UPS 2Q Earnings Per Share Jump 25% on Revenue Growth of 8%
U.S. Domestic Profit Improves 31%; Supply Chain and Freight Profit Sets New High
ATLANTA--(BUSINESS WIRE)-- UPS (NYSE:UPS) today announced adjusted diluted earnings per share of $1.05 for the second quarter of 2011, a 25% improvement over the $0.84 for the prior-year period. Total revenue increased 8.1% to $13.2 billion.
On an adjusted basis, U.S. Domestic operating profit increased 31%, while Supply Chain and Freight generated record operating profit of $187 million.
On a reported basis, diluted earnings per share for the quarter were $1.07, a 27% increase over the same quarter last year. During the period, UPS recorded two real estate transactions that resulted in a net after-tax gain of $20 million.
"UPS's results reflect the continued execution of our strategy and the ability to grow earnings in an uneven economic environment," said Scott Davis, UPS chairman and CEO. "Customers are recognizing the value of the integrated solutions that leverage UPS capabilities around the globe and across the entire supply chain."
Consolidated Results 2Q 2011 Adjusted 2Q 2010
2Q 2011
Revenue $13.19 B $12.20 B
Operating profit $1.70 B $1.67 B $1.40 B
Operating margin 12.9 % 12.6 % 11.5 %
Average volume per day 14.9 M 14.8 M
Diluted earnings per share $1.07 $1.05 $0.84
In the second quarter, UPS delivered 957 million packages generating $13.2 billion in revenue. Adjusted operating margin expanded by 110 basis points to 12.6%, while reported operating margin improved 140 basis points to 12.9%.
Cash Position
For the six months ending June 30, UPS generated $2.3 billion in free cash flow even after making accelerated pension contributions of $1.2 billion. Capital expenditures for the period were $951 million, as the company has added four B-767 and two B-747-400 aircraft to its fleet.
In addition, year-to-date, UPS paid dividends of more than $1 billion, up 10.6% per share. The company also repurchased 14.4 million shares for approximately $1.1 billion.
U.S. Domestic Package 2Q 2011 Adjusted 2Q 2010
2Q 2011
Revenue $7.74 B $7.27 B
Operating profit $966 M $981 M $748 M
Operating margin 12.5 % 12.7 % 10.3 %
Average volume per day 12.63 M 12.62 M
Operating profit improved 31% on an adjusted basis with revenue growth of 6.4%. Volume growth was flat as a result of the slow U.S. economy. Adjusted operating margin expanded 240 basis points to 12.7% due to higher yields and network efficiencies.
On a reported basis, including the negative impact of a $15 million real estate transaction, operating profit increased 29% and operating margin expanded by 220 basis points to 12.5%.
Last month, UPS received the No. 1 ranking in the express delivery industry as reported by the University of Michigan's American Customer Satisfaction Index. This survey measures key attributes such as consumer expectations, quality and value of services as well as consumers' intention to re-purchase.
International Package 2Q 2011 2Q 2010 Revenue $3.14 B $2.77 B Operating profit $497 M $521 M Operating margin 15.8 % 18.8 % Average volume per day 2.32 M 2.18 M
Revenue for the segment improved 13.3% driven by an export volume increase of 8.1%, with Europe and China continuing their strong growth trends. Revenue per piece climbed 6.3% with currency, fuel surcharges, rate increases and product mix all contributing.
Currency translation and hedging programs negatively impacted operating profit by more than $50 million.
Continuing the expansion of its Asian air network, UPS launched a new flight this week to serve western China. The flight originates in Cologne, Germany, and makes a stop in Warsaw before transiting to Chengdu, China, on the way to Shanghai. With the addition of the Chengdu flight, UPS now connects Europe and Asia with 24 flights per week, providing more next day options, guaranteed, than any logistics carrier.
Supply Chain & Freight 2Q 2011 Adjusted 2Q 2010
2Q 2011
Revenue $2.32 B $2.16 B
Operating profit $235 M $187 M $133 M
Operating margin 10.2 % 8.1 % 6.1 %
Operating profit climbed 41% on an adjusted basis to $187 million with revenue growth of 7%. The adjusted operating margin for the segment increased 200 basis points to 8.1%. This was driven by significant improvements in the Forwarding business as a result of revenue management initiatives and favorable buy rates.
On a reported basis, including the positive impact of a $48 million real estate transaction, operating profit increased 77% and operating margin grew 410 basis points to 10.2%.
UPS Freight revenue increased 19% over the prior-year period, driving improved profitability. The business saw strong increases in LTL revenue per hundredweight and gross weight hauled, up 11.2% and 6.2%, respectively.
In June, UPS and Merck announced a significant expansion of their North American relationship with a global distribution and logistics agreement. This agreement includes aspects of Merck's global supply chain around the world. UPS will provide various services including distribution, warehousing and multi-modal transportation to Merck across Europe, Asia and Latin America.
Outlook
"Despite softening economic conditions, UPS delivered its highest ever second quarter earnings per share," said Kurt Kuehn, UPS's chief financial officer. "These results were driven by the quality of revenue in U.S. Domestic, superior export volume growth in International and record Supply Chain & Freight results.
"We remain confident in our ability to execute and surpass prior peak EPS this year," Kuehn continued. "Although economic conditions will impact our performance, we reiterate guidance for 2011 adjusted diluted earnings per share to a range of $4.15-to-$4.40."
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 second quarter results with investors and analysts during a conference call at 8:30 a.m. EDT 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.
In the second quarter of 2011, we recorded certain real estate transactions, including a $15 million pre-tax loss for U.S. Domestic Package segment and a $48 million pre-tax gain in the Supply Chain & Freight segment. In the first quarter of 2010, we recorded a $98 million pre-tax restructuring charge in our U.S. Domestic Package operations related to the reorganization of our domestic management structure. We also incurred a $38 million pre-tax loss on the sale of a specialized transportation business in Germany in our Supply Chain & Freight segment. Additionally, we recorded a $76 million charge to income tax expense, resulting from a change in the filing status of a German subsidiary. We presented second quarter and year-to-date 2011 and 2010 operating profit, operating margin, pre-tax income, net income and earnings per share excluding the impact of these items as we believe these adjusted measures better enable shareowners to focus on period-over-period operating performance. The underlying matters that produced these charges were unique, and we do not believe they are reflective of the types of charges that will affect future results.
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, increases 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 - Second Quarter
(unaudited)
Three Months Ended
June 30, Change
2011 2010 $ %
(amounts in millions, except per
share data)
Statement of Income Data:
Revenue:
U.S. Domestic Package $ 7,737 $ 7,269 $ 468 6.4 %
International Package 3,139 2,771 368 13.3 %
Supply Chain & Freight 2,315 2,164 151 7.0 %
Total revenue 13,191 12,204 987 8.1 %
Operating expenses:
Compensation and benefits 6,683 6,515 168 2.6 %
Other 4,810 4,287 523 12.2 %
Total operating expenses 11,493 10,802 691 6.4 %
Operating profit:
U.S. Domestic Package 966 748 218 29.1 %
International Package 497 521 (24 ) -4.6 %
Supply Chain & Freight 235 133 102 76.7 %
Total operating profit 1,698 1,402 296 21.1 %
Other income (expense):
Investment income (loss) 9 (18 ) 27 N/A
Interest expense (83 ) (84 ) 1 -1.2 %
Total other income (expense) (74 ) (102 ) 28 -27.5 %
Income before income taxes 1,624 1,300 324 24.9 %
Income tax expense 561 455 106 23.3 %
Net income $ 1,063 $ 845 $ 218 25.8 %
Net income as a percentage of revenue 8.1 % 6.9 %
Per share amounts
Basic earnings per share $ 1.08 $ 0.85 $ 0.23 27.1 %
Diluted earnings per share $ 1.07 $ 0.84 $ 0.23 27.4 %
Weighted-average shares outstanding
Basic 988 994 (6 ) -0.6 %
Diluted 998 1,003 (5 ) -0.5 %
As adjusted income data:
Operating profit:
U.S. Domestic Package (1) $ 981 $ 748 $ 233 31.1 %
International Package 497 521 (24 ) -4.6 %
Supply Chain & Freight (1) 187 133 54 40.6 %
Total operating profit 1,665 1,402 263 18.8 %
Income before income taxes (1) $ 1,591 $ 1,300 $ 291 22.4 %
Net income (2) $ 1,043 $ 845 $ 198 23.4 %
Basic earnings per share (2) $ 1.06 $ 0.85 $ 0.21 24.7 %
Diluted earnings per share (2) $ 1.05 $ 0.84 $ 0.21 25.0 %
(1) Second quarter 2011 operating profit and consolidated income before income
taxes excluded the impact of gains and losses on certain real estate
transactions, including a $15 million loss for U.S. Domestic Package segment and
a $48 million gain in the Supply Chain & Freight segment.
(2) Second quarter 2011 net income and earnings per share amounts excluded the
after-tax impact of the U.S. Domestic Package and Supply Chain & Freight real
estate transactions described in (1), which total a combined $20 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, Change
2011 2010 $ / # %
Revenue (in millions):
U.S. Domestic Package:
Next Day Air $ 1,562 $ 1,463 $ 99 6.8 %
Deferred 764 698 66 9.5 %
Ground 5,411 5,108 303 5.9 %
Total U.S. Domestic Package 7,737 7,269 468 6.4 %
International Package:
Domestic 672 561 111 19.8 %
Export 2,316 2,085 231 11.1 %
Cargo 151 125 26 20.8 %
Total International Package 3,139 2,771 368 13.3 %
Supply Chain & Freight:
Forwarding and Logistics 1,539 1,498 41 2.7 %
Freight 660 555 105 18.9 %
Other 116 111 5 4.5 %
Total Supply Chain & Freight 2,315 2,164 151 7.0 %
Consolidated $ 13,191 $ 12,204 $ 987 8.1 %
Consolidated volume (in millions) 957 948 9 1.0 %
Operating weekdays 64 64 -
Average Daily Package Volume (in
thousands):
U.S. Domestic Package:
Next Day Air 1,172 1,180 (8 ) -0.7 %
Deferred 851 845 6 0.7 %
Ground 10,604 10,593 11 0.1 %
Total U.S. Domestic Package 12,627 12,618 9 0.1 %
International Package:
Domestic 1,403 1,337 66 4.9 %
Export 916 847 69 8.1 %
Total International Package 2,319 2,184 135 6.2 %
Consolidated 14,946 14,802 144 1.0 %
Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air $ 20.82 $ 19.37 $ 1.45 7.5 %
Deferred 14.03 12.91 1.12 8.7 %
Ground 7.97 7.53 0.44 5.8 %
Total U.S. Domestic Package 9.57 9.00 0.57 6.3 %
International Package:
Domestic 7.48 6.56 0.92 14.0 %
Export 39.51 38.46 1.05 2.7 %
Total International Package 20.13 18.93 1.20 6.3 %
Consolidated $ 11.21 $ 10.47 $ 0.74 7.1 %
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, Change
2011 2010 $ %
(amounts in millions, except per
share data)
Statement of Income Data:
Revenue:
U.S. Domestic Package $ 15,280 $ 14,371 $ 909 6.3 %
International Package 6,039 5,410 629 11.6 %
Supply Chain & Freight 4,454 4,151 303 7.3 %
Total revenue 25,773 23,932 1,841 7.7 %
Operating expenses:
Compensation and benefits 13,291 13,054 237 1.8 %
Other 9,358 8,434 924 11.0 %
Total operating expenses 22,649 21,488 1,161 5.4 %
Operating profit:
U.S. Domestic Package 1,815 1,310 505 38.5 %
International Package 943 948 (5 ) -0.5 %
Supply Chain & Freight 366 186 180 96.8 %
Total operating profit 3,124 2,444 680 27.8 %
Other income (expense):
Investment income (loss) 20 (22 ) 42 N/A
Interest expense (168 ) (169 ) 1 -0.6 %
Total other income (expense) (148 ) (191 ) 43 -22.5 %
Income before income taxes 2,976 2,253 723 32.1 %
Income taxes 1,028 875 153 17.5 %
Net income $ 1,948 $ 1,378 $ 570 41.4 %
Net income as a percentage of 7.6 % 5.8 %
revenue
Per share amounts
Basic earnings per share $ 1.97 $ 1.39 $ 0.58 41.7 %
Diluted earnings per share $ 1.95 $ 1.37 $ 0.58 42.3 %
Weighted average shares outstanding
Basic 990 994 (4 ) -0.4 %
Diluted 1,000 1,003 (3 ) -0.3 %
As adjusted income data:
Operating profit:
U.S. Domestic Package (1) $ 1,830 $ 1,408 $ 422 30.0 %
International Package 943 948 (5 ) -0.5 %
Supply Chain & Freight (2) 318 224 94 42.0 %
Total operating profit 3,091 2,580 511 19.8 %
Income before income taxes (1), (2) $ 2,943 $ 2,389 $ 554 23.2 %
Net income (3) $ 1,928 $ 1,553 $ 375 24.1 %
Basic earnings per share (3) $ 1.95 $ 1.56 $ 0.39 25.0 %
Diluted earnings per share (3) $ 1.93 $ 1.55 $ 0.38 24.5 %
(1) 2011 U.S. Domestic Package operating profit and consolidated income before
income taxes excluded the impact of a $15 million loss on certain real estate
transactions. 2010 U.S. Domestic Package operating profit and consolidated
income before income taxes excluded a $98 million restructuring charge related
to the reorganization of our domestic management structure. This charge
reflected the value of voluntary retirement benefits, severance benefits and
unvested stock compensation.
(2) 2011 Supply Chain & Freight operating profit and consolidated income before
income taxes excluded the impact of a $48 million gain on certain real estate
transactions. 2010 Supply Chain & Freight operating profit and consolidated
income before income taxes excluded a $38 million loss on the sale of a
specialized transportation business in Germany.
(3) 2011 net income and earnings per share amounts excluded the after-tax
impact of the U.S. Domestic Package and Supply Chain & Freight real estate
transactions described in (1) and (2), which total a combined $20 million. 2010
net income and earnings per share amounts excluded the after-tax impact of the
U.S. Domestic Package restructuring charge described in (1) and the business
sale described in (2), which total a combined $99 million. Additionally, 2010
net income and earnings per share excluded a $76 million charge to income tax
expense, resulting from a change in the tax filing status of a German
subsidiary.
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, Change
2011 2010 $ / # %
Revenue (in millions):
U.S. Domestic Package:
Next Day Air $ 3,057 $ 2,845 $ 212 7.5 %
Deferred 1,517 1,392 125 9.0 %
Ground 10,706 10,134 572 5.6 %
Total U.S. Domestic Package 15,280 14,371 909 6.3 %
International Package:
Domestic 1,301 1,145 156 13.6 %
Export 4,447 4,017 430 10.7 %
Cargo 291 248 43 17.3 %
Total International Package 6,039 5,410 629 11.6 %
Supply Chain & Freight:
Forwarding and Logistics 2,968 2,889 79 2.7 %
Freight 1,264 1,047 217 20.7 %
Other 222 215 7 3.3 %
Total Supply Chain & Freight 4,454 4,151 303 7.3 %
Consolidated $ 25,773 $ 23,932 $ 1,841 7.7 %
Consolidated volume (in millions) 1,914 1,888 26 1.4 %
Operating weekdays 128 127 1
Average Daily Package Volume (in
thousands):
U.S. Domestic Package:
Next Day Air 1,164 1,163 1 0.1 %
Deferred 873 872 1 0.1 %
Ground 10,611 10,637 (26 ) -0.2 %
Total U.S. Domestic Package 12,648 12,672 (24 ) -0.2 %
International Package:
Domestic 1,398 1,350 48 3.6 %
Export 905 841 64 7.6 %
Total International Package 2,303 2,191 112 5.1 %
Consolidated 14,951 14,863 88 0.6 %
Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air $ 20.52 $ 19.26 $ 1.26 6.5 %
Deferred 13.58 12.57 1.01 8.0 %
Ground 7.88 7.50 0.38 5.1 %
Total U.S. Domestic Package 9.44 8.93 0.51 5.7 %
International Package:
Domestic $ 7.27 $ 6.68 $ 0.59 8.8 %
Export 38.39 37.61 0.78 2.1 %
Total International Package 19.50 18.55 0.95 5.1 %
Consolidated $ 10.99 $ 10.35 $ 0.64 6.2 %
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) June 30, 2011
Net cash from operations $ 3,335
Capital expenditures (951 )
Proceeds from disposals of PP&E 11
Net change in finance receivables 81
Other investing activities (128 )
Free cash flow $ 2,348
Amounts are subject to reclassification.
Source: UPS
Released July 26, 2011