UNITED PARCEL SERVICE INC

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.

In September 2026, we also announced our movement to a new global operating structure designed to enable enterprise-wide decision-making, unlock additional synergies across our businesses, accelerate growth opportunities in complex logistics and enhance our customer service.

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").

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.

We have two 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 Supply Chain Solutions ("SCS").

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.

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.

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:

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

•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.

•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").

•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.

•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).

•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:

◦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.

◦Goodwill and Asset Impairment Charges of $182 million, or $0.21 per diluted share, in the third quarter, related to a reporting unit within SCS. For additional information, see note 7 to the unaudited consolidated financial statements.

◦Gains on Sales of Assets of $33 million, or $0.04 per diluted share, in the third quarter, related to sales of previously impaired aircraft parts. For additional information, see note 5 to the unaudited consolidated financial statements.

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

For additional operational results for the quarter and year-to-date periods specific to our segments, refer to Results of Operations - Segment Review below.