UNITED PARCEL SERVICE INC

Previous wording

In the first half of 2026, we also advanced a number of initiatives that drove growth in healthcare and international markets, including the integration of Andlauer Healthcare Group ("AHG"), which expanded our healthcare logistics network and capabilities, and investments in temperature-controlled cross-dock facilities. Internationally, we expanded our hub in Incheon, South Korea, opened a logistics center in Taiwan and implemented initiatives to improve ground transit times in Europe.

Current wording

During the third quarter and the first nine months of 2026, we took several steps in furtherance of our Customer First, People Led and Innovation Driven strategy to grow in the most attractive parts of the market including healthcare, small and medium-sized businesses ("SMBs") and international. We continued to invest in our healthcare and international markets, including through the integration of Andlauer Healthcare Group ("AHG"), which we acquired in the fourth quarter of 2025 and which has expanded our healthcare logistics network and capabilities, and investments in temperature-controlled cross-dock facilities. We also expanded our hub in Incheon, South Korea, opened a new air hub in the Philippines and a new logistics center in Taiwan, and implemented initiatives to improve ground transit times in Europe.

Previous wording

During the second quarter of 2026, we took several steps in furtherance of our Customer First, People Led and Innovation Driven strategy to grow in the most attractive parts of the market including healthcare, small and medium-sized businesses ("SMBs") and international. This included completing the planned reduction of volume from our largest customer, as previously announced, in which we reduced their volume by more than 50% from 2024 levels. We also continued our focus on revenue quality and made progress on previously announced initiatives related to workforce optimization, network capacity actions and the outsourcing of last-mile delivery of a portion of our Ground Saver product to the United States Postal Service ("USPS").

Current wording

We reached important milestones in our network and operating transformation efforts, including the second quarter completion of the planned reduction of volume from our largest customer, in which we reduced their volume by more than 50% from 2024 levels. We also continued our focus on revenue quality, and made progress on previously announced initiatives related to workforce optimization, network capacity and last-mile delivery outsourcing of a portion of our Ground Saver product to the United States Postal Service ("USPS").

Previous wording

We also advanced our Network of the Future initiative, which is intended to enhance the efficiency of our U.S. Domestic Package network through automation and operational sort consolidation. Our related Network Reconfiguration initiative expanded our Network of the Future initiative, and has led, and will continue to lead, to further consolidations in facilities, vehicles, aircraft 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. As a part of these initiatives, in the first half of 2026, we closed 45 leased and owned buildings, 44 of which have been permanently closed, and recorded approximately $1.1 billion in separation costs related to our previously announced voluntary separation program, the Driver Choice Program. See Supplemental Information - Items Affecting Comparabilityfor additional discussion of this initiative.

Current wording

In addition, our Network of the Future initiative is enhancing the efficiency of our U.S. Domestic Package network through automation and operational sort consolidation. Our related Network Reconfiguration initiative has expanded our Network of the Future initiative and allowed us to further consolidate facilities, vehicles, aircraft and workforce, as well as execute an end-to-end process redesign through our Efficiency Reimagined initiative. Through these initiatives, in the first nine months of 2026, we closed 47 leased or owned buildings, 46 of which have been permanently closed, and recorded approximately $1.2 billion in separation costs related to our previously announced voluntary separation program, the Driver Choice Program. See Supplemental Information - Items Affecting Comparabilityfor additional discussion.

Previous wording

Our financial results for the three and six months ended June 30, 2026 reflected the impact of a complex macroeconomic environment, including evolving trade policies, higher fuel and network costs arising from the Middle East conflict, as well as the impact of our strategic actions described above.

Current wording

Our financial results for the three and nine months ended September 30, 2026 reflected the impact of a complex macroeconomic environment, including evolving trade policies, fuel price impacts and network costs arising from the Middle East conflict, as well as the successful execution of our strategic and transformation initiatives described above. Taking these factors into account, in the three months ended September 30, 2026, revenue and operating profit grew, and in the nine months ended September 30, 2026, revenue grew, in our global small package operations.

Previous wording

In February 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). UPS has filed and received U.S. Customs and Border Protection ("CBP") approval for approximately $500 million of IEEPA tariffs paid for entries eligible for refund. For additional information on tariffs, see note 10 to the unaudited, consolidated financial statements included in this report.

Current wording

In February 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). Under the first phase of the U.S. Customs and Border Protection ("CBP") administrative refund process, UPS received approximately $500 million of IEEPA tariffs paid for entries eligible for refund. As of September 30, 2026, approximately $270 million of these refunds had not yet been passed through to our customers and was included in Other current liabilities in our consolidated balance sheet. For additional information on tariffs, see note 10 to the unaudited consolidated financial statements.

Previous wording

Highlights of our consolidated results compared to our results for the three and six months ended June 30, 2026 and 2025, which are discussed in more detail below, include:

Current wording

Highlights of our consolidated results for the three and nine months ended September 30, 2026 and 2025, which are discussed in more detail below, include:

Previous wording

•All of our segments contributed to revenue growth during the quarter and year-to-date periods of 2026.

Current wording

•All of our segments grew revenue during the quarter and year-to-date periods of 2026.

Previous wording

•Revenue increased in both the quarter and year-to-date periods due to higher fuel surcharge revenue, benefits from our focus on revenue quality and higher yielding volume, as well as the impact of the AHG acquisition in the fourth quarter of 2025, partially offset by lower revenue associated with average daily volume declines and decreases in our Mail Innovations volume.

Current wording

•Revenue increased in the quarter and year-to-date periods due to higher fuel surcharge revenue, benefits from our focus on revenue quality and higher-yielding volume, and revenue from the acquisition of AHG and additional healthcare growth, partially offset by lower revenue associated with our planned average daily volume declines. The year-to-date period was impacted by volume decreases in Mail Innovations.

Previous wording

•Average daily package volume in our global small package operations decreased in both the quarter and year-to-date periods primarily due to planned reduction in volume from our largest customer, revenue quality actions, including those affecting certain e-commerce customers, and the impact of trade policy changes on certain international trade lanes. These declines were partially offset by continued growth from SMBs who leveraged our Digital Access Program ("DAP").

Current wording

•Average daily package volume in our global small package operations decreased in both the quarter and year-to-date periods primarily due to the planned volume reduction from our largest customer, revenue quality actions affecting certain other e-commerce customers, and the impact of trade policy changes on certain international trade lanes. These declines were partially offset by continued average daily package volume growth from SMBs who leveraged our Digital Access Program ("DAP").

Previous wording

•Operating expenses increased during the quarter and year-to-date periods, primarily due to employee separation costs related to the Driver Choice Program and excess operational staffing in the first quarter of 2026 associated with outsourcing our Ground Saver product. Expenses also increased due to higher purchased transportation costs and higher costs for third-party aircraft, including lease expense incurred to address capacity constraints following the permanent grounding and retirement of our MD-11 fleet in the fourth quarter of 2025. Additionally, higher fuel costs and charter utilization expenses associated with network disruptions resulting from the Middle East conflict contributed to the increase. These increases were partially offset by benefits achieved as we executed our Network Reconfiguration and Efficiency Reimagined initiatives, as well as gains on sales of properties and aircraft parts.

Current wording

•Operating expenses increased during the quarter and year-to-date periods, primarily due to higher purchased transportation and fuel costs, higher costs for third-party aircraft leases, net of vendor recoveries, incurred to address capacity constraints following the permanent grounding and retirement of our MD-11 fleet in the fourth quarter of 2025, and charter utilization expenses associated with network disruptions resulting from the Middle East conflict. Employee separation costs related to the Driver Choice Program, mainly incurred in the second quarter, and additional labor costs in the first quarter of 2026 associated with outsourcing our Ground Saver product, also drove the year-to-date increases. The current period was also impacted by a goodwill impairment charge within our Healthcare Logistics and Distribution ("HLD") reporting unit and a prior year gain from sale-leaseback transactions that did not recur in 2026. These increases were partially offset by benefits achieved from the execution of our Network Reconfiguration and Efficiency Reimagined initiatives, as well as gains on sales of real estate and aircraft parts.

Previous wording

•As a result of the factors described above, consolidated operating profit and operating margin decreased $892 million for the quarter ($1.3 billion year to date), with operating margin decreasing 450 basis points to 4.1% (down 320 basis points to 5.0% year to date).

Current wording

•As a result of the factors described above, consolidated operating profit decreased $60 million for the quarter (down $1.4 billion year to date), with operating margin decreasing 80 basis points to 7.6% (down 230 basis points to 5.9%, year to date).

Previous wording

•We reported second quarter 2026 net income of $604 million and diluted earnings per share of $0.71 ($1.5 billion and $1.73 per diluted share, year to date). Non-GAAP adjusted diluted earnings per share for the second quarter of 2026 were $1.76 ($2.82 per diluted share, year to date) after adjusting for the after-tax impacts of:

Current wording

•Third quarter net income was $1.2 billion and diluted earnings per share were $1.37 ($2.6 billion and $3.09 per diluted share, year to date). Non-GAAP adjusted diluted earnings per share for the third quarter were $1.69 ($4.52 per diluted share, year to date) after adjusting for the after-tax impacts of:

Previous wording

◦Transformation strategy costs of $891 million, or $1.05 per diluted share, in the second quarter ($933 million, or $1.09 per diluted share, year to date), primarily from employee separation costs related to the Driver Choice Program. For additional information, see note 16 of the unaudited, consolidated financial statements.

Current wording

◦Transformation Strategy Costs of $130 million, or $0.15 per diluted share, in the third quarter ($1.1 billion, or $1.26 per diluted share, year to date), primarily from employee separation costs related to the Driver Choice Program. For additional information, see note 16 to the unaudited consolidated financial statements.

Previous wording

•We also returned $2.7 billion of cash to shareowners through dividends during the first half of 2026.

Current wording

•We also returned $4.1 billion of cash to shareowners through dividends during the first nine months of 2026.

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 financial measures that exclude the impact of the following:

Current wording

We supplement the presentation of operating profit, operating margin, other income (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

Network Reconfiguration and Efficiency Reimagined: 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 Package 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 further reductions in our facilities, vehicles, aircraft 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 and enhance our business performance and profitability beyond ordinary ongoing efforts. Through these initiatives we have reduced our operational workforce and closed certain daily operations at leased and owned buildings. In the first half of 2026, we closed 45 leased and owned buildings, 44 of which have been permanently closed. In the first six months of 2026, we achieved approximately $1.2 billion of program benefits from these initiatives. We expect to achieve approximately $3 billion in full year 2026 benefits from these initiatives.

Current wording

Network Reconfiguration and Efficiency Reimagined: Our Network of the Future initiative is enhancing the efficiency of our U.S. Domestic Package network through automation and operational sort consolidation. In connection with our strategic execution of planned volume declines from our largest customer, we began our Network Reconfiguration initiative in the fourth quarter of 2024, which was an expansion of Network of the Future and under which we are further consolidating facilities, vehicles, aircraft and our workforce, as well as, executing an end-to-end process redesign through our Efficiency Reimagined initiative. Through these initiatives, in the first nine months of 2026, we closed 47 leased or owned buildings, 46 of which have been permanently closed and achieved approximately $1.8 billion of program benefits. We expect to achieve nearly $3 billion in full year 2026 benefits from these initiatives.

Previous wording

As a part of these initiatives, we expect non-GAAP adjusted operating expense to exclude between $1.3 and $1.5 billion in cost during the full year 2026, primarily related to employee separation costs and third-party consulting fees of which $1.1 billion is related to the Driver Choice Program. As of June 30, 2026, we had incurred costs to date of $1.8 billion, including $1.2 billion in 2026, as a part of these initiatives. These initiatives are expected to conclude by 2027.

Current wording

As a part of these initiatives, we expect non-GAAP adjusted operating expense to exclude between $1.4 and $1.6 billion in cost for the full year 2026, primarily related to employee separation costs and third-party consulting fees, of which $1.2 billion is related to the Driver Choice Program. As of September 30, 2026, we had incurred $1.4 billion in costs during 2026, and $1.9 billion in total costs, as a part of these initiatives. While the planned volume reductions from our largest customer were completed in the second quarter of 2026, our Efficiency Reimagined initiative is not expected to conclude until the fourth quarter of 2027.

Previous wording

In addition, we have incurred and expect to continue to incur other costs and benefits associated with our Network Reconfiguration initiative and anticipated lower volumes, including early asset retirement, lease-related costs and gains from the sale of properties. It is our intention to exit or abandon leases, sell property and transfer or dispose of equipment associated with closed facilities. During the six months ended June 30, 2026, we recorded $60 million in gains on sales of properties related to this initiative. We expect the costs and benefits associated with these actions may increase should we determine to close additional buildings.

Current wording

In addition, we have incurred other costs and benefits associated with our Network Reconfiguration initiative, including early asset retirement, lease-related costs and gains from sales of real estate. It is our intention to exit or abandon leases, sell property and transfer or dispose of equipment associated with closed facilities. During the nine months ended September 30, 2026, we also recorded gains on sales of real estate related to this initiative. See note 5 to the unaudited consolidated financial statements for additional information.

Previous wording

We exclude the impact of gains or losses related to the business divestitures. We do not consider these gains or losses to be a component of our ongoing operations, nor do we consider their impact when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards.

Current wording

We exclude the impact of gains and losses related to business divestitures. We do not consider these transactions to be a component of our ongoing operations, nor do we consider their impact when evaluating business unit operating performance, resource allocation decisions or incentive compensation award determinations.

Previous wording

We exclude the impact of goodwill and certain asset impairment charges. We do not consider these charges 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, see note 7 to the unaudited, consolidated financial statements.

Current wording

We exclude the impact of goodwill and certain asset impairment charges. We do not consider these charges when evaluating business unit operating performance, resource allocation decisions or incentive compensation award determinations. For more information regarding goodwill and asset impairment, see note 7 to the unaudited consolidated financial statements.

Previous wording

We previously recorded non-GAAP adjustments for transactions that resulted in capital loss deferred tax assets not expected to be realized. As a result of property sales during 2025, these capital losses were fully realized within that year. We supplement our presentation with non-GAAP adjusted financial measures that exclude the impact of the reversals of 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 that were not expected to be realized. As a result of property sales during 2025, we realized these capital losses. We supplement our presentation with non-GAAP adjusted financial measures that exclude the impact of the reversals of the valuation allowances against these deferred tax assets as we believe such treatment is consistent with how the valuation allowance was initially established.

Previous wording

We evaluate the efficiency of our operations using various metrics, including non-GAAP adjusted cost per piece. Non-GAAP adjusted cost per piece in any period is calculated as non-GAAP adjusted operating expenses divided by total volume. Because non-GAAP adjusted operating expenses exclude costs or charges that we do not consider a part of underlying business performance when monitoring and evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards, we believe this is the appropriate metric on which to base reviews and evaluations of the efficiency of our operational performance.

Current wording

We evaluate the efficiency of our operations using various metrics, including non-GAAP adjusted cost per piece. Non-GAAP adjusted cost per piece in any period is calculated as non-GAAP adjusted operating expenses divided by total volume. Because non-GAAP adjusted operating expenses exclude costs or charges that we do not consider a part of underlying business performance when monitoring and evaluating business unit operating performance, resource allocation decisions or incentive compensation award determinations, we believe this is the appropriate metric on which to base reviews and evaluations of the efficiency of our operational performance.

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. Our allocation methodologies are refined periodically, or as necessary to reflect changes in our businesses. During the six months ended June 30, 2026, there were no significant changes to our allocation methodologies.

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. Our allocation methodologies are refined periodically, or as necessary to reflect changes in our businesses. During the nine months ended September 30, 2026, there were no significant changes to our allocation methodologies.

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 of June 30, 2026, we had two aircraft temporarily idled for an average period of approximately six 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 operational service during the third and fourth quarters of 2026. Following the permanent grounding and retirement of our MD-11 fleet in the fourth quarter of 2025, we experienced increased third-party lease expense to address capacity constraints. During the six months ended June 30, 2026, we took delivery of five Boeing 767-300 aircraft, which were accounted for as finance leases, and began to reduce the associated third-party expense.

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 September 30, 2026, we had one aircraft temporarily idled for approximately seven 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 this aircraft to return to operational service during the fourth quarter of 2026. Following the permanent grounding and retirement of our MD-11 fleet in the fourth quarter of 2025, we increased third-party lease utilization to address capacity constraints. During the nine months ended September 30, 2026, we took delivery ofnine Boeing 767-300 aircraft, which were accounted for as finance leases, and began to reduce the associated third-party aircraft leases.

Previous wording

We test goodwill for impairment annually at July 1 and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Testing goodwill for impairment requires that we make a number of significant assumptions, including assumptions related to projections of future revenues, costs, capital expenditures, working capital, our cost of capital, long-term growth rates, market comparables and discount rates. We are also required to make assumptions relating to our overall business and operating strategy, and the regulatory and market environment.

Current wording

We test goodwill for impairment annually at July 1 and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Testing goodwill for impairment requires that we make a number of significant assumptions, including assumptions related to projections of amounts and timing of future revenues, costs, capital expenditures, working capital, our cost of capital, long-term growth rates, market comparables, discount rates and other factors. We are also required to make assumptions relating to our overall business and operating strategy, and the regulatory and market environment.

Previous wording

The growth in rates and product mix and fuel surcharge shown above includes contributions from our air cargo product, which is measured by dimensional weight rather than on a per piece basis and therefore does not impact the volume and revenue per piece discussions below.

Current wording

Comparative results were impacted by one more operating day in 2026 compared to 2025. The growth in rates and product mix and fuel surcharge shown above includes contributions from our air cargo product, which is measured by dimensional weight rather than on a per piece basis and therefore does not impact the volume and revenue per piece discussions below.

Previous wording

Average daily volume decreased for both the quarter and year-to-date periods, driven by planned volume reductions from our largest customer, which concluded during the quarter, as well as, actions taken on lower-yielding e-commerce volume. These overall declines were partially offset by continued growth from SMBs who leveraged our Digital Access Program ("DAP").

Current wording

Average daily volume decreased for both the quarter and year-to-date periods, primarily due to lower volume from our largest customer, reflecting the impact of planned volume reductions completed in the second quarter of 2026. The overall declines were partially offset by continued growth from SMBs who leveraged our Digital Access Program ("DAP").

Previous wording

Residential ("business-to-consumer") and commercial ("business-to-business") volume declined. Business-to-consumer volume decreased 3.5% for the quarter (down 6.9% year to date) as a result of the planned volume declines discussed above. Business-to-business volume decreased 3.2% for the quarter (down 4.1% year to date) primarily driven by the retail sector, partially offset by continued growth in the technology sector.

Current wording

Residential ("business-to-consumer") and commercial ("business-to-business") volume declined. Business-to-consumer volume decreased 2.1% for the quarter (down 5.4% year to date) as a result of the planned volume declines discussed above, partially offset by growth in the technology and healthcare sectors. Business-to-business volume decreased 4.7% for the quarter (down 4.3% year to date) primarily driven by the retail sector, partially offset by continued growth in the technology sector.

Previous wording

Within our air products, average daily volume decreased 2.3% for the quarter (down 5.7% year to date), driven by the continued execution of planned volume declines from our largest customer, partially offset by growth from SMB and healthcare customers.

Current wording

Air average daily volume decreased 6.7% for the quarter (down 6.0% year to date), driven by the volume reductions from our largest customer, partially offset by growth from SMB customers and the healthcare sector.

Previous wording

Ground average daily volume decreased 3.5% for the quarter (down 5.7% year to date), driven primarily by the residential and commercial volume reductions discussed above.

Current wording

Ground average daily volume decreased 2.7% for the quarter (down 4.8% year to date), driven primarily by the residential and commercial volume reductions discussed above. The decline was partially offset by residential volume growth from SMB customers.

Previous wording

Revenue per piece increased 9.3% for the quarter (up 8.0% year to date), driven by an average 5.9% net increase in base and accessorial rates implemented throughout 2025, higher fuel surcharges and favorable customer mix.

Current wording

Revenue per piece increased 6.1% during the quarter (up 7.4% year to date), driven by an average 5.9% net increase in base and accessorial rates implemented throughout 2025, higher fuel surcharges and favorable customer mix.

Previous wording

Operating expenses increased for both the quarter and year-to-date periods as a result of second quarter separation costs associated with the Driver Choice Program within compensation and benefits, higher facility and transportation expenses and higher fuel costs. These increases were partially offset by cost reductions from the execution of our Network Reconfigurationand Efficiency Reimagined initiatives.

Current wording

Operating expenses increased for both the quarter and year-to-date periods as a result of higher facility and transportation expenses, separation costs related to the Driver Choice Program within compensation and benefits and higher fuel costs. These increases were partially offset by cost reductions from the execution of our Network Reconfigurationand Efficiency Reimagined initiatives.

Previous wording

•Compensation and benefits expense increased $864 million for the quarter (up $472 million year to date), driven by second quarter separation costs related to the Driver Choice Program of $1.1 billion, contractual wage rate increases, and higher workers' compensation expense. Year-to-date results were also impacted by excess operational staffing in the first quarter of 2026 associated with outsourcing our Ground Saver product. These increases were partially offset by reduced headcount as we executed our Network Reconfiguration and Efficiency Reimagined initiatives, fewer labor hours resulting from the outsourcing of our Ground Saver product, lower volume and lower pension and health and welfare costs within our U.S. union workforce.

Current wording

•Compensation and benefits expense decreased $336 million for the quarter (up $136 million year to date). The decrease for the quarter was driven by fewer labor hours resulting from the outsourcing of our Ground Saver product, lower volume from our largest customer, reductions in headcount as we executed our Network Reconfiguration and Efficiency Reimagined initiatives and lower pension and health and welfare costs within our U.S. union workforce. These decreases were partially offset by contractual wage rate increases and higher workers' compensation costs, reflecting unfavorable development in prior year claims and higher current year claim costs. The year-to-date increase also reflected separation costs related to the Driver Choice Program, most of which were recognized in the second quarter, and additional labor costs in the first quarter associated with outsourcing our Ground Saver product.

Previous wording

•Facility and transportation related costs increased $602 million for the quarter (up $1.1 billion year to date), primarily due to higher fees paid to the USPS associated with outsourcing our Ground Saver product.

Current wording

•Facility and transportation related costs increased $661 million for the quarter (up $1.8 billion year to date), primarily due to higher fees paid to USPS associated with outsourcing our Ground Saver product, higher fuel costs charged to us by third-party transportation providers and higher third-party aircraft lease expense, net of vendor recoveries, to address capacity constraints resulting from fourth quarter 2025 aircraft retirements.

Previous wording

Reconfiguration and Efficiency Reimagined programs. Costs in the 2025 period also included costs related to our Transformation 2.0 and Fit to Serve programs. These primarily consisted of 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 transformation strategy costs of $171 million and $302 million in the third quarters of 2026 and 2025, respectively and $1.4 billion and $400 million in the 2026 and 2025 year-to-date periods, respectively. Third quarter 2026 non-GAAP adjusted operating expenses also exclude $43 million of gains from the sale of certain previously impaired aircraft parts. Transformation strategy costs in the second and third quarters of 2026 primarily consist of separation costs related to the Driver Choice Program. Transformation strategy costs during the year-to-date 2026 and 2025 periods relate to our Network Reconfiguration and Efficiency Reimagined initiatives. The 2025 period also included costs related to our Transformation 2.0 and Fit to Serve programs. These primarily consisted of 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 and other costs and gains excluded from our non-GAAP financial measures.

Previous wording

Cost per piece increased 16.8% during the second quarter of 2026 (up 13.3% year to date) primarily driven by separation costs related to the Driver Choice Program, higher fees paid to the USPS associated with outsourcing our Ground Saver product, higher fuel costs, contractual wage rate increases and lower average daily volume and stops, partially offset by increased productivity and operational efficiencies from our network reconfiguration efforts. Non-GAAP adjusted cost per piece increased 8.0% (up 8.7% year to date).

Current wording

Cost per piece increased 4.1% during the quarter (up 10.2% year to date) primarily driven by higher fees paid to USPS associated with outsourcing our Ground Saver product, higher fuel costs, contractual wage rate increases and the impact of lower average daily volume and stops. The year-to-date increase also includes the impact of separation costs related to the Driver Choice Program, most of which were recognized in the second quarter. These increases were partially offset by the impact of increased productivity and operational efficiencies from our Network Reconfiguration efforts and gains on sales of assets. Non-GAAP adjusted cost per piece increased 5.5% during the quarter (up 7.7% year to date).

Previous wording

Average daily volume decreased for both domestic and export products for the quarter and year-to-date periods, primarily in Europe, the Middle East and Africa ("EMEA").

Current wording

Average daily volume decreased for both domestic and export products for the quarter and year-to-date periods, primarily in Europe, the Middle East and Africa ("EMEA") due to geopolitical tensions.

Previous wording

Export average daily volume decreased 4.2% for the quarter (down 4.9% year to date) led by declines in EMEA intra-regional movements due to our revenue quality efforts, and in U.S. destination lanes resulting from trade policy changes, including de minimis exclusions. Total U.S. import average daily volume decreased led by average daily volume declines from EMEA global trade policy changes, including de minimis exclusions. The decline was partially offset by higher demand on the Asia to U.S. trade lane, led by China outbound volume, as we lapped the elimination of the de minimis in May 2026.

Current wording

Export average daily volume decreased 8.3% for the quarter (down 6.1% year to date) led by declines in EMEA intra-regional volumes due primarily to our revenue quality actions and the continued Middle East conflict. Total U.S. import average daily volume also decreased in both periods as changes in trade policies, including de minimis exclusions, continued to affect customer demand and shipping patterns, although the impact began to moderate in September as the business lapped the initial implementation. These declines were partially offset by higher demand on China-to-U.S. and Asia-to-Asia trade lanes for both periods.

Previous wording

Domestic revenue per piece increased 13.1% for the quarter (up 14.4% year to date) primarily driven by fuel surcharges and shifts in customer mix, mainly in EMEA and Canada.

Current wording

Domestic revenue per piece increased 9.9% for the quarter (up 12.9% year to date) primarily driven by fuel surcharges, surge fees and shifts in customer mix, mainly in EMEA and Canada.

Previous wording

Our non-GAAP adjusted operating expenses exclude the impact of $0 and $10 million of transformation strategy costs in the second quarters of 2026 and 2025, respectively, and $4 and $23 million in the 2026 and 2025 year-to-date periods, respectively. Transformation strategy costs during 2026 and 2025 periods relate to our Network Reconfiguration and Efficiency Reimagined programs. The costs in the 2025 periods also include costs related to our Transformation 2.0 and Fit to Serve programs, which primarily consisted of compensation and benefits costs and 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 transformation strategy costs of $0 and $15 million in the third quarters of 2026 and 2025, respectively, and $4 and $38 million in the year-to-date periods, respectively. Transformation strategy costs during both 2026 and 2025 periods relate to our Network Reconfiguration and Efficiency Reimagined initiatives. The 2025 period also included costs related to our Transformation 2.0 and Fit to Serve programs, which primarily consisted of compensation and benefits costs and fees paid to outside professional service providers. See Supplemental Information - Items Affecting Comparability for additional discussion of transformation strategy and other costs and gains excluded from our non-GAAP financial measure.