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E-Commerce Lifts UPS 1Q Earnings
Press Release

Strong January Boosts U.S. Domestic Profit Growth; Reaffirms Full Year Guidance

 

Atlanta, April 25, 2013 - UPS (NYSE: UPS) today announced first quarter 2013 adjusted diluted earnings per share of $1.04. The quarter benefited from a stronger than expected post-holiday season in January as UPS e-commerce solutions resonated with customers. In the U.S. Domestic segment, daily package volume grew 4.4% and operating profit improved 9%. Additionally, UPS reaffirmed its full-year 2013 guidance for adjusted diluted earnings per share; an increase of 6-to-12% over 2012 adjusted results.

On a reported basis, diluted earnings per share were $1.08, compared to $1.00 for the same period last year. During the quarter, UPS reported a $36 million after-tax gain related to its attempted acquisition of TNT. This amount includes a $213 million after-tax currency gain from liquidating a foreign subsidiary, mostly offset by a $177 million after-tax charge for the termination fee and other transaction-related costs.

"UPS demonstrated its ability to consistently deliver results," said Scott Davis, UPS Chairman and CEO. "The UPS product portfolio is in-tune with connected and empowered consumers, creating a competitive advantage that positions us well for sustained growth."

 
 
Adjusted
 
Consolidated Results
1Q 2013
1Q 2013
1Q 2012
Revenue
$13.43 B
 
$13.14 B
Operating profit
$1.58 B
$1.62 B
$1.57 B
Operating margin
11.8 %
12.1 %
11.9 %
Average volume per day
16.2 M
 
15.6 M
Diluted earnings per share
$1.08
$1.04
$1.00

For the three months ended March 31, 2013, UPS delivered 16.2 million packages per day, an increase of 4.1% over the prior-year period.

Cash Position

For the three months ended March 31, UPS generated $1.4 billion in free cash flow after capital expenditures of $453 million. The company ended the quarter with $7.3 billion in cash and marketable securities.

UPS paid dividends of $572 million, an increase of nearly 9% per share and repurchased 12.2 million shares for $1.0 billion. In February, reflecting confidence in UPS's cash outlook, the Board of Directors reauthorized the company's share repurchase program for $10 billion.

U.S. Domestic Package
1Q 2013
1Q 2012
Revenue
$8.27 B
$8.00 B
Operating profit
$1,085 M
$995 M
Operating margin
13.1 %
12.4 %
Average volume per day
13.83 M
13.24 M

During the first quarter, U.S. Domestic revenue increased $267 million and operating profit was up $90 million compared to last year. Operating margin expanded 70 basis points, reflecting the efficiency of the UPS business model.

Daily package volume grew 4.4% compared to the same period last year, led by UPS Ground which delivered 531,000 more packages per day, up nearly 5%. Next Day Air and Deferred products also demonstrated growth, up 1.8% and 3.7% respectively. Total U.S. Domestic revenue per piece was up 0.4%, as base rate improvements were offset by lower fuel surcharges and changes in both customer and product mix.

Post-holiday demand in January was very strong, buoyed by B2C growth including adoption of the UPS Returns portfolio of services. UPS automated and customizable returns services helped businesses gain better control and visibility of their inventories while improving customer satisfaction.

   
Adjusted
 
International Package
1Q 2013
1Q 2013
1Q 2012
Revenue
$2.98 B
 
$2.97 B
Operating profit
$352 M
$391 M
$408 M
Operating margin
11.8 %
13.1 %
13.8 %
Average volume per day
2.40 M
 
2.35 M

Daily export volume increased 3.8%, driven by Asia, up about 8%. Europe daily exports grew approximately 3%, while U.S. exports expanded slightly.

International revenue was $2.98 billion. Export yield, down 2.5% on a currency neutral basis, continued to be pressured by lighter weight packages and increased reliance on non-premium products. In addition, fuel and currency were a $30 million drag. As a result, adjusted operating profit was $391 million, a decline of $17 million.

On a reported basis, the segment recorded operating profit of $352 million, a decline of $56 million compared to the prior year period, reflecting charges related to the attempted acquisition of TNT.

UPS remains focused on growing its global presence and unique capabilities. During the quarter, to better serve the European retail e-commerce market, it launched UPS Access Point locations in the United Kingdom. By the summer, consumers there will have 1,500 convenient alternatives for receiving UPS home deliveries and dropping off returns.

UPS also significantly expanded its UPS Worldwide Expedited service, tripling the coverage area to more than 220 countries and territories.

Supply Chain and Freight
1Q 2013
1Q 2012
Revenue
$2.19 B
$2.17 B
Operating profit
$143 M
$166 M
Operating margin
6.5 %
7.7 %

Revenue in the segment was up 0.9% to $2.19 billion. Operating profit was $143 million, as the Forwarding business remained under pressure, impacted by overcapacity in the trans-Pacific trade lanes. Both tonnage and yields declined.

UPS Freight increased shipments per day 3.6%, with tonnage up 5.1% and revenue per hundredweight up 1.7%. Industry leading visibility tools and unique service offerings, such as UPS Pickup Notifications for LTL, continue to be well received by customers.

The Distribution unit increased revenue about 10% and continued to invest in technology and infrastructure, including new healthcare facilities in North America and Europe.

Additionally, today UPS announced the acquisition of Cemelog, a medical logistics company serving Eastern and Central Europe. The transaction is expected to close in June. This will add 255,000 square feet of dedicated healthcare distribution space and offer UPS customers expanded access to new patient populations.

Outlook

"January started strong, benefiting from the post-holiday season. The pace of growth for the remainder of the quarter was in line with our expectations," said Kurt Kuehn, UPS chief financial officer. "Although macro uncertainty remains; we are reaffirming our 2013 guidance for full year adjusted diluted earnings per share to be within a range of $4.80 to $5.06."

EDITOR'S NOTE:
UPS Chairman and CEO Scott Davis and CFO Kurt Kuehn will discuss first quarter results with investors and analysts during a conference call at 8:30 a.m. EDT today. That call is open to listeners through a live Webcast. To access the call, go to www.investors.ups.com and click on "Earnings Webcast."

UPS routinely posts investor announcements on its web site - www.investors.ups.com - and encourages those interested in the company to check there frequently.

About UPS
UPS (NYSE: UPS) is a global leader in logistics, offering a broad range of solutions including the transportation of packages and freight; the facilitation of international trade, and the deployment of advanced technology to more efficiently manage the world of business. Headquartered in Atlanta, UPS serves more than 220 countries and territories worldwide. The company can be found on the Web at UPS.com and its corporate blog can be found at blog.ups.com. To get UPS news direct, visit pressroom.ups.com/RSS.

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