Detailed Annual Report of UPS | PDF

2018 Annual Report
Strong Today.
Creating Our Tomorrow.

OVER
28,000
UPS ACCESS POINT
LOCATIONS
481,000
EMPLOYEES
2,500
WORLDWIDE
OPERATING
FACILITIES
123,000
VEHICLES
IN DELIVERY
FLEET
180
MILLION
DAILY ONLINE
TRACKING
MORE THAN
10,000
ALTERNATIVE FUEL
VEHICLES
5.2
BILLION
2018 DELIVERY
VOLUME
MORE THAN
56 MILLION
UPS MY CHOICE®
MEMBERS
2,320
DAILY FLIGHT
SEGMENTS
YEAR FOUNDED
1907
10.6
MILLION
CUSTOMERS
QUICK FACTS
KEY METRICSFINANCIAL HIGHLIGHTS
FREE CASH FLOW
2018 2017 2016
Return on assets (GAAP) 10.0% 11.4% 8.7%
Return on assets (Adjusted)* 13.1% 12.0% 12.7%
Dividend yield 3.7% 2.6% 2.7%
2018 2017 2016
Net cash from operations $12,711 $1,479 $6,473
Capital expenditures 1 (6,283) (5,227) (2,965)
Proceeds from disposals 37 24 88
of PP&E
Net change in finance receivables 4 5 9
Other investing activities 1 1 (59)
Free cash flow2 $6,470 ($3,718) $3,546
Discretionary pension $7,291 $2,461
contributions
Adjusted free cash flow $6,470 $3,573 $6,007
excluding discretionary
pension contributions
(in millions of dollars)
2018 2017 2016
Revenue $71,861 $66,585 $61,610
Operating expenses 64,837 59,056 53,922
Net income 4,791 4,905 3,422
Adjusted net income* 6,301 5,254 5,095
Diluted earnings per share 5.51 5.61 3.86
Adjusted diluted earnings 7.24 6.00 5.74
per share*
Dividends declared 3.64 3.32 3.12
per share
Assets 50,016 45,574 40,545
Long-term debt 19,931 20,278 12,394
Shareowners’ equity 3,037 1,024 430
Capital expenditures 1 6,283 5,227 2,965
Cash and marketable 5,035 4,069 4,567
securities
(in millions except for per-share amounts)
2Adjusted free cash flow including principal repayments of capital
lease obligations was $6.130 billion in 2018.
1Adjusted capital expenditures including principal repayments of
capital lease obligations were $6.623 billion in 2018.
*See reconciliation of Non-GAAP financial measures on page A1.

Dear Fellow Shareowner,
Strong Today.
CREATING Our Tomorrow.
1
UPS is more than a year into a sweeping
transformation that’s touching every part of
our business — from leadership and culture
to our operations, processes and the way
we go to market. We’ve identified key global
megatrends that are poised to create the
greatest impact on our business over the
next decade and have aligned our strategies
to capitalize on these market opportunities.
We are investing in advanced technology and
focusing on key sectors to stay at the forefront
of our industry and create long-term value for
customers and shareowners.
The path we are on expands our current
competitive advantages and provides new
ways for UPS to grow. The investments we are
making in our network, people, technology
and products will improve leverage in our
global operations and are creating greater
differentiation for UPS in the markets we
serve. Our customers will benefit from more
flexibility, consistency and visibility in how
packages are moved through our network.
By enhancing the value we create for our
customers, we will generate higher revenue
per package, better balance between our
business- and residential-based volumes and a
higher level of earnings growth.
In short, UPS is Strong Today, and we are
CREATING our Tomorrow.

We are implementing
technology that’s making our
network and our company
more efficient, more flexible,
more resilient, and more
anticipatory.
REVENUE
in billions of dollars
2018
2017
2016
2015
2014 58.2
66.6
61.6
71.9
59.2
59.2
U.S. Domestic
Package
Supply Chain
& Freight
International
Package
60.7%
20.1%
19.2%
2018 REVENUE BY SEGMENT
percent
2018 REVENUE BY GEOGRAPHY
percent
21.9%
78.1%
U.S.
International
.
To generate
higher quality revenue
growth, we listened to our
customers and are taking
action to develop new
solutions to better serve
their needs and strengthen
their loyalty.

Transformation and our Future
Embarking on transformation touches all
facets of our business and puts UPS on a
clear path to enhance performance, “future-
proofing” the company and taking advantage
of our most promising growth opportunities.
Our transformation is designed to achieve
three principal goals: generate high-quality
revenue growth; drive efficiencies and cost
reductions that will improve our margins; and
further develop our talent as we continue to
foster a culture of innovation.
There are several megatrends that are key to
driving our business over the long-term. We
are pursuing four central opportunities that
serve as our new strategic growth imperatives:
• First, we reaffirmed our commitment to
focus our portfolio, service offerings and
pricing to meet the needs of small and
medium-sized businesses.
• Second, we are increasing our range of
offerings to solidify UPS as the provider of
choice in both B2C and B2B e-commerce,
the next frontier of growth.
• Third, we are improving our reach
and capabilities in high-growth
international markets to continue to
expand market share.
• Finally, we are developing innovative
logistics solutions to improve patient
care across the healthcare and life
sciences ecosystem.
To generate higher quality revenue growth,
we listened to our customers and are taking
action to develop new solutions to better
serve their needs and strengthen their loyalty.
These include new initiatives to expand
our portfolio and enhance our customers’
experience when doing business with UPS. We
launched new international express offerings;
expanded our Saturday operations; and added
new e-commerce services, including our asset-
light Ware2Go warehousing solution. We have
simplified pricing for small and medium-sized
businesses and equipped our sales force with
the tools to provide customers with shipping
quotes more quickly, often on the spot.
We are gaining traction with all of these
initiatives, and these actions will continue to
enhance our growth and earnings trajectory
well into the future.
Strong Today...
We made substantial progress on the network
investment initiatives we first discussed in
early 2017. We are implementing technology
that’s making our network and our company
more efficient, more flexible, more resilient,
and more anticipatory. The result is a
network that enables us to attract additional
opportunities for high-quality revenue growth
and generate improved operating margins.
We are capturing opportunities through digital
technology and automation that are changing
the way people and companies connect and
communicate. We operate a highly efficient
and integrated network that enables us
to offer customers a broad portfolio of air,
ground, express and deferred offerings with
more visibility and control than ever before.
For example, we have further automated our
technology platforms to provide enhanced
tracking, as well as access to special services.
Through the use of new technology, improved
controls and state-of-the-art automation,
our customers have more control over all of
their shipments — inbound and outbound,
package and freight, local and international.
Additionally, our advanced methods of
optimizing the flows of freight and packages
with available capacity results in improved
transit times for our customers and better
asset utilization and network efficiency. To
3

build on those improvements and fulfill the
growing demand for our services, we are
significantly expanding capacity through
comprehensive investments across our
operations. In 2018, we opened 22 new,
highly automated facilities that added more
than 400,000 packages per hour of sortation
capacity. And the 18 highly automated
facilities that will come online in 2019 will
make us even more efficient.
These improvements have succeeded in
large part due to the innovative ideas and
commitment to service our people bring to
UPS every day. We will continue to shape
our culture so we can seize on the new
market opportunities of the 21st century.
We are doing this in part by realigning our
management structure, and recruiting more
outside talent who offer new experiences to
enrich our leadership team. During the past
year, we have appointed members of the
leadership team to new positions, including
three who joined us from outside of UPS. They
bring new perspectives and ideas to a team of
world-class leaders. The diversity of thought,
experience and perspective of the entire team
continues to position us for success.
Together, we are strengthening our business
processes and culture. We are shifting a
culture historically centered on “constructive
dissatisfaction” to a new mindset of
“continuous transformation.” We are making
our company stronger and more capable of
delivering attractive returns in both the near
and long terms.
Our Results
The progress we have made towards our
transformation strategies and investments
were reflected in our 2018 results. Here are
the highlights:
We realized the benefits of transformation with
both growth and efficiency improvements. We
successfully delivered on our financial targets
for full-year earnings growth. Adjusted diluted
earnings per share increased 21%, to $7.24*;
marking an all-time high.
We produced good volume and revenue gains
as well as improved the quality of our revenue.
UPS delivered about 21 million packages per
day. This higher volume drove a 7.9% increase
in consolidated revenue, to $72 billion.
In the U.S., our small package business revenue
grew 6.9% to more than $43 billion driven by
the best increase in revenue per package in
many years.
The International business segment turned
an adjusted operating profit of $2.6 billion*
with strong growth in Export shipments in a
changing environment.
The Supply Chain and Freight segment
generated another year of excellent results with
a 13%* increase in adjusted operating profit.
We generated outstanding cash flow, which
enabled UPS to continue investing in our
network and rewarding shareowners. For
the year, we made $6.6 billion* in adjusted
capital expenditures, distributed $3.2 billion in
dividends and bought back $1 billion in shares.
UPS was voted No. 1 in the delivery industry
in Fortune magazine’s 2018 rankings of the
“World’s Most Admired Companies.” Just
Capital recognized UPS as one of America’s
100 Most Just Companies for the third
straight year. We were named to the Dow
Jones Sustainability World Index for the sixth
straight year and achieved a prestigious spot
on the Carbon Disclosure Project’s climate
change “A” list for our efforts to cut emissions,
mitigate climate risks, and develop a low-
carbon economy. At UPS, global citizenship
is part of who we are, and the deep culture
of excellence that permeates the entire
*See reconciliation of Non-GAAP financial measures on page A1. 5

NET INCOME
in Billions of Dollars
2018
2017 4.9
5.3
3.4
5.12016
4.8
4.92015
2014 3.0
4.4
4.8
6.3
Adjusted*
DILUTED EARNINGS PER SHARE
in Dollars
2018
2017
5.51
7.24
5.61
6.00
2016 3.86
5.74
2015
2014
5.34
5.43
3.28
4.75
OPERATING MARGIN
Percent
2018
2017
9.8
10.3
11.3
11.3
2016 12.5
12.5
2015
2014
12.2
12.2
11.4
11.4
Adjusted*
DIVIDENDS DECLARED
Dollars per share
2018
2017
2016
2015
2014
SHARE REPURCHASE EXPENDITURES
in Billions of Dollars
NUMBER SHARES REPURCHASED
in Millions of Dollars
2018
2017
8.9
16.1
2016 25.5
2015
2014
26.8
26.4
2018
2017
1.0
1.8
2016 2.7
2015
2014
2.7
2.7
Adjusted*
3.64
3.32
3.12
2.92
2.68
*See reconciliation of Non-GAAP financial measures on page A1.