10-QPeriod: Q1 FY2008

UNITED PARCEL SERVICE INC Quarterly Report for Q1 Ended Mar 31, 2008

Filed May 9, 2008For Securities:UPS

Summary

United Parcel Service (UPS) reported its first quarter 2008 results, showing a 6.5% increase in consolidated revenue to $12.675 billion, driven by robust performance in its International Package and Supply Chain & Freight segments. While overall package volume remained flat, revenue per piece saw a significant increase of 5.4%, signaling effective pricing strategies and the impact of fuel surcharges. Net income rose by 7.5% to $906 million, or $0.87 per diluted share, up from $843 million, or $0.78 per diluted share, in the prior year. This growth was partly due to the absence of significant charges recorded in Q1 2007, but also reflects operational improvements. The company continues to execute its capital allocation strategy, significantly increasing share repurchases to $1.235 billion in the quarter under an expanded $10 billion authorization, while also raising its quarterly dividend.

Key Highlights

  • 1Consolidated revenue increased by 6.5% to $12.675 billion, driven by strong international growth and expanded supply chain services.
  • 2Net income grew by 7.5% to $906 million, resulting in diluted EPS of $0.87, an increase from $0.78 in the prior year.
  • 3Revenue per piece across all segments increased by 5.4%, reflecting successful pricing strategies and higher fuel surcharges.
  • 4International Package segment revenue surged by 15.7%, supported by a 7.8% increase in export volume and favorable currency impacts.
  • 5Supply Chain & Freight segment operating profit more than doubled, increasing by 145.7% to $113 million, driven by forwarding and logistics growth.
  • 6The company repurchased $1.235 billion in stock during the quarter, underscoring its commitment to returning capital to shareholders under an expanded $10 billion authorization.
  • 7Despite a 0.3% decrease in U.S. Domestic Package volume, revenue per piece grew, partially offsetting the volume decline.

Frequently Asked Questions

UPS reported a 6.5% increase in consolidated revenue to $12.675 billion and a 7.5% increase in net income to $906 million. Diluted earnings per share rose to $0.87 from $0.78 in the prior year's quarter. This performance was supported by strong international segment growth and effective pricing strategies across all segments.

Revenue growth was primarily driven by the International Package segment, which saw a 15.7% increase due to higher export volumes and favorable currency rates. The Supply Chain & Freight segment also contributed significantly with a 10.8% revenue increase. While U.S. Domestic Package volume saw a slight decline, an improvement in revenue per piece helped offset this.

UPS significantly increased its share repurchase activity, buying back $1.235 billion in stock during the quarter, as part of a new policy authorizing up to $10 billion in repurchases over two years. The company also increased its quarterly dividend payment to $0.45 per share.

UPS is involved in several class-action lawsuits concerning wage-and-hour laws, ADA accommodations, franchise disputes, and alleged price-fixing of fuel surcharges. The company is also subject to investigations regarding air cargo and freight forwarding pricing practices. While UPS intends to defend itself vigorously and does not currently believe these matters will have a material adverse effect, the outcomes are uncertain and could potentially impact financial results.