UNITED PARCEL SERVICE INC
For the period ended Jun 30, 2025. Filed Aug 6, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 6, 2025
Extracted filing text, with the paragraph anchors used by the comparison.
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Consolidated Operating Expenses
| Three Months Ended June 30, · Change · Six Months Ended June 30, · Change | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2025 · 2024 · $ · % · 2025 · 2024 · $ · % | ||||||||||
| Operating Expenses (in millions): | ||||||||||
| Compensation and benefits | $11,626 | $11,503 | $123 | 1.1% | $23,453 | $23,142 | $311 | 1.3% | ||
| Transformation Strategy Costs | (50) | (20) | (30) | 150.0% | (74) | (51) | (23) | 45.1% | ||
| Non-GAAP Adjusted Compensation and Benefits | $11,576 | $11,483 | $93 | 0.8% | $23,379 | $23,091 | $288 | 1.2% | ||
| Repairs and maintenance | $755 | $734 | $21 | 2.9% | $1,487 | $1,452 | $35 | 2.4% | ||
| Depreciation and amortization | 936 | 887 | 49 | 5.5% | 1,848 | 1,785 | 63 | 3.5% | ||
| Purchased transportation | 2,522 | 3,273 | (751) | (22.9)% | 5,252 | 6,519 | (1,267) | (19.4)% | ||
| Fuel | 1,058 | 1,126 | (68) | (6.0)% | 2,116 | 2,186 | (70) | (3.2)% | ||
| Other occupancy | 544 | 492 | 52 | 10.6% | 1,151 | 1,056 | 95 | 9.0% | ||
| Other expenses | 1,958 | 1,859 | 99 | 5.3% | 3,972 | 3,827 | 145 | 3.8% | ||
| Total Other Expenses | 7,773 | 8,371 | (598) | (7.1)% | 15,826 | 16,825 | (999) | (5.9)% | ||
| Gain on Divestiture | 20 | — | 20 | N/A | 20 | — | 20 | N/A | ||
| Transformation Strategy Costs | (24) | (7) | (17) | 242.9% | (58) | (22) | (36) | 163.6% | ||
| Goodwill and Asset Impairment Charges | — | — | — | N/A | (39) | (48) | 9 | (18.8)% | ||
| Expense for Regulatory Matter | — | (5) | 5 | (100.0)% | — | (45) | 45 | (100.0)% | ||
| One-Time Payment for International Regulatory Matter | — | (88) | 88 | (100.0)% | — | (88) | 88 | (100.0)% | ||
| Non-GAAP Adjusted Total Other Expenses | $7,769 | $8,271 | $(502) | (6.1)% | $15,749 | $16,622 | (873) | (5.3)% | ||
| Total Operating Expenses | $19,399 | $19,874 | $(475) | (2.4)% | $39,279 | $39,967 | $(688) | (1.7)% | ||
| Non-GAAP Adjusted Total Operating Expenses | $19,345 | $19,754 | $(409) | (2.1)% | $39,128 | $39,713 | $(585) | (1.5)% | ||
| Currency (Benefit) / Cost - (in millions)(1) | $86 | $(45) | ||||||||
(1) Amount represents the change in currency translation compared to the prior year.
| Three Months Ended June 30, · Change · Six Months Ended June 30, · Change | ||||||
|---|---|---|---|---|---|---|
| 2025 | 2024 | $ | 2025 | 2024 | $ | |
| Non-GAAP Adjustments to Operating Expenses (in millions): | ||||||
| Transformation Strategy Costs: | ||||||
| Compensation | $4 | $8 | $(4) | $7 | $13 | $(6) |
| Benefits | 46 | 12 | 34 | 67 | 38 | 29 |
| Other expenses | 24 | 7 | 17 | 58 | 22 | 36 |
| Total Transformation Strategy Costs | 74 | 27 | 47 | $132 | $73 | $59 |
| Gain on Divestiture | ||||||
| Other expenses | $(20) | — | (20) | $(20) | $— | $(20) |
| Total Gain on Divestiture | (20) | — | (20) | (20) | — | (20) |
| Expense for Regulatory Matter | ||||||
| Other expenses | $— | 5 | (5) | $— | $45 | $(45) |
| Total Expense for Regulatory Matter | — | 5 | (5) | — | 45 | (45) |
| One-Time Payment for International Regulatory Matter | ||||||
| Other expenses | $— | 88 | (88) | $— | $88 | $(88) |
| Total One-Time Payment for International Regulatory Matter | — | 88 | (88) | — | 88 | (88) |
| Goodwill and Asset Impairment Charges | ||||||
| Other expenses | $— | — | — | $39 | $48 | $(9) |
| Total Asset Impairment Charges | — | — | — | 39 | 48 | (9) |
| Total Non-GAAP Adjustments to Operating Expenses | $54 | $120 | $(66) | $151 | $254 | $(103) |
Compensation and Benefits
Total compensation expense and non-GAAP adjusted total compensation expense increased for both the quarter and year-to-date periods. Compensation costs increased $50 million for the quarter (up $285 million year to date) and, on a non-GAAP adjusted basis, increased $56 million for the quarter (up $292 million year to date). The principal factors contributing to the overall increases were:
Direct labor costs increased $188 million for the quarter (up $462 million year to date). Additional stops resulting from insourcing our Ground Saver product increased direct labor costs by $229 million for the quarter ($527 million increase year to date). Wage rate growth was responsible for $128 million of the cost increase ($260 million increase year to date) driven by increased seniority within our union workforce, contractual wage rate increases for our U.S. union workforce and higher overtime. International labor cost increased $29 million for the quarter (up $42 million year to date) due to merit compensation increases and the implementation of weekend operations within Europe. Other payroll costs for flight operations increased $35 million for the quarter due to increased activity (up $75 million year to date). These increases were partially offset by the impact of decreases in volume, which reduced direct labor expense by $228 million for the quarter (down $427 million year to date). Further expected growth in compensation expense is expected to be partially offset by the anticipated impact from workforce reductions as we execute on our Network Reconfiguration and Efficiency Reimagined initiatives.
Indirect labor costs increased $23 million for the quarter (up $13 million year to date) due to higher administrative and overtime costs.
Management compensation costs decreased $162 million for the quarter (down $191 million year to date) due to lower overall headcount and a reduction in incentive compensation expense.
Benefits costs increased $73 million for the quarter (up $26 million year to date) and on a non-GAAP adjusted basis increased $37 million (down $4 million year to date). The principal factors driving these changes were:
Health and welfare costs increased $47 million for the quarter (up $65 million year to date), driven by increased contributions to multiemployer plans as a result of contractually-mandated rate increases.
Other employee benefits expense increased $47 million for the quarter (up $41 million year to date) due to higher separation costs as we continue to right-size our business.
Accruals for paid time off, payroll taxes and other costs increased $22 million for the quarter (up $45 million year to date) primarily due to the impact of insourcing our Ground Saver product and higher wages.
Workers' compensation expense increased $12 million for the quarter (up $10 million year to date) due to less favorable developments in prior year claims partially offset by the impact from a reduction in overall hours worked.
Pension and other postretirement benefits costs decreased $56 million for the quarter (down $137 million year to date). These reductions were driven by the impact of demographic updates and workforce reductions, a decrease in the cost of company-sponsored defined benefit plans driven by lower service cost resulting from higher discount rates, and decreased expense for multiemployer plans.
Non-GAAP adjusted operating expenses in the second quarter and year-to-date periods of 2025 and 2024 exclude the impact of costs incurred under our transformation strategy programs, Fit to Serve, Transformation 2.0 and Network Reconfiguration and Efficiency Reimagined initiatives, and primarily consisted of other employee benefits expense and related payroll tax expense. Compensation and benefits expenses under these programs during the second quarter of 2025 were $50 million ($74 million year to date), an increase of $30 million for the quarter (up $23 million year to date) as compared to the same period of 2024. See Supplemental Information - Items Affecting Comparability for additional discussion of items excluded from our non-GAAP financial measures.
Repairs and Maintenance
Repairs and maintenance cost increased in both the second quarter and year-to-date periods due to increased ground network usage and an increase in parts and labor for aircraft.
Depreciation and Amortization
Depreciation and amortization expense increased in both the second quarter and year-to-date periods due to capital asset additions and building closures during the second quarter of 2025 which shortened useful lives and accelerated depreciation.
Purchased Transportation
Third-party transportation expense charged to us by air, ocean and ground carriers decreased $751 million for the quarter (down $1.3 billion year to date). The changes were primarily driven by:
Ground transportation decreased $623 million for the quarter (down $1.1 billion year to date) primarily due to the divestiture of Coyote in 2024 and the impact of insourcing our Ground Saver Product, as well as lower overall volume.
Third-party fuel surcharges decreased $91 million for the quarter (down $182 million year to date) primarily due to the divestiture of Coyote.
Rail transportation decreased $30 million for the quarter (down $49 million year to date) primarily due to lower volume.
Fuel Expense
The decrease in fuel expense for both the quarter and year-to-date periods was mainly attributable to lower prices for jet fuel, diesel and gasoline, partially offset by the impact of increases in flight activity. Market prices and the manner in which we purchase fuel influence our costs. The majority of our fuel purchases utilize index-based pricing formulas plus or minus a fixed locational/supplier differential. While many of the indices are correlated, each index may respond differently to changes in underlying prices, which in turn can drive variability in our costs.
Other Occupancy
Other occupancy expense increased $52 million for the quarter (up $95 million year to date) due to an increase in electrical and power utilities, rent expense, other occupancy related expenses such as taxes and permits and weather-related costs.
Other Expenses
Other expenses increased $99 million for the quarter (up $145 million year to date), and on a non-GAAP adjusted basis, increased $195 million for the quarter (up $271 million year to date). The principal factors contributing to the increases were:
Auto liability insurance costs increased $43 million for the quarter (up $85 million year to date) driven by the unfavorable development of old claims.
Technology expense increased $28 million for the quarter (up $42 million year to date) due to higher software costs and rental costs for tech equipment.
Third-party consulting expense increased $27 million for the quarter (up $78 million year to date) primarily driven by cost associated with our transformation initiatives.
Commissions paid increased $14 million for the quarter (up $62 million year to date) primarily due to growth in our Digital Access Program.
These increases were offset by $28 million in gains from asset disposals for the quarter ($118 million year to date) compared to immaterial impacts in the 2024 periods.
Non-GAAP adjusted operating expenses exclude the impact of:
In the second quarter and year-to-date 2024 periods, we incurred $88 million of international regulatory expense. We did not have any similar expenses in 2025.
In the 2025 year-to-date period we recognized expense of $39 million related to the write down in the value of certain assets within our UPS Digital business. A gain of $20 million from the divestiture of the same business was recognized in the second quarter of 2025. In the first quarter of 2024 we recognized expense of $48 million related to the impairment of trade names and software.
Transformation strategy costs of $24 million for the quarter ($58 million year to date), an increase of $17 million for the quarter ($36 million year to date) as a result of additional third-party consulting costs associated with our transformation initiatives.
In the second quarter and year-to-date 2024 periods, we incurred expenses of $5 and $45 million, respectively, related to a regulatory matter. We did not have any similar expenses in 2025.
We expect to incur additional other expenses under our Fit to Serve, Transformation 2.0, Network Reconfigurationand Efficiency Reimagined programs during the remainder of 2025. See Supplemental Information - Items Affecting Comparability for additional discussion on the types, amounts and timing thereof.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.