EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contacts: Norman Black, Public Relations
404-828-7593
Teresa Finley, Investor Relations
404-828-7359
UPS 4TH QUARTER SHOWS
10% REVENUE GAIN
FULL-YEAR EARNINGS UP 15% AS INTERNATIONAL PROFITS EXCEED $1 BILLION
ATLANTA, Jan. 27, 2005 - UPS (NYSE:UPS) today reported a solid revenue
gain of 10.2% in its fourth quarter and earnings of $0.76 per diluted share, up
1.3% compared to the prior-year period. For the full year, revenue increased to
a record $36.6 billion while net income climbed 15%.
Consolidated revenue for the three months ended Dec. 31, 2004, rose to
$9.84 billion, with strong double-digit growth reported by the international and
non-package segments and a 6.6% increase by the U.S. domestic segment.
Consolidated worldwide package volume for the fourth quarter rose 3.7%
to 963 million, while consolidated average daily volume increased by 297,000
packages per day to 15.5 million. Growth was led by international export volume,
up 13.5%, and U.S. Next Day Air(R), which increased 4.1%. Ground volume within
the U.S. grew at 1.5%.
"Our global small package business remains strong and 2004 was an
excellent year," said Scott Davis, UPS's chief financial officer. "UPS delivered
almost 3.6 billion packages in 2004 - the most in our history - although we were
disappointed with our U.S. ground volume growth in the fourth quarter. As a
result, we will focus several new efforts in this area in the coming months."
Adjusted diluted earnings per share were $0.82 for the fourth quarter
of 2004, up 17% over the adjusted $0.70 for the prior-year period. Adjusted
results for the fourth quarter of 2004 include a $66 million benefit due to a
lower than planned effective tax rate. Adjusted results for the quarter exclude
several items, including a $110 million pre-tax impairment charge related to
aircraft; a $63 million pre-tax charge to pension expense, and a net credit to
income tax expense of $43 million. Adjusted results for the fourth quarter of
2003 exclude a pre-tax gain of $28 million on the redemption of long-term debt
and a credit to income tax expense of $39 million.
Our previous estimate of GAAP earnings for the 2004 fourth quarter of
$0.84 to $0.87 per diluted share included higher net tax credits than were
realized.
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2-2-2
Highlights by segment for the fourth quarter included:
- - International package revenue increased almost 23% to $1.9 billion on a
13.5% gain in average daily export volume. Overall, international
average daily package volume rose 5.6%. Asia export volume increased
34% with export volume out of China up 125%. Excluding the aircraft
impairment charge, operating profit for the segment jumped 40% to $337
million, completing a year in which the segment generated more than $1
billion in operating profit for the first time ever. Adjusted operating
margin increased 220 basis points to 18.1%.
- - U.S. domestic package revenue grew 6.6% during the period to $7.1
billion. Excluding the impact of the aircraft and pension charges,
described above, operating profit rose 1% to $919 million and the
operating margin was 13%. Average daily ground volume in the U.S. grew
1.5% for the quarter. Total Next Day Air(R) volume grew strongly at
4.1%. Ground volume shipped through The UPS Store jumped 20%. Yields
remained strong, with an increase in revenue per piece of 3.2% for all
U.S. domestic products.
- - Revenue for the non-package segment increased 16.6% to $880 million,
including an 11.6% revenue gain for the UPS Supply Chain Solutions
unit. Revenue growth for the segment was on track and hit its target
for the year. UPS completed its acquisition of Menlo Worldwide
Forwarding last month and will add time-definite guaranteed heavy air
freight to its portfolio across the globe.
"We have a long-term strategy that uniquely positions us to capitalize
on the growth of global commerce, and we're taking steps now to address our
domestic growth and cost issues," Davis said. "We are accelerating efforts to
sell solutions to the mid-sized customer market that combine supply chain and
small package capabilities. Our senior managers in the field will be devoting
more time to these mid-sized customers. And we also plan to dramatically
increase the number of customers who are technologically linked to UPS through
electronic shipping systems."
For the full year ended Dec. 31, 2004, consolidated revenue increased
9.2% to a record $36.6 billion, while operating profit rose 12.2% to $5 billion.
Net income for the year totaled $3.3 billion, up 15% compared to the $2.9
billion reported in 2003. Results for 2004 include the aircraft impairment and
pension charges noted previously, as well as several credits to income tax
expense. Results for 2003 include an investment impairment charge; gains from
the sale of Aviation Technologies and Mail Technologies; a gain on the
redemption of long-term debt, and several credits to income tax expense.
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3-3-3
Excluding the impact of the items noted above, operating profit for the
full year rose 16.1% to $5.2 billion; net income rose 19.1% to $3.3 billion, and
earnings per diluted share totaled $2.90 in 2004 compared to $2.44 in 2003.
Davis said the company is expecting a solid period of growth in 2005.
The international segment should continue its exceptional performance with
strong export volume growth. U.S. domestic volume should grow 2-to-3% for the
year with improving operating margins. UPS Supply Chain Solutions will add more
than $1 billion in revenue as a result of the acquisition of Menlo Worldwide
Forwarding, which should be slightly accretive to earnings this year.
Davis reiterated the company's expectation that total earnings per
share for 2005 will grow 13-to-17% over the adjusted $2.90 reported for 2004.
The CFO said UPS generated $3.5 billion in free cash flow in 2004 and will
continue to generate substantial positive cash flow in 2005.
For the first quarter, UPS is projecting diluted earnings per share in
a range of $0.70 to $0.75 compared to the $0.67 reported during the prior-year
period.
"In 2004, we grew our ground business, we grew our air business, we
grew our international business and we delivered more packages than ever
before," Davis concluded. "We're optimistic about 2005 and confident in our
ability to continue producing the type of consistent earnings growth for which
we're known. Opportunities like the integration of Menlo Worldwide Forwarding,
with another 400 sales personnel, and the agreement to take direct control of
our international express operations in China, will help us to continue
executing our global growth strategy."
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 fourth quarter results with
investors and analysts during a conference call later today at 10:00 a.m. EST.
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, pre-tax income, 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.
We presented operating profit, net income and earnings per share
excluding the impact of the items noted above 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 pre-tax income, net
income and earnings per share excluding the impact of the impairment charge
because the Company has significantly reduced the size of its equity portfolio
investments and such investments are not a core business of the Company. We
believe it is useful to present pre-tax income, net income, and earnings per
share excluding the gain on redemption of debt, as this debt transaction will
have no bearing upon future earnings. We believe it is useful to present net
income and earnings per share excluding the impact of a lower effective state
tax rate, since the factors that produced the lower rate were unique to the
period. We also believe it is useful to present net income and earnings per
share excluding adjustments due to tax contingencies and net operating loss
carryforwards because these items were unique and are not expected to affect
future tax expense. We believe it is useful to present operating profit, pre-tax
income and earnings per share excluding the aircraft impairment charge and
pension expense charge because these items were unique to the period and will
have minimal implications upon future earnings.
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 - FOURTH QUARTER
THREE MONTHS ENDED
DECEMBER 31, CHANGE
--------------------- ---------------------
2004 2003 $ %
------ ------ ---- ---
(amounts in millions, except per share data)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $7,096 $6,659 $437 6.6%
International package 1,864 1,518 346 22.8%
Non-package 880 755 125 16.6%
------ ------ ----
Total revenue 9,840 8,932 908 10.2%
Operating expenses:
Compensation and benefits 5,530 5,036 494 9.8%
Other 3,106 2,623 483 18.4%
------ ------ ----
Total operating expenses 8,636 7,659 977 12.8%
Operating profit:
U.S. domestic package 765 911 (146) -16.0%
International package 318 241 77 32.0%
Non-package 121 121 -- 0.0%
------ ------ ----
Total operating profit 1,204 1,273 (69) -5.4%
Other income (expense):
Investment income 25 23 2 8.7%
Interest expense (37) (27) (10) 37.0%
Gain on redemption of long-term debt -- 28 (28) -100.0%
------ ------ ----
Total other income (expense) (12) 24 (36) -150.0%
Income before income taxes 1,192 1,297 (105) -8.1%
Income taxes 326 441 (115) -26.1%
------ ------ ----
Net income $ 866 $ 856 $ 10 1.2%
====== ====== =====
Net income as a percentage of revenue 8.8% 9.6%
Per share amounts
Basic earnings per share $ 0.77 $ 0.76 $ 0.01 1.3%
Diluted earnings per share $ 0.76 $ 0.75 $ 0.01 1.3%
Weighted average shares outstanding
Basic 1,130 1,132
Diluted 1,135 1,140
AS ADJUSTED INCOME DATA:
Operating profit:
U.S. domestic package (1) $ 919 $ 911 $ 8 0.9%
International package (1) 337 241 96 39.8%
Non-package 121 121 -- 0.0%
------ ------ ----
Total operating profit (1) 1,377 1,273 104 8.2%
Income before income taxes (2) 1,365 1,269 96 7.6%
Net income (3) 933 799 134 16.8%
Basic earnings per share 0.83 0.71 0.12 16.9%
Diluted earnings per share 0.82 0.70 0.12 17.1%
(1) Fourth quarter 2004 excludes an impairment charge on Boeing 727, 747, and
McDonnell Douglas DC-8 aircraft, and related engines and parts, of $110 million
($70 million after-tax), of which $91 million was related to the U.S. domestic
package segment and $19 million to the International package segment. Fourth
quarter 2004 U.S. domestic package operating profit excludes a $63 million ($40
million after-tax) charge to pension expense resulting from the consolidation of
data collection systems.
(2) In addition to the items described in (1), fourth quarter 2003 income before
income taxes excludes a pre-tax gain recognized upon the redemption of long-term
debt of $28 million ($18 million after-tax).
(3) In addition to the after-tax effect of the items described in (1) and (2),
fourth quarter 2004 net income excludes net credits to income tax expense of $43
million related to various items, including the resolution of certain tax
matters, the removal of a portion of the valuation allowances on certain
deferred tax assets on net operating loss carryforwards and an adjustment for
identified tax contingency items. Additionally, fourth quarter 2003 net income
excludes a $39 million credit to income tax expense related primarily to the
release of deferred taxes due to a lower effective state tax rate.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
1
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - FOURTH QUARTER
THREE MONTHS ENDED
DECEMBER 31, CHANGE
---------------------- ------------------
2004 2003 $ %
------- ------- ----- ----
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 1,596 $ 1,416 $ 180 12.7%
Deferred 932 854 78 9.1%
Ground 4,568 4,389 179 4.1%
------- ------- -----
Total U.S. domestic package 7,096 6,659 437 6.6%
International package:
Domestic 366 315 51 16.2%
Export 1,360 1,081 279 25.8%
Cargo 138 122 16 13.1%
------- ------- -----
Total International package 1,864 1,518 346 22.8%
Non-package:
UPS Supply Chain Solutions 624 559 65 11.6%
Other 256 196 60 30.6%
------- ------- -----
Total Non-package 880 755 125 16.6%
------- ------- -----
Consolidated $ 9,840 $ 8,932 $ 908 10.2%
======= ======= =====
Memo: Gross revenue
UPS Supply Chain Solutions $ 1,406 $ 1,161 $ 245 21.1%
Consolidated volume (in millions) 963 929 34 3.7%
Operating weekdays 62 61
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. domestic package:
Next day air 1,271 1,221 50 4.1%
Deferred 1,106 1,115 (9) -0.8%
Ground 11,683 11,505 178 1.5%
------- ------- -----
Total U.S. domestic package 14,060 13,841 219 1.6%
International package:
Domestic 873 866 7 0.8%
Export 598 527 71 13.5%
------- ------- -----
Total International package 1,471 1,393 78 5.6%
------- ------- -----
Consolidated 15,531 15,234 297 1.9%
======= ======= =====
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 20.25 $ 19.01 $1.24 6.5%
Deferred 13.59 12.56 1.03 8.2%
Ground 6.31 6.25 0.06 1.0%
Total U.S. domestic package 8.14 7.89 0.25 3.2%
International package:
Domestic 6.76 5.96 0.80 13.4%
Export 36.68 33.63 3.05 9.1%
Total International package 18.93 16.43 2.50 15.2%
Consolidated 9.16 8.67 0.49 5.7%
======= ======= =====
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
Twelve Months Ended
December 31, Change
---------------------- ------------------
2004 2003 $ %
------- ------- ------ ---
(amounts in millions, except per share data)
Statement of Income Data:
Revenue:
U.S. domestic package $26,610 $25,022 $1,588 6.3%
International package 6,762 5,561 1,201 21.6%
Non-package 3,210 2,902 308 10.6%
------- ------- ------
Total revenue 36,582 33,485 3,097 9.2%
Operating expenses:
Compensation and benefits 20,916 19,328 1,588 8.2%
Other 10,677 9,712 965 9.9%
------- ------- ------
Total operating expenses 31,593 29,040 2,553 8.8%
Operating profit:
U.S. domestic package 3,345 3,272 73 2.2%
International package 1,121 709 412 58.1%
Non-package 523 464 59 12.7%
------- ------- ------
Total operating profit 4,989 4,445 544 12.2%
Other income (expense):
Investment income (loss) 82 18 64 355.6%
Interest expense (149) (121) (28) 23.1%
Gain on redemption of long-term debt -- 28 (28) -100.0%
------- ------- ------
Total other income (expense) (67) (75) 8 -10.7%
Income before income taxes 4,922 4,370 552 12.6%
Income taxes 1,589 1,472 117 7.9%
------- ------- ------
Net income $ 3,333 $ 2,898 $ 435 15.0%
======= ======= ======
Net income as a percentage of revenue 9.1% 8.7%
Per share amounts
Basic earnings per share $ 2.95 $ 2.57 $ 0.38 14.8%
Diluted earnings per share $ 2.93 $ 2.55 $ 0.38 14.9%
Weighted average shares outstanding
Basic 1,129 1,128
Diluted 1,137 1,138
As adjusted income data:
Operating profit:
U.S. domestic package (1) $ 3,499 $ 3,272 $ 227 6.9%
International package (1) 1,140 709 431 60.8%
Non-package (1) 523 464 59 12.7%
------- ------- ------
Total operating profit (1) 5,162 4,445 717 16.1%
Income before income taxes (2) 5,095 4,400 695 15.8%
Net income (3) 3,301 2,772 529 19.1%
Basic earnings per share 2.92 2.46 0.46 18.7%
Diluted earnings per share 2.90 2.44 0.46 18.9%
(1) 2004 operating profit excludes an impairment charge on Boeing 727, 747, and
McDonnell Douglas DC-8 aircraft, and related engines and parts, of $110 million
($70 million after-tax), of which $91 million was related to the U.S. domestic
package segment and $19 million to the International package segment. 2004 U.S.
domestic package operating profit excludes a $63 million ($40 million after-tax)
charge to pension expense resulting from the consolidation of data collection
systems. 2003 non-package operating profit excludes a $24 million pre-tax loss
($14 million after-tax gain) from the sale of our former Mail Technologies unit
and a $24 million pre-tax gain ($15 million after-tax) from the sale of our
former Aviation Technologies unit.
(2) In addition to the items described in (1), 2003 income before income taxes
excludes a pre-tax gain recognized upon the redemption of long-term debt of $28
million ($18 million after-tax), and an investment impairment charge of $58
million ($37 million after-tax).
(3) In addition to the after-tax effect of the items described in (1) and (2),
2004 net income excludes net credits to income tax expense of $142 million
related to various items, including the resolution of certain tax matters, the
removal of a portion of the valuation allowances on certain deferred tax assets
on net operating loss carryforwards and an adjustment for identified tax
contingency items. Additionally, 2003 net income excludes a $39 million credit
to income tax expense for a lower effective state tax rate, a $55 million credit
to income tax expense related to the resolution of various tax matters, and a
$22 million credit to tax expense from a favorable court ruling on the tax
treatment of jet engine maintenance costs.
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
Twelve Months Ended
December 31, Change
---------------------- ------------------
2004 2003 $ %
------- ------- ----- ---
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 6,040 $ 5,580 $ 460 8.2%
Deferred 3,161 2,982 179 6.0%
Ground 17,409 16,460 949 5.8%
------- ------- -----
Total U.S. domestic package 26,610 25,022 1,588 6.3%
International package:
Domestic 1,346 1,134 212 18.7%
Export 4,944 4,001 943 23.6%
Cargo 472 426 46 10.8%
------- ------- -----
Total International package 6,762 5,561 1,201 21.6%
Non-package:
UPS Supply Chain Solutions 2,346 2,126 220 10.3%
Other 864 776 88 11.3%
------- ------- -----
Total Non-package 3,210 2,902 308 10.6%
------- ------- -----
Consolidated $36,582 $33,485 $3,097 9.2%
======= ======= ======
Memo: Gross revenue
UPS Supply Chain Solutions $ 4,983 $ 4,337 $ 646 14.9%
Consolidated volume (in millions) 3,591 3,437 154 4.5%
Operating weekdays 254 252
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. domestic package:
Next day air 1,194 1,185 9 0.8%
Deferred 910 918 (8) -0.9%
Ground 10,676 10,268 408 4.0%
------- ------- -----
Total U.S. domestic package 12,780 12,371 409 3.3%
International package:
Domestic 815 786 29 3.7%
Export 541 481 60 12.5%
------- ------- -----
Total International package 1,356 1,267 89 7.0%
------- ------- -----
Consolidated 14,136 13,638 498 3.7%
======= ======= =====
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 19.92 $ 18.69 $1.23 6.6%
Deferred 13.68 12.89 0.79 6.1%
Ground 6.42 6.36 0.06 0.9%
Total U.S. domestic package 8.20 8.03 0.17 2.1%
International package:
Domestic 6.50 5.73 0.77 13.4%
Export 35.98 33.01 2.97 9.0%
Total International package 18.26 16.08 2.18 13.6%
Consolidated $ 9.16 $ 8.77 $0.39 4.4%
======= ======= =====
Certain prior year amounts have been reclassified to conform to the current year
presentation.
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