UPS 2006 Annual Report Download - page 11

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Revenue (in billions)
$0
$10
$20
$30
$40
$50
06
47.6
05
040302
42.6
36.6
33.5
31.3
Diluted EPS (in dollars)
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$0
06
3.86
05
040302
3.47
2.93
2.55
2.81
0%
5%
10%
15%
20%
25%
Return on Invested Capital
(in percent)
06
22.1
05
040302
19.7
17.9
17.4
17.3
During this fi ve-year period, UPS completed
11 acquisitions at a total investment of almost
$1.8 billion. These acquisitions have extended
the UPS presence in key geographies around the
world—notably China, Japan, and Europe. In
addition, acquisitions have broadened the breadth
of capabilities we offer, which now include freight
forwarding, time-defi nite delivery of heavy air
freight, and less-than-truckload services.
The second priority for our use of cash is
return to shareowners through dividends and
share repurchases.
Dividend growth has been impressive in the last fi ve
years, with declared dividends doubling to $1.52
per share in 2006. The pay-out ratio has gradually
increased to 39 percent in 2006. And dividend yield
at 2 percent is above the average yield of the S&P
500 Index.
Share repurchases have played a signifi cant role in
returning value to shareowners. From 2002 through
2006, UPS repurchased almost 102 million shares
at a total cost of over $7 billion.
The bottom line is that we have invested $26 billion
in the last fi ve years in capital expenditures,
acquisitions, dividends, and share repurchases—all
to enhance long-term value for shareowners.
LOOKING TO THE FUTURE
We are on track to attain our 2010 performance goals
(which are based on 2005 results), despite the challenge
a slower-growth U.S. economy will bring in 2007.
With organic revenue growth between 6 and
8 percent, by 2010 UPS should realize revenue of
approximately $60 billion. Business unit contribu-
tion to operating profi t should evolve somewhat,
with the International segment contributing about
33 percent (compared with 26 percent in 2006). The
U.S. Small Package segment should remain strong
and post steady gains, while the Supply Chain
and Freight segment is expected to be producing
positive returns. Earnings per share compound
annual growth rate is expected to range between 9
and 14 percent.
By 2010, cash from operations should exceed
$9 billion, more than a 50 percent increase over
2006 results. Our approach to the use of cash likely
will not change dramatically over the next several
years. We are dedicated to reinvesting in the business,
and will be patient and careful with our investment
decisions. We also intend to continue returning
cash directly to shareowners in the form of in-
creased dividends and share repurchases. Decisions
on the magnitude and form of distributions will
9