10-QPeriod: Q2 FY2020

UNITED PARCEL SERVICE INC Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 4, 2020For Securities:UPS

Summary

United Parcel Service (UPS) reported strong revenue growth in the second quarter of 2020, up 13.4% year-over-year to $20.5 billion, driven by a significant increase in business-to-consumer (B2C) shipments, which surged by 65.2% due to the ongoing impact of the COVID-19 pandemic and the shift to e-commerce. This surge in B2C volume, however, led to lower delivery density and increased operating expenses, particularly in compensation and benefits, impacting the U.S. Domestic Package segment's operating profit despite higher overall revenue. Net income for the quarter increased by 4.9% to $1.8 billion, or $2.03 per diluted share. The company maintained a strong liquidity position with $9.2 billion in cash, cash equivalents, and marketable securities. UPS also announced a suspension of its share repurchase program and a deferral of certain capital expenditures to manage its financial resources amidst economic uncertainty. The company anticipates continued elevated B2C volumes, though some cost pressures are expected to persist.

Financial Highlights

54 data points
Beta

Revenue

$20.46B

Net Income

$1.77B

8.6% Net Margin

EPS (Diluted)

$2.03

Total Assets

$62.06B

Cash & Equivalents

$8.81B

Free Cash Flow

$2.27B

Financial Statements
Beta
Revenue$20.46B
Operating Expenses$18.25B
Operating Income$2.21B
Interest Expense$183.00M
Net Income$1.77B
EPS (Basic)$2.04
EPS (Diluted)$2.03
Shares Outstanding (Basic)866.00M
Shares Outstanding (Diluted)869.00M

Key Highlights

  • 1Consolidated revenue increased by 13.4% to $20.5 billion in Q2 2020, primarily driven by a 65.2% increase in B2C shipments.
  • 2Average daily package volume saw a significant rise of 20.9% year-over-year, largely due to B2C growth in the U.S. Domestic segment.
  • 3Net income grew 4.9% to $1.8 billion ($2.03 diluted EPS), demonstrating resilience amidst operational challenges.
  • 4Operating expenses increased by 14.7% due to lower delivery density from elevated B2C volumes, impacting the U.S. Domestic Package segment's operating profit.
  • 5The company maintained a strong liquidity position with $9.2 billion in cash, cash equivalents, and marketable securities as of June 30, 2020.
  • 6UPS announced the suspension of its share repurchase program and the deferral of certain capital expenditures in response to COVID-19 uncertainty.
  • 7International Package segment revenue grew 5.7%, boosted by strong outbound volume from Asia and e-commerce growth in Europe.

Frequently Asked Questions

The COVID-19 pandemic significantly boosted business-to-consumer (B2C) shipments, leading to a 13.4% increase in consolidated revenue to $20.5 billion. This surge in B2C volume, however, negatively impacted delivery density and increased operating expenses, particularly in compensation and benefits, which compressed operating margins in the U.S. Domestic Package segment. Despite these challenges, net income grew by 4.9%.

UPS maintained a strong liquidity position with $9.2 billion in cash, cash equivalents, and marketable securities as of June 30, 2020. In response to economic uncertainty, the company suspended its share repurchase program and deferred certain capital expenditures planned beyond 2020. UPS believes its current liquidity and expected cash flow are adequate to meet its obligations.

Overall average revenue per piece decreased by 5.2% in Q2 2020. This decline was primarily driven by a shift in customer and product mix, with a significant increase in lower-yielding B2C ground volume and a decrease in average billable weight per shipment. These factors were partially offset by base rate increases implemented in December 2019.

The filing emphasizes ongoing uncertainty related to the COVID-19 pandemic's impact on the global economy, business operations, and financial results. Other key risks include competition, regulatory changes, fuel price volatility, labor contract negotiations, and the potential for increased self-insurance liabilities due to higher mileage driven.