Supply Chain & Freight Segment Profit Improves
ATLANTA, April 25, 2007 - UPS (NYSE:UPS) today reported a
7.9% increase in adjusted diluted earnings per share to $0.96 on a 3.3% revenue
gain, thanks to a strong performance by its international operation and
significant improvement by its supply chain and freight segment.
Those results exclude an impairment charge relating to aging jet aircraft and
expenses for a voluntary separation program completed during the quarter.
Including these charges, diluted earnings per share declined 12.4% to $0.78
compared to the same period in 2006.
"We are pleased with the company's first quarter performance," said Mike
Eskew, UPS chairman and CEO. "Strong gains in our international package and
supply chain and freight businesses helped offset the impact of a slowing U.S.
economy. We will continue to invest aggressively to seize the growth
opportunities created by the rise in global trade."
| Consolidated Results |
1Q 2007 |
As Adjusted |
1Q 2006 |
| Revenue |
$11.9 B |
|
$11.5 B |
| Operating profit |
$1.36 B |
$1.65 B |
$1.56 B |
| Operating margin |
11.4 % |
13.8 % |
13.5 % |
| Average volume per day |
15.13 M |
|
15.06 M |
| Diluted earnings per share |
$0.78 |
$0.96 |
$0.89 |
For the three months ended March 31, 2007, adjusted operating margin improved
30 basis points to 13.8%. The supply chain and freight segment reported adjusted
operating profit of $54 million, an improvement of $79 million.
During the period, UPS took an impairment charge of $221 million on certain
Boeing 727 and 747 aircraft, including related engines and parts, due to the
acceleration of the planned retirement of these aircraft. In addition, the
company realized a charge to expense of $68 million to reflect the cost of a
previously announced voluntary separation opportunity. The charge covered cash
payouts, the acceleration of stock compensation and certain retiree healthcare
benefits for participating employees. The effect of these two items after tax
was $184 million, which reduced diluted earnings per share by $0.18.
The aircraft impairment charge impacted the U.S. Domestic Package segment by
$159 million and the International Package segment by $62 million. The
separation charge impacted the U.S. Domestic Package segment by $53 million, the
International Package segment by $7 million and the Supply Chain and Freight
segment by $8 million.
Cash Position
UPS ended the quarter with $2.4 billion in
cash and marketable securities. UPS also:
- Generated $1.9 billion in free cash flow.
- Purchased 8.9 million shares.
- Paid dividends totaling $828 million. The dividend was increased 11% during
the quarter.
- Invested $675 million in capital expenditures.
| U.S. Domestic Package |
1Q 2007 |
As Adjusted |
1Q 2006 |
| Revenue |
$7.55 B |
|
$7.46 B |
| Operating profit |
$941 M |
$1.15 B |
$1.19 B |
| Operating margin |
12.5 % |
15.3 % |
15.9 % |
| Average volume per day |
13.3 M |
|
13.3 M |
Consolidated volume in the U.S. operation was flat for the quarter as a
result of a slowing U.S. economy. Next Day Air® volume declined
marginally and deferred volume dropped 1.8%. Ground volume was flat, although
revenue per piece on ground products remained strong with a gain of 3%.
During the quarter, UPS unveiled an industry-leading Delivery
InterceptSM option in the United States that allows shippers to
intercept and reroute packages before they're delivered. The company also
unveiled enhancements to Web-based shipping tools that allow customers to
streamline the preparation, management and tracking of multiple types of
shipments, whether small package or freight, domestic or international.
| International Package |
1Q 2007 |
As Adjusted |
1Q 2006 |
| Revenue |
$2.39 B |
|
$2.16 B |
| Operating profit |
$371 M |
$440 M |
$395 M |
| Operating margin |
15.6 % |
18.4 % |
18.3 % |
| Average volume per day |
1.8 M |
|
1.7 M |
Export volume showed strong growth with a 10% gain, led by a jump of more
than 20% from Asia and a double-digit increase from Europe.
In early April, UPS and the Chinese government opened the way for
construction of UPS's International Air Hub at Pudong International Airport in
Shanghai. This facility, expected to be operational next year, expands UPS's
steadily increasing presence in China in support of trade growth in that part of
the world.
| Supply Chain and Freight |
1Q 2007 |
As Adjusted |
1Q 2006 |
| Revenue |
$1.97 B |
|
$1.90 B |
| Operating profit |
$46 M |
$54 M |
($25 M) |
| Operating margin |
2.3 % |
2.7 % |
(1.3 %) |
The Supply Chain and Freight segment posted a second consecutive quarter of
improving results. The Forwarding and Logistics unit achieved excellent cost
control and completed the restructuring efforts begun last year. Despite the
challenging Less-than-Truckload (LTL) environment, ground freight posted
increased revenue and positive shipment growth.
Outlook
"We remain excited about the long-term growth
opportunities ahead for UPS," said Scott Davis, vice chairman and CFO. "The U.S.
economy was softer than we originally anticipated, but continued rapid growth
outside the United States and steady improvements from our Supply Chain and
Freight segment are expected to produce a solid performance for the company in
2007."
Davis said UPS is projecting earnings for the second quarter in a range of
$1.00 to $1.05 per diluted share compared to $0.97 for the second quarter of
2006. He also reaffirmed the company's annual target of a 6-to-10 percent
increase in adjusted diluted earnings per share.
UPS, which celebrates its 100th anniversary in 2007, 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 www.ups.com. To get UPS news direct, visit pressroom.ups.com/RSS.
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