10-QPeriod: Q3 FY2002

UNITED PARCEL SERVICE INC Quarterly Report for Q3 Ended Sep 30, 2002

Filed November 14, 2002For Securities:UPS

Summary

United Parcel Service Inc. (UPS) reported its financial results for the third quarter and the first nine months of fiscal year 2002. The company demonstrated resilience with a slight increase in consolidated revenue to $7.75 billion for the quarter, up 4.8% year-over-year, and $23.02 billion for the nine-month period, up 3.1%. Net income for the quarter was $578 million, a modest increase from $568 million in the prior year, resulting in diluted earnings per share of $0.51. The nine-month net income was $1.75 billion, slightly down from $1.754 billion, with diluted EPS at $1.55. The company's performance was influenced by varied segment results. U.S. domestic package revenue saw a modest 1.4% increase for the quarter, but operating profit declined due to lower volume, impacted by economic weakness and labor negotiations. International package operations showed robust growth, with revenue up 17% for the quarter, driven by strong export volume and improved revenue per piece, leading to a significant increase in operating profit. Non-package operations also delivered substantial revenue growth, largely attributed to acquisitions.

Key Highlights

  • 1Consolidated revenue increased by 4.8% to $7.75 billion in Q3 2002 and by 3.1% to $23.02 billion for the first nine months of 2002.
  • 2Net income for Q3 2002 was $578 million, a slight increase from $568 million in Q3 2001, with diluted EPS at $0.51.
  • 3U.S. domestic package revenue grew 1.4% in Q3, but operating profit declined 9.6% due to lower volumes and increased expenses.
  • 4International package revenue saw strong growth of 17% in Q3, driven by export volume and favorable currency impacts, leading to a significant operating profit increase.
  • 5Non-package operations experienced revenue growth of 17.4% in Q3, largely due to acquisitions.
  • 6The company adopted Financial Accounting Standards Board (FASB) Statement No. 142, 'Goodwill and Other Intangible Assets,' effective January 1, 2002, which stopped the amortization of goodwill.
  • 7UPS reached a tentative basis for settlement with the IRS regarding outstanding tax issues related to EV package insurance.

Frequently Asked Questions

For the third quarter ended September 30, 2002, UPS reported revenue of $7.75 billion, an increase of 4.8% compared to the prior year. Net income was $578 million, a slight increase from $568 million in the same period of 2001, resulting in diluted earnings per share of $0.51. For the first nine months of 2002, revenue reached $23.02 billion, up 3.1% year-over-year, while net income was $1.75 billion, a slight decrease from $1.754 billion, with diluted earnings per share of $1.55.

U.S. domestic package revenue increased by 1.4% in the third quarter, but operating profit declined due to lower volume and increased expenses. International package operations showed strong performance with a 17% revenue increase driven by export volume and currency effects, leading to a significant rise in operating profit. Non-package operations also saw substantial revenue growth of 17.4% in the quarter, primarily due to acquisitions.

Effective January 1, 2002, UPS adopted FASB Statement No. 142, which means goodwill is no longer amortized but is subject to impairment testing. This change impacts the comparability of earnings with prior periods. Additionally, the company is engaged in ongoing settlement discussions with the IRS regarding significant tax issues related to EV package insurance, which could potentially result in a refund or credit.

The U.S. domestic package segment experienced a decline in operating profit primarily due to a decrease in average daily volume. This was influenced by the general weakness in the U.S. economy and the impact of labor negotiations with the International Brotherhood of Teamsters, particularly around the expiration of the previous contract. Increased operating expenses also contributed to the decline.