UPS 2010 Annual Report Download - page 35

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Our U.S. Domestic Package, International Package, and Supply Chain & Freight segments were all
positively affected by the worldwide economic recovery in 2010. Our operating results had deteriorated in 2008
and 2009, due to the severity and length of the economic recession. Growth in world trade, U.S. industrial
production and retail sales positively impacted volume in our package delivery, LTL and forwarding operations
in 2010. Additionally, cost containment initiatives and better network efficiencies resulted in improving
operating profit margins for our small package operations. Our consolidated results are presented in the table
below:
Year Ended December 31, % Change
2010 2009 2008 2010 /2009 2009 /2008
Revenue (in millions) ............................. $49,545 $45,297 $51,486 9.4% (12.0)%
Operating Expenses (in millions) .................... 43,671 41,496 46,104 5.2% (10.0)%
Operating Profit (in millions) ....................... $ 5,874 $ 3,801 $ 5,382 54.5% (29.4)%
Operating Margin ................................ 11.9% 8.4% 10.5%
Average Daily Package Volume (in thousands) ......... 15,574 15,064 15,539 3.4% (3.1)%
Average Revenue Per Piece ........................ $ 10.24 $ 9.83 $ 10.70 4.2% (8.1)%
Net Income (in millions) ........................... $ 3,488 $ 2,152 $ 3,003 62.1% (28.3)%
Basic Earnings Per Share .......................... $ 3.51 $ 2.16 $ 2.96 62.5% (27.0)%
Diluted Earnings Per Share ......................... $ 3.48 $ 2.14 $ 2.94 62.6% (27.2)%
Items Affecting Comparability
The year-over-year comparisons of our financial results are affected by the following items (in millions):
Year Ended December 31,
2010 2009 2008
Operating Expenses:
Restructuring Charge ................................ $ 98 $— $—
Gain on Sales of Businesses .......................... (20) — —
Gain on Sale of Real Estate ........................... (109) — —
Aircraft Impairment Charge ........................... — 181 —
Goodwill Impairment Charge ......................... — — 548
Intangible Impairment Charge ......................... — — 27
Interest Expense:
Currency Remeasurement Charge ...................... — 77 —
Income Tax Expense (Benefit) from the Items Above .......... 37 (94) —
Charge for Change in Tax Filing Status for German Subsidiary . . . 76 — —
Restructuring Charge
In 2010, we streamlined the management structure in our U.S. Domestic Package segment, and incurred a
restructuring charge associated with this reorganization. This pre-tax charge totaled $98 million ($64 million
after-tax), and reflects the value of voluntary retirement benefits, severance benefits and unvested stock
compensation.
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