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UPS: What to Do With Cash Pile?

ATLANTA ( TheStreet) -- Among the "problems" that UPS UPS (UPS - Get Report) faces is deciding what to do with its excess cash.

"We are going to be back soon hopefully to that problem of what to do with excess cash generation," said CFO Kurt Kuehn, during an earnings conference call on Tuesday. "We have no intentions of building a large hoard of cash."

Kuehn said the company will look at a share-repurchase: a dividend increase is also possible. "We did redistribute 100% of net income last year," he noted.

The company's strong position reflects both increased revenue and reduced spending. Capital expenditures, set for $1.8 billion this year, will be below their historic range for the next few years, thanks to completions of two hubs in China, expansion of the Louisville hub and recent upgrading of the aircraft fleet.

Meanwhile, the recession has ended, shipping volumes are up and, as it cycles through the contracts it negotiated in a recession, UPS sees opportunity. "During the depths of the recession, there were huge pressures on pricing," Kuehn said. "We think perhaps we should be charging a little higher (but) it takes a year or so at least to cycle through contracts."

One more positive note on the earnings side: UPS envisions a gain of 10 cents a share, beginning in 2011, from reduced costs resulting from the elimination of 1,800 positions. Current-year savings will be minimal due to the cost of offering separation and relocation packages to about 1,100 workers.
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