EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contacts: Norman Black, Public Relations
404-828-7593
Teresa Finley, Investor Relations
404-828-7359
UPS 4Q EARNINGS SURGE 25%
ON 22% WORLDWIDE REVENUE GAIN
RECORD EARNINGS FOR 2005 WITH STRONG CASH FLOW
ATLANTA, Jan. 26, 2006 - Led by a strong 21.5% gain in worldwide revenue,
UPS (NYSE:UPS) today reported net income of $1.05 billion and a 25% increase in
diluted earnings per share for the fourth quarter.
For the full year, adjusted earnings per share climbed 19.7% and the
company generated $3.5 billion in free cash flow. The 12-month period also
produced record volume with UPS delivering 3.75 billion packages in 2005, or an
average of 14.8 million per day.
"UPS's performance in 2005 was exceptional, including a well-executed peak
season," said Mike Eskew, UPS chairman and CEO. "All of our people pulled
together to achieve the growth and financial goals we set for ourselves. Our
momentum accelerated during each quarter of 2005 and we look forward to more
progress in 2006."
For the quarter ended Dec. 31, 2005, global volume increased 7.9% to a
record 16.8 million packages per day. That equates to an additional 1.2 million
packages delivered per day. U.S. volume grew 6.2% in total, paced by an 8.5%
increase in deferred air volume coupled with a 6.3% increase in Next Day Air(R)
packages. Average daily ground volume in the U.S. rose 5.9%. U.S. volume gains
in the fourth quarter were the highest experienced by the company in several
years.
Internationally, average daily package volume rose 25.1% to 1.8 million a
day. Export volume was again strong with a 15.4% increase reflecting significant
gains across all regions of the world.
Revenue for the fourth quarter climbed 21.5% to $11.95 billion, including
the impact of acquisitions. Consolidated operating profit increased 42.1% to
$1.71 billion. Adjusting fourth quarter 2004 results for an aircraft impairment
charge and a charge to pension expense, operating profit jumped 24.3%.
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2-2-2
Earnings per diluted share were $0.95 for the quarter compared to $0.76
reported in the prior year. Adjusting for the after-tax effects of the items
mentioned above and credits to income tax expense recognized in 2004, diluted
earnings per share rose 15.9% from $0.82 a year ago. The company increased its
effective tax rate in the fourth quarter of 2005, which reduced earnings per
diluted share by $0.02.
Highlights by segment for the fourth quarter included:
- U.S. domestic package revenue grew 8.9% during the period to $7.82
billion. Boosted by a strong holiday season, all products
experienced strong volume growth. Excluding the impact of the 2004
aircraft impairment and pension charges, operating profit rose 21.9%
to $1.24 billion. Pricing remained firm. The U.S. segment's
operating margin increased to 15.8%.
- International package revenue increased 18.3% to $2.22 billion.
Excluding the impact of the 2004 aircraft impairment charge,
operating profit climbed 25.3% to $431 million. Export volume grew
15.4% with double-digit growth across Asia, Europe and the U.S.
International domestic volume climbed 31.7% aided by acquisitions in
Europe during the year. The international operating margin increased
to 19.4%.
- Revenue for the supply chain and freight segment jumped 146% to
$1.91 billion, reflecting the positive impacts of both the Menlo
Worldwide Forwarding and Overnite acquisitions. Operating profit
climbed 139% to $43 million. Revenue at Overnite for its first full
quarter as part of UPS totaled $483 million.
For the full year ended Dec. 31, 2005, diluted earnings per share totaled
$3.47 compared to $2.93 per diluted share in 2004. Adjusting for the effects of
the impairment and pension charges and tax credits recorded in 2004, diluted
earnings per share increased 19.7%, up from $2.90 in 2004. This was at the high
end of the company's 18-to-20% anticipated growth range, the second consecutive
year of nearly a 20% gain in adjusted earnings. Revenue increased 16.4% to a
record $42.6 billion while operating profit rose 23.1% to $6.14 billion. Net
income for 2005 totaled $3.87 billion, up 16.1% compared to the $3.33 billion
reported in 2004. Adjusting 2004's amounts for the effects of the items
described above, operating profit increased by 19% and net income was up 17.2%.
"The year was one of significant growth, margin expansion and excellent
cash flow," said Chief Financial Officer Scott Davis. "We're optimistic about
2006 and confident in our ability to continue producing the type of consistent
earnings growth for which we're known. We will continue to invest in all three
of our businesses and execute strategies in each segment that will enable us to
capitalize on the growth in global commerce."
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3-3-3
For the first quarter of 2006, UPS is projecting diluted earnings per
share in a range of $0.85 to $0.89 compared to the $0.78 reported during the
prior-year period. For the full year of 2006, Davis reiterated UPS's expectation
of an increase in diluted earnings per share of 11-to-16%, consistent with the
company's historical compound annual growth rate.
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 also provide the amount of
our free cash flow to supplement our cash flow determined under GAAP. We define
free cash flow as net cash from operating activities adjusted for capital
expenditures, proceeds from disposals of property, plant and equipment, net
change in finance receivables and other investing activities. We believe free
cash flow is an important measure in assessing the generation of cash for
discretionary investments and dividends.
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 fourth
quarter of 2004, we recorded a $110 million pre-tax impairment charged related
to aircraft; a $63 million pre-tax charge to pension expense and a net credit to
income tax expense of $43 million. We presented 2004 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. The underlying matters that produced the impairment
charge, the charge to pension expense and the tax benefits were unique and we
believe they have no bearing on future anticipated 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.
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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
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31, CHANGE
-------------------------- ------------------------
2005 2004 $ %
-------- ------- ------ -----
(amounts in millions, except per share data)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $ 7,824 $ 7,187 $ 637 8.9%
International package 2,220 1,877 343 18.3%
Supply chain and freight 1,910 776 1,134 146.1%
-------- ------- ------
Total revenue 11,954 9,840 2,114 21.5%
Operating expenses:
Compensation and benefits 6,122 5,497 625 11.4%
Other 4,121 3,139 982 31.3%
-------- ------- ------
Total operating expenses 10,243 8,636 1,607 18.6%
Operating profit:
U.S. domestic package 1,237 861 376 43.7%
International package 431 325 106 32.6%
Supply chain and freight 43 18 25 138.9%
-------- ------- ------
Total operating profit 1,711 1,204 507 42.1%
Other income (expense):
Investment income 8 25 (17) -68.0%
Interest expense (52) (37) (15) 40.5%
-------- ------- ------
Total other income (expense) (44) (12) (32) 266.7%
-------- ------- ------
Income before income taxes 1,667 1,192 475 39.8%
Income taxes 618 326 292 89.6%
-------- ------- ------
Net income $ 1,049 $ 866 $ 183 21.1%
======== ======= ======
Net income as a percentage of revenue 8.8% 8.8%
Per share amounts
Basic earnings per share $ 0.95 $ 0.77 $ 0.18 23.4%
Diluted earnings per share $ 0.95 $ 0.76 $ 0.19 25.0%
Weighted average shares outstanding
Basic 1,103 1,130
Diluted 1,107 1,135
AS ADJUSTED INCOME DATA:
U.S. domestic package (1) $ 1,237 $ 1,015 $ 222 21.9%
International package (1) 431 344 87 25.3%
Supply chain and freight 43 18 25 138.9%
-------- ------- ------
Total operating profit 1,711 1,377 334 24.3%
Income before income taxes (1) $ 1,667 $ 1,365 $ 302 22.1%
Net income (2) $ 1,049 $ 933 $ 116 12.4%
Basic earnings per share (2) $ 0.95 $ 0.83 $ 0.12 14.5%
Diluted earnings per share (2) $ 0.95 $ 0.82 $ 0.13 15.9%
(1) Fourth quarter 2004 adjusted operating profit and income before income taxes
exclude an impairment charge on Boeing 727, 747 and McDonnell Douglas DC-8
aircraft, and related engines and parts, of $110 million ($91 million U.S.
domestic package and $19 million International package), and a $63 million
charge to pension expense for the U.S. domestic package segment resulting from
the consolidation of data collection systems.
(2) Fourth quarter 2004 net income excludes the after-tax effect of the items
described in (1) above, which totaled $110 million, and excludes net credits to
income tax expense of $43 million resulting from several items, including the
resolution of certain tax matters, the removal of a portion of valuation
allowances on certain deferred tax assets on net operating loss carryforwards
and an adjustment for identified tax contingency items.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
1
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - FOURTH QUARTER
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31, CHANGE
-------------------------- ------------------------
2005 2004 $ %
-------- ------- ------ -----
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 1,716 $ 1,608 $ 108 6.7%
Deferred 969 939 30 3.2%
Ground 5,139 4,640 499 10.8%
-------- ------- ------
Total U.S. domestic package 7,824 7,187 637 8.9%
International package:
Domestic 474 366 108 29.5%
Export 1,590 1,373 217 15.8%
Cargo 156 138 18 13.0%
-------- ------- ------
Total International package 2,220 1,877 343 18.3%
Supply chain and freight:
Freight services and logistics 1,305 657 648 98.6%
Overnite 483 - 483 N/A
Other 122 119 3 2.5%
-------- ------- ------
Total Supply chain and freight 1,910 776 1,134 146.1%
-------- ------- ------
Consolidated $ 11,954 $ 9,840 $2,114 21.5%
======== ======= ======
Consolidated volume (in millions) 1,039 963 76 7.9%
Operating weekdays 62 62
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. domestic package:
Next day air 1,351 1,271 80 6.3%
Deferred 1,200 1,106 94 8.5%
Ground 12,374 11,683 691 5.9%
-------- ------- ------
Total U.S. domestic package 14,925 14,060 865 6.2%
International package:
Domestic 1,150 873 277 31.7%
Export 690 598 92 15.4%
-------- ------- ------
Total International package 1,840 1,471 369 25.1%
-------- ------- ------
Consolidated 16,765 15,531 1,234 7.9%
======== ======= ======
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 20.49 $ 20.41 $ 0.08 0.4%
Deferred 13.02 13.69 (0.67) -4.9%
Ground 6.70 6.41 0.29 4.5%
Total U.S. domestic package 8.46 8.24 0.22 2.7%
International package:
Domestic 6.65 6.76 (0.11) -1.6%
Export 37.17 37.03 0.14 0.4%
Total International package 18.09 19.07 (0.98) -5.1%
Consolidated $ 9.51 $ 9.27 $ 0.24 2.6%
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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
(UNAUDITED)
TWELVE MONTHS ENDED
DECEMBER 31, CHANGE
-------------------------- ------------------------
2005 2004 $ %
-------- ------- ------ -----
(amounts in millions, except per share data)
STATEMENT OF INCOME DATA:
Revenue:
U.S. domestic package $ 28,610 $26,960 $1,650 6.1%
International package 7,977 6,809 1,168 17.2%
Supply chain and freight 5,994 2,813 3,181 113.1%
-------- ------- ------
Total revenue 42,581 36,582 5,999 16.4%
Operating expenses:
Compensation and benefits 22,490 20,768 1,722 8.3%
Other 13,948 10,825 3,123 28.8%
-------- ------- ------
Total operating expenses 36,438 31,593 4,845 15.3%
Operating profit:
U.S. domestic package 4,493 3,702 791 21.4%
International package 1,494 1,149 345 30.0%
Supply chain and freight 156 138 18 13.0%
-------- ------- ------
Total operating profit 6,143 4,989 1,154 23.1%
Other income (expense):
Investment income 104 82 22 26.8%
Interest expense (172) (149) (23) 15.4%
-------- ------- ------
Total other income (expense) (68) (67) (1) 1.5%
-------- ------- ------
Income before income taxes 6,075 4,922 1,153 23.4%
Income taxes 2,205 1,589 616 38.8%
-------- ------- ------
Net income $ 3,870 $ 3,333 $ 537 16.1%
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Net income as a percentage of revenue 9.1% 9.1%
Per share amounts
Basic earnings per share $ 3.48 $ 2.95 $ 0.53 18.0%
Diluted earnings per share $ 3.47 $ 2.93 $ 0.54 18.4%
Weighted average shares outstanding
Basic 1,113 1,129
Diluted 1,116 1,137
AS ADJUSTED INCOME DATA:
U.S. domestic package (1) $ 4,493 $ 3,856 $ 637 16.5%
International package (1) 1,494 1,168 326 27.9%
Supply chain and freight 156 138 18 13.0%
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Total operating profit 6,143 5,162 981 19.0%
Income before income taxes (1) $ 6,075 $ 5,095 $ 980 19.2%
Net income (2) $ 3,870 $ 3,301 $ 569 17.2%
Basic earnings per share (2) $ 3.48 $ 2.92 $ 0.56 19.2%
Diluted earnings per share (2) $ 3.47 $ 2.90 $ 0.57 19.7%
(1) Year-to-Date 2004 adjusted operating profit excludes an impairment charge on
Boeing 727, 747 and McDonnell Douglas DC-8 aircraft, and related engines and
parts, of $110 million ($91 million U.S. domestic package and $19 million
International package), and a $63 million charge to pension expense for the U.S.
domestic package segment resulting from the consolidation of data collection
systems.
(2) Year-to-Date 2004 net income excludes the after-tax effect of the items
described in (1) above, which totaled $110 million, and excludes net credits to
income tax expense of $142 million resulting from several items, including the
resolution of certain tax matters, the removal of a portion of valuation
allowances on certain deferred tax assets on net operating loss carryforwards
and an adjustment for identified tax contingency items.
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
(UNAUDITED)
TWELVE MONTHS ENDED
DECEMBER 31, CHANGE
-------------------------- ------------------------
2005 2004 $ %
-------- ------- ------ -----
REVENUE (IN MILLIONS):
U.S. domestic package:
Next day air $ 6,381 $ 6,084 $ 297 4.9%
Deferred 3,258 3,193 65 2.0%
Ground 18,971 17,683 1,288 7.3%
-------- ------- ------
Total U.S. domestic package 28,610 26,960 1,650 6.1%
International package:
Domestic 1,588 1,346 242 18.0%
Export 5,856 4,991 865 17.3%
Cargo 533 472 61 12.9%
-------- ------- ------
Total International package 7,977 6,809 1,168 17.2%
Supply chain and freight:
Freight services and logistics 4,737 2,379 2,358 99.1%
Overnite 797 - 797 N/A
Other 460 434 26 6.0%
-------- ------- ------
Total Supply chain and freight 5,994 2,813 3,181 113.1%
-------- ------- ------
Consolidated $ 42,581 $36,582 $5,999 16.4%
======== ======= ======
Consolidated volume (in millions) 3,746 3,591 155 4.3%
Operating weekdays 254 254
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. domestic package:
Next day air 1,228 1,194 34 2.8%
Deferred 946 910 36 4.0%
Ground 11,044 10,676 368 3.4%
-------- ------- ------
Total U.S. domestic package 13,218 12,780 438 3.4%
International package:
Domestic 916 815 101 12.4%
Export 616 541 75 13.9%
-------- ------- ------
Total International package 1,532 1,356 176 13.0%
-------- ------- ------
Consolidated 14,750 14,136 614 4.3%
======== ======= ======
AVERAGE REVENUE PER PIECE:
U.S. domestic package:
Next day air $ 20.46 $ 20.06 $ 0.40 2.0%
Deferred 13.56 13.81 (0.25) -1.8%
Ground 6.76 6.52 0.24 3.7%
Total U.S. domestic package 8.52 8.31 0.21 2.5%
International package:
Domestic 6.83 6.50 0.33 5.1%
Export 37.43 36.32 1.11 3.1%
Total International package 19.13 18.40 0.73 4.0%
Consolidated $ 9.62 $ 9.27 $ 0.35 3.8%
======== ======= ======
Certain prior year amounts have been reclassified to conform to the current year
presentation.
4
UNITED PARCEL SERVICE, INC.
RECONCILIATION OF FREE CASH FLOW
(UNAUDITED)
PRELIMINARY
2005 2004
----------- -------
(in millions)
Net cash from operations $ 5,801 $ 5,331
Capital expenditures (2,187) (2,127)
Proceeds from disposals of PP&E 15 75
Net change in finance receivables 95 318
Other investing activities (194) (68)
-------- -------
Free cash flow $ 3,530 $ 3,529
======== =======
Certain prior year amounts have been reclassified to conform to the current
period presentation.
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