UPS announces Strategic Priorities, three-year Financial Targets and new ESG Targets | site |




The company will highlight priorities for its Customer First, People Led, Innovation Driven strategy; discuss targeted areas of growth including small and medium-sized businesses, healthcare and international; provide 2023 financial targets; and discuss newly established ESG targets.



(Information contained in UPS press release dated: June 9, 2021)

Atlanta - - UPS (NYSE:UPS) will host its investor and analyst conference today beginning at 9:00 a.m. EDT. The virtual event will be available in its entirety through a live webcast and replay at investors.ups.com .
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(Graphic courtesy: UPS)




The company will highlight priorities for its Customer First, People Led, Innovation Driven strategy; discuss targeted areas of growth including small and medium-sized businesses, healthcare and international; provide 2023 financial targets; and discuss newly established ESG targets.
  • Customer First: The company’s Customer First strategy strives to provide the best digital experience powered by its global smart logistics network. The company will showcase the actions it is taking to make it simpler and more helpful to do business with UPS. Customer First focuses on removing friction when doing business with UPS, as measured by gains in Net Promoter Score, or NPS. The company has targeted a 2023 NPS score of 50 or higher.
  • People Led: The company will discuss the measures it is taking to improve the employee experience and increase the likelihood that an employee recommends UPS as a great place to work. The company has established a 2023 “likelihood to recommend” target of 80 percent or higher.
  • Innovation Driven: By highlighting technology and productivity initiatives, the company will address its approach to creating shareowner value by delivering consistently higher returns on invested capital, as well as returns to shareowners through dividends and share repurchases.
“We are creating a new UPS, rooted in the values of the company. Our strategic priorities are evolving to reflect the changing needs of our customers and our business, and what matters most to our stakeholders,” said Carol Tomé, UPS chief executive officer.

Outlook

2023 Financial Targets

Today the company will discuss its 2023 financial targets as follows:
  • Consolidated revenue ranging from approximately $98 billion to approximately $102 billion.
  • Consolidated adjusted* operating margin ranging from approximately 12.7 percent to approximately 13.7 percent.
  • Cumulative capital spending from 2021–2023 of approximately $13.5 billion to approximately $14.5 billion.
  • Adjusted return on invested capital ranging from approximately 26 percent to approximately 29 percent.
* “Adjusted” amounts are non-GAAP financial measures. See the appendix to this release for a discussion of non-GAAP financial measures, including required reconciliations.

The company is only able to provide operating margin and return on invested capital guidance on an adjusted (non-GAAP) basis because it is not possible to predict or provide a reconciliation reflecting the impact of future pension mark-to-market or other unknown or unanticipated potential adjustments which would be included in reported (GAAP) results and which could be material.


ESG Targets
The company is also announcing a new set of company-wide ESG targets, including its pledge to be carbon neutral across scope 1, 2 and 3 emissions in its global operations by 2050. Interim 2035 environmental sustainability targets include:
  • 50% reduction in CO2 per package delivered for its global small package operations (2020 base year).
  • 100% of company facilities powered by renewable electricity.
  • 30% of the fuel used in its global air fleet be sustainable aviation fuel.
UPS has published its ESG strategy at investors.ups.com/esg .








Non-GAAP Financial Measures; Reconciliations
From time to time we supplement the reporting of our financial information determined under generally accepted accounting principles ("GAAP") with certain non-GAAP financial measures. These include: "adjusted" compensation and benefits; operating expenses; earnings before interest, taxes, depreciation and amortization (“EBITDA”); operating profit; operating margin; other income and (expense); income before income taxes; income tax expense; effective tax rate; net income; and earnings per share. We present revenue and revenue per piece on a constant currency basis. Additionally, we disclose free cash flow, return on invested capital (“ROIC”) and the ratio of adjusted total debt to adjusted EBITDA.

We believe that these non-GAAP measures provide meaningful information to assist users of our financial statements in more fully understanding our financial results and cash flows and assessing our ongoing performance, because they exclude items that may not be indicative of, or are unrelated to, our underlying operations and may provide a useful baseline for analyzing trends in our underlying businesses. These non-GAAP measures are used internally by management for business unit operating performance analysis, business unit resource allocation and in connection with incentive compensation award determinations.

Non-GAAP financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our adjusted financial information does not represent a comprehensive basis of accounting. Therefore, our adjusted financial information may not be comparable to similarly titled information reported by other companies.

Restructuring and Other Charges

Adjusted EBITDA, operating profit, operating margin, income before income taxes, net income and earnings per share may exclude the impact of charges related to any restructuring programs, including transformation costs and asset impairments.

Costs Related to Legal Contingencies and Expenses

Adjusted EBITDA, operating profit, operating margin, pre-tax income, net income and earnings per share may exclude the impact of costs related to certain of our legal contingencies and expenses that are associated with non-routine legal matters. We believe this adjusted information provides a useful comparison of year-to-year financial performance without considering the impact of these non-routine contingencies and expenses. We evaluate our performance on this adjusted basis.

Changes in Foreign Currency Exchange Rates and Hedging Activities

Currency-neutral revenue, revenue per piece and operating profit exclude the period over period impact of foreign currency exchange rate changes and any foreign currency hedging activities. These measures are calculated by dividing current period reported U.S. dollar revenue, revenue per piece and operating profit by the current period average exchange rates to derive current period local currency revenue, revenue per piece and operating profit. The derived amounts are then multiplied by the average foreign exchange rates used to translate the comparable results for each month in the prior year period (including the impact of any foreign currency hedging activities). The difference between the current period reported U.S. dollar revenue, revenue per piece and operating profit and the derived current period U.S. dollar revenue, revenue per piece and operating profit is the period over period impact of foreign currency exchange rate and hedging activities.

Mark-To-Market Pension and Postretirement Adjustments

We recognize changes in the fair value of plan assets and net actuarial gains and losses in excess of a 10% corridor for our pension and postretirement defined benefit plans immediately as part of other pension income (expense). We supplement our presentation of certain financial data with non-GAAP measures that exclude the impact of gains and losses recognized in excess of the 10% corridor and the related income tax effects. We believe excluding these mark-to-market impacts provides important supplemental information by removing the volatility associated with short-term changes in market interest rates, equity values, and similar factors.

The deferred income tax effects of mark-to-market pension and postretirement adjustments are calculated by multiplying the statutory tax rates applicable in each tax jurisdiction, including the U.S. federal jurisdiction and various U.S. state and non-U.S. jurisdictions, by the adjustments.

Free Cash Flow

We calculate free cash flow as cash flows from operating activities less capital expenditures, proceeds from disposals of property, plant and equipment, and plus or minus the net changes in finance receivables and other investing activities. We believe free cash flow is an important indicator of how much cash is generated by our ongoing business operations and we use this as a measure of incremental cash available to invest in our business, meet our debt obligations and return cash to shareowners.

Return on Invested Capital

ROIC is calculated as the trailing twelve months (“TTM”) of adjusted operating income divided by the average of total debt, non-current pension and postretirement benefit obligations and shareowners’ equity, at the current period end and the corresponding period end of the prior year. Because ROIC is not a measure defined by GAAP, we calculate it, in part, using non-GAAP financial measures that we believe are most indicative of our ongoing business performance. We consider ROIC to be a useful measure for evaluating the effectiveness and efficiency of our long-term capital investments.

Adjusted Total Debt / Adjusted EBITDA

Adjusted total debt is defined as our long-term debt and finance leases, including current maturities, plus non-current pension and postretirement benefit obligations. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization adjusted for restructuring and other costs and investment income and other. We believe the ratio of adjusted total debt to adjusted EBITDA is an important indicator of our financial strength, and is a ratio used by third parties when evaluating the level of our indebtedness.

Forward-Looking Non-GAAP Metrics

From time to time when presenting forward-looking non-GAAP metrics, we are unable to provide quantitative reconciliations to the most closely correlated GAAP measure due to the uncertainty in the timing, amount or nature of any adjustments, which could be material in any period.