UPS Achieves Record Earnings Per Share

2012 Free Cash Flow $5.4 Billion; Expects 2013 EPS growth 6-to-12%; $4 Billion in Share Repurchases

ATLANTA--(BUSINESS WIRE)-- UPS (NYSE:UPS) today announced record 2012 fourth quarter and full year adjusted diluted earnings per share of $1.32 and $4.53 respectively, with the U.S. Domestic segment leading the way. The company generated annual free cash flow of approximately $5.4 billion, a testament to operations execution and the emphasis UPS places on capital efficiency. UPS estimates that Hurricane Sandy reduced earnings per share by approximately $0.05.

UPS recorded a fourth quarter mark-to-market, non-cash, after-tax charge of $3.0 billion for its company-sponsored pension and post-retirement benefit plans. Although the plans exceeded their expected rate of return, these incremental gains were more than offset by a 120 basis point decline in year-end discount rates. As a result, on a GAAP basis, diluted earnings per share for the quarter fell to a loss of $1.83. For the full year, reported diluted earnings per share were $0.83. This adjustment does not affect cash flow, required pension funding or benefits paid to plan participants.

“2012 presented its challenges, most notably weak global trade. Nonetheless, UPS executed well, delivering superior service to customers,” said Scott Davis, UPS Chairman and CEO. “Despite modest macro growth expectations for 2013 and uncertainty in the U.S. caused by the lack of progress in Washington, the UPS business model will deliver consistent results, with operating profit growth in all segments.”

UPS expects full year earnings per share to be within a range of $4.80 - $5.06, an increase of 6-to-12% compared to 2012 adjusted results. The company also raised guidance for 2013 share repurchases from $1.5 billion to $4.0 billion.

Adjusted

Consolidated Results

4Q 2012

4Q 2011

Revenue

$14.57 B

$14.17 B

Operating profit (loss)

($2.78 B

)

$2.05 B

$1.20 B

$2.02 B

Operating margin

(19.1 %

)

14.1 %

8.4 %

14.3 %

Average volume per day

18.8 M

18.3 M

Diluted earnings (loss) per share

($1.83

)

$1.32

$0.74

$1.28

During the year, UPS delivered more than four billion packages. For the quarter, it delivered 18.8 million pieces per day, an increase of 2.9% over the prior-year period.

Overall consumer spending for holiday shopping fell slightly below expectations, however; UPS still delivered more than 500 million packages, including almost 28 million on its peak day, both new records.

Cash Position

For the year ending Dec. 31, UPS generated $5.4 billion in free cash flow after capital expenditures of $2.2 billion. UPS repurchased 21.8 million shares for approximately $1.6 billion and paid dividends totaling $2.1 billion, up 9.6% per share.

Adjusted

U.S. Domestic Package

4Q 2012

4Q 2011

Revenue

$8.93 B

$8.67 B

Operating profit (loss)

($1.80 B

)

$1.38 B

$0.84 B

$1.32 B

Operating margin

(20.1 %

)

15.4%

9.7 %

15.2 %

Average volume per day

16.2 M

15.7 M

As on-line retailers continue to rely on UPS to serve their customers, daily package volume was up 3.0%, led by 7.7% growth in UPS Next Day Air®, while ground improved 3.0%.

On an adjusted basis, operating profit increased $58 million or 4.4%, and operating margin expanded to 15.4%, despite challenges created by Hurricane Sandy. Revenue grew 3.0% and revenue per piece increased 1.7%, driven by base rate improvements in both ground and air products.

As a result of the pension mark-to-market adjustment, the segment reported an operating loss of $1.8 billion, on a U.S. GAAP basis.

This holiday season, the B2C market took advantage of the unique consumer experience offered by UPS My Choice. Reflecting its popularity, subscribers have grown to almost 2.5 million. This innovative service reduces missed deliveries to customers and lowers UPS operating costs.

Adjusted

International Package

4Q 2012

4Q 2011

Revenue

$3.20 B

$3.15 B

Operating profit (loss)

($442 M

)

$499 M

$334 M

$505 M

Operating margin

(13.8 %

)

15.6 %

10.6 %

16.0 %

Average volume per day

2.7 M

2.6 M

Strong demand for UPS products in Asia and Europe led to a 5.5% increase in average daily export volume, increasing revenue to $3.2 billion.

Adjusted operating profit was $499 million, down slightly, as customer and product mix changes drove a 3.5% decline in export yields, on a currency neutral basis. Adjusted operating margin of 15.6% remains industry leading.

As a result of the pension mark-to-market adjustment, the segment reported an operating loss of $442 million, on a U.S. GAAP basis.

Earlier this month, UPS announced a new express air freight service, UPS Worldwide Express Freight™, for urgent, time-sensitive and high-value international heavyweight shipments. This new service is an extension of the UPS Worldwide Express package portfolio and offers customers a seamless experience between shipping express package and express freight.

Adjusted

Supply Chain & Freight

4Q 2012

4Q 2011

Revenue

$2.44 B

$2.34 B

Operating profit (loss)

($541 M

)

172 M

22 M

199 M

Operating margin

(22.2 %

)

7.1 %

0.9 %

8.5 %

Revenue in the Supply Chain & Freight segment increased $94 million or 4.0% compared with the fourth quarter of 2011. Adjusted operating profit was $172 million.

As a result of the pension mark-to-market adjustment, the segment reported an operating loss of $541 million, on a U.S. GAAP basis.

The Freight Forwarding unit experienced revenue improvement on strong tonnage increases in international air freight. Operating margin was negatively impacted by an increase in purchased transportation rates on Asia outbound freight during a period of accelerated demand in the market.

The Distribution business unit achieved revenue growth of more than 10% as UPS continued to meet customers’ needs for optimal supply chain management and value added services. Although operating margin was still strong, it declined due to investments in technology and new facilities to support the Healthcare and High Tech industries.

UPS Freight revenue increased 6.2% with LTL gross weight hauled up 4.9% and LTL revenue per hundredweight up 1.5%.

During the quarter, UPS launched an innovative ocean and air freight forwarding technology platform, UPS Order Watch, enhancing the UPS Supplier Management product with cloud-based capabilities that allow customers to more efficiently manage their international inbound supply chains.

Outlook

“UPS delivered its best ever adjusted earnings per share with strong free cash flow, even in the midst of weaker than expected global economic conditions in 2012,” said Kurt Kuehn, UPS chief financial officer. “Economic growth for 2013 is expected to be below long-term trends. Despite $350 million in headwinds from unfavorable foreign exchange comparisons and increased pension expense, UPS anticipates full year diluted earnings per share to increase 6% to 12% over 2012 adjusted results.

“Free cash flow remains a UPS hallmark, creating opportunities for significant distributions to shareholders,” Kuehn added. “Based on our strong financial position, UPS has increased expected share repurchases for 2013 from $1.5 billion to $4.0 billion.”

UPS (NYSE:UPS) is a global leader in logistics, offering a broad range of solutions including the transportation of packages and freight; the facilitation of international trade, and the deployment of 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 blog.ups.com. To get UPS news direct, visit pressroom.ups.com/RSS.

EDITOR’S NOTE:

UPS Chairman and CEO Scott Davis and CFO Kurt Kuehn will discuss fourth quarter results with investors and analysts during a conference call at 8:30 a.m. EST today. That call is open to listeners through a live Webcast. To access the call, go to www.investors.ups.com and click on “Earnings Webcast.”

UPS routinely posts investor announcements on its web site --www.investors.ups.com -- and encourages those interested in the company to check there frequently.

We supplement the reporting of our financial information determined under generally accepted accounting principles ("GAAP") with certain non-GAAP financial measures, including, as applicable, "as adjusted" operating profit, operating margin, pre-tax income, net income and earnings per share. The equivalent measures determined in accordance with GAAP are also referred to as "reported" or "unadjusted.” We believe that these adjusted measures provide meaningful information to assist investors and analysts in understanding our financial results and assessing our prospects for future performance. We believe these adjusted financial measures are important indicators of our recurring operations because they exclude items that may not be indicative of, or are unrelated to, our core operating results, and provide a better baseline for analyzing trends in our underlying businesses. Furthermore, we use these adjusted financial measures to determine awards for our management personnel under our incentive compensation plans.

We supplemented the presentation of our fourth quarter and year-to-date 2012 and 2011 operating profit, operating margin, pre-tax income, net income and earnings per share with similar measures that excluded the impact of certain transactions. During 2012, these items included the impact of mark-to-market adjustments for pension expense recognized outside of a 10% corridor ($4.831 billion pre-tax charge) and the establishment of a withdrawal liability related to the New England Teamsters and Trucking Industry Pension Fund ($896 million pre-tax charge) . In 2011, these items included the impact of certain real estate transactions ($33 million pre-tax gains) and mark-to-market adjustments for pension expense recognized outside of a 10% corridor ($827 million pre-tax charge). We believe these adjusted measures better enable shareowners to focus on period-over-period operating performance.

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for GAAP operating profit, operating margin, net income and earnings per share, the most directly comparable GAAP financial measures. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the preceding reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our business. We strongly encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Except for historical information contained herein, the statements made in this release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements, including statements regarding the intent, belief or current expectations of UPS and its management regarding the company's strategic directions, prospects and future results, involve certain risks and uncertainties. Certain factors may cause actual results to differ materially from those contained in the forward-looking statements, including economic and other conditions in the markets in which we operate, governmental regulations, our competitive environment, strikes, work stoppages and slowdowns, changes in aviation and motor fuel prices, cyclical and seasonal fluctuations in our operating results, and other risks discussed in the company's Form 10-K and other filings with the Securities and Exchange Commission, which discussions are incorporated herein by reference.



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

	Three Months Ended
	December 31,						Change
	2012			2011			$			%
_{(amounts in millions, except per share data)}
Statement of Income Data:
Revenue:
U.S. Domestic Package	$	8,933		$	8,670		$	263		3.0	%
International Package		3,201			3,153			48		1.5	%
Supply Chain & Freight		2,437			2,343			94		4.0	%
Total revenue		14,571			14,166			405		2.9	%

Operating expenses:
Compensation and benefits		11,943			7,730			4,213		54.5	%
Other		5,410			5,239			171		3.3	%
Total operating expenses		17,353			12,969			4,384		33.8	%

Operating profit (loss):
U.S. Domestic Package		(1,799	)		841			(2,640	)	N/A
International Package		(442	)		334			(776	)	N/A
Supply Chain & Freight		(541	)		22			(563	)	N/A
Total operating profit (loss)		(2,782	)		1,197			(3,979	)	N/A

Other income (expense):
Investment income		6			8			(2	)	-25.0	%
Interest expense		(109	)		(96	)		(13	)	13.5	%
Total other income (expense)		(103	)		(88	)		(15	)	17.0	%

Income (loss) before income taxes		(2,885	)		1,109			(3,994	)	N/A

Income tax expense (benefit)		(1,137	)		384			(1,521	)	N/A

Net income (loss)	$	(1,748	)	$	725		$	(2,473	)	N/A

Net income (loss) as a percentage of revenue		-12.0	%		5.1	%

Per share amounts
Basic earnings (loss) per share	$	(1.83	)	$	0.75		$	(2.58	)	N/A
Diluted earnings (loss) per share	$	(1.83	)	$	0.74		$	(2.57	)	N/A

Weighted-average shares outstanding
Basic		956			968			(12	)	-1.2	%
Diluted		956			977			(21	)	-2.1	%

As adjusted income data:
Operating profit:
U.S. Domestic Package (1)	$	1,378		$	1,320		$	58		4.4	%
International Package (1)		499			505			(6	)	-1.2	%
Supply Chain & Freight (1)		172			199			(27	)	-13.6	%
Total operating profit (1)		2,049			2,024			25		1.2	%

Income before income taxes (1)	$	1,946		$	1,936		$	10		0.5	%
Net income (2)	$	1,275		$	1,252		$	23		1.8	%

Basic earnings per share (2)	$	1.33		$	1.29		$	0.04		3.1	%
Diluted earnings per share (2)	$	1.32		$	1.28		$	0.04		3.1	%

(2) Fourth quarter 2012 and 2011 net income and earnings per share amounts exclude the impact of the pension mark-to-market adjustment described in (1), which decreased net income by $3.023 billion and $527 million, respectively. 4th quarter 2012 adjusted diluted earnings per share is based on weighted-average shares outstanding of 965 million.

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,				Change
	2012		2011		$/ #			%

Revenue (in millions):
U.S. Domestic Package:
Next Day Air	$	1,669	$	1,584	$	85		5.4	%
Deferred		992		1,022		(30	)	-2.9	%
Ground		6,272		6,064		208		3.4	%
Total U.S. Domestic Package		8,933		8,670		263		3.0	%
International Package:
Domestic		676		667		9		1.3	%
Export		2,391		2,358		33		1.4	%
Cargo		134		128		6		4.7	%
Total International Package		3,201		3,153		48		1.5	%
Supply Chain & Freight:
Forwarding and Logistics		1,623		1,583		40		2.5	%
Freight		671		632		39		6.2	%
Other		143		128		15		11.7	%
Total Supply Chain & Freight		2,437		2,343		94		4.0	%
Consolidated	$	14,571	$	14,166	$	405		2.9	%

Consolidated volume (in millions)		1,148		1,134		14		1.2	%

Operating weekdays		61		62		(1	)

Average Daily Package Volume (in thousands):
U.S. Domestic Package:
Next Day Air		1,405		1,305		100		7.7	%
Deferred		1,296		1,314		(18	)	-1.4	%
Ground		13,461		13,068		393		3.0	%
Total U.S. Domestic Package		16,162		15,687		475		3.0	%
International Package:
Domestic		1,559		1,559		-		0.0	%
Export		1,100		1,043		57		5.5	%
Total International Package		2,659		2,602		57		2.2	%
Consolidated		18,821		18,289		532		2.9	%

Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air	$	19.47	$	19.58	$	(0.11	)	-0.6	%
Deferred		12.55		12.54		0.01		0.1	%
Ground		7.64		7.48		0.16		2.1	%
Total U.S. Domestic Package		9.06		8.91		0.15		1.7	%
International Package:
Domestic		7.11		6.90		0.21		3.0	%
Export		35.63		36.46		(0.83	)	-2.3	%
Total International Package		18.91		18.75		0.16		0.9	%
Consolidated	$	10.45	$	10.31	$	0.14		1.4	%

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,						Change
	2012			2011			$			%
_{(amounts in millions, except per share data)}
Statement of Income Data:
Revenue:
U.S. Domestic Package	$	32,856		$	31,717		$	1,139		3.6	%
International Package		12,124			12,249			(125	)	-1.0	%
Supply Chain & Freight		9,147			9,139			8		0.1	%
Total revenue		54,127			53,105			1,022		1.9	%

Operating expenses:
Compensation and benefits		33,102			27,575			5,527		20.0	%
Other		19,682			19,450			232		1.2	%
Total operating expenses		52,784			47,025			5,759		12.2	%

Operating profit:
U.S. Domestic Package		459			3,764			(3,305	)	-87.8	%
International Package		869			1,709			(840	)	-49.2	%
Supply Chain & Freight		15			607			(592	)	-97.5	%
Total operating profit		1,343			6,080			(4,737	)	-77.9	%

Other income (expense):
Investment income		24			44			(20	)	-45.5	%
Interest expense		(393	)		(348	)		(45	)	12.9	%
Total other income (expense)		(369	)		(304	)		(65	)	21.4	%

Income before income taxes		974			5,776			(4,802	)	-83.1	%

Income tax expense		167			1,972			(1,805	)	-91.5	%

Net income	$	807		$	3,804		$	(2,997	)	-78.8	%

Net income as a percentage of revenue		1.5	%		7.2	%

Per share amounts
Basic earnings per share	$	0.84		$	3.88		$	(3.04	)	-78.4	%
Diluted earnings per share	$	0.83		$	3.84		$	(3.01	)	-78.4	%

Weighted-average shares outstanding
Basic		960			981			(21	)	-2.1	%
Diluted		969			991			(22	)	-2.2	%

As adjusted income data:
Operating profit:
U.S. Domestic Package (1)	$	4,532		$	4,258		$	274		6.4	%
International Package (1)		1,810			1,880			(70	)	-3.7	%
Supply Chain & Freight (1)		728			736			(8	)	-1.1	%
Total operating profit		7,070			6,874			196		2.9	%

Income before income taxes (1)	$	6,701		$	6,570		$	131		2.0	%
Net income (2)	$	4,389		$	4,311		$	78		1.8	%

Basic earnings per share (2)	$	4.57		$	4.39		$	0.18		4.1	%
Diluted earnings per share (2)	$	4.53		$	4.35		$	0.18		4.1	%

(1) 2012 operating profit and consolidated income before income taxes exclude the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $4.831 billion, allocated between the U.S. Domestic Package segment ($3.177 billion), International Package segment ($941 million), and Supply Chain & Freight segment ($713 million). 2012 also excludes an $896 million pre-tax charge from the withdrawal liability associated with restructuring a multiemployer pension plan in the U.S. Domestic Package segment.

2011 operating profit and consolidated income before income taxes exclude the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $827 million, allocated between the U.S. Domestic Package segment ($479 million), International Package segment ($171 million), and Supply Chain & Freight segment ($177 million). 2011 operating profit and consolidated income before income taxes also excludes a $33 million gain on certain real estate transactions ($15 million loss in U.S. Domestic Package and a $48 million gain in Supply Chain & Freight).

(2) 2012 net income and earnings per share amounts exclude the after tax impact of the adjustments described in (1), which combined to a decrease in net income by $3.582 billion.

2011 net income and earnings per share amounts exclude the after tax impact of the adjustments

described in (1), which combined to a decrease net income by $507 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)

	Twelve Months Ended
	December 31,				Change
	2012		2011		$/ #			%

Revenue (in millions):
U.S. Domestic Package:
Next Day Air	$	6,412	$	6,229	$	183		2.9	%
Deferred		3,392		3,299		93		2.8	%
Ground		23,052		22,189		863		3.9	%
Total U.S. Domestic Package		32,856		31,717		1,139		3.6	%
International Package:
Domestic		2,531		2,628		(97	)	-3.7	%
Export		9,033		9,056		(23	)	-0.3	%
Cargo		560		565		(5	)	-0.9	%
Total International Package		12,124		12,249		(125	)	-1.0	%
Supply Chain & Freight:
Forwarding and Logistics		5,977		6,103		(126	)	-2.1	%
Freight		2,640		2,563		77		3.0	%
Other		530		473		57		12.1	%
Total Supply Chain & Freight		9,147		9,139		8		0.1	%
Consolidated	$	54,127	$	53,105	$	1,022		1.9	%

Consolidated volume (in millions)		4,107		4,013		94		2.3	%

Operating weekdays		252		254		(2	)

Average Daily Package Volume (in thousands):
U.S. Domestic Package:
Next Day Air		1,277		1,206		71		5.9	%
Deferred		1,031		975		56		5.7	%
Ground		11,588		11,230		358		3.2	%
Total U.S. Domestic Package		13,896		13,411		485		3.6	%
International Package:
Domestic		1,427		1,444		(17	)	-1.2	%
Export		972		942		30		3.2	%
Total International Package		2,399		2,386		13		0.5	%
Consolidated		16,295		15,797		498		3.2	%

Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air	$	19.93	$	20.33	$	(0.40	)	-2.0	%
Deferred		13.06		13.32		(0.26	)	-2.0	%
Ground		7.89		7.78		0.11		1.4	%
Total U.S. Domestic Package		9.38		9.31		0.07		0.8	%
International Package:
Domestic		7.04		7.17		(0.13	)	-1.8	%
Export		36.88		37.85		(0.97	)	-2.6	%
Total International Package		19.13		19.28		(0.15	)	-0.8	%
Consolidated	$	10.82	$	10.82	$	-		0.0	%

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



United Parcel Service, Inc.
Reconciliation of Free Cash Flow
(unaudited)

	Preliminary
	Year-to-Date
(amounts in millions)	December 31,
Net cash from operations	$	7,213
Capital expenditures		(2,153	)
Proceeds from disposals of PP&E		95
Net change in finance receivables		101
Other investing activities		97
Free cash flow	$	5,353

Amounts are subject to reclassification.

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

UPS
Mark Dickens, Public Relations
404-828-8428
or
Andy Dolny, Investor Relations
404-828-8901

Source: UPS

Released January 31, 2013

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UPS Achieves Record Earnings Per Share

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