10-QPeriod: Q3 FY2004

UNITED PARCEL SERVICE INC Quarterly Report for Q3 Ended Sep 30, 2004

Filed November 5, 2004For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported strong financial performance for the nine months ended September 30, 2004. Revenue increased by 8.9% year-over-year to $26.74 billion, driven by robust growth in both U.S. domestic and international package segments. Net income saw a significant rise of 20.8% to $2.47 billion, resulting in diluted earnings per share of $2.17. This performance reflects a combination of increased package volume, higher average revenue per piece, and effective cost management, although operating expenses did rise due to higher compensation, benefits, and fuel costs. The company also highlighted a favorable tax settlement with the IRS, contributing to a $99 million credit in the third quarter. In terms of strategic initiatives, UPS announced an agreement to acquire Menlo Worldwide Forwarding, further strengthening its supply chain solutions segment. The company continues to prioritize shareholder returns, increasing its dividend payments and repurchasing a substantial amount of its common stock.

Key Highlights

  • 1Revenue for the nine months ended September 30, 2004, increased by 8.9% to $26.74 billion, compared to $24.55 billion in the prior year period.
  • 2Net income for the first nine months of 2004 rose by 20.8% to $2.47 billion, with diluted EPS growing from $1.80 to $2.17.
  • 3International package revenue experienced substantial growth of 21.1% year-over-year, driven by strong export volume growth, particularly in the Asia-Pacific region.
  • 4U.S. domestic package revenue increased by 6.3%, supported by a 3.9% rise in average daily package volume and a 1.5% increase in revenue per piece.
  • 5The company recorded a $99 million credit to tax expense in Q3 2004 related to the settlement of various tax matters with the IRS.
  • 6UPS announced its agreement to acquire Menlo Worldwide Forwarding for $260 million, expanding its supply chain solutions capabilities.
  • 7Shareholder returns were enhanced through increased dividend payments and significant share repurchases totaling $1.092 billion in the first nine months of 2004.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance in both U.S. domestic and international package operations. The international segment saw a significant 21.1% increase in revenue, fueled by robust export volume growth, especially in the Asia-Pacific region. U.S. domestic package revenue also grew, supported by an increase in package volume and average revenue per piece.

Profitability saw a marked improvement. Net income increased by 20.8% to $2.47 billion for the first nine months of 2004, compared to $2.04 billion in the same period of 2003. This translated to higher diluted earnings per share, which grew from $1.80 to $2.17.

Key highlights include the agreement to acquire Menlo Worldwide Forwarding, which is expected to bolster UPS's supply chain solutions segment. Additionally, the company reached a favorable settlement with the IRS for past tax matters, resulting in a $99 million credit to tax expense. UPS also continued its commitment to shareholder returns through increased dividends and substantial share repurchases.

Consolidated operating expenses increased by 7.4% year-over-year. This rise was largely attributed to increases in compensation and benefits, higher fuel expenses due to rising prices, and increased purchased transportation costs. However, these increases were partially offset by lower depreciation and amortization and other occupancy expenses.