10-KPeriod: FY2016

UNITED PARCEL SERVICE INC Annual Report, Year Ended Dec 31, 2016

Filed February 21, 2017For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported total revenue of $60.9 billion for the fiscal year ending December 30, 2016. The company experienced a 4.4% increase in total revenue year-over-year, driven primarily by a 4.2% growth in average daily package volume. The U.S. Domestic Package segment remains the largest contributor to revenue, followed by International Package and Supply Chain & Freight operations. Despite revenue growth, operating profit saw a significant decline of 28.7% to $5.47 billion, largely influenced by a substantial increase in operating expenses, particularly a $2.65 billion mark-to-market loss related to defined benefit plans. The company continues to invest in technology, such as the ORION system for route optimization, and expanding its network capacity to support e-commerce growth and operational efficiency.

Financial Highlights

53 data points
Beta

Revenue

$60.91B

Net Income

$3.42B

5.6% Net Margin

EPS (Diluted)

$3.86

Total Assets

$40.55B

Cash & Equivalents

$3.48B

Free Cash Flow

$3.51B

Financial Statements
Beta
Revenue$60.91B
Operating Expenses$53.92B
Operating Income$7.69B
Interest Expense$381.00M
Net Income$3.42B
EPS (Basic)$3.88
EPS (Diluted)$3.86
Shares Outstanding (Basic)883.00M
Shares Outstanding (Diluted)887.00M

Key Highlights

  • 1Total revenue reached $60.9 billion, a 4.4% increase from the prior year, driven by a 4.2% rise in average daily package volume.
  • 2U.S. Domestic Package operations contributed the largest portion of revenue ($38.3 billion), supported by strong e-commerce growth.
  • 3International Package segment saw revenue grow 1.7% to $12.35 billion, with notable volume increases in Europe and Asia.
  • 4Supply Chain & Freight segment revenue increased 8.3% to $10.26 billion, significantly boosted by the acquisition of Coyote Logistics.
  • 5Operating profit declined by 28.7% to $5.47 billion, primarily due to a significant $2.65 billion mark-to-market pension adjustment charge.
  • 6Capital expenditures increased to $2.97 billion, primarily for expanding network capacity, including investments in automated facilities and aircraft, signaling a focus on future growth and efficiency.
  • 7UPS continued its share repurchase program, spending $2.68 billion on repurchases and increasing its quarterly dividend by 6% in February 2017.

Frequently Asked Questions

UPS's revenue grew by 4.4% to $60.9 billion in 2016, primarily driven by a 4.2% increase in average daily package volume. This volume growth was fueled by the continued expansion of e-commerce and a 9% rise in business-to-consumer (B2C) shipments within the U.S. Domestic Package segment. International volume also saw a 4.4% increase, supported by growth in Europe and Asia.

The primary reason for the substantial 28.7% decrease in operating profit to $5.47 billion was a significant mark-to-market loss of $2.65 billion related to defined benefit plans, which impacted compensation and benefits expenses. Excluding these mark-to-market adjustments, adjusted operating profit showed a more modest decline of 2.0% for the U.S. Domestic segment and an increase of 13.2% for the International segment.

UPS is making substantial capital investments to enhance its network and capabilities. In 2016, capital expenditures reached $2.97 billion, allocated towards expanding network capacity, automating existing facilities, and acquiring new aircraft, including 14 Boeing 747-8F cargo aircraft. Technology investments, such as the continued deployment of the ORION (On Road Integrated Optimization and Navigation) system, are also a key focus to improve route optimization and operational efficiency.

UPS is strategically positioned to capitalize on the growth of e-commerce. The company is expanding services like UPS SurePost and UPS i-parcel for cost-effective delivery and enhancing customer-facing technology like UPS My Choice and UPS Follow My Delivery to provide greater visibility and control. The increasing volume of business-to-consumer shipments, particularly residential deliveries, is a key driver for UPS's operational focus and investment.