UPS reports net income of US$1.04B in Q3, up 5% year-over-year, total revenue of US$13.2B, up 8%; results driven by U.S. Domestic Package, Supply Chain and Freight segments
Alison Gallant
ATLANTA
,
October 26, 2011
(press release)
–
U.S. Domestic and Supply Chain & Freight Lead the Way; Free Cash Flow Exceeds $3.7 Billion
UPS (NYSE: UPS) today announced diluted earnings per share of $1.06 for the third quarter of 2011, a 14% improvement over the adjusted $0.93 for the prior-year period. Total revenue increased 8% to $13.2 billion.
The results were driven by the U.S. Domestic and Supply Chain & Freight segments. U.S. Domestic operating margin improved to 13.1% compared to last year's adjusted results and Supply Chain and Freight operating profit increased more than 10%. Free cash flow for the first nine months of the year was strong, exceeding $3.7 billion.
On a reported basis, diluted earnings per share increased 7.1% over the same quarter last year. In the prior-year period, the company recorded an after-tax benefit of $61 million from the sale of real estate.
"UPS produced another solid quarter of earnings growth against the backdrop of a deceleration in exports from Asia and a challenging global economic environment," said Scott Davis, UPS chairman and CEO. "The resilience of our global model was evident during the quarter and we remain confident in our ability to perform in both good and bad economies."During the quarter, UPS delivered 965 million packages, an increase of 0.7% over the prior-year period.
Consolidated Results
Revenue
Operating profit
Operating margin
Average volume per day
Diluted earnings per share
In July, UPS released its 2010 Sustainability Report, highlighting successful fuel conservation efforts. The company reduced miles driven by 63.5 million, resulting in carbon emissions avoidance of 68,000 metric tonnes. During the quarter, UPS also was recognized with the highest score in the 2011 Carbon Disclosure Project's Global Leadership Index.
Cash Position
For the nine months ending Sept. 30, UPS generated more than $3.7 billion in free cash flow after making capital expenditures of $1.6 billion and pension contributions of $1.4 billion.
The company accelerated its repurchase activity during the quarter, acquiring more than $1.1 billion in UPS stock. Year-to-date, UPS has repurchased 31.7 million shares for approximately $2.2 billion and paid dividends totaling $1.5 billion, up 10.6% per share.
Revenue increased 6.5% and operating profit improved more than 11% over the 2010 third quarter adjusted results. Operating margin expanded 60 basis points to 13.1% due to higher yields, favorable product mix changes and network efficiencies. Total domestic volume growth was flat as a result of the slow U.S. economy; however, UPS Next Day Air volume rose 1.3%.
On a reported basis compared to the third quarter of last year, operating profit decreased slightly and operating margin contracted by 90 basis points.
At the end of the quarter and just in time for the holidays, UPS unveiled a ground-breaking solution for residential deliveries. UPS My Choice enables U.S. consumers to take advantage of the unique delivery options that only UPS can offer. Since the product launch in early October, over 100,000 subscribers have enrolled.
Revenue for the segment improved more than 14%, driven by export volume growth of 6.5%. Revenue per piece climbed 9.4% with currency, higher fuel surcharges and base rate increases all contributing.
Operating profit and margin for the segment declined due to excess capacity caused by a deceleration in package volume on the Asia-to-U.S. trade lane. They also were negatively impacted by product mix, higher fuel prices and currency fluctuations.
Last month, the company announced a significant expansion of its European air hub in Cologne, Germany. The $200 million investment will utilize the latest UPS technology to improve efficiency and support continued European growth.
Operating profit for the third quarter climbed more than 10% to $195 million on revenue growth of 5.3% compared to the prior-year period. The operating margin for the segment increased 30 basis points to 8.3%.
UPS Freight drove segment results as operating profit improved and operating margin expanded. On a year-over-year basis, revenue for the quarter jumped approximately 15% on a slight decline in daily shipments. The business also experienced increases in LTL revenue per hundredweight and weight per shipment.
Forwarding revenue experienced downward pressure compared to the same quarter last year due to excess capacity in the air freight industry. Nonetheless, Forwarding expanded operating margin and slightly improved operating profit.
In September, UPS introduced PharmaPort 360, the latest innovation in cold-chain shipping solutions designed specifically for the healthcare industry. This unique temperature-controlled container offers unparalleled shipment monitoring and product protection for pharmaceuticals, vaccines and biologics.
Outlook
"We are reiterating our 2011 guidance for UPS adjusted diluted earnings per share to a range of $4.15-to-$4.40," said Kurt Kuehn, UPS's chief financial officer. "UPS continues to deliver strong financial results in today's global economic environment as customers benefit from the logistics solutions that only UPS offers."
United Parcel Service, Inc.
Selected Financial Data - Third Quarter
(unaudited)
Three Months Ended
September 30, Change
------------------------------- ------------------------
2011 2010 $ %
--------------- --------------- ------------- ----------
(amounts in millions, except per share data)
Statement of Income Data:
Revenue:
U.S. Domestic Package $ 7,767 $ 7,291 $ 476 6.5 %
International Package 3,057 2,676 381 14.2 %
Supply Chain & Freight 2,342 2,225 117 5.3 %
------ ------ ----
Total revenue 13,166 12,192 974 8.0 %
Operating expenses:
Compensation and benefits 6,694 6,411 283 4.4 %
Other 4,853 4,165 688 16.5 %
------ ------ ----
Total operating expenses 11,547 10,576 971 9.2 %
Operating profit:
U.S. Domestic Package 1,015 1,020 (5) -0.5 %
International Package 409 419 (10) -2.4 %
Supply Chain & Freight 195 177 18 10.2 %
------ ------ ----
Total operating profit 1,619 1,616 3 0.2 %
Other income (expense):
Investment income 16 15 1 6.7 %
Interest expense (84) (91) 7 -7.7 %
------ --- ------ --- ----
Total other income (expense) (68) (76) 8 -10.5 %
Income before income taxes 1,551 1,540 11 0.7 %
Income tax expense 509 549 (40) -7.3 %
Net income $ 1,042 $ 991 $ 51 5.1 %
=== ====== === ====== === ====
Net income as a percentage of revenue 7.9 % 8.1 %
Per share amounts
Basic earnings per share $ 1.07 $ 1.00 $ 0.07 7.0 %
Diluted earnings per share $ 1.06 $ 0.99 $ 0.07 7.1 %
Weighted-average shares outstanding
Basic 977 994 (17) -1.7 %
Diluted 987 1,004 (17) -1.7 %
As adjusted income data:
Operating profit:
U.S. Domestic Package (1) $ 1,015 $ 911 $ 104 11.4 %
International Package 409 419 (10) -2.4 %
Supply Chain & Freight 195 177 18 10.2 %
------ ------ ----
Total operating profit 1,619 1,507 112 7.4 %
Income before income taxes (1) $ 1,551 $ 1,431 $ 120 8.4 %
Net income (2) $ 1,042 $ 930 $ 112 12.0 %
Basic earnings per share (2) $ 1.07 $ 0.94 $ 0.13 13.8 %
Diluted earnings per share (2) $ 1.06 $ 0.93 $ 0.13 14.0 %
(1)Third quarter 2010 U.S. Domestic Package operating profit and
consolidated income before income taxes exclude a $109 million
gain on the sale of real estate.
(2) Third quarter 2010 net income and earnings per share amounts
exclude the after-tax effect of the real estate sale discussed in
(1), which totaled $61 million.
Certain prior year amounts have been reclassified to conform to
the current year presentation.
United Parcel Service, Inc.
Selected Operating Data - Third Quarter
(unaudited)
Three Months Ended
September 30, Change
------------------------ ------------------------
2011 2010 $/ # %
----------- ----------- ------------- ---------
Revenue (in millions):
U.S. Domestic Package:
Next Day Air $ 1,588 $ 1,466 $ 122 8.3 %
Deferred 760 696 64 9.2 %
Ground 5,419 5,129 290 5.7 %
------ ------ ----
Total U.S. Domestic Package 7,767 7,291 476 6.5 %
International Package:
Domestic 660 569 91 16.0 %
Export 2,251 1,975 276 14.0 %
Cargo 146 132 14 10.6 %
------ ------ ----
Total International Package 3,057 2,676 381 14.2 %
Supply Chain & Freight:
Forwarding and Logistics 1,552 1,536 16 1.0 %
Freight 667 581 86 14.8 %
Other 123 108 15 13.9 %
------ ------ ----
Total Supply Chain & Freight 2,342 2,225 117 5.3 %
------ ------ ----
Consolidated $ 13,166 $ 12,192 $ 974 8.0 %
=== ====== === ====== === ====
Consolidated volume (in millions) 965 958 7 0.7 %
Operating weekdays 64 64 -
Average Daily Package Volume (in thousands):
U.S. Domestic Package:
Next Day Air 1,196 1,181 15 1.3 %
Deferred 852 856 (4) -0.5 %
Ground 10,688 10,693 (5) 0.0 %
------ ------ ---- ---
Total U.S. Domestic Package 12,736 12,730 6 0.0 %
International Package:
Domestic 1,424 1,376 48 3.5 %
Export 919 863 56 6.5 %
------ ------ ----
Total International Package 2,343 2,239 104 4.6 %
------ ------ ----
Consolidated 15,079 14,969 110 0.7 %
====== ====== ====
Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air $ 20.75 $ 19.40 $ 1.35 7.0 %
Deferred 13.94 12.70 1.24 9.8 %
Ground 7.92 7.49 0.43 5.7 %
Total U.S. Domestic Package 9.53 8.95 0.58 6.5 %
International Package:
Domestic 7.24 6.46 0.78 12.1 %
Export 38.27 35.76 2.51 7.0 %
Total International Package 19.41 17.75 1.66 9.4 %
Consolidated $ 11.06 $ 10.27 $ 0.79 7.7 %
=== ====== === ====== === ====
Certain prior year amounts have been reclassified to conform to
the current year presentation.
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