Exhibit 99.1
FOR IMMEDIATE RELEASE
Contacts: Norman Black, Public Relations
404-828-7593
Teresa Finley, Investor Relations
404-828-7359
UPS 2ND QUARTER PRODUCES
SOLID EARNINGS ON 15% REVENUE GAIN
ATLANTA, July 25, 2006 -- UPS (NYSE:UPS) today reported a strong gain in
consolidated revenue and a 10.2% improvement in earnings per diluted share to
$0.97. Global small package volume rose 6% or 841,000 additional packages each
day.
CONSOLIDATED RESULTS Second quarter Year-ago
- -------------------- -------------- --------
Revenue $11.74 B $10.19 B
Operating profit $ 1.70 B $ 1.55 B
Operating margin 14.4% 15.2%
Average volume per day 15.0 M 14.1 M
Diluted earnings per share $ 0.97 $ 0.88
"Our global small package volume growth in the second quarter was robust,
resulting in a solid earnings gain," said Mike Eskew, UPS chairman and CEO. "The
global small package market continues to expand and we are seeing significant
opportunities for UPS."
During the second quarter, UPS announced a $1+ billion expansion of its
mega-hub at the heart of its global transportation network, Worldport, located
in Louisville, Ky. The 1.1 million square-foot expansion will increase sorting
capacity by 60% to 487,000 packages per hour. This five-year expansion plan
reflects excellent growth projections in UPS's air package volume around the
world.
CASH POSITION
UPS closed the quarter with $2.85 billion in cash and marketable
securities. For the first six months, UPS also:
- Generated $2.7 billion in free cash flow.
- Purchased 17.8 million shares, reducing total shares outstanding by
1.4%.
- Paid $1.17 billion in dividends. UPS has increased dividends 81% over
the last three years.
- Invested $1.44 billion in capital expenditures.
The UPS Board of Directors has approved an increase of $2 billion in the
amount of authorized funds for repurchase of Class A and Class B shares.
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U. S. PACKAGE Second quarter Year-ago
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Revenue $7.46 B $6.94 B
Operating profit $1.23 B $1.12 B
Operating margin 16.5% 16.1%
Average volume per day 13.3 M 12.7 M
All levels of service posted gains. Daily ground volume increased 4.6%,
while average daily volume for Next Day Air(R) rose 4.2% and deferred air volume
climbed 7.6%. Total revenue per piece remained firm with a gain of 2.7%.
During the period, UPS was named the country's top business brand in the
American Brand Excellence Awards 2006 for being a forward-thinking, ethical
industry leader.
INTERNATIONAL PACKAGE Second quarter Year-ago
- --------------------- -------------- --------
Revenue $2.23 B $ 2.0 B
Operating profit $ 414 M $ 397 M
Operating margin 18.5% 19.9%
Average volume per day 1.7 M 1.5 M
Total international package volume grew 16.5%. Export volume increased 6.5%
and non-U.S. domestic volume was up 23.6% aided by acquisitions. Operating
profit and volume growth were constrained by three fewer operating days in
Europe compared to the same quarter last year.
During the quarter, the company began direct air service from Shanghai to
Europe while also adding three new flights connecting Shanghai to the U.S. and
another new flight between Qingdao and Incheon, Korea. The additional flights
improve UPS service options in several key Asian markets experiencing rapid
growth.
SUPPLY CHAIN AND FREIGHT Second quarter Year-ago
- ------------------------ -------------- --------
Revenue $2.04 B $1.25 B
Operating profit $ 47 M $ 34 M
Operating margin 2.3% 2.7%
Revenue and profit improvements in this segment were primarily driven by
the acquisition last August of a leading LTL carrier, Overnite, now re-branded
UPS Freight. Freight forwarding and logistics operating results improved
significantly over first quarter results.
Integration of the acquired heavy air freight network into the UPS Airlines
operation was completed at the end of June as scheduled. The integration is
allowing UPS to improve service reliability and transit times while offering an
expanded portfolio of services.
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OUTLOOK
"We expect diluted earnings per share in a range of $0.87 to $0.91 in the
third quarter compared to the $0.86 reported during the prior-year period," said
Scott Davis, UPS's chief financial officer. The third quarter has fewer
operating days than the prior-year period, negatively impacting earnings per
share comparison approximately $0.04 to $0.05.
Davis also stated that full-year earnings growth is expected to be at the
low end of the company's original 11-to-16% guidance for 2006.
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 free cash flow. 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, dividends and
share repurchases.
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 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 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
for the year ended December 31, 2005, 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
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30, CHANGE
------------------ --------------
2006 2005 $ %
------- ------- ------ -----
(amounts in millions, except per share data)
STATEMENT OF INCOME DATA:
Revenue:
U.S. Domestic Package $ 7,462 $ 6,942 $ 520 7.5%
International Package 2,233 1,997 236 11.8%
Supply Chain & Freight 2,041 1,252 789 63.0%
------- ------- ------
Total revenue 11,736 10,191 1,545 15.2%
Operating expenses:
Compensation and benefits 5,990 5,389 601 11.2%
Other 4,051 3,253 798 24.5%
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Total operating expenses 10,041 8,642 1,399 16.2%
Operating profit:
U.S. Domestic Package 1,234 1,118 116 10.4%
International Package 414 397 17 4.3%
Supply Chain & Freight 47 34 13 38.2%
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Total operating profit 1,695 1,549 146 9.4%
Other income (expense):
Investment income 23 38 (15) -39.5%
Interest expense (54) (46) (8) 17.4%
------- ------- ------
Total other income (expense) (31) (8) (23) 287.5%
------- ------- ------
Income before income taxes 1,664 1,541 123 8.0%
Income taxes 603 555 48 8.6%
------- ------- ------
Net income $ 1,061 $ 986 $ 75 7.6%
======= ======= ======
Net income as a percentage of revenue 9.0% 9.7%
Per share amounts
Basic earnings per share $ 0.98 $ 0.88 $ 0.10 11.4%
Diluted earnings per share $ 0.97 $ 0.88 $ 0.09 10.2%
Weighted average shares outstanding
Basic 1,087 1,116
Diluted 1,092 1,119
Certain prior year amounts have been reclassified to conform to the current year
presentation.
1
UNITED PARCEL SERVICE, INC.
SELECTED OPERATING DATA - SECOND QUARTER
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30, CHANGE
------------------ -------------
2006 2005 $ %
------- ------- ------ ----
REVENUE (IN MILLIONS):
U.S. Domestic Package:
Next Day Air $ 1,687 $ 1,560 $ 127 8.1%
Deferred 822 767 55 7.2%
Ground 4,953 4,615 338 7.3%
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Total U.S. Domestic Package 7,462 6,942 520 7.5%
International Package:
Domestic 473 381 92 24.1%
Export 1,614 1,492 122 8.2%
Cargo 146 124 22 17.7%
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Total International Package 2,233 1,997 236 11.8%
Supply Chain & Freight:
Forwarding and Logistics 1,444 1,173 271 23.1%
Freight 510 -- 510 N/A
Other 87 79 8 10.1%
------- ------- ------
Total Supply Chain & Freight 2,041 1,252 789 63.0%
------- ------- ------
Consolidated $11,736 $10,191 $1,545 15.2%
======= ======= ======
Consolidated volume (in millions) 958 904 54 6.0%
Operating weekdays 64 64
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. Domestic Package:
Next Day Air 1,240 1,190 50 4.2%
Deferred 936 870 66 7.6%
Ground 11,074 10,592 482 4.6%
------- ------- ------
Total U.S. Domestic Package 13,250 12,652 598 4.7%
International Package:
Domestic 1,062 859 203 23.6%
Export 656 616 40 6.5%
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Total International Package 1,718 1,475 243 16.5%
------- ------- ------
Consolidated 14,968 14,127 841 6.0%
======= ======= ======
AVERAGE REVENUE PER PIECE:
U.S. Domestic Package:
Next Day Air $ 21.26 $ 20.48 $ 0.78 3.8%
Deferred 13.72 13.78 (0.06) -0.4%
Ground 6.99 6.81 0.18 2.6%
Total U.S. Domestic Package 8.80 8.57 0.23 2.7%
International Package:
Domestic 6.96 6.93 0.03 0.4%
Export 38.44 37.84 0.60 1.6%
Total International Package 18.98 19.84 (0.86) -4.3%
Consolidated $ 9.97 $ 9.75 $ 0.22 2.3%
======= ======= ======
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
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, CHANGE
----------------- --------------
2006 2005 $ %
------- ------- ------ -----
(amounts in millions, except per share data)
STATEMENT OF INCOME DATA:
Revenue:
U.S. Domestic Package $14,925 $13,753 $1,172 8.5%
International Package 4,394 3,839 555 14.5%
Supply Chain & Freight 3,938 2,485 1,453 58.5%
------- ------- ------
Total revenue 23,257 20,077 3,180 15.8%
Operating expenses:
Compensation and benefits 12,009 10,786 1,223 11.3%
Other 7,998 6,357 1,641 25.8%
------- ------- ------
Total operating expenses 20,007 17,143 2,864 16.7%
Operating profit:
U.S. Domestic Package 2,419 2,146 273 12.7%
International Package 809 745 64 8.6%
Supply Chain & Freight 22 43 (21) -48.8%
------- ------- ------
Total operating profit 3,250 2,934 316 10.8%
Other income (expense):
Investment income 46 68 (22) -32.4%
Interest expense (102) (83) (19) 22.9%
------- ------- ------
Total other income (expense) (56) (15) (41) 273.3%
------- ------- ------
Income before income taxes 3,194 2,919 275 9.4%
Income taxes 1,158 1,051 107 10.2%
------- ------- ------
Net income $ 2,036 $ 1,868 $ 168 9.0%
======= ======= ======
Net income as a percentage of revenue 8.8% 9.3%
Per share amounts
Basic earnings per share $ 1.87 $ 1.67 $ 0.20 12.0%
Diluted earnings per share $ 1.86 $ 1.66 $ 0.20 12.0%
Weighted average shares outstanding
Basic 1,091 1,120
Diluted 1,096 1,123
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)
SIX MONTHS ENDED
JUNE 30, CHANGE
----------------- --------------
2006 2005 $ %
------- ------- ------ -----
REVENUE (IN MILLIONS):
U.S. Domestic Package:
Next Day Air $ 3,371 $ 3,060 $ 311 10.2%
Deferred 1,653 1,531 122 8.0%
Ground 9,901 9,162 739 8.1%
------- ------- ------
Total U.S. Domestic Package 14,925 13,753 1,172 8.5%
International Package:
Domestic 939 739 200 27.1%
Export 3,175 2,858 317 11.1%
Cargo 280 242 38 15.7%
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Total International Package 4,394 3,839 555 14.5%
Supply Chain & Freight:
Forwarding and Logistics 2,783 2,326 457 19.6%
Freight 987 -- 987 N/A
Other 168 159 9 5.7%
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Total Supply Chain & Freight 3,938 2,485 1,453 58.5%
------- ------- ------
Consolidated $23,257 $20,077 $3,180 15.8%
======= ======= ======
Consolidated volume (in millions) 1,922 1,789 133 7.5%
Operating weekdays 128 128
AVERAGE DAILY PACKAGE VOLUME (IN THOUSANDS):
U.S. Domestic Package:
Next Day Air 1,247 1,168 79 6.8%
Deferred 944 865 79 9.1%
Ground 11,093 10,528 565 5.4%
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Total U.S. Domestic Package 13,284 12,561 723 5.8%
International Package:
Domestic 1,076 823 253 30.7%
Export 656 590 66 11.2%
------- ------- ------
Total International Package 1,732 1,413 319 22.6%
------- ------- ------
Consolidated 15,016 13,974 1,042 7.5%
======= ======= ======
AVERAGE REVENUE PER PIECE:
U.S. Domestic Package:
Next Day Air $ 21.12 $ 20.47 $ 0.65 3.2%
Deferred 13.68 13.83 (0.15) -1.1%
Ground 6.97 6.80 0.17 2.5%
Total U.S. Domestic Package 8.78 8.55 0.23 2.7%
International Package:
Domestic 6.82 7.02 (0.20) -2.8%
Export 37.81 37.84 (0.03) -0.1%
Total International Package 18.56 19.89 (1.33) -6.7%
Consolidated $ 9.91 $ 9.70 $ 0.21 2.2%
======= ======= ======
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
YEAR-TO-DATE YEAR-TO-DATE
JUNE 30, 2006 JUNE 30, 2005
------------- -------------
(amounts in millions)
Net cash from operations $ 4,086 $ 4,076
Capital expenditures (1,440) (1,043)
Proceeds from disposals of PP&E 31 10
Net change in finance receivables (25) 56
Other investing activities 14 (24)
------- -------
Free cash flow $ 2,666 $ 3,075
======= =======
Certain prior year amounts have been reclassified to conform to the current
period presentation.
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