UPS reports hefty 4th quarter loss on pension withdrawal charge

(UPS photo)

By HARRY R. WEBER
The Associated Press

1/30/2008

ATLANTA — UPS Inc., the world’s largest shipping carrier, reported Wednesday that it swung to a hefty loss in the fourth quarter due to a $6.1 billion payment to shift 45,000 of its employees from one pension plan to another. The company also said it expects financial headwinds to hamper its results in the first quarter of 2008.

It expects to make $3 billion in capital expenditures in 2008, at the low end of its historical range, Chief Financial Officer Kurt Kuehn said during a conference call with analysts.

Kuehn said “2008 will be a year of both challenges and opportunities for the company.”

The results for the most recent quarter, when one-time items are excluded, met Wall Street expectations.

Even so, executives said UPS was hampered by the large spike in fuel prices in a short period of time in the fourth quarter. Usually, the company is able to pass increases in fuel prices along to customers, but executives said that wasn’t as easy to do in the fourth quarter because of how quickly fuel prices rose.

For the three months ended Dec. 31, Atlanta-based UPS said it lost $2.58 billion, or $2.46 a share, compared to a profit of $1.13 billion, or $1.04 a share, for the same period a year earlier.

Excluding the after-tax impact of the pension withdrawal charge, UPS said it earned $1.20 billion, or $1.13 a share, in the fourth quarter. That was in line with what analysts surveyed by Thomson Financial were expecting.

Shares rose 28 cents to $71.20 in early trading Wednesday.

Revenue in the fourth quarter rose 6.1 percent to $13.39 billion, compared to $12.63 billion recorded a year earlier.

For all of 2007, UPS said it earned $447 million, or 42 cents a share, compared to a profit of $4.20 billion, or $3.86 a share, for the same period a year earlier. Full-year revenue was $49.69 billion, compared to $47.55 billion in 2006.

During the quarter, the company announced the ratification of a new five-year agreement with the International Brotherhood of Teamsters, eight months before expiration of the existing contract. As a result, $6.1 billion was paid to withdraw roughly 45,000 UPS employees from the Central States multi-employer pension plan and expensed to the U.S. Package segment in the quarter.

UPS has said it would move employees into a single employer pension fund jointly administered by UPS management and the Teamsters. The Teamsters represent 238,000 of UPS’ 427,700 employees. Those represented include all hourly full-time drivers and part-time sorters.

Going forward, UPS, also known as United Parcel Service, said the first quarter will be the most difficult of 2008 due to lower profitability from an early Easter and additional interest expense not yet offset by labor contract benefits.

The company said earnings per share for the quarter should be within the range of 94 cents to 98 cents. For the full year, UPS expects earnings per share to be between $4.30 and $4.50.

Chief Executive Officer Scott Davis said “economic uncertainty will probably make 2008 more challenging than last year.”