EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contacts: Peggy Gardner, Public Relations
404-828-6051
Teresa Finley, Investor Relations
404-828-7359
UPS 2ND QUARTER EARNINGS CLIMB OVER 18%
AS PACKAGE BUSINESS GROWS WORLDWIDE
COMPANY RAISES FULL-YEAR EARNINGS EXPECTATIONS
ATLANTA, July 22, 2004 - UPS (NYSE:UPS) today reported an 18.2% gain in
net income for the second quarter on a 7.8% increase in revenue with strong
growth in its global small package business. In addition, the company raised its
future guidance and expects full year 2004 earnings growth to approach 20%.
Previously, the company's guidance called for 2004 earnings at the
upper end of a 12-to-18% range.
In the second quarter, total average daily package volume worldwide
rose to 13.6 million, a net gain of 550,000 packages per day compared to the
prior-year period. Average daily ground volume within the United States climbed
almost 5%. International export volume increased 13% with double-digit growth in
all regions of the world, led by China with a gain of almost 70%.
"Our global small package business is vibrant and growing," said Scott
Davis, UPS's chief financial officer. "This strong growth is being fueled by our
integrated customer technologies, expanded supply chain capabilities and
superior service and reliability."
For the three months ended June 30, consolidated revenue totaled $8.87
billion, up 7.8% from the $8.23 billion reported during the prior-year period.
Consolidated operating profit jumped 21.3% to $1.31 billion. Net income totaled
$818 million. Earnings per diluted share were $0.72, up 18% from the $0.61
reported for the second quarter of 2003.
Operating profit and net income for the period a year ago were impacted
by a pre-tax loss from the sale of the company's Mail Technologies unit, which
was more than offset by a related tax benefit. Adjusting for that prior year
reduction in operating profit of $24 million and net income benefit of $14
million, operating profit for the current period rose 18.7% and net income rose
20.6%. Earnings per diluted share rose 20% from the adjusted $0.60 per share
reported last year.
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For the six months ended June 30, consolidated revenues totaled $17.79
billion, an increase of 9.5% compared to the prior-year period. Operating profit
totaled $2.53 billion, a gain of 24.8% compared to the period in 2003. Net
income increased 21% to $1.58 billion over the earlier period. In addition to
the impact of the sale of Mail Technologies, the company's results for the first
six months of 2003 were affected by a first quarter write-down in marketable
securities, and a reduction to income tax expense resulting from the resolution
of various tax matters with the IRS. Adjusting for the impact of these items,
operating profit for the first six months of 2004 rose 23.3% and net income
improved by 24.1%.
Second quarter highlights by company segments included:
[X] International package revenues climbed almost 18% to $1.61
billion as average daily package volume rose 8.5%. Asia export
volume increased 17% and U.S. export volume grew an
industry-leading 12%. Operating profit soared 72% to $272
million. This unit now contributes more than 20% of UPS's
total operating profit.
[X] U.S. package revenue rose 5.8% to $6.48 billion. Operating
profit climbed 7.2% to $892 million and operating margin
improved 20 basis points to 13.8%, the highest in two years.
Average daily ground volume in the U.S. showed a strong 4.9%
gain, contributing to a total domestic volume increase of
3.8%. Next Day Air(R) package volume saw robust growth that
actually exceeded the growth rate of ground volume, offsetting
the decline in air letter volume stemming from the unusually
high mortgage refinancing activity last year. Average revenue
per piece rose for all products, with the overall U.S. average
revenue per piece increasing 2%.
[X] Revenue for the non-package segment grew 6.4% to $778 million,
while operating profit climbed 62%. Excluding the loss from
the 2003 sale of the Mail Technologies business, operating
profit increased 28.1%. Revenue for UPS Supply Chain
Solutions, the largest unit in the non-package segment,
increased 7.2% to $568 million.
Several developments during the second quarter positioned the company
well for future growth. The United States and China agreed to significantly
expand aviation rights, unique customer services were developed or enhanced with
eBay, Yahoo! Small Business and Toshiba, and UPS Supply Chain Solutions launched
a service to help businesses recycle or dispose of unwanted electronics.
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"The breadth of solutions we bring to our customers is a unique
competitive advantage," Davis said. "It is allowing us to deepen our
relationships with customers, which is producing bottom-line benefits to all
three segments of our business."
Davis said the company projects third quarter earnings to increase over
last year to the range of $0.69 to $0.72 per diluted share and expects full year
2004 earnings growth approaching 20%, compared with last year's adjusted
earnings per share of $2.44.
UPS is the world's largest package delivery company and a global leader
in supply chain services, offering an extensive range of options for
synchronizing the movement of goods, information and funds. Headquartered in
Atlanta, Ga., UPS serves more than 200 countries and territories worldwide.
UPS's stock trades on the New York Stock Exchange (UPS) and the company can be
found on the Web at UPS.com.
# # #
EDITOR'S NOTE: UPS CFO Scott Davis will discuss second quarter results with
investors and analysts during a conference call later today at 10:00 a.m. EDT.
That conference call is open to listeners through a live Webcast. To access the
call, go to www.shareholder.com/UPS and click on "Earnings Webcast."
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, net income and earnings per share. 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 plan.
In the second quarter of 2003, we recorded a $24 million pre-tax loss
and a $38 million tax benefit on the sale of our Mail Technologies business. In
the first quarter of 2003, we incurred a $58 million pre-tax impairment charge
related to the Company's investment in S&P 500 equity portfolios and benefited
from a $55 million reduction to income tax expense due to the resolution of
various tax issues with the Internal Revenue Service. We presented operating
profit, 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. We believe it is useful to present
operating profit, net income and earnings per share excluding the impact of the
sale of Mail Technologies as this sale has minimal implications on future
financial performance. We believe it is useful to present net income and
earnings per share excluding the impact of the impairment charge because the
Company has been significantly reducing the size of its equity portfolio
investments and such investments are not a core business of the Company. We also
believe it is useful to present net income and earnings per share excluding the
impact of the resolution of the tax issues because the underlying matters that
produced the tax benefits were unique and, as resolved, have no bearing on
future anticipated tax expense.
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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 accompanying 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
QUARTER ENDED JUNE 30, CHANGE 2Q 2004 VS.
---------------------------------------------------- 2Q 2003 (AS ADJUSTED)
2003 2003 2003 ---------------------
2004 AS REPORTED ADJUSTMENTS AS ADJUSTED $ %
------- ----------- ----------- ----------- ------- -------
(financial data in millions,
except per share amounts)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $ 6,480 $ 6,124 $ -- $ 6,124 $ 356 5.8%
International package 1,613 1,371 -- 1,371 242 17.7%
Non-package 778 731 -- 731 47 6.4%
------- ------- ------- ------- -------
Total revenue 8,871 8,226 -- 8,226 645 7.8%
Operating expenses:
Compensation and benefits 5,079 4,754 -- 4,754 325 6.8%
Other 2,482 2,392 (24) (a) 2,368 114 4.8%
------- ------- ------- ------- -------
Total operating expenses 7,561 7,146 (24) 7,122 439 6.2%
Operating profit:
U.S. domestic package 892 832 -- 832 60 7.2%
International package 272 158 -- 158 114 72.2%
Non-package 146 90 24 (a) 114 32 28.1%
------- ------- ------- ------- -------
Total operating profit 1,310 1,080 24 1,104 206 18.7%
Other income (expense):
Investment income 14 10 -- 10 4 40.0%
Interest expense (35) (38) -- (38) 3 -7.9%
------- ------- ------- ------- -------
Total other income (expense) (21) (28) -- (28) 7 -25.0%
Income before income taxes 1,289 1,052 24 1,076 213 19.8%
Income taxes 471 360 38 (a) 398 73 18.3%
------- ------- ------- ------- -------
Net income $ 818 $ 692 $ (14) $ 678 $ 140 20.6%
======= ======= ======= ======= =======
Net income as a percentage of revenue 9.2% 8.4% 8.2%
Per share amounts
Basic earnings per share $ 0.73 $ 0.61 $ 0.60
Diluted earnings per share $ 0.72 $ 0.61 $ 0.60
Weighted average shares outstanding
Basic 1,128 1,127 1,127
Diluted 1,137 1,136 1,136
(a) The Company recognized a $24 million pre-tax loss and a $38 million tax
benefit from the sale of its former Mail Technologies unit.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
1
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - SECOND QUARTER
QUARTER ENDED JUNE 30, CHANGE
----------------------- ----------------------
2004 2003 $ %
------- ------- ------- ------
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 1,492 $ 1,387 $ 105 7.6%
Deferred 734 716 18 2.5%
Ground 4,254 4,021 233 5.8%
------- ------- -------
Total U.S. domestic package 6,480 6,124 356 5.8%
International package:
Domestic 318 274 44 16.1%
Export 1,183 992 191 19.3%
Cargo 112 105 7 6.7%
------- ------- -------
Total International package 1,613 1,371 242 17.7%
Non-package:
UPS Supply Chain Solutions 568 530 38 7.2%
Other 210 201 9 4.5%
------- ------- -------
Total Non-package 778 731 47 6.4%
------- ------- -------
Consolidated $ 8,871 $ 8,226 $ 645 7.8%
======= ======= =======
Memo: Gross revenue
UPS Supply Chain Solutions $ 1,172 $ 1,068 $ 104 9.7%
Consolidated volume (in millions) 869 833 36 4.2%
Operating weekdays 64 64
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. domestic package:
Next day air 1,181 1,179 2 0.2%
Deferred 832 862 (30) -3.5%
Ground 10,252 9,776 476 4.9%
------- ------- -------
Total U.S. domestic package 12,265 11,817 448 3.8%
International package:
Domestic 784 742 42 5.7%
Export 521 461 60 13.0%
------- ------- -------
Total International package 1,305 1,203 102 8.5%
------- ------- -------
Consolidated 13,570 13,020 550 4.2%
======= ======= =======
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 19.74 $ 18.38 $ 1.36 7.4%
Deferred 13.78 12.98 0.80 6.2%
Ground 6.48 6.43 0.05 0.8%
Total U.S. domestic package 8.26 8.10 0.16 2.0%
International package:
Domestic 6.34 5.77 0.57 9.9%
Export 35.48 33.62 1.86 5.5%
Total International package 17.97 16.44 1.53 9.3%
Consolidated $ 9.19 $ 8.87 $ 0.32 3.6%
======= ======= =======
Certain prior year amounts have been reclassified to conform to the current year
presentation.
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UNITED PARCEL SERVICE, INC.
SELECTED FINANCIAL DATA - YEAR-TO-DATE
SIX MONTHS ENDED JUNE 30, CHANGE 2004 VS.
-------------------------------------------------------- 2003 (AS ADJUSTED)
2003 2003 2003 ---------------------
2004 AS REPORTED ADJUSTMENTS AS ADJUSTED $ %
-------- ----------- ----------- ------------ -------- ----------
(financial data in millions, except per
share amounts)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $ 13,020 $ 12,144 $ -- $ 12,144 $ 876 7.2%
International package 3,232 2,673 -- 2,673 559 20.9%
Non-package 1,538 1,424 -- 1,424 114 8.0%
-------- -------- -------- -------- --------
Total revenue 17,790 16,241 -- 16,241 1,549 9.5%
Operating expenses:
Compensation and benefits 10,247 9,462 -- 9,462 785 8.3%
Other 5,016 4,754 (24)(a) 4,730 286 6.0%
-------- -------- -------- -------- --------
Total operating expenses 15,263 14,216 (24) 14,192 1,071 7.5%
Operating profit:
U.S. domestic package 1,723 1,536 -- 1,536 187 12.2%
International package 541 292 -- 292 249 85.3%
Non-package 263 197 24(a) 221 42 19.0%
-------- -------- -------- -------- --------
Total operating profit 2,527 2,025 24 2,049 478 23.3%
Other income (expense):
Investment income (loss) 31 (28) 58(b) 30 1 3.3%
Interest expense (74) (63) -- (63) (11) 17.5%
-------- -------- -------- -------- --------
Total other income (expense) (43) (91) 58 (33) (10) 30.3%
Income before income taxes 2,484 1,934 82 2,016 468 23.2%
Income taxes 907 631 114(a),(b),(c) 745 162 21.7%
-------- -------- -------- -------- --------
Net income $ 1,577 $ 1,303 $ (32) $ 1,271 $ 306 24.1%
======== ======== ======== ======== ========
Net income as a percentage of revenue 8.9% 8.0% 7.8%
Per share amounts
Basic earnings per share $ 1.40 $ 1.16 $ 1.13
Diluted earnings per share $ 1.39 $ 1.15 $ 1.12
Weighted average shares outstanding
Basic 1,129 1,126 1,126
Diluted 1,138 1,136 1,136
(a) The Company recognized a $24 million pre-tax loss and a $38 million tax
benefit from the sale of its former Mail Technologies unit in the
second quarter of 2003.
(b) The Company recognized a $58 million investment impairment charge ($37
million after tax) during the first quarter of 2003.
(c) The Company recognized a $55 million credit to tax expense for the
resolution of various tax contingencies in the first quarter of 2003.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
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UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - YEAR-TO-DATE
SIX MONTHS ENDED JUNE 30, CHANGE
------------------------------------------------
2004 2003 $ %
------- ------- ------- ------
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 2,962 $ 2,740 $ 222 8.1%
Deferred 1,498 1,414 84 5.9%
Ground 8,560 7,990 570 7.1%
------- ------- -------
Total U.S. domestic package 13,020 12,144 876 7.2%
International package:
Domestic 654 540 114 21.1%
Export 2,364 1,932 432 22.4%
Cargo 214 201 13 6.5%
------- ------- -------
Total International package 3,232 2,673 559 20.9%
Non-package:
UPS Supply Chain Solutions 1,131 1,030 101 9.8%
Other 407 394 13 3.3%
------- ------- -------
Total Non-package 1,538 1,424 114 8.0%
------- ------- -------
Consolidated $17,790 $16,241 $ 1,549 9.5%
======= ======= =======
Memo: Gross revenue
UPS Supply Chain Solutions $ 2,299 $ 2,077 $ 222 10.7%
Consolidated volume (in millions) 1,751 1,659 92 5.5%
Operating weekdays 128 127
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. domestic package:
Next day air 1,175 1,157 18 1.6%
Deferred 863 853 10 1.2%
Ground 10,322 9,828 494 5.0%
------- ------- -------
Total U.S. domestic package 12,360 11,838 522 4.4%
International package:
Domestic 797 759 38 5.0%
Export 519 466 53 11.4%
------- ------- -------
Total International package 1,316 1,225 91 7.4%
------- ------- -------
Consolidated 13,676 13,063 613 4.7%
======= ======= =======
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 19.69 $ 18.65 $ 1.04 5.6%
Deferred 13.56 13.05 0.51 3.9%
Ground 6.48 6.40 0.08 1.3%
Total U.S. domestic package 8.23 8.08 0.15 1.9%
International package:
Domestic 6.41 5.60 0.81 14.5%
Export 35.59 32.65 2.94 9.0%
Total International package 17.92 15.89 2.03 12.8%
Consolidated $ 9.16 $ 8.81 $ 0.35 4.0%
======= ======= =======
Certain prior year amounts have been reclassified to conform to the current year
presentation.
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