10-QPeriod: Q2 FY2012

UNITED PARCEL SERVICE INC Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 3, 2012For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported solid financial results for the second quarter and first half of 2012, demonstrating resilience amidst a challenging global economic environment. Revenue saw modest growth, driven primarily by an increase in U.S. Domestic Package volume, fueled by e-commerce and business-to-consumer shipments. While international markets experienced slower growth leading to some volume shifts, UPS adapted by optimizing its air capacity and cost structure. The company maintained a strong operational focus, enhancing yield management and operational efficiency across all segments. This strategic focus contributed to improved operating margins in the U.S. Domestic Package and Supply Chain & Freight segments. UPS also continued its share repurchase program and increased its quarterly dividend, signaling confidence in its financial health and commitment to returning value to shareholders. The company is also progressing with its significant acquisition of TNT Express N.V., which is expected to close in the fourth quarter of 2012, pending regulatory approvals.

Financial Highlights

52 data points
Beta

Revenue

$13.35B

Net Income

$1.12B

8.4% Net Margin

EPS (Diluted)

$1.15

Total Assets

$37.18B

Cash & Equivalents

$6.72B

Free Cash Flow

$1.05B

Financial Statements
Beta
Revenue$13.35B
Operating Expenses$11.56B
Operating Income$1.79B
Interest Expense$92.00M
Net Income$1.12B
EPS (Basic)$1.16
EPS (Diluted)$1.15
Shares Outstanding (Basic)962.00M
Shares Outstanding (Diluted)971.00M

Key Highlights

  • 1Revenue increased by 1.2% to $13.35 billion for the second quarter of 2012 and by 2.8% to $26.49 billion for the first six months, driven by U.S. Domestic Package volume growth.
  • 2U.S. Domestic Package segment operating profit increased by 13.7% in Q2 2012, reflecting strong volume growth and improved operating margin.
  • 3International Package segment revenue declined by 4.0% in Q2 2012, impacted by slower economic growth in Europe and shifting trade patterns, though export volume saw modest growth.
  • 4The company repurchased $870 million of its stock in the first six months of 2012, with a new $5.0 billion repurchase authorization in place.
  • 5Dividends per share increased to $0.57 in 2012 from $0.52 in 2011, indicating a commitment to shareholder returns.
  • 6Net income for the quarter was $1.116 billion, or $1.15 per diluted share, a 2.2% and 5.5% increase, respectively, over the prior year.
  • 7UPS is in the process of acquiring TNT Express N.V., a significant strategic move expected to close in Q4 2012, pending regulatory approval.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in U.S. Domestic Package volume, which benefited from strong e-commerce and business-to-consumer shipments. This offset some of the slower growth seen in international markets.

The global economic slowdown, particularly in Europe, led to slower growth and a shift from premium express products to standard delivery products. This resulted in a decrease in revenue for the International Package segment, although intra-regional trade continued to grow.

The proposed acquisition of TNT Express N.V. is undergoing a Phase II review by the European Commission, which is expected to take up to 25 weeks. UPS anticipates the acquisition will be completed in the fourth quarter of 2012.

UPS manages fuel price volatility primarily through fuel surcharges applied to its domestic and international services. These surcharges are indexed to the U.S. Department of Energy's fuel prices. Additionally, the company periodically enters into derivative contracts to manage price risk for refined fuels.