UNITED PARCEL SERVICE INC
For the period ended Jun 30, 2026. Filed Aug 5, 2026.
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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, 2026 · Filed Aug 5, 2026
Extracted filing text, with the paragraph anchors used by the comparison.
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Consolidated Operating Expenses
The following table sets forth our consolidated operating expense for the three and six months ended June 30, 2026 and 2025, respectively (in millions):
| Three Months Ended June 30, · Change · Six Months Ended June 30, · Change | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2026 · 2025 · $ · % · 2026 · 2025 · $ · % | ||||||||||
| Operating Expenses (in millions): | ||||||||||
| Compensation and benefits | $12,654 | $11,626 | $1,028 | 8.8% | $24,199 | $23,453 | $746 | 3.2% | ||
| Transformation Strategy Costs | (1,117) | (50) | (1,067) | (1,148) | (74) | (1,074) | ||||
| Non-GAAP Adjusted Compensation and Benefits | $11,537 | $11,576 | $(39) | (0.3)% | $23,051 | $23,379 | $(328) | (1.4)% | ||
| Repairs and maintenance | $789 | $755 | $34 | 4.5% | $1,581 | $1,487 | $94 | 6.3% | ||
| Depreciation and amortization | 980 | 936 | 44 | 4.7% | 1,965 | 1,848 | 117 | 6.3% | ||
| Purchased transportation | 3,187 | 2,522 | 665 | 26.4% | 5,951 | 5,252 | 699 | 13.3% | ||
| Fuel | 1,697 | 1,058 | 639 | 60.4% | 2,780 | 2,116 | 664 | 31.4% | ||
| Other occupancy | 557 | 544 | 13 | 2.4% | 1,231 | 1,151 | 80 | 7.0% | ||
| Other expenses | 2,040 | 1,958 | 82 | 4.2% | 4,132 | 3,972 | 160 | 4.0% | ||
| Total Other Expenses | 9,250 | 7,773 | 1,477 | 19.0% | 17,640 | 15,826 | 1,814 | 11.5% | ||
| Transformation Strategy Costs | (55) | (24) | (31) | 129.2% | (79) | (58) | (21) | 36.2% | ||
| Net (Loss) Gain on Divestiture | — | 20 | (20) | (100.0)% | — | (19) | 19 | (100.0)% | ||
| Non-GAAP Adjusted Total Other Expenses | $9,195 | $7,769 | $1,426 | 18.4% | $17,561 | $15,749 | $1,812 | 11.5% | ||
| Total Operating Expenses | $21,904 | $19,399 | $2,505 | 12.9% | $41,839 | $39,279 | $2,560 | 6.5% | ||
| Non-GAAP Adjusted Total Operating Expenses | $20,732 | $19,345 | $1,387 | 7.2% | $40,612 | $39,128 | $1,484 | 3.8% | ||
| Currency (Benefit) / Cost - (in millions)(1) | $81 | $283 | ||||||||
(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 | ||||||
|---|---|---|---|---|---|---|
| 2026 | 2025 | $ | 2026 | 2025 | $ | |
| Non-GAAP Adjustments to Operating Expenses (in millions): | ||||||
| Transformation Strategy Costs: | ||||||
| Compensation | $— | $4 | $(4) | $— | $7 | $(7) |
| Benefits | 1,117 | 46 | 1,071 | 1,148 | 67 | 1,081 |
| Other expenses | 55 | 24 | 31 | 79 | 58 | 21 |
| Total Transformation Strategy Costs | $1,172 | $74 | $1,098 | $1,227 | $132 | $1,095 |
| Other expenses: | ||||||
| Net Loss (Gain) on Divestiture | — | (20) | 20 | — | 19 | (19) |
| Total Non-GAAP Adjustments to Operating Expenses | $1,172 | $54 | $1,118 | $1,227 | $151 | $1,076 |
Compensation and Benefits
Compensation expense increased $64 million for the quarter (down $183 million year to date). The principal factors contributing to the changes were:
Management compensation costs increased $188 million for the quarter (up $145 million year to date), primarily due to an increase in incentive compensation, partially offset by lower overall headcount as we continue to execute our transformation strategy. For additional information on our transformation strategy, see note 16 to the unaudited, consolidated financial statements.
Direct labor costs decreased $98 million for the quarter (down $308 million year to date). The impact of volume declines as well as a decline in total stops from outsourcing our Ground Saver product decreased direct labor costs by $267 million for the quarter (down $690 million year to date). These decreases were partially offset by an increase of $129 million for the quarter (up $415 million year to date) in wage rate growth driven by increased seniority and contractual wage rate increases, and excess operational staffing in the first quarter of 2026 associated with outsourcing our Ground Saver product.
Benefits costs increased $965 million for the quarter (up $930 million year to date). Employee benefits increased $987 million for the quarter (up $999 million year to date) primarily from separation costs associated with the Driver Choice Program. Multiemployer pension and other postretirement benefits costs, paid time off, payroll taxes, health and welfare and other costs decreased $38 million for the quarter (down $152 million year to date) primarily due to headcount reductions. Workers' compensation expense increased $16 million for the quarter (up $83 million year to date) due to an increase in current year claim costs and less favorable development in prior year claims, partially offset by a reduction in overall hours worked.
Non-GAAP adjusted operating expenses for the quarter and year-to-date periods of both 2026 and 2025 exclude the impact of costs incurred under our Transformation 2.0, Fit to Serve and Network Reconfiguration and Efficiency Reimagined initiatives, and primarily consisted of employee benefits expense and related payroll tax expense. Compensation and benefits expenses under these initiatives were $1.1 billion and $50 million in the second quarters of 2026 and 2025, respectively, and $1.1 billion and $74 million in the 2026 and 2025 year to date periods, respectively. See Supplemental Information - Items Affecting Comparability for additional discussion of items excluded from our non-GAAP financial measures.
Repairs and Maintenance
Repairs and maintenance costs increased in both the quarter and year-to-date periods due to an increase in aircraft maintenance costs and higher routine repair expenses for buildings and facilities.
Depreciation and Amortization
Depreciation and amortization expense increased in both the quarter and year-to-date periods due to capital asset additions and building closures associated with our transformation initiatives, as well as additional amortization related to software investments and the acquisition of AHG in the fourth quarter of 2025.
Purchased Transportation
Third-party transportation expense charged to us by air, ocean and ground carriers increased $665 million for the quarter (up $699 million year to date). The changes were primarily driven by:
Ground transportation expense increased $362 million for the quarter (up $338 million year to date) primarily due to an increase in fees paid to the USPS associated with outsourcing our Ground Saver product and increases in expense related to our digital businesses due to overall growth, partially offset by the impact of the decline in volume in Mail Innovations.
Air carrier expense increased $175 million for the quarter (up $253 million year to date) from additional leased aircraft expense to address temporary capacity constraints resulting from fourth quarter 2025 aircraft retirements and additional charter utilization associated with network disruptions from the Middle East conflict.
Third-party fuel surcharge expense increased $86 million for the quarter (up $80 million year to date) primarily due to fuel surcharges charged to us as a result of the Middle East conflict.
Fuel Expense
Fuel expense increased $639 million for the quarter (up $664 million year to date) mainly attributable to higher prices for jet fuel, diesel and gasoline due to the Middle East conflict, partially offset by the impact of lower volumes.
Other Occupancy
Other occupancy expense increased $13 million for the quarter (up $80 million year to date) primarily due to new lease expenses, including leases acquired in the AHG acquisition, an increase in the number and costs of weather-related events, and an increase in property taxes.
Other Expenses
Other expenses increased $82 million for the quarter (up $160 million year to date). The increase was primarily driven by growth in DAP, which increased expenses by $53 million for the quarter (up $92 million year to date). Technology expense increased $42 million for the quarter (up $69 million year to date) due to additional software costs and application fees. Third-party consulting expense increased $36 million for the quarter (up $10 million year to date) in support of Efficiency Reimagined. Credit losses was relatively flat for the quarter and up $25 million year to date as a result of changes in the composition of our accounts receivable. These increases were partially offset by higher gains on sales of properties and aircraft parts of $52 million for the quarter (up $104 million year to date).
In 2026, non-GAAP adjusted operating expenses exclude transformation strategy costs, consisting of fees paid to outside professional service providers. In 2025, non-GAAP adjusted operating expenses exclude the divestiture of a business within SCS and transformation strategy costs for fees paid to outside professional service providers.
We expect to incur additional other expenses under our Network Reconfigurationand Efficiency Reimagined programs during the remainder of 2026. See Supplemental Information - Items Affecting Comparability for additional discussion on the types, amounts and timing thereof.
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