UPS - United Parcel Service, Inc. - Q3 2013 Earnings Call Transcript

    Company Name:United Parcel Service, Inc.
    Event Title:Q3 2013 Earnings Call Transcript
    Event Date:25-Oct-2013
    Event Time:08:30 AM ET



    Good morning. My name is Steven, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the UPS Investor Relations Third Quarter 2013 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks there will be a question-and-answer period. Please note, we will take only one question from each participant to accommodate more analysts during the call. Thank you for your cooperation. It is now my pleasure to turn the floor over to your host, Mr. Andy Dolny, UPS's Treasurer and Investor Relations Officer. Sir, the floor is yours.

    Andy Dolny

    Investor Relations
    Good morning and welcome to UPS's third quarter earnings call. Joining me today are Scott Davis, our CEO and Kurt Kuehn, our CFO. Along with Chief Operating Officer David Abney; International President, Jim Barber; President of U.S. Operations, Myron Gray; and UPS's Chief Sales and Marketing Officer, Alan Gershenhorn. Before we begin, I want to review the Safe Harbor language.

    Some of the comments we'll make today are forward-looking statements that address our expectations for the future performance or results of operations of the company. These anticipated results are subject to risk and uncertainties, which are described in detail in our 2012 Form 10-K and 2013 10-Q reports. are available on the UPS Investor Relations website and from the Securities and Exchange Commission. In our remarks today, all quarterly and full year comments and comparisons to 2012 will refer to adjusted results. In addition, we will discuss UPS's free cash flow which is a non-GAAP financial measure.

    The webcast of today's call along with the reconciliation of free cash flow and adjusted results are available on the UPS Investor Relations website. Finally our goal is to allow as many as possible to participate on today's call. So please ask only one question and then get back in the queue. Thanks for your cooperation. Now let me turn it over to Scott.

    D. Scott Davis

    Chairman & Chief Executive Officer
    Thanks and good morning. Our third quarter results improved from the first half of the year, even though our business faced similar market dynamics. Customers continue to streamline their supply chains allowing UPS to meet their needs with our integrated solutions and logistics expertise. The U.S. domestic business continues to benefit from e-commerce while international experienced strong demand for UPS deferred products. Performance in our supply chain and freight segment improved primarily from ocean forwarding, brokerage, and North American air freight results.

    Regarding the global economic environment forecast for growth in EU have been revised upward as it begins to recover from session.

    However, hays in economic projections are mixed as expansion in Japan has been offset somewhat by slowing China growth. Here in the U.S. uncertainty created by the partial shutdown of the U.S. Government has created some anxiety while the impact to UPS on the surface appears to be minimal, some experts predict the shutdown will be a drag on fourth quarter GDP .

    Though the shutdown is behind us. Temporary solutions like sequestration and government furloughs only delay the inevitable. Hitting this news button on our fiscal problems only extends uncertainty and dampens economic growth. No business can survive without carefully managing its resources and our country can't either.

    Now is the time for the government to fix the debt and put Americas house in order. Although our political leaders struggle to effectively implement economic policy, companies worldwide are successfully adapting to evolving market conditions and evaluating all options to improve their bottom lines. And UPS can help with our comprehensive portfolio of capabilities. We are built to meet the needs of business, whether it be ground, air or ocean.

    An integral part of developing these solutions is listing to our customers. For example, one of Latin American executives told us to expect a strong growth from the region, we took action. During the quarter, UPS launched the industry's first guaranteed standard service from the U.S. to Mexico. By leverage our extensive network and brokerage expertise UPS now provides a seamless delivery experience for South bound shipments. The company also expanded our Preferred LCL Ocean product to serve the Asia to Mexico lane.

    In addition, UPS has opened new express service centers to serve the fast growing the region of Northern Mexico. Continuing our commitment to invest across the portfolio and around the world. We opened distribution facilities in Chengdu and Shanghai, China. Further expanding our capabilities.

    Now I want to take a moment to update you on our labor negotiations. As we announced back in the summer our employees have proved the national master, which covers the key elements of the contract, wages, pension and helthcare. Work continues on the open supplements. In the last month progress has been made with majority receiving approval. This includes a largest area of the central region and other large areas like New York. The remaining supplements will go out soon and we are confident in their approval.

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