EXHIBIT 99.1
Contacts: Norman Black, Public Relations
404-828-7593
Teresa Finley, Investor Relations
404-828-7359
UPS REPORTS SOLID 3RD QUARTER EARNINGS
AS PACKAGE BUSINESS GROWS WORLDWIDE
INTERNATIONAL PROFIT JUMPS ALMOST 50%;
BOARD INCREASES SHARE REPURCHASE AUTHORIZATION TO $2 BILLION
ATLANTA, Oct. 21, 2004 - UPS (NYSE:UPS) today reported solid third
quarter growth with revenues rising 7.7% and net income increasing 20.4%.
Total worldwide average daily volume increased by 445,000 packages per
day to 13.7 million, a 3.4% increase. Total international export package volume
grew 13.2%, while UPS Supply Chain Solutions posted strong growth with revenue
up 10.1%.
"The reach and reliability of our global package delivery network is
unmatched and we're attracting new business as a result," said Scott Davis,
UPS's chief financial officer. "We're seeing double-digit export growth in every
region of the world with strong profit increases to match."
The CFO also said UPS continues to generate substantial positive cash
flow and the Board of Directors has increased the company's share repurchase
authorization to $2 billion.
For the three months ended Sept. 30, consolidated revenue totaled $8.95
billion, up 7.7% compared to the $8.31 billion reported during the prior-year
period. Consolidated operating profit rose 9.7% to $1.26 billion. Net income for
the quarter was $890 million compared to $739 million reported for the same
period in 2003.
The results for the third quarter in 2003 included a $24 million gain
on the sale of UPS Aviation Technologies as well as a $22 million tax benefit
due to a favorable tax ruling. The most recent quarter includes a $99 million
reduction to income taxes due to the resolution of various tax matters.
Excluding these items, third quarter operating profit increased $135
million to $1.26 billion, a gain of 12%. Adjusted net income totaled $791
million this year compared to $702 million in 2003, up 12.7%.
Earnings per diluted share were $0.78 compared to $0.65 the prior year.
On an adjusted basis, earnings per diluted share totaled $0.70 per share, up
12.9% compared to the prior year's $0.62. The adjusted $0.70 per diluted share
is within UPS's guidance of $0.69 to $0.72.
For the nine months ended Sept. 30, consolidated revenues totaled
$26.74 billion, an increase of 8.9% compared to the prior-year period. Operating
profit totaled $3.79 billion, a gain of 19.3% compared to the period in 2003.
Net income increased to $2.47 billion, a gain of 20.8% compared to the period in
2003.
Third quarter highlights by company segments included:
- International package revenue increased 21.6% to $1.67 billion
on a 13.2% gain in export package volume and a 4.1% increase
in international domestic package volume. Asia export volume
increased 29% as export volume out of China more than doubled.
U.S. export volume led the industry with its fourth
consecutive quarter of double-digit growth. Operating profit
jumped 49% to $262 million. International operating margin
increased 290 basis points to 15.7%.
- U.S. package revenue increased 4.4% to $6.49 billion while
operating profit climbed 3.9% to $857 million. Both were
impacted by a difficult September during which multiple
hurricanes and tropical storms disrupted commerce across the
U.S. and UPS operations in the Southeast and East. Average
daily ground volume in the U.S. grew 4.5% for the quarter.
Total Next Day Air(R) volume was down in the quarter due to
the large amount of letters associated with mortgage
refinancing activity last year. Excluding letters, Next Day
package volume increased in the quarter. Average revenue per
piece rose 1.5% for all U.S. products.
- Revenue for the non-package segment climbed 9.5% to $792
million. Excluding last year's gain on the sale of UPS
Aviation Technologies, operating profit increased 13.9% to
$139 million. Revenue for UPS Supply Chain Solutions, the
largest unit in the non-package segment, increased 10.1% to
$591 million. The UPS SCS unit, with the pending acquisition
of Menlo Worldwide Forwarding, will add guaranteed heavy air
freight to its portfolio across the globe.
In addition to this month's agreement to acquire Menlo Worldwide
Forwarding, several other developments occurred during the quarter that will be
instrumental to continued growth. Earlier in the period, UPS added air
capabilities to its Trade Direct SM line of services, helping customers
eliminate the need for warehousing after importing.
Last month, UPS added three additional flights to its
"around-the-world" network to accommodate expanding package flows between Asia
and Europe. And just this past Monday, the U.S. Transportation Department
finalized its earlier award of aviation rights allowing UPS to triple its direct
access to the fast-growing China market.
"We will keep building our capabilities as more customers turn to UPS
to help them effectively manage their transportation and supply chain needs,"
Davis added.
For the fourth quarter, Davis said the company is expecting a solid
holiday shipping season in the United States and stellar growth outside the U.S.
UPS is projecting fourth quarter diluted earnings per share to increase over
last year's adjusted $0.70 to a range of $0.83 to $0.87. Davis added UPS expects
earnings per share in 2005 to grow between 13-to-17%.
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 third 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 third quarter of 2004, we recorded a $99 million reduction in
income tax expense due to the resolution of various tax matters. In the third
quarter of 2003, we recognized a $22 million credit to income tax expense due to
a favorable court ruling on the treatment of jet engine maintenance costs. Also
in the third quarter of 2003, we recognized a $24 million pre-tax gain ($15
million after-tax) upon the sale of our former Aviation Technologies unit. 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 sales of Aviation
Technologies and Mail Technologies as these sales have 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 contingencies because the underlying matters
that produced the tax benefits were unique and, as resolved, have no bearing on
future anticipated tax expense.
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 - THIRD QUARTER
THREE MONTHS ENDED
SEPTEMBER 30, CHANGE
-----------------------------------------------------------
2004 2003 $ %
------- ------- ------- -------
(amounts in millions, except per share data)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $ 6,494 $ 6,219 $ 275 4.4%
International package 1,666 1,370 296 21.6%
Non-package 792 723 69 9.5%
------- ------- -------
Total revenue 8,952 8,312 640 7.7%
Operating expenses:
Compensation and benefits 5,139 4,830 309 6.4%
Other 2,555 2,335 220 9.4%
------- ------- -------
Total operating expenses 7,694 7,165 529 7.4%
Operating profit:
U.S. domestic package 857 825 32 3.9%
International package 262 176 86 48.9%
Non-package 139 146 (7) -4.8%
------- ------- -------
Total operating profit 1,258 1,147 111 9.7%
Other income (expense):
Investment income 26 23 3 13.0%
Interest expense (38) (31) (7) 22.6%
------- ------- -------
Total other income (expense) (12) (8) (4) 50.0%
Income before income taxes 1,246 1,139 107 9.4%
Income taxes 356 400 (44) -11.0%
------- ------- -------
Net income $ 890 $ 739 $ 151 20.4%
======= ======= =======
Net income as a percentage of revenue 9.9% 8.9%
Per share amounts
Basic earnings per share $ 0.79 $ 0.66 $ 0.13 19.7%
Diluted earnings per share $ 0.78 $ 0.65 $ 0.13 20.0%
Weighted average shares outstanding
Basic 1,126 1,128
Diluted 1,135 1,140
AS ADJUSTED INCOME DATA:
Operating profit:
U.S. domestic package $ 857 $ 825 $ 32 3.9%
International package 262 176 86 48.9%
Non-package (1) 139 122 17 13.9%
------- ------- -------
Total operating profit (1) 1,258 1,123 135 12.0%
Income before income taxes (1) 1,246 1,115 131 11.7%
Net income (1), (2), (3) 791 702 89 12.7%
Basic earnings per share (1), (2), (3) 0.70 0.62 0.08 12.9%
Diluted earnings per share (1), (2), (3) 0.70 0.62 0.08 12.9%
(1) In the third quarter of 2003, the Company recognized a $24 million
pre-tax ($15 million after-tax) gain from the sale of our former
Aviation Technologies unit.
(2) In the third quarter of 2003, the Company recognized a $22 million
credit to tax expense from a favorable court ruling on the tax
treatment of jet engine maintenance costs.
(3) In the third quarter of 2004, the Company recognized a $99 million
credit to tax expense due to the resolution of various tax matters.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
1
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - THIRD QUARTER
THREE MONTHS ENDED
SEPTEMBER 30, CHANGE
-------------------------------------------------------
2004 2003 $ %
------- ------- ------- -----
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 1,482 $ 1,424 $ 58 4.1%
Deferred 731 714 17 2.4%
Ground 4,281 4,081 200 4.9%
------- ------- -------
Total U.S. domestic package 6,494 6,219 275 4.4%
International package:
Domestic 326 279 47 16.8%
Export 1,220 988 232 23.5%
Cargo 120 103 17 16.5%
------- ------- -------
Total International package 1,666 1,370 296 21.6%
Non-package:
UPS Supply Chain Solutions 591 537 54 10.1%
Other 201 186 15 8.1%
------- ------- -------
Total Non-package 792 723 69 9.5%
------- ------- -------
Consolidated $ 8,952 $ 8,312 $ 640 7.7%
======= ======= =======
Memo: Gross revenue
UPS Supply Chain Solutions $ 1,278 $ 1,099 $ 179 16.3%
Consolidated volume (in millions) 877 849 28 3.4%
Operating weekdays 64 64
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. domestic package:
Next day air 1,157 1,207 (50) -4.1%
Deferred 813 859 (46) -5.4%
Ground 10,409 9,961 448 4.5%
------- ------- -------
Total U.S. domestic package 12,379 12,027 352 2.9%
International package:
Domestic 794 763 31 4.1%
Export 530 468 62 13.2%
------- ------- -------
Total International package 1,324 1,231 93 7.6%
------- ------- -------
Consolidated 13,703 13,258 445 3.4%
======= ======= =======
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 20.01 $ 18.43 $ 1.58 8.6%
Deferred 14.05 12.99 1.06 8.2%
Ground 6.43 6.40 0.03 0.5%
Total U.S. domestic package 8.20 8.08 0.12 1.5%
International package:
Domestic 6.42 5.71 0.71 12.4%
Export 35.97 32.99 2.98 9.0%
Total International package 18.24 16.08 2.16 13.4%
Consolidated $ 9.17 $ 8.82 $ 0.35 4.0%
======= ======= =======
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
NINE MONTHS ENDED
SEPTEMBER 30, CHANGE
-------------------------------------------------------------
2004 2003 $ %
-------- -------- -------- ------
(amounts in millions, except per share data)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $ 19,514 $ 18,363 $ 1,151 6.3%
International package 4,898 4,043 855 21.1%
Non-package 2,330 2,147 183 8.5%
-------- -------- --------
Total revenue 26,742 24,553 2,189 8.9%
Operating expenses:
Compensation and benefits 15,386 14,292 1,094 7.7%
Other 7,571 7,089 482 6.8%
-------- -------- --------
Total operating expenses 22,957 21,381 1,576 7.4%
Operating profit:
U.S. domestic package 2,580 2,361 219 9.3%
International package 803 468 335 71.6%
Non-package 402 343 59 17.2%
-------- -------- --------
Total operating profit 3,785 3,172 613 19.3%
Other income (expense):
Investment income (loss) 57 (5) 62 -1240.0%
Interest expense (112) (94) (18) 19.1%
-------- -------- --------
Total other income (expense) (55) (99) 44 -44.4%
Income before income taxes 3,730 3,073 657 21.4%
Income taxes 1,263 1,031 232 22.5%
-------- -------- --------
Net income $ 2,467 $ 2,042 $ 425 20.8%
======== ======== ========
Net income as a percentage of revenue 9.2% 8.3%
Per share amounts
Basic earnings per share $ 2.19 $ 1.81 $ 0.38 21.0%
Diluted earnings per share $ 2.17 $ 1.80 $ 0.37 20.6%
Weighted average shares outstanding
Basic 1,128 1,126
Diluted 1,137 1,137
AS ADJUSTED INCOME DATA:
Operating profit:
U.S. domestic package $ 2,580 $ 2,361 $ 219 9.3%
International package 803 468 335 71.6%
Non-package (1) 402 343 59 17.2%
-------- -------- --------
Total operating profit (1) 3,785 3,172 613 19.3%
Income before income taxes (1), (2) 3,730 3,131 599 19.1%
Net income (1), (2), (3), (4) 2,368 1,973 395 20.0%
Basic earnings per share (1), (2), (3), (4) 2.10 1.75 0.35 20.0%
Diluted earnings per share (1), (2), (3), (4) 2.08 1.74 0.34 19.5%
(1) In the second quarter of 2003, the Company recognized a $24 million
pre-tax loss, and a $38 million tax benefit, from the sale of our
former Mail Technologies unit. In the third quarter of 2003, the
Company recognized a $24 million pre-tax ($15 million after-tax) gain
from the sale of our former Aviation Technologies unit.
(2) In the first quarter of 2003, the Company recognized a $58 million
investment impairment charge ($37 million after-tax).
(3) In the first quarter of 2003, the Company recognized a $55 million
credit to tax expense related to the resolution of various tax
contingencies. In the third quarter of 2003, the Company recognized a
$22 million credit to tax expense from a favorable court ruling on the
tax treatment of jet engine maintenance costs.
(4) In the third quarter of 2004, the Company recognized a $99 million
credit to tax expense related to the resolution of various tax matters.
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
NINE MONTHS ENDED
SEPTEMBER 30, CHANGE
------------------------------------------------------
2004 2003 $ %
------- ------- ------- ------
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 4,444 $ 4,164 $ 280 6.7%
Deferred 2,229 2,128 101 4.7%
Ground 12,841 12,071 770 6.4%
------- ------- -------
Total U.S. domestic package 19,514 18,363 1,151 6.3%
International package:
Domestic 980 819 161 19.7%
Export 3,584 2,920 664 22.7%
Cargo 334 304 30 9.9%
------- ------- -------
Total International package 4,898 4,043 855 21.1%
Non-package:
UPS Supply Chain Solutions 1,722 1,567 155 9.9%
Other 608 580 28 4.8%
------- ------- -------
Total Non-package 2,330 2,147 183 8.5%
------- ------- -------
Consolidated $26,742 $24,553 $ 2,189 8.9%
======= ======= =======
Memo: Gross revenue
UPS Supply Chain Solutions $ 3,577 $ 3,176 $ 401 12.6%
Consolidated volume (in millions) 2,628 2,508 120 4.8%
Operating weekdays 192 191
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. domestic package:
Next day air 1,169 1,174 (5) -0.4%
Deferred 846 855 (9) -1.1%
Ground 10,351 9,873 478 4.8%
------- ------- -------
Total U.S. domestic package 12,366 11,902 464 3.9%
International package:
Domestic 796 760 36 4.7%
Export 522 467 55 11.8%
------- ------- -------
Total International package 1,318 1,227 91 7.4%
------- ------- -------
Consolidated 13,684 13,129 555 4.2%
======= ======= =======
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 19.80 $ 18.57 $ 1.23 6.6%
Deferred 13.72 13.03 0.69 5.3%
Ground 6.46 6.40 0.06 0.9%
Total U.S. domestic package 8.22 8.08 0.14 1.7%
International package:
Domestic 6.41 5.64 0.77 13.7%
Export 35.76 32.74 3.02 9.2%
Total International package 18.04 15.95 2.09 13.1%
Consolidated $ 9.16 $ 8.81 $ 0.35 4.0%
======= ======= =======
Certain prior year amounts have been reclassified to conform to the current year
presentation.
4