August 8, 2023

UPS Releases 2Q 2023 Earnings

Consolidated Revenues of $22.1B, Compared to $24.8B Last Year
Consolidated Operating Profit of $2.8B; Adj. Consolidated Operating Profit of
$2.9B
Consolidated Operating Margin of 12.6%; Adjusted Consolidated Operating
Margin of 13.2%
Diluted EPS of $2.42; Adj. Diluted EPS of $2.54, Compared to $3.29 Last Year
Win-win-win Labor Agreement Reached with Teamsters Covering More Than
300,000 UPS Employees

ATLANTA--(BUSINESS WIRE)-- UPS (NYSE:UPS) today announced second-quarter 2023

consolidated revenues of $22.1 billion, a 10.9% decrease from the second quarter of 2022.
Consolidated operating profit was $2.8 billion, down 21.4% compared to the second quarter
of 2022, and down 18.4% on an adjusted basis. Diluted earnings per share were $2.42 for
the quarter; adjusted diluted earnings per share of $2.54 were 22.8% below the same period
in 2022.

For the second quarter of 2023, GAAP results included after-tax transformation and other
charges of $106 million, or $0.12 per diluted share.

“We are pleased to have reached agreement with the Teamsters. I want to thank the more
than 500,000 UPSers around the world for their hard work and efforts, and for once again
providing industry-leading service. And a special thank you to our customers for trusting
your business with UPS during our labor negotiations,” said Carol Tomé, UPS chief
executive officer. “UPS is stronger than ever. Looking ahead, we will stay on strategy to
capture growth in the most attractive parts of the market and make our global integrated
network even more efficient.”

U.S. Domestic Segment

Adjusted Adjusted
2Q 2023 2Q 2023 2Q 2022 2Q 2022
Revenue $14,396 M $15,459 M
Operating profit $1,602 M $1,681 M $1,829 M $1,855 M

Revenue decreased 6.9%, driven by a 9.9% decrease in average daily volume, which
was partially offset by a 3.3% increase in revenue per piece.
Operating margin was 11.1%; adjusted operating margin was 11.7%.

International Segment

Adjusted Adjusted
2Q 2023 2Q 2023 2Q 2022 2Q 2022
Revenue $4,415 M $5,073 M
Operating profit $883 M $902 M $1,193 M $1,204 M

Revenue decreased 13.0%, primarily driven by a 6.6% reduction in average daily

volume and continued softness on Asia trade lanes.
Operating margin was 20.0%; adjusted operating margin was 20.4%.

Supply Chain Solutions1

Adjusted Adjusted
2Q 2023 2Q 2023 2Q 2022 2Q 2022
Revenue $3,244 M $4,234 M
Operating profit $295 M $336 M $513 M $517 M

1
Consists of operating segments that do not meet the criteria of a reportable segment under ASC Topic 280 –
Segment Reporting.

Revenue decreased 23.4% due to market rate and volume declines in forwarding,
partially offset by growth in logistics, including healthcare.
Operating margin was 9.1%; adjusted operating margin was 10.4%.

2023 Outlook

The company provides certain guidance on an adjusted (non-GAAP) basis because it is not
possible to predict or provide a reconciliation reflecting the impact of future pension
adjustments or other unanticipated events, which would be included in reported (GAAP)
results and could be material.

UPS is updating its full-year 2023 consolidated revenue and adjusted operating margin
targets primarily to reflect the volume impact from labor negotiations and the costs
associated with the tentative agreement reached with the International Brotherhood of
Teamsters on July 25, 2023. UPS now expects full-year 2023 consolidated revenue to be
about $93 billion and an adjusted operating margin of around 11.8%.

The company is reaffirming its capital allocation plans and expects capital expenditures to
be about $5.3 billion, dividend payments to be around $5.4 billion, subject to board approval,
and share repurchases to be around $3 billion.
* “Adjusted” amounts are non-GAAP financial measures. See the appendix to this release for a discussion of non-
GAAP financial measures, including a reconciliation to the most closely correlated GAAP measure.

Conference Call Information

UPS CEO Carol Tomé and CFO Brian Newman will discuss second-quarter results with
investors and analysts during a conference call at 8:30 a.m. ET, August 8, 2023. That call
will be open to others through a live Webcast. To access the call, go to
www.investors.ups.com and click on “Earnings Conference Call.” Additional financial
information is included in the detailed financial schedules being posted on
www.investors.ups.com under “Quarterly Earnings and Financials” and as furnished to the
SEC as an exhibit to our Current Report on Form 8-K.

About UPS

UPS (NYSE: UPS) is one of the world’s largest companies, with 2022 revenue of $100.3
billion, and provides a broad range of integrated logistics solutions for customers in more
than 220 countries and territories. Focused on its purpose statement, “Moving our world
forward by delivering what matters,” the company’s more than 500,000 employees embrace
a strategy that is simply stated and powerfully executed: Customer First. People Led.
Innovation Driven. UPS is committed to reducing its impact on the environment and
supporting the communities we serve around the world. UPS also takes an unwavering
stance in support of diversity, equity and inclusion. More information can be found at
www.ups.com, about.ups.com and www.investors.ups.com.

Forward-Looking Statements

This release, our Annual Report on Form 10-K for the year ended December 31, 2022 and
our other filings with the Securities and Exchange Commission contain and in the future may
contain “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Statements other than those of current or historical fact, and all
statements accompanied by terms such as “will,” “believe,” “project,” “expect,” “estimate,”
“assume,” “intend,” “anticipate,” “target,” “plan,” and similar terms, are intended to be
forward-looking statements. Forward-looking statements are made subject to the safe
harbor provisions of the federal securities laws pursuant to Section 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. Forward-looking statements may relate to our intent, belief,
forecasts of, or current expectations about our strategic direction, prospects, future results,
or future events; they do not relate strictly to historical or current facts. Management believes
that these forward-looking statements are reasonable as and when made. However, caution
should be taken not to place undue reliance on any forward-looking statements 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 and our present expectations
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; changes in our relationships with any of our significant customers; our ability to
attract and retain qualified employees; strikes, work stoppages or slowdowns by our
employees; results of negotiations and ratifications of labor contracts; our ability to maintain
our brand image and corporate reputation; increased or more complex physical security
requirements; a significant data breach or information technology 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
changing economic, political and social developments in international markets; our ability to
realize the anticipated benefits from acquisitions, dispositions, joint ventures or strategic
alliances; changing prices of energy, including gasoline, diesel and jet fuel, or interruptions in
supplies of these commodities; changes in exchange rates or interest rates; our ability to
accurately forecast our future capital investment needs; significant expenses and funding
obligations relating to employee health, retiree health and/or pension benefits; our ability to
manage insurance and claims expenses; changes in business 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 and
regulations, including relating to climate change; potential claims or litigation related to labor
and 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 Report on Form 10-K for the
year ended December 31, 2022, and subsequently filed reports. You should consider the
limitations on, and risks associated with, forward-looking statements and not unduly rely on
the accuracy of predictions contained in such forward-looking statements. We do not
undertake any obligation to update forward-looking statements to reflect events,
circumstances, changes in expectations, or the occurrence of unanticipated events after the
date of those statements, except as required by law.

From time to time, we expect to participate in analyst and investor conferences. Materials
provided or displayed at those conferences, such as slides and presentations, may be
posted on our investor relations website at www.investors.ups.com under the heading
"Presentations" when made available. These presentations may contain new material
nonpublic information about our company and you are encouraged to monitor this site for
any new posts, as we may use this mechanism as a public announcement.

Reconciliation of GAAP and Non-GAAP Financial Measures

We supplement the reporting of our financial information determined under generally

accepted accounting principles ("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 prepared in accordance with GAAP. Our adjusted financial
measures do not represent a comprehensive basis of accounting and therefore may not be
comparable to similarly titled measures reported by other companies.

Forward-Looking Non-GAAP Metrics

From time to time when presenting forward-looking non-GAAP metrics, we are unable to
provide quantitative reconciliations to the most closely correlated GAAP measure due to the
uncertainty in the timing, amount or nature of any adjustments, which could be material in
any period.

Changes in Foreign Currency Exchange Rates and Hedging Activities

We supplement the reporting of revenue, revenue per piece and operating profit with
adjusted measures that exclude the period-over-period impact of foreign currency exchange
rate changes and hedging activities. We believe currency-neutral revenue, revenue per
piece and operating profit information allows users of our financial statements to understand
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 per piece and operating profit by the
current period average exchange rates to derive current period local currency revenue,
revenue per piece and operating profit. The derived amounts are then multiplied by the
average foreign currency exchange rates used to translate the comparable results for each
month in the prior year period (including the period-over-period impact of foreign currency
hedging activities). The difference between the current period reported U.S. Dollar revenue,
revenue per piece and operating profit and the derived current period U.S. Dollar revenue,
revenue per piece and operating profit is the period-over-period impact of currency
fluctuations.

Incentive Compensation Program Design Changes

During 2022, we completed certain structural changes to the design of our incentive
compensation programs that resulted in a one-time, non-cash charge in connection with the
accelerated vesting of certain equity incentive awards that we do not expect to repeat. We
supplement the presentation of our operating profit, operating margin, income before income
taxes, net income and earnings per share with non-GAAP measures that exclude the impact
of these changes. We believe excluding the impacts of such changes allows users of our
financial statements to more appropriately identify underlying growth trends in compensation
and benefits expense.

Long-lived Asset Estimated Residual Value Changes

During the fourth quarter of 2022, we incurred a one-time, non-cash charge resulting from a
reduction in the estimated residual value of our MD-11 fleet. We supplement the
presentation of our operating profit, operating margin, income before income taxes, net
income and earnings per share with non-GAAP measures that exclude the impact of this
charge. We believe excluding the impact of this charge better enables users of our financial
statements to understand the ongoing cost associated with our long-lived assets.

Transformation Charges, and Goodwill, Asset Impairment and Divestiture Charges

We supplement the presentation of our operating profit, operating margin, income before
income taxes, net income and earnings per share with non-GAAP measures that exclude
the impact of charges related to transformation activities, and goodwill, asset impairment
and divestiture charges. We believe excluding the impact of these charges better enables
users of our financial statements to view and evaluate underlying business performance
from the perspective of management. We do not consider these costs when evaluating the
operating performance of our business units, making decisions to allocate resources or in
determining incentive compensation awards.

Defined Benefit Pension and Postretirement Medical Plan Gains and Losses

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 plan assets or
the plan's projected benefit obligation), as well as gains and losses resulting from plan
curtailments and settlements, for our pension and postretirement defined benefit plans
immediately as part of Investment income and other in the statements of consolidated
income. We supplement the presentation of our income before income taxes, net income
and earnings per share with adjusted measures that exclude the impact of these gains and
losses and the related income tax effects. We believe excluding these defined benefit plan
gains and losses provides important supplemental information by removing the volatility
associated with plan amendments and short-term changes in market interest rates, equity
values and similar factors.

Free Cash Flow

We calculate free cash flow as cash flows from operating activities less capital expenditures,
proceeds from disposals of property, plant and equipment, and plus or minus the net
changes in other investing activities. We believe free cash flow is an important indicator of
how much cash is generated by our ongoing business operations and we use this as a
measure of incremental cash available to invest in our business, meet our debt obligations
and return cash to shareowners.

Adjusted Return on Invested Capital

Adjusted ROIC is calculated as the trailing twelve months (“TTM”) of adjusted operating
income divided by the average of total debt, non-current pension and postretirement benefit
obligations and shareowners’ equity, at the current period end and the corresponding period
end of the prior year. Because adjusted ROIC is not a measure defined by GAAP, we
calculate it, in part, using non-GAAP financial measures that we believe are most indicative
of our ongoing business performance. We consider adjusted ROIC to be a useful measure
for evaluating the effectiveness and efficiency of our long-term capital investments.

Adjusted Total Debt / Adjusted EBITDA

Adjusted total debt is defined as our long-term debt and finance leases, including current
maturities, plus non-current pension and postretirement benefit obligations. Adjusted
EBITDA is defined as earnings before interest, taxes, depreciation and amortization adjusted
for the impacts of incentive compensation program redesign, transformation and other costs,
defined benefit plan gains and losses and other income. We believe the ratio of adjusted
total debt to adjusted EBITDA is an important indicator of our financial strength, and is a
ratio used by third parties when evaluating the level of our indebtedness.

Reconciliation of GAAP and Non-GAAP Income Statement Items

(in millions, except per share data):
 Three Months Ended June 30, 2023

As
As Adjusted
Reported Transformation (Non-
(GAAP) & Other Adj.(1) GAAP)
U.S. Domestic Package $ 12,794 $ 79 $ 12,715
International Package 3,532 19 3,513
Supply Chain Solutions 2,949 41 2,908
Operating Expense 19,275 139 19,136

U.S. Domestic Package 1,602 79 1,681

International Package 883 19 902
Supply Chain Solutions 295 41 336
Operating Profit 2,780 139 2,919

Other Income and (Expense):

Other pension income (expense) 66 — 66
Investment income (expense) and other 65 — 65
Interest expense (191) — (191)
Total Other Income (Expense) (60) — (60)

Income Before Income Taxes 2,720 139 2,859

Income Tax Expense 639 33 672
Net Income $ 2,081 $ 106 $ 2,187

Basic Earnings Per Share $ 2.42 $ 0.12 $ 2.54

Diluted Earnings Per Share $ 2.42 $ 0.12 $ 2.54

(1) Reflects other employee benefits costs of $109 million and other costs of $30 million.

Reconciliation of GAAP and Non-GAAP Income Statement Items

(in millions, except per share data):

Six Months Ended June 30, 2023

As
As Adjusted
Reported Transformation (Non-
(GAAP) & Other Adj.(1) GAAP)
$ 26,315 $ 101 $ 26,214
U.S. Domestic Package
International Package 7,247 (3) 7,250
 Supply Chain Solutions 6,097 52 6,045
Operating Expense 39,659 150 39,509

U.S. Domestic Package 3,068 101 3,169

International Package 1,711 (3) 1,708
Supply Chain Solutions 542 52 594
Operating Profit 5,321 150 5,471

Other Income and (Expense):

Other pension income (expense) 132 — 132
Investment income (expense) and other 168 — 168
Interest expense (379) — (379)
Total Other Income (Expense) (79) — (79)

Income Before Income Taxes 5,242 150 5,392

Income Tax Expense 1,266 35 1,301
Net Income $ 3,976 $ 115 $ 4,091

Basic Earnings Per Share $ 4.62 $ 0.13 $ 4.75

Diluted Earnings Per Share $ 4.61 $ 0.13 $ 4.74

(1) Reflects a goodwill impairment charge of $8 million within Supply Chain Solutions, employee benefit benefits
costs of $97 million and other costs of $45 million.

Reconciliation of Currency Adjusted Revenue, Revenue Per Piece,

and Adjusted Operating Profit
(in millions, except per piece data)

Three Months Ended June 30,

2023
2023 2022 Currency %
As As % Neutral Change
Reported Reported Change Currency (Non- (Non-
(GAAP) (GAAP) (GAAP) Impact GAAP) (1) GAAP)
Average Revenue
Per Piece:
International
Package:
Domestic $ 7.67 $ 7.61 0.8% $ 0.10 $ 7.77 2.1%
Export 33.70 36.91 (8.7)% 0.23 33.93 (8.1)%
 Total
International
Package $ 20.91 $ 22.17 (5.7)% $ 0.17 $ 21.08 (4.9)%

Consolidated $ 13.92 $ 13.72 1.5% $ 0.03 $ 13.95 1.7%

Revenue:
U.S. Domestic
Package $ 14,396 $ 15,459 (6.9)% $ — $ 14,396 (6.9)%
International
Package 4,415 5,073 (13.0)% 34 4,449 (12.3)%
Supply Chain
Solutions 3,244 4,234 (23.4)% 7 3,251 (23.2)%
Total revenue $ 22,055 $ 24,766 (10.9)% $ 41 $ 22,096 (10.8)%
2023
As
2023 2022 Adjusted
As As % Currency %
Adjusted Adjusted Change Neutral Change
(Non- (Non- (Non- Currency (Non- (Non-
GAAP) GAAP) GAAP) Impact GAAP) (1) GAAP)
As Adjusted
Operating Profit(2):
U.S. Domestic
Package $ 1,681 $ 1,855 (9.4)% $ — $ 1,681 (9.4)%
International
Package 902 1,204 (25.1)% 32 934 (22.4)%
Supply Chain
Solutions 336 517 (35.0)% (3) 333 (35.6)%
Total operating
profit $ 2,919 $ 3,576 (18.4)% $ 29 $ 2,948 (17.6)%

(1) Amounts adjusted for period over period foreign currency exchange rate and hedging differences.
(2) Amounts adjusted for transformation & other.

Reconciliation of Currency Adjusted Revenue, Revenue Per Piece,

and Adjusted Operating Profit
(in millions, except per piece data)

Six Months Ended June 30,

 2023
2023 2022 Currency %
As As % Neutral Change
Reported Reported Change Currency (Non- (Non-
(1)
(GAAP) (GAAP) (GAAP) Impact GAAP) GAAP)
Average Revenue
Per Piece:
International
Package:
Domestic $ 7.63 $ 7.48 2.0% $ 0.32 $ 7.95 6.3%
Export 33.34 35.47 (6.0)% 0.60 33.94 (4.3)%
Total
International
Package $ 20.69 $ 21.29 (2.8)% $ 0.46 $ 21.15 (0.7)%

Consolidated $ 13.83 $ 13.49 2.5% $ 0.07 $ 13.90 3.0%

Revenue:
U.S. Domestic
Package $ 29,383 $ 30,583 (3.9)% $ — $ 29,383 (3.9)%
International
Package 8,958 9,949 (10.0)% 195 9,153 (8.0)%
Supply Chain
Solutions 6,639 8,612 (22.9)% 57 6,696 (22.2)%
Total revenue $ 44,980 $ 49,144 (8.5)% $ 252 $ 45,232 (8.0)%
2023
As
2023 2022 Adjusted
As As % Currency %
Adjusted Adjusted Change Neutral Change
(Non- (Non- (Non- Currency (Non- (Non-
GAAP) GAAP) GAAP) Impact GAAP) (1) GAAP)
As Adjusted
Operating Profit(2):
U.S. Domestic
Package $ 3,169 $ 3,560 (11.0)% $ — $ 3,169 (11.0)%
International
Package 1,708 2,324 (26.5)% 83 1,791 (22.9)%
Supply Chain
Solutions 594 998 (40.5)% (8) 586 (41.3)%
Total operating $ 5,471 $ 6,882 $ 75 $ 5,546
profit (20.5)% (19.4)%
(1) Amounts adjusted for period over period foreign currency exchange rate and hedging differences.
(2) Amounts adjusted for transformation & other.

Reconciliation of Free Cash Flow (Non-GAAP measure)

(in millions):

Six Months Ended June 30,

2023
Cash flows from operating activities $ 5,594
Capital expenditures (1,820)
Proceeds from disposals of property, plant and equipment 50
Other investing activities 12
Free Cash Flow (Non-GAAP measure) $ 3,836

Reconciliation of Adjusted Debt to Adjusted EBITDA (Non-GAAP measure)

(in millions):

TTM(1)
Ended
June 30,
2023
Net income $ 10,013
Add back:
Income tax expense 2,965
Interest expense 738
Depreciation & amortization 3,324
EBITDA $ 17,040
Add back (deduct):
Incentive compensation program redesign 505
Transformation and other 232
Defined benefit plan (gains) and losses (1,028)
Investment income and other pension income (1,059)
Adjusted EBITDA $ 15,690

Debt and finance leases, including current maturities $ 20,763

Add back:
Non-current pension and postretirement benefit obligations 4,635
Adjusted total debt $ 25,398

Adjusted total debt/Net income 2.54

Adjusted total debt/adjusted EBITDA (Non-GAAP) 1.62

(1) Trailing twelve months.

 Reconciliation of Adjusted Return on Invested Capital (Non-GAAP measure)
(in millions):

TTM(1)
Ended
June 30,
2023
Net income $ 10,013
Add back (deduct):
Income tax expense 2,965
Interest expense 738
Other pension (income) expense (1,754)
Investment (income) expense and other (333)
Operating profit $ 11,629
Incentive compensation program redesign 505
Long-lived asset estimated residual value changes 76
Transformation and other 232
Adjusted operating profit $ 12,442

Average debt and finance leases, including current maturities 20,670

Average pension and postretirement benefit obligations 6,489
Average shareowners' equity 18,174
Average invested capital $ 45,333

Net income to average invested capital 22.1%

Adjusted Return on Invested Capital (Non-GAAP) 27.4%

(1) Trailing twelve months.

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Source: UPS