Sat, Mar 31, 2001 EST
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UPS Fourth Quarter Net Income Rises Nearly 10 Percent, Beats Lowered Expectations
By Justin Bachman   Associated Press
ATLANTA — Despite a moribund holiday shipping season, United Parcel Service Inc.'s fourth-quarter net income rose nearly 10 percent, helping the company beat analysts' lowered expectations.

But the shipping giant also cautioned that 2001 will be a sluggish year for growth and that results likely will fall short of the torrid pace UPS has set during the past few years.

The company said Tuesday that income for the three months ended Dec. 31 was $724 million, or 63 cents per share, compared with $661 million, or 56 cents per share, in the same period a year before.

That beat the 61 cents per share prediction of analysts surveyed by First Call/Thomson Financial. Analysts had lowered projections from a consensus of 64 cents after UPS warned Dec. 14 that weak shipments would trim results.

The Atlanta-based company said the results were aided by a lower tax rate that added $34 million to the quarter's results.

Revenue for the three months ended Dec. 31 was $7.9 billion, up 6 percent from $7.45 billion in the same period of 1999.

UPS shares rose 60 cents to $61.40 in trading Tuesday on the New York Stock Exchange.

The company expects 2001 to be a difficult year, especially during the first half, chief financial officer Scott Davis said. UPS expects its prospects to mirror those of the U.S. economy, growing 1 to 2 percent through June and 3 to 3.5 percent in the second half of the year.

As a result, UPS expects revenues to increase 8 to 10 percent in 2001 and per-share earnings to increase between 9 and 11 percent.

"Our rate of growth this year will not be at the same pace as we've seen in the last few years domestically," Davis said. "But we do expect to grow, and at a rate faster than the domestic package market."

The 2001 predictions are based on an economic upturn many analysts expect in the latter part of the year, Davis said.

"Even though some might see the current economic environment as gloom and doom, we don't," he said in a conference call with analysts. "UPS is focused on the long term."

Price increases will help UPS weather the lagging U.S. economy, as will profit margins that are historically higher than competitors, Lazard Freres analyst Greg Burns said. UPS will increase its air shipment rates 3.7 percent next month, while prices for ground shipments have risen 3.1 percent.

"There's a question as to how much of that will stick, but clearly they're in the driver's seat because they're so much more profitable than their competitors," said Burns.

UPS said its worldwide package delivery volume increased 3.6 percent during the fourth quarter to 14.7 million items per day. International shipments continued to be the company's brightest spot, rising 19.3 percent, while next-day air shipping volume rose 5.1 percent.

U.S. domestic volume rose a weak 2.8 percent, which UPS blamed on fewer holiday shipments caused by the slowing economy.

For the year, UPS had net income of $2.93 billion, or $2.50 per share, up from $883 million, or 77 cents per share, in 1999. The 1999 results were affected by $1.78 billion UPS put into an escrow account pending appeal of a tax court judgment it lost.

Revenue rose 10 percent to $29.77 billion, up from $27.05 billion in 1999.

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