55 Glenlake Parkway, NE Atlanta, GA 30328-3474 UPS Annual Report 2005 UPS Annual Report 2005 UPS Annual Report www.ups.com 30% post-consumer content 225070_Cover.indd5070_Cover.indd 1 33/13/06/13/06 77:45:23:45:23 PPMM UPS at a Glance 2005 Highlights Investor Information UPS is the world’s largest package delivery company and - Record revenue, operating profi t and earnings per share. Annual Meeting Investor Relations a global leader in supply chain services, operating in over - Highest volume in UPS history… 3.75 billion packages. Our annual meeting of shareowners will be held at 8:00 A.M. You can contact the Investor Relations Department at: 200 countries and territories. - Free cash fl ow of $3.6 billion.* on May 4, 2006 at the Hotel du Pont, 11th and Market Streets, UPS 800-877-1503 UPS provides time-defi nite delivery of a single letter, Wilmington, DE. Shareowners of record as of March 9, 2006 - Signifi cant expansion of the UPS service portfolio — 55 Glenlake Pkwy., N.E. 404-828-6059 small package, less-than-truckload (LTL) or truckload freight: are entitled to vote at the meeting. time-defi nite delivery of air freight and less-than-truckload Atlanta, GA 30328-3474 www.shareholder.com/ups - via air or ground freight transportation — through acquisitions. Exchange Listing - anywhere in the world - Strengthened international small package operations in Transfer Agent and Registrar: Mellon Investor Services LLC Our Class B common stock is listed on the New York Stock Europe and Asia through acquisitions and the buy out of Direct notices of address changes or questions regarding account UPS supply chain services manage a customer’s behind-the- Exchange under the symbol “UPS.” a joint venture. status, stock transfers, lost certifi cates, or dividend payments to: scenes movement of goods anywhere around the world, and — in some cases — even repair those products: Certifi cations United Parcel Service, Inc. * See page 10 for a reconciliation of free cash fl ow. UPS has included as Exhibits 31.1, 31.2, 32.1, and 32.2 to its Annual c/o Mellon Investor Services LLC - shipping via air, sea, ground, and rail Report on Form 10-K fi led with the Securities and Exchange Commission P.O. Box 3415 - managing international trade certifi cates of the Chief Executive Offi cer and Chief Financial Offi cer South Hackensack, NJ 07606-3415 - overseeing customs brokerage attesting to the quality of UPS’s public disclosure. In addition, the Chief or - fi lling orders Executive Offi cer certifi ed to the New York Stock Exchange on May 26, - handling returns 2005 that he was not aware of any violations by UPS of the New York 480 Washington Boulevard - fi nancing business growth Stock Exchange corporate governance listing standards. Jersey City, NJ 07310 Selected Financial Highlights Form 10-K Direct Stock Purchase Plan Our Annual Report on Form 10-K for the year ended To make an initial purchase of Class B shares go to (in millions, except for per-share amounts) 2005 2004 % Change December 31, 2005 is part of this UPS Annual Report 2005. www.melloninvestor.com and select “For Investors.” If you would like an additional copy of our Form 10-K, Search for “Direct Investment Plans” and access the you can access it through the Investor Relations Web site, “Enrollment Wizard.” Revenue $ 42,581 $ 36,582 16.4 www.shareholder.com/ups, or at the Securities and Exchange Current Class B shareowners can enroll in the plan online Operating expenses 36,438 31,593 15.3 Commission Web site, www.sec.gov. The Form 10-K is by accessing their account through www.melloninvestor.com/isd Net income 3,870 3,333 16.1 available free of charge by calling or writing Investor Relations. or calling 800-758-4674. Diluted earnings per share 3.47 2.93 18.4 UPS Shareowner Services Dividend Reinvestment Plan Dividends declared per share 1.32 1.12 17.9 Convenient access 24 hours a day, seven days a week. To reinvest dividends in the purchase of additional UPS shares: Assets 35,222 33,088 6.4 Class A Common Shareowners - Class A shareowners: follow instructions under Long-term debt 3,159 3,261 (3.1) www.melloninvestor.com ”UPS Shareowner Services” Shareowners’ equity 16,884 16,378 3.1 Select “MellonOne” - Class B shareowners: go to www.melloninvestor.com/isd 888-663-8325 Capital expenditures 2,187 2,127 2.8 Class B Common Shareowners Online Access to Shareowner Materials Cash and investments 3,041 5,197 (41.5) www.melloninvestor.com You may receive shareowner information electronically. To Select “For Investors” and then “Investor ServiceDirect” enroll, follow the MLink® enrollment instructions when you 800-758-4674 access your UPS Class A or Class B shareowner account via the Web addresses above. Calls from outside the United States: 201-680-6612 TDD for hearing impaired: 800-231-5469 TDD for non-U.S. shareowners: 201-680-6610 Copyright © 2006 United Parcel Service of America, Inc. All rights reserved. 225070_Cover.indd5070_Cover.indd 2 33/14/06/14/06 111:31:411:31:41 PPMM UPS Facts Chief Executive Offi cer Letter .... 2 UPS Products and Services ........ 6 Founded: Chief Financial Offi cer Letter ..... 8 1907 UPS Business Philosophy ......... 11 Employees: Board of Directors 407,000 and Senior Management ......... 12 Customers: Annual Report on Form 10-K ... 13 7.9 million Daily small package volume: 14.8 million worldwide UPS.com: 10 million tracking requests daily Operating facilities: 3,000 worldwide Access points: 145,000 worldwide Aircraft: 268 (Ninth-largest airline in the world) Package delivery vehicles: 92,000 Freight vehicles: 6,700 tractors; 22,100 trailers UPS Annual Report 2005 225070_Narrative.indd5070_Narrative.indd 1 33/10/06/10/06 44:14:40:14:40 PPMM Dear fellow shareowners, UPS completed 2005 with tremendous momentum and a keen focus on helping our customers succeed in a complex global environment. Our vision is to bring the world’s businesses together through synchronized commerce. We do this by coordinating their distribution systems, supply chains and order management cycles, helping them to compete better in an expanding global economy. Customers tell us they need to reach new markets, differentiate themselves from competitors, enhance relationships with their own customers, improve cash fl ow, and focus on what they do best. Increasingly, they rely on UPS and our synchronized solutions to help them achieve these critical business objectives. As a result, UPS is deeply ingrained in the fabric of global commerce and supply chains. We’ve become part of the infrastructure of trade — a blending of physical and intellectual assets that both support and drive commerce, whether it’s around the block or around the world. Michael L. Eskew Chairman and Chief Executive Offi cer 225070_Narrative.indd5070_Narrative.indd 2 33/11/06/11/06 44:41:49:41:49 PPMM Diligent execution A year ago, I laid out four expectations for 2005: stemmed from our focus on the middle market customer sector, continued integration of UPS • Preserve the consistency in revenue and earnings shipping technology into customers’ operations, growth that we established over the years our expanded product portfolio, and accelerated • Grow market share in the global small cross-selling of that portfolio. package business This business is a significant value generator and • Increase operating profit in each of our three has long been the financial engine that provides the business units — U.S. domestic, international resources for our global expansion. With operating and supply chain profit of $4.5 billion in 2005, our domestic business consistently posts the best operating margins in the • Maintain a sustainable approach to running industry — 15.7 percent for 2005. Reinvestment of our business the funds that this business generates supports growth through acquisitions, new product development and I’m proud to say we achieved all of that and more. service enhancements. We grew revenue and diluted earnings per share by Package Flow Technology, a multi-year re-engineering 16.4 percent and 18.4 percent, respectively. of our package pickup and delivery process, is a good We delivered a record 3.75 billion small packages example of reinvestment to support growth. This in 2005 — or 14.8 million every day. technology improves productivity, reduces costs and provides the platform for new consignee-focused We grew operating profit in each of our businesses, services. ending 2005 with total operating profit of $6.1 billion — a 23 percent increase over the previous year’s results. Our International segment turned in another exceptional year. Revenue increased 17.2 percent and We generated free cash flow of $3.6 billion.* operating profit was up 30 percent with volume growth in all areas of the world. Operating margin in this And we achieved these results through an organization business was an outstanding 18.7 percent for the year. that is as committed as ever to the role of responsible corporate citizenship. In Europe, UPS has developed a comprehensive, integrated air and ground network — much like that Another outstanding year in the United States — which serves our customers’ local, regional and international shipping needs. The Our U.S. domestic small package operation exhibited 2005 acquisition of two strong, local networks in excellent volume growth during 2005, gaining Poland and in the United Kingdom expanded our momentum as the year progressed. Volume gains customer base and brought enhanced services to customers in those areas. * See page 10 for a reconciliation of free cash flow. '%%*GZkZcjZWnHZ\bZci '%%*DeZgVi^c\Egd[^iWnHZ\bZci ^cW^aa^dch ^cW^aa^dch +#% &#* &*+b^aa^dc -#% '-#+ +,J#H#YdbZhi^XeVX`V\Z ,(J#H#YdbZhi^XeVX`V\Z )#* &.>ciZgcVi^dcVaeVX`V\Z ')>ciZgcVi^dcVaeVX`V\Z &)HjeeanX]V^cVcY[gZ^\]i (HjeeanX]V^cVcY[gZ^\]i Chief ExecutiveUPS Officer Annual Letter Report 20053 25070_Narrative.indd 3 3/16/06 1:51:12 PM In Asia, UPS is pursuing a comprehensive growth achieving $50 million to $100 million in savings in strategy, with China as our priority.