UNITED PARCEL SERVICE INC

Through our Customer First, People Led, Innovation Driven strategy we are investing to grow in the premium parts of the market and drive efficiency across our network. We are focused on the parts of the market that value our end-to-end integrated network, including healthcare, commercial shippers and small- and medium-sized businesses ("SMBs"). Through our Network of the Future initiative, we are transforming our network by combining physical and digital capabilities, including our smart package smart facility RFID solution, to streamline our operations. We are also leveraging technology to add new capabilities and expand our addressable market.

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

On April 1, 2024, we announced that we entered into an agreement to expand our relationship with the U.S. Postal Service ("USPS"), providing for UPS to become the USPS primary air cargo provider within the United States.

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

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

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

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

•Average daily package volume in our global small package operations decreased, with declines in both commercial and residential shipments across all of our product segments. These declines were primarily the result of the challenging macroeconomic conditions.

•Revenue declined as well, driven by lower volume and relatively flat revenue per piece.

•Operating expenses decreased, due to a reduction in purchased transportation in all segments and reductions in fuel expenses in our small package operations, as well as the impact of our ongoing productivity initiatives.

•Operating profit and operating margin decreased as revenue declines were greater than operating expense reductions.

•We reported net income of $1.1 billion and diluted earnings per share of $1.30. Adjusted diluted earnings per share were $1.43 after adjusting for the after-tax impacts of:

◦transformation and other costs of $75 million, or $0.09 per diluted share, and

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

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

International Package segment revenues were also impacted by declines in demand related surcharges and currency fluctuations, partially offset by revenue per piece growth due to increases in base rates and changes in product and customer mix.

In Supply Chain Solutions, revenue decreases were driven by volume and market rate declines in Forwarding, somewhat offset by growth in our Logistics businesses. Expenses decreased primarily due to lower purchased transportation expense in Forwarding, partially offset by expense increases within Logistics.