Kurt Peters

U.S. Volume Climbs; International Operating Profit Doubles

ATLANTA, April 22, 2004 - UPS (NYSE:UPS) today reported an 11.3% increase in revenue and a 24% gain in net income for the first quarter, reflecting strong results in all three business segments.

Scott Davis, UPS`s chief financial officer, pointed to three highlights for the quarter including an increase in average U.S. ground and air volume of nearly 600,000 packages a day, or 5%; a doubling of international profit to $269 million, and double-digit revenue growth in the UPS Supply Chain Solutions unit.

"We clearly are reaping the benefits of our strategy to provide broad solutions across the supply chain," added Davis. "Increasingly, we are seeing each segment of our business help fuel the growth of other business units."

For the three months ended March 31, consolidated revenue totaled $8.92 billion, up 11.3% from the $8.02 billion reported during the prior-year period. Consolidated operating profit jumped 28.8% to $1.22 billion, almost equaling the operating profit reported for the most recent fourth quarter, which includes the peak holiday season.

Net income totaled $759 million, an increase of 24% over the prior year`s $611 million. Earnings per diluted share were $0.67, up 24% from the $0.54 reported for the first quarter of 2003. In that prior-year period, net income was affected by a reduction in income taxes and a write-down in marketable securities. Excluding those items, net income for the most recent period rose 28% from $593 million, and earnings per diluted share increased 29% from $0.52 reported in 2003.

Highlights by segment included:
-- International package continued its exceptional performance with revenues climbing 24.3% to $1.62 billion. Operating profit for this segment increased 101% to $269 million. Operating margin reached 16.6%, the highest ever in this segment. Export volume was strong around the world, with U.S. exports up almost 13%. UPS operations in China recorded a nearly 60% surge in export volume.
-- U.S. package revenue rose 8.6% to $6.54 billion. Operating profit climbed 18% to $831 million and margins improved 100 basis points to 12.7%. Average daily volume in the U.S. showed a strong 5% gain, with ground volume jumping 5.2%. Next Day Air(r) and deferred air volume grew a healthy 3.1% and 5.8%, respectively. Average revenue per piece rose for all products, with the overall U.S. average revenue per piece increasing 1.7%.
-- Revenue for the non-package segment grew 9.7% to $760 million, with revenue from the UPS Supply Chain Solutions unit increasing more than 12%. Operating profit for the segment rose 9.3% to $117 million.

"We saw strong margins across all three segments and that`s very encouraging," said Davis. "Each segment is hitting its stride and our supply chain and technology capabilities - coupled with the reliability of our global network -- are making us an attractive `one-source provider` to customers."

Several developments during the first quarter positioned the company well for future growth. UPS is in the process of rolling out proprietary technology that streamlines its pickup and delivery operations. This new technology will improve service and lower operating costs. Through the end of the quarter, deployment was complete in 131 out of 1,060 sites. That deployment will accelerate in the second quarter.

Other developments included gaining the authority to operate six additional flights between Hong Kong and the Philippines via Singapore; acquiring the remaining stake of UPS`s joint venture in Japan, making its operation there wholly-owned; unveiling significant enhancements to its customer shipping technology products, including UPS CampusShip(tm), Quantum View SM Manage and Flex(r) Global View, and announcing plans to open another 1,700 The UPS Store locations over the next three years.

In looking ahead, Davis said the company projects second quarter earnings in the range of $0.67 to $0.72 per diluted share versus an adjusted $0.60 last year. He said the company is well on track to achieve its goal of 12-to-18% earnings growth in 2004 and now expects to reach the higher end of that guidance for the full year.

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.

The non-GAAP financial measures included in this press release are reconciled to the comparable GAAP measures in the schedules attached to this press release. Additional detailed financial schedules are available on the company`s Web site at www.shareholder.com/ups/stock.cfm.

EDITOR`S NOTE: UPS CFO Scott Davis will discuss first quarter results with investors and analysts during a conference call later today at 10:00 a.m. (EDT). That conference call is open to listeners through a live Webcast. To access the call, go to www.shareholder.com/UPS and click on "Earnings Webcast."

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, increases 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.

Norman Black, Public Relations
Teresa Finley, Investor Relations


Economics, Financial ratio, revenue, United Parcel Service, United States law