United Parcel Service UPS · USD

NOTE 14. SEGMENT AND GEOGRAPHIC INFORMATION 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 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 PackageU.S. Domestic Package operations include the time-definite delivery of letters, documents and packages throughout the United States.During the quarter ended December 31, 2024, based on a change in our management reporting structure, we began presenting our U.S. air cargo results within our U.S. Domestic Package segment. This activity was previously reported within SCS. This change aligns with how our chief operating decision maker ("CODM") reviews operating results to assess performance and allocate resources. Prior periods have been recast to conform to current presentation with no changes to consolidated results.International PackageInternational 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 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, the Middle East and Africa ("EMEA"), Canada and Latin America (together "Americas") and Asia.SCSSCS 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 informationWe consider our Chief Executive Officer to be our CODM.

NOTE 2. REVENUE RECOGNITIONRevenue RecognitionSubstantially all of our revenues are from contracts associated with the pickup, transportation and delivery of packages and freight ("transportation services"). These services may be carried out by or arranged by us and generally occur over a short period of time. Additionally, we provide value-added logistics services to customers through our global network of company-owned and leased distribution centers and field stocking locations. Disaggregation of Revenue202520242023Revenue:Next Day Air$9,652 $9,703 $9,894 Deferred 4,446 4,757 5,093 Ground44,183 45,347 44,971 Cargo & Other1,238 569 247 U.S. Domestic Package$59,519 $60,376 $60,205 Domestic$3,401 $3,186 $3,144 Export14,479 14,142 14,003 Cargo & Other696 632 684 International Package$18,576 $17,960 $17,831 Forwarding$2,916 $4,728 $5,534 Logistics5,855 6,437 5,927 Other1,795 1,569 1,461 SCS$10,566 $12,734 $12,922 Consolidated revenue$88,661 $91,070 $90,958 As of the fourth quarter of 2024, based on a change in our management reporting structure, U.S. Air Cargo revenue is presented within our U.S. Domestic Package segment and prior periods have been recast. Refer to note 14 for further information.Accounts Receivable, NetIn 2025, we entered into accounts receivable factoring programs with third parties, in which we may sell certain customer receivables to third parties on a revolving periodic 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 Activities in 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 these programs are $860 million. In 2025, we sold $734 million of accounts receivable for net cash proceeds of $730 million. In connection with these programs, we recognized a liability, measured at fair value, related to our estimated recourse obligations recorded within Other current liabilities in our consolidated balance sheet. We also recorded an immaterial loss associated with the transactions within Other Income (Expense) in our statements of consolidated income. As of December 31, 2025, $491 million accounts receivable was outstanding under our factoring programs.

NOTE 9. DEBT AND FINANCING ARRANGEMENTS The carrying value of our outstanding debt obligations, as of December 31, 2025 and 2024 consists of the following (in millions):PrincipalCarrying ValueAmountMaturity20252024Fixed-Rate senior notes:3.900% senior notes$— 2025$— $1,000 2.400% senior notes500 2026500 499 3.050% senior notes1,000 2027998 997 3.400% senior notes750 2029748 748 2.500% senior notes400 2029399 398 4.450% senior notes750 2030747 746 4.650% senior notes500 2030498 — 4.875% senior notes900 2033896 895 5.150% senior notes900 2034894 894 5.250% senior notes1,250 20351,240 — 6.200% senior notes1,500 20381,487 1,486 5.200% senior notes500 2040495 495 4.875% senior notes500 2040492 492 3.625% senior notes375 2042369 369 3.400% senior notes500 2046493 492 3.750% senior notes1,150 20471,138 1,138 4.250% senior notes750 2049744 743 3.400% senior notes700 2049689 689 5.300% senior notes1,250 20501,232 1,232 5.050% senior notes1,100 20531,083 1,083 5.500% senior notes1,100 20541,087 1,087 5.950% senior notes1,250 20551,232 — 5.600% senior notes600 2064590 590 6.050% senior notes1,000 2065985 — Floating-rate senior notes:Floating-rate senior notes1,884 2049-20751,863 1,755 Debentures:7.620% debentures276 2030279 279 Pound Sterling notes:5.500% notes90 203189 83 5.125% notes614 2050585 544 Euro Senior Notes:1.625% notes— 2025— 731 1.000% notes588 2028587 521 1.500% notes588 2032586 521 Finance lease obligations (see note 11)781 2026-2118781 455 Facility notes, bonds & other321 2026-2045321 322 Total debt$24,367 $24,127 $21,284 Less: current maturities of long-term debt and finance leases(608)(1,838)Long-term debt and finance leases$23,519 $19,446 Commercial PaperWe 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 was no commercial paper outstanding as of December 31, 2025 or 2024. The amount of commercial paper outstanding under these programs in 2026 is expected to fluctuate. Debt ClassificationWe 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 RepaymentsOn April 1, 2025, our 3.900% Senior notes with a principal balance of $1.0 billion matured and were repaid in full. On November 15, 2025, our 1.

NOTE 15. INCOME TAXESThe income tax expense (benefit) for 2025, 2024 and 2023 consists of the following (in millions):202520242023Current:U.S. Federal$970 $1,093 $1,012 U.S. State and Local113 172 195 Non-U.S.517 410 459 Total Current1,600 1,675 1,666 Deferred:U.S. Federal(26)38 150 U.S. State and Local7 (30)20 Non-U.S.11 (23)29 Total Deferred(8)(15)199 Total Income Tax Expense$1,592 $1,660 $1,865 Income before income taxes includes the following components (in millions):202520242023United States$5,240 $5,839 $6,246 Non-U.S.1,924 1,603 2,327 Total Income Before Income Taxes$7,164 $7,442 $8,573 The table below provides the updated effective tax rate reconciliation. A reconciliation of the statutory federal income tax rate to the effective income tax rate for 2025 consists of the following (in millions, except percentages):2025$%U.S. Federal Statutory Tax Rate$1,505 21.0 State and Local Income Taxes, Net of Federal Income Tax Effect(1)101 1.4 Foreign Tax Effects168 2.4 Effect of Cross-Border Tax Laws, Net of Related Credits(68)(0.9)Tax Credits(90)(1.3)Changes in Valuation Allowances(91)(1.3)Nontaxable or Nondeductible Items45 0.6 Other Adjustments22 0.3 Effective Income Tax Rate$1,592 22.2 (1) State taxes in California, Illinois, New York, Minnesota, Florida, and Pennsylvania made up the majority (greater than 50 percent) of the tax effect in this category.As previously disclosed, during 2024 and 2023, a reconciliation of the statutory federal income tax rate to the effective income tax rate consists of the following:20242023Statutory U.S. federal income tax rate21.0 %21.0 %U.S. state and local income taxes (net of federal benefit)1.8 1.9 Non-U.S. tax rate differential— (0.6)FDII and GILTI, net(1)(1.2)(0.9)U.S. federal tax credits(0.8)(0.7)Goodwill and other asset impairments— 0.1 Net uncertain tax positions0.2 (0.5)Other1.3 1.5 Effective income tax rate22.3 %21.8 %(1) Foreign-Derived Intangible Income ("FDII") and Global Intangible Low-Taxed Income ("GILTI").Our effective tax rate is affected by recurring factors, such as statutory tax rates in the jurisdictions in which we operate and the relative amounts of taxable income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year, but may not be consistent from year to year. Our effective tax rate was 22.2% in 2025, compared with 22.3% and 21.

NOTE 13. STOCK-BASED COMPENSATIONWe are authorized, under our 2021 Omnibus Incentive Compensation Plan (the "Plan"), to issue non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock units ("RSUs"), and restricted performance shares and performance units ("RPUs", collectively with RSUs, "Restricted Units") underlying 25 million shares. Each award issued in the form of Restricted Units, stock options and other permitted awards reduces the share reserve by one share. We had 6 million shares available to be issued under the Plan as of December 31, 2025.Our primary equity compensation programs are the UPS Long-Term Incentive Performance Award program (the "LTIP") and the UPS Stock Option program. Restricted Units may be granted to certain senior management employees to support employee retention. We also grant Restricted Units to our Board of Directors (the "Board") as a component of their annual compensation. The awards issued under these programs are considered to be equity classified. The total expense recognized in our statements of consolidated income for these stock compensation programs during 2025, 2024 and 2023 was $73, $24 and $220 million, respectively. The associated income tax benefit (expense) recognized in our statements of consolidated income during 2025, 2024 and 2023 was $9, $(18) and $42 million, respectively. The cash income tax benefit received from the exercise of stock options and conversion of Restricted Units to class A shares during 2025, 2024 and 2023 was $2, $110 and $201 million, respectively.Management Incentive Program We maintain the UPS Management Incentive Program (the "MIP") for certain management employees. Non-executive management eligibility under the MIP is determined annually by the executive officers of UPS. Executive officer eligibility is determined annually by the Compensation and Human Capital Committee of the Board (the "Compensation Committee"). The MIP is an incentive-based compensation program, with awards based on annual Company performance. Beginning 2023, MIP awards are paid in cash, unless a participant elects to receive all or a portion of the award in unrestricted shares of class A common stock. As of December 31, 2025, the MIP was classified as a compensation obligation within Accrued wages and withholdings in our consolidated balance sheets. Substantially all MIP awards are settled in cash, based on participant elections.

NOTE 11. LEASESWe 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.AircraftIn addition to the aircraft that we own, we charter aircraft to handle package and cargo volume on certain international trade lanes and domestic routes. Due to the nature of these agreements, primarily being that either party can cancel the agreement with short notice, we have classified these as short-term leases. A majority of our long-term aircraft operating leases are operated by a third party to handle package and cargo volume in geographic regions where, due to government regulations, we are restricted from operating an airline. We also have long-term finance leases for aircraft that we operate. Transportation equipment and other equipmentWe enter into both long-term and short-term leases for transportation equipment to supplement our capacity or meet contractual demands. Some of these assets are leased on a month-to-month basis and the leases can be terminated without penalty. We also enter into equipment leases to increase capacity during periods of high demand. These leases are treated as short-term as the cumulative right of use is less than 12 months over the term of the contract.Some of our transportation and technology equipment leases require us to make additional lease payments based on the underlying usage of the assets. Due to the variable nature of these costs, these are expensed as incurred and are not included in the right-of-use lease asset and associated lease obligation.Sale-leaseback transactionsIn 2025, we entered into sale-leaseback transactions involving a data center and real estate properties.The real estate transactions were entered into under triple-net operating lease agreements with initial terms ranging from 15 to 20 years, which may be renewed. The leases include increases to base rent at rates ranging from 2.5% to 3.0% over the remaining terms of the leases.

NOTE 8. ACQUISITIONS & DISPOSITIONSIn the first quarter of 2025, we acquired Frigo-Trans, an industry-leading, complex healthcare logistics provider based in Germany. In the fourth quarter of 2025, we acquired AHG, a leading North American supply chain management company offering customized third-party logistics and specialized cold chain transportation solutions for the healthcare sector. Both acquisitions are expected to increase our complex cold-chain logistics capabilities internationally. During 2025, we also reacquired development area rights for The UPS Store.The aggregate purchase price for all acquisitions in 2025 was approximately $2.0 billion, net of cash acquired, which is recorded within SCS. Acquisitions were funded using cash from operations. The impact of these acquisitions to our consolidated revenue and net income in 2025 was not material. The estimated fair values of assets acquired and liabilities assumed, for AHG, are subject to change based on completion of our purchase accounting. Certain areas, including the fair value of intangibles, property, plant and equipment, equity method investments included within Other Non-Current Assets, and our estimates of tax positions, are preliminary as of December 31, 2025. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in millions): 2025Cash and cash equivalents$68 Accounts receivable, net102 Other current assets24 Property, plant and equipment, net144 Operating lease right-of-use assets109 Goodwill1,344 Intangible assets, net 1763 Other non-current assets14 Accounts payable and other current liabilities(91)Current maturities of long-term debt(64)Current maturities of operating leases(27)Non-current operating leases(69)Deferred income tax liabilities(197)Long-term finance lease obligations(11)Other non-current liabilities(88)Total purchase price$2,021 (1)Includes $40 million for acquisitions of reacquired development area rights for The UPS Store.Goodwill recognized during 2025 is attributable to expected synergies from future growth. We assigned approximately $1.3 billion of goodwill to SCS and approximately $80 million to our International Package segment, the Americas reporting unit. This goodwill acquired is not expected to be deductible for income tax purposes.

The Risk Committee oversees the Company’s approach to cybersecurity risk assessment and mitigation by, among other things, (i) reviewing the Company’s cybersecurity insurance program, (ii) reviewing the Company’s cybersecurity budget, (iii) discussing the results of various internal cybersecurity audits and periodic independent third-party assessments of the Company’s cybersecurity programs, (iv) being briefed on cybersecurity matters by outside experts, and (v) receiving regular updates from the Company’s Chief Information Security Officer ("CISO") and others on cybersecurity risks, operational metrics, compliance and regulatory developments, training programs, risk mitigation activities, key projects and industry developments. The Company's Chief Legal and Compliance Officer ("CLCO"), Chief Digital and Technology Officer ("CDTO"), CISO and Vice President of Compliance and Internal Audit participate in Risk Committee meetings and meet individually with the Risk Committee on a periodic basis to discuss and address relevant matters, including the Company’s approach to cybersecurity risk assessment and mitigation. The CISO reports to the CDTO, who in turn reports to the Chief Executive Officer ("CEO"). The CISO has more than thirty years of IT experience, has served many years in various information security management roles and has multiple cybersecurity certifications.The Company maintains an enterprise risk management process designed to identify potential events that may affect the achievement of the Company's objectives or have a material adverse effect on the Company. Cybersecurity is among the risks considered as a part of this process. The Company's management, including the CISO, also participates on the Company's Information Security & Privacy Governance Council ("ISPGC"). The ISPGC meets periodically to consider information security and privacy matters.The Company utilizes various technical and qualitative processes to assist in identifying, assessing and managing cybersecurity risks. The Company's processes include periodic discussions and risk reviews with management. These processes also include, depending on facts and circumstances, internal audits, third-party assessments, post-remediation reviews, engagements with independent third-party service providers and key governmental agencies, regular employee training, an incident response plan and backup and recovery plans.