Profit for package delivery and trucking giant UPS tumbled in the second quarter due to retirement liabilities for some union employees.
It recorded a net profit of $454 million compared to $1.07 billion a year earlier, a 57.6% decline, or diluted earnings per share of 49 cents compared to $1.13 per share during the same time.
This happened as total revenue for the Georgia-based operation increased to $14.3 billion in the most recent quarter compared to $13.5 billion a year earlier.
During the quarter the company completed the transfer of post-retirement liabilities for certain Teamster employees to healthcare plans and recorded an after-tax charge of $665 million.
UPS Supply Chain and Freight revenue increased 6.5% to $2.3 billion, resulting primarily from growth in the forwarding and distribution business units. Operating profit dropped $65 million, down 41% as a result of the post-retirement liability transfer.
UPS Freight revenue was 5.5% higher, driven by a 4.1% increase in less-than-truckload revenue per hundredweight and tonnage gains of 1.6%. Operating profit and margin improved from the prior year, as the business unit continued to focus on profitable revenue opportunities, according to the company.
U.S. domestic package revenue increased 5.2% to $8.7 billion while operating profit declined 82% to $209 million as a result of the post-retirement liability transfer
The company announced plans to increase 2014 operating expense for capacity and peak related projects to a total of $175 million, following heavy criticism UPS received last holiday season for customer shipment delays.
"These initiatives will increase operating expense this year, but will provide financial benefits for years to come," Kuehn continued. "As a result, we have lowered our expectations for adjusted diluted earnings per share to be in a range of $4.90 to $5.00, a 7-to-9% increase over 2013 adjusted results." In April the UPS forecast was between $5.05 and $5.30 per share.
More details are available on the UPS website.