UPS 2nd Quarter Produces Solid Earnings on 15% Revenue Gain
ATLANTA, July 25, 2006 - UPS (NYSE:UPS) today reported a strong gain in
consolidated revenue and a 10.2% improvement in earnings per diluted share to
$0.97. Global small package volume rose 6% or 841,000 additional packages each
day.
| Consolidated Results |
Second quarter |
Year-ago |
| Revenue |
$11.74 B |
$10.19 B |
| Operating profit |
$1.70 B |
$1.55 B |
| Operating margin |
14.4% |
15.2% |
| Average volume per day |
15.0 M |
14.1 M |
| Diluted earnings per share |
$0.97 |
$0.88 |
"Our global small package volume growth in the second quarter was robust,
resulting in a solid earnings gain," said Mike Eskew, UPS chairman and CEO. "The
global small package market continues to expand and we are seeing significant
opportunities for UPS."
During the second quarter, UPS announced a $1+ billion expansion of its
mega-hub at the heart of its global transportation network, Worldport, located
in Louisville, Ky. The 1.1 million square-foot expansion will increase sorting
capacity by 60% to 487,000 packages per hour. This five-year expansion plan
reflects excellent growth projections in UPS's air package volume around the
world.
Cash Position
UPS closed the quarter with $2.85 billion
in cash and marketable securities. For the first six months, UPS also:
- Generated $2.7 billion in free cash flow.
- Purchased 17.8 million shares, reducing total shares outstanding by 1.4%.
- Paid $1.17 billion in dividends. UPS has increased dividends 81% over the
last three years.
- Invested $1.44 billion in capital expenditures.
The UPS Board of Directors has approved an increase of $2 billion in the
amount of authorized funds for repurchase of Class A and Class B shares.
| U.S. Package |
Second quarter |
Year-ago |
| Revenue |
$7.46 B |
$6.94 B |
| Operating profit |
$1.23 B |
$1.12 B |
| Operating margin |
16.5% |
16.1% |
| Average volume per day |
13.3 M |
12.7 M |
All levels of service posted gains. Daily ground volume increased 4.6%, while
average daily volume for Next Day Air® rose 4.2% and deferred air volume climbed
7.6%. Total revenue per piece remained firm with a gain of 2.7%.
During
the period, UPS was named the country's top business brand in the American Brand
Excellence Awards 2006 for being a forward-thinking, ethical industry
leader.
| International Package |
Second quarter |
Year-ago |
| Revenue |
$2.23 B |
$2.0 B |
| Operating profit |
$414 M |
$397 M |
| Operating margin |
18.5% |
19.9% |
| Average volume per day |
1.7 M |
1.5 M |
Total international package volume grew 16.5%. Export volume increased 6.5%
and non-U.S. domestic volume was up 23.6% aided by acquisitions. Operating
profit and volume growth were constrained by three fewer operating days in
Europe compared to the same quarter last year.
During the quarter, the company began direct air service from Shanghai to
Europe while also adding three new flights connecting Shanghai to the U.S. and
another new flight between Qingdao and Incheon, Korea. The additional flights
improve UPS service options in several key Asian markets experiencing rapid
growth.
| Supply Chain and Freight |
Second quarter |
Year-ago |
| Revenue |
$2.04 B |
$1.25 B |
| Operating profit |
$47 M |
$34 M |
| Operating margin |
2.3% |
2.7% |
Revenue and profit improvements in this segment were primarily driven by the
acquisition last August of a leading LTL carrier, Overnite, now re-branded UPS
Freight. Freight forwarding and logistics operating results improved
significantly over first quarter results.
Integration of the acquired
heavy air freight network into the UPS Airlines operation was completed at the
end of June as scheduled. The integration is allowing UPS to improve service
reliability and transit times while offering an expanded portfolio of
services.
Outlook
"We expect diluted earnings per share in a range
of $0.87 to $0.91 in the third quarter compared to the $0.86 reported during the
prior-year period," said Scott Davis, UPS's chief financial officer. The third
quarter has fewer operating days than the prior-year period, negatively
impacting earnings per share comparison approximately $0.04 to $0.05.
Davis also stated that full-year earnings growth is expected to be at the low
end of the company's original 11-to-16% guidance for 2006.
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.
 View the full financial tables
# # #
EDITOR'S NOTE: UPS CFO Scott Davis will discuss second
quarter results with investors and analysts during a conference call later today
at 10:00 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."
We supplement the reporting of our financial information determined under
generally accepted accounting principles (GAAP) with certain non-GAAP financial
measures, including free cash flow. 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, dividends and
share repurchases.
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 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 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
for the year ended December 31, 2005, and other filings with the Securities and
Exchange Commission, which discussions are incorporated herein by reference.
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