UPS Discusses Strategy

There is no issue more critical to the future of commerce than managing global supply chains, which is why the future of UPS is bright, the company's chairman and CEO said today.

Addressing his first conference of investors and analysts since assuming UPS's top post, Mike Eskew explained the company's strategy and critical role in global commerce as other senior executives offered an overview of recent developments and updated financial guidance.

"We believe UPS is one of just a few companies, across all industries, that actually has a direct impact on the way global commerce is conducted," said Eskew. "More than ever, businesses realize there's still too much fat in their distribution systems. But these are costs that can be reduced and managed more effectively with better supply chain planning and execution."

And that, Eskew added, is why UPS has been migrating "to a complete supply chain solutions company … a company that makes it as easy for a customer to ship a package or manage a supply chain from Iowa to India as it is from Iowa to Indiana."

"That's our future, and that's what will help us further extend our substantial competitive advantages," he declared.

During the conference, which concluded today, the company said it expects earnings per diluted share for the first quarter of 2002 to be at the high end of the $0.40-to-$0.47 guidance that it provided in late January.

"The quarter is unfolding fairly well," said UPS Chief Financial Officer Scott Davis. "While volume growth is still about one-to-two percent below last year's levels, yields are firm and expense controls are tracking ahead of plan."

Davis said earnings per diluted share for the second quarter of the year should be in the range of $0.50 to $0.55, compared with $0.55 during the same period last year.

For the second half of the year, assuming a timely completion of labor negotiations with the Teamsters union and a strengthening economy, the company said it expects improving revenue trends and earnings increases in the low-teens. Among the factors contributing to the estimate are an expected 50-to-60 percent improvement in the profitability of UPS's international package delivery business and a gain in profitability of approximately $100 million in its non-package segment this year.

Further, UPS said that in 2003 and 2004, it expects to meet or exceed its long-term historical performance levels.

During the investor conference, which was carried on a live Webcast, UPS senior executives elaborated on some of the key elements of the company's strategy and growth plans for the coming year, including several new technology initiatives to better connect UPS with its customers domestically and worldwide. Among other developments discussed:

The company has successfully pursued domestic initiatives that have produced record service levels and significant cost savings.
The company's investment in its Asian operations soon will pay dividends. The establishment of a new intra-Asia hub in the Philippines will add extensive, new service capabilities throughout Asia and, in particular, on the important corridor between Asia and Europe.
UPS's export business in Europe continues to grow in excess of 15% per year and the company is poised to expand that market presence.
UPS has developed the supply chain expertise needed for the future by successfully expanding and integrating its new subsidiaries.
"We believe we are in the leading position to revolutionize the flow of commerce," Eskew concluded. "We have a great core business, as evidenced by the $1 billion, state-of-the-art air hub now operating here in Louisville; a domestic ground business that remains unparalleled, and an international business growing at a strong rate.

"Now, with the new Supply Chain Solutions organization, we are expanding that foundation to include the logistics and financial capabilities necessary to support customers from the world's largest global businesses to the lone entrepreneur working at home. We are taking a strong, successful company and evolving by creating a new way of doing business."

UPS is the world's largest transportation company, offering the most extensive range of e-commerce and supply chain solutions for the movement of goods, information and funds. UPS stock trades on the New York Stock Exchange (UPS) and the company can be found on the Web at www.ups.com.