Daily Volume Up 721,000; International Profit Jumps 22%
ATLANTA, Oct. 19, 2006 - UPS (NYSE:UPS) today reported solid
revenue and profit growth for its most recent quarter on a healthy 5% rise in
global small package volume.
Consolidated revenue for the quarter ending Sept. 30, 2006, increased 10.5%
and diluted earnings per share increased 11.6% to $0.96. The growth in small
package volume translated to 721,000 additional packages each day in the UPS
network.
The company also said it is taking significant steps to improve the
profitability of its forwarding and logistics business, confirming it will
eliminate 20% of the non-operating expense in the business unit.
"UPS is moving forward with confidence," said Chairman and CEO Mike Eskew.
"Our small package business continues to show strength across all segments and
we are taking the steps necessary to put our supply chain business on the right
track after a disappointing performance."
| Consolidated Results |
Third quarter |
Year-ago |
| Revenue |
$11.66 B |
$10.55 B |
| Operating profit |
$1.58 B |
$1.50 B |
| Average volume per day |
15.1 M |
14.3 M |
| Diluted earnings per share |
$0.96 |
$0.86 |
Operating profit for the quarter was reduced by an $87 million pre-tax charge
for a tentative legal settlement involving a wage-and-hour case in California.
In addition, there was a $52 million reduction in income tax expense related to
favorable developments with certain international tax issues. The combination of
these two items had no effect on the $0.96 diluted earnings per share.
Cash Position
For the first nine months, UPS generated $4
billion in cash from operations and:
- Purchased 26.5 million shares, reducing total shares outstanding by 2.1%.
- Paid $1.6 billion in dividends.
- Invested $2.3 billion in capital expenditures.
The company's cash position declined from the previous end-of-quarter due
primarily to the funding of its UPS-sponsored pension plans in the amount of
$1.5 billion.
| U.S. Package |
Third quarter |
Year-ago |
| Revenue |
$7.40 B |
$7.03 B |
| Operating profit |
$1.21 B |
$1.11 B |
| Operating margin |
16.3% |
15.8% |
| Average volume per day |
13.3 M |
12.9 M |
All levels of small package service posted gains. Daily ground volume
increased 3.6%, while average daily volume for Next Day Air® rose 1.0% and
deferred air volume climbed 3.4%. Total revenue per piece remained firm with a
gain of 3.4%.
This segment was adversely impacted by the $87 million tentative legal
settlement previously mentioned. In addition, the unit experienced a positive
impact from a reduction in worker's compensation claims expense. This reflects
the success of the company's health and safety programs, which have dramatically
reduced claims and injuries.
| International Package |
Third quarter |
Year-ago |
| Revenue |
$2.25 B |
$1.92 B |
| Operating profit |
$387 M |
$318 M |
| Operating margin |
17.2% |
16.6% |
| Average volume per day |
1.8 M |
1.5 M |
Total international package volume grew 19.9%. Export volume increased 13.6%.
Non-U.S. domestic volume was up 24.2% aided by the LYNX Express acquisition.
In the third quarter, the company opened its first retail centers in China.
The launch of the UPS Express centers in Shanghai's central business
district is the latest in a series of strategic initiatives to expand UPS's
operations and brand presence in China.
Additionally, UPS today announced a new partnership with the Italian Post.
Under the five-year agreement, UPS will deliver the Italian post office's
international express volume.
| Supply Chain and Freight |
Third quarter |
Year-ago |
| Revenue |
$2.01 B |
$1.60 B |
| Operating profit (loss) |
($19) M |
$70 M |
| Operating margin |
(.9%) |
4.4% |
The forwarding and logistics unit is in the process of implementing cost and
revenue initiatives that will improve its performance. UPS Freight results were
below expectations due to a revenue shortfall and cost pressures related to the
consolidation of its western U.S. unit, Motor Cargo, Inc., into the UPS Freight
network.
Outlook
"We still expect full year diluted earnings per
share growth of about 11% despite the performance in the supply chain and
freight segment," said Scott Davis, UPS's chief financial officer. "The small
package business should be strong in the fourth quarter as we expect
international deliveries and the U.S. holiday shipping period to be solid. We
also anticipate modest improvement from the supply chain and freight segment
over third quarter results."
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. To get UPS news direct, visit pressroom.ups.com/RSS.
 View
the full financial tables
EDITOR'S NOTE: UPS Chairman and CEO Mike
Eskew and CFO Scott Davis will discuss third quarter results with investors and
analysts during a conference call today at 8:30 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."
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.
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