News Release Details

UPS Delivers 1Q 2018 EPS of $1.55, Up 17%

April 26, 2018
  • International Revenue and Operating Profit Climb 15%
  • Average Daily Exports grew 12%, Led by Europe and U.S. Trade Lanes
  • Supply Chain & Freight Operating Profit up 14% on 16% Revenue Growth
  • U.S. Domestic Revenue Rises 7.2% on 4.6% Volume Growth
  • Weather Conditions Muted First Quarter U.S. Domestic Results  
  • Cash from Operations of $4.1B Resulted in Free Cash Flow* of $2.6B
  • Reaffirms Full-Year 2018 Adjusted EPS Guidance

ATLANTA, April 26, 2018 (GLOBE NEWSWIRE) -- UPS (NYSE:UPS) today announced that first-quarter 2018 earnings per share rose 17% to $1.55, led by double-digit operating profit growth in both International and Supply Chain and Freight segments. “Top-line growth in our business was strong across all business segments, reflecting the power of UPS’s global solutions and continued favorable economic conditions,” said UPS Chairman and CEO David Abney. “When combined with our transformation initiatives, these favorable trends position UPS for strong returns going forward.” 

Consolidated Results 1Q 2018 1Q 2017 % Change
Revenue $17,113 M $15,510 M 10 %
Net income $1,345 M $1,166 M 15 %
Diluted earnings per share $1.55 $1.33 17 %

For the total company in 1Q 2018:

  • Total revenue increased 10% to $17.1 billion, on strong demand for UPS solutions.
  • Average yield increased by 4.3%, led by International and U.S. Deferred Air products.
  • UPS rewarded shareowners by increasing dividends per share by nearly 10% over the prior year, and distributing $840 million during the quarter. 
  • To support investment strategies the company made capital expenditures of $1.5 billion.
  • The lower effective tax rate reflects a more competitive U.S. tax structure, some discrete tax items and includes the impact of share-based compensation.
  • First quarter results include the adoption of new accounting standards for pension and revenue recognition.  Prior-period results were also recast to reflect these changes.

* Information on non-GAAP financial measures is attached to this press release.

U.S. Domestic Segment

The U.S. Domestic segment experienced strong demand as customers increasingly chose UPS solutions.  Both unexpected and planned items weighed on operating profit for the segment during the first quarter.

  1Q 2018 1Q 2017
Revenue $10,227 M $9,536 M
Operating profit $756 M $950 M

For the U.S. Domestic segment in 1Q 2018:

  • Revenue increased to $10.2 billion, up 7.2% over 1Q 2017.  Revenue improved across all products, signaling the strong market demand for UPS solutions.    
  • Revenue per piece increased 2.6% as higher base-rate pricing and fuel surcharges offset headwinds from customer and product mix.
  • Operating profit includes headwinds from severe winter weather of $85 million, Saturday deployment, network projects and higher pension expenses.

International Segment

“The execution of our diversified global strategies and our investments produced double-digit growth in revenue and profit,” said Abney.  “Each of our International regions is contributing to our financial gains, and we expect this strong momentum to continue.”

  1Q 2018 1Q 2017
Revenue $3,533 M $3,074 M
Operating profit $594 M $518 M

For the International segment in 1Q 2018:

  • International revenue increased 15% despite two fewer operating days in many countries. Currency-neutral revenue increased 8.7%.
  • Export, Domestic and Cargo product groups all achieved double-digit revenue growth.
  • Export shipments per day grew an average 12% as premium products continue to outpace non-premium.
  • Export volume growth in Europe and the U.S. continued to be strong for the quarter.
  • Operating profit was $594 million, up 15% on higher Export shipments and expanded product yields.  Currency-neutral operating profit increased 10%.

* Information on non-GAAP financial measures is attached to this press release.

Supply Chain and Freight Segment

The Supply Chain and Freight segment produced another quarter of strong financial results.  Revenue and operating profit grew by double digits due to successful revenue-quality initiatives, opportunistic growth strategies and structural cost reductions.

     
  1Q 2018 1Q 2017
Revenue $3,353 M $2,900 M
Operating profit $170 M $149 M
     

For the Supply Chain and Freight segment in 1Q 2018:

  • Revenue increased to $3.4 billion, up 16% over 1Q 2017.  The business units focused on high quality, middle-market customers. 
  • The Forwarding business led all units with 27% revenue growth, as revenue management initiatives and stable market conditions drove top-line gains.
  • UPS Freight revenue increased 9.9% on solid LTL (less-than-truckload) pricing and tonnage growth.
  • Operating profit was $170 million, up 14% from the same quarter in 2017.     

Outlook

The company provides guidance on an adjusted (non-GAAP) basis because it is not possible to predict or provide a reconciliation reflecting the impact of future pension mark-to-market adjustments or other unanticipated events, which would be included in reported (GAAP) results and could be material.

“Our focused business strategies are producing strong results in both the International and Supply Chain segments,” said Richard Peretz, UPS’s chief financial officer.  “The benefits from our investments, new multi-year transformation efficiencies and stronger pricing position us well for shareowner value creation.”

  • UPS expects 2018 adjusted diluted earnings per share to be in a range of $7.03 to $7.37.
  • The company projects free cash flow of $4.5 billion to $5.0 billion in 2018.
  • The effective tax rate should be in a range of 23% to 24% for the remainder of the year.
  • Capital expenditures in 2018 are planned between $6.5 billion to $7.0 billion.

Conference Call Information
           
UPS CEO David Abney and CFO Richard Peretz will discuss first-quarter results with investors and analysts during a conference call at 8:30 a.m. ET, April 26, 2018.  That call is open to others through a live Webcast.  To access the call, go to www.investors.ups.com and click on “Earnings Webcast.”

About UPS

UPS (NYSE:UPS) is a global leader in logistics, offering a broad range of solutions including transporting packages and freight; facilitating international trade, and deploying advanced technology to more efficiently manage the world of business. Headquartered in Atlanta, UPS serves more than 220 countries and territories worldwide. The company can be found on the web at ups.com or pressroom.ups.com and its corporate blog can be found at longitudes.ups.com. To get UPS news direct, follow @UPS_News on Twitter.

Forward-Looking Statements

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 (including tax laws and regulations), our competitive environment, changes in the facts or assumptions underlying our health and pension benefit funding obligations, negotiation and ratification of labor contracts, strikes, work stoppages and slowdowns, changes 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.

Reconciliation of GAAP and non-GAAP Financial Measures

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, other income (expense), pre-tax income, net income and earnings per share. The equivalent measures determined in accordance with GAAP are also referred to as "reported" or "unadjusted.” Additionally, we periodically disclose free cash flow, free cash flow excluding discretionary pension contributions, as well as currency-neutral revenue, revenue per piece and operating profit.

We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Examples of items for which we may make adjustments include but are not limited to: amounts related to mark-to-market gains or losses (non-cash); settlement of contingencies; gains or losses associated with mergers, acquisitions, divestitures and other structural changes; charges related to restructuring programs; asset impairments (non-cash); amounts related to changes in tax regulations or positions; pension and postretirement related items; and debt modifications.

We believe that these non-GAAP measures provide additional meaningful information to assist users of our financial statements in understanding our financial results, cash flows and assessing our ongoing performance because they exclude items that may not be indicative of, or are unrelated to, our underlying operations and may provide a useful baseline for analyzing trends in our underlying businesses. Management uses these non-GAAP financial measures in making financial, operating and planning decisions. We also use certain of these measures for the determination of incentive compensation award results.

Non-GAAP financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our non-GAAP financial information does not represent a comprehensive basis of accounting. Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.

Currency-Neutral Revenue, Revenue per Piece and Operating Profit

We supplement the reporting of our revenue, revenue per piece and operating profit with similar non-GAAP measures that exclude the period-over-period impact of foreign currency exchange rate changes and hedging activities. We believe currency-neutral revenue, revenue per piece and operating profit information allows users of our financial statements to understand growth trends in our products and results. We evaluate the performance of our International Package and Supply Chain and Freight businesses on a currency-neutral basis.

Currency-neutral revenue, revenue per piece and operating profit are calculated by dividing current period reported U.S. dollar revenue, revenue per piece and operating profit by the current period average exchange rates to derive current period local currency revenue, revenue per piece and operating profit. The derived current period local currency revenue, revenue per piece and operating profit are then multiplied by the average foreign exchange rates used to translate the comparable results for each month in the prior year period (including the period over period impact of foreign currency revenue hedging activities). The difference between the current period reported U.S. dollar revenue, revenue per piece and operating profit and the derived current period U.S. dollar revenue, revenue per piece and operating profit is the period over period impact of currency fluctuations.

Free Cash Flow

We supplement the reporting of cash flows from operating activities with free cash flow, a non-GAAP liquidity measure. We believe free cash flow is an important indicator of how much cash is generated by regular business operations and we use it as a measure of incremental cash available to invest in our business, meet our debt obligations and return cash to shareowners. We calculate free cash flow as cash flows from operating activities less capital expenditures, proceeds from disposals of property, plant and equipment, and plus or minus the net changes in finance receivables and other investing activities.

 
 
Reconciliation of GAAP and non-GAAP Revenue, Revenue Per Piece and Operating Profit 
(in millions, except Per Piece amounts):
 
Three Months Ended March 31
           
  2018 As-
Reported
(GAAP)
2017 As-
Reported
(GAAP)
% Change
(GAAP)
Currency
Impact
2018
Currency-
Neutral
(non-GAAP)
% Change
(non-GAAP)
Average Revenue Per Piece:            
International Package:            
Domestic $ 6.70 $ 5.69 17.8 % $ (0.74 ) $ 5.96 4.7 %
Export   28.87   28.15 2.6 %   (1.21 )   27.66 -1.7 %
Total International Package $ 16.99 $ 15.47 9.8 % $ (0.96 ) $ 16.03 3.6 %
             
Consolidated $ 10.97 $ 10.52 4.3 % $ (0.16 ) $ 10.81 2.8 %
             
Revenue:            
U.S. Domestic Package $ 10,227 $ 9,536 7.2 % $ -   $ 10,227 7.2 %
International Package   3,533   3,074 14.9 %   (193 )   3,340 8.7 %
Supply Chain & Freight   3,353   2,900 15.6 %   (51 )   3,302 13.9 %
Total revenue $ 17,113 $ 15,510 10.3 % $ (244 ) $ 16,869 8.8 %
                                           
Operating Profit:            
U.S. Domestic Package $ 756 $ 950 -20.4 % $ -   $ 756 -20.4 %
International Package   594   518 14.7 %   (22 )   572 10.4 %
Supply Chain & Freight   170   149 14.1 %   (1 )   169 13.4 %
Total operating profit $ 1,520 $ 1,617 -6.0 % $ (23 ) $ 1,497 -7.4 %
                                           
               

 

Reconciliation of GAAP and non-GAAP Liquidity Measures (in millions)
   
Three Months Ended March 31
   
Net Increase in Cash, Cash Equivalents and Restricted Cash
   
  Preliminary
2018
Cash flows from operating activities $ 4,067  
Cash flows used in investing activities   (1,446 )
Cash flows used in financing activities   (2,550 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (14 )
Net increase in cash, cash equivalents and restricted cash $ 57  
   
Reconciliation of Free Cash Flow (non-GAAP)
   
  Preliminary
2018
   
Cash flows from operating activities (GAAP) $ 4,067  
Capital expenditures   (1,537 )
Proceeds from disposals of PP&E   20  
Net change in finance receivables   -  
Other investing activities   2  
Free cash flow (non-GAAP) $ 2,552  
       

 

United Parcel Service, Inc.
Selected Financial Data - First Quarter
(unaudited)
               
  Three Months Ended    
  March 31  
    2018       2017     Change   % Change
(amounts in millions, except per share data)                          
Statement of Income Data:                          
Revenue:                          
U.S. Domestic Package $ 10,227     $ 9,536     $ 691     7.2 %
International Package   3,533       3,074       459     14.9 %
Supply Chain & Freight   3,353       2,900       453     15.6 %
Total revenue   17,113       15,510       1,603     10.3 %
                           
Operating expenses:                          
Compensation and benefits   9,045       8,311       734     8.8 %
Other   6,548       5,582       966     17.3 %
Total operating expenses   15,593       13,893       1,700     12.2 %
                           
Operating profit:                          
U.S. Domestic Package   756       950       (194 )   -20.4 %
International Package   594       518       76     14.7 %
Supply Chain & Freight   170       149       21     14.1 %
Total operating profit   1,520       1,617       (97 )   -6.0 %
                           
Other income (expense):                          
Other pension income (expense)   285       180       105     58.3 %
Investment income and other   9       15       (6 )   -40.0 %
Interest expense   (153 )     (102 )     (51 )   50.0 %
Total other income (expense)   141       93       48     51.6 %
                           
Income before income taxes   1,661       1,710       (49 )   -2.9 %
                           
Income tax expense   316       544       (228 )   -41.9 %
                           
Net income $ 1,345     $ 1,166     $ 179     15.4 %
                           
Net income as a percentage of revenue   7.9 %     7.5 %            
                           
Per share amounts:                          
Basic earnings per share $ 1.55     $ 1.33     $ 0.22     16.5 %
Diluted earnings per share $ 1.55     $ 1.33     $ 0.22     16.5 %
                           
Weighted-average shares outstanding:                          
Basic   866       874       (8 )   -0.9 %
Diluted   870       879       (9 )   -1.0 %
                           

 

United Parcel Service, Inc.
Selected Operating Data - First Quarter
(unaudited)
               
               
  Three Months Ended        
  March 31  
    2018     2017   Change   % Change
                       
Revenue (in millions):                      
U.S. Domestic Package:                      
Next Day Air $ 1,784   $ 1,665   $ 119     7.1 %
Deferred   1,069     970     99     10.2 %
Ground   7,374     6,901     473     6.9 %
Total U.S. Domestic Package   10,227     9,536     691     7.2 %
International Package:                      
Domestic   716     613     103     16.8 %
Export   2,672     2,337     335     14.3 %
Cargo and Other   145     124     21     16.9 %
Total International Package   3,533     3,074     459     14.9 %
Supply Chain & Freight:                      
Forwarding   1,605     1,266     339     26.8 %
Logistics   782     740     42     5.7 %
Freight   777     707     70     9.9 %
Other   189     187     2     1.1 %
Total Supply Chain & Freight   3,353     2,900     453     15.6 %
Consolidated $ 17,113   $ 15,510   $ 1,603     10.3 %
                       
Consolidated volume (in millions)   1,241     1,187     54     4.5 %
                       
Operating weekdays   64     64     -     0.0 %
                       
Average Daily Package Volume (in thousands):                      
U.S. Domestic Package:                      
Next Day Air   1,437     1,315     122     9.3 %
Deferred   1,297     1,243     54     4.3 %
Ground   13,545     13,008     537     4.1 %
Total U.S. Domestic Package   16,279     15,566     713     4.6 %
International Package:                      
Domestic   1,670     1,683     (13 )   -0.8 %
Export   1,446     1,297     149     11.5 %
Total International Package   3,116     2,980     136     4.6 %
Consolidated   19,395     18,546     849     4.6 %
                       
Average Revenue Per Piece:                      
U.S. Domestic Package:                      
Next Day Air $ 19.40   $ 19.78   $ (0.38 )   -1.9 %
Deferred   12.88     12.19     0.69     5.7 %
Ground   8.51     8.29     0.22     2.7 %
Total U.S. Domestic Package   9.82     9.57     0.25     2.6 %
International Package:                      
Domestic   6.70     5.69     1.01     17.8 %
Export   28.87     28.15     0.72     2.6 %
Total International Package   16.99     15.47     1.52     9.8 %
Consolidated $ 10.97   $ 10.52   $ 0.45     4.3 %
                       

 

United Parcel Service, Inc.
Supplemental Analysis of Currency and UPS Freight
                       
Currency Neutral Revenue Per Piece
(unaudited)
                       
  Three Months Ended           Currency    
  March 31           Neutral    
    2018     2017   % Change   Currency   2018*   % Change
                       
Average Revenue Per Piece:                      
International Package:                      
Domestic $ 6.70   $ 5.69     17.8 %   $ (0.74 )   $ 5.96   4.7 %
Export   28.87     28.15     2.6 %   $ (1.21 )   $ 27.66   -1.7 %
Total International Package $ 16.99   $ 15.47     9.8 %   $ (0.96 )   $ 16.03   3.6 %
                                       
                                       
Consolidated $ 10.97   $ 10.52     4.3 %   $ (0.16 )   $ 10.81   2.8 %
                                       
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences        
                       
Currency Neutral Revenue
(unaudited)
                       
  Three Months Ended           Currency     
  March 31           Neutral    
    2018     2017   % Change   Currency   2018*   % Change
Revenue (in millions):                      
U.S. Domestic Package $ 10,227   $ 9,536     7.2 %   $ -     $ 10,227   7.2 %
International Package   3,533     3,074     14.9 %     (193 )     3,340   8.7 %
Supply Chain & Freight   3,353     2,900     15.6 %     (51 )     3,302   13.9 %
Total revenue $ 17,113   $ 15,510     10.3 %   $ (244 )   $ 16,869   8.8 %
                                       
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences        
                       
Currency Neutral Operating Profit
(unaudited)
                       
  Three Months Ended           Currency    
  March 31            Neutral    
    2018     2017   % Change   Currency   2018*   % Change
Operating profit (in millions):                      
U.S. Domestic Package $ 756   $ 950     -20.4 %   $ -     $ 756   -20.4 %
International Package   594     518     14.7 %     (22 )     572   10.4 %
Supply Chain & Freight   170     149     14.1 %     (1 )     169   13.4 %
Total operating profit $ 1,520   $ 1,617     -6.0 %   $ (23 )   $ 1,497   -7.4 %
                                       
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences        
                       
UPS Freight Selected Operating Data - First Quarter 
(unaudited)
                       
  Three Months Ended                
  March 31            
    2018     2017   Change   % Change        
LTL revenue (in millions) $ 661   $ 616   $ 45       7.3 %        
LTL revenue per LTL hundredweight $ 24.76   $ 23.57   $ 1.19       5.0 %        
                                   
LTL shipments (in thousands)   2,468     2,510     (42 )     -1.7 %        
LTL shipments per day (in thousands)   38.6     39.2     (0.6 )     -1.7 %        
                                   
LTL gross weight hauled (in millions of pounds)   2,670     2,613     57       2.2 %        
LTL weight per shipment (in pounds)   1,082     1,041     41       3.9 %        
                                   
Operating weekdays   64     64     -       0.0 %        
                                   

 

United Parcel Service, Inc.
               
               
Detail of Other Operating Expenses - First Quarter
(unaudited)
               
               
(in millions) Three Months Ended      
  March 31    
    2018     2017   Change   % Change
Repairs and maintenance $ 434   $ 390   $ 44   11.3 %
Depreciation and amortization   596     554     42   7.6 %
Purchased transportation   3,145     2,545     600   23.6 %
Fuel   750     621     129   20.8 %
Other occupancy   361     299     62   20.7 %
Other expenses   1,262     1,173     89   7.6 %
Total other operating expenses $ 6,548   $ 5,582   $ 966   17.3 %
               
               
               
Detail of Other Pension Income (Expense) - First Quarter
(unaudited)
               
               
(in millions) Three Months Ended      
  March 31    
    2018     2017   Change   % Change
U.S. Domestic Package $ 227   $ 139   $ 88   63.3 %
International Package   20     13     7   53.8 %
Supply Chain & Freight   38     28     10   35.7 %
Total other pension income (expense) $ 285   $ 180   $ 105   58.3 %
               
               
               
Earnings Per Share and Share Data - First Quarter 
(unaudited)
               
               
      Three Months Ended    
(amounts in millions, except per share data)     March 31    
        2018     2017    
               
Numerator:                  
Net income     $ 1,345   $ 1,166    
                   
Denominator:                  
Weighted-average shares       861     869    
Deferred compensation obligations       1     1    
Vested portion of restricted units       4     4    
Denominator for basic earnings per share       866     874    
                   
Effect of dilutive securities:                  
Restricted units       4     4    
Stock options       -     1    
Denominator for diluted earnings per share       870     879    
                   
Basic earnings per share     $ 1.55   $ 1.33    
                   
Diluted earnings per share     $ 1.55   $ 1.33    
                   
                   
                   
Detail of shares outstanding as of March 31, 2018:                  
                   
Class A shares       173          
Class B shares       689          
Total shares outstanding       862          
                   

 

United Parcel Service, Inc.
Consolidated Balance Sheets - March 31, 2018 and December 31, 2017
(unaudited)
       
(amounts in millions) March 31,   December 31,
  2018   2017
ASSETS      
Current Assets:      
Cash and marketable securities $ 4,209   $ 4,069
Other current assets   9,411     11,649
Total Current Assets   13,620     15,718
Property, Plant and Equipment   50,309     48,726
Less accumulated depreciation and amortization   27,070     26,608
    23,239     22,118
Other Assets   7,605     7,738
  $ 44,464   $ 45,574
       
LIABILITIES AND SHAREOWNERS' EQUITY      
Current Liabilities $ 11,149   $ 12,886
Long-Term Debt   20,409     20,278
Pension and Postretirement Benefit Obligations   7,053     7,061
Deferred Taxes, Credits and Other Liabilities   4,478     4,325
Shareowners' Equity   1,375     1,024
  $ 44,464   $ 45,574
       
Amounts are subject to reclassification.      
           

 

United Parcel Service, Inc.
Selected Cash Flow Data
(unaudited)
   
Net Increase in Cash, Cash Equivalents and Restricted Cash
   
  Preliminary
  Year-to-Date
(amounts in millions) March 31
Cash flows from operating activities $ 4,067  
Cash flows used in investing activities   (1,446 )
Cash flows used in financing activities   (2,550 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (14 )
Net increase in cash, cash equivalents and restricted cash $ 57  
   
   
   
   
Reconciliation of Free Cash Flow (non-GAAP measure)
   
  Preliminary
  Year-to-Date
(amounts in millions) March 31
Cash flows from operating activities $ 4,067  
Capital expenditures   (1,537 )
Proceeds from disposals of PP&E   20  
Net change in finance receivables   -  
Other investing activities   2  
Free cash flow (non-GAAP measure) $ 2,552  
   
   
Amounts are subject to reclassification.  

 

United Parcel Service, Inc.  
Aircraft Fleet - As of March 31, 2018  
(unaudited)  
           
  Owned and Leases & Charters      
Description Capital Leases from Others On Order Under Option  
Operating:          
Boeing 757-200 75 - - -  
Boeing 767-200 - 2 -    
Boeing 767-300 59 - 4 -  
Boeing 767-300BCF 3 - - -  
Airbus A300-600 52 - - -  
Boeing MD-11 37 4 - -  
Boeing 747-400F 11 - - -  
Boeing 747-400BCF 2 - - -  
Boeing 747-8F 5 - 23 -  
Other - 314 - -  
           
Total 244 320 27 -  
           


Contacts:
Steve Gaut, Public Relations
404-828-8787

Scott Childress, Investor Relations
404-828-7957

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