Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 8-K
 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 24, 2018

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12509305&doc=3

United Parcel Service, Inc.
(Exact name of registrant as specified in its charter)
 

 
 
 
 
 
 
Delaware
 
001-15451
 
58-2480149
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
55 Glenlake Parkway, N.E., Atlanta, Georgia
 
30328
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (404) 828-6000
Not Applicable
(Former name or former address, if changed since last report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter). Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o





Item 2.02 — Results of Operations and Financial Condition.
     
On October 24, 2018 United Parcel Service, Inc. (the “Company”) issued a press release containing information about the Company’s results of operations for the third quarter ended September 30, 2018. A copy of the press release is attached hereto as Exhibit 99.1.


Item 9.01 — Financial Statements and Exhibits.

(c) Exhibits

99.1    Press release dated October 24, 2018 titled "UPS 3Q18 EARNINGS PER SHARE UP MORE THAN 20%"


The information contained in Items 2.02 and 9.01 shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Exchange Act, except as may be expressly set forth by reference in any such filing.







Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
 
 
 
 
 
 
UNITED PARCEL SERVICE, INC.
Date:
October 24, 2018
 
 
 
By:
 
/S/    RICHARD N. PERETZ
 
 
 
 
 
 
 
Richard N. Peretz
 
 
 
 
 
 
 
Senior Vice President, Chief Financial Officer and Treasurer
 
 
 
 
 
 
 
 



Exhibit


For Immediate Release
Contacts:
                         Steve Gaut, Public Relations
 
                         404-828-8787
 
                         Scott Childress, Investor Relations
 
                         404-828-7957

UPS 3Q18 EARNINGS PER SHARE UP MORE THAN 20%

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 - October 24, 2018 - 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.”






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



- more -





2-2-2

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

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

- more -





3-3-3

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.




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

- more -






4-4-4

“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
 
 
 
 
 
 
 
As- Reported (GAAP)
 
Transformation 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 As- Reported (GAAP)
 
2017 As- Reported (GAAP)
% Change (GAAP)
 
Currency Impact
 
2018 Currency- Neutral
(non-GAAP)
% Change (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 (non-GAAP)
 
2017 As- Adjusted (non-GAAP)
% Change (non-GAAP)
 
Currency Impact
 
2018 As Adjusted Currency- Neutral
(non-GAAP)
% Change (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
 %



























Certain prior year amounts have been classified to confirm to the current year presentation.






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 As- Reported (GAAP)
 
2017 As- Reported (GAAP)
% Change (GAAP)
 
Currency Impact
 
2018 Currency- Neutral
(non-GAAP)
% Change (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 (non-GAAP)
 
2017 As- Adjusted (non-GAAP)
% Change (non-GAAP)
 
Currency Impact
 
2018 As Adjusted Currency- Neutral
(non-GAAP)
% Change (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
)%


























Certain prior year amounts have been classified to confirm to the current year presentation.





Reconciliation of GAAP and 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




































Certain prior year amounts have been classified to confirm to the current year presentation.





United Parcel Service, Inc.
Selected Financial Data - Third Quarter
(unaudited)
 
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.

Certain prior year amounts have been reclassified to conform to the current year presentation.








United Parcel Service, Inc.
Selected Operating Data - Third Quarter
(unaudited)
 
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

 

 
 %
 
 
 
 
 
 
 
 
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
 %











Certain prior year amounts have been reclassified to conform to the current year presentation.





United Parcel Service, Inc.
Supplemental Analysis of Currency and UPS Freight
Currency Neutral Revenue Per Piece
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
 
Currency
 
 
 
September 30
 
 
 
Neutral
 
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
 
 
 
September 30
 
 
 
Neutral
 
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
 
September 30
 
 
 
 
 
Neutral
 
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


%





Certain prior year amounts have been reclassified to conform to the current year presentation.





United Parcel Service, Inc.
Detail of Other Operating Expenses - Third Quarter
(unaudited)
 
Three Months Ended
 
 
 
 
 
September 30
 
 
 
 
 
2018
 
2017
 
Change
 
% Change
(in millions)
 
 
 
 
 
 
 
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)
 
Three Months Ended
 
 
 
 
 
September 30
 
 
 
 
(in millions)
2018
 
2017
 
Change
 
% Change
U.S. Domestic Package
227

 
165

 
62

 
37.6
%
International Package
20

 
20

 

 
%
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
 
September 30
 
2018
 
2017
(amounts in millions, except per share data)
 
 
 
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 June 30, 2018:
 
 
 
 
 
 
 
Class A shares
164

 
 
Class B shares
695

 
 
    Total shares outstanding
859

 
 





Certain prior year amounts have been reclassified to conform to the current year presentation.





United Parcel Service, Inc.
Selected Operating Data - Year to Date
(unaudited)

 
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 (1)
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.
Certain prior year amounts have been reclassified to conform to the current year presentation





United Parcel Service, Inc.
Selected Operating Data - Year to Date
(unaudited)
 
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

 

 
 %
 
 
 
 
 
 
 
 
Average Daily Package Volume (in thousands):