ATLANTA, April 18, 2002 – UPS (NYSE:UPS) today reported a better-than-expected quarterly financial performance led by solid international growth, effective cost management and industry-leading results in its premium air products.
For the quarter ended March 31, 2002, which had one less working day than the prior-year period, revenue totaled $7.58 billion, up 1.9%. Consolidated operating profit increased 0.3% during the period to $947 million. Net income decreased 3.3% to $563 million, or $0.50 per diluted share, from $582 million or $0.51 per diluted share last year, excluding the $26 million effect of adopting a new accounting standard for derivatives in the first quarter of 2001. These results exceeded the company’s expectations of $0.40 to $0.47 per share announced three months ago.
"We were able to show strong growth in our international export volume and supply chain businesses as well as stable operating income, even with tough economic conditions and fewer working days," said UPS Chief Financial Officer Scott Davis. "Domestically, our cost controls were highly effective and yields remained firm. These factors helped us to exceed expectations, even as we continued to invest in the business to position UPS to benefit from a stronger economy.”
UPS's international export volume showed solid growth, led by Asia and Europe. Average daily volume in Asia improved by 11%, and Europe was up 13%. Within the United States, UPS's premium air products, while down 1.1%, still far outpaced the market. U.S. ground volume was off a moderate 1.6%. Consolidated average daily volume showed a slight decline, dropping 1.3% to 13.2 million packages per day.
In the UPS Logistics unit, revenue increased 53% -- 18% due to organic growth and the balance from acquisitions, much of which was contributed by the new UNI-DATA subsidiary in Germany acquired last August.
During the quarter, UPS continued to grow its international export business and expand its supply chain services. On the international side, UPS opened a new intra-Asian hub in the Philippines as the quarter ended, accelerating delivery times for goods moving within and out of Asia. The new intra-Asian network completes an important piece of global infrastructure at a time when the company’s business is showing strong growth in the region. The opening of the new hub comes one year after the successful launch of direct flights between China and the U.S.
UPS also announced during the period the formation of a streamlined organization within its non-package segment – named Supply Chain Solutions -- that combines sales, marketing, finance and technology resources for its supply chain subsidiaries. The organization offers customers the integrated services of UPS Logistics Group, Freight Services (including freight-forwarder Fritz), UPS Capital, UPS Consulting and UPS Mail Innovations. These business units not only broadened the range of services offered by UPS, but also generated more than $300 million in new package revenue in 2001. Growth in Supply Chain Solutions continues to benefit all segments of the business.
Within the Supply Chain Solutions group, UPS has changed the presentation of revenue for the group's units. After numerous acquisitions, the group had some businesses that reported gross revenue, including amounts paid for freight under management, and others that reported revenue net of such amounts. The company now reports all such revenue as “net.” This change has no impact on earnings but has the effect of reducing both revenues and expenses by $75 million in the current quarter.
Looking forward, Davis said, “We have yet to see any significant evidence of a rebound in economic activity in the United States. Nevertheless, we are maintaining our earnings guidance for the second quarter, given three months ago, of $0.50 to $0.55 per diluted share. Factors that could impact this forecast include the state of the economy and the status of our contract negotiations with the Teamsters union.”
Davis said negotiations with the union are moving forward, with talks underway this week. He said the company remains optimistic it will reach an agreement that rewards its employees for their performance while allowing the company to successfully grow and execute its global strategy.
UPS also announced it had filed a secondary shelf registration statement with the Securities and Exchange Commission related to the possible sale of up to 30 million shares of UPS Class B common stock by two affiliates. In the event UPS is added to a stock index such as the S&P 500, these shares could be sold to index funds that hold shares of companies included in the index. While the company has no reason to believe such a step is imminent, its addition to the S&P 500 index would create an immediate demand for substantial additional stock. A secondary offering under this registration statement could help meet a portion of that demand.
UPS is the world’s largest global transportation company, offering the most extensive range of e-commerce and supply chain solutions for the movement of goods, information and funds. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide. UPS stock trades on the New York Stock Exchange (UPS) and the company can be found on the Web at www.ups.com.
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EDITOR’S NOTE: UPS CFO Scott Davis will discuss 1st quarter results with analysts and investors at 10 a.m. EDT today. That conference call is open to all to listen through a live Webcast. Go to www.ups.com, click on UPS Investor Relations, then click on “Earnings Webcast.” After the conference, a replay of the call will be available at the site for a limited time.
Except for historical information contained herein, the statements made in this release constitute forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of US the Securities Exchange Act of 1934. Such forward-looking statements involve certain risks and uncertainties, including statements regarding the intent, belief or current expectations of UPS and its management regarding the company's strategic directions, prospects and future results. 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, our competitive environment, strikes, work stoppages and slowdowns, governmental regulation, increases in aviation and motor fuel prices, the failure of proposed acquisitions to be completed for any reason, cyclical and seasonal fluctuations in our operating results, and other risks discussed in the company's Form 10-K and other filings with the American Securities and Exchange Commission, which discussions are incorporated herein by reference.
A registration statement relating to UPS class B common stock that may be offered has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold, nor may offers to buy be accepted, prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
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