Bank of America Merrill Lynch 2018 Transportation Conference UPS CFO Richard Peretz

Transcription

1 Bank of America Merrill Lynch 2018 Transportation Conference UPS CFO Richard Peretz May 15,

2 Forward-Looking Statements Presentations may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 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: general economic conditions, both in the U.S. and internationally; significant competition on a local, regional, national, and international basis; changes in our relationships with our significant customers; existing complex and stringent regulations in the U.S. and internationally (including tax laws and regulations), changes to which can impact our business; increased security requirements that may increase our costs of operations and reduce operating efficiencies; legal, regulatory or market responses to global climate change; negotiation and ratification of labor contracts; strikes, work stoppages and slowdowns by our employees; the effects of changing prices of energy, including gasoline, diesel and jet fuel, and interruptions in supplies of these commodities; changes in exchange rates or interest rates; our ability to maintain the image of our brand; breaches in data security; disruptions to the Internet or our technology infrastructure; our ability to accurately forecast our future capital investment needs; exposure to changing economic, political and social developments in international and emerging markets; changes in business strategy, government regulations, or economic or market conditions that may result in substantial write-downs, impairment of our assets; increases in our expenses or funding obligations relating to employee health, retiree health and/or pension benefits; the potential for various claims and litigation related to labor and employment, personal injury, property damage, business practices, environmental liability and other matters; our ability to realize the anticipated benefits from acquisitions, joint ventures or strategic alliances; our ability to manage insurance and claims expenses; severe weather of other natural or manmade disasters; and other risks discussed in our filings with the Securities and Exchange Commission from time to time, including our Annual Report on Form 10-K for the year ended December 31, 2017, or described from time to time in our future reports filed with the Securities and Exchange Commission. You should consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. We do not undertake any obligation to update forward-looking statements to reflect events, circumstances, changes in expectations, or the occurrence of unanticipated events after the date of those statements. 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 such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements. Information included in all presentations, including comparisons to prior periods, may reflect adjusted results. See appendix for reconciliations of adjusted results and other non-gaap financial measures United Parcel Service of America, All rights reserved. 2

3 Connecting Global Buyers & Sellers $2B Europe Commitment 220+ Countries and Territories 5 quarters of Double Digit Export Growth Expanded SC&F Services Through Seamless Cross-border Movements 3

4 UPS Financial Foundation 2018 Free Cash Flow Guidance * Refer to Appendix for 2017 FCF Reconciliation Around $4.5 to 5 Billion No current plans to make discretionary pension contribution in 2018 or FCF remains solid throughout business units. Continue to evaluate global liquidity. Opportunistic with pension contribution in and beyond cash tax rate expected to be mid-teens. Stable or growing dividend for almost 50 years Strongest dividend yield amongst transports*** Strong Stewards of Capital Re-invest in the business Dividends are a priority Maintain a strong balance sheet Balanced approach to share repurchases 4

5 Investing for Greater Efficiency & Flexibility CapEx Facilities Technology Vehicles Returns $800M to $1B in Savings Incremental Growth Project Deployment Costs Premium Air Products Currently in the first year of a 3 year peak capital phase. We expect CapEx to return to historical levels Benefits are expected to build as investments are activated Strong International and US Air Margins Aircraft New Transformation Initiatives 5

6 Transformation Improve efficiency of our business. Better align resources to growth opportunities. Generate higher financial returns for shareowners. Announced U.S. Voluntary Retirement Program Global Procurement and many other initiatives Majority of benefits to the U.S. Domestic business segment. Host Investor Conference in several months. 6

7 UPS 2018 Financial Targets (Non-GAAP) 2018 adjusted EPS* of $7.03 to $7.37, +17% to 23%. 2Q18 and 3Q18 will have the highest EPS growth, 22% to 26% growth. 4Q18 EPS growth in the mid-teens. Expected free cash flow of $4.5 to $5.0 billion this year. Expect effective tax rate of 23% to 24% for remaining quarters. CapEx between $6.5 to $7.0 billion for year. New Transformation initiatives not included in guidance *Over 2017 Adjusted Results 7

8 UPS is Well Positioned Expanding Global Opportunities Advancing the UPS Smart Global Logistics Network Strong Financial Foundation 8

9 Adjusted Net Income and EPS Reconciliation (amounts in millions, except per share amounts) Q18 GAAP Net Income $ 4,905 $ 1,345 GAAP Diluted Earnings Per Share $ 5.61 $ 1.55 Operating Expenses: Transfer heatlhcare coverage to MEP $ - $ - TNT Termination Fee and Related Expenses - - Gain Upon Liquidation of Foreign Subsidiary - - MEPP withdrawal liability - - Pension Mark to Market Real Estate Gain - - Total Adjustmets to Operating Expenses: $ 800 $ - Tax-Effect of Above Items (193) - Impact of Tax Reform (258) - Total Adjustments to Net Income $ 349 $ - Adjusted Net Income $ 5,254 $ 1,345 Divided By: Diluted WAVG Shares Outstanding Impact of Adjustments to Diluted EPS $ 0.39 $ - Adjusted Diluted Earnings Per Share $ 6.00 $ 1.55 Shareholder Distributions Dividends $ 2,928 $ 840 Share Repurchases 1, Total $ 4,744 $ 1,095 % Adjusted Net Income - Dividends 56% 62% % Adjusted Net Income - Share Repurchases 35% 19% % Adjusted Net Income Returned to Shareholders 90% 81% 9

10 Adjusted Free Cash Flow Reconciliation Net Increase (Decrease) in Cash and Cash Equivalents Preliminary Year-to-Date (amounts in millions) December 31 Cash flows from operating activities $ 1,479 Cash flows used in investing activities (4,975) Cash flows from financing activities 3,287 Effect of exchange rate changes on cash and cash equivalents 53 Net increase (decrease) in cash and cash equivalents $ (156) Reconciliation of Free Cash Flow (non-gaap) Preliminary Year-to-Date (amounts in millions) December 31 Cash flows from operating activities $ 1,479 Capital expenditures (5,227) Proceeds from disposals of PP&E 24 Net change in finance receivables 5 Other investing activities 1 Free cash flow (non-gaap) $ (3,718) Discretionary pension contributions 7,291 Free cash flow, excluding discretionary pension contributions (non-gaap) $ 3,573 10