Announces Positive 2018 Outlook

  • Revenue Growth Tops 11% for 4Q17 and 8% for Full-Year 2017
  • 4Q17 EPS of $1.27; Adjusted 4Q EPS of $1.67
  • International Export Shipments Rose 16% in 4Q17, Full-Year up 15%
  • Supply Chain & Freight Profit Jumps with Strong Revenue Growth of 21%
  • U.S. Domestic Revenue up 8.4% on Higher Package Demand and Yields
  • 2017 EPS of $5.61; Adjusted 2017 EPS of $6.01
  • UPS Increases Investments for Growth in 2018
  • Announces Full-Year 2018 Adjusted EPS Guidance Range of $7.03 to $7.37

ATLANTA, Feb. 01, 2018 (GLOBE NEWSWIRE) -- UPS (NYSE:UPS) today announced fourth quarter 2017 earnings.  “We achieved our 2017 adjusted earnings-per-share target through exceptionally strong revenue and yield growth, coupled with benefits from our network investments and portfolio initiatives,” said David Abney, UPS chairman and CEO.  “We made significant progress on key capacity investments in 2017.  Our momentum, transformative actions and the economic catalyst from the Tax Cuts and Jobs Act (TCJA), position UPS for growth in 2018 and beyond.  We expect to unlock significant resources, which will be available for accelerated investments in our network and create additional opportunities for our people.”

Consolidated Results4Q 2017Adjusted
4Q 2017
4Q 2016Adjusted
4Q 2016
Revenue$18,829 M $16,931 M 
Operating profit (loss)$1,494 M$2,294 M$(428) M$2,223 M
Diluted earnings (loss) per share$1.27$1.67$(0.27)$1.63

Fourth-quarter 2017 GAAP results include a benefit of $0.30 per share attributable to the TCJA.  In addition, results include a mark-to-market (MTM) non-cash, pre-tax pension charge of $800 million which represents an after-tax charge of $0.70 per diluted share.  In the prior-year period, the company reported non-cash, after-tax charges of $1.90 per diluted share related to mark-to-market pension charges. 

For the total company in 4Q 2017:

  • Revenue increased 11.2%; currency-neutral revenue was up 10.9%.
  • 4Q 2017 diluted EPS of $1.27; adjusted diluted EPS of $1.67.
  • During the quarter, the company delivered 1.5 billion packages, up 5.7% over last year.
  • Record deliveries for Peak Season of 762 million, materially above last year and over plan.

* Information on non-GAAP financial measures is attached to this press release.

U.S. Domestic Segment

The Domestic segment is transforming its network to take full advantage of structural changes in the direct-to-consumer market.  Demand for UPS Ground rose in the fourth quarter with volume growth of 5.7% and revenue of 9.3%.  Premium Next Day Air shipment growth continued to be strong at 4.9% as customers selected faster delivery options.  However, bottom line results were muted by additional peak operating expenses due to cyber-period volume surges and short-term costs related to capacity projects yet to come on-line.  

 4Q 2017Adjusted
4Q 2017
4Q 2016Adjusted
4Q 2016
Revenue$11,835 M $10,913 M 
Operating profit (loss)$627 M$1,264 M$(570) M$1,338 M

For the U.S. Domestic segment in 4Q 2017:

  • Revenue increased $922 million or 8.4% over 4Q 2016, driven by Deferred Air and Ground. 
  • Revenue per piece increased 2.9%, as higher base-rate pricing and fuel surcharges offset headwinds from customer and product mix.  
  • Shipments surged beyond network capacity during Cyber-periods driving additional operating cost of $125 million.
  • Saturday operations provided additional capacity and flexibility during the quarter.
  • Operating profit includes additional expense from investments in new technology, customer solutions and automated capacity expansion of about $60 million.
  • Adjusted operating profit excludes the MTM pension charge.

International Segment

“Our International segment has generated four consecutive quarters of double-digit export growth,” said Abney.  “That execution, combined with our growth strategy and the investments we’ve made over the last three-and-a-half years, produced results that exceeded expectations.” 

 4Q 2017Adjusted
4Q 2017
4Q 2016Adjusted
4Q 2016
Revenue$3,753 M $3,335 M 
Operating profit$725 M$760 M$281 M$706 M

For the International segment in 4Q 2017:

  • The segment reported revenue growth of 13% driven by premium products.
  • Export shipment growth surged 16% per day.  All regions of the world contributed to the expansion.
  • 4Q 2017 operating profit was $725 million; 4Q adjusted operating profit increased 7.6% to $760 million, the result of broad, accelerated growth combined with expanded yields.
  • Adjusted operating profit excludes the MTM pension charge.
  • Currency-neutral operating profit increased 19% on an adjusted basis.

* Information on non-GAAP financial measures is attached to this press release.

Supply Chain and Freight Segment

The Supply Chain and Freight segment produced record full-year and fourth-quarter results with double-digit expansion in both revenue and adjusted operating profit.  Improved market conditions combined with revenue-quality improvements and structural cost-reduction programs produced strong results.

 4Q 2017Adjusted
4Q 2017
4Q 2016Adjusted
4Q 2016
Revenue$3,241 M $2,683 M 
Operating profit (loss)$142 M$270 M$(139) M$179 M

For the Supply Chain and Freight segment in 4Q 2017:

  • Revenue increased 21% over 4Q 2016, the result of deeper alignment with preferred customers, strengthened revenue management initiatives and improved market conditions.
  • Tonnage gains in Freight Forwarding, UPS Freight and Coyote Logistics contributed to improved top-line results.
  • 4Q 2017 operating profit of $142 million; adjusted operating profit was $270 million.
  • Adjusted operating profit excludes the MTM pension charge.

Full-year 2017 Consolidated Results

  • Total revenue increased 8.2% to $65.9 billion on shipment growth and yield expansion.
  • Full-year 2017 diluted EPS of $5.61; adjusted diluted EPS was $6.01.
  • Adjusted diluted EPS excludes the impact of both MTM pension charge and TCJA income tax benefit.
  • Company made capital expenditures of $5.2 billion during the year.
  • Paid dividends of $2.9 billion, an increase of 6.4% per share over the prior year. 
  • Repurchased 16.1 million shares for approximately $1.8 billion.

Outlook

The company provides guidance on an adjusted (non-GAAP) basis because it is not possible to predict or provide a reconciliation reflecting the impact of future pension mark-to-market adjustments or other unanticipated events, which would be included in reported (GAAP) results and could be material.

“Our growth opportunities are accelerating,” said Richard Peretz, UPS chief financial officer.  “The strong economic outlook and UPS’s high return on invested capital generates a unique opportunity to create additional long-term value by increasing capital investments.  These investments enable UPS to execute our strategy and we are well-positioned for 2018 and beyond.”

  • UPS expects 2018 adjusted diluted earnings per share to be in a range of $7.03 to $7.37, which includes about $200 million of additional pre-tax pension expense due to lower discount rates.
  • Our guidance includes TCJA benefits that will increase net income and cash flow. 
  • Capital expenditures planned between $6.5 billion to $7.0 billion, mostly dedicated to investments in new technology, aircraft and automated capacity.

Conference Call Information
           
UPS CEO David Abney and CFO Richard Peretz will discuss fourth-quarter results with investors and analysts during a conference call at 8:30 a.m. ET, February 1, 2018.  That call is open to others through a live Webcast.  To access the call, go to www.investors.ups.com and click on “Earnings Webcast.”

About UPS

UPS (NYSE:UPS) is a global leader in logistics, offering a broad range of solutions including transporting packages and freight; facilitating international trade, and deploying 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 or pressroom.ups.com and its corporate blog can be found at longitudes.ups.com. To get UPS news direct, follow @UPS_News on Twitter.

Forward-Looking Statements

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 (including tax laws and regulations), our competitive environment, changes in the facts or assumptions underlying our health and pension benefit funding obligations, negotiation and ratification of labor contracts, 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.

Reconciliation of GAAP and non-GAAP Financial Measures

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.” Additionally, we periodically disclose free cash flow, free cash flow excluding discretionary pension contributions, as well as currency-neutral revenue, revenue per piece and operating profit.

We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Examples of items for which we may make adjustments include but are not limited to: amounts related to mark-to-market gains or losses (non-cash); settlement of contingencies; gains or losses associated with mergers, acquisitions, divestitures and other structural changes; charges related to restructuring programs; asset impairments (non-cash); amounts related to changes in tax regulations or positions; pension and postretirement related items; and debt modifications.

We believe that these non-GAAP measures provide additional meaningful information to assist users of our financial statements in understanding our financial results, cash flows and assessing our ongoing performance because they exclude items that may not be indicative of, or are unrelated to, our underlying operations and may provide a useful baseline for analyzing trends in our underlying businesses. Management uses these non-GAAP financial measures in making financial, operating and planning decisions. We also use certain of these measures for the determination of incentive compensation award results.

Non-GAAP financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our non-GAAP financial information does not represent a comprehensive basis of accounting. Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.

Mark-To-Market Pension and Postretirement Adjustments

We recognize changes in the fair value of plan assets and net actuarial gains and losses in excess of a 10% corridor for company-sponsored pension and post-retirement obligations immediately as part of net periodic benefit cost. We supplement the presentation of our operating profit, operating margin, pre-tax income, net income and earnings per share with similar non-GAAP measures that exclude the impact of the portion of net periodic benefit cost represented by the gains and losses recognized in excess of the 10% corridor and the related income tax effects. We believe this adjusted net periodic benefit cost provides important supplemental information that reflects the anticipated long-term cost of our defined benefit plans, and provides a benchmark for historical defined benefit cost trends that may provide useful comparison of year-to-year financial performance without considering the short-term impact of changes in market interest rates, equity prices, and similar factors.

This adjusted net periodic benefit cost ($843 million in 2017 and $1,074 million in 2016) is comparable to the accounting for our defined benefit plans in our quarterly reporting under U.S. GAAP, utilizing the expected return on plan assets (8.65% in 2017 and 8.65% in 2016) and the discount rate used to determine net periodic benefit cost (4.34% in 2017 and 4.81% in 2016).  The non-adjusted net periodic benefit cost reflects the actual return on plan assets (12.45% in 2017 and 6.06% in 2016) and the discount rate used to measure the projected benefit obligation at the December 31 measurement date (3.81% in 2017 and 4.34% in 2016).

The deferred income tax effects of these mark-to-market pension and postretirement adjustments are calculated by multiplying the statutory tax rates applicable in each tax jurisdiction, including the U.S. federal jurisdiction and various U.S. state and non-U.S. jurisdictions, by the adjustments. The blended average of the applicable statutory tax rates in 2017 and 2016 were 24.1% and 36.9%, respectively.

Tax Cuts and Jobs Act of 2017

On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted that significantly revises U.S. corporate income tax law by, among other things, reducing the corporate income tax rate to 21% and implementing a modified territorial tax system, that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. Net Income and diluted earnings per share as adjusted, excluding the benefit from TCJA of $258 million, is a non-GAAP measure. The tax benefit was primarily due to the TCJA’s reduction in the corporate tax rate that resulted in a remeasurement of our net deferred tax liability. We believe diluted earnings per share excluding the tax benefit is useful in evaluating our ongoing operating performance for the current period to that of other periods presented. The estimates are based on our initial analysis and current interpretation of the TCJA. Given the significant complexity of the Act, anticipated guidance from the U. S. Treasury about implementing the Act, and the potential for additional guidance from the Securities and Exchange Commission or the Financial Accounting Standards Board related to the Act, our estimates may be refined in the future.

Weighted-Average Shares Outstanding and Diluted Earnings per Share

The computation of weighted-average shares outstanding and diluted earnings per share for the fourth quarter of 2016 excludes the effect of certain incentive compensation awards because they were anti-dilutive in consideration of our reported net loss. Adjusted diluted earnings per share for this period includes the dilutive effect of these same shares because we are reporting adjusted net income after excluding the mark-to-market pension and postretirement adjustment.

Currency-Neutral Revenue, Revenue per Piece and Operating Profit

We supplement the reporting of our revenue, revenue per piece and operating profit with similar non-GAAP measures that exclude the period-over-period impact of foreign currency exchange rate changes and hedging activities. We believe currency-neutral revenue, revenue per piece and operating profit information allows users of our financial statements to understand growth trends in our products and results. We evaluate the performance of our International Package and Supply Chain and Freight businesses on a currency-neutral basis.

Currency-neutral revenue, revenue per piece and operating profit are calculated by dividing current period reported U.S. dollar revenue, revenue per piece and operating profit by the current period average exchange rates to derive current period local currency revenue, revenue per piece and operating profit. The derived current period local currency revenue, revenue per piece and operating profit are then multiplied by the average foreign exchange rates used to translate the comparable results for each month in the prior year period (including the period over period impact of foreign currency revenue hedging activities). The difference between the current period reported U.S. dollar revenue, revenue per piece and operating profit and the derived current period U.S. dollar revenue, revenue per piece and operating profit is the period over period impact of currency fluctuations.

Free Cash Flow

We supplement the reporting of cash flows from operating activities with free cash flow and free cash flow excluding discretionary pension contributions, non-GAAP liquidity measures. We believe free cash flow is an important indicator of how much cash is generated by regular business operations and we use it as a measure of incremental cash available to invest in our business, meet our debt obligations and return cash to shareowners. We calculate free cash flow as cash flows from operating activities less capital expenditures, proceeds from disposals of property, plant and equipment, and plus or minus the net changes in finance receivables and other investing activities.

We believe free cash flow excluding discretionary pension contributions is an important indicator of how much cash is generated by regular business operations and we use it to monitor our cash flow performance. We also believe this non-GAAP measure provides investors additional useful information when evaluating our cash flows from operating activities.

Reconciliation of GAAP and non-GAAP Income Statement Data (in millions, except EPS amounts):
 
Three Months Ended December 31, 2017
       
  As-Reported
(GAAP)
Defined Benefit
Plans MTM
Charges
Impact of TCJAAs-Adjusted
(non-GAAP)
 
Operating profit:      
  U.S. Domestic Package $  627 $  637$    - $  1,264 
  International Package  725  35   -  760 
  Supply Chain & Freight  142  128   -  270 
  Total operating profit $  1,494 $  800$    - $  2,294 
       
        
Income Taxes $  284 $  193$    258 $  735 
       
Net income $  1,104 $  607$    (258)$  1,453 
       
Diluted earnings per share $  1.27 $  0.70$    (0.30)$  1.67 
       
       
Three Months Ended December 31, 2016
       
  As-Reported
(GAAP)
Defined Benefit
Plans MTM
Charges
Impact of TCJAAs-Adjusted
(non-GAAP)
 
Operating profit (loss):      
  U.S. Domestic Package $  (570)$  1,908$    - $  1,338 
  International Package  281  425   -  706 
  Supply Chain & Freight  (139) 318   -  179 
  Total operating profit $  (428)$  2,651$    - $  2,223 
       
        
Income Taxes $  (277)$  978$    - $  701 
       
Net income (loss) $  (239)$  1,673$    - $  1,434 
       
Diluted weighted avg. shares  876  5  881 
       
Diluted earnings (loss) per share $  (0.27)$   1.90$    - $  1.63 
       
        

Note: Certain amounts may not compute due to rounding. 

Reconciliation of GAAP and non-GAAP Income Statement Data (in millions, except EPS amounts):
 
Year Ended December 31, 2017
       
  As-Reported
(GAAP)
Defined Benefit
Plans MTM
Charges
Impact of TCJAAs-Adjusted
(non-GAAP)
 
Operating profit:      
  U.S. Domestic Package $  4,280$  637$    - $  4,917 
  International Package  2,464 35   -  2,499 
  Supply Chain & Freight  785 128   -  913 
  Total operating profit $  7,529$  800$    - $  8,329 
       
        
Income Taxes $  2,238$  193$    258 $  2,689 
       
Net income $  4,910$  607$    (258)$  5,259 
       
Diluted earnings per share $  5.61$  0.69$    (0.29)$  6.01 
       
       
Year Ended December 31, 2016
       
  As-Reported
(GAAP)
Defined Benefit
Plans MTM
Charges
Impact of TCJAAs-Adjusted
(non-GAAP)
 
Operating profit:      
  U.S. Domestic Package $  3,017$  1,908$    - $  4,925 
  International Package  2,044 425   -  2,469 
  Supply Chain & Freight  406 318   -  724 
  Total operating profit $  5,467$  2,651$    - $  8,118 
       
        
Income Taxes $  1,705$  978$    - $  2,683 
       
Net income $  3,431$  1,673$    - $  5,104 
       
Diluted earnings per share $  3.87$  1.88$    - $  5.75 
       
        

Note: Certain amounts may not compute due to rounding.


Reconciliation of GAAP and non-GAAP Revenue, Revenue Per Piece and As-Adjusted Currency Neutral Operating Profit
(in millions, except Per Piece amounts):
  
Three Months Ended December 31 
      
 2017 As-
Reported
(GAAP)
2016 As-
Reported
(GAAP)
% Change
(GAAP)
Currency
Impact
2017
Currency-
Neutral
(non-GAAP)
% Change
(non-GAAP)
Average Revenue Per Piece:      
International Package:      
Domestic$  6.31$  5.5713.3%$(0.45)$  5.865.2%
Export 28.50 29.50-3.4% 0.28  28.78-2.4%
Total International Package$  16.57$  15.904.2%$(0.12)$  16.453.5%
       
Consolidated$  10.19$  9.853.5%$(0.02)$  10.173.2%
       
Revenue:      
U.S. Domestic Package$  11,835$  10,9138.4%$    - $  11,8358.4%
International Package 3,753 3,33512.5% (27) 3,72611.7%
Supply Chain & Freight 3,241 2,68320.8% (25) 3,21619.9%
Total revenue$  18,829$  16,93111.2%$  (52)$  18,77710.9%
                      
 2017 As-
Adjusted 

(non-GAAP) 
2016 As-
Adjusted 

(non-GAAP) 
% Change
(non-GAAP)
Currency
Impact
2017
As-
Adjusted
Currency-
Neutral
(non-GAAP)
% Change
(non-GAAP)
As-Adjusted Operating Profit:      
U.S. Domestic Package$  1,264$  1,338-5.5%$    - $  1,264-5.5%
International Package 760 7067.6% 80  84019.0%
Supply Chain & Freight 270 17950.8%   1  27151.4%
Total operating profit$  2,294$  2,2233.2%$  81 $  2,3756.8%
                      


Reconciliation of GAAP and non-GAAP Revenue, Revenue Per Piece and As-Adjusted Currency Neutral Operating Profit
(in millions, except Per Piece amounts):
  
Year Ended December 31 
      
 2017 As-
Reported
(GAAP)
2016 As-
Reported
(GAAP)
% Change
(GAAP)
Currency
Impact
2017
Currency-
Neutral
(non-GAAP)
% Change
(non-GAAP)
Average Revenue Per Piece:      
International Package:      
Domestic$  6.08$  5.853.9%$(0.03)$  6.053.4%
Export 28.69 30.38-5.6% 0.95  29.64-2.4%
Total International Package$  16.22$  16.29-0.4%$  0.41 $  16.632.1%
       
Consolidated$  10.53$  10.302.2%$  0.06 $  10.592.8%
       
Revenue:      
U.S. Domestic Package$  40,764$  38,3016.4%$    - $  40,7646.4%
International Package 13,338 12,3508.0% 325  13,66310.6%
Supply Chain & Freight 11,770 10,25514.8% (10) 11,76014.7%
Total revenue$  65,872$  60,9068.2%$  315 $  66,1878.7%
              


 2017 As-
Adjusted 

(non-GAAP) 
2016 As-
Adjusted 

(non-GAAP) 
 % Change
(non-GAAP)
Currency
Impact
2017
As-
Adjusted
Currency-
Neutral
(non-GAAP)
% Change
(non-GAAP)
As-Adjusted Operating Profit:         
U.S. Domestic Package$  4,917$  4,925-0.2%$    -$  4,917-0.2%
International Package 2,499 2,4691.2% 375 2,87416.4%
Supply Chain & Freight 913 72426.1% 2 91526.4%
Total operating profit   $  8,329$  8,1182.6%$  377$  8,7067.2%
                   


Reconciliation of GAAP and non-GAAP Liquidity Measures (in millions)
  
Year Ended December 31
  
Net Increase (Decrease) in Cash and Cash Equivalents
  
  2017 
Cash flows from operating activities$  1,479 
Cash flows used in investing activities (4,975) 
Cash flows from financing activities 3,287 
Effect of exchange rate changes on cash and cash equivalents 53 
Net (decrease) in cash and cash equivalents$  (156) 
  
Reconciliation of Free Cash Flow (non-GAAP)
  
  2017 
  
Cash flows from operating activities (GAAP)$  1,479 
Capital expenditures (5,227) 
Proceeds from disposals of PP&E 24 
Net change in finance receivables 5 
Other investing activities 1 
Free cash flow (non-GAAP)$  (3,718) 
Discretionary pension contributions 7,291 
Free cash flow, excluding discretionary pension contributions (non-GAAP)$  3,573 
    

 

United Parcel Service, Inc.
Selected Financial Data - Fourth Quarter
(unaudited)
          
 Three Months Ended    
 December 31   
  2017   2016  Change % Change  
(amounts in millions, except per share data)         
Statement of Income Data:         
Revenue:         
U.S. Domestic Package$  11,835   $  10,913   $  922   8.4%  
International Package   3,753      3,335      418   12.5%  
Supply Chain & Freight   3,241      2,683      558   20.8%  
Total revenue   18,829      16,931      1,898   11.2%  
          
Operating expenses:         
Compensation and benefits   10,131      11,322      (1,191) -10.5%  
Other   7,204      6,037      1,167   19.3%  
Total operating expenses   17,335      17,359      (24) -0.1%  
          
Operating profit:         
U.S. Domestic Package   627      (570)    1,197   N/A   
International Package   725      281      444   158.0%  
Supply Chain & Freight   142      (139)    281   N/A   
Total operating profit    1,494      (428)    1,922   N/A   
          
Other income (expense):         
Investment income and other   23      12      11   91.7%  
Interest expense   (129)    (100)    (29) 29.0%  
Total other income (expense)   (106)    (88)    (18) 20.5%  
          
Income (loss) before income taxes   1,388      (516)    1,904   N/A   
           
Income tax expense (benefit)   284      (277)    561   N/A   
           
Net income (loss)$  1,104   $  (239) $  1,343   N/A   
           
Net income (loss) as a percentage of revenue 5.9%  -1.4%       
           
Per share amounts:          
Basic earnings (loss) per share$  1.27   $  (0.27) $  1.54   N/A   
Diluted earnings (loss) per share$  1.27   $  (0.27) $  1.54   N/A   
          
Weighted-average shares outstanding:         
Basic    867      876      (9) -1.0%  
Diluted    872      876      (4) -0.5%  
          
As adjusted income data:         
Operating profit:         
U.S. Domestic Package (1)$  1,264   $  1,338      (74) -5.5%  
International Package (1)   760      706      54   7.6%  
Supply Chain & Freight (1)   270      179      91   50.8%  
Total operating profit (1)   2,294      2,223      71   3.2%  
          
Income before income taxes (1)$  2,188   $  2,135   $  53   2.5%  
Net income (2)$  1,453   $  1,434   $  19   1.3%  
          
Basic earnings per share (2)$  1.68   $  1.64   $  0.04   2.4%  
Diluted earnings per share (2)$  1.67   $  1.63   $  0.04   2.5%  
          

(1) 2017 operating profit and consolidated income before income taxes exclude the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $800 million, allocated between the U.S. Domestic Package segment ($637 million), International Package segment ($35 million), and Supply Chain & Freight segment ($128 million).

2016 operating profit and consolidated income before income taxes exclude the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $2.651 billion, allocated between the U.S. Domestic Package segment ($1.908 billion), International Package segment ($425 million), and Supply Chain & Freight segment ($318 million).

(2) 2017 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $607 million. 2017 net income also excludes income tax benefits of $258 million attributable to the 2017 Tax Cuts and Jobs Act.

2016 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $1.673 billion. 2016 diluted earnings per share is based on weighted-average shares outstanding of 881 million, which includes the effect of 5 million dilutive shares and share equivalents.

 
 
United Parcel Service, Inc.
Selected Operating Data - Fourth Quarter
(unaudited)
          
          
 Three Months Ended      
 December 31   
  2017  2016 Change % Change  
          
Revenue (in millions):         
U.S. Domestic Package:         
Next Day Air $  1,905  $  1,834  $  71   3.9%  
Deferred   1,429     1,301     128   9.8%  
Ground   8,501     7,778     723   9.3%  
Total U.S. Domestic Package   11,835     10,913     922   8.4%  
International Package:         
Domestic   739     637     102   16.0%  
Export   2,869     2,561     308   12.0%  
Cargo and Other   145     137     8   5.8%  
Total International Package   3,753     3,335     418   12.5%  
Supply Chain & Freight:         
Forwarding and Logistics   2,272     1,813     459   25.3%  
Freight   758     686     72   10.5%  
Other   211     184     27   14.7%  
Total Supply Chain & Freight   3,241     2,683     558   20.8%  
Consolidated$  18,829  $  16,931  $  1,898   11.2%  
          
Consolidated volume (in millions)   1,515     1,433     82   5.7%  
          
Operating weekdays   63     63     -    0.0%  
          
Average Daily Package Volume (in thousands):        
U.S. Domestic Package:         
Next Day Air    1,660     1,582     78   4.9%  
Deferred   1,868     1,827     41   2.2%  
Ground   17,069     16,142     927   5.7%  
Total U.S. Domestic Package   20,597     19,551     1,046   5.4%  
International Package:         
Domestic   1,859     1,815     44   2.4%  
Export   1,598     1,378     220   16.0%  
Total International Package   3,457     3,193     264   8.3%  
Consolidated   24,054     22,744     1,310   5.8%  
          
Average Revenue Per Piece:         
U.S. Domestic Package:         
Next Day Air $  18.22  $  18.40  $  (0.18) -1.0%  
Deferred   12.14     11.30     0.84   7.4%  
Ground   7.91     7.65     0.26   3.4%  
Total U.S. Domestic Package   9.12     8.86     0.26   2.9%  
International Package:         
Domestic   6.31     5.57     0.74   13.3%  
Export   28.50     29.50     (1.00) -3.4%  
Total International Package   16.57     15.90     0.67   4.2%  
Consolidated$  10.19  $  9.85  $  0.34   3.5%  
          


United Parcel Service, Inc.
Supplemental Analysis of Currency and UPS Freight
               
Currency Neutral Revenue Per Piece   
(unaudited)   
               
 Three Months Ended      Currency      
 December 31     Neutral
     
  2017  2016 % Change Currency 2017* % Change   
               
Average Revenue Per Piece:              
International Package:              
Domestic$  6.31  $  5.57   13.3% $  (0.45) $  5.86  5.2%   
Export   28.50     29.50   -3.4%    0.28      28.78  -2.4%   
Total International Package$  16.57  $  15.90   4.2% $  (0.12) $  16.45  3.5%   
               
               
Consolidated$  10.19  $  9.85   3.5% $  (0.02) $  10.17  3.2%   
               
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences       
               
Currency Neutral Revenue   
(unaudited)   
               
 Three Months Ended      Currency      
 December 31     Neutral
     
  2017  2016 % Change Currency 2017* % Change   
Revenue (in millions):              
U.S. Domestic Package$  11,835  $ 10,913   8.4% $  -    $ 11,835  8.4%   
International Package   3,753     3,335   12.5%    (27)    3,726  11.7%   
Supply Chain & Freight   3,241     2,683   20.8%    (25)    3,216  19.9%   
Total revenue$  18,829  $ 16,931   11.2% $  (52) $ 18,777  10.9%   
               
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences       
               
As-Adjusted Currency Neutral Operating Profit   
(unaudited)   
               
 Three Months Ended     As-Adjusted Currency    
 December 31     Neutral
   
 2017* 2016* % Change Currency 2017** % Change   
As-Adjusted Operating profit (in millions):             
U.S. Domestic Package$  1,264  $  1,338   -5.5% $  -    $  1,264  -5.5%   
International Package   760     706   7.6%    80      840  19.0%   
Supply Chain & Freight   270     179   50.8%    1      271  51.4%   
Total operating profit$  2,294  $  2,223   3.2% $  81   $  2,375  6.8%   
               
* Amounts adjusted for Defined Benefit Plans MTM charges            
** Amounts adjusted for Defined Benefit Plans MTM charges and period over period foreign currency exchange rate and hedging differences
   
                       
               
UPS Freight Selected Operating Data - Fourth Quarter    
(unaudited)   
               
 Three Months Ended           
 December 31         
  2017  2016 Change % Change       
LTL revenue (in millions)$  653  $  604  $  49    8.1%       
LTL revenue per LTL hundredweight$  24.63  $  23.42  $  1.21    5.2%       
               
LTL shipments (in thousands)   2,464     2,447     17    0.7%       
LTL shipments per day (in thousands)   40.4     40.1     0.3    0.7%       
               
LTL gross weight hauled (in millions of pounds)   2,651     2,578     73    2.8%       
LTL weight per shipment (in pounds)   1,076     1,054     22    2.1%       
               
Operating weekdays 61  61    -     0.0%       


United Parcel Service, Inc.
          
          
Detail of Other Operating Expenses - Fourth Quarter
(unaudited)
          
(in millions)Three Months Ended     
 December 31    
  2017  2016 Change % Change  
Repairs and maintenance$  420  $  388  $  32   8.2%  
Depreciation and amortization   594     563     31   5.5%  
Purchased transportation   3,528     2,823     705   25.0%  
Fuel   817     638     179   28.1%  
Other occupancy   310     275     35   12.7%  
Other expenses   1,535     1,350     185   13.7%  
Total other operating expenses$  7,204  $  6,037  $  1,167   19.3%  
          
          
          
Earnings Per Share and Share Data - Fourth Quarter
(unaudited)
          
          
   Three Months Ended    
(amounts in millions, except per share data)  December 31    
    2017  2016     
          
Numerator:         
Net income (loss)  $  1,104  $  (239)    
          
Denominator:         
Weighted-average shares     861     870      
Deferred compensation obligations     1     1      
Vested portion of restricted units     5     5      
Denominator for basic earnings (loss) per share    867     876      
          
Effect of dilutive securities:         
Restricted units     4     -       
Stock options      1     -       
Denominator for diluted earnings (loss) per share    872     876      
          
Basic earnings (loss) per share  $  1.27  $  (0.27)    
          
Diluted earnings (loss) per share  $  1.27  $  (0.27)    
          
          
          
Detail of shares outstanding as of December 31, 2017:        
          
Class A shares     172       
Class B shares     687       
Total shares outstanding     859       
          


United Parcel Service, Inc.
Selected Financial Data - Year to Date
(unaudited)
          
 Twelve Months Ended    
 December 31
    
  2017   2016  Change % Change  
(amounts in millions, except per share data)         
Statement of Income Data:         
Revenue:         
U.S. Domestic Package$  40,764   $  38,301   $  2,463   6.4%  
International Package   13,338      12,350      988   8.0%  
Supply Chain & Freight   11,770      10,255      1,515   14.8%  
Total revenue   65,872      60,906      4,966   8.2%  
          
Operating expenses:         
Compensation and benefits   34,588      34,770      (182) -0.5%  
Other   23,755      20,669      3,086   14.9%  
Total operating expenses   58,343      55,439      2,904   5.2%  
          
Operating profit:         
U.S. Domestic Package   4,280      3,017      1,263   41.9%  
International Package   2,464      2,044      420   20.5%  
Supply Chain & Freight   785      406      379   93.3%  
Total operating profit   7,529      5,467      2,062   37.7%  
          
Other income (expense):         
Investment income and other   72      50      22   44.0%  
Interest expense   (453)    (381)    (72) 18.9%  
Total other income (expense)   (381)    (331)    (50) 15.1%  
          
Income before income taxes   7,148      5,136      2,012   39.2%  
          
Income tax expense    2,238      1,705      533   31.3%  
          
Net income$  4,910   $  3,431   $  1,479   43.1%  
          
Net income as a percentage of revenue 7.5%  5.6%      
          
Per share amounts:         
Basic earnings per share$  5.64   $  3.89   $  1.75   45.0%  
Diluted earnings per share$  5.61   $  3.87   $  1.74   45.0%  
          
Weighted-average shares outstanding:         
Basic    871      883      (12) -1.4%  
Diluted    875      887      (12) -1.4%  
          
As adjusted income data:         
Operating profit:         
U.S. Domestic Package (1)$  4,917   $  4,925   $  (8) -0.2%  
International Package (1)   2,499      2,469      30   1.2%  
Supply Chain & Freight (1)   913      724      189   26.1%  
Total operating profit (1)   8,329      8,118      211   2.6%  
          
Income before income taxes (1)$  7,948   $  7,787   $  161   2.1%  
Net income (2)$  5,259   $  5,104   $  155   3.0%  
          
Basic earnings per share (2)$  6.04   $  5.78   $  0.26   4.5%  
Diluted earnings per share (2)$  6.01   $  5.75   $  0.26   4.5%  
          

(1) 2017 operating profit and consolidated income before income taxes exclude the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $800 million, allocated between the U.S. Domestic Package segment ($637 million), International Package segment ($35 million), and Supply Chain & Freight segment ($128 million).

2016 operating profit and consolidated income before income taxes exclude the impact of an increase in pension expense due to a mark-to-market loss recognized outside of a 10% corridor of $2.651 billion, allocated between the U.S. Domestic Package segment ($1.908 billion), International Package segment ($425 million), and Supply Chain & Freight segment ($318 million).

(2) 2017 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $607 million. 2017 net income also excludes income tax benefits of $258 million attributable to the 2017 Tax Cuts and Jobs Act.

2016 net income and earnings per share amounts exclude the after-tax impact of the adjustments described in (1), which decreased net income by $1.673 billion.

 
United Parcel Service, Inc.
Selected Operating Data - Year to Date
(unaudited)
         
 Twelve Months Ended    
 December 31  
  2017  2016 Change % Change 
         
Revenue (in millions):        
U.S. Domestic Package:        
Next Day Air $  7,088  $  6,752  $  336   5.0% 
Deferred   4,421     4,082     339   8.3% 
Ground   29,255     27,467     1,788   6.5% 
Total U.S. Domestic Package   40,764     38,301     2,463   6.4% 
International Package:        
Domestic   2,645     2,441     204   8.4% 
Export   10,167     9,374     793   8.5% 
Cargo and Other   526     535     (9) -1.7% 
Total International Package   13,338     12,350     988   8.0% 
Supply Chain & Freight:        
Forwarding and Logistics   7,981     6,793     1,188   17.5% 
Freight   2,998     2,736     262   9.6% 
Other   791     726     65   9.0% 
Total Supply Chain & Freight   11,770     10,255     1,515   14.8% 
Consolidated$  65,872  $  60,906  $  4,966   8.2% 
         
Consolidated volume (in millions)   5,087     4,868     219   4.5% 
         
Operating weekdays   254     255     (1) -0.4% 
         
Average Daily Package Volume (in thousands):       
U.S. Domestic Package:        
Next Day Air    1,460     1,379     81   5.9% 
Deferred   1,400     1,351     49   3.6% 
Ground   14,061     13,515     546   4.0% 
Total U.S. Domestic Package   16,921     16,245     676   4.2% 
International Package:        
Domestic   1,714     1,635     79   4.8% 
Export   1,395     1,210     185   15.3% 
Total International Package   3,109     2,845     264   9.3% 
Consolidated   20,030     19,090     940   4.9% 
         
Average Revenue Per Piece:        
U.S. Domestic Package:        
Next Day Air $  19.11  $  19.20  $  (0.09) -0.5% 
Deferred   12.43     11.85     0.58   4.9% 
Ground   8.19     7.97     0.22   2.8% 
Total U.S. Domestic Package   9.48     9.25     0.23   2.5% 
International Package:        
Domestic   6.08     5.85     0.23   3.9% 
Export   28.69     30.38     (1.69) -5.6% 
Total International Package   16.22     16.29     (0.07) -0.4% 
Consolidated$  10.53  $  10.30  $  0.23   2.2% 
         


United Parcel Service, Inc.
Supplemental Analysis of Currency and UPS Freight
               
Currency Neutral Revenue Per Piece   
(unaudited)   
               
 Twelve Months Ended     Currency     
 December 31      Neutral
     
  2017  2016 % Change Currency 2017* % Change   
               
Average Revenue Per Piece:              
International Package:              
Domestic$  6.08  $  5.85   3.9% $  (0.03) $  6.05  3.4%   
Export   28.69     30.38   -5.6%    0.95      29.64  -2.4%   
Total International Package$  16.22  $  16.29   -0.4% $  0.41   $  16.63  2.1%   
               
               
Consolidated$  10.53  $  10.30   2.2% $  0.06   $  10.59  2.8%   
               
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences       
               
Currency Neutral Revenue   
(unaudited)   
               
 Twelve Months Ended     Currency
     
 December 31     Neutral
     
  2017  2016 % Change Currency 2017* % Change   
Revenue (in millions):              
U.S. Domestic Package$  40,764  $ 38,301   6.4% $  -    $ 40,764  6.4%   
International Package   13,338     12,350   8.0%    325      13,663  10.6%   
Supply Chain & Freight   11,770     10,255   14.8%    (10)    11,760  14.7%   
Total revenue$  65,872  $ 60,906   8.2% $  315   $ 66,187  8.7%   
               
* Amounts adjusted for period over period foreign currency exchange rate and hedging differences       
               
As-Adjusted Currency Neutral Operating Profit   
(unaudited)   
               
 Twelve Months Ended     As-Adjusted Currency
   
 December 31     Neutral
   
 2017* 2016* % Change Currency 2017** % Change   
As-Adjusted Operating profit (in millions):             
U.S. Domestic Package$  4,917  $  4,925   -0.2% $  -    $  4,917  -0.2%   
International Package   2,499     2,469   1.2%    375      2,874  16.4%   
Supply Chain & Freight   913     724   26.1%    2      915  26.4%   
Total operating profit$  8,329  $  8,118   2.6% $  377   $  8,706  7.2%   
               
* Amounts adjusted for Defined Benefit Plans MTM charges            
** Amounts adjusted for Defined Benefit Plans MTM charges and period over period foreign currency exchange rate and hedging differences
   
                       
               
UPS Freight Selected Operating Data - Year to Date   
(unaudited)   
               
 Twelve Months Ended           
 December 31         
  2017  2016 Change % Change       
LTL revenue (in millions)$  2,596  $  2,384  $  212    8.9%       
LTL revenue per LTL hundredweight$  24.08  $  23.44  $  0.64    2.7%       
               
LTL shipments (in thousands)   10,203     9,954     249    2.5%       
LTL shipments per day (in thousands)   40.5     39.3     1.2    3.1%       
               
LTL gross weight hauled (in millions of pounds)   10,782     10,167     615    6.0%       
LTL weight per shipment (in pounds)   1,057     1,021     36    3.5%       
               
Operating weekdays 252  253    (1)  -0.4%       
               


United Parcel Service, Inc.
          
          
Detail of Other Operating Expenses - Year to Date
(unaudited)
          
          
(in millions)Twelve Months Ended      
 December 31    
  2017  2016 Change % Change  
Repairs and Maintenance$  1,600  $  1,538  $  62  4.0%  
Depreciation and Amortization   2,282     2,224     58  2.6%  
Purchased Transportation   10,989     9,129     1,860  20.4%  
Fuel   2,690     2,118     572  27.0%  
Other Occupancy   1,155     1,037     118  11.4%  
Other Expenses   5,039     4,623     416  9.0%  
Total Other Operating Expenses$  23,755  $  20,669  $  3,086  14.9%  
          
          
          
Earnings Per Share and Share Data - Year to Date
(unaudited)
          
   Twelve Months Ended    
(amounts in millions, except per share data)  December 31    
    2017  2016    
          
Numerator:         
Net income  $  4,910  $  3,431     
          
Denominator:         
Weighted-average shares     865     878     
Deferred compensation obligations     1     1     
Vested portion of restricted units     5     4     
Denominator for basic earnings per share     871     883     
          
Effect of dilutive securities:         
Restricted units     3     3     
Stock options      1     1     
Denominator for diluted earnings per share     875     887     
          
Basic earnings per share  $  5.64  $  3.89     
          
Diluted earnings per share  $  5.61  $  3.87     
          


United Parcel Service, Inc.
Consolidated Balance Sheets - December 31, 2017 and December 31, 2016
(unaudited)
        
 (amounts in millions) December 31, December 31, 
     2017  2016 
 ASSETS     
 Current Assets:     
  Cash and marketable securities $  4,069  $  4,567  
  Other current assets    11,479     9,282  
  Total Current Assets    15,548     13,849  
 Property, Plant and Equipment    48,726     43,674  
  Less accumulated depreciation and amortization    26,608     24,874  
       22,118     18,800  
 Other Assets    7,737     7,728  
    $  45,403  $  40,377  
        
 LIABILITIES AND SHAREOWNERS' EQUITY     
 Current Liabilities $  12,708  $  11,730  
 Long-Term Debt     20,278     12,394  
 Pension and Postretirement Benefit Obligations    7,061     12,694  
 Deferred Taxes, Credits and Other Liabilities    4,326     3,130  
 Shareowners' Equity    1,030     429  
    $  45,403  $  40,377  
        
 Amounts are subject to reclassification.  
        


United Parcel Service, Inc.
Selected Cash Flow Data
(unaudited)
           
Net Increase (Decrease) in Cash and Cash Equivalents
           
  Preliminary        
  Year-to-Date        
(amounts in millions) December 31        
Cash flows from operating activities $  1,479          
Cash flows used in investing activities    (4,975)        
Cash flows from financing activities    3,287          
Effect of exchange rate changes on cash and cash equivalents    53          
Net increase (decrease) in cash and cash equivalents $  (156)        
           
           
           
Reconciliation of Free Cash Flow (non-GAAP)
           
  Preliminary        
  Year-to-Date        
(amounts in millions) December 31        
Cash flows from operating activities $  1,479          
Capital expenditures    (5,227)        
Proceeds from disposals of PP&E    24          
Net change in finance receivables    5          
Other investing activities    1          
Free cash flow (non-GAAP) $  (3,718)        
Discretionary pension contributions    7,291          
Free cash flow, excluding discretionary pension contributions (non-GAAP)$  3,573          
           
Amounts are subject to reclassification.          


United Parcel Service, Inc.
Aircraft Fleet - As of December 31, 2017
(unaudited)
     
 Owned andLeases & Charters  
DescriptionCapital Leasesfrom OthersOn OrderUnder Option
Operating:    
Boeing 757-200  75   -    -    - 
Boeing 767-300  59   -    -    - 
Boeing 767-300BCF  2   -    1   - 
Airbus A300-600  52   -     -    - 
Boeing MD-11  37   -    -    - 
Boeing 747-400F  11   -    -    - 
Boeing 747-400BCF  2   -    -     - 
Boeing 747-8F  3   -    11   14
Other  -    340   -    - 
     
Total  241   340   12   14
     


Contacts:
Steve Gaut, Public Relations                                          
404-828-8787

Scott Childress, Investor Relations
404-828-7957