10-QPeriod: Q2 FY2013

UNITED PARCEL SERVICE INC Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 2, 2013For Securities:UPS

Summary

United Parcel Service, Inc. (UPS) reported its financial results for the second quarter and the first six months of 2013. The company experienced a slight increase in revenue for both periods, driven by continued growth in e-commerce and business-to-consumer shipments, although overall economic growth remained slow. Operating profit saw a modest decrease in the quarter but a slight increase year-to-date, impacted by various factors including increased compensation and benefits costs, and a significant charge related to the termination of the TNT Express acquisition. Key financial highlights include a decrease in cash and cash equivalents and marketable securities compared to year-end 2012, coupled with an increase in long-term debt and pension and postretirement benefit obligations. The company continued its robust share repurchase program. UPS also navigated significant events such as the termination of its proposed acquisition of TNT Express, which resulted in a substantial charge but was partially offset by a foreign currency gain from subsidiary liquidation. The company remains focused on operational efficiency and cost containment amidst a challenging global economic environment.

Financial Highlights

52 data points
Beta

Revenue

$13.51B

Net Income

$1.07B

7.9% Net Margin

EPS (Diluted)

$1.13

Total Assets

$36.70B

Cash & Equivalents

$4.81B

Free Cash Flow

$1.14B

Financial Statements
Beta
Revenue$13.51B
Operating Expenses$11.77B
Operating Income$1.74B
Interest Expense$98.00M
Net Income$1.07B
EPS (Basic)$1.14
EPS (Diluted)$1.13
Shares Outstanding (Basic)943.00M
Shares Outstanding (Diluted)952.00M

Key Highlights

  • 1Revenue increased by 1.2% to $13.5 billion for the three months ended June 30, 2013, compared to the prior year.
  • 2Net income decreased by 4.0% to $1.07 billion for the three months ended June 30, 2013, compared to the prior year.
  • 3Operating expenses increased by 1.8% to $11.8 billion for the three months ended June 30, 2013, compared to the prior year, driven by higher compensation and benefits.
  • 4The company recorded a $284 million pre-tax charge related to the termination of the TNT Express acquisition, offset by a $245 million pre-tax foreign currency gain from the liquidation of a foreign subsidiary.
  • 5Cash and cash equivalents decreased from $7.3 billion at December 31, 2012, to $4.8 billion at June 30, 2013.
  • 6The company repurchased approximately $1.87 billion of its common stock during the six months ended June 30, 2013.
  • 7Pension and postretirement benefit obligations increased to $11.4 billion at June 30, 2013, from $11.1 billion at December 31, 2012.

Frequently Asked Questions

The termination of the proposed TNT Express acquisition resulted in a pre-tax charge of $284 million for the first quarter of 2013, comprising a $268 million termination fee and $16 million in related expenses. This negatively impacted the International Package segment. Subsequently, the liquidation of a foreign subsidiary used in the acquisition process resulted in a pre-tax foreign currency gain of $245 million, partially offsetting the termination charge.

For the second quarter of 2013, revenue increased by 1.2% to $13.5 billion, while net income decreased by 4.0% to $1.07 billion. Operating profit decreased by 2.7% to $1.74 billion. For the six months ended June 30, 2013, revenue increased by 1.7% to $26.9 billion, net income increased by 1.1% to $2.11 billion, and operating profit decreased by 1.1% to $3.32 billion.

As of June 30, 2013, UPS had $4.8 billion in cash and cash equivalents, a decrease from $7.3 billion at December 31, 2012. The company also had $1.4 billion in marketable securities. Net cash from operating activities for the first six months of 2013 was $3.4 billion, while net cash used in investing activities was $1.9 billion, and net cash used in financing activities was $4.0 billion.

UPS is involved in several legal proceedings, including class-action lawsuits related to wage-and-hour laws, franchise rebranding, and antitrust allegations. The company is also cooperating with a DOJ investigation regarding third-party negotiators. Additionally, UPS entered into a Non-Prosecution Agreement with the U.S. Attorney's Office related to shipments by illicit online pharmacies, involving a $40 million forfeiture. While the company denies liability in most cases and is defending vigorously, the ultimate outcomes of these matters cannot be predicted, and some could have a material adverse effect.