10-QPeriod: Q3 FY2012

UNITED PARCEL SERVICE INC Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 2, 2012For Securities:UPS

Summary

United Parcel Service (UPS) reported its financial results for the third quarter and the first nine months of 2012. The company experienced a significant decrease in net income for the quarter, primarily due to an $896 million pre-tax charge related to a multiemployer pension plan withdrawal. Excluding this one-time charge, adjusted operating profit showed a more modest decline, highlighting operational resilience. Revenue showed slight declines year-over-year for the quarter but a modest increase year-to-date, reflecting a challenging global economic environment. The U.S. Domestic Package segment saw increased volume driven by e-commerce, though B2B volumes were pressured. The International Package segment faced headwinds from slowing global growth, leading to shifts from premium express to standard delivery products and adjustments in air capacity. The Supply Chain & Freight segment saw mixed performance, with LTL freight revenue growing but forwarding and logistics facing rate pressures and currency impacts.

Financial Highlights

52 data points
Beta

Revenue

$13.07B

Net Income

$469.00M

3.6% Net Margin

EPS (Diluted)

$0.48

Total Assets

$39.06B

Cash & Equivalents

$8.43B

Free Cash Flow

$599.00M

Financial Statements
Beta
Revenue$13.07B
Operating Expenses$12.30B
Operating Income$766.00M
Interest Expense$98.00M
Net Income$469.00M
EPS (Basic)$0.49
EPS (Diluted)$0.48
Shares Outstanding (Basic)961.00M
Shares Outstanding (Diluted)970.00M

Key Highlights

  • 1Net income for the third quarter decreased significantly to $469 million from $1,072 million in the prior year, largely due to an $896 million pre-tax charge for a multiemployer pension plan withdrawal.
  • 2Excluding the pension charge, adjusted operating profit for the quarter was $1,025 million, a slight decrease from $1,046 million in the prior year, indicating underlying operational stability.
  • 3Consolidated revenue for the third quarter was $13.071 billion, a decrease of 0.7% compared to $13.166 billion in the prior year. Year-to-date revenue increased by 1.6% to $39.556 billion.
  • 4U.S. Domestic Package segment volume increased by 3.7% for the quarter, driven by e-commerce growth, although revenue per piece slightly declined.
  • 5International Package segment revenue decreased by 3.7% for the quarter due to slower global economic growth and a shift towards less premium delivery services.
  • 6The company announced an agreement to acquire TNT Express N.V. for approximately $6.67 billion, which is undergoing a Phase II review by the European Commission.
  • 7UPS continued its share repurchase program, spending $1.392 billion in the first nine months of 2012, and increased its quarterly cash dividend to $0.57 per share.

Frequently Asked Questions

The significant drop in net income for the third quarter of 2012 was primarily due to an $896 million pre-tax charge related to the company's withdrawal from a multiemployer pension plan within its U.S. Domestic Package segment. This charge impacted operating expenses and therefore net income.

UPS is adapting to the challenging global economic environment by adjusting its air capacity and cost structure to align with prevailing volume mixes. The company is also focusing on yield management, increasing operational efficiency, and containing costs across all segments. In the International Package segment, they have adjusted their air network and optimized facilities to improve transit times and leverage growing trade lanes.

UPS announced an agreement to purchase TNT Express for €9.50 per share. The European Commission moved the proposed acquisition to a Phase II review. As of the filing date, the European Commission issued a Statement of Objections, and UPS expected to respond and anticipated the acquisition to be completed in early 2013. The offer valued TNT Express at approximately $6.67 billion.

Fuel surcharges play a role in offsetting fuel price volatility. In the third quarter of 2012, lower fuel prices and a reduction in the index used for fuel surcharges led to a decrease in domestic fuel surcharge revenue, negatively impacting revenue per piece. However, year-to-date fuel surcharge revenue increased due to higher volume. The company also noted a time lag between fuel price changes and surcharge adjustments that negatively impacted operating profit in the third quarter.