By Laura Stevens and Erin McCarthy
United Parcel Service Inc. became the latest delivery company to
report a difficult quarter due to the winter weather, saying it
cost the company about $200 million.
Severe weather conditions affected about half the working days
during the quarter, prohibiting some U.S. employees from working,
executives said during a conference call with analysts. The impact
is expected to push the entire year's profits to the lower range of
the company's previous forecast of between $5.05 and $5.30 per
share.
"I don't think there is a person in the country who is more
happy about seeing spring weather return, and as a result of it, in
April, both our productivity and service has returned to normal
levels," said Myron Gray, head of U.S. operations.
UPS said Thursday evening it would record a pre-tax charge of
$1.05 billion associated with a new labor contract in the second
quarter largely due to changes to the company's health and welfare
plans.
The changes will also allow it to remove about $1.2 billion in
retiree health-care liability for active employees from its balance
sheet. Without the new contract, UPS said it estimated health-care
costs would have continued to increase 8% per year.
During the call, Chief Financial Officer Kurt Kuehn said that
the company had already factored these charges into its earnings
forecast for the year.
During the earnings call, executives discussed plans to improve
its performance during this year's busy holiday season. In addition
to making permanent changes, such as increasing the space to unload
trailers at its Louisville, Ky., air hub, it is also adding about
6,000 new parking spaces to load and unload its delivery trucks, an
increase of 10%.
The company also is in talks with retailers to better forecast
package flow, he added. UPS said it is investing around $600
million to improve its network and technology to avoid problems
this year.
On Wednesday, the national union representing UPS
package-delivery employees overrode three local bargaining units
that had delayed approving parts of a five-year national contract.
The new master contract should take effect on Friday.
For the first quarter, the shipper reported earnings of $911
million, or 98 cents a share, down 12.4% from $1.04 billion, or
$1.08 a share, a year earlier. Revenue rose 2.6% to $13.8
billion.
The company's U.S. domestic package business reported $927
million in operating profit, down by $158 million from a year
earlier. The international business was a bright spot, reporting a
5% increase in revenue to $3.13 billion.
Write to Laura Stevens at laura.stevens@wsj.com and Erin
McCarthy at erin.mccarthy@wsj.com
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