UPS 2006 Annual Report Download - page 97

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
NOTE 12. SEGMENT AND GEOGRAPHIC INFORMATION
We report our operations in three segments: U.S. Domestic Package operations, International Package
operations, and Supply Chain & Freight operations. Package operations represent our most significant business
and are broken down into regional operations around the world. Regional operations managers are responsible
for both domestic and export operations within their geographic area.
U.S. Domestic Package
Domestic Package operations include the time-definite delivery of letters, documents, and packages
throughout the United States.
International Package
International Package operations include delivery to more than 200 countries and territories worldwide,
including shipments wholly outside the United States, as well as shipments with either origin or distribution
outside the United States. Our International Package reporting segment includes the operations of our Europe,
Asia, and Americas operating segments.
Supply Chain & Freight
Supply Chain & Freight includes our forwarding and logistics operations, UPS Freight, and other
aggregated business units. Our forwarding and logistics business provides services in more than 175 countries
and territories worldwide, and includes supply chain design and management, freight distribution, customs
brokerage, mail and consulting services. UPS Freight offers a variety of LTL and TL services to customers in
North America. Other aggregated business units within this segment include Mail Boxes, Etc. (the franchisor of
Mail Boxes, Etc. and The UPS Store) and UPS Capital.
In evaluating financial performance, we focus on operating profit as a segment’s measure of profit or loss.
Operating profit is before investment income, interest expense, and income taxes. The accounting policies of the
reportable segments are the same as those described in the summary of accounting policies (see Note 1), with
certain expenses allocated between the segments using activity-based costing methods. Unallocated assets are
comprised primarily of cash, marketable securities, short-term investments, and equity-method real estate
investments.
Segment information as of, and for the years ended, December 31 is as follows (in millions):
2006 2005 2004
Revenue:
U.S. Domestic Package .......................................... $30,456 $28,610 $26,960
International Package ............................................ 9,089 7,977 6,809
Supply Chain & Freight .......................................... 8,002 5,994 2,813
Consolidated ............................................... $47,547 $42,581 $36,582
Operating Profit:
U.S. Domestic Package .......................................... $ 4,923 $ 4,493 $ 3,702
International Package ............................................ 1,710 1,494 1,149
Supply Chain & Freight .......................................... 2 156 138
Consolidated ............................................... $ 6,635 $ 6,143 $ 4,989
F-37