WEATHER IMPACTS UPS 1Q RESULTS

  • U.S. Domestic Daily Volume Increases 4.2%
  • International Operating Profit Climbs 12%
  • International Daily Volume Jumps 7.9% on Strong Europe Growth
  • E-commerce Drives Robust Demand in the U.S. for Lightweight Solutions
  • Generates Free Cash Flow of $1.9 Billion

ATLANTA, USA, Apr. 24, 2014 – UPS (NYSE:UPS) today released first quarter 2014 results. Diluted earnings per share totalled $0.98, a $0.06 decline from first quarter 2013 adjusted results. Operating profit for the quarter was $1.5 billion, down $106 million from the prior-year’s adjusted results. Unusually harsh weather weighed on operating profit by approximately $200 million, due to increased expenses and slower revenue growth. Average daily shipments in the U.S. climbed 4.2% driven primarily by large e-commerce shippers using lightweight deferred shipping solutions.

The International segment operating margin expanded to 14.0% on daily volume growth of 7.9%. Supply Chain and Freight experienced improved operating profit and margin expansion.

For the first quarter of 2013, UPS reported diluted earnings per share of $1.08, which includes $36 million in after-tax gains related to the attempted acquisition of TNT.

“Much of the U.S. economy was negatively affected by the severe weather conditions in the first quarter, resulting in lower UPS operating results versus the prior year,” said Scott Davis, UPS chairman and CEO. “International and the Supply Chain and Freight segment benefitted from positive momentum during the quarter as customers utilized the strategic investments made by UPS to strengthen our portfolio.”


Cash Flow

For the three months ended March 31, UPS generated $1.9 billion in free cash flow. The company paid dividends of $596 million, up 8.1% per share over the prior year, and repurchased 6.8 million shares for approximately $660 million.


U.S. Domestic Package
                                                                             

U.S. Domestic revenue increased 2.6% over the prior-year period, to $8.5 billion. Daily volume improved 4.2%, led by UPS SurePost and UPS Second Day Air.

The segment generated $927 million in operating profit, down $158 million compared to the prior year, due to the impact of severe winter weather. The company experienced lost revenue and additional cost as a result of significant network disruptions on more than half of the operating days during the quarter. Overtime wages, purchased transportation and snow removal costs increased substantially over the prior year. Operating margin contracted 220 basis points to 10.9%.

Revenue per package declined 1.5% from the previous year due to changes in customer and product mix, as well as lower fuel surcharges. Product mix continues to be impacted by the rapid increase of UPS SurePost. More e-commerce retailers are choosing this product to serve their value-conscious customers.


International Package

The International segment revenue improved 5.0% and produced operating profit of $438 million, 12% more than the prior-year adjusted results. Operating margin expanded to 14% driven by improved network efficiency and in-country leverage.

On a reported basis, the segment recorded operating profit growth of 24% more than the prior-year result of $352 million. This reflects the operating profit impact of a $39 million net charge in 2013, related to the attempted acquisition of TNT.

Export shipments climbed 7.7% driven by 15% growth in Europe and modest gains in Asia and the Americas. Transborder shipments in Europe continue to expand rapidly as customers migrate to Pan-European distribution using UPS solutions.

To support strong Intra-European growth and intercontinental trade, the company announced the completed expansion of its Cologne, Germany, air hub. This $200 million investment increased facility capacity by 70%.

Non-U.S. Domestic deliveries increased 8.1%, driven by growth in Europe and Canada. Poland led the European countries with more than 20% growth, while Germany and the U.K. contributed strong gains.

Average revenue per package declined 2.1% due to product mix changes as non-premium Export products jumped almost 13%, overshadowing improved growth in premium products.


Supply Chain & Freight
                           

Supply Chain and Freight operating profit increased 3.5% to $148 million. Operating margin expanded 30 basis points to 6.8%, driven by gains in the Forwarding and Distribution units.

The Forwarding business delivered improved operating profit and margin gains during the quarter as the unit adapted to market changes. International Air Freight growth in shipments and tonnage were offset by lower revenue per pound. Ocean Freight and Brokerage showed both improved revenue and operating profit.

Gains from retail and healthcare customers drove higher revenue growth in the Distribution business unit. Operating profit improved more than 10% despite additional expansion costs during the quarter.

UPS Freight revenue increased slightly on a 3.1% increase in LTL revenue per hundredweight. Both tonnage and operating profit were negatively impacted by the severe winter weather.


Outlook

“During the quarter, the momentum of the underlying business was masked by the disruption of inclement weather,” said Kurt Kuehn, UPS chief financial officer.  “We are encouraged by the positive trends in our business and expect the remainder of the year to perform as we originally guided. However, due to the challenging start to 2014, we anticipate diluted earnings per share to be at the low end of our full-year guidance range of $5.05 to $5.30.”


About UPS

UPS (NYSE:UPS) is a global leader in logistics, offering a broad range of solutions including the transportation of packages and freight; the facilitation of international trade, and the deployment of advanced technology to more efficiently manage the world of business.  Headquartered in Atlanta, USA, UPS serves more than 220 countries and territories worldwide.  The company can be found on the Web at UPS.com and its corporate blog can be found at blog.ups.com.  To get UPS news direct, visit pressroom.ups.com.

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, negotiation and ratification of labor contracts, strikes, work stoppages and slowdowns, changes 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.

Contacts:        

Andy McGowan, Public Relations
+1-404-828-4663

Joe Wilkins, Investor Relations 
+1-404-828-8209

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