UPS 2006 Annual Report Download - page 5

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2006 Revenue by Segment
(in billions)
64% U.S. domestic package
19% International package
17% Supply chain and freight
$9.1
$30.4
$8.0
$0
$0.8
$1.6
$2.4
$3.2
$4.0
Net Income (in billions)
06
4.2
05
040302
3.9
3.3
2.9
3.2
slashing a day or more from transit time in 3 mil-
lion ZIP code pairings. We also enhanced a variety
of shipping technologies to provide more visibility
tools for both small package and freight deliveries.
Our international small package business contin-
ued to deliver outstanding results. Profi t increased
over 14 percent to $1.7 billion. Here, too, we
invested substantially to upgrade services and facili-
ties in key markets around the globe. We extended
daily, time-defi nite delivery options in 30 countries,
and enhanced a number of technology tools to sim-
plify the complexities of international trade. We
also completed the expansion of our Cologne air
hub, an investment of $135 million, which nearly
doubled package handling capacity and makes the
facility one of the most sophisticated in the world.
The UPS integrated ground and air business model
in Europe is performing extremely well. The in-
tegrations of LYNX Express and Stolica S.A. are
proceeding smoothly. LYNX increases the density
of our business in the United Kingdom, resulting
in productivity and effi ciency gains. And Stolica
S.A. gives UPS a strong position in Poland, a key
European market with great potential for growth.
Finally, in Asia we expanded our air network to 21
weekly fl ights to and from the United States and China.
We also completed the extension of our international
express service to 330 cities in China, which account for
about 85 percent of China’s global trade. And we intro-
duced our retail concept in Asia with the opening of two
locations in China and two in India that are similar to
The UPS Store® in the United States and Canada.
SUPPLY CHAIN AND FREIGHT
The Supply Chain and Freight segment produced
disappointing results. This segment includes our
heavy freight business (ground, air, and ocean),
brokerage, and distribution operations. It experi-
enced diffi culties integrating two large acquisitions
in 2006. With these integrations now behind us, we
have signifi cant opportunity to optimize these net-
works, improve margins, and grow the top line.
In the air freight business we have achieved network
synergies by transitioning most of the acquired freight
business to UPS aircraft and by consolidating freight
handling facilities into the UPS network. Our goal
going forward is to maximize capacity utilization
with the right mix of business on each airplane.
In the ground freight unit, 2006 was a building
year. We rebranded the Overnite acquisition as
UPS FreightSM, deployed technology enhancements,
cross-trained both the freight and small package sales
3