10-QPeriod: Q1 FY2013

UNITED PARCEL SERVICE INC Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 3, 2013For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported its first quarter 2013 results, showcasing a modest revenue increase driven by gains in U.S. Domestic Package operations, which benefited from strong e-commerce and business-to-consumer shipment growth. However, International Package operations faced headwinds, including the significant impact of a terminated acquisition with TNT Express, resulting in a substantial termination fee, partially offset by a foreign currency gain from a subsidiary liquidation. Overall, while net income rose year-over-year, operating profit saw only a marginal increase, reflecting the ongoing challenging global economic environment and the impact of one-time items. Investors should note the company's continued focus on operational efficiency and cost containment initiatives. Significant share repurchases were executed, underscoring a commitment to returning capital to shareholders. The company also reached a tentative agreement with the Teamsters union on new contracts, a positive development for labor relations. Despite the mixed financial results and the impact of unusual items, UPS's core U.S. domestic business demonstrated resilience.

Financial Highlights

52 data points
Beta

Revenue

$13.43B

Net Income

$1.04B

7.7% Net Margin

EPS (Diluted)

$1.08

Total Assets

$38.01B

Cash & Equivalents

$6.46B

Free Cash Flow

$1.30B

Financial Statements
Beta
Revenue$13.43B
Operating Expenses$11.85B
Operating Income$1.58B
Interest Expense$96.00M
Net Income$1.04B
EPS (Basic)$1.09
EPS (Diluted)$1.08
Shares Outstanding (Basic)952.00M
Shares Outstanding (Diluted)960.00M

Key Highlights

  • 1Revenue increased by 2.3% to $13.43 billion, primarily driven by a 3.3% rise in U.S. Domestic Package revenue.
  • 2Net income grew by 6.9% to $1.037 billion, with diluted EPS increasing to $1.08 from $1.00 in the prior year.
  • 3The company incurred a significant $284 million pre-tax charge related to the termination of the TNT Express acquisition agreement.
  • 4A foreign currency gain of $245 million was recognized from the liquidation of a foreign subsidiary.
  • 5Operating profit saw a modest increase of 0.7% to $1.58 billion, with operating margins slightly decreasing from 11.9% to 11.8%.
  • 6U.S. Domestic Package saw a strong increase in operating profit of 9.0%, while International Package operating profit decreased by 13.7% (adjusted for one-time items).
  • 7Share repurchases totaled $1.013 billion in the first quarter, reflecting a significant capital return to shareholders, with a new $10 billion repurchase authorization in place.

Frequently Asked Questions

The termination of the TNT Express acquisition resulted in a significant $284 million pre-tax charge in the first quarter of 2013, consisting of a $268 million termination fee and $16 million in related expenses. This charge negatively impacted the International Package segment's operating profit and overall financial results for the quarter. However, this was partially offset by a $245 million pre-tax gain from the liquidation of a foreign subsidiary.

The U.S. Domestic Package segment showed robust performance, with revenue increasing by 3.3% and operating profit rising by 9.0% due to strong volume growth in e-commerce and business-to-consumer shipments. The International Package segment faced challenges, with revenue growing only 0.4% and operating profit declining 13.7% (adjusted for the TNT termination), impacted by challenging economic conditions and the aforementioned acquisition termination. The Supply Chain & Freight segment saw a slight revenue increase of 0.9%, but its operating profit decreased by 13.9% due to weaker performance in forwarding and logistics.

UPS demonstrated a strong commitment to returning capital to shareholders, repurchasing $1.013 billion of its common stock in the first quarter of 2013. The company also announced a new $10.0 billion share repurchase authorization in February 2013, replacing a previous one, with no expiration date. This indicates a continued strategy of significant capital deployment towards share buybacks, alongside an increased quarterly dividend of $0.62 per share.

A significant development was the tentative agreement reached on April 25, 2013, with the Teamsters union for new five-year contracts covering U.S. Domestic Package and UPS Freight employees. Subject to ratification, these new agreements would take effect on August 1, 2013, providing labor stability for a key part of UPS's operations.