10-QPeriod: Q2 FY2011

UNITED PARCEL SERVICE INC Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 5, 2011For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported solid financial results for the second quarter and first six months of 2011. Revenue saw a significant increase, driven by strong performance in both U.S. Domestic Package and International Package segments. The company demonstrated improved operating profit and margins, reflecting successful yield management and cost containment initiatives. While facing challenges such as volatile fuel prices and a slowing U.S. economy, UPS continued to invest in strategic growth areas, including international network expansion. Financially, UPS showed healthy cash flow from operations, which supported capital expenditures, share repurchases, and dividend payments. The company maintained a strong liquidity position and adequate borrowing capacity. Despite ongoing legal proceedings and investigations, management expressed confidence in the company's ability to defend itself and believes these matters will not have a material adverse effect on its financial condition.

Financial Highlights

52 data points
Beta

Revenue

$13.19B

Net Income

$1.09B

8.3% Net Margin

EPS (Diluted)

$1.09

Total Assets

$35.15B

Cash & Equivalents

$4.69B

Free Cash Flow

$1.48B

Financial Statements
Beta
Revenue$13.19B
Operating Expenses$11.45B
Operating Income$1.75B
Interest Expense$83.00M
Net Income$1.09B
EPS (Basic)$1.11
EPS (Diluted)$1.09
Shares Outstanding (Basic)988.00M
Shares Outstanding (Diluted)998.00M

Key Highlights

  • 1Revenue increased by 8.1% to $13.19 billion for the three months ended June 30, 2011, compared to the prior year, indicating robust demand for services.
  • 2Operating profit surged by 21.1% to $1.70 billion for the second quarter, showcasing improved operational efficiency and effective cost management.
  • 3Diluted Earnings Per Share (EPS) rose to $1.07 in Q2 2011, a substantial increase from $0.84 in Q2 2010, signaling enhanced profitability for shareholders.
  • 4U.S. Domestic Package segment revenue grew by 6.4% to $7.74 billion, driven by a focus on higher-yielding customer segments and revenue management, despite flat overall volume.
  • 5International Package operations saw a strong revenue increase of 13.3% to $3.14 billion, fueled by robust export volume growth and strategic network investments.
  • 6Net cash from operating activities increased by $302 million to $3.31 billion for the first six months, providing strong financial flexibility.
  • 7The company repurchased approximately $1.05 billion of its common stock in the first six months of 2011, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

Revenue growth was primarily driven by increased average revenue per piece across all segments, a result of base rate increases, fuel surcharge adjustments, and a focus on higher-yielding customer segments and revenue management initiatives. International package volume growth also significantly contributed to the top-line increase.

UPS managed increasing fuel costs through a combination of strategies. They applied fuel surcharges on domestic and international services, which are indexed to fuel prices. Additionally, they focused on operational efficiencies such as network optimization, increased aircraft utilization, and improved delivery densities to mitigate the impact of higher fuel prices on operating expenses.

UPS continued to return capital to shareholders through share repurchases and dividends. For the first six months of 2011, the company repurchased approximately $1.05 billion of its common stock, with a remaining authorization of $4.14 billion. The quarterly cash dividend was increased to $0.52 per share in 2011, indicating a commitment to regular dividend payments.

UPS is involved in several ongoing judicial proceedings and investigations, including class action lawsuits related to wage-and-hour laws, franchise disputes, antitrust claims, and investigations by the Department of Justice and the European Commission concerning pricing practices. While the company is vigorously defending itself and believes it has meritorious defenses, the ultimate outcome and potential financial impact of some of these matters cannot be estimated at this time. However, management stated they do not believe these matters will have a material adverse effect on the company's financial condition, results of operations, or liquidity.