10-QPeriod: Q1 FY2003

UNITED PARCEL SERVICE INC Quarterly Report for Q1 Ended Mar 31, 2003

Filed May 15, 2003For Securities:UPS

Summary

United Parcel Service (UPS) reported its first-quarter 2003 financial results, showing a net income of $611 million, a significant increase from $491 million in the same period of 2002. This growth was driven by strong performance in international package operations and non-package services, despite a decline in U.S. domestic package volume due to adverse weather and economic weakness. The company successfully implemented revenue-enhancing strategies, including rate increases and fuel surcharges, which boosted average revenue per piece across its services. Key financial highlights include a 5.8% increase in consolidated revenue to $8.015 billion and a substantial rise in diluted earnings per share to $0.54 from $0.43 in the prior year, excluding the impact of a prior year accounting change. UPS continued to manage its liquidity effectively, with substantial cash, cash equivalents, and marketable securities. The company also provided updates on its ongoing restructuring program and ongoing legal proceedings, indicating confidence in its financial condition and operational outlook.

Key Highlights

  • 1Consolidated revenue increased by 5.8% to $8.015 billion in Q1 2003, up from $7.579 billion in Q1 2002.
  • 2Net income rose to $611 million in Q1 2003, a 24.4% increase compared to $491 million in Q1 2002.
  • 3Diluted Earnings Per Share (EPS) improved to $0.54 in Q1 2003, compared to $0.43 in Q1 2002 (after accounting for a prior year cumulative effect of accounting change).
  • 4International package revenue saw a significant increase of 23.5%, driven by strong export volume growth and higher revenue per piece.
  • 5Non-package operations revenue grew by 11.4%, with UPS Supply Chain Solutions showing an 8.7% increase.
  • 6U.S. domestic package volume declined by 1.2%, primarily attributed to adverse weather conditions and economic weakness, though revenue per piece increased by 3.3%.
  • 7The company ended the quarter with strong liquidity, reporting $3.015 billion in cash, cash equivalents, marketable securities, and short-term investments.

Frequently Asked Questions

The primary driver of the increase in net income was the strong performance in international package operations and non-package segments, alongside revenue-enhancing strategies such as rate increases and fuel surcharges that boosted revenue per piece, partially offsetting a decline in U.S. domestic package volume.

The decline in U.S. domestic package volume was primarily attributed to adverse weather conditions and continued weakness in the U.S. economy during the first quarter of 2003.

UPS maintained strong liquidity by reporting $3.015 billion in cash, cash equivalents, marketable securities, and short-term investments. The company also has access to significant credit facilities, including commercial paper programs and bank credit agreements.

UPS is involved in multi-district litigation concerning EV insurance. While the company has had some claims dismissed, certain claims under specific federal statutes and breach of contract claims from August 26, 1994, onwards are still proceeding. UPS believes these remaining claims have no merit and intends to defend them vigorously, though the ultimate resolution cannot currently be determined.