10-QPeriod: Q2 FY2010

UNITED PARCEL SERVICE INC Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 9, 2010For Securities:UPS

Summary

United Parcel Service Inc. (UPS) reported a significant increase in revenue and net income for the second quarter and first half of 2010 compared to the same periods in 2009, reflecting an improving economic environment. Total revenue for the second quarter grew by 12.7% to $12.2 billion, and net income more than doubled to $845 million. This strong performance was driven by increased package volumes and higher revenue per piece across its U.S. Domestic, International, and Supply Chain & Freight segments. Key factors contributing to the improved financial results include the company's cost containment initiatives, network efficiencies gained from recent investments like the Worldport expansion, and a favorable shift in fuel surcharge dynamics. Despite a restructuring charge of $98 million in the U.S. Domestic Package segment, the company demonstrated robust operating profit growth, signaling a positive recovery from the economic downturn. Investors can note the company's continued commitment to returning capital through dividends and share repurchases, while also managing debt levels effectively.

Financial Highlights

51 data points
Beta

Revenue

$12.20B

Net Income

$826.00M

6.8% Net Margin

EPS (Diluted)

$0.82

Total Assets

$33.27B

Cash & Equivalents

$3.25B

Free Cash Flow

$1.08B

Financial Statements
Beta
Revenue$12.20B
Operating Expenses$10.80B
Operating Income$1.37B
Interest Expense$84.00M
Net Income$826.00M
EPS (Basic)$0.83
EPS (Diluted)$0.82
Shares Outstanding (Basic)994.00M
Shares Outstanding (Diluted)1.00B

Key Highlights

  • 1Revenue increased by 12.7% to $12.2 billion in Q2 2010, and by 9.9% to $23.9 billion for the six months ended June 30, 2010.
  • 2Net income surged by 89.9% to $845 million in Q2 2010, and by 62.9% to $1.378 billion for the first six months of 2010.
  • 3U.S. Domestic Package operations saw a 7.1% revenue increase in Q2 2010, driven by improved package volumes and revenue per piece.
  • 4International Package operations demonstrated strong growth with revenue up 23.4% in Q2 2010, significantly boosted by export volumes and the acquisition of Unsped in Turkey.
  • 5Supply Chain & Freight segment revenue increased by 20.6% in Q2 2010, supported by strong performance in forwarding and logistics.
  • 6Operating profit rose significantly across all segments, with U.S. Domestic up 57.1%, International up 77.8%, and Supply Chain & Freight up 5.6% in Q2 2010.
  • 7The company maintained a strong liquidity position, with net cash from operating activities of $3.012 billion for the first six months of 2010.

Frequently Asked Questions

The primary driver for the significant increase in revenue and net income is the improving global economic situation in the first half of 2010 compared to 2009. This led to improvements in package volumes, revenue, and operating profit across all three key segments: U.S. Domestic Package, International Package, and Supply Chain & Freight.

Yes, there are several items affecting comparability. For the six months ended June 30, 2010, there was a $98 million restructuring charge in the U.S. Domestic Package segment and a $38 million loss on the sale of a business in the Supply Chain & Freight segment. Additionally, a $76 million non-cash charge was recorded due to a change in tax filing status for a German subsidiary. In contrast, the prior year (six months ended June 30, 2009) included a significant $181 million aircraft impairment charge.

UPS had $10.251 billion in total debt outstanding as of June 30, 2010, with a Debt to Total Capitalization ratio of 56.4%. The company has access to significant credit facilities and actively manages its debt through a combination of commercial paper, senior notes, and other borrowings. The company also continues to return capital to shareholders through dividends and share repurchases, while maintaining sufficient liquidity and financial covenants are being met.

International Package operations showed very strong performance, with revenue up 23.4% in Q2 2010. This was driven by robust export volume growth, particularly in Asia, and an increase in domestic volume partly due to the acquisition of Unsped in Turkey. The company expects continued strength from improving global trade and favorable lane lengthening leading to growth in higher-yielding products.