UPS Announces Strategic Initiatives And Three-Year Financial Targets
Under a better and bolder approach,
During the conference,
“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,
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
Forward-Looking Statements
This release, our Annual Report on Form 10-K for the year ended
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
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
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
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
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 |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
As Reported (GAAP) |
|
Pension Adj.(1) |
|
One-Time Compensation(2) |
|
|
|
Transformation & Other Adj.(4) |
|
As Adjusted (Non-GAAP) |
||||||||
|
$ |
54,882 |
|
|
$ |
— |
|
$ |
61 |
|
$ |
— |
|
$ |
266 |
|
$ |
54,555 |
|
International Package |
|
14,600 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
51 |
|
|
14,549 |
|
|
|
12,335 |
|
|
|
— |
|
|
— |
|
|
236 |
|
|
118 |
|
|
11,981 |
|
Operating Expense |
|
81,817 |
|
|
|
— |
|
|
61 |
|
|
236 |
|
|
435 |
|
|
81,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
5,076 |
|
|
|
— |
|
|
61 |
|
|
— |
|
|
266 |
|
|
5,403 |
|
International Package |
|
3,231 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
51 |
|
|
3,282 |
|
|
|
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 |
|||||||||||||||||||
(3) Reflects impairment charges of |
|||||||||||||||||||
(4) Reflects other employee benefits costs of |
Reconciliation of Free Cash Flow (Non-GAAP measure) (in millions): |
||||
Twelve Months Ended |
||||
|
|
|
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 |
||
|
|
|
|
||
|
|
|
|
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 |
|
|
|
|
|
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 (in millions): |
||||
|
|
|
||
|
|
TTM(1) Ended |
||
|
|
|
||
|
|
|
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 |
|
|
|
|
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 |
|
|
21.9 |
% |
(1) Trailing twelve months. |
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