10-KPeriod: FY2012

UNITED PARCEL SERVICE INC Annual Report, Year Ended Dec 31, 2012

Filed February 28, 2013For Securities:UPS

Summary

United Parcel Service (UPS) reported strong revenue growth of 1.9% to $54.1 billion in 2012, driven by an increase in U.S. Domestic Package volume, particularly from e-commerce, and continued international expansion. However, the company experienced a significant decrease in operating profit and net income, primarily due to a substantial $4.831 billion pre-tax mark-to-market loss on defined benefit plans and an $896 million withdrawal charge related to a multiemployer pension fund. Excluding these and other non-recurring items, adjusted operating profit and adjusted operating margin showed improvement, highlighting the underlying operational strength despite economic headwinds like slower international growth and a shift towards lower-yield deferred services. The company continued to invest in technology and network enhancements, including telematics and the ORION routing system, to improve efficiency and customer experience. Strategic acquisitions like Kiala S.A. bolstered its European business-to-consumer offerings. UPS also demonstrated a commitment to shareholder returns through consistent dividend payments and significant share repurchases. Looking ahead, the company anticipated capital expenditures of $2.4 billion in 2013.

Financial Highlights

53 data points
Beta

Revenue

$54.13B

Net Income

$807.00M

1.5% Net Margin

EPS (Diluted)

$0.83

Total Assets

$38.86B

Cash & Equivalents

$7.33B

Free Cash Flow

$5.06B

Financial Statements
Beta
Revenue$54.13B
Operating Expenses$52.78B
Operating Income$1.34B
Interest Expense$393.00M
Net Income$807.00M
EPS (Basic)$0.84
EPS (Diluted)$0.83
Shares Outstanding (Basic)960.00M
Shares Outstanding (Diluted)969.00M

Key Highlights

  • 1Total revenue increased by 1.9% to $54.1 billion in 2012, driven by volume growth in U.S. Domestic Package operations and international expansion.
  • 2Operating profit significantly decreased by 77.9% to $1.343 billion, largely due to a substantial $4.831 billion pre-tax mark-to-market loss on defined benefit plans and an $896 million multiemployer pension plan withdrawal charge.
  • 3Adjusted operating profit increased by 6.4% in U.S. Domestic Package operations, indicating underlying operational improvement.
  • 4Investments in technology, including telematics and ORION, continued to drive operational efficiency and enhance customer service.
  • 5The company returned significant value to shareholders through dividends and share repurchases, authorizing a new $10 billion repurchase program.
  • 6International Package segment faced headwinds from slower global economic growth, leading to a shift towards lower-yield services, but continued to expand its network in key regions like Asia.
  • 7The company maintained a strong balance sheet with $7.924 billion in cash and marketable securities as of December 31, 2012.

Frequently Asked Questions

The primary reason for the sharp decline in net income was a substantial $4.831 billion pre-tax mark-to-market loss related to UPS's defined benefit pension and postretirement plans, as well as an $896 million charge for withdrawing from a multiemployer pension fund. These were non-cash or unusual charges that significantly impacted the reported net income.

The U.S. Domestic Package segment saw revenue growth and an improvement in adjusted operating profit, driven by e-commerce. The International Package segment experienced slower growth due to global economic conditions, leading to a shift towards less premium services. The Supply Chain & Freight segment had modest revenue growth but a significant drop in operating profit, impacted by forwarding and logistics performance.

UPS emphasized its continued investment in technology to improve operational efficiency, including the rollout of telematics across its fleet and the implementation of its ORION (On Road Integrated Optimization and Navigation) system. The company also highlighted strategic acquisitions like Kiala S.A. to enhance its European e-commerce capabilities and expansion of its European air hub in Cologne.

UPS maintained a strong financial position with significant cash and marketable securities. The company continued its practice of returning value to shareholders through regular dividend payments, which were increased in early 2013, and a robust share repurchase program. A new $10 billion share repurchase authorization was approved in February 2013, with approximately $4 billion planned for 2013.