Exhibit 99.1
     
Contacts:
  Norman Black, Public Relations
404-828-7593
Teresa Finley, Investor Relations
404-828-7359
UPS GENERATES SOLID
2nd QUARTER RESULTS
Export Revenue Rises 14%; LTL Shipments Climb 12%
     ATLANTA, July 24, 2007 — UPS (NYSE:UPS) today reported a solid 7.2% increase in diluted earnings per share for the second quarter to $1.04 on a 3.9% gain in revenue. Strong performance by the international package segment and encouraging trends in supply chain and freight overcame a challenging U.S. small package market.
     International export revenues jumped 14% on double-digit volume growth. UPS Freight less-than-truckload (LTL) revenue climbed 10.5% on a 12% increase in shipments.
     “The company’s total performance reflects the benefits of our truly global network,” said Mike Eskew, UPS’s chairman and CEO. “Strong gains in our international package segment offset a lack of growth in the U.S. business. We’re also executing well in our supply chain and freight business and are pleased with the profit improvements in this segment. We remain confident in the long-term growth prospects that the dynamic global marketplace offers UPS.”
                 
Consolidated Results   2Q 2007     2Q 2006  
Revenue
   $ 12.19 B   $ 11.74 B
Operating profit
   $ 1.77 B   $ 1.70 B
Operating margin
     14.5 %     14.4 %
Average volume per day
     15.03 M     14.97 M
Diluted earnings per share
   $ 1.04     $ 0.97  
     For the three months ended June 30, 2007, net income rose 4.1% to $1.1 billion. Operating margin increased to 14.5% with improvements in both the international package and supply chain and freight segments.
Cash Position
     UPS closed the quarter with $2.1 billion in cash and marketable securities. For the first six months, UPS also:
  •   Exceeded $2.3 billion in free cash flow.
 
  •   Purchased 21 million shares, reducing total shares outstanding by 1.7%.
 
  •   Paid $1.3 billion in dividends.
 
  •   Invested $1.2 billion in capital expenditures.
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U. S. Domestic Package   2Q 2007     2Q 2006  
Revenue
   $ 7.58 B   $ 7.46 B
Operating profit
   $ 1.19 B   $ 1.23 B
Operating margin
     15.7 %     16.5 %
Average volume per day
     13.23 M     13.25 M
     Ground volume was flat during the quarter, reflecting declining growth rates in both industrial production and business-to-consumer shipments. Next Day Air® volume increased 1.6% to partially offset a 4% decline in deferred air volume. Total U.S. revenue per piece remained firm, up 1.7%, with revenue per piece on ground volume rising 3%.
                 
International Package   2Q 2007     2Q 2006  
Revenue
   $ 2.50 B   $ 2.23 B
Operating profit
   $ 475 M   $ 414 M
Operating margin
     19.0 %     18.5 %
Average volume per day
     1.80 M     1.72 M
     Total export volume increased 10.4%. Europe posted a double-digit export volume gain, reflecting strong cross-border growth. Asia export volume jumped 25% with particularly strong growth out of China. For the segment, operating profit increased 14.7% and margins expanded 50 basis points to 19%.
                 
Supply Chain and Freight   2Q 2007     2Q 2006  
Revenue
   $ 2.11 B   $ 2.04 B
Operating profit
   $ 98 M   $ 47 M
Operating margin
     4.6 %     2.3 %
     The forwarding and logistics business continues to benefit from the performance improvement initiatives launched in the second half of 2006. UPS Freight, which has been investing significantly to update customer service and technology systems, reported a strong gain in second quarter revenue to $549 million.
Outlook
     “We see increasing benefits for the company due to investments in both ground, air and ocean freight capabilities as well as further expansion globally of our small package business,” said Scott Davis, UPS’s vice chairman and CFO. “Toward the end of the year, we expect the small package market to more closely correlate to U.S. economic trends and as a result, we should see gradual volume growth in our U.S. package business.”
     UPS expects diluted earnings per share for the third quarter to fall within a range of $0.99 to $1.04 compared to the $0.96 reported for the prior-year period. Davis also reaffirmed the company’s annual target of a 6-to-10 percent increase in adjusted diluted earnings per share.
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     UPS, which celebrates its 100th anniversary in 2007, 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. To get UPS news direct, visit pressroom.ups.com/RSS.
# # #
EDITOR’S NOTE: UPS Chairman and CEO Mike Eskew and Vice Chairman and CFO Scott Davis will discuss second quarter results with investors and analysts during a conference call today at 8:30 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, 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 plans. 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 first quarter of 2007, we recorded a $221 million pre-tax impairment charge related to aircraft and a $68 million pre-tax charge related to cash payouts and the acceleration of stock compensation and certain retiree healthcare benefits for employees who accepted a voluntary separation opportunity. We presented first quarter 2007 operating profit, operating margin, pre-tax income, 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 and the charge related to the voluntary separation opportunity were unique, and we do not believe they are reflective of the types of charges that will affect 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.
     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
(unaudited)
                                 
    Three Months Ended        
    June 30,     Change  
     
    2007     2006     $     %  
     
(amounts in millions, except per share data)                                
Statement of Income Data:
                                
Revenue:
                                
U.S. Domestic Package
   $ 7,579     $ 7,462     $ 117       1.6 %
International Package
     2,500       2,233       267       12.0 %
Supply Chain & Freight
     2,110       2,041       69       3.4 %
             
Total revenue
     12,189       11,736       453       3.9 %
 
                                
Operating expenses:
                                
Compensation and benefits
     6,327       5,990       337       5.6 %
Other
     4,097       4,051       46       1.1 %
             
Total operating expenses
     10,424       10,041       383       3.8 %
 
                                
Operating profit:
                                
U.S. Domestic Package
     1,192       1,234       (42 )     -3.4 %
International Package
     475       414       61       14.7 %
Supply Chain & Freight
     98       47       51       108.5 %
             
Total operating profit
     1,765       1,695       70       4.1 %
 
                                
Other income (expense):
                                
Investment income
     28       23       5       21.7 %
Interest expense
     (61 )     (54 )     (7 )     13.0 %
             
Total other income (expense)
     (33 )     (31 )     (2 )     6.5 %
             
Income before income taxes
     1,732       1,664       68       4.1 %
 
                                
Income taxes
     628       603       25       4.1 %
             
Net income
   $ 1,104     $ 1,061     $ 43       4.1 %
             
 
                                
Net income as a percentage of revenue
     9.1 %     9.0 %                
 
                                
Per share amounts
                                
Basic earnings per share
   $ 1.04     $ 0.98     $ 0.06       6.1 %
Diluted earnings per share
   $ 1.04     $ 0.97     $ 0.07       7.2 %
 
                                
Weighted-average shares outstanding
                                
Basic
     1,060       1,087       (27 )     -2.5 %
Diluted
     1,066       1,092       (26 )     -2.4 %
         
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 — Second Quarter
(unaudited)
                                 
    Three Months Ended        
    June 30,     Change  
     
    2007     2006     $ / #     %  
     
Revenue (in millions):
                                
U.S. Domestic Package:
                                
Next Day Air
   $ 1,684     $ 1,687     $ (3 )     -0.2 %
Deferred
     792       822       (30 )     -3.6 %
Ground
     5,103       4,953       150       3.0 %
             
Total U.S. Domestic Package
     7,579       7,462       117       1.6 %
International Package:
                                
Domestic
     517       473       44       9.3 %
Export
     1,834       1,614       220       13.6 %
Cargo
     149       146       3       2.1 %
             
Total International Package
     2,500       2,233       267       12.0 %
Supply Chain & Freight:
                                
Forwarding and Logistics
     1,465       1,444       21       1.5 %
Freight
     549       510       39       7.6 %
Other
     96       87       9       10.3 %
             
Total Supply Chain & Freight
     2,110       2,041       69       3.4 %
             
Consolidated
   $ 12,189     $ 11,736     $ 453       3.9 %
             
 
                                
Consolidated volume (in millions)
     962       958       4       0.4 %
 
                                
Operating weekdays
     64       64                  
 
                                
Average Daily Package Volume (in thousands):
                                
U.S. Domestic Package:
                                
Next Day Air
     1,260       1,240       20       1.6 %
Deferred
     899       936       (37 )     -4.0 %
Ground
     11,071       11,074       (3 )     0.0 %
             
Total U.S. Domestic Package
     13,230       13,250       (20 )     -0.2 %
International Package:
                                
Domestic
     1,077       1,062       15       1.4 %
Export
     724       656       68       10.4 %
             
Total International Package
     1,801       1,718       83       4.8 %
             
Consolidated
     15,031       14,968       63       0.4 %
             
 
                                
Average Revenue Per Piece:
                                
U.S. Domestic Package:
                                
Next Day Air
   $ 20.88     $ 21.26     $ (0.38 )     -1.8 %
Deferred
     13.77       13.72       0.05       0.4 %
Ground
     7.20       6.99       0.21       3.0 %
Total U.S. Domestic Package
     8.95       8.80       0.15       1.7 %
International Package:
                                
Domestic
     7.50       6.96       0.54       7.8 %
Export
     39.58       38.44       1.14       3.0 %
Total International Package
     20.40       18.98       1.42       7.5 %
Consolidated
   $ 10.32     $ 9.97     $ 0.35       3.5 %
             
         
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
(unaudited)
                                 
    Six Months Ended        
    June 30,     Change  
     
    2007     2006     $     %  
     
(amounts in millions, except per share data)                                
Statement of Income Data:
                                
Revenue:
                                
U.S. Domestic Package
   $ 15,131     $ 14,925     $ 206       1.4 %
International Package
     4,885       4,394       491       11.2 %
Supply Chain & Freight
     4,079       3,938       141       3.6 %
             
Total revenue
     24,095       23,257       838       3.6 %
 
                                
Operating expenses:
                                
Compensation and benefits
     12,668       12,009       659       5.5 %
Other
     8,304       7,998       306       3.8 %
             
Total operating expenses
     20,972       20,007       965       4.8 %
 
                                
Operating profit:
                                
U.S. Domestic Package
     2,133       2,419       (286 )     -11.8 %
International Package
     846       809       37       4.6 %
Supply Chain & Freight
     144       22       122       554.5 %
             
Total operating profit
     3,123       3,250       (127 )     -3.9 %
 
                                
Other income (expense):
                                
Investment income
     42       46       (4 )     -8.7 %
Interest expense
     (110 )     (102 )     (8 )     7.8 %
             
Total other income (expense)
     (68 )     (56 )     (12 )     21.4 %
             
Income before income taxes
     3,055       3,194       (139 )     -4.4 %
 
                                
Income taxes
     1,108       1,158       (50 )     -4.3 %
             
Net income
   $ 1,947     $ 2,036     $ (89 )     -4.4 %
             
 
                                
Net income as a percentage of revenue
     8.1 %     8.8 %                
 
                                
Per share amounts
                                
Basic earnings per share
   $ 1.83     $ 1.87     $ (0.04 )     -2.1 %
Diluted earnings per share
   $ 1.82     $ 1.86     $ (0.04 )     -2.2 %
 
                                
Weighted average shares outstanding
                                
Basic
     1,065       1,091       (26 )     -2.4 %
Diluted
     1,070       1,096       (26 )     -2.4 %
 
                                
As adjusted income data:
                                
U.S. Domestic Package (1)
   $ 2,345     $ 2,419     $ (74 )     -3.1 %
International Package (1)
     915       809       106       13.1 %
Supply Chain & Freight (1)
     152       22       130       590.9 %
             
Total operating profit
     3,412       3,250       162       5.0 %
 
                                
Income before income taxes (1)
   $ 3,344     $ 3,194     $ 150       4.7 %
Net income (2)
   $ 2,131     $ 2,036     $ 95       4.7 %
Basic earnings per share (2)
   $ 2.00     $ 1.87     $ 0.13       7.0 %
Diluted earnings per share (2)
   $ 1.99     $ 1.86     $ 0.13       7.0 %
(1) 2007 adjusted operating profit and income before income taxes exclude an impairment charge on Boeing 727 and 747 aircraft, and related engines and parts, of $221 million ($159 million U.S. Domestic Package and $62 million International Package), due to the acceleration of the planned retirement of these aircraft.
2007 adjusted operating profit and income before income taxes also exclude a charge related to the special voluntary separation opportunity (“SVSO”), which was offered to approximately 640 employees who work in non-operating functions. The SVSO was accepted by 195, or 30%, of the eligible employees during the first quarter. As a result, we have recorded a charge to expense of $68 million ($53 million U.S. Domestic Package, $7 million International Package, and $8 million Supply Chain & Freight), to reflect the cash payout and the acceleration of stock compensation and certain retiree healthcare benefits under the SVSO program.
(2) First quarter net income and earnings per share amounts exclude the after-tax impact of the charges described in (1), which total $184 million.
         
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
(unaudited)
                                 
    Six Months Ended        
    June 30,     Change  
     
    2007     2006     $ / #     %  
     
Revenue (in millions):
                                
U.S. Domestic Package:
                                
Next Day Air
   $ 3,337     $ 3,371     $ (34 )     -1.0 %
Deferred
     1,594       1,653       (59 )     -3.6 %
Ground
     10,200       9,901       299       3.0 %
             
Total U.S. Domestic Package
     15,131       14,925       206       1.4 %
International Package:
                                
Domestic
     1,028       939       89       9.5 %
Export
     3,581       3,175       406       12.8 %
Cargo
     276       280       (4 )     -1.4 %
             
Total International Package
     4,885       4,394       491       11.2 %
Supply Chain & Freight:
                                
Forwarding and Logistics
     2,851       2,783       68       2.4 %
Freight
     1,037       987       50       5.1 %
Other
     191       168       23       13.7 %
             
Total Supply Chain & Freight
     4,079       3,938       141       3.6 %
             
Consolidated
   $ 24,095     $ 23,257     $ 838       3.6 %
             
 
                                
Consolidated volume (in millions)
     1,930       1,922       8       0.4 %
 
                                
Operating weekdays
     128       128                  
 
                                
Average Daily Package Volume (in thousands):
                                
U.S. Domestic Package:
                                
Next Day Air
     1,253       1,247       6       0.5 %
Deferred
     918       944       (26 )     -2.8 %
Ground
     11,089       11,093       (4 )     0.0 %
             
Total U.S. Domestic Package
     13,260       13,284       (24 )     -0.2 %
International Package:
                                
Domestic
     1,095       1,076       19       1.8 %
Export
     723       656       67       10.2 %
             
Total International Package
     1,818       1,732       86       5.0 %
             
Consolidated
     15,078       15,016       62       0.4 %
             
 
                                
Average Revenue Per Piece:
                                
U.S. Domestic Package:
                                
Next Day Air
   $ 20.81     $ 21.12     $ (0.31 )     -1.5 %
Deferred
     13.57       13.68       (0.11 )     -0.8 %
Ground
     7.19       6.97       0.22       3.2 %
Total U.S. Domestic Package
     8.91       8.78       0.13       1.5 %
International Package:
                                
Domestic
     7.33       6.82       0.51       7.5 %
Export
     38.70       37.81       0.89       2.4 %
Total International Package
     19.81       18.56       1.25       6.7 %
Consolidated
   $ 10.23     $ 9.91     $ 0.32       3.2 %
             
         
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  
    June 30, 2007  
(amounts in millions)      
Net cash from operations
   $ 3,597  
Capital expenditures
     (1,206 )
Proceeds from disposals of PP&E
     34  
Net change in finance receivables
     24  
Other investing activities
     (97 )
 
      
Free cash flow
   $ 2,352  
 
      
Amounts are subject to reclassification.

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