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United Parcel Service (UPS)
Q3 2012 Earnings Call
October 23, 2012 8:30 am ET
Andy Dolny - Vice President of Investor Relations
D. Scott Davis - Chairman, Chief Executive Officer and Chairman of Executive Committee
Kurt P. Kuehn - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Treasurer
Alan Gershenhorn - Senior Vice President of Worldwide Sales, Marketing and Strategy
Daniel J. Brutto - Senior Vice President and President of UPS International
Myron A. Gray - President of U.S. Operations
David P. Abney - Chief Operating Officer of UPS International
Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division
Christian Wetherbee - Citigroup Inc, Research Division
Ken Hoexter - BofA Merrill Lynch, Research Division
Nathan Brochmann - William Blair & Company L.L.C., Research Division
Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division
William J. Greene - Morgan Stanley, Research Division
Christopher J. Ceraso - Crédit Suisse AG, Research Division
David Vernon - Sanford C. Bernstein & Co., LLC., Research Division
Arthur W. Hatfield - Raymond James & Associates, Inc., Research Division
H. Peter Nesvold - Jefferies & Company, Inc., Research Division
Edward M. Wolfe - Wolfe Trahan & Co.
Justin B. Yagerman - Deutsche Bank AG, Research Division
Kevin W. Sterling - BB&T Capital Markets, Research Division
Brandon R. Oglenski - Barclays Capital, Research Division
Helane R. Becker - Dahlman Rose & Company, LLC, Research Division
David P. Campbell - Thompson, Davis & Company
Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division
John L. Barnes - RBC Capital Markets, LLC, Research Division
David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division
Keith Schoonmaker - Morningstar Inc., Research Division
Previous Statements by UPS
» United Parcel Service Management Discusses Q2 2012 Results - Earnings Call Transcript
» United Parcel Service's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» United Parcel Service's CEO Discusses Q4 2011 Results - Earnings Call Transcript
Good morning. Today, I'm joined by Scott Davis, our CEO; and Kurt Kuehn, our CFO, to discuss the company's results for the quarter and future expectations. In addition, in an effort to increase access to UPS leadership, we have asked David Abney, our COO; Dan Brutto, International President; Alan Gershenhorn, Chief Sales and Marketing Officer; and Myron Gray, President of U.S. Operations, to participate today and in future calls.
Before we begin, 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 risks and uncertainties, which are described in detail in our 2011 Form 10-K and 2012 10-Q reports. These reports are available on the UPS Investor Relations website and from the Securities and Exchange Commission.
In August, we announced restructuring of the New England Teamsters and Trucking Industry Pension Fund. As a result, in our third quarter earnings, UPS recorded a noncash charge of $896 million. On an after tax basis, the impact was $559 million or $0.58 per share. Excluding the effect of this transaction, diluted earnings per share for the third quarter were $1.06. In our remarks today, we will refer to UPS third quarter 2012 results excluding the impact of this charge.
Additionally, all 2012 full year references and comparisons to 2011 will refer to adjusted results. We believe this is a more 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, along with the webcast of today's call, are available on the UPS Investor Relations website.
A couple of reminders, any guidance that we provide does not include any operating results, synergies or post-closing integration expense related to TNT. Also, our outlook does not include any potential pension, mark-to-market entry. If interest rates stay as low as they are, UPS will likely record a sizable mark-to-market charge in the fourth quarter. Keep in mind, this will not affect cash flow or require funding. While this charge would impact our GAAP earnings, it will be excluded in adjusted results. [Operator Instructions]
Now let me turn it over to Scott.
D. Scott Davis
Thanks, Andy, and good morning. Our third quarter results reflect the ability of UPSers to meet the needs of our customers while making the necessary adjustments in an environment of shifting market conditions. The U.S. Domestic business benefited from e-commerce. International results have rebounded as exports from Asia grew slightly. Europe was steady, however, U.S. exports remained weak. The Supply Chain & Freight segment continued to deliver strong operating margins.
Now let's take a quick look at the global economy. In Europe, more countries are slipping into recession as they impose austerity measures. Though the economy there has contracted, the small package market has not.
In Asia, although projections have come down, economic growth there leads the world. Although as I said last quarter, exports continue to lag GDP growth.
Here in the U.S., where some of the recent economic indicators provide optimism, general economists have lowered their expectations for the remainder of the year. The lack of clear direction on future tax and spending policy has and will continue to slow business investment. This will clearly impact the B2B small package market.
Regardless of the outcome in November, the U.S. is on the edge of a fiscal cliff, and there is concern whether our politicians can reach an agreement that solves these issues. The lack of political will to fix our debt problem adds to the uncertainty in our economy, just what we don't need.