FOR IMMEDIATE RELEASE
Contacts: Norman Black, Public Relations
404-828-7593
Kurt Kuehn, Investor Relations
404-828-6977
INTERNATIONAL, NON-PACKAGE SEGMENTS
DRIVE UPS 1ST QUARTER RESULTS
ATLANTA, April 22, 2003 - UPS today reported solid first quarter
results driven by its international and non-package businesses, with both
segments generating strong revenue growth and record-setting profits.
The U.S. package segment experienced volume declines during the first
two months of the quarter, exacerbated by severe winter weather and a difficult
economy. In March, however, and continuing into April, volume trends improved
and the company now is experiencing growth in its U.S. package business.
For the quarter ended March 31, 2003, revenue totaled $8.02 billion, up
5.8% from the $7.58 billion reported during the prior-year period. Consolidated
operating profit fell 0.2% to $945 million. Net income increased 24.4% to $611
million compared to the prior year's $491 million. Excluding a $72 million
non-recurring charge in 2002 for the adoption of a new accounting standard, net
income rose 8.5%, from $563 million in 2002 to $611 million this year.
Earnings per diluted share, adjusted to exclude the non-recurring item,
increased 8% to $0.54 versus $0.50 recorded during the prior-year period.
Without this adjustment, earnings per share increased 25.6% compared to the
$0.43 recorded during the first quarter of 2002.
Operating profit for the international package segment more than
quadrupled to $134 million, led by a 10.3% increase in export volume and a 23.5%
increase in revenue. Operating profit for the non-package segment almost doubled
to $107 million on an 11.4% gain in revenue. The U.S. package segment was hurt
by a number of adverse items, including a sharp increase in fuel costs; bad
weather that cost the company more than $30 million, and increases in pension
and healthcare expenses. Nonetheless, revenue per piece showed excellent
improvement as the pricing environment remained firm.
"We are pleased with the quarter on many fronts," said UPS Chief
Financial Officer Scott Davis. "We generated good results despite a very
challenging domestic environment and were gratified to see our strategy really
taking hold in the international and supply chain segments."
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UPS took several steps over the quarter to generate growth
opportunities, including the introduction of a new look and branding campaign to
demonstrate its expanded global capabilities. The company also launched a
program under which most Mail Boxes Etc. centers in the U.S. will re-brand into
THE UPS STORE, and continued integration activities within the new UPS Supply
Chain Solutions organization.
Additional results for each segment include:
o In the international segment, revenue increased 23.5% to $1.3 billion
compared to the prior year period. Operating profit surged more than
300% to $134 million. Average daily export volume continued to
outperform market growth, posting a 10.3% increase overall with a 16%
gain in Asia and an 11% hike in Europe.
o Within the U.S. domestic segment, revenue totaled $6 billion, up 2%
compared to $5.9 billion for the prior year. Operating profit declined
18.3% to $704 million due to a volume decline of 1.2% and adverse
costs. Approximately one-half of the volume decline was attributed to
the effects of bad weather in February. Next Day Air(R) express volume
grew a strong 3.9%, well above market growth, and the quarter ended
with positive growth trends.
o The non-package segment posted its best quarter ever. Revenue
increased 11.4% to $693 million. Operating profit totaled $107
million, up from the $55 million reported the prior year. UPS Supply
Chain Solutions benefited substantially from its successful
integration and restructuring.
The quarter's consolidated results were helped by a $55 million
reduction in income taxes, or $0.05 per share, as a number of outstanding tax
issues were resolved. Those gains were partially offset by a writedown in UPS's
marketable securities, reflecting market conditions. The writedown totaled $58
million pre-tax, or $0.03 per share.
As to future guidance, Davis said the company expects second quarter
earnings to be in the range of $0.58 to 0.62 per diluted share compared to $0.54
in 2002. He said the company is on track to achieve its stated goal of a
10-to-15% gain in earnings per share for the full year.
"We expect domestic package volume to continue the momentum begun in
March and April and post between a 1-to-2% increase over last year's second
quarter results," Davis said. "All three domestic product lines should show
positive growth rates, with Next Day Air remaining the strongest. We have put in
place many initiatives that we believe will continue to expand our U.S. package
business.
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"International growth trends should continue and we expect the
synergies being created by the integration of our UPS Supply Chain Solutions
organization will continue to pay off," Davis added. "We are encouraged by the
way our customers are accepting our strategy of synchronizing global commerce."
UPS is the world's largest package delivery company and a global leader
in supply chain services, offering an extensive range of options for
synchronizing the movement of goods, information and funds. Headquartered in
Atlanta, Ga., UPS serves more than 200 countries and territories worldwide.
UPS's stock trades on the New York Stock Exchange (UPS), and the company can be
found on the Web at UPS.com.
# # #
DETAILED FINANCIAL SCHEDULES ARE AVAILABLE ON THE COMPANY'S WEB SITE.
EDITOR'S NOTE: UPS CFO Scott Davis will discuss first quarter results with
investors and analysts during a conference call later today at 10:00 a.m. (EDT).
That conference call is open to listeners through a live webcast at www.ups.com.
To access the call through the Website, click on "UPS Investor Relations" at the
bottom right of the U.S. homepage, then click on "Earnings Webcast."
Except for historical information contained herein, the statements made
in this release constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements, including statements
regarding the intent, belief or current expectations of UPS and its management
regarding the company's strategic directions, prospects and future results,
involve certain risks and uncertainties. Certain factors may cause actual
results to differ materially from those contained in the forward-looking
statements, including economic and other conditions in the markets in which we
operate, governmental regulations, our competitive environment, strikes, work
stoppages and slowdowns, increases in aviation and motor fuel prices, cyclical
and seasonal fluctuations in our operating results, and other risks discussed in
the company's Form 10-K and other filings with the Securities and Exchange
Commission, which discussions are incorporated herein by reference.
UNITED PARCEL SERVICE, INC.
SELECTED FINANCIAL DATA - FIRST QUARTER
<Table>
<Caption>
QUARTER ENDED MARCH 31, CHANGE
---------------------------------------------------
2003 2002 $ %
--------- --------- --------- ---------
(financial data in millions, except per share amounts)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $ 6,020 $ 5,903 $ 117 2.0%
International package 1,302 1,054 248 23.5%
Non-package 693 622 71 11.4%
--------- --------- ---------
Total revenue 8,015 7,579 436 5.8%
Operating expenses:
Compensation and benefits 4,708 4,449 259 5.8%
Other 2,362 2,183 179 8.2%
--------- --------- ---------
Total operating expenses 7,070 6,632 438 6.6%
Operating profit:
U.S. domestic package 704 862 (158) -18.3%
International package 134 30 104 346.7%
Non-package 107 55 52 94.5%
--------- --------- ---------
Total operating profit 945 947 (2) -0.2%
Other income (expense):
Investment income (loss) (38) 12 (50) -416.7%
Interest expense (25) (43) 18 -41.9%
--------- --------- ---------
Total other income (expense) (63) (31) (32) -103.2%
--------- --------- ---------
Income before income taxes 882 916 (34) -3.7%
Income taxes 271 353 (82) -23.2%
FAS 142 cumulative adjustment, net -- (72) 72 N/A
--------- --------- ---------
Net income $ 611 $ 491 $ 120 24.4%
========= ========= =========
Non-recurring items:
FAS 142 cumulative adjustment, net -- 72 (72) N/A
--------- --------- ---------
As adjusted net income exclusive of non-recurring items $ 611 $ 563 $ 48 8.5%
========= ========= =========
As adjusted net income as a percentage of revenue 7.6% 7.4%
Per share amounts
Basic earnings per share $ 0.54 $ 0.44
Diluted earnings per share $ 0.54 $ 0.43
As adjusted per share amounts
Basic earnings per share $ 0.54 $ 0.50
Diluted earnings per share $ 0.54 $ 0.50
Weighted average shares outstanding
Basic 1,124 1,119
Diluted 1,136 1,134
</Table>
Certain prior year amounts have been reclassified to conform to the current year
presentation.
1
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - FIRST QUARTER
<Table>
<Caption>
QUARTER ENDED MARCH 31, CHANGE
--------------------------------------------------
2003 2002 $ %
---------- ---------- ---------- ----------
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 1,353 $ 1,313 $ 40 3.0%
Deferred 698 700 (2) -0.3%
Ground 3,969 3,890 79 2.0%
---------- ---------- ----------
Total U.S. domestic package 6,020 5,903 117 2.0%
International package:
Domestic 266 222 44 19.8%
Export 940 737 203 27.5%
Cargo 96 95 1 1.1%
---------- ---------- ----------
Total International package 1,302 1,054 248 23.5%
Non-package:
UPS Supply Chain Solutions 500 460 40 8.7%
Other 193 162 31 19.1%
---------- ---------- ----------
Total Non-package 693 622 71 11.4%
---------- ---------- ----------
Consolidated $ 8,015 $ 7,579 $ 436 5.8%
========== ========== ==========
Memo: Gross revenue
UPS Supply Chain Solutions $ 912 $ 704 $ 208 29.5%
Consolidated volume (in millions) 826 832 (6) -0.8%
Operating weekdays 63 63
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. domestic package:
Next day air 1,135 1,092 43 3.9%
Deferred 845 880 (35) -4.0%
Ground 9,881 10,034 (153) -1.5%
---------- ---------- ----------
Total U.S. domestic package 11,861 12,006 (145) -1.2%
International package:
Domestic 776 780 (4) -0.5%
Export 471 427 44 10.3%
---------- ---------- ----------
Total International package 1,247 1,207 40 3.3%
---------- ---------- ----------
Consolidated 13,108 13,213 (105) -0.8%
========== ========== ==========
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 18.92 $ 19.09 $ (0.17) -0.9%
Deferred 13.11 12.63 0.48 3.8%
Ground 6.38 6.15 0.23 3.7%
Total U.S. domestic package 8.06 7.80 0.26 3.3%
International package:
Domestic 5.44 4.52 0.92 20.4%
Export 31.68 27.40 4.28 15.6%
Total International package 15.35 12.61 2.74 21.7%
Consolidated $ 8.75 $ 8.24 $ 0.51 6.2%
========== ========== ==========
</Table>
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2