10-KPeriod: FY2002

UNITED PARCEL SERVICE INC Annual Report, Year Ended Dec 31, 2002

Filed March 6, 2003For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported its 2002 fiscal year results in this 10-K filing, highlighting its position as the world's largest package delivery company. The company generated over $31 billion in revenue, driven by its extensive global network and advanced technology infrastructure. UPS emphasized its strong brand equity and customer relationships as key competitive strengths. The report also detailed the company's growth strategy, focusing on expanding its U.S. domestic business, continuing international expansion, and leveraging its e-commerce capabilities. A significant event impacting the financials was the resolution of a long-standing tax dispute related to excess value (EV) package insurance, which resulted in a substantial pre-tax income of $1.023 billion in the fourth quarter of 2002. The company also reported on its operational performance, noting a slight decrease in U.S. domestic package revenue but significant growth in international and non-package segments. UPS highlighted its continued investment in infrastructure, including a major expansion of its Louisville air hub, and its ongoing commitment to technology integration.

Key Highlights

  • 1Total revenue for 2002 exceeded $31 billion, supported by a global network and advanced technology.
  • 2The company settled a significant tax dispute related to EV package insurance, resulting in a $1.023 billion pre-tax income in Q4 2002.
  • 3U.S. domestic package revenue saw a slight decrease (-0.3%) due to volume diversion and economic weakness, but was offset by strong revenue per piece growth.
  • 4International package revenue grew by 10.2%, driven by export volume growth, particularly in Europe and Asia.
  • 5Non-package revenue (including logistics and freight services) increased significantly by 28.3%, largely due to acquisitions.
  • 6UPS completed a major expansion of its Louisville, Kentucky air hub (WorldportSM), increasing its sorting capacity and enhancing operational efficiency.
  • 7A new six-year contract with the International Brotherhood of Teamsters was ratified in October 2002, providing labor stability.

Frequently Asked Questions

The settlement of the EV package insurance tax issues in January 2003 resulted in a positive impact of $1.023 billion pre-tax ($776 million after tax) recorded in the fourth quarter of 2002. This settlement resolved a long-standing dispute with the IRS and was less than the amounts previously accrued by the company.

U.S. domestic package revenue experienced a slight decrease of 0.3% to $23.924 billion. This was primarily due to a 1.9% decrease in average daily package volume, which was influenced by customers diverting volume during the negotiation of the new Teamsters contract and ongoing economic weakness. However, revenue per piece saw a 1.6% increase, partially offsetting the volume decline.

UPS identifies its key competitive strengths as its Global Reach and Scale (extensive integrated air and ground network), advanced Technology Systems (leveraging data and wireless networks), strong E-Commerce Capabilities (facilitating online commerce), a Broad and Flexible Range of Distribution Services, deep Customer Relationships, strong Brand Equity, a Distinctive People and Culture (employee-owner concept), and overall Financial Strength.

UPS's growth strategy focuses on building its leadership position in the U.S. business, continuing international expansion (particularly in Europe and Asia), providing comprehensive supply chain solutions, leveraging its leading-edge technology and e-commerce advantage, and pursuing strategic acquisitions and global alliances.