International and Non-Package Segments Drive UPS 1st Quarter Results

UPS today reported solid first quarter results driven
by its international and non-package businesses, with both segments generating strong
revenue growth and record-setting profits.
The U.S. package segment experienced volume declines during the first two
months of the quarter, exacerbated by severe winter weather and a difficult economy.
In March, however, and continuing into April, volume trends improved and the
company now is experiencing growth in its U.S. package business.
For the quarter ended March 31, 2003, revenue totaled $8.02 billion, up 5.8%
from the $7.58 billion reported during the prior-year period. Consolidated operating
profit fell 0.2% to $945 million. Net income increased 24.4% to $611 million
compared to the prior year's $491 million. Excluding a $72 million non-recurring
charge in 2002 for the adoption of a new accounting standard, net income rose 8.5%,
from $563 million in 2002 to $611 million this year.
Earnings per diluted share, adjusted to exclude the non-recurring item,
increased 8% to $0.54 versus $0.50 recorded during the prior-year period. Without
this adjustment, earnings per share increased 25.6% compared to the $0.43 recorded
during the first quarter of 2002.
Operating profit for the international package segment more than quadrupled to
$134 million, led by a 10.3% increase in export volume and a 23.5% increase in
revenue. Operating profit for the non-package segment almost doubled to $107
million on an 11.4% gain in revenue. The U.S. package segment was hurt by a number
of adverse items, including a sharp increase in fuel costs; bad weather that cost the
company more than $30 million, and increases in pension and healthcare expenses.
Nonetheless, revenue per piece showed excellent improvement as the pricing
environment remained firm.
“We are pleased with the quarter on many fronts,” said UPS Chief Financial
Officer Scott Davis. “We generated good results despite a very challenging domestic
environment and were gratified to see our strategy really taking hold in the
international and supply chain segments.”
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UPS took several steps over the quarter to generate growth opportunities,
including the introduction of a new look and branding campaign to demonstrate its
expanded global capabilities. The company also launched a program under which
most Mail Boxes Etc. centers in the U.S. will re-brand into The UPS Store, and
continued integration activities within the new UPS Supply Chain Solutions
organization.
Additional results for each segment include:
· In the international segment, revenue increased 23.5% to $1.3 billion
compared to the prior year period. Operating profit surged more than 300% to
$134 million. Average daily export volume continued to outperform market
growth, posting a 10.3% increase overall with a 16% gain in Asia and an 11%
hike in Europe.
· Within the U.S. domestic segment, revenue totaled $6 billion, up 2% compared
to $5.9 billion for the prior year. Operating profit declined 18.3% to $704
million due to a volume decline of 1.2% and adverse costs. Approximately
one-half of the volume decline was attributed to the effects of bad weather in
February. Next Day Air® express volume grew a strong 3.9%, well above
market growth, and the quarter ended with positive growth trends.
· The non-package segment posted its best quarter ever. Revenue increased
11.4% to $693 million. Operating profit totaled $107 million, up from the $55
million reported the prior year. UPS Supply Chain Solutions benefited
substantially from its successful integration and restructuring.
The quarter’s consolidated results were helped by a $55 million reduction in
income taxes, or $0.05 per share, as a number of outstanding tax issues were resolved.
Those gains were partially offset by a writedown in UPS’s marketable securities,
reflecting market conditions. The writedown totaled $58 million pre-tax, or $0.03 per
share.
As to future guidance, Davis said the company expects second quarter earnings
to be in the range of $0.58 to 0.62 per diluted share compared to $0.54 in 2002. He
said the company is on track to achieve its stated goal of a 10-to-15% gain in earnings
per share for the full year.
“We expect domestic package volume to continue the momentum begun in
March and April and post between a 1-to-2% increase over last year’s second quarter
results,” Davis said. “All three domestic product lines should show positive growth
rates, with Next Day Air remaining the strongest. We have put in place many
initiatives that we believe will continue to expand our U.S. package business.
“International growth trends should continue and we expect the synergies
being created by the integration of our UPS Supply Chain Solutions organization will
continue to pay off,” Davis added. “We are encouraged by the way our customers are
accepting our strategy of synchronizing global commerce.”
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UPS is the world’s largest package delivery company and a global leader in
supply chain services, offering an extensive range of options for synchronizing the
movement of goods, information and funds. Headquartered in Atlanta, Ga., UPS serves
more than 200 countries and territories worldwide. UPS's stock trades on the New
York Stock Exchange (UPS), and the company can be found on the Web at UPS.com.
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Detailed financial schedules are available on the company’s web site.