UPS 2006 Annual Report Download - page 18

We place significant value on the quality of our customer relationships, and we conduct comprehensive
research to monitor customer perceptions. Since 1993, we have conducted telephone interviews with shipping
decision-makers virtually every business day to determine their satisfaction with small package carriers and
perception of performance on 19 service factors. Results from this survey for 2006 continue to show high levels
of customer satisfaction.
Brand Equity. We have built a leading and trusted brand in our industry – a brand that stands for quality
service, reliability and product innovation. The distinctive appearance of our vehicles and the friendliness and
helpfulness of our drivers are major contributors to our brand equity.
Distinctive Culture. We believe that the dedication of our employees results in large part from our
distinctive “employee-owner” concept. Our employee stock ownership tradition dates from 1927, when our
founders, who believed that employee stock ownership was a vital foundation for successful business, first
offered stock to employees. To facilitate employee stock ownership, we maintain several stock-based
compensation programs.
Our long-standing policy of “promotion from within” complements our tradition of employee ownership,
and this policy makes it generally unnecessary for us to hire managers and executive officers from outside UPS.
The vast majority of our management team began their careers as full-time or part-time hourly UPS employees,
and has spent their entire careers with us. Our chief executive officer and many of our executive officers have
more than 30 years of service with UPS and have accumulated a meaningful ownership stake in our company.
Therefore, our executive officers have a strong incentive to effectively manage UPS, which benefits all our
shareowners.
Financial Strength. Our balance sheet reflects financial strength that few companies can match. As of
December 31, 2006, we had a balance of cash, cash equivalents, marketable securities and short-term investments
of approximately $1.983 billion and shareowners’ equity of $15.482 billion. Long-term debt was $3.133 billion.
We carry long-term debt ratings of AAA/Aaa from Standard & Poor’s and Moody’s, respectively, reflecting our
low use of debt and strong capacity to service our obligations. Our financial strength gives us the resources to
achieve global scale and to make investments in technology, transportation equipment and buildings as well as to
pursue strategic opportunities which will facilitate our growth.
Growth Strategy
Our growth strategy takes advantage of our competitive strengths while maintaining our focus on meeting or
exceeding our customers’ requirements. The principal components of our growth strategy are:
Build on Our Leadership Position in Our U.S. Business. We believe that our tradition of reliable package
delivery service, our experienced and dedicated employees and our unmatched integrated air and ground network
provide us with the advantages of reputation, service quality and economies of scale that differentiate us from our
competitors. Our strategy is to increase domestic revenue through cross-selling our existing and new services to
our large and diverse customer base, to limit the rate of expense growth and to employ technology-driven
efficiencies to increase operating profit.
Continued International Expansion. We have built a strong international presence through significant
investments over several decades. The international package delivery market continues to grow at a faster rate
than that of the U.S. We will use our worldwide infrastructure and broad product portfolio to grow high-margin
premium services and to implement cost, process and technology improvements in our international operations.
Both Europe and Asia offer significant opportunities for growth.
Europe is our largest region outside the United States – accounting for approximately half of our
international revenue.
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