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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
24
Results of Operations—Segment Review
The results and discussions that follow are reflective of how our executive management monitors the performance of our
reporting segments. We supplement the reporting of our financial information determined under generally accepted accounting
principles (“GAAP”) with certain non-GAAP financial measures, including operating profit, operating margin, pre-tax income,
net income and earnings per share adjusted for the non-comparable items discussed previously. We believe that these adjusted
measures provide meaningful information to assist investors and analysts in understanding our financial results and assessing
our prospects for future performance. We believe these adjusted financial measures are important indicators of our recurring
results of operations because they exclude items that may not be indicative of, or are unrelated to, our core operating results,
and provide a better baseline for analyzing trends in our underlying businesses.
U.S. Domestic Package Operations
Year Ended December 31, % Change
2012 2011 2010 2012 / 2011 2011 / 2010
Average Daily Package Volume (in thousands):
Next Day Air 1,277 1,206 1,205 5.9 % 0.1%
Deferred 1,031 975 941 5.7 % 3.6%
Ground 11,588 11,230 11,140 3.2 % 0.8%
Total Avg. Daily Package Volume 13,896 13,411 13,286 3.6 % 0.9%
Average Revenue Per Piece:
Next Day Air $ 19.93 $ 20.33 $ 19.14 (2.0)% 6.2%
Deferred 13.06 13.32 12.50 (2.0)% 6.6%
Ground 7.89 7.78 7.43 1.4 % 4.7%
Total Avg. Revenue Per Piece $ 9.38 $ 9.31 $ 8.85 0.8 % 5.2%
Operating Days in Period 252 254 253
Revenue (in millions):
Next Day Air $ 6,412 $ 6,229 $ 5,835 2.9 % 6.8%
Deferred 3,392 3,299 2,975 2.8 % 10.9%
Ground 23,052 22,189 20,932 3.9 % 6.0%
Total Revenue $ 32,856 $31,717 $29,742 3.6 % 6.6%
Operating Expenses (in millions):
Operating Expenses $ 32,397 $27,953 $26,504 15.9 % 5.5%
Defined Benefit Plans Mark-to-Market Charge (3,177)(479)(31)
Restructuring Charge — — (98)
Gains (Losses) on Real Estate Transactions —(15) 109
Multiemployer Pension Plan Withdrawal Charge (896) — —
Adjusted Operating Expenses $ 28,324 $27,459 $26,484 3.2 % 3.7%
Operating Profit (in millions) and Operating Margin:
Operating Profit $ 459 $ 3,764 $ 3,238 (87.8)% 16.2%
Adjusted Operating Profit $ 4,532 $ 4,258 $ 3,258 6.4 % 30.7%
Operating Margin 1.4% 11.9% 10.9%
Adjusted Operating Margin 13.8% 13.4% 11.0%