U.S. Domestic Profit Climbs 12%; Economic Uncertainty Dampens Expectations
Atlanta, July 24, 2012 - UPS (NYSE: UPS) today announced
second quarter 2012 diluted earnings per share of $1.15, a 7.5% improvement over
the 2011 adjusted results. U.S. Domestic operating profit expanded $122 million
or 12% over the prior-year period. On a reported basis, diluted earnings per
share increased 5.5% and U.S. Domestic operating profit rose 14%.
"Increasing uncertainty in the United States, continuing weakness in Asia
exports and the debt crisis in Europe are impacting projections of economic
expansion," said Scott Davis, UPS chairman and CEO. "Throughout its history, UPS
has maintained its strength in all economic cycles and we are making the
adjustments necessary to respond to today's challenging conditions."
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Adjusted |
| Consolidated Results |
2Q 2012 |
2Q 2011 |
2Q 2011 |
| Revenue |
$13.35 B |
$13.19 B |
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| Operating profit |
$1.79 B |
$1.75 B |
$1.71 B |
| Operating margin |
13.4 % |
13.2 % |
13.0 % |
| Average volume per day |
15.4 M |
14.9 M |
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| Diluted earnings per share |
$1.15 |
$1.09 |
$1.07 |
UPS, the Official Logistics and Express Delivery Supporter of the 2012 London
Olympic and Paralympic Games, has been busy preparing for the world's largest
peacetime logistical undertaking. The Games provide UPS with a prime
opportunity to showcase its expertise on a global stage while handling more than
30 million items for these events.
During the quarter, UPS made several announcements regarding its proposal to
acquire TNT Express. Plans for financing the purchase were disclosed in May
and the formal Offer Memorandum was filed in June. Earlier this month, the
company announced it was moving to a Phase II review as there are certain areas
that the European Commission requires more time to analyze.
UPS expects to close on the transaction during the fourth quarter. The
complementary strengths of both companies will create a customer-focused
platform delivering unparalleled access to the world.
Cash Position
For the six months ending June 30, UPS generated $3 billion in free cash
flow, an increase of more than $600 million over the same period last year.
Capital expenditures were $949 million. UPS repurchased 11.3 million shares
for approximately $870 million and paid dividends totaling $1.1 billion, a 9.6%
increase per share over the prior year.
UPS ended the quarter with $7.3 billion in cash and marketable securities as
it prepares to complete the acquisition of TNT Express.
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Adjusted |
| U.S. Domestic Package |
2Q 2012 |
2Q 2011 |
2Q 2011 |
| Revenue |
$8.06 B |
$7.74 B |
|
| Operating profit |
$1,134 M |
$997 M |
$1,012 M |
| Operating margin |
14.1 % |
12.9 % |
13.1 % |
| Average volume per day |
13.1 M |
12.6 M |
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U.S. Domestic revenue increased 4.1% over the prior-year period, driven by a
3.5% gain in package volume. Operating profit jumped more than 12% over
2011 adjusted results. Operating margin expanded 100 basis points to 14.1%,
aided by volume growth, improved efficiency, higher base rates and a benefit
from the timing of the fuel surcharge.
On a reported basis, operating profit improved 14% and operating margin
climbed 120 basis points over the prior-year period.
Volume grew across all products as ground rose 3%, UPS Next Day Air increased
5% and deferred air climbed 8.6%. The majority of the improvement was driven by
large e-commerce customers shipping low-weight residential packages.
Average revenue per package increased 0.6%, as higher base rates were mostly
offset by changes in customer and product mix.
| International Package |
2Q 2012 |
2Q 2011 |
| Revenue |
$3.01 B |
$3.14 B |
| Operating profit |
$454 M |
$505 M |
| Operating margin |
15.1 % |
16.1 % |
| Average volume per day |
2.3 M |
2.3 M |
Revenue was $3 billion as the segment remains under pressure due to weaker
global economies and reductions in exports from Asia. Currency fluctuations
also had a negative impact.
In this challenging environment, operating profit was $454 million. The
operating margin of 15.1% remains the best in the industry.
Export volume increased 0.8% over the same quarter last year. European
growth was mostly offset by double-digit declines in exports from Asia to the
U.S. and Europe. Non-U.S. Domestic volume, down 3.2%, reflected weaker economic
conditions and continued yield improvement initiatives.
Average revenue per piece was down 2.4%, although on a currency-neutral basis
it was up 2.1%.
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Adjusted |
| Supply Chain and Freight |
2Q 2012 |
2Q 2011 |
2Q 2011 |
| Revenue |
$2.28 B |
$2.32 B |
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| Operating profit |
$202 M |
$243 M |
$195 M |
| Operating margin |
8.9 % |
10.5 % |
8.4 % |
All business units contributed to the strong operating profit of $202 million
in the Supply Chain and Freight segment. Operating margin achieved a new high of
8.9%.
Total revenue declined 1.6% to $2.28 billion due to slowing International Air
Freight demand and lower pricing. Forwarding continues to experience pressure on
pricing, especially out of Asia, as excess capacity in the marketplace
continues. Operating profit was strong due to effective revenue management
and cost controls.
The Distribution business experienced revenue growth driven by healthcare and
e-commerce customers. The continued investment in technology and
infrastructure to support the company's healthcare initiative was a slight drag
on operating profit.
At UPS Freight, revenue was flat as lower tonnage was offset by higher
yields. The business unit did experience operating profit improvement and
margin expansion.
Outlook
"The company's performance was mixed during the second quarter," said Kurt
Kuehn, UPS's chief financial officer. "The results in the U.S. Domestic and
Supply Chain and Freight segments were partially offset by the weakness in
International.
"As we look toward the second half of the year, customers are more concerned
as greater uncertainty exists. Additionally, economic growth expectations have
come down," Kuehn continued. "Consequently, we are reducing our guidance
for 2012 diluted earnings per share to a range of $4.50 to $4.70, an increase of
3%-to-8% over 2011 adjusted results."
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