Forward-Looking Statements

Transcription

1 November 1, 2017

2 Forward-Looking Statements Presentations may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of Forwardlooking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or anticipated results. These risks and uncertainties include, but are not limited to: general economic conditions, both in the U.S. and internationally; significant competition on a local, regional, national, and international basis; changes in our relationships with our significant customers; existing complex and stringent regulations in the U.S. and internationally, changes to which can impact our business; increased security requirements that may increase our costs of operations and reduce operating efficiencies; legal, regulatory or market responses to global climate change; negotiation and ratification of labor contracts; strikes, work stoppages and slowdowns by our employees; the effects of changing prices of energy, including gasoline, diesel and jet fuel, and interruptions in supplies of these commodities; changes in exchange rates or interest rates; our ability to maintain the image of our brand; breaches in data security; disruptions to the Internet or our technology infrastructure; our ability to accurately forecast our future capital investment needs; exposure to changing economic, political and social developments in international and emerging markets; changes in business strategy, government regulations, or economic or market conditions that may result in substantial impairment of our assets; increases in our expenses or funding obligations relating to employee health, retiree health and/or pension benefits; the potential for various claims and litigation related to labor and employment, personal injury, property damage, business practices, environmental liability and other matters; our ability to realize the anticipated benefits from acquisitions, joint ventures or strategic alliances; our ability to manage insurance and claims expenses; and other risks discussed in our filings with the Securities and Exchange Commission from time to time, including our Annual Report on Form 10-K for the year ended December 31, 2016, or described from time to time in our future reports filed with the Securities and Exchange Commission. You should consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. We do not undertake any obligation to update forward-looking statements to reflect events, circumstances, changes in expectations, or the occurrence of unanticipated events after the date of those statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements. Information included in all presentations, including comparisons to prior periods, may reflect adjusted results. See appendix for reconciliations of adjusted results and other non-gaap financial measures.

3 2017 Targets (Non-GAAP) U.S. Domestic Target 2017 Revenue 5% to 7% Adj. Operating Profit 6% to 8% International Target 2017 Revenue 2% to 4% Adj. Operating Profit -8% to -4% Adj. Operating Margin Slightly lower Adj. Operating Margin Below LY SC&F Target 2017 Revenue 8% to 10% Adj. Operating Profit Expansion after 1Q Adj. Operating Margin Slightly below LY Total Company Target 2017 Total Revenue 5% to 7% Adj. Operating Profit ~3% Adj. Earnings per Share 2% to 6% Share Repurchases of $1.8B, Dividend Payout of 50% to 55% of Adj. Net Income, and ROIC* between 23% to 28% *See Appendix for reconciliation of adjusted results from prior years. The company provides guidance on an adjusted (non-gaap) basis because it is not possible to predict or provide a reconciliation reflecting the impact of future pension 3 mark-tomarket adjustments, which would be included in GAAP results and could be material.

4 Targets (Non-GAAP) U.S. Domestic Target Revenue 4% to 6% Adj. Operating Profit 5% to 9% Adj. Operating Margin 13% to 14% International Target Revenue 5% to 8% Adj. Operating Profit 8% to 12% Adj. Operating Margin 16% to 19% SC&F Target Revenue 4% to 8% Adj. Operating Profit 6% to 10% Adj. Operating Margin 6% to 8% Total Company Target Total Revenue 4% to 6% Adj. Operating Profit 5% to 9% Adj. Earnings per Share 5% to 10% Share Repurchases of $1.0B to $1.8B, Dividend Payout of 50% to 55% of Adj. Net Income, and ROIC* between 23% to 28% *See Appendix for reconciliation of adjusted results from prior years. The company provides 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-tomarket adjustments, which would be included in GAAP results and could be material.

5 ROIC Strong History of Returns on Capital 40% 30% 20% Historical average greater than 20% 23% to 28% 10% Ultimate Investment Allocation Flexibility Re-invest in the business Dividends are a priority Maintain a strong balance sheet Balanced approach to share repurchases 5

6 CapEx as a % of Revenue Reinvestment History 20% UPS Airline 16% 12% 8% 4% Global Expansion SC&F Acquisitions Smart Global Logistics Network 6 7% Revenue 0%

7 Dividends Since IPO growth averaged 10% $3.32 Stable or growing dividend for almost 50 years $2.92 $3.12 $2.68 $2.48 $2.28 $2.08 $1.68 $1.80 $1.80 $ * ** Annual cash dividends paid since 1969 *2008 included five dividend payments (totaling $2.22/share) due to dividend payment schedule change **2017 is estimated based on $.83 per share first quarter announcement

8 Industry leading Margins* *Operating Margin is presented on an as adjusted basis for all companies (trailing 12 months) and is not reflective of the Global Small Package market. ** FDX includes TNT and Eliminations, corporate, and other 8

9 Online Retail is Growth Engine for Future US Cross Border is expected to grow 7x the rate of GDP UPS is transforming our business model to capture this Opportunity Note: Nominal GDP Source: UPS Rates & Forecasting, emarketer, Forrester 9

10 Percent of U.S. Domestic Packages B2C Mix Expected to Climb 46% 48% B2C Shipments projected to continue growing 44% 40% 36% Actual Forecast

11 Solving the B2C Equation at UPS Revenue per package Cost per stop Packages per stop Value-added Solutions Dim-weight Pricing Peak Pricing Options ORION Hub Modernization SurePost UPS Access Point Synthetic Density UPS Access Point Network Not at Home delivery Enhances capacity Improves customer service About 9,000 in US >27,500 globally UPS MyChoice Members re-direct delivery Eliminates multiple attempts 40M members and growing About 1.1B delivered packages Commercial Residential UPS SurePost Redirect Expanding consumer options Growth in Large & Middle-market ~35% redirected into UPS system 11

12 Superior Consumer Experience UPS My Choice, UPS Access Point TM, UPS Returns Choice Control Convenience UPS My Choice service UPS Access Point locations 12

13 Bending the Cost Curve 13

14 Smart Global Logistics Network Benefits Facility Automation EDGE (2020) (2021) $300M - $400M $200M - $300M $800M to $1B* Upon Completion ORION (2019) $150M - $200M Network Planning Tool (2020) $100M - $200M *Annual cost savings and avoidance (Targeted completion dates) 14

15 The Smart Global Logistics Network Higher Levels of Automation and Integration Than Ever Before Facility Automation/ Modernization Smart Trailer Network Planning Tool International Package Flow Tech ORION EDGE SurePost Redirect 15

16 ORION Extending Innovation Beyond the Network Completed Phase I in 2016: More than $400M in cost savings and avoidance Generated NPV of more than $700M 2.3B delivery route optimizations in one year 210M fewer miles driven Future: Dynamic functionality $150 to $200M in annual savings 16

17 Facility Investments The World s Most Integrated and Efficient Network will be Even More Efficient Over 70 new package and hub projects around the world: Advancing the connectedness of the UPS network New, expanding and retrofit facilities More Efficiency More Flexibility More Capacity Investments in our integrated network benefit all packages and customers Cost savings and avoidance: In all, targeting between $300M to $400M annually 17

18 T H O U G H T L E A D E R S H I P Revenue Management O N E U P S E X P E R I E N C E UPS Customer Solutions Supply Chain and Industry Expertise / Marketing / Sales Broad Portfolio of Capabilities Products / Technologies Efficient Integrated Network L E A D I N G B R A N D Align Price with Cost NEW Peak Surcharge General Rate Increase DIM Weight Large Package & Overmax Residential Delivery Surcharge Weekly Fuel Surcharge Global Package / Forwarding / Freight / Distribution Forecast Accuracy Tool B A L A N C E D G L O B A L P R E S E N C E 18

19 Saturday Operations U.S. Pickup and Delivery of Ground and Air 6 Days a Week Fastest and Widest Service on Mondays Pick up Saturday, Delivery Monday 1 business day earlier Commercial and Residential Major markets include: New York, Los Angeles, Dallas, Chicago, Seattle, Atlanta, and Miami Will serve half of U.S. population by 4Q17 peak. Coverage to expand to about 5,900 cities and towns We will provide Saturday Ground service to about 4,700 towns and cities by the end of

20 All Service Levels, One Integrated Network Asset Leverage, Technology Driven Flexibility, Unmatched Efficiency Advantage of single integrated network Distribution Center UPS Shipper NPT Automation UPS Feeder Package Sorting Hub UPS Airplane EDGE ORION Residential UPS domestic and international packages all levels Delivery Center Delivery Business Returns UPS Access Point TM

21 Proprietary and Confidential: This presentation may not be used or disclosed to any person other than employees of customer, unless expressly authorized by UPS. UPS with Breakthrough Capabilities 16% More Efficiency and Capacity; Longest Routes with Ability to Cascade Capacity Modern flight deck New wing design Next-generation alloys Next-generation cargo handling system 3 deployed by 4Q17 Peak 14 firm, 14 options New 787 technology engines 2014 United Parcel Service of America, Inc. UPS, the UPS brandmark, the color brown and photos are trademarks of United Parcel Service of America, Inc. All rights reserved. 21

22 Proprietary and Confidential: This presentation may not be used or disclosed to any person other than employees of customer, unless expressly authorized by UPS. Building International Capabilities Territory Expansion Canada & West Germany 1989 Western Europe, Asia & LatAm expansion Foundational acquisitions & organic growth in Asia, W. Europe, Canada & Mexico 2003 Core, Opportunity & Maintenance categories China, Poland, Turkey, Chile, Czech Republic, Hungary investments Emerging Markets Expansion ISMEA region formed Major Acquisitions and Investments Include 2014 United Parcel Service of America, Inc. UPS, the UPS brandmark, the color brown and photos are trademarks of United Parcel Service of America, Inc. All rights reserved. 22

23 International Growth Strategy FOUNDATION First expanded outside the U.S. more than 40 years ago Today we serve more than 220 countries and territories OPTIMIZE Invested nearly $2B in our European infrastructure, nearly half complete Add capacity to existing network footprint, increase scale economies & expand capabilities CREATE Offer customer-centric solutions: UPS My Choice, UPS Access Point, and i-parcel Improving Europe time-in-transit by cutting one full day between 101K city pairs Entered 3PL truckload market with the acquisition of Freightex Expanding our dangerous goods service to 36 countries; effectively expand market opportunities * UPS Estimates 23

24 International Service Portfolio Expansion UPS Reaches the Top 20 Countries* for AM Delivery - More than the Competition Expand Industry-Leading Express Service: UPS Express provides broadest time-of-day coverage in the market UPS Express Saver provides global coverage to almost anywhere in 20 to 48 hours In 2016: Added Early A.M. Express Plus to 26 new countries Added Express to 52 new countries In 2017, bringing Express and Express Plus to 37 new countries Cut a full day out of delivery times between over 350 cities in 26 European countries * By GDP 24

25 International Operating Margins 25% 20% 15% bps Impact* 16-19% 10% *Impact due to currency hedges See Appendix for reconciliation of adjusted results. 25

26 2Q07 1Q08 4Q08 3Q09 2Q10 1Q11 4Q11 4Q12 3Q13 2Q14 1Q15 4Q15 3Q16 2Q17 Average Daily Volume International Export Volume Trends 1,400 1,200 UPS 10 Year CAGR = +7.3% 1, FedEx s 10 Year CAGR = +4.8% 400 Source: Company quarterly reports Note: FedEx in fiscal quarters, includes TNT as of quarter ending Sep

27 Supply Chain & Freight Addressing Customers Total Transportation Needs With Industry Leading Portfolio of Services Freight Forwarding Distribution Coyote UPS Freight Air and Ocean Brokerage Rail Freight Insurance / Financing Expedited Ground Express Critical Supplier Management Design & Planning Post Sales and Service Parts Contract Logistics e-fulfillment solutions Acquired Marken TL brokerage Expanded in Mexico Best in class customer facing technology Expanding into Europe - acquired FreightEx Freight LTL TL and Intermodal Dedicated Contract Carriage Specialty solutions: trade show, temperature Supply Chain & Freight Portfolio connected well to Small Package 27

28 Global Healthcare Integrated Distribution Network 77 dedicated facilities globally and growing GDP & GMP compliance* Temperature control storage & packaging Integrated Transportation services including Temperature Controlled Air and Ground Labelling and kitting Order to cash services including charge-back processing Pharmacy operations Single integrated global platform Implantable Device Inventory Management and Loaner Kit management 7.7 million square feet Current UPS Facilities UPS Air Hub 28

29 UPS Acquires Marken Expanding Global Clinical Trials Capability Expanding existing UPS capabilities and coverage, especially in emerging markets Expect to be accretive year 1 High margin business #1 Inbound Market Leader 43 Global Facilities Serving >150 countries 140 Vehicles 650 Employees Makes UPS the World s Largest Clinical Trials Integrated Carrier 29

30 Coyote - High Growth, Scaled Provider Technology-driven solutions and a scaled provider of full truckload brokerage services. Coyote primarily operates in North America, but with recent expansion into Europe, Coyote is positioned to service global shippers. Complete Global Visibility Supplier & Systems Integrator 30

31 Appendix I. Latest Results II. III. IV. Additional Information Financial Reconciliations Glossary 31

32 Consolidated Results (In millions, except EPS) 3Q17 3Q16 $ Change % Change Revenue $15,978 $14,928 $1, % Operating Expenses $13,943 $12,894 $1, % Operating Profit $2,035 $2,034 $1 0.0% Net Income $1,264 $1,270 -$6-0.5% Diluted EPS $1.45 $1.44 $ % 3Q17: UPS Revenue Rises 7% on Balanced Shipment Growth and Yield Expansion International Operating Profit Climbs 8.9%; Currency-Neutral Profit* up 20% Daily Export Volume up 19% for 3rd Straight Quarter of Double-Digit Growth U.S. Domestic Revenue up 3.9% on Higher Package Demand and Yields U.S. Operating Profit of $1.2B, Including $50M of Negative Hurricane Impact Supply Chain & Freight Boosts Revenue more than 13%; Profits up 9.7% Company Lifts Bottom of Guidance Range; Expects Full-Year 2017 Adjusted Earnings Per Share of $5.85 to $

33 UPS Snapshot Leader in global supply chain & freight services Premium Global Brand Ranked as most valuable global brand by: Delivering 19 million packages every day Enabled by Technology Founded 110 Year Ago UPS.com UPS Ready Smart Logistics Started by two teenagers making retail deliveries in the early years 116,000 delivery vehicles from vans to motorcycles 500+ aircraft 10 th largest airline serving Sustainably Serving Customers & Communities Employees Customers & Communities Sustainability 434,000+ employees 10M+ Connected 100M+ UPS Foundation 20% reduction carbon density 33

34 UPS Alternative Fuel / Advanced Technology Fleet U.S. Total: 7,111* CNG: 3,471 LNG: 1,353 Propane: 1,176 Hybrid Electric: 500 Composite: 398 Electric: 122 HHV: 91 International Total: 1,456* Propane: 1,130 Electric: 159 CNG: 76 Ethanol: 62 Biomethane: 19 Hybrid Electric: Total Worldwide: 8,567* *As of 05/31/2017

35 The UPS Foundation On A Page Proprietary and Confidential: This presentation may not be used or disclosed to any person other than employees of customer, unless expressly authorized by UPS. UPS is Committed to More Global Volunteerism $57.5M Employee pledge in support of United Way 2.7M Employee Volunteer Hours Environmental Sustainability 1B+ Miles on alternative and advanced technology fleet >1.0M Alternative fuel and advanced technology miles driven/day Diversity & Inclusion $14.9M Underserved & underrepresented population Recognized industry leader in environmental sustainability Commitment to help customers build more sustainable supply chains Strong tradition of community involvement Connected Community $116.6M Total Philanthropic Contributions to 170+ countries (2016) 2014 United Parcel Service of America, Inc. UPS, the UPS brandmark, the color brown and photos are trademarks of United Parcel Service of America, Inc. All rights reserved. 35

36 Proprietary and Confidential: This presentation may not be used or disclosed to any person other than employees of customer, unless expressly authorized by UPS. Leveraging Major Sponsorships As An Enabler of Growth China 2008 London 2012 Expo million items in and out of the Olympic Village and venues Two air hubs in China and accelerated growth 35% respondents more likely to use UPS post sponsorship 30 million items in and out of the Olympic Village and venues $2 billion investment in Europe - ongoing Connecting Minds, Creating the Future 25M+ expected visitors 70% visitors are overseas 2014 United Parcel Service of America, Inc. UPS, the UPS brandmark, the color brown and photos are trademarks of United Parcel Service of America, Inc. All rights reserved. 36

37 UPS International Regional Statistics GLOBAL EUROPE APAC AMERICAS Employees 434,000 46,500 14, ,000 Delivery Fleet 116,000 14,000 1,870 3,880 Operating Facilities* >2, UPS Access Points >27,500 17,000 n/a 1,700 Flight Segments Intra-Region Intercontinental 1,077 U.S. 1,090 Int l 170 Daily 141 Daily 189 Weekly 143 Weekly 192 Daily 41 Daily Source: UPS Pressroom Fact Sheets *Operating facilities include brokerage, Forwarding, & Distribution facilities 37

38 Reconciliation of GAAP and non-gaap Financial Measures We supplement the reporting of our financial information determined under generally accepted accounting principles ("GAAP") with certain non-gaap financial measures, including, as applicable, "as adjusted" operating profit, operating margin, pre-tax income, net income and earnings per share. The equivalent measures determined in accordance with GAAP are also referred to as "reported" or "unadjusted. Additionally, we periodically disclose free cash flow as well as currency-neutral revenue, revenue per piece and operating profit. We believe that these non-gaap measures provide additional meaningful information to assist users of our financial statements in understanding our financial results 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. Management uses these non-gaap financial measures in making financial, operating and planning decisions. We also use certain of these measures for the determination of incentive compensation award results. 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 non-gaap financial information does not represent a comprehensive basis of accounting. Therefore, our non-gaap financial information may not be comparable to similarly titled measures reported by other companies. Currency-Neutral Revenue, Revenue per Piece and Operating Profit We supplement the reporting of our revenue, revenue per piece and operating profit with similar non-gaap measures that exclude the period-over-period impact of foreign currency exchange rate changes and hedging activities. We believe currency-neutral revenue, revenue per piece and operating profit information allows users of our financial statements to understand growth trends in our products and results. We evaluate the performance of our International Package business on a currency-neutral basis. Currency-neutral revenue, revenue per piece and operating profit 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 current period local currency revenue, revenue per piece and operating profit 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 period over period impact of foreign currency revenue 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 currency fluctuations. 38

39 U.S. Domestic Cost Per Piece Reconciliation 39

40 Currency Neutral Revenue Reconciliation 40

41 Small Package Operating Margin Reconciliation (amounts in millions) 4Q16 1Q17 2Q17 3Q17 TTM GAAP Operating Income (Loss) U.S. Domestic Package $ (570) $ 1,076 $ 1,395 $ 1,182 $ 3,083 Mark-to-Market Pension Impact (Outside of 10% Corridor) 1, ,908 U.S. Domestic Package Adjusted $ 1,338 $ 1,076 $ 1,395 $ 1,182 $ 4,991 International Package $ 281 $ 529 $ 583 $ 627 $ 2,020 Mark-to-Market Pension Impact (Outside of 10% Corridor) International Package Adjusted $ 706 $ 529 $ 583 $ 627 $ 2,445 Adjusted Small Package Operating Income $ 2,044 $ 1,605 $ 1,978 $ 1,809 $ 7,436 Revenue U.S. Domestic Package 10,913 9,535 9,745 9,649 39,842 International Package 3,335 3,058 3,163 3,364 12,920 Total Small Package $ 14,248 $ 12,593 $ 12,908 $ 13,013 $ 52,762 U.S Domestic Operating Margin* 12.3% 11.3% 14.3% 12.2% 12.5% International Operating Margin* 21.2% 17.3% 18.4% 18.6% 18.9% Adjusted Operating Margin* 14.3% 12.7% 15.3% 13.9% 14.1% 41

42 Historical Operating Margin Reconciliation (amounts in millions) Segment Operating Margins U.S. Domestic Package GAAP Operating Profit $ 3,764 $ 459 $ 4,603 $ 2,859 $ 4,767 $ 3,017 Defined Benefit Plans Mark-to-Market Charge 479 3, ,908 Transfer healthcare coverage to MEP Multiemployer Pension Plan Withdrawal Charge (Gain) or Loss on Real Estate Sale U.S. Domestic Package Adjusted Operating Profit $ 4,258 $ 4,532 $ 4,603 $ 4,509 $ 4,829 $ 4,925 International Package GAAP Operating Profit $ 1,709 $ 869 $ 1,757 $ 1,677 $ 2,137 $ 2,044 Defined Benefit Plans Mark-to-Market Charge Transfer healthcare coverage to MEP TNT Termination Fee and Related Expenses Gain Upon Liquidation of Foreign Subsidiary - - (245) International Package Adjusted Operating Profit $ 1,880 $ 1,810 $ 1,796 $ 1,905 $ 2,181 $ 2,469 Supply Chain & Freight GAAP Operating Profit $ 607 $ 15 $ 674 $ 432 $ 764 $ 406 Defined Benefit Plans Mark-to-Market Charge Transfer healthcare coverage to MEP (48) Supply Chain & Freight Adjusted Operating Profit $ 736 $ 728 $ 674 $ 718 $ 776 $ 724 Total GAAP Operating Profit $ 6,080 $ 1,343 $ 7,034 $ 4,968 $ 7,668 $ 5,467 Total Adjusted Operating Profit $ 6,874 $ 7,070 $ 7,073 $ 7,132 $ 7,786 $ 8,118 Revenue U.S. Domestic Package $ 31,717 $ 32,856 $ 34,074 $ 35,851 $ 36,747 $ 38,301 International Package 12,249 12,124 12,429 12,988 12,149 12,350 Supply Chain & Freight 9,139 9,147 8,935 9,393 9,467 10,255 Total Revenue $ 53,105 $ 54,127 $ 55,438 $ 58,232 $ 58,363 $ 60,906 GAAP U.S Domestic Package Operating Margin 11.9% 1.4% 13.5% 8.0% 13.0% 7.9% GAAP International Package Operating Margin 14.0% 7.2% 14.1% 12.9% 17.6% 16.6% GAAP Supply Chain & Freight Operating Margin 6.6% 0.2% 7.5% 4.6% 8.1% 4.0% GAAP Total Operating Margin 11.4% 2.5% 12.7% 8.5% 13.1% 9.0% Adjusted U.S Domestic Package Operating Margin 13.4% 13.8% 13.5% 12.6% 13.1% 12.9% Adjusted International Package Operating Margin 15.3% 14.9% 14.5% 14.7% 18.0% 20.0% Adjusted Supply Chain & Freight Operating Margin 8.1% 8.0% 7.5% 7.6% 8.2% 7.1% Adjusted Total Operating Margin 12.9% 13.1% 12.8% 12.2% 13.3% 13.3% 42

43 Adjusted Net Income and EPS Reconciliation Earnings per Share and Shareholder Distribution Trends (amounts in millions, except per share amounts) & 2016 % Increase 2014 to 2016 % CAGR 2014 to 2016 GAAP Net Income $ 3,032 $ 4,844 $ 3,431 $ 8, % 6.4% GAAP Diluted Earnings Per Share $ 3.28 $ 5.35 $ % 8.6% Operating Expenses: Transfer healthcare coverage to MEP $ 1,102 $ - $ - $ - Pension Mark to Market 1, ,651 2,769 Total Adjustments to Operating Expenses: $ 2,164 $ 118 $ 2,651 $ 2,769 Tax-Effect of Above Items (807) (39) (978) (1,017) Total Adjustments to Net Income $ 1,357 $ 79 $ 1,673 $ 1,752 Adjusted Net Income $ 4,389 $ 4,923 $ 5,104 $ 10, % 7.8% Divided By: Diluted WAVG Shares Outstanding Adjusted Diluted Earnings Per Share $ 4.75 $ 5.43 $ % 10.0% Shareholder Distributions Dividends $ 2,487 $ 2,649 $ 2,771 $ 5,420 Share Repurchases 2,662 2,711 2,706 5,417 Total $ 5,149 $ 5,360 $ 5,477 $ 10,837 % Adjusted Net Income - Dividends 57% 54% 54% 54% % Adjusted Net Income - Share Repurchases 61% 55% 53% 54% % Adjusted Net Income Returned to Shareholders 118% 109% 107% 108% 43

44 ROIC Reconciliation ROIC (amounts in millions) Adjusted GAAP Adjusted GAAP Adjusted GAAP Adjusted GAAP Adjusted GAAP Adjusted GAAP Operating Profit 6,874 6,080 7,070 1,343 7,073 7,034 7,132 4,968 7,786 7,668 8,118 5,467 Less: Taxes (2,365) (2,073) (2,439) (230) (2,504) (2,427) (2,532) (1,719) (2,647) (2,607) (2,801) (1,815) After-Tax Op Profit 4,509 4,007 4,631 1,113 4,569 4,607 4,600 3,249 5,139 5,061 5,317 3,652 Beginning LT Debt 10,491 10,491 11,095 11,095 11,089 11,089 10,824 10,824 9,856 9,856 11,316 11,316 Ending LT Debt 11,095 11,095 11,089 11,089 10,824 10,824 9,856 9,856 11,316 11,316 12,394 12,394 Beginning Shareowners' Equity 10,387 8,047 9,853 7,108 7,941 4,733 6,566 6,488 5,356 2,158 5,200 2,491 Ending Shareowners' Equity 9,853 7,108 7,941 4,733 6,566 6,488 5,356 2,158 5,200 2,491 3, Average Invested Capital 20,913 18,371 19,989 17,013 18,210 16,567 16,301 14,663 15,864 12,911 16,380 13,315 Return on Invested Capital 21.6% 21.8% 23.2% 6.5% 25.1% 27.8% 28.2% 22.2% 32.4% 39.2% 32.5% 27.4% Beginning Total Debt 10,846 10,846 11,128 11,128 11,120 11,120 10,872 10,872 10,787 10,787 14,334 14,334 Ending Total Debt 11,128 11,128 11,120 * 11,120 * 10,872 10,872 10,787 10,787 14,334 14,334 16,075 16,075 Beginning Shareowners' Equity 10,387 8,047 9,853 7,108 7,941 4,733 6,566 6,488 5,356 2,158 5,200 2,491 Ending Shareowners' Equity 9,853 7,108 7,941 4,733 6,566 6,488 5,356 2,158 5,200 2,491 3, Average Invested Capital 21,107 18,565 20,021 17,045 18,250 16,607 16,791 15,153 17,839 14,885 19,730 16,665 Return on Invested Capital 21.4% 21.6% 23.1% 6.5% 25.0% 27.7% 27.4% 21.4% 28.8% 34.0% 27.0% 21.9% *2012 total debt adjusted to reflect 1/15/13 debt repayment of $1.75B Shareowners Equity Adjustments: 2011 beginning balance adjusted $2.340 billion for unrecognized pension and postretirement benefits costs, net of tax 2011 ending balance adjusted $2.745 billion for unrecognized pension and postretirement benefits costs, net of tax 2012 ending balance adjusted $3.208 billion for unrecognized pension and postretirement benefits costs, net of tax 2013 ending balance adjusted $78 million for TNT and unrecognized pension and postretirement benefits costs, net of tax 2014 ending balance adjusted $3.198 billion for unrecognized pension and postretirement benefits costs, net of tax 2015 ending balance adjusted $2.709 billion for unrecognized pension and postretirement benefits costs, net of tax 2016 ending balance adjusted $3.421 billion for unrecognized pension and postretirement benefits costs, net of tax 44

45 Glossary Definition Definition Definition ABC Activity Based Costing EDGE Enhanced Dynamic Global Execution LTL Less-Than-Truckload ADV Average Daily Volume EMEA Europe, Middle East, and Africa MTM Mark-To-Market pension revaluation B2B Business To Business retail channel EPS Earnings Per Share NPT Network Planning Tools B2C B2R Block hours Business To Consumer retail channel Business To Retail store distribution channel FSC Fuel Surcharge ORION On-Road Integrated Optimization and Navigation GDP Gross Domestic Product ROIC Return On Invested Capital Aircraft hours IAF International Air Freight SC&F Supply Chain and Freight segment CAGR Compound Annual Growth Rate IP Industrial Production SSLAW Small Sort Label & Weigh DIAD Delivery Information Acquisition Device IPO Initial Public Offering TTM Trailing Twelve Months 3PL Third Party Logistics 45