Company Projects 2011 EPS to Jump 16-to-22%; International & Supply Chain 2010 Profits Set Records
Atlanta, February 01, 2011 - UPS (NYSE: UPS) today
announced adjusted diluted earnings per share of $1.08 for the fourth quarter of
2010, a 44% improvement over the prior-year period. Global revenue grew 8.4%,
generating $1.8 billion in adjusted operating profit, a 40% increase.
On a reported basis, diluted earnings per share totaled $1.11, a 48% increase
over the $0.75 reported for the same period last year. During the quarter, UPS
recorded a net after-tax gain of $32 million related to the sale of certain
non-core business units.
For the full year 2010, the company delivered 3.9 billion packages, an
average of 15.6 million per day. Revenue increased 9.4% to $49.5
billion. Adjusted operating profit soared 47% to $5.8 billion with the
International and Supply Chain & Freight segments achieving record-setting
levels, generating $1.9 billion and $577 million, respectively. On a reported
basis, operating profit for the year was $5.9 billion, up 55%. Adjusted diluted
earnings per share were $3.56, up 54%, and $3.48 on a reported basis, up
63%.
"UPS again demonstrated exceptional earnings growth by leveraging the
strength of its network to provide solutions for customers," said Scott Davis,
UPS chairman and CEO. "I'm encouraged by the opportunities we see in 2011 as UPS
continues to expand into emerging markets while demonstrating the power of the
logistics capabilities we've built worldwide."
Based on expectations for 2011, UPS is providing annual guidance for diluted
earnings per share to a range of $4.12-to-$4.35, an increase of 16-to-22% over
2010 adjusted results. This would exceed the peak earnings level recorded in
2007.
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Adjusted |
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| Consolidated Results |
4Q 2010 |
4Q 2010 |
4Q 2009 |
| Revenue |
$13.42 B |
|
$12.38 B |
| Operating profit |
$1.81 B |
$1.76 B |
$1.26 B |
| Operating margin |
13.5 % |
13.1 % |
10.2 % |
| Average volume per day |
17.7 M |
|
17.3 M |
| Diluted earnings per share |
$1.11 |
$1.08 |
$0.75 |
For the three months ended Dec. 31, 2010, UPS delivered 1.1 billion packages,
a 3.9% increase. Adjusted operating margin expanded 290 basis points to
13.1%. On a reported basis, operating margin was 13.5%.
During the holiday shipping season, global volume exceeded 24 million
packages on five days, including one day that exceeded 25 million. UPS
delivered more than 440 million packages during the holiday shipping season,
powered by strong demand from on-line retailers.
Cash Position
For the year ending Dec. 31, UPS generated $3.1 billion in free cash flow
even after $2 billion in accelerated contributions to defined benefit pension
plans in the fourth quarter. The company also:
- Invested $1.4 billion in capital expenditures.
- Paid dividends totaling $1.8 billion.
- Repurchased 12.4 million shares at a cost of approximately $800 million.
| U.S. Domestic Package |
4Q 2010 |
4Q 2009 |
| Revenue |
$8.08 B |
$7.55 B |
| Operating profit |
$1.04 B |
$764 M |
| Operating margin |
12.9 % |
10.1 % |
| Average volume per day |
15.12 M |
14.86 M |
Operating profit increased 37% to $1.04 billion on revenue growth of
7%. The margin expansion of 280 basis points was driven by higher yields,
operational efficiencies and volume growth.
Revenue per piece improved 3.5%, primarily through increases in base pricing
and higher fuel surcharges. Average daily package volume was up 1.7% during
the quarter due to growth in UPS Next Day Air and Ground.
The company noted a strong response by U.S. customers to its new UPS Smart
Pickup service, designed for those who want the convenience of a scheduled
pickup but may not ship a package every day. This high-tech service, the
latest in a series of environmentally responsible offerings, alerts UPS drivers
when a pickup needs to be made.
| International Package |
4Q 2010 |
4Q 2009 |
| Revenue |
$3.05 B |
$2.79 B |
| Operating profit |
$537 M |
$467 M |
| Operating margin |
17.6 % |
16.7 % |
| Average volume per day |
2.54 M |
2.42 M |
The operating profit for the segment increased 15% to $537 million on 9%
growth in revenue. The operating margin expanded to 17.6% as a result of volume
growth, yield improvement and excellent cost management.
Export average daily volume increased 8.7%. The company experienced
strong growth from key export countries, with China up more than
30%. European exports continued to show solid performance, led by
double-digit gains in Germany.
For 2010, International volume increased 13.6% to a record 2.3 million
packages per day. Throughout the year, UPS significantly increased its
global network capacity to take advantage of opportunities in the
marketplace. For example, airlift out of Asia was increased by 40%.
During the quarter, UPS deployed technology aimed at the rapidly growing
mobile user market. The popular UPS Mobile Apps and mobile Web site were
released to customers in Germany, Canada, the United Kingdom, Italy and
France.
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Adjusted |
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| Supply Chain and Freight |
4Q 2010 |
4Q 2010 |
4Q 2009 |
| Revenue |
$2.29 B |
|
$2.03 B |
| Operating profit |
$234 M |
$176 M |
$28 M |
| Operating margin |
10.2 % |
7.7 % |
1.4 % |
Adjusted operating profit improved more than six fold to $176 million on
revenue growth of 13%. The adjusted operating margin for the segment increased
630 basis points to 7.7%, with all business units contributing.
UPS Freight outpaced the market with revenue up 23% due to double-digit
growth in shipments per day, an increase in gross weight hauled and significant
yield improvement. Forwarding and Logistics revenue increased 10.1% to $1.6
billion, driven primarily by revenue management initiatives in the Forwarding
business unit.
As the year ended, UPS announced a significant expansion of its global
healthcare distribution facility network in the U.S., Asia, Europe and Canada to
accommodate continued rapid growth in its healthcare business. These new
facilities are specially designed to meet the needs of pharmaceutical, biotech
and medical device companies.
Outlook
"The fourth quarter results punctuate a year in which UPSers superbly
executed our strategy," said Kurt Kuehn, UPS's chief financial officer. "As
we close the book on 2010 and look towards 2011, UPS is uniquely positioned for
growth in the future.
"Over the past two years, UPS took the necessary steps to weather the
economic storm and emerged stronger," Kuehn continued. "As a result, we expect
to exceed previous peak earnings level with 2011 diluted earnings per share
within a range of $4.12 to $4.35, an increase of 16% to 22% over adjusted 2010
results.
"Cash flow will continue to be strong, creating a foundation for increasing
returns to shareholders," Kuehn added. "We plan to significantly ramp up
share repurchases, to approximately $2 billion in 2011."
EDITOR'S NOTE
UPS Chairman and CEO Scott Davis and CFO Kurt Kuehn will discuss fourth
quarter results with investors and analysts during a conference call at 8:30
a.m. EST 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.
We supplement the reporting of our financial information determined under
generally accepted accounting principles ("GAAP") with certain non-GAAP
financial measures, including, as applicable, "as adjusted" operating profit,
operating margin, pre-tax income, net income and earnings per share. The
equivalent measures determined in accordance with GAAP are also referred to as
"reported" or "unadjusted". We believe that these adjusted measures provide
meaningful information to assist investors and analysts in understanding our
financial results and assessing our prospects for future performance. We
believe these adjusted financial measures are important indicators of our
recurring operations because they exclude items that may not be indicative of or
are unrelated to our core operating results, and provide a better baseline for
analyzing trends in our underlying businesses. Furthermore, we use these
adjusted financial measures to determine awards for our management personnel
under our incentive compensation plans.
In the first quarter of 2010, we recorded a $98 million pre-tax restructuring
charge in our U.S. Domestic Package operations related to the reorganization of
our domestic management structure. We also incurred a $38 million pre-tax
loss on the sale of a specialized transportation business in Germany in our
Supply Chain & Freight segment. Additionally, we recorded a $76 million
charge to income tax expense, resulting from a change in the filing status of a
German subsidiary. In the third quarter of 2010, we recorded a $109 million
pre-tax gain on the sale of real estate. In the fourth quarter of 2010, we
recorded a $71 million pre-tax gain related to the sale of UPS Logistics
Technologies, partially offset by a $13 million pre-tax fair value adjustment of
a financial guarantee associated with the first quarter sale of a business unit
in Germany. In the first quarter of 2009, we recorded a $181 million
pre-tax impairment charge related to our McDonnell-Douglas DC-8-71 and DC-8-73
aircraft fleets. In the second quarter of 2009, we recorded a $77 million
pre-tax charge for the remeasurement of certain obligations denominated in
foreign currencies, in which hedge accounting was not able to be
applied. We presented fourth quarter and year-to-date 2010 and 2009
operating profit, operating margin, pre-tax income, net income and earnings per
share excluding the impact of these items as we believe these adjusted measures
better enable shareowners to focus on period-over-period operating performance.
The underlying matters that produced these charges and gain were unique, and we
do not believe they are reflective of the types of items that will affect future
results.
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
GAAP operating profit, operating margin, income before income taxes, net income
and earnings per share, 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
the 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, our
competitive environment, increased security requirements, strikes, work
stoppages and slowdowns, changes in energy prices, governmental regulations 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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