10-QPeriod: Q3 FY2010

UNITED PARCEL SERVICE INC Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 5, 2010For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported strong performance for the nine months ended September 30, 2010, reflecting a rebound in the global economy compared to the prior year. Revenue increased by 9.7% year-over-year to $36.1 billion, driven by improvements in volume, revenue per piece across its segments, and cost containment initiatives. Net income saw a substantial increase of 69.8% to $2.37 billion, with diluted earnings per share rising to $2.36. The company's operating profit grew significantly, indicating effective operational leverage and efficiency gains. UPS continued to invest in its network, including expansions and hub openings, while also streamlining its management structure and divesting non-core assets. The balance sheet shows a healthy increase in cash and equivalents, alongside well-managed debt levels, although the company is navigating various legal and regulatory matters.

Financial Highlights

50 data points
Beta

Revenue

$12.19B

Net Income

$972.00M

8.0% Net Margin

EPS (Diluted)

$0.97

Total Assets

$32.91B

Cash & Equivalents

$3.02B

Free Cash Flow

$564.00M

Financial Statements
Beta
Revenue$12.19B
Operating Expenses$10.58B
Operating Income$1.59B
Interest Expense$91.00M
Net Income$972.00M
EPS (Basic)$0.98
EPS (Diluted)$0.97
Shares Outstanding (Basic)994.00M
Shares Outstanding (Diluted)1.00B

Key Highlights

  • 1Total revenue increased by 9.7% to $36.1 billion for the first nine months of 2010 compared to the same period in 2009.
  • 2Net income more than doubled, growing by 69.8% to $2.37 billion.
  • 3Diluted Earnings Per Share (EPS) increased significantly to $2.36, up from $1.39 in the prior year.
  • 4Operating profit saw a robust increase of 59.7% to $4.06 billion, demonstrating improved operational efficiency.
  • 5U.S. Domestic Package operations showed strong recovery, with operating profit nearly doubling due to increased volume, yields, and cost savings.
  • 6International Package operations delivered solid growth with a 17.1% revenue increase, driven by strong performance in Asia and Europe.
  • 7Cash and cash equivalents more than doubled to $3.02 billion as of September 30, 2010, compared to $1.54 billion at the beginning of the year.

Frequently Asked Questions

The primary driver of revenue growth was the improving worldwide economic situation compared to 2009, leading to increased volume, revenue per piece across all segments, and the successful implementation of cost containment initiatives. International trade and retail sales also contributed significantly to this growth.

UPS focused on cost containment and network efficiencies. This included streamlining its domestic management structure, optimizing its transportation network, investing in new hubs and expansions, and divesting non-core businesses. These efforts helped to offset some of the increases in operating expenses like purchased transportation and fuel.

The company's liquidity position improved significantly, with cash and cash equivalents more than doubling to $3.02 billion by the end of the third quarter of 2010. Total debt remained relatively stable, and the Debt to Total Capitalization ratio decreased from 59.4% to 53.1%, indicating a stronger balance sheet. The company maintained strong credit ratings and ample borrowing capacity.

UPS is involved in several ongoing legal proceedings, including class-action lawsuits related to wage-and-hour laws, ADA compliance, and franchise disputes. The company is also subject to investigations regarding pricing practices in the freight forwarding industry by U.S. and European authorities. While UPS intends to vigorously defend itself in these matters, the ultimate outcome and potential financial impact remain undetermined at this time, though the company believes most will not have a material adverse effect.