01—Abstract
Summary
Summary of the 10-K filed February 21, 2017. Cited figures are marked; the original filing is the authoritative source.
United Parcel Service, Inc. (UPS) reported total revenue of $60.9 billiona for the fiscal year ending December 30, 2016.
The company experienced a 4.4%b 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 billionc, 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.
02—Key points
Key Highlights
- Total revenue reached $60.9 billion, a 4.4% increase from the prior year, driven by a 4.2% rise in average daily package volume.
- U.S. Domestic Package operations contributed the largest portion of revenue ($38.3 billion), supported by strong e-commerce growth.
- International Package segment saw revenue grow 1.7% to $12.35 billion, with notable volume increases in Europe and Asia.
- Supply Chain & Freight segment revenue increased 8.3% to $10.26 billion, significantly boosted by the acquisition of Coyote Logistics.
- Operating profit declined by 28.7% to $5.47 billion, primarily due to a significant $2.65 billion mark-to-market pension adjustment charge.
- Capital 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.
- UPS continued its share repurchase program, spending $2.68 billion on repurchases and increasing its quarterly dividend by 6% in February 2017.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 21, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $60.91B$58.36B | +4.4% |
| Operating Expenses | $53.92B$50.70B | +6.4% |
| Operating Income | $7.69B$7.67B | +0.3% |
| Interest Expense | $381.00M$341.00M | +11.7% |
| Net Income | $3.42B$4.84B | −29.4% |
| EPS (Basic) | $3.88$5.38 | −27.9% |
| EPS (Diluted) | $3.86$5.35 | −27.9% |
| Shares Outstanding (Basic) | 883.00M901.00M | −2.0% |
| Shares Outstanding (Diluted) | 887.00M906.00M | −2.1% |
05—Questions
Frequently Asked Questions
What were the main drivers of UPS's revenue growth in 2016?
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.
What caused the significant drop in operating profit despite revenue growth?
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.
How is UPS investing in its network and future capabilities?
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.
What is UPS's strategy regarding e-commerce growth?
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.
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