UPS (NYSE:UPS) will host its investor and analyst conference
today at its Worldport air hub in Louisville, KY beginning at 9:15
a.m. ET. At the conference, the company will share details of its
strategic growth and productivity initiatives and discuss its
three-year financial targets. The event will also be available
through a live webcast and replay at investors.ups.com.
Under a better and bolder approach, UPS will continue its
Customer First, People Led, Innovation Driven strategy, and is
positioning itself to become the premium small package provider and
logistics partner in the world.
During the conference, UPS will highlight several strategic
initiatives that will enable market share capture and expand its
addressable market to drive incremental growth. In addition, the
company will share details about how it will lower its cost to
serve through its Network of the Future initiative, a plan that
will optimize and further automate its core integrated network.
“We executed the strategy we set forth nearly three years ago by
changing almost every aspect of our business. After coming off a
difficult market in 2023, the small package industry is poised to
return to growth in 2024 and beyond. Over the next three years, we
plan to make bold moves to create a growth flywheel in premium
markets, while at the same time drive higher productivity and
efficiency,” said Carol Tomé, UPS chief executive officer. “The
growth and productivity initiatives we are executing will result in
higher revenue, expanded operating margins and increased free cash
flow to deliver long-term value to our shareowners.”
Outlook
2026 Financial Targets
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 unanticipated
events, which would be included in reported (GAAP) results and
could be material.
Today the company will discuss its 2026 financial targets as
follows:
- Consolidated revenue ranging from approximately $108 billion to
approximately $114 billion.
- Consolidated adjusted* operating margin above 13%.
- U.S. Domestic Package segment adjusted* operating margin of at
least 12%.
- International Package segment adjusted* operating margin
between 18% and 19%.
- Supply Chain Solutions adjusted* operating margin of around
12%.
- Free cash flow* of between $17 billion and $18 billion.
- Capital spending from 2024–2026 of approximately 5.5% of total
revenue.
*Represents a non-GAAP financial measure. See the
appendix to this release for a discussion of non-GAAP financial
measures.
About UPS
UPS (NYSE: UPS) is one of the world’s largest companies, with
2023 revenue of $91.0 billion, and provides a broad range of
integrated logistics solutions for customers in more than 200
countries and territories. Focused on its purpose statement,
“Moving our world forward by delivering what matters,” the
company’s approximately 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 ups.com,
about.ups.com and investors.ups.com/.
Forward-Looking Statements
This release, our Annual Report on Form 10-K for the year ended
December 31, 2023 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: changes in general economic conditions in the U.S.
or internationally; significant competition on a local, regional,
national and international basis; changes in our relationships with
our significant customers; our ability to attract and retain
qualified employees; strikes, work stoppages or slowdowns by our
employees; increased or more complex physical or operational
security requirements; a significant cybersecurity incident, or
increased data protection regulations; our ability to maintain our
brand image and corporate reputation; impacts from 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, regulatory
and social developments in international and emerging markets; our
ability to realize the anticipated benefits from acquisitions,
dispositions, joint ventures or strategic alliances; the effects of
changing prices of energy, including gasoline, diesel, jet fuel,
other fuels and interruptions in supplies of these commodities;
changes in exchange rates or interest rates; our ability to
accurately forecast our future capital investment needs; increases
in our expenses or 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; 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, 2023, 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.
From time to time, we expect to participate in analyst and
investor conferences. Materials provided or displayed at those
conferences, such as slides and presentations, may be posted on our
investor relations website at www.investors.ups.com under the
heading "Presentations" when made available. These presentations
may contain new material nonpublic information about our company
and you are encouraged to monitor this site for any new posts, as
we may use this mechanism as a public announcement.
Non-GAAP Financial Measures; Reconciliations
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.
We believe that these non-GAAP measures provide meaningful
information to assist users of our financial statements in more
fully understanding our financial results and 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. These non-GAAP measures are used
internally by management for business unit operating performance
analysis, business unit resource allocation and in connection with
incentive compensation award determinations.
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 adjusted financial information does not
represent a comprehensive basis of accounting. Therefore, our
adjusted financial information may not be comparable to similarly
titled information 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.
Transformation Charges, and Goodwill, Asset Impairment and
Divestiture Charges
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 charges related to transformation activities, and goodwill,
asset impairment and divestiture charges. We believe excluding the
impact of these charges better enables users of our financial
statements to view and evaluate underlying business performance
from the perspective of 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.
One-Time Compensation Payment
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 a one-time payment made to certain U.S.-based, non-union
part-time supervisors following the ratification of our labor
agreement with the Teamsters. We do not expect this or similar
payments to recur. We believe excluding the impact of this one-time
payment better enables users of our financial statements to view
and evaluate underlying business performance from the same
perspective as management.
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 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
pension and postretirement medical 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.
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
finance receivables and 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 goodwill and asset impairment charges,
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):
Twelve Months Ended December
31, 2023
As Reported (GAAP)
Pension Adj.(1)
One-Time
Compensation(2)
Goodwill & Asset
Impairment Charges(3)
Transformation & Other
Adj.(4)
As Adjusted
(Non-GAAP)
U.S. Domestic Package
$
54,882
$
—
$
61
$
—
$
266
$
54,555
International Package
14,600
—
—
—
51
14,549
Supply Chain Solutions
12,335
—
—
236
118
11,981
Operating Expense
81,817
—
61
236
435
81,085
U.S. Domestic Package
5,076
—
61
—
266
5,403
International Package
3,231
—
—
—
51
3,282
Supply Chain Solutions
834
—
—
236
118
1,188
Operating Profit
9,141
—
61
236
435
9,873
Other Income and (Expense):
Other pension income (expense)
(95
)
359
—
—
—
264
Investment income (expense) and other
312
—
—
—
—
312
Interest expense
(785
)
—
—
—
—
(785
)
Total Other Income (Expense)
(568
)
359
—
—
—
(209
)
Income Before Income Taxes
8,573
359
61
236
435
9,664
Income Tax Expense
1,865
85
15
43
102
2,110
Net Income
$
6,708
$
274
$
46
$
193
$
333
$
7,554
Basic Earnings Per Share
$
7.81
$
0.32
$
0.05
$
0.22
$
0.40
$
8.80
Diluted Earnings Per Share
$
7.80
$
0.32
$
0.05
$
0.22
$
0.39
$
8.78
(1) Net mark-to-market loss recognized
outside of a 10% corridor on company-sponsored defined benefit
pension and postretirement plans.
(2) Represents a one-time payment of $61
million to certain U.S.-based non-union part-time supervisors.
(3) Reflects impairment charges of $125
and $111 million in respect of goodwill and an indefinite-lived
intangible asset, respectively.
(4) Reflects other employee benefits costs
of $337 million and other costs of $98 million.
Reconciliation of Free Cash
Flow (Non-GAAP measure)
(in millions):
Twelve Months Ended December
31,
2023
Cash flows from operating activities
$
10,238
Capital expenditures
(5,158
)
Proceeds from disposals of property, plant
and equipment
193
Other investing activities
(19
)
Free Cash Flow (Non-GAAP measure)
$
5,254
Reconciliation of Adjusted
Debt to Adjusted EBITDA (Non-GAAP measure)
(in millions):
TTM(1) Ended
December 31
2023
Net income
$
6,708
Add back:
Income tax expense
1,865
Interest expense
785
Depreciation & amortization
3,366
EBITDA
$
12,724
Add back (deduct):
Incentive compensation program
redesign
—
One-time compensation
61
Goodwill & asset impairment
charges
236
Transformation and other
435
Defined benefit plan (gains) and
losses
359
Investment income and other pension
income
(576
)
Adjusted EBITDA
$
13,239
Debt and finance leases, including current
maturities
$
22,264
Add back:
Non-current pension and postretirement
benefit obligations
6,159
Adjusted total debt
$
28,423
Adjusted total debt/Net income
4.24
Adjusted total debt/adjusted EBITDA
(Non-GAAP)
2.15
(1) Trailing twelve months.
Reconciliation of Adjusted
Return on Invested Capital (Non-GAAP measure)
(in millions):
TTM(1) Ended
December 31
2023
Net income
$
6,708
Add back (deduct):
Income tax expense
1,865
Interest expense
785
Other pension (income) expense
95
Investment (income) expense and other
(312
)
Operating profit
$
9,141
Incentive compensation program
redesign
—
Long-lived asset estimated residual value
changes
—
One-time compensation
61
Goodwill & asset impairment
charges
236
Transformation and other
435
Adjusted operating profit
$
9,873
Average debt and finance leases, including
current maturities
20,963
Average pension and postretirement benefit
obligations
5,483
Average shareowners' equity
18,558
Average invested capital
$
45,004
Net income to average invested capital
14.9
%
Adjusted Return on Invested Capital
(Non-GAAP)
21.9
%
(1) Trailing twelve months.
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