UPS 2Q Earnings Soar 71% on 13% Revenue Growth

Full-Year Guidance Raised; 2010 EPS Expected to Climb 45-50%

ATLANTA--(BUSINESS WIRE)-- UPS (NYSE:UPS) today announced diluted earnings per share of $0.84 for the second quarter of 2010, a 71% jump over the adjusted earnings of the prior-year period. Global revenue increased 13%, generating a 57% increase in operating profit to $1.4 billion.

On a reported basis, diluted earnings per share increased 91% over the $0.44 in the second quarter of 2009.

"UPS fired on all cylinders in the second quarter even in the face of a mixed global economic environment," said Scott Davis, UPS's chairman and CEO. "Thanks to superb execution, our U.S. domestic reorganization is producing better than expected results. Substantial growth in our international segment continues to outpace the market. It's clear the strategic direction we've set for the company is proving successful."

Based on expectations of continued momentum in every segment, UPS has increased its guidance for 2010 adjusted earnings to a range of $3.35 to $3.45 per diluted share, a 45%-to-50% increase over last year.


Consolidated Results         2Q 2010     2Q 2009    Adjusted
                                                    2Q 2009

Revenue                      $12.2   B   $10.8  B

Operating profit             $ 1.4   B   $ 895  M

Operating margin               11.5  %     8.3  %

Average volume per day         14.8  M     14.3 M

Diluted earnings per share   $ 0.84      $ 0.44     $ 0.49



For the three months ended June 30, 2010, operating margin expanded 320 basis points to 11.5% and consolidated volume totaled 948 million packages, a 4% increase. Revenue per piece improved 7%, reflecting higher base rates, fuel surcharge increases and heavier average shipment weight.

In the prior-year quarter, UPS took a $48 million after-tax charge for the remeasurement of certain foreign currency obligations that did not qualify for hedge accounting treatment. That adjustment reduced second quarter 2009 diluted earnings per share by $0.05.

As the quarter ended, President Obama named UPS Chairman and CEO Scott Davis to the President's Export Council. As an industry leader, Davis will advise the administration on policies and programs to improve U.S. exports.

Cash Position

For the six months ending June 30, UPS generated more than $2.5 billion in free cash flow. The company also:

    --  Paid dividends totaling $910 million.
    --  Invested $690 million in capital expenditures.
    --  Repurchased approximately 7 million shares at a cost of $425 million.
    --  Ended the period with more than $4 billion in cash and marketable
        securities.


U.S. Domestic Package    2Q 2010     2Q 2009

Revenue                  $ 7.27  B   $6.79 B

Operating profit         $ 748   M   $ 476   M

Operating margin           10.3  %     7.0   %

Average volume per day     12.62 M     12.47 M



Operating profit climbed 57% to $748 million. Revenue increased 7% with margin expansion of 330 basis points. This operating leverage was driven by improved yields and additional efficiencies throughout the UPS integrated network.

Average daily package volume rose more than 1% during the quarter, driven by a 2% growth in ground volume. Revenue per piece improved 6%, primarily through higher fuel surcharges and increases in base pricing. Yields on air products climbed more than 11%.


International Package   2Q 2010   2Q 2009

Revenue                 $ 2.77 B  $ 2.25 B

Operating profit        $ 521  M  $ 293  M

Operating margin          18.8 %    13.0 %

Average volume per day    2.18 M    1.82 M



The operating profit for the segment increased 78% to $521 million on a 23% jump in revenue. Operating margin improved 580 basis points to 18.8%. Export volume increased 15%, outpacing the market due to strong growth in all regions with Asia leading the way, up more than 40%.

Non-U.S. domestic volume increased 24%, driven by an acquisition in Turkey in the third quarter of last year as well as 13% organic growth, powered by strength in core European countries and Canada.

During the quarter, UPS announced new alliances with its local service partners in Malaysia and Vietnam. These agreements will provide greater access to UPS's broad portfolio of services and superior global network for customers in these important emerging markets.


Supply Chain and Freight  2Q 2010   2Q 2009

Revenue                   $ 2.16 B  $ 1.79 B

Operating profit          $ 133  M  $ 126  M

Operating margin            6.1  %    7.0  %



Each business unit in the segment improved profitability. Forwarding led the way with tonnage growth exceeding 30%. However, margin expansion was limited due to capacity constraints in the global air freight market.

UPS Freight revenue grew 10% over last year, driven by improved yield and higher weight per shipment. As expected, UPS Freight returned to profitability in the second quarter.

During the quarter, UPS hosted its fifth annual Healthcare Forum in Washington, D.C. Healthcare logistics experts gathered to discuss UPS solutions that create more efficient supply chains. In addition, trends were discussed on healthcare reform, regulatory issues and opportunities in emerging markets.

Outlook

"UPS's performance in the second quarter was driven by our ability to respond to customer's needs through our broad product portfolio and integrated global network," said Kurt Kuehn, UPS's chief financial officer. "We experienced strong revenue growth across the board, with substantial margin expansion in our U.S. and International segments.

"Despite the anticipated slow pace of the U.S. recovery and a cautious outlook for Europe, we are confident in our ability to grow the business and improve profits," Kuehn added. "Therefore we are raising our full year 2010 guidance with expected adjusted earnings growth of 45%-to-50% per share."

UPS (NYSE: UPS) is the world's largest package delivery company and a global leader in supply chain and freight services. With more than a century of experience in transportation and logistics, UPS is a leading global trade expert equipped with a broad portfolio of solutions. Headquartered in Atlanta, Ga., UPS serves more than 215 countries and territories worldwide. The company can be found on the Web at UPS.com and its corporate blog can be found at www.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 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. In the first quarter of 2009, we recorded a $181 million pre-tax impairment charge related to our McDonnell-Douglas DC-8-71 and DC-8-73 aircraft fleets. In the second quarter of 2009, we recorded a $77 million pre-tax charge for the remeasurement of certain obligations denominated in foreign currencies, in which hedge accounting was not able to be applied. We presented second quarter and year-to-date 2010 and 2009 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, 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 - Second Quarter

(unaudited)

                                        Three Months Ended

                                        June 30,             Change

                                          2010      2009        $        %

(amounts in millions, except per share
data)

Statement of Income Data:

Revenue:

U.S. Domestic Package                   $ 7,269   $ 6,789     $ 480      7.1   %

International Package                     2,771     2,246       525      23.4  %

Supply Chain & Freight                    2,164     1,794       370      20.6  %

Total revenue                             12,204    10,829      1,375    12.7  %

Operating expenses:

Compensation and benefits                 6,515     6,330       185      2.9   %

Other                                     4,287     3,604       683      19.0  %

Total operating expenses                  10,802    9,934       868      8.7   %

Operating profit:

U.S. Domestic Package                     748       476         272      57.1  %

International Package                     521       293         228      77.8  %

Supply Chain & Freight                    133       126         7        5.6   %

Total operating profit                    1,402     895         507      56.6  %

Other income (expense):

Investment income (loss)                  (18)      (22    )    4        -18.2 %

Interest expense                          (84)      (181   )    97       -53.6 %

Total other income (expense)              (102)     (203   )    101      -49.8 %

Income before income taxes                1,300     692         608      87.9  %

Income tax expense                        455       247         208      84.2  %

Net income                              $ 845     $ 445       $ 400      89.9  %

Net income as a percentage of revenue     6.9%      4.1    %

Per share amounts

Basic earnings per share                $ 0.85    $ 0.45      $ 0.40     88.9  %

Diluted earnings per share              $ 0.84    $ 0.44      $ 0.40     90.9  %

Weighted-average shares outstanding

Basic                                     994       998         (4    )  -0.4  %

Diluted                                   1,003     1,004       (1    )  -0.1  %

As adjusted income data:

Operating profit:

U.S. Domestic Package                   $ 748     $ 476       $ 272      57.1  %

International Package                     521       293         228      77.8  %

Supply Chain & Freight                    133       126         7        5.6   %

Total operating profit                    1,402     895         507      56.6  %

Income before income taxes (1)          $ 1,300   $ 769       $ 531      69.1  %

Net income (2)                          $ 845     $ 493       $ 352      71.4  %

Basic earnings per share (2)            $ 0.85    $ 0.49      $ 0.36     73.5  %

Diluted earnings per share (2)          $ 0.84    $ 0.49      $ 0.35     71.4  %

(1) Second quarter 2009 interest expense and consolidated income before income
taxes exclude a $77 million charge for the remeasurement of certain
obligations denominated in foreign currencies, in which hedge accounting was
not able to be applied.

(2) Second quarter 2009 net income and earnings per share amounts exclude the
after-tax effect of the currency remeasurement charge discussed in (1), which
totaled $48 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

                                     2010      2009    $ / #      %

Revenue (in millions):

U.S. Domestic Package:

Next Day Air                       $ 1,463   $ 1,315   $ 148      11.3 %

Deferred                             698       652       46       7.1  %

Ground                               5,108     4,822     286      5.9  %

Total U.S. Domestic Package          7,269     6,789     480      7.1  %

International Package:

Domestic                             561       478       83       17.4 %

Export                               2,085     1,677     408      24.3 %

Cargo                                125       91        34       37.4 %

Total International Package          2,771     2,246     525      23.4 %

Supply Chain & Freight:

Forwarding and Logistics             1,498     1,183     315      26.6 %

Freight                              555       507       48       9.5  %

Other                                111       104       7        6.7  %

Total Supply Chain & Freight         2,164     1,794     370      20.6 %

Consolidated                       $ 12,204  $ 10,829  $ 1,375    12.7 %

Consolidated volume (in millions)    948       914       34       3.6  %

Operating weekdays                   64        64        -

Average Daily Package Volume (in
thousands):

U.S. Domestic Package:

Next Day Air                         1,180     1,180     -        0.0  %

Deferred                             845       879       (34   )  -3.9 %

Ground                               10,593    10,406    187      1.8  %

Total U.S. Domestic Package          12,618    12,465    153      1.2  %

International Package:

Domestic                             1,337     1,079     258      23.9 %

Export                               847       740       107      14.5 %

Total International Package          2,184     1,819     365      20.1 %

Consolidated                         14,802    14,284    518      3.6  %

Average Revenue Per Piece:

U.S. Domestic Package:

Next Day Air                       $ 19.37   $ 17.41   $ 1.96     11.3 %

Deferred                             12.91     11.59     1.32     11.4 %

Ground                               7.53      7.24      0.29     4.0  %

Total U.S. Domestic Package          9.00      8.51      0.49     5.8  %

International Package:

Domestic                             6.56      6.92      (0.36 )  -5.2 %

Export                               38.46     35.41     3.05     8.6  %

Total International Package          18.93     18.51     0.42     2.3  %

Consolidated                       $ 10.47   $ 9.78    $ 0.69     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

                                        2010        2009        $        %

(amounts in millions, except per
share data)

Statement of Income Data:

Revenue:

U.S. Domestic Package                 $ 14,371    $ 13,738    $ 633      4.6   %

International Package                   5,410       4,486       924      20.6  %

Supply Chain & Freight                  4,151       3,543       608      17.2  %

Total revenue                           23,932      21,767      2,165    9.9   %

Operating expenses:

Compensation and benefits               13,054      12,662      392      3.1   %

Other                                   8,434       7,492       942      12.6  %

Total operating expenses                21,488      20,154      1,334    6.6   %

Operating profit:

U.S. Domestic Package                   1,310       860         450      52.3  %

International Package                   948         587         361      61.5  %

Supply Chain & Freight                  186         166         20       12.0  %

Total operating profit                  2,444       1,613       831      51.5  %

Other income (expense):

Investment income (loss)                (22    )    (9     )    (13   )  144.4 %

Interest expense                        (169   )    (263   )    94       -35.7 %

Total other income (expense)            (191   )    (272   )    81       -29.8 %

Income before income taxes              2,253       1,341       912      68.0  %

Income taxes                            875         495         380      76.8  %

Net income                            $ 1,378     $ 846       $ 532      62.9  %

Net income as a percentage of           5.8    %    3.9    %
revenue

Per share amounts

Basic earnings per share              $ 1.39      $ 0.85      $ 0.54     63.5  %

Diluted earnings per share            $ 1.37      $ 0.84      $ 0.53     63.1  %

Weighted average shares outstanding

Basic                                   994         998         (4    )  -0.4  %

Diluted                                 1,003       1,003       -        0.0   %

As adjusted income data:

U.S. domestic package (1)             $ 1,408     $ 1,041     $ 367      35.3  %

International package                   948         587         361      61.5  %

Supply chain and freight (2)            224         166         58       34.9  %

Total operating profit                  2,580       1,794       786      43.8  %

Income before income taxes (1), (2),  $ 2,389     $ 1,599     $ 790      49.4  %
(3)

Net income (4)                        $ 1,553     $ 1,010     $ 543      53.8  %

Basic earnings per share (4)          $ 1.56      $ 1.01      $ 0.55     54.5  %

Diluted earnings per share (4)        $ 1.55      $ 1.01      $ 0.54     53.5  %

(1) 2010 U.S. Domestic Package operating profit and consolidated income before
income taxes exclude a $98 million restructuring charge related to the
reorganization of our domestic management structure. This charge reflects the
value of voluntary retirement benefits, severance benefits and unvested stock
compensation. 2009 U.S. Domestic Package operating profit and consolidated
income before income taxes exclude a $181 million impairment charge on our
McDonnell-Douglas DC-8-71 and DC-8-73 airframes, engines, and parts, due to an
acceleration of the planned retirement of these aircraft.

(2) 2010 Supply Chain & Freight operating profit and consolidated income before
income taxes exclude a $38 million loss on the sale of a specialized
transportation business in Germany.

(3) 2009 interest expense and consolidated income before income taxes exclude a
$77 million charge for the remeasurement of certain obligations denominated in
foreign currencies, in which hedge accounting was not able to be applied.

(4) 2010 net income and earnings per share amounts exclude 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 exclude a $76 million
charge to income tax expense, resulting from a change in the tax filing status
of a German subsidiary. 2009 net income and earnings per share amounts exclude
the after-tax effect of the impairment and currency remeasurement charges
discussed in (1) and (3), which totaled $164 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,            Change

                                     2010      2009    $ / #      %

Revenue (in millions):

U.S. Domestic Package:

Next Day Air                       $ 2,845   $ 2,696   $ 149      5.5  %

Deferred                             1,392     1,345     47       3.5  %

Ground                               10,134    9,697     437      4.5  %

Total U.S. Domestic Package          14,371    13,738    633      4.6  %

International Package:

Domestic                             1,145     942       203      21.5 %

Export                               4,017     3,363     654      19.4 %

Cargo                                248       181       67       37.0 %

Total International Package          5,410     4,486     924      20.6 %

Supply Chain & Freight:

Forwarding and Logistics             2,889     2,380     509      21.4 %

Freight                              1,047     961       86       8.9  %

Other                                215       202       13       6.4  %

Total Supply Chain & Freight         4,151     3,543     608      17.2 %

Consolidated                       $ 23,932  $ 21,767  $ 2,165    9.9  %

Consolidated volume (in millions)    1,888     1,830     58       3.1  %

Operating weekdays                   127       127       -

Average Daily Package Volume (in
thousands):

U.S. Domestic Package:

Next Day Air                         1,163     1,185     (22   )  -1.9 %

Deferred                             872       890       (18   )  -2.0 %

Ground                               10,637    10,495    142      1.4  %

Total U.S. Domestic Package          12,672    12,570    102      0.8  %

International Package:

Domestic                             1,350     1,088     262      24.1 %

Export                               841       752       89       11.8 %

Total International Package          2,191     1,840     351      19.1 %

Consolidated                         14,863    14,410    453      3.1  %

Average Revenue Per Piece:

U.S. Domestic Package:

Next Day Air                       $ 19.26   $ 17.91   $ 1.35     7.5  %

Deferred                             12.57     11.90     0.67     5.6  %

Ground                               7.50      7.28      0.22     3.0  %

Total U.S. Domestic Package          8.93      8.61      0.32     3.7  %

International Package:

Domestic                             6.68      6.82      (0.14 )  -2.1 %

Export                               37.61     35.21     2.40     6.8  %

Total International Package          18.55     18.42     0.13     0.7  %

Consolidated                       $ 10.35   $ 9.86    $ 0.49     5.0  %

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)              June 30, 2010

Net cash from operations           $ 3,009

Capital expenditures                 (694  )

Proceeds from disposals of PP&E      40

Net change in finance receivables    46

Other investing activities           130

Free cash flow                     $ 2,531

Amounts are subject to reclassification.

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




    Source: UPS