FOR IMMEDIATE RELEASE
Contacts: Norman Black, Public Relations
404-828-7593
Teresa Finley, Investor Relations
404-828-7359
STRONG VOLUME GROWTH PROPELS
UPS TO RECORD QUARTERLY PROFIT
INTERNATIONAL PROFIT JUMPS MORE THAN 50%;
U.S. GROUND VOLUME SURGES
ATLANTA, Jan. 29, 2004 - Led by strong volume gains both in the United
States and overseas and significant margin improvement within its international
operation, UPS (NYSE:UPS) today reported a 19% jump in adjusted net income for
the fourth quarter after excluding certain items that affect the year-ago
comparison.
The quarter's performance capped a record year for volume. UPS
delivered 3.44 billion packages in 2003, or an average 13.64 million per day.
For the quarter ended Dec. 31, consolidated revenue totaled $8.93
billion, up 8.2% from the $8.26 billion reported during the prior-year period as
both the international and U.S. package businesses enjoyed strong volume gains.
Average daily export volume increased 10% during the quarter, pushing
consolidated international average daily volume to a record 1.4 million, an
increase of 6.3%. Export volume out of the U.S. increased more than 10%, the
largest such increase since 2000. Within the United States, average daily
package volume jumped 4.9% to a record 13.8 million. U.S. ground volume surged
5.2%, while Next Day Air(R) volume climbed 3.5% and deferred air volume rose a
solid 4%.
For the three months ended Dec. 31, net income totaled $856 million or
$0.75 per diluted share, compared to $1.5 billion or $1.32 per diluted share in
the fourth quarter of 2002. However, excluding several items affecting
comparisons between the periods, diluted earnings per share were $0.70 in 2003
and diluted earnings per share were $0.59 in 2002.
The items that affect comparisons include:
- In the fourth quarter of 2003, UPS realized a gain on
redemption of long-term debt of $18 million after tax. In
addition, UPS lowered its effective tax rate to reflect
improvements in state taxes, reducing its income tax expense
by $39 million. Combined, these items increased diluted
earnings per share for the most recent period by $0.05.
Without these items, net income would have been $799 million.
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2-2-2
- In the fourth quarter of 2002, the company booked a final
settlement of a tax dispute with the Internal Revenue Service,
reversing $1.02 billion of a tax assessment liability. In
addition, the company reduced an accrual due to a change in
its vacation policy, and also recorded a restructuring charge
related to its UPS Supply Chain Solutions unit. These items
increased the 2002 fourth quarter's net income by $832
million. Without these items, net income would have been $670
million.
"Our fourth quarter performance underscores how effectively our
strategies are working," said Scott Davis, UPS's chief financial officer. "All
three of our business segments are showing expanded margins, led by
international."
Of particular note, Davis continued, was the strength of the 2003 peak
holiday season, which was boosted by increasing levels of on-line shopping. UPS
delivered more than 20 million packages on Peak Day. In a sign of increasing
customer connectivity, packages sent using UPS Internet Ship climbed 50%
compared to 2002 and tracking requests surged to a high of 12 million on the
busiest day, up a third over the previous year. During the quarter, volume
through The UPS Store(TM) doubled compared to the prior year.
Highlights by segment, excluding the adjustments described above, included:
- U.S. package revenue rose 7% to $6.66 billion. Operating
profit rose 9.6% to $911 million and margins improved to
13.7%. Average revenue per piece rose for all products, with
the overall U.S. average revenue per piece increasing 1.9%.
- International package revenue rose 17% to $1.52 billion.
Operating profit for this segment increased 56% to $241
million. Operating margin reached 15.9%, the highest operating
margin ever achieved by this segment.
- The non-package segment saw operating profit rise 27% to $121
million. In the quarter, the UPS Supply Chain Solutions
business unit signed a number of new contracts that will
positively impact revenue growth in the first quarter.
For the full year ended Dec. 31, 2003, consolidated revenue increased
7.1% to a record $33.5 billion, while operating profit rose 8.5% to $4.45
billion compared to $4.1 billion in 2002. Net income for the year totaled $2.9
billion compared to $3.2 billion in 2002. However, a number of items impact
comparison of the two years. These items increased 2003's net income by $126
million and increased net income for 2002 by $760 million. Excluding the impact
of these items, earnings per diluted share totaled $2.44 in 2003 compared to
$2.14 in 2002.
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3-3-3
Davis said the company is pleased with the momentum across all its
business lines. "We continue to believe that our industry has great growth
opportunities and that UPS has a business model that is creating superior
returns, growth and consistency," the CFO said. "We're one of the few U.S.
companies that's as successful internationally as it is at home, and our supply
chain capabilities are making us an attractive `one-source provider' to
customers. That's why we've set the goal of having all three segments operating
with margins of more than 15% by 2007, our 100th anniversary."
For 2004, UPS expects U.S. package volume growth rates of about 4%,
Davis said. The company anticipates continued vibrant growth in the
international segment with about a 20% increase in profitability, he continued.
On the non-package side, the company expects a revenue increase in the low
double-digits with a $50 million or more increase in profit.
Davis said the company projects first quarter earnings in the range
of $0.58 to $0.62 per diluted share versus an adjusted $0.52 last year. The
company reaffirms its targeted earnings growth of 12-to-18% for the full year,
he added.
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.
# # #
THE NON-GAAP FINANCIAL MEASURES INCLUDED IN THIS PRESS RELEASE ARE RECONCILED
TO THE COMPARABLE GAAP MEASURES IN THE SCHEDULES ATTACHED TO THIS PRESS
RELEASE. ADDITIONAL DETAILED FINANCIAL SCHEDULES ARE
AVAILABLE ON THE COMPANY'S WEB SITE AT WWW.SHAREHOLDER.COM/UPS/STOCK.CFM.
EDITOR'S NOTE: UPS CFO Scott Davis will discuss fourth quarter results with
investors and analysts during a conference call later today at 10:00 a.m. (EST).
That conference call is open to listeners through a live Webcast. To access the
call, go to www.shareholder.com/UPS and click on "Earnings Webcast."
4-4-4
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 - FOURTH QUARTER
QUARTER ENDED DECEMBER 31,
------------------------------------------------------ CHANGE 4Q 2003 VS.
4Q 2002 (AS ADJUSTED)
2002 2002 2002 ---------------------------
2003 AS REPORTED ADJUSTMENTS AS ADJUSTED $ %
--------------------------------------------------------------------------------------
(financial data in millions,
except per share amounts)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $6,659 $6,224 $ -- $6,224 $435 7.0%
International package 1,518 1,298 -- 1,298 220 16.9%
Non-package 755 735 -- 735 20 2.7%
-------------------------------------------------------------------
Total revenue 8,932 8,257 -- 8,257 675 8.2%
Operating expenses:
Compensation and benefits 5,036 4,540 197 (a) 4,737 299 6.3%
Other 2,623 2,546 (106) (b) 2,440 183 7.5%
-------------------------------------------------------------------
Total operating expenses 7,659 7,086 91 7,177 482 6.7%
Operating profit:
U.S. domestic package 911 1,006 (175) (a) 831 80 9.6%
International package 241 165 (11) (a) 154 87 56.5%
Non-package 121 - 95 (a),(b) 95 26 27.4%
-------------------------------------------------------------------
Total operating profit 1,273 1,171 (91) 1,080 193 17.9%
Other income (expense):
Investment income 23 19 -- 19 4 21.1%
Interest expense (27) (52) -- (52) 25 -48.1%
Gain on redemption of long-term debt 28 -- -- -- 28 N/A
Tax assessment reversal -- 1,023 (1,023) (c) -- -- N/A
-------------------------------------------------------------------
Total other income (expense) 24 990 (1,023) (33) 57 -172.7%
Income before income taxes 1,297 2,161 (1,114) 1,047 250 23.9%
Income taxes 441 659 (282) (d) 377 64 17.0%
-------------------------------------------------------------------
Net income $ 856 $1,502 $ (832) $ 670 $186 27.8%
===================================================================
Net income as a percentage of revenue 9.6% 18.2% 8.1%
Per share amounts
Basic earnings per share $ 0.76 $ 1.34 $ 0.60
Diluted earnings per share $ 0.75 $ 1.32 $ 0.59
Weighted average shares outstanding
Basic 1,132 1,124 1,124
Diluted 1,140 1,135 1,135
-------------------------------------------------------
(a) UPS recognized a credit to operating expense due to a change in our
vacation policy of $197 million ($175 million - U.S. Domestic package,
$11 million - International package, $11 million - Non-package).
(b) Non-package restructuring charge and related expenses of $106 million
at our Supply Chain Solutions unit.
(c) $1.023 billion gain related to the settlement of a previously
established tax assessment liability.
(d) Increased tax expense due to the tax provision on the credit to
operating expenses resulting from the change in vacation policy and the
tax assessment reversal, partially offset by the tax benefit resulting
from the restructuring charge. Adjustment does not include a $26
million reduction in income tax expense due to favorable resolution of
several other tax matters.
Certain prior year amounts have been reclassified to conform to the current year
presentation. Results for the quarter ending December 31, 2003, include a
pre-tax gain for the redemption of long-term debt of $28 million ($18 million
after-tax). In addition, the company lowered its effective tax rate to reflect
improvements in state taxes. The impact of this change was to reduce the
provision for income taxes and increase net income by $39 million. Excluding the
impact of these two items, diluted earnings per share would be $0.70.
1
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - FOURTH QUARTER
QUARTER ENDED DECEMBER 31, CHANGE
--------------------------------------------------------------
2003 2002 $ %
--------------------------------------------------------------
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 1,416 $ 1,356 $ 60 4.4%
Deferred 854 801 53 6.6%
Ground 4,389 4,067 322 7.9%
-----------------------------------------
Total U.S. domestic package 6,659 6,224 435 7.0%
International package:
Domestic 315 254 61 24.0%
Export 1,081 910 171 18.8%
Cargo 122 134 (12) -9.0%
-----------------------------------------
Total International package 1,518 1,298 220 16.9%
Non-package:
UPS Supply Chain Solutions 559 544 15 2.8%
Other 196 191 5 2.6%
-----------------------------------------
Total Non-package 755 735 20 2.7%
-----------------------------------------
Consolidated $ 8,932 $ 8,257 $ 675 8.2%
=========================================
Memo: Gross revenue
UPS Supply Chain Solutions $ 1,161 $ 1,129 $ 32 2.8%
Consolidated volume (in millions) 929 885 44 5.0%
Operating weekdays 61 61
AVERAGE DAILY PACKAGE VOLUME
(IN THOUSANDS):
U.S. domestic package:
Next day air 1,221 1,180 41 3.5%
Deferred 1,115 1,072 43 4.0%
Ground 11,505 10,938 567 5.2%
-----------------------------------------
Total U.S. domestic package 13,841 13,190 651 4.9%
International package:
Domestic 866 831 35 4.2%
Export 527 479 48 10.0%
-----------------------------------------
Total International package 1,393 1,310 83 6.3%
-----------------------------------------
Consolidated 15,234 14,500 734 5.0%
=========================================
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 19.01 $ 18.84 $ 0.17 0.9%
Deferred 12.56 12.25 0.31 2.5%
Ground 6.25 6.10 0.15 2.5%
Total U.S. domestic package 7.89 7.74 0.15 1.9%
International package:
Domestic 5.96 5.01 0.95 19.0%
Export 33.63 31.14 2.49 8.0%
Total International package 16.43 14.57 1.86 12.8%
Consolidated $ 8.67 $ 8.35 $ 0.32 3.8%
=========================================
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2
UNITED PARCEL SERVICE, INC.
SELECTED FINANCIAL DATA - YEAR-TO-DATE
YEAR ENDED DECEMBER 31,
------------------------------------------------------------- CHANGE 2003 VS.
2002 2002 2002 2002 (AS ADJUSTED)
------------------------
2003 AS REPORTED ADJUSTMENTS AS ADJUSTED $ %
----------------------------------------------------------------------------------------
(financial data in millions,
except per share amounts)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $ 25,022 $ 23,924 $ -- $ 23,924 $ 1,098 4.6%
International package 5,561 4,680 -- 4,680 881 18.8%
Non-package 2,902 2,668 -- 2,668 234 8.8%
-----------------------------------------------------------------------
Total revenue 33,485 31,272 -- 31,272 2,213 7.1%
Operating expenses:
Compensation and benefits 19,328 17,940 197(a) 18,137 1,191 6.6%
Other 9,712 9,236 (106)(b) 9,130 582 6.4%
-----------------------------------------------------------------------
Total operating expenses 29,040 27,176 91 27,267 1,773 6.5%
Operating profit:
U.S. domestic package 3,272 3,576 (175)(a) 3,401 (129) -3.8%
International package 709 322 (11)(a) 311 398 128.0%
Non-package 464 198 95(a),(b) 293 171 58.4%
-----------------------------------------------------------------------
Total operating profit 4,445 4,096 (91) 4,005 440 11.0%
Other income (expense):
Investment income (loss) 18 63 -- 63 (45) -71.4%
Interest expense (121) (173) -- (173) 52 -30.1%
Gain on redemption of long-term debt 28 -- -- -- 28 N/A
Tax assessment reversal -- 1,023 (1,023)(c) -- -- N/A
-----------------------------------------------------------------------
Total other income (expense) (75) 913 (1,023) (110) 35 31.8%
Income before income taxes 4,370 5,009 (1,114) 3,895 475 12.2%
Income taxes 1,472 1,755 (282)(d) 1,473 (1) -0.1%
FAS 142 cumulative adjustment, net -- (72) 72(e) --
-----------------------------------------------------------------------
Net income $ 2,898 $ 3,182 $ (760) $ 2,422 $ 476 19.7%
=======================================================================
Net income as a percentage of revenue 8.7% 10.2% 7.7%
Per share amounts
Basic earnings per share $ 2.57 $ 2.84 $ 2.16
Diluted earnings per share $ 2.55 $ 2.81 $ 2.14
Weighted average shares outstanding
Basic 1,128 1,120 1,120
Diluted 1,138 1,134 1,134
-----------------------------------------------------------------------
(a) UPS recognized a credit to operating expense due to a change in our
vacation policy of $197 million ($175 million - U.S. Domestic package,
$11 million - International package, $11 million - Non-package).
(b) Non-package restructuring charge and related expenses of $106 million
at our Supply Chain Solutions unit.
(c) $1.023 billion gain related to the settlement of a previously
established tax assessment liability.
(d) Increased tax expense due to the tax provision on the credit to
operating expenses resulting from the change in vacation policy and the
tax assessment reversal, partially offset by the tax benefit resulting
from the restructuring charge. Adjustment does not include a $26
million reduction in income tax expense due to favorable resolution of
several other tax matters.
(e) $72 million cumulative adjustment upon adoption of FAS 142 on January
1, 2002 resulting from the impairment of our former Mail Technologies
unit.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
3
UNITED PARCEL SERVICE, INC.
ANALYSIS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2003
------------------- --------------- ------------- -------------- -----------------
1Q 2Q 3Q 4Q Year
------------------- --------------- ------------- -------------- -----------------
(financial data in millions, Diluted Diluted Diluted Diluted Diluted
except per share amounts) $ EPS $ EPS $ EPS $ EPS $ EPS
------------------- --------------- ------------- -------------- -----------------
Denominator for diluted EPS 1,136 1,136 1,140 1,140 1,138
Net income, as reported 611 0.54 692 0.61 739 0.65 856 0.75 2,898 2.55
Adjustments:
Reduction of income tax expense (55) (0.05) (22) (0.02) (39) (0.03) (116) (0.10)
Investment impairment 37 0.03 37 0.03
Sale of Mail Technologies (14) (0.01) (14) (0.01)
Sale of Aviation Technologies (15) (0.01) (15) (0.01)
Gain on redemption of long-term debt (18) (0.02) (18) (0.02)
------- -------- ----- ------- ----- ------ ----- ------ ------- ------
Net income, as adjusted $ 593 $ 0.52 $ 678 $ 0.60 $ 702 $ 0.62 $ 799 $ 0.70 $ 2,772 $ 2.44
======= ======== ===== ======= ===== ====== ===== ====== ======= ======
4
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - YEAR-TO-DATE
YEAR ENDED DECEMBER 31, CHANGE
---------------------------------------------------------
2003 2002 $ %
---------------------------------------------------------
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 5,580 $ 5,349 $ 231 4.3%
Deferred 2,982 2,868 114 4.0%
Ground 16,460 15,707 753 4.8%
--------------------------------------
Total U.S. domestic package 25,022 23,924 1,098 4.6%
International package:
Domestic 1,134 943 191 20.3%
Export 4,001 3,276 725 22.1%
Cargo 426 461 (35) -7.6%
--------------------------------------
Total International package 5,561 4,680 881 18.8%
Non-package:
UPS Supply Chain Solutions 2,126 1,969 157 8.0%
Other 776 699 77 11.0%
--------------------------------------
Total Non-package 2,902 2,668 234 8.8%
--------------------------------------
Consolidated $33,485 $31,272 $ 2,213 7.1%
======================================
Memo: Gross revenue
UPS Supply Chain Solutions $ 4,337 $ 3,864 $ 473 12.2%
Consolidated volume (in millions) 3,437 3,362 75 2.2%
Operating weekdays 252 252
AVERAGE DAILY PACKAGE VOLUME
(IN THOUSANDS):
U.S. domestic package:
Next day air 1,185 1,111 74 6.7%
Deferred 918 895 23 2.6%
Ground 10,268 10,112 156 1.5%
--------------------------------------
Total U.S. domestic package 12,371 12,118 253 2.1%
International package:
Domestic 786 779 7 0.9%
Export 481 443 38 8.6%
--------------------------------------
Total International package 1,267 1,222 45 3.7%
--------------------------------------
Consolidated 13,638 13,340 298 2.2%
======================================
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 18.69 $ 19.11 $ (0.42) -2.2%
Deferred 12.89 12.72 0.17 1.3%
Ground 6.36 6.16 0.20 3.2%
Total U.S. domestic package 8.03 7.83 0.20 2.6%
International package:
Domestic 5.73 4.80 0.93 19.4%
Export 33.01 29.35 3.66 12.5%
Total International package 16.08 13.70 2.38 17.4%
Consolidated $ 8.77 $ 8.37 $ 0.40 4.8%
======================================
Certain prior year amounts have been reclassified to conform to the current year
presentation.
5