- Consolidated Revenues of $22.9B, Compared to $24.4B Last
Year
- Consolidated Operating Profit of $2.5B; Adj. Consolidated
Operating Profit of $2.6B
- Consolidated Operating Margin of 11.1%
- Diluted EPS of $2.19; Adj. Diluted EPS of $2.20, Compared to
$3.05 Last Year
- Updates 2023 Financial Guidance
UPS (NYSE:UPS) today announced first-quarter 2023 consolidated
revenues of $22.9 billion, a 6.0% decrease from the first quarter
of 2022. Consolidated operating profit was $2.5 billion, down 21.8%
compared to the first quarter of 2022, and down 22.8% on an
adjusted basis. Diluted earnings per share were $2.19 for the
quarter; adjusted diluted earnings per share of $2.20 were 27.9%
below the same period in 2022.
For the first quarter of 2023, GAAP results included after-tax
transformation and other charges of $9.0 million, or $0.01 per
diluted share.
“I want to thank all UPSers for delivering industry-leading
service to our customers,” said Carol Tomé, UPS chief executive
officer. “In the first quarter, deceleration in U.S. retail sales
resulted in lower volume than we anticipated, and we faced ongoing
demand weakness in Asia. In response, we focused on controlling
what we could control and delivered first-quarter consolidated
operating profit and operating margin in line with our base case
targets. Given current macro conditions, we expect volume to remain
under pressure. We will remain focused on driving productivity
while investing in efficiency and growth initiatives, enabling us
to come out of this demand cycle even stronger.”
U.S. Domestic Segment
1Q
2023
Adjusted 1Q
2023
1Q
2022
Adjusted 1Q
2022
Revenue
$14,987 M
$15,124 M
Operating profit
$1,466 M
$1,488 M
$1,662 M
$1,705 M
- Revenue decreased 0.9%, driven by a 5.4% decrease in average
daily volume, which was nearly offset by a 4.8% increase in revenue
per piece.
- Operating margin was 9.8%; adjusted operating margin was
9.9%.
International Segment
1Q
2023
Adjusted 1Q
2023
1Q
2022
Adjusted 1Q
2022
Revenue
$4,543 M
$4,876 M
Operating profit
$828 M
$806 M
$1,116 M
$1,120 M
- Revenue decreased 6.8%, driven by a 6.2% reduction in average
daily volume due to lower domestic volume and softness in China
trade lanes.
- Operating margin was 18.2%; adjusted operating margin was
17.7%.
Supply Chain Solutions1
1Q
2023
Adjusted 1Q
2023
1Q
2022
Adjusted 1Q
2022
Revenue
$3,395 M
$4,378 M
Operating profit
$247 M
$258 M
$473 M
$481 M
1 Consists of operating segments that do
not meet the criteria of a reportable segment under ASC Topic 280 –
Segment Reporting.
- Revenue decreased 22.5% due to market rate and volume declines
in forwarding, partially offset by growth in our healthcare
business.
- Operating margin was 7.3%; adjusted operating margin was
7.6%.
2023 Outlook
The company provides certain guidance on an adjusted (non-GAAP)
basis because it is not possible to predict or provide a
reconciliation reflecting the impact of future pension adjustments
or other unanticipated events, which would be included in reported
(GAAP) results and could be material.
In January, UPS provided a range for its 2023 financial targets
based on the macroeconomic forecast at that time. Over the first
quarter of 2023, the global volume environment deteriorated due to
challenging macro conditions and changes in consumer behavior. As a
result, UPS expects full-year revenue and adjusted operating margin
to be at the low end of its previously guided range.
2023 full-year financial targets are:
- Consolidated revenue of around $97.0 billion
- Consolidated adjusted operating margin of around 12.8%
- Capital expenditures of approximately $5.3 billion
- Dividend payments, subject to board approval, of about $5.4
billion
- Share repurchases targeted to be around $3 billion
* “Adjusted” amounts are non-GAAP
financial measures. See the appendix to this release for a
discussion of non-GAAP financial measures, including a
reconciliation to the most closely correlated GAAP measure.
Conference Call
Information
UPS CEO Carol Tomé and CFO Brian Newman will discuss
first-quarter results with investors and analysts during a
conference call at 8:30 a.m. ET, April 25, 2023. That call will be
open to others through a live Webcast. To access the call, go to
www.investors.ups.com and click on “Earnings Conference Call.”
Additional financial information is included in the detailed
financial schedules being posted on www.investors.ups.com under
“Quarterly Earnings and Financials” and as furnished to the SEC as
an exhibit to our Current Report on Form 8-K.
About UPS
UPS (NYSE: UPS) is one of the world’s largest companies, with
2022 revenue of $100.3 billion, and provides a broad range of
integrated logistics solutions for customers in more than 220
countries and territories. Focused on its purpose statement,
“Moving our world forward by delivering what matters,” the
company’s more than 500,000 employees embrace a strategy that is
simply stated and powerfully executed: Customer First. People Led.
Innovation Driven. UPS is committed to reducing its impact on the
environment and supporting the communities we serve around the
world. UPS also takes an unwavering stance in support of diversity,
equity and inclusion. More information can be found at www.ups.com,
about.ups.com and www.investors.ups.com.
Forward-Looking
Statements
This release, our Annual Report on Form 10-K for the year ended
December 31, 2022 and our other filings with the Securities and
Exchange Commission contain and in the future may contain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements other than
those of current or historical fact, and all statements accompanied
by terms such as “will,” “believe,” “project,” “expect,”
“estimate,” “assume,” “intend,” “anticipate,” “target,” “plan,” and
similar terms, are intended to be forward-looking statements.
Forward-looking statements are made subject to the safe harbor
provisions of the federal securities laws pursuant to Section 27A
of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934.
From time to time, we also include written or oral
forward-looking statements in other publicly disclosed materials.
Forward-looking statements may relate to our intent, belief,
forecasts of, or current expectations about our strategic
direction, prospects, future results, or future events; they do not
relate strictly to historical or current facts. Management believes
that these forward-looking statements are reasonable as and when
made. However, caution should be taken not to place undue reliance
on any forward-looking statements because such statements speak
only as of the date when made and the future, by its very nature,
cannot be predicted with certainty.
Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from our historical experience and our present expectations or
anticipated results. These risks and uncertainties, include, but
are not limited to the impact of: continued uncertainties related
to the COVID-19 pandemic; changes in general economic conditions,
in the U.S. or internationally; industry evolution and significant
competition; changes in our relationships with any of our
significant customers; our ability to attract and retain qualified
employees; strikes, work stoppages or slowdowns by our employees;
results of negotiations and ratifications of labor contracts; our
ability to maintain our brand image and corporate reputation;
increased or more complex physical security requirements; a
significant data breach or information technology system
disruption; global climate change; interruptions in or impacts on
our business from natural or man-made events or disasters including
terrorist attacks, epidemics or pandemics; exposure to changing
economic, political and social developments in international
markets; our ability to realize the anticipated benefits from
acquisitions, dispositions, joint ventures or strategic alliances;
changing prices of energy, including gasoline, diesel and jet fuel,
or interruptions in supplies of these commodities; changes in
exchange rates or interest rates; our ability to accurately
forecast our future capital investment needs; significant expenses
and funding obligations relating to employee health, retiree health
and/or pension benefits; our ability to manage insurance and claims
expenses; changes in business strategy, government regulations, or
economic or market conditions that may result in impairments of our
assets; potential additional U.S. or international tax liabilities;
increasingly stringent laws and regulations, including relating to
climate change; potential claims or litigation related to labor and
employment, personal injury, property damage, business practices,
environmental liability and other matters; and other risks
discussed in our filings with the Securities and Exchange
Commission from time to time, including our Annual Report on Form
10-K for the year ended December 31, 2022, and subsequently filed
reports. You should consider the limitations on, and risks
associated with, forward-looking statements and not unduly rely on
the accuracy of predictions contained in such forward-looking
statements. We do not undertake any obligation to update
forward-looking statements to reflect events, circumstances,
changes in expectations, or the occurrence of unanticipated events
after the date of those statements, except as required by law.
Information, including comparisons to prior periods, may reflect
adjusted results. See the appendix for reconciliations of adjusted
results and other non-GAAP financial measures.
Reconciliation of GAAP and Non-GAAP
Financial Measures
From time to time we supplement the reporting of our financial
information determined under generally accepted accounting
principles ("GAAP") with certain non-GAAP financial measures.
Adjusted financial measures should be considered in addition to,
and not as an alternative for, our reported results prepared in
accordance with GAAP. Our adjusted financial measures do not
represent a comprehensive basis of accounting and therefore may not
be comparable to similarly titled measures reported by other
companies.
Forward-Looking Non-GAAP Metrics
From time to time when presenting forward-looking non-GAAP
metrics, we are unable to provide quantitative reconciliations to
the most closely correlated GAAP measure due to the uncertainty in
the timing, amount or nature of any adjustments, which could be
material in any period.
Changes in Foreign Currency Exchange Rates and Hedging
Activities
Currency-neutral revenue, revenue per piece and operating profit
exclude the period over period impact of foreign currency exchange
rate changes and any foreign currency hedging activities. These
measures 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 amounts 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 impact of any foreign currency
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
foreign currency exchange rates and hedging activities.
Incentive Compensation Program Design Changes
During 2022, we undertook certain structural changes to the
design of our incentive compensation programs that resulted in a
one-time, non-cash charge in connection with the accelerated
vesting of certain equity incentive awards that we do not expect to
repeat. We supplement the presentation of our operating profit,
operating margin, income before income taxes, net income and
earnings per share with non-GAAP measures that exclude the impact
of these changes. We believe excluding the impacts of such changes
allows users of our financial statements to more appropriately
identify underlying growth trends in compensation and benefits
expense.
Long-lived Asset Estimated Residual Value Changes
During the fourth quarter of 2022, we incurred a one-time,
non-cash charge resulting from a reduction in the estimated
residual value of our MD-11 fleet. We supplement the presentation
of our operating profit, operating margin, income before income
taxes, net income and earnings per share with non-GAAP measures
that exclude the impact of this charge. We believe excluding the
impact of this charge better enables users of our financial
statements to understand the ongoing cost associated with our
long-lived assets.
Transformation and Other Charges
Adjusted EBITDA, operating profit, operating margin, income
before income taxes, net income and earnings per share may exclude
the impact of charges related to transformation activities,
goodwill and asset impairments, and divestitures. We believe
excluding the impact of these charges better enables users of our
financial statements to view underlying business performance from
the same perspective as management. We do not consider these costs
when evaluating the operating performance of our business units,
making decisions to allocate resources or in determining incentive
compensation awards.
Defined Benefit Pension and Postretirement Medical Plan Gains
and Losses
We recognize changes in the fair value of plan assets and net
actuarial gains and losses in excess of a 10% corridor (defined as
10% of the greater of the fair value of plan assets or the plan's
projected benefit obligation), as well as gains and losses
resulting from plan curtailments and settlements, for our pension
and postretirement defined benefit plans immediately as part of
Investment income (expense) and other in the statements of
consolidated income. We supplement the presentation of our income
before income taxes, net income and earnings per share with
adjusted measures that exclude the impact of these gains and losses
and the related income tax effects. We believe excluding these
defined benefit plan gains and losses provides important
supplemental information by removing the volatility associated with
plan amendments and short-term changes in market interest rates,
equity values and similar factors.
The deferred income tax effects of 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.
Free Cash Flow
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
other investing activities. We believe free cash flow is an
important indicator of how much cash is generated by our ongoing
business operations and we use this as a measure of incremental
cash available to invest in our business, meet our debt obligations
and return cash to shareowners.
Adjusted Return on Invested Capital
Adjusted ROIC is calculated as the trailing twelve months
(“TTM”) of adjusted operating income divided by the average of
total debt, non-current pension and postretirement benefit
obligations and shareowners’ equity, at the current period end and
the corresponding period end of the prior year. Because adjusted
ROIC is not a measure defined by GAAP, we calculate it, in part,
using non-GAAP financial measures that we believe are most
indicative of our ongoing business performance. We consider
adjusted ROIC to be a useful measure for evaluating the
effectiveness and efficiency of our long-term capital
investments.
Adjusted Total Debt / Adjusted EBITDA
Adjusted total debt is defined as our long-term debt and finance
leases, including current maturities, plus non-current pension and
postretirement benefit obligations. Adjusted EBITDA is defined as
earnings before interest, taxes, depreciation and amortization
adjusted for the impacts of incentive compensation program
redesign, transformation and other costs, defined benefit plan
gains and losses and other income. We believe the ratio of adjusted
total debt to adjusted EBITDA is an important indicator of our
financial strength, and is a ratio used by third parties when
evaluating the level of our indebtedness.
Reconciliation of GAAP and
Non-GAAP Income Statement Items
(in millions, except per share
data):
Three Months Ended March 31,
2023
As Reported (GAAP)
Transformation & Other
Adj.(1)
As Adjusted
(Non-GAAP)
U.S. Domestic Package
$
13,521
$
22
$
13,499
International Package
3,715
(22
)
3,737
Supply Chain Solutions
3,148
11
3,137
Operating Expense
20,384
11
20,373
U.S. Domestic Package
1,466
22
1,488
International Package
828
(22
)
806
Supply Chain Solutions
247
11
258
Operating Profit
2,541
11
2,552
Other Income and (Expense):
Other pension income (expense)
66
—
66
Investment income (expense) and other
103
—
103
Interest expense
(188
)
—
(188
)
Total Other Income (Expense)
(19
)
—
(19
)
Income Before Income Taxes
2,522
11
2,533
Income Tax Expense
627
2
629
Net Income
$
1,895
$
9
$
1,904
Basic Earnings Per Share
$
2.20
$
0.01
$
2.21
Diluted Earnings Per Share
$
2.19
$
0.01
$
2.20
(1) Reflects a goodwill impairment charge
of $8 million within Supply Chain Solutions and other costs of $15
million, partially offset by a reduction in other employee benefits
costs of $12 million.
Reconciliation of Currency
Adjusted Revenue, Revenue Per Piece,
and Adjusted Operating
Profit
(in millions, except per piece
data)
Three Months Ended March
31,
2023 As Reported
(GAAP)
2022 As Reported
(GAAP)
% Change (GAAP)
Currency Impact
2023 Currency
Neutral (Non-GAAP)(1)
% Change
(Non-GAAP)
Average Revenue Per Piece:
International Package:
Domestic
$
7.59
$
7.36
3.1
%
$
0.52
$
8.11
10.2
%
Export
33.00
34.10
(3.2
)%
0.95
33.95
(0.4
)%
Total International Package
$
20.47
$
20.45
0.1
%
$
0.75
$
21.22
3.8
%
Consolidated
$
13.74
$
13.26
3.6
%
$
0.11
$
13.85
4.4
%
Revenue:
U.S. Domestic Package
$
14,987
$
15,124
(0.9
)%
$
—
$
14,987
(0.9
)%
International Package
4,543
4,876
(6.8
)%
161
4,704
(3.5
)%
Supply Chain Solutions
3,395
4,378
(22.5
)%
50
3,445
(21.3
)%
Total revenue
$
22,925
$
24,378
(6.0
)%
$
211
$
23,136
(5.1
)%
2023 As Adjusted
(Non-GAAP)
2022 As Adjusted
(Non-GAAP)
% Change
(Non-GAAP)
Currency Impact
2023 As Adjusted
Currency Neutral (Non-GAAP)(1)
% Change
(Non-GAAP)
As Adjusted Operating
Profit(2):
U.S. Domestic Package
$
1,488
$
1,705
(12.7
)%
$
—
$
1,488
(12.7
)%
International Package
806
1,120
(28.0
)%
51
857
(23.5
)%
Supply Chain Solutions
258
481
(46.4
)%
(5
)
253
(47.4
)%
Total operating profit
$
2,552
$
3,306
(22.8
)%
$
46
$
2,598
(21.4
)%
(1) Amounts adjusted for period over
period foreign currency exchange rate and hedging differences.
(2) Amounts adjusted for transformation
& other.
Reconciliation of Free Cash
Flow (Non-GAAP measure)
(in millions):
Three Months Ended March
31,
2023
Cash flows from operating activities
$
2,357
Capital expenditures
(609
)
Proceeds from disposals of property, plant
and equipment
5
Other investing activities
17
Free Cash Flow (Non-GAAP measure)
$
1,770
Reconciliation of Adjusted
Debt to Adjusted EBITDA (Non-GAAP measure)
(in millions):
TTM(1) Ended
March 31,
2023
Net income
$
10,781
Add back:
Income tax expense
3,174
Interest expense
718
Depreciation & amortization
3,258
EBITDA
$
17,931
Add back (deduct):
Incentive compensation program
redesign
505
Transformation and other
134
Defined benefit plan (gains) and
losses
(1,028
)
Investment income and other pension
income
(1,261
)
Adjusted EBITDA
$
16,281
Debt and finance leases, including current
maturities
$
22,188
Add back:
Non-current pension and postretirement
benefit obligations
4,602
Adjusted total debt
$
26,790
Adjusted total debt/Net income
2.48
Adjusted total debt/adjusted EBITDA
(Non-GAAP)
1.65
(1) Trailing twelve months.
Reconciliation of Adjusted
Return on Invested Capital (Non-GAAP measure)
(in millions):
TTM(1) Ended
March 31,
2023
Net income
$
10,781
Add back (deduct):
Income tax expense
3,174
Interest expense
718
Other pension (income) expense
(1,986
)
Investment (income) expense and other
(303
)
Operating profit
12,384
Incentive compensation program
redesign
505
Long-lived asset estimated residual value
changes
76
Transformation and other
134
Adjusted operating profit
13,099
Average debt and finance leases, including
current maturities
22,035
Average pension and postretirement benefit
obligations
6,403
Average shareowners' equity
17,744
Average invested capital
$
46,182
Net income to average invested capital
23.3
%
Adjusted Return on Invested Capital
(Non-GAAP)
28.4
%
(1) Trailing twelve months.
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