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Consolidated revenue for the quarter ending Sept. 30, 2006, increased 10.5% and diluted earnings per share increased 11.6% to $0.96. The growth in small package volume translated to 721,000 additional packages each day in the UPS network.

The company also said it is taking significant steps to improve the profitability of its forwarding and logistics business, confirming it will eliminate 20% of the non-operating expense in the business unit.

"UPS is moving forward with confidence," said Chairman and CEO Mike Eskew. "Our small package business continues to show strength across all segments and we are taking the steps necessary to put our supply chain business on the right track after a disappointing performance."

Operating profit for the quarter was reduced by an $87 million pre-tax charge for a tentative legal settlement involving a wage-and-hour case in California. In addition, there was a $52 million reduction in income tax expense related to favorable developments with certain international tax issues. The combination of these two items had no effect on the $0.96 diluted earnings per share.

Cash Position
For the first nine months, UPS generated $4 billion in cash from operations and:

• Purchased 26.5 million shares, reducing total shares outstanding by 2.1%.
• Paid $1.6 billion in dividends.
• Invested $2.3 billion in capital expenditures.

The company's cash position declined from the previous end-of-quarter due primarily to the funding of its UPS-sponsored pension plans in the amount of $1.5 billion.

All levels of small package service posted gains. Daily ground volume increased 3.6%, while average daily volume for Next Day Air® rose 1.0% and deferred air volume climbed 3.4%. Total revenue per piece remained firm with a gain of 3.4%.

This segment was adversely impacted by the $87 million tentative legal settlement previously mentioned. In addition, the unit experienced a positive impact from a reduction in worker's compensation claims expense. This reflects the success of the company's health and safety programs, which have dramatically reduced claims and injuries.

Total international package volume grew 19.9%. Export volume increased 13.6%. Non-U.S. domestic volume was up 24.2% aided by the LYNX Express acquisition.

In the third quarter, the company opened its first retail centers in China. The launch of the UPS Express centers in Shanghai's central business district is the latest in a series of strategic initiatives to expand UPS's operations and brand presence in China.

Additionally, UPS today announced a new partnership with the Italian Post. Under the five-year agreement, UPS will deliver the Italian post office's international express volume.

The forwarding and logistics unit is in the process of implementing cost and revenue initiatives that will improve its performance. UPS Freight results were below expectations due to a revenue shortfall and cost pressures related to the consolidation of its western U.S. unit, Motor Cargo, Inc., into the UPS Freight network.

Outlook
"We still expect full year diluted earnings per share growth of about 11% despite the performance in the supply chain and freight segment," said Scott Davis, UPS's chief financial officer. "The small package business should be strong in the fourth quarter as we expect international deliveries and the U.S. holiday shipping period to be solid. We also anticipate modest improvement from the supply chain and freight segment over third quarter results."

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 UPS.com. To get UPS news direct, visit pressroom.ups.com/RSS.

View the full financial tables

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EDITOR'S NOTE: UPS Chairman and CEO Mike Eskew and CFO Scott Davis will discuss third quarter results with investors and analysts during a conference call today at 8:30 a.m. EDT. That conference call is open to listeners through a live Webcast. To access the call, go to www.shareholder.com/UPS and click on "Earnings Webcast."

Except for historical information contained herein, the statements made in this release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements, including statements regarding the intent, belief or current expectations of UPS and its management regarding the company's strategic directions, prospects and future results, involve certain risks and uncertainties. Certain factors may cause actual results to differ materially from those contained in the forward-looking statements, including economic and other conditions in the markets in which we operate, governmental regulations, our competitive environment, strikes, work stoppages and slowdowns, increases in aviation and motor fuel prices, cyclical and seasonal fluctuations in our operating results, and other risks discussed in the company's Form 10-K and other filings with the Securities and Exchange Commission, which discussions are incorporated herein by reference.

• UPS Pressroom
  pr@ups.com
  404-828-7123

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