UPS Releases 2Q Results

Earnings Decline Caused by Economic Weakness, Fuel Costs;
Supply Chain & Freight Continues to Exceed Expectations
ATLANTA--(Business Wire)--
UPS (NYSE:UPS) today reported a 6.7% revenue increase in the
second quarter but an 18.3% decline in diluted earnings per share to
$0.85 compared to $1.04 the prior year. Increasing fuel costs and a
stagnant U.S. economy caused the earnings decline in both the U.S.
Domestic and International Package segments.

In contrast, the Supply Chain and Freight segment posted a
substantial improvement in profitability.

"Although operating conditions in the second quarter were
challenging, UPS firmly believes the long-term growth fundamentals for
our company and for our industry are very favorable," said Scott
Davis, UPS chairman and CEO. "We are helping our customers manage
through this difficult period while doing everything we can inside UPS
to adapt to current conditions."

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Consolidated Results 2Q 2008 2Q 2007
--------------------------- -------------- ---------------------------
Revenue $13.00 B $12.19 B
Operating profit $1.45 B $1.77 B
Operating margin 11.2 % 14.5 %
Average volume per day 15.0 M 15.0 M
Diluted earnings per
share $0.85 $1.04
*T

For the three months ended June 30, 2008, UPS delivered
consolidated volume of 959 million packages, essentially unchanged
from the second quarter last year. Revenue rose to $13.0 billion and
revenue per piece increased 5.9%. Results were negatively affected by
a 67% increase in fuel expense, a reduction in premium product volumes
and weakness in U.S. imports.

Cash Position

For the first six months of 2008, free cash flow remained strong
at $3.4 billion, including approximately $1 billion in U.S. federal
cash tax benefits related to the company's withdrawal from the Central
States Pension Plan. The company also:

-- Purchased 34.8 million shares at a cost of $2.4 billion.

-- Paid dividends totaling $1.3 billion.

-- Invested $1.4 billion in capital expenditures.

-- Ended the quarter with $1.7 billion in cash and short-term
investments.

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U.S. Domestic Package 2Q 2008 2Q 2007
------------------------ ------------------ --------------------------
Revenue $7.71 B $7.58 B
Operating profit $0.90 B $1.19 B
Operating margin 11.7 % 15.7 %
Average volume per
day 13.1 M 13.2 M
*T

The slow U.S. economy caused average daily volume in the United
States to decline 1.3% in the quarter and also contributed to a more
pronounced reduction in premium products than in the previous quarter.
Volumes per day declined 6.1% for Next Day Air(R), 2.3% for deferred
air and 0.7% for ground. Consolidated revenue per piece rose 3.1%,
increasing for all services.

These factors, along with the rapid increase in fuel cost and the
impact of the two-month lag in the application of the fuel surcharge,
were responsible for the declines in second quarter operating results.

During the quarter, UPS and DHL announced they were working on a
10-year agreement through which UPS would provide air lift for DHL's
express, deferred and international volume within the U.S. and between
the U.S., Canada and Mexico.

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International Package 2Q 2008 2Q 2007
------------------------ -------------------- ------------------------
Revenue $2.95 B $2.50 B
Operating profit $407 M $475 M
Operating margin 13.8 % 19.0 %
Average volume per
day 1.93 M 1.80 M
*T

International results were negatively impacted by higher fuel
costs, declining U.S. import volume and slower growth in premium
services in the major regions of the world.

Export volume increased an industry-leading 10.2%, aided by the
calendar effect of an early Easter, which boosted growth rates by
approximately 2%. However, volume growth slowed significantly through
the quarter.

During the period, UPS continued its global investments. In the
United Kingdom, the company completed network integration of Tamworth,
its largest ground hub outside the U.S. In Asia, UPS announced
construction of an intra-Asia hub in Shenzhen, China; initiated five
weekly flights to Nagoya, Japan, and concluded the buyout of its joint
venture partner in Korea.

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Supply Chain and Freight 2Q 2008 2Q 2007
---------------------------- ---------------- --------------------
Revenue $2.34 B $2.11 B
Operating profit $148 M $98 M
Operating margin 6.3 % 4.6 %
*T

Segment revenue increased almost 11% with operating profit
climbing more than 50%. Results were driven by the continued strong
performance of the Forwarding and Logistics businesses. During the
quarter, UPS announced an expansion of its logistics campus in
Burlington, Ontario, to address healthcare and high-tech customers'
needs.

UPS Freight LTL revenue grew 7.2%, but shipments declined 2.3% as
a consequence of the stagnant U.S. economy. UPS Freight expanded its
reliability guarantee on shipments to and from Canada and introduced
time-in-transit enhancements to 1,000 lanes in the United States.

Outlook

"Slow U.S. economic activity and fuel price increases hit us and
our customers during the quarter," said Kurt Kuehn, UPS's chief
financial officer. "Even though economists do not predict a recovery
until 2009, we anticipate that the second half of 2008 will generate
modestly better results than the first half, assuming business
conditions do not worsen. Therefore, we are providing
earnings-per-share guidance for 2008 within a range of $3.50 to $3.70.
This translates to a range of $1.78-to-$1.98 for the second half
compared to $1.72 for the first half."

Kuehn pointed out that comparisons to last year's results would be
more difficult in the third quarter and moderate in the fourth.

"We are taking the necessary steps to control costs, add value for
customers and grow our business while adjusting to the realities of
today's challenging environment," Kuehn added.

UPS (NYSE: UPS) is the world's largest package delivery company
and a global leader in supply chain and freight services. With more
than a century of experience in transportation and logistics, UPS is a
leading global trade expert equipped with a broad portfolio of
solutions. Headquartered in Atlanta, Ga., UPS serves more than 200
countries and territories worldwide. The company can be found on the
Web at UPS.com. To get UPS news direct, visit pressroom.ups.com/RSS.

EDITOR'S NOTE: UPS Chairman and CEO Scott Davis and CFO Kurt Kuehn
will discuss second quarter results with investors and analysts during
a conference call at 8:30 a.m. EDT today. That call is open to
listeners through a live Webcast. To access the call, go to
www.shareholder.com/UPS and click on "Earnings Webcast."

We supplement the reporting of our financial information
determined under generally accepted accounting principles (GAAP) with
certain non-GAAP financial measures, including, as applicable, "as
adjusted" operating profit, operating margin, pre-tax income, net
income and earnings per share. 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 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. Furthermore, we use these adjusted
financial measures to determine awards for our management personnel
under our incentive compensation plans. We also provide the amount of
our free cash flow to supplement our cash flow determined under GAAP.
We define free cash flow as net cash from operating activities
adjusted for capital expenditures, proceeds from disposals of
property, plant and equipment, net change in finance receivables and
other investing activities. We believe free cash flow is an important
measure in assessing the generation of cash for discretionary
investments and dividends.

Because non-GAAP financial measures are not standardized, it may
not be possible to compare these financial measures with other
companies' non-GAAP financial measures having the same or similar
names. These adjusted financial measures should not be considered in
isolation or as a substitute for GAAP operating profit, operating
margin, net income and earnings per share, the most directly
comparable GAAP financial measures. These non-GAAP financial measures
reflect an additional way of viewing aspects of our operations that,
when viewed with our GAAP results and the preceding reconciliations to
corresponding GAAP financial measures, provide a more complete
understanding of our business. We strongly encourage investors to
review our financial statements and publicly-filed reports in their
entirety and not to rely on any single financial measure.

Except for historical information contained herein, the statements
made in this release constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Such forward-looking
statements, including statements regarding the intent, belief or
current expectations of UPS and its management regarding the company's
strategic directions, prospects and future results, involve certain
risks and uncertainties. Certain factors may cause actual results to
differ materially from those contained in the forward-looking
statements, including economic and other conditions in the markets in
which we operate, governmental regulations, our competitive
environment, strikes, work stoppages and slowdowns, increases in
aviation and motor fuel prices, cyclical and seasonal fluctuations in
our operating results, and other risks discussed in the company's Form
10-K and other filings with the Securities and Exchange Commission,
which discussions are incorporated herein by reference.

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United Parcel Service, Inc.
Selected Financial Data - Second Quarter
(unaudited)

Three Months
Ended
June 30, Change
--------------------------------
2008 2007 $ %
--------------------------------
(amounts in millions, except per share
data)
Statement of Income Data:
Revenue:
U.S. Domestic Package $ 7,714 $ 7,579 $ 135 1.8%
International Package 2,948 2,500 448 17.9%
Supply Chain & Freight 2,339 2,110 229 10.9%
-------------------------
Total revenue 13,001 12,189 812 6.7%

Operating expenses:
Compensation and benefits 6,522 6,327 195 3.1%
Other 5,025 4,097 928 22.7%
-------------------------
Total operating expenses 11,547 10,424 1,123 10.8%

Operating profit:
U.S. Domestic Package 899 1,192 (293) -24.6%
International Package 407 475 (68) -14.3%
Supply Chain & Freight 148 98 50 51.0%
-------------------------
Total operating profit 1,454 1,765 (311) -17.6%

Other income (expense):
Investment income 14 28 (14) -50.0%
Interest expense (104) (61) (43) 70.5%
-------------------------
Total other income (expense) (90) (33) (57) 172.7%

-------------------------
Income before income taxes 1,364 1,732 (368) -21.2%

Income tax expense 491 628 (137) -21.8%

-------------------------
Net income $ 873 $ 1,104 $ (231) -20.9%
=========================

Net income as a percentage of revenue 6.7% 9.1%

Per share amounts
Basic earnings per share $ 0.86 $ 1.04 $(0.18) -17.3%
Diluted earnings per share $ 0.85 $ 1.04 $(0.19) -18.3%

Weighted-average shares outstanding
Basic 1,021 1,060 (39) -3.7%
Diluted 1,029 1,066 (37) -3.5%

Certain prior year amounts have been reclassified to conform to the
current year presentation.
*T

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United Parcel Service, Inc.
Selected Operating Data - Second Quarter
(unaudited)

Three Months
Ended
June 30, Change
----------------------------
2008 2007 $/ # %
----------------------------

Revenue (in millions):
U.S. Domestic Package:
Next Day Air $ 1,648 $ 1,684 $ (36) -2.1%
Deferred 789 792 (3) -0.4%
Ground 5,277 5,103 174 3.4%
----------------------
Total U.S. Domestic Package 7,714 7,579 135 1.8%
International Package:
Domestic 622 517 105 20.3%
Export 2,145 1,834 311 17.0%
Cargo 181 149 32 21.5%
----------------------
Total International Package 2,948 2,500 448 17.9%
Supply Chain & Freight:
Forwarding and Logistics 1,635 1,465 170 11.6%
Freight 596 549 47 8.6%
Other 108 96 12 12.5%
----------------------
Total Supply Chain & Freight 2,339 2,110 229 10.9%
------- ------- ------
Consolidated $13,001 $12,189 $ 812 6.7%
======================

Consolidated volume (in millions) 959 962 (3) -0.3%

Operating weekdays 64 64

Average Daily Package Volume (in
thousands):
U.S. Domestic Package:
Next Day Air 1,183 1,260 (77) -6.1%
Deferred 878 899 (21) -2.3%
Ground 10,999 11,071 (72) -0.7%
----------------------
Total U.S. Domestic Package 13,060 13,230 (170) -1.3%
International Package:
Domestic 1,127 1,077 50 4.6%
Export 798 724 74 10.2%
----------------------
Total International Package 1,925 1,801 124 6.9%
----------------------
Consolidated 14,985 15,031 (46) -0.3%
======================

Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air $ 21.77 $ 20.88 $0.89 4.3%
Deferred 14.04 13.77 0.27 2.0%
Ground 7.50 7.20 0.30 4.2%
Total U.S. Domestic Package 9.23 8.95 0.28 3.1%
International Package:
Domestic 8.62 7.50 1.12 14.9%
Export 42.00 39.58 2.42 6.1%
Total International Package 22.46 20.40 2.06 10.1%
Consolidated $ 10.93 $ 10.32 $0.61 5.9%
======================

Certain prior year amounts have been reclassified to conform to the
current year presentation.
*T

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United Parcel Service, Inc.
Selected Financial Data - Year to Date
(unaudited)

Six Months Ended
June 30, Change
--------------------------------
2008 2007 $ %
--------------------------------
(amounts in millions, except per share
data)
Statement of Income Data:
Revenue:
U.S. Domestic Package $15,449 $15,131 $ 318 2.1%
International Package 5,707 4,885 822 16.8%
Supply Chain & Freight 4,520 4,079 441 10.8%
-------------------------
Total revenue 25,676 24,095 1,581 6.6%

Operating expenses:
Compensation and benefits 13,022 12,668 354 2.8%
Other 9,707 8,304 1,403 16.9%
-------------------------
Total operating expenses 22,729 20,972 1,757 8.4%

Operating profit:
U.S. Domestic Package 1,858 2,133 (275) -12.9%
International Package 828 846 (18) -2.1%
Supply Chain & Freight 261 144 117 81.3%
-------------------------
Total operating profit 2,947 3,123 (176) -5.6%

Other income (expense):
Investment income 71 42 29 69.0%
Interest expense (238) (110) (128) 116.4%
-------------------------
Total other income (expense) (167) (68) (99) 145.6%

-------------------------
Income before income taxes 2,780 3,055 (275) -9.0%

Income taxes 1,001 1,108 (107) -9.7%

-------- -------- -------
Net income $ 1,779 $ 1,947 $ (168) -8.6%
=========================

Net income as a percentage of revenue 6.9% 8.1%

Per share amounts
Basic earnings per share $ 1.73 $ 1.83 $(0.10) -5.5%
Diluted earnings per share $ 1.72 $ 1.82 $(0.10) -5.5%

Weighted average shares outstanding
Basic 1,029 1,065 (36) -3.4%
Diluted 1,036 1,070 (34) -3.2%

As adjusted income data:
U.S. domestic package (1) $ 1,858 $ 2,345 $ (487) -20.8%
International package (1) 828 915 (87) -9.5%
Supply chain and freight (1) 261 152 109 71.7%
-------------------------
Total operating profit 2,947 3,412 (465) -13.6%

Income before income taxes (1) $ 2,780 $ 3,344 $ (564) -16.9%
Net income (2) $ 1,779 $ 2,131 $ (352) -16.5%
Basic earnings per share (2) $ 1.73 $ 2.00 $(0.27) -13.5%
Diluted earnings per share (2) $ 1.72 $ 1.99 $(0.27) -13.6%

(1) 2007 adjusted operating profit and income before income taxes
exclude an impairment charge on Boeing 727 and 747 aircraft, and
related engines and parts, of $221 million ($159 million U.S.
Domestic Package and $62 million International Package), due to the
acceleration of the planned retirement of these aircraft.

2007 adjusted operating profit and income before income taxes also
exclude a charge related to the special voluntary separation
opportunity ("SVSO"), which was accepted by 195, or 30%, of the
eligible employees. We recorded a charge to expense of $68 million
($53 million U.S. Domestic Package, $7 million International Package,
and $8 million Supply Chain & Freight), to reflect the cash payout
and the acceleration of stock compensation and certain retiree
healthcare benefits under the SVSO program.

(2) 2007 net income and earnings per share amounts exclude the after-
tax impact of the charges described in (1), which total $184 million.

Certain prior year amounts have been reclassified to conform to the
current year presentation.
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United Parcel Service, Inc.
Selected Operating Data - Year to Date
(unaudited)

Six Months
Ended
June 30, Change
-----------------------------
2008 2007 $/ # %
-----------------------------

Revenue (in millions):
U.S. Domestic Package:
Next Day Air $ 3,286 $ 3,337 $ (51) -1.5%
Deferred 1,594 1,594 - 0.0%
Ground 10,569 10,200 369 3.6%
-----------------------
Total U.S. Domestic Package 15,449 15,131 318 2.1%
International Package:
Domestic 1,205 1,028 177 17.2%
Export 4,167 3,581 586 16.4%
Cargo 335 276 59 21.4%
-----------------------
Total International Package 5,707 4,885 822 16.8%
Supply Chain & Freight:
Forwarding and Logistics 3,198 2,851 347 12.2%
Freight 1,109 1,037 72 6.9%
Other 213 191 22 11.5%
-----------------------
Total Supply Chain & Freight 4,520 4,079 441 10.8%
-----------------------
Consolidated $25,676 $24,095 $1,581 6.6%
=======================

Consolidated volume (in millions) 1,927 1,930 (3) -0.1%

Operating weekdays 128 128

Average Daily Package Volume (in
thousands):
U.S. Domestic Package:
Next Day Air 1,191 1,253 (62) -4.9%
Deferred 894 918 (24) -2.6%
Ground 11,069 11,089 (20) -0.2%
-----------------------
Total U.S. Domestic Package 13,154 13,260 (106) -0.8%
International Package:
Domestic 1,114 1,095 19 1.7%
Export 788 723 65 9.0%
-----------------------
Total International Package 1,902 1,818 84 4.6%
-----------------------
Consolidated 15,056 15,078 (22) -0.1%
=======================

Average Revenue Per Piece:
U.S. Domestic Package:
Next Day Air $ 21.55 $ 20.81 $ 0.74 3.6%
Deferred 13.93 13.57 0.36 2.7%
Ground 7.46 7.19 0.27 3.8%
Total U.S. Domestic Package 9.18 8.91 0.27 3.0%
International Package:
Domestic 8.45 7.33 1.12 15.3%
Export 41.31 38.70 2.61 6.7%
Total International Package 22.07 19.81 2.26 11.4%
Consolidated $ 10.80 $ 10.23 $ 0.57 5.6%
=======================

Certain prior year amounts have been reclassified to conform to the
current year presentation.
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United Parcel Service, Inc.
Reconciliation of Free Cash Flow
(unaudited)

Preliminary
Year-to-Date
(amounts in millions) June 30, 2008
-------------
Net cash from operations $ 5,019
Capital expenditures (1,387)
Proceeds from disposals of PP&E 71
Net change in finance receivables (66)
Other investing activities (254)
-------------
Free cash flow $ 3,383
=============

Amounts are subject to reclassification.
*T

UPS
Public Relations:
Norman Black, 404-828-7593
or
Investor Relations:
Andy Dolny, 404-828-8901

Copyright Business Wire 2008