UNITED PARCEL SERVICE INC
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
UPS$108.30-2.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0001090727-24-000028
OverviewSupplemental Information - Items Affecting ComparabilityResults of Operations - Segment ReviewInternational Package OperationsSupply Chain Solutions OperationsConsolidated Operating ExpensesOther Income (Expense)Income Tax ExpenseLiquidity and Capital ResourcesCash Flows From Operating ActivitiesCash Flows From Investing ActivitiesCash Flows From Financing ActivitiesSources of CreditContractual CommitmentsLegal Proceedings and ContingenciesCollective Bargaining AgreementsRecent Accounting PronouncementsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001090727-24-000045
OverviewSupplemental Information - Items Affecting ComparabilityResults of Operations - Segment ReviewInternational Package OperationsSupply Chain Solutions OperationsConsolidated Operating ExpensesOther Income (Expense)Income Tax ExpenseLiquidity and Capital ResourcesCash Flows From Operating ActivitiesCash Flows From Investing ActivitiesCash Flows From Financing ActivitiesSources of CreditContractual CommitmentsLegal Proceedings and ContingenciesCollective Bargaining AgreementsRecent Accounting PronouncementsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 188 previous paragraphs and 208 current paragraphs.
76 unchanged; 69 reworded; 62 added; 43 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 16 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (62)
Current report
We are pursuing our goal of becoming the premium small package provider, logistics orchestrator and leading complex healthcare logistics provider in the world under our Customer First, People Led, Innovation Driven strategy. We are investing to grow in the most attractive parts of the market and transforming our integrated network through automation. Together, our Smart Package, Smart Facility and Network of the Future initiatives are providing enhanced shipment visibility for our customers and driving efficiency.
Current report
During the first half of the year, we took a number of steps in furtherance of our strategy. We continued to grow our healthcare logistics capabilities, including opening our first dedicated healthcare facility in Ireland. We also expanded the size of our flagship facility in the Netherlands, including additional ultra-cold storage capabilities to support the growing market for complex biopharma products. We continued adding partners to our Digital Access Program, expanded weekend service to six additional U.S. markets and launched an enhanced Worldwide Economy product globally.
Current report
We also continue to pursue inorganic opportunities. On June 23, 2024, we announced that we have entered into an agreement to divest our truckload brokerage business, Coyote, and on July 22, 2024, we announced that we have entered into an agreement to acquire Estafeta, a leading domestic small package provider in Mexico that is expected to enhance our logistics orchestration capabilities in this market.
Current report
After volume declined in the first quarter of 2024, our global small package operations experienced growth during the second quarter. Within the U.S., volume growth was driven by residential volume from several new e-commerce customers. This growth occurred primarily in our SurePost product, which led to a decline in revenue per piece for the quarter. Internationally, we experienced declines in total average daily volume, but we experienced increased demand in certain export markets. This export volume growth occurred on several of our higher yielding trade lanes, contributing to an increase in revenue per piece in both the quarter and year-to-date periods.
Current report
In Supply Chain Solutions, revenue declines in the first quarter were largely offset by revenue growth during the second quarter, driven primarily by growth in our logistics businesses. This growth included the impact of the acquisition of MNX Global Logistics in the fourth quarter of 2023 as well as continued growth in our healthcare operations. Our digital businesses also saw revenue increase for the second quarter, and we began onboarding the new U.S. Postal Service ("USPS") air cargo business, which we expect to be fully implemented before our fourth-quarter peak period.
Current report
We expect revenue and operating profit growth in the second half of 2024 due to anticipated volume growth in our global small package operations. Additionally, wage-rate growth will decrease as we enter into the second year of the Teamsters contract beginning in the third quarter and we will further benefit from the impact of our Fit to Serve initiative. As a result of lower than originally planned capital expenditures and the anticipated divestiture of Coyote, we intend to return additional cash to shareowners by targeting approximately $500 million of share repurchases in the second half of the year.
Current report
•Average daily package volume in our global small package operations increased slightly in the quarter, primarily as a result of new e-commerce customers in our U.S. Domestic package segment. Year to date, continued challenging external conditions drove average daily package volume declines across all products in our global small package operations.
Current report
•Revenue declined in both the quarter and year-to-date periods primarily as a result of unfavorable changes in product mix driven by customers trading down to lower cost options. Year to date, volume declines also contributed to the revenue decrease.
Current report
•Operating expenses increased in the quarter and year-to-date periods, primarily due to increased compensation and benefits expense in our U.S. Domestic Package segment under our Teamsters contract. These increases were partially offset year to date by decreases in purchased transportation and fuel expenses as well as the impact of productivity initiatives.
Current report
•Operating profit and operating margin decreased for both the quarter and year-to-date periods as efficiency initiatives were not enough to offset operating expense increases.
Current report
◦transformation and other costs of $26 million, or $0.03 per diluted share in the quarter ($101 million, or $0.12 per share, year to date);
Current report
◦a payment to settle a one-time international regulatory matter, including interest, of $94 million, or $0.11 per diluted share in the quarter and year-to-date periods; and
Current report
International Package revenues were impacted by lower volumes in both periods as described above, as well as fluctuations in currency exchange rates, all of which were partially offset by revenue per piece growth. Expense increased for the quarter, primarily driven by higher fuel prices and the impact of a payment to settle a one-time international regulatory matter. Year to date, expense was relatively flat.
Current report
In Supply Chain Solutions, revenue increases for the quarter were primarily driven by growth in Logistics, while year-to-date revenue declines were driven by Forwarding, particularly our truckload brokerage business. Logistics drove the overall increase in segment expense for both periods, partially offset by lower purchased transportation in Forwarding in both periods.
Current report
International Regulatory Matter
Current report
In the second quarter of 2024, we made a payment of $94 million of previously restricted cash to settle a previously-disclosed challenge by Italian tax authorities to the deductibility of Value Added Tax payments by UPS to certain third-party service providers, a review of which was launched in the fourth quarter of 2023. We supplement the presentation of our operating profit, operating margin, interest expense, total other income (expense), income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of this payment. We believe excluding the impact of this payment, which we do not believe is a component of our ongoing operations and we do not expect to recur, better enables users of our financial statements to view and evaluate underlying business performance from the same perspective as management.
Current report
Adjusted Cost per Piece
Current report
We evaluate the efficiency of our operations using various metrics, including adjusted cost per piece. Adjusted cost per piece is calculated as adjusted operating expenses in a period divided by total volume for that period. Because adjusted operating expenses exclude costs or charges that we do not consider a part of underlying business performance when monitoring and evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards, we believe this is the appropriate metric on which to base reviews and evaluations of the efficiency of our operational performance.
Current report
During the second quarter, we determined our truckload brokerage business, Coyote, met the criteria to be classified as held for sale. In connection therewith, we tested the indefinite-lived trade name and goodwill associated with Coyote for impairment prior to reclassifying the assets associated with this business as held for sale. The tests did not indicate impairment. For additional information see note 8 and note 18 to the unaudited, consolidated financial statements.
Current report
Average daily volume increased in the quarter but decreased year to date. Challenging macroeconomic conditions, including continued weakness in manufacturing output, drove the overall volume decline year to date, while new e-commerce customers entering our network were primarily responsible for the volume growth in the quarter. We anticipate that average daily volume will increase in both the second half of 2024 and on a full year-over-year basis as we expect to benefit from improving macroeconomic conditions and continue to execute on our strategic initiatives.
Current report
Business-to-consumer volume increased 4.8% in the quarter (up 1.6% year to date), due primarily to the addition of e-commerce customers noted above and stronger online consumer spending.
Current report
Average daily volume for Ground commercial shipments decreased 4.6% for the quarter (down 5.1% year to date), due to the impact of general economic conditions discussed above. We experienced declines from both large customers and small-and medium-sized businesses ("SMBs") in both the quarter and year to date, slightly offset by continued growth within our Digital Access Program. Overall Ground residential volumes increased 7.9% for the quarter (up 4.0% year to date), primarily due to an increase in SurePost volume from new e-commerce customers.
Current report
We anticipate the year-over-year revenue per piece growth rate will improve in the second half of the year due in part to Peak delivery surcharges, although it will remain pressured by product mix.
Current report
Fuel surcharge revenue decreased $12 million for the quarter, primarily driven by an unfavorable shift in product mix, partially offset by the impact of our pricing initiatives. The year-to-date decrease of $196 million in fuel surcharge revenue was due to lower overall volume and fuel price declines in the first quarter.
Current report
Operating expenses and adjusted operating expenses increased for the quarter and year to date. Pickup and delivery costs increased $375 million in the quarter (up $686 million year to date) and package sortation costs increased $66 million in the quarter (up $166 million year to date). The increase in operating expenses was primarily due to increased compensation and benefits expense for both the quarter and year-to-date periods. This was driven by wage rate increases for our union workforce under our Teamsters contract and the impact of seniority, partially offset by a reduction in direct labor hours. We anticipate compensation and benefits expense growth will moderate in the second half of 2024 as we enter the second year of the Teamsters contract.
Current report
These increases were partially offset by a decrease of $7 million in the costs of operating our integrated air and ground network in the quarter (down $298 million year to date), and a decrease in other operating costs of $27 million (down $251 million year to date). In addition to the impact of one less operating day in the first half of 2024, these reductions were primarily driven by:
Current report
•A reduction in fuel expense for both periods, driven by decreases in the cost of ground fuels, as well as the positive impact of network optimization initiatives that reduced overall fuel consumption. A decrease in the cost of jet fuel and volume declines in the first quarter also contributed to the year-to-date reduction.
Current report
•A reduction in allocated expenses in both periods, including benefits from our Fit to Serve initiative.
Current report
Cost per piece increased 1.9% for the quarter (up 3.0% year to date), and adjusted cost per piece increased 2.5% (up 3.3% year to date). For both periods, the increase in cost per piece was primarily driven by the higher wage rates for our union workforce discussed above, while volume and revenue declined year to date. We anticipate the cost per piece growth rate will moderate for the remainder of the year as our cost of labor growth rate is expected to moderate.
Current report
As a result of the factors described above, operating profit decreased $613 million in the quarter (down $1.3 billion year to date), with operating margin decreasing 410 basis points to 7.0% (down 400 basis points to 6.4% year to date). Adjusted operating profit decreased $684 million in the quarter (down $1.3 billion year to date), with adjusted operating margin decreasing 460 basis points to 7.1% (down 430 basis points to 6.5% year to date).
Current report
(1)Net of currency hedging; amount represents the change in currency translation compared to the prior year.
Current report
Our premium products experienced a volume decline of 5.6% for the quarter (down 7.6% year to date), primarily from our Worldwide Express products as we continued to see customers make cost trade-offs to our economy products. Volume in our non-premium products was relatively flat for both the quarter and year to date, with a shift from Transborder to Worldwide products resulting from the trade lane shifts discussed above.
Current report
Domestic volume decreased both for the quarter and year to date, driven by declines in a number of European markets, as challenging economic conditions continued to negatively impact consumer spending. These declines were slightly offset in the second quarter by growth from retail customers in the Americas region during that period.
Current report
Export revenue per piece increased 0.6% for the quarter but remained relatively flat year to date. The improvement for the quarter was driven by base rate increases and a favorable shift in geographic mix. Excluding the impact of currency, export revenue per piece increased 2.0% for the quarter (up 1.0% year to date).
Current report
Total international fuel surcharge revenue increased $52 million for the quarter, with the impacts of our pricing initiatives more than offsetting volume declines. Year to date, fuel surcharge revenue decreased $7 million due to the impact of lower fuel prices in the first quarter and year-to-date volume declines. We anticipate fuel surcharge revenue will increase in the second half of the year driven by expected volume growth.
Current report
Operating expenses increased for the second quarter while remaining relatively flat year to date. Adjusted operating expenses increased slightly for the second quarter but decreased for the year-to-date period.
Current report
On an unadjusted basis, a payment to settle a one-time regulatory matter in Italy also contributed to the increase during the quarter and largely offset the reduction in network costs year to date.
Current report
(1) Amount represents the change in currency translation compared to the prior year.
Current report
Total revenue in Supply Chain Solutions increased for the quarter, but decreased year to date. The second quarter increase was primarily due to growth in Logistics and certain of our other businesses, which more than offset declines in Forwarding. Year to date, revenue declines in Forwarding were only partially offset by growth within Logistics.
Showing the first 40 of 62 passages. Open the source sections for the rest.
Removed paragraphs (43)
Previous report
Through our Customer First, People Led, Innovation Driven strategy we are investing to grow in the premium parts of the market and drive efficiency across our network. We are focused on the parts of the market that value our end-to-end integrated network, including healthcare, commercial shippers and small- and medium-sized businesses ("SMBs"). Through our Network of the Future initiative, we are transforming our network by combining physical and digital capabilities, including our smart package smart facility RFID solution, to streamline our operations. We are also leveraging technology to add new capabilities and expand our addressable market.
Previous report
During the first quarter, we took a number of steps in furtherance of this strategy. For example, we expanded our no box, no label returns service that combines the reach and capabilities of The UPS Store and Happy Returns, and we launched Roadie XD, adding capabilities for big and bulky long-zone deliveries for items that are incompatible with our small package network. Additionally, we continued to develop capabilities to enhance our SMB customer experience. In furtherance of our healthcare strategy, we opened a new facility at our global air hub specifically designed for complex healthcare shipments. For the remainder of 2024, we expect to continue investment in our network to drive further operational efficiencies.
Previous report
On April 1, 2024, we announced that we entered into an agreement to expand our relationship with the U.S. Postal Service ("USPS"), providing for UPS to become the USPS primary air cargo provider within the United States.
Previous report
During the first quarter of 2024, the macroeconomic environment remained challenging. Persistent soft demand, lack of growth in industrial production and continuing inflationary pressures contributed to volume declines in our global small package operations, although we experienced pockets of growth in certain markets and trade lanes. In Supply Chain Solutions, our freight forwarding businesses continued to be negatively impacted by soft demand and market overcapacity. Somewhat offsetting this was increased revenue in our logistics businesses, driven by growth in our healthcare operations and the impact of the acquisition of MNX Global Logistics in the fourth quarter of 2023.
Previous report
We expect our second quarter earnings to be lower relative to 2023, primarily due to the higher labor costs associated with the first year of the Teamsters contract. However, we anticipate a return to operating profit growth during the second half of 2024.
Previous report
•Average daily package volume in our global small package operations decreased, with declines in both commercial and residential shipments across all of our product segments. These declines were primarily the result of the challenging macroeconomic conditions.
Previous report
•Revenue declined as well, driven by lower volume and relatively flat revenue per piece.
Previous report
•Operating expenses decreased, due to a reduction in purchased transportation in all segments and reductions in fuel expenses in our small package operations, as well as the impact of our ongoing productivity initiatives.
Previous report
•Operating profit and operating margin decreased as revenue declines were greater than operating expense reductions.
Previous report
◦transformation and other costs of $75 million, or $0.09 per diluted share, and
Previous report
International Package segment revenues were also impacted by declines in demand related surcharges and currency fluctuations, partially offset by revenue per piece growth due to increases in base rates and changes in product and customer mix.
Previous report
In Supply Chain Solutions, revenue decreases were driven by volume and market rate declines in Forwarding, somewhat offset by growth in our Logistics businesses. Expenses decreased primarily due to lower purchased transportation expense in Forwarding, partially offset by expense increases within Logistics.
Previous report
Additionally, as of March 31, 2024, the estimated fair value of the indefinite-lived trade name associated with our truckload brokerage business, Coyote, remained greater than its carrying value by less than 10 percent. The carrying value of this trade name is $89 million. During the quarter, our truckload brokerage business continued to be negatively impacted by market conditions, which resulted in revenue declines. We continue to monitor business performance and external factors affecting our valuation assumptions for this trade name. As previously disclosed, we are continuing to evaluate strategic alternatives relating to this business.
Previous report
Average daily volume decreased, with reductions in both residential and commercial volume. Challenging macroeconomic conditions, including weakness in manufacturing output, drove the overall volume decline. We anticipate that year-over-year average daily volume will increase each quarter for the remainder of 2024.
Previous report
Business-to-consumer volume declined 1.5% in the quarter as a result of the factors discussed above, with declines from both large customers and SMBs.
Previous report
Average daily volumes for Ground commercial shipments decreased by 5.6%, due to the general economic conditions discussed above. Overall Ground residential volumes were relatively flat, as the decreases were offset by a 10.8% increase in SurePost volume from large customers. We expect volume to increase in the second quarter, driven by anticipated volume from large customers.
Previous report
We continue to execute on pricing and revenue quality initiatives within our strategy, and anticipate revenue per piece will remain relatively flat in the second quarter before returning to growth during the second half of 2024.
Previous report
Operating expenses and adjusted operating expenses decreased for the quarter. The costs of operating our integrated air and ground network decreased $291 million, and other operating costs decreased $224 million. In addition to the impact of one less operating day in 2024, the decrease in operating expenses was primarily due to:
Previous report
•Lower fuel expense driven by lower volume and decreases in the price of jet fuel, diesel and gasoline. We expect fuel expense to remain relatively flat in the second quarter of 2024.
Previous report
These reductions were partially offset by increases of $311 million in pickup and delivery costs and $100 million in sortation costs that were driven by increased compensation and benefits expense for our union workforce. Compensation expense increased due to the contractual rates under our Teamsters contract, partially offset by a reduction in direct labor hours. Contractual rate increases for contributions to multiemployer benefit plans drove the increase in benefits expense.
Previous report
Total cost per piece increased 4.2% for the quarter and adjusted cost per piece increased 4.1%, as the reduction in volume more than offset the decrease in overall expenses. We anticipate the cost per piece growth rate will increase further in the second quarter and then moderate for the remainder of the year.
Previous report
As a result of the factors described above, revenue declines were greater than operating expense reductions and operating profit decreased $641 million in the first quarter, with operating margin decreasing 400 basis points to 5.8%. Adjusted operating profit decreased $649 million, with adjusted operating margin decreasing 400 basis points to 5.9%.
Previous report
Our premium products experienced volume declines of 9.6% for the quarter, primarily in our Worldwide and Transborder Express Saver products. These declines resulted from continuing shifts in customer product preferences. Volume in our non-premium products decreased 1.6% for the quarter, driven by declines in our Transborder Standard product, primarily within Europe. The declines in both our premium and non-premium products were due to the macroeconomic conditions described above.
Previous report
Domestic volume declined in the quarter, with the largest declines in Germany, Canada and the United Kingdom as challenging economic conditions in those countries reduced consumer spending.
Previous report
Export revenue per piece decreased 0.6% for the quarter. The decrease was primarily attributable to changes in product mix due to the shifts in customer preferences. Declines in revenue per piece were mostly offset by base rate increases. Excluding the impact of currency, export revenue per piece remained flat relative to last year.
Previous report
Total international fuel surcharge revenue decreased $59 million for the quarter, due to a decrease in price per gallon and volume declines, partially offset by higher surcharge modifiers. Based on our current commodity market outlook, we expect fuel surcharge revenue will increase in the second quarter.
Previous report
Operating expenses and adjusted operating expenses decreased for the quarter, primarily due to:
Previous report
•Lower pickup and delivery costs, which decreased $22 million as a result of lower volumes and the impact of cost management initiatives.
Previous report
On an unadjusted basis, these reductions were partially offset by the impact of year-over-year increases in employee separation costs as we continued to right-size our business.
Previous report
Total revenue in Supply Chain Solutions decreased for the quarter. This was primarily due to declines in our Forwarding business, with both truckload brokerage and freight forwarding revenues decreasing, and declines within certain of our other businesses. These declines were partially offset by revenue growth in our Logistics businesses.
Previous report
•Revenue in our truckload brokerage business decreased $148 million due to lower volumes and a decline in market rates. These decreases were partially offset by volume increases from SMBs as a result of our revenue quality initiatives.
Previous report
•International airfreight revenue decreased approximately $53 million due to continued weakness in market demand, impacting both volumes and rates. We expect improvements in market demand and tightening capacity, particularly on Asia export lanes, which are expected to lead to revenue growth in the second half of 2024.
Previous report
•The remaining reduction in revenue was primarily attributable to our ocean freight forwarding business, driven by a change in product mix that drove growth in volume but at lower rates. We expect revenue to remain challenged in the second quarter as capacity increases are expected to continue to exceed demand.
Previous report
As a result of the factors described above, total operating profit decreased $115 million, with operating margin decreasing 320 basis points to 4.1%. On an adjusted basis, operating profit decreased $32 million with adjusted operating margin decreasing 60 basis points to 7.0%.
Previous report
•Pension and other postretirement benefits expense decreased $12 million as reductions in participating headcount more than offset increases in service costs under Company-sponsored plans due to lower discount rates and benefit increases under the terms of the Teamsters contract.
Previous report
•U.S. Domestic expense decreased $116 million due to overall volume declines, a reduction in ground volume handled by third-party carriers and other network optimization initiatives. These decreases were partially offset by an increase in delivery costs for our SurePost product as a result of higher volume.
Previous report
•International Package expense decreased $56 million, primarily due to declines in volume.
Previous report
•Working capital benefits from lower incentive compensation payments and payment of deferred employer payroll taxes in 2023 that did not repeat.
Previous report
These factors were partially offset by:
Showing the first 40 of 43 passages. Open the source sections for the rest.
Reworded paragraphs (69)
Previous wording
•We reported net income of $1.1 billion and diluted earnings per share of $1.30. Adjusted diluted earnings per share were $1.43 after adjusting for the after-tax impacts of:
Current wording
•We reported quarterly net income of $1.4 billion and diluted earnings per share of $1.65 ($2.5 billion and $2.94 per share, year to date). Adjusted diluted earnings per share were $1.79 ($3.21 per share, year to date) after adjusting for the after-tax impacts of:
Previous wording
◦asset impairment charges of $35 million, or $0.04 per diluted share.
Current wording
◦asset impairment charges of $35 million, or $0.04 per diluted share in the year-to-date period.
Previous wording
Within our segments, U.S. Domestic Package revenues and expenses were primarily impacted by the matters described above, with expense decreases partially offset by increases in union workforce compensation and benefits expense.
Current wording
Within our segments, U.S. Domestic Package revenues and expenses were primarily impacted by the matters described above.
Previous wording
Certain operating expenses are allocated between our reporting segments using activity-based costing methods. These activity-based costing methods require us to make estimates that impact the amount of each expense category that is attributed to each segment. Changes in these estimates would directly impact the amount of expense allocated to each segment and therefore the operating profit of each reporting segment. Our allocation methodologies are refined periodically, or as necessary to reflect changes in our businesses. While there were no significant changes to our allocation methodologies in the first quarter of 2024, we expect additional air cargo volumes from our recently-announced agreement with the USPS will result in a greater share of air network expense being allocated to Supply Chain Solutions beginning in the second quarter of 2024.
Current wording
Certain operating expenses are allocated between our reporting segments using activity-based costing methods. These activity-based costing methods require us to make estimates that impact the amount of each expense category that is attributed to each segment. Changes in these estimates would directly impact the amount of expense allocated to each segment and therefore the operating profit of each reporting segment. Our allocation methodologies are refined periodically, or as necessary to reflect changes in our businesses. While there were no significant changes to our allocation methodologies in the second quarter of 2024, air cargo volume from our previously-announced agreement with the USPS resulted in immaterial additional air network expense being allocated to Supply Chain Solutions for the quarter. We anticipate this allocation will increase in the second half of the year as the related volume attributable to this agreement increases.
Previous wording
As a normal part of managing our air network, we routinely idle aircraft and engines temporarily for maintenance or to adjust network capacity. As a result of the reduction in volumes experienced during the quarter, we temporarily idled certain aircraft within our network in order to better match capacity with current demand. Temporarily idled assets are classified as held-and-used, and we continue to record depreciation expense for these assets. As of March 31, 2024, we had eight aircraft temporarily idled for an average period of approximately two months. We expect these aircraft to return to revenue service during 2024.
Current wording
As a normal part of managing our air network, we routinely idle aircraft and engines temporarily for maintenance or to adjust network capacity. As a result of the reduction in air volumes, we temporarily idled certain aircraft within our network in order to better match capacity with current demand. Temporarily idled assets are classified as held-and-used, and we continue to record depreciation expense for these assets. As of June 30, 2024, we had eight aircraft temporarily idled for an average period of approximately four months. We expect these aircraft to return to revenue service in the second half of 2024.
Previous wording
As of March 31, 2024, none of our reporting units had indications that an impairment was more likely than not. Approximately $1.5 billion of our consolidated goodwill balance of $4.8 billion is represented by our Global Freight Forwarding, Coyote and Roadie reporting units which, based on our quarterly monitoring, are exhibiting a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods. We do not expect any impairment would have a significant impact on our consolidated financial position, results of operations or cash flows.
Current wording
As of June 30, 2024, none of our reporting units had indications that an impairment was more likely than not. Approximately $1.1 billion of our consolidated goodwill balance of $4.4 billion is represented by our Global Freight Forwarding and Roadie reporting units which, based on our quarterly monitoring, are exhibiting a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods. We do not expect any impairment would have a significant impact on our consolidated financial position, results of operations or cash flows.
Previous wording
Revenue was also negatively impacted by having one less operating day in the first quarter of 2024.
Current wording
Revenue was also negatively impacted by having one less operating day in the first half of 2024.
Previous wording
Business-to-business volume declined 5.5% in the quarter for the reasons described above, driven by declines across a number of sectors including retail, technology and manufacturing. Returns volume increased in the quarter, partially attributable to our addressable market expansion with capabilities like no box, no label returns through Happy Returns and the convenience of our The UPS Store locations.
Current wording
Business-to-business volume declined 4.6% in the quarter (down 5.1% year to date) for the reasons described above, driven by declines across a number of sectors including retail, technology and manufacturing. Returns volume increases in both the quarter and year to date partially offset the declines, primarily attributable to our addressable market expansion with capabilities like no box, no label returns through Happy Returns and the convenience of our The UPS Store locations.
Previous wording
Within our Air products, average daily volume decreases were driven by continued execution under the contract terms with our largest customer as planned, as well as by the impact of other customers making cost trade-offs to our ground network.
Current wording
Within our Air products, average daily volume decreased in both the quarter and year to date. The decrease was driven by continued execution under the contract terms with our largest customer as planned, as well as by the impact of other large customers making cost trade-offs to our ground network products.
Previous wording
In December 2023, we implemented an average 5.9% net increase in base and accessorial rates for both our Air and Ground products. Revenue per piece from our Air products increased for the quarter, while revenue per piece from our Ground products declined. The increase in base and accessorial rates favorably impacted revenue per piece from both Air and Ground products, although it was partially offset by decreases in fuel surcharge revenues and average billable weight per piece, coupled with an unfavorable shift in product mix within our Ground products.
Current wording
Revenue per piece from our Air products increased for the quarter and year to date, while revenue per piece from our Ground products declined for both periods. In December 2023, we implemented an average 5.9% net increase in base and accessorial rates for both our Air and Ground products, which favorably impacted revenue per piece. This was partially offset by decreases in fuel surcharge revenues and average billable weight per piece. The unfavorable shift in product mix and an increase in shorter zone shipments also negatively impacted revenue per piece within our Ground products.
Previous wording
Fuel surcharge revenue decreased $184 million for the quarter, driven by reductions in price per gallon and the impact of lower volumes. We expect fuel surcharge revenue to increase in the second quarter, primarily due to volume growth and the impact of higher surcharge modifiers.
Current wording
We expect fuel surcharge revenue to increase year over year during the second half of 2024.
Previous wording
•A reduction in purchased transportation costs and aircraft block hours, resulting from lower overall volumes and the impact of network optimization initiatives, which drove a reduction in ground volume handled by third-party carriers.
Current wording
•A reduction in purchased transportation costs and aircraft block hours resulting from changes in product mix and network optimization initiatives, partially offset by higher third-party delivery expense required to address increased SurePost volume.
Previous wording
Revenue was also negatively impacted by having one less operating day in the first quarter of 2024.
Current wording
Year-to-date revenue was also negatively impacted by having one less operating day in the first half of 2024.
Previous wording
Average daily volume for both export and domestic products decreased in the quarter. Business-to-consumer volume decreased 11.1% and business-to-business volume decreased 3.7%. Challenging economic conditions and geopolitical factors contributed to the volume declines. Volume declines were primarily attributable to SMBs, although volume from large customers also declined, with declines driven by the retail and manufacturing sectors, while the technology sector exhibited moderate volume growth. We expect year-over-year average daily volume to be relatively flat in the second quarter and to improve in the second half of the year, dependent on an improvement in global macroeconomic conditions.
Current wording
Average daily volume decreased in the quarter and year-to-date periods for both our export and domestic products, impacted by challenging economic conditions and geopolitical factors. We experienced volume declines from both large customers and SMBs, primarily within the retail and manufacturing sectors. This was partially offset by growth from customers in the technology sector in both the quarter and year-to-date periods. Business-to-business volume decreased 3.9% for the quarter (down 3.8% year to date), while business-to-consumer volume remained relatively flat (down 6.0% year to date). We expect year-over-year average daily volume to improve in the second half of the year, dependent on an improvement in global macroeconomic conditions.
Previous wording
Export volume decreased for the quarter, primarily driven by declines on intra-Europe trade lanes. These declines were partially offset by increases on the Americas to U.S. trade lanes, as manufacturing and distribution moves closer to the U.S. consumer market. We also experienced volume improvements on the China to U.S. trade lane during the quarter. The intra-Europe volume decline was primarily due to lower consumer spending as a result of economic conditions.
Current wording
For both the quarter and year to date, the decrease in export volume was driven by declines on intra-Europe trade lanes as challenging economic conditions continued to impact consumer spending. For the quarter, these declines were partially offset by growth in 11 of our top 20 export countries. This included improvements on the Americas to U.S. trade lanes as manufacturing and distribution moves closer to the U.S. consumer market, and improvements on the China to U.S. trade lane driven by retail, technology and manufacturing customers.
Previous wording
Total revenue per piece increased 2.0% for the quarter, primarily due to base rate increases. This was partially offset by declines in fuel and demand-related surcharges, as well as unfavorable currency movements. Excluding the impact of currency, revenue per piece increased 2.5% for the quarter. We anticipate overall revenue per piece growth will be relatively flat in the second quarter and will decline in the second half of the year due to the continued shift to non-premium products.
Current wording
Total revenue per piece increased 2.4% for the quarter (up 2.2% year to date), primarily due to base rate and fuel surcharge increases. These were partially offset by unfavorable currency movements and declines in demand-related surcharges. Excluding the impact of currency, revenue per piece increased 4.0% for the quarter (up 3.2% year to date). We anticipate overall revenue per piece will increase in the second half of 2024 relative to the prior year, driven by expected volume growth in Asia.
Previous wording
Domestic revenue per piece increased 5.5% for the quarter, primarily due to the rate increases discussed above. Excluding the impact of currency, domestic revenue per piece increased 6.1% for the quarter.
Current wording
Domestic revenue per piece increased 5.6% for the quarter (up 5.5% year to date), driven by base rate increases and favorable shifts in customer and geographic mix, partially offset by unfavorable currency movements. Excluding the impact of currency, domestic revenue per piece increased 8.0% for the quarter (up 7.1% year to date).
Previous wording
•Reductions in the cost of operating our integrated air and ground network, which decreased $125 million, driven by lower fuel prices and reductions in air charters and aircraft block hours.
Current wording
•The cost of operating our integrated air and ground network increased $41 million for the quarter, driven primarily by an increase in the cost of jet fuel. Year to date, network costs decreased $85 million due to a fuel price decline in the first quarter and reductions in air charters and aircraft block hours resulting from volume declines.
Previous wording
Forwarding operating expenses decreased $229 million, primarily due to a reduction of approximately $196 million in purchased transportation expense as a result of lower market rates across our businesses, and decreased volumes in both the airfreight and truckload brokerage businesses. We expect our operating expenses will increase during the second half of 2024 driven by expected higher volumes.
Current wording
We expect our operating expenses will increase during the second half of 2024, driven by expected volume growth.
Previous wording
As a result of the factors described above, operating profit decreased $172 million for the quarter, with operating margin decreasing 280 basis points to 15.4%. Adjusted operating profit decreased $124 million and adjusted operating margin decreased 170 basis points to 16.0%.
Current wording
As a result of the factors described above, operating profit decreased $165 million for the quarter ($337 million year to date), with operating margin decreasing 360 basis points to 16.4% (down 320 basis points to 15.9% year to date). Adjusted operating profit decreased $78 million ($202 million year to date) and adjusted operating margin decreased 150 basis points to 18.9% (down 160 basis points to 17.5% year to date).
Previous wording
Increased geopolitical uncertainty continues to impact volumes in our International Package segment. As previously disclosed, substantially all of our operations in Russia and Belarus have been suspended, and we expect to complete the liquidation of our Small Package and Forwarding and Logistics subsidiaries in these countries by end of 2024. Substantially all of our operations in Ukraine remain indefinitely suspended. These actions have not had, and are not expected to have, a material impact on us.
Current wording
Increased geopolitical uncertainty continues to impact volumes in our International Package segment. As previously disclosed, substantially all of our operations in Russia have been suspended and we expect to complete the liquidation of our Small Package and Forwarding and Logistics subsidiaries in Russia by the end of 2024. In July 2024, we completed liquidation of our operations in Belarus. Substantially all of our operations in Ukraine remain indefinitely suspended. These actions have not had, and are not expected to have, a material impact on us.
Previous wording
Within our Logistics businesses, revenue increased $132 million. The acquisition of MNX Global Logistics in the fourth quarter of 2023 contributed $90 million of the increase, with the remainder driven by growth in clinical trials and pharmaceuticals within our healthcare operations. Revenue in mail services remained relatively flat as rate increases and a favorable shift in product characteristics were offset by a decrease in volume.
Current wording
Within our Logistics businesses, revenue increased $115 million for the quarter (up $247 million year to date). The acquisition of MNX Global Logistics in the fourth quarter of 2023 contributed $88 million of the increase for the quarter ($178 million year to date), with the remainder driven by growth in clinical trials and pharmaceuticals business within our healthcare operations. We expect these trends will continue in the second half of the year. Revenue in mail services remained relatively flat for both the quarter and year to date as decreases in volume were partially offset by rate increases and a favorable shift in product characteristics. We expect our mail services business to generate volume and revenue growth during the second half of the year.
Previous wording
Revenue from other businesses within Supply Chain Solutions decreased, driven by a reduction of $69 million from lower volumes under contracts with the USPS. Revenue from transition services provided to the acquirer of UPS Freight declined $34 million as we continue to wind down these arrangements. These reductions were partially offset by higher revenue from our digital businesses due to business growth and the impact of the acquisition of Happy Returns in the fourth quarter of 2023. We expect revenue from our other Supply Chain Solutions businesses will increase during the second half of 2024 as this is where we will report the revenue related to the additional air cargo volume under our recently announced agreement with the USPS.
Current wording
Revenue from other businesses within Supply Chain Solutions increased for the quarter, but decreased year to date.
Previous wording
Total operating expenses and adjusted operating expenses within Supply Chain Solutions decreased for the quarter.
Current wording
Total operating expenses and adjusted operating expenses within Supply Chain Solutions increased for the second quarter and year to date.
Previous wording
Logistics operating expenses increased $124 million, driven by the impact of the acquisition of MNX Global Logistics which contributed $88 million of the increase. Expenses in our healthcare operations increased $43 million, primarily due to higher rates for third-party transportation. Operating expenses in mail services were relatively flat. On an unadjusted basis, Logistics operating expenses were also impacted by a charge to write down the value of certain trade names acquired as part of the Bomi Group acquisition.
Current wording
Logistics operating expenses increased $145 million for the quarter (up $269 million year to date), driven primarily by the impact of the acquisition of MNX Global Logistics which contributed $87 million of the increase for the quarter ($175 million year to date). Expenses in our healthcare operations increased $46 million for the quarter ($89 million year to date), primarily due to higher rates for third-party transportation. Operating expenses in mail services were relatively flat for both the quarter and year to date. We expect that Logistics operating expense will continue to increase in the second half of the year, driven by business growth. On an unadjusted basis, Logistics operating expenses were also impacted by a charge during the first quarter to write down the value of certain trade names acquired as part of the Bomi Group acquisition.
Previous wording
Expenses in our other Supply Chain Solutions businesses decreased, largely driven by the reduction in transportation costs incurred to fulfill our obligations to the USPS under existing agreements. Costs incurred to procure transportation for, and provide transition services to, the acquirer of UPS Freight also decreased as we continued to wind down these arrangements. These decreases were partially offset by higher operating costs within our digital businesses. On an unadjusted basis, these decreases were offset by the impact of transformation and other costs, including an expense related to a regulatory matter. We expect expenses in our other Supply Chain Solutions businesses will increase during the second half of 2024, as this is where we will report expenses related to the additional air cargo volume under our recently announced agreement with the USPS.
Current wording
Expenses in our other Supply Chain Solutions businesses increased $77 million for the quarter (up $33 million year to date), largely driven by higher operating costs within our digital businesses due to volume growth and the impact of acquiring Happy Returns. Expenses associated with USPS volumes increased during the second quarter as we began handling volume under our new air cargo agreement. Year to date, the increase was more than offset by lower costs associated with lower USPS volumes during the first quarter. Costs incurred to procure transportation for, and provide transition services to, the acquirer of UPS Freight also continued to decrease in both periods as we continued to wind down these arrangements. On an unadjusted basis, expense was further increased by the impact of transformation and other costs, including expense related to a regulatory matter. We expect expenses in our other Supply Chain Solutions businesses will increase during the second half of 2024 due to volume growth in our digital businesses and under our air cargo agreement with the USPS.
Previous wording
Total compensation and benefits and adjusted total compensation and benefits increased in the first quarter. Compensation costs increased $97 million. The principal factors contributing to the increase were:
Current wording
Total compensation and benefits and adjusted total compensation and benefits increased for both the second quarter and year to date. Compensation costs increased $259 million for the quarter (up $356 million year to date) and on an adjusted basis increased $256 million for the quarter (up $352 million year to date). The principal factors contributing to the overall increase were:
Previous wording
•Direct labor costs increased $199 million. Contractual wage rate increases for our U.S. union workforce resulted in an increase in costs of $328 million. This was partially offset by the impact of reductions in U.S. direct labor hours and administrative headcount due to volume declines, which reduced expense by $207 million. The remaining increase was driven by changes in seniority within our workforce. We expect wage rate growth to remain elevated on a year-over-year basis in the second quarter before moderating during the second half of 2024 as a result of the terms of our contract with the Teamsters.
Current wording
•Direct labor costs increased $349 million for the quarter (up $549 million year to date). Contractual wage rate increases for our U.S. union workforce resulted in an increase in costs of $299 million for the quarter (up $627 million year to date). Productivity improvements reduced direct labor cost by $41 million for the second quarter (down $43 million year to date). Additionally, the impact of lower volumes in the first quarter reduced year-to-date expense by $207 million. The remaining increase for both the quarter and year to date was primarily due to changes in seniority within our workforce. We expect wage rate growth to moderate beginning in the second half of the year as a result of the terms of our contract with the Teamsters.
Previous wording
•Management compensation costs decreased $73 million due to a reduction in incentive compensation expense and lower overall headcount.
Current wording
•Management compensation costs decreased $80 million for the quarter (down $154 million year to date) due to a reduction in incentive compensation expense and lower overall headcount.
Previous wording
Benefits costs increased $78 million for the quarter, and increased $35 million on an adjusted basis. The principal factors driving the increase were:
Current wording
Benefits costs increased $48 million for the second quarter (up $126 million year to date) and on an adjusted basis increased $140 million for the second quarter (up $176 million year to date). The principal factors driving the overall increase were:
Previous wording
•Accruals for paid time off, payroll taxes and other costs increased $43 million, primarily due to contractual wage rate growth.
Current wording
•Accruals for paid time off, payroll taxes and other costs increased $151 million for the quarter (up $194 million year to date), primarily due to contractual wage rate growth.
Previous wording
•Health and welfare costs increased $39 million, driven by increased contributions to multiemployer plans as a result of contractually-mandated rate increases.
Current wording
•Health and welfare costs increased $52 million for the quarter (up $92 million year to date), driven by increased contributions to multiemployer plans as a result of contractually-mandated rate increases.
Previous wording
•Workers' compensation expense decreased $29 million due to favorable developments in prior year claims counts.
Current wording
•Workers' compensation expense decreased $61 million for the quarter (down $90 million year to date) due to favorable developments in prior year claims counts and a reduction in hours worked.
Previous wording
•Other employee benefits expense increased $37 million due to separation costs incurred as we continued to right-size our business for the future. On an adjusted basis, other employee benefits expense remained relatively flat.
Current wording
•Other employee benefits expense decreased $89 million for the quarter (down $52 million year to date) due to higher separation costs incurred in 2023 as we continue to right-size our business. On an adjusted basis, other employee benefits expense remained relatively flat.
Previous wording
The decrease in repairs and maintenance expense was primarily due to the deferral of aircraft engine maintenance, as the declines in volume resulted in the temporary idling of certain aircraft. This was partially offset by an increase in routine repairs to buildings and facilities. We expect these expense trends to continue in the second quarter.
Current wording
The increase in repairs and maintenance expense for both the second quarter and year to date was primarily attributable to higher routine repairs to buildings and facilities. During the second quarter, we also incurred additional aircraft engine maintenance expense due to the timing of required maintenance cycles. We expect these expense trends to continue in the second half of 2024.
Previous wording
We incurred higher depreciation expense as a result of facility automation and expansion projects coming into service. Amortization expense for capitalized software investments in support of our strategic initiatives increased, and we recorded additional amortization expense for intangible assets due to the acquisitions of MNX Global Logistics and Happy Returns in the fourth quarter of 2023.
Current wording
We incurred higher depreciation expense in the second quarter and year to date as a result of facility automation and expansion projects aligned with our strategic objectives. Amortization expense for capitalized software investments in support of our strategic initiatives increased for both periods, and we recorded additional amortization expense for intangible assets arising from the acquisitions of MNX Global Logistics and Happy Returns in the fourth quarter of 2023.
Previous wording
Third-party transportation expense charged to us by air, ocean and ground carriers decreased for the quarter. The changes were primarily driven by:
Current wording
Third-party transportation expense charged to us by air, ocean and ground carriers increased for the quarter, but decreased year to date. The changes were primarily driven by:
Previous wording
•Supply Chain Solutions expense decreased $123 million, driven by volume declines and lower market rates paid for services in our Forwarding businesses. This was partially offset by expense increases in our logistics operations due to business growth and the impact of the acquisition of MNX Global Logistics.
Current wording
•Supply Chain Solutions expense increased $64 million for the second quarter, driven by growth in healthcare logistics and the impact of the acquisition of MNX Global Logistics, as well as volume growth in our digital businesses. These impacts were partially offset by expense declines in truckload brokerage due to lower volumes and market rates paid for services. Year to date, expense decreased $59 million as the impact of volume declines and lower market rates across our forwarding businesses more than offset increases in our logistics businesses.
Previous wording
The reduction in fuel expense for the quarter was driven by lower prices for jet fuel, diesel and gasoline, and the impact of lower volumes. Market prices and the manner in which we purchase fuel influence our costs. The majority of our fuel purchases utilize index-based pricing formulas plus or minus a fixed locational/supplier differential. While many of the indices are correlated, each index may respond differently to changes in underlying prices, which in turn can drive variability in our costs.
Current wording
The increase in fuel expense for the quarter was mainly attributable to higher prices for jet fuel. Year to date, overall fuel expense decreased, driven by the combination of lower prices for jet fuel and the impact of volume declines in the first quarter, as well as lower prices for diesel and gasoline. Market prices and the manner in which we purchase fuel influence our costs. The majority of our fuel purchases utilize index-based pricing formulas plus or minus a fixed locational/supplier differential. While many of the indices are correlated, each index may respond differently to changes in underlying prices, which in turn can drive variability in our costs.
Previous wording
Other occupancy expense increased for the quarter, primarily due to increases in property rents. A decrease in utilities expense as a result of declines in rates and usage was offset by higher costs related to winter weather events.
Current wording
Other occupancy expense increased for the quarter and year to date, primarily due to increases in property rents. A decrease in utilities expense as a result of declines in rates and usage was offset by higher costs related to winter weather events during the first quarter.
Showing the first 40 of 69 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
•Revenue from transition services provided to the acquirer of UPS Freight continued to decrease in both the quarter and year-to-date periods as we continue to wind down these arrangements.