Analysis of Debt
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- Statement of Comprehensive Income
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Operating Profit Margin since 2005
- Current Ratio since 2005
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
- Aggregate Accruals
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Total Debt (Carrying Amount)
United Parcel Service Inc., balance sheet: debt
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The analysis of the reported debt data over the five-year period reveals several notable trends in the company's debt structure.
- Current Maturities of Long-Term Debt, Commercial Paper, and Finance Leases
- This component shows fluctuations throughout the period. It decreased from $2,623 million in 2020 to $2,131 million in 2021, then increased slightly to $2,341 million in 2022. A more considerable rise to $3,348 million was observed in 2023, followed by a significant drop to $1,838 million in 2024. This volatility suggests changing short-term debt management strategies or varying refinancing activities year over year.
- Long-Term Debt and Finance Leases, Excluding Current Maturities
- There is a clear decreasing trend from $22,031 million in 2020 to $17,321 million in 2022, indicating a reduction in long-term obligations. However, this trend reverses with an increase to $18,916 million in 2023 and further to $19,446 million in 2024. This pattern could point to new debt issuances or adjustments in long-term financing after an initial period of deleveraging.
- Total Long-Term Debt, Including Current Maturities (Carrying Amount)
- The total long-term debt follows an overall downward trend from $24,654 million in 2020 to $19,662 million in 2022. A rebound occurs in 2023 with an increase to $22,264 million, before slightly decreasing again to $21,284 million in 2024. These movements mirror the combined effects seen in both current maturities and non-current long-term debt, reflecting dynamic management of the company’s debt load.
Total Debt (Fair Value)
| Dec 31, 2024 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Total long-term debt, including current maturities (fair value) | |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | |
Based on: 10-K (reporting date: 2024-12-31).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on debt:
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| Total | |||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Weighted-average interest rate = 100 × ÷ =
Interest Costs Incurred
United Parcel Service Inc., interest costs incurred
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest expense | |||||||||||
| Capitalized interest | |||||||||||
| Interest costs incurred |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Interest Expense
- The interest expense shows a generally increasing trend over the observed periods. Starting at 701 million USD in 2020, it decreased slightly to 694 million USD in 2021, but then resumed an upward trajectory, reaching 704 million USD in 2022. The increase became more pronounced in subsequent years, rising to 785 million USD in 2023 and further to 866 million USD in 2024. This pattern suggests a gradual growth in the cost of borrowing or changes in the interest rates affecting debt obligations.
- Capitalized Interest
- Capitalized interest experienced a notable decline from 87 million USD in 2020 to 58 million USD in 2021. Following this reduction, the figure held steady at around 60 million USD in 2022 before escalating significantly in the latter periods, increasing to 118 million USD in 2023 and slightly higher to 121 million USD in 2024. This shift indicates higher levels of interest costs being allocated to qualifying assets, possibly reflecting increased investments in capital projects or changes in accounting treatments.
- Interest Costs Incurred
- The total interest costs incurred, encompassing both interest expense and capitalized interest, exhibit a clear upward trend throughout the reported years. Beginning at 788 million USD in 2020, the total slightly decreased to 752 million USD in 2021 before steadily rising to 764 million USD in 2022. The increase became more substantial in 2023 at 903 million USD, followed by further growth to 987 million USD in 2024. This overall increase aligns with the trends observed in both components and may be indicative of rising debt levels, higher interest rates, or increased capital expenditure activities impacting the company’s financing costs.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
2024 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= ÷ =
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= ÷ =
- Interest Coverage Ratio (without capitalized interest)
-
The interest coverage ratio exhibited a significant increase from 3.63 in 2020 to a peak of 24.91 in 2021, indicating a marked improvement in the company's ability to meet its interest obligations during this period. Following this peak, the ratio showed a gradual decline over the subsequent years, falling to 22.06 in 2022, then to 11.92 in 2023, and further decreasing to 9.59 in 2024. Despite the downward trend from 2021 onwards, the ratio remains substantially above the 2020 level, suggesting that the company maintained a relatively strong interest payment capacity throughout the observed period.
- Adjusted Interest Coverage Ratio (with capitalized interest)
-
The adjusted interest coverage ratio, which accounts for capitalized interest, follows a pattern closely aligned with the unadjusted ratio. It increased sharply from 3.23 in 2020 to 22.99 in 2021, indicating improved coverage. Subsequently, the ratio declined consistently over the following years, dropping to 20.33 in 2022, then more steeply to 10.36 in 2023, and finally to 8.42 in 2024. This trend suggests a diminishing cushion for interest payments when capitalized interest is considered, although coverage remains considerably better than in the initial year.
- Overall Observations
-
Both ratios demonstrate a clear pattern of significant improvement in 2021 compared to 2020, followed by a steady decline through 2024. This implies that the company experienced a period of enhanced earnings or reduced interest expense in 2021, improving its ability to cover interest costs. However, the subsequent decreasing trend could indicate rising interest expenses, reduced earnings before interest and taxes, or a combination of both, warranting attention to underlying financial drivers. The adjusted ratio's consistently lower values relative to the unadjusted ratio highlight the impact of capitalized interest on coverage metrics.