UPS Delivers Solid Financial Results Despite Tough Economic Conditions
ATLANTA--July 19, 2001--UPS (NYSE:UPS) today reported a nearly 4% increase in revenue, volume growth in its air and international businesses and earnings in line with previous guidance, despite a weak global economy during the second quarter of 2001.
For the three months ended June 30, 2001, revenue totaled $7.6 billion, up 3.9% compared to the $7.3 billion reported for the same period a year earlier. Consolidated operating profits were $1.04 billion, down 10.3% compared to the $1.16 billion reported for the prior-year period. Earnings per diluted share were $0.55, an 8.3% decline from $0.60 the prior year, on net income of $630 million versus $695 million in the second quarter of 2000.
Highlights for the quarter included continued growth in the company`s logistics business, a double-digit gain in international export volume and an increase in domestic air volume, combined with effective controls on discretionary expenses.
"We said three months ago that we would take the steps necessary to effectively manage our business through these tough times and that`s exactly what we`re doing," said UPS Chairman and CEO Jim Kelly. "Our expense controls are working and we continue to grow in some of our key businesses, particularly international export and logistics. More important, we made significant strides in our strategy of expanding our global supply chain management capabilities."
For the quarter, revenue in the Domestic Package segment increased 1.5% to $6 billion, with total average daily volume off 0.9%. Ground volume declined 1.3% and next-day air volume was flat; however, deferred air volume increased 2.6%. Yields in this segment, or revenue per piece, increased 2.5% compared with the same quarter last year. Effective cost management limited the profitability decline to only 5.7%, despite the volume reduction.
The International Package segment reported revenue of $1 billion, up 4.2%. International export volume grew 10.8% compared with last year`s second quarter, led by Europe with a 21% increase. Yields in the International segment were down 3.5% (but up 0.7% when adjusted for currency fluctuations). A number of factors impacted operating profits, however, resulting in a $50 million decline. These included a shortfall in expected cargo revenues, the negative currency impact, unanticipated short-term aircraft lease costs, and a decline in Asia package volume.
The Non-package segment posted a 39% revenue increase to $535 million, aided by a number of acquisitions. UPS Logistics Group - the largest business unit in this category -- reported revenue of $308 million, up 41%. Profitability in this segment declined $12 million from the second quarter last year, reflecting integration costs for recent acquisitions and goodwill amortization.
In the quarter, UPS took several critical steps to expand its global infrastructure. It completed the acquisition of Fritz Companies Inc., which became part of a new $750 million customs brokerage and freight forwarding unit that also includes operations obtained in seven other small acquisitions. In addition the company purchased the assets of Mail Boxes Etc.
A comprehensive mail services strategy was unveiled featuring the acquisitions of Mail2000 and Global Management Services LLC (commonly know as RMX). UPS also continued the expansion of its Service Parts Logistics network by acquiring Polysys Electronic Systems AG of Switzerland and announcing its intention to acquire UNI-DATA AG of Germany.
UPS also launched its direct air service to China.
Commenting on UPS`s prospects, Chief Financial Officer Scott Davis reiterated the company`s concern with the U.S. economic outlook and said the emphasis on controlling discretionary costs would continue. Davis said the company still had not seen signs of any strengthening of U.S. economic activity.
"We are pleased that we were able to deliver on our second-quarter guidance even as we positioned UPS for the future," said Davis. "Given current economic conditions and the fact that our third quarter is historically less profitable than the second, we expect earnings per share in the third quarter of $0.52 to $0.55. And when the economy turns, which it will, we believe that we remain very well positioned for strong financial performance."
UPS is the world`s largest express carrier and largest package delivery company, serving more than 200 countries and territories around the world. Headquartered in Atlanta, Ga., the company is located on the Web at www.ups.com. During the second quarter, UPS was recognized as one of "The 50 Best Companies for Minorities" in Fortune magazine and received the prestigious "Ron Brown Award for Corporate Leadership" from the United States Department of Commerce.
EDITOR`S NOTE: UPS CFO Scott Davis will discuss 2nd 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 plus company financial summaries will be available at the site.
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 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 Securities and Exchange Commission, which discussions are incorporated herein by reference.
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