UPS Achieves Record Earnings Per Share

  UPS Achieves Record Earnings Per Share

2012 Free Cash Flow $5.4 Billion; Expects 2013 EPS growth 6-to-12%; $4 Billion
                             in Share Repurchases

Business Wire

ATLANTA -- January 31, 2013

UPS (NYSE:UPS) today announced record 2012 fourth quarter and full year
adjusted diluted earnings per share of $1.32 and $4.53 respectively, with the
U.S. Domestic segment leading the way. The company generated annual free cash
flow of approximately $5.4 billion, a testament to operations execution and
the emphasis UPS places on capital efficiency. UPS estimates that Hurricane
Sandy reduced earnings per share by approximately $0.05.

UPS recorded a fourth quarter mark-to-market, non-cash, after-tax charge of
$3.0 billion for its company-sponsored pension and post-retirement benefit
plans. Although the plans exceeded their expected rate of return, these
incremental gains were more than offset by a 120 basis point decline in
year-end discount rates. As a result, on a GAAP basis, diluted earnings per
share for the quarter fell to a loss of $1.83. For the full year, reported
diluted earnings per share were $0.83. This adjustment does not affect cash
flow, required pension funding or benefits paid to plan participants.

“2012 presented its challenges, most notably weak global trade. Nonetheless,
UPS executed well, delivering superior service to customers,” said Scott
Davis, UPS Chairman and CEO. “Despite modest macro growth expectations for
2013 and uncertainty in the U.S. caused by the lack of progress in Washington,
the UPS business model will deliver consistent results, with operating profit
growth in all segments.”

UPS expects full year earnings per share to be within a range of $4.80 -
$5.06, an increase of 6-to-12% compared to 2012 adjusted results. The company
also raised guidance for 2013 share repurchases from $1.5 billion to $4.0
billion.

                                         Adjusted              Adjusted
Consolidated Results           4Q 2012      4Q 2012      4Q 2011      4Q 2011
                                                                      
Revenue                        $14.57 B                  $14.17 B
Operating profit (loss)        ($2.78 B )   $2.05 B      $1.20 B      $2.02 B
Operating margin               (19.1 %  )   14.1 %       8.4 %        14.3 %
Average volume per day         18.8 M                    18.3 M
Diluted earnings (loss)        ($1.83   )   $1.32        $0.74        $1.28
per share

During the year, UPS delivered more than four billion packages. For the
quarter, it delivered 18.8 million pieces per day, an increase of 2.9% over
the prior-year period.

Overall consumer spending for holiday shopping fell slightly below
expectations, however; UPS still delivered more than 500 million packages,
including almost 28 million on its peak day, both new records.

Cash Position

For the year ending Dec. 31, UPS generated $5.4 billion in free cash flow
after capital expenditures of $2.2 billion. UPS repurchased 21.8 million
shares for approximately $1.6 billion and paid dividends totaling $2.1
billion, up 9.6% per share.

                                      Adjusted   Adjusted  
U.S. Domestic Package       4Q 2012      4Q 2012      4Q 2011      4Q 2011
                                                                           
Revenue                     $8.93 B                   $8.67 B
Operating profit (loss)     ($1.80 B )   $1.38 B      $0.84 B      $1.32 B
Operating margin            (20.1 %  )   15.4%        9.7 %        15.2 %
Average volume per day      16.2 M                    15.7 M

As on-line retailers continue to rely on UPS to serve their customers, daily
package volume was up 3.0%, led by 7.7% growth in UPS Next Day Air®, while
ground improved 3.0%.

On an adjusted basis, operating profit increased $58 million or 4.4%, and
operating margin expanded to 15.4%, despite challenges created by Hurricane
Sandy. Revenue grew 3.0% and revenue per piece increased 1.7%, driven by base
rate improvements in both ground and air products.

As a result of the pension mark-to-market adjustment, the segment reported an
operating loss of $1.8 billion, on a U.S. GAAP basis.

This holiday season, the B2C market took advantage of the unique consumer
experience offered by UPS My Choice. Reflecting its popularity, subscribers
have grown to almost 2.5 million. This innovative service reduces missed
deliveries to customers and lowers UPS operating costs.

                                      Adjusted             Adjusted
International Package       4Q 2012       4Q 2012      4Q 2011     4Q 2011
                                          
Revenue                     $3.20 B                    $3.15 B
Operating profit (loss)     ($442 M )     $499 M       $334 M      $505 M
Operating margin            (13.8 % )     15.6 %       10.6 %      16.0 %
Average volume per day      2.7 M                      2.6 M

Strong demand for UPS products in Asia and Europe led to a 5.5% increase in
average daily export volume, increasing revenue to $3.2 billion.

Adjusted operating profit was $499 million, down slightly, as customer and
product mix changes drove a 3.5% decline in export yields, on a currency
neutral basis. Adjusted operating margin of 15.6% remains industry leading.

As a result of the pension mark-to-market adjustment, the segment reported an
operating loss of $442 million, on a U.S. GAAP basis.

Earlier this month, UPS announced a new express air freight service, UPS
Worldwide Express Freight™, for urgent, time-sensitive and high-value
international heavyweight shipments. This new service is an extension of the
UPS Worldwide Express package portfolio and offers customers a seamless
experience between shipping express package and express freight.

                                      Adjusted             Adjusted
Supply Chain & Freight      4Q 2012       4Q 2012      4Q 2011     4Q 2011
Revenue                     $2.44 B                    $2.34 B
Operating profit (loss)     ($541 M )     $  172 M     $ 22 M      $  199 M
Operating margin            (22.2 % )        7.1 %       0.9 %        8.5 %

Revenue in the Supply Chain & Freight segment increased $94 million or 4.0%
compared with the fourth quarter of 2011. Adjusted operating profit was $172
million.

As a result of the pension mark-to-market adjustment, the segment reported an
operating loss of $541 million, on a U.S. GAAP basis.

The Freight Forwarding unit experienced revenue improvement on strong tonnage
increases in international air freight. Operating margin was negatively
impacted by an increase in purchased transportation rates on Asia outbound
freight during a period of accelerated demand in the market.

The Distribution business unit achieved revenue growth of more than 10% as UPS
continued to meet customers’ needs for optimal supply chain management and
value added services. Although operating margin was still strong, it declined
due to investments in technology and new facilities to support the Healthcare
and High Tech industries.

UPS Freight revenue increased 6.2% with LTL gross weight hauled up 4.9% and
LTL revenue per hundredweight up 1.5%.

During the quarter, UPS launched an innovative ocean and air freight
forwarding technology platform, UPS Order Watch, enhancing the UPS Supplier
Management product with cloud-based capabilities that allow customers to more
efficiently manage their international inbound supply chains.

Outlook

“UPS delivered its best ever adjusted earnings per share with strong free cash
flow, even in the midst of weaker than expected global economic conditions in
2012,” said Kurt Kuehn, UPS chief financial officer. “Economic growth for 2013
is expected to be below long-term trends. Despite $350 million in headwinds
from unfavorable foreign exchange comparisons and increased pension expense,
UPS anticipates full year diluted earnings per share to increase 6% to 12%
over 2012 adjusted results.

“Free cash flow remains a UPS hallmark, creating opportunities for significant
distributions to shareholders,” Kuehn added. “Based on our strong financial
position, UPS has increased expected share repurchases for 2013 from $1.5
billion to $4.0 billion.”

UPS (NYSE:UPS) is a global leader in logistics, offering a broad range of
solutions including the transportation of packages and freight; the
facilitation of international trade, and the deployment of 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 and its corporate blog can be found at
blog.ups.com. To get UPS news direct, visit pressroom.ups.com/RSS.

EDITOR’S NOTE:

UPS Chairman and CEO Scott Davis and CFO Kurt Kuehn will discuss fourth
quarter results with investors and analysts during a conference call at 8:30
a.m. EST today. That call is open to listeners through a live Webcast. To
access the call, go to www.investors.ups.com  and click on “Earnings Webcast.”

UPS routinely posts investor announcements on its web site
--www.investors.ups.com -- and encourages those interested in the company to
check there frequently.

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.” We believe that these adjusted measures provide
meaningful information to assist investors and analysts in understanding our
financial results and assessing our prospects for future performance. We
believe these adjusted financial measures are important indicators of our
recurring operations because they exclude items that may not be indicative of,
or are unrelated to, our core operating results, and provide a better baseline
for analyzing trends in our underlying businesses. Furthermore, we use these
adjusted financial measures to determine awards for our management personnel
under our incentive compensation plans.

We supplemented the presentation of our fourth quarter and year-to-date 2012
and 2011 operating profit, operating margin, pre-tax income, net income and
earnings per share with similar measures that excluded the impact of certain
transactions. During 2012, these items included the impact of mark-to-market
adjustments for pension expense recognized outside of a 10% corridor ($4.831
billion pre-tax charge) and the establishment of a withdrawal liability
related to the New England Teamsters and Trucking Industry Pension Fund ($896
million pre-tax charge) . In 2011, these items included the impact of certain
real estate transactions ($33 million pre-tax gains) and mark-to-market
adjustments for pension expense recognized outside of a 10% corridor ($827
million pre-tax charge). We believe these adjusted measures better enable
shareowners to focus on period-over-period operating performance.

Because non-GAAP financial measures are not standardized, it may not be
possible to compare these financial measures with other companies' non-GAAP
financial measures having the same or similar names. These adjusted financial
measures should not be considered in isolation or as a substitute for GAAP
operating profit, operating margin, net income and earnings per share, the
most directly comparable GAAP financial measures. These non-GAAP financial
measures reflect an additional way of viewing aspects of our operations that,
when viewed with our GAAP results and the preceding reconciliations to
corresponding GAAP financial measures, provide a more complete understanding
of our business. We strongly encourage investors to review our financial
statements and publicly-filed reports in their entirety and not to rely on any
single financial measure.

Except for historical information contained herein, the statements made in
this release constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements, including statements
regarding the intent, belief or current expectations of UPS and its management
regarding the company's strategic directions, prospects and future results,
involve certain risks and uncertainties. Certain factors may cause actual
results to differ materially from those contained in the forward-looking
statements, including economic and other conditions in the markets in which we
operate, governmental regulations, our competitive environment, strikes, work
stoppages and slowdowns, 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.

 
    
    United Parcel Service, Inc.
    Selected Financial Data - Fourth Quarter
    (unaudited)
                                                                 
                              Three Months Ended
                              December 31,               Change
                              2012        2011          $           %
    [(amounts in
    millions, except per                 
    share data)]
    Statement of Income
    Data:
    Revenue:
    U.S. Domestic Package     $ 8,933      $ 8,670        $ 263        3.0   %
    International Package       3,201        3,153          48         1.5   %
    Supply Chain &             2,437     2,343      94        4.0   %
    Freight
    Total revenue               14,571       14,166         405        2.9   %
                                                                       
    Operating expenses:
    Compensation and            11,943       7,730          4,213      54.5  %
    benefits
    Other                      5,410     5,239      171       3.3   %
    Total operating             17,353       12,969         4,384      33.8  %
    expenses
                                                                       
    Operating profit
    (loss):
    U.S. Domestic Package       (1,799 )     841            (2,640 )   N/A
    International Package       (442   )     334            (776   )   N/A
    Supply Chain &             (541   )   22         (563   )   N/A
    Freight
    Total operating             (2,782 )     1,197          (3,979 )   N/A
    profit (loss)
                                                                       
    Other income
    (expense):
    Investment income           6            8              (2     )   -25.0 %
    Interest expense           (109   )   (96    )    (13    )   13.5  %
    Total other income          (103   )     (88    )       (15    )   17.0  %
    (expense)
                                                     
    Income (loss) before        (2,885 )     1,109          (3,994 )   N/A
    income taxes
                                                                       
    Income tax expense          (1,137 )     384            (1,521 )   N/A
    (benefit)
                                                      
    Net income (loss)         $ (1,748 )  $ 725       $ (2,473 )   N/A
                                                                       
    Net income (loss) as
    a percentage of             -12.0  %     5.1    %
    revenue
                                                                       
    Per share amounts
    Basic earnings (loss)     $ (1.83  )   $ 0.75         $ (2.58  )   N/A
    per share
    Diluted earnings          $ (1.83  )   $ 0.74         $ (2.57  )   N/A
    (loss) per share
                                                                       
    Weighted-average
    shares outstanding
    Basic                       956          968            (12    )   -1.2  %
    Diluted                     956          977            (21    )   -2.1  %
                                                             
    As adjusted income
    data:
    Operating profit:
    U.S. Domestic Package     $ 1,378      $ 1,320        $ 58         4.4   %
    (1)
    International Package       499          505            (6     )   -1.2  %
    (1)
    Supply Chain &             172       199        (27    )   -13.6 %
    Freight (1)
    Total operating             2,049        2,024          25         1.2   %
    profit (1)
                                                                       
    Income before income      $ 1,946      $ 1,936        $ 10         0.5   %
    taxes (1)
    Net income (2)            $ 1,275      $ 1,252        $ 23         1.8   %
                                                                       
    Basic earnings per        $ 1.33       $ 1.29         $ 0.04       3.1   %
    share (2)
    Diluted earnings per      $ 1.32       $ 1.28         $ 0.04       3.1   %
    share (2)

(1) 2012 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 $4.831 billion, allocated between the
U.S. Domestic Package segment ($3.177 billion), International Package segment
($941 million), and Supply Chain & Freight segment ($713 million).

2011 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 $827 million, allocated between the
U.S. Domestic Package segment ($479 million), International Package segment
($171 million), and Supply Chain & Freight segment ($177 million).

(2) Fourth quarter 2012 and 2011 net income and earnings per share amounts
exclude the impact of the pension mark-to-market adjustment described in (1),
which decreased net income by $3.023 billion and $527 million, respectively.
4th quarter 2012 adjusted diluted earnings per share is based on
weighted-average shares outstanding of 965 million.

Certain prior year amounts have been reclassified to conform to the current
year presentation.



United Parcel Service, Inc.
Selected Operating Data - Fourth Quarter
(unaudited)
                                                                 
                              Three Months Ended
                              December 31,              Change
                              2012        2011         $/ #        %
                                         
Revenue (in millions):
U.S. Domestic Package:
Next Day Air                  $ 1,669      $ 1,584        $ 85          5.4  %
Deferred                        992          1,022          (30   )     -2.9 %
Ground                         6,272     6,064      208        3.4  %
Total U.S. Domestic             8,933        8,670          263         3.0  %
Package
International Package:
Domestic                        676          667            9           1.3  %
Export                          2,391        2,358          33          1.4  %
Cargo                          134       128        6          4.7  %
Total International             3,201        3,153          48          1.5  %
Package
Supply Chain & Freight:
Forwarding and Logistics        1,623        1,583          40          2.5  %
Freight                         671          632            39          6.2  %
Other                          143       128        15         11.7 %
Total Supply Chain &           2,437     2,343      94         4.0  %
Freight
Consolidated                  $ 14,571   $ 14,166    $ 405        2.9  %
                                                                        
Consolidated volume (in         1,148        1,134          14          1.2  %
millions)
                                                                        
Operating weekdays              61           62             (1    )
                                                                        
Average Daily Package
Volume (in thousands):
U.S. Domestic Package:
Next Day Air                    1,405        1,305          100         7.7  %
Deferred                        1,296        1,314          (18   )     -1.4 %
Ground                         13,461    13,068     393        3.0  %
Total U.S. Domestic             16,162       15,687         475         3.0  %
Package
International Package:
Domestic                        1,559        1,559          -           0.0  %
Export                         1,100     1,043      57         5.5  %
Total International            2,659     2,602      57         2.2  %
Package
Consolidated                   18,821    18,289     532        2.9  %
                                                                        
Average Revenue Per
Piece:
U.S. Domestic Package:
Next Day Air                  $ 19.47      $ 19.58        $ (0.11 )     -0.6 %
Deferred                        12.55        12.54          0.01        0.1  %
Ground                          7.64         7.48           0.16        2.1  %
Total U.S. Domestic             9.06         8.91           0.15        1.7  %
Package
International Package:
Domestic                        7.11         6.90           0.21        3.0  %
Export                          35.63        36.46          (0.83 )     -2.3 %
Total International             18.91        18.75          0.16        0.9  %
Package
Consolidated                  $ 10.45    $ 10.31     $ 0.14       1.4  %

Certain prior year amounts have been reclassified to conform to the current
year presentation.

                                                                
                                                                       
United Parcel Service, Inc.
Selected Financial Data - Year to Date
(unaudited)
                                                                       
                          Twelve Months Ended
                          December 31,                Change       
                          2012         2011         $            %
[(amounts in
millions, except per                  
share data)]
Statement of Income
Data:
Revenue:
U.S. Domestic Package     $ 32,856       $ 31,717       $ 1,139        3.6   %
International Package       12,124         12,249         (125   )     -1.0  %
Supply Chain &             9,147      9,139      8           0.1   %
Freight
Total revenue               54,127         53,105         1,022        1.9   %
                                                                       
Operating expenses:
Compensation and            33,102         27,575         5,527        20.0  %
benefits
Other                      19,682     19,450     232         1.2   %
Total operating             52,784         47,025         5,759        12.2  %
expenses
                                                                       
Operating profit:
U.S. Domestic Package       459            3,764          (3,305 )     -87.8 %
International Package       869            1,709          (840   )     -49.2 %
Supply Chain &             15         607        (592   )     -97.5 %
Freight
Total operating             1,343          6,080          (4,737 )     -77.9 %
profit
                                                                       
Other income
(expense):
Investment income           24             44             (20    )     -45.5 %
Interest expense           (393   )    (348   )    (45    )     12.9  %
Total other income          (369   )       (304   )       (65    )     21.4  %
(expense)
                                                  
Income before income        974            5,776          (4,802 )     -83.1 %
taxes
                                                                       
Income tax expense          167            1,972          (1,805 )     -91.5 %
                                                  
Net income                $ 807       $ 3,804     $ (2,997 )     -78.8 %
                                                                       
Net income as a             1.5    %       7.2    %
percentage of revenue
                                                                       
Per share amounts
Basic earnings per        $ 0.84         $ 3.88         $ (3.04  )     -78.4 %
share
Diluted earnings per      $ 0.83         $ 3.84         $ (3.01  )     -78.4 %
share
                                                                       
Weighted-average
shares outstanding
Basic                       960            981            (21    )     -2.1  %
Diluted                     969            991            (22    )     -2.2  %
                                                           
As adjusted income
data:
Operating profit:
U.S. Domestic Package     $ 4,532        $ 4,258        $ 274          6.4   %
(1)
International Package       1,810          1,880          (70    )     -3.7  %
(1)
Supply Chain &             728        736        (8     )     -1.1  %
Freight (1)
Total operating             7,070          6,874          196          2.9   %
profit
                                                                       
Income before income      $ 6,701        $ 6,570        $ 131          2.0   %
taxes (1)
Net income (2)            $ 4,389        $ 4,311        $ 78           1.8   %
                                                                       
Basic earnings per        $ 4.57         $ 4.39         $ 0.18         4.1   %
share (2)
Diluted earnings per      $ 4.53         $ 4.35         $ 0.18         4.1   %
share (2)

(1) 2012 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 $4.831 billion, allocated between the
U.S. Domestic Package segment ($3.177 billion), International Package segment
($941 million), and Supply Chain & Freight segment ($713 million). 2012 also
excludes an $896 million pre-tax charge from the withdrawal liability
associated with restructuring a multiemployer pension plan in the U.S.
Domestic Package segment.

2011 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 $827 million, allocated between the
U.S. Domestic Package segment ($479 million), International Package segment
($171 million), and Supply Chain & Freight segment ($177 million). 2011
operating profit and consolidated income before income taxes also excludes a
$33 million gain on certain real estate transactions ($15 million loss in U.S.
Domestic Package and a $48 million gain in Supply Chain & Freight).

(2) 2012 net income and earnings per share amounts exclude the after tax
impact of the adjustments described in (1), which combined to a decrease in
net income by $3.582 billion.

2011 net income and earnings per share amounts exclude the after tax impact of
the adjustments
described in (1), which combined to a decrease net income by $507 million.

Certain prior year amounts have been reclassified to conform to the current
year presentation.



United Parcel Service, Inc.
Selected Operating Data - Year to Date
(unaudited)
                                                                  
                                Twelve Months Ended
                                December 31,             Change
                                2012        2011        $/ #        %
                                           
Revenue (in millions):
U.S. Domestic Package:
Next Day Air                    $ 6,412      $ 6,229      $ 183         2.9  %
Deferred                          3,392        3,299        93          2.8  %
Ground                           23,052    22,189    863        3.9  %
Total U.S. Domestic Package       32,856       31,717       1,139       3.6  %
International Package:
Domestic                          2,531        2,628        (97   )     -3.7 %
Export                            9,033        9,056        (23   )     -0.3 %
Cargo                            560       565       (5    )     -0.9 %
Total International Package       12,124       12,249       (125  )     -1.0 %
Supply Chain & Freight:
Forwarding and Logistics          5,977        6,103        (126  )     -2.1 %
Freight                           2,640        2,563        77          3.0  %
Other                            530       473       57         12.1 %
Total Supply Chain &             9,147     9,139     8          0.1  %
Freight
Consolidated                    $ 54,127   $ 53,105   $ 1,022      1.9  %
                                                                        
Consolidated volume (in           4,107        4,013        94          2.3  %
millions)
                                                                        
Operating weekdays                252          254          (2    )
                                                                        
Average Daily Package
Volume (in thousands):
U.S. Domestic Package:
Next Day Air                      1,277        1,206        71          5.9  %
Deferred                          1,031        975          56          5.7  %
Ground                           11,588    11,230    358        3.2  %
Total U.S. Domestic Package       13,896       13,411       485         3.6  %
International Package:
Domestic                          1,427        1,444        (17   )     -1.2 %
Export                           972       942       30         3.2  %
Total International Package      2,399     2,386     13         0.5  %
Consolidated                     16,295    15,797    498        3.2  %
                                                                        
Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air                    $ 19.93      $ 20.33      $ (0.40 )     -2.0 %
Deferred                          13.06        13.32        (0.26 )     -2.0 %
Ground                            7.89         7.78         0.11        1.4  %
Total U.S. Domestic Package       9.38         9.31         0.07        0.8  %
International Package:
Domestic                          7.04         7.17         (0.13 )     -1.8 %
Export                            36.88        37.85        (0.97 )     -2.6 %
Total International Package       19.13        19.28        (0.15 )     -0.8 %
Consolidated                    $ 10.82    $ 10.82    $ -          0.0  %

Certain prior year amounts have been reclassified to conform to the current
year presentation.



United Parcel Service, Inc.
Reconciliation of Free Cash Flow
(unaudited)
                                  
                                    Preliminary
                                    Year-to-Date
(amounts in millions)               December 31,
Net cash from operations            $   7,213
Capital expenditures                    (2,153 )
Proceeds from disposals of PP&E         95
Net change in finance receivables       101
Other investing activities             97     
Free cash flow                      $   5,353  

Amounts are subject to reclassification.

Certain prior year amounts have been reclassified to conform to the current
year presentation.

Contact:

UPS
Mark Dickens, Public Relations
404-828-8428
or
Andy Dolny, Investor Relations
404-828-8901
 
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