United Parcel Service's IPO Harvard Business School Case #103-015 Case Software #XLS-352
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Exhibit 4 Overnight, Deferred, and Ground Market Shares, 1990–1999 By Revenue
By Volume
Overnight
UPS Next Day Air FDX Overnight ABF Next Day USPS Express Mail Deferred UPS Deferred FDX Deferred (E2, ES) ABF Second Day USPS Priority Mail Ground UPS Ground FedEx Ground without RPS withRPS* USPS Parcel Post
1990 31% 51% 10% 8%
1991 30% 51% 11% 8%
1992 30% 50% 12% 8%
1993 30% 50% 13% 7%
1994 30% 50% 13% 7%
1995 30% 49% 14% 7%
1996 32% 49% 13% 6%
1997 31% 48% 15% 6%
1998 32% 47% 15% 6%
1999 34% 46% 14% 6%
1999 25% 46% 23% 6%
1990 40% 16% 5% 39%
1991 38% 17% 5% 40%
1992 35% 16% 6% 43%
1993 34% 18% 6% 42%
1994 32% 18% 6% 44%
1995 30% 19% 6% 45%
1996 30% 18% 7% 45%
1997 28% 20% 6% 46%
1998 26% 23% 6% 45%
1999 27% 22% 6% 45%
1999 13% 13% 4% 70%
1990 87% 0% 5% 8%
1991 87% 0% 5% 8%
1992 85% 0% 6% 9%
1993 85% 0% 7% 8%
1994 83% 0% 8% 9%
1995 82% 0% 8% 10%
1996 82% 0% 8% 10%
1997 81% 0% 9% 10%
1998 80% 0% 10% 10%
1999 80% 0% 10% 10%
1999 79% 0% 11% 10%
* RPS acquired by FedEx in 10/97
Note: Ground market shares are based on the revenues and volume of the largest providers in the industry. They do not include data for private delivery fleets of individual companies, courier services, regional delivery services, LTL trucking firms and third-party logistics companies Source: SJ Consulting Group.
Exhibit 6 FedEx Stock Price Performance and Valuation Multiples Market Data and Multiples—(November 1,1999)
Shares outstanding (weighted average, diluted) Share price a Price/Earnings b Price/Total revenue c Market/Book value d Equity Beta
300.6 million $41.50 19.8 0.74 2.68 1.16
Source: FedEx company filings. a
Total market capitalization/Net income.
b
Total market capitalization/Total revenue.
c
Total market capitalization/Shareholders’ equity.
d
Salomon Smith Barney Equity Research report on FedEx, June 22, 1999.
Exhibit 7 UPS Financial Statements, 1994–1999
Statement of Income (year-ended December 31)
(Financial data in millions, except per share amounts) REVENUE U.S. domestic package International package Non-package TOTAL REVENUES Operating expenses: Compensation and benefits Other Restructuring charge TOTAL OPERATING EXPENSES OPERATING PROFIT (LOSS) U.S. domestic package International package Non-package Corporate TOTAL OPERATING PROFIT Other income (expense): Investment income Interest expense Tax assessment Miscellaneous, net INCOME BEFORE INCOME TAXES Income taxes NET INCOME Per share amounts: Basic earnings per share Diluted earnings per share
1994
1995
16,943 2,346 287 19,576
17,773 2,886 386 21,045
11,727 6,293
Nine Months Ended September 30, 1999
1997
1998
18,881 2,989 498 22,368
18,868 2,934 656 22,458
20,650 3,237 901 24,788
15,129 2,342 653 18,124
16,239 2,562 805 19,606
13,326 7,013
13,289 7,461
14,346 7,352
10,587 5,315
11,226 5,522
—
—
—
—
—
18,020
12,401 6,478 372 19,251
20,339
20,760
21,698
15,902
16,748
1,821 (390) 125
1,937 (250) 107
2,181 (281) 129
1,654 (67) 111
2,899 56 135
2,098 19 105
2,522 147 85 104 2,858
—
1996
Nine Months Ended September 30, 1998
—
—
—
—
—
—
1,556
1,794
2,029
1,698
3,090
2,222
13 (29)
26 (77)
39 (95)
70 (187)
84 (227)
56 (169)
—
—
—
—
—
—
35 1,575 632 943
(35) 1,708 665 1,043
(63) 1,910 764 1,146
(28)· 1,553 644 909
(45) 2,902 1,161 1,741
(3) 2,106 847 1,259
115 (170) (1,786) (30) 987 765 222
0.84 0.82
0.93 0.92
1.03 1.01
0.82 0.81
1.59 1.57
1.16 1.14
0.20 0.20
Dividends declared per share Net income before impact of tax assessment As a percentage of revenue
0.28 943 4.8%
0.32 1,043 5.0%
1997
1998
460 — 2,405 669 417 526 4,477
1,240 389 2,713 703 380 — 5,425
3,519 6,771 654 1,433 1,734 4,063 328 18,502 7,495 11,007 428 15,912
3,482 7,739 651 1,478 1,803 4,144 257 19,554 8,170 11,384 258 17,067
Source: UPS Company Filings.
Exhibit 7 (continued) BALANCE SHEET United Parcel Service In millions, except where noted. As of December 31, ASSETS CURRENT ASSETS Cash and cash equivalents Marketable securities and short-term investments Accounts receivable Prepaid employee benefit costs Materials, supplies and other prepaid expenses Common stock held for stock plans Total Current Assets PROPERTY, PLANT, AND EQUIPMENT Vehicles Aircraft (including aircraft under capitalized leases) Land Buildings Leasehold improvements Plant equipment Construction-in-progress Less accumulated depreciation and amortization Net Property, Plant, and Equipment Other Assets TOTAL ASSETS LIABILITIES AND SHAREOWNERS' EQUITY CURRENT LIABILITIES
0.34 1,146 5.1%
0.35 909 4.0%
0.43 1,741 7.0%
0.20 1,259 7.0%
0.28 1,664 8.5%
Accounts payable Accrued wages and withholdings Dividends payable Deferred income taxes Current maturities of long-term debt Other current liabilities Total Current Liabilities Long-Term Debt (including capitalized lease obligations) Accumulated Postretirement Benefit Obligation Deferred Taxes, Credits and Other Liabilities SHAREOWNERS' EQUITY Preferred stock, no par value, authorized 200,000,000 shares, none issued Class A common s tock, par value $.01 per share, authorized 4,600,000,000 shares, issued 1,101,295,534 and 1,118,000,000 in 1999 and 1998 Class B common s tock, par value $.01 per share, authorized 5,600,000,000 shares, issued 109,400,000 and -0- in 1999 and 1998 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Unrealized loss on marketable securities Treasury stock, at cost (-0- and 23, 211,904 shares in 1997 and 1998)
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY
1,207 1,194 191 140 41 625 3,398 2,583 911 2,933
1,322 1,092 247
—
—
56
11 325 7,325 (63)
—
6,112 (81)
—
410 646 3,717 2,191 969 3,017
—
—
6,087 —
7,598 (425)
6,087 15,912
7,173 17,067
Source: UPS Company Filings.
Exhibit 7 (continued)
Financial Data in Millions: Balance Sheet Data (at end of period): Working Capital
Year Ended December 31 1994 1995 1996 1997 $120 $261 $1,097 $1,079
6 Months Ended 1998 June 30,1999 $1,708 $434
Long-term debt Total assets Shareowner's equity
Source: UPS Company Filings.
$1,127 $1,729 $2,573 $11,182 $12,645 $14,954 $4,647 $ 5,151 $5,901
$2,583 $15,912 $6,087
$2,191 $2,138 $17,067 $18,302 $7,173 $6,122
Exhibit 8 FedEx Financial Statements, 1996–1999
CONSOLIDATED STATEMENTS OF INCOME FDX Corporation Years ended May 31 In thousands, except Earnings Per Share REVENUES OPERATING EXPENSES: Salaries and employee benefits Purchased transportation Rentals and landing fees Depreciation and amortization Maintenance and repairs Fuel Merger expenses Restructuring and impairment charges (credits) Other
1996 $ 10,273,619 4,619,990 370,650 959,055 719,609 617,657 578,614 1,784,220 9,649,795 623,824
6,150,247 1,252,901 1,138,690 928,833 773,765 734,722 225,036 2,526,696 13,730,890 507,002
6,647,140 1,481,590 1,304,296 963,732 874,400 726,776 88,000 (16,000) 2,792,216 14,862,150 1,010,660
7,087,728 1,537,785 1,396,694 1,035,118 958,873 604,929 2,989,257 15,610,384 1,163,086
(95,599) 11,734 (83,865)
(104,195) 23,058 (81,137)
(124,413) 13,271 (111,142)
(98,191) (3,831) (102,022)
539,959 232,182 307,777
425,865 229,761 196,104
899,518 401,363 498,155
1,061,064 429,731 631,333
$
307,777 $
196,104 $
4,875 503,030 $
$
2.69 $
OPERATING INCOME OTHER INCOME (EXPENSE): Interest, net Other, net INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES PROVISION FOR INCOME TAXES INCOME FROM CONTINUING OPERATIONS INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES NET INCOME EARNINGS PER COMMON SHARE Continuing operations Discontinued operations
.67
$ -
$ EARNINGS PER COMMON SHARE,
1997* 1998 1999 $ 14,237,892 $ 15,872,810 $ 16,773,470
2.69 $
.67
$
1.70 $ .02 1.72 $
-
631,333 2.13 -
2.13
ASSUMING DILUTION Continuing operations Discontinued operations
$ $
2.69 $ 2.69 $
.67 $ .67 $
1.67 $ .02 1.69 $
2.10 2.10
Source: FedEx Company Filings. *
Financial results for 1997 and subsequent years are consolidated to include the acquisition of Caliber System Inc.
Exhibit 8 (continued) FedEx Corporation CONSOLIDATED BALANCE SHEETS FDX Corporation May 31 In millions ASSETS CURRENT ASSETS Cash and cash equivalents Receivables, less allowances Spare parts, supplies and fuel Deferred income taxes Prepaid expenses and other Total current assets PROPERTY AND EQUIPMENT, AT COST Flight equipment Package handling and ground support equipment and vehicles Computer and electronic equipment Other Less accumulated depreciation and amortization Net property and equipment OTHER ASSETS Goodwill Equipment deposits and other assets Total other assets
1995
1996
1997*
1998
1999
357.6 1,130.3 193.3 115.8 72.2 1,869.1
93.5 1,271.6 222.1 92.6 48.5 1,728.3
160.9 1,878.0 339.4 197.0 68.6 2,643.7
229.6 1,943.4 364.7 232.8 109.6 2,880.1
325.3 2,153.2 291.9 290.7 79.9 3,141.0
3,006.7 1,841.1 1,224.0 1,625.9 7,697.7 3,982.5 3,715.2
3,372.6 2,148.5 1,439.9 1,717.5 8,678.5 4,561.9 4,116.6
3,741.4 3,131.1 1,957.9 2,557.6 11,387.9 5,917.5 5,470.4
4,056.5 3,425.3 2,162.6 2,819.4 12,463.9 6,528.8 5,935.1
4,556.7 3,858.8 2,363.6 2,940.7 13,719.9 7,160.7 6,559.2
397.3 451.8 849.0
380.7 473.4 854.1
370.3 559.8 930.2
356.3 514.6 870.9
344.0 604.0 948.0
LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES Current portion of long-term debt Accounts payable Accrued expenses Other Liabilities Total current liabilities LONG-TERM DEBT, LESS CURRENT PORTION DEFERRED INCOME TAXES OTHER LIABILITIES COMMITMENTS AND CONTINGENCIES (NOTES 5, 13 and 14) COMMON STOCKHOLDERS' INVESTMENT Common Stock, $.10 par value Additional paid-in capital Retained earnings Accumulated other comprehensive income Less treasury stock, at cost, and deferred compensation Total common stockholders' investment
6,433.4
6,699.0
9,044.3
9,686.1
10,648.2
255.4 618.6 904.5 1,778.5 1,324.7 56.0 1,028.6
8.0 705.5 904.9 1,618.4 1,325.3 64.0 1,115.1
356.7 999.8 1,223.0 2,579.5 1,598.0 181.8 1,183.9
257.5 1,145.4 1,400.9 2,803.8 1,385.2 274.1 1,261.7
14.9 1,134.0 895.4 740.5 2,784.8 1,359.7 293.5 1,546.6
5.6 775.3 1,466.4 0.0 2,247.3 1.7 2,245.6 6,433.4
5.7 815.1 1,766.6 0.0 2,587.4 11.3 2,576.1 6,699.0
14.8 938.0 2,621.5 0.0 3,574.3 73.1 3,501.2 9,044.3
14.7 992.8 2,999.4 (27.3) 3,979.6 18.4 3,961.2 9,686.1
29.8 1,061.3 3,615.8 (24.7) 4,682.2 18.5 4,663.7 10,648.2
Source: FedEx Company Filings. *
Note: Financial results for 1997 and subsequent years are consolidated to i nclude the acquisition of Caliber System Inc.
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
Exhibit 9 Selected UPS Operating Statistics (financial data in millions)
1995 Operating Data: Delivery volume (in millions of packages) Average daily package volume (in thousands) U.S. domestic: Next Day Air Deferred Ground Total U.S. domestic International Domestic Export Total International Total average daily package volume Average revenue per piece: U.S. domestic: Next Day Air Deferred Ground Total U.S. domestic International Domestic Export Total International Total average revenue per piece Revenue: U.S. domestic: Next Day Air Deferred Ground Total U.S. domestic International
Year Ended December 31, 1996 1997
1998
3,094
3,153
3,038
3,137
668 716 9,949 11,333
760 763 10,015 11,538
822 771 9,521 11,114
938 783 9,645 11,366
722 175 897 12,230
683 194 877 12,415
678 217 895 12,009
730 256 986 12,352
$19.34 11.27 4.95 6.20
$19.34 11.39 5.09 6.44
$19.49 11.86 5.19 6.71
$19.69 12.39 5.51 7.15
6.22 37.18 12.26 $6.64
6.10 37.32 13.01 $6.91
5.36 35.01 12.55 $7.15
5.14 33.46 12.49 $7.58
$3,269 2,041 12,463 17,773
$3,734 2,207 12,940 18,881
$4,054 2,314 12,500 18,868
$4,690 2,464 13,496 20,650
Domestic Export Cargo Total International Non-package Total revenue Operating weekdays Capital expenditures (in millions)
Source: UPS Prospectus Filing, September 1999.
1,136 1,646 176 2,958 314 $21,045 253 $2,096
1,058 1,839 177 3,074 413 $22,368 254 $2,333
919 1,922 226 3,067 523 $22,458 253 $1,984
953 2,176 270 3,399 739 $24,788 254 $1,645
Exhibit 10 Summary of FedEx and UPS Operating Statistics UPS Calendar 1998 Average Daily Package Volume (thousands of packages) ● U.S. Express ● U.S. Deferred ● U.S. Ground ● Total U.S. ● Total International ● Total packages Calendar 1998 Average U.S. Revenue per package ● Express ● Deferred ● Ground Number of Employees (full-time and contract positions) Total on-balance sheet assets Number of jet and small aircraft owned and leased Number of vehicles
938 783 9,645 11,366 986 12,352
FedEx
1,957 894 1,385 4,236 282 4,518
ᵃ
$19.69 $14.34 $12.39 $9.93 $5.51 $5.36 340,000 156,386 $23.0 billion $10.6 billion 536 634 149,000 46,000
Source: Derived by casewriters using UPS and FedEx Company Filings. a
Revenues per package (yield) is a function of both average package weight and distance.
Exhibit 11 FedEx Note on Leases May 31,1999 ($ thousands) Package handling and ground support equipment and vehicles Facilities Computer and electronic equipment and other Less accumulated depreciation
($ thousands) Minimum rentals Contingent rentals
($ thousands) 2000 2001 2002 2003 2004 Thereafter
Source: 1999 FedEx Annual Report, Notes to Consolidated Statements.
$245,041 134,442 6,496 385,979 268,696 $117,283
$1,246,259 59,839 $1,306,098 Capital Leases Operating Leases $15,023 $1,011,957 15,023 933,339 15,023 876,055 15,023 809,770 14,894 764,550 302.502 8,717,952 $377,488 $13,113,623
Exhibit 12 UPS Note on Leases 1998 ($ millions) Aircraft Accumulated amortization
($ millions) 1999 2000 2001 2002 2003 After 2003 Total minimum lease payments Less inputed interest Present value of minimum capitalized lease payments Less current portion Long-term capitalized lease obligations
$614 (38) $576 Capitalized Leases $ 67 67 67 67 67 526 $861 (263) 598 (39) $559
Source: UPS Prospectus Filing, September 1999, Notes to Financial Statements.
Operating Leases $ 211 146 115 94 77 477 $1,120
Exhibit 13 Selected ―Best of Breed‖ Ratios vs. Industrial Comparables Stock Market Cap Net Incomeb Price to Market a Price (billions) (millions) ROE Earnings to Book Home Depot Lowes Coca-Cola PepsiCo Wal-Mart Target
$68.50 $49.31 $49.94 $32.19 $50.81 $64.31
100.8 18.9 124.7 48.9 227.4 28.4
1,979 556 3,174 1,921 4,927 1,052
25% 17% 40% 31% 25% 22%
50.9 34.1 39.3 25.5 46.1 27.0
Source: Derived by case writers using SEC filings and market data from bigcharts.com. accessed on 06/23/02 a
As of close of trading October 15, 1999.
b
Latest 12 months.
12.7 5.8 15.6 7.9 11.6 6.0
