UPS 3Q Earnings Climb 69% on Revenue Growth of 9%

ATLANTA--(BUSINESS WIRE)--UPS (NYSE:UPS) today announced adjusted diluted earnings per share of $0.93 for the third quarter of 2010, a 69% improvement over the prior-year period. Global revenue grew 9.3%, generating $1.5 billion in adjusted operating profit, a 62% increase.

“This is a direct result of the successful execution of our long-range strategy.”

On a reported basis, diluted earnings per share were $0.99, an 80% increase over the $0.55 in the same period last year. During the quarter, UPS recorded an after-tax benefit of $61 million on the sale of real estate.

“UPS once again exceeded expectations due to superior execution across all business units and our ability to provide solutions that create value for our customers,” said Scott Davis, UPS chairman and CEO. “We continue to deliver significant earnings growth and margin expansion in the current economic environment. This is a true testament to what can be accomplished when you have excellent people, superior service and an unmatched global portfolio.”

Based on the company’s performance, UPS has increased its guidance for 2010 adjusted diluted earnings to a range of $3.48 to $3.54 per share, a 51%-to-53% increase over last year.

		Adjusted
Consolidated Results	3Q 2010	3Q 2010	3Q 2009
Revenue	$12.19 B		$11.15 B
Operating profit	$1.62 B	$1.51 B	$929 M
Operating margin	13.3 %	12.4 %	8.3 %
Average volume per day	15.0 M		14.3 M
Diluted earnings per share	$0.99	$0.93	$0.55

For the three months ended Sept. 30, 2010, revenue increased 9.3% on average daily volume growth of 5%. UPS delivered 958 million packages in the quarter.

Adjusted operating margin expanded 410 basis points to 12.4%. On a reported basis, operating margin was 13.3%.

During the quarter, UPS unveiled a new communications platform with the theme “We Love Logistics.” This campaign is UPS’s first coordinated global advertising effort and is designed to demonstrate the power of logistics to businesses around the world.

Cash Position

For the nine months ending Sept. 30, UPS generated $3.5 billion in free cash flow. The company also:

Paid dividends totaling $1.36 billion.
Invested $1 billion in capital expenditures.
Repurchased 9.3 million shares at a cost of $589 million.

Adjusted

U.S. Domestic Package

3Q 2010

3Q 2009

Revenue

$7.29 B

$6.87 B

Operating profit

$1.02 B

911 M

$514 M

Operating margin

14.0 %

12.5 %

7.5 %

Average volume per day

12.73 M

12.29 M

Adjusted operating profit increased 77% to $911 million on revenue growth of 6%. The margin expansion of 500 basis points was driven by volume growth, improved yields and the benefits of more streamlined operations. Reported operating profit was $1.02 billion, a 98% increase.

Average daily package volume expanded 3.6% during the quarter due to growth in Ground and Next Day Air®. Revenue per piece improved 4%, primarily through increases in base pricing and higher fuel surcharges.

During the quarter, UPS introduced Returns® Flexible Access, expanding the options for consumers to return goods to retailers. The combination of UPS and postal access channels creates the most extensive returns network available to consumers today.

International Package	3Q 2010	3Q 2009
Revenue	$2.68 B	$2.42 B
Operating profit	$419 M	$313 M
Operating margin	15.7 %	12.9 %
Average volume per day	2.24 M	1.97 M

The operating profit for the segment increased 34% to $419 million on an 11% increase in revenue. Operating margin improved 280 basis points to 15.7%. Export average daily volume increased 13%, outpacing the market, due to growth in all regions with Asia leading the way, up more than 30%.

Non-U.S. domestic volume increased 14% with strength across Europe, Canada and Mexico.

As part of an on-going strategy to grow its business in emerging markets, UPS entered into an expanded alliance with its local domestic courier in Indonesia. This agreement extends the footprint for pick-up and delivery of international express packages throughout the country.

Supply Chain and Freight	3Q 2010	3Q 2009
Revenue	$2.23 B	$1.86 B
Operating profit	$177 M	$102 M
Operating margin	8.0 %	5.5 %

Revenue grew 19% with the Forwarding business unit leading the way. Operating profit jumped 74% to $177 million, powered by Forwarding and Logistics.

The operating margin for the segment increased 250 basis points to 8.0%. This margin expansion was primarily driven by improved revenue management, increased tonnage and improved operational efficiencies in Forwarding and Logistics.

UPS Freight revenue grew 14% due to improved yield and increases in gross weight hauled.

During the quarter, UPS launched Preferred LCL Ocean Freight, a new service that provides up to 20% faster door-to-door delivery than other less-than-container-load (LCL) services on the market.

Outlook

“UPS generated superior performance across all segments,” said Kurt Kuehn, UPS’s chief financial officer. “This is a direct result of the successful execution of our long-range strategy.

“I am confident in UPS’s ability to generate strong cash flow and continued earnings growth while investing in growth opportunities around the world,” Kuehn added. “Based on the projections of retailers and economists, we expect modest growth during the holiday peak season. We are raising our full-year 2010 guidance with adjusted earnings per share expected to grow more than 50% over last year. ”

UPS (NYSE:UPS) is a global leader in logistics, offering a broad range of solutions including the transportation of packages and freight; the facilitation of international trade, and the deployment of advanced technology to more efficiently manage the world of business. Headquartered in Atlanta, UPS serves more than 220 countries and territories worldwide. The company can be found on the Web at UPS.com and its corporate blog can be found at blog.ups.com. To get UPS news direct, visit pressroom.ups.com/RSS.

EDITOR’S NOTE:

UPS Chairman and CEO Scott Davis and CFO Kurt Kuehn will discuss third quarter results with investors and analysts during a conference call at 8:30 a.m. EDT today. That call is open to listeners through a live Webcast. To access the call, go to www.investors.ups.com and click on “Earnings Webcast.”

UPS routinely posts investor announcements on its web site -- investor.shareholder.com/ups -- and encourages those interested in the company to check there frequently.

We supplement the reporting of our financial information determined under generally accepted accounting principles (“GAAP”) with certain non-GAAP financial measures, including, as applicable, “as adjusted” operating profit, operating margin, pre-tax income, net income and earnings per share. The equivalent measures determined in accordance with GAAP are also referred to as “reported” or “unadjusted”. We believe that these adjusted measures provide meaningful information to assist investors and analysts in understanding our financial results and assessing our prospects for future performance. We believe these adjusted financial measures are important indicators of our recurring operations because they exclude items that may not be indicative of or are unrelated to our core operating results, and provide a better baseline for analyzing trends in our underlying businesses. Furthermore, we use these adjusted financial measures to determine awards for our management personnel under our incentive compensation plans.

In the first quarter of 2010, we recorded a $98 million pre-tax restructuring charge in our U.S. Domestic Package operations related to the reorganization of our domestic management structure. We also incurred a $38 million pre-tax loss on the sale of a specialized transportation business in Germany in our Supply Chain & Freight segment. Additionally, we recorded a $76 million charge to income tax expense, resulting from a change in the filing status of a German subsidiary. In the third quarter of 2010, we recorded a $109 million pre-tax gain on the sale of real estate. In the first quarter of 2009, we recorded a $181 million pre-tax impairment charge related to our McDonnell-Douglas DC-8-71 and DC-8-73 aircraft fleets. In the second quarter of 2009, we recorded a $77 million pre-tax charge for the remeasurement of certain obligations denominated in foreign currencies, in which hedge accounting was not able to be applied. We presented third quarter and year-to-date 2010 and 2009 operating profit, operating margin, pre-tax income, net income and earnings per share excluding the impact of these items as we believe these adjusted measures better enable shareowners to focus on period-over-period operating performance. The underlying matters that produced these charges and gain were unique, and we do not believe they are reflective of the types of items that will affect future results.

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for GAAP operating profit, operating margin, net income and earnings per share, the most directly comparable GAAP financial measures. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our business. We strongly encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Except for historical information contained herein, the statements made in this release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements, including statements regarding the intent, belief or current expectations of UPS and its management regarding the company's strategic directions, prospects and future results, involve certain risks and uncertainties. Certain factors may cause actual results to differ materially from those contained in the forward-looking statements, including economic and other conditions in the markets in which we operate, governmental regulations, our competitive environment, strikes, work stoppages and slowdowns, changes in aviation and motor fuel prices, cyclical and seasonal fluctuations in our operating results, and other risks discussed in the company's Form 10-K and other filings with the Securities and Exchange Commission, which discussions are incorporated herein by reference.

United Parcel Service, Inc.
Selected Financial Data - Third Quarter
(unaudited)

	Three Months Ended
	September 30,						Change
	2010			2009			$			%
(amounts in millions, except per share data)
Statement of Income Data:
Revenue:
U.S. Domestic Package	$	7,291		$	6,868		$	423		6.2	%
International Package		2,676			2,422			254		10.5	%
Supply Chain & Freight		2,225			1,863			362		19.4	%
Total revenue		12,192			11,153			1,039		9.3	%

Operating expenses:
Compensation and benefits		6,411			6,341			70		1.1	%
Other		4,165			3,883			282		7.3	%
Total operating expenses		10,576			10,224			352		3.4	%

Operating profit:
U.S. Domestic Package		1,020			514			506		98.4	%
International Package		419			313			106		33.9	%
Supply Chain & Freight		177			102			75		73.5	%
Total operating profit		1,616			929			687		74.0	%

Other income (expense):
Investment income		15			6			9		150.0	%
Interest expense		(91	)		(93	)		2		-2.2	%
Total other income (expense)		(76	)		(87	)		11		-12.6	%

Income before income taxes		1,540			842			698		82.9	%

Income tax expense		549			293			256		87.4	%

Net income	$	991		$	549		$	442		80.5	%

Net income as a percentage of revenue		8.1	%		4.9	%

Per share amounts
Basic earnings per share	$	1.00		$	0.55		$	0.45		81.8	%
Diluted earnings per share	$	0.99		$	0.55		$	0.44		80.0	%

Weighted-average shares outstanding
Basic		994			997			(3	)	-0.3	%
Diluted		1,004			1,004			-		0.0	%

As adjusted income data:
Operating profit:
U.S. Domestic Package (1)	$	911		$	514		$	397		77.2	%
International Package		419			313			106		33.9	%
Supply Chain & Freight		177			102			75		73.5	%
Total operating profit		1,507			929			578		62.2	%

Income before income taxes (1)	$	1,431		$	842		$	589		70.0	%
Net income (2)	$	930		$	549		$	381		69.4	%
Basic earnings per share (2)	$	0.94		$	0.55		$	0.39		70.9	%
Diluted earnings per share (2)	$	0.93		$	0.55		$	0.38		69.1	%

(1) Third quarter 2010 U.S. Domestic Package operating profit and consolidated income before income taxes exclude a $109 million gain on the sale of real estate.

(2) Third quarter 2010 net income and earnings per share amounts exclude the after-tax effect of the real estate sale discussed in (1), which totaled $61 million.

Certain prior year amounts have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.
Selected Operating Data - Third Quarter
(unaudited)

	Three Months Ended
	September 30,				Change
	2010		$		$/ #			%

Revenue (in millions):
U.S. Domestic Package:
Next Day Air	$	1,466	$	1,348	$	118		8.8	%
Deferred		696		664		32		4.8	%
Ground		5,129		4,856		273		5.6	%
Total U.S. Domestic Package		7,291		6,868		423		6.2	%
International Package:
Domestic		569		536		33		6.2	%
Export		1,975		1,770		205		11.6	%
Cargo		132		116		16		13.8	%
Total International Package		2,676		2,422		254		10.5	%
Supply Chain & Freight:
Forwarding and Logistics		1,536		1,250		286		22.9	%
Freight		581		509		72		14.1	%
Other		108		104		4		3.8	%
Total Supply Chain & Freight		2,225		1,863		362		19.4	%
Consolidated	$	12,192	$	11,153	$	1,039		9.3	%

Consolidated volume (in millions)		958		927		31		3.3	%

Operating weekdays		64		65		(1	)

Average Daily Package Volume (in thousands):
U.S. Domestic Package:
Next Day Air		1,181		1,144		37		3.2	%
Deferred		856		856		-		0.0	%
Ground		10,693		10,287		406		3.9	%
Total U.S. Domestic Package		12,730		12,287		443		3.6	%
International Package:
Domestic		1,376		1,207		169		14.0	%
Export		863		767		96		12.5	%
Total International Package		2,239		1,974		265		13.4	%
Consolidated		14,969		14,261		708		5.0	%

Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air	$	19.40	$	18.13	$	1.27		7.0	%
Deferred		12.70		11.93		0.77		6.5	%
Ground		7.49		7.26		0.23		3.2	%
Total U.S. Domestic Package		8.95		8.60		0.35		4.1	%
International Package:
Domestic		6.46		6.83		(0.37	)	-5.4	%
Export		35.76		35.50		0.26		0.7	%
Total International Package		17.75		17.97		(0.22	)	-1.2	%
Consolidated	$	10.27	$	9.90	$	0.37		3.7	%

Certain prior year amounts have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.
Selected Financial Data - Year to Date
(unaudited)

	Nine Months Ended
	September 30,						Change
	2010			2009			$			%
(amounts in millions, except per share data)
Statement of Income Data:
Revenue:
U.S. Domestic Package	$	21,662		$	20,606		$	1,056		5.1	%
International Package		8,086			6,908			1,178		17.1	%
Supply Chain & Freight		6,376			5,406			970		17.9	%
Total revenue		36,124			32,920			3,204		9.7	%

Operating expenses:
Compensation and benefits		19,465			19,003			462		2.4	%
Other		12,599			11,375			1,224		10.8	%
Total operating expenses		32,064			30,378			1,686		5.6	%

Operating profit:
U.S. Domestic Package		2,330			1,374			956		69.6	%
International Package		1,367			900			467		51.9	%
Supply Chain & Freight		363			268			95		35.4	%
Total operating profit		4,060			2,542			1,518		59.7	%

Other income (expense):
Investment income (loss)		(7	)		(3	)		(4	)	133.3	%
Interest expense		(260	)		(356	)		96		-27.0	%
Total other income (expense)		(267	)		(359	)		92		-25.6	%

Income before income taxes		3,793			2,183			1,610		73.8	%

Income taxes		1,424			788			636		80.7	%

Net income	$	2,369		$	1,395		$	974		69.8	%

Net income as a percentage of revenue		6.6	%		4.2	%

Per share amounts
Basic earnings per share	$	2.38		$	1.40		$	0.98		70.0	%
Diluted earnings per share	$	2.36		$	1.39		$	0.97		69.8	%

Weighted average shares outstanding
Basic		994			998			(4	)	-0.4	%
Diluted		1,003			1,004			(1	)	-0.1	%

As adjusted income data:
Operating profit:
U.S. Domestic Package (1)	$	2,319		$	1,555		$	764		49.1	%
International Package		1,367			900			467		51.9	%
Supply Chain and Freight (2)		401			268			133		49.6	%
Total operating profit		4,087			2,723			1,364		50.1	%

Income before income taxes (1), (2), (3)	$	3,820		$	2,441		$	1,379		56.5	%
Net income (4)	$	2,483		$	1,559		$	924		59.3	%
Basic earnings per share (4)	$	2.50		$	1.56		$	0.94		60.3	%
Diluted earnings per share (4)	$	2.48		$	1.55		$	0.93		60.0	%

(1) 2010 U.S. Domestic Package operating profit and consolidated income before income taxes exclude a $98 million restructuring charge related to the reorganization of our domestic management structure, as well as a $109 million gain on the sale of real estate. 2009 U.S. Domestic Package operating profit and consolidated income before income taxes exclude a $181 million impairment charge on our McDonnell-Douglas DC-8-71 and DC-8-73 airframes, engines, and parts, due to an acceleration of the planned retirement of these aircraft.

(2) 2010 Supply Chain & Freight operating profit and consolidated income before income taxes exclude a $38 million loss on the sale of a specialized transportation business in Germany.

(3) 2009 interest expense and consolidated income before income taxes exclude a $77 million charge for the remeasurement of certain obligations denominated in foreign currencies, in which hedge accounting was not able to be applied.

(4) 2010 net income and earnings per share amounts exclude the after-tax impact of the U.S. Domestic Package restructuring charge and real estate gain described in (1) and the business sale described in (2), which combined to decrease net income by $38 million. Additionally, 2010 net income and earnings per share exclude a $76 million charge to income tax expense, resulting from a change in the tax filing status of a German subsidiary. 2009 net income and earnings per share amounts exclude the after-tax effect of the impairment and currency remeasurement charges discussed in (1) and (3), which totaled $164 million.

Certain prior year amounts have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.
Selected Operating Data - Year to Date
(unaudited)

	Nine Months Ended
	September 30,				Change
	2010		2009		$/ #			%

Revenue (in millions):
U.S. Domestic Package:
Next Day Air	$	4,311	$	4,044	$	267		6.6	%
Deferred		2,088		2,009		79		3.9	%
Ground		15,263		14,553		710		4.9	%
Total U.S. Domestic Package		21,662		20,606		1,056		5.1	%
International Package:
Domestic		1,714		1,478		236		16.0	%
Export		5,992		5,133		859		16.7	%
Cargo		380		297		83		27.9	%
Total International Package		8,086		6,908		1,178		17.1	%
Supply Chain & Freight:
Forwarding and Logistics		4,425		3,630		795		21.9	%
Freight		1,628		1,470		158		10.7	%
Other		323		306		17		5.6	%
Total Supply Chain & Freight		6,376		5,406		970		17.9	%
Consolidated	$	36,124	$	32,920	$	3,204		9.7	%

Consolidated volume (in millions)		2,846		2,757		89		3.2	%

Operating weekdays		191		192		(1	)

Average Daily Package Volume (in thousands):
U.S. Domestic Package:
Next Day Air		1,169		1,171		(2	)	-0.2	%
Deferred		866		878		(12	)	-1.4	%
Ground		10,656		10,424		232		2.2	%
Total U.S. Domestic Package		12,691		12,473		218		1.7	%
International Package:
Domestic		1,359		1,128		231		20.5	%
Export		848		757		91		12.0	%
Total International Package		2,207		1,885		322		17.1	%
Consolidated		14,898		14,358		540		3.8	%

Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air	$	19.31	$	17.99	$	1.32		7.3	%
Deferred		12.62		11.92		0.70		5.9	%
Ground		7.50		7.27		0.23		3.2	%
Total U.S. Domestic Package		8.94		8.60		0.34		4.0	%
International Package:
Domestic		6.60		6.82		(0.22	)	-3.2	%
Export		36.99		35.32		1.67		4.7	%
Total International Package		18.28		18.27		0.01		0.1	%
Consolidated	$	10.32	$	9.87	$	0.45		4.6	%

Certain prior year amounts have been reclassified to conform to the current year presentation.

United Parcel Service, Inc.
Reconciliation of Free Cash Flow
(unaudited)

	Preliminary
	Year-to-Date
(amounts in millions)	September 30, 2010
Net cash from operations	$	3,925
Capital expenditures		(1,011	)
Proceeds from disposals of PP&E		294
Net change in finance receivables		76
Other investing activities		179
Free cash flow	$	3,463


Amounts are subject to reclassification.

Certain prior year amounts have been reclassified to conform to the current year presentation.