Atlanta - Company Projects 2011 EPS to Jump 16-to-22%; International & Supply Chain 2010 Profits Set Records

UPS today announced adjusted diluted earnings per share of $1.08 for the fourth quarter of 2010, a 44% improvement over the prior-year period. Global revenue grew 8.4%, generating $1.8 billion in adjusted operating profit, a 40% increase.

On a reported basis, diluted earnings per share totaled $1.11, a 48% increase over the $0.75 reported for the same period last year. During the quarter, UPS recorded a net after-tax gain of $32 million related to the sale of certain non-core business units.

For the full year 2010, the company delivered 3.9 billion packages, an average of 15.6 million per day. Revenue increased 9.4% to $49.5 billion. Adjusted operating profit soared 47% to $5.8 billion with the International and Supply Chain & Freight segments achieving record-setting levels, generating $1.9 billion and $577 million, respectively. On a reported basis, operating profit for the year was $5.9 billion, up 55%. Adjusted diluted earnings per share were $3.56, up 54%, and $3.48 on a reported basis, up 63%.

"UPS again demonstrated exceptional earnings growth by leveraging the strength of its network to provide solutions for customers," said Scott Davis, UPS chairman and CEO. "I'm encouraged by the opportunities we see in 2011 as UPS continues to expand into emerging markets while demonstrating the power of the logistics capabilities we've built worldwide."

Based on expectations for 2011, UPS is providing annual guidance for diluted earnings per share to a range of $4.12-to-$4.35, an increase of 16-to-22% over 2010 adjusted results. This would exceed the peak earnings level recorded in 2007.

For the three months ended Dec. 31, 2010, UPS delivered 1.1 billion packages, a 3.9% increase. Adjusted operating margin expanded 290 basis points to 13.1%. On a reported basis, operating margin was 13.5%.

During the holiday shipping season, global volume exceeded 24 million packages on five days, including one day that exceeded 25 million. UPS delivered more than 440 million packages during the holiday shipping season, powered by strong demand from on-line retailers.

Cash Position

For the year ending Dec. 31, UPS generated $3.1 billion in free cash flow even after $2 billion in accelerated contributions to defined benefit pension plans in the fourth quarter. The company also:

- Invested $1.4 billion in capital expenditures.
- Paid dividends totaling $1.8 billion.
- Repurchased 12.4 million shares at a cost of approximately $800 million.

U.S. Domestic Package    

Operating profit increased 37% to $1.04 billion on revenue growth of 7%. The margin expansion of 280 basis points was driven by higher yields, operational efficiencies and volume growth.

Revenue per piece improved 3.5%, primarily through increases in base pricing and higher fuel surcharges. Average daily package volume was up 1.7% during the quarter due to growth in UPS Next Day Air and Ground.   

The company noted a strong response by U.S. customers to its new UPS Smart Pickup service, designed for those who want the convenience of a scheduled pickup but may not ship a package every day. This high-tech service, the latest in a series of environmentally responsible offerings, alerts UPS drivers when a pickup needs to be made.

International Package    

The operating profit for the segment increased 15% to $537 million on 9% growth in revenue. The operating margin expanded to 17.6% as a result of volume growth, yield improvement and excellent cost management.

Export average daily volume increased 8.7%. The company experienced strong growth from key export countries, with China up more than 30%. European exports continued to show solid performance, led by double-digit gains in Germany.

For 2010, International volume increased 13.6% to a record 2.3 million packages per day. Throughout the year, UPS significantly increased its global network capacity to take advantage of opportunities in the marketplace. For example, airlift out of Asia was increased by 40%.

During the quarter, UPS deployed technology aimed at the rapidly growing mobile user market. The popular UPS Mobile Apps and mobile Web site were released to customers in Germany, Canada, the United Kingdom, Italy and France.

Adjusted operating profit improved more than six fold to $176 million on revenue growth of 13%. The adjusted operating margin for the segment increased 630 basis points to 7.7%, with all business units contributing.

UPS Freight outpaced the market with revenue up 23% due to double-digit growth in shipments per day, an increase in gross weight hauled and significant yield improvement. Forwarding and Logistics revenue increased 10.1% to $1.6 billion, driven primarily by revenue management initiatives in the Forwarding business unit.

As the year ended, UPS announced a significant expansion of its global healthcare distribution facility network in the U.S., Asia, Europe and Canada to accommodate continued rapid growth in its healthcare business. These new facilities are specially designed to meet the needs of pharmaceutical, biotech and medical device companies.

Outlook

"The fourth quarter results punctuate a year in which UPSers superbly executed our strategy," said Kurt Kuehn, UPS's chief financial officer. "As we close the book on 2010 and look towards 2011, UPS is uniquely positioned for growth in the future.

"Over the past two years, UPS took the necessary steps to weather the economic storm and emerged stronger," Kuehn continued. "As a result, we expect to exceed previous peak earnings level with 2011 diluted earnings per share within a range of $4.12 to $4.35, an increase of 16% to 22% over adjusted 2010 results.

"Cash flow will continue to be strong, creating a foundation for increasing returns to shareholders," Kuehn added. "We plan to significantly ramp up share repurchases, to approximately $2 billion in 2011."