News Release Details

UPS Growth Accelerates In 2017

February 1, 2018

Announces Positive 2018 Outlook

  • Revenue Growth Tops 11% for 4Q17 and 8% for Full-Year 2017
  • 4Q17 EPS of $1.27; Adjusted 4Q EPS of $1.67
  • International Export Shipments Rose 16% in 4Q17, Full-Year up 15%
  • Supply Chain & Freight Profit Jumps with Strong Revenue Growth of 21%
  • U.S. Domestic Revenue up 8.4% on Higher Package Demand and Yields
  • 2017 EPS of $5.61; Adjusted 2017 EPS of $6.01
  • UPS Increases Investments for Growth in 2018
  • Announces Full-Year 2018 Adjusted EPS Guidance Range of $7.03 to $7.37

ATLANTA, Feb. 01, 2018 (GLOBE NEWSWIRE) -- UPS (NYSE:UPS) today announced fourth quarter 2017 earnings.  “We achieved our 2017 adjusted earnings-per-share target through exceptionally strong revenue and yield growth, coupled with benefits from our network investments and portfolio initiatives,” said David Abney, UPS chairman and CEO.  “We made significant progress on key capacity investments in 2017.  Our momentum, transformative actions and the economic catalyst from the Tax Cuts and Jobs Act (TCJA), position UPS for growth in 2018 and beyond.  We expect to unlock significant resources, which will be available for accelerated investments in our network and create additional opportunities for our people.”

Consolidated Results 4Q 2017 Adjusted
4Q 2017
4Q 2016 Adjusted
4Q 2016
Revenue $18,829 M   $16,931 M  
Operating profit (loss) $1,494 M $2,294 M $(428) M $2,223 M
Diluted earnings (loss) per share $1.27 $1.67 $(0.27) $1.63

Fourth-quarter 2017 GAAP results include a benefit of $0.30 per share attributable to the TCJA.  In addition, results include a mark-to-market (MTM) non-cash, pre-tax pension charge of $800 million which represents an after-tax charge of $0.70 per diluted share.  In the prior-year period, the company reported non-cash, after-tax charges of $1.90 per diluted share related to mark-to-market pension charges. 

For the total company in 4Q 2017:

  • Revenue increased 11.2%; currency-neutral revenue was up 10.9%.
  • 4Q 2017 diluted EPS of $1.27; adjusted diluted EPS of $1.67.
  • During the quarter, the company delivered 1.5 billion packages, up 5.7% over last year.
  • Record deliveries for Peak Season of 762 million, materially above last year and over plan.

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

U.S. Domestic Segment

The Domestic segment is transforming its network to take full advantage of structural changes in the direct-to-consumer market.  Demand for UPS Ground rose in the fourth quarter with volume growth of 5.7% and revenue of 9.3%.  Premium Next Day Air shipment growth continued to be strong at 4.9% as customers selected faster delivery options.  However, bottom line results were muted by additional peak operating expenses due to cyber-period volume surges and short-term costs related to capacity projects yet to come on-line.  

  4Q 2017 Adjusted
4Q 2017
4Q 2016 Adjusted
4Q 2016
Revenue $11,835 M   $10,913 M  
Operating profit (loss) $627 M $1,264 M $(570) M $1,338 M

For the U.S. Domestic segment in 4Q 2017:

  • Revenue increased $922 million or 8.4% over 4Q 2016, driven by Deferred Air and Ground. 
  • Revenue per piece increased 2.9%, as higher base-rate pricing and fuel surcharges offset headwinds from customer and product mix.  
  • Shipments surged beyond network capacity during Cyber-periods driving additional operating cost of $125 million.
  • Saturday operations provided additional capacity and flexibility during the quarter.
  • Operating profit includes additional expense from investments in new technology, customer solutions and automated capacity expansion of about $60 million.
  • Adjusted operating profit excludes the MTM pension charge.

International Segment

“Our International segment has generated four consecutive quarters of double-digit export growth,” said Abney.  “That execution, combined with our growth strategy and the investments we’ve made over the last three-and-a-half years, produced results that exceeded expectations.” 

  4Q 2017 Adjusted
4Q 2017
4Q 2016 Adjusted
4Q 2016
Revenue $3,753 M   $3,335 M  
Operating profit $725 M $760 M $281 M $706 M

For the International segment in 4Q 2017:

  • The segment reported revenue growth of 13% driven by premium products.
  • Export shipment growth surged 16% per day.  All regions of the world contributed to the expansion.
  • 4Q 2017 operating profit was $725 million; 4Q adjusted operating profit increased 7.6% to $760 million, the result of broad, accelerated growth combined with expanded yields.
  • Adjusted operating profit excludes the MTM pension charge.
  • Currency-neutral operating profit increased 19% on an adjusted basis.

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

Supply Chain and Freight Segment

The Supply Chain and Freight segment produced record full-year and fourth-quarter results with double-digit expansion in both revenue and adjusted operating profit.  Improved market conditions combined with revenue-quality improvements and structural cost-reduction programs produced strong results.

  4Q 2017 Adjusted
4Q 2017
4Q 2016 Adjusted
4Q 2016
Revenue $3,241 M   $2,683 M  
Operating profit (loss) $142 M $270 M $(139) M $179 M

For the Supply Chain and Freight segment in 4Q 2017:

  • Revenue increased 21% over 4Q 2016, the result of deeper alignment with preferred customers, strengthened revenue management initiatives and improved market conditions.
  • Tonnage gains in Freight Forwarding, UPS Freight and Coyote Logistics contributed to improved top-line results.
  • 4Q 2017 operating profit of $142 million; adjusted operating profit was $270 million.
  • Adjusted operating profit excludes the MTM pension charge.

Full-year 2017 Consolidated Results

  • Total revenue increased 8.2% to $65.9 billion on shipment growth and yield expansion.
  • Full-year 2017 diluted EPS of $5.61; adjusted diluted EPS was $6.01.
  • Adjusted diluted EPS excludes the impact of both MTM pension charge and TCJA income tax benefit.
  • Company made capital expenditures of $5.2 billion during the year.
  • Paid dividends of $2.9 billion, an increase of 6.4% per share over the prior year. 
  • Repurchased 16.1 million shares for approximately $1.8 billion.

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 growth opportunities are accelerating,” said Richard Peretz, UPS chief financial officer.  “The strong economic outlook and UPS’s high return on invested capital generates a unique opportunity to create additional long-term value by increasing capital investments.  These investments enable UPS to execute our strategy and we are well-positioned for 2018 and beyond.”

  • UPS expects 2018 adjusted diluted earnings per share to be in a range of $7.03 to $7.37, which includes about $200 million of additional pre-tax pension expense due to lower discount rates.
  • Our guidance includes TCJA benefits that will increase net income and cash flow. 
  • Capital expenditures planned between $6.5 billion to $7.0 billion, mostly dedicated to investments in new technology, aircraft and automated capacity.

Conference Call Information
           
UPS CEO David Abney and CFO Richard Peretz will discuss fourth-quarter results with investors and analysts during a conference call at 8:30 a.m. ET, February 1, 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, 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.

Mark-To-Market Pension and Postretirement Adjustments

We recognize changes in the fair value of plan assets and net actuarial gains and losses in excess of a 10% corridor for company-sponsored pension and post-retirement obligations immediately as part of net periodic benefit cost. We supplement the presentation of our operating profit, operating margin, pre-tax income, net income and earnings per share with similar non-GAAP measures that exclude the impact of the portion of net periodic benefit cost represented by the gains and losses recognized in excess of the 10% corridor and the related income tax effects. We believe this adjusted net periodic benefit cost provides important supplemental information that reflects the anticipated long-term cost of our defined benefit plans, and provides a benchmark for historical defined benefit cost trends that may provide useful comparison of year-to-year financial performance without considering the short-term impact of changes in market interest rates, equity prices, and similar factors.

This adjusted net periodic benefit cost ($843 million in 2017 and $1,074 million in 2016) is comparable to the accounting for our defined benefit plans in our quarterly reporting under U.S. GAAP, utilizing the expected return on plan assets (8.65% in 2017 and 8.65% in 2016) and the discount rate used to determine net periodic benefit cost (4.34% in 2017 and 4.81% in 2016).  The non-adjusted net periodic benefit cost reflects the actual return on plan assets (12.45% in 2017 and 6.06% in 2016) and the discount rate used to measure the projected benefit obligation at the December 31 measurement date (3.81% in 2017 and 4.34% in 2016).

The deferred income tax effects of these mark-to-market pension and postretirement adjustments are calculated by multiplying the statutory tax rates applicable in each tax jurisdiction, including the U.S. federal jurisdiction and various U.S. state and non-U.S. jurisdictions, by the adjustments. The blended average of the applicable statutory tax rates in 2017 and 2016 were 24.1% and 36.9%, respectively.

Tax Cuts and Jobs Act of 2017

On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted that significantly revises U.S. corporate income tax law by, among other things, reducing the corporate income tax rate to 21% and implementing a modified territorial tax system, that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. Net Income and diluted earnings per share as adjusted, excluding the benefit from TCJA of $258 million, is a non-GAAP measure. The tax benefit was primarily due to the TCJA’s reduction in the corporate tax rate that resulted in a remeasurement of our net deferred tax liability. We believe diluted earnings per share excluding the tax benefit is useful in evaluating our ongoing operating performance for the current period to that of other periods presented. The estimates are based on our initial analysis and current interpretation of the TCJA. Given the significant complexity of the Act, anticipated guidance from the U. S. Treasury about implementing the Act, and the potential for additional guidance from the Securities and Exchange Commission or the Financial Accounting Standards Board related to the Act, our estimates may be refined in the future.

Weighted-Average Shares Outstanding and Diluted Earnings per Share

The computation of weighted-average shares outstanding and diluted earnings per share for the fourth quarter of 2016 excludes the effect of certain incentive compensation awards because they were anti-dilutive in consideration of our reported net loss. Adjusted diluted earnings per share for this period includes the dilutive effect of these same shares because we are reporting adjusted net income after excluding the mark-to-market pension and postretirement adjustment.

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 and free cash flow excluding discretionary pension contributions, non-GAAP liquidity measures. 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.

We believe free cash flow excluding discretionary pension contributions is an important indicator of how much cash is generated by regular business operations and we use it to monitor our cash flow performance. We also believe this non-GAAP measure provides investors additional useful information when evaluating our cash flows from operating activities.

Reconciliation of GAAP and non-GAAP Income Statement Data (in millions, except EPS amounts):
 
Three Months Ended December 31, 2017
             
    As-Reported
(GAAP)
Defined Benefit
Plans MTM
Charges
Impact of TCJA As-Adjusted
(non-GAAP)
 
Operating profit:            
  U.S. Domestic Package   $   627   $   637 $     -   $   1,264  
  International Package     725     35     -     760  
  Supply Chain & Freight     142     128     -     270  
  Total operating profit   $   1,494   $   800 $     -   $   2,294  
             
             
Income Taxes   $   284   $   193 $     258   $   735  
             
Net income   $   1,104   $   607 $     (258 ) $   1,453  
             
Diluted earnings per share   $   1.27   $   0.70 $     (0.30 ) $   1.67  
             
             
Three Months Ended December 31, 2016
             
    As-Reported
(GAAP)
Defined Benefit
Plans MTM
Charges
Impact of TCJA As-Adjusted
(non-GAAP)
 
Operating profit (loss):            
  U.S. Domestic Package   $   (570 ) $   1,908 $     -   $   1,338  
  International Package     281     425     -     706  
  Supply Chain & Freight     (139 )   318     -     179  
  Total operating profit   $   (428 ) $   2,651 $     -   $   2,223  
             
             
Income Taxes   $   (277 ) $   978 $     -   $   701  
             
Net income (loss)   $   (239 ) $   1,673 $     -   $   1,434  
             
Diluted weighted avg. shares     876     5     881  
             
Diluted earnings (loss) per share   $   (0.27 ) $    1.90 $     -   $   1.63  
             
             

Note: Certain amounts may not compute due to rounding. 

Reconciliation of GAAP and non-GAAP Income Statement Data (in millions, except EPS amounts):
 
Year Ended December 31, 2017
             
    As-Reported
(GAAP)
Defined Benefit
Plans MTM
Charges
Impact of TCJA As-Adjusted
(non-GAAP)
 
Operating profit:            
  U.S. Domestic Package   $   4,280 $   637 $     -   $   4,917  
  International Package     2,464   35     -     2,499  
  Supply Chain & Freight     785   128     -     913  
  Total operating profit   $   7,529 $   800 $     -   $   8,329  
             
             
Income Taxes   $   2,238 $   193 $     258   $   2,689  
             
Net income   $   4,910 $   607 $     (258 ) $   5,259  
             
Diluted earnings per share   $   5.61 $   0.69 $     (0.29 ) $   6.01  
             
             
Year Ended December 31, 2016
             
    As-Reported
(GAAP)
Defined Benefit
Plans MTM
Charges
Impact of TCJA As-Adjusted
(non-GAAP)
 
Operating profit:            
  U.S. Domestic Package   $   3,017 $   1,908 $     -   $   4,925  
  International Package     2,044   425     -     2,469  
  Supply Chain & Freight     406   318     -     724  
  Total operating profit   $   5,467 $   2,651 $     -   $   8,118  
             
             
Income Taxes   $   1,705 $   978 $     -   $   2,683  
             
Net income   $   3,431 $   1,673 $     -   $   5,104  
             
Diluted earnings per share   $   3.87 $   1.88 $     -   $   5.75  
             
             

Note: Certain amounts may not compute due to rounding.

 

Reconciliation of GAAP and non-GAAP Revenue, Revenue Per Piece and As-Adjusted Currency Neutral Operating Profit
(in millions, except Per Piece amounts):
   
Three Months Ended December 31  
           
  2017 As-
Reported
(GAAP)
2016 As-
Reported
(GAAP)
% Change
(GAAP)
Currency
Impact
2017
Currency-
Neutral
(non-GAAP)
% Change
(non-GAAP)
Average Revenue Per Piece:            
International Package:            
Domestic $   6.31 $   5.57 13.3 % $ (0.45 ) $   5.86 5.2 %
Export   28.50   29.50 -3.4 %   0.28     28.78 -2.4 %
Total International Package $   16.57 $   15.90 4.2 % $ (0.12 ) $   16.45 3.5 %
             
Consolidated $   10.19 $   9.85 3.5 % $ (0.02 ) $   10.17 3.2 %
             
Revenue:            
U.S. Domestic Package $   11,835 $   10,913 8.4 % $     -   $   11,835 8.4 %
International Package   3,753   3,335 12.5 %   (27 )   3,726 11.7 %
Supply Chain & Freight   3,241   2,683 20.8 %   (25 )   3,216 19.9 %
Total revenue $   18,829 $   16,931 11.2 % $   (52 ) $   18,777 10.9 %
                                           
  2017 As-
Adjusted 

(non-GAAP) 
2016 As-
Adjusted 

(non-GAAP) 
% Change
(non-GAAP)
Currency
Impact
2017
As-
Adjusted
Currency-
Neutral
(non-GAAP)
% Change
(non-GAAP)
As-Adjusted Operating Profit:            
U.S. Domestic Package $   1,264 $   1,338 -5.5 % $     -   $   1,264 -5.5 %
International Package   760   706 7.6 %   80     840 19.0 %
Supply Chain & Freight   270   179 50.8 %     1     271 51.4 %
Total operating profit $   2,294 $   2,223 3.2 % $   81   $   2,375 6.8 %
                                           

 

Reconciliation of GAAP and non-GAAP Revenue, Revenue Per Piece and As-Adjusted Currency Neutral Operating Profit
(in millions, except Per Piece amounts):
   
Year Ended December 31  
           
  2017 As-
Reported
(GAAP)
2016 As-
Reported
(GAAP)
% Change
(GAAP)
Currency
Impact
2017
Currency-
Neutral
(non-GAAP)
% Change
(non-GAAP)
Average Revenue Per Piece:            
International Package:            
Domestic $   6.08 $   5.85 3.9 % $ (0.03 ) $   6.05 3.4 %
Export   28.69   30.38 -5.6 %   0.95     29.64 -2.4 %
Total International Package $   16.22 $   16.29 -0.4 % $   0.41   $   16.63 2.1 %
             
Consolidated $   10.53 $   10.30 2.2 % $   0.06   $   10.59 2.8 %
             
Revenue:            
U.S. Domestic Package $   40,764 $   38,301 6.4 % $     -   $   40,764 6.4 %
International Package   13,338   12,350 8.0 %   325     13,663 10.6 %
Supply Chain & Freight   11,770   10,255 14.8 %   (10 )   11,760 14.7 %
Total revenue $   65,872 $   60,906 8.2 % $   315   $   66,187 8.7 %
                           

 

  2017 As-
Adjusted 

(non-GAAP) 
2016 As-
Adjusted 

(non-GAAP) 
 % Change
(non-GAAP)
Currency
Impact
2017
As-
Adjusted
Currency-
Neutral
(non-GAAP)
% Change
(non-GAAP)
As-Adjusted Operating Profit:               
U.S. Domestic Package $   4,917 $   4,925 -0.2 % $     - $   4,917 -0.2 %
International Package   2,499   2,469 1.2 %   375   2,874 16.4 %
Supply Chain & Freight   913   724 26.1 %   2   915 26.4 %
Total operating profit    $   8,329 $   8,118 2.6 % $   377 $   8,706 7.2 %
                                     

 

Reconciliation of GAAP and non-GAAP Liquidity Measures (in millions)
   
Year Ended December 31
   
Net Increase (Decrease) in Cash and Cash Equivalents
   
    2017  
Cash flows from operating activities $   1,479  
Cash flows used in investing activities   (4,975)  
Cash flows from financing activities   3,287  
Effect of exchange rate changes on cash and cash equivalents   53  
Net (decrease) in cash and cash equivalents $   (156)  
   
Reconciliation of Free Cash Flow (non-GAAP)
   
    2017  
   
Cash flows from operating activities (GAAP) $   1,479  
Capital expenditures   (5,227)  
Proceeds from disposals of PP&E   24  
Net change in finance receivables   5  
Other investing activities   1  
Free cash flow (non-GAAP) $   (3,718)  
Discretionary pension contributions   7,291  
Free cash flow, excluding discretionary pension contributions (non-GAAP) $   3,573  
       

 

United Parcel Service, Inc.
Selected Financial Data - Fourth Quarter
(unaudited)
                   
  Three Months Ended        
  December 31      
    2017       2016     Change   % Change    
(amounts in millions, except per share data)                  
Statement of Income Data:                  
Revenue:                  
U.S. Domestic Package $   11,835     $   10,913     $   922     8.4 %    
International Package     3,753         3,335         418     12.5 %    
Supply Chain & Freight     3,241         2,683         558     20.8 %    
Total revenue     18,829         16,931         1,898     11.2 %    
                   
Operating expenses:                  
Compensation and benefits     10,131         11,322         (1,191 )   -10.5 %    
Other     7,204         6,037         1,167     19.3 %    
Total operating expenses     17,335         17,359         (24 )   -0.1 %    
                   
Operating profit:                  
U.S. Domestic Package     627         (570 )       1,197     N/A      
International Package     725         281         444     158.0 %    
Supply Chain & Freight     142         (139 )       281     N/A      
Total operating profit     1,494         (428 )       1,922     N/A      
                   
Other income (expense):                  
Investment income and other     23         12         11     91.7 %    
Interest expense     (129 )       (100 )       (29 )   29.0 %    
Total other income (expense)     (106 )       (88 )       (18 )   20.5 %    
                   
Income (loss) before income taxes     1,388         (516 )       1,904     N/A      
                     
Income tax expense (benefit)     284         (277 )       561     N/A      
                     
Net income (loss) $   1,104     $   (239 )   $   1,343     N/A      
                     
Net income (loss) as a percentage of revenue   5.9 %     -1.4 %              
                     
Per share amounts:                    
Basic earnings (loss) per share $   1.27     $   (0.27 )   $   1.54     N/A      
Diluted earnings (loss) per share $   1.27     $   (0.27 )   $   1.54     N/A      
                   
Weighted-average shares outstanding:                  
Basic     867         876         (9 )   -1.0 %    
Diluted     872         876         (4 )   -0.5 %    
                   
As adjusted income data:                  
Operating profit:                  
U.S. Domestic Package (1) $   1,264     $   1,338         (74 )   -5.5 %    
International Package (1)     760         706         54     7.6 %    
Supply Chain & Freight (1)     270         179         91     50.8 %    
Total operating profit (1)     2,294         2,223         71     3.2 %    
                   
Income before income taxes (1) $   2,188     $   2,135     $   53     2.5 %    
Net income (2) $   1,453     $   1,434     $   19     1.3 %    
                   
Basic earnings per share (2) $   1.68     $   1.64     $   0.04     2.4 %    
Diluted earnings per share (2) $   1.67     $   1.63     $   0.04     2.5 %    
                   

(1) 2017 operating profit and consolidated income before income taxes exclude the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $800 million, allocated between the U.S. Domestic Package segment ($637 million), International Package segment ($35 million), and Supply Chain & Freight segment ($128 million).

2016 operating profit and consolidated income before income taxes exclude the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $2.651 billion, allocated between the U.S. Domestic Package segment ($1.908 billion), International Package segment ($425 million), and Supply Chain & Freight segment ($318 million).

(2) 2017 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $607 million. 2017 net income also excludes income tax benefits of $258 million attributable to the 2017 Tax Cuts and Jobs Act.

2016 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $1.673 billion. 2016 diluted earnings per share is based on weighted-average shares outstanding of 881 million, which includes the effect of 5 million dilutive shares and share equivalents.

 
 
United Parcel Service, Inc.
Selected Operating Data - Fourth Quarter
(unaudited)
                   
                   
  Three Months Ended            
  December 31      
    2017     2016   Change   % Change    
                   
Revenue (in millions):                  
U.S. Domestic Package:                  
Next Day Air $   1,905   $   1,834   $   71     3.9 %    
Deferred     1,429       1,301       128     9.8 %    
Ground     8,501       7,778       723     9.3 %    
Total U.S. Domestic Package     11,835       10,913       922     8.4 %    
International Package:                  
Domestic     739       637       102     16.0 %    
Export     2,869       2,561       308     12.0 %    
Cargo and Other     145       137       8     5.8 %    
Total International Package     3,753       3,335       418     12.5 %    
Supply Chain & Freight:                  
Forwarding and Logistics     2,272       1,813       459     25.3 %    
Freight     758       686       72     10.5 %    
Other     211       184       27     14.7 %    
Total Supply Chain & Freight     3,241       2,683       558     20.8 %    
Consolidated $   18,829   $   16,931   $   1,898     11.2 %    
                   
Consolidated volume (in millions)     1,515       1,433       82     5.7 %    
                   
Operating weekdays     63       63       -      0.0 %    
                   
Average Daily Package Volume (in thousands):                
U.S. Domestic Package:                  
Next Day Air     1,660       1,582       78     4.9 %    
Deferred     1,868       1,827       41     2.2 %    
Ground     17,069       16,142       927     5.7 %    
Total U.S. Domestic Package     20,597       19,551       1,046     5.4 %    
International Package:                  
Domestic     1,859       1,815       44     2.4 %    
Export     1,598       1,378       220     16.0 %    
Total International Package     3,457       3,193       264     8.3 %    
Consolidated     24,054       22,744       1,310     5.8 %    
                   
Average Revenue Per Piece:                  
U.S. Domestic Package:                  
Next Day Air $   18.22   $   18.40   $   (0.18 )   -1.0 %    
Deferred     12.14       11.30       0.84     7.4 %    
Ground     7.91       7.65       0.26     3.4 %    
Total U.S. Domestic Package     9.12       8.86       0.26     2.9 %    
International Package:                  
Domestic     6.31       5.57       0.74     13.3 %    
Export     28.50       29.50       (1.00 )   -3.4 %    
Total International Package     16.57       15.90       0.67     4.2 %    
Consolidated $   10.19   $   9.85   $   0.34     3.5 %    
                   

 

United Parcel Service, Inc.
Supplemental Analysis of Currency and UPS Freight
                             
Currency Neutral Revenue Per Piece      
(unaudited)      
                             
  Three Months Ended            Currency           
  December 31           Neutral          
    2017     2016   % Change   Currency   2017*   % Change      
                             
Average Revenue Per Piece:                            
International Package:                            
Domestic $   6.31   $   5.57     13.3 %   $   (0.45 )   $   5.86   5.2 %      
Export     28.50       29.50     -3.4 %       0.28         28.78   -2.4 %      
Total International Package $   16.57   $   15.90     4.2 %   $   (0.12 )   $   16.45   3.5 %      
                             
                             
Consolidated $   10.19   $   9.85     3.5 %   $   (0.02 )   $   10.17   3.2 %      
                             
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences              
                             
Currency Neutral Revenue      
(unaudited)      
                             
  Three Months Ended            Currency           
  December 31           Neutral          
    2017     2016   % Change   Currency   2017*   % Change      
Revenue (in millions):                            
U.S. Domestic Package $   11,835   $  10,913     8.4 %   $   -      $  11,835   8.4 %      
International Package     3,753       3,335     12.5 %       (27 )       3,726   11.7 %      
Supply Chain & Freight     3,241       2,683     20.8 %       (25 )       3,216   19.9 %      
Total revenue $   18,829   $  16,931     11.2 %   $   (52 )   $  18,777   10.9 %      
                             
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences              
                             
As-Adjusted Currency Neutral Operating Profit      
(unaudited)      
                             
  Three Months Ended           As-Adjusted Currency       
  December 31           Neutral      
  2017*   2016*   % Change   Currency   2017**   % Change      
As-Adjusted Operating profit (in millions):                          
U.S. Domestic Package $   1,264   $   1,338     -5.5 %   $   -      $   1,264   -5.5 %      
International Package     760       706     7.6 %       80         840   19.0 %      
Supply Chain & Freight     270       179     50.8 %       1         271   51.4 %      
Total operating profit $   2,294   $   2,223     3.2 %   $   81     $   2,375   6.8 %      
                             
* Amounts adjusted for Defined Benefit Plans MTM charges                        
** Amounts adjusted for Defined Benefit Plans MTM charges and period over period foreign currency exchange rate and hedging differences      
                                             
                             
UPS Freight Selected Operating Data - Fourth Quarter      
(unaudited)      
                             
  Three Months Ended                      
  December 31                  
    2017     2016   Change   % Change              
LTL revenue (in millions) $   653   $   604   $   49       8.1 %              
LTL revenue per LTL hundredweight $   24.63   $   23.42   $   1.21       5.2 %              
                             
LTL shipments (in thousands)     2,464       2,447       17       0.7 %              
LTL shipments per day (in thousands)     40.4       40.1       0.3       0.7 %              
                             
LTL gross weight hauled (in millions of pounds)     2,651       2,578       73       2.8 %              
LTL weight per shipment (in pounds)     1,076       1,054       22       2.1 %              
                             
Operating weekdays   61     61       -        0.0 %              

 

United Parcel Service, Inc.
                   
                   
Detail of Other Operating Expenses - Fourth Quarter
(unaudited)
                   
(in millions) Three Months Ended          
  December 31        
    2017     2016   Change   % Change    
Repairs and maintenance $   420   $   388   $   32     8.2 %    
Depreciation and amortization     594       563       31     5.5 %    
Purchased transportation     3,528       2,823       705     25.0 %    
Fuel     817       638       179     28.1 %    
Other occupancy     310       275       35     12.7 %    
Other expenses     1,535       1,350       185     13.7 %    
Total other operating expenses $   7,204   $   6,037   $   1,167     19.3 %    
                   
                   
                   
Earnings Per Share and Share Data - Fourth Quarter
(unaudited)
                   
                   
      Three Months Ended        
(amounts in millions, except per share data)     December 31        
        2017     2016          
                   
Numerator:                  
Net income (loss)     $   1,104   $   (239 )        
                   
Denominator:                  
Weighted-average shares         861       870          
Deferred compensation obligations         1       1          
Vested portion of restricted units         5       5          
Denominator for basic earnings (loss) per share       867       876          
                   
Effect of dilutive securities:                  
Restricted units         4       -           
Stock options         1       -           
Denominator for diluted earnings (loss) per share       872       876          
                   
Basic earnings (loss) per share     $   1.27   $   (0.27 )        
                   
Diluted earnings (loss) per share     $   1.27   $   (0.27 )        
                   
                   
                   
Detail of shares outstanding as of December 31, 2017:                
                   
Class A shares         172            
Class B shares         687            
Total shares outstanding         859            
                   

 

United Parcel Service, Inc.
Selected Financial Data - Year to Date
(unaudited)
                   
  Twelve Months Ended        
  December 31        
    2017       2016     Change   % Change    
(amounts in millions, except per share data)                  
Statement of Income Data:                  
Revenue:                  
U.S. Domestic Package $   40,764     $   38,301     $   2,463     6.4 %    
International Package     13,338         12,350         988     8.0 %    
Supply Chain & Freight     11,770         10,255         1,515     14.8 %    
Total revenue     65,872         60,906         4,966     8.2 %    
                   
Operating expenses:                  
Compensation and benefits     34,588         34,770         (182 )   -0.5 %    
Other     23,755         20,669         3,086     14.9 %    
Total operating expenses     58,343         55,439         2,904     5.2 %    
                   
Operating profit:                  
U.S. Domestic Package     4,280         3,017         1,263     41.9 %    
International Package     2,464         2,044         420     20.5 %    
Supply Chain & Freight     785         406         379     93.3 %    
Total operating profit     7,529         5,467         2,062     37.7 %    
                   
Other income (expense):                  
Investment income and other     72         50         22     44.0 %    
Interest expense     (453 )       (381 )       (72 )   18.9 %    
Total other income (expense)     (381 )       (331 )       (50 )   15.1 %    
                   
Income before income taxes     7,148         5,136         2,012     39.2 %    
                   
Income tax expense     2,238         1,705         533     31.3 %    
                   
Net income $   4,910     $   3,431     $   1,479     43.1 %    
                   
Net income as a percentage of revenue   7.5 %     5.6 %            
                   
Per share amounts:                  
Basic earnings per share $   5.64     $   3.89     $   1.75     45.0 %    
Diluted earnings per share $   5.61     $   3.87     $   1.74     45.0 %    
                   
Weighted-average shares outstanding:                  
Basic     871         883         (12 )   -1.4 %    
Diluted     875         887         (12 )   -1.4 %    
                   
As adjusted income data:                  
Operating profit:                  
U.S. Domestic Package (1) $   4,917     $   4,925     $   (8 )   -0.2 %    
International Package (1)     2,499         2,469         30     1.2 %    
Supply Chain & Freight (1)     913         724         189     26.1 %    
Total operating profit (1)     8,329         8,118         211     2.6 %    
                   
Income before income taxes (1) $   7,948     $   7,787     $   161     2.1 %    
Net income (2) $   5,259     $   5,104     $   155     3.0 %    
                   
Basic earnings per share (2) $   6.04     $   5.78     $   0.26     4.5 %    
Diluted earnings per share (2) $   6.01     $   5.75     $   0.26     4.5 %    
                   

(1) 2017 operating profit and consolidated income before income taxes exclude the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $800 million, allocated between the U.S. Domestic Package segment ($637 million), International Package segment ($35 million), and Supply Chain & Freight segment ($128 million).

2016 operating profit and consolidated income before income taxes exclude the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $2.651 billion, allocated between the U.S. Domestic Package segment ($1.908 billion), International Package segment ($425 million), and Supply Chain & Freight segment ($318 million).

(2) 2017 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $607 million. 2017 net income also excludes income tax benefits of $258 million attributable to the 2017 Tax Cuts and Jobs Act.

2016 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $1.673 billion.

 
United Parcel Service, Inc.
Selected Operating Data - Year to Date
(unaudited)
                 
  Twelve Months Ended        
  December 31    
    2017     2016   Change   % Change  
                 
Revenue (in millions):                
U.S. Domestic Package:                
Next Day Air $   7,088   $   6,752   $   336     5.0 %  
Deferred     4,421       4,082       339     8.3 %  
Ground     29,255       27,467       1,788     6.5 %  
Total U.S. Domestic Package     40,764       38,301       2,463     6.4 %  
International Package:                
Domestic     2,645       2,441       204     8.4 %  
Export     10,167       9,374       793     8.5 %  
Cargo and Other     526       535       (9 )   -1.7 %  
Total International Package     13,338       12,350       988     8.0 %  
Supply Chain & Freight:                
Forwarding and Logistics     7,981       6,793       1,188     17.5 %  
Freight     2,998       2,736       262     9.6 %  
Other     791       726       65     9.0 %  
Total Supply Chain & Freight     11,770       10,255       1,515     14.8 %  
Consolidated $   65,872   $   60,906   $   4,966     8.2 %  
                 
Consolidated volume (in millions)     5,087       4,868       219     4.5 %  
                 
Operating weekdays     254       255       (1 )   -0.4 %  
                 
Average Daily Package Volume (in thousands):              
U.S. Domestic Package:                
Next Day Air     1,460       1,379       81     5.9 %  
Deferred     1,400       1,351       49     3.6 %  
Ground     14,061       13,515       546     4.0 %  
Total U.S. Domestic Package     16,921       16,245       676     4.2 %  
International Package:                
Domestic     1,714       1,635       79     4.8 %  
Export     1,395       1,210       185     15.3 %  
Total International Package     3,109       2,845       264     9.3 %  
Consolidated     20,030       19,090       940     4.9 %  
                 
Average Revenue Per Piece:                
U.S. Domestic Package:                
Next Day Air $   19.11   $   19.20   $   (0.09 )   -0.5 %  
Deferred     12.43       11.85       0.58     4.9 %  
Ground     8.19       7.97       0.22     2.8 %  
Total U.S. Domestic Package     9.48       9.25       0.23     2.5 %  
International Package:                
Domestic     6.08       5.85       0.23     3.9 %  
Export     28.69       30.38       (1.69 )   -5.6 %  
Total International Package     16.22       16.29       (0.07 )   -0.4 %  
Consolidated $   10.53   $   10.30   $   0.23     2.2 %  
                 

 

United Parcel Service, Inc.
Supplemental Analysis of Currency and UPS Freight
                             
Currency Neutral Revenue Per Piece      
(unaudited)      
                             
  Twelve Months Ended           Currency          
  December 31            Neutral          
    2017     2016   % Change   Currency   2017*   % Change      
                             
Average Revenue Per Piece:                            
International Package:                            
Domestic $   6.08   $   5.85     3.9 %   $   (0.03 )   $   6.05   3.4 %      
Export     28.69       30.38     -5.6 %       0.95         29.64   -2.4 %      
Total International Package $   16.22   $   16.29     -0.4 %   $   0.41     $   16.63   2.1 %      
                             
                             
Consolidated $   10.53   $   10.30     2.2 %   $   0.06     $   10.59   2.8 %      
                             
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences              
                             
Currency Neutral Revenue      
(unaudited)      
                             
  Twelve Months Ended           Currency          
  December 31           Neutral          
    2017     2016   % Change   Currency   2017*   % Change      
Revenue (in millions):                            
U.S. Domestic Package $   40,764   $  38,301     6.4 %   $   -      $  40,764   6.4 %      
International Package     13,338       12,350     8.0 %       325         13,663   10.6 %      
Supply Chain & Freight     11,770       10,255     14.8 %       (10 )       11,760   14.7 %      
Total revenue $   65,872   $  60,906     8.2 %   $   315     $  66,187   8.7 %      
                             
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences              
                             
As-Adjusted Currency Neutral Operating Profit      
(unaudited)      
                             
  Twelve Months Ended           As-Adjusted Currency      
  December 31           Neutral      
  2017*   2016*   % Change   Currency   2017**   % Change      
As-Adjusted Operating profit (in millions):                          
U.S. Domestic Package $   4,917   $   4,925     -0.2 %   $   -      $   4,917   -0.2 %      
International Package     2,499       2,469     1.2 %       375         2,874   16.4 %      
Supply Chain & Freight     913       724     26.1 %       2         915   26.4 %      
Total operating profit $   8,329   $   8,118     2.6 %   $   377     $   8,706   7.2 %      
                             
* Amounts adjusted for Defined Benefit Plans MTM charges                        
** Amounts adjusted for Defined Benefit Plans MTM charges and period over period foreign currency exchange rate and hedging differences      
                                             
                             
UPS Freight Selected Operating Data - Year to Date      
(unaudited)      
                             
  Twelve Months Ended                      
  December 31                  
    2017     2016   Change   % Change              
LTL revenue (in millions) $   2,596   $   2,384   $   212       8.9 %              
LTL revenue per LTL hundredweight $   24.08   $   23.44   $   0.64       2.7 %              
                             
LTL shipments (in thousands)     10,203       9,954       249       2.5 %              
LTL shipments per day (in thousands)     40.5       39.3       1.2       3.1 %              
                             
LTL gross weight hauled (in millions of pounds)     10,782       10,167       615       6.0 %              
LTL weight per shipment (in pounds)     1,057       1,021       36       3.5 %              
                             
Operating weekdays   252     253       (1 )     -0.4 %              
                             

 

United Parcel Service, Inc.
                   
                   
Detail of Other Operating Expenses - Year to Date
(unaudited)
                   
                   
(in millions) Twelve Months Ended            
  December 31        
    2017     2016   Change   % Change    
Repairs and Maintenance $   1,600   $   1,538   $   62   4.0 %    
Depreciation and Amortization     2,282       2,224       58   2.6 %    
Purchased Transportation     10,989       9,129       1,860   20.4 %    
Fuel     2,690       2,118       572   27.0 %    
Other Occupancy     1,155       1,037       118   11.4 %    
Other Expenses     5,039       4,623       416   9.0 %    
Total Other Operating Expenses $   23,755   $   20,669   $   3,086   14.9 %    
                   
                   
                   
Earnings Per Share and Share Data - Year to Date
(unaudited)
                   
      Twelve Months Ended        
(amounts in millions, except per share data)     December 31        
        2017     2016        
                   
Numerator:                  
Net income     $   4,910   $   3,431        
                   
Denominator:                  
Weighted-average shares         865       878        
Deferred compensation obligations         1       1        
Vested portion of restricted units         5       4        
Denominator for basic earnings per share         871       883        
                   
Effect of dilutive securities:                  
Restricted units         3       3        
Stock options         1       1        
Denominator for diluted earnings per share         875       887        
                   
Basic earnings per share     $   5.64   $   3.89        
                   
Diluted earnings per share     $   5.61   $   3.87        
                   

 

United Parcel Service, Inc.
Consolidated Balance Sheets - December 31, 2017 and December 31, 2016
(unaudited)
               
  (amounts in millions)   December 31,   December 31,  
         2017    2016  
  ASSETS          
  Current Assets:          
    Cash and marketable securities   $   4,069   $   4,567  
    Other current assets       11,479       9,282  
    Total Current Assets       15,548       13,849  
  Property, Plant and Equipment       48,726       43,674  
    Less accumulated depreciation and amortization       26,608       24,874  
            22,118       18,800  
  Other Assets       7,737       7,728  
        $   45,403   $   40,377  
               
  LIABILITIES AND SHAREOWNERS' EQUITY          
  Current Liabilities   $   12,708   $   11,730  
  Long-Term Debt       20,278       12,394  
  Pension and Postretirement Benefit Obligations       7,061       12,694  
  Deferred Taxes, Credits and Other Liabilities       4,326       3,130  
  Shareowners' Equity       1,030       429  
        $   45,403   $   40,377  
               
  Amounts are subject to reclassification.   
               

 

United Parcel Service, Inc.
Selected Cash Flow Data
(unaudited)
                     
Net Increase (Decrease) in Cash and Cash Equivalents
                     
    Preliminary                
    Year-to-Date                
(amounts in millions)   December 31                
Cash flows from operating activities   $   1,479                  
Cash flows used in investing activities       (4,975 )                
Cash flows from financing activities       3,287                  
Effect of exchange rate changes on cash and cash equivalents       53                  
Net increase (decrease) in cash and cash equivalents   $   (156 )                
                     
                     
                     
Reconciliation of Free Cash Flow (non-GAAP)
                     
    Preliminary                
    Year-to-Date                
(amounts in millions)   December 31                
Cash flows from operating activities   $   1,479                  
Capital expenditures       (5,227 )                
Proceeds from disposals of PP&E       24                  
Net change in finance receivables       5                  
Other investing activities       1                  
Free cash flow (non-GAAP)   $   (3,718 )                
Discretionary pension contributions       7,291                  
Free cash flow, excluding discretionary pension contributions (non-GAAP) $   3,573                  
                     
Amounts are subject to reclassification.                    

 

United Parcel Service, Inc.
Aircraft Fleet - As of December 31, 2017
(unaudited)
         
  Owned and Leases & Charters    
Description Capital Leases from Others On Order Under Option
Operating:        
Boeing 757-200   75   -    -    - 
Boeing 767-300   59   -    -    - 
Boeing 767-300BCF   2   -    1   - 
Airbus A300-600   52   -     -    - 
Boeing MD-11   37   -    -    - 
Boeing 747-400F   11   -    -    - 
Boeing 747-400BCF   2   -    -     - 
Boeing 747-8F   3   -    11   14
Other   -    340   -    - 
         
Total   241   340   12   14
         

 

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

Scott Childress, Investor Relations
404-828-7957  

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