UPS(UPS) - 2025 Q1 - Quarterly Report

Financial Performance - Revenue for Q1 2025 was $21,546 million, a decrease of 0.7$21,706 million in Q1 2024[206] - Operating profit increased to $1,666 million, reflecting a 3.3$1,613 million in the previous year[206] - Net income rose to $1,187 million, a 6.6$1,113 million in Q1 2024[206] - Total revenue increased by 1.4% to $14,460 million in Q1 2025, driven by a 1.9$146 million to $979 million, with an operating margin of 6.8$164 million to $1,011 million, with a non-GAAP adjusted operating margin of 7.0$4,373 million, driven by a $94 million increase in export revenue[242] - Operating profit decreased by$15 million to $641 million, resulting in an operating margin of 14.7$28 million to $654 million, with a non-GAAP adjusted operating margin of 15.0$2,713 million, primarily due to the divestiture of Coyote, which contributed $563 million in the prior year[257] Volume and Operational Metrics - Average daily package volume decreased by 1.9$3.5 billion from the Network Reconfiguration and Efficiency Reimagined initiatives in 2025, with $500 million realized by March 31, 2025[201] - The company anticipates recording between$400 million and $600 million in expenses related to early asset retirements and other costs in 2025[202] - The company expects to incur expenses between$400 million and $600 million in 2025 related to early asset retirements and other costs associated with its Network Reconfiguration and Efficiency Reimagined programs[216] - Operating expenses increased by 3.7$3,732 million, with pickup and delivery expenses rising by $87 million due to increased volumes[252] - Total operating expenses were$19,880 million, a decrease of $213 million or 1.1$235 million for the quarter, with non-GAAP adjusted total compensation and benefits also increasing by $236 million[269] - Purchased transportation expenses decreased by$516 million, primarily due to the impact of the disposition of Coyote and insourcing of the Ground Saver product[273] Strategic Initiatives and Acquisitions - The acquisition of Frigo-Trans, completed in January 2025, is expected to enhance complex cold-chain logistics capabilities internationally[200] - The company plans to reduce its operational workforce by approximately 20,000 positions and close 73 facilities by the end of June 2025[201] - Cash paid for acquisitions in 2025 included $478 million for Frigo-Trans and reacquired development area rights for The UPS Store[292] - The company has pending acquisition commitments, including an agreement to acquire Andlauer Healthcare Group for approximately CAD$2.2 billion (USD $1.6 billion)[304] Shareholder Returns and Capital Management - Shareholder returns included$1.0 billion in share repurchases and dividends of $1.64 per share during the first quarter[205] - The company repurchased 8.6 million shares of class B common stock for$1.0 billion during the first quarter of 2025[295] - The quarterly cash dividend was increased to $1.64 per share in 2025, compared to$1.63 in 2024[296] - Total debt outstanding as of March 31, 2025, was $21.369 billion, an increase from$20.013 billion in 2024[295] - The company anticipates capital expenditures of approximately $3.5 billion in 2025, with 80$876 million, representing 4.1% of revenue, down from $1.035 billion or 4.8$5.1 billion in cash, cash equivalents, and marketable securities, with $1.7 billion held by foreign subsidiaries[286][288] - Net cash from operating activities for the three months ended March 31, 2025, was$2.318 billion, a decrease of $1.0 billion compared to$3.316 billion in 2024[287] Market Risks and Hedging - The total net fair value of currency derivatives as of March 31, 2025, was $103 million, down from$283 million at the end of 2024[311] - As of March 31, 2025, the company's market risks and hedging strategies have not materially changed from the disclosures in the Annual Report for the year ended December 31, 2024[313] - The company entered into foreign currency exchange forward contracts on multiple currencies, including Euro, British Pound Sterling, Canadian Dollar, Hong Kong Dollar, and Chinese Renminbi in Q1 2025[313] - The fair value changes of these contracts between December 31, 2024, and March 31, 2025, were primarily due to fluctuations in foreign currency exchange rates[313] - The company limits counterparty risk by engaging only with banks and financial institutions that meet established credit guidelines[314] - Agreements with active counterparties include early termination rights and collateral provisions for positions exceeding $250 million[315] - As of March 31, 2025, the company held no cash collateral and was not required to post any collateral with counterparties[316] - The company has not historically incurred losses due to counterparty default and does not expect to in the future[316]