United Parcel Service Inc. (UPS) said it is changing the way it accounts for gains and losses related to its pension plans, saying the system is more transparent, but warned of an $827 million pre-tax charge for the change this fiscal year.
The change has no effect on the actual pension plans.
The shipping company will switch to recording pension-related gains and losses each year, rather than spreading the impact over several years. It follows several other major companies that have recently adopted the accounting method, including Honeywell International Inc. (HON), International Business Machines Corp. (IBM) and AT&T Inc. (T).
The accounting change will reduce fourth-quarter earnings by 51 cents a share, but should raise adjusted earnings by 3 cents. Full-year earnings will be reduced by 41 cents, but adjusted earnings will rise by 12 cents.
The company previously forecast adjusted earnings of $4.15 to $4.40 for the year.
A market-to-market adjustment will be made in the fourth quarter of each year going forward.
International growth has kept overall volume rising lately as U.S. volume has stagnated. But, UPS has been increasingly wary of how business in the U.S. will hold up as the economic outlook grows cloudier. UPS has also offset climbing fuel costs with some increased shipping rates.
In October, UPS said its third-quarter earnings rose in results the company said were driven by its supply chain/freight segment.
Shares closed Thursday at $75.84 and were inactive premarket. The stock is up 6% over the past three months.
-By Ben Fox Rubin, Dow Jones Newswires; 212-416-3108; firstname.lastname@example.org