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): January 31, 2019

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12664559&doc=4
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 by 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 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 January 31, 2019, United Parcel Service, Inc. (the “Company”) issued a press release containing information about the Company’s results of operations for the fourth quarter ended December 31, 2018. The Company also posted on its website at www.investors.ups.com financial statement schedules containing additional detail about the Company's results of operations for the same period.

A copy of the press release is attached hereto as Exhibit 99.1. A copy of financial statement schedules are attached hereto as Exhibit 99.2.

Item 9.01 — Financial Statements and Exhibits.

(d) Exhibits

99.1       Press release dated January 31, 2019 "UPS ACHIEVES EPS TARGET ON STRONG REVENUE YIELDS"
99.2       Q4 2018 financial statement schedules

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 Securities Act or the Exchange Act, expect 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:
January 31, 2019
 
 
 
By:
 
/S/    RICHARD N. PERETZ
 
 
 
 
 
 
 
Richard N. Peretz
 
 
 
 
 
 
 
Senior Vice President, Chief Financial Officer and Treasurer

 
 
 
 
 
 
 
 



Exhibit


Exhibit 99.1
For Immediate Release

Contacts:
Steve Gaut, Public Relations
 
404-828-8787
 
Scott Childress, Investor Relations
 
404-828-7957
UPS ACHIEVES EPS TARGET
ON STRONG REVENUE YIELDS

4Q18 EPS of $0.52; Adjusted 4Q EPS up nearly 17% to $1.94
Pricing and Mix Strategies Lift 4Q Revenue Quality
U.S. Domestic Revenue up 6.3% on 4Q Yield Growth
International 4Q Achieves Record Profits; Margin Rises above 20%
Supply Chain & Freight Revenue Rises, driven by Forwarding and Logistics
2018 Full-year Cash from Operations was $12.7B
Free Cash Flow in 2018 topped $6B, Exceeding Expectations
2019 Total Adjusted Operating Profit Growth* in the Low-teens with all Segments up Double-digits
Announces Full-Year 2019 Adjusted EPS Guidance* Range of $7.45 to $7.75

ATLANTA - January 31, 2019 - UPS (NYSE:UPS) today announced fourth-quarter 2018 earnings highlighted by high-quality revenue initiatives that are producing positive, sustainable benefits.

“We achieved our 2018 adjusted earnings-per-share goal by successfully executing Transformation investments and initiatives that lifted revenue quality and improved efficiency,” said David Abney, UPS chairman and CEO. “Our diverse portfolio, global footprint and flexible network position UPS for profitable growth in 2019 and beyond.”

Consolidated
Results
4Q 2018
Adjusted
4Q 2018
4Q 2017
Adjusted
4Q 2017
Revenue
$19,848 M
 
$18,975 M
 
Net Income
$453 M
$1,690 M
$1,096 M
$1,445 M
Diluted Earnings Per Share
$0.52
$1.94
$1.26
$1.66

Fourth-quarter 2018 GAAP results include a mark-to-market (MTM) non-cash, after-tax pension charge of $1.237 billion, which represents an after-tax charge of $1.42 per diluted share. In the prior-year period, the company’s GAAP results included $0.40 per diluted share related to mark-to-market pension charges and benefits from the Tax Cuts and Jobs Act.

For the total company in 4Q 2018:

Revenue increased 4.6%; currency-neutral revenue was up 5.2%.
Average revenue yield expanded 4.1%, with gains in all products.
Achieved record shipments and exceptional on-time service during the peak holiday season.

* Information on non-GAAP financial measures is attached to this press release. The Company provides guidance on an adjusted (non-GAAP) basis because it is not possible to provide the most comparable GAAP measure. See "Outlook." 
- more -





U.S. Domestic Segment

The segment benefited from UPS’s Transformation initiatives, new network capabilities and higher-quality revenue during the period. The U.S. Domestic segment delivered more than 21 million packages, on average, per day with strong revenue yields and record on-time performance. Shipment growth was balanced, as business-to-business and business-to-consumer packages grew in the quarter. As anticipated, operating profit was reduced by planned pension expense, start-up costs for several large facilities, and one less operating day than in the prior year’s fourth quarter.
 
4Q 2018
4Q 2017
Revenue
$12,575 M
$11,833 M
Operating profit
$999 M
$1,087M


For the U.S. Domestic segment in 4Q 2018:
Revenue increased $742 million or 6.3% over 4Q 2017, with growth across all products.
Premium Next Day Air revenue grew more than 10%, with volume growth of 7.8% as customers selected faster delivery options.
Revenue per piece increased 4.8% on expanded base rates and positive product and customer mix.
The company successfully opened 14 major facilities in the U.S. during the quarter, providing higher efficiency and record on-time deliveries. For the full year, UPS opened 22 new facilities worldwide.


International Segment

“Our International segment produced record results highlighted by double-digit profitability in Europe,” said Abney. “Our broad portfolio, diverse revenue base and flexible network help buffer the impacts of global-economic softening. These strengths also position UPS to help customers navigate the current complexities of global trade.”

 
4Q 2018
4Q 2017
Revenue
$3,829 M
$3,721M
Operating profit
$781 M
$735 M

For the International segment in 4Q 2018:
Revenue expanded 2.9% with growth across all regions; currency-neutral revenue up 5.4%.
Revenue per piece increased 1.7%; currency-neutral revenue per piece grew 4.2%, with international domestic products up 7.8% and export products up 3.6%.
Operating profit grew 6.3%; adjusted currency-neutral operating profit increased 9.8% to $807 million, driven by growth, revenue yields and disciplined cost control.
Operating margin expanded 60 basis points** (bps) to 20.4% on a reported basis and 80 bps to 20.6% on a currency-neutral basis, demonstrating improved operating leverage.

* Information on non-GAAP financial measures is attached to this press release. 
** One basis point equals one-hundredth of a percentage point. 




- more -








Supply Chain and Freight Segment

The Supply Chain and Freight business remains strong. Fourth quarter segment profitability was reduced by about $60 million as a result of the UPS Freight contract ratification process. Profitability for the other business units was positive, led by gains in Forwarding. Revenue-quality improvements and a disciplined focus on cost containment further contributed to the positive results.

 
4Q 2018
4Q 2017
Revenue
$3,444 M
$3,421 M
Operating profit
$224 M
$241 M

For the Supply Chain and Freight segment in 4Q 2018:
The business units demonstrated continued growth as the result of greater alignment with small and medium-sized customers.
Coyote, brokerage and international air and ocean freight made significant contributions to operating profit within Forwarding, demonstrating value to customers across the world.
Logistics revenue increased almost 7% from growth in the Healthcare, Aerospace, Retail and Manufacturing sectors.
UPS Freight increased revenue per LTL (less-than-truckload) hundredweight by 6.9%, with its continued focus on revenue quality.

Full-year 2018 Consolidated Results

Total revenue increased 7.9% to $71.9 billion on shipment growth; revenue-yield expansion of 4.3% surpassed 2017 yield by 200 basis points.
Full-year 2018 diluted EPS totaled $5.51; adjusted diluted EPS was $7.24.
Adjusted diluted EPS excludes the impact of the MTM pension charge and Transformation costs.
Paid dividends of $3.2 billion, an increase of 10% per share over the prior year.
Repurchased 8.9 million shares for approximately $1 billion.

Outlook

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

“UPS executed very well during the quarter in a challenging environment,” said Richard Peretz, UPS chief financial officer. “In 2019, we plan to generate substantial increases in operating profit growth in all three business units.”

UPS expects total adjusted operating profit growth in the low-teens with all segments up double-digits.
Adjusted, diluted earnings per share to be in a range of $7.45 to $7.75, which includes pension financing costs headwinds of about $325 million.
The 2019 effective tax rate should be between 23 and 24 percent.
Capital expenditures are planned between 8.5% and 10% of 2019 consolidated revenue.
Transformation charges are excluded from guidance.

# # #






Conference Call Information
    
UPS CEO David Abney and CFO Richard Peretz will discuss fourth-quarter results with investors and analysts during a conference call at 8:30 a.m. ET, January 31, 2019. That call will be open to others through a live Webcast. To access the call, go to www.investors.ups.com and click on “Earnings Webcast.” Additional financial information is included in the detailed financial schedules being posted on www.investors.ups.com under “Financials” and as filed with the SEC as an exhibit to our Current Report on Form 8-K.

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. 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 direction, 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 changes in economic and other conditions in the markets in which we operate, governmental regulations (including tax laws and regulations), our competitive environment, in the facts or assumptions underlying our health and pension benefit funding obligations, results of negotiation and ratification of labor contracts, the impact of any strikes, work stoppages or 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, other income (expense), 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 such as the implementation of our Transformation strategy; asset impairments (non-cash); amounts related to changes in tax regulations or positions; amounts related to changes in foreign currency exchange rates and impact from any hedging activities; other 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 awards.

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.
Mark-To-Market Pension and Postretirement Adjustments
We recognize changes in the fair value of plan assets and net actuarial gains and losses in excess of a 10% corridor for company-sponsored pension and post-retirement obligations immediately as part of net periodic benefit cost. 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 the portion of net periodic benefit cost represented by the gains and losses recognized in excess of the 10% corridor and the related income tax effects. We believe this adjusted net periodic benefit cost provides important supplemental information that reflects the anticipated long-term cost of our defined benefit plans, and provides a benchmark for historical defined benefit cost trends that may provide useful comparison of year-to-year financial performance without considering the short-term impact of changes in market interest rates, equity prices, and similar factors.

This adjusted net periodic benefit cost ($615 million in 2018 and $843 million in 2017) is comparable to the accounting for our defined benefit plans in our quarterly reporting under U.S. GAAP, utilizing the expected return on plan assets (7.68% in 2018 and 8.65% in 2017) and the discount rate used to determine net periodic benefit cost (3.81% in 2018 and 4.34% in 2017). The non-adjusted net periodic benefit cost reflects the actual return on plan assets (-2.38% in 2018 and 14.25% in 2017) and the discount rate used to measure the projected benefit obligation at the December 31 measurement date (4.45% in 2018 and 3.81% in 2017).






The deferred income tax effects of these mark-to-market pension and postretirement adjustments are calculated by multiplying the statutory tax rates applicable in each tax jurisdiction, including the U.S. federal jurisdiction and various U.S. state and non-U.S. jurisdictions, by the adjustments. The blended average of the applicable statutory tax rates in 2018 and 2017 was 24.0% and 24.1%, respectively.
Costs Related to Restructuring Programs; 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 costs related to restructuring programs, including transformation strategy costs. We believe this adjusted information provides a useful comparison of year-to-year financial performance without considering the short-term impact of restructuring costs. We evaluate the performance of our businesses on an adjusted basis.
Impact of Changes in Foreign Currency Exchange Rates and Hedging Activities

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 this 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 and Adjusted Capital Expenditures

We supplement the reporting of cash flows from operating activities with free cash flow, free cash flow excluding discretionary pension contributions and free cash flow plus principal repayments of capital lease obligations, non-GAAP liquidity measures. We believe these free cash flow measures are important indicators 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. Additionally, we believe that adjusting capital expenditures for principal repayments of capital lease obligations more appropriately reflects the overall cash that we have invested in capital assets. 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. Free cash flow excluding discretionary pension contributions adds back any discretionary pension contributions made during the period.






Reconciliation of GAAP and Non-GAAP Income Statement Data
(in millions, except per share amounts):

Three Months Ended December 31, 2018
 
 
 
 
 
 
 
 
 
As- Reported (GAAP)
 
Transformation Strategy Costs
 
Defined Benefits Plans MTM Charges
 
As-Adjusted (non-GAAP)
Operating profit:
 
 
 
 
 
 
 
U.S. Domestic Package
$
999

 
$

 
$

 
$
999

International Package
781

 

 

 
$
781

Supply Chain & Freight
224

 

 

 
224

Total operating profit
$
2,004

 
$

 
$

 
$
2,004

 
 
 
 
 
 
 
 
Total other income (expense)
$
(1,461
)
 
$

 
$
1,627

 
$
166

 
 
 
 
 
 
 
 
Income before income taxes
$
543

 
$

 
$
1,627

 
$
2,170

 
 
 
 
 
 
 
 
Income tax expense
$
90

 
$

 
$
390

 
$
480

 
 
 
 
 
 
 
 
Net income
$
453

 
$

 
$
1,237

 
$
1,690

 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.52

 
$

 
$
1.42

 
$
1.94


Twelve Months Ended December 31, 2018
 
 
 
 
 
 
 
 
 
As- Reported (GAAP)
 
Transformation Strategy Costs
 
Defined Benefit Plans MTM Charges
 
As-Adjusted
(non-GAAP)
Operating profit:
 
 
 
 
 
 
 
U.S. Domestic Package
$
3,643

 
$
235

 
$

 
$
3,878

International Package
2,529

 
76

 

 
2,605

Supply Chain & Freight
852

 
49

 

 
901

Total operating profit
$
7,024

 
$
360

 
$

 
$
7,384

 
 
 
 
 
 
 
 
Total other income (expense)
$
(1,005
)
 
$

 
$
1,627

 
622

 
 
 
 
 
 
 
 
Income before income taxes
$
6,019

 
$
360

 
$
1,627

 
$
8,006

 
 
 
 
 
 
 
 
Income tax expense
$
1,228

 
$
87

 
$
390

 
$
1,705

 
 
 
 
 
 
 
 
Net income
$
4,791

 
$
273

 
$
1,237

 
$
6,301

 
 
 
 
 
 
 
 
Diluted earnings per share
$
5.51

 
$
0.31

 
$
1.42

 
$
7.24


Note: Certain amounts may not compute due to rounding.










Reconciliation of GAAP and non-GAAP Revenue, Revenue Per Piece and Operating Profit
(in millions, except per piece amounts):
Three Months Ended December 31
 
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
$
6.58

 
$
6.31

4.3
 %
 
$
0.22

 
$
6.80

7.8
 %
   Export
28.82

 
28.43

1.4
 %
 
0.63

 
29.45

3.6
 %
      Total International Package
$
16.79

 
$
16.51

1.7
 %
 
$
0.42

 
$
17.21

4.2
 %
 
 
 
 
 
 
 
 
 
 
Consolidated
$
10.59

 
$
10.17

4.1
 %
 
$
0.05

 
$
10.64

4.6
 %
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
12,575

 
$
11,833

6.3
 %
 
$

 
$
12,575

6.3
 %
  International Package
3,829

 
3,721

2.9
 %
 
92

 
3,921

5.4
 %
  Supply Chain & Freight
3,444

 
3,421

0.7
 %
 
24

 
3,468

1.4
 %
  Total revenue
$
19,848

 
$
18,975

4.6
 %
 
$
116

 
$
19,964

5.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018 As- Reported (GAAP)
 
2017 As- Reported (GAAP)
% Change (non-GAAP)
 
Currency Impact
 
2018 As Adjusted Currency- Neutral
(non-GAAP)
% Change (non-GAAP)
Operating Profit:
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
999

 
$
1,087

(8.1
)%
 
$

 
$
999

(8.1
)%
  International Package
781

 
735

6.3
 %
 
26

 
807

9.8
 %
  Supply Chain & Freight
224

 
241

(7.1
)%
 

 
224

(7.1
)%
  Total operating profit
$
2,004

 
$
2,063

(2.9
)%
 
$
26

 
$
2,030

(1.6
)%



























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 Operating Profit
(in millions, except per piece amounts):

Twelve Months Ended December 31
 
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
$
6.59

 
$
6.07

8.6
 %
 
$
(0.19
)
 
$
6.40

5.4
 %
   Export
29.27

 
28.70

2.0
 %
 
(0.16
)
 
29.11

1.4
 %
      Total International Package
$
17.08

 
$
16.22

5.3
 %
 
$
(0.18
)
 
$
16.90

4.2
 %
 
 
 
 
 
 
 
 
 
 
Consolidated
$
10.98

 
$
10.53

4.3
 %
 
$
(0.03
)
 
$
10.95

4.0
 %
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
43,593

 
$
40,761

6.9
 %
 
$

 
$
43,593

6.9
 %
  International Package
14,442

 
13,342

8.2
 %
 
(147
)
 
14,295

7.1
 %
  Supply Chain & Freight
13,826

 
12,482

10.8
 %
 
(39
)
 
13,787

10.5
 %
  Total revenue
$
71,861

 
$
66,585

7.9
 %
 
$
(186
)
 
$
71,675

7.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
$
3,878

 
$
4,303

(9.9
)%
 
$

 
$
3,878

(9.9
)%
  International Package
2,605

 
2,429

7.2
 %
 
10

 
2,615

7.7
 %
  Supply Chain & Freight
901

 
797

13.0
 %
 
5

 
906

13.7
 %
  Total operating profit
$
7,384

 
$
7,529

(1.9
)%
 
$
15

 
$
7,399

(1.7
)%
























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






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


Twelve Months Ended December 31
 
 
 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
 
 
 
 
 
 
 
 
Preliminary
2018
Cash flows from operating activities
 
$
12,711

Cash flows used in investing activities
 
(6,330
)
Cash flows used in financing activities
 
(5,692
)
 
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
(91
)
    Net increase in cash, cash equivalents and restricted cash
 
$
598

 
 
 
Reconciliation of Adjusted Capital Expenditures and Free Cash Flow (non-GAAP measures)
 
 
 
 
 
Preliminary
2018
 
 
 
Cash flows from operating activities (GAAP)
 
$
12,711

Capital expenditures
 
(6,283
)
Principal repayments of capital lease obligations
 
(340
)
Adjusted Capital Expenditures (non-GAAP measure)
 
$
(6,623
)
Proceeds from disposals of PP&E
 
37

Net change in finance receivables
 
4

Other investing activities
 
1

     Adjusted Free cash flow (non-GAAP)
 
$
6,130



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

































Exhibit


Exhibit 99.2
United Parcel Service, Inc.
Selected Financial Data - Fourth Quarter
(unaudited)
 
Three Months Ended
 
 
 
December 31
 
 
2018
2017
Change
% Change
(amounts in millions, except per share data)
 
 
 
 
Statement of Income Data:
 
 
 
 
Revenue:
 
 
 
 
  U.S. Domestic Package
$
12,575

$
11,833

$
742

6.3
 %
  International Package
3,829

3,721

108

2.9
 %
  Supply Chain & Freight
3,444

3,421

23

0.7
 %
  Total revenue
19,848

18,975

873

4.6
 %
 
 
 
 
 
Operating expenses:
 
 
 
 
  Compensation and benefits
10,151

9,545

606

6.3
 %
  Other
7,693

7,367

326

4.4
 %
  Total operating expenses
17,844

16,912

932

5.5
 %
 
 
 
 
 
Operating profit:
 
 
 
 
  U.S. Domestic Package
999

1,087

(88
)
(8.1
)%
  International Package
781

735

46

6.3
 %
  Supply Chain & Freight
224

241

(17
)
(7.1
)%
  Total operating profit
2,004

2,063

(59
)
(2.9
)%
 
 
 
 
 
Other income (expense):
 
 
 
 
 Other pension income (expense)
(1,343
)
(586
)
(757
)
129.2
 %
  Investment income
30

23

7

30.4
 %
  Interest expense
(148
)
(129
)
(19
)
14.7
 %
  Total other income (expense)
(1,461
)
(692
)
(769
)
111.1
 %
 
 
 
 
 
Income before income taxes
543

1,371

(828
)
(60.4
)%
 
 
 
 
 
Income tax expense
90

275

(185
)
(67.3
)%
 
 
 
 
 
Net income
$
453

$
1,096

$
(643
)
(58.7
)%
 
 
 
 
 
Net income as a percentage of revenue
2.3
%
5.8
%
 
 
 
 
 
 
 
Per share amounts:
 
 
 
 
  Basic earnings per share
$
0.52

$
1.26

$
(0.74
)
(58.7
)%
  Diluted earnings per share
$
0.52

$
1.26

$
(0.74
)
(58.7
)%
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
  Basic
865

867

(2
)
(0.2
)%
  Diluted
869

872

(3
)
(0.3
)%
 
 
 
 
 
As adjusted income data:
 
 
 
 
Operating profit:
 
 
 
 
  U.S. Domestic Package (1)
$
999

$
1,087

$
(88
)
(8.1
)%
  International Package (1)
781

735

46

6.3
 %
  Supply Chain & Freight (1)
224

241

(17
)
(7.1
)%
       Total operating profit (1)
2,004

2,063

(59
)
(2.9
)%
 
 
 
 
 
Total other income (expense) (1)
166

108

58

53.7
 %
Income before income taxes (1)
$
2,170

$
2,171

$
(1
)
0.0
 %
Net income (2)
$
1,690

$
1,445

$
245

17.0
 %
 
 
 
 
 
Basic earnings per share (2)
$
1.95

$
1.67

$
0.28

16.8
 %
Diluted earnings per share (2)
$
1.94

$
1.66

$
0.28

16.9
 %
(1) Fourth quarter 2018 total other income (expense) and consolidated income before income taxes excludes the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $1.627 billion.

Fourth quarter 2017 total other income (expense) and consolidated income before income taxes excludes the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $800 million.

(2) Fourth quarter 2018 net income and earnings per share amounts exclude the after-tax impact of the adjustment described in (1), which decreased net income by $1.237 billion.

Fourth quarter 2017 net income and earnings per share amounts exclude the after-tax impact of the adjustment described in (1), which decreased net income by $607 million. 2017 net income also excludes income tax benefits of $258 million attributable to the 2017 Tax Cuts and Job Acts.

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






United Parcel Service, Inc.
Selected Operating Data - Fourth Quarter
(unaudited)
 
Three Months Ended
 
 
 
December 31
 
 
2018
2017
Change
% Change
 
 
 
 
 
Revenue (in millions):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
2,108

$
1,902

$
206

10.8
 %
   Deferred
1,537

1,431

106

7.4
 %
   Ground
8,930

8,500

430

5.1
 %
      Total U.S. Domestic Package
12,575

11,833

742

6.3
 %
International Package:
 
 
 
 
   Domestic
780

737

43

5.8
 %
   Export
2,900

2,839

61

2.1
 %
   Cargo and Other
149

145

4

2.8
 %
      Total International Package
3,829

3,721

108

2.9
 %
Supply Chain & Freight:
 
 
 
 
   Forwarding
1,644

1,627

17

1.0
 %
   Forwarding and Logistics
878

823

55

6.7
 %
   Freight
721

760

(39
)
(5.1
)%
   Other
201

211

(10
)
(4.7
)%
      Total Supply Chain & Freight
3,444

3,421

23

0.7
 %
Consolidated
$
19,848

$
18,975

$
873

4.6
 %
 
 
 
 
 
Consolidated volume (in millions)
1,535

1,515

20

1.3
 %
 
 
 
 
 
Operating weekdays
62

63

(1
)
(1.6
)%
 
 
 
 
 
Average Daily Package Volume (in thousands):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
1,789

1,660

129

7.8
 %
   Deferred
1,962

1,872

90

4.8
 %
   Ground
17,482

17,076

406

2.4
 %
      Total U.S. Domestic Package
21,233

20,608

625

3.0
 %
International Package:
 
 
 
 
   Domestic
1,912

1,853

59

3.2
 %
   Export
1,623

1,585

38

2.4
 %
      Total International Package
3,535

3,438

97

2.8
 %
Consolidated
24,768

24,046

722

3.0
 %
 
 
 
 
 
Average Revenue Per Piece:
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
19.01

$
18.18

$
0.83

4.6
 %
   Deferred
12.64

12.14

0.50

4.1
 %
   Ground
8.24

7.90

0.34

4.3
 %
      Total U.S. Domestic Package
9.55

9.11

0.44

4.8
 %
International Package:
 
 
 
 
   Domestic
6.58

6.31

0.27

4.3
 %
   Export
28.82

28.43

0.39

1.4
 %
      Total International Package
16.79

16.51

0.28

1.7
 %
Consolidated
$
10.59

$
10.17

$
0.42

4.1
 %


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
 
 
 
December 31
 
 
 
Neutral
 
2018
 
2017
 
% Change
 
Currency
 
2018*
 
% Change
Average Revenue Per Piece:
 
 
 
 
 
 
 
 
 
 
 
International Package:
 
 
 
 
 
 
 
 
 
 
 
   Domestic
$
6.58

 
$
6.31

 
4.3
 %
 
$
0.22

 
$
6.80

 
7.8
 %
   Export
28.82

 
28.43

 
1.4
 %
 
0.63

 
29.45

 
3.6
 %
      Total International Package
$
16.79

 
$
16.51

 
1.7
 %
 
$
0.42

 
$
17.21

 
4.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
$
10.59

 
$
10.17

 
4.1
 %
 
$
0.05

 
$
10.64

 
4.6
 %
*Amounts adjusted for period over period foreign currency exchange rate and hedging differences
 
 
 
 
 
 
 
 
 
 
 
Currency Neutral Revenue
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
 
Currency
 
 
 
December 31
 
 
 
Neutral
 
2018
 
2017
 
% Change
 
Currency
 
2018*
 
% Change
Revenue (in millions):
 
 
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
12,575

 
$
11,833

 
6.3
 %
 
$

 
$
12,575

 
6.3
 %
  International Package
3,829

 
3,721

 
2.9
 %
 
92

 
3,921

 
5.4
 %
  Supply Chain & Freight
3,444

 
3,421

 
0.7
 %
 
24

 
3,468

 
1.4
 %
  Total revenue
$
19,848

 
$
18,975

 
4.6
 %
 
$
116

 
$
19,964

 
5.2
 %
*Amounts adjusted for period over period foreign currency exchange rate and hedging differences
 
 
 
 
 
 
 
 
 
 
 
Currency Neutral Operating Profit
(unaudited)
 
Three Months Ended
 
 
 
 
 
Currency
 
December 31
 
 
 
 
 
Neutral
 
2018
 
2017
 
% Change
 
Currency
 
2018*
 
% Change
Operating Profit (in millions):
 
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
999

 
$
1,087

 
(8.1
)%
 
$

 
$
999

 
(8.1
)%
  International Package
781

 
735

 
6.3
 %
 
26

 
807

 
9.8
 %
  Supply Chain & Freight
224

 
241

 
(7.1
)%
 

 
224

 
(7.1
)%
  Total operating profit
$
2,004

 
$
2,063

 
(2.9
)%
 
$
26

 
$
2,030

 
(1.6
)%
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences


UPS Freight Selected Operating Data - Fourth Quarter
(unaudited)
 
Three Months Ended
 
 
 
December 31
 
 
 
2018
2017
Change
% Change
LTL revenue (in millions)
$
584

$
655

$
(71
)
(10.8
)%
LTL revenue per LTL hundredweight
$
26.36

$
24.65

$
1.71

6.9
 %
 
 
 
 
 
LTL shipments (in thousands)
2,010

2,471

(461
)
(18.7
)%
LTL shipments per day (in thousands)
32.4

40.5

(8.1
)
(20.0
)%
 
 
 
 
 
LTL gross weight hauled (in millions of pounds)
2,214

2,657

(443
)
(16.7
)%
LTL weight per shipment (in pounds)
1,102

1,075

27

2.5
 %
 
 
 
 
 
Operating weekdays
62

61

1

1.6
 %










United Parcel Service, Inc.
Detail of Other Operating Expenses - Fourth Quarter
(unaudited)
 
Three Months Ended
 
 
 
 
 
December 31
 
 
 
 
 
2018
 
2017
 
Change
 
% Change
(in millions)
 
 
 
 
 
 
 
Repairs and Maintenance
$
438

 
$
420

 
$
18

 
4.3
 %
Depreciation and Amortization
545

 
594

 
(49
)
 
(8.2
)%
Purchased Transportation
3,839

 
3,705

 
134

 
3.6
 %
Fuel
958

 
817

 
141

 
17.3
 %
Other Occupancy
359

 
310

 
49

 
15.8
 %
Other Expenses
1,554

 
1,521

 
33

 
2.2
 %
Total Other Operating Expenses
$
7,693

 
$
7,367

 
$
326

 
4.4
 %

Detail of Other Pension Income (Expense) - Fourth Quarter
(unaudited)
 
Three Months Ended
 
 
 
 
 
December 31
 
 
 
 
(in millions)
2018
 
2017
 
Change
 
% Change
U.S. Domestic Package
$
227

 
$
164

 
$
63

 
38.4
%
International Package
20

 
19

 
1

 
5.3
%
Supply Chain & Freight
37

 
31

 
6

 
19.4
%
Total other pension income (expense)
$
284

 
$
214

 
$
70

 
32.7
%
 
 
 
 
 
 
 
 
Pension Mark-to-Market Loss
$
(1,627
)
 
$
(800
)
 
$
(827
)
 
103.4
%
Total other pension income (expense)
$
(1,343
)
 
$
(586
)
 
$
(757
)
 
129.2
%
 
 
 
 
 
 
 
 

Earnings Per Share and Share Data - Fourth Quarter
(unaudited)

 
Three Months Ended
 
December 31
 
2018
 
2017
(amounts in millions, except per share data)
 
 
 
Numerator:
 
 
 
    Net income
$
453

 
$
1,096

 
 
 
 
Denominator:
 
 
 
    Weighted-average shares
859

 
861

    Deferred compensation obligations
1

 
1

    Vested portion of restricted units
5

 
5

Denominator for basic earnings per share
865

 
867

 
 
 
 
Effect of dilutive securities:
 
 
 
    Restricted units
4

 
4

    Stock options

 
1

Denominator for diluted earnings per share
869

 
872

 
 
 
 
Basic earnings per share
$
0.52

 
$
1.26

 
 
 
 
Diluted earnings per share
$
0.52

 
$
1.26

 
 
 
 
 
 
 
 
Detail of shares outstanding as of December 31, 2018:
 
 
 
 
 
 
 
Class A shares
163

 
 
Class B shares
695

 
 
    Total shares outstanding
858

 
 

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





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

 
Twelve Months Ended
 
 
 
December 31,
 
 
2018
2017
Change
% Change
(amounts in millions, except per share data)
 
 
 
 
Statement of Income Data:
 
 
 
 
Revenue:
 
 
 
 
  U.S. Domestic Package
$
43,593

$
40,761

$
2,832

6.9
 %
  International Package
14,442

13,342

1,100

8.2
 %
  Supply Chain & Freight
13,826

12,482

1,344

10.8
 %
  Total revenue
71,861

66,585

5,276

7.9
 %
 
 
 
 
 
Operating expenses:
 
 
 
 
  Compensation and benefits
37,235

34,577

2,658

7.7
 %
  Other
27,602

24,479

3,123

12.8
 %
  Total operating expenses
64,837

59,056

5,781

9.8
 %
 
 
 
 
 
Operating profit:
 
 
 
 
  U.S. Domestic Package
3,643

4,303

(660
)
(15.3
)%
  International Package
2,529

2,429

100

4.1
 %
  Supply Chain & Freight
852

797

55

6.9
 %
  Total operating profit
7,024

7,529

(505
)
(6.7
)%
 
 
 
 
 
Other income (expense):
 
 
 
 
Other pension income (expense)
(490
)
(11
)
(479
)
N/A

  Investment income
90

72

18

25.0
 %
  Interest expense
(605
)
(453
)
(152
)
33.6
 %
  Total other income (expense)
(1,005
)
(392
)
(613
)
156.4
 %
 
 
 
 
 
Income before income taxes
6,019

7,137

(1,118
)
(15.7
)%
 
 
 
 
 
Income tax expense
1,228

2,232

(1,004
)
(45.0
)%
 
 
 
 
 
Net income
$
4,791

$
4,905

$
(114
)
(2.3
)%
 
 
 
 
 
Net income as a percentage of revenue
6.7
%
7.4
%
 
 
 
 
 
 
 
Per share amounts
 
 
 
 
  Basic earnings per share
$
5.53

$
5.63

$
(0.10
)
(1.8
)%
  Diluted earnings per share
$
5.51

$
5.61

$
(0.10
)
(1.8
)%
 
 
 
 
 
Weighted-average shares outstanding
 
 
 
 
  Basic
866

871

(5
)
(0.6
)%
  Diluted
870

875

(5
)
(0.6
)%
 
 
 
 
 
As adjusted income data:
 
 
 
 
Operating profit:
 
 
 
 
  U.S. Domestic Package (1)
$
3,878

$
4,303

$
(425
)
(9.9
)%
  International Package (1)
2,605

2,429

176

7.2
 %
  Supply Chain & Freight (1)
901

797

104

13.0
 %
       Total operating profit (1)
7,384

7,529

(145
)
(1.9
)%
 
 
 
 
 
Total other income (expense) (2)
$
622

$
408

$
214

52.5
 %
Income before income taxes (1) (2)
$
8,006

$
7,937

$
69

0.9
 %
Net income (3)
$
6,301

$
5,254

$
1,047

19.9
 %
 
 
 
 
 
Basic earnings per share (3)
$
7.28

$
6.03

$
1.25

20.7
 %
Diluted earnings per share (3)
$
7.24

$
6.00

$
1.24

20.7
 %
(1) 2018 operating profit and consolidated income before income taxes excludes the impact of $360 million of transformation strategy costs. These costs are allocated between the U.S. Domestic Package segment ($235 million), International Package segment ($76 million) and Supply Chain & Freight segment ($49 million).

(2) 2018 total other income (expense) and consolidated income before income taxes excludes the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $1.627 billion.

2017 total other income (expense) and consolidated income before income taxes excludes the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $800 million.

(3) 2018 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1) and (2), which decreased net income by $1.510 billion.

2017 net income and earnings per share amounts exclude the after-tax impact of the adjustment described in (2), which decreased net income by $607 million. 2017 net income also excludes income tax benefits of $258 million attributable to the 2017 Tax Cuts and Jobs Act.

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)

 
Twelve Months Ended
 
 
 
December 31
 
 
 
2018
2017
Change
% Change
 
 
 
 
 
Revenue (in millions):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
7,618

$
7,088

$
530

7.5
 %
   Deferred
4,752

4,422

330

7.5
 %
   Ground
31,223

29,251

1,972

6.7
 %
      Total U.S. Domestic Package
43,593

40,761

2,832

6.9
 %
International Package:
 
 
 
 
   Domestic
2,874

2,646

228

8.6
 %
   Export
10,973

10,170

803

7.9
 %
   Cargo and Other
595

526

69

13.1
 %
      Total International Package
14,442

13,342

1,100

8.2
 %
Supply Chain & Freight:
 
 
 
 
   Forwarding
6,580

5,674

906

16.0
 %
   Logistics
3,234

3,017

217

7.2
 %
   Freight
3,218

3,000

218

7.3
 %
   Other
794

791

3

0.4
 %
      Total Supply Chain & Freight
13,826

12,482

1,344

10.8
 %
Consolidated
$
71,861

$
66,585

$
5,276

7.9
 %
 
 
 
 
 
Consolidated volume (in millions)
5,231

5,088

143

2.8
 %
 
 
 
 
 
Operating weekdays
253

254

(1
)
(0.4
)%
 
 
 
 
 
Average Daily Package Volume (in thousands):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
1,542

1,460

82

5.6
 %
   Deferred
1,432

1,400

32

2.3
 %
   Ground
14,498

14,060

438

3.1
 %
      Total U.S. Domestic Package
17,472

16,920

552

3.3
 %
International Package:
 
 
 
 
   Domestic
1,723

1,715

8

0.5
 %
   Export
1,482

1,395

87

6.2
 %
      Total International Package
3,205

3,110

95

3.1
 %
Consolidated
20,677

20,030

647

3.2
 %
 
 
 
 
 
Average Revenue Per Piece:
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
19.53

$
19.11

$
0.42

2.2
 %
   Deferred
13.12

12.44

0.68

5.5
 %
   Ground
8.51

8.19

0.32

3.9
 %
      Total U.S. Domestic Package
9.86

9.48

0.38

4.0
 %
International Package:
 
 
 
 
   Domestic
6.59

6.07

0.52

8.6
 %
   Export
29.27

28.70

0.57

2.0
 %
      Total International Package
17.08

16.22

0.86

5.3
 %
Consolidated
$
10.98

$
10.53

$
0.45

4.3
 %

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)
 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
 
 
 
 
Currency
 
 
 
December 31
 
 
 
Neutral
 
2018
 
2017
 
% Change
 
Currency
 
2018*
 
% Change
Average Revenue Per Piece:
 
 
 
 
 
 
 
 
 
 
 
International Package:
 
 
 
 
 
 
 
 
 
 
 
   Domestic
$
6.59

 
$
6.07

</