10-QPeriod: Q1 FY2010

UNITED PARCEL SERVICE INC Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 7, 2010For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported its first-quarter 2010 financial results, indicating a strong recovery from the previous year's economic downturn. Revenue increased by 7.2% to $11.73 billion, driven by improved global economic conditions, increased trade, and rebuilding inventory levels. This top-line growth, combined with cost containment initiatives and network efficiencies, led to a significant 45.1% increase in operating profit to $1.04 billion and a notable improvement in operating margin to 8.9% from 6.6% in the prior year. All three operating segments—U.S. Domestic Package, International Package, and Supply Chain & Freight—contributed to the positive results, with U.S. Domestic Package seeing a substantial rise in operating profit despite a restructuring charge. The company also saw an increase in average daily package volume and revenue per piece across key segments. While liquidity remains strong with substantial cash from operations, the company also addressed its debt structure and continued its share repurchase program, albeit at a slower pace than previously. Management highlighted ongoing efforts to optimize operations, including investments in infrastructure and strategic sales of non-core assets.

Financial Highlights

49 data points
Beta

Revenue

$11.73B

Net Income

$515.00M

4.4% Net Margin

EPS (Diluted)

$0.51

Total Assets

$32.50B

Cash & Equivalents

$2.54B

Free Cash Flow

$1.27B

Financial Statements
Beta
Revenue$11.73B
Operating Expenses$10.69B
Operating Income$1.01B
Interest Expense$85.00M
Net Income$515.00M
EPS (Basic)$0.52
EPS (Diluted)$0.51
Shares Outstanding (Basic)995.00M
Shares Outstanding (Diluted)1.00B

Key Highlights

  • 1Revenue increased by 7.2% year-over-year to $11.73 billion, reflecting an improving economic environment.
  • 2Operating profit saw a significant 45.1% increase to $1.04 billion, with operating margin improving to 8.9%.
  • 3U.S. Domestic Package segment experienced strong operating profit growth, driven by volume and yield improvements, despite a $98 million restructuring charge.
  • 4International Package operations showed robust revenue growth of 17.8%, fueled by increased export volumes and expansion in Asia.
  • 5Net cash provided by operating activities was $1.55 billion, though lower than the prior year due to increased pension contributions.
  • 6The company continued to manage its debt, with total debt outstanding decreasing year-over-year and maintaining strong credit ratings.
  • 7A $76 million non-cash charge was recorded due to a change in tax status for a German subsidiary.

Frequently Asked Questions

The primary driver of UPS's revenue growth in the first quarter of 2010 was the improving worldwide economic situation. This led to increased global trade, inventory rebuilding, and higher retail sales, which in turn boosted demand for shipping and logistics services across all of UPS's segments.

The U.S. Domestic Package segment incurred a pre-tax restructuring charge of $98 million in the first quarter of 2010 related to streamlining its management structure. Despite this charge, the segment's operating profit still increased significantly year-over-year due to strong underlying operational performance, volume growth, and yield improvements.

UPS expects that funds from operations and its borrowing programs will provide adequate liquidity and capital resources to meet its future operational needs, including anticipated capital expenditures. The company generated $1.55 billion in net cash from operating activities during the quarter.

UPS is involved in several lawsuits, including class-action allegations related to wage-and-hour laws, the Americans with Disabilities Act, franchisee disputes, and investigations into pricing practices in the air cargo and freight forwarding industries. While UPS is vigorously defending itself, it has not yet determined the amount of any potential liability or whether such liability would have a material adverse effect on its financial condition, results of operations, or liquidity for most of these matters.