UPS 2007 Annual Report Download - page 5

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O n August 28, we marked the centennial anniversary
of our founding. We celebrated our 100th year of service
in our birthplace, Seattle, Washington, by recognizing
the people who made it possible — our founders, our
valued customers, and current and retired employees.
Shortly thereafter, we reached a labor agreement with
the International Brotherhood of Teamsters, covering
more than 240,000 UPS employees, 10 months ahead
of the July 2008 expiration of our current contract.
The new contract extends through July 2013, ensuring
service continuity for our customers.
The labor agreement satisfactorily resolved the issues
we identifi ed as signifi cant when negotiations began.
It does so at a manageable cost to UPS, while providing
us the fl exibilities we need to remain competitive in the
marketplace. In short, we believe this is a good contract
for our employees, our customers and our shareowners.
UPS’s new fi nancial policy will enable the company to
migrate to a more effi cient capital structure. After
study ing our options for some time, we determined
we could signifi cantly increase the debt component
of the balance sheet and enhance shareowner value
by reducing the company’s cost of capital.
We intend to manage our balance sheet to a target ratio
within a range of 50 to 60 percent of funds from opera-
tions to total debt. At the end of 2007, we were at
75 percent. The new policy permits us to increase
investments in the business, undertake larger share
repurchases and pursue growth opportunities.
In line with this new policy, the Board of Directors
increased stock repurchase authorization to $10 billion.
We intend to complete the share repurchases by the end
of 2009. Timing will depend on market conditions.
UPS has a long-standing commitment to a very strong
balance sheet and that will not change. We are putting
our balance sheet strength to work to deploy capital
more effi ciently for the benefi t of our shareowners,
while maintaining a great deal of fi nancial fl exibility.
IN VESTING IN THE FUTURE
In addition to these noteworthy events, in 2007 UPS:
• Delivered record revenue, operating profi t and diluted
earnings per share, when adjusted for the impact of
several one-time charges
• M aintained our industry-leading adjusted operating
margin
• Invested in the company’s future through new services
and technology, infrastructure expansion and aircraft
• Returned signifi cant amounts of cash to our share-
owners: $1.7 billion in dividends and $2.6 billion
to repurchase 35.9 million shares of stock
GLO BAL SM ALL PACKAGE N ET WORK
Worldwide, UPS delivered a record number of packages —
3.97 billion. In the United States, slower GDP growth
in 2007 than in recent years restrained the pace of
volume growth. Even so, we experienced the highest
volume in history, and pricing remained fi rm. Revenue
increased 1.7 percent to $31.0 billion. However, the
U.S. Package segment reported a $1.5 billion loss for
the year, as a result of a $6.1 billion pre-tax payment
as part of the new labor agreement to withdraw
approx imately 45,000 UPS Teamster employees from
their pension plan and set up a new, jointly trusteed
plan. Without this payment and other one-time charges,
operating profi t for the U.S. domestic operation would
have been $4.8 billion.
CHAIRMAN’S MESSAGE
we’re moving ahead
The year 2007 was particularly memorable for UPS. We celebrated 100 years of service,
negotiated an historic labor contract, and developed a new fi nancial policy —
announced in January 2008 — aimed at enhancing shareowner value.
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