Document
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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 22, 2019

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13157364&doc=9
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.







Item 2.02 — Results of Operations and Financial Condition.
     
On October 22, 2019, 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, 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 October 22, 2019 "UPS RELEASES 3Q 2019 EARNINGS"
99.2 Q3 2019 financial statement schedules
104 The cover page from this Current Report on Form 8-K, formatted in Inline XBRL

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:
October 22, 2019
 
 
 
By:
 
  /s/ RICHARD N. PERETZ
 
 
 
 
 
 
 
Richard N. Peretz
 
 
 
 
 
 
 
Senior Vice President
 
 
 
 
 
 
 
 



Exhibit


Exhibit 99.1
For Immediate Release

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

UPS RELEASES 3Q 2019 EARNINGS
Operating Profit Up More Than 20%, with Margin Expansion in All Segments


3Q19 EPS of $2.01, Up More Than 16%; Adjusted* EPS Up 13.7% to $2.07
U.S. Daily Volume Grew Above 9%; Next Day Air Volume Jumped Nearly 24%
U.S. Operating Profit Rose Over 28%; Grew Nearly 26% on an Adjusted Basis
Positive Operating Leverage in U.S. Driven by Lower Unit Cost
International Operating Profit Up 24.4%; and 20.3% on an Adjusted Basis
Supply Chain and Freight Operating Margin of 7.3%; Adjusted Margin of 7.6%
Reaffirms 2019 Adjusted EPS and Raises Adjusted FCF Target to Over $4.0B


ATLANTA - October 22, 2019 - UPS (NYSE:UPS) today announced third-quarter 2019 adjusted earnings per share of $2.07, a 13.7% increase over the same period last year. The company delivered strong operating profit growth of more than 20%, led by the U.S. Domestic and International segments. U.S. Domestic performed exceptionally well year-over-year, with volume gains across all products.

“Our results reflect significant progress from our transformation initiatives, and our ability to generate growth and deliver increased efficiencies in a dynamic economic environment,” said David Abney, UPS chairman and CEO. “As we recently announced, we continue to forge new partnerships and create innovative solutions to accelerate growth in the most attractive opportunities.”

Transformation strategy costs are excluded from adjusted results. Adjusted third-quarter 2019 results exclude a pre-tax transformation charge of $63 million, or $0.06 per diluted share after tax. Adjusted third-quarter 2018 results excluded a pre-tax transformation charge of $97 million, or $0.09 per share after tax.

Consolidated Results
3Q 2019
Adjusted
3Q 2019
3Q 2018
Adjusted
3Q 2018
Revenue
$18,318 M
 
$17,444 M
 
Net Income
$1,750 M
$1,797 M
$1,508 M
$1,581 M
Diluted Earnings Per Share
$2.01
$2.07
$1.73
$1.82
 
 
 



* “Adjusted” and 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 3Q 2019:

Consolidated revenue increased 5% to $18.3 billion, driven by strong average daily volume growth in the U.S.
Total operating profit growth was very strong at more than 23%, and 20.1% on an adjusted basis, led by the U.S. Domestic and International segments.
Total operating margin expanded 170 basis points**; adjusted operating margin expanded 150 basis points.
Adjusted capital expenditures for the year are approximately $4.5 billion to support network enhancements.
Year-to-date cash from operations was $5.7 billion and adjusted free cash flow grew to $3.2 billion.
Dividends per share increased 5.5%, and the company repurchased 7 million shares for approximately $753 million year-to-date.

U.S. Domestic Segment

In the U.S. Domestic segment, total volume across all products grew more than 9%. Next Day Air increased nearly 24%; Deferred Air grew more than 17%; and Ground volume rose nearly 7%. Growth came from both B2C and B2B shippers, led by the retail, healthcare and high-tech sectors.

“The investments we are making in new facilities and automation in our network, coupled with solid execution of our strategies, are producing strong results, including strong, positive operating leverage,” said Abney. “We see significant near-term benefits to both top- and bottom-line results in the U.S. and continued momentum into the future.”

 
3Q 2019
Adjusted
3Q 2019
3Q 2018
Adjusted
3Q 2018
Revenue
$11,455 M
 
$10,437 M
 
Operating profit
$1,216 M
$1,242 M
$949 M
$988 M
 
 
 

Revenue grew more than $1 billion, a nearly 10% increase.
Operating profit increased 28.1%, and nearly 26% on an adjusted basis.
Operating margin was 10.6%; adjusted operating margin expanded 130 basis points.
Unit costs were lower by 2.7%; on an adjusted basis, down 2.5%, contributing to positive operating leverage.

International Segment

The International segment reported strong operating profit and expanded operating margin. The company’s performance is the result of a number of items in the quarter, including strong cost control, good execution and targeted domestic and export growth.

 
3Q 2019
Adjusted
3Q 2019
3Q 2018
Adjusted
3Q 2018
Revenue
$3,494 M
 
$3,478 M
 
Operating profit
$667 M
$693 M
$536 M
$576 M

International saw export volume growth on intra-European trade lanes and virtually all Asia trade lanes except Asia-U.S.

**One basis point equals one-hundredth of a percentage point. 






International domestic revenue per piece fell less than 1%, but grew 2.3% when adjusting for currency.
Operating profit increased more than 24%, or by 20.3% on an adjusted basis.
Industry-leading operating margin remained strong at 19.1%; adjusted operating margin expanded 320 basis points**.

Supply Chain and Freight Segment

The Supply Chain and Freight segment’s performance was driven by small and medium-sized customers that generate higher-quality revenue, as well as cost management actions throughout the network.

 
3Q 2019
Adjusted
3Q 2019
3Q 2018
Adjusted
3Q 2018
Revenue
$3,369 M
 
$3,529 M
 
Operating profit
$245 M
$256 M
$242 M
$260 M

Operating margin expanded to 7.3%, and to 7.6% on an adjusted basis.
Logistics revenue increased more than 7% from growth in the healthcare, retail and manufacturing sectors.
UPS Freight produced an increase in revenue per LTL (less-than-truckload) hundredweight of nearly 4%, driven by its focus on small and medium-sized businesses.
The Forwarding unit adjusted costs and partially offset the negative revenue impact of trade uncertainty.

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 delivered solid performance for the third quarter,” said Brian Newman, UPS’s chief financial officer. “Positive impacts from our transformation initiatives are visible in our results as we continue to improve network efficiencies and create new solutions that will open more growth opportunities well into the future.”

The company reaffirms full-year adjusted diluted EPS in the range of $7.45 to $7.75.
Guidance assumes no further deterioration regarding global trade uncertainty or U.S. industrial weakness.
Adjusted free cash flow for the year is projected to be over $4.0 billion.
Capital investments have been reduced in both 2019 and 2020 by about $500 million each year. Network automation targets and other transformation goals remain unchanged.
The effective tax rate for the full year 2019 is estimated to be between 22% and 23%.
Transformation charges are not included in the adjusted guidance.


**One basis point equals one-hundredth of a percentage point. 

  
# # #


Conference Call Information
    





UPS CEO David Abney, CFO Brian Newman and former CFO Richard Peretz will discuss third-quarter results with investors and analysts during a conference call at 8:30 a.m. ET, October 22, 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 ups.com/longitudes 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 including 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 September 30, 2019
 
 
 
 
 
 
 
As- Reported (GAAP)
 
Transformation Strategy Costs(1)
 
As-Adjusted (Non-GAAP)
Operating profit:
 
 
 
 
 
U.S. Domestic Package
$
1,216

 
$
26

 
$
1,242

International Package
667

 
26

 
693

Supply Chain & Freight
245

 
11

 
256

Total operating profit
$
2,128

 
$
63

 
$
2,191

 
 
 
 
 
 
Income before income taxes
$
2,206

 
$
63

 
$
2,269

 
 
 
 
 
 
Income tax expense
$
456

 
$
16

 
$
472

 
 
 
 
 
 
Net income
$
1,750

 
$
47

 
$
1,797

 
 
 
 
 
 
Diluted earnings per share
$
2.01

 
$
0.06

 
$
2.07

(1) Transformation strategy costs included other employee benefits costs of $41 million, and other costs of $22 million




Nine Months Ended September 30, 2019
 
 
 
 
 
 
 
As- Reported (GAAP)
 
Transformation Strategy Costs (1)
 
As-Adjusted (Non-GAAP)
Operating profit:
 
 
 
 
 
U.S. Domestic Package
$
3,090

 
$
72

 
$
3,162

International Package
1,858

 
112

 
1,970

Supply Chain & Freight
717

 
23

 
740

Total operating profit
$
5,665

 
$
207

 
$
5,872

 
 
 
 
 
 
Income before income taxes
$
5,850

 
$
207

 
$
6,057

 
 
 
 
 
 
Income tax expense
$
1,304

 
$
50

 
$
1,354

 
 
 
 
 
 
Net income
$
4,546

 
$
157

 
$
4,703

 
 
 
 
 
 
Diluted earnings per share
$
5.23

 
$
0.18

 
$
5.41

(1) Transformation strategy costs included other employee benefits costs of $149 million, and other costs of $58 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 September 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
$
6.45

 
$
6.47

(0.3
)%
 
$
0.17

 
$
6.62

2.3
 %
   Export
29.06

 
29.32

(0.9
)%
 
0.06

 
29.12

(0.7
)%
      Total International Package
$
16.92

 
$
17.06

(0.8
)%
 
$
0.11

 
$
17.03

(0.2
)%
 
 
 
 
 
 
 
 
 
 
Consolidated
$
11.02

 
$
11.20

(1.6
)%
 
$
0.01

 
$
11.03

(1.5
)%
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
11,455

 
$
10,437

9.8
 %
 
$

 
$
11,455

9.8
 %
  International Package
3,494

 
3,478

0.5
 %
 
24

 
3,518

1.2
 %
  Supply Chain & Freight
3,369

 
3,529

(4.5
)%
 
20

 
3,389

(4.0
)%
  Total revenue
$
18,318

 
$
17,444

5.0
 %
 
$
44

 
$
18,362

5.3
 %
 
 
 
 
 
 
 
 
 
 
(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
$
1,242

 
$
988

25.7
 %
 
$

 
$
1,242

25.7
 %
  International Package
693

 
576

20.3
 %
 
(32
)
 
661

14.8
 %
  Supply Chain & Freight
256

 
260

(1.5
)%
 
7

 
263

1.2
 %
  Total operating profit
$
2,191

 
$
1,824

20.1
 %
 
$
(25
)
 
$
2,166

18.8
 %
 
 
 
 
 
 
 
 
 
 
(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):
Nine Months Ended September 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
$
6.52

 
$
6.60

(1.2
)%
 
$
0.33

 
$
6.85

3.8
 %
   Export
29.29

 
29.43

(0.5
)%
 
0.43

 
29.72

1.0
 %
      Total International Package
$
17.04

 
$
17.18

(0.8
)%
 
$
0.37

 
$
17.41

1.3
 %
 
 
 
 
 
 
 
 
 
 
Consolidated
$
11.10

 
$
11.14

(0.4
)%
 
$
0.06

 
$
11.16

0.2
 %
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
33,085

 
$
31,018

6.7
 %
 
$

 
$
33,085

6.7
 %
  International Package
10,458

 
10,613

(1.5
)%
 
222

 
10,680

0.6
 %
  Supply Chain & Freight
9,983

 
10,382

(3.8
)%
 
70

 
10,053

(3.2
)%
  Total revenue
$
53,526

 
$
52,013

2.9
 %
 
$
292

 
$
53,818

3.5
 %
 
 
 
 
 
 
 
 
 
 
(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
$
3,162

 
$
2,879

9.8
 %
 
$

 
$
3,162

9.8
 %
  International Package
1,970

 
1,824

8.0
 %
 
(46
)
 
1,924

5.5
 %
  Supply Chain & Freight
740

 
677

9.3
 %
 
9

 
749

10.6
 %
  Total operating profit
$
5,872

 
$
5,380

9.1
 %
 
$
(37
)
 
$
5,835

8.5
 %
 
 
 
 
 
 
 
 
 
 
(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):
Nine Months Ended September 30
 
 
 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
 
 
 
 
 
 
 
 
Preliminary
2019
Cash flows from operating activities
 
$
5,693

Cash flows used in investing activities
 
(4,027
)
Cash flows used in financing activities
 
(1,824
)
 
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
6

    Net increase/(decrease) in cash, cash equivalents and restricted cash
 
$
(182
)
 
 
 
Reconciliation of Adjusted Capital Expenditures and Free Cash Flow (Non-GAAP measures)
 
 
 
 
 
Preliminary
2019
 
 
 
Cash flows from operating activities (GAAP)
 
$
5,693

Capital expenditures
 
(4,336
)
Principal repayments of capital lease obligations
 
(120
)
Adjusted capital expenditures (non-GAAP measure)
 
$
(4,456
)
Proceeds from disposals of PP&E
 
61

Net change in finance receivables
 
8

Other investing activities
 
(84
)
     Adjusted free cash flow (Non-GAAP measure)
 
$
1,222

Discretionary pension contributions
 
2,000

Adjusted free cash flow (non-GAAP measure) excluding discretionary pension contributions
 
$
3,222

 
 
 



Amounts are subject to reclassification.




























Exhibit


Exhibit 99.2
United Parcel Service, Inc.
Selected Financial Data - Third Quarter
(unaudited)
 
Three Months Ended
 
 
 
September 30
 
 
2019
2018
Change
% Change
(amounts in millions, except per share data)
 
 
 
 
Statement of Income Data:
 
 
 
 
Revenue:
 
 
 
 
  U.S. Domestic Package
$
11,455

$
10,437

$
1,018

9.8
 %
  International Package
3,494

3,478

16

0.5
 %
  Supply Chain & Freight
3,369

3,529

(160
)
(4.5
)%
  Total revenue
18,318

17,444

874

5.0
 %
 
 
 
 
 
Operating expenses:
 
 
 
 
  Compensation and benefits
9,590

9,015

575

6.4
 %
  Other
6,600

6,702

(102
)
(1.5
)%
  Total operating expenses
16,190

15,717

473

3.0
 %
 
 
 
 
 
Operating profit:
 
 
 
 
  U.S. Domestic Package
1,216

949

267

28.1
 %
  International Package
667

536

131

24.4
 %
  Supply Chain & Freight
245

242

3

1.2
 %
  Total operating profit
2,128

1,727

401

23.2
 %
 
 
 
 
 
Other income (expense):
 
 
 
 
 Other pension income (expense)
191

284

(93
)
(32.7
)%
  Investment income and other
46

33

13

39.4
 %
  Interest expense
(159
)
(155
)
(4
)
2.6
 %
  Total other income (expense)
78

162

(84
)
(51.9
)%
 
 
 
 
 
Income before income taxes
2,206

1,889

317

16.8
 %
 
 
 
 
 
Income tax expense (benefit)
456

381

75

19.7
 %
 
 
 
 
 
Net income
$
1,750

$
1,508

$
242

16.0
 %
 
 
 
 
 
Net income as a percentage of revenue
9.6
%
8.6
%
 
 
 
 
 
 
 
Per share amounts:
 
 
 
 
  Basic earnings per share
$
2.03

$
1.74

$
0.29

16.7
 %
  Diluted earnings per share
$
2.01

$
1.73

$
0.28

16.2
 %
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
  Basic
864

865

(1
)
(0.1
)%
  Diluted
870

870


0.0
 %
 
 
 
 
 
As adjusted income data:
 
 
 
 
Operating profit:
 
 
 
 
  U.S. Domestic Package (1)
$
1,242

$
988

$
254

25.7
 %
  International Package (1)
693

576

117

20.3
 %
  Supply Chain & Freight (1)
256

260

(4
)
(1.5
)%
       Total operating profit (1)
2,191

1,824

367

20.1
 %
 
 
 
 
 
Income before income taxes (1)
$
2,269

$
1,986

$
283

14.2
 %
Net income (2)
$
1,797

$
1,581

$
216

13.7
 %
 
 
 
 
 
Basic earnings per share (2)
$
2.08

$
1.83

$
0.25

13.7
 %
Diluted earnings per share (2)
$
2.07

$
1.82

$
0.25

13.7
 %

(1) 2019 operating profit and consolidated income before income taxes exclude the impact of $63 million of transformation strategy costs, that reflect other employee benefits costs of $41 million and other costs of $22 million. These costs are allocated between the U.S. Domestic Package segment ($26 million), International Package segment ($26 million) and Supply Chain & Freight segment ($11 million).

2018 operating profit and consolidated income before income taxes exclude the impact of $97 million of transformation costs, that reflect other employee benefits costs of $70 million and other costs of $27 million. 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) 2019 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $47 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 $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
 
 
2019
2018
Change
% Change
 
 
 
 
 
Revenue (in millions):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
2,146

$
1,896

$
250

13.2
 %
   Deferred
1,248

1,066

182

17.1
 %
   Ground
8,061

7,475

586

7.8
 %
      Total U.S. Domestic Package
11,455

10,437

1,018

9.8
 %
International Package:
 
 
 
 
   Domestic
689

678

11

1.6
 %
   Export
2,673

2,654

19

0.7
 %
   Cargo and Other
132

146

(14
)
(9.6
)%
      Total International Package
3,494

3,478

16

0.5
 %
Supply Chain & Freight:
 
 
 
 
   Forwarding
1,472

1,672

(200
)
(12.0
)%
Logistics
846

790

56

7.1
 %
   Freight
852

867

(15
)
(1.7
)%
   Other
199

200

(1
)
(0.5
)%
      Total Supply Chain & Freight
3,369

3,529

(160
)
(4.5
)%
Consolidated
$
18,318

$
17,444

$
874

5.0
 %
 
 
 
 
 
Consolidated volume (in millions)
1,345

1,229

116

9.4
 %
 
 
 
 
 
Operating weekdays
64

63

1

1.6
 %
 
 
 
 
 
Average Daily Package Volume (in thousands):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
1,891

1,526

365

23.9
 %
   Deferred
1,474

1,256

218

17.4
 %
   Ground
14,544

13,624

920

6.8
 %
      Total U.S. Domestic Package
17,909

16,406

1,503

9.2
 %
International Package:
 
 
 
 
   Domestic
1,668

1,663

5

0.3
 %
   Export
1,437

1,437


0.0
 %
      Total International Package
3,105

3,100

5

0.2
 %
Consolidated
21,014

19,506

1,508

7.7
 %
 
 
 
 
 
Average Revenue Per Piece:
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
17.73

$
19.72

$
(1.99
)
(10.1
)%
   Deferred
13.23

13.47

(0.24
)
(1.8
)%
   Ground
8.66

8.71

(0.05
)
(0.6
)%
      Total U.S. Domestic Package
9.99

10.10

(0.11
)
(1.1
)%
International Package:
 
 
 
 
   Domestic
6.45

6.47

(0.02
)
(0.3
)%
   Export
29.06

29.32

(0.26
)
(0.9
)%
      Total International Package
16.92

17.06

(0.14
)
(0.8
)%
Consolidated
$
11.02

$
11.20

$
(0.18
)
(1.6
)%

















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
 
2019
 
2018
 
% Change
 
Currency
 
2019*
 
% Change
Average Revenue Per Piece:
 
 
 
 
 
 
 
 
 
 
 
International Package:
 
 
 
 
 
 
 
 
 
 
 
   Domestic
$
6.45

 
$
6.47

 
(0.3
)%
 
$
0.17

 
$
6.62

 
2.3
 %
   Export
29.06

 
29.32

 
(0.9
)%
 
0.06

 
29.12

 
(0.7
)%
      Total International Package
$
16.92

 
$
17.06

 
(0.8
)%
 
$
0.11

 
$
17.03

 
(0.2
)%
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
$
11.02

 
$
11.20

 
(1.6
)%
 
$
0.01

 
$
11.03

 
(1.5
)%
*Amounts adjusted for period over period foreign currency exchange rate and hedging differences
 
 
 
 
 
 
 
 
 
 
 
Currency Neutral Revenue
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
 
Currency
 
 
 
September 30
 
 
 
Neutral
 
2019
 
2018
 
% Change
 
Currency
 
2019*
 
% Change
Revenue (in millions):
 
 
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
11,455

 
$
10,437

 
9.8
 %
 
$

 
$
11,455

 
9.8
 %
  International Package
3,494

 
3,478

 
0.5
 %
 
24

 
3,518

 
1.2
 %
  Supply Chain & Freight
3,369

 
3,529

 
(4.5
)%
 
20

 
3,389

 
(4.0
)%
  Total revenue
$
18,318

 
$
17,444

 
5.0
 %
 
$
44

 
$
18,362

 
5.3
 %
*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
 
 
 
2019*
 
2018*
 
% Change
 
Currency
 
2019**
 
% Change
As-Adjusted Operating Profit (in millions):
 
 
 
 
 
 
 
 
 
 
  U.S. Domestic Package
$
1,242

 
$
988

 
25.7
 %
 
$

 
$
1,242

 
25.7
 %
  International Package
693

 
576

 
20.3
 %
 
(32
)
 
661

 
14.8
 %
  Supply Chain & Freight
256

 
260

 
(1.5
)%
 
7

 
263

 
1.2
 %
  Total operating profit
$
2,191

 
$
1,824

 
20.1
 %
 
$
(25
)
 
$
2,166

 
18.8
 %
* 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 -Third Quarter
(unaudited)
 
Three Months Ended
 
 
 
September 30
 
 
 
2019
2018
Change
% Change
LTL revenue (in millions)
$
699

$
735

$
(36
)
(4.9
)%
LTL revenue per LTL hundredweight
$
26.71

$
25.70

$
1.01

3.9
 %
 
 
 
 
 
LTL shipments (in thousands)
2,441

2,603

(162
)
(6.2
)%
LTL shipments per day (in thousands)
38.1

41.3

(3.2
)
(7.7
)%
 
 
 
 
 
LTL gross weight hauled (in millions of pounds)
2,617

2,860

(243
)
(8.5
)%
LTL weight per shipment (in pounds)
1,072

1,098

(26
)
(2.4
)%
 
 
 
 
 
Operating weekdays
64

63

1

1.6
 %



Certain prior year 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
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
(in millions)
 
 
 
 
 
 
 
Repairs and maintenance
$
485

 
$
437

 
$
48

 
11.0
 %
Depreciation and amortization
587

 
524

 
63

 
12.0
 %
Purchased transportation
2,984

 
3,216

 
(232
)
 
(7.2
)%
Fuel
824

 
867

 
(43
)
 
(5.0
)%
Other occupancy
346

 
321

 
25

 
7.8
 %
Other expenses
1,374

 
1,337

 
37

 
2.8
 %
Total other operating expenses
$
6,600

 
$
6,702

 
$
(102
)
 
(1.5
)%


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

 
Three Months Ended
 
September 30
 
2019
 
2018
(amounts in millions, except per share data)
 
 
 
Numerator:
 
 
 
    Net income
$
1,750

 
$
1,508

 
 
 
 
Denominator:
 
 
 
    Weighted-average shares
858

 
860

    Deferred compensation obligations

 
1

    Vested portion of restricted units
6

 
4

Denominator for basic earnings (loss) per share
864

 
865

 
 
 
 
Effect of dilutive securities:
 
 
 
    Restricted units
6

 
5

    Stock options

 

Denominator for diluted earnings (loss) per share
870

 
870

 
 
 
 
Basic earnings per share
$
2.03

 
$
1.74

 
 
 
 
Diluted earnings per share
$
2.01

 
$
1.73

 
 
 
 
 
 
 
 
Detail of shares outstanding as of September 30, 2019:
 
 
 
 
 
 
 
Class A shares
157

 
 
Class B shares
701

 
 
    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)
 
Nine Months Ended
 
 
 
September 30
 
 
2019
2018
Change
% Change
(amounts in millions, except per share data)
 
 
 
 
Statement of Income Data:
 
 
 
 
Revenue:
 
 
 
 
  U.S. Domestic Package
$
33,085

$
31,018

$
2,067

6.7
 %
  International Package
10,458

10,613

(155
)
(1.5
)%
  Supply Chain & Freight
9,983

10,382

(399
)
(3.8
)%
  Total revenue
53,526

52,013

1,513

2.9
 %
 
 
 
 
 
Operating expenses:
 
 
 
 
  Compensation and benefits
28,206

27,084

1,122

4.1
 %
  Other
19,655

19,909

(254
)
(1.3
)%
  Total operating expenses
47,861

46,993

868

1.8
 %
 
 
 
 
 
Operating profit:
 
 
 
 
  U.S. Domestic Package
3,090

2,644

446

16.9
 %
  International Package
1,858

1,748

110

6.3
 %
  Supply Chain & Freight
717

628

89

14.2
 %
  Total operating profit
5,665

5,020

645

12.8
 %
 
 
 
 
 
Other income (expense):
 
 
 
 
 Other pension income (expense)
574

853

(279
)
(32.7
)%
  Investment income and other
98

60

38

63.3
 %
  Interest expense
(487
)
(457
)
(30
)
6.6
 %
  Total other income (expense)
185

456

(271
)
(59.4
)%
 
 
 
 
 
Income before income taxes
5,850

5,476

374

6.8
 %
 
 
 
 
 
Income tax expense (benefit)
1,304

1,138

166

14.6
 %
 
 
 
 
 
Net income
$
4,546

$
4,338

$
208

4.8
 %
 
 
 
 
 
Net income as a percentage of revenue
8.5
%
8.3
%
 
 
 
 
 
 
 
Per share amounts:
 
 
 
 
  Basic earnings per share
$
5.26

$
5.01

$
0.25

5.0
 %
  Diluted earnings per share
$
5.23

$
4.99

$
0.24

4.8
 %
 
 
 
 
 
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)
$
3,162

$
2,879

$
283

9.8
 %
  International Package (1)
1,970

1,824

146

8.0
 %
  Supply Chain & Freight (1)
740

677

63

9.3
 %
       Total operating profit (1)
5,872

5,380

492

9.1
 %
 
 
 
 
 
Income before income taxes (1)
$
6,057

$
5,836

$
221

3.8
 %
Net income (2)
$
4,703

$
4,611

$
92

2.0
 %
 
 
 
 
 
Basic earnings per share (2)
$
5.44

$
5.33

$
0.11

2.1
 %
Diluted earnings per share (2)
$
5.41

$
5.30

$
0.11

2.1
 %

(1) 2019 operating profit and consolidated income before income taxes exclude the impact of $207 million of transformation strategy costs, that reflect other employee benefits costs of $149 million and other costs of $58 million. These costs are allocated between the U.S. Domestic Package segment ($72 million), International Package segment ($112 million) and Supply Chain & Freight segment ($23 million).

2018 operating profit and consolidated income before income taxes exclude the impact of $360 million of transformation costs, which includes voluntary retirement plan severance costs of $262 million, and other costs of $98 million. 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) 2019 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $157 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 $273 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
 
 
2019
2018
Change
% Change
 
 
 
 
 
Revenue (in millions):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
6,160

$
5,510

$
650

11.8
 %
   Deferred
3,494

3,215

279

8.7
 %
   Ground
23,431

22,293

1,138

5.1
 %
      Total U.S. Domestic Package
33,085

31,018

2,067

6.7
 %
International Package:
 
 
 
 
   Domestic
2,069

2,094

(25
)
(1.2
)%
   Export
7,972

8,073

(101
)
(1.3
)%
   Cargo and Other
417

446

(29
)
(6.5
)%
      Total International Package
10,458

10,613

(155
)
(1.5
)%
Supply Chain & Freight:
 
 
 
 
   Forwarding
4,384

4,936

(552
)
(11.2
)%
Logistics
2,511

2,356

155

6.6
 %
   Freight
2,486

2,497

(11
)
(0.4
)%
   Other
602

593

9

1.5
 %
      Total Supply Chain & Freight
9,983

10,382

(399
)
(3.8
)%
Consolidated
$
53,526

$
52,013

$
1,513

2.9
 %
 
 
 
 
 
Consolidated volume (in millions)
3,885

3,696

189

5.1
 %
 
 
 
 
 
Operating weekdays
191

191


0.0
 %
 
 
 
 
 
Average Daily Package Volume (in thousands):
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
1,771

1,462

309

21.1
 %
   Deferred
1,413

1,260

153

12.1
 %
   Ground
14,068

13,529

539

4.0
 %
      Total U.S. Domestic Package
17,252

16,251

1,001

6.2
 %
International Package:
 
 
 
 
   Domestic
1,661

1,662

(1
)
(0.1
)%
   Export
1,425

1,436

(11
)
(0.8
)%
      Total International Package
3,086

3,098

(12
)
(0.4
)%
Consolidated
20,338

19,349

989

5.1
 %
 
 
 
 
 
Average Revenue Per Piece:
 
 
 
 
U.S. Domestic Package:
 
 
 
 
   Next Day Air
$
18.21

$
19.73

$
(1.52
)
(7.7
)%
   Deferred
12.95

13.36

(0.41
)
(3.1
)%
   Ground
8.72

8.63

0.09

1.0
 %
      Total U.S. Domestic Package
10.04

9.99

0.05

0.5
 %
International Package:
 
 
 
 
   Domestic
6.52

6.60

(0.08
)
(1.2
)%
   Export
29.29

29.43

(0.14
)
(0.5
)%
      Total International Package
17.04

17.18

(0.14
)
(0.8
)%
Consolidated
$
11.10

$
11.14

$
(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)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
 
 
 
 
Currency
 
 
 
September 30
 
 
 
Neutral
 
2019
 
2018
 
% Change
 
Currency
 
2019*
 
% Change
Average Revenue Per Piece:
 
 
 
 
 
 
 
 
 
 
 
International Package:
 
 
 
 
 
 
 
 
 
 
 
   Domestic
$
6.52

 
$
6.60

 
(1.2
)%
 
$
0.33

 
$
6.85

 
3.8
 %
   Export
29.29

 
29.43

 
(0.5
)%
 
0.43

 
29.72

 
1.0
 %
      Total International Package
$
17.04

 
$
17.18

 
(0.8
)%
 
$
0.37

 
$
17.41

 
1.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
$
11.10

 
$
11.14

 
(0.4
)%