Analysis of Debt
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United Parcel Service Inc. pages available for free this week:
- Cash Flow Statement
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Dividend Discount Model (DDM)
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Sales (P/S) since 2005
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Total Debt (Carrying Amount)
United Parcel Service Inc., balance sheet: debt
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
The carrying amount of total long-term debt and finance leases exhibited fluctuations over the five-year period. An initial decrease was followed by increases in subsequent years, culminating in a notable rise by the final reporting date.
- Overall Trend
- The total long-term debt, including current maturities, began at US$21,915 million in 2021. It decreased to US$19,662 million in 2022 before increasing to US$22,264 million in 2023. A slight decrease to US$21,284 million occurred in 2024, followed by a significant increase to US$24,127 million in 2025.
- Current Maturities
- Current maturities of long-term debt and finance leases increased from US$2,131 million in 2021 to US$2,341 million in 2022 and further to US$3,348 million in 2023. A substantial decrease was observed in 2024, falling to US$1,838 million, and continued to decline to US$608 million in 2025.
- Long-Term Debt (Excluding Current Maturities)
- Long-term debt, excluding current maturities, decreased from US$19,784 million in 2021 to US$17,321 million in 2022. It then increased to US$18,916 million in 2023 and US$19,446 million in 2024, before rising significantly to US$23,519 million in 2025. This component represents the majority of the total debt.
The decrease in current maturities in 2024 and 2025, coupled with the increase in long-term debt excluding current maturities, suggests a potential strategy of refinancing short-term obligations into longer-term arrangements. The substantial increase in total debt in 2025 warrants further investigation to understand the underlying reasons, such as potential acquisitions, capital expenditures, or changes in financing strategies.
Total Debt (Fair Value)
| Dec 31, 2025 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Long-term debt, including current maturities and excluding finance leases | |
| Finance lease obligations | |
| Total long-term debt and finance leases, including current maturities (fair value) | |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | |
Based on: 10-K (reporting date: 2025-12-31).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on debt and finance leases:
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| Total | |||
Based on: 10-K (reporting date: 2025-12-31).
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, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest expense | |||||||||||
| Capitalized interest | |||||||||||
| Interest costs incurred |
Based on: 10-K (reporting date: 2025-12-31), 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).
Interest expense, capitalized interest, and total interest costs incurred all demonstrate an increasing trend over the five-year period. The rate of increase appears to be accelerating, particularly in the later years of the observed timeframe.
- Interest Expense
- Interest expense rose from US$694 million in 2021 to US$1,017 million in 2025. The increase was relatively modest between 2021 and 2022 (US$10 million), but became more substantial in subsequent years, reaching US$153 million between 2023 and 2025. This suggests a growing burden from debt financing.
- Capitalized Interest
- Capitalized interest also increased over the period, moving from US$58 million in 2021 to US$116 million in 2025. While smaller in magnitude than interest expense, the trend is consistent. The largest increase occurred between 2021 and 2023 (US$60 million), indicating potentially increased investment in projects where interest is eligible for capitalization.
- Interest Costs Incurred
- Total interest costs incurred, representing the sum of interest expense and capitalized interest, increased from US$752 million in 2021 to US$1,133 million in 2025. The growth mirrors that of interest expense, with a noticeable acceleration in the later years. The increase from 2023 to 2025 was US$230 million, representing the largest annual increase in the observed period. This suggests a significant rise in the overall cost of borrowing.
The consistent upward trajectory of all three metrics indicates a growing reliance on debt financing and/or increasing interest rates, or a combination of both. Further investigation into the company’s debt structure and borrowing terms would be necessary to determine the primary drivers of these increases.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2025-12-31), 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).
2025 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= ÷ =
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= ÷ =
The interest coverage ratios demonstrate a consistent decline over the five-year period. Both the interest coverage ratio (without capitalized interest) and the adjusted interest coverage ratio (with capitalized interest) exhibit this pattern, though the adjusted ratio consistently reports lower values.
- Interest Coverage Ratio (without capitalized interest)
- This ratio begins at 24.91 in 2021 and decreases steadily to 8.04 in 2025. The decline is most pronounced between 2022 and 2023, falling from 22.06 to 11.92. Subsequent annual decreases are more moderate, but continue the overall downward trajectory.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- Starting at 22.99 in 2021, this ratio also shows a consistent decline, reaching 7.22 by 2025. Similar to the unadjusted ratio, the largest decrease occurs between 2022 and 2023, moving from 20.33 to 10.36. The rate of decline slows in later years, but remains negative.
- Relationship between Ratios
- The adjusted interest coverage ratio is consistently lower than the interest coverage ratio without capitalized interest across all reported years. The difference between the two ratios remains relatively stable, suggesting a consistent level of capitalized interest. This indicates that including capitalized interest significantly reduces the reported ability to cover interest expenses.
- Overall Trend
- The observed trend suggests a weakening ability to meet interest obligations from earnings. While both ratios remain above 1.0 throughout the period, indicating a positive coverage, the decreasing values warrant attention. Continued declines could signal increasing financial risk.