United Parcel Service's CEO Discusses Q1 2012 Results - Earnings Call Transcript

United Parcel Service (UPS)

Q1 2012 Earnings Call

April 26, 2012 8:30 am ET

Executives

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

Analysts

Christian Wetherbee - Citigroup Inc, Research Division

Nathan Brochmann - William Blair & Company L.L.C., Research Division

Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division

Ken Hoexter - BofA Merrill Lynch, Research Division

Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division

Edward M. Wolfe - Wolfe Trahan & Co.

Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division

Justin B. Yagerman - Deutsche Bank AG, Research Division

Arthur W. Hatfield - Raymond James & Associates, Inc., Research Division

William J. Greene - Morgan Stanley, Research Division

David Vernon - Sanford C. Bernstein & Co., LLC., Research Division

H. Peter Nesvold - Jefferies & Company, Inc., Research Division

John L. Barnes - RBC Capital Markets, LLC, Research Division

Brandon R. Oglenski - Barclays Capital, Research Division

David P. Campbell - Thompson, Davis & Company

Christopher J. Ceraso - Crédit Suisse AG, Research Division

David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division

Helane R. Becker - Dahlman Rose & Company, LLC, Research Division

Presentation

Operator

Good morning, my name is Steven, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the UPS Investor Relations' First Quarter 2012 Earnings Conference Call. [Operator Instructions] It is now our pleasure to turn the floor over to your host, Mr. Andy Dolny, UPS Treasurer and Investor Relations Officer. Sir, the floor is yours.

Andy Dolny

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.

Before they 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 risk and uncertainties, which are described in detail in our 2011 Form 10-K report. This report is available on the UPS Investor Relations website and from the Securities and Exchange Commission.

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 are also available on the UPS Investor Relations website in the Financials section.

In March, UPS announced it reached an agreement to acquire TNT Express. Although we expect the transaction to close before the end of the year, any guidance that we provide will not include the results of TNT operations nor any synergies or integration expense associated with the acquisition.

As always, today's call is being webcast and is also available on the UPS Investor Relations website. [Operator Instructions] I thank you in advance for your cooperation.

Now let me turn it over to Scott.

D. Scott Davis

Thanks, Andy. Good morning, everyone. 2012 is off to a good start for a couple of reasons. First, we announced our intention to acquire TNT Express, an investment that will contribute to our growth for many years to come.

Secondly, looking more near-term, first quarter results built upon momentum from last year. We continue to see strong demand from UPS products and services, especially in the U.S. and Europe. Both U.S. Domestic and Supply Chain and Freight segments delivered double-digit profit growth in the quarter.

Back in January, we discussed that expectations for the U.S. economy were improving, especially compared to the rest of the world. During the quarter, the most positive news has come from the U.S. where indications of economic rebound are evident. Retail sales have grown faster than expected, and the employment environment has improved.

On the other hand, economies in other parts of the world continue to face challenges. Europe struggles under austerity measures, and slowing growth persists out of Asia.

Despite this, we continue to see our export volume in both Europe and intra-Asia perform well. UPS is executing on its strategy of investing to grow with the announcement of 2 acquisitions.

First, in February, we acquired the European consumer delivery company, Kiala. It's retail delivery network and unique technology will benefit UPS, as we continue to look for ways to serve the growing B2C market, especially outside the U.S. As you know, last month, UPS announced an offer to acquire TNT Express. While we have not closed on the transaction, we have made initial contact with the regulators.

UPS remains confident it will receive all required approvals. The acquisition of TNT will diversify our global revenue, increasing our portfolio of solutions and expanding our geographic footprint. We're excited about the prospects of adding such a strong and respected company to the UPS family.

During the quarter, UPS received accolades from a number of organizations for our reputation, ethics and brand. One of the more widely recognized honors we received was the #1 ranking with Fortune Magazine as our industry's most admired company. This is the 27th time UPS has received this recognition in the 31 years the award has been given.

Also during the quarter, UPS My Choice, the B2C solution we introduced in October, surpassed 1 million subscribers. UPS has received a positive response from customers, as they enjoyed unprecedented levels of visibility and control over their deliveries.

Before I turn it over to Kurt, I want to congratulate the almost 6,000 members of the UPS Circle of Honor: Individuals who have achieved 25 years or more of accident-free driving. In fact, this year, we recognized our first driver to surpass the 50-year milestone. That's truly amazing. This is just one example of how these drivers and the rest of the approximately 400,000 UPS's around the world contribute to our company's success.

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