1、Table of ContentsUnited StatesSecurities and Exchange CommissionWashington,D.C.20549_ Form 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2023 orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURI

2、TIES EXCHANGE ACT OF 1934For the transition period from to Commission file number 001-15451_ United Parcel Service,Inc.(Exact name of registrant as specified in its charter)Delaware 58-2480149(State or Other Jurisdiction ofIncorporation or Organization)(IRS EmployerIdentification No.)55 Glenlake Par

3、kway N.E.,Atlanta,Georgia30328(Address of Principal Executive Offices)(Zip Code)(404)828-6000(Registrants telephone number,including area code)_ Securities registered pursuant to Section 12(b)of the Act:Title of Each ClassTrading SymbolName of Each Exchange on Which RegisteredClass B common stock,pa

4、r value$0.01 per shareUPSNew York Stock Exchange0.375%Senior Notes due 2023UPS23ANew York Stock Exchange1.625%Senior Notes due 2025UPS25New York Stock Exchange1%Senior Notes due 2028UPS28New York Stock Exchange1.500%Senior Notes due 2032UPS32New York Stock Exchange Indicate by check mark whether the

5、 registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required tofile such reports),and(2)has been subject to such filing requirements for the past 90 day

6、s.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for suchshorter period that the registrant was required to submit

7、such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer”,“accelerated filer”,“smaller reporting company”and“emer

8、ging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerxAccelerated filerNon-accelerated filer Smaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for comply

9、ing with any new or revised financial accounting standards provided pursuant to Section 13(a)of theExchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No There were 134,106,663 Class A shares,and 724,779,682 Class B shares,w

10、ith a par value of$0.01 per share,outstanding at April 24,2023.Table of ContentsTABLE OF CONTENTSPART IFINANCIAL INFORMATIONCautionary Statement About Forward-Looking Statements1Item 1.Financial Statements2Consolidated Balance Sheets2Statements of Consolidated Income3Statements of Consolidated Compr

11、ehensive Income(Loss)3Statements of Consolidated Cash Flows4Notes to Unaudited,Consolidated Financial Statements5Note 1Basis of Presentation and Accounting Policies5Note 2Recent Accounting Pronouncements7Note 3Revenue Recognition8Note 4Stock-Based Compensation10Note 5Marketable Securities and Non-Cu

12、rrent Investments12Note 6Property,Plant and Equipment15Note 7Employee Benefit Plans16Note 8Goodwill and Intangible Assets18Note 9Debt and Financing Arrangements20Note 10Leases23Note 11Legal Proceedings and Contingencies26Note 12Shareowners Equity27Note 13Segment Information31Note 14Earnings Per Shar

13、e32Note 15Derivative Instruments and Risk Management33Note 16Income Taxes37Note 17Transformation Strategy Costs38Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations39Overview39Supplemental Information-Items Affecting Comparability41Results of Operations-Segmen

14、t Review43U.S.Domestic Package Operations44International Package Operations47Supply Chain Solutions Operations50Consolidated Operating Expenses52Other Income and(Expense)55Income Tax Expense56Liquidity and Capital Resources57Cash Flows From Operating Activities57Cash Flows From Investing Activities5

15、8Cash Flows From Financing Activities59Sources of Credit60Contractual Commitments60Legal Proceedings and Contingencies60Collective Bargaining Agreements60Recent Accounting Pronouncements60Item 3.Quantitative and Qualitative Disclosures About Market Risk61Item 4.Controls and Procedures62PART IIOTHER

16、INFORMATIONItem 1.Legal Proceedings63Item 1A.Risk Factors63Item 2.Unregistered Sales of Equity Securities and Use of Proceeds64Item 6.Exhibits65Table of ContentsPART I.FINANCIAL INFORMATIONCautionary Statement About Forward-Looking StatementsThis report,our Annual Report on Form 10-K for the year en

17、ded December 31,2022 and our other filings with the Securities and Exchange Commission contain and inthe future may contain“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995.Statements other than those of current orhistorical fact,and all statement

18、s accompanied by terms such as“will,”“believe,”“project,”“expect,”“estimate,”“assume,”“intend,”“anticipate,”“target,”“plan,”and similarterms,are intended to be forward-looking statements.Forward-looking statements are made subject to the safe harbor provisions of the federal securities laws pursuant

19、 toSection 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.From time to time,we also include written or oral forward-looking statements in other publicly disclosed materials.Such statements may relate to our intent,belief,forecasts of,or current expectations

20、about our strategic direction,prospects,future results,or future events;they do not relate strictly to historical or current facts.Managementbelieves that these forward-looking statements are reasonable as and when made.However,caution should be taken not to place undue reliance on any forward-looki

21、ngstatements because such statements speak only as of the date when made and the future,by its very nature,cannot be predicted with certainty.Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience

22、and our presentexpectations or anticipated results.These risks and uncertainties include,but are not limited to,the impact of:continued uncertainties related to the COVID-19 pandemic;changes in general economic conditions,in the U.S.or internationally;industry evolution and significant competition;c

23、hanges in our relationships with any of our significantcustomers;our ability to attract and retain qualified employees;strikes,work stoppages or slowdowns by our employees;results of negotiations and ratifications of laborcontracts;our ability to maintain our brand image and corporate reputation;inc

24、reased or more complex physical security requirements;a significant data breach or informationtechnology system disruption;global climate change;interruptions in or impacts on our business from natural or man-made events or disasters including terrorist attacks,epidemics or pandemics;exposure to cha

25、nging economic,political and social developments in international markets;our ability to realize the anticipated benefits fromacquisitions,dispositions,joint ventures or strategic alliances;changing prices of energy,including gasoline,diesel and jet fuel,or interruptions in supplies of thesecommodit

26、ies;changes in exchange rates or interest rates;our ability to accurately forecast our future capital investment needs;significant expenses and funding obligationsrelating to employee health,retiree health and/or pension benefits;our ability to manage insurance and claims expenses;changes in busines

27、s strategy,government regulations,or economic or market conditions that may result in impairments of our assets;potential additional U.S.or international tax liabilities;increasingly stringent laws andregulations,including relating to climate change;potential claims or litigation related to labor an

28、d employment,personal injury,property damage,business practices,environmental liability and other matters;and other risks discussed in our filings with the Securities and Exchange Commission from time to time,including our Annual Reporton Form 10-K for the year ended December 31,2022,and subsequentl

29、y filed reports.You should consider the limitations on,and risks associated with,forward-lookingstatements and not unduly rely on the accuracy of predictions contained in such forward-looking statements.We do not undertake any obligation to update forward-lookingstatements to reflect events,circumst

30、ances,changes in expectations,or the occurrence of unanticipated events after the date of those statements,except as required by law.1Table of ContentsItem 1.Financial StatementsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSMarch 31,2023(unaudited)and December 31,2022(in milli

31、ons)March 31,2023December 31,2022ASSETSCurrent Assets:Cash and cash equivalents$6,190$5,602 Marketable securities3,208 1,993 Accounts receivable10,448 12,729 Less:Allowance for credit losses(149)(146)Accounts receivable,net10,299 12,583 Other current assets2,028 2,039 Total Current Assets21,725 22,2

32、17 Property,Plant and Equipment,Net34,995 34,719 Operating Lease Right-Of-Use Assets4,089 3,755 Goodwill4,249 4,223 Intangible Assets,Net2,811 2,796 Deferred Income Tax Assets155 139 Other Non-Current Assets4,165 3,275 Total Assets$72,189$71,124 LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:

33、Current maturities of long-term debt,commercial paper and finance leases$2,332$2,341 Current maturities of operating leases668 621 Accounts payable6,302 7,515 Accrued wages and withholdings3,012 4,049 Self-insurance reserves1,069 1,069 Accrued group welfare and retirement plan contributions1,196 1,0

34、78 Other current liabilities1,683 1,467 Total Current Liabilities16,262 18,140 Long-Term Debt and Finance Leases19,856 17,321 Non-Current Operating Leases3,539 3,238 Pension and Postretirement Benefit Obligations4,602 4,807 Deferred Income Tax Liabilities4,345 4,302 Other Non-Current Liabilities3,53

35、2 3,513 Shareowners Equity:Class A common stock(135 and 134 shares issued in 2023 and 2022,respectively)2 2 Class B common stock(724 and 725 shares issued in 2023 and 2022,respectively)7 7 Additional paid-in capital Retained earnings21,510 21,326 Accumulated other comprehensive loss(1,481)(1,549)Def

36、erred compensation obligations9 13 Less:Treasury stock(0.2 shares in both 2023 and 2022)(9)(13)Total Equity for Controlling Interests20,038 19,786 Noncontrolling interests15 17 Total Shareowners Equity20,053 19,803 Total Liabilities and Shareowners Equity$72,189$71,124 See notes to unaudited,consoli

37、dated financial statements.2Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESSTATEMENTS OF CONSOLIDATED INCOME(In millions,except per share amounts)(unaudited)Three Months Ended March 31,20232022Revenue$22,925$24,378 Operating Expenses:Compensation and benefits11,462 11,601 Repairs and mai

38、ntenance725 701 Depreciation and amortization834 764 Purchased transportation3,543 4,607 Fuel1,271 1,220 Other occupancy551 501 Other expenses1,998 1,733 Total Operating Expenses20,384 21,127 Operating Profit2,541 3,251 Other Income and(Expense):Investment income and other169 315 Interest expense(18

39、8)(174)Total Other Income and(Expense)(19)141 Income Before Income Taxes2,522 3,392 Income Tax Expense627 730 Net Income$1,895$2,662 Basic Earnings Per Share$2.20$3.05 Diluted Earnings Per Share$2.19$3.03 STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME(LOSS)(In millions)(unaudited)Three Months Ended

40、 March 31,20232022Net Income$1,895$2,662 Change in foreign currency translation adjustment,net of tax118(40)Change in unrealized gain(loss)on marketable securities,net of tax7(6)Change in unrealized gain(loss)on cash flow hedges,net of tax(77)43 Change in unrecognized pension and postretirement bene

41、fit costs,net of tax20 24 Comprehensive Income(Loss)$1,963$2,683 See notes to unaudited,consolidated financial statements.3Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESSTATEMENTS OF CONSOLIDATED CASH FLOWS(In millions)(unaudited)Three Months Ended March 31,20232022Cash Flows From Opera

42、ting Activities:Net income$1,895$2,662 Adjustments to reconcile net income to net cash from operating activities:Depreciation and amortization834 764 Pension and postretirement benefit(income)expense243 201 Pension and postretirement benefit contributions(1,277)(45)Self-insurance reserves(20)(45)Def

43、erred tax(benefit)expense56 209 Stock compensation expense126 386 Other(gains)losses(13)44 Changes in assets and liabilities,net of effects of business acquisitions:Accounts receivable2,254 1,227 Other assets62 7 Accounts payable(1,668)(743)Accrued wages and withholdings(508)(343)Other liabilities40

44、5 173 Other operating activities(32)(17)Net cash from operating activities2,357 4,480 Cash Flows From Investing Activities:Capital expenditures(609)(548)Proceeds from disposal of businesses,property,plant and equipment5 Purchases of marketable securities(2,371)(68)Sales and maturities of marketable

45、securities1,179 60 Acquisitions,net of cash acquired(34)1 Other investing activities17(17)Net cash used in investing activities(1,813)(572)Cash Flows From Financing Activities:Net change in short-term debt Proceeds from long-term borrowings2,503 Repayments of long-term borrowings(65)(18)Purchases of

46、 common stock(751)(254)Issuances of common stock49 67 Dividends(1,348)(1,284)Other financing activities(384)(481)Net cash from/(used in)financing activities4(1,970)Effect of Exchange Rate Changes on Cash,Cash Equivalents and Restricted Cash40 15 Net Increase(Decrease)in Cash,Cash Equivalents and Res

47、tricted Cash588 1,953 Cash,Cash Equivalents and Restricted Cash:Beginning of period5,602 10,255 End of period$6,190$12,208 See notes to unaudited,consolidated financial statements.4Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 1.B

48、ASIS OF PRESENTATION AND ACCOUNTING POLICIESPrinciples of ConsolidationThe accompanying interim unaudited,consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the UnitedStates(GAAP)for interim financial information and with the instructi

49、ons to Form 10-Q and Rule 10-01 of Regulation S-X.These interim unaudited,consolidated financialstatements contain all adjustments(consisting of normal recurring accruals)necessary to present fairly our financial position as of March 31,2023 and our results of operationsand cash flows for the three

50、months ended March 31,2023 and 2022.The results reported in these interim unaudited,consolidated financial statements should not be regardedas indicative of results that may be expected for any other period or the entire year.The interim unaudited,consolidated financial statements should be read in

51、conjunction withthe audited,consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31,2022.During the first quarter of 2023,we reclassified certain operating expenses to better align with the manner in which we manage our operations

52、.Substantially all of thesecosts were previously classified within operating expenses as Other expenses and have now been classified within operating expenses as Repairs and maintenance in thestatements of consolidated income.The remaining line items within operating expenses impacted by this reclas

53、sification were inconsequential.As a result,the statements ofconsolidated income for the three months ended March 31,2023 and 2022 give effect to this reclassification by decreasing Other expenses by$88 and$77 million,respectively,and increasing Repairs and maintenance by$83 and$75 million,respectiv

54、ely.The reclassification had no impact on our reported revenue,operating profit,net income,or anyinternal performance measure on which management is compensated.Fair Value of Financial InstrumentsThe carrying amounts of our cash and cash equivalents,accounts receivable,finance receivables and accoun

55、ts payable approximated fair value as of March 31,2023 andDecember 31,2022.The fair values of our marketable securities are disclosed in note 5,our recognized multiemployer pension withdrawal liabilities in note 7,our short-andlong-term debt in note 9 and our derivative instruments in note 15.We app

56、ly a fair value hierarchy(Levels 1,2 and 3)when measuring and reporting items at fair value.Fairvalues are based on listed market prices(Level 1),when such prices are available.To the extent that listed market prices are not available,fair value is determined based on otherrelevant factors,including

57、 dealer price quotations(Level 2).If listed market prices or other relevant factors are not available,inputs are developed from unobservable datareflecting our own assumptions and include situations where there is little or no market activity for the asset or liability(Level 3).Use of EstimatesThe p

58、reparation of the accompanying interim unaudited,consolidated financial statements requires management to make estimates and judgments that affect the reportedamounts of assets and liabilities and the disclosure of contingencies at the date of these financial statements,as well as the reported amoun

59、ts of revenues and expenses duringthe reporting period.Although our estimates contemplate current and expected future conditions,as applicable,it is reasonably possible that actual conditions could differ from ourexpectations,which could materially affect our results of operations and financial posi

60、tion.As a result,our accounting estimates and assumptions may change significantly overtime.5Table of ContentsSupplier Finance ProgramsAs part of our working capital management,certain financial institutions offer a Supply Chain Finance(SCF)program to certain of our suppliers.We agree tocommercial t

61、erms with our suppliers,including prices,quantities and payment terms,regardless of whether the supplier elects to participate in the SCF program.Suppliers issueinvoices to us based on the agreed-upon contractual terms.If they participate in the SCF program,our suppliers,at their sole discretion,det

62、ermine which invoices,if any,to sellto the financial institutions.Our suppliers voluntary inclusion of invoices in the SCF program has no bearing on our payment terms.No guarantees are provided by us under theSCF program.We have no economic interest in a suppliers decision to participate,and we have

63、 no direct financial relationship with the financial institutions,as it relates to theSCF program.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 theparticipating financial institutions that

64、 as of March 31,2023 and December 31,2022,suppliers sold them$628 and$806 million,respectively,of our outstanding paymentobligations.6Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 2.RECENT ACCOUNTING PRONOUNCEMENTSAdoption of New

65、Accounting StandardsIn September 2022,the Financial Accounting Standards Board issued an Accounting Standards Update(ASU)to enhance the disclosure of supplier finance programs.This ASU did not affect the recognition,measurement or financial statement presentation of obligations covered by supplier f

66、inance programs.We adopted the requirements ofthis ASU as of January 1,2023 and have included required disclosures within note 1.Other accounting pronouncements adopted during the periods covered by the unaudited,consolidated financial statements did not have a material impact on ourconsolidated fin

67、ancial position,results of operations or cash flows.Accounting Standards Issued But Not Yet EffectiveAccounting pronouncements issued before,but not effective until after,March 31,2023,are not expected to have a material impact on our consolidated financial position,results of operations,cash flows

68、or internal controls.7Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 3.REVENUE RECOGNITIONRevenue RecognitionSubstantially all of our revenues are from contracts associated with the pickup,transportation and delivery of packages an

69、d freight(“transportation services”).Theseservices 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 throughour global network of distribution centers and field stocking locations.The vast major

70、ity of our contracts with customers are for transportation services that include only one performance obligation;the transportation services themselves.Wegenerally recognize revenue over time,based on the extent of progress towards completion of the services in the contract.All of our major business

71、es act as a principal in theirrevenue 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 RevenueThree Months Ended March 31,20232022Revenue:Next Day Air$2,461$2,594 Deferred1,194

72、 1,420 Ground11,332 11,110 U.S.Domestic Package14,987 15,124 Domestic794 851 Export3,552 3,778 Cargo&Other197 247 International Package4,543 4,876 Forwarding1,514 2,589 Logistics1,410 1,251 Other471 538 Supply Chain Solutions3,395 4,378 Consolidated revenue$22,925$24,378 Contract Assets and Liabilit

73、iesContract assets include billed and unbilled amounts resulting from in-transit shipments,as we have an unconditional right to payment only when services have beencompleted(i.e.shipments have been delivered).Amounts do not exceed their net realizable value.Contract assets are generally classified a

74、s current and the full balance isconverted each quarter based on the short-term nature of the transactions.Contract liabilities consist of advance payments and billings in excess of revenue as well as deferred revenue.Advance payments and billings in excess of revenuerepresent payments received from

75、 our customers that will be earned over the contract term.Deferred revenue represents the amount due from customers related to in-transitshipments that has not yet been recognized as revenue based on our selected measure of progress.We classify advance payments and billings in excess of revenue as e

76、ithercurrent or long-term,depending on the period over which the amount will be earned.We classify deferred revenue as current based on the short-term nature of the transactions.Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each repo

77、rting period.In order to determine revenue recognized inthe period from contract liabilities,we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds thatdeferred revenue balance.8Table of ContentsUNITED PARCEL SERVIC

78、E,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSContract assets and liabilities as of March 31,2023 and December 31,2022 were as follows(in millions):Balance Sheet LocationMarch 31,2023December 31,2022Contract Assets:Revenue related to in-transit packagesOther current asset

79、s$267$308 Contract Liabilities:Short-term advance payments from customersOther current liabilities$10$11 Long-term advance payments from customersOther non-current liabilities$25$26 Accounts Receivable,NetAccounts receivable,net,include amounts billed and currently due from customers.The amounts due

80、 are stated at their net estimated realizable value.Losses on accountsreceivable are recognized when reasonable and supportable forecasts affect the expected collectability.This requires us to make our best estimate of the current expected lossesinherent in our accounts receivable at each balance sh

81、eet date.This estimate requires consideration of historical loss experience,adjusted for current conditions,forwardlooking indicators,trends in customer payment frequency and judgments about the probable effects of relevant observable data,including present and future economicconditions and the fina

82、ncial health of specific customers and market sectors.Our risk management process includes standards and policies for reviewing major accountexposures and concentrations of risk.Amounts for credit losses charged to expense,before recoveries,during each of the three months ended March 31,2023 and 202

83、2,were$43 and$54 million,respectively.9Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 4.STOCK-BASED COMPENSATIONWe issue share-based awards under various incentive compensation plans,including non-qualified and incentive stock opti

84、ons,stock appreciation rights,restricted stockand stock units(RSUs)and restricted performance shares and performance units(RPUs,collectively with RSUs,Restricted Units).Upon vesting,Restricted Units resultin the issuance of the equivalent number of UPS class A common shares after required tax withho

85、ldings.Dividends accrued on Restricted Units are reinvested in additionalRestricted Units at each dividend payable date and are subject to the same vesting and forfeiture conditions as the underlying Restricted Units.Our primary equity compensation programs are the UPS Management Incentive Program(t

86、he MIP),the UPS Long-Term Incentive Performance Program(the LTIP)and the UPS Stock Option program.We also maintain an employee stock purchase plan which allows eligible employees to purchase shares of UPS class A common stock at adiscount.Pre-tax compensation expense for share-based awards recognize

87、d in Compensation and benefits in the statements of consolidated income for the three months endedMarch 31,2023 and 2022 was$126 and$386 million,respectively.Management Incentive ProgramRPUs issued under the MIP prior to 2022 vested one year following the grant date based on continued employment wit

88、h the Company and were expensed on a straight-line basis(less estimated forfeitures)over the requisite service period.In cases of death,disability or retirement,RPUs vested and were expensed immediately.On November 2,2022,the Compensation and Human Capital Committee of the UPS Board of Directors(the

89、 Compensation Committee)amended and restated theterms and conditions of the MIP effective January 1,2023,such that awards earned will be fully electable in the form of cash or unrestricted shares of class A common stock.The terms and conditions governing the 2022 MIP were also amended and restated t

90、o fully vest RPUs to be issued in connection therewith as of December 31,2022.As a result,the award was classified as a compensation obligation and recorded in Accrued wages and withholdings on the consolidated balance sheet at that date.Based on the Compensation Committees approval of the 2022 MIP,

91、we determined the award measurement date to be February 8,2023 for U.S.-based employees andexecutive management,and March 20,2023 for international employees.Each RPU issued under the MIP was valued using the closing New York Stock Exchange(NYSE)prices of$186.36 and$183.49 on those dates.The compens

92、ation obligation recognized as of December 31,2022 was relieved and the issuance of RPUs was recorded asAdditional Paid-in Capital on the measurement date.Long-Term Incentive Performance ProgramRPUs issued under the LTIP vest at the end of a three-year performance period,assuming continued employmen

93、t with the Company(except in the case of death,disability or retirement,in which case immediate vesting occurs on a prorated basis).The actual number of RPUs earned is based on achievement of the performance targetsestablished on the grant date.The performance targets are equally weighted between ad

94、justed earnings per share and cumulative free cash flow.The actual number of RPUs earned is subject toadjustment based on total shareholder return relative to the Standard&Poors 500 Index(S&P 500).We determine the grant date fair value of the RPUs using a Monte Carlomodel and recognize compensation

95、expense(less estimated forfeitures)ratably over the vesting period,based on the number of awards expected to be earned.Based on the Compensation Committees approval of the 2023 LTIP award performance targets,we determined March 22,2023 to be the award measurement date andeach target RPU awarded was

96、valued at$200.01.10Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSThe weighted-average assumptions used and the weighted-average fair values of the LTIP awards granted in 2023 and 2022 are as follows:20232022Risk-free interest rate3.81%

97、2.35%Expected volatility30.30%31.92%Weighted-average fair value of RPUs granted$200.01$227.00 Share payout107.80%107.37%There is no expected dividend yield as units earn dividend equivalents.Non-Qualified Stock OptionsWe grant non-qualified stock options to a limited group of eligible senior managem

98、ent employees under the UPS Stock Option program.Stock option awards vest over afive-year period with approximately 20%of the award vesting at each anniversary of the grant date(except in the case of death,disability or retirement,in which caseimmediate vesting occurs).The option grants expire 10 ye

99、ars after the date of the grant.On March 22,2023,we granted 0.1 million stock options at an exercise price of$185.54,the NYSE closing price on that date.The fair value of each option granted is estimated using a Black-Scholes option pricing model.The weighted-average assumptions used and the weighte

100、d-average fairvalues of options granted in 2023 and 2022 are as follows:20232022Expected dividend yield3.54%2.35%Risk-free interest rate3.70%2.39%Expected life(in years)5.937.5Expected volatility28.31%25.04%Weighted-average fair value of options granted$41.08$48.45 11Table of ContentsUNITED PARCEL S

101、ERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 5.MARKETABLE SECURITIES AND NON-CURRENT INVESTMENTSThe following is a summary of marketable securities classified as trading and available-for-sale as of March 31,2023 and December 31,2022(in millions):CostUnrealized

102、GainsUnrealizedLossesEstimatedFair ValueMarch 31,2023:Current trading marketable securities:Equity securities$6$6 Total trading marketable securities6 6 Current available-for-sale securities:U.S.government and agency debt securities761 2(4)759 Mortgage and asset-backed debt securities9 9 Corporate d

103、ebt securities2,279 3(6)2,276 U.S.state and local municipal debt securities3 3 Non-U.S.government debt securities155 155 Total available-for-sale marketable securities3,207 5(10)3,202 Total current marketable securities$3,213$5$(10)$3,208 CostUnrealizedGainsUnrealizedLossesEstimatedFair ValueDecembe

104、r 31,2022:Current trading marketable securities:Equity securities$2$2 Total trading marketable securities2 2 Current available-for-sale securities:U.S.government and agency debt securities355 (8)347 Mortgage and asset-backed debt securities9 9 Corporate debt securities1,472 (6)1,466 U.S.state and lo

105、cal municipal debt securities4 4 Non-U.S.government debt securities165 165 Total available-for-sale marketable securities2,005 (14)1,991 Total current marketable securities$2,007$(14)$1,993 Investment ImpairmentsWe have concluded that no material impairment losses existed as of March 31,2023.In maki

106、ng this determination,we considered the financial condition and prospects ofeach issuer,the magnitude of the losses compared with the cost,the probability that we will be unable to collect all amounts due according to the contractual terms of thesecurity,the credit rating of the security and our abi

107、lity and intent to hold these investments until the anticipated recovery in market value occurs.12Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSMaturity InformationThe amortized cost and estimated fair value of marketable securities as

108、 of March 31,2023 by contractual maturity are shown below(in millions).Actual maturities maydiffer from contractual maturities because the issuers of the securities may have the right to prepay obligations with or without prepayment penalties.CostEstimatedFair ValueDue in one year or less$1,727$1,72

109、6 Due after one year through three years1,478 1,474 Due after three years through five years2 2 Due after five years 3,207 3,202 Equity securities6 6$3,213$3,208 Non-Current InvestmentsWe hold non-current investments that are reported within Other Non-Current Assets in our consolidated balance sheet

110、s.Cash paid for these investments is included inOther investing activities in our statements of consolidated cash flows.Equity method investments:As of March 31,2023 and December 31,2022,equity securities accounted for under the equity method had a carrying value of$257 and$256 million,respectively.

111、Other equity securities:Certain equity securities that do not have readily determinable fair values are reported in accordance with the measurement alternative in ASCTopic 321 Investments-Equity Securities.As of March 31,2023 and December 31,2022,we held equity securities accounted for using the mea

112、surement alternative of$33 and$31 million,respectively.Other investments:We hold an investment in a variable life insurance policy to fund benefits for the UPS Excess Coordinating Benefit Plan.The investment had a fairmarket value of$19 and$18 million as of March 31,2023 and December 31,2022,respect

113、ively.Fair Value MeasurementsMarketable securities valued utilizing Level 1 inputs include active exchange-traded equity securities and equity index funds,and most U.S.government debt securities,as these securities all have quoted prices in active markets.Marketable securities valued utilizing Level

114、 2 inputs include asset-backed securities,corporate bonds and municipalbonds.These securities are valued using market corroborated pricing,matrix pricing or other models that utilize observable inputs such as yield curves.13Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITE

115、D CONSOLIDATED FINANCIAL STATEMENTSThe following table presents information about our investments measured at fair value on a recurring basis as of March 31,2023 and December 31,2022,and indicatesthe fair value hierarchy of the valuation techniques utilized to determine such fair value(in millions):

116、Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)Total March 31,2023:Marketable Securities:U.S.government and agency debt securities$759$759 Mortgage and asset-backed debt securities 9 9 Corporate debt securiti

117、es 2,276 2,276 U.S.state and local municipal debt securities 3 3 Equity securities 6 6 Non-U.S.government debt securities 155 155 Total marketable securities759 2,449 3,208 Other non-current investments 19 19 Total$759$2,468$3,227 Represents a variable life insurance policy funding benefits for the

118、UPS Excess Coordinating Benefit Plan.December 31,2022:Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)TotalMarketable Securities:U.S.government and agency debt securities$279$68$347 Mortgage and asset-backed d

119、ebt securities 9 9 Corporate debt securities 1,466 1,466 U.S.state and local municipal debt securities 4 4 Equity securities 2 2 Non-U.S.government debt securities 165 165 Total marketable securities279 1,714 1,993 Other non-current investments 18 18 Total$279$1,732$2,011 Represents a variable life

120、insurance policy funding benefits for the UPS Excess Coordinating Benefit Plan.There were no transfers of investments into or out of Level 3 during the three months ended March 31,2023 or 2022.(1)(1)(1)(1)14Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FI

121、NANCIAL STATEMENTSNOTE 6.PROPERTY,PLANT AND EQUIPMENTProperty,plant and equipment as of March 31,2023 and December 31,2022 consisted of the following(in millions):20232022Vehicles$10,840$10,628 Aircraft22,638 22,598 Land2,143 2,140 Buildings6,122 6,032 Building and leasehold improvements5,142 5,067

122、Plant equipment16,454 16,145 Technology equipment2,445 2,411 Construction-in-progress2,544 2,409 68,328 67,430 Less:Accumulated depreciation and amortization(33,333)(32,711)Property,Plant and Equipment,Net$34,995$34,719 Property,plant and equipment purchased on account was$626 and$176 million as of

123、March 31,2023 and December 31,2022,respectively.There were no material impairment charges during the three months ended March 31,2023 or 2022.15Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 7.EMPLOYEE BENEFIT PLANSCompany-Sponsore

124、d Benefit PlansInformation about the net periodic benefit cost(income)for our company-sponsored pension and postretirement benefit plans for the three months ended March 31,2023and 2022 is as follows(in millions):U.S.Pension BenefitsU.S.PostretirementMedical BenefitsInternationalPension Benefits2023

125、20222023202220232022Three Months Ended March 31:Service cost$293$506$5$8$11$18 Interest cost627 488 29 20 17 12 Expected return on assets(742)(820)(3)(1)(21)(20)Amortization of prior service cost27 23 Settlement and curtailment(gain)loss (33)Net periodic benefit cost(income)$205$197$31$27$7$(23)The

126、components of net periodic benefit cost(income)other than current service cost are presented within Investment income and other in the statements of consolidatedincome.During the first quarter of 2022,we amended the UPS Canada Ltd.Retirement Plan to cease future benefit accruals effective December 3

127、1,2023.We remeasured planassets and benefit obligations for this plan,which resulted in a curtailment gain of$33 million($24 million after-tax)during the three-month period.The gain is included inInvestment income and other in the statement of consolidated income.During the first quarter of 2023,we

128、contributed$1.2 billion and$74 million to our company-sponsored pension and U.S.postretirement medical benefit plans,respectively.We expect to contribute approximately$78 and$44 million over the remainder of the year to our pension and U.S.postretirement medical benefit plans,respectively.Multiemplo

129、yer Benefit PlansWe 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.Our current collective bargaining agreements set forth the annual contribution increases allotted to

130、 the plans that we participate in,and we are incompliance with these contribution rates.These limitations on annual contribution rates will remain in effect throughout the terms of the existing collective bargainingagreements.As of March 31,2023 and December 31,2022,we had$819 and$821 million,respec

131、tively,recorded in Other Non-Current Liabilities in our consolidated balance sheetsand$8 million as of March 31,2023 and December 31,2022 recorded in Other current liabilities in our consolidated balance sheets associated with our previous withdrawalfrom the New England Teamsters and Trucking Indust

132、ry Pension Fund.This liability is payable in equal monthly installments over a remaining term of approximately 40 years.Based on the borrowing rates currently available to us for long-term financing of a similar maturity,the fair value of this withdrawal liability as of March 31,2023 andDecember 31,

133、2022 was$710 and$686 million,respectively.We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of thisliability.UPS was a contributing employer to the Central States Pension Fund(“CSPF”)until 2007 at which time UPS withdrew from the CSPF.Under a

134、collective bargainingagreement with the International Brotherhood of Teamsters(“IBT”),UPS agreed to provide coordinating benefits in the UPS/IBT Full Time Employee Pension Plan(“UPS/IBTPlan”)for UPS participants whose last employer was UPS and who had not retired as of January 1,2008(“the UPS Transf

135、er Group”)in the event that benefits are reduced bythe 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 ourconsent and can only be reduced in accordance with law.Subsequent to our withdrawal,the

136、 CSPF incurred extensive asset losses and indicated that it was projected to becomeinsolvent.In such event,the CSPF benefits would be reduced to the legally permitted Pension Benefit Guaranty Corporation(PBGC)limits,triggering the coordinatingbenefits provision in the collective bargaining agreement

137、.16Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSIn March 2021,the American Rescue Plan Act(“ARPA”)was enacted into law.The ARPA contains provisions that allow for qualifying multiemployer pension plans toapply for special financial as

138、sistance(SFA)from the PBGC,which will be funded by the U.S.government.Following SFA approval,a qualifying multiemployer pension planwill receive a lump sum payment to enable it to continue paying unreduced pension benefits through 2051.The multiemployer plan is not obligated to repay the SFA.TheARPA

139、 is intended to prevent both the PBGC and certain financially distressed multiemployer pension plans,including the CSPF,from becoming insolvent through 2051.TheCSPF submitted an application for SFA that was approved in December 2022 and,in January 2023,the CSPF received$35.8 billion from the PBGC.We

140、 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 inmeasuring our pension benefit obligation at the December 31st measurement date.As of December 31,2022,our best estimate of coordinati

141、ng benefits that may be required tobe paid by the UPS/IBT Plan after SFA funds have been exhausted was immaterial.The value of our estimate for future coordinating benefits will continue to be influenced by a number of factors,including interpretations of the ARPA,future legislativeactions,actuarial

142、 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 projectedbenefit obligation.We will continue to assess the impact of these uncertainties in accordance with ASC Topic 715.Collective Bargaining AgreementsWe

143、have approximately 330,000 employees in the U.S.employed under a national master agreement and various supplemental agreements with local unions affiliatedwith the Teamsters.These agreements run through July 31,2023.We have begun negotiating successor agreements with the Teamsters.We are negotiating

144、 in good faith in aneffort to reach an agreement that is in the best interests of our employees,the Teamsters and UPS;however,no assurances of our ability to do so,or the timing or terms thereof,can be provided.Customers may reduce their business or stop doing business with us if they believe that s

145、uch actions or threatened actions may adversely affect our ability toprovide services.We may permanently lose customers if we are unable to provide uninterrupted service,and this could materially adversely affect us.The terms of futurecollective bargaining agreements also may affect our competitive

146、position and results of operations.Furthermore,our actions or responses to any such negotiations,labordisputes,strikes or work stoppages could negatively impact how our brand is perceived and our corporate reputation and have adverse effects on our business,including ourresults of operations.We have

147、 approximately 10,000 employees in Canada employed under a collective bargaining agreement with theTeamsters which runs through July 31,2025.We have approximately 3,500 pilots who are employed under a collective bargaining agreement with the Independent Pilots Association(IPA).This collectivebargain

148、ing agreement becomes amendable September 1,2025.We have approximately 1,800 airline mechanics who are covered by a collective bargaining agreement with Teamsters Local 2727 which becomes amendable November1,2026.In addition,approximately 3,100 of our auto and maintenance mechanics who are not emplo

149、yed under agreements with the Teamsters are employed under collectivebargaining agreements with the International Association of Machinists and Aerospace Workers(“IAM”).The collective bargaining agreement with the IAM runs through July31,2024.17Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIA

150、RIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 8.GOODWILL AND INTANGIBLE ASSETSThe following table indicates the allocation of goodwill as of March 31,2023 and December 31,2022(in millions):U.S.DomesticPackageInternationalPackageSupply ChainSolutionsConsolidatedDecember 31,2022:$847$49

151、2$2,884$4,223 Acquired 9 9 Impairments (8)(8)Currency/Other 6 19 25 March 31,2023:$847$498$2,904$4,249 During the three months ended March 31,2023,we recorded goodwill adjustments of$9 million relating to our November 2022 acquisition of Bomi Group.Certain areas,including our estimates of tax positi

152、ons for Bomi Group,remain preliminary as of March 31,2023.Additionally,we recorded an immaterial impairment charge related to the closure of a trade management services business within Supply Chain Solutions.The remainingmovements are due to the impact of changes in the value of the U.S.Dollar on th

153、e translation of non-U.S.Dollar goodwill balances.We complete our annual goodwill impairment evaluation as of July 1st on a reporting unit basis.Our 2022 annual impairment testing indicated that the fair value ofgoodwill associated with our Roadie reporting unit remained greater than its carrying va

154、lue,although this excess was less than 10 percent.The goodwill associated with ourRoadie reporting unit as of March 31,2023 was$241 million.There were no events or changes in circumstances during the first quarter of 2023 that would indicate the carryingamount of Roadie goodwill may be impaired as o

155、f the date of this report.For each of our reporting units and our indefinite-lived trade name,we continue to monitor the combined impact of macroeconomic conditions and business performanceon our estimates of fair value.18Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED

156、CONSOLIDATED FINANCIAL STATEMENTSThe following is a summary of intangible assets as of March 31,2023 and December 31,2022(in millions):Gross CarryingAmountAccumulatedAmortizationNet CarryingValueMarch 31,2023:Capitalized software$5,300$(3,598)$1,702 Licenses55(34)21 Franchise rights261(39)222 Custom

157、er relationships880(474)406 Trade name126(10)116 Trademarks,patents and other177(37)140 Amortizable intangible assets$6,799$(4,192)$2,607 Indefinite-lived intangible assets204 204 Total Intangible Assets,Net$7,003$(4,192)$2,811 December 31,2022:Capitalized software$5,186$(3,500)$1,686 Licenses55(30)

158、25 Franchise rights226(37)189 Customer relationships872(453)419 Trade name125(8)117 Trademarks,patents and other183(27)156 Amortizable intangible assets$6,647$(4,055)$2,592 Indefinite-lived intangible assets204 204 Total Intangible Assets,Net$6,851$(4,055)$2,796 A trade name and licenses with carryi

159、ng values of$200 and$4 million,respectively,as of March 31,2023 are deemed to be indefinite-lived intangible assets,andtherefore are not amortized.There were no events or changes in circumstances during the three months ended March 31,2023 that would indicate the carrying amount of ourindefinite-liv

160、ed intangible assets may be impaired as of the date of this report.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 berecoverable.There were no impairment charges for finite-live

161、d intangible assets during the three months ended March 31,2023 or 2022.19Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 9.DEBT AND FINANCING ARRANGEMENTSThe carrying value of our outstanding debt obligations as of March 31,2023 an

162、d December 31,2022 consists of the following(in millions):Principal AmountCarrying ValueMaturity20232022Fixed-rate senior notes:2.500%senior notes$1,000 2023$1,000$999 2.800%senior notes500 2024499 499 2.200%senior notes400 2024399 399 3.900%senior notes1,000 2025998 997 2.400%senior notes500 202649

163、9 499 3.050%senior notes1,000 2027995 995 3.400%senior notes750 2029747 747 2.500%senior notes400 2029398 397 4.450%senior notes750 2030745 744 4.875%senior notes900 2033894 6.200%senior notes1,500 20381,485 1,485 5.200%senior notes500 2040494 494 4.875%senior notes500 2040491 491 3.625%senior notes

164、375 2042369 369 3.400%senior notes500 2046492 492 3.750%senior notes1,150 20471,137 1,137 4.250%senior notes750 2049743 743 3.400%senior notes700 2049688 688 5.300%senior notes1,250 20501,231 1,231 5.050%senior notes1,100 20531,083 Floating-rate senior notes:Floating-rate senior notes500 2023500 500

165、 Floating-rate senior notes1,566 2049-20731,548 1,027 Debentures:7.620%debentures276 2030280 280 Pound Sterling notes:5.500%notes82 203182 79 5.125%notes563 2050535 521 Euro senior notes:0.375%senior notes762 2023761 745 1.625%senior notes762 2025760 744 1.000%senior notes544 2028542 531 1.500%senio

166、r notes544 2032542 530 Canadian senior notes:2.125%senior notes555 2024553 553 Finance lease obligations365 390 Facility notes and bonds320 320 Other debt13 36 Total debt$22,377 22,188 19,662 Less:current maturities(2,332)(2,341)Long-term debt$19,856$17,321 20Ta

167、ble of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSCommercial 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 paperprogram.As of M

168、arch 31,2023,we had no outstanding balances under our commercial paper programs.The amount of commercial paper outstanding under these programs in2023 is expected to fluctuate.Debt ClassificationWe have classified certain floating-rate senior notes that are redeemable at the option of the note holde

169、r as long-term liabilities in our consolidated balance sheets,due toour intent and ability to refinance the debt if the put option is exercised.Debt RepaymentsDuring the first quarter of 2023,we repaid approximately$16 million of foreign currency-denominated debt assumed in the Bomi Group acquisitio

170、n.On April 1,2023,our 2.500%Senior Notes with a principal balance of$1.0 billion and our floating rate senior notes with a principal balance of$500 million matured andwere repaid in full.Debt IssuancesOn February 23,2023 we issued two series of notes in the principal amounts of$900 million and$1.1 b

171、illion.These notes bear interest at 4.875%and 5.050%,respectively,and mature on March 3,2033 and March 3,2053,respectively.Interest on the notes is payable semi-annually,beginning September 2023.Each series of notes iscallable at our option at a redemption price equal to the greater of 100%of the pr

172、incipal amount,or the sum of the present values of scheduled payments of principal andinterest,plus accrued and unpaid interest.On March 7,2023 we issued floating rate senior notes with a principal balance of$529 million.These notes bear interest at a rate equal to the compounded SecuredOvernight Fi

173、nancing Rate(SOFR)less 0.350%per year and mature on March 15,2073.These notes are callable at various times after 30 years at a stated percentage of parvalue and are redeemable at the option of the note holders at various times afteroneyear at a stated percentage of par value.Reference Rate ReformOu

174、r floating-rate senior notes that mature between 2049 and 2067 bear interest at rates that reference the London Interbank Offer Rate(LIBOR)for U.S.Dollars.Aspart of a broader program of reference rate reform,it is expected that U.S.Dollar LIBOR rates will cease to be published after June 2023.We are

175、 currently working to transitionthese notes to an alternative reference rate,and we anticipate that the SOFR will be adopted in accordance with recommendations of the Alternative Reference RatesCommittee.Sources of CreditWe maintain two credit agreements with a consortium of banks.The first of these

176、 agreements provides revolving credit facilities of$1.0 billion,and expires on December5,2023.Amounts outstanding under this agreement bear interest at a periodic fixed rate equal to the term SOFR rate,plus 0.10%per annum and an applicable margin based onour then-current credit rating.The applicable

177、 margin from the credit pricing grid as of March 31,2023 was 0.70%.Alternatively,a fluctuating rate of interest equal to thehighest of(1)the rate of interest last quoted by The Wall Street Journal as the prime rate in the United States;(2)the Federal Funds effective rate plus 0.50%;or(3)theAdjusted

178、Term SOFR Rate for a one-month interest period plus 1.00%,may be used at our discretion.The second agreement provides revolving credit facilities of$2.0 billion,and expires on December 7,2026.Amounts outstanding under this facility bear interest at aperiodic fixed rate equal to the term SOFR rate pl

179、us 0.10%per annum and an applicable margin based on our then-current credit rating.The applicable margin from the creditpricing grid as of March 31,2023 was 0.875%.Alternatively,a fluctuating rate of interest equal to the highest of(1)the rate of interest last quoted by The Wall Street Journal asthe

180、 prime rate in the United States;(2)the Federal Funds effective rate plus 0.50%;or(3)the Adjusted Term SOFR Rate for a one-month interest period plus 1.00%,plus anapplicable margin,may be used at our discretion.21Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDA

181、TED FINANCIAL STATEMENTSIf the credit ratings established by Standard&Poors and Moodys differ,the higher rating will be used,except in cases where the lower rating is two or more levels lower.In these circumstances,the rating one step below the higher rating will be used.We are also able to request

182、advances under these facilities based on competitive bids for theapplicable interest rate.There were no amounts outstanding under these facilities as of March 31,2023.Debt CovenantsOur existing debt instruments and credit facilities subject us to certain financial covenants.As of March 31,2023,and f

183、or all prior periods presented,we have satisfiedthese 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,to 10%of net tangible assets.As of March 31,2023,10%of net tangible assets was

184、 equivalent to$4.9 billion and we had no covered sale-leaseback transactions or securedindebtedness outstanding.We do not expect these covenants to have a material impact on our financial condition or liquidity.Fair Value of DebtBased on the borrowing rates currently available to us for long-term de

185、bt with similar terms and maturities,the fair value of long-term debt,including current maturities,was approximately$21.9 and$18.2 billion as of March 31,2023 and December 31,2022,respectively.We utilized Level 2 inputs in the fair value hierarchy of valuationtechniques to determine the fair value o

186、f all of our debt instruments.22Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 10.LEASESWe have finance and operating leases for real estate(primarily package centers,airport facilities and warehouses),aircraft and engines,informat

187、ion 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

188、 certain international trade lanes and domestic routes.Due to the natureof 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-termaircraft operating leases are operated by a third party to

189、 handle package and cargo volume in geographic regions where,due to government regulations,we are restricted fromoperating an airline.Transportation equipment and other equipmentWe enter into both long-term and short-term leases for transportation equipment to supplement our capacity or meet contrac

190、tual demands.Some of these assets are leasedon 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.Theseleases are treated as short-term as the cumulative right of use is less than 12 months ov

191、er 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 variablenature of these costs,these are expensed as incurred and are not included in the right of use lease asset

192、 and associated lease obligation.The components of lease expense for the three months ended March 31,2023 and 2022 were as follows(in millions):20232022Operating lease costs$207$183 Finance lease costs:Amortization of assets29 28 Interest on lease liabilities4 4 Total finance lease costs33 32 Variab

193、le lease costs72 68 Short-term lease costs277 302 Total lease costs$589$585 This table excludes sublease income as it was not material to the three months ended March 31,2023 or 2022.In addition to the lease costs disclosed in the table above,we monitor all lease categories for any indicators that t

194、he carrying value of the assets may not be recoverable.There were no material impairments recognized during the three months ended March 31,2023 or 2022.(1)(1)23Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSSupplemental information rel

195、ated to leases and location within our consolidated balance sheets is as follows(in millions,except lease term and discount rate):March 31,2023December 31,2022Operating Leases:Operating lease right-of-use assets$4,089$3,755 Current maturities of operating leases$668$621 Non-current operating leases3

196、,539 3,238 Total operating lease obligations$4,207$3,859 Finance Leases:Property,plant and equipment,net$869$959 Current maturities of long-term debt,commercial paper and finance leases$68$92 Long-term debt and finance leases297 298 Total finance lease obligations$365$390 Weighted average remaining

197、lease term(in years):Operating leases11.210.8Finance leases8.88.4Weighted average discount rate:Operating leases2.73%2.32%Finance leases3.28%3.17%Supplemental cash flow information related to leases is as follows(in millions):Three Months Ended March 31,20232022Cash paid for amounts included in meas

198、urement of obligations:Operating cash flows from operating leases$212$176 Operating cash flows from finance leases1 1 Financing cash flows from finance leases48 18 Right-of-use assets obtained in exchange for lease obligations:Operating leases$498$119 Finance leases$30$59 24Table of ContentsUNITED P

199、ARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSMaturities of lease obligations as of March 31,2023 were as follows(in millions):Finance LeasesOperating Leases2023$73$576 202462 705 202548 632 202639 543 202738 472 Thereafter183 2,038 Total lease payments443 4,9

200、66 Less:Imputed interest(78)(759)Total lease obligations365 4,207 Less:Current obligations(68)(668)Long-term lease obligations$297$3,539 As of March 31,2023,we had$771 million of additional leases which had not commenced.These leases will commence between 2023 and 2024 when we are grantedaccess to t

201、he property,such as when leasehold improvements are completed by the lessor or a certificate of occupancy is obtained.25Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 11.LEGAL PROCEEDINGS AND CONTINGENCIESWe are involved in a numbe

202、r 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 all pendingmatters,including(except as otherwise noted herei

203、n)the matters described below,and we intend to vigorously defend each matter.We accrue amounts associated with legalproceedings 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 orlower than the

204、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 ouroperations or financial condition.For these matters,we have described the reasons that we are un

205、able to estimate a possible loss or range of losses.Judicial ProceedingsWe 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.At this time,we donot believe that any loss associated with any such matter

206、will have a material impact on our operations or financial condition.One of these matters,Hughes v.UPS SupplyChain Solutions,Inc.and United Parcel Service,Inc.had previously been certified as a class action in Kentucky state court.In the second quarter of 2019,the court granted ourmotion for judgmen

207、t on the pleadings related to the wage-and-hour claims.The plaintiffs appeal of this decision was denied.However,they were granted a discretionary reviewby the Kentucky Supreme Court.In the first quarter of 2023,the Kentucky Supreme Court ruled in our favor.Plaintiffs have filed a motion for reheari

208、ng before the KentuckySupreme Court.Other MattersIn August 2016,Spains National Markets and Competition Commission(CNMC)announced an investigation into 10 companies in the commercial delivery and parcelindustry,including UPS,related to alleged nonaggression agreements to allocate customers.In May 20

209、17,we received a Statement of Objections issued by the CNMC.In July2017,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 u

210、s.We have filed an appeal before the Spanish Supreme Court.We do not believe that any loss fromthis matter would have a material impact on our operations or financial condition.We are vigorously defending ourselves and believe that we have a number of meritoriouslegal defenses.There are also unresol

211、ved questions of law that could be important to the ultimate resolution of this matter.We are a party in various other matters that arose in the normal course of business.We do not believe that the eventual resolution of these other matters(eitherindividually or in the aggregate),including any reaso

212、nably possible losses in excess of current accruals,will have a material impact on our operations or financial condition.26Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 12.SHAREOWNERS EQUITYCapital Stock,Additional Paid-In Capital

213、,Retained Earnings and Non-Controlling Minority InterestsWe are authorized to issue two classes of common stock,which are distinguished from each other primarily by their respective voting rights.Class A shares of UPS areentitled to 10 votes per share,whereas class B shares are entitled to one vote

214、per share.Class A shares are primarily held by UPS employees and retirees,as well as trusts anddescendants of the Companys founders,and these 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 both ha

215、ve a$0.01 par value,and as of March 31,2023,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 March 31,2023,no preferred shares had been iss

216、ued.The following is a rollforward of our common stock,additional paid-in capital,retained earnings and non-controlling minority interests accounts for the three monthsended March 31,2023 and 2022(in millions,except per share amounts):Three Months Ended March 31:20232022 SharesDollarsSharesDollarsCl

217、ass A Common Stock:Balance at beginning of period134$2 138$2 Stock award plans3 4 Common stock issuances1 1 Conversions of class A to class B common stock(3)(3)Class A shares outstanding at end of period135$2 140$2 Class B Common Stock:Balance at beginning of period725$7 732$7 Common stock purchases

218、(4)(1)Conversions of class A to class B common stock3 3 Class B shares outstanding at end of period724$7 734$7 Additional Paid-In Capital:Balance at beginning of period$1,343 Stock award plans345(35)Common stock purchases(492)(260)Common stock issuances147 183 Balance at end of period$1,231 Retained

219、 Earnings:Balance at beginning of period$21,326$16,179 Net income attributable to controlling interests1,895 2,662 Dividends($1.62 and$1.52 per share)(1,453)(1,406)Common stock purchases(258)Other(2)Balance at end of period$21,510$17,433 Non-Controlling Interests:Balance at beginning of period$17$16

220、 Change in non-controlling interest(2)2 Balance at end of period$15$18 The dividend per share amount is the same for both class A and class B common stock.Dividends include$105 and$122 million as of March 31,2023 and 2022,respectively,that were settled in sharesof class A common stock.(1)(1)27Table

221、of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSWe repurchased 4.1 and 1.2 million shares of class B common stock for$750 and$260 million during the three months ended March 31,2023 and 2022,respectively.Repurchases of$751 and$254 million,resp

222、ectively,are reported on the statements of consolidated cash flows due to the timing of settlements.These repurchases werecompleted as follows:In August 2021,the Board of Directors authorized the company to repurchase up to$5.0 billion of class A and class B common stock(the 2021 Authorization).For

223、thethree months ended March 31,2023 and 2022,we repurchased 0.5 and 1.2 million shares of class B common stock for$82 and$260 million,respectively,under thisauthorization.In January 2023,the Board of Directors terminated the 2021 Authorization and approved a new share repurchase authorization for$5.

224、0 billion of class A and class Bcommon stock(the 2023 Authorization).For the three months ended March 31,2023,we repurchased 3.6 million shares for$668 million under the 2023Authorization.As of March 31,2023,we had$4.3 billion available under this repurchase authorization.We anticipate our share rep

225、urchases will total approximately$3.0 billion in 2023.Future share repurchases may be in the form of accelerated share repurchase programs,open market purchases or other methods we deem appropriate.The timing of sharerepurchases will depend upon market conditions.Unless terminated earlier by the Boa

226、rd of Directors,this program will expire when we have purchased all shares authorized forrepurchase under the program.Movements in additional paid-in capital in respect of stock award plans comprise accruals for unvested awards,offset by adjustments for awards that vest during theperiod.Accumulated

227、Other Comprehensive Income(Loss)We recognize activity in other comprehensive income for foreign currency translation adjustments,unrealized holding gains and losses on available-for-sale securities,unrealized gains and losses from derivatives that qualify as hedges of cash flows and unrecognized pen

228、sion and postretirement benefit costs.The activity in accumulated othercomprehensive income(loss)for the three months ended March 31,2023 and 2022 was as follows(in millions):Three Months Ended March 31:20232022Foreign currency translation gain(loss),net of tax:Balance at beginning of period$(1,446)

229、$(1,162)Translation adjustment(net of tax effect of$(15)and$0)115(40)Reclassification to earnings(net of tax effect of$0 and$0)3 Balance at end of period(1,328)(1,202)Unrealized gain(loss)on marketable securities,net of tax:Balance at beginning of period(11)(1)Current period changes in fair value(ne

230、t of tax effect of$1 and$(2)5(6)Reclassification to earnings(net of tax effect of$1 and$0)2 Balance at end of period(4)(7)Unrealized gain(loss)on cash flow hedges,net of tax:Balance at beginning of period167(17)Current period changes in fair value(net of tax effect of$(8)and$23)(26)72 Reclassificati

231、on to earnings(net of tax effect of$(16)and$(9)(51)(29)Balance at end of period90 26 Unrecognized pension and postretirement benefit costs,net of tax:Balance at beginning of period(259)(2,098)Net actuarial gain(loss)resulting from remeasurements of plan assets and liabilities(net of tax effect of$0

232、and$11)31 Reclassification to earnings(net of tax effect of$7 and$(3)20(7)Balance at end of period(239)(2,074)Accumulated other comprehensive income(loss)at end of period$(1,481)$(3,257)28Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSD

233、etail of the gains(losses)reclassified from accumulated other comprehensive income(loss)to the statements of consolidated income for the three months endedMarch 31,2023 and 2022 is as follows(in millions):Amount Reclassified from AOCIAffected Line Item in the Income StatementThree Months Ended March

234、 31:20232022Unrealized Gain(Loss)on Foreign Currency Translation:Realized gain(loss)on business wind-down$(3)$Other expensesIncome tax(expense)benefit Income tax expenseImpact on net income(3)Net incomeUnrealized gain(loss)on marketable securities:Realized gain(loss)on sale of securities(3)Investmen

235、t income and otherIncome tax(expense)benefit1 Income tax expenseImpact on net income(2)Net incomeUnrealized gain(loss)on cash flow hedges:Interest rate contracts(1)(3)Interest expenseForeign currency exchange contracts68 41 RevenueIncome tax(expense)benefit(16)(9)Income tax expenseImpact on net inco

236、me51 29 Net incomeUnrecognized pension and postretirement benefit costs:Prior service costs(27)(23)Investment income and otherCurtailment of benefit obligation 33 Investment income and otherIncome tax(expense)benefit7(3)Income tax expenseImpact on net income(20)7 Net incomeTotal amount reclassified

237、for the period$26$36 Net incomeAccumulated other comprehensive income(loss)(1)(1)29Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSDeferred Compensation Obligations and Treasury StockWe maintain a deferred compensation plan whereby certa

238、in employees were previously able to elect to defer the gains on stock option exercises by deferring the sharesreceived upon exercise into a rabbi trust.The shares held in this trust are classified as treasury stock,and the liability to participating employees is classified as Deferredcompensation o

239、bligations within Shareowners Equity in the consolidated balance sheets.The number of shares needed to settle the liability for deferred compensationobligations is included in the denominator in both the basic and diluted earnings per share calculations.Employees are generally no longer able to defe

240、r the gains from stockoptions exercised subsequent to December 31,2004.Activity in the deferred compensation program for the three months ended March 31,2023 and 2022 was as follows(in millions):20232022Three Months Ended March 31:SharesDollarsSharesDollarsDeferred Compensation Obligations:Balance a

241、t beginning of period$13$16 Reinvested dividends Benefit payments(4)(4)Balance at end of period$9$12 Treasury Stock:Balance at beginning of period$(13)$(16)Reinvested dividends Benefit payments 4 4 Balance at end of period$(9)$(12)30Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO

242、 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 13.SEGMENT INFORMATIONWe have two reportable segments:U.S.Domestic Package and International Package,which are together referred to as our global small package operations.Ourremaining businesses are reported as Supply Chain Solutions.Global small pack

243、age operations represent our most significant business and are broken down into regionaloperations around the world.Regional operations managers are responsible for both domestic and export products within their geographic area.Supply Chain Solutionscomprises the results of non-reportable operating

244、segments that do not meet the quantitative and qualitative criteria of a reportable segment as defined under ASC Topic 280 Segment Reporting.U.S.Domestic PackageU.S.Domestic Package operations include the time-definite delivery of letters,documents and packages throughout the United States.Internati

245、onal PackageInternational Package operations include delivery to more than 220 countries and territories worldwide,including shipments wholly outside the United States,as well asshipments with either origin or destination outside the United States.Our International Package reporting segment includes

246、 our operations in Europe,Asia,the Indian sub-continent,the Middle East,Africa,Canada and Latin America.Supply Chain SolutionsSupply Chain Solutions includes our Forwarding,Logistics,Coyote,Marken,UPS Mail Innovations and other businesses.Our Forwarding,Logistics and UPS MailInnovations businesses p

247、rovide services in more than 200 countries and territories worldwide and include international air and ocean freight forwarding,customs brokerage,distribution and post-sales services,healthcare logistics,mail and consulting services.Coyote offers truckload brokerage services primarily in the United

248、States.Markenprovides supply chain solutions to the life sciences industry.Other businesses within this segment include The UPS Store,UPS Capital,Roadie,and Delivery Solutions.In evaluating financial performance,we focus on operating profit as a segments measure of profit or loss.Operating profit is

249、 before investment income(expense)andother,interest expense and income tax expense.Certain expenses are allocated between the segments using activity-based costing methods.These activity-based costingmethods require us to make estimates that impact the amount of each expense category that is attribu

250、ted to each segment.Changes in these estimates directly impact the amountof expense allocated to each segment,and therefore the operating profit of each reporting segment.Our allocation methodologies are refined periodically,as necessary,to reflectchanges in our businesses.There were no significant

251、changes to our allocation methodologies in the first quarter.Results of operations for the three months ended March 31,2023 and 2022 are as follows(in millions):Three Months Ended March 31,20232022Revenue:U.S.Domestic Package$14,987$15,124 International Package4,543 4,876 Supply Chain Solutions3,395

252、 4,378 Consolidated revenue$22,925$24,378 Operating Profit:U.S.Domestic Package$1,466$1,662 International Package828 1,116 Supply Chain Solutions247 473 Consolidated operating profit$2,541$3,251 31Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL ST

253、ATEMENTSNOTE 14.EARNINGS PER SHAREThe 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 distributionswhether through dividends or in liquidation.The following table sets forth the computation of basic an

254、d diluted earnings per share for the three months ended March 31,2023 and 2022(in millions,except per shareamounts):Three Months Ended March 31,20232022Numerator:Net income attributable to common shareowners$1,895$2,662 Denominator:Weighted average shares858 871 Vested portion of restricted units4 3

255、 Denominator for basic earnings per share862 874 Effect of dilutive securities:Restricted units2 4 Stock options1 1 Denominator for diluted earnings per share865 879 Basic earnings per share$2.20$3.05 Diluted earnings per share$2.19$3.03 Diluted earnings per share for the three months ended March 31

256、,2023 and 2022 excluded the effect of 0.2 and 0.1 million shares of common stock that may be issuedupon the exercise of employee stock options because such effect would be antidilutive.32Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNO

257、TE 15.DERIVATIVE INSTRUMENTS AND RISK MANAGEMENTRisk Management PoliciesChanges in fuel prices,interest rates and foreign currency exchange rates impact our results of operations and we actively monitor these exposures.Where deemedappropriate,to manage the impact of these exposures on earnings and/o

258、r cash flows,we may enter into a variety of derivative financial instruments.We do not hold or issuederivative financial instruments for trading or speculative purposes.Credit Risk ManagementThe forward contracts,swaps and options discussed below contain an element of risk that the counterparties ma

259、y be unable to meet the terms of the agreements.We seekto minimize such risk exposures for these instruments by limiting the counterparties to banks and financial institutions that meet established credit guidelines.We may furthermanage credit risk through the use of zero threshold bilateral collate

260、ral provisions and/or early termination rights utilizing master netting arrangements,whereby cash isexchanged based on the net fair value of derivatives associated with each counterparty.As of March 31,2023 and December 31,2022,we held cash collateral of$375 and$534 million,respectively,under these

261、agreements.This collateral is included in Cashand cash equivalents in the consolidated balance sheets and is unrestricted.As of March 31,2023 and December 31,2022,no collateral was required to be posted with ourcounterparties.Types of HedgesCommodity Risk ManagementCurrently,the fuel surcharges that

262、 we apply in our domestic and international package businesses are the primary means of reducing the risk of adverse fuel price changeson 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 brokerag

263、e services.Foreign Currency Risk ManagementTo protect against the reduction in value of forecasted foreign currency cash flows from our international package business,we maintain a foreign currency cash flowhedging program.Our most significant foreign currency exposures relate to the Euro,British Po

264、und Sterling,Canadian Dollar,Chinese Renminbi and Hong Kong Dollar.Wegenerally designate and account for these contracts as cash flow hedges of anticipated foreign currency denominated revenue.We also hedge portions of our anticipated cash settlements of principal and interest on certain foreign cur

265、rency denominated debt.We generally designate and account forthese 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 ManagementOur indeb

266、tedness under our various financing arrangements creates interest rate risk.We use a combination of derivative instruments as part of our program to manage thefixed and floating interest rate mix of our total debt portfolio and related overall cost of borrowing.We have designated and account for the

267、 majority of our interest rate swaps that convert fixed-rate interest payments into floating-rate interest payments as fair valuehedges of the associated debt instruments.We have designated and account for interest rate swaps that convert floating-rate interest payments into fixed-rate interest paym

268、entsas 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,interestrate locks or similar derivatives.33Table of ContentsUNITED PARCEL SE

269、RVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSOutstanding PositionsAs of March 31,2023 and December 31,2022,the notional amounts of our outstanding derivative positions were as follows(in millions):March 31,2023December 31,2022Currency hedges:EuroEUR3,880 4,115 Britis

270、h Pound SterlingGBP776 856 Canadian DollarCAD1,515 1,598 Hong Kong DollarHKD4,552 4,261 Interest rate hedges:Floating to Fixed Interest Rate SwapsUSD28 28 As of March 31,2023 and December 31,2022,we had no outstanding commodity hedge positions.Balance Sheet RecognitionThe following table indicates t

271、he location in the consolidated balance sheets where our derivative assets and liabilities have been recognized,the fair value hierarchy levelapplicable to each derivative type and the related fair values of those derivatives.We have master netting arrangements with substantially all of our counterp

272、arties giving us the right of offset for our derivative positions.However,we have not elected tooffset the fair value positions of our derivative contracts recorded in the consolidated balance sheets.The columns labeled Net Amounts if Right of Offset had been Appliedindicate the potential net fair v

273、alue positions by type of contract and location in the consolidated balance sheets had we elected to apply the right of offset as of March 31,2023and December 31,2022(in millions):FairValueHierarchyLevelGross Amounts Presented inConsolidated Balance SheetsNet Amounts if Right of Offset had been Appl

274、iedAsset DerivativesBalance Sheet LocationMarch 31,2023December 31,2022March 31,2023December 31,2022Derivatives designated as hedges:Foreign currency exchange contractsOther current assetsLevel 2$143$174$135$171 Foreign currency exchange contractsOther non-current assetsLevel 2188 250 159 226 Deriva

275、tives not designated as hedges:Foreign currency exchange contractsOther current assetsLevel 2 1 1 Total Asset Derivatives$331$425$294$398 Fair ValueHierarchy LevelGross Amounts Presented inConsolidated Balance SheetsNet Amounts if Right of Offset had been AppliedLiability DerivativesBalance Sheet Lo

276、cationMarch 31,2023December 31,2022March 31,2023December 31,2022Derivatives designated as hedges:Foreign currency exchange contractsOther current liabilitiesLevel 2$8$3$Foreign currency exchange contractsOther non-current liabilitiesLevel 229 24 Interest rate contractsOther non-current liabilitiesLe

277、vel 25 5 5 5 Derivatives not designated as hedges:Foreign currency exchange contractsOther current liabilitiesLevel 21 1 Total Liability Derivatives$43$32$6$5 34Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSOur foreign currency exchang

278、e rate,interest rate and investment market price derivatives are largely comprised of over-the-counter derivatives,which are primarily valuedusing pricing models that rely on market observable inputs such as yield curves,foreign currency exchange rates and investment forward prices;therefore,these d

279、erivatives areclassified as Level 2.Balance Sheet Location of Hedged Item in Fair Value Hedges The following table indicates the amounts that were recorded in the consolidated balance sheets related to cumulative basis adjustments for fair value hedges as ofMarch 31,2023 and December 31,2022(in mill

280、ions):Line Item in the Consolidated Balance Sheets inWhich the Hedged Item is IncludedCarrying Amount of Hedged LiabilitiesCumulative Amount of Fair Value Hedge AdjustmentsCarrying Amountof Hedged LiabilitiesCumulative Amount of Fair Value Hedge AdjustmentsMarch 31,2023March 31,2023December 31,2022D

281、ecember 31,2022Long-term debt and finance leases$280$5$280$5 Income Statement and AOCI Recognition of Designated HedgesThe following table indicates the amount of gains(losses)that have been recognized in the statements of consolidated income for fair value and cash flow hedges,as wellas the associa

282、ted gain(loss)for the underlying hedged item for fair value hedges for the three months ended March 31,2023 and 2022(in millions):Three Months Ended March 31,20232022Location and Amount of Gain(Loss)Recognized in Income on FairValue and Cash Flow Hedging RelationshipsRevenueInterest ExpenseInvestmen

283、t Incomeand OtherRevenueInterest ExpenseInvestment Incomeand OtherGain(loss)on fair value hedging relationships:Interest Rate Contracts:Hedged items$8$Derivatives designated as hedging instruments (8)Gain(loss)on cash flow hedging relationships:Interest Rate Contracts:Amount of gain(loss)reclassifie

284、d from accumulated othercomprehensive income(1)(3)Foreign Currency Exchange Contracts:Amount of gain(loss)reclassified from accumulated othercomprehensive income68 41 Total amounts of income and expense line items presented in thestatement of income in which the effects of fair value or cash flowhed

285、ges are recorded$68$(1)$41$(3)$35Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSThe following table indicates the amount of gains(losses)that have been recognized in AOCI for the three months ended March 31,2023 and 2022 for those deriv

286、ativesdesignated as cash flow hedges(in millions):Three Months Ended March 31:Derivative Instruments in Cash Flow Hedging RelationshipsAmount of Gain(Loss)Recognized in AOCI on Derivatives20232022Interest rate contracts$3 Foreign currency exchange contracts(34)92 Total$(34)$95 As of March 31,2023,th

287、ere were$130 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 March 31,2024.The actual amounts that will be reclassified to income over the next 12 months will vary from this amount as a result of cha

288、nges in marketconditions.The maximum term over which we are hedging exposures to the variability of cash flows is approximately 9 years.The following table indicates the amount of gains(losses)that have been recognized in AOCI within foreign currency translation adjustment for the three months ended

289、March 31,2023 and 2022 for those instruments designated as net investment hedges(in millions):Three Months Ended March 31:Non-derivative Instruments in Net Investment Hedging RelationshipsAmount of Gain(Loss)Recognized in AOCI on Debt20232022Foreign currency denominated debt$(73)$46 Total$(73)$46 In

290、come Statement Recognition of Non-Designated Derivative InstrumentsDerivative instruments that are not designated as hedges are recorded at fair value with unrealized gains and losses reported in earnings each period.Cash flows from thesettlement of derivative instruments appear in the statement of

291、consolidated cash flows within the same categories as the cash flows of the hedged item.We may periodically terminate interest rate swaps and foreign currency exchange forward contracts or enter into offsetting swap and foreign currency positions withdifferent counterparties.As part of this process,

292、we de-designate our original hedge relationship.Amounts recorded in the statements of consolidated income related to fair value changes and settlements of interest rate swaps and foreign currency forward contracts notdesignated as hedges for the three months ended March 31,2023 and 2022(in millions)

293、were as follows:Derivative Instruments Not Designated inHedging RelationshipsLocation of Gain(Loss)Recognized in IncomeAmount of Gain(Loss)Recognized in Income20232022Three Months Ended March 31:Foreign currency exchange contractsInvestment income and other$4$(28)Total$4$(28)36Table of ContentsUNITE

294、D PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 16.INCOME TAXESOur effective tax rate for the three months ended March 31,2023 and 2022 was approximately 24.9%and 21.5%,respectively.The year-over-year increase in oureffective tax rate was driven by lower

295、 excess tax benefits related to share-based compensation,unfavorable changes in jurisdictional earnings mix and uncertain tax positions.We have recognized liabilities for uncertain tax positions and we reevaluate these uncertain tax positions on a quarterly basis.A number of years may elapse before

296、anuncertain tax position is audited and ultimately settled.It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions.Items that may causechanges to unrecognized tax benefits include the allowance or disallowance of deductions,the timing of deductions and

297、 the allocation of income and expense between taxjurisdictions.These changes could result from the settlement of ongoing litigation,the completion of ongoing examinations,the expiration of the statute of limitations,or otherunforeseen circumstances.Over the next twelve months,it is reasonably possib

298、le that the amount of unrecognized tax benefits may decrease by up to$180 million.37Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSNOTE 17.TRANSFORMATION STRATEGY COSTSWe are undertaking an enterprise-wide transformation of our organiza

299、tion.The program includes initiatives,as well as changes in processes and technology,that impactglobal direct and indirect operating costs.The table below presents transformation strategy costs for the three months ended March 31,2023 and 2022(in millions):Three Months Ended March 31,20232022Transfo

300、rmation Strategy Costs:Compensation and benefits$(12)$33 Total other expenses15 22 Total Transformation Strategy Costs$3$55 Income Tax Benefit from Transformation Strategy Costs(12)After-Tax Transformation Strategy Costs$3$43 The income tax effects of transformation strategy costs are calculated by

301、multiplying the amount of the adjustments by the statutory tax rates applicable in each taxjurisdiction.38Table of ContentsItem 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsOverviewWe continue to execute our Customer First,People Led,Innovation Driven strateg

302、y by investing to improve the customer experience and drive growth in our targetedcustomer segments,including small-and medium-sized businesses(SMBs)and healthcare.We seek to provide industry-leading service to our customers by combining ourdigital capabilities with our global integrated network.Dur

303、ing the quarter,we continued the expansion of our Digital Access Program and other technology-driven initiatives to make it faster and easier for SMBs to do businesswith us.We expanded our global footprint of dedicated healthcare facilities,accelerated deployment of our smart package-smart facility

304、technology and continued to pursueinitiatives to drive further productivity improvements and better serve our customers.Macroeconomic headwinds,including global inflation and a decline in U.S.manufacturing production,led to a challenging operating environment in the first quarter of2023.In the U.S.,

305、consumer spending continued to shift towards services and discretionary spending slowed.Internationally,exports out of Asia remained weak andinflationary pressures persisted in Europe.These factors negatively impacted demand for our services,resulting in volume declines in our global small package o

306、perations.Weanticipate these factors will continue to impact us throughout the remainder of 2023.We may also be negatively impacted by the ongoing negotiation of our labor contract withthe Teamsters.For additional information on the status of these negotiations,see note 7 to the accompanying unaudit

307、ed financial statements.Notwithstanding the challenging macroeconomic environment in the first quarter,we managed our network with agility,focused on productivity,controlled cost andgenerated operating profit that was in line with our expectations.Additionally,we returned cash to shareowners through

308、 dividends and share repurchases,and continued to makelong-term investments to support our strategy.We have two reportable segments:U.S.Domestic Package and International Package,which are together referred to as our global small package operations.Ourremaining businesses are reported as Supply Chai

309、n Solutions.39Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESMANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONSHighlights of our consolidated results,which are discussed in more detail below,include:Three Months Ended March 31,Change 20232022$%Revenue(in

310、millions)$22,925$24,378$(1,453)(6.0)%Operating Expenses(in millions)20,384 21,127(743)(3.5)%Operating Profit(in millions)$2,541$3,251$(710)(21.8)%Operating Margin11.1%13.3%Net Income(in millions)$1,895$2,662$(767)(28.8)%Basic Earnings Per Share$2.20$3.05$(0.85)(27.9)%Diluted Earnings Per Share$2.19$

311、3.03$(0.84)(27.7)%Operating Days64 64 Average Daily Package Volume(in thousands)21,989 23,278(5.5)%Average Revenue Per Piece$13.74$13.26$0.48 3.6%Average daily package volume and revenue in our global small package operations decreased,with declines in both commercial and residential shipments,prima

312、rily as aresult of the macroeconomic conditions described herein.Operating expenses decreased,driven by a reduction in purchased transportation in Supply Chain Solutions.Operating profit and operating margin decreased,as revenue declines were greater than operating expense reductions.We reported net

313、 income of$1.9 billion and diluted earnings per share of$2.19.Adjusted diluted earnings per share was$2.20,which includes the after-tax impacts oftransformation strategy costs and goodwill impairment charges of$9 million,or$0.01 per diluted share.In the U.S.Domestic Package segment,revenue declines

314、were driven by lower volume.These were somewhat offset by revenue per piece growth due to improvements inrevenue quality and customer mix,together with higher fuel revenue as a result of increases in price per gallon and pricing initiatives.Expenses increased primarily due tohigher wages and benefit

315、s costs for our union employees,partially offset by lower management compensation expense,increased productivity and declines in purchasedtransportation costs.In our International Package segment,revenue declines were driven by lower volume,unfavorable fluctuations in foreign currency exchange rates

316、 and declines indemand-related surcharges.These declines were partially offset by the impact of revenue quality initiatives and increased fuel revenue.Expense decreases were primarily drivenby favorable currency impacts and the impact of volume declines,partially offset by higher fuel prices.In Supp

317、ly Chain Solutions,revenue decreases were driven by volume and market rate declines in Forwarding that were slightly offset by growth in Logistics,including theimpact of the Bomi Group acquisition that occurred in the fourth quarter of 2022.Expenses decreased,driven by lower transportation costs in

318、Forwarding.These were partiallyoffset by increases in transportation and other costs within Logistics.40Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESMANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONSSupplemental Information-Items Affecting Comparability

319、We supplement the reporting of our financial information determined under generally accepted accounting principles in the United States(GAAP)with certain non-GAAP financial measures.Adjusted financial measures should be considered in addition to,and not as an alternative for,our reported results pre

320、pared in accordance with GAAP.Our adjustedfinancial measures do not represent a comprehensive basis of accounting and therefore may not be comparable to similarly titled measures reported by other companies.Adjusted amounts reflect the following(in millions):Three Months Ended March 31,Non-GAAP Adju

321、stments20232022Operating Expenses:Transformation Strategy Costs$3$55 Goodwill and Asset Impairments,and Divestiture Charges8 Total Adjustments to Operating Expenses$11$55 Other Income and(Expense):Defined Benefit Plan(Gains)Losses$(33)Total Adjustments to Other Income and(Expense)$(33)Total Adjustme

322、nts to Income Before Income Taxes$11$22 Income Tax(Benefit)Expense:Transformation Strategy Costs$(12)Goodwill and Asset Impairments,and Divestiture Charges(2)Defined Benefit Plan(Gains)Losses 9 Total Adjustments to Income Tax(Benefit)Expense$(2)$(3)Total Adjustments to Net Income$9$19 Transformation

323、 Charges,and Goodwill,Asset Impairment and Divestiture ChargesWe supplement the presentation of our operating profit,operating margin,income before income taxes,net income and earnings per share with non-GAAP measures thatexclude the impact of charges related to transformation activities,and goodwil

324、l,asset impairment and divestiture charges.We believe excluding the impact of these chargesbetter enables users of our financial statements to view and evaluate underlying business performance from the perspective of management.We do not consider these costswhen evaluating the operating performance

325、of our business units,making decisions to allocate resources or in determining incentive compensation awards.For moreinformation regarding transformation activities,see note 17 to the unaudited,consolidated financial statements.For more information regarding goodwill impairment charges,see note 8 to

326、 our unaudited,consolidated financial statements.41Table of ContentsUNITED PARCEL SERVICE,INC.AND SUBSIDIARIESMANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONSForeign Currency Exchange Rate Changes and Hedging ActivitiesWe supplement the reporting of revenue,revenue

327、 per piece and operating profit with adjusted measures that exclude the period over period impact of foreign currencyexchange rate changes and hedging activities.We believe currency-neutral revenue,revenue per piece and operating profit information allows users of our financial statementsto understa

328、nd growth trends in our products and results.We evaluate the performance of International Package and Supply Chain Solutions on this currency-neutral basis.Currency-neutral revenue,revenue per piece and operating profit are calculated by dividing current period reported U.S.Dollar revenue,revenue pe

329、r piece and operatingprofit by the current period average exchange rates to derive current period local currency revenue,revenue per piece and operating profit.The derived amounts are thenmultiplied by the average foreign currency exchange rates used to translate the comparable results for each mont

330、h in the prior year period(including the period over periodimpact of foreign currency hedging activities).The difference between the current period reported U.S.Dollar revenue,revenue per piece and operating profit and the derivedcurrent period U.S.Dollar revenue,revenue per piece and operating prof

331、it is the period over period impact of currency fluctuations.Defined Benefit Plan Gains and LossesWe incur certain employment-related expenses associated with pension and postretirement medical benefits.These pension and postretirement medical benefits costs forcompany-sponsored defined benefit plan

332、s are calculated using various actuarial assumptions and methodologies,including discount rates,expected returns on plan assets,healthcare cost trend rates,inflation,compensation increase rates,mortality rates and coordination of benefits with plans not sponsored by UPS.Actuarial assumptions arerevi

333、ewed on an annual basis,unless circumstances require an interim remeasurement of any of our plans.We recognize changes in the fair value of plan assets and net actuarial gains and losses in excess of a 10%corridor(defined as 10%of the greater of the fair value of planassets or the plans projected benefit obligation),as well as gains and losses resulting from plan curtailments and settlements,for o