FOR IMMEDIATE RELEASE
Contacts: Norman Black, Public Relations
404-828-7593
Teresa Finley, Investor Relations
404-828-7359
STRONG GLOBAL VOLUME GROWTH
PRODUCES 12% GAIN IN EARNINGS
DAILY VOLUME UP 721,000; INTERNATIONAL PROFIT JUMPS 22%
ATLANTA, Oct. 19, 2006 -- UPS (NYSE:UPS) today reported solid revenue and
profit growth for its most recent quarter on a healthy 5% rise in global small
package volume.
Consolidated revenue for the quarter ending Sept. 30, 2006, increased 10.5%
and diluted earnings per share increased 11.6% to $0.96. The growth in small
package volume translated to 721,000 additional packages each day in the UPS
network.
The company also said it is taking significant steps to improve the
profitability of its forwarding and logistics business, confirming it will
eliminate 20% of the non-operating expense in the business unit.
"UPS is moving forward with confidence," said Chairman and CEO Mike Eskew.
"Our small package business continues to show strength across all segments and
we are taking the steps necessary to put our supply chain business on the right
track after a disappointing performance."
CONSOLIDATED RESULTS Third quarter Year-ago
- -------------------- ------------- --------
Revenue $11.66 B $10.55 B
Operating profit $ 1.58 B $ 1.50 B
Average volume per day 15.1 M 14.3 M
Diluted earnings per share $ 0.96 $ 0.86
Operating profit for the quarter was reduced by an $87 million pre-tax
charge for a tentative legal settlement involving a wage-and-hour case in
California. In addition, there was a $52 million reduction in income tax expense
related to favorable developments with certain international tax issues. The
combination of these two items had no effect on the $0.96 diluted earnings per
share.
- more -
CASH POSITION
For the first nine months, UPS generated $4 billion in cash from operations
and:
- Purchased 26.5 million shares, reducing total shares outstanding by
2.1%.
- Paid $1.6 billion in dividends.
- Invested $2.3 billion in capital expenditures.
The company's cash position declined from the previous end-of-quarter due
primarily to the funding of its UPS-sponsored pension plans in the amount of
$1.5 billion.
U. S. PACKAGE Third quarter Year-ago
- ------------- ------------- --------
Revenue $7.40 B $7.03 B
Operating profit $1.21 B $1.11 B
Operating margin 16.3% 15.8%
Average volume per day 13.3 M 12.9 M
All levels of small package service posted gains. Daily ground volume
increased 3.6%, while average daily volume for Next Day Air(R) rose 1.0% and
deferred air volume climbed 3.4%. Total revenue per piece remained firm with a
gain of 3.4%.
This segment was adversely impacted by the $87 million tentative legal
settlement previously mentioned. In addition, the unit experienced a positive
impact from a reduction in worker's compensation claims expense. This reflects
the success of the company's health and safety programs, which have dramatically
reduced claims and injuries.
INTERNATIONAL PACKAGE Third quarter Year-ago
- --------------------- ------------- --------
Revenue $2.25 B $1.92 B
Operating profit $ 387 M $ 318 M
Operating margin 17.2% 16.6%
Average volume per day 1.8 M 1.5 M
Total international package volume grew 19.9%. Export volume increased
13.6%. Non-U.S. domestic volume was up 24.2% aided by the LYNX Express
acquisition.
In the third quarter, the company opened its first retail centers in China.
The launch of the UPS Express centers in Shanghai's central business district is
the latest in a series of strategic initiatives to expand UPS's operations and
brand presence in China.
Additionally, UPS today announced a new partnership with the Italian Post.
Under the five-year agreement, UPS will deliver the Italian post office's
international express volume.
- more -
SUPPLY CHAIN AND FREIGHT Third quarter Year-ago
- ------------------------ ------------- --------
Revenue $2.01 B $1.60 B
Operating profit (loss) ($19) M $ 70 M
Operating margin (.9%) 4.4%
The forwarding and logistics unit is in the process of implementing cost
and revenue initiatives that will improve its performance. UPS Freight results
were below expectations due to a revenue shortfall and cost pressures related to
the consolidation of its western U.S. unit, Motor Cargo, Inc., into the UPS
Freight network.
OUTLOOK
"We still expect full year diluted earnings per share growth of about 11%
despite the performance in the supply chain and freight segment," said Scott
Davis, UPS's chief financial officer. "The small package business should be
strong in the fourth quarter as we expect international deliveries and the U.S.
holiday shipping period to be solid. We also anticipate modest improvement from
the supply chain and freight segment over third quarter results."
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. To get UPS news direct, visit pressroom.ups.com/RSS.
# # #
EDITOR'S NOTE: UPS Chairman and CEO Mike Eskew and CFO Scott Davis will discuss
third quarter results with investors and analysts during a conference call today
at 8:30 a.m. EDT. 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."
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 - THIRD QUARTER
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30, CHANGE
------------------ ---------------
2006 2005 $ %
------- ------- ------ ------
(amounts in millions, except per share data)
STATEMENT OF INCOME DATA:
Revenue:
U.S. Domestic Package $ 7,402 $ 7,033 $ 369 5.2%
International Package 2,251 1,918 333 17.4%
Supply Chain & Freight 2,009 1,599 410 25.6%
------- ------- ------
Total revenue 11,662 10,550 1,112 10.5%
Operating expenses:
Compensation and benefits 5,908 5,603 305 5.4%
Other 4,178 3,449 729 21.1%
------- ------- ------
Total operating expenses 10,086 9,052 1,034 11.4%
Operating profit (loss):
U.S. Domestic Package 1,208 1,110 98 8.8%
International Package 387 318 69 21.7%
Supply Chain & Freight (19) 70 (89) -127.1%
------- ------- ------
Total operating profit 1,576 1,498 78 5.2%
Other income (expense):
Investment income 25 28 (3) -10.7%
Interest expense (54) (37) (17) 45.9%
------- ------- ------
Total other income (expense) (29) (9) (20) 222.2%
------- ------- ------
Income before income taxes 1,547 1,489 58 3.9%
Income taxes 509 536 (27) -5.0%
------- ------- ------
Net income $ 1,038 $ 953 $ 85 8.9%
======= ======= ======
Net income as a percentage of revenue 8.9% 9.0%
Per share amounts
Basic earnings per share $ 0.96 $ 0.86 $ 0.10 11.6%
Diluted earnings per share $ 0.96 $ 0.86 $ 0.10 11.6%
Weighted average shares outstanding
Basic 1,080 1,109
Diluted 1,085 1,112
Certain prior year amounts have been reclassified to conform to the current year
presentation.
1
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - THIRD QUARTER
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30, CHANGE
------------------- -------------
2006 2005 $ / # %
-------- -------- ------ ----
REVENUE (IN MILLIONS):
U.S. Domestic Package:
Next Day Air $ 1,683 $ 1,605 $ 78 4.9%
Deferred 794 758 36 4.7%
Ground 4,925 4,670 255 5.5%
------- ------- ------
Total U.S. Domestic Package 7,402 7,033 369 5.2%
International Package:
Domestic 482 375 107 28.5%
Export 1,622 1,408 214 15.2%
Cargo 147 135 12 8.9%
------- ------- ------
Total International Package 2,251 1,918 333 17.4%
Supply Chain & Freight:
Forwarding and Logistics 1,419 1,200 219 18.3%
Freight 497 314 183 58.3%
Other 93 85 8 9.4%
------- ------- ------
Total Supply Chain & Freight 2,009 1,599 410 25.6%
------- ------- ------
Consolidated $11,662 $10,550 $1,112 10.5%
======= ======= ======
Consolidated volume (in millions) 949 918 31 3.4%
Operating weekdays 63 64
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. Domestic Package:
Next Day Air 1,239 1,227 12 1.0%
Deferred 889 860 29 3.4%
Ground 11,175 10,788 387 3.6%
------- ------- ------
Total U.S. Domestic Package 13,303 12,875 428 3.3%
International Package:
Domestic 1,088 876 212 24.2%
Export 677 596 81 13.6%
------- ------- ------
Total International Package 1,765 1,472 293 19.9%
------- ------- ------
Consolidated 15,068 14,347 721 5.0%
======= ======= ======
AVERAGE REVENUE PER PIECE:
U.S. Domestic Package:
Next Day Air $ 21.56 $ 20.44 $ 1.12 5.5%
Deferred 14.18 13.77 0.41 3.0%
Ground 7.00 6.76 0.24 3.6%
Total U.S. Domestic Package 8.83 8.54 0.29 3.4%
International Package:
Domestic 7.03 6.69 0.34 5.1%
Export 38.03 36.91 1.12 3.0%
Total International Package 18.92 18.93 (0.01) -0.1%
Consolidated $ 10.01 $ 9.60 $ 0.41 4.3%
======= ======= ======
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
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30, CHANGE
------------------- ---------------
2006 2005 $ %
-------- -------- ------- -----
(amounts in millions, except per share data)
STATEMENT OF INCOME DATA:
Revenue:
U.S. Domestic Package $22,327 $20,786 $1,541 7.4%
International Package 6,645 5,757 888 15.4%
Supply Chain & Freight 5,947 4,084 1,863 45.6%
------- ------- ------
Total revenue 34,919 30,627 4,292 14.0%
Operating expenses:
Compensation and benefits 17,917 16,389 1,528 9.3%
Other 12,176 9,806 2,370 24.2%
------- ------- ------
Total operating expenses 30,093 26,195 3,898 14.9%
Operating profit:
U.S. Domestic Package 3,627 3,256 371 11.4%
International Package 1,196 1,063 133 12.5%
Supply Chain & Freight 3 113 (110) -97.3%
------- ------- ------
Total operating profit 4,826 4,432 394 8.9%
Other income (expense):
Investment income 71 96 (25) -26.0%
Interest expense (156) (120) (36) 30.0%
------- ------- ------
Total other income (expense) (85) (24) (61) 254.2%
------- ------- ------
Income before income taxes 4,741 4,408 333 7.6%
Income taxes 1,667 1,587 80 5.0%
------- ------- ------
Net income $ 3,074 $ 2,821 $ 253 9.0%
======= ======= ======
Net income as a percentage of revenue 8.8% 9.2%
Per share amounts
Basic earnings per share $ 2.83 $ 2.53 $ 0.30 11.9%
Diluted earnings per share $ 2.82 $ 2.52 $ 0.30 11.9%
Weighted average shares outstanding
Basic 1,088 1,116
Diluted 1,092 1,120
Certain prior year amounts have been reclassified to conform to the current year
presentation.
3
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - YEAR TO DATE
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30, CHANGE
------------------- --------------
2006 2005 $ / # %
-------- -------- ------ -----
REVENUE (IN MILLIONS):
U.S. Domestic Package:
Next Day Air $ 5,054 $ 4,665 $ 389 8.3%
Deferred 2,447 2,289 158 6.9%
Ground 14,826 13,832 994 7.2%
------- ------- ------
Total U.S. Domestic Package 22,327 20,786 1,541 7.4%
International Package:
Domestic 1,421 1,114 307 27.6%
Export 4,797 4,266 531 12.4%
Cargo 427 377 50 13.3%
------- ------- ------
Total International Package 6,645 5,757 888 15.4%
Supply Chain & Freight:
Forwarding and Logistics 4,202 3,526 676 19.2%
Freight 1,484 314 1,170 372.6%
Other 261 244 17 7.0%
------- ------- ------
Total Supply Chain & Freight 5,947 4,084 1,863 45.6%
------- ------- ------
Consolidated $34,919 $30,627 $4,292 14.0%
======= ======= ======
Consolidated volume (in millions) 2,871 2,707 164 6.1%
Operating weekdays 191 192
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. Domestic Package:
Next Day Air 1,244 1,188 56 4.7%
Deferred 926 863 63 7.3%
Ground 11,120 10,615 505 4.8%
------- ------- ------
Total U.S. Domestic Package 13,290 12,666 624 4.9%
International Package:
Domestic 1,080 841 239 28.4%
Export 663 592 71 12.0%
------- ------- ------
Total International Package 1,743 1,433 310 21.6%
------- ------- ------
Consolidated 15,033 14,099 934 6.6%
======= ======= ======
AVERAGE REVENUE PER PIECE:
U.S. Domestic Package:
Next Day Air $ 21.27 $ 20.45 $ 0.82 4.0%
Deferred 13.84 13.81 0.03 0.2%
Ground 6.98 6.79 0.19 2.8%
Total U.S. Domestic Package 8.80 8.55 0.25 2.9%
International Package:
Domestic 6.89 6.90 (0.01) -0.1%
Export 37.88 37.53 0.35 0.9%
Total International Package 18.68 19.55 (0.87) -4.5%
Consolidated $ 9.94 $ 9.67 $ 0.27 2.8%
======= ======= ======
Certain prior year amounts have been reclassified to conform to the current year
presentation.
4