UPS (NYSE:UPS) today announced third-quarter 2021 consolidated
revenue of $23.2 billion, a 9.2% increase over the third quarter of
2020. Consolidated operating profit was $2.9 billion, up 22.6%
compared to the third quarter of 2020, and up 23.4% on an adjusted
basis. Diluted earnings per share were $2.65 for the quarter, 18.3%
above the same period in 2020, and up 18.9% on an adjusted basis.
For the third quarter of 2021, GAAP results include after-tax
transformation and other charges of $54 million, equivalent to
$0.06 per share. Year-to-date cash from operations was $11.8
billion, up 26.7% compared to the same period in 2020, with free
cash flow of $9.3 billion, a 52.3% increase above the first nine
months of 2020.
“I want to thank all UPSers for delivering what matters with
great service to our customers,” said Carol Tomé, UPS chief
executive officer. “The actions we are taking under our better not
bigger strategic framework to improve revenue quality, enhance
productivity and remain disciplined on capital allocation are
driving our positive financial performance.”
U.S. Domestic Segment
|
3Q 2021 |
Adjusted3Q 2021 |
3Q 2020 |
Adjusted3Q 2020 |
Revenue |
$14,208 M |
|
$13,225 M |
|
Operating profit |
$1,407 M |
$1,414 M |
$1,098 M |
$1,133 M |
- Revenue was up 7.4%, driven by a 12.0% increase in revenue per
piece.
- Operating margin was 9.9%; adjusted operating margin was
10.0%.
International Segment
|
3Q 2021 |
Adjusted3Q 2021 |
3Q 2020 |
Adjusted3Q 2020 |
Revenue |
$4,720 M |
|
$4,087 M |
|
Operating profit |
$1,051 M |
$1,108 M |
$966 M |
$972 M |
- Revenue increased 15.5%, with strong growth from all
regions.
- Operating margin was 22.3%; adjusted operating margin was
23.5%.
Supply Chain Solutions Segment
|
3Q 2021 |
Adjusted3Q 2021 |
3Q 2020 |
Adjusted3Q 2020 |
Revenue |
$4,256 M |
|
$3,926 M |
|
Operating profit |
$438 M |
$448 M |
$299 M |
$302 M |
- Revenue increased 8.4%, led by Forwarding and Logistics, which
combined grew 35.4%.
- Operating margin was 10.3%; adjusted operating margin was
10.5%.
Outlook
For the full year in 2021, the company is raising its
consolidated adjusted operating margin target to approximately
13.0% and expects adjusted return on invested capital to be around
29%. Capital expenditures are now planned to be approximately $4.2
billion and the company’s effective tax rate is expected to be
about 22.5%.
* “Adjusted” and free cash flow amounts are
non-GAAP financial measures. See the appendix to this release for a
discussion of non-GAAP financial measures, including a
reconciliation to the most closely correlated GAAP measure.
Contacts:UPS Media Relations: 404-828-7123 or pr@ups.comUPS
Investor Relations: 404-828-6059 (option 4) or investor@ups.com
Conference Call Information
UPS CEO Carol Tomé and CFO Brian Newman will discuss
third-quarter results with investors and analysts during a
conference call at 8:30 a.m. ET, October 26, 2021. That call will
be open to others through a live Webcast. To access the call, go to
www.investors.ups.com and click on “Earnings Conference Call.”
Additional financial information is included in the detailed
financial schedules being posted on www.investors.ups.com under
“Quarterly Earnings and Financials” and as filed with the SEC as an
exhibit to our Current Report on Form 8-K.
About UPS
UPS (NYSE: UPS) is one of the world’s largest companies, with
2020 revenue of $84.6 billion, and provides a broad range of
integrated logistics solutions for customers in more than 220
countries and territories. Focused on its purpose statement,
“Moving our world forward by delivering what matters,” the
company’s more than 540,000 employees embrace a strategy that is
simply stated and powerfully executed: Customer First. People Led.
Innovation Driven. UPS is committed to reducing its impact on the
environment and supporting the communities we serve around the
world. UPS also takes an unwavering stance in support of diversity,
equality, and inclusion. More information can be found at
www.ups.com, about.ups.com and www.investors.ups.com.
Forward-Looking Statements
This release and our filings with the Securities and Exchange
Commission contain and in the future may contain “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Statements other than those of current or
historical fact, and all statements accompanied by terms such as
“will,” “believe,” “project,” “expect,” “estimate,” “assume,”
“intend,” “anticipate,” “target,” “plan,” and similar terms, are
intended to be forward-looking statements. Forward-looking
statements are made subject to the safe harbor provisions of the
federal securities laws pursuant to Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934.
From time to time, we also include written or oral
forward-looking statements in other publicly disclosed materials.
Such statements may relate to our intent, belief, forecasts of, or
current expectations about our strategic direction, prospects,
future results, or future events; they do not relate strictly to
historical or current facts. Management believes that these
forward-looking statements are reasonable as and when made.
However, caution should be taken not to place undue reliance on any
forward-looking statements because such statements speak only as of
the date when made and the future, by its very nature, cannot be
predicted with certainty.
Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from our historical experience and our present expectations or
anticipated results. These risks and uncertainties, include, but
are not limited to: continued uncertainties related to the impact
of the COVID-19 pandemic on our business and operations, financial
performance and liquidity, our customers and suppliers, and on the
global economy; changes in general economic conditions, in the U.S.
or internationally; significant competition on a local, regional,
national and international basis; changes in our relationships with
our significant customers; changes in the regulatory environment in
the U.S. or internationally; increased or more complex physical or
data security requirements; legal, regulatory or market responses
to global climate change; results of negotiations and ratifications
of labor contracts; strikes, work stoppages or slowdowns by our
employees; the effects of changing prices of energy, including
gasoline, diesel and jet fuel, and interruptions in supplies of
these commodities; changes in exchange rates or interest rates;
uncertainty from the expected discontinuance of LIBOR and
transition to any other interest rate benchmark; our ability to
maintain our brand image; our ability to attract and retain
qualified employees; breaches in data security; disruptions to the
Internet or our technology infrastructure; interruptions in or
impacts on our business from natural or man-made events or
disasters including terrorist attacks, epidemics or pandemics; our
ability to accurately forecast our future capital investment needs;
exposure to changing economic, political and social developments in
international and emerging markets; changes in business strategy,
government regulations, or economic or market conditions that may
result in impairment of our assets; increases in our expenses or
funding obligations relating to employee health, retiree health
and/or pension benefits; potential additional U.S. or international
tax liabilities; potential claims or litigation related to labor
and employment, personal injury, property damage, business
practices, environmental liability and other matters; our ability
to realize the anticipated benefits from acquisitions,
dispositions, joint ventures or strategic alliances; our ability to
realize the anticipated benefits from our transformation
initiatives; cyclical and seasonal fluctuations in our operating
results; our ability to manage insurance and claims expenses; and
other risks discussed in our filings with the Securities and
Exchange Commission from time to time, including our Annual Report
on Form 10-K for the year ended December 31, 2020 and subsequently
filed reports. You should consider the limitations on, and risks
associated with, forward-looking statements and not unduly rely on
the accuracy of predictions contained in such forward-looking
statements. We do not undertake any obligation to update
forward-looking statements to reflect events, circumstances,
changes in expectations, or the occurrence of unanticipated events
after the date of those statements.
Reconciliation of GAAP and non-GAAP Financial
Measures
From time to time we supplement the reporting of our financial
information determined under generally accepted accounting
principles ("GAAP") with certain non-GAAP financial measures. These
include: "adjusted" compensation and benefits; operating expenses;
operating profit; operating margin; other income and (expense);
income before income taxes; income tax expense; effective tax rate;
net income and earnings per share. We present revenue and revenue
per piece on a constant currency basis. Additionally, we disclose
free cash flow and return on invested capital (“ROIC”).
We believe that these non-GAAP measures provide meaningful
information to assist users of our financial statements in more
fully understanding our financial results and cash flows and
assessing our ongoing performance, because they exclude items that
may not be indicative of, or are unrelated to, our underlying
operations and may provide a useful baseline for analyzing trends
in our underlying businesses. These non-GAAP measures are used
internally by management for business unit operating performance
analysis, business unit resource allocation and in connection with
incentive compensation award determinations.
Non-GAAP financial measures should be considered in addition to,
and not as an alternative for, our reported results prepared in
accordance with GAAP. Our adjusted financial information does not
represent a comprehensive basis of accounting. Therefore, our
adjusted financial information may not be comparable to similarly
titled information reported by other companies.
Restructuring and Other Charges
Adjusted operating profit, operating margin, income before
income taxes, net income and earnings per share may exclude the
impact of charges related to any restructuring programs, including
transformation costs and asset impairments.
Changes in Foreign Currency Exchange Rates and Hedging
Activities
Currency-neutral revenue, revenue per piece and operating profit
exclude the period over period impact of foreign currency exchange
rate changes and any foreign currency hedging activities. These
measures are calculated by dividing current period reported U.S.
dollar revenue, revenue per piece and operating profit by the
current period average exchange rates to derive current period
local currency revenue, revenue per piece and operating profit. The
derived amounts are then multiplied by the average foreign exchange
rates used to translate the comparable results for each month in
the prior year period (including the impact of any foreign currency
hedging activities). The difference between the current period
reported U.S. dollar revenue, revenue per piece and operating
profit and the derived current period U.S. dollar revenue, revenue
per piece and operating profit is the period over period impact of
foreign currency exchange rates and hedging activities.
Mark-To-Market Pension and Postretirement Adjustments
We recognize changes in the fair value of plan assets and net
actuarial gains and losses in excess of a 10% corridor for our
pension and postretirement defined benefit plans immediately as
part of other pension income (expense). We supplement our
presentation of certain financial data with non-GAAP measures that
exclude the impact of gains and losses recognized in excess of the
10% corridor and the related income tax effects. We believe
excluding these mark-to-market impacts provides important
supplemental information by removing the volatility associated with
short-term changes in market interest rates, equity values, and
similar factors.
The deferred income tax effects of mark-to-market pension and
postretirement adjustments are calculated by multiplying the
statutory tax rates applicable in each tax jurisdiction, including
the U.S. federal jurisdiction and various U.S. state and non-U.S.
jurisdictions, by the adjustments.
Free Cash Flow
We calculate free cash flow as cash flows from operating
activities less capital expenditures, proceeds from disposals of
property, plant and equipment, and plus or minus the net changes in
finance receivables and other investing activities. We believe free
cash flow is an important indicator of how much cash is generated
by our ongoing business operations and we use this as a measure of
incremental cash available to invest in our business, meet our debt
obligations and return cash to shareowners.
Return on Invested Capital
ROIC is calculated as the trailing twelve months (“TTM”) of
adjusted operating income divided by the average of total debt,
non-current pension and postretirement benefit obligations and
shareowners’ equity, at the current period end and the
corresponding period end of the prior year. Because ROIC is not a
measure defined by GAAP, we calculate it, in part, using non-GAAP
financial measures that we believe are most indicative of our
ongoing business performance. We consider ROIC to be a useful
measure for evaluating the effectiveness and efficiency of our
long-term capital investments.
Forward-Looking Non-GAAP Metrics
From time to time when presenting forward-looking non-GAAP
metrics, we are unable to provide quantitative reconciliations to
the most closely correlated GAAP measure due to the uncertainty in
the timing, amount or nature of any adjustments, which could be
material in any period.
Reconciliation of GAAP and Non-GAAP
Income Statement Items(in millions, except per
share amounts):
Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
As Reported (GAAP) |
|
Transformation & Other Adj.(1) |
|
As Adjusted(Non-GAAP) |
Operating profit: |
|
|
|
|
|
U.S. Domestic Package |
$ |
1,407 |
|
|
$ |
7 |
|
|
$ |
1,414 |
|
International Package |
1,051 |
|
|
57 |
|
|
1,108 |
|
Supply Chain Solutions |
438 |
|
|
10 |
|
|
448 |
|
Operating Profit |
2,896 |
|
|
74 |
|
|
2,970 |
|
|
|
|
|
|
|
Other Income and
(Expense): |
|
|
|
|
|
Other pension income (expense) |
285 |
|
|
— |
|
|
285 |
|
Investment income (expense) and other |
(11 |
) |
|
— |
|
|
(11 |
) |
Interest expense |
(177 |
) |
|
— |
|
|
(177 |
) |
Total Other Income
(Expense) |
$ |
97 |
|
|
$ |
— |
|
|
$ |
97 |
|
|
|
|
|
|
|
Income Before Income
Taxes |
2,993 |
|
|
74 |
|
|
3,067 |
|
Income Tax Expense |
664 |
|
|
20 |
|
|
684 |
|
Net Income |
$ |
2,329 |
|
|
$ |
54 |
|
|
$ |
2,383 |
|
|
|
|
|
|
|
Basic Earnings Per Share |
$ |
2.66 |
|
|
$ |
0.06 |
|
|
$ |
2.72 |
|
|
|
|
|
|
|
Diluted Earnings Per
Share |
$ |
2.65 |
|
|
$ |
0.06 |
|
|
$ |
2.71 |
|
|
|
|
|
|
|
(1) Transformation & Other of $74 million reflects other
employee benefits costs of $33 million and other costs of $41
million.
Reconciliation of Currency Adjusted
Revenue, Revenue Per Piece, and Adjusted Operating
Profit(in millions, except per piece
amounts):
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021As-Reported(GAAP) |
|
2020As-Reported(GAAP) |
|
% Change(GAAP) |
|
CurrencyImpact |
|
2021CurrencyNeutral(Non-GAAP)(1) |
|
% Change(Non-GAAP) |
Average Revenue Per
Piece: |
|
|
|
|
|
|
|
|
|
|
|
|
International Package: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
7.19 |
|
|
$ |
6.61 |
|
|
8.8 |
% |
|
$ |
(0.16 |
) |
|
$ |
7.03 |
|
|
6.4 |
% |
Export |
|
33.56 |
|
|
28.98 |
|
|
15.8 |
% |
|
(0.36 |
) |
|
33.20 |
|
|
14.6 |
% |
Total International Package |
|
$ |
19.80 |
|
|
$ |
17.37 |
|
|
14.0 |
% |
|
$ |
(0.26 |
) |
|
$ |
19.54 |
|
|
12.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
12.50 |
|
|
$ |
11.06 |
|
|
13.0 |
% |
|
$ |
(0.04 |
) |
|
$ |
12.46 |
|
|
12.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Domestic Package |
|
$ |
14,208 |
|
|
$ |
13,225 |
|
|
7.4 |
% |
|
$ |
— |
|
|
$ |
14,208 |
|
|
7.4 |
% |
International Package |
|
4,720 |
|
|
4,087 |
|
|
15.5 |
% |
|
(58 |
) |
|
4,662 |
|
|
14.1 |
% |
Supply Chain Solutions |
|
4,256 |
|
|
3,926 |
|
|
8.4 |
% |
|
(12 |
) |
|
4,244 |
|
|
8.1 |
% |
Total revenue |
|
$ |
23,184 |
|
|
$ |
21,238 |
|
|
9.2 |
% |
|
$ |
(70 |
) |
|
$ |
23,114 |
|
|
8.8 |
% |
(1) Amounts adjusted for period over period foreign currency
exchange rate and hedging differences
|
|
2021As-Adjusted(Non-GAAP)(1) |
|
2020As-Adjusted(Non-GAAP)(1) |
|
% Change(Non-GAAP) |
|
CurrencyImpact |
|
2021As-AdjustedCurrencyNeutral(Non-GAAP)(2) |
|
% Change(Non-GAAP) |
As-Adjusted Operating
Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Domestic Package |
|
$ |
1,414 |
|
|
$ |
1,133 |
|
|
24.8 |
% |
|
$ |
— |
|
|
$ |
1,414 |
|
|
24.8 |
% |
International Package |
|
1,108 |
|
|
972 |
|
|
14.0 |
% |
|
(20 |
) |
|
1,088 |
|
|
11.9 |
% |
Supply Chain Solutions |
|
448 |
|
|
302 |
|
|
48.3 |
% |
|
17 |
|
|
465 |
|
|
54.0 |
% |
Total operating profit |
|
$ |
2,970 |
|
|
$ |
2,407 |
|
|
23.4 |
% |
|
$ |
(3 |
) |
|
$ |
2,967 |
|
|
23.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts adjusted for transformation & other
(2) Amounts adjusted for transformation & other and period
over period foreign currency exchange rate and hedging
differences
Reconciliation of Free Cash Flow
(Non-GAAP measure)(in millions):
|
|
|
Nine Months Ended |
September 30, |
|
|
2021 |
Cash flows from operating activities |
|
$ |
11,761 |
|
Capital expenditures |
|
(2,570 |
) |
Proceeds from disposals of
PP&E |
|
22 |
|
Net change in finance
receivables |
|
28 |
|
Other investing
activities |
|
24 |
|
Free Cash Flow (Non-GAAP measure) |
|
$ |
9,265 |
|
Amounts are subject to reclassification.
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