UPS today reported a strong gain in consolidated revenue and a 10.2% improvement in earnings per diluted share to $0.97. Global small package volume rose 6% or 841,000 additional packages each day.

Consolidated Results Second quarter Year-ago
Revenue $11.74 B $10.19 B
Operating profit $1.70 B $1.55 B
Operating margin 14.4% 15.2%
Average volume per day 15.0 M 14.1 M
Diluted earnings per share $0.97 $0.88

"Our global small package volume growth in the second quarter was robust, resulting in a solid earnings gain," said Mike Eskew, UPS chairman and CEO. "The global small package market continues to expand and we are seeing significant opportunities for UPS."

During the second quarter, UPS announced a $1+ billion expansion of its mega-hub at the heart of its global transportation network, Worldport, located in Louisville, Ky. The 1.1 million square-foot expansion will increase sorting capacity by 60% to 487,000 packages per hour. This five-year expansion plan reflects excellent growth projections in UPS's air package volume around the world.

Cash Position
UPS closed the quarter with $2.85 billion in cash and marketable securities. For the first six months, UPS also:

Generated $2.7 billion in free cash flow.
Purchased 17.8 million shares, reducing total shares outstanding by 1.4%.
Paid $1.17 billion in dividends. UPS has increased dividends 81% over the last three years.
Invested $1.44 billion in capital expenditures.

The UPS Board of Directors has approved an increase of $2 billion in the amount of authorized funds for repurchase of Class A and Class B shares.

U.S. Package Second quarter Year-ago
Revenue $7.46 B $6.94 B
Operating profit $1.23 B $1.12 B
Operating margin 16.5% 16.1%
Average volume per day 13.3 M 12.7 M

All levels of service posted gains. Daily ground volume increased 4.6%, while average daily volume for Next Day Air® rose 4.2% and deferred air volume climbed 7.6%. Total revenue per piece remained firm with a gain of 2.7%.

During the period, UPS was named the country's top business brand in the American Brand Excellence Awards 2006 for being a forward-thinking, ethical industry leader.

International Package Second quarter Year-ago
Revenue $2.23 B $2.0 B
Operating profit $414 M $397 M
Operating margin 18.5% 19.9%
Average volume per day 1.7 M 1.5 M

Total international package volume grew 16.5%. Export volume increased 6.5% and non-U.S. domestic volume was up 23.6% aided by acquisitions. Operating profit and volume growth were constrained by three fewer operating days in Europe compared to the same quarter last year.

During the quarter, the company began direct air service from Shanghai to Europe while also adding three new flights connecting Shanghai to the U.S. and another new flight between Qingdao and Incheon, Korea. The additional flights improve UPS service options in several key Asian markets experiencing rapid growth.

Supply Chain and Freight Second quarter Year-ago
Revenue $2.04 B $1.25 B
Operating profit $47 M $34 M
Operating margin 2.3% 2.7%

Revenue and profit improvements in this segment were primarily driven by the acquisition last August of a leading LTL carrier, Overnite, now re-branded UPS Freight. Freight forwarding and logistics operating results improved significantly over first quarter results.

Integration of the acquired heavy air freight network into the UPS Airlines operation was completed at the end of June as scheduled. The integration is allowing UPS to improve service reliability and transit times while offering an expanded portfolio of services.

"We expect diluted earnings per share in a range of $0.87 to $0.91 in the third quarter compared to the $0.86 reported during the prior-year period," said Scott Davis, UPS's chief financial officer. The third quarter has fewer operating days than the prior-year period, negatively impacting earnings per share comparison approximately $0.04 to $0.05.

Davis also stated that full-year earnings growth is expected to be at the low end of the company's original 11-to-16% guidance for 2006.

UPS is the world's largest package delivery company and a global leader in supply chain services, offering an extensive range of options for synchronizing the movement of goods, information and funds. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide. UPS's stock trades on the New York Stock Exchange (UPS) and the company can be found on the Web at