- Global Shipments Rise 6.9% to 1.1
Billion
- U.S. Domestic Operating Margin Improves
to 14.7%
- International Export Packages per Day
Climb 9.4%
- Supply Chain and Freight Operating
Margin Hits 8.9%
- Balanced Growth Across All Segments
Drives Operating Profit up 8.3%
- Reaffirms Full-Year Adjusted EPS
Guidance of $4.90 to $5.00
UPS® (NYSE:UPS) today announced diluted earnings per share of
$1.32 for the third quarter 2014, a 13.8% improvement over the
prior year period. Operating profit increased 8.3%, resulting from
balanced growth across all three segments.
Daily packages in the U.S. were 6.9% higher as demand from both
B2C and B2B customers improved. International Export shipments
increased 9.4% with strong growth in both Asia and Europe. UPS
delivered 1.1 billion packages around the world, up 6.9% over the
third quarter 2013.
“The solid performance we delivered this quarter establishes our
ability to stay ahead of market growth and generate positive
operating leverage,” said David Abney, UPS chief executive officer.
“We continue making investments in technology and expanding our
capabilities around the world to ensure we provide the long-term
solutions customers demand.”
Cash Flow
For the nine months ended Sept. 30, UPS generated $2.8 billion
in free cash flow. The company paid dividends of $1.8 billion, up
8.1% per share over the prior year, and repurchased 20.6 million
shares for approximately $2.1 billion.
U.S. Domestic Package
U.S. Domestic revenue increased to $8.7 billion, up 5.3% over
the third quarter 2013. Daily package volume improved 6.9%, led by
gains in UPS Ground and Deferred products up 7.7% and 5.9%,
respectively. E-commerce continued to drive strong B2C growth,
while B2B deliveries were also higher this quarter.
Operating profit was $1.3 billion, up 7.8%. Operating margin
expanded 30 basis points to 14.7%. The segment experienced positive
operating leverage as investments in new technology and capacity
helped lower costs.
Total revenue per package declined 1.5% as base rate
improvements were offset by changes in customer and product mix.
UPS SurePost shipments increased more than 50%, contributing to the
mix change.
During the quarter, UPS announced the expansion of its Access
Point alternate delivery solution to the New York City and Chicago
areas. Plans were announced to add locations in other U.S. cities,
in addition to more than 4,400 existing UPS Stores, by the end of
2015.
International Package
International revenue increased 5.5% to $3.2 billion on daily
package growth of 6.7%. Export products jumped 9.4% with gains from
all regions of the world. Shipments out of Asia grew 16% and Europe
was up 14%.
Operating profit improved 10.3% to $460 million. Operating
margin expanded 70 basis points over the prior year period, to
14.5%. Revenue and cost initiatives implemented during the quarter
contributed to the margin improvements.
Currency-neutral revenue per package declined 1.0% due to
changing product mix and continued strength in shorter trade lanes.
Non-premium products continue to outpace premium, putting pressure
on yield.
On October 7, UPS announced the acquisition of international
e-commerce enabler i-parcel, LLC. The company’s experience and
technology in cross-border e-commerce assists U.K. and U.S. based
retailers expand their reach to consumers in over 100 countries
worldwide.
Supply Chain &
Freight
Supply Chain and Freight revenue was up 7.4% to $2.4 billion,
resulting primarily from growth in the Distribution and UPS Freight
business units. Operating profit was 7% higher at $215 million, and
operating margin was 8.9%.
Forwarding revenue was higher primarily due to increased
International Air Freight (IAF) tonnage which was aided by
high-tech product launches and Government sector gains. Operating
profit improvements in North American Air Freight and Ocean
Forwarding were more than offset by continued pricing pressure in
IAF.
Distribution revenue increased more than 10% over the same
quarter last year. Strong demand from Healthcare and Retail sector
customers contributed to the growth.
UPS Freight revenue increased 7.9% to $810 million. LTL
shipments were 4.7% higher and revenue per hundredweight improved
1.1%. Operating profit and margin expanded from the third quarter
last year.
Outlook
The company announced its expectations for the upcoming holiday
season. UPS expects shipments delivered during the month of
December to climb 11% over the prior year. As previously announced,
the company committed an additional $175 million in operating
expense and $500 million in capital expenditures to enhance its
capabilities and prepare the network for peak and future volume
growth.
“It’s encouraging to see all three segments show positive
momentum, as we head into our busiest time of year,” said Kurt
Kuehn, UPS chief financial officer. “We expect another robust peak
season and are confident our network is prepared to operate at the
highest level. As a result, we are reiterating our expectations for
adjusted diluted earnings per share to be in a range of $4.90 to
$5.00, a 7-to-9% increase over 2013 adjusted results.”
About UPS
UPS (NYSE: UPS) is a global leader in logistics, offering a
broad range of solutions including the transportation of packages
and freight; the facilitation of international trade, and the
deployment of advanced technology to more efficiently manage the
world of business. Headquartered in Atlanta, UPS serves more than
220 countries and territories worldwide. The company can be found
on the Web at ups.com® and its corporate blog can be found at
Longitudes.ups.com. To get UPS news direct, visit
pressroom.ups.com/RSS.
Editor’s Note:
UPS CEO David Abney and CFO Kurt Kuehn will lead a discussion on
third quarter results with investors and analysts during a
conference call at 8:30 a.m. ET today. That call is open to
listeners through a live Webcast. To access the call, go to
www.investors.ups.com and click on “Earnings Webcast.”
UPS routinely posts investor announcements on its website –
www.investors.ups.com – and encourages those interested in the
company to check there frequently.
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. The equivalent measures
determined in accordance with GAAP are also referred to as
"reported" or "unadjusted.” 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 supplemented the presentation of our year-to-date 2014 and
2013 operating profit, operating margin, pre-tax income, net income
and earnings per share with similar measures that excluded the
impact of certain transactions. In the second quarter of 2014, we
recorded a $1.066 billion pre-tax charge ($665 million after-tax)
related to the transfer of postretirement benefit obligations to
multiemployer healthcare plans for certain employees under the
Teamsters National Master Agreement. The charge is allocated
between the U.S. Domestic Package segment ($957 million), the
International Package segment ($27 million) and the Supply Chain
& Freight segment ($82 million). In the first quarter of 2013,
we recorded transactions related to our attempted acquisition of
TNT Express N.V. These items included the impact of (1) a pre-tax
charge for the TNT termination fee and transaction-related costs of
$284 million ($177 million after-tax), and (2) a pre-tax currency
gain realized upon the liquidation of a foreign subsidiary of $245
million ($213 million after-tax). We believe these adjusted
measures provide additional information that better enables
shareowners to focus on period-over-period operating
performance.
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, which are 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, negotiation and
ratification of labor contracts, strikes, work stoppages and
slowdowns, changes 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 2014
2013 $ % (amounts in
millions, except per share data)
Statement of Income Data:
Revenue: U.S. Domestic Package $ 8,691 $ 8,254 $ 437 5.3 %
International Package 3,183 3,017 166 5.5 % Supply Chain &
Freight 2,416 2,250
166 7.4 % Total revenue 14,290 13,521 769 5.7 %
Operating expenses: Compensation and benefits 7,217 6,961
256 3.7 % Other 5,119 4,756
363 7.6 % Total operating expenses 12,336
11,717 619 5.3 % Operating profit: U.S. Domestic Package
1,279 1,186 93 7.8 % International Package 460 417 43 10.3 % Supply
Chain & Freight 215 201
14 7.0 % Total operating profit 1,954 1,804
150 8.3 % Other income (expense): Investment income 2 2 -
0.0 % Interest expense (87 ) (92 )
5 -5.4 % Total other income (expense) (85 ) (90 ) 5
-5.6 % Income before income
taxes 1,869 1,714 155 9.0 % Income tax expense 655 617 38
6.2 % Net income $ 1,214
$ 1,097 $ 117 10.7 % Net income
as a percentage of revenue 8.5 % 8.1 % Per share amounts:
Basic earnings per share $ 1.33 $ 1.17 $ 0.16 13.7 % Diluted
earnings per share $ 1.32 $ 1.16 $ 0.16 13.8 %
Weighted-average shares outstanding: Basic 913 935 (22 ) -2.4 %
Diluted 922 944 (22 ) -2.3 %
Certain prior year amounts have been
reclassified to conform to the current year presentation.
United Parcel Service, Inc.
Selected Operating Data - Third
Quarter
(unaudited)
Three Months Ended
September 30, Change 2014
2013 $/ # %
Revenue (in millions): U.S. Domestic Package: Next Day Air $
1,636 $ 1,595 $ 41 2.6 % Deferred 827 790 37 4.7 % Ground
6,228 5,869 359 6.1 % Total U.S.
Domestic Package 8,691 8,254 437 5.3 % International Package:
Domestic 689 653 36 5.5 % Export 2,339 2,214 125 5.6 % Cargo
155 150 5 3.3 % Total
International Package 3,183 3,017 166 5.5 % Supply Chain &
Freight: Forwarding and Logistics 1,459 1,358 101 7.4 % Freight 810
751 59 7.9 % Other 147 141 6
4.3 % Total Supply Chain & Freight 2,416
2,250 166 7.4 % Consolidated $ 14,290
$ 13,521 $ 769 5.7 % Consolidated
volume (in millions) 1,093 1,023 70 6.9 % Operating weekdays
64 64 -
Average Daily Package Volume (in thousands):
U.S. Domestic Package: Next Day Air 1,235 1,222 13 1.1 % Deferred
1,008 952 56 5.9 % Ground 12,209 11,340
869 7.7 % Total U.S. Domestic Package 14,452 13,514
938 6.9 % International Package: Domestic 1,547 1,474 73 5.0 %
Export 1,085 992 93 9.4 %
Total International Package 2,632 2,466
166 6.7 % Consolidated 17,084
15,980 1,104 6.9 %
Average Revenue
Per Piece: U.S. Domestic Package: Next Day Air $ 20.70 $ 20.39
$ 0.31 1.5 % Deferred 12.82 12.97 (0.15 ) -1.2 % Ground 7.97 8.09
(0.12 ) -1.5 % Total U.S. Domestic Package 9.40 9.54 (0.14 ) -1.5 %
International Package: Domestic 6.96 6.92 0.04 0.6 % Export 33.68
34.87 (1.19 ) -3.4 % Total International Package 17.98 18.17 (0.19
) -1.0 % Consolidated $ 10.72 $ 10.87 $ (0.15 ) -1.4
%
Certain prior year amounts have been
reclassified to conform to the current year presentation.
United Parcel Service, Inc.
Selected Financial Data - Year to
Date
(unaudited)
Nine Months Ended
September 30, Change 2014
2013 $ % (amounts in
millions, except per share data)
Statement of Income Data:
Revenue: U.S. Domestic Package $ 25,847 $ 24,766 $ 1,081 4.4 %
International Package 9,562 9,057 505 5.6 % Supply Chain &
Freight 6,928 6,639
289 4.4 % Total revenue 42,337 40,462 1,875 4.6 %
Operating expenses: Compensation and benefits 22,857 20,910
1,947 9.3 % Other 15,266 14,426
840 5.8 % Total operating expenses 38,123
35,336 2,787 7.9 % Operating profit: U.S. Domestic Package
2,415 3,403 (988 ) -29.0 % International Package 1,342 1,220 122
10.0 % Supply Chain & Freight 457
503 (46 ) -9.1 % Total operating profit 4,214
5,126 (912 ) -17.8 % Other income (expense): Investment
income 27 10 17 170.0 % Interest expense (266 )
(286 ) 20 -7.0 % Total other income
(expense) (239 ) (276 ) 37 -13.4 %
Income before income taxes 3,975 4,850 (875 ) -18.0 %
Income tax expense 1,396 1,645 (249 ) -15.1 %
Net income $ 2,579 $ 3,205
$ (626 ) -19.5 % Net income as a percentage of
revenue 6.1 % 7.9 % Per share amounts Basic earnings per
share $ 2.81 $ 3.40 $ (0.59 ) -17.4 % Diluted earnings per share $
2.78 $ 3.37 $ (0.59 ) -17.5 % Weighted-average shares
outstanding Basic 918 943 (25 ) -2.7 % Diluted 927 952 (25 ) -2.6 %
As adjusted income data: Operating profit:
U.S. Domestic Package (1) $ 3,372 $ 3,403 $ (31 ) -0.9 %
International Package (1) 1,369 1,259 110 8.7 % Supply Chain &
Freight (1) 539 503
36 7.2 % Total operating profit (1) 5,280 5,165 115
2.2 % Income before income taxes (1) $ 5,041 $ 4,889 $ 152
3.1 % Net income (2) $ 3,244 $ 3,169 $ 75 2.4 % Basic
earnings per share (2) $ 3.53 $ 3.36 $ 0.17 5.1 % Diluted earnings
per share (2) $ 3.50 $ 3.33 $ 0.17 5.1 %
(1) Second quarter 2014 operating profit
and consolidated income before income taxes exclude $1.066 billion
pre-tax charge associated with transferring
postretirement health and welfare benefit obligations to
multiemployer healthcare plans for certain employees under the
Teamsters National Master Agreement. The charge was
allocated between the U.S. Domestic Package segment ($957 million),
the International Package segment ($27 million) and the Supply
Chain & Freight segment ($82 million).
First quarter 2013 operating profit and
consolidated income before income taxes exclude the impact of the
TNT termination penalty of €200 million ($268 million) and
transaction-related expenses of $16 million. The combination of
these items resulted in a pre-tax charge of $284 million ($177
million after-tax). Subsequent to the termination of the merger
protocol, we liquidated a foreign subsidiary resulting in a
realized foreign currency gain of $245 million ($213 million
after-tax). Both transactions impacted the International Package
segment.
(2) Second quarter 2014 net income and
earnings per share amounts exclude the $665 million after-tax
charge of transferring postretirement benefit
obligations described in (1).
First Quarter 2013 net income and earnings
per share amounts excluded the after-tax impact of the
International Package segment transactions described in (1), which
total a combined $36 million after-tax gain.
Certain prior year amounts have been
reclassified to conform to the current year presentation.
United Parcel Service, Inc.
Selected Operating Data - Year to
Date
(unaudited)
Nine Months Ended
September 30, Change 2014 2013
$/ # % Revenue (in
millions): U.S. Domestic Package: Next Day Air $ 4,862 $ 4,754
$ 108 2.3 % Deferred 2,507 2,400 107 4.5 % Ground 18,478
17,612 866 4.9 % Total U.S.
Domestic Package 25,847 24,766 1,081 4.4 % International Package:
Domestic 2,069 1,939 130 6.7 % Export 7,046 6,664 382 5.7 % Cargo
447 454 (7 ) -1.5 % Total
International Package 9,562 9,057 505 5.6 % Supply Chain &
Freight: Forwarding and Logistics 4,224 4,051 173 4.3 % Freight
2,275 2,170 105 4.8 % Other 429 418
11 2.6 % Total Supply Chain & Freight
6,928 6,639 289 4.4 %
Consolidated $ 42,337 $ 40,462 $ 1,875 4.6 %
Consolidated volume (in millions) 3,244 3,051 193 6.3 %
Operating weekdays 191 191 -
Average Daily Package
Volume (in thousands): U.S. Domestic Package: Next Day Air
1,241 1,223 18 1.5 % Deferred 1,027 970 57 5.9 % Ground
12,124 11,362 762 6.7 % Total
U.S. Domestic Package 14,392 13,555 837 6.2 % International
Package: Domestic 1,524 1,439 85 5.9 % Export 1,066
980 86 8.8 % Total International
Package 2,590 2,419 171
7.1 % Consolidated 16,982 15,974
1,008 6.3 %
Average Revenue Per Piece: U.S.
Domestic Package: Next Day Air $ 20.51 $ 20.35 $ 0.16 0.8 %
Deferred 12.78 12.95 (0.17 ) -1.3 % Ground 7.98 8.12 (0.14 ) -1.7 %
Total U.S. Domestic Package 9.40 9.57 (0.17 ) -1.8 % International
Package: Domestic 7.11 7.05 0.06 0.9 % Export 34.61 35.60 (0.99 )
-2.8 % Total International Package 18.43 18.62 (0.19 ) -1.0 %
Consolidated $ 10.78 $ 10.94 $ (0.16 ) -1.5 %
Certain prior year amounts have been
reclassified to conform to the current year presentation.
United Parcel Service, Inc.
Reconciliation of Free Cash
Flow
(unaudited)
Preliminary Year-to-Date (amounts in millions)
September 30, Net cash from operations $ 4,208 Capital
expenditures (1,444 ) Proceeds from disposals of PP&E 28 Net
change in finance receivables 23 Other investing activities
(20 ) Free cash flow $ 2,795 Amounts are subject to
reclassification.
Certain prior year amounts have been
reclassified to conform to the current year presentation.
UPSAndy McGowan, Public Relations404-828-4663orJoe Wilkins,
Investor Relations404-828-8209
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