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): July 24, 2019

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13019395&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):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
Class B common stock, par value $0.01 per share
 
UPS
 
New York Stock Exchange
 
 
 
 
 
Floating-Rate Senior Notes Due 2020
 
UPS20A
 
New York Stock Exchange
 
 
 
 
 
1.625% Senior Notes Due 2025
 
UPS25
 
New York Stock Exchange
 
 
 
 
 
1% Senior Notes due 2028
 
UPS28
 
New York Stock Exchange
 
 
 
 
 
0.375% Senior Notes due 2023
 
UPS23A
 
New York Stock Exchange
 
 
 
 
 
1.500% Senior Notes due 2032
 
UPS32
 
New York Stock Exchange

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.

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 July 24, 2019, United Parcel Service, Inc. (the “Company”) issued a press release containing information about the Company’s results of operations for the second quarter ended June 30, 2019. 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 the financial statement schedules are attached hereto as Exhibit 99.2.

Item 9.01 — Financial Statements and Exhibits.

(d) Exhibits

99.1       Press release dated July 24, 2019 "UPS RELEASES 2Q 2019 EARNINGS"
99.2 Q2 2019 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 Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or 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:
July 24, 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 RELEASES 2Q 2019 EARNINGS
Operating Profit Up in All Segments

2Q19 EPS of $1.94; 2Q19 Adjusted* EPS of $1.96
U.S. Daily Volume Grew Over 7%; Next Day Air Volume Soared Over 30%
U.S. Operating Profit Increased Nearly 29%; Up 8% on an Adjusted Basis
International Boosts Operating Margins to 18.9%; Adjusted Margins of 19%
Supply Chain and Freight Operating Profit Increased Nearly 26%; Adjusted Operating Profit Up More Than 10%
Cash from Operations of $4.2B; Adjusted Free Cash Flow Near $2.2B
UPS reaffirms adjusted full-year diluted EPS in the range of $7.45 to $7.75


ATLANTA - July 24, 2019 - UPS (NYSE:UPS) today announced second-quarter 2019 adjusted earnings per share of $1.96. The company turned the rising demand for next-day service into strong financial results in the U.S. and leveraged asset-light and proven cost management strategies in the International and Supply Chain and Freight segments.

“Our Transformation initiatives are generating greater efficiencies across the network and, when combined with our growth strategies, UPS achieved profit growth in all segments,” said David Abney, UPS chairman and CEO. “We also announced a very extensive roll-out of new products and services such as UPS My Choice for Business, expanded UPS Access Points, and UPS Worldwide Economy, among others, for small- and medium-sized businesses, all designed to generate additional profitable growth.”

Amounts presented on an adjusted basis exclude Transformation strategy costs. Second-quarter 2019 adjusted results exclude a pre-tax charge of $21 million, or $0.02 per share after tax. Second-quarter 2018 adjusted results excluded a pre-tax charge of $263 million, or $0.23 per share after tax, primarily from the UPS Voluntary Retirement Program.

Consolidated Results
2Q 2019
Adjusted
2Q 2019
2Q 2018
Adjusted
2Q 2018
Revenue
$18,048 M
 
$17,456 M
 
Net Income
$1,685 M
$1,702 M
$1,485 M
$1,685 M
Diluted Earnings Per Share
$1.94
$1.96
$1.71
$1.94
 
 
 


- more -

* “Adjusted” and “as adjusted” amounts presented in this release are non-GAAP financial measures. See the appendix to this release for a discussion of non-GAAP financial metrics, including a reconciliation to the most closely correlated GAAP measure. 








For the total company in 2Q 2019:
Consolidated revenue increased 3.4% to $18 billion, driven by gains in average daily volume in the U.S. and higher-quality, currency-neutral revenue in the International segment.
Total operating profit grew nearly 21%, and 6.3% on an adjusted basis, with growth in all segments.
Total operating margin expanded 170 basis points; adjusted operating margin expanded 30 basis points.
Capital expenditures for the year are approximately $2.9 billion to support network enhancements.
Year-to-date dividends per share increased 5.5% and the company repurchased 4.8 million shares for approximately $500 million.


U.S. Domestic Segment

The U.S. Domestic segment generated significant volume growth in all products, led by a more than 30% surge in UPS Next Day Air volume. The sharp increase in demand for the company’s next-day services was driven by accelerated delivery requirements from e-commerce shippers.

“Demand for faster delivery is a structural change in our industry,” said Abney. “Anticipating this change, our additional air capacity and modernized network enabled this growth to have a positive impact on profitability and positions UPS well to serve the growing needs of the market.”

Both B2B and B2C shipments grew within the period. In addition, the company added more than 2 million square feet of new, automated sorting capabilities, increasing efficiency benefits and contributing to positive operating leverage.


 
2Q 2019
Adjusted
2Q 2019
2Q 2018
Adjusted
2Q 2018
Revenue
$11,150 M
 
$10,354 M
 
Operating profit
$1,208 M
$1,226 M
$939 M
$1,135 M
 
 
 


Revenue increased $796 million or 7.7% over 2Q 2018, led by increased demand for air services from customers in healthcare and retail.
Operating profit increased by 28.6%, or 8% on an adjusted basis.
Operating margins were 10.8%, and 11% on an adjusted basis.
Network efficiencies continued to reduce the growth in cost per piece, with a steady decline in unit cost growth for the third straight quarter.













- more -






International Segment

International benefitted from its highly flexible network and by targeting growth markets within the company’s diverse revenue base. The segment generated its best second-quarter profit in history and expanded adjusted operating margins while navigating areas of trade uncertainty.


 
2Q 2019
Adjusted
2Q 2019
2Q 2018
Adjusted
2Q 2018
Revenue
$3,505 M
 
$3,602 M
 
Operating profit
$663 M
$665 M
$618 M
$654M



International volume slightly declined due to global macroeconomic pressure and tough year-over-year comparisons, as 2Q 2018 exports grew 9.5%.
Total revenue per piece fell less than 1%, but grew nearly 2% when adjusting for currency.
International domestic revenue per piece rose 0.3%, an increase of 5.6% on a currency-neutral basis.
Operating profit increased more than 7%, or by 1.7% on an adjusted basis.


Supply Chain and Freight Segment

Supply Chain and Freight grew operating profit to more than $270 million, a double-digit increase for the quarter. Successful cost management enabled by the company’s asset-light strategies delivered strong financial results while revenue was pressured by softer trade.

 
2Q 2019
Adjusted
2Q 2019
2Q 2018
Adjusted
2Q 2018
Revenue
$3,393M
 
$3,500 M
 
Operating profit
$272 M
$273 M
$216 M
$247M


Operating margins expanded to 8% on an adjusted and unadjusted basis, due to strong execution, disciplined cost management and strategic initiatives that focus on delivering excellent service levels and growing high-quality revenue from the SMB market.
International Air Freight achieved robust profit growth on a decline in tonnage, driven by expanded buy/sell spreads.
Coyote and Marken made significant contributions to operating profit.
UPS Freight achieved a 3.9% increase in revenue per LTL (less-than-truckload) hundredweight as the unit focused on revenue quality.


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.


- more -







“UPS grew profits across all business segments,” said Richard Peretz, UPS’s chief financial officer. “Our performance was driven by the efficiencies created by investments in our network, the success of ongoing initiatives and our ability to execute in an ever-changing environment. We expect to carry this momentum through the upcoming quarters.”

The company’s full-year adjusted diluted EPS will be in the range of $7.45 to $7.75.
Adjusted free cash flow for the year is projected to be between $3.5 and $4 billion with potential additional upside from the working capital initiatives.
The effective tax rate for the full-year 2019 is estimated to be between 22% and 24%.
Third-quarter adjusted EPS is expected to benefit from numerous items including one additional operating day and year-over-year International benefits from 2018 commodities headwinds that should not repeat.
Transformation charges and pension MTM are not included in the adjusted guidance.
  
# # #

Conference Call Information
    
UPS CEO David Abney and CFO Richard Peretz will discuss second-quarter results with investors and analysts during a conference call at 8:30 a.m. ET, July 24, 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. UPS was awarded America’s Best Customer Service company for Shipping and Delivery services by Newsweek magazine; Forbes Most Valuable Brand in Transportation; and top rankings on the JUST 100 list for social responsibility, the Dow Jones Sustainability World Index, and the Harris Poll Reputation Quotient, among other prestigious rankings and awards. The company can be found on the web at ups.com or pressroom.ups.com and its corporate blog can be found at longitudes.ups.com. The company’s sustainability eNewsletter, UPS Horizons, can be found at
ups.com/sustainabilitynewsletter. To get UPS news direct, follow @UPS_News on Twitter. To ship with UPS, visit ups.com/ship.


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 contemplated by 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, the facts or assumptions underlying our health and pension benefit funding obligations, the 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. Additionally, we periodically disclose free cash flow, free cash flow excluding discretionary pension contributions, and capital expenditures excluding principal repayments of capital lease obligations. The equivalent measures determined in accordance with GAAP are also referred to as "reported" or "unadjusted.”

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 the impact of 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.

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 our performance on this 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 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 segments 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 amounts 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 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 them 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 June 30, 2019
 
 
 
 
 
 
 
As- Reported (GAAP)
 
Transformation Strategy Costs(1)
 
As-Adjusted (Non-GAAP)
Operating profit:
 
 
 
 
 
U.S. Domestic Package
$
1,208

 
$
18

 
$
1,226

International Package
663

 
2

 
665

Supply Chain & Freight
272

 
1

 
273

Total operating profit
$
2,143

 
$
21

 
$
2,164

 
 
 
 
 
 
Income before income taxes
$
2,204

 
$
21

 
$
2,225

 
 
 
 
 
 
Income tax expense
$
519

 
$
4

 
$
523

 
 
 
 
 
 
Net income
$
1,685

 
$
17

 
$
1,702

 
 
 
 
 
 
Diluted earnings per share
$
1.94

 
$
0.02

 
$
1.96

(1) Transformation strategy costs included other employee benefits costs of $2 million, and other costs of $19 million




Six Months Ended June 30, 2019
 
 
 
 
 
 
 
As- Reported (GAAP)
 
Transformation Strategy Costs (1)
 
As-Adjusted (Non-GAAP)
Operating profit:
 
 
 
 
 
U.S. Domestic Package
$
1,874

 
$
46

 
$
1,920

International Package
1,191

 
86

 
1,277

Supply Chain & Freight
472

 
12

 
484

Total operating profit
$
3,537

 
$
144

 
$
3,681

 
 
 
 
 
 
Income before income taxes
$
3,644

 
$
144

 
$
3,788

 
 
 
 
 
 
Income tax expense
$
848

 
$
34

 
$
882

 
 
 
 
 
 
Net income
$
2,796

 
$
110

 
$
2,906

 
 
 
 
 
 
Diluted earnings per share
$
3.22

 
$
0.12

 
$
3.34

(1) Transformation strategy costs included other employee benefits costs of $108 million, and other costs of $36 million


Note: Certain amounts may not compute due to rounding.

















Reconciliation of GAAP and Non-GAAP Revenue, Revenue Per Piece, and Adjusted Operating
Profit
(in millions, except per piece amounts):
Three Months Ended June 30
 
2019 As- Reported (GAAP)
 
2018 As- Reported (GAAP)
% Change (GAAP)
 
Currency Impact
 
2019 Currency- Neutral
(Non-GAAP) (1)
% Change (Non-GAAP)
Average Revenue Per Piece:
 
 
 
 
 
 
 
 
 
International Package:
 
 
 
 
 
 
 
 
 
   Domestic
$
6.63

 
$
6.61

0.3
 %
 
$
0.35

 
$
6.98

5.6
 %
   Export
30.06

 
30.14

(0.3
)%
 
0.50

 
30.56

1.4
 %
      Total International Package
$
17.41

 
$
17.50

(0.5
)%
 
$
0.42

 
$
17.83

1.9
 %
 
 
 
 
 
 
 
 
 
 
Consolidated
$
11.21

 
$
11.26

(0.4
)%
 
$
0.06

 
$
11.27

0.1
 %
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
11,150

 
$
10,354

7.7
 %
 
$

 
$
11,150

7.7
 %
  International Package
3,505

 
3,602

(2.7
)%
 
81

 
3,586

(0.4
)%
  Supply Chain & Freight
3,393

 
3,500

(3.1
)%
 
31

 
3,424

(2.2
)%
  Total revenue
$
18,048

 
$
17,456

3.4
 %
 
$
112

 
$
18,160

4.0
 %
 
 
 
 
 
 
 
 
 
 
(1) Amounts adjusted for period over period foreign currency exchange rate and hedging differences
 
 
 
 
 
 
 
 
 
 
 
2019 As- Adjusted (Non-GAAP) (1)
 
2018 As-Adjusted (Non-GAAP)(1)
% Change (Non-GAAP)
 
Currency Impact
 
2019 As -Adjusted Currency Neutral
(Non-GAAP) (2)
% Change (Non-GAAP)
Operating Profit:
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
1,226

 
$
1,135

8.0
 %
 
$

 
$
1,226

8.0
 %
  International Package
665

 
654

1.7
 %
 
(10
)
 
655

0.2
 %
  Supply Chain & Freight
273

 
247

10.5
 %
 
1

 
274

10.9
 %
  Total operating profit
$
2,164

 
$
2,036

6.3
 %
 
$
(9
)
 
$
2,155

5.8
 %
 
 
 
 
 
 
 
 
 
 
(1) Amounts adjusted for Transformation strategy costs
(2) Amounts adjusted for Transformation strategy costs and period over period foreign currency exchange rate and hedging differences


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 Adjusted Operating
Profit
(in millions, except per piece amounts):
Six Months Ended June 30
 
2019 As- Reported (GAAP)
 
2018 As- Reported (GAAP)
% Change (GAAP)
 
Currency Impact
 
2019 Currency- Neutral
(Non-GAAP) (1)
% Change (Non-GAAP)
Average Revenue Per Piece:
 
 
 
 
 
 
 
 
 
International Package:
 
 
 
 
 
 
 
 
 
   Domestic
$
6.56

 
$
6.66

(1.5
)%
 
$
0.41

 
$
6.97

4.7
 %
   Export
29.40

 
29.50

(0.3
)%
 
0.62

 
30.02

1.8
 %
      Total International Package
$
17.10

 
$
17.24

(0.8
)%
 
$
0.50

 
$
17.60

2.1
 %
 
 
 
 
 
 
 
 
 
 
Consolidated
$
11.15

 
$
11.11

0.4
 %
 
$
0.07

 
$
11.22

1.0
 %
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
21,630

 
$
20,581

5.1
 %
 
$

 
$
21,630

5.1
 %
  International Package
6,964

 
7,135

(2.4
)%
 
198

 
7,162

0.4
 %
  Supply Chain & Freight
6,614

 
6,853

(3.5
)%
 
50

 
6,664

(2.8
)%
  Total revenue
$
35,208

 
$
34,569

1.8
 %
 
$
248

 
$
35,456

2.6
 %
 
 
 
 
 
 
 
 
 
 
(1) Amounts adjusted for period over period foreign currency exchange rate and hedging differences
 
 
 
 
 
 
 
 
 
 
 
2019 As- Adjusted (Non-GAAP) (1)
 
2018 As-Adjusted (Non-GAAP)(1)
% Change (Non-GAAP)
 
Currency Impact
 
2019 As-Adjusted Currency Neutral
(Non-GAAP) (2)
% Change (Non-GAAP)
Operating Profit:
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
1,920

 
$
1,891

1.5
 %
 
$

 
$
1,920

1.5
 %
  International Package
1,277

 
1,248

2.3
 %
 
(14
)
 
1,263

1.2
 %
  Supply Chain & Freight
484

 
417

16.1
 %
 
2

 
486

16.5
 %
  Total operating profit
$
3,681

 
$
3,556

3.5
 %
 
$
(12
)
 
$
3,669

3.2
 %
 
 
 
 
 
 
 
 
 
 
(1) Amounts adjusted for Transformation strategy costs
(2) Amounts adjusted for Transformation strategy costs and period over period foreign currency exchange rate and hedging differences


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































Reconciliation of Non-GAAP Liquidity Measures
(in millions):
Six Months Ended June 30
 
 
 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
 
 
 
 
 
 
 
 
Preliminary
2019
Cash flows from operating activities
 
$
4,207

Cash flows used in investing activities
 
(2,847
)
Cash flows used in financing activities
 
(1,534
)
 
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
23

    Net increase/(decrease) in cash, cash equivalents and restricted cash
 
$
(151
)
 
 
 
Reconciliation of Adjusted Capital Expenditures and Free Cash Flow (Non-GAAP measures)
 
 
 
 
 
Preliminary
2019
 
 
 
Cash flows from operating activities (GAAP)
 
$
4,207

Capital expenditures
 
(2,861
)
Principal repayments of capital lease obligations
 
(85
)
Adjusted capital expenditures (non-GAAP measure)
 
$
(2,946
)
Proceeds from disposals of PP&E
 
6

Net change in finance receivables
 
8

Other investing activities
 
(96
)
     Adjusted free cash flow (Non-GAAP measure)
 
$
1,179

Discretionary pension contributions
 
1,005

Adjusted Free cash flow (Non-GAAP measure) excluding discretionary pension contributions
 
$
2,184

 
 
 



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 - Second Quarter
(unaudited)
 
Three Months Ended
 
 
 
June 30
 
 
2019
2018
Change
% Change
(amounts in millions, except per share data)
 
 
 
 
Statement of Income Data:
 
 
 
 
Revenue:
 
 
 
 
  U.S. Domestic Package
$
11,150

$
10,354

$
796

7.7
 %
  International Package
3,505

3,602

(97
)
(2.7
)%
  Supply Chain & Freight
3,393

3,500

(107
)
(3.1
)%
  Total revenue
18,048

17,456

592

3.4
 %
 
 
 
 
 
Operating expenses:
 
 
 
 
  Compensation and benefits
9,299

9,024

275

3.0
 %
  Other
6,606

6,659

(53
)
(0.8
)%
  Total operating expenses
15,905

15,683

222

1.4
 %
 
 
 
 
 
Operating profit:
 
 
 
 
  U.S. Domestic Package
1,208

939

269

28.6
 %
  International Package
663

618

45

7.3
 %
  Supply Chain & Freight
272

216

56

25.9
 %
  Total operating profit
2,143

1,773

370

20.9
 %
 
 
 
 
 
Other income (expense):
 
 
 
 
 Other pension income (expense)
192

284

(92
)
(32.4
)%
  Investment income and other
28

18

10

55.6
 %
  Interest expense
(159
)
(149
)
(10
)
6.7
 %
  Total other income (expense)
61

153

(92
)
(60.1
)%
 
 
 
 
 
Income before income taxes
2,204

1,926

278

14.4
 %
 
 
 
 
 
Income tax expense (benefit)
519

441

78

17.7
 %
 
 
 
 
 
Net income
$
1,685

$
1,485

$
200

13.5
 %
 
 
 
 
 
Net income as a percentage of revenue
9.3
%
8.5
%
 
 
 
 
 
 
 
Per share amounts:
 
 
 
 
  Basic earnings per share
$
1.95

$
1.71

$
0.24

14.0
 %
  Diluted earnings per share
$
1.94

$
1.71

$
0.23

13.5
 %
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
  Basic
865

866

(1
)
(0.1
)%
  Diluted
869

870

(1
)
(0.1
)%
 
 
 
 
 
As adjusted income data:
 
 
 
 
Operating profit:
 
 
 
 
  U.S. Domestic Package (1)
$
1,226

$
1,135

$
91

8.0
 %
  International Package (1)
665

654

11

1.7
 %
  Supply Chain & Freight (1)
273

247

26

10.5
 %
       Total operating profit (1)
2,164

2,036

128

6.3
 %
 
 
 
 
 
Income before income taxes (1)
$
2,225

$
2,189

$
36

1.6
 %
Net income (2)
$
1,702

$
1,685

$
17

1.0
 %
 
 
 
 
 
Basic earnings per share (2)
$
1.97

$
1.95

$
0.02

1.0
 %
Diluted earnings per share (2)
$
1.96

$
1.94

$
0.02

1.0
 %

(1) 2019 operating profit and consolidated income before income taxes exclude the impact of $21 million of transformation strategy costs, that reflect other employee benefits costs of $2 million and other costs of $19 million. These costs are allocated between the U.S. Domestic Package segment ($18 million), International Package segment ($2 million) and Supply Chain & Freight segment ($1 million).

2018 operating profit and consolidated income before income taxes exclude the impact of $263 million of transformation costs, which includes voluntary retirement plan severance 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) 2019 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $17 million.

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 - Second Quarter
(unaudited)
 
Three Months Ended
 
 
 
June 30
 
 
2019
2018
Change
% Change
 
 
 
 
 
Revenue (in millions):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
2,173

$
1,830

$
343

18.7
 %
   Deferred
1,157

1,080

77

7.1
 %
   Ground
7,820

7,444

376

5.1
 %
      Total U.S. Domestic Package
11,150

10,354

796

7.7
 %
International Package:
 
 
 
 
   Domestic
690

700

(10
)
(1.4
)%
   Export
2,668

2,747

(79
)
(2.9
)%
   Cargo and Other
147

155

(8
)
(5.2
)%
      Total International Package
3,505

3,602

(97
)
(2.7
)%
Supply Chain & Freight:
 
 
 
 
   Forwarding
1,496

1,659

(163
)
(9.8
)%
Logistics
833

784

49

6.3
 %
   Freight
861

853

8

0.9
 %
   Other
203

204

(1
)
(0.5
)%
      Total Supply Chain & Freight
3,393

3,500

(107
)
(3.1
)%
Consolidated
$
18,048

$
17,456

$
592

3.4
 %
 
 
 
 
 
Consolidated volume (in millions)
1,294

1,226

68

5.5
 %
 
 
 
 
 
Operating weekdays
64

64


 %
 
 
 
 
 
Average Daily Package Volume (in thousands):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
1,855

1,424

431

30.3
 %
   Deferred
1,380

1,226

154

12.6
 %
   Ground
13,972

13,420

552

4.1
 %
      Total U.S. Domestic Package
17,207

16,070

1,137

7.1
 %
International Package:
 
 
 
 
   Domestic
1,626

1,654

(28
)
(1.7
)%
   Export
1,387

1,424

(37
)
(2.6
)%
      Total International Package
3,013

3,078

(65
)
(2.1
)%
Consolidated
20,220

19,148

1,072

5.6
 %
 
 
 
 
 
Average Revenue Per Piece:
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
18.30

$
20.08

$
(1.78
)
(8.9
)%
   Deferred
13.10

13.76

(0.66
)
(4.8
)%
   Ground
8.75

8.67

0.08

0.9
 %
      Total U.S. Domestic Package
10.12

10.07

0.05

0.5
 %
International Package:
 
 
 
 
   Domestic
6.63

6.61

0.02

0.3
 %
   Export
30.06

30.14

(0.08
)
(0.3
)%
      Total International Package
17.41

17.50

(0.09
)
(0.5
)%
Consolidated
$
11.21

$
11.26

$
(0.05
)
(0.4
)%

















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
 
 
 
June 30
 
 
 
Neutral
 
2019
 
2018
 
% Change
 
Currency
 
2019*
 
% Change
Average Revenue Per Piece:
 
 
 
 
 
 
 
 
 
 
 
International Package:
 
 
 
 
 
 
 
 
 
 
 
   Domestic
$
6.63

 
$
6.61

 
0.3
 %
 
$
0.35

 
$
6.98

 
5.6
 %
   Export
30.06

 
30.14

 
(0.3
)%
 
0.50

 
30.56

 
1.4
 %
      Total International Package
$
17.41

 
$
17.50

 
(0.5
)%
 
$
0.42

 
$
17.83

 
1.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
$
11.21

 
$
11.26

 
(0.4
)%
 
$
0.06

 
$
11.27

 
0.1
 %
*Amounts adjusted for period over period foreign currency exchange rate and hedging differences
 
 
 
 
 
 
 
 
 
 
 
Currency Neutral Revenue
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
 
Currency
 
 
 
June 30
 
 
 
Neutral
 
2019
 
2018
 
% Change
 
Currency
 
2019*
 
% Change
Revenue (in millions):
 
 
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
11,150

 
$
10,354

 
7.7
 %
 
$

 
$
11,150

 
7.7
 %
  International Package
3,505

 
3,602

 
(2.7
)%
 
81

 
3,586

 
(0.4
)%
  Supply Chain & Freight
3,393

 
3,500

 
(3.1
)%
 
31

 
3,424

 
(2.2
)%
  Total revenue
$
18,048

 
$
17,456

 
3.4
 %
 
$
112

 
$
18,160

 
4.0
 %
*Amounts adjusted for period over period foreign currency exchange rate and hedging differences
 
 
 
 
 
 
 
 
 
 
 
Currency Neutral Operating Profit
(unaudited)
 
Three Months Ended
 
 
 
 
 
Currency
 
 
 
June 30
 
 
 
 
 
Neutral
 
 
 
2019*
 
2018*
 
% Change
 
Currency
 
2019**
 
% Change
As-Adjusted Operating Profit (in millions):
 
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
1,226

 
$
1,135

 
8.0
 %
 
$

 
$
1,226

 
8.0
 %
  International Package
665

 
654

 
1.7
 %
 
(10
)
 
655

 
0.2
 %
  Supply Chain & Freight
273

 
247

 
10.5
 %
 
1

 
274

 
10.9
 %
  Total operating profit
$
2,164

 
$
2,036

 
6.3
 %
 
$
(9
)
 
$
2,155

 
5.8
 %
* 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 -Second Quarter
(unaudited)
 
Three Months Ended
 
 
 
June 30
 
 
 
2019
2018
Change
% Change
LTL revenue (in millions)
$
706

$
726

$
(20
)
(2.8
)%
LTL revenue per LTL hundredweight
$
26.34

$
25.36

$
0.98

3.9
 %
 
 
 
 
 
LTL shipments (in thousands)
2,440

2,639

(199
)
(7.5
)%
LTL shipments per day (in thousands)
38.1

41.2

(3.1
)
(7.5
)%
 
 
 
 
 
LTL gross weight hauled (in millions of pounds)
2,680

2,861

(181
)
(6.3
)%
LTL weight per shipment (in pounds)
1,098

1,084

14

1.3
 %
 
 
 
 
 
Operating weekdays
64

64


 %



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






United Parcel Service, Inc.
Detail of Other Operating Expenses - Second Quarter
(unaudited)
 
Three Months Ended
 
 
 
 
 
June 30
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
(in millions)
 
 
 
 
 
 
 
Repairs and maintenance
$
473

 
$
423

 
$
50

 
11.8
 %
Depreciation and amortization
575

 
542

 
33

 
6.1
 %
Purchased transportation
3,000

 
3,209

 
(209
)
 
(6.5
)%
Fuel
857

 
852

 
5

 
0.6
 %
Other occupancy
322

 
321

 
1

 
0.3
 %
Other expenses
1,379

 
1,312

 
67

 
5.1
 %
Total other operating expenses
$
6,606

 
$
6,659

 
$
(53
)
 
(0.8
)%


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

 
Three Months Ended
 
June 30
 
2019
 
2018
(amounts in millions, except per share data)
 
 
 
Numerator:
 
 
 
    Net income
$
1,685

 
$
1,485

 
 
 
 
Denominator:
 
 
 
    Weighted-average shares
860

 
861

    Deferred compensation obligations

 
1

    Vested portion of restricted units
5

 
4

Denominator for basic earnings (loss) per share
865

 
866

 
 
 
 
Effect of dilutive securities:
 
 
 
    Restricted units
4

 
3

    Stock options

 
1

Denominator for diluted earnings (loss) per share
869

 
870

 
 
 
 
Basic earnings per share
$
1.95

 
$
1.71

 
 
 
 
Diluted earnings per share
$
1.94

 
$
1.71

 
 
 
 
 
 
 
 
Detail of shares outstanding as of June 30, 2019:
 
 
 
 
 
 
 
Class A shares
161

 
 
Class B shares
698

 
 
    Total shares outstanding
859

 
 

 














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)
 
Six Months Ended
 
 
 
June 30
 
 
2019
2018
Change
% Change
(amounts in millions, except per share data)
 
 
 
 
Statement of Income Data:
 
 
 
 
Revenue:
 
 
 
 
  U.S. Domestic Package
$
21,630

$
20,581

$
1,049

5.1
 %
  International Package
6,964

7,135

(171
)
(2.4
)%
  Supply Chain & Freight
6,614

6,853

(239
)
(3.5
)%
  Total revenue
35,208

34,569

639

1.8
 %
 
 
 
 
 
Operating expenses:
 
 
 
 
  Compensation and benefits
18,616

18,069

547

3.0
 %
  Other
13,055

13,207

(152
)
(1.2
)%
  Total operating expenses
31,671

31,276

395

1.3
 %
 
 
 
 
 
Operating profit:
 
 
 
 
  U.S. Domestic Package
1,874

1,695

179

10.6
 %
  International Package
1,191

1,212

(21
)
(1.7
)%
  Supply Chain & Freight
472

386

86

22.3
 %
  Total operating profit
3,537

3,293

244

7.4
 %
 
 
 
 
 
Other income (expense):
 
 
 
 
 Other pension income (expense)
383

569

(186
)
(32.7
)%
  Investment income and other
52

27

25

92.6
 %
  Interest expense
(328
)
(302
)
(26
)
8.6
 %
  Total other income (expense)
107

294

(187
)
(63.6
)%
 
 
 
 
 
Income before income taxes
3,644

3,587

57

1.6
 %
 
 
 
 
 
Income tax expense (benefit)
848

757

91

12.0
 %
 
 
 
 
 
Net income
$
2,796

$
2,830

$
(34
)
(1.2
)%
 
 
 
 
 
Net income as a percentage of revenue
7.9
%
8.2
%
 
 
 
 
 
 
 
Per share amounts:
 
 
 
 
  Basic earnings per share
$
3.23

$
3.27

$
(0.04
)
(1.2
)%
  Diluted earnings per share
$
3.22

$
3.25

$
(0.03
)
(0.9
)%
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
  Basic
866

866


0.0
 %
  Diluted
869

870

(1
)
(0.1
)%
 
 
 
 
 
As adjusted income data:
 
 
 
 
Operating profit:
 
 
 
 
  U.S. Domestic Package (1)
$
1,920

$
1,891

$
29

1.5
 %
  International Package (1)
1,277

1,248

29

2.3
 %
  Supply Chain & Freight (1)
484

417

67

16.1
 %
       Total operating profit (1)
3,681

3,556

125

3.5
 %
 
 
 
 
 
Income before income taxes (1)
$
3,788

$
3,850

$
(62
)
(1.6
)%
Net income (2)
$
2,906

$
3,030

$
(124
)
(4.1
)%
 
 
 
 
 
Basic earnings per share (2)
$
3.36

$
3.50

$
(0.14
)
(4.0
)%
Diluted earnings per share (2)
$
3.34

$
3.48

$
(0.14
)
(4.0
)%

(1) 2019 operating profit and consolidated income before income taxes exclude the impact of $144 million of transformation strategy costs, that reflect other employee benefits costs of $108 million and other costs of $36 million. These costs are allocated between the U.S. Domestic Package segment ($46 million), International Package segment ($86 million) and Supply Chain & Freight segment ($12 million).

2018 operating profit and consolidated income before income taxes exclude the impact of $263 million of transformation costs, which includes voluntary retirement plan severance 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) 2019 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $110 million.

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)
 
Six Months Ended
 
 
 
June 30
 
 
2019
2018
Change
% Change
 
 
 
 
 
Revenue (in millions):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
4,014

$
3,614

$
400

11.1
 %
   Deferred
2,246

2,149

97

4.5
 %
   Ground
15,370

14,818

552

3.7
 %
      Total U.S. Domestic Package
21,630

20,581

1,049

5.1
 %
International Package:
 
 
 
 
   Domestic
1,380

1,416

(36
)
(2.5
)%
   Export
5,299

5,419

(120
)
(2.2
)%
   Cargo and Other
285

300

(15
)
(5.0
)%
      Total International Package
6,964

7,135

(171
)
(2.4
)%
Supply Chain & Freight:
 
 
 
 
   Forwarding
2,912

3,264

(352
)
(10.8
)%
Logistics
1,665

1,566

99

6.3
 %
   Freight
1,634

1,630

4

0.2
 %
   Other
403

393

10

2.5
 %
      Total Supply Chain & Freight
6,614

6,853

(239
)
(3.5
)%
Consolidated
$
35,208

$
34,569

$
639

1.8
 %
 
 
 
 
 
Consolidated volume (in millions)
2,540

2,467

73

3.0
 %
 
 
 
 
 
Operating weekdays
127

128

(1
)
(0.8
)%
 
 
 
 
 
Average Daily Package Volume (in thousands):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
1,710

1,430

280

19.6
 %
   Deferred
1,382

1,261

121

9.6
 %
   Ground
13,829

13,483

346

2.6
 %
      Total U.S. Domestic Package
16,921

16,174

747

4.6
 %
International Package:
 
 
 
 
   Domestic
1,657

1,662

(5
)
(0.3
)%
   Export
1,419

1,435

(16
)
(1.1
)%
      Total International Package
3,076

3,097

(21
)
(0.7
)%
Consolidated
19,997

19,271

726

3.8
 %
 
 
 
 
 
Average Revenue Per Piece:
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
18.48

$
19.74

$
(1.26
)
(6.4
)%
   Deferred
12.80

13.31

(0.51
)
(3.8
)%
   Ground
8.75

8.59

0.16

1.9
 %
      Total U.S. Domestic Package
10.07

9.94

0.13

1.3
 %
International Package:
 
 
 
 
   Domestic
6.56

6.66

(0.10
)
(1.5
)%
   Export
29.40

29.50

(0.10
)
(0.3
)%
      Total International Package
17.10

17.24

(0.14
)
(0.8
)%
Consolidated
$
11.15

$
11.11

$
0.04

0.4
 %

















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)
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
 
 
 
 
Currency
 
 
 
June 30
 
 
 
Neutral
 
2019
 
2018
 
% Change
 
Currency
 
2019*
 
% Change
Average Revenue Per Piece:
 
 
 
 
 
 
 
 
 
 
 
International Package:
 
 
 
 
 
 
 
 
 
 
 
   Domestic
$
6.56

 
$
6.66

 
(1.5
)%
 
$
0.41

 
$
6.97

 
4.7
 %
   Export
29.40

 
29.50

 
(0.3
)%
 
0.62

 
30.02

 
1.8
 %
      Total International Package
$
17.10

 
$
17.24

 
(0.8
)%
 
$
0.50

 
$
17.60

 
2.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
$
11.15

 
$
11.11

 
0.4
 %
 
$
0.07

 
$
11.22

 
1.0
 %
*Amounts adjusted for period over period foreign currency exchange rate and hedging differences
 
 
 
 
 
 
 
 
 
 
 
Currency Neutral Revenue
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
 
 
 
 
Currency
 
 
 
June 30
 
 
 
Neutral
 
2019
 
2018
 
% Change
 
Currency
 
2019*
 
% Change
Revenue (in millions):