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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): JANUARY 28, 2003
United Parcel Service, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 001-15451 58-2480149
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(State of incorporation) (Commission File Number) (IRS Employer Identification No.)
55 Glenlake Parkway, N.E.
Atlanta, Georgia 30328
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 828-6000
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
Press Release. On January 28, 2003, the registrant ("UPS") announced
its fourth quarter and annual results for the three months and year ended
December 31, 2002. The press release was as follows:
FOR IMMEDIATE RELEASE Contacts: Norman Black, Public Relations
404-828-7593
Kurt Kuehn, Investor Relations
404-828-6977
UPS FOURTH QUARTER RESULTS
PACED BY INTERNATIONAL SEGMENT
ATLANTA, Jan. 28, 2003 - Paced by record international performance,
UPS (NYSE:UPS) today reported solid gains in both revenue and net income for
the fourth quarter.
The quarter also saw several non-recurring items, the most notable of
which involved the final settlement of a tax dispute with the Internal Revenue
Service.
For the quarter ended Dec. 31, 2002, revenue totaled $8.26 billion, up
3.3% from the $8 billion reported during the prior-year period. Including
non-recurring items, consolidated operating profit improved 13.2% to $1.2
billion and net income increased 133% to $1.5 billion. Diluted earnings per
share totaled $1.32 for the quarter.
Adjusted to exclude non-recurring items, consolidated operating profit
improved 4.4% to $1.08 billion compared to the $1.03 billion reported in 2001,
and net income increased 3.9% to $670 million from $645 million. Earnings per
diluted share increased 3.5% to $0.59 versus $0.57 recorded during the period
in 2001.
Operating profit for the international segment more than doubled as
export revenue climbed 20% compared to the prior year. Revenue and operating
profit for the non-package segment increased substantially after excluding
non-recurring items. As expected, the weak American economy continued to impact
U.S. domestic package operations, but the 1.3% volume decline during the
quarter still reflected growing momentum compared with the prior two quarters.
"While we have not seen signs of an economic rebound in the United
States, our international business is showing strong growth and our non-package
initiatives are paying off," said Scott Davis, UPS's chief financial officer.
"Within the U.S., the holiday peak season started slowly and then surged at the
end, providing a test that our new UPS Worldport(SM) air hub passed with flying
colors.
-more-
"On the international front, the fourth quarter was our second
consecutive record quarter," Davis continued. "Our expanded network in Asia,
coupled with increased service through more than 100 additional Asian flights
during the West coast dock disruption, contributed substantially. In addition,
the European export market continued to demonstrate significant double-digit
growth."
In the international segment, revenue jumped 17% during the fourth
quarter to $1.3 billion compared to the $1.1 billion reported during the period
in 2001. Including non-recurring items, international operating profit totaled
$165 million. Excluding non-recurring items, operating profit jumped 133% to
$154 million compared to $66 million the prior year. Export volume continued
very strong, climbing 13% in Europe and 24% in Asia.
In the U.S. domestic segment, revenue totaled $6.22 billion for the
fourth quarter, essentially flat compared to $6.23 billion a year ago.
Including non-recurring items, operating profit was $1 billion. Excluding
non-recurring items, operating profit declined 9.1% to $831 million from the
$914 million reported in 2001. Average daily package volume in the United
States declined 1.3% for the quarter to 13.2 million.
In the non-package segment, revenue increased 12.4% to $735 million.
The business units within this segment that comprise Supply Chain Solutions,
UPS Logistics Group and UPS Freight Services, saw their combined revenues
increase 12.2% to $544 million during the quarter. Including non-recurring
items, the non-package segment did not show an operating profit. Excluding
non-recurring items, non-package operating profit increased to $95 million from
$54 million. The Logistics arm of Supply Chain Solutions showed substantial
improvements in profitability in the quarter.
Also during the fourth quarter, apart from the IRS settlement, several
other tax issues were favorably resolved. The overall impact was to reduce the
annual tax rate to 37.8% and the quarter's tax rate to 36%. The tax rate for
2003 is projected to be 37.5%.
There were several non-recurring items during the fourth quarter,
affecting both income and expense. First, UPS and the IRS recently finalized
their tentative settlement of all outstanding tax issues related to excess
value package insurance. As a result of the settlement, UPS recorded income,
before taxes, of $1.02 billion during the fourth quarter. The credits and
refunds associated with this settlement are expected to occur over the next
several years.
A second fourth-quarter item involved the manner in which employees
earn vacation pay. UPS modified its vacation plan to specify that vacation time
is earned during the year, as opposed to automatically being credited when the
new year begins. The change estimated a $197 million accrued liability as UPS
closed its books on 2002.
Finally, the company recorded $106 million in restructuring and
related charges in the non-package segment. This stems from the consolidation
of
4-4-4
numerous acquisitions and streamlining the Supply Chain Solutions unit to
more efficiently provide service to customers. The charge covers a reduction in
personnel and integration of facilities and information technology. The company
anticipates an additional $21 million in charges to complete this process,
primarily in the first half of 2003. Once completed, it should result in annual
savings of approximately $75 million.
In addition to the preceding non-recurring items, which affected the
fourth quarter, the company recorded a goodwill impairment charge of $72
million on its Mail Technologies unit retroactive to 2002's first quarter and
the adoption of FASB Statement No. 142.
For the full year ended Dec. 31, revenue totaled $31.3 billion, up
3.1% compared to the $30.3 billion reported during 2001. Including
non-recurring items, operating profit was $4.1 billion; net income was $3.18
billion, and diluted earnings per share were $2.81. Excluding non-recurring
items, operating profit rose 1.1% to $4 billion while net income was flat at
$2.42 billion and diluted earnings per share totaled $2.14 for the full year,
up 1% from the $2.12 recorded in 2001.
As to future guidance, Davis said the company expects 2003 first
quarter earnings in a range between $0.48 to $0.53 per diluted share compared
to $0.50 in 2002. While the company expects its volume growth momentum to
improve as 2003 unfolds, volume in the first quarter likely will be flat
compared to 2002.
Davis said the company should see an increase in earnings per share
for the full year between 10% and 15%. Results should strengthen through the
course of the year, starting in the second quarter. This should be driven both
by an economic recovery and more favorable comparisons to the periods in 2002
when labor negotiations slowed the U.S. package business. Capital expenditures
for 2003 should total about $2 billion.
"In the United States, the timing of the economic recovery is
definitely the biggest unknown," Davis said. "Outside the U.S., we expect to
see continued strong export growth, particularly in Asia and Europe, and an
increase in international profitability of 20% or more. And with the
realignment of Supply Chain Solutions, we're anticipating steady margin
expansion over the coming year."
UPS is the world's largest global transportation company, offering the
most extensive range of e-commerce and supply chain solutions for the movement
of goods, information and funds. Headquartered in Atlanta, Ga., UPS serves more
than 200 countries and territories worldwide. UPS stock trades on the New York
Stock Exchange (UPS) and the company can be found on the Web at www.ups.com.
# # #
DETAILED FINANCIAL SCHEDULES ARE AVAILABLE ON THE COMPANY'S WEB SITE.
EDITOR'S NOTE: UPS CFO Scott Davis will discuss fourth quarter results with
investors and analysts during a conference call later today at 10:00 am (EST).
That conference call is open to listeners through a live webcast at
www.ups.com. To access the call through the Website, click on "Investor
Relations" and then click on "Earnings Webcast."
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 involve certain risks and
uncertainties, including statements regarding the intent, belief or current
expectations of UPS and its management regarding the company's strategic
directions, prospects and future results. 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 (or customer behavior in anticipation of such events),
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 - FOURTH QUARTER
QUARTER ENDED DECEMBER 31,
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CHANGE
2002 NON-RECURRING 2002 --------------
AS REPORTED TRANSACTIONS AS ADJUSTED 2001 $ %
---------------------------------------------------------------------
(financial data in millions, except per share amounts)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $6,224 $ -- $6,224 $6,234 $(10) -0.2%
International package 1,298 -- 1,298 1,109 189 17.0%
Non-package 735 -- 735 654 81 12.4%
--------------------------------------------------------
Total revenue 8,257 -- 8,257 7,997 260 3.3%
Operating expenses:
Compensation and benefits(1) 4,540 197 4,737 4,571 166 3.6%
Other(2) 2,546 (106) 2,440 2,392 48 2.0%
--------------------------------------------------------
Total operating expenses 7,086 91 7,177 6,963 214 3.1%
Operating profit:
U.S. domestic package 1,006 (175) 831 914 (83) -9.1%
International package 165 (11) 154 66 88 133.3%
Non-package -- 95 95 54 41 75.9%
--------------------------------------------------------
Total operating profit 1,171 (91) 1,080 1,034 46 4.4%
Other income (expense):
Investment income 19 -- 19 33 (14) -42.4%
Interest expense (52) -- (52) (48) (4) 8.3%
Tax assessment reversal(3) 1,023 (1,023) -- -- -- N/A
--------------------------------------------------------
Total other income (expense) 990 (1,023) (33) (15) (18) N/A
--------------------------------------------------------
Income before income taxes 2,161 (1,114) 1,047 1,019 28 2.7%
Income taxes 659 (282) 377 374 3 0.8%
--------------------------------------------------------
Net income $1,502 $ (832) $ 670 $ 645 $ 25 3.9%
========================================================
Net income as a percentage of
revenue 18.2% 8.1% 8.1%
Per share amounts
Basic earnings per share $ 1.34 $ 0.60 $ 0.57
Diluted earnings per share $ 1.32 $ 0.59 $ 0.57
Weighted average shares outstanding
Basic 1,124 1,124 1,124
Diluted 1,135 1,135 1,137
(1) UPS adopted a change in our vacation policy whereby vacation time is now
earned during the year of entitlement. This resulted in the elimination of
a $197 million liability, with a credit to expense in the following
segments: U.S. domestic package: $175 million; International package: $11
million; and Non-package: $11 million.
(2) UPS recorded $106 million in restructuring and related charges in
connection with the reorganization of our Non-package operations.
(3) UPS recorded a $1,023 million credit to expense related to the difference
between an original tax assessment expense charge recorded in 1999, and the
estimated settlement amount that has now been approved.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
1
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - FOURTH QUARTER
QUARTER ENDED DECEMBER 31, CHANGE
-------------------------------------------
2002 2001 $ %
-------------------------------------------
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 1,356 $ 1,357 $ (1) -0.1%
Deferred 801 802 (1) -0.1%
Ground 4,067 4,075 (8) -0.2%
-----------------------------
Total U.S. domestic package 6,224 6,234 (10) -0.2%
International package:
Domestic 254 242 12 5.0%
Export 910 758 152 20.1%
Cargo 134 109 25 22.9%
-----------------------------
Total International package 1,298 1,109 189 17.0%
Non-package:
UPS Logistics Group 298 235 63 26.8%
UPS Freight Services 246 250 (4) -1.6%
Other 191 169 22 13.0%
-----------------------------
Total Non-package 735 654 81 12.4%
-----------------------------
Consolidated $ 8,257 $ 7,997 $ 260 3.3%
=============================
Memo: Gross revenue
UPS Logistics Group $ 371 $ 294 $ 77 26.2%
UPS Freight Services $ 577 $ 501 $ 76 15.2%
Consolidated volume (in millions) 885 896 (11) -1.2%
Operating weekdays 61 61
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. domestic package:
Next day air 1,180 1,172 8 -0.7%
Deferred 1,072 1,089 (17) -1.6%
Ground 10,938 11,099 (161) -1.5%
-----------------------------
Total U.S. domestic package 13,190 13,360 (170) -1.3%
International package:
Domestic 831 874 (43) -4.9%
Export 479 441 38 8.6%
-----------------------------
Total International package 1,310 1,315 (5) -0.4%
-----------------------------
Consolidated 14,500 14,675 (175) -1.2%
=============================
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 18.84 $ 18.98 $(0.14) -0.7%
Deferred 12.25 12.07 0.18 1.5%
Ground 6.10 6.02 0.08 1.3%
Total U.S. domestic package 7.74 7.65 0.09 1.2%
International package:
Domestic 5.01 4.54 0.47 10.4%
Export 31.14 28.18 2.96 10.5%
Total International package 14.57 12.47 2.10 16.8%
Consolidated $ 8.35 $ 8.08 $0.27 3.3%
=============================
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2
UNITED PARCEL SERVICE, INC.
SELECTED FINANCIAL DATA - YEAR-TO-DATE
YEAR-ENDED DECEMBER 31,
----------------------------------------------------- CHANGE
2002 NON-RECURRING 2002 ------------------
AS REPORTED TRANSACTIONS AS ADJUSTED 2001 $ %
----------- ------------- ----------- ---------- -------- ------
(financial data in millions, except per
share amounts)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $ 23,924 $ -- $ 23,924 $ 23,997 $ (73) -0.3%
International package 4,680 -- 4,680 4,245 435 10.2%
Non-package 2,668 -- 2,668 2,079 589 28.3%
----------------------------------------------------------------
Total revenue 31,272 -- 31,272 30,321 951 3.1%
Operating expenses:
Compensation and benefits (1) 17,944 197 18,141 17,397 744 4.3%
Other (2) 9,232 (106) 9,126 8,962 164 1.8%
----------------------------------------------------------------
Total operating expenses 27,176 91 27,267 26,359 908 3.4%
Operating profit:
U.S. domestic package 3,576 (175) 3,401 3,620 (219) -6.0%
International package 322 (11) 311 125 186 148.8%
Non-package 198 95 293 217 76 35.0%
----------------------------------------------------------------
Total operating profit 4,096 (91) 4,005 3,962 43 1.1%
Other income (expense)
Investment income 63 -- 63 159 (96) -60.4%
Interest expense (173) -- (173) (184) 11 -6.0%
Tax assessment reversal (3) 1,023 (1,023) -- -- -- N/A
----------------------------------------------------------------
Total other income (expense) 913 (1,023) (110) (25) (85) N/A
----------------------------------------------------------------
Income before income taxes 5,009 (1,114) 3,895 3,937 (42) -1.1%
Income taxes 1,755 (282) 1,473 1,512 (39) -2.6%
----------------------------------------------------------------
Income before cumulative effect
adjustments 3,254 (832) 2,422 2,425 (3) -0.1%
Cumulative effect adjustments (4) (72) -- (72) (26) (46) N/A
----------------------------------------------------------------
Net income $ 3,182 $ (832) $ 2,350 $ 2,399 $ (49) -2.0%
================================================================
Net income as a percentage of revenue 10.2% 7.5% 7.9%
Per share amounts
Basic earnings per share $ 2.84 $ 2.10 $ 2.13
Diluted earnings per share $ 2.81 $ 2.07 $ 2.10
As adjusted per share amounts
Basic earnings per share $ 2.16 $ 2.16 $ 2.15
Diluted earnings per share $ 2.14 $ 2.14 $ 2.12
Weighted average shares outstanding
Basic 1,120 1,120 1,126
Diluted 1,134 1,134 1,144
(1) UPS adopted a change in our vacation policy whereby time is now earned
during the year of entitlement. This resulted in the elimination of a
$197 million liability, with a credit to expense in the following
segments: U.S. domestic package: $175 million; International package:
$11 million; and Non-package: $11 million.
(2) UPS recorded $106 million in restructuring and related charges in
connection with the reorganization of our Non-package operations.
(3) UPS recorded a $1,023 million credit to expense related to the
difference between an original tax assessment expense charge recorded
in 1999, and the estimated settlement amount that has now been
approved.
(4) The cumulative effect of adopting FAS 133 was recorded in the first
quarter of 2001. The adoption of FAS 142 produced a goodwill impairment
charge for the Mail Technologies unit of our Non-package segment in the
first quarter of 2002.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
3
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - YEAR-TO-DATE
QUARTER ENDED DECEMBER 31, CHANGE
--------------------------------------------------------------
2002 2001 $ %
--------- --------- --------- ---------
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 5,349 $ 5,433 $ (84) -1.5%
Deferred 2,868 2,893 (25) -0.9%
Ground 15,707 15,671 36 0.2%
-------------------------------------------
Total U.S. domestic package 23,924 23,997 (73) -0.3%
International package:
Domestic 943 907 36 4.0%
Export 3,276 2,931 345 11.8%
Cargo 461 407 54 13.3%
-------------------------------------------
Total International package 4,680 4,245 435 10.2%
Non-package:
UPS Logistics Group 1,024 738 286 38.8%
UPS Freight Services 945 741 204 27.5%
Other 699 600 99 16.5%
-------------------------------------------
Total Non-package 2,668 2,079 589 28.3%
-------------------------------------------
Consolidated $ 31,272 $ 30,321 $ 951 3.1%
===========================================
Memo: Gross revenue
UPS Logistics Group $ 1,269 $ 969 $ 300 31.0%
UPS Freight Services $ 2,004 $ 1,318 $ 686 52.0%
Consolidated volume (in millions) 3,362 3,418 (56) -1.6%
Operating weekdays 252 252
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS)
U.S. domestic package:
Next day air 1,111 1,116 (5) -0.4%
Deferred 895 917 (22) -2.4%
Ground 10,112 10,317 (205) -2.0%
-------------------------------------------
Total U.S. domestic package 12,118 12,350 (232) -1.9%
International package:
Domestic 779 805 (26) -3.2%
Export 443 408 35 8.6%
-------------------------------------------
Total International package 1,222 1,213 9 0.7%
-------------------------------------------
Consolidated 13,340 13,563 (223) -1.6%
===========================================
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 19.11 $ 19.32 $ (0.21) -1.1%
Deferred 12.72 12.52 0.20 1.6%
Ground 6.16 6.03 0.13 2.2%
Total U.S. domestic package 7.83 7.71 0.12 1.6%
International package:
Domestic 4.80 4.47 0.33 7.4%
Export 29.35 28.51 0.84 2.9%
Total International package 13.70 12.56 1.14 9.1%
Consolidated $ 8.37 $ 8.14 $ 0.23 2.8%
===========================================
4
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.
Date: February 21, 2003 UNITED PARCEL SERVICE, INC.
By: /s/ D. SCOTT DAVIS
-------------------------------------
Name: D. Scott Davis
Title: Senior Vice President, Chief
Financial Officer and Treasurer