01—Abstract
Summary
Summary of the 10-K filed February 21, 2019. Cited figures are marked; the original filing is the authoritative source.
United Parcel Service (UPS) reported solid revenue growth in 2018, driven by increases across all its segments, with total revenue reaching $71.86 billiona.
However, operating profit saw a decline of 6.7% to $7.02 billionb, impacted by approximately $360 million in pre-tax transformation strategy costs, higher pension expenses, and one less operating day. Diluted earnings per share decreased to $5.51 from $5.61 in the prior year. Despite these headwinds, UPS continued to invest in its global network, expanding capacity and technology, particularly in its International Package and Supply Chain & Freight segments, which showed operating profit growth.
The company also remained committed to shareholder returns, increasing its quarterly dividend and continuing its share repurchase program. Key areas of strategic focus include growth in international markets, e-commerce, healthcare logistics, and operational efficiencies through technology. The company's financial health remains strong, supported by robust cash generation.
UPS is navigating a dynamic operating environment, including competitive pressures, evolving regulatory landscapes, and the impact of global economic conditions. Management's strategic investments are aimed at modernizing operations and enhancing service offerings to meet growing customer demands, especially in e-commerce and specialized logistics sectors. The company's comprehensive network and broad service portfolio continue to be significant competitive advantages.
02—Key points
Key Highlights
- Total revenue increased by 7.9% to $71.86 billion in 2018.
- Operating profit decreased by 6.7% to $7.02 billion, impacted by transformation costs and higher pension expenses.
- Diluted Earnings Per Share (EPS) declined to $5.51 from $5.61 in the prior year.
- The company experienced strong volume growth in its International Package (3.1% average daily volume) and Supply Chain & Freight (10.8% revenue growth) segments.
- UPS continued its strategic investments in technology and network modernization as part of its transformation strategy.
- The company maintained a strong financial position with $5.035 billion in cash, cash equivalents, and marketable securities.
- Shareholder returns were supported by a 5.5% increase in the quarterly dividend and ongoing share repurchases.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 21, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $71.86B$65.87B | +9.1% |
| Operating Expenses | $64.84B$59.06B | +9.8% |
| Operating Income | $7.02B$7.53B | −6.7% |
| Interest Expense | $605.00M$453.00M | +33.6% |
| Net Income | $4.79B$4.91B | −2.3% |
| EPS (Basic) | $5.53$5.63 | −1.8% |
| EPS (Diluted) | $5.51$5.61 | −1.8% |
| Shares Outstanding (Basic) | 866.00M871.00M | −0.6% |
| Shares Outstanding (Diluted) | 870.00M875.00M | −0.6% |
05—Questions
Frequently Asked Questions
What were the main drivers of UPS's revenue growth in 2018?
UPS's revenue growth in 2018 was primarily driven by increased volume across all segments and improvements in revenue per piece due to pricing initiatives and a favorable product mix. E-commerce growth, particularly in business-to-consumer shipments, was a significant contributor to volume increases in the U.S. Domestic Package segment. International Package operations saw growth driven by strong demand across major trade lanes, while Supply Chain & Freight benefited from increased truckload brokerage volume and tonnage in air and ocean freight forwarding.
What factors negatively impacted UPS's operating profit in 2018?
Operating profit was negatively impacted by several factors in 2018. The company incurred approximately $360 million in pre-tax transformation strategy costs related to modernization efforts. Higher pension expenses, primarily due to lower discount rates and mark-to-market losses, also weighed on profits. Additionally, there was one less operating day in the year, and costs associated with bringing new facility and technology projects online contributed to the decrease. Increased employee compensation and benefit costs, along with higher fuel prices and purchased transportation expenses, also played a role.
How is UPS investing in its future growth and operational efficiency?
UPS is making significant investments in its global smart logistics network, focusing on modernizing operations through state-of-the-art technology. Key investments include expanding automated sort capacity, upgrading its air and ground networks, and implementing new technologies for greater efficiency and resource optimization. Strategic growth areas include expanding services for small and medium-sized businesses, growing international markets, capitalizing on global e-commerce, and enhancing healthcare and life-sciences logistics. These investments are designed to improve service quality, reduce costs, and drive long-term profitability.
What is the status of UPS's collective bargaining agreements?
As of the filing date, the national master agreement with the Teamsters for the U.S. Domestic Package business unit was considered ratified, with remaining local and supplemental agreements in negotiation. The UPS Freight business unit's national master agreement was ratified in November 2018. The company also noted that its pilots' collective bargaining agreement becomes amendable in September 2021, and its airline mechanics' agreement was recently ratified with an amendable date of November 2023. Auto and maintenance mechanics' agreements were set to expire in July 2019.
06—Continue