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United Parcel Service (UPS)
Q1 2011 Earnings Call
April 26, 2011 8:30 am ET
D. Davis - Chairman, Chief Executive Officer and Chairman of Executive Committee
Andy Dolny - Vice President of Investor Relations
Kurt Kuehn - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Treasurer
Jeffrey Kauffman - Sterne Agee & Leach Inc.
Thomas Wadewitz - JP Morgan Chase & Co
Ken Hoexter - BofA Merrill Lynch
Garrett Chase - Barclays Capital
Scott Malat - Goldman Sachs Group Inc.
David Campbell - Thompson Davis & Co
Bill Greene - Morgan Stanley
Jon Langenfeld - Robert W. Baird & Co. Incorporated
Mark McVicar - Nomura Securities Co. Ltd.
Kevin Sterling - BB&T Capital Markets
Robin Byde - HSBC
Edward Wolfe - Bear Stearns
Scott Flower - Macquarie Research
Chris Wetherbee - Citigroup Inc
Nathan Brochmann - William Blair & Company L.L.C.
Matthew Brooklier - Piper Jaffray Companies
Previous Statements by UPS
» United Parcel Service's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» United Parcel Service Q2 2010 Earnings Call Transcript
» United Parcel Service, Inc. F1Q 2010 Earnings Call Transcript
Good morning, everyone. Thanks for joining us today. I'm here this morning with Scott Davis, our CEO; and Kurt Kuehn, our CFO to discuss the company's results for the quarter and our outlook for the remainder of 2011. Before they begin, however, I want to 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 2010 Form 10-K report. This report is available on the UPS Investor Relations website and from the Securities and Exchange Commission. Today's call is being webcast, and will also be available on the UPS Investor Relations website.
I want to remind you of 3 adjustments we recorded in the first quarter of last year. These charges related to the U.S. Domestic segment reorganization, the change of tax filing status of a German subsidiary and the loss on sale of a Supply Chain business. They reduced net income by $175 million and diluted earnings per share by $0.18.
In the remarks today, Scott and Kurt will refer to UPS's first quarter 2010 (sic)  results excluding the impact of these items. We believe this is the most accurate picture of the company's performance. Reconciliations to comparable GAAP measures and free cash flow, which is a non-GAAP financial measure, are explained in the schedules that accompanied our earnings news release. These schedules are also available on the UPS Investor Relations website in the financial section.
Now to begin our review, I'll turn the program over to Scott.
Good morning, everyone. UPS had great results this quarter, continuing the momentum we had in 2010. Earnings climbed 24% on 7% revenue growth despite the obstacles we faced like unrest in North Africa and the Middle East, skyrocketing fuel costs and some of the worst weather conditions in years. So far, the global economic recovery has been resilient, yet, the risks are a little greater than they were 3 months ago. Consensus forecasts have come down slightly, as 2011 GDP growth for the U.S. is now expected to be 2.9% and global GDP is forecast to be 3.5%.
Employment has begun to show signs of improvement. Here in the U.S., unemployment dipped below 9% for the first time in almost two years, further evidence that the recovery continues.
Obviously, everyone is aware of the tragic events in Japan. UPS is one of the first to support the humanitarian efforts there, working closely with the relief agency partners in Asia.
UPS pledged $1 million in relief aid and has been assisting with logistics support. We have delivered many containers and truck loads of emergency supplies and equipment throughout Japan. Some of these important deliveries include emergency shelters, generators, survival kits and food supplies. UPS will continue to look for other opportunities to help the victims. While the immediate impact on the global economy and UPS is not expected to be substantial, the medium-term implications on global supply chains are still not clear.
Here in the U.S., it is important for us to demonstrate economic leadership and increased promotion of free trade. Expectations of the Congress will soon address pending free trade legislation that is critical to grow U.S. exports and to create new jobs.
The South Korean free trade agreement, that President Obama endorsed back in December, has not yet passed. This critical piece of legislation is needed to further our progress, of meeting the export council's goal of doubling U.S. exports in the next 5 years.
Other important trade agreements like those with Colombia and Panama are still in the approval process. UPS stands ready to facilitate the growth of trade between countries once these agreements are finalized. I would like to see Colombia and Panama approved as soon as possible, however, I personally disagree with holding up the Korean agreement while waiting for approval of these other 2 FTAs.
During the quarter, UPS continued to be active in expanding our capabilities to serve the economies of the world. For instance, UPS launched 4 direct flights from Hong Kong to Europe, making us the clear leader in guaranteed next-day delivery for this important trade lane.