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UPS 1st Quarter Shows Strong Gain in Earnings


Revenue Rises 16.5%; Excellent Cash Flow

ATLANTA, April 20, 2006 - UPS (NYSE:UPS) today reported earnings per diluted share of $0.89, up 14.1% over the prior year. Results were driven by a 9% increase in global small package volume or 1.24 million packages per day, outpacing worldwide market growth.

The consolidated results for the period included:

- Revenue grew 16.5% to $11.5 billion.
- Operating profit increased 12.3% to $1.6 billion.
- Net income increased 10.5% to $975 million.
- Free cash flow improved to $1.9 billion.

Solid fundamentals are delivering healthy cash flow. Free cash was used to buy back more than 11 million shares in an on-going repurchase program. Dividends were increased by 15% and are up 81% over the last three years.

“This was a quarter of outstanding growth that resulted in strong returns and excellent cash flow,” said Mike Eskew, UPS chairman and CEO. “To drive future results, we will continue to invest in our network, technology and products to bring even more value to the customer.”

Highlights by segment for the first quarter included:

U.S. Package

- Revenue grew 9.6% to $7.5 billion.
- Operating profit increased 15.3% to $1.19 billion.
- Operating margin improved 80 basis points to 15.9%.
- Volume grew 6.8% in total, or 848,000 packages per day.

Revenue gains were a result of robust growth across all products combined with firm pricing. Product growth was paced by a 9.3% increase in Next Day Air® volume coupled with a 10.8% increase in deferred air volume. Average daily ground volume rose 6.2%, or almost 650,000 packages per day.

During the quarter, UPS accelerated the speed of its U.S. ground network, enhanced its 2nd Day Air A.M.® products and launched extensive training of its sales teams in selling the freight portfolio.

International Package

- Revenue grew 17.3% to $2.16 billion.
- Operating profit increased 13.5% to $395 million.
- Operating margin remained strong at 18.3%.
- Volume grew 29.1% to 1.7 million packages per day.

Export volume growth was excellent with a 16.3% increase, reflecting strong performance in all major regions of the world. Non-U.S. domestic volume climbed 38.3%, aided by acquisitions.

Recently, UPS added important international flights to and from China and expanded its operations there. The company also enhanced Trade Direct service between the United States, Canada and Europe and extended its unique Web-based multi-location shipping system, UPS CampusShip™, to another 18 countries and territories.

Supply Chain and Freight

- Revenue grew 53.9% to $1.9 billion, driven primarily by acquisitions.
- Operating profit declined $34 million.

Freight forwarding and logistics operating profit was impacted by increased expenses and lost revenue due to the integration of the former Menlo Worldwide Forwarding unit. However, these results were somewhat offset by solid less-than-truckload revenue and shipment growth in the ground freight operations.


“No company in this industry is better positioned to capitalize on the growth opportunities we see around the world,” said Chief Financial Officer Scott Davis. As a result, UPS is projecting diluted earnings per share in a range of $0.97 to $1.01 in the second quarter compared to the $0.88 reported during the prior-year period. “We are reaffirming our full-year 2006 guidance,” Davis added. “UPS continues to expect an increase in diluted earnings per share of 11-to-16%, consistent with the company’s historical growth rate.”

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

View the full financial tables:

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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 and click on “Earnings Webcast.”

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. 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 plan. We also provide the amount of our free cash flow to supplement our cash flow determined under GAAP. We define free cash flow as net cash from operating activities adjusted for capital expenditures, proceeds from disposals of property, plant and equipment, net change in finance receivables and other investing activities. We believe free cash flow is an important measure in assessing the generation of cash for discretionary investments, dividends and share repurchases.

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, net income and earnings per share, 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 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, 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.


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