International export revenues jumped 14% on double-digit volume growth. UPS Freight less-than-truckload (LTL) revenue climbed 10.5% on a 12% increase in shipments.

"The company's total performance reflects the benefits of our truly global network," said Mike Eskew, UPS's chairman and CEO. "Strong gains in our international package segment offset a lack of growth in the U.S. business. We're also executing well in our supply chain and freight business and are pleased with the profit improvements in this segment. We remain confident in the long-term growth prospects that the dynamic global marketplace offers UPS."

For the three months ended June 30, 2007, net income rose 4.1% to $1.1 billion. Operating margin increased to 14.5% with improvements in both the international package and supply chain and freight segments.

Cash Position
UPS closed the quarter with $2.1 billion in cash and marketable securities. For the first six months, UPS also:

• Exceeded $2.3 billion in free cash flow.
• Purchased 21 million shares, reducing total shares outstanding by 1.7%.
• Paid $1.3 billion in dividends.
• Invested $1.2 billion in capital expenditures.
  
  

Ground volume was flat during the quarter, reflecting declining growth rates in both industrial production and business-to-consumer shipments. Next Day Air® volume increased 1.6% to partially offset a 4% decline in deferred air volume. Total U.S. revenue per piece remained firm, up 1.7%, with revenue per piece on ground volume rising 3%.

Total export volume increased 10.4%. Europe posted a double-digit export volume gain, reflecting strong cross-border growth. Asia export volume jumped 25% with particularly strong growth out of China. For the segment, operating profit increased 14.7% and margins expanded 50 basis points to 19%.

The forwarding and logistics business continues to benefit from the performance improvement initiatives launched in the second half of 2006. UPS Freight, which has been investing significantly to update customer service and technology systems, reported a strong gain in second quarter revenue to $549 million.

Outlook
"We see increasing benefits for the company due to investments in both ground, air and ocean freight capabilities as well as further expansion globally of our small package business," said Scott Davis, UPS's vice chairman and CFO. "Toward the end of the year, we expect the small package market to more closely correlate to U.S. economic trends and as a result, we should see gradual volume growth in our U.S. package business."

UPS expects diluted earnings per share for the third quarter to fall within a range of $0.99 to $1.04 compared to the $0.96 reported for the prior-year period. Davis also reaffirmed the company's annual target of a 6-to-10 percent increase in adjusted diluted earnings per share.