UPS Releases 3Q15 Results


  • Positive Momentum Continues with 3Q EPS up 5.3%
  • International Operating Profit Increased 10%
  • Strong Air Shipment Growth in U.S. Domestic
  • Revenue Gains Tempered by Currency and Lower Fuel Surcharges
  • Completed Acquisition of Asset-Light Coyote Logistics
  • Reaffirms Full-Year 2015 EPS Guidance at Higher End of Range

ATLANTA, Oct. 27, 2015 (GLOBE NEWSWIRE) -- UPS (NYSE:UPS) today announced third quarter 2015 diluted earnings per share of $1.39, a 5.3% increase over the same period last year.  International operating profits were up more than 10% to $507 million, driving company-wide results higher.

Currency exchange rates and lower fuel surcharges reduced total revenue slightly to $14.2 billion.  On a currency-neutral basis revenue grew 1.8%.  Revenue management initiatives across the business resulted in base rate improvements. 

The company completed the acquisition of Coyote Logistics during the quarter.  The addition of this asset-light, truckload brokerage firm provides expanded capabilities for UPS.  Coyote is expected to create more than $100 million of synergies.

“Third quarter results reflect strong progress on our long-term initiatives despite uneven economic conditions,” said David Abney, UPS chief executive officer.  “We remain committed to these strategies to support customers and improved shareowner value.”   

Total company shipments increased 1.9% over the third quarter last year to 1.1 billion packages, led by U.S. air products and European transborder shipments. 

Cash Flow

For the nine months ended Sept. 30, UPS generated $4.6 billion in free cash flow.  The company paid dividends of $1.9 billion, an increase of 9.0% per share over the prior year.  UPS also repurchased 20 million shares for approximately $2.0 billion.  

U.S. Domestic Package                                                 

U.S. Domestic revenue of $8.9 billion was up 1.9% over the same quarter last year.  Lower fuel surcharge rates dampened revenue growth and lowered revenue per package by about 250 basis points.  Strong base rate improvements were also offset by changes in product and customer mix. 

Daily shipments were up 0.6%, due primarily to faster growing premium air products.  Deferred Air products jumped 13% and UPS Next Day Air was 4.0% higher as more ecommerce shippers chose to upgrade to air services.  Ground products dropped slightly as slowing industrial production contributed to the first year-over-year decrease in business-to-business (B2B) shipments this year.  Meanwhile, the pace of growth for all business-to-consumer (B2C) products increased this quarter.

Operating profit declined 1.6% to $1.3 billion with an operating margin of 14.2%.  The year-over-year change in fuel surcharge revenue fell faster than fuel related expense, creating a drag on operating results.

International Package                  

International operating profit increased 10% to $507 million.  Operating margin expanded to 17.1%.  Operating results continue to benefit from revenue quality enhancements, network improvements and Export volume growth.  

Adjusting for the negative impact of currency, total International revenue increased 0.4%.  In addition, lower fuel surcharge revenue resulted in an approximately 350 basis point reduction in package yield.  Underlying base rates increased across all regions of the world.

Daily Export shipments were up 1.2% over the prior year.  Growth in Europe transborder and U.S. inbound shipments outweighed a drop in Asia and U.S. exports.

Supply Chain & Freight                  

Supply Chain & Freight revenue increased slightly to $2.4 billion.  Lower Forwarding revenue and a drop in less-than-truckload (LTL) tonnage was offset by the addition of revenue from Coyote Logistics.  Despite approximately $20 million in Coyote transaction fees, total segment operating profit increased to $219 million.  Operating margin expanded over the prior year period to 9.1%.

UPS closed on its Coyote Logistics acquisition midway through the quarter.  In October, UPS’s Freight Brokerage team transitioned to Coyote’s world-class order management platform, further strengthening our product offering.

The Freight Forwarding business continues to benefit from revenue quality initiatives started earlier in the year.  While tonnage and revenue were down, improvements to the network and pricing drove significant operating profit expansion.

The Distribution business continues to build out its infrastructure to serve the healthcare and aerospace industries.  Revenue increased slightly as growth was dampened by the effects of currency translations. 

UPS Freight revenue dropped 8.6% due to lower fuel surcharges and reduced LTL tonnage during the quarter.  Changes in fuel surcharges contributed to about 600 basis point reduction in the revenue growth rate.  Soft market demand combined with selective pricing initiatives also contributed to the decline. 

Outlook

“We are generating positive momentum as a result of the strong execution of our business units,” said Richard Peretz, UPS chief financial officer.  “This gives us confidence we will achieve the higher-end of our full-year earnings per share guidance.”

The company’s guidance for 2015 full-year diluted earnings per share is $5.05 to $5.30, an increase of 6% to 12% over adjusted 2014 results.

EDITOR’S NOTE: 

UPS CEO David Abney and CFO Richard Peretz will discuss third quarter results with investors and analysts during a conference call at 8:30 a.m. ET, October 27, 2015.  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.

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 Longitudes.ups.com. To get UPS news direct, visit pressroom.ups.com/RSS.

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 disclose revenue growth adjusted for the impact of foreign currency. 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 year-to-date 2014 operating profit, operating margin, pre-tax income, net income and earnings per share with similar measures that excluded the impact of certain transactions. In the second quarter of 2014, we recorded a $1.066 billion pre-tax charge ($665 million after-tax) related to the transfer of postretirement benefit obligations to multiemployer healthcare plans for certain employees employed under the Teamsters National Master Agreement. The charge is allocated between the U.S. Domestic Package segment ($957 million), the International Package segment ($27 million) and the Supply Chain & Freight segment ($82 million). We believe these adjusted measures provide additional information that better enables 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, income before taxes, net income and earnings per share, which are 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, 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.

United Parcel Service, Inc. 
Selected Financial Data - Third Quarter 
(unaudited) 
  
 Three Months Ended   
 September 30  Change 
  2015   2014  $   % 
(amounts in millions, except per share data)        
Statement of Income Data:        
Revenue:        
U.S. Domestic Package$  8,860  $  8,691  $  169   1.9% 
International Package   2,959     3,183     (224)  -7.0% 
Supply Chain & Freight   2,418     2,416     2   0.1% 
Total revenue   14,237     14,290     (53)  -0.4% 
         
Operating expenses:        
Compensation and benefits   7,458     7,217     241   3.3% 
Other   4,795     5,119     (324)  -6.3% 
Total operating expenses   12,253     12,336     (83)  -0.7% 
         
Operating profit:        
U.S. Domestic Package   1,258     1,279     (21)  -1.6% 
International Package   507     460     47   10.2% 
Supply Chain & Freight   219     215     4   1.9% 
Total operating profit   1,984     1,954     30   1.5% 
         
Other income (expense):        
Investment income   4     2     2   100.0% 
Interest expense   (83)    (87)    4   -4.6% 
Total other income (expense)   (79)    (85)    6   -7.1% 
         
Income before income taxes   1,905     1,869     36   1.9% 
         
Income tax expense   648     655     (7)  -1.1% 
         
Net income$  1,257  $  1,214  $  43   3.5% 
         
Net income as a percentage of revenue 8.8%  8.5%     
         
Per share amounts:        
Basic earnings per share$  1.40  $  1.33  $  0.07   5.3% 
Diluted earnings per share$  1.39  $  1.32  $  0.07   5.3% 
         
Weighted-average shares outstanding:        
Basic   895     913     (18)  -2.0% 
Diluted   903     922     (19)  -2.1% 
  
Certain prior year amounts have been reclassified to conform to the current year presentation. 

 

United Parcel Service, Inc.
Selected Operating Data - Third Quarter
(unaudited)
 
 Three Months Ended    
 September 30   Change
  2015   2014  $ / #   %
        
Revenue (in millions):       
U.S. Domestic Package:       
Next Day Air$  1,662  $  1,636  $  26   1.6%
Deferred   883     827     56   6.8%
Ground   6,315     6,228     87   1.4%
Total U.S. Domestic Package   8,860     8,691     169   1.9%
International Package:       
Domestic   594     689     (95)  -13.8%
Export   2,215     2,339     (124)  -5.3%
Cargo and Other   150     155     (5)  -3.2%
Total International Package   2,959     3,183     (224)  -7.0%
Supply Chain & Freight:       
Forwarding and Logistics   1,500     1,459     41   2.8%
Freight   740     810     (70)  -8.6%
Other   178     147     31   21.1%
Total Supply Chain & Freight   2,418     2,416     2   0.1%
Consolidated$  14,237  $  14,290  $  (53)  -0.4%
        
Consolidated volume (in millions)   1,114     1,093     21   1.9%
        
Operating weekdays   65     64     1   1.6%
        
Average Daily Package Volume (in thousands):      
U.S. Domestic Package:       
Next Day Air   1,285     1,235     50   4.0%
Deferred   1,141     1,008     133   13.2%
Ground   12,114     12,209     (95)  -0.8%
Total U.S. Domestic Package   14,540     14,452     88   0.6%
International Package:       
Domestic   1,495     1,547     (52)  -3.4%
Export   1,098     1,085     13   1.2%
Total International Package   2,593     2,632     (39)  -1.5%
Consolidated   17,133     17,084     49   0.3%
        
Average Revenue Per Piece:       
U.S. Domestic Package:       
Next Day Air$  19.90  $  20.70  $  (0.80)  -3.9%
Deferred   11.91     12.82     (0.91)  -7.1%
Ground   8.02     7.97     0.05   0.6%
Total U.S. Domestic Package   9.37     9.40     (0.03)  -0.3%
International Package:       
Domestic   6.11     6.96     (0.85)  -12.2%
Export   31.04     33.68     (2.64)  -7.8%
Total International Package   16.67     17.98     (1.31)  -7.3%
Consolidated$  10.48  $  10.72  $  (0.24)  -2.2%
                
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)
 
 Nine Months Ended  
 September 30   Change
  2015   2014  $   %
(amounts in millions, except per share data)       
Statement of Income Data:       
Revenue:       
U.S. Domestic Package$  26,482  $  25,847  $  635   2.5%
International Package   8,974     9,562     (588)  -6.1%
Supply Chain & Freight   6,853     6,928     (75)  -1.1%
Total revenue   42,309     42,337     (28)  -0.1%
        
Operating expenses:       
Compensation and benefits   22,524     22,857     (333)  -1.5%
Other   14,168     15,266     (1,098)  -7.2%
Total operating expenses   36,692     38,123     (1,431)  -3.8%
        
Operating profit:       
U.S. Domestic Package   3,483     2,415     1,068   44.2%
International Package   1,557     1,342     215   16.0%
Supply Chain & Freight   577     457     120   26.3%
Total operating profit   5,617     4,214     1,403   33.3%
        
Other income (expense):       
Investment income   12     27     (15)  -55.6%
Interest expense   (256)    (266)    10   -3.8%
Total other income (expense)   (244)    (239)    (5)  2.1%
        
Income before income taxes   5,373     3,975     1,398   35.2%
        
Income tax expense   1,860     1,396     464   33.2%
        
Net income$  3,513  $  2,579  $  934   36.2%
        
Net income as a percentage of revenue 8.3%  6.1%    
        
Per share amounts:       
Basic earnings per share$  3.90  $  2.81  $  1.09   38.8%
Diluted earnings per share$  3.87  $  2.78  $  1.09   39.2%
        
Weighted-average shares outstanding:       
Basic   901     918     (17)  -1.9%
Diluted   908     927     (19)  -2.0%
                
        
As adjusted income data:       
Operating profit:       
U.S. Domestic Package (1)$  3,483  $  3,372  $  111   3.3%
International Package (1)   1,557     1,369     188   13.7%
Supply Chain & Freight   577     539     38   7.1%
Total operating profit (1)   5,617     5,280     337   6.4%
        
Income before income taxes (1)$  5,373  $  5,041  $  332   6.6%
Net income (2)$  3,513  $  3,244  $  269   8.3%
        
Basic earnings per share (2)$  3.90  $  3.53  $  0.37   10.5%
Diluted earnings per share (2)$  3.87  $  3.50  $  0.37   10.6%


(1) Second quarter 2014 operating profit and consolidated income before income taxes excludes $1.066 billion pre-tax charge  associated with transferring postretirement health and welfare benefit obligations to multiemployer healthcare plans for certain employees under the Teamsters National Master Agreement.  The charge is allocated between the U.S. Domestic Package segment ($957 million), the International Package segment ($27 million) and the Supply Chain & Freight segment ($82 million).
 
(2) Second quarter 2014 net income and earnings per share amounts exclude the $665 million after-tax charge of transferring postretirement benefit obligations described in (1).   
 
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)
 
 Nine Months Ended    
 September 30   Change
  2015   2014  $ / #   %
        
Revenue (in millions):       
U.S. Domestic Package:       
Next Day Air$  4,810  $  4,862  $  (52)  -1.1%
Deferred   2,657     2,507     150   6.0%
Ground   19,015     18,478     537   2.9%
Total U.S. Domestic Package   26,482     25,847     635   2.5%
International Package:       
Domestic   1,799     2,069     (270)  -13.0%
Export   6,698     7,046     (348)  -4.9%
Cargo and Other   477     447     30   6.7%
Total International Package   8,974     9,562     (588)  -6.1%
Supply Chain & Freight:       
Forwarding and Logistics   4,149     4,224     (75)  -1.8%
Freight   2,202     2,275     (73)  -3.2%
Other   502     429     73   17.0%
Total Supply Chain & Freight   6,853     6,928     (75)  -1.1%
Consolidated$  42,309  $  42,337  $  (28)  -0.1%
        
Consolidated volume (in millions)   3,316     3,244     72   2.2%
        
Operating weekdays   192     191     1   0.5%
        
Average Daily Package Volume (in thousands):      
U.S. Domestic Package:       
Next Day Air   1,252     1,241     11   0.9%
Deferred   1,163     1,027     136   13.2%
Ground   12,208     12,124     84   0.7%
Total U.S. Domestic Package   14,623     14,392     231   1.6%
International Package:       
Domestic   1,534     1,524     10   0.7%
Export   1,112     1,066     46   4.3%
Total International Package   2,646     2,590     56   2.2%
Consolidated   17,269     16,982     287   1.7%
        
Average Revenue Per Piece:       
U.S. Domestic Package:       
Next Day Air$  20.01  $  20.51  $  (0.50)  -2.4%
Deferred   11.90     12.78     (0.88)  -6.9%
Ground   8.11     7.98     0.13   1.6%
Total U.S. Domestic Package   9.43     9.40     0.03   0.3%
International Package:       
Domestic   6.11     7.11     (1.00)  -14.1%
Export   31.37     34.61     (3.24)  -9.4%
Total International Package   16.73     18.43     (1.70)  -9.2%
Consolidated$  10.55  $  10.78  $  (0.23)  -2.1%
                
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) September 30
Net cash from operations $  6,411 
Capital expenditures    (1,654)
Proceeds from disposals of PP&E    14 
Net change in finance receivables    (11)
Other investing activities    (125)
Free cash flow $  4,635 
   
Amounts are subject to reclassification.


 


            

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