News Release Details

UPS 3Q18 Earnings per Share Up More Than 20%

October 24, 2018
  • 3Q18 EPS of $1.73, up More Than 20%; Adjusted EPS up 26% to $1.82
  • U.S. Domestic Revenue up 8.1% on Growth and Accelerating Yields
  • International Currency-Neutral Revenue Grew 5%, with Gains in all Regions
  • International Year-Over-Year Comparisons Affected by Headwinds from Currency and Fuel
  • Supply Chain & Freight Operating Profit up 24%; Adjusted Operating Profit Jumps 33%
  • YTD Cash from Operations was $9.4B and Free Cash Flow was up to $4.9B
  • Raising Free Cash Flow Guidance to Over $5B and Reaffirming Adjusted EPS

ATLANTA, Oct. 24, 2018 (GLOBE NEWSWIRE) -- UPS (NYSE:UPS) today announced third-quarter diluted earnings per share of $1.73, up more than 20%, and adjusted, diluted earnings per share of $1.82, up 26%.  

Third-quarter adjusted results exclude a pre-tax charge of $97 million, or $0.09 per share after tax, due to transformation-related costs.  These projects are a part of the company’s transformation initiatives that will create efficiencies across the enterprise.  Transformation will also produce higher-quality revenue growth.

Consolidated Results 3Q 2018 Adjusted
3Q 2018
3Q 2017
Revenue $17,444 M   $16,173 M
Net Income $1,508 M $1,581 M $1,259 M
Diluted Earnings Per Share $1.73   $1.82     $1.44
EPS Growth   20.1 %   26.4 %  

“Our business strategies position UPS to improve operating leverage and many of our actions are already contributing to performance gains,” said UPS Chairman and CEO David Abney.  “We generated another quarter of industry-leading margins and strong free cash flow and we are confident in the outlook for the business.”

For the company in 3Q 2018:

  • Consolidated revenue increased 7.9% and currency-neutral revenue was 8.4% higher.
  • Average revenue yield increased 4.0%, with base-pricing gains in all product categories.
  • Year-to-date cash from operations expanded to $9.4 billion
  • Free cash flow increased to $4.9 billion through the first nine months of the year.
  • Year-to-date dividends per share increased by 10%, producing an annual dividend yield in excess of 3%.
  • The company repurchased 6.6 million shares year-to-date for approximately $750 million.
  • Capital investments and associated efficiencies were as expected in the quarter with year-to-date expenditures at $4.5 billion.
  • Third quarter results benefited from several discrete items, including tax that helped to offset unplanned International headwinds from currency and fuel.

U.S. Domestic Segment

The U.S. Domestic segment experienced strong revenue growth of 8.1% to $10.4 billion, driven by high demand for the company’s solutions and robust yield expansion compared to 3Q 2017.  The segment also generated sequential yield improvements driven in part by a more disciplined approach to capture high-quality growth opportunities.

 

3Q 2018
Adjusted
3Q 2018


3Q 2017
Revenue $10,437 M   $9,651 M
Operating profit $949 M $988 M $1,011 M

For the U.S. Domestic segment in 3Q 2018:

  • Revenue, volume and revenue per piece increased across all products in the quarter.
  • Daily shipments increased 3.3%, led by Next Day Air and Ground products.
  • Ground revenue per piece increased by 5.1% over the prior year.   
  • Operating profit was reduced by planned increases in pension expense and the cost of ongoing network improvements. 
  • Adjusted operating profit excludes transformation charges of $39 million.

International Segment

International segment revenue increased in all regions compared to the same period last year, on both a reported and currency-neutral basis.  Export volume also increased across all regions and exports grew nearly 3% on top of 19% growth last year.  Year-over-year comparisons are affected by the strong 3Q 2017 growth UPS experienced in Europe. 

 

3Q 2018
Adjusted
3Q 2018


3Q 2017
Revenue $3,478 M   $3,376 M
Operating profit $536 M $576 M $606 M

For the International segment in 3Q 2018:

  • Revenue increased 3%; on a currency-neutral basis, revenue increased 5%.
  • Europe export volume grew 4.2% on top of the 25% growth in 3Q 2017.
  • Yield increased 3.0% and currency-neutral yield jumped 5.1%, driven by revenue management actions and improved product mix.
  • Operating profit includes headwinds primarily from currency and fuel, as well as some economic softening related to changing trade policies.
  • Currency was a negative impact of $28 million, primarily from emerging markets.
  • Adjusted operating profit excludes transformation charges of $40 million.

Supply Chain and Freight Segment

“Supply Chain and Freight performance was outstanding this quarter, as the unit delivered double-digit growth in both revenue and adjusted operating profit,” Abney said.  “UPS will continue to leverage our vast forwarding, customs, and supply-chain solutions to help customers expand their existing businesses and reach new markets.”

 

3Q 2018
Adjusted
3Q 2018


3Q 2017
Revenue $3,529 M   $3,146 M
Operating profit $242 M $260 M $195 M

For the Supply Chain and Freight segment in 3Q 2018:

  • Revenue increased more than 12% to $3.5 billion, as the business units benefited from strategies focused on small and medium-sized customers.
  • The Forwarding business led all units with 17% revenue growth, as revenue management initiatives and high-value solutions generated yield improvement.
  • UPS Freight revenue increased 11% on higher pricing and heavier shipments.
  • Third quarter operating margin was 6.8%; adjusted operating margin expanded 120 basis points to 7.4%.
  • Operating profit was up 24% to $242 million and adjusted operating profit increased 33% to $260 million.
  • Adjusted operating profit excludes transformation charges of $18 million.       

Outlook

The company provides earnings per share guidance on an adjusted (non-GAAP) basis because it is not possible to predict or provide a reconciliation reflecting the impact of future required pension mark-to-market adjustments, which would be included in reported (GAAP) results. The impact of such adjustments could be material.

“Improvements in revenue quality and our new, highly-automated capacity gives us confidence in a successful peak season for our customers and shareowners,” said Richard Peretz, UPS’s chief financial officer.

  • UPS expects 2018 adjusted, diluted earnings per share in a range of $7.03 to $7.37.
  • The company is raising free cash flow guidance to over $5.0 billion in 2018.
  • Capital expenditures in 2018 remain planned between $6.5 billion and $7.0 billion.
  • As previously guided, UPS expects 4Q18 adjusted EPS to increase about 15 percent, despite anticipated currency headwinds in emerging markets and one less operating day during peak season.
  • The effective tax rate should be in a range of 23% to 24% for the fourth quarter.

* Information on non-GAAP financial measures is attached to this press release.

 

Conference Call Information
           
UPS CEO David Abney and CFO Richard Peretz will discuss third-quarter results with investors and analysts during a conference call at 8:30 a.m. ET, October 24, 2018.  That call is open to others through a live Webcast.  To access the call, go to www.investors.ups.com and click on “Earnings Webcast.”

About UPS
UPS (NYSE: UPS) is a global leader in logistics, offering a broad range of solutions including transporting packages and freight; facilitating international trade, and deploying advanced technology to more efficiently manage the world of business.  UPS is committed to operating more sustainably – for customers, the environment and the communities we serve around the world.  Learn more about our efforts at ups.com/sustainability.  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 longitudes.ups.com. To get UPS news direct, follow @UPS_News on Twitter.

Forward-Looking Statements

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, governmental regulations (including tax laws and regulations), our competitive environment, changes in the facts or assumptions underlying our health and pension benefit funding obligations, negotiation and ratification of labor contracts, strikes, work stoppages and slowdowns, changes in aviation and motor fuel prices, cyclical and seasonal fluctuations in our operating results, 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.

Reconciliation of GAAP and non-GAAP Financial Measures

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.” Additionally, we periodically disclose free cash flow, free cash flow excluding discretionary pension contributions, as well as currency-neutral revenue, revenue per piece and operating profit.

We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Examples of items for which we may make adjustments include but are not limited to: amounts related to mark-to-market gains or losses (non-cash); settlement of contingencies; gains or losses associated with mergers, acquisitions, divestitures and other structural changes; charges related to restructuring programs; asset impairments (non-cash); amounts related to changes in tax regulations or positions; pension and postretirement related items; and debt modifications.

We believe that these non-GAAP measures provide additional meaningful information to assist users of our financial statements in understanding our financial results, cash flows and assessing our ongoing performance because they exclude items that may not be indicative of, or are unrelated to, our underlying operations and may provide a useful baseline for analyzing trends in our underlying businesses. Management uses these non-GAAP financial measures in making financial, operating and planning decisions. We also use certain of these measures for the determination of incentive compensation award results.

Non-GAAP financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our non-GAAP financial information does not represent a comprehensive basis of accounting. Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.

Transformation Strategy Costs

We supplement the presentation of our operating profit, operating margin, pre-tax income, net income and earnings per share with similar non-GAAP measures that exclude the impact of transformation strategy costs.  We believe this adjusted information provides important supplemental information that provides useful comparison of year-to-year financial performance without considering the short-term impact of transformation impacts. We evaluate the performance of our businesses on an adjusted basis.

Currency-Neutral Revenue, Revenue per Piece and Operating Profit

We supplement the reporting of our revenue, revenue per piece and operating profit with similar non-GAAP measures that exclude the period-over-period impact of foreign currency exchange rate changes and hedging activities. We believe currency-neutral revenue, revenue per piece and operating profit information allows users of our financial statements to understand growth trends in our products and results. We evaluate the performance of our International Package and Supply Chain and Freight businesses on a currency-neutral basis.

Currency-neutral revenue, revenue per piece and operating profit are calculated by dividing current period reported U.S. dollar revenue, revenue per piece and operating profit by the current period average exchange rates to derive current period local currency revenue, revenue per piece and operating profit. The derived current period local currency revenue, revenue per piece and operating profit are then multiplied by the average foreign exchange rates used to translate the comparable results for each month in the prior year period (including the period over period impact of foreign currency revenue hedging activities). The difference between the current period reported U.S. dollar revenue, revenue per piece and operating profit and the derived current period U.S. dollar revenue, revenue per piece and operating profit is the period over period impact of currency fluctuations.

Free Cash Flow

We supplement the reporting of cash flows from operating activities with free cash flow and free cash flow excluding discretionary pension contributions, non-GAAP liquidity measures. We believe free cash flow is an important indicator of how much cash is generated by regular business operations and we use it as a measure of incremental cash available to invest in our business, meet our debt obligations and return cash to shareowners. We calculate free cash flow as cash flows from operating activities less capital expenditures, proceeds from disposals of property, plant and equipment, and plus or minus the net changes in finance receivables and other investing activities.
 

Reconciliation of GAAP and non-GAAP Income Statement Data
(in millions, except EPS amounts):

Three Months Ended September 30, 2018
          Transformation    
      As-Reported
(GAAP)
  Strategy
Costs
  As-Adjusted
(non-GAAP)
Operating profit:              
  U.S. Domestic Package     $   949   $   39   $   988
  International Package         536       40       576
  Supply Chain & Freight         242       18       260
  Total operating profit     $   1,727   $   97   $   1,824
               
Income before income taxes     $   1,889   $   97   $   1,986
               
Income tax expense     $   381       24   $   405
               
Net income     $   1,508   $   73   $   1,581
               
Diluted earnings per share     $   1.73   $   0.09   $   1.82

 

Nine Months Ended September 30, 2018
 

 

 
      As-Reported
(GAAP)
  Transformation
Strategy
Costs
  As-Adjusted
(non-GAAP)
Operating profit:                
  U.S. Domestic Package       $   2,644   $   235   $   2,879
  International Package           1,748       76       1,824
  Supply Chain & Freight           628       49       677
  Total operating profit       $   5,020   $   360   $   5,380
                 
Income before income taxes       $   5,476   $   360   $   5,836
                 
Income tax expense       $   1,138   $   87   $   1,225
                 
Net income       $   4,338   $   273   $   4,611
                 
Diluted earnings per share       $   4.99   $   0.31   $   5.30

Note: Certain amounts may not compute due to rounding. 


Reconciliation of GAAP and non-GAAP Revenue, Revenue Per Piece and
As-Adjusted Currency Neutral Operating Profit
(in millions, except per piece amounts):

Three Months Ended September 30
                         
                    2018    
    2018 As-   2017 As-           Currency
Neutral
  % Change
    Reported
(GAAP)
  Reported
(GAAP)
  % Change
 (GAAP)

 
Currency
Impact
  (non-
GAAP)
  (non-
GAAP)
Average Revenue Per Piece:                        
International Package:                        
  Domestic   $   6.47   $   6.26   3.4 %   $   0.15   $   6.62   5.8 %
  Export       29.32       29.09   0.8 %       0.55       29.87   2.7 %
  Total International Package   $   17.06   $   16.56   3.0 %   $   0.34   $   17.40   5.1 %
                         
                         
Consolidated   $   11.20   $   10.77   4.0 %   $   0.06   $   11.26   4.5 %
                         
Revenue:                        
  U.S. Domestic Package   $   10,437   $   9,651   8.1 %   $   -    $   10,437   8.1 %
  International Package       3,478       3,376   3.0 %       67       3,545   5.0 %
  Supply Chain & Freight       3,529       3,146   12.2 %       17       3,546   12.7 %
  Total revenue   $   17,444   $   16,173   7.9 %   $   84   $   17,528   8.4 %
                         
                         
                         
                    2018 As-
Adjusted
   
    2018 As-
Adjusted
  2017 As-
Adjusted
  % Change       Currency
Neutral
  % Change
     (non-
GAAP)
   (non-
GAAP)
  (non-
GAAP)
  Currency
Impact
  (non-
GAAP)
  (non-
GAAP)
As-Adjusted Operating Profit:                        
  U.S. Domestic Package   $   988   $   1,011   -2.3 %   $   -    $   988   -2.3 %
  International Package       576       606   -5.0 %       28       604   -0.3 %
  Supply Chain & Freight       260       195   33.3 %       4       264   35.4 %
  Total operating profit   $   1,824   $   1,812   0.7 %   $   32   $   1,856   2.4 %
 

 

Reconciliation of GAAP and non-GAAP Revenue, Revenue Per Piece and
As-Adjusted Currency Neutral Operating Profit
(in millions, except per piece amounts):

Nine Months Ended September 30
                           
                      2018 Currency    
      2018 As-   2017 As-           Neutral   % Change
      Reported
(GAAP)
  Reported
(GAAP)
  % Change
(GAAP)
  Currency
Impact
  (non-
GAAP)
  (non-
GAAP)
  Average Revenue Per Piece:                        
  International Package:                        
    Domestic   $   6.60   $   5.99   10.2 %   $   (0.34 )   $   6.26   4.5 %
    Export       29.43       28.79   2.2 %       (0.46 )       28.97   0.6 %
    Total International Package   $   17.18   $   16.11   6.6 %   $   (0.39 )   $   16.79   4.2 %
                           
                           
  Consolidated   $   11.14   $   10.68   4.3 %   $   (0.06 )   $   11.08   3.7 %
                           
  Revenue:                        
    U.S. Domestic Package   $   31,018   $   28,928   7.2 %   $   -      $   31,018   7.2 %
    International Package       10,613       9,621   10.3 %       (239 )       10,374   7.8 %
    Supply Chain & Freight       10,382       9,061   14.6 %       (63 )       10,319   13.9 %
    Total revenue   $   52,013   $   47,610   9.2 %   $   (302 )   $   51,711   8.6 %
                           
                      2018 As-    
                      Adjusted    
      2018 As-   2017 As-           Currency    
      Adjusted   Adjusted   % Change       Neutral   % Change
       (non-
GAAP)
   (non-
GAAP)
  (non-
GAAP)
  Currency
Impact
  (non-
GAAP)
  (non-
GAAP)
  As-Adjusted Operating Profit:                        
    U.S. Domestic Package   $   2,879   $   3,216   -10.5 %   $   -      $   2,879   -10.5 %
    International Package       1,824       1,694   7.7 %       (16 )       1,808   6.7 %
    Supply Chain & Freight       677       556   21.8 %       5         682   22.7 %
    Total operating profit   $   5,380   $   5,466   -1.6 %   $   (11 )   $   5,369   -1.8 %
                           

Reconciliation of non-GAAP Liquidity Measures
(in millions):

Nine Months Ended September 30
         
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
         
      Preliminary
      2018
Cash flows from operating activities     $   9,422  
Cash flows used in investing activities         (4,499 )
Cash flows used in financing activities         (4,260 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash         (57 )
    Net increase in cash, cash equivalents and restricted cash     $   606  
         
         
Reconciliation of Free Cash Flow (non-GAAP)
         
      Preliminary
      2018
Cash flows from operating activities (GAAP)     $   9,422  
Capital expenditures          (4,490 )
Proceeds from disposals of PP&E          45  
Net change in finance receivables          (7 )
Other investing activities          (23 )
    Free cash flow (non-GAAP)     $    4,947  
 

 

               
  Three Months Ended    
  September 30  
    2018       2017     Change   % Change
(amounts in millions, except per share data)              
Statement of Income Data:              
Revenue:              
  U.S. Domestic Package $   10,437     $   9,651     $   786     8.1 %
  International Package     3,478         3,376         102     3.0 %
  Supply Chain & Freight     3,529         3,146         383     12.2 %
  Total revenue     17,444         16,173         1,271     7.9 %
               
Operating expenses:              
  Compensation and benefits     9,015         8,437         578     6.9 %
  Other     6,702         5,924         778     13.1 %
  Total operating expenses     15,717         14,361         1,356     9.4 %
               
Operating profit:              
  U.S. Domestic Package     949         1,011         (62 )   -6.1 %
  International Package     536         606         (70 )   -11.6 %
  Supply Chain & Freight     242         195         47     24.1 %
  Total operating profit      1,727         1,812         (85 )   -4.7 %
               
Other income (expense):              
  Other pension income (expense)     284         216         68     31.5 %
  Investment income and other     33         20         13     65.0 %
  Interest expense     (155 )       (111 )       (44 )   39.6 %
  Total other income (expense)     162         125         37     29.6 %
               
Income before income taxes     1,889         1,937         (48 )   -2.5 %
               
Income tax expense     381         678         (297 )   -43.8 %
               
Net income $   1,508     $   1,259     $   249     19.8 %
               
Net income as a percentage of revenue   8.6 %     7.8 %        
               
Per share amounts:              
  Basic earnings per share $   1.74     $   1.45     $   0.29     20.0 %
  Diluted earnings per share $   1.73     $   1.44     $   0.29     20.1 %
               
Weighted-average shares outstanding:              
  Basic      865         869         (4 )   -0.5 %
  Diluted      870         874         (4 )   -0.5 %
               
As adjusted income data:              
Operating profit:              
  U.S. Domestic Package (1) $   988     $   1,011     $   (23 )   -2.3 %
  International Package (1)     576         606         (30 )   -5.0 %
  Supply Chain & Freight (1)     260         195         65     33.3 %
      Total operating profit (1)     1,824         1,812         12     0.7 %
               
Income before income taxes (1) $   1,986     $   1,937     $   49     2.5 %
Net income (2) $   1,581     $   1,259     $   322     25.6 %
               
Basic earnings per share (2) $   1.83     $   1.45     $   0.38     26.2 %
Diluted earnings per share (2) $   1.82     $   1.44     $   0.38     26.4 %

(1) Third quarter 2018 operating profit and consolidated income before income taxes exclude the impact of $97 million of transformation strategy costs. These costs are allocated between the U.S. Domestic Package segment ($39 million), International Package segment ($40 million) and Supply Chain & Freight segment ($18 million).

(2) Third quarter 2018 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $73 million.

               
  Three Months Ended        
  September 30  
    2018     2017   Change   % Change
               
Revenue (in millions):              
U.S. Domestic Package:              
  Next Day Air  $   1,896   $   1,769   $   127     7.2 %
  Deferred     1,066       1,001       65     6.5 %
  Ground     7,475       6,881       594     8.6 %
      Total U.S. Domestic Package     10,437       9,651       786     8.1 %
International Package:              
  Domestic     678       673       5     0.7 %
  Export     2,654       2,568       86     3.3 %
  Cargo and Other     146       135       11     8.1 %
     Total International Package     3,478       3,376       102     3.0 %
Supply Chain & Freight:              
  Forwarding     1,672       1,434       238     16.6 %
  Logistics     790       736       54     7.3 %
  Freight     867       778       89     11.4 %
  Other     200       198       2     1.0 %
     Total Supply Chain & Freight     3,529       3,146       383     12.2 %
Consolidated $   17,444   $   16,173   $   1,271     7.9 %
               
Consolidated volume (in millions)     1,229       1,197       32     2.7 %
               
Operating weekdays     63       63       -      0.0 %
               
Average Daily Package Volume (in thousands):            
U.S. Domestic Package:              
  Next Day Air      1,526       1,471       55     3.7 %
  Deferred     1,256       1,240       16     1.3 %
  Ground     13,624       13,178       446     3.4 %
    Total U.S. Domestic Package     16,406       15,889       517     3.3 %
International Package:              
  Domestic     1,663       1,706       (43 )   -2.5 %
  Export     1,437       1,401       36     2.6 %
     Total International Package     3,100       3,107       (7 )   -0.2 %
Consolidated     19,506       18,996       510     2.7 %
               
Average Revenue Per Piece:              
U.S. Domestic Package:              
  Next Day Air  $   19.72   $   19.09   $   0.63     3.3 %
  Deferred     13.47       12.81       0.66     5.2 %
  Ground     8.71       8.29       0.42     5.1 %
    Total U.S. Domestic Package     10.10       9.64       0.46     4.8 %
International Package:              
  Domestic     6.47       6.26       0.21     3.4 %
  Export     29.32       29.09       0.23     0.8 %
     Total International Package     17.06       16.56       0.50     3.0 %
Consolidated $   11.20   $   10.77   $   0.43     4.0 %
               

 

                       
Currency Neutral Revenue Per Piece
(unaudited)
                       
  Three Months Ended           Currency Neutral    
  September 30              
    2018     2017   % Change   Currency   2018*   % Change
                       
Average Revenue Per Piece:                      
International Package:                      
  Domestic $   6.47   $   6.26     3.4 %   $   0.15     $   6.62   5.8 %
  Export     29.32       29.09     0.8 %       0.55         29.87   2.7 %
     Total International Package $   17.06   $   16.56     3.0 %   $   0.34     $   17.40   5.1 %
                       
                       
Consolidated $   11.20   $   10.77     4.0 %   $   0.06     $   11.26   4.5 %
                       
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences        
                       
Currency Neutral Revenue
(unaudited)
                       
  Three Months Ended           Currency Neutral    
  September 30              
    2018     2017   % Change   Currency   2018*   % Change
Revenue (in millions):                      
  U.S. Domestic Package $   10,437   $   9,651     8.1 %   $   -      $  10,437   8.1 %
  International Package     3,478       3,376     3.0 %       67         3,545   5.0 %
  Supply Chain & Freight     3,529       3,146     12.2 %       17         3,546   12.7 %
  Total revenue $   17,444   $  16,173     7.9 %   $   84     $  17,528   8.4 %
                       
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences 
                       
Currency Neutral Operating Profit
(unaudited)
                       
  Three Months Ended           Currency Neutral    
  September 30              
  2018*     2017   % Change   Currency   2018**   % Change
As-Adjusted Operating profit (in millions):                    
  U.S. Domestic Package $   988   $   1,011     -2.3 %   $   -      $   988   -2.3 %
  International Package     576       606     -5.0 %       28         604   -0.3 %
  Supply Chain & Freight     260       195     33.3 %       4         264   35.4 %
  Total operating profit $   1,824   $   1,812     0.7 %   $   32     $   1,856   2.4 %
                       
* Amounts adjusted for Transformation strategy costs 
** Amounts adjusted for Transformation strategy costs and period over period foreign currency exchange rate and hedging differences
                       
UPS Freight Selected Operating Data - Third Quarter 
(unaudited)
                       
  Three Months Ended                
  September 30            
    2018     2017   Change   % Change        
LTL revenue (in millions) $   735   $   673   $   62       9.2 %        
LTL revenue per LTL hundredweight $   25.70   $   24.46   $   1.24       5.1 %        
                       
LTL shipments (in thousands)     2,603       2,590       13       0.5 %        
LTL shipments per day (in thousands)     41.3       41.1       0.2       0.5 %        
                       
LTL gross weight hauled (in millions of pounds)     2,860       2,751       109       4.0 %        
LTL weight per shipment (in pounds)     1,098       1,062       36       3.4 %        
                       
Operating weekdays   63     63       -        0.0 %        
                       

 

               
Detail of Other Operating Expenses - Third Quarter
(unaudited)
               
               
(in millions) Three Months Ended      
  September 30    
    2018     2017   Change   % Change
Repairs and maintenance $   437   $   399   $   38     9.5 %
Depreciation and amortization     524       572       (48 )   -8.4 %
Purchased transportation     3,216       2,832       384     13.6 %
Fuel     867       636       231     36.3 %
Other occupancy     321       282       39     13.8 %
Other expenses     1,337       1,203       134     11.1 %
Total other operating expenses $   6,702   $   5,924   $   778     13.1 %
               
               
               
Detail of Other Pension Income (Expense) - Third Quarter
(unaudited)
               
               
(in millions) Three Months Ended      
  September 30    
    2018     2017   Change   % Change
U.S. Domestic Package $   227   $   165   $   62     37.6 %
International Package     20       20       -      0.0 %
Supply Chain & Freight     37       31       6     19.4 %
Total other pension income (expense) $   284   $   216   $   68     31.5 %
               
               
               
Earnings Per Share and Share Data - Third Quarter 
(unaudited)
               
               
      Three Months Ended    
(amounts in millions, except per share data)     September 30    
        2018     2017      
               
Numerator:              
  Net income      $   1,508   $   1,259      
               
Denominator:              
  Weighted-average shares         860       864      
  Deferred compensation obligations         1       1      
  Vested portion of restricted units         4       4      
Denominator for basic earnings per share         865       869      
               
Effect of dilutive securities:              
  Restricted units         5       4      
  Stock options          -        1      
Denominator for diluted earnings per share         870       874      
               
Basic earnings per share     $   1.74   $   1.45      
               
Diluted earnings per share     $   1.73   $   1.44      
               
               
               
Detail of shares outstanding as of September 30, 2018:            
               
Class A shares         164        
Class B shares         695        
  Total shares outstanding         859        
               

 

               
  Nine Months Ended    
  September 30  
    2018       2017     Change   % Change
(amounts in millions, except per share data)              
Statement of Income Data:              
Revenue:              
  U.S. Domestic Package $   31,018     $   28,928     $   2,090     7.2 %
  International Package     10,613         9,621         992     10.3 %
  Supply Chain & Freight     10,382         9,061         1,321     14.6 %
  Total revenue     52,013         47,610         4,403     9.2 %
               
Operating expenses:              
  Compensation and benefits     27,084         25,032         2,052     8.2 %
  Other     19,909         17,112         2,797     16.3 %
  Total operating expenses     46,993         42,144         4,849     11.5 %
               
Operating profit:              
  U.S. Domestic Package     2,644         3,216         (572 )   -17.8 %
  International Package     1,748         1,694         54     3.2 %
  Supply Chain & Freight     628         556         72     12.9 %
  Total operating profit     5,020         5,466         (446 )   -8.2 %
               
Other income (expense):              
  Other pension income (expense)     853         575         278     48.3 %
  Investment income and other     60         49         11     22.4 %
  Interest expense     (457 )       (324 )       (133 )   41.0 %
  Total other income (expense)     456         300         156     52.0 %
               
Income before income taxes     5,476         5,766         (290 )   -5.0 %
               
Income tax expense      1,138         1,957         (819 )   -41.8 %
               
Net income $   4,338     $   3,809     $   529     13.9 %
               
Net income as a percentage of revenue   8.3 %     8.0 %        
               
Per share amounts:              
  Basic earnings per share $   5.01     $   4.37     $   0.64     14.6 %
  Diluted earnings per share $   4.99     $   4.35     $   0.64     14.7 %
               
Weighted-average shares outstanding:              
  Basic      866         872         (6 )   -0.7 %
  Diluted      870         876         (6 )   -0.7 %
               
As adjusted income data:              
Operating profit:              
  U.S. Domestic Package (1) $   2,879     $   3,216     $   (337 )   -10.5 %
  International Package (1)     1,824         1,694         130     7.7 %
  Supply Chain & Freight      677         556         121     21.8 %
    Total operating profit (1)     5,380         5,466         (86 )   -1.6 %
               
Income before income taxes (1) $   5,836     $   5,766     $   70     1.2 %
Net income (2) $   4,611     $   3,809     $   802     21.1 %
               
Basic earnings per share (2) $   5.33     $   4.37     $   0.96     22.0 %
Diluted earnings per share (2) $   5.30     $   4.35     $   0.95     21.8 %

(1) Third quarter 2018 operating profit and consolidated income before income taxes exclude the impact of $97 million of transformation strategy costs. These costs are allocated between the U.S. Domestic Package segment ($39 million), International Package segment ($40 million) and Supply Chain & Freight segment ($18 million).
 
Second quarter 2018 operating profit and consolidated income before income taxes exclude the impact of $263 million of transformation strategy costs, which includes voluntary retirement plan transformation strategy costs of $192 million, and other costs of $71 million.  These costs are allocated between the U.S. Domestic Package segment ($196 million), International Package segment ($36 million) and Supply Chain & Freight segment ($31 million).             

(2) Third quarter 2018 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $73 million.

Second quarter 2018 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $200 million.

               
  Nine Months Ended        
  September 30  
    2018     2017   Change   % Change
               
Revenue (in millions):              
U.S. Domestic Package:              
  Next Day Air  $   5,510   $   5,186   $   324     6.2 %
  Deferred     3,215       2,991       224     7.5 %
  Ground     22,293       20,751       1,542     7.4 %
      Total U.S. Domestic Package     31,018       28,928       2,090     7.2 %
International Package:              
  Domestic     2,094       1,909       185     9.7 %
  Export     8,073       7,331       742     10.1 %
  Cargo and Other     446       381       65     17.1 %
    Total International Package     10,613       9,621       992     10.3 %
Supply Chain & Freight:              
  Forwarding     4,936       4,047       889     22.0 %
  Logistics     2,356       2,194       162     7.4 %
  Freight     2,497       2,240       257     11.5 %
  Other     593       580       13     2.2 %
    Total Supply Chain & Freight     10,382       9,061       1,321     14.6 %
Consolidated  $   52,013    $   47,610    $   4,403     9.2 %
               
Consolidated volume (in millions)     3,696       3,573       123     3.4 %
               
Operating weekdays     191       191       -      0.0 %
               
Average Daily Package Volume (in thousands):            
U.S. Domestic Package:              
  Next Day Air      1,462       1,394       68     4.9 %
  Deferred     1,260       1,245       15     1.2 %
  Ground     13,529       13,065       464     3.6 %
    Total U.S. Domestic Package     16,251       15,704       547     3.5 %
International Package:              
  Domestic     1,662       1,669       (7 )   -0.4 %
  Export     1,436       1,333       103     7.7 %
    Total International Package     3,098       3,002       96     3.2 %
Consolidated     19,349       18,706       643     3.4 %
               
Average Revenue Per Piece:              
U.S. Domestic Package:              
  Next Day Air  $   19.73   $   19.48   $   0.25     1.3 %
  Deferred     13.36       12.58       0.78     6.2 %
  Ground     8.63       8.32       0.31     3.7 %
    Total U.S. Domestic Package     9.99