ended December 31, 2022.

These gains were included in Investment income (expense) and other in our statement of consolidated income for the year ended December 31, 2022.

UNITED PARCEL SERVICE, INC.

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Matching contributions charged to expense were $ 161 , $ 161 and $ 153 million for 2024, 2023 and 2022, respectively.

Beginning in 2023, non-union employees, including those previously accruing benefits in the UPS Retirement Plan, receive a retirement contribution of 5 % to 8 % ( 3 % to 8 % prior to 2023 for employees hired after July 1, 2016) of eligible compensation to the UPS 401(k) Savings Plan based on years of vesting service.

Beginning in 2023, non-union employees, including those previously accruing benefits in the UPS Retirement Plan, receive an annual retirement contribution of 5 % to 8 % ( 3 % to 8 % prior to 2023 for employees hired after July 1, 2016) of eligible compensation to the UPS 401(k) Savings Plan based on years of vesting service.

Effective January 1, 2025, the UPS Retirement Plan contribution for certain non-union employees with an employment commencement date on or after January 1, 2025 is 3 % of eligible compensation, regardless of years of vesting service.

Retirement contributions charged to expense were $ 359 , $ 380 and $ 83 million for 2024, 2023 and 2022, respectively.

In addition, the UPS 401(k) Savings Plan provides for transition contributions to certain participants hired prior to 2008.

The amount charged to expense for transition contributions in 2023 was $ 128 million.

There were no transition contributions in previous years.

The amounts charged to expense for transition contributions were $ 108 and $ 128 million for 2024 and 2023, respectively.

There were no transition contributions in years prior to 2023.

Contributions under this plan are subject to maximum compensation and contribution limits for a tax-qualified defined contribution plan as prescribed by the IRS.

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These assumptions are updated each measurement date, which is typically annually.

As of December 31, 2023, the impact of each basis point change in the discount rate on the projected benefit obligation of our pension and postretirement medical benefit plans is as follows (in millions):

As of December 31, 2024, the impact of each basis point change in the discount rate on the projected benefit obligation of our pension and postretirement medical benefit plans was as follows (in millions):

Increase (Decrease) in the Projected Benefit Obligation

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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 2021, the American Rescue Plan Act (“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.

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.

In January 2023, $ 35.8 billion was paid to the CSPF by the PBGC.

The passage of the ARPA triggered a remeasurement of the UPS/IBT Plan under ASC Topic 715.

Accordingly, we remeasured the plan assets and pension benefit obligation as of March 31, 2021, which resulted in an actuarial gain of $ 6.4 billion, reflecting a reduction of the liability for coordinating benefits of $ 5.1 billion and a gain from other updated actuarial assumptions of $ 1.3 billion.

We recorded a gain of $ 3.1 billion in accumulated other comprehensive income within the equity section of our consolidated balance sheet and a mark-to-market gain of $ 3.3 billion within Investment income and other in our statement of consolidated income during the first quarter of 2021.

In the event CSPF were to become insolvent, 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.

We account for the potential obligation to pay coordinating benefits under ASC Topic 715, which requires us to provide a best estimate of various actuarial assumptions in measuring our pension benefit obligation at the December 31 measurement date.

As of December 31, 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.

As of December 31, 2024, our best estimate of coordinating benefits that may be required to be paid by the UPS/IBT Plan was immaterial.

The value of our estimate for future coordinating benefits will continue to be influenced by a number of factors, including interpretations of the law, future legislative actions, actuarial assumptions and the ability of the CSPF to sustain its long-term commitments.

Actual events may result in a change in our best estimate of the projected benefit obligation.

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Benefit obligation ( 46,559 ) ( 47,712 ) ( 1,850 ) ( 1,974 ) ( 1,500 ) ( 1,601 )

Funded status $ ( 4,221 ) $ ( 1,446 ) $ ( 1,876 ) $ ( 1,801 ) $ 292 $ 227

Funded Status Recognized in our Balance Sheet:

Funded status recognized at December 31 $ ( 5,060 ) $ ( 4,221 ) $ ( 1,731 ) $ ( 1,876 ) $ 278 $ 292

Funded Status Amounts Recognized in our Balance Sheet:

Other non-current assets $ — $ — $ — $ — $ 480 $ 510

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Pension and postretirement benefit obligations ( 5,033 ) ( 4,195 ) ( 1,631 ) ( 1,753 ) ( 195 ) ( 211 )

Net asset (liability) $ ( 4,221 ) $ ( 1,446 ) $ ( 1,876 ) $ ( 1,801 ) $ 292 $ 227

Net liability at December 31 $ ( 5,060 ) $ ( 4,221 ) $ ( 1,731 ) $ ( 1,876 ) $ 278 $ 292

Amounts Recognized in AOCI (1) :

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Unrecognized net actuarial gain (loss) ( 2,686 ) ( 2,097 ) 131 129 107 99

Gross unrecognized cost ( 3,423 ) ( 654 ) 127 198 92 107

Deferred tax assets (liabilities) 831 168 ( 31 ) ( 48 ) ( 28 ) ( 30 )

Net unrecognized cost $ ( 2,592 ) $ ( 486 ) $ 96 $ 150 $ 64 $ 77

Gross unrecognized cost at December 31 ( 3,937 ) ( 3,423 ) 130 127 102 92

Deferred tax asset at December 31 956 831 ( 32 ) ( 31 ) ( 32 ) ( 28 )

Net unrecognized cost at December 31 $ ( 2,981 ) $ ( 2,592 ) $ 98 $ 96 $ 70 $ 64

(1) Accumulated Other Comprehensive Income (Loss)

The accumulated benefit obligation for our pension plans as of December 31, 2024 and 2023 was $ 48.0 and $ 49.2 billion, respectively.

The accumulated benefit obligation for our postretirement medical benefit plans as of both December 31, 2023 and 2022 was $ 2.0 billion.

The accumulated benefit obligation for our postretirement medical benefit plans as of December 31, 2024 and 2023 was $ 1.9 and $ 2.0 billion, respectively.

Benefit payments under the pension plans include $ 37 and $ 35 million paid from employer assets for the years ended December 31, 2024 and 2023, respectively.

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Fair value of plan assets at end of year $ 41,499 $ 43,491 $ 119 $ 98 $ 1,778 $ 1,893

(1) Plan amendments in 2023 and 2022 were related to collective bargaining agreements with the Teamsters and the Independent Pilots Association, respectively.

(1) Plan amendments in 2024 and 2023 were related to collective bargaining agreements with the Teamsters.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2024 - $ 2.5 billion pre-tax actuarial gain related to benefit obligations:

• Discount Rates ($ 2.8 billion pre-tax gain):

The weighted-average discount rate for our pension and postretirement medical plans increased from 5.40 % as of December 31, 2023 to 5.85 % as of December 31, 2024, primarily due to an increase in treasury yields on AA-rated corporate bonds.

• Demographic and Assumption Changes ($ 0.3 billion pre-tax loss):

This represents the difference between actual and estimated participant data and demographic factors, including healthcare cost trends, compensation changes, rates of termination, retirement, mortality and other changes.

2023 - $ 2.4 billion pre-tax actuarial loss related to benefit obligations:

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2022 - $ 20.9 billion pre-tax actuarial gain related to benefit obligations:

• Discount Rates ($ 21.1 billion pre-tax gain):

The weighted-average discount rate for our pension and postretirement medical plans increased from 3.11 % as of December 31, 2021 to 5.77 % as of December 31, 2022, primarily due to an increase in U.S.

treasury yields, as well as an increase in credit spreads on AA-rated corporate bonds.

• Demographic and Assumption Changes ($ 0.2 billion pre-tax loss):

Pension and Postretirement Plan Assets

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mortgage-backed securities that are valued based on cash flow and yield models using acceptable modeling and pricing conventions;

certain investments that are pooled with other investments in a commingled fund;

hedge funds, equity securities and certain investments that are pooled with other investments in a commingled fund;

and derivatives and other instruments primarily valued using pricing models that rely on market observable inputs such as yield curves, foreign currency exchange rates and investment forward price.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investments that do not have a readily determinable fair value, and which provide a net asset value ("NAV") or its equivalent developed consistent with FASB measurement principles, are valued using NAV as a practical expedient.

Investments that do not have a readily determinable fair value, and which provide a NAV or its equivalent developed consistent with ASC measurement principles, are valued using NAV as a practical expedient.

These investments are not classified in Levels 1, 2, or 3 of the fair value hierarchy but instead included within the subtotals by asset category.

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and international pension and postretirement benefit plan assets by asset category as of December 31, 2024 and 2023 are presented below (in millions), as well as the percentage that each category comprises of our total plan assets and the respective target allocations.

The tables have been updated from prior year presentation to show derivative assets and liabilities separately from other asset categories, primarily U.S.

Government Securities, by type of underlying risk.

The asset categories within equity securities, fixed income securities, and alternative and other investments in the table below have been collapsed from prior year presentation to align with the nature, characteristics, and type of underlying risk of those assets.

There were no transfers between asset categories.

December 31, 2024 Total

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Equity securities

Large Cap 5,732 1,457 4,275 —

Small Cap 335 335 — —

Emerging Markets 970 733 237 —

Global Equity 62 62 — —

International Equity 3,065 861 2,204 —

Total Equity Securities 10,164 3,448 6,716 — 23.3 15 - 45

6,979 3,270 3,709 — 16.8 % 15 - 45 %

Fixed income securities

Government Securities

19,643 13,375 6,247 21 47.2 % 30 - 73 %

Corporate Bonds 7,041 62 6,979 —

Global Bonds 602 1 601 —

Municipal Bonds 6 — 6 —

Total Fixed Income Securities 25,673 17,299 8,374 — 58.9 30 - 70

Other Investments:

Hedge Funds 3,959 28 2,194 — 9.1 3 - 13

Private Equity 5,071 — — — 11.6 3 - 15

Private Debt 948 — — — 2.2 2 - 15

Real Estate 2,575 393 77 — 5.9 3 - 15

Structured Products (2)

Alternative and other investments (1) :

2,034 — 538 — 4.9 % 3 - 13 %

Total Other Investments 12,722 421 2,440 —

Derivatives and Other Instruments:

Equity Risk ( 136 ) 29 ( 165 ) — ( 0.3 )

2,674 301 77 — 6.4 % 3 - 15 %

Private equity, private debt, and other investments

6,508 — 195 — 15.6 % 5 - 29 %

Total Alternative and other investments

11,216 301 810 —

Derivatives and other instruments, net:

( 392 ) ( 99 ) ( 294 ) — ( 0.9 ) %

Interest rate risk

( 1,619 ) ( 442 ) ( 1,177 ) — ( 3.9 ) %

Other risk (2)

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Total Derivatives and other instruments

Plan Assets $ 43,589 $ 22,070 $ 11,658 $ — 100.0 %

( 1,936 ) ( 539 ) ( 1,398 ) —

$ 41,618 $ 21,857 $ 9,634 $ 21 100.0 %

Asset Category (International Plans):

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Equity securities

Local Markets Equity — — — —

Equity 89 — 89 —

Emerging Markets — — — —

International / Global Equity 20 20 — —

Total Equity Securities 109 20 89 — 5.8 1 - 10

165 23 142 — 9.3 % 1 - 10 %

Fixed income securities

Local Government Bonds 827 175 652 —

Corporate Bonds 424 — 424 —

Global Bonds 141 137 4 —

Total Fixed Income Securities 1,392 312 1,080 — 73.5 50 - 75

Other Investments:

Real Estate (1)

1,202 243 959 — 67.6 % 50 - 75 %

Alternative and other investments (1) :

62 — 17 23 3.5 % 1 - 10 %

Private equity, private debt, and other investments

222 — 189 18 12.5 % 10 - 35 %

Total International plan assets

$ 1,778 $ 393 $ 1,307 $ 41 100.0 %

Total plan assets

$ 43,396 $ 22,250 $ 10,941 $ 62

(1) Includes certain investments that are measured at NAV per share (or its equivalent).

(2) Represents mortgage and asset-backed securities.

(2) Includes credit risk, foreign currency exchange risk and commodity risk.

(3) Includes $ 2.7 billion of cash held as collateral for market exposures, which is not subject to the target allocations.

UNITED PARCEL SERVICE, INC.

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Equity securities

Large Cap 6,599 2,517 4,082 —

Small Cap 698 698 — —

Emerging Markets 1,597 1,171 426 —

Global Equity 1,168 1,168 — —

International Equity 3,555 1,663 1,892 —

Total Equity Securities 13,617 7,217 6,400 — 32.2 20 - 45

10,164 3,448 6,716 — 23.3 % 15 - 45 %

Fixed income securities

Government Securities

25,673 17,299 8,374 — 58.9 % 30 - 70 %

Corporate Bonds 6,129 7 6,122 —

Global Bonds 670 — 670 —

Municipal Bonds 9 — 9 —

Total Fixed Income Securities 21,973 14,640 7,333 — 52.0 30 - 70

Other Investments:

Hedge Funds 4,364 — 2,713 — 10.3 3 - 13

Private Equity 5,012 — — — 11.9 3 - 15

Private Debt 829 — — — 2.0 1 - 15

Real Estate 2,415 267 69 — 5.7 3 - 15

Structured Products (2)

Alternative and other investments (1) :

3,959 28 2,194 — 9.1 % 3 - 13 %

Total Other Investments 12,790 267 2,952 —

Derivative and Other Instruments:

2,575 393 77 — 5.9 % 3 - 15 %

Private equity, private debt, and other investments

6,188 — 169 — 14.2 % 5 - 35 %

Total Alternative and other investments

12,722 421 2,440 —

Derivative and other instruments, net:

Equity risk contracts

( 136 ) 29 ( 165 ) — ( 0.3 ) %

Interest rate risk contracts

( 5,877 ) ( 20 ) ( 5,857 ) — ( 13.5 ) %

Other risk (2)

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Total Derivative and other instruments

Plan Assets $ 42,273 $ 22,983 $ 9,719 $ — 100.0 %

( 5,988 ) 8 ( 5,996 ) —

$ 43,589 $ 22,070 $ 11,658 $ — 100.0 %

Asset Category (International Plans):

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Equity securities

Local Markets Equity 138 — 138 —

Equity ( 3 ) — ( 3 ) —

Emerging Markets — — — —

International / Global Equity 298 36 262 —

Total Equity Securities 433 36 397 — 26.4 20 - 50

109 20 89 — 5.8 % 1 - 10 %

Fixed income securities

Local Government Bonds 91 59 32 —

Corporate Bonds 494 — 494 —

Global Bonds 119 98 21 —

Total Fixed Income Securities 704 157 547 — 42.8 35 - 55

Other Investments:

Real Estate (1)

1,392 312 1,080 — 73.5 % 50 - 75 %

Alternative and other investments (1) :

66 — 18 25 3.5 % 1 - 10 %

Private equity, private debt, and other investments

255 — 183 55 13.4 % 10 - 35 %

Total International plan assets

$ 1,893 $ 409 $ 1,364 $ 80 100.0 %

Total plan assets

$ 45,482 $ 22,479 $ 13,022 $ 80

(1) Includes certain investments that are measured at NAV per share (or its equivalent).

(2) Represents mortgage and asset-backed securities.

(2) Includes credit risk, foreign currency exchange risk and commodity risk.

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The following table presents the changes in the Level 3 instruments measured on a recurring basis for the years ended December 31, 2024 and 2023 (in millions):

Corporate Bonds Other Total

Fixed Income Securities

Alternative and Other Investments

Balance as of January 1, 2023

$ — $ 77 $ 77

Actual Return on Assets:

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Balance as of December 31, 2023

$ — $ 80 $ 80

Actual Return on Assets:

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Balance as of December 31, 2024

$ 21 $ 41 $ 62

There were no shares of UPS class A or class B common stock directly held in plan assets as of December 31, 2024 or 2023.

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2025 to plan trust

$ 1,170 $ 140 $ 10

2025 to plan participants

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Future contributions to the plans are determined only through collective bargaining, and we have no additional legal or constructive obligation to increase contributions beyond the agreed-upon amounts (except potential surcharges under the Pension Protection Act of 2006 described above).

The number of employees covered by multiemployer pension plans in 2023 decreased relative to 2022 as we reduced union headcount due to the reduction in volume.

The number of covered employees in 2022 was relatively flat compared to 2021.

Contribution rates increased in accordance with the terms of our collective bargaining agreements.

The number of employees covered by multiemployer pension plans in 2024 was relatively consistent compared to 2023, but decreased in 2023 relative to 2022 as we reduced union headcount due to lower volume.

In each year, contribution rates increased in accordance with the terms of our collective bargaining agreements.

There have been no other significant changes that affect the comparability of 2024, 2023 and 2022 contributions.

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We have approximately 314,000 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 scheduled to expire on July 31, 2023.

In September 2023, a new national master agreement with the Teamsters was ratified.

This agreement contains wage and health and welfare benefit rate increases for our covered part-time and full-time Teamster employees.

employed under a national master agreement and various supplemental agreements with local unions affiliated with the IBT.

These agreements are scheduled to expire on July 31, 2028.

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

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We have approximately 1,900 airline mechanics who are covered by a collective bargaining agreement with Teamsters Local 2727 which becomes amendable November 1, 2026.

In addition, approximately 3,000 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 collective bargaining agreement with the IAM runs through July 31, 2024.

In addition, approximately 3,000 of our auto and maintenance mechanics who are not employed under agreements with the Teamsters are employed under a collective bargaining agreement with the International Association of Machinists and Aerospace Workers ("IAM").

In July 2024, the IAM ratified a new National Master Agreement that expires on July 31, 2029.

UNITED PARCEL SERVICE, INC.

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Pending / Implemented UPS Contributions and Accruals

(in millions)

Surcharge Imposed

(in millions) Surcharge Imposed

Pension Fund 2024 2023 2024 2023 2022

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175 & 505 Pension Trust Fund 55-6021850-001 Red Red Yes Implemented 21 21 21 No

Hagerstown Motor Carriers and Teamsters Pension Fund 52-6045424-001 Green Red No NA 13 13 12 No

Hagerstown Motor Carriers and Teamsters Pension Fund 52-6045424-001 Green Green No NA 13 13 13 No

National Pension Fund / National Pension Plan 51-6031295-002 Red Red Yes Implemented 53 50 48 No

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In 2012, we reached an agreement with the New England Teamsters and Trucking Industry Pension Fund ("NETTI Fund"), a multiemployer pension plan in which UPS is a participant, to restructure the pension liabilities for approximately 10,200 UPS employees represented by the Teamsters.

As of December 31, 2023 and 2022, we had $ 813 and $ 821 million, respectively, recognized in Other Non-Current Liabilities and $ 9 and $ 8 million, respectively, recorded in Other current liabilities in our consolidated balance sheets, representing the remaining balance of the NETTI Fund withdrawal liability.

As of December 31, 2024 and 2023, we had $ 804 and $ 813 million, respectively, recognized in Other Non-Current Liabilities and $ 9 million as of December 31, 2024 and 2023 recorded in Other current liabilities in our consolidated balance sheets, representing the remaining balance of the NETTI Fund withdrawal liability.

This liability is payable in equal monthly installments over a remaining term of approximately 38 years.

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We utilized Level 2 inputs in the fair value hierarchy to determine the fair value of this liability.

Agreement with the District 9 International Association of Machinists and Aerospace Workers Pension Trust

In 2024, we reached an agreement with the District 9 International Association of Machinists and Aerospace Workers Pension Trust ("IAM Fund"), a multiemployer plan in which UPS was a participant, to withdraw from the Fund and transfer the impacted UPS employees to the UPS Pension Plan.

As of December 31, 2024, we had $ 19 million recorded in Other current liabilities in our consolidated balance sheets, representing the IAM Fund withdrawal liability.

UNITED PARCEL SERVICE, INC.

46 unchanged sentences

Acquired — 4 723 727

Impairments — — ( 125 ) ( 125 )

Currency / Other — 7 40 47

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Acquired — — 4 4

Impairments — — ( 125 ) ( 125 )

— — ( 495 ) ( 495 )

Currency / Other — ( 16 ) ( 65 ) ( 81 )

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2024 Goodwill Activity

Goodwill acquired during 2023 was primarily associated with our acquisitions of MNX Global Logistics and Happy Returns, which are both reported within Supply Chain Solutions.

It also reflects the 2023 completion of purchase accounting allocations from our 2022 acquisition of Bomi Group and other immaterial transactions completed during 2023.

See note 8 for further discussion of business acquisitions.

As described in more detail below, during 2023 we recorded non-cash goodwill impairment charges of $ 125 million, comprised of:

$ 56 million related to our Roadie reporting unit, $ 61 million related to our Delivery Solutions reporting unit, which represented all of the goodwill associated with that reporting unit, and an immaterial charge resulting from the closure of a trade management services business within Supply Chain Solutions.

Goodwill acquired during 2024 was associated with our acquisition of certain locations of The UPS Store.

It also reflects the 2024 completion of purchase accounting allocations from our 2023 acquisitions of MNX Global Logistics and Happy Returns, which are both reported within Supply Chain Solutions.

In 2024, the decrease in goodwill balance is primarily due to the divestiture of our truckload brokerage business ("Coyote") within Supply Chain Solutions as discussed in note 8.

The remaining changes were due to the impact of changes in the value of the U.S.

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2023 Goodwill Activity

Goodwill acquired during 2022 was primarily associated with our acquisitions of Delivery Solutions and Bomi Group.

Goodwill associated with Delivery Solutions was reported in Supply Chain Solutions as of December 31, 2022.

Goodwill associated with Bomi Group is reported in International Package and Supply Chain Solutions.

Goodwill acquired during 2023 was primarily associated with our acquisitions of MNX Global Logistics and Happy Returns, which are both reported within Supply Chain Solutions.

It also reflects the 2023 completion of purchase accounting allocations from our 2022 acquisition of Bomi Group.

During 2023, we recorded non-cash goodwill impairment charges of $ 125 million, comprised of:

$ 56 million related to our Roadie reporting unit, $ 61 million related to our Delivery Solutions reporting unit, which represented all the goodwill associated with that reporting unit, and an immaterial charge resulting from the closure of a trade management services business within Supply Chain Solutions.

The remaining changes were due to the impact of changes in the value of the U.S.

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We complete our annual goodwill impairment test as of July 1 on a reporting unit basis.

In developing our valuation assumptions underlying the annual impairment test in 2023, we determined that the cost of capital for our Roadie and Delivery Solutions reporting units had increased, driven by increases in the risk-free interest rate and volatility of the stock prices of market comparables.

The results of our annual test using these assumptions indicated that the carrying values of our Roadie and Delivery Solutions reporting units exceeded their estimated fair values and as a result, we recorded the impairment charges described above.

In addition to our annual impairment test, we are also required to conduct interim impairment tests when changes in circumstances indicate an impairment may have occurred between annual tests.

In connection with matters resulting in the Coyote trade name impairment discussed below, we performed an interim test of the goodwill associated with our Coyote reporting unit as of December 31, 2023.

While this interim test did not indicate an impairment, we continue to monitor this reporting unit and may be required to perform additional interim tests in future periods as facts and circumstances evolve.

Within our consolidated goodwill balance of $ 4.9 billion as of December 31, 2023, approximately $ 0.9 billion was represented by certain reporting units within Supply Chain Solutions, including Coyote and Roadie, that had a limited excess of fair value as of the most recent valuation.

The results concluded that the fair values of our reporting units were in excess of their respective carrying values.

Approximately $ 1.1 billion of our consolidated goodwill balance of $ 4.3 billion is represented by our Global Freight Forwarding, Roadie and Global Logistics and Distribution reporting units which, based on our annual impairment evaluation, are exhibiting a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods.

Based on our review of managerial realignments, which occurred as of October 1, 2024, we have determined that our MNX Global Logistics and Marken businesses are now within a single operating segment and, based on criteria in ASC Topic 350, also represent a single reporting unit.

We performed impairment analyses as of October 1, 2024, reflective of our reporting unit structures before and after the reporting unit change, and did not identify any impairment of goodwill in connection therewith.

We did no t record any goodwill impairment charges in the years ended December 31, 2024 or 2022.

In 2023, we recorded non-cash goodwill impairment charges of $ 125 million, as described above.

Cumulatively, we have recorded $ 1.2 billion of goodwill impairment charges in Supply Chain Solutions, while our International and U.S.

Domestic Package segments have no t recorded any goodwill impairment charges.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We did not record any goodwill impairment charges for the years ended December 31, 2022 or 2021.

Cumulatively, we have recorded $ 1.2 billion of goodwill impairment charges in Supply Chain Solutions, while our International and U.S.

Domestic Package segments have no t recorded any goodwill impairment charges.

Intangible Assets

24 unchanged sentences

Total Intangible Assets $ 7,860 $ ( 4,555 ) $ 3,305

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

These assets are reported within Supply Chain Solutions.

Impairment tests for indefinite-lived intangible assets are performed annually, or more frequently if required.

Our annual test as of July 1 indicated that the fair value of the Coyote trade name was in excess of its carrying value, although the excess was less than 10 percent.

Since the July 1 testing date, our truckload brokerage business continued to be negatively impacted by market conditions, which resulted in revenue declines.

In response, during the fourth quarter of 2023, we began to evaluate strategic alternatives for this business.

As a result, we tested the Coyote trade name for impairment as of December 31, 2023, using forecasts that reflected updated market conditions and our evaluation of strategic alternatives related to this business.

We concluded that the carrying value of the trade name exceeded its estimated fair value and recorded an impairment charge of $ 111 million within Other expenses in our statement of consolidated income.

The revised carrying value of this trade name as of December 31, 2023 was $ 89 million.

The trade name continues to be indefinite-lived.

The table as of December 31, 2024 above excludes intangible assets associated with Coyote, which was divested during the third quarter of 2024 as discussed in note 8.

During 2023, we recorded an impairment of $ 111 million related to the Coyote trade name within Other expenses in our statements of consolidated income.

We did no t record any impairments of indefinite-lived intangibles during 2024.

As of December 31, 2024, we do not have material indefinite-lived intangible assets.

All of our other recorded intangible assets are deemed to be finite-lived and are amortized over their estimated useful lives.

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Additionally, a decision to sell or abandon an intangible asset before the end of its useful life may result in an impairment charge.

Impairments of finite-lived intangible assets were $ 8 , $ 17 and $ 19 million in 2023, 2022, and 2021, respectively.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairments of finite-lived intangible assets were $ 71 , $ 8 and $ 17 million in 2024, 2023, and 2022, respectively, and were recorded within Other expenses in our statements of consolidated income.

For the year ended December 31, 2024, these charges represented trade name and capitalized software license impairments.

Amortization of intangible assets was $ 648 , $ 597 and $ 525 million in each of 2024, 2023 and 2022, respectively.

1 unchanged sentence

Amortization expense in future periods will be affected by business acquisitions and divestitures, software development, licensing agreements, purchases of development areas or similar franchise rights and other factors.

As a result of our strategic actions under our Efficiency Reimagined initiatives, we are reviewing our software application infrastructure and expect that, as result of this review, it is reasonably possible that revisions to the useful lives of certain finite-lived intangible assets or early retirements will occur in future periods.

See further discussion in note 18.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In November 2023, we acquired Happy Returns, a technology-focused company that provides innovative end-to-end returns services, and MNX Global Logistics, a global time-critical and temperature-sensitive logistics provider.

ACQUISITIONS & DISPOSITIONS

During 2024, the aggregate purchase price for acquisitions was $ 71 million, net of cash acquired, which primarily related to the acquisition of franchise development areas for The UPS Store, which are recorded as intangible assets within Supply Chain Solutions.

On September 16, 2024, we completed the divestiture of Coyote, for net proceeds of $ 1.002 billion.

These proceeds are recognized within Proceeds from disposal of businesses, property, plant and equipment in the statements of consolidated cash flows.

In connection with the completion of this divestiture, we recorded a pre-tax gain of $ 156 million ($ 152 million after tax) for the year ended December 31, 2024.

The gain was recognized within Other expenses in the statements of consolidated income.

We reported Coyote within our Forwarding businesses in Supply Chain Solutions.

The following table summarizes the carrying values of the assets and liabilities divested (in millions):

Cash and cash equivalents $ 20

Accounts receivable, net

Other current assets 34

Operating lease right-of-use assets

Intangible assets, net

Other non-current assets

Total assets divested

Accounts payable

Other current liabilities

Non-current operating leases

Other non-current liabilities

Total liabilities divested

Net assets divested

In January 2025, we acquired Frigo-Trans and Biotech & Pharma Logistics, an industry-leading, complex healthcare logistics provider based in Germany, for approximately $ 440 million.

The acquisition is expected to increase our complex cold-chain logistics capabilities internationally.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 2023, we acquired Happy Returns, a technology-focused company that provides innovative end-to-end returns services, and MNX Global Logistics, a global time-critical and temperature-sensitive logistics provider.

These businesses are reported within Supply Chain Solutions.

The impact of these acquisitions to our consolidated revenue and net income in 2023 was not material.

During 2023, we also acquired franchise development areas for The UPS Store, which are recorded as intangible assets within Supply Chain Solutions.

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Acquisitions were funded using cash from operations.

The estimated fair values of assets acquired and liabilities assumed are subject to change based on completion of our purchase accounting.

Certain areas, including the fair value of equity method investments included within Other Non-Current Asset s and our estimates of tax positions, are preliminary as of December 31, 2023.

The preliminary purchase price allocation for acquired companies can be modified for up to one year from the date of acquisition.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition dates (in millions):

The following table summarizes the final purchase price allocations (in millions):

Cash and cash equivalents $ 18

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(1) Includes $ 64 million for acquisitions of development areas for The UPS Store.

Goodwill recognized upon acquisition of approximately $ 742 million is attributable to expected synergies from future growth.

Goodwill recognized of approximately $ 739 million is attributable to expected synergies from future growth.

We assigned $ 735 million of goodwill to Supply Chain Solutions and $ 4 million to our International Package segment.

A portion of the goodwill acquired is expected to be deductible for income tax purposes.

A portion of the goodwill acquired is deductible for income tax purposes.

Intangible assets acquired of approximately $ 554 million consist of $ 253 million of customer relationships (amortized over a weighted average of 15 years), $ 64 million of franchise rights (amortized over 20 years), $ 165 million of developed technology and software (amortized over a weighted average of 11 years), $ 45 million of trade names (amortized over a weighted average of 9 years) and $ 27 million of other intangible assets (amortized over a weighted average of 3 years).

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Acquisition-related costs in 2023 were approximately $ 12 million.

These were expensed as incurred and included in Other expenses within our statement of consolidated income.

These were expensed and included in Other expenses within our statement of consolidated income.

UNITED PARCEL SERVICE, INC.

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Acquisitions were funded using cash from operations.

The following table summarizes the final purchase price allocation (in millions):

The following table summarizes the final purchase price allocations (in millions):

Cash and cash equivalents $ 29

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Acquisition-related costs in 2022 were approximately $ 25 million.

These were expensed as incurred and included in Other expenses within the statement of consolidated income.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 2021, we acquired Roadie, a technology platform that provides local same-day delivery with operations throughout the United States.

The Roadie technology platform is purpose-built to connect merchants and consumers with contract drivers to enable efficient and scalable same-day local delivery services for items that are not compatible with the UPS network.

The acquisition was funded using cash from operations.

We report Roadie within Supply Chain Solutions.

The following table summarizes the final purchase price allocation (in millions):

Cash and cash equivalents $ 12

Accounts receivable 15

Intangible Assets

Deferred Income Tax Liabilities

Total purchase price $ 586

Goodwill recognized of approximately $ 375 million was attributable to expected synergies from future growth, including synergies in our U.S.

Domestic Package segment.

We allocated $ 243 and $ 132 million of the recognized goodwill to Supply Chain Solutions and U.S.

Domestic Package, respectively.

None of the goodwill is deductible for income tax purposes.

Intangible assets acquired of approximately $ 231 million primarily consisted of $ 145 million of technology (amortized over 8 years), $ 67 million of trade name (amortized over 10 years) and $ 19 million in other intangibles (amortized over an average of 8 years).

The carrying value of accounts receivable approximated fair value.

Acquisition-related costs were not material, and were expensed as incurred and included in Other expenses within our statement of consolidated income.

These were expensed and included in Other expenses within the statement of consolidated income.

UNITED PARCEL SERVICE, INC.

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2.200 % senior notes

3.900 % senior notes

1,000 2025 1,000 999

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1,100 2054 1,087 —

Floating-rate senior notes:

5.600 % senior notes

600 2064 590 —

Floating rate senior notes:

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Euro Senior Notes:

0.375 % senior notes

1.625 % senior notes

1.625 % notes

732 2025 731 774

1.000 % senior notes

1.000 % notes

523 2028 521 551

1.500 % senior notes

1.500 % notes

523 2032 521 551

Canadian Senior Notes:

2.125 % senior notes

567 2024 566 553

2.125 % notes

Finance lease obligations (see Note 11) 455 2025-2118 455 472

472 2024 – 2046 472 390

Facility notes and bonds 320 2029-2045 320 320

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commercial paper program and € 5.0 billion (in a variety of currencies) under a European commercial paper program.

As of December 31, 2023, we had $ 2.2 billion outstanding under our U.S.

commercial paper program with an average interest rate of 5.45 %.

The entire balance was classified as a current liability in our consolidated balance sheet as of December 31, 2023.

There was no commercial paper outstanding as of December 31, 2024.

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Debt Classification

As of December 31, 2023, we continued to classify our 2.200 % senior notes with a principal balance of $ 400 million that mature in September 2024 as long-term debt in our consolidated balance sheet based on our intent and ability to refinance the debt.

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

Debt Repayments

On April 1, 2023, our 2.500 % senior notes with a principal balance of $ 1.0 billion and our floating-rate senior notes with a principal balance of $ 500 million matured and were repaid in full.

On November 15, 2023, our 0.375 % Euro senior notes with a principal balance of € 700 million ($ 749 million) matured and were repaid in full.

Additionally, during 2023, we repaid $ 23 million of debt assumed in the Bomi Group acquisition.

On May 21, 2024, our 2.125 % Canadian Dollar senior notes with a principal balance of C$ 750 million ($ 550 million) matured and were repaid in full.

On September 3, 2024, our 2.200 % senior notes with a principal balance of $ 400 million matured and were repaid in full.

On November 11, 2024, our 2.800 % senior notes with a principal balance of $ 500 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.

On May 22, 2024 we issued three series of notes in the principal amounts of $ 900 million, $ 1.1 billion and $ 600 million.

These notes bear interest at 5.150 %, 5.500 % and 5.600 %, respectively, and mature on May 22, 2034, May 22, 2054 and May 22, 2064, respectively.

Interest on the notes is payable semi-annually.

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.

Interest on the notes is payable quarterly, beginning June 2023.

On May 28, 2024 we issued floating rate senior notes with a principal balance of $ 213 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 June 1, 2074.

Interest on the notes is payable quarterly.

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.

Fixed-Rate Senior Notes

All of our fixed-rate notes pay interest semi-annually and allow for redemption by us at any time by paying the greater of the principal amount or a "make-whole" amount, plus accrued interest.

We subsequently entered into interest rate swaps on certain of these notes, which effectively converted the fixed interest rates on the notes to variable interest rates.

The average interest rates payable on the notes where fixed interest rates were swapped to variable interest rates, including the impact of the interest rate swaps, for the years ended December 31, 2023 and 2022 were as follows:

Principal Average Effective Interest Rate

Value Maturity 2023 2022

2.450 % senior notes

1,000 2022 — % 1.75 %

There were no outstanding interest rate swaps as of December 31, 2023.

Our fixed-rate notes pay interest semi-annually and allow for redemption by us at any time by paying the greater of the principal amount or a "make-whole" amount, plus accrued interest.

Reference Rate Reform

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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 .

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Floating-Rate Senior Notes

We had floating-rate senior notes in the principal amounts of $ 500 and $ 400 million that matured in 2023 and 2022, and bore interest at three-month LIBOR plus spreads of 45 and 38 basis points, respectively.

The average interest rate on these notes for 2023 and 2022 was 5.32 % and 1.93 %, respectively.

We had floating-rate senior notes in the principal amount of $ 500 million that matured in 2023.

These notes bore interest at three-month LIBOR plus a spread of 45 basis points.

The average interest rate on these notes for 2023 was 5.32 %.

Our outstanding floating-rate senior notes with principal amounts totaling $ 1.8 billion bear interest at either thirty-day, ninety-day or compounded SOFR, less a spread ranging from 4 to 35 basis points.

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We have classified these floating-rate senior notes as long-term liabilities in our consolidated balance sheets, due to our intent and ability to refinance the debt if the put option is exercised.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.620 % Debentures

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The notes are callable at our option at a redemption price equal to the greater of the principal amount, or the present value of the remaining scheduled payments of principal and interest thereon discounted to the date of redemption at a benchmark comparable government bond yield plus 20 basis points, plus accrued interest.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Canadian Dollar Senior Notes

The Canadian Dollar notes consist of a single series, as follows:

• Notes in the principal amount of C$ 750 million, which bear interest at a fixed rate of 2.125 % and mature in May 2024.

Interest is payable semi-annually.

The notes are callable at our option, in whole or in part, at the Government of Canada yield plus 21.5 basis points, and on or after the par call date at par value.

Finance Lease Obligations

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The average interest rates for 2024 and 2023 were 3.21 % and 3.29 %, respectively.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Bonds with a principal balance of $ 29 million issued by the Dallas/Fort Worth International Airport Facility Improvement Corporation associated with our Dallas, Texas airport facilities.

The bonds are due in May 2032 and bear interest at a variable rate that is payable quarterly.

The variable cash flows on this obligation were swapped to a fixed rate of 5.11 % until July 2023, when the interest rate swap was terminated.

The average interest rate for 2023 was 4.42 %.

The average interest rates for 2024 and 2023 were 3.26 % and 4.42 %, respectively.

• Bonds with a principal balance of $ 100 million issued by the Delaware County, Pennsylvania Industrial Development Authority associated with our Philadelphia, Pennsylvania airport facilities.

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(1) Purchase commitments include estimates of future amounts yet to be recognized in our financial statements.

Purchase commitments represent contractual agreements for capital expenditures that are legally binding, including contracts for aircraft, vehicles and facility construction projects.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In addition to the purchase commitments presented above, during the first quarter of 2025 we entered into an accelerated share repurchase agreement for $ 1.0 billion worth of shares to be completed during the first quarter of 2025 and an agreement to purchase certain services totaling approximately $ 400 million to be paid over 10 years, beginning in 2025.

Purchase commitments entered into after December 31, 2024 are not reflected in the table above.

Purchase commitments represent contractual agreements for certain capital expenditures and pending acquisitions, that are legally binding, including contracts for aircraft, vehicles and facility construction projects.

We are evaluating available financing alternatives with respect to our aircraft purchase commitments.

Sources of Credit

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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 3, 2024.

The first of these agreements provides revolving credit facilities of $ 1.0 billion and expires on November 24, 2025.

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.

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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.

The second agreement provides revolving credit facilities of $ 2.0 billion and expires on November 25, 2029.

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.

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and (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.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO 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.

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We are a defendant in a number of lawsuits filed in state and federal courts containing various class action allegations under state wage-and-hour laws.

We do not believe that any loss associated with any such matter will have a material impact on our operations or financial condition.

We do not believe that any loss associated with any such matter will have a material impact on our financial condition, results of operations or liquidity.

In October 2022, Gratton v.

United Parcel Service, Inc., was filed in the United States District Court for the Eastern District of Washington.

Plaintiff sued UPS for various employment related claims.

In the third quarter of 2024, the jury found in favor of the plaintiff only on his retaliation claim, awarding him $ 39.6 million in compensatory damages and $ 198 million in punitive damages.

We have filed post-trial motions appealing the verdict as we believe a number of reversible errors have been committed entitling us to reverse the verdict substantially or in its entirety.

In the fourth quarter of 2024, the punitive damage award was vacated in its entirety.

In the first quarter of 2025, the court vacated the remainder of the jury’s verdict and granted our motion for a new trial.

As of December 31, 2024, we had accrued an immaterial amount in our consolidated balance sheet in connection with this matter.

In July 2023, Baker v.

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Accordingly, we are not able to estimate a possible loss or range of loss that may result from this matter or to determine whether such loss, if any, would have a material adverse effect on our financial condition, results of operations or liquidity.

In October 2024, a securities class action, Savage v.

United Parcel Service, Inc.

et al, was filed in the United States District Court for the Northern District of Georgia, naming the Company and certain current and former officers as defendants.

This matter has been dismissed.

Other Matters

We are a party to various other matters that arose in the normal course of business.

These include disputes with government authorities in various jurisdictions over the imposition of duties, fines, taxes and assessments from time to time.

We are vigorously defending ourselves and believe that we have a number of meritorious defenses in these disputes.

There are also unresolved questions of law that could be important to the ultimate resolution of these disputes.

Accordingly, we are not able to estimate a possible loss or range of loss that may result from these disputes or to determine whether such loss, if any, would have a material impact on our financial condition, results of operations or liquidity.

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.

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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 operations or financial condition.

We do not believe that any loss from this matter would have a material impact on our financial condition, results of operations or liquidity.

As previously disclosed, the Securities and Exchange Commission (the "SEC") had investigated our controls and practices surrounding impairment analyses in connection with the divestiture 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.

In March 2024, the SEC staff informed the Company that it disagreed with the timing of the impairment.

The Company reached a negotiated resolution with the SEC, without admitting or denying the SEC’s findings.

In connection therewith, the Company agreed to pay a civil penalty, and agreed to remedial actions, training and process changes, many of which have already been implemented.

The resolution did not have a material effect on the Company’s financial condition, results of operations or liquidity.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We are a party to various other matters that arose in the normal course of business.

These include disputes with government authorities in various jurisdictions over the imposition of duties, fines, taxes and assessments from time to time.

We are vigorously defending ourselves and believe that we have a number of meritorious defenses in these disputes.

There are also unresolved questions of law that could be important to the ultimate resolution of these disputes.

Accordingly, we are not able to estimate a possible loss or range of losses that may result from these disputes or to determine whether such losses, if any, would have a material impact on our financial condition, results of operations or liquidity.

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

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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.

There were no material impairments recognized for the years ended December 31, 2023, 2022 or 2021.

We recognized certain immaterial impairments, primarily within Supply Chain Solutions, for the years ended December 31, 2024, 2023 and 2022.

UNITED PARCEL SERVICE, INC.

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As of December 31, 2024, we had additional leases which have not commenced of $ 561 million.

These leases will commence between 2024 and 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.

These leases will commence between 2025 and 2026 when we are granted access to the property, such as when we are able to begin constructing leasehold improvements or obtain a certificate of occupancy.

UNITED PARCEL SERVICE, INC.

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Common stock purchases ( 288 ) ( 1,368 ) ( 1,038 )

Other — — ( 3 )

Balance at end of year $ 20,882 $ 21,055 $ 21,326

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Dividends include $ 195 , $ 239 and $ 249 million for 2024, 2023 and 2022, respectively, that were settled in shares of class A common stock.

(3) Includes adjustments related to certain stock-based awards.

UNITED PARCEL SERVICE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We repurchased 12.8 , 19.0 and 2.6 million shares of class B common stock for $ 2.3 , $ 3.5 and $ 0.5 billion during the years ended December 31, 2023, 2022 and 2021, respectively.

We repurchased 3.9 , 12.8 and 19.0 million shares of class B common stock for $ 500 million, $ 2.3 billion and $ 3.5 billion during the years ended December 31, 2024, 2023 and 2022, respectively.

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").

The share repurchases discussed above for the years ended December 31, 2022 and 2021, were completed under this authorization.

The share repurchases discussed above for the year ended December 31, 2022 were completed under this authorization.

For the year ended December 31, 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 for $ 5.0 billion of class A and class B common stock (the "2023 Authorization").

The share repurchases discussed above for the year ended December 31, 2024 were completed under the 2023 Authorization.

For the year ended December 31, 2023, we repurchased 12.3 million shares for $ 2.2 billion under the 2023 Authorization.

As of December 31, 2024, we had $ 2.3 billion available under this repurchase authorization.

In February 2025, we entered into an accelerated share repurchase agreement for $ 1.0 billion worth of shares.

This agreement is expected to settle in the first quarter of 2025.

We do not anticipate further share repurchases in 2025.

Future share repurchases may be in the form of accelerated share repurchase programs, open market purchases or other methods we deem appropriate.

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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.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive Income (Loss)

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Current period changes in fair value (net of tax effect of $ 0 , $ 2 and $( 3 ))

7 ( 12 ) ( 2 )

Reclassification to earnings (net of tax effect of $ 0 , $ 1 and $ 1 )

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Unrealized Gain (Loss) on Marketable Securities:

Realized gain (loss) on sale of securities $ ( 3 ) $ ( 3 ) $ 5 Investment income and other

Realized gain (loss) on sale of securities $ — $ ( 3 ) $ ( 3 ) Investment income (expense) and other

Income tax (expense) benefit — 1 1 Income tax expense

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Foreign currency exchange contracts 176 213 304 Revenue

Foreign currency exchange contracts ( 1 ) ( 1 ) — Investment income and other

Foreign currency exchange contracts ( 1 ) ( 1 ) ( 1 ) Investment income (expense) and other

Income tax (expense) benefit ( 41 ) ( 48 ) ( 70 ) Income tax expense

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Unrecognized Pension and Postretirement Benefit Costs:

Prior service costs $ ( 109 ) $ ( 94 ) $ ( 148 ) Investment income and other

Prior service credit for divested business — — 69 Other expenses

Plan amendments for divested business — — ( 66 ) Other expenses

Remeasurement of benefit obligation ( 351 ) 1,027 3,272 Investment income and other

Curtailments and settlements of benefit obligations ( 8 ) 34 — Investment income and other

Prior service costs $ ( 154 ) $ ( 109 ) $ ( 94 ) Investment income (expense) and other

Remeasurement of benefit obligation ( 665 ) ( 351 ) 1,027 Investment income (expense) and other

Curtailments and settlements of benefit obligations — ( 8 ) 34 Investment income (expense) and other

Income tax (expense) benefit 195 111 ( 230 ) Income tax expense

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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.

Beginning in 2023, awards earned under the UPS Management Incentive Award Program (the "MIP") are fully electable, at the option of the recipient, in the form of cash or unrestricted shares of class A common stock.

The total expense recognized in our statements of consolidated income under all stock compensation programs during 2023, 2022 and 2021 was $ 0.2 , $ 1.6 and $ 0.9 billion, respectively.

The associated income tax benefit recognized in our statements of consolidated income during 2023, 2022 and 2021 was $ 42 , $ 451 and $ 301 million, respectively.

The awards issued under these programs are considered to be equity classified.

The total expense recognized in our statements of consolidated income for these stock compensation programs during 2024, 2023 and 2022 was $ 24 million, $ 220 million and $ 1.6 billion, respectively.

The associated income tax benefit (expense) recognized in our statements of consolidated income during 2024, 2023 and 2022 was $( 18 ), $ 42 and $ 451 million, respectively.

The cash income tax benefit received from the exercise of stock options and conversion of Restricted Units to class A shares during 2024, 2023 and 2022 was $ 110 , $ 201 and $ 352 million, respectively.

We maintain the UPS Management Incentive Award Program (the "MIP") for certain management employees.

Employees may elect to receive cash or unrestricted shares of class A common stock under the MIP.

Substantially all MIP awards are settled in cash, based on participant elections.

We also maintain an employee stock purchase plan which allows eligible employees to purchase shares of UPS class A common stock at a discount.

Management Incentive Award Program

1 unchanged sentence

Executive officer eligibility is determined annually by the Compensation and Human Capital Committee of the Board (the "Compensation Committee").

The MIP is an incentive-based compensation program, with awards based on annual Company performance.

Beginning 2023, MIP awards are paid in cash, unless a participant elects to receive all or a portion of the award in unrestricted shares of class A common stock.

As of December 31, 2024, the MIP was classified as a compensation obligation within Accrued wages and withholdings in our consolidated balance sheets.

Prior to 2023, MIP awards were generally paid in one-half to two-thirds RPUs, depending upon the recipient's level of seniority.

1 unchanged sentence

Upon conversion, RPUs resulted in the issuance of an equivalent number of shares of class A common stock after required tax withholdings.

MIP RPUs granted between 2019 and prior to 2022, vested over one year following the grant date conditioned upon continued employment with the Company (except in the case of death, disability or retirement, in which case immediate vesting occurred).

The grant value was expensed on a straight-line basis (less estimated forfeitures) over the requisite service period (except in the case of death, disability or retirement, in which case immediate expensing occurred).

MIP RPUs granted prior to 2019 vested over a five-year period with approximately 20 % of the award vesting and converting to class A common stock each anniversary of the grant date.

As of December 31, 2023, all outstanding MIP RPUs had fully vested.

During 2022, the Compensation Committee amended and restated the terms and conditions governing 2022 MIP RPUs to provide that such awards would fully vest as of December 31, 2022.

1 unchanged sentence

Domestic Package.

In 2022, this award was classified as a compensation obligation and recorded in Accrued wages and withholdings in our consolidated balance sheet.

In 2023, the Compensation Committee approved the 2022 MIP awards and the compensation obligation was relieved.

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The weighted-average grant date fair value of Restricted Units, other than awards granted under the LTIP, which are discussed below, granted during 2024, 2023 and 2022 was $ 147.22 , $ 185.66 and $ 223.72 , respectively.

The total fair value of these RPUs vested was $ 1.1 , $ 0.9 and $ 0.7 billion in 2023, 2022 and 2021, respectively.

During 2023, all outstanding MIP Restricted Units fully vested.

The total fair value of these RPUs vested was $ 11 million, $ 1.1 billion and $ 923 million in 2024, 2023 and 2022, respectively.

As of December 31, 2024, there was $ 3 million of total unrecognized compensation cost related to non-vested Restricted Units, other than awards granted under the LTIP, which are discussed below.

That cost is expected to be recognized over a weighted-average period of two years and two months.

That cost is expected to be recognized over a weighted-average period of two years .

Long-Term Incentive Performance Award Program ("LTIP")

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The number of RPUs earned is based on achievement of performance targets established on the grant date.

For LTIP awards with a performance period ended December 31, 2021, the performance targets were equally weighted among consolidated operating return on invested capital ("ROIC"), growth in currency-constant consolidated revenue and total shareholder return ("RTSR") relative to a peer group of companies.

For the two-thirds of the award related to ROIC and growth in currency-constant consolidated revenue, we recognized the grant date fair value of these RPUs (less estimated forfeitures) as compensation expense ratably over the vesting period, based on the number of awards expected to be earned.

The remaining one-third of the award was valued using a Monte Carlo model.

We recognized the grant date fair value of this portion of the award (less estimated forfeitures) as compensation expense ratably over the vesting period.

For LTIP awards with a performance period ending in 2022 or later, the performance targets are equally weighted between adjusted earnings per share and adjusted cumulative free cash flow.

The final number of RPUs earned will then be subject to adjustment based on RTSR relative to the Standard & Poor's 500 Index.

LTIP awards have performance targets that are equally weighted between adjusted earnings per share and adjusted cumulative free cash flow.

The final number of RPUs earned is then subject to adjustment based on RTSR relative to the Standard & Poor's 500 Index.

We determine the grant date fair value of these 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.

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Reinvested dividends 90 N/A

Performance adjustments (1)

( 320 ) 226.71

Forfeited / Expired ( 259 ) 184.89

Non-vested as of December 31, 2024 1,401 $ 174.12

(1) Represents the incremental performance adjustment to RPUs with a performance period ending in 2024, which vested during the year.

The fair value of each LTIP RPU is based on the NYSE closing price of class B common stock on the date of grant.

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As of December 31, 2024, there was $ 104 million of total unrecognized compensation cost related to non-vested LTIP RPUs.

That cost is expected to be recognized over a weighted-average period of one year and nine months.

That cost is expected to be recognized over a weighted-average period of one year and ten months.

Non-qualified Stock Options

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As of December 31, 2024, there was $ 3 million of total unrecognized compensation cost related to non-vested options.

That cost is expected to be recognized over a weighted-average period of three years and four months.

That cost is expected to be recognized over a weighted-average period of three years and five months.

Discounted Employee Stock Purchase Plan

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

During the quarter ended December 31, 2024, based on a change in our management reporting structure, we began presenting our U.S.

air cargo product within our U.S.

Domestic Package segment.

This activity was previously reported within Supply Chain Solutions.

This change aligns with how our chief operating decision maker reviews operating results to assess performance and allocate resources.

Prior periods have been recast to conform to current year presentation with no changes to consolidated results.

International Package

International Package operations include delivery to more than 200 countries and territories worldwide, including shipments wholly outside the United States, as well as shipments with either origin or destination outside the United States.

Our International Package reporting segment includes our operations in Europe, the Indian sub-continent, Middle East and Africa (together "EMEA"), Canada and Latin America (together "Americas") and Asia.

Our International Package reporting segment includes the aggregation of our operations in Europe, the Indian sub-continent, Middle East and Africa (together "EMEA"), Canada and Latin America (together "Americas") and Asia.

Supply Chain Solutions

Supply Chain Solutions includes our Forwarding, Logistics, digital and other businesses.

Our Forwarding and 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 Forwarding and Logistics businesses provide services in more than 200 countries and territories worldwide and include international air and ocean freight forwarding, customs brokerage, mail services, healthcare logistics, distribution and post-sales services.

Our digital businesses leverage technology to enable a range of on-demand services such as same-day delivery, end-to-end return services and integrated supply chain and high-value shipment insurance solutions.

In evaluating financial performance, we focus on operating profit as a segment’s measure of profit or loss.

Operating profit is before investment income and other, interest expense and income tax expense.

Segment information

We consider our Chief Executive Officer to be our chief operating decision maker ("CODM").

The CODM is responsible for setting the Company's strategic direction, managing overall operations, and is the main point of communication between the board of directors and key operational personnel within the organization.

The CODM utilizes operating profit as a primary measure of segment performance because it reflects the underlying business performance and provides the CODM with a basis for making resource allocation decisions.

Operating profit is defined as income before investment income (expense) and other, interest expense and income tax expense.

Operating profit is considered to be a primary measure of segment performance.

The CODM regularly reviews segment level expense details which include compensation, benefits and purchased transportation expenses when assessing operating segment performance.

Compensation and benefits are separately assessed for Domestic Package whereas these categories are assessed together for International Package.

These categories are the primary segment expenses used by the CODM to assesses segment performance.

Certain expenses are allocated between the segments using activity-based costing methods.

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Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses.

In 2021, we updated our cost allocation methodology for aircraft engine maintenance expense to better align with aircraft utilization by segment, resulting in an immaterial reallocation of expense from our U.S.

Domestic Package segment to our International Package segment.

As we operate an integrated, global multimodal network, we evaluate many of our capital expenditure decisions at a network level.

Accordingly, expenditures on property, plant and equipment by segment are not presented.

Unallocated assets are comprised primarily of cash and marketable securities.

UNITED PARCEL SERVICE, INC.

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Segment information for the years ended December 31, 2024, 2023 and 2022 is as follows (in millions):

Year ended December 31, 2024 U.S.

Domestic International Total

Revenue $ 60,376 $ 17,960 $ 78,336

Reconciliation of revenue:

Other revenues (2)

Total consolidated $ 91,070

Compensation and benefits 3,783

Compensation 20,839

Benefits 16,862

Purchased transportation 2,466 3,447

Other segment items (1)

Segment Operating profit/(loss) $ 4,345 $ 3,191 $ 7,536

Reconciliation of segment operating profit to income before income taxes:

Other profit/(loss) (2)

Other pension income (expense) ( 396 )

Investment income (expense) and other 236

Interest expense ( 866 )

Income Before Income Taxes $ 7,442

Other Segment Disclosures:

Segment assets $ 38,657 $ 18,300 $ 56,957

Other assets (2)

Unallocated assets 3,263

Consolidated Assets $ 70,070

Depreciation and amortization (3)

$ 2,470 $ 777 $ 3,247

Domestic Package $ 59,958 $ 64,209 $ 60,317

International Package 17,831 19,698 19,541

Supply Chain Solutions 13,169 16,431 17,429

Consolidated revenue $ 90,958 $ 100,338 $ 97,287

Operating Profit:

Domestic Package $ 5,076 $ 6,997 $ 6,436

International Package 3,231 4,326 4,646

Supply Chain Solutions 834 1,771 1,728

Consolidated operating profit $ 9,141 $ 13,094 $ 12,810

Domestic Package $ 38,368 $ 38,303 $ 35,746

International Package 17,587 17,670 17,225

Supply Chain Solutions 11,245 10,407 9,556

Unallocated 3,657 4,744 6,878

Other depreciation and amortization (2)

Consolidated Depreciation and Amortization $ 3,609

(1) Other segment items for each reportable segment include repairs and maintenance, depreciation and amortization, fuel, other occupancy, allocated costs for our air network, information service, and general and administrative service expenses.

(2) Revenue, Operating profit/(loss), Assets, and Depreciation and Amortization from segments below the quantitative thresholds are attributable to operating segments which provide supply chain solutions.

These operating segments include our Forwarding, Logistics, Digital, and Other businesses.

(3) The amounts of depreciation and amortization disclosed by reportable segment are included within the other segment items captions.

These totals are presented after applying activity based costing methods to allocate expenses between segments as noted above.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year ended December 31, 2023

International

$ 60,205 $ 17,831 $ 78,036

Reconciliation of revenue:

Other revenues (2)

Total consolidated

Compensation and benefits

Compensation 19,818

Benefits 16,859

Purchased transportation 2,555 3,391

Other segment items (1)

Segment Operating profit/(loss)

$ 5,156 $ 3,231 $ 8,387

Reconciliation of segment operating profit to income before income taxes:

Other profit/(loss) (2)

Other pension income (expense)

Investment income (expense) and other

Interest expense

Income Before Income Taxes

Other Segment Disclosures:

Segment assets

$ 38,368 $ 17,587 $ 55,955

Other assets (2)

Unallocated assets

Consolidated Assets

Depreciation and Amortization Expense:

Domestic Package $ 2,290 $ 2,173 $ 2,058

International Package 742 761 685

Supply Chain Solutions 334 254 210

Consolidated depreciation and amortization expense $ 3,366 $ 3,188 $ 2,953

Revenue by product type for the years ended December 31, 2023, 2022 and 2021 is as follows (in millions):

Depreciation and amortization (3)

$ 2,290 $ 742 $ 3,032

Domestic Package:

Next Day Air $ 9,894 $ 10,699 $ 10,009

Deferred 5,093 5,968 5,846

Ground 44,971 47,542 44,462

Domestic Package 59,958 64,209 60,317

International Package:

Domestic 3,144 3,346 3,690

Export 14,003 15,341 15,012

Cargo 684 1,011 839

Total International Package 17,831 19,698 19,541

Supply Chain Solutions:

Forwarding 5,534 8,943 9,872

Logistics 5,927 5,351 4,767

Freight — — 1,064

Other 1,708 2,137 1,726

Total Supply Chain Solutions 13,169 16,431 17,429

Consolidated revenue $ 90,958 $ 100,338 $ 97,287

Other depreciation and amortization (2)

Consolidated Depreciation and Amortization

These operating segments include our Forwarding, Logistics, Digital, and Other businesses.

(3) The amounts of depreciation and amortization disclosed by reportable segment are included within the other segment items captions.

These totals are presented after applying activity based costing methods to allocate expenses between segments as noted above.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year ended December 31, 2022

International

$ 64,611 $ 19,698 $ 84,309

Reconciliation of revenue:

Other revenues (2)

Total consolidated

Compensation and benefits

Compensation 20,488

Benefits 16,603

Purchased transportation 3,333 3,773

Other segment items (1)

Segment Operating profit/(loss)

$ 7,151 $ 4,326 $ 11,477

Reconciliation of segment operating profit to income before income taxes:

Other profit/(loss) (2)

Other pension income (expense)

Investment income (expense) and other

Interest expense

Income Before Income Taxes

Other Segment Disclosures:

Segment assets

$ 38,303 $ 17,670 $ 55,973

Other assets (2)

Unallocated assets

Consolidated Assets

Depreciation and amortization (3)

$ 2,173 $ 761 $ 2,934

Other depreciation and amortization (2)

Consolidated Depreciation and Amortization

These operating segments include our Forwarding, Logistics, Digital, and Other businesses.

(3) The amounts of depreciation and amortization disclosed by reportable segment are included within the other segment items captions.

These totals are presented after applying activity based costing methods to allocate expenses between segments as noted above.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue by product type for the years ended 2024, 2023 and 2022 is provided in note 2, Revenue Recognition.

Geographic information for the years ended December 31, 2024, 2023 and 2022 is as follows (in millions):

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$ 7,442 $ 8,573 $ 14,825

A reconciliation of the statutory federal income tax rate to the effective income tax rate for the years ended December 31, 2023, 2022 and 2021 consists of the following:

A reconciliation of the statutory federal income tax rate to the effective income tax rate for the years ended 2024, 2023 and 2022 consists of the following:

2024 2023 2022

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tax rate differential — ( 0.6 ) 0.1

FDII and GILTI, net (1)

( 1.2 ) ( 0.9 ) ( 0.7 )

federal tax credits ( 0.8 ) ( 0.7 ) ( 0.5 )

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Effective income tax rate 22.3 % 21.8 % 22.1 %

(1) Foreign-Derived Intangible Income ("FDII") and Global Intangible Low-Taxed Income ("GILTI")

Our effective tax rate is affected by recurring factors, such as statutory tax rates in the jurisdictions in which we operate and the relative amounts of taxable income we earn in those jurisdictions.

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Our effective tax rate was 22.3 % in 2024, compared with 21.8 % and 22.1 % in 2023 and 2022, respectively, primarily due to the effects of the aforementioned recurring factors and the following discrete tax items.

2024 Discrete Items

We recognized an income tax benefit of $ 159 million related to pre-tax defined benefit pension and postretirement medical plan losses of $ 665 million.

This income tax benefit was generated at a higher average tax rate than the 2024 U.S.

federal statutory tax rate because it included the effect of U.S.

state and local and foreign taxes.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We recorded pre-tax transformation strategy costs of $ 322 million.

As a result, we recorded an additional income tax benefit of $ 77 million.

This income tax benefit was generated at a higher average tax rate than the 2024 U.S.

federal statutory tax rate due to the effect of U.S.

state and local and foreign taxes.

We recorded asset impairment charges of $ 108 million.

As a result, we recorded an additional income tax benefit of $ 27 million.

This income tax benefit was generated at a higher average tax rate than the 2024 U.S.

federal statutory tax rate due to the effect of U.S.

state and local and foreign taxes.

We recorded a pre-tax expense of $ 19 million in connection with a multi-employer pension plan withdrawal.

As a result, we recorded an income tax benefit of $ 5 million.

This income tax benefit was generated at a higher average tax rate than the 2024 U.S.

federal statutory tax rate due to the effect of U.S.

state and local taxes.

We recorded a pre-tax gain of $ 156 million related to the divestiture of Coyote.

As a result, we recorded additional income tax expense of $ 4 million.

This income tax expense was generated at a lower average tax rate than the 2024 U.S.

federal statutory tax rate due to the disposition generating capital losses for tax purposes that were not expected to be realized.

As we discussed in note 10, we paid $ 45 million in connection with the settlement of a regulatory matter with the SEC.

We did not record any additional income tax benefit related to these expenses, which were not deductible for tax purposes.

We recorded pre-tax expense of $ 94 million in connection with a one-time payment for an international regulatory matter.

We did not record any additional income tax benefit related to these expenses which are not deductible for tax purposes.

The recognition of excess tax benefits and deficiencies related to share-based compensation in income tax expense resulted in a net tax expense of $ 22 million and increased our effective tax rate by 0.3 %.

2023 Discrete Items

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federal statutory tax rate due to the effect of U.S.

state and local taxes.

state and local and foreign taxes.

The recognition of excess tax benefits and deficiencies related to share-based compensation in income tax expense did not impact our effective tax rate for the year ended December 31, 2023.

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state and local and foreign taxes.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We recorded pre-tax expenses of $ 76 million as a result of a reduction in estimated residual value for certain aircraft.

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The recognition of excess tax benefits and deficiencies related to share-based compensation in income tax expense resulted in a net tax benefit of $ 95 million and reduced our effective tax rate by 0.6 % during the year ended December 31, 2022.

2021 Discrete Items

We recognized an income tax expense of $ 784 million related to pre-tax defined benefit pension and postretirement medical plan gains of $ 3.3 billion.

This income tax expense was generated at a higher average tax rate than the 2021 U.S.

federal statutory tax rate because it included the effect of U.S.

state and local and foreign taxes.

We recorded pre-tax Transformation strategy costs of $ 380 million.

As a result, we recorded an additional income tax benefit of $ 95 million.

This income tax benefit was generated at a higher average tax rate than the 2021 U.S.

federal statutory tax rate due to the effect of U.S.

state and local and foreign taxes.

We recorded a pre-tax gain of $ 46 million related to the divestiture of UPS Freight.

As a result, we recorded an additional income tax expense of $ 11 million.

This income tax expense was generated at a higher average tax rate than the 2021 U.S.

federal statutory tax rate due to the effect of U.S.

state and local taxes.

The recognition of excess tax benefits and deficiencies related to share-based compensation in income tax expense resulted in a net tax benefit of $ 105 million and reduced our effective tax rate by 0.6 % during the year ended December 31, 2021.

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Beginning in 2012, we were granted a tax incentive for certain of our non-U.S.

In 2022, this incentive was renegotiated and extended through December 31, 2026.

In 2022, the tax incentive was renegotiated and extended through December 31, 2026.

The tax incentive is conditional upon our meeting specific employment and investment thresholds.

We have applied to exit this incentive effective January 1, 2025.

The impact of this tax incentive decreased non-U.S.

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Insurance reserves 646 626

Stock compensation 158 315

Accrued employee compensation 352 354

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Net deferred tax asset (liability) $ ( 3,483 ) $ ( 3,646 )

The valuation allowance decreased by $ 4 million and increased by $ 1 and $ 34 million during the years ended December 31, 2023, 2022 and 2021, respectively.

The valuation allowance increased by $ 63 million, decreased by $ 4 million and increased by $ 1 million during the years ended December 31, 2024, 2023 and 2022, respectively.

We have a U.S.

federal capital loss carryforward of $ 200 million as of December 31, 2023, less than $ 1 million of which expires on December 31, 2025, $ 150 million of which expires on December 31, 2026 and the remainder of which expires on December 31, 2027.

federal capital loss carryforward of $ 409 million as of December 31, 2024, $ 133 million of which expires on December 31, 2026, $ 49 million of which expires on December 31, 2027 and the remainder of which expires on December 31, 2029.

UNITED PARCEL SERVICE, INC.

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state and local credit carryforwards $ 47 $ 48

state and local operating loss carryforwards and credits can be carried forward for periods ranging from three years to indefinitely.

state and local operating loss carryforwards and credits will begin to expire on various dates ranging from 2025 to indefinitely.

We also have non-U.S.

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The remaining liability of $ 62 million is reflected in current and non-current liabilities in our consolidated balance sheets based on the timing of payment.

This balance will be paid between 2024 and 2026.

This balance will be paid in 2025 and 2026.

Additionally, the Organization for Economic Co-operation and Development ("OECD") has introduced a framework to implement a global minimum corporate tax of 15%, referred to as Pillar Two or the minimum tax directive.

Many aspects of the minimum tax directive will be effective beginning in 2024, with certain remaining impacts to be effective beginning in 2025.

Many aspects of the minimum tax directive became effective beginning in 2024, with certain remaining impacts to be effective beginning in 2025.

While it is uncertain whether the U.S.

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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.

As of December 31, 2023 and 2022, we held cash collateral of $ 103 and $ 534 million, respectively, under these agreements.

This collateral is included in Cash and cash equivalents in our consolidated balance sheets and is unrestricted.

As of December 31, 2023 we were required to post $ 13 million with our counterparties.

We may further manage credit risk through the use of 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 when positions exceed certain amounts.

During 2024, the terms of these arrangements were revised to include a threshold of $ 250 million.

As of December 31, 2024, we did no t hold any cash collateral.

As of December 31, 2023, we held cash collateral of $ 103 million under these agreements.

Collateral is included in Cash and cash equivalents in our consolidated balance sheets and is unrestricted.

As of December 31, 2024, no collateral was required to be posted with our counterparties.

As of December 31, 2023, we were required to post $ 13 million of collateral with our counterparties.

Types of Hedges

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Hong Kong Dollar HKD 4,160 1,822

Interest rate hedges:

Floating to Fixed Interest Rate Swaps USD — 28

Chinese Renminbi CNH 6,065 —

As of December 31, 2024 and 2023, we had no outstanding commodity hedge positions.

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Foreign currency exchange contracts Other non-current liabilities Level 2 3 65 — 21

Interest rate contracts Other non-current liabilities Level 2 — 5 — 5

Derivatives not designated as hedges:

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Total Liability Derivatives $ 8 $ 92 $ — $ 26

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

therefore, these derivatives are classified as Level 2.

UNITED PARCEL SERVICE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

therefore, these derivatives are classified as Level 2.

Balance Sheet Location of Hedged Item in Fair Value Hedges

3 unchanged sentences

Long-term debt and finance leases

$ 279 $ 4 $ 280 $ 4

Income Statement and AOCI Recognition of Designated Hedges

The following table indicates the amount of gains and (losses) that have been recognized in the statements of consolidated income for fair value and cash flow hedges, as well as the associated gain or (loss) for the underlying hedged item for fair value hedges for the years ended December 31, 2024 and 2023 (in millions):

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 or (loss) on fair value hedging relationships:

Interest Contracts:

Hedged items $ — $ — $ — $ — $ 11 $ —

Derivatives designated as hedging instruments — — — — ( 11 ) —

Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships Revenue Interest Expense Investment Income (Expense) and Other

Revenue Interest Expense Investment Income (Expense) and Other

Gain or (loss) on cash flow hedging relationships:

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in Income Amount of Gain (Loss) Recognized in Income

Foreign currency exchange contracts Investment income and other $ ( 7 ) $ ( 69 )

Foreign currency exchange contracts Investment income (expense) and other

$ ( 1 ) $ ( 7 )

Total $ ( 1 ) $ ( 7 )

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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 the fourth quarter of 2023, we implemented our "fit to serve" initiative, which is intended to right-size our business for the future through a workforce reduction of approximately 12,000 positions and create a more efficient operating model to enhance responsiveness to changing market dynamics.

As of December 31, 2023, we recorded an accrual for separation costs, primarily related to U.S.

separations, of $ 205 million in our consolidated balance sheet, all of which we expect to pay in 2024.

We expect to incur additional expense for U.S.

and international separations during 2024.

As previously disclosed, we are undertaking an enterprise-wide transformation of our organization that includes various projects and initiatives, including workforce reductions and changes in processes and technology, that impact our global direct and indirect operating costs.

The table below presents transformation strategy costs for the years ended December 31, 2024, 2023 and 2022 (in millions):

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After-Tax Transformation Strategy Costs $ 245 $ 333 $ 142

Compensation and benefit costs under these programs are primarily related to severance costs incurred in conjunction with reductions in our workforce.

We are primarily accounting for these separations under ASC Topic 712 as they have been, or will be, carried out under a plan which provides a contractual termination benefit to impacted employees.

The nature of our separation initiatives has resulted in a relatively short period of time, typically less than one year , between the point at which the separation meets the criteria for recognition as an accrual and the point at which the separation is completed.

Other expenses incurred in furtherance of our transformation strategy have been primarily related to fees paid to third-party service providers that supported modernization of our corporate support functions, assisted in our strategic reviews and contributed to our financial systems transition and healthcare strategy.

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.

Transformation strategy costs during the periods presented related to our Transformation 2.0, Fit to Serve and Network reconfiguration and Efficiency Reimagined programs.

Total costs by program are shown in the table below for the years ended December 31, 2024, 2023 and 2022 (in millions):

2024 2023 2022

Transformation Strategy Costs:

Transformation 1.0 $ — $ 13 $ 50

Transformation 2.0

Spans and layers — 86 4

Business portfolio review 29 84 80

Financial systems 54 36 33

Other initiatives — 4 11

Transformation 2.0 total 83 210 128

Fit to Serve 204 212 —

Network Reconfiguration and Efficiency Reimagined

Total Transformation Strategy Costs $ 322 $ 435 $ 178

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transformation 1.0:

Transformation 1.0 was a fundamental change in the Company’s operating model, moving certain functions from a decentralized operating model supported by disparate technology to a centralized model, leveraging third-party offshore resources to supplement our internal resources.

The Company completed Transformation 1.0 in 2023.

Transformation 2.0:

Based on efficiencies gained as a part of Transformation 1.0, and in connection with changes in our executive leadership in 2020, we identified and reprioritized certain then-current and future investments, including investments in our workforce, portfolio of businesses and technology (such projects, collectively, “Transformation 2.0”).

Specifically, we identified opportunities to reduce spans and layers of management, began a review of our business portfolio and identified opportunities to invest in certain technologies, including financial reporting and certain schedule, time and pay systems, to reduce global indirect operating costs, provide better visibility, and reduce reliance on legacy systems and coding languages.

Our organizational structure review indicated an opportunity to realize initial savings of approximately $ 400 million with potential opportunities to save up to an additional $ 240 million through the reduction of spans and layers of management with an anticipation that these savings would be recurring.

The business portfolio review was expanded in 2022.

As a result thereof, we determined to exit certain businesses that were not aligned with our corporate strategy and determined to make new investments into certain businesses, including healthcare-focused businesses, better aligned to our strategic targets.

In connection therewith, we incurred costs primarily consisting of outside professional fees related to these reviews and other costs related to these transactions.

Lastly, our review of our systems and technologies identified certain areas of our business that were reliant on outdated technologies.

Our reviews determined that continued use of these legacy technologies would likely increase maintenance costs and that investments into new technologies would enhance our ability to leverage our data and allow us to establish a more flexible system architecture.

As of December 31, 2023, we substantially completed our initiatives to reduce spans and layers of management and achieved savings in line with our anticipated benefits.

Our ongoing efforts under Transformation 2.0 include initiatives related to our financial systems and our business portfolio review.

As of December 31, 2024, we have incurred $ 798 million of costs as part of Transformation 2.0.

Transformation 2.0 initiatives are expected to conclude during 2025, with anticipated remaining costs of approximately $ 90 million primarily related to completion of our technology initiatives.

During 2023, we began our "Fit to Serve" initiative intended to right-size our business through a workforce reduction of approximately 14,000 positions, primarily within management, and create a more efficient operating model to enhance responsiveness to changing market dynamics.

Accruals for separation costs of $ 45 and $ 205 million within Fit to Serve were included in our consolidated balance sheets as of December 31, 2024 and December 31, 2023, respectively.

Separations accrued as of December 31, 2023 have been substantially completed and we expect that amounts accrued as of December 31, 2024 will be paid through the first half of 2025.

As of December 31, 2024, we have incurred total costs of $ 416 million and anticipate that we will incur additional costs of approximately $ 45 million under Fit to Serve.

Fit to Serve is expected to conclude in 2025.

Network Reconfiguration and Efficiency Reimagined

In the first quarter of 2025, as previously disclosed we entered into an agreement in principle with our largest customer to significantly reduce the volume we deliver for them.

We expect volume from this customer to decline to approximately 50 % of year end 2024 levels by mid-2026.

We are making a deliberate shift in our business to increase our focus on growing higher yielding volume.

We expect that these actions will result in reduced revenues within our U.S.

Domestic Package segment, as described below, during 2025 relative to 2024.

In conjunction therewith, as disclosed on January 30, 2025, we are beginning a network reconfiguration within the U.S.

which is expected to lead to consolidations of our facilities and workforce as well as an end-to-end process redesign through 2027.

This network reconfiguration, which is an expansion of our Network of the Future program, is expected to result in exit activities that could result in the closure of up to 10 % of our buildings in 2025, a reduction in the size of our vehicle and aircraft fleets, and a decrease in the size of our workforce, which we expect will lead to additional expense.

The costs directly associated with these activities are in addition to operational costs that we may incur.

We are not yet able to determine the specific assets or extent of our workforce that will be impacted by our network redesign, the timing of those future changes or

UNITED PARCEL SERVICE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the associated charges we will incur and therefore are not currently able to provide an estimate of the total cost or the cost by period.

We expect that impacted assets will remain in use during some or all of the periods of our network reconfiguration.

We expect to partially offset costs to complete our network reconfiguration through end-to-end process redesign carried out during our network reconfiguration through our Efficiency Reimagined initiatives.

These initiatives are being undertaken to align our organizational processes to the operational changes expected to occur in our network reconfiguration and drive organizational efficiency.

These initiatives are expected to yield approximately $ 1.0 billion in annualized savings beginning in 2025.

We incurred related costs of $ 35 million for the three months ended December 31, 2024.

We expect to incur related costs of approximately $ 300 to $ 400 million during 2025 and incremental costs in 2026 and 2027 to complete the program primarily associated with outside professional services and severance costs.

Upon the completion of our network reconfiguration and Efficiency Reimagined initiatives, we expect to realize further benefits in subsequent periods from lower expense, including depreciation, compensation, benefit and other, as well as lower capital requirements.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data