Strong Volume Growth at UPS Drives Increase in 3Q Profits
Net income for the three-month period ending Sept. 30 totaled $577 million compared to $449 million for the year-ago period. International operating results improved significantly, rising to an operating profit of $38 million for the quarter compared to a loss of $15 million for the same period the year before. U.S. domestic package operating profits rose 16.1% to $879 million from $757 million for the prior-year period.
Earnings per share on a diluted basis for the 3rd quarter totaled $1.03 compared to 81 cents a year earlier. Total worldwide revenues rose 9% to $6.715 billion, compared to $6.158 billion reported for the 1998 period.
UPS reports its business results on a calendar year basis. For the first three quarters of 1999, the company reported total revenues of $19.606 billion, up 8.2% from the $18.124 billion reported for the first three quarters of 1998. Net income for the first nine months of 1999 totaled $222 million, compared to the $1.259 billion reported during the prior-year period. The decline in net income for 1999 reflects the effect of a 2nd quarter tax assessment charge that reduced net income by $1.442 billion. Earnings per share on a diluted basis for the first three quarters of 1999 totaled 39 cents after the tax assessment charge, compared to $2.28 in 1998.
In reviewing 3rd quarter business trends, UPS noted the growing American economy helped produce strong volume increases in the United States that contributed to healthy gains in net income. UPS's international operations also continued a meaningful contribution to operating profit growth thanks to double-digit gains in export volume.
UPS divides its financial results into U.S. Domestic Package Operations, International Package Operations and Non-Package Operations. The latter category includes the UPS Logistics Group. The 3rd quarter results for the three segments are as follows:
- In the United States, domestic package revenues totaled $5.574 billion during the 3rd quarter compared to $5.147 billion for the same period in 1998. This 8.3% revenue increase reflected a 6.8% average daily volume increase, improved product mix and higher revenue per piece. Domestic package operating profits rose from $757 million in 1998 to $879 million this year, up 16.1%. Average daily Next Day Air volume rose a strong 14.6%, while average daily deferred volume (2nd Day and 3 Day Select) climbed 12.1%.
- International package revenues climbed 10.2% to $862 million compared to the $782 million reported during the 3rd quarter of 1998. Operating profits for international package operations improved from a loss of $15 million during the period in 1998 to a profit of $38 million this quarter. International export volume – packages moving across national borders – surged 22.1%.
- Revenues for non-package operations rose 21.8%, from $229 million in 1998 to $279 million during the quarter this year. Overall, operating profits for this segment declined from $35 million to $27 million.
The strong domestic and international gains across the company were driven by a number of factors beyond solid volume growth. They include continuing improvements in product mix, revenue per piece, corporate-wide cost management efforts and better network utilization. Fuel costs rose in this year's 3rd quarter by $32 million, or 22.5%, compared to 1998, but for the entire year were up only $24 million or 5.4%.
The 3rd quarter saw several important developments, both within the United States and in international operations. UPS entered alliances with several e-commerce companies worldwide, such as the Business Navigator in Hong Kong and Oracle and Tumbleweed in the U.S. UPS also added a third "around the world" flight between the United States and growing markets in Europe, the Middle East, India and Asia. Combined with the two original "around the world" flights, UPS will improve transit times and enhance service across three continents.
As the quarter ended, UPS also announced a new offering that makes it possible for all 1.7 million of its customers to gain access to the company's Web sites with free fenced Internet access. And for the second consecutive year, UPS was rated "The World's Most Admired" company in the mail, package and freight delivery category in a Fortune magazine survey.
UPS is the world's largest express carrier and largest package delivery company, serving more than 200 countries and territories around the world. Headquartered in Atlanta, the company resides on the Web at http://www.ups.com.