In Focus

UPS: The Whole Package

NOTE: During the month of July, we are featuring companies who are headquartered in some of the states we Chicks call home. This week, Georgia kicks off the fun. More than just the state famous for peanuts, peaches and Jimmy Carter, Georgia has 15 public companies featured on Forbes 500 list. Here's how they rate: Home Depot (23), UPS (52), Bellsouth (66), Southern Company (76) Georgia-Pacific (84), Coca-Cola (93), Delta Air Lines (123), Coca-Cola Enterprises (128), Aflac (193), Suntrust Banks (221), GenuineParts (229), First Data (313), Flowers Industries (387), Cox Communications (466) and Mohawk Industries (491). This week we will review Delta Air Lines, Cox Communications, UPS and Flowers Industries.

"Brown paper packages tied up with string, these are a few of my favorite things!" Guess what, Julie Andrews? Brown paper packages are among my favorite things too! Having that brown truck stop in front of your house is one of the cheapest thrills a person can get these days! And I'm not talking about the cute driver in the brown shorts that bebops his way up to your door. It's the package, Chicky! We all love mail. Whether it's that anxiously anticipated new make-up product I ordered or the mystery package addressed to my husband that I'm dying to tear into - I love getting a parcel. Making sure I get my parcels is what UPS (NYSE: UPS) does best.

The United Parcel Service is the largest package delivery company in the world. Their primary business is actually the delivery of time-definite packages and documents. Which, of course, means their customers can specify when they'd like their parcels to be delivered. UPS operates throughout the United States (what Chick doesn't know that?) and in over 200 countries and territories. Wow, they must have a lot of brown trucks! Actually, the company operates more than 150,000 vehicles and over 500 airplanes. In fact, in 1988, when UPS received the okay from the Federal Aviation Administration (FAA) to operate its own aircraft, UPS Airlines became the fastest growing airline in FAA history. Today it is the ninth largest airline in North America! Their aviation fleet has certainly boosted the company's presence in the international shipping market. UPS can now reach over 4 billion people. Everyday, UPS ships nearly 13 million packages and documents for their customers. Gosh, next time I see my friendly neighborhood driver, I'm going to offer him an ice cold lemonade to take on the go -- I didn't realize each UPS driver delivers up to 500 packages a day!

Continuing with my research, I discovered why my driver is so friendly. They're trained that way... extensively. UPS believes its most valuable asset is loyal and capable staff. They invest more than 300 million dollars a year in employee learning programs. The program certainly seems to be working as every single one of their executive officers, including the CEO, has more than 25 years of service with the company. UPS credits much of its employee dedication to their "employee-owner" concept. We Chicks like to see employees, and especially management, holding shares of a company's own stock. If they do well for the company, the company will, in turn, do well for them. UPS employees, retirees, founder's families and foundations own about 90% of the outstanding UPS stock. In November of 1999, UPS sold the remaining 10% of its stock to the public in a highly anticipated initial public offering on the New York Stock Exchange. Currently, the stock appears to be languishing amidst its lows; however, one could argue they are poised for a very bright future.

To begin with, their numbers are not bad at all, sporting high gross and net margins while maintaining a low flow ratio. The one number not in line with our Chicks Dozen standard is their cash vs. long-term debt number. UPS seems to be running a tad low on cash. There are two points, however, that must be considered. One, I like where they seem to be putting their money -- employee training and information technology. Two, they are one of the few companies (and only transportation company) with a triple A credit rating from both Standard & Poor's and Moody's, giving them access to resources when needed.

Mike Eskew, second man in charge, next to CEO Jim Kelly, says that many think of UPS as not much more than a trucking company. He emphasizes the fact that they are really much more of a technology company. I was amazed to discover the company invests one billion dollars per year on information technology, and has done so for the past decade. Some advances have included devices such as the DIAD. I'm sure you're familiar with it. Its more formal name is a "delivery information acquisition device." It's that little thingy your delivery man carries to your door instead of the old pen and clipboard. With a mere wave of the inkless stylus, your signature and time of receipt are instantly transmitted to the country's largest privately held cellular network. The company has always tracked such information, but now, as with everything, it so much easier. In 1995, UPS offered package tracking to their customers on their award-winning website. The company was actually surprised by the overwhelming public response. They used to get 600,000 calls per day for tracking information; today 4 million people go to the web per day, to check on their packages for themselves.

The company has continued to embrace information technology. Three years ago, they started an e-commerce sales force to get business customers to integrate UPS package-shipment data into their own websites, streamlining the process for all involved. Thus far, the company has been quite successful teaming with over 100 e-commerce leaders to offer fully integrated websites. If UPS has its way, they will not only be the company delivering your packages, they'll be the ones processing your order, packing it up, as well as sending it, while continuing to bring it to your door with a friendly smile.

Despite having been Fortune Magazine's Most Admired Transportation Company in the mail, package and freight category for 17 consecutive years, a Chick does have options. I suppose I could send my in-laws in Iowa their Christmas packages by Federal Express or the good 'ole United States Postal Service, but why change now? UPS admits success only if they can guarantee customer satisfaction and ensure efficiency. Well, according to this Chick, they've succeeded. Time will tell whether their stock will follow suit.

Hmm, what should I write about next? Whiskers on kittens or warm woolen mittens?