FOR IMMEDIATE RELEASE
EXHIBIT 99.1
Contacts: Norman Black, Public Relations
404-828-7593
Teresa Finley, Investor Relations
404-828-7359
STRONG INTERNATIONAL GROWTH
PRODUCES SOLID QUARTER FOR UPS
SUPPLY CHAIN & FREIGHT SEGMENT PROFIT IMPROVES
ATLANTA, April 25, 2007 - UPS (NYSE:UPS) today reported a 7.9% increase in
adjusted diluted earnings per share to $0.96 on a 3.3% revenue gain, thanks to a
strong performance by its international operation and significant improvement by
its supply chain and freight segment.
Those results exclude an impairment charge relating to aging jet aircraft
and expenses for a voluntary separation program completed during the quarter.
Including these charges, diluted earnings per share declined 12.4% to $0.78
compared to the same period in 2006.
"We are pleased with the company's first quarter performance," said Mike
Eskew, UPS chairman and CEO. "Strong gains in our international package and
supply chain and freight businesses helped offset the impact of a slowing U.S.
economy. We will continue to invest aggressively to seize the growth
opportunities created by the rise in global trade."
CONSOLIDATED RESULTS 1Q 2007 AS ADJUSTED 1Q 2006
- -------------------- ------- ----------- -------
Revenue $ 11.9 B $ 11.5 B
Operating profit $ 1.36 B $ 1.65 B $ 1.56 B
Operating margin 11.4 % 13.8 % 13.5 %
Average volume per day 15.13 M 15.06 M
Diluted earnings per share $ 0.78 $ 0.96 $ 0.89
For the three months ended March 31, 2007, adjusted operating margin
improved 30 basis points to 13.8%. The supply chain and freight segment reported
adjusted operating profit of $54 million, an improvement of $79 million.
During the period, UPS took an impairment charge of $221 million on certain
Boeing 727 and 747 aircraft, including related engines and parts, due to the
acceleration of the planned retirement of these aircraft. In addition, the
company realized a charge to expense of $68 million to reflect the cost of a
previously announced voluntary separation opportunity. The charge covered cash
payouts, the acceleration of stock compensation and certain retiree healthcare
benefits for participating employees. The effect of these two items after tax
was $184 million, which reduced diluted earnings per share by $0.18.
- more -
2-2-2
The aircraft impairment charge impacted the U.S. Domestic Package segment
by $159 million and the International Package segment by $62 million. The
separation charge impacted the U.S. Domestic Package segment by $53 million, the
International Package segment by $7 million and the Supply Chain and Freight
segment by $8 million.
CASH POSITION
UPS ended the quarter with $2.4 billion in cash and marketable securities.
UPS also:
o Generated $1.9 billion in free cash flow.
o Purchased 8.9 million shares.
o Paid dividends totaling $828 million. The dividend was increased 11%
during the quarter.
o Invested $675 million in capital expenditures.
U.S. DOMESTIC PACKAGE 1Q 2007 AS ADJUSTED 1Q 2006
- --------------------- ------- ----------- -------
Revenue $7.55 B $7.46 B
Operating profit $ 941 M $1.15 B $1.19 B
Operating margin 12.5 % 15.3 % 15.9 %
Average volume per day 13.3 M 13.3 M
Consolidated volume in the U.S. operation was flat for the quarter as a
result of a slowing U.S. economy. Next Day Air(R) volume declined marginally and
deferred volume dropped 1.8%. Ground volume was flat, although revenue per piece
on ground products remained strong with a gain of 3%.
During the quarter, UPS unveiled an industry-leading Delivery InterceptSM
option in the United States that allows shippers to intercept and reroute
packages before they're delivered. The company also unveiled enhancements to
Web-based shipping tools that allow customers to streamline the preparation,
management and tracking of multiple types of shipments, whether small package or
freight, domestic or international.
INTERNATIONAL PACKAGE 1Q 2007 AS ADJUSTED 1Q 2006
- --------------------- ------- ----------- -------
Revenue $ 2.39 B $2.16 B
Operating profit $ 371 M $ 440 M $395 M
Operating margin 15.6 % 18.4 % 18.3 %
Average volume per day 1.8 M 1.7 M
Export volume showed strong growth with a 10% gain, led by a jump of more
than 20% from Asia and a double-digit increase from Europe.
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3-3-3
In early April, UPS and the Chinese government opened the way for
construction of UPS's International Air Hub at Pudong International Airport in
Shanghai. This facility, expected to be operational next year, expands UPS's
steadily increasing presence in China in support of trade growth in that part of
the world.
SUPPLY CHAIN AND FREIGHT 1Q 2007 AS ADJUSTED 1Q 2006
- ------------------------ ------- ----------- -------
Revenue $ 1.97 B $ 1.90 B
Operating profit $ 46 M $ 54M ($25 M)
Operating margin 2.3 % 2.7% (1.3 %)
The Supply Chain and Freight segment posted a second consecutive quarter of
improving results. The Forwarding and Logistics unit achieved excellent cost
control and completed the restructuring efforts begun last year. Despite the
challenging Less-than-Truckload (LTL) environment, ground freight posted
increased revenue and positive shipment growth.
OUTLOOK
"We remain excited about the long-term growth opportunities ahead for UPS,"
said Scott Davis, vice chairman and CFO. "The U.S. economy was softer than we
originally anticipated, but continued rapid growth outside the United States and
steady improvements from our Supply Chain and Freight segment are expected to
produce a solid performance for the company in 2007."
Davis said UPS is projecting earnings for the second quarter in a range of
$1.00 to $1.05 per diluted share compared to $0.97 for the second quarter of
2006. He also reaffirmed the company's annual target of a 6-to-10 percent
increase in adjusted diluted earnings per share.
UPS, which celebrates its 100th anniversary in 2007, 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.
# # #
EDITOR'S NOTE: UPS Chairman and CEO Mike Eskew and Vice Chairman and CFO Scott
Davis will discuss first quarter results with investors and analysts during a
conference call at 8:30 a.m. EDT today. That call is open to listeners through a
live Webcast. To access the call, go to www.shareholder.com/UPS and click on
"Earnings Webcast."
We supplement the reporting of our financial information determined under
generally accepted accounting principles (GAAP) with certain non-GAAP financial
measures, including, as applicable, "as adjusted" operating profit, operating
margin, pre-tax income, net income and earnings per share. We believe that these
adjusted measures provide meaningful information to assist investors and
analysts in understanding our financial results and assessing our prospects for
future performance. We believe these adjusted financial measures are important
indicators of our recurring operations because they exclude items that may not
be indicative of or are unrelated to our core operating results, and provide a
better baseline for analyzing trends in our underlying businesses. Furthermore,
we use these adjusted financial measures to determine awards for our management
personnel under our incentive compensation plans. We also provide the amount of
our free cash flow to supplement our cash flow determined under GAAP. We define
free cash flow as net cash from operating activities adjusted for capital
expenditures, proceeds from disposals of property, plant and equipment, net
change in finance receivables and other investing activities. We believe free
cash flow is an important measure in assessing the generation of cash for
discretionary investments and dividends.
In the first quarter of 2007, we recorded a $221 million pre-tax impairment
charge related to aircraft and a $68 million pre-tax charge related to cash
payouts and the acceleration of stock compensation and certain retiree
healthcare benefits for employees who accepted a voluntary separation
opportunity. We presented first quarter 2007 operating profit, operating margin,
pre-tax income, net income and earnings per share excluding the impact of these
items as we believe these adjusted measures better enable shareowners to focus
on period-over-period operating performance. The underlying matters that
produced the impairment charge and the charge related to the voluntary
separation opportunity were unique, and we do not believe they are reflective of
the types of charges that will affect future anticipated results.
Because non-GAAP financial measures are not standardized, it may not be
possible to compare these financial measures with other companies' non-GAAP
financial measures having the same or similar names. These adjusted financial
measures should not be considered in isolation or as a substitute for GAAP
operating profit, operating margin, net income and earnings per share, the most
directly comparable GAAP financial measures. These non-GAAP financial measures
reflect an additional way of viewing aspects of our operations that, when viewed
with our GAAP results and the preceding reconciliations to corresponding GAAP
financial measures, provide a more complete understanding of our business. We
strongly encourage investors to review our financial statements and
publicly-filed reports in their entirety and not to rely on any single financial
measure.
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
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, CHANGE
--------------------------- -------------------------------
2007 2006 $ %
--------- ---------- ---------- ----------
(amounts in millions, except per share data)
STATEMENT OF INCOME DATA:
Revenue:
U.S. Domestic Package $ 7,552 $ 7,463 $ 89 1.2%
International Package 2,385 2,161 224 10.4%
Supply Chain & Freight 1,969 1,897 72 3.8%
-------- -------- -----
Total revenue 11,906 11,521 385 3.3%
Operating expenses:
Compensation and benefits 6,341 6,019 322 5.3%
Other 4,207 3,947 260 6.6%
-------- -------- -----
Total operating expenses 10,548 9,966 582 5.8%
Operating profit (loss):
U.S. Domestic Package 941 1,185 (244) -20.6%
International Package 371 395 (24) -6.1%
Supply Chain & Freight 46 (25) 71 N/A
-------- -------- -----
Total operating profit 1,358 1,555 (197) -12.7%
Other income (expense):
Investment income 14 23 (9) -39.1%
Interest expense (49) (48) (1) 2.1%
-------- -------- -----
Total other income (expense) (35) (25) (10) 40.0%
-------- -------- -----
Income before income taxes 1,323 1,530 (207) -13.5%
Income taxes 480 555 (75) -13.5%
-------- -------- -----
Net income $ 843 $ 975 $ (132) -13.5%
======== ======== =====
Net income as a percentage of revenue 7.1% 8.5%
Per share amounts
Basic earnings per share $ 0.79 $ 0.89 $ (0.10) -11.2%
Diluted earnings per share $ 0.78 $ 0.89 $ (0.11) -12.4%
Weighted-average shares outstanding
Basic 1,070 1,096
Diluted 1,075 1,100
AS ADJUSTED INCOME DATA:
U.S. Domestic Package $ 1,153 $ 1,185 $ (32) -2.7%
International Package 440 395 45 11.4%
Supply Chain & Freight 54 (25) 79 N/A
-------- -------- -----
Total operating profit (1) 1,647 1,555 92 5.9%
Income before income taxes (1) $ 1,612 $ 1,530 $ 82 5.4%
Net income (2) $ 1,027 $ 975 $ 52 5.3%
Basic earnings per share (2) $ 0.96 $ 0.89 $ 0.07 7.9%
Diluted earnings per share (2) $ 0.96 $ 0.89 $ 0.07 7.9%
(1) First quarter 2007 adjusted operating profit and income before income
taxes exclude an impairment charge on Boeing 727 and 747 aircraft, and
related engines and parts, of $221 million ($159 million U.S. Domestic
Package and $62 million International Package), due to the acceleration
of the planned retirement of these aircraft.
First quarter 2007 adjusted operating profit and income before income
taxes also exclude a charge related to the special voluntary separation
opportunity ("SVSO"), which was offered to approximately 640 employees
who work in non-operating functions. The SVSO was accepted by 195, or
30%, of the eligible employees during the first quarter. As a result,
we have recorded a charge to expense of $68 million ($53 million U.S.
Domestic Package, $7 million International Package, and $8 million
Supply Chain & Freight), to reflect the cash payout and the
acceleration of stock compensation and certain retiree healthcare
benefits under the SVSO program.
(2) First quarter net income and earnings per share amounts exclude the
after-tax impact of the charges described in (1), which total $184
million.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
1
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - FIRST QUARTER
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31, CHANGE
-------------------- ----------------------
2007 2006 $ / # %
-------- -------- --------- ---------
REVENUE (IN MILLIONS):
U.S. Domestic Package:
Next Day Air $ 1,653 $ 1,684 $ (31) -1.8%
Deferred 802 831 (29) -3.5%
Ground 5,097 4,948 149 3.0%
-------- -------- -----
Total U.S. Domestic Package 7,552 7,463 89 1.2%
International Package:
Domestic 511 466 45 9.7%
Export 1,747 1,561 186 11.9%
Cargo 127 134 (7) -5.2%
-------- -------- -----
Total International Package 2,385 2,161 224 10.4%
Supply Chain & Freight:
Forwarding and Logistics 1,386 1,339 47 3.5%
Freight 488 477 11 2.3%
Other 95 81 14 17.3%
-------- -------- -----
Total Supply Chain & Freight 1,969 1,897 72 3.8%
-------- -------- -----
Consolidated $ 11,906 $ 11,521 $ 385 3.3%
======== ======== =====
Consolidated volume (in millions) 968 964 4 0.4%
Operating weekdays 64 64
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. Domestic Package:
Next Day Air 1,246 1,253 (7) -0.6%
Deferred 936 953 (17) -1.8%
Ground 11,107 11,112 (5) 0.0%
-------- -------- -----
Total U.S. Domestic Package 13,289 13,318 (29) -0.2%
International Package:
Domestic 1,114 1,090 24 2.2%
Export 722 656 66 10.1%
-------- ----- -----
Total International Package 1,836 1,746 90 5.2%
-------- -------- -----
Consolidated 15,125 15,064 61 0.4%
======== ======== =====
AVERAGE REVENUE PER PIECE:
U.S. Domestic Package:
Next Day Air $ 20.73 $ 21.00 $ (0.27) -1.3%
Deferred 13.39 13.62 (0.23) -1.7%
Ground 7.17 6.96 0.21 3.0%
Total U.S. Domestic Package 8.88 8.76 0.12 1.4%
International Package:
Domestic 7.17 6.68 0.49 7.3%
Export 37.81 37.18 0.63 1.7%
Total International Package 19.22 18.14 1.08 6.0%
Consolidated $ 10.13 $ 9.84 $ 0.29 2.9%
======== ======== =====
</Table>
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2
UNITED PARCEL SERVICE, INC.
RECONCILIATION OF FREE CASH FLOW
(UNAUDITED)
PRELIMINARY
YEAR-TO-DATE
(amounts in millions) MARCH 31, 2007
-------------------
Net cash from operations $ 2,507
Capital expenditures (675)
Proceeds from disposals of PP&E 18
Net change in finance receivables 24
Other investing activities 15
------------------
Free cash flow $ 1,889
==================
Amounts are subject to reclassification.
3