UNITED PARCEL SERVICE INC

Previous wording

During the first quarter of 2025, we took several steps in furtherance of this strategy, including deliberately shifting our business to increase our focus on higher yielding volume. We entered into an agreement with our largest customer that, as previously disclosed, provides for reductions to the volume they ship with us, relative to 2024, by more than 50% by June 2026. We insourced our former SurePost product, using the UPS network for final mile delivery, and now replaced it with Ground Saver, a new domestic economy service. We also announced our Ground with Freight Pricing product to provide for shipments weighing more than 150 pounds.

Current wording

During the second quarter and first half of 2025, we took several steps in furtherance of this strategy, including continuing our deliberate shift in our business to increase our focus on higher yielding volume. As previously disclosed, we have entered into an agreement with our largest customer that provides for reductions in the volume they ship with us, relative to 2024, by more than 50% by June 2026. Through the first half of 2025, this volume glide-down proceeded as planned, and in the second half 2025, we expect to accelerate the year-over-year pace of decline to close to 30%.

Previous wording

In January 2025, we completed the previously announced acquisition of Frigo-Trans and Biotech & Pharma Logistics ("Frigo-Trans"), an industry-leading, complex healthcare logistics provider based in Germany. The acquisition is expected to increase our complex cold-chain logistics capabilities internationally. In the second quarter of 2025, we entered into an agreement to acquire Andlauer Healthcare Group ("AHG"), a leading North American supply chain management company headquartered in Canada that offers customized third-party logistics and specialized cold chain transportation solutions for the healthcare sector. This acquisition is expected to close in the second half of 2025, subject to AHG’s shareholder approval, customary regulatory reviews and approvals, and other customary closing conditions.

Current wording

In the first half of 2025, we completed the previously announced acquisition of Frigo-Trans and Biotech & Pharma Logistics ("Frigo-Trans"), an industry-leading, complex healthcare logistics provider based in Germany. The acquisition has increased our complex cold-chain logistics capabilities internationally. As previously disclosed, in the second quarter of 2025, we entered into an agreement to acquire Andlauer Healthcare Group ("AHG"), a leading North American supply chain management company that offers customized third-party logistics and specialized cold chain transportation solutions for the healthcare sector. This acquisition is expected to close in late 2025, subject to customary regulatory reviews and approvals.

Previous wording

Network Reconfiguration and Efficiency Reimagined: Our Network of the Future initiative is intended to enhance our efficiency through automation and operational sort consolidation in our U.S. Domestic network. In connection with our plan for lower volumes from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future and is expected to lead to consolidations of our facilities and workforce as well as an end-to-end process redesign. We launched our Efficiency Reimagined initiatives to undertake the end-to-end process redesign effort which will align our organizational processes to the network reconfiguration. We expect to reduce our operational workforce by 25 million hours and by approximately 20,000 positions during 2025 and close 73 leased and owned buildings by the end of June 2025. We are continuing to review our network and may identify additional buildings for closure. As of March 31, 2025, we continue to evaluate the impact of expected changes in volume on our air network. We anticipate $3.5 billion of total cost savings will be delivered this year from Network Reconfigurationand Efficiency Reimaginedand, through March 31, 2025 we had realized approximately $500 million in cost savings and incurred related costs of $23 million from these initiatives. These initiatives are expected to end in 2027.

Current wording

As previously disclosed, our Network of the Future initiative is intended to enhance the efficiency of our network through automation and operational sort consolidation in our U.S. Domestic network. In connection with our strategic execution of planned volume declines from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future and has led and will continue to lead to consolidations of our facilities and workforce as well as an end-to-end process redesign. We launchedour Efficiency Reimagined initiatives to undertake the end-to-end process redesign effort which will align our organizational processes to the network reconfiguration. In connection therewith, we expect to reduce our operational workforce by approximately 20,000 positions. During the second quarter of 2025, we closed daily operations at 74 leased and owned buildings, 68 of which have been permanently closed. We continue to review expected changes in volume in our integrated air and ground network to identify additional buildings for closure.

Previous wording

In connection with the Network Reconfigurationand Efficiency Reimagined programs described above, we expect to record between $400 and $600 million in expense during 2025, related to early asset retirements, lease related costs, third-party consulting fees and employee separation benefits. We expect the costs associated with these actions may increase should we determine to close additional buildings. It is our intention to sell the property and equipment associated with closed facilities; however, as of the date hereof, we have not yet formalized plans of sale. In addition, we believe that workforce reductions may require a remeasurement of certain U.S. pension and postretirement benefit plan obligations and assets at an interim date. We are not yet able to estimate the timing or potential impact of such an event.

Current wording

In connection with the Network Reconfigurationand Efficiency Reimagined programs, we expect to exclude between $400 and $650 million in non-GAAP adjusted expense during 2025, related primarily to third-party consulting fees, employee separation benefits and certain programmatic expenses. We expect the costs associated with these actions may increase should we determine to close additional buildings. In addition, we believe that workforce reductions may require a remeasurement of certain U.S. pension and postretirement benefit plan obligations and assets during 2025. We are not yet able to estimate the timing of potential impact of such an event. As of June 30, 2025, we have incurred costs related to these programs of $126 million. We have begun to realize the expected benefits from these programs and, as previously disclosed, expect to achieve $3.5 billion in savings from these programs in 2025.

Previous wording

Our global small package operations experienced planned volume decreases during the quarter. Volumes declined in the U.S. due to the planned glide down of volume with our largest customer, partially offset by volume growth in our International business, driven by our domestic and export products. Decreases in package volume were largely offset by growth in revenue per piece. Revenue in our global small package operations increased slightly due to growth in air cargo revenue as we fully onboarded volume under our contract with the U.S. Postal Service ("USPS") during the fourth quarter of 2024.

Current wording

Our financial results for both the second quarter and year-to-date periods of 2025 reflect the impact of a complex macro environment, driven by evolving trade policies, as well as the significant strategic actions we are taking. Our global package operations experienced volume declines during the second quarter and year-to-date periods of 2025 due to our strategic execution of planned volume declines from our largest customer and our revenue quality efforts, partially offset by volume growth in all regions of our International business. Overall declines in package volume in both periods were largely offset by growth in revenue per piece due to pricing actions and changes in customer and product mix. Revenue in our global small package operations during the second quarter and year-to-date periods of 2025 benefited from growth in air cargo revenue as we fully onboarded volume under our contract with the U.S. Postal Service ("USPS") during the fourth quarter of 2024.

Previous wording

Supply Chain Solutions revenue decreased, driven by the impact of the third quarter 2024 divestiture of Coyote, partially offset by growth in our mail services and certain of our digital businesses.

Current wording

Supply Chain Solutions revenue decreased in both the second quarter and year-to-date periods of 2025, driven by the impact of the third quarter 2024 divestiture of Coyote and declines in Mail Innovations, Air and Ocean Forwarding, partially offset by growth in certain of our healthcare and digital businesses.

Previous wording

•Average daily package volume in our global small package operations decreased, driven by planned volume declines from our largest customer, as well as challenging macroeconomic conditions. The overall decrease in the U.S. Domestic Package segment was partially offset by growth in SMBs and commercial shipments in that segment as well as growth in all regions of the International Package segment.

Current wording

•Average daily package volume in our global small package operations decreased in both the quarter and year-to-date periods driven by our strategic execution of planned volume declines from our largest customer and pricing actions taken on certain e-commerce customers, as well as challenging macroeconomic conditions. The overall decreases in the U.S. Domestic Package segment in both the second quarter and year-to-date periods were partially offset by growth in SMB volume; consolidated volume declines were partially offset by growth in all regions of the International Package segment.

Previous wording

•We recorded net income of $1.2 billion and diluted earnings per share of $1.40 in the first quarter of 2025. Non-GAAP adjusted diluted earnings per share for the quarter were $1.49 after adjusting for the after-tax impacts of:

Current wording

•We reported quarterly net income of $1.3 billion and diluted earnings per share of $1.51 ($2.5 billion and $2.91 per share, year to date). Non-GAAP adjusted diluted earnings per share for the quarter were $1.55 ($3.04 per share, year to date) after adjusting for the after-tax impacts of:

Previous wording

◦the reversal of an income tax valuation allowance of $10 million, or $0.01 per diluted share.

Current wording

◦the reversal of an income tax valuation allowance of $13 million, or ($0.02) per diluted share, in the second quarter ($23 million, or ($0.03) per diluted share, year to date); and

Previous wording

◦goodwill and asset impairment charges of $49 million, or $0.05 per diluted share; and

Current wording

◦goodwill and asset impairment charges of $49 million, or $0.06 per diluted share, in the year-to-date period.

Previous wording

We supplement the presentation of operating profit, operating margin, other income and (expense), income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of the following items:

Current wording

We supplement the presentation of operating profit, operating margin, other income and (expense), income before income taxes, net income and earnings per share with non-GAAP financial measures that exclude the impact of the following:

Previous wording

We exclude the impact of charges related to activities within our transformation strategy. Our transformation strategy activities have spanned several years and are designed to fundamentally change the spans and layers of our organization structure, processes, technologies and the composition of our business portfolio. Our transformation strategy includes initiatives within our Transformation 2.0, Fit to Serve, Network Reconfigurationand Efficiency Reimagined programs. Various circumstances from time to time have precipitated these initiatives, including identification and prioritization of investments as a result of executive leadership changes, developments and changes in competitive landscapes, inflationary pressures, consumer behaviors, and other factors including post-COVID normalization and volume diversions attributed to our 2023 labor negotiations.

Current wording

We exclude the impact of charges related to activities within our transformation strategy. Our transformation strategy activities have spanned several years and are designed to fundamentally change the spans and layers of our organization structure, processes, technologies and the composition of our business portfolio. Our transformation strategy includes initiatives within our Transformation 2.0, Fit to Serve, and Network Reconfigurationand Efficiency Reimagined programs. Various circumstances have precipitated these initiatives, including identification and prioritization of investments, developments and changes in competitive landscapes, inflationary pressures, consumer behaviors, and other factors including post-COVID normalization and volume diversions attributed to our 2023 labor negotiations.

Previous wording

Transformation 2.0: Based on a number of factors including evaluating efficiencies previously gained, and in connection with changes in our executive leadership in 2020, we identified and reprioritized certain then-current and future investments, including additional investments in our workforce, portfolio of businesses and technology (such projects, collectively, “Transformation 2.0”). 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. As of March 31, 2025, our remaining efforts under Transformation 2.0 include technology initiatives related to our financial systems. Previously completed initiatives within Transformation 2.0 are described in Supplemental Information - Items Affecting Comparabilityin our Annual Report on Form 10-K for the year ended December 31, 2024. Costs associated with Transformation 2.0 have primarily consisted of compensation and benefit costs related to reductions in our workforce and fees paid to third-party consultants. As of March 31, 2025, we have incurred $814 million of costs as part of Transformation 2.0, with anticipated remaining costs of approximately $75 million primarily related to completion of our technology initiatives. We expect any remaining costs to be incurred during 2025. These technology initiatives are expected to provide enhanced reporting quality for both internal and external purposes in part through simplification and standardization of data to better enable migration into cloud-based tools and automation, including transitioning general ledger, consolidation, and planning tools along with U.S. payroll from older programs and software supporting our freight forwarding business. These efforts are expected to reduce the need for future investments; we expect to realize benefits therefrom beginning during the second quarter of 2025.

Current wording

Transformation 2.0: Based on a number of factors including evaluating efficiencies previously gained, and in connection with changes in 2020, we identified and reprioritized certain then-current and future investments, including additional investments in our workforce, portfolio of businesses and technology (such projects, collectively, "Transformation 2.0"). 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. As of June 30, 2025, our remaining efforts under Transformation 2.0 include technology initiatives related to our financial systems. Previously completed initiatives within Transformation 2.0 are described in Supplemental Information - Items Affecting Comparabilityin our Annual Report on Form 10-K for the year ended December 31, 2024. Costs associated with Transformation 2.0 have primarily consisted of compensation and benefit costs related to reductions in our workforce and fees paid to third-party consultants. As of June 30, 2025, we have incurred $811 million of costs as part of Transformation 2.0, with anticipated remaining costs of approximately $75 million primarily related to completion of our technology initiatives. We expect any remaining costs to be incurred during 2025. These technology initiatives are expected to provide enhanced reporting quality for both internal and external purposes in part through simplification and standardization of data to better enable migration into cloud-based tools and automation, including transitioning general ledger, consolidation, and planning tools along with U.S. payroll from older programs and software supporting our freight forwarding business. These efforts are expected to reduce the need for future investments and we began realizing benefits therefrom during the second quarter of 2025.

Previous wording

Fit to Serve: In 2023, a number of factors, including macroeconomic headwinds and volume diversion resulting from our labor negotiations with the International Brotherhood of Teamsters, contributed to volume declines in our U.S. Domestic Package business. In addition, our International Package and Supply Chain Solutions businesses were also negatively impacted by a number of challenging macroeconomic conditions during 2023. In response to these factors, we undertook our Fit to Serve initiative with the intent to right-size our business to create a more efficient operating model that was more responsive to market dynamics through a workforce reduction of approximately 14,000 positions, primarily within management. As of March 31, 2025, we have incurred total costs of $435 million under Fit to Serve, which primarily consist of benefit costs related to reductions in our workforce. We expect to incur remaining costs of approximately $25 million in 2025 as a part of this initiative, which should be complete in 2025. We have achieved savings of approximately $1.0 billion through this program via reductions in our compensation and benefit expense.

Current wording

Fit to Serve: In 2023, a number of factors, including macroeconomic headwinds and volume diversion resulting from our labor negotiations with the International Brotherhood of Teamsters, contributed to volume declines in our U.S. Domestic Package business. In addition, our International Package and Supply Chain Solutions businesses were also negatively impacted by a number of challenging macroeconomic conditions during 2023. In response to these factors, we undertook our Fit to Serve initiative with the intent to right-size our business to create a more efficient operating model that was more responsive to market dynamics through a workforce reduction of approximately 14,000 positions, primarily within management. As of June 30, 2025, we have incurred total costs of $444 million under Fit to Serve, which primarily consist of benefit costs related to reductions in our workforce. We expect to incur remaining costs of approximately $20 million in 2025 as a part of this initiative, which should be complete in 2025. We have achieved savings of approximately $1.0 billion through this program via reductions in our compensation and benefit expense.

Previous wording

As previously disclosed, our Network of the Future initiative is intended to enhance our efficiency through automation and operational sort consolidation in our U.S. Domestic network. In connection with our plan for lower volumes from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future and is expected to lead to consolidations of our facilities and workforce as well as an end-to-end process redesign. We launched our Efficiency Reimagined initiatives to undertake the end-to-end process redesign effort which will align our organizational processes to the network reconfiguration. We expect to reduce our operational workforce by 25 million hours and by approximately 20,000 positions during 2025 and close 73 leased and owned buildings by the end of June 2025. We are continuing to review our network and may identify additional buildings for closure. As of March 31, 2025, we continue to evaluate the impact of expected changes in volume on our air network. We anticipate $3.5 billion of total cost savings will be delivered this year from Network Reconfigurationand Efficiency Reimaginedand, through March 31, 2025 we had realized approximately $500 million in cost savings and incurred related costs of $23 million from these initiatives. These initiatives are expected to end in 2027.

Current wording

Network Reconfiguration and Efficiency Reimagined: As previously disclosed, our Network of the Future initiative is intended to enhance the efficiency of our network through automation and operational sort consolidation in our U.S. Domestic network. In connection with our strategic execution of planned volume declines from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future and has led and will continue to lead to consolidations of our facilities and workforce as well as an end-to-end process redesign. We launchedour Efficiency Reimagined initiatives to undertake the end-to-end process redesign effort which will align our organizational processes to the network reconfiguration. In connection therewith, we expect to reduce our operational workforce by approximately 20,000 positions. During the second quarter of 2025, we closed daily operations at 74 leased and owned buildings, 68 of which have been permanently closed. We continue to review expected changes in volume in our integrated air and ground network to identify additional buildings for closure.

Previous wording

In connection with the Network Reconfigurationand Efficiency Reimagined programs described above, we expect to record between $400 and $600 million in expense during 2025, related to early asset retirements, lease related costs, third-party consulting fees and employee separation benefits. We expect the costs associated with these actions may increase should we determine to close additional buildings. It is our intention to sell the property and equipment associated with closed facilities; however, as of the date hereof, we have not yet formalized plans of sale. In addition, we believe that workforce reductions may require a remeasurement of certain U.S. pension and postretirement benefit plan obligations and assets at an interim date. We are not yet able to estimate the timing or potential impact of such an event.

Current wording

In connection with the Network Reconfigurationand Efficiency Reimagined programs, we expect to exclude between $400 and $650 million in non-GAAP adjusted expense during 2025, related primarily to third-party consulting fees, employee separation benefits and certain programmatic expenses. We expect the costs associated with these actions may increase should we determine to close additional buildings. In addition, we believe that workforce reductions may require a remeasurement of certain U.S. pension and postretirement benefit plan obligations and assets during 2025. We are not yet able to estimate the timing of potential impact of such an event. As of June 30, 2025, we have incurred costs related to these programs of $126 million. We have begun to realize the expected benefits from these programs and, as previously disclosed, expect to achieve $3.5 billion in savings from these programs in 2025.

Previous wording

We exclude the impact of goodwill and asset impairment charges, including impairments of long-lived assets and equity method investments, which we do not consider when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards. For more information regarding goodwill and asset impairment charges, see note 5 and note 8 to the unaudited, consolidated financial statements.

Current wording

We exclude the impact of goodwill and asset impairment charges, including impairments of certain long-lived assets and equity method investments, which we do not consider when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards. For more information regarding goodwill and asset impairment charges, see note 5 and note 8 to the unaudited, consolidated financial statements.

Previous wording

We exclude the impact of a charge to settle a regulatory matter that we consider to be unrelated to our ongoing operations and that we do not expect to recur. For more information regarding this regulatory matter, see note 10 in our Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

We exclude the impact of a charge to settle a regulatory matter that we consider to be unrelated to our ongoing operations and that we do not expect to recur. For more information regarding this matter, see note 10 in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

We previously recorded non-GAAP adjustments for transactions that resulted in capital loss deferred tax assets not expected to be realized. We now expect a portion of these capital losses to be realized in future periods. We supplement our presentation with non-GAAP measures that exclude the impact of subsequent changes in the valuation allowances against these deferred tax assets as we believe such treatment is consistent with how the valuation allowance was initially established.

Current wording

We previously recorded non-GAAP adjustments for transactions that resulted in capital loss deferred tax assets not expected to be realized. We now expect a portion of these capital losses to be realized in future periods. We supplement our presentation with non-GAAP measures that exclude the impact of subsequent changes in the valuation allowances against these deferred tax assets as we believe such treatment is consistent with how the valuation allowance was initially established. For more information regarding the reversal of this income tax valuation allowance, see note 16 to the unaudited, consolidated financial statements.

Previous wording

Certain operating expenses are allocated between our reporting segments using activity-based costing methods. These activity-based costing methods require us to make estimates that impact the amount of each expense category that is attributed to each segment. Changes in these estimates would directly impact the amount of expense allocated to each segment and therefore the operating profit of each reporting segment. Our allocation methodologies are refined periodically, or as necessary to reflect changes in our businesses.

Current wording

Certain operating expenses are allocated between our reporting segments using activity-based costing methods. These activity-based costing methods require us to make estimates that impact the amount of each expense category that is attributed to each segment. Changes in these estimates would directly impact the amount of expense allocated to each segment and therefore the operating profit of each reporting segment. Our allocation methodologies are refined periodically, or as necessary to reflect changes in our businesses. There were no significant changes to our allocation methodologies in the second quarter of 2025.

Previous wording

As a normal part of managing our air network, we routinely idle aircraft and engines temporarily for maintenance or to adjust network capacity. As a result of the reduction in air volumes, as of March 31, 2025, we had three aircraft temporarily idled for an average period of approximately eight months in order to better match capacity with current demand. Temporarily idled assets are classified as held-and-used, and we continue to record depreciation expense for these assets. We expect these aircraft to return to revenue service during 2025. We continue to evaluate possible retirements within our MD-11 fleet and during the remainder of 2025, we expect to retire three fully depreciated MD-11s from operational service.

Current wording

As a normal part of managing our air network, we routinely idle aircraft and engines temporarily for maintenance or to adjust network capacity. As of June 30, 2025, we had five aircraft temporarily idled for an average period of approximately eight months in order to better match capacity with current demand. Temporarily idled assets are classified as held-and-used, and we continue to record depreciation expense for these assets. We expect these aircraft to return to revenue service during the second half of 2025. During the second quarter of 2025, we retired two fully depreciated MD-11s from operational service. We continue to evaluate possible retirements within our fleet and expect to retire one fully depreciated MD-11 from operational service in the second half of 2025.

Previous wording

Approximately $1.1 billion of our consolidated goodwill balance of $4.7 billion is represented by our Global Freight Forwarding, Roadie and Global Logistics and Distribution reporting units which, based on our annual impairment evaluation, exhibited a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods. During the first quarter of 2025, our Mail Innovations reporting unit experienced cost increases inconsistent with our expectations due to increases in purchased transportation rates which resulted from the expiration of our previous contract with our primary vendor. We are evaluating additional vendors for this business. We are also addressing the revenue quality in the business. Depending on the outcome of these actions, our expectations for the future performance of this reporting unit could be materially affected. Approximately $295 million in goodwill is represented by our Mail Innovations reporting unit. Additionally, Frigo-Trans, which was acquired during the first quarter of 2025, will be reported as part of our Healthcare Logistics and Distribution ("HLD") reporting unit.

Current wording

Approximately $1.2 billion of our consolidated goodwill balance of $4.8 billion is represented by our Global Freight Forwarding, Roadie and Global Logistics and Distribution reporting units which, based on our July 1, 2024 annual impairment evaluation, exhibited a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods. During the first quarter of 2025, our Mail Innovations reporting unit experienced cost increases higher than our expectations due to increases in purchased transportation rates, resulting from the expiration of a contract with our primary vendor. These cost increases began to dissipate in the second quarter of 2025 as we started utilizing alternative vendors. In the second quarter of 2025, we also took action to address the revenue quality in this business, and experienced improvements therein. Depending on the outcome of these actions, our expectations for the future performance of this reporting unit could be materially affected. Approximately $295 million in goodwill is represented by our Mail Innovations reporting unit. Additionally, Frigo-Trans, which was acquired during the first half of 2025, is now reported as part of our Healthcare Logistics and Distribution reporting unit.

Previous wording

We continue to monitor all of our reporting units subsequent to the most recent annual test and, while we do not believe it is more likely than not that our reporting units' fair values are less than their carrying values as of March 31, 2025, challenging macroeconomic and uncertain geopolitical conditions, actual reporting unit performance, revisions to our forecasts of future performance or other factors, including market comparables, may negatively impact certain estimates and assumptions that we use in determining our reporting units' fair values. Such impacts may be more pronounced for reporting units whose fair values do not significantly exceed their carrying values. Any of these factors or a combination thereof could result in an impairment charge in one or more of our reporting units during a future period. We continue to monitor business performance and external factors affecting our reporting units.

Current wording

We continue to monitor all of our reporting units subsequent to the most recent annual test and, while we do not believe it is more likely than not that our reporting units' fair values are less than their carrying values as of June 30, 2025, challenging macroeconomic and uncertain geopolitical conditions, changes in global trade policy, actual reporting unit performance, revisions to our forecasts of future performance or other factors, including market comparables, may negatively impact certain estimates and assumptions that we use in determining our reporting units' fair values. Such impacts may be more pronounced for reporting units whose fair values do not significantly exceed their carrying values. Any of these factors or a combination thereof could result in an impairment charge in one or more of our reporting units during a future period.

Previous wording

Comparative results were impacted by one additional operating day in the first quarter of 2024. The growth in rates / product mix shown above includes the growth we experienced in our air cargo product during the first quarter of 2025, as air cargo under our contract with the USPS was fully onboarded during the fourth quarter of 2024. Air cargo is measured by dimensional weight, not on a per piece basis, and therefore does not impact the volume and revenue per piece discussions below. We expect revenue in the second quarter to be down due to planned volume decreases, partially offset by continued growth in air cargo.

Current wording

Comparative results were impacted by one less operating day in the first half of 2025. The growth in rates and product mix shown above includes the growth we experienced in our air cargo product during both the second quarter and the year-to-date periods in 2025, as air cargo under our contract with the USPS was fully onboarded during the fourth quarter of 2024. Air cargo is measured by dimensional weight, not on a per piece basis, and therefore does not impact the volume and revenue per piece discussions below.

Previous wording

Business-to-consumer volume decreased 7.0%, as a result of the factors discussed above, with declines from both large customers and SMBs, partially offset by continued growth within our Digital Access Program.

Current wording

Average daily volume decreased for both the quarter and year-to-date periods, driven by our strategic execution of planned volume declines from our largest customer and decreases in our Ground Saver product as a result of our pricing actions on certain e-commerce volume, as well as macro dynamics on market demand. As a result, residential and commercial volume decreased for both the quarter and year-to-date periods. Business-to-business volume decreased 2.3% in the quarter (down 0.5% year to date), primarily driven by demand softness within the manufacturing and retail sectors partially offset by continued volume growth from SMBs who leverage our Digital Access Program and growth in returns. Business-to-consumer volume decreased 10.9% in the quarter (down 9.0% year to date), as a result of the factors discussed above, with declines from large customers, partially offset by continued growth in SMB from our Digital Access Program.

Previous wording

Within our Air products, average daily volume decreased 9.5%, driven by the continued execution under the contract terms with our largest customer, partially offset by increased demand from the healthcare and technology sectors.

Current wording

Within our Air products, average daily volume decreased 11.6% in the quarter (down 10.6% year to date), driven by the continued execution under the contract terms with our largest customer, partially offset by increased demand from the healthcare and technology sectors.

Previous wording

Revenue per piece from our Air and Ground products increased. In December 2024, we implemented an average 5.9% net increase in base and accessorial rates for both our Air and Ground products, which favorably impacted revenue per piece.

Current wording

Revenue per piece from both our Air and Ground products increased for both the quarter and year-to-date periods. In December 2024, we implemented an average 5.9% net increase in base and accessorial rates for both our Air and Ground products.

Previous wording

•An increase in compensation and benefits expense which was driven by increased stops associated with insourcing the delivery of our Ground Saver product and the impact of wage rate increases for our union workforce.

Current wording

•Compensation and Benefits for our Air and Ground products increased $222 million for the quarter (up $341 million year to date) primarily driven by increased stops associated with the insourcing of our Ground Saver product and the impact of health and welfare and wage rate increases for our union workforce. This was partially offset by a decrease in management compensation cost due to a reduction in incentive compensation expense.

Previous wording

Our non-GAAP adjusted operating expenses exclude the impact of transformation strategy costs which were $32 and $9 million within the U.S. Domestic Package segment in the first quarter of 2025 and 2024, respectively. Transformation strategy costs reflected within the U.S. Domestic Package segment during both periods were related to our Fit to Serve and Transformation 2.0 programs. The first quarter of 2025 also reflects transformation strategy costs related to our Network Reconfiguration and Efficiency Reimagined programs. Within these programs, we incurred compensation and benefits costs, as well as fees paid to outside professional service providers. See Supplemental Information - Items Affecting Comparability for additional discussion of transformation strategy costs excluded from our non-GAAP financial measures.

Current wording

Our non-GAAP adjusted operating expenses exclude the impact of asset impairment charges of $5 million in the 2024 year-to-date period as well as transformation strategy costs of $66 and $8 million within the U.S. Domestic Package segment in the second quarters of 2025 and 2024, respectively and $98 and $17 million in the 2025 and 2024 year-to-date periods, respectively. Transformation strategy costs reflected within the U.S. Domestic Package segment during the 2025 and 2024 periods relate to our Fit to Serve and Transformation 2.0 programs. These costs in the 2025 periods also include costs related to our Network Reconfiguration and Efficiency Reimagined programs. Within these programs, we incurred compensation and benefits costs, as well as fees paid to outside professional service providers. See Supplemental Information - Items Affecting Comparability for additional discussion of transformation strategy costs excluded from our non-GAAP financial measures.

Previous wording

Cost per piece and non-GAAP adjusted cost per piece both increased 3.7% in the 2025 period. The increase in cost per piece was primarily driven by lower average daily volume, due primarily to the planned volume reductions from our largest customer as discussed above, which were not fully offset by the benefits of our cost saving initiatives. We anticipate cost per piece will show year-over-year growth in the second quarter.

Current wording

Cost per piece increased 6.1% during the second quarter of 2025 (up 4.9% year to date). Non-GAAP adjusted cost per piece increased 5.6% during the second quarter of 2025 (up 4.6% year to date). The increase in cost per piece was primarily driven by increased compensation and benefits costs from Ground Saver volume in addition to lower average daily volume, due primarily to the strategic execution of planned volume declines from our largest customer as discussed above, which were not fully offset by the benefits of our cost saving initiatives.

Previous wording

As a result of the factors described above, total operating profit decreased $78 million for the quarter, with operating margin decreasing 220 basis points to 1.7%. On a non-GAAP adjusted basis, operating profit decreased $120 million for the quarter with non-GAAP adjusted operating margin decreasing 320 basis points to 3.6%. Non-GAAP adjusted operating profit excludes the impact of operating expense adjustments discussed above. The macro environment is highly uncertain due to changing trade policies and tariff uncertainty, the eventual outcomes could result in pressure in some parts of our business.

Current wording

As a result of the factors described above, operating profit decreased $72 million for the quarter (up $74 million year to date), with operating margin decreasing 50 basis points to 6.5% for the quarter (up 20 basis points to 6.6% year to date). Non-GAAP adjusted operating profit decreased $14 million for the quarter (up $150 million year to date), with non-GAAP adjusted operating margin remaining unchanged at 7.0% for the quarter (up 50 basis points to 7.0% year to date). Non-GAAP adjusted operating profit excludes the impact of operating expense adjustments discussed above.

Previous wording

Average daily volume increased for the quarter, driven by increases in both our domestic and export products.

Current wording

Average daily volume increased for both the quarter and year-to-date periods, driven by increases in both our domestic and export products in all regions.

Previous wording

Export premium products increased 10.4% for the quarter driven by Worldwide and Transborder Express products. Worldwide Express product volume increased as a result of accelerated U.S. inbound services in anticipation of tariff changes. Export non-premium product volumes increased 11.5%, primarily driven by Transborder Standard products from retail SMBs.

Current wording

Export premium products increased 7.0% for the quarter (up 8.7% year to date) driven by increases in Worldwide and Transborder Express products. Transborder Express product volume increased driven by European customers in the healthcare industry. Worldwide Express product volume increased as a result of accelerated U.S. inbound services in anticipation of tariff changes. Export non-premium product volumes increased 5.2% for the quarter (up 8.4% year to date), primarily driven by increases in Transborder Standard products from SMBs primarily within the retail sector.

Previous wording

Total revenue per piece decreased 2.6% for the quarter primarily due to non-premium product growth outpacing premium products, decreases in demand related surcharges and unfavorable currency fluctuations. These decreases were partially offset by the impact of base rate increases. Currency had a negative impact of 190 basis points on revenue per piece. Rate changes for shipments originating outside the U.S. are made throughout the year and vary by geographic market.

Current wording

Revenue per piece decreased 1.3% for the quarter (down 2.0% year to date) primarily due to a shift in product mix to Transborder Standard from our Worldwide products and lower demand-related surcharges, partially offset by favorable currency movements during the second quarter. Rate changes for shipments originating outside the U.S. are made throughout the year and vary by geographic market.

Previous wording

Operating expenses increased for the quarter. Pickup and delivery expenses increased $87 million, driven by increased volumes and the impact of the implementation of weekend operations within Europe. Costs of operating our integrated air and ground network increased $40 million primarily due to increased air charters and block hours as we aligned our network to meet higher volume demands. This was partially offset by lower average fuel prices and the impact of currency movements.

Current wording

Operating expenses increased for both the quarter and year-to-date periods. Pickup and delivery expenses increased$152 million (up $239 million year to date), driven by increased volumes and merit compensation increases as well as the impact of the implementation of weekend operations within Europe. Costs of operating our integrated air and ground network increased $48 million (up $87 million year to date) primarily due to increased air charters and block hours as we aligned our network to meet higher volume demands.

Previous wording

Our non-GAAP adjusted operating expenses exclude the impact of activities associated with our transformation strategy, which were $13 and $24 million within the International Package segment in the first quarters of 2025 and 2024, respectively. Transformation strategy costs reflected within the International Package segment during both periods were related to our Fit to Serve program. The first quarter of 2025 also includes transformation strategy costs related to our Efficiency Reimagined program. Within these programs, we incurred compensation and benefits costs, as well as fees paid to outside professional service providers. See Supplemental Information - Items Affecting Comparability for additional discussion of transformation strategy costs excluded from our non-GAAP financial measures.

Current wording

Non-GAAP adjusted operating expenses exclude the impact of a one-time international regulatory matter of $88 million in the second quarter and year-to-date periods of 2024 and a $2 million asset impairment charge in the year-to-date period of 2024. Additionally, non-GAAP adjusted operating expenses exclude activities associated with our transformation strategy, which were $10 and $18 million in the second quarters of 2025 and 2024, respectively, and $23 and $42 million in the 2025 and 2024 year-to-date periods, respectively. Transformation strategy costs reflected within the International Package segment during both periods were related to our Fit to Serve and our Efficiency Reimagined programs. Within these programs, we incurred compensation and benefits costs, as well as fees paid to outside professional service providers. See Supplemental Information - Items Affecting Comparability for additional discussion of transformation strategy costs excluded from our non-GAAP adjusted financial measures.

Previous wording

As a result of the factors described above, operating profit decreased $15 million for the quarter, with operating margin decreasing 70 basis points to 14.7%. Non-GAAP adjusted operating profit decreased $28 million and non-GAAP adjusted operating margin decreased 100 basis points to 15.0%.

Current wording

As a result of the factors described above, operating profit decreased $46 million for the quarter ($61 million year to date), with operating margin decreasing 140 basis points to 15.0% (down 110 basis points to 14.8% year to date). Non-GAAP adjusted operating profit decreased $142 million for the quarter ($170 million year to date) and non-GAAP adjusted operating margin decreased 370 basis points to 15.2% (down 240 basis points to 15.1% year to date).

Previous wording

Revenue from our other businesses within Supply Chain Solutions increased $53 million for the quarter. This was primarily driven by growth in our digital businesses, including a $38 million increase driven by volume growth at Roadie.

Current wording

Revenue from our other businesses within Supply Chain Solutions increased $59 million for the quarter (up $112 million year to date) primarily driven by growth in our digital businesses, which increased $61 million for the quarter (up $109 million year to date) primarily driven by volume growth from Roadie as well as UPS Capital.

Previous wording

Total operating expenses and non-GAAP adjusted operating expenses within Supply Chain Solutions decreased for the quarter for the reasons described below.

Current wording

Total operating expenses and non-GAAP adjusted operating expenses within Supply Chain Solutions decreased for the quarter and year-to-date periods for the reasons described below. Non-GAAP adjusted operating expenses within our Forwarding, Logistics and other Supply Chain Solutions businesses exclude expenses related to financial systems and other projects undertaken as part of our transformation strategy as shown in the table above.

Previous wording

Expenses in our other Supply Chain Solutions businesses increased $20 million for the quarter and, on a non-GAAP adjusted basis, increased $21 million for the quarter. Within our digital businesses, operating expenses increased $21 million primarily driven by volume growth at Roadie. In the first quarter of 2025, non-GAAP adjusted operating expense in our other Supply Chain Solutions businesses excluded $39 million related to the impairment of certain assets related to a business within UPS Digital. In the first quarter of 2024, non-GAAP adjusted operating expense in these businesses excluded a $40 million impact related to a regulatory matter.

Current wording

Operating expenses and non-GAAP adjusted operating expenses in our other Supply Chain Solutions businesses increased $3 and $28 million, respectively, for the quarter (up $23 and $49 million, year to date, respectively). Within our digital businesses, operating expenses increased $39 million during the quarter and $52 million, year to date, primarily due to volume growth at Roadie. During the second quarter, non-GAAP adjusted operating expenses in our other Supply Chain Solutions businesses exclude a $20 million gain on divestiture and year to date non-GAAP adjusted operating expenses exclude a $39 million impairment charge, both related to a business within UPS Digital. Non-GAAP adjusted operating expenses in these businesses in the prior year periods exclude a $5 and $45 million expense related to a regulatory matter in the 2024 second quarter and year-to-date periods, respectively.