10-QPeriod: Q1 FY2005

UNITED PARCEL SERVICE INC Quarterly Report for Q1 Ended Mar 31, 2005

Filed May 10, 2005For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported solid financial performance for the first quarter ended March 31, 2005. The company demonstrated healthy revenue growth, driven by increases in both its U.S. domestic and international package segments. Operating profit also saw a significant uptick, reflecting improved operational efficiency and strategic pricing adjustments, including rate increases and fuel surcharges. Key strategic moves during the quarter included the integration of the Menlo Worldwide Forwarding acquisition into the Supply Chain Solutions segment, although this segment experienced an operating profit decline due to integration costs. UPS also continued its commitment to shareholder returns through substantial share repurchases and an increased dividend. The company's financial position remains strong, supported by robust operating cash flow, despite ongoing investments in capital expenditures and strategic acquisitions.

Key Highlights

  • 1Total revenue increased by 10.8% to $9.886 billion compared to the same period last year.
  • 2Net income rose by 16.2% to $882 million, with diluted EPS increasing to $0.78 from $0.67.
  • 3U.S. domestic package revenue grew 2.8%, driven by a 2.6% increase in revenue per piece.
  • 4International package revenue surged by 13.0%, with export volume up 9.3%.
  • 5Supply Chain Solutions revenue saw substantial growth of 85.7%, largely due to the acquisition of Menlo Worldwide Forwarding.
  • 6Operating profit increased by 13.8% to $1.385 billion.
  • 7UPS repurchased approximately 10.5 million shares for $785 million during the quarter.

Frequently Asked Questions

Revenue growth was primarily driven by increases in both the U.S. Domestic Package segment (2.8%) and the International Package segment (13.0%). The Supply Chain Solutions segment also experienced significant growth (85.7%), largely attributable to the acquisition of Menlo Worldwide Forwarding. Strategic pricing initiatives, including rate increases and the implementation of fuel surcharges, also contributed to revenue per piece growth across segments.

The acquisition of Menlo Worldwide Forwarding significantly boosted revenue in the Supply Chain Solutions segment, contributing $508 million. However, this segment experienced an operating profit decline of $19 million due to operating losses within the acquired operations and integration costs. The company is still in the process of finalizing the purchase price allocation and integrating Menlo's operations.

UPS demonstrated a commitment to shareholder returns by increasing its quarterly cash dividend to $0.33 per share and continuing its share repurchase program. In the first quarter of 2005, the company repurchased approximately 10.5 million shares for $785 million, with $1.032 billion of its share repurchase authorization remaining as of March 31, 2005.

UPS is involved in ongoing litigation, including class-action allegations under state wage-and-hour laws. While the company denies liability and intends to vigorously defend itself, it has not yet determined the potential financial impact of these matters. The company also previously settled significant tax issues related to EV insurance and expects refunds from the IRS for other tax years. While the company believes these matters will not have a material adverse effect, they represent ongoing areas of potential financial exposure.