UNITED PARCEL SERVICE INC

NOTE 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly our financial position as of September 30, 2026, and our results of operations and cash flows for the three and nine months ended September 30, 2026 and 2025. The results reported in these unaudited consolidated financial statements should not be regarded as indicative of results that may be expected for any other period or the entire year. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025 (our "2025 Form 10-K").

Throughout this report, the terms "nine months ended" and "year-to-date period" and "first nine months" refer to the nine months ended September 30.

Fair Value of Financial Instruments

The carrying amounts of our cash and cash equivalents, marketable securities, accounts receivable and accounts payable approximated fair value as of September 30, 2026 and December 31, 2025. The fair values of our recognized multiemployer pension withdrawal liabilities are disclosed in note 6, our short- and long-term debt in note 9 and our derivative instruments in note 14. We apply a fair value hierarchy (Levels 1, 2 and 3) when measuring and reporting items at fair value. Fair values are based on listed market prices (Level 1), when such prices are available. To the extent that listed market prices are not available, fair values are determined based on other relevant factors, including dealer price quotations (Level 2). If listed market prices or other relevant factors are not available, including situations where there is little or no market activity for an asset or liability, inputs are developed from unobservable data reflecting our own assumptions (Level 3). Certain investments that do not have readily determinable fair values are reported in accordance with the measurement alternative in Accounting Standards Codification ("ASC") Topic 321. For further discussion on these investments, see note 1 to the audited consolidated financial statements in our 2025 Form 10-K.

Use of Estimates

The preparation of the accompanying unaudited consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of these financial statements, as well as the reported amounts of revenues and expenses during the reporting period.

Although our estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. As a result, our accounting estimates and assumptions may change significantly over time.

Supplier Finance Programs

As part of our working capital management, certain financial institutions offer a Supply Chain Finance ("SCF") program to certain of our suppliers. During the nine months ended September 30, 2026, there were no material changes to the SCF program described in note 1 to the audited consolidated financial statements in our 2025 Form 10-K. Amounts due to our suppliers that participate in the SCF program are included in Accounts payable in our consolidated balance sheets. We have been informed by the participating financial institutions that as of September 30, 2026 and December 31, 2025, suppliers sold $384 and $435 million, respectively, of our outstanding payment obligations during the relevant period.

Supplemental Cash Flow Information

The following table presents supplemental cash flow information (in millions):

During the nine months ended September 30, 2026 and 2025, aircraft finance lease arrangements resulted in $643 and $312 million, respectively, of noncash investing and financing activities.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Standards

Accounting pronouncements adopted during the periods covered by the unaudited consolidated financial statements did not have a material impact on our consolidated financial position, results of operations, cash flows or internal controls.

Accounting Standards Issued But Not Yet Effective

In November 2024, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") on expense disaggregation disclosures, which will require tabular disclosure in the notes to financial statements for specific expense categories. The standard is effective for us beginning with our 2027 annual report and for interim and annual periods thereafter. This ASU will require additional expense disclosures. We are evaluating the impact of adoption, but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

In September 2025, the FASB issued an ASU on targeted improvements to the accounting for internal‑use software, which modernizes accounting guidance for costs incurred in developing internal-use software. This ASU removes references to development stages, instead requiring capitalization to begin based on a "probable-to-complete" threshold. This ASU is effective for us beginning with our 2028 annual report and for interim and annual periods thereafter. Early adoption is permitted. We are evaluating the impact of adoption, but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

In December 2025, the FASB issued an ASU on accounting for government grants. The ASU defines the scope of government grants and permits recognition only when it is probable that the entity will comply with the grant’s conditions and the grant will be received. It also provides guidance on presentation approaches for both asset‑related and income‑related grants and expands related disclosure requirements. This ASU is effective for us beginning in the first quarter of 2029 and for all interim and annual periods thereafter, and early adoption is permitted. We are evaluating the impact of adoption, but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

In May 2026, the FASB issued an ASU on accounting for and disclosure of environmental credits and credit obligations. This ASU provides recognition, measurement, presentation and disclosure requirements for all entities that generate, purchase, or receive environmental credits or have a regulatory compliance obligation that may be settled with environmental credits. This ASU becomes effective for us beginning in the first quarter of 2028 and for all interim and annual periods thereafter, and early adoption is permitted. We are evaluating the impact of adoption, but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

Other accounting pronouncements issued before, but not effective until after, September 30, 2026, are not expected to have a material impact on our consolidated financial position, results of operations, cash flows or internal controls.

NOTE 3. REVENUE RECOGNITION

Revenue Recognition

Substantially all of our revenues are from contracts associated with the pickup, transportation and delivery of packages and freight ("transportation services") that include only one performance obligation: the transportation services themselves. These services may be carried out by or arranged by us and generally occur over a short period of time. We generally recognize revenue over time, based on the extent of progress towards completion of the services in the contract. All of our major businesses act as a principal in their revenue arrangements and as such, we report revenue and the associated purchased transportation costs on a gross basis within our statements of consolidated income.

Disaggregation of Revenue

Accounts Receivable, Net

As part of our working capital management, we have an accounts receivable factoring program with third parties, in which we may sell certain customer receivables on a revolving basis. Any such transactions are accounted for as sales and, accordingly, receivables sold are removed from Accounts receivable, Net in our consolidated balance sheets and the proceeds

are reflected in Cash Flows from Operating Activitiesin our statements of consolidated cash flows. Our continuing involvement in these receivables is primarily limited to servicing and, under limited circumstances, recourse. Total accounts which may be outstanding under the program are $860 million and, as of September 30, 2026, $410 million was available. In connection with this program, we recognized a liability, measured at fair value, related to our estimated recourse obligations recorded within Other current liabilitiesin our applicable consolidated balance sheets. As of September 30, 2026 and December 31, 2025 cash collections of $121 and $59 million, respectively, were not yet remitted to third-party purchasers. These obligations are included within Other current liabilities in our consolidated balance sheets, with changes in such obligations reflected within

Cash Flows from Financing Activities in our statements of consolidated cash flows. As of September 30, 2026 and December 31, 2025, accounts receivable outstanding under our factoring program were $450 and $491 million, respectively.

Our allowance for credit losses as of September 30, 2026 and December 31, 2025 was $242 and $180 million, respectively. Amounts for credit losses charged to expense, before recoveries, during both of the three months ended September 30, 2026 and 2025 were $95 million. During the nine months ended September 30, 2026 and 2025, these amounts were $296 and $267 million, respectively.

Contract Assets and Liabilities

Contract assets were $271 and $275 million as of September 30, 2026 and December 31, 2025, respectively, and were recorded within Other current assetsin our consolidated balance sheets. Contract liabilities recorded within Other Non-Current Liabilities were $40 and $49 million as of September 30, 2026 and December 31, 2025, respectively. Short-term contract liabilities were immaterial as of September 30, 2026 and December 31, 2025.

NOTE 4. STOCK-BASED COMPENSATION

Pre-tax compensation expense for equity-classified stock compensation awards recorded within Compensation and benefits in our statements of consolidated income for the three months ended September 30, 2026 and 2025 was $37 and $25 million, respectively. For the nine months ended September 30, 2026 and 2025 these amounts were $95 and $41 million, respectively.

Our UPS Management Incentive Award Program ("MIP") awards are classified as a compensation obligation within Accrued wages and withholdings in our consolidated balance sheets. Substantially all MIP awards are settled in cash, subject to participant elections. Cash payments related to the 2025 MIP and 2024 MIP awards are reflected in Accrued wages and withholdings in our statements of consolidated cash flows for the nine months ended September 30, 2026 and 2025, respectively.

During the nine months ended September 30, 2026, there were no material changes to our stock-based compensation plans described in note 13 to the audited consolidated financial statements in our 2025 Form 10-K, except as described below.

Long-Term Incentive Program ("LTIP")

On May 6, 2026 (the "grant date"), the Compensation and Human Capital Committee of the Board (the "Compensation Committee") approved awards under the Company's 2026 LTIP program. The 2026 LTIP award contains both a restricted stock unit ("RSU") component and a restricted performance unit ("RPU") component. RPU performance targets are equally weighted between adjusted revenue growth and non-GAAP adjusted return on invested capital ("ROIC"). RPUs vest at the end of athree-year performance period, assuming continued employment with the Company (except in the case of death, disability or retirement, in which case immediate vesting occurs on a prorated basis). The exact number of RPUs earned is based on Company performance, and subject to modification based on the Company's total shareholder return relative to the Standard & Poor's 500 Index. We determined the grant date fair value of the RPUs using a Monte Carlo model. Each target RPU awarded on the grant date was valued at $106.08. RSUs were valued using the closing NYSE price of $99.89 on the grant date, and will generally vest ratably over three years on each anniversary of the grant date, assuming continued employment with the Company (except in the case of disability or retirement, in which case vesting will continue, or death, in which case immediate vesting will occur).

The weighted-average assumptions used and the weighted-average fair values of the LTIP RPU awards granted during the nine months ended September 30, 2026 and 2025 are as follows:

There is no expected dividend yield as RPUs earn dividend equivalents.

Non-qualified Stock Options

On February 4, 2026, we granted a total of 4.0 million stock options to approximately 460 employees. Options were granted at an exercise price of $116.74 per share, the closing NYSE price of our class B common stock on that date.

The fair value of each option granted was estimated using a Black-Scholes option pricing model. The weighted-average assumptions used and the weighted-average fair values of options granted during the nine months ended September 30, 2026 and 2025 are as follows:

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of September 30, 2026 and December 31, 2025 consisted of the following (in millions):

(1)Includes MD-11 airframes and engines that were fully depreciated as of December 31, 2025.

Depreciation and amortization expense for property, plant and equipment during both of the nine months ended September 30, 2026 and 2025 was$2.3 billion. As of September 30, 2026 and December 31, 2025, we determined that $52 and $54 million, respectively, of assets primarily within our U.S. Domestic Package segment met the criteria to be classified as held for sale and, as a result, are presented within Other current assetsin our consolidated balance sheets.

Network Reconfiguration and Efficiency Reimagined

During the nine months ended September 30, 2026, as part of our Network Reconfigurationand Efficiency Reimagined initiatives, we closed 47 leased or owned buildings,46 of which have been permanently closed. 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. It is reasonably possible that our plans will also result in further revisions to our estimates of the useful lives and salvage values of certain of our long-lived assets. Any revisions to these plans could further accelerate depreciation expense and lead to the recognition of additional charges related to early retirements in future periods. For additional information, see note 16.

Asset Disposals

For the three months ended September 30, 2026 and 2025, we recorded $180 and $354 million respectively, of gains on sales of assets, and for the nine months ended September 30, 2026 and 2025, we recorded $370 and $436 million, respectively.

The 2026 gains were related to real estate and aircraft parts and were primarily within our U.S. Domestic Package segment.

The 2025 gains primarily related to sale-leaseback transactions involving a data center and real estate and were primarily within our Supply Chain Solutions businesses. We concluded that each qualified as a sale; accordingly, we derecognized the carrying amounts of the properties and recognized the related operating lease right-of-use assets and lease liabilities at lease commencement. During the three months ended September 30, 2025, we received cash proceeds of approximately $415 million and recognized gains of $330 million. During the nine months ended September 30, 2025 we received cash proceeds of approximately $465 million and recognized gains of $362 million. In the three and nine months ended September 30, 2026 sale-leaseback transactions were immaterial.

These gains were recognized within Other (gains) lossesin our statements of consolidated cash flows and within Other expenses in our statements of consolidated income.

Impairment

There were no material impairment charges to property, plant and equipment during the nine months ended September 30, 2026 or 2025. We will continue to monitor our long-lived asset groups for impairment.

NOTE 6. EMPLOYEE BENEFIT PLANS

Company-Sponsored Benefit Plans

Information about the net periodic benefit cost for our company-sponsored pension and postretirement benefit plans for the three and nine months ended September 30, 2026 and 2025 is as follows (in millions):

Service cost and the remaining components of net periodic benefit cost are presented within Compensation and benefits and Investment income and other, respectively, in our statements of consolidated income.

During the nine months ended September 30, 2026, we contributed $1.1 billion and $229 million to our company-sponsored pension and U.S. postretirement medical benefit plans, respectively. Included in these amounts are discretionary non-cash contributions made in August 2026 in the form of company-issued notes with principal amounts of $450 million. We do not expect material contributions over the remainder of the year to our company-sponsored pension and U.S. postretirement medical benefit plans.

Multiemployer Benefit Plans

We contribute to a number of multiemployer defined benefit and health and welfare plans under the terms of collective bargaining agreements that cover our union-represented employees. These collective bargaining agreements include required contribution rates to the plans that we participate in, and we are in compliance with these contribution rates.

As of September 30, 2026 and December 31, 2025, we had $788 and $795 million, respectively, recorded in Other Non-Current Liabilities and $10 million and $9 million, respectively, recorded in Other current liabilities in our consolidated balance sheets associated with our previous withdrawal from the New England Teamsters and Trucking Industry Pension Fund. This liability is payable in equal monthly installments over a remaining term of approximately 36 years. Based on borrowing rates available to us for long-term financing of a similar maturity, the fair value of this withdrawal liability as of September 30, 2026 and December 31, 2025 was $589 and $662 million, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of this liability.

UPS was a contributing employer to the Central States Pension Fund ("CSPF") until 2007, at which time UPS withdrew from the CSPF. Under a collective bargaining agreement with the International Brotherhood of Teamsters ("Teamsters"), UPS agreed to provide coordinating benefits in the UPS/IBT Full Time Employee Pension Plan ("UPS/IBT Plan") for UPS participants whose last employer was UPS and who had not retired as of January 1, 2008 ("the UPS Transfer Group") in the event that benefits are reduced by the CSPF consistent with the terms of our withdrawal agreement with the CSPF. Under this agreement, benefits to the UPS Transfer Group cannot be reduced without our consent and can only be reduced in accordance with law.

In the event CSPF were to become insolvent, CSPF benefits would be reduced to the legally permitted Pension Benefit Guaranty Corporation limits, triggering the coordinating benefits provision in the collective bargaining agreement.

We account for the potential obligation to pay coordinating benefits under ASC Topic 715, which requires us to provide a best estimate of various actuarial assumptions in measuring our pension benefit obligation at the December 31 measurement date. As of December 31, 2025, our best estimate of coordinating benefits that may be required to be paid by the UPS/IBT Plan was immaterial.

The value of our estimate for future coordinating benefits will continue to be influenced by a number of factors, including interpretations of law, future legislative actions, actuarial assumptions and the ability of the CSPF to sustain its long-term commitments. Actual events may result in a change in our best estimate of the projected benefit obligation. We will continue to assess the impact of these uncertainties in accordance with ASC Topic 715.

Collective Bargaining Agreements

In the U.S., we have certain employees covered by a national master agreement and various supplemental agreements with local unions affiliated with the Teamsters which run through July 31, 2028. In Canada, certain employees are covered by a collective bargaining agreement with the Teamsters which runs through July 31, 2030.

Certain of our pilots are employed under a collective bargaining agreement with the Independent Pilots Association ("IPA") which became amendable September 1, 2025. We are currently engaged in negotiations with the IPA.

Certain of our airline mechanics are covered by a collective bargaining agreement with Teamsters Local 2727 which becomes amendable November 1, 2029. In addition, certain auto and maintenance mechanics are employed under a collective bargaining agreement with the International Association of Machinists and Aerospace Workers which runs through July 31, 2029.

NOTE 7. GOODWILL AND INTANGIBLE ASSETS

The following table indicates the allocation of goodwill as of September 30, 2026 and December 31, 2025 (in millions):

Changes in goodwill during the nine months ended September 30, 2026 resulted from:

•An impairment charge related to our Healthcare Logistics and Distribution ("HLD") reporting unit within SCS.

•The impact of U.S. Dollar exchange rate movements on non‑U.S. Dollar goodwill balances.

•An increase in goodwill as part of purchase accounting allocations relating to our acquisition of Andlauer Healthcare Group ("AHG") in the fourth quarter of 2025. Certain areas of purchase accounting, including our estimates of tax positions, remain preliminary as of September 30, 2026.

We conducted our most recent annual goodwill impairment testing as of July 1, 2026 using both qualitative and quantitative methods. Our quantitative tests utilize a combination of the income and market approaches. In developing our valuation assumptions underlying the annual impairment testing, we determined that the estimated fair value of our HLD reporting unit within SCS was adversely impacted by an increase in the cost of capital, driven by higher discount rates from lower financial performance within our European healthcare logistics operations. The results of our testing using these revised assumptions indicated that the carrying value of our HLD reporting unit exceeded its estimated fair value. At the July 1, 2026 testing date, approximately $1.6 billion of our $5.8 billion consolidated goodwill balance was represented by our HLD reporting unit.

As a result, for the third quarter of 2026, we recorded a goodwill impairment charge of $182 million within Other expenses in our statement of consolidated income.

For each of our reporting units, we continue to monitor the impact of macroeconomic conditions and business performance on our estimates of fair value. During the nine months ended September 30, 2026, none of our other reporting units had indications that an impairment was more likely than not. Actual reporting unit performance, revisions to our forecasts of future-performance, market factors, changes in global trade policy, changes in estimates or assumptions in future impairment testing, other factors, or a combination thereof could result in additional non-cash impairment charges in one or more of our reporting units during a future period.

Notwithstanding the above, during 2025, our Mail Innovations reporting unit, which is contained within SCS, experienced cost increases in excess of our expectations due to higher purchased transportation rates following the expiration of a contract with our primary vendor. These cost pressures began to moderate as we transitioned volume to alternative vendors. However, the pace of recovery has been slower than anticipated. Based on our most recent annual impairment evaluation, Mail Innovations continues to exhibit an excess fair value above its carrying value. However, further deterioration in the financial performance could negatively impact the reporting unit and our estimates of fair value. Approximately $295 million in goodwill is represented by our Mail Innovations reporting unit.

The following table summarizes intangible assets as of September 30, 2026 and December 31, 2025 (in millions):

Impairment tests for finite-lived intangible assets are performed when a triggering event occurs that may indicate that the carrying value of the intangible asset may not be recoverable. For the nine months ended September 30, 2026, there were no impairment charges for finite-lived intangible assets.

For the nine months ended September 30, 2025, we recorded intangible asset impairment charges of $33 million ($25 million after tax) within Other expenses in our statement of consolidated income. These charges were primarily software impairment charges related to the divestiture of a business within SCS.

NOTE 8. LEASES

We have finance and operating leases for real estate (primarily package centers, airport facilities and warehouses), aircraft and engines, information technology equipment, vehicles and various other equipment used in operating our business. Certain leases for real estate and aircraft contain options to purchase, extend or terminate the lease.

As of September 30, 2026, we had $1.5 billion of additional leases which had not commenced and are expected to commence later in 2026 through 2027. These leases are primarily related to aircraft and will commence upon delivery of the related aircraft. Other leases will commence when we are granted access to the property, such as when leasehold improvements are completed or a certificate of occupancy is obtained.

The components of lease expense for the three and nine months ended September 30, 2026 and 2025 were as follows (in millions):

NOTE 9. DEBT AND FINANCING ARRANGEMENTS

The carrying value of our outstanding debt obligations as of September 30, 2026 and December 31, 2025 consisted of the following (in millions):

Commercial Paper

We are authorized to borrow up to $10.0 billion under a U.S. commercial paper program and €5.0 billion (in a variety of currencies) under a European commercial paper program. There wasno commercial paper outstanding as of September 30, 2026 or December 31, 2025. The amount of commercial paper outstanding under these programs in the remainder of 2026 is expected to fluctuate.

Debt Classification

We have classified certain floating-rate senior notes that are redeemable at the option of the note holder as long-term debt in our consolidated balance sheets, due to our intent and ability to refinance the debt if the put option is exercised.

Debt Issuances

On August 12, 2026, we issued fixed-rate senior notes with a principal balance of $1.0 billion. The notes bear interest at 4.850% per year and mature on August 15, 2031. Interest on the notes is payable semi-annually, beginning February 15, 2027. The notes are callable at our option at a redemption price equal to the greater of 100% of the principal amount, or the sum of the present values of the remaining scheduled payments of principal and interest, plus accrued and unpaid interest. In connection with this issuance, we contributed $450 million principal amount of the notes directly to our company-sponsored pension plans. For additional information, see note 6.

On August 18, 2026, we issued floating rate senior notes with a principal balance of $325 million. These notes bear interest at a rate equal to the compounded Secured Overnight Financing Rate ("SOFR") less 0.350% per year and mature on September 1, 2076. Interest on the notes is payable quarterly, beginning December 1, 2026. These notes are callable at various times after 30 years at a stated percentage of par value and are redeemable at the option of the note holders at various times afterone year at a stated percentage of par value.

Sources of credit

We maintaintwo credit agreements with a consortium of banks. The first of these agreements provides revolving credit facilities of $1.0 billion, expires on November 23, 2026 and bears interest at a periodic fixed rate equal to the term SOFR rate, plus an applicable margin based on our then-current credit rating. The second agreement provides revolving credit facilities of $2.0 billion, expires on November 25, 2029 and bears interest at a periodic fixed rate equal to the term SOFR rate, plus 0.10% per annum and an applicable margin based on our then-current credit rating. The applicable margin for both agreements as of September 30, 2026 was 0.70%.

There wereno amounts outstanding under these facilities as of September 30, 2026 or December 31, 2025. We expect to be able to renew these agreements in the ordinary course of business prior to their respective maturities. For further discussion see note 9 to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.

Debt Covenants

Our existing debt instruments and credit facilities subject us to certain financial covenants. These covenants limit the amount of secured indebtedness that we may incur, and limit the amount of attributable debt in sale-leaseback transactions. We were in compliance with these financial covenants for all periods presented.

Fair Value of Debt

Based on the borrowing rates currently available to us for long-term debt with similar terms and maturities, the fair value of long-term debt, including current maturities, excluding leases, was approximately $22.4 and $22.8 billion as of September 30, 2026 and December 31, 2025, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of all of our debt instruments.

Other Arrangements

During the nine months ended September 30, 2026, we entered into nine new aircraft leases under an existing financing arrangement. The structure of this arrangement required parent company guarantees of approximately $1.8 billion.

In 2025 we entered into a real estate transaction for the development of a facility and recognized a financing obligation, which will continue to increase as construction progresses. As of September 30, 2026 and December 31, 2025 we recognized $230 and $132 million, respectively, related to this obligation within Other Non-Current Liabilities in our consolidated balance sheets.

NOTE 10. LEGAL PROCEEDINGS AND CONTINGENCIES

We are involved in a number of judicial proceedings and other matters arising from the conduct of our business.

Although there can be no assurances as to the ultimate outcome, we have generally denied, or believe we have meritorious defenses and will deny, liability in pending matters, including (except as may be otherwise noted herein) the matters described below, and we intend to vigorously defend each matter. We accrue amounts associated with judicial proceedings and other contingencies when and to the extent a loss becomes probable and can be reasonably estimated. The actual costs of resolving legal proceedings may be substantially higher or lower than the amounts accrued on those claims.

For matters as to which we are not able to estimate a possible loss or range of losses, we are not able to determine whether any such loss will have a material impact on our operations or financial condition. For these matters, we have described the reasons that we are unable to estimate a possible loss or range of losses.

Judicial Proceedings

We are a defendant in a number of lawsuits filed in state and federal courts containing various class action allegations under state wage-and-hour laws. We do not believe that any loss associated with any such matter will have a material impact on our financial condition, results of operations or liquidity.

In December 2025, Malone et al. v. United Parcel Service Inc. (OH) was certified as a class action in federal court in the Eastern District of Pennsylvania. The plaintiffs filed this action alleging entitlement to overtime under the Pennsylvania Minimum Wage Act, seeking allegedly unpaid wages. We are vigorously defending ourselves in this matter. We believe that we have meritorious defenses, and there are unresolved questions of law and fact that could be important to the ultimate resolution of this matter. Accordingly, we are not able to estimate a possible loss or range of loss that may result from this matter or to determine whether such loss, if any, would have a material adverse effect on our financial condition, results of operations or liquidity.

Other Matters

In August 2016, Spain’s National Markets and Competition Commission ("CNMC") announced an investigation into 10 companies in the commercial delivery and parcel industry, including UPS, related to alleged nonaggression agreements to allocate customers. In May 2017, we received a Statement of Objections issued by the CNMC. In July 2017, we received a Proposed Decision from the CNMC. In March 2018, the CNMC adopted a final decision, finding an infringement and imposing an immaterial fine on UPS. We appealed the decision. In December 2022, a trial court ruled against us. In June 2026, the Spanish Supreme Court affirmed the decision. We intend to further appeal. We are vigorously defending ourselves and believe that we have a number of meritorious defenses. There are also unresolved questions of law that could be important to the ultimate resolution of this matter. We do not believe that any loss from this matter would have a material impact on our financial condition, results of operations or liquidity.

In November 2025, one of our cargo aircraft was involved in an accident at Louisville Muhammad Ali International Airport. We maintain industry-standard insurance coverage for this incident and are continuing to assess the impact on the environment and our business. As of September 30, 2026, we recorded contingencies of $47 million related to environmental remediation in Other current liabilities with corresponding insurance recoveries in Accounts receivable, Net in our consolidated balance sheets. Amounts recorded as of December 31, 2025 were immaterial. In addition, we are subject to a number of claims, litigation and other proceedings arising out of this incident. It is reasonably possible the resolution of these matters could result in additional charges and related insurance recoveries in future periods, the amount of which cannot be reasonably estimated at this time. We do not believe the financial impact related to these matters will have a material adverse effect on our financial condition, results of operations or liquidity.

On February 20, 2026, the U.S. Supreme Court (the "Court") issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). The Court’s ruling did not address the manner or timing of any potential IEEPA tariff refunds. From time to time, we act as an intermediary for cross‑border shipments and, in certain circumstances, may pay customs tariffs, duties, taxes or other governmental charges on behalf of customers. Such amounts are generally passed through to customers in accordance with our contract terms and may be reflected as outstanding receivables in our consolidated balance sheets. On February 24, 2026, U.S. Customs and Border Protection ("CBP") stopped collecting IEEPA tariffs and we stopped paying IEEPA tariffs for new entries. On April 20, 2026, CBP launched Phase 1 of an administrative IEEPA tariff refund process. UPS received approximately $500 million of IEEPA tariffs paid for entries eligible for refund under this Phase. Entries are being reconciled to original payment for pass-through to our customers. As of

September 30, 2026, approximately $270 million of refunds had not yet been passed through to our customers and was included in Other current liabilities in our consolidated balance sheet. We continue to monitor developments and evaluate options for pursuing the balance of IEEPA tariff refunds from CBP.

The future impact resulting from this matter will continue to be influenced by multiple factors, including the interpretation and implementation of the Supreme Court’s decision by other courts, potential developments at CBP and other regulatory authorities, as well as potential legislative responses, related litigation and the recoverability of receivables from customers. Any tariffs previously paid that are determined to be recoverable from CBP on behalf of our customers or amounts refundable to customers for tariffs previously paid will be recognized when realization is probable and the amounts can be reasonably estimated.

We will continue to monitor and evaluate the financial statement impact of related developments.

We are a party to various other matters that arose in the normal course of business. These include disputes with government authorities in various jurisdictions over the imposition of duties, fines, taxes and assessments from time to time. We are vigorously defending ourselves and believe that we have a number of meritorious defenses in these disputes. There are also unresolved questions of law that could be important to the ultimate resolution of these disputes. Accordingly, we are not able to estimate a possible loss or range of losses that may result from these disputes or to determine whether such losses, if any, would have a material impact on our financial condition, results of operations or liquidity.

We do not believe that the eventual resolution of any other matters (either individually or in the aggregate), including any reasonably possible losses in excess of current accruals, will have a material impact on our operations or financial condition.

NOTE 11. SHAREOWNERS' EQUITY

Capital Stock, Additional Paid-In Capital, Retained Earnings and Noncontrolling Interests

We are authorized to issuetwo classes of common stock, which are distinguished from each other primarily by their respective voting rights. Class A shares of UPS are entitled to 10 votes per share, whereas class B shares are entitled toone vote per share. Class A shares are primarily held by UPS employees and retirees, as well as trusts and descendants of the Company's founders. Class A shares are fully convertible into class B shares at any time. Class B shares are publicly traded on the NYSE under the symbol "UPS". Class A and B shares each have a $0.01 par value and, as of September 30, 2026, there were 4.6 billion class A shares and 5.6 billion class B shares authorized to be issued. Additionally, there are 200 million preferred shares authorized to be issued, with a par value of $0.01 per share. As of September 30, 2026, no preferred shares had been issued.

The following is a rollforward of our common stock, additional paid-in capital, retained earnings and non-controlling interests accounts for the three and nine months ended September 30, 2026 and 2025 (in millions):

(1) In the nine months ended September 30, 2025 we repurchased 8.6 million shares of class B common stock for $1.0 billion under our 2023 share repurchase authorization. No shares were repurchased during the nine months ended September 30, 2026.

(2)The dividend per share amount is the same for both class A and class B common stock. Dividends include $39 and$42 million for the three months ended September 30, 2026 and 2025, respectively, and $120 and$127 million for thenine months ended September 30, 2026 and 2025, respectively, that were settled in shares of class A common stock.

The activity in accumulated other comprehensive income (loss) ("AOCI") was as follows (in millions):

Detail of the gains (losses) reclassified from accumulated other comprehensive loss to the statements of consolidated income was as follows (in millions):

NOTE 12. SEGMENT INFORMATION

We havetwo reportable segments: U.S. Domestic Package and International Package, which are together referred to as our global small package operations. Our remaining businesses are reported as SCS. Global small package operations represent our most significant business and are broken down into regional operations around the world. Regional operations managers are responsible for both domestic and export products within their geographic area. SCS comprises the results of non-reportable operating segments that do not meet the quantitative and qualitative criteria of a reportable segment as defined under ASC Topic 280.

U.S. Domestic Package

U.S. Domestic Package operations include the time-definite delivery of letters, documents and packages throughout the United States.

International Package

International Package operations include delivery to more than 200 countries and territories worldwide, including shipments wholly outside the United States, as well as shipments with either an origin or destination outside the United States. We offer a wide selection of guaranteed day- and time-definite international transportation services supported by our brokerage capabilities that facilitate cross‑border clearance for international shipments. International Package includes our operations in Europe, Middle East and Africa ("EMEA"), Canada and Latin America (together "Americas") and Asia.

SCS

SCS includes our Forwarding, Logistics, digital and other businesses. Our Forwarding and Logistics businesses operate globally, offering international air and ocean freight forwarding, customs brokerage, mail services, healthcare logistics, distribution and post-sales services. Our digital businesses leverage technology to enable a range of on-demand services such as same-day delivery, end-to-end return services and integrated supply chain and high-value shipment insurance solutions.

Segment Information

We consider our Chief Executive Officer to be our Chief Operating Decision Maker ("CODM"). The CODM is responsible for setting the Company's strategic direction, managing overall operations, and is the main point of communication between the Board and key operational personnel within the organization.

The CODM utilizes operating profit as a primary measure of segment performance because it reflects the underlying business performance and provides the CODM with a basis for making resource allocation decisions. Operating profit is defined as income before investment income and other, interest expense and income tax expense.

The CODM regularly reviews segment-level expense details which include compensation and benefits for the U.S. Domestic Package segment and compensation, benefits and purchased transportation for the International Package segment, when assessing operating segment performance. These expense categories represent the primary metrics used by the CODM to assess segment performance. For the U.S. Domestic Package segment, compensation and benefits are evaluated separately, whereas for the International Package segment, these categories are assessed in aggregate.

Certain expenses are allocated between the 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 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, as necessary, to reflect changes in our businesses. There were no significant changes to our allocation methodologies during the nine months ended September 30, 2026.

As we operate an integrated, global multimodal network, we evaluate many of our capital expenditure decisions at a network level. Accordingly, expenditures on property, plant and equipment by segment are not presented.

Segment results of operations for the three and nine months ended September 30, 2026 and 2025 were as follows (in millions):

(1)Includes purchased transportation (applicable only to our U.S. Domestic Package segment), repairs and maintenance, depreciation and amortization, fuel, other occupancy, and allocated costs for our air network, information services and general and administrative service expenses.

(2)Revenue and operating profit/(loss) from segments below the quantitative thresholds are attributable to operating segments which provide supply chain solutions.

Depreciation and amortization by reportable segment for the three and nine months ended September 30, 2026 and 2025 are included within the other segment items captions in the table above. These totals are presented after applying activity-based costing methods to allocate expenses between segments as noted above.

(1)Depreciation and amortization from segments below the quantitative thresholds are attributable to operating segments which provide supply chain solutions.

Assets by reportable segment as of September 30, 2026 and December 31, 2025 consisted of the following (in millions):

(1)Assets from segments below the quantitative thresholds are attributable to operating segments which provide supply chain solutions.

(2)Unallocated assets consist primarily of cash held by our centralized investment entity.

NOTE 13. EARNINGS PER SHARE

Earnings per share amounts are the same for class A and class B common shares as the holders of each class are legally entitled to equal per-share distributions whether through dividends or in liquidation.

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2026 and 2025 (in millions, except per share amounts):

(1)Earnings per share is computed using unrounded amounts.

Diluted earnings per share for the three months ended September 30, 2026 and 2025 excluded the effect of 5.1 and 1.7 million shares of common stock, respectively, that may be issued upon the exercise of employee stock options because such effect would be antidilutive. Antidilutive shares of common stock for the nine months ended September 30, 2026 and 2025 were 5.0 and 1.3 million, respectively.

NOTE 14. DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT

Types of Hedges

Commodity Risk Management

The fuel surcharges that we apply in our U.S. Domestic and International Package businesses are the primary means we employ to reduce the risk of adverse fuel price changes on our business. In order to mitigate the impact of fuel surcharges imposed on us by outside carriers, we regularly adjust the rates we charge for our freight brokerage services.

Foreign Currency Risk Management

To protect against the reduction in value of forecasted foreign currency cash flows from our international package business, we maintain a foreign currency cash flow hedging program. Our most significant foreign currency exposures relate to the Euro, British Pound Sterling, Canadian Dollar, Chinese Renminbi and Hong Kong Dollar. We generally designate and account for these contracts as cash flow hedges of anticipated foreign currency denominated revenue.

We may also hedge portions of our anticipated cash settlements of principal and interest on certain foreign currency denominated debt. We generally designate and account for these contracts as cash flow hedges of forecasted foreign currency denominated transactions.

We hedge our net investment in certain foreign operations with foreign currency denominated debt instruments.

Interest Rate Risk Management

We may use a combination of derivative instruments to manage the fixed and floating interest rate mix of our total debt portfolio and related overall cost of borrowing.

We generally designate and account for interest rate swaps that convert fixed-rate interest payments into floating-rate interest payments as fair value hedges of the associated debt instruments. We designate and account for interest rate swaps that convert floating-rate interest payments into fixed-rate interest payments as cash flow hedges of the forecasted payment obligations.

We may periodically hedge the forecasted fixed-coupon interest payments associated with anticipated debt offerings by using forward starting interest rate swaps, interest rate locks or similar derivatives.

Outstanding Positions

As of September 30, 2026 and December 31, 2025, the notional amounts of our outstanding derivative positions were as follows (in millions):

As of September 30, 2026 and December 31, 2025, we hadno outstanding commodity hedge positions.

Balance Sheet Recognition

The following table indicates the location in our consolidated balance sheets where our derivative assets and liabilities have been recognized, the fair value hierarchy level applicable to each derivative type and the related fair values of those derivatives.

We have master netting arrangements with substantially all of our counterparties giving us the right of offset for our derivative positions. However, we have not elected to offset the fair value positions of our derivative contracts recorded in our consolidated balance sheets. The columns labeled Net Amounts if Right of Offset had been Applied indicate the potential net fair value positions by type of contract and location in our consolidated balance sheets had we elected to apply the right of offset as of September 30, 2026 and December 31, 2025 (in millions):

Our foreign currency exchange rate derivatives are largely comprised of over-the-counter derivatives, which are primarily valued using pricing models that rely on market observable inputs such as yield curves, foreign currency exchange rates and investment forward prices; therefore, these derivatives are classified as Level 2.

Balance Sheet Location of Hedged Item in Fair Value Hedges

The following table indicates the amounts that were recorded in our consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of September 30, 2026 and December 31, 2025 (in millions):

Income Statement and AOCI Recognition of Designated Hedges

The following table indicates the amount of gains (losses) that were recognized in Revenue in our statements of consolidated income for cash flow hedges during the three and nine months ended September 30, 2026 and 2025 (in millions):

The following table indicates the amount of gains (losses) that were recognized in AOCI during the three and nine months ended September 30, 2026 and 2025 for those derivatives designated as cash flow hedges (in millions):

As of September 30, 2026, there were $8 million of pre-tax gains related to cash flow hedges deferred in AOCI that are expected to be reclassified to income over the 12-month period ending September 30, 2027. The actual amounts that will be reclassified to income over the next 12 months will vary from this amount as a result of changes in market conditions. The maximum term over which we are hedging exposures to the variability of cash flows is approximately three years.

The following table indicates the amount of gains (losses) that have been recognized in AOCI within foreign currency translation adjustment during the three and nine months ended September 30, 2026 and 2025 for those instruments designated as net investment hedges (in millions):

NOTE 15. INCOME TAXES

Our effective tax rate for the three months ended September 30, 2026, increased to 26.0% compared to 18.4% in the same period of 2025 (23.9% year to date compared to 21.1% in 2025). The year-over-year increase in our effective tax rate in both the quarter and year-to-date periods was mainly driven by the 2025 valuation allowance release described below and a non-deductible goodwill impairment charge recognized during the third quarter of 2026. For additional information, see note 7. In addition, unfavorable changes in our jurisdictional earnings mix are being offset by favorable changes from the One Big Beautiful Bill Act and creditable foreign taxes in the U.S.

During the nine months ended September 30, 2025, we released all of the valuation allowance on our U.S. capital loss carryforward, resulting in a year-to-date tax benefit of $105 million, including $86 million benefit recognized during the third quarter of 2025.

NOTE 16. TRANSFORMATION STRATEGY COSTS

As previously disclosed, we are undertaking an enterprise-wide transformation of our organization that includes various projects and initiatives, including workforce reductions and changes in processes and technology, that impact our global direct and indirect operating costs.

The table below presents transformation strategy costs for the three and nine months ended September 30, 2026 and 2025 (in millions):

(1)The income tax effects of transformation strategy costs are calculated by multiplying the amount of the adjustments by the statutory tax rates applicable in each tax jurisdiction.

Compensation and benefit costs under these programs primarily consist of severance costs incurred in conjunction with reductions in our workforce. We are primarily accounting for these reductions in workforce under ASC Topic 712 as they have been, or will be, carried out under a plan which provides a contractual termination benefit to impacted employees. The nature of our separation initiatives has resulted in a relatively short period of time, typically less thanone year, between the point at which the separation meets the criteria for recognition as an accrual and the point at which the separation is completed. In the first quarter of 2026, we offered a voluntary separation program, the Driver Choice Program, to all full-time drivers in the United States. The program election window closed in the first quarter of 2026, final acceptances were determined and communicated to impacted employees in the second and third quarter of 2026, and recognition of separation costs related to the program was substantially complete in the third quarter of 2026.

Accruals for separation costs of $158 and $117 million were included in Other current liabilities in our consolidated balance sheets as of September 30, 2026 and December 31, 2025, respectively. During the nine months ended September 30, 2026, we recognized additional separation costs, including payroll taxes, of approximately $1.2 billion and made payments of approximately $1.1 billion.

Other costs incurred in furtherance of our transformation strategy are primarily fees paid to third-party service providers. Any costs incurred as a result of restructuring, exit or disposal activities were not significant and, as period costs, do not give rise to significant restructuring, exit or disposal liabilities.

Transformation strategy costs during the periods presented related to our Transformation 2.0, Fit to Serve, and Network Reconfigurationand Efficiency Reimagined initiatives. Total costs by initiative are shown in the table below for the three and nine months ended September 30, 2026 and 2025 (in millions):

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 has included initiatives within our Transformation 2.0, Fit to Serve, and Network Reconfigurationand Efficiency Reimagined initiatives. Previously completed initiatives within Transformation 2.0 and Fit to Serve are described in note 18 to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.

Network Reconfigurationand 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 and owned buildings,46 of which have been permanently closed. As of September 30, 2026, we had incurred costs to date of $1.9 billion, including $1.4 billion in 2026. 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.