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Start time: 08:30
End Time: 09:30
United Parcel Service, Inc. (UPS)
F1Q10 Earnings Call
April 27, 2010; 8:30 am ET
Andy Dolny - VP IR
Scott Davis - CEO
Kurt Kuehn - CFO
Gary Chase - Barclays Capital
Nathan Brochmann - William Blair & Company
Ken Hoexter - Bank of America/Merrill Lynch
Edward Wolfe - Wolfe Research
Robin Byde - HSBC Securities
Tom Wadewitz - JPMorgan
Scott Malat - Goldman Sachs
Bill Greene - Morgan Stanley
Helane Becker - Jesup & Lamont Securities
Justin Yagerman - Deutsche Bank
Matt Brooklier - Piper Jaffray
Chris Ceraso - Credit Suisse
David Campbell - Thompson, Davis & Company
David Ross - Stifel, Nicolaus & Company
Previous Statements by UPS
» United Parcel Service, Inc. Q4 2009 Earnings Call Transcript
» United Parcel Service, Inc. Q3 2009 Earnings Call Transcript
» United Parcel Service, Inc. Q2 2009 Earnings Call Transcript
All lines have been placed on mute to prevent any background noise and after the speakers’ remarks there will be a question-and-answer period. Please note, we will take one question and one follow-up question from each participant. Thank you. It is now my pleasure to turn the floor over to your host, Mr. Andy Dolny, Vice President of Investor Relations. Sir, the floor is yours.
Good morning, everyone. Thanks for joining us today. In a moment, Scott Davis, our CEO; and Kurt Kuehn, our CFO will discuss first quarter results and expectations going forward.
Before they begin, however, I’ll briefly review the Safe Harbor language. Some of the comments we'll make today are forward-looking statements that address our expectations for the future performance or results of operations of the company. These anticipated results are subject to risk and uncertainties, which are described in detail in our 2009 Form 10-K report.
This report is available on the UPS Investor Relations website or from the Securities and Exchange Commission. Today's call is being webcast and will also be available on our Investor Relations website.
I want to remind you about three adjustments we made to first quarter results. A $98 million pre-tax restructuring charge related to the reorganization of the U.S. Domestic Package segment. A $38 million pre-tax loss on a sale of the supply chain business and a $76 million, non-cash charge to income tax expense resulting from a change in the tax filing status of a German subsidiary.
These charges reduced net income by $175 million and diluted earnings per share by $0.18. In addition in last years first quarter there was a $181 million aircraft impairment charge which resulted from the retirement of our DC-8 fleet. The after tax impact of this charge was a $116 million or $0.12 per share. In their remarks today Scott and Kurt will refer to UPS results excluding the impact of these charges.
Since we believe this is a more accurate picture of the company’s performance. A reconciliation of these adjustments to comparable GAAP measures is explained in the schedules that companied our earnings news releases this morning. The schedules are also available on the UPS Investors Relations website in the financial section.
In addition during the call we refer to free cash flow which is a non-GAAP financial measure. A Reconciliation is included in the news announcement this morning and his available on the UPS Investors Relations website. To begin our review of the quarter I will turn the program over to Scott for opening comments.
Thanks Andy and good morning everyone. Last quarter I mentioned that UPS was well positioned to take advantage of improving global economic trends. That we have the ability to manage effectively, in response to changing market conditions. This quarter UPS started to prove it, economies around the world are showing signs of recovery. Experts are providing more UPB forecasts then they were few months ago.
Conditions are slowly starting to improve and UPS’s first quarter results illustrated our ability to take advantage of these trends.
In the quarter, UPS achieved better than expected growth in volume, revenue and profit. In particular, the International Package segment really shined. You’re seeing how our global product portfolio provides benefits to our customers and our share owners alike. Our strong management team quickly capitalized on this growth, while still controlling costs and we saw the operating leverage inherent in the UPS network.
Also in the quarter, two significant infrastructure projects came to fruition. Each strategically enhanced in our network. We opened the second phase of our Worldport expansion ahead of schedule and under budget. This enables UPS to continue to reduce operations in regional air hubs and imply a larger more fuel efficient aircraft.
In addition, we began to operate in our new intra-Asia air hub in Shenzhen, China. This hub allows UPS to better serve our customers by reducing time in transit for 100s of city pairs in the area. These projects required significant capital commitment and will enhance customer service, provide better access to international markets and improve efficiencies for UPS around the globe.
In February, the administration announced the National Export Initiative, which UPS strongly endorses. It has always been our firm belief that increasing global trade is the best way to stimulate economic recovery and to create jobs. We intend to work with the President’s team in any way we can on this new important endeavor. Since the beginning of the year, UPS has received wide ranging recognitions. The company was named most admired in our industry by Fortune’s.
One of the top ten most referable companies by Forbes. One of the hundred best corporate citizens and one of the top ten global companies in Climate Innovation.