Category: UPS News

The external fund manager backed by Berkshire Hathaway’s Charlie Munger, Li Lu, makes no bones about it when he says ‘The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.’ So it seems the smart money knows that debt – which is usually involved in bankruptcies – is a very important factor, when you assess how risky a company is. As with many other companies United Parcel Service, Inc. (NYSE:UPS) makes use of debt. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can’t easily pay it off, either by raising capital or with its own cash flow. Ultimately, if the company can’t fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Louisville-based UPS Airlines has been as busy as ever during the Covid-19 pandemic, delivering hundreds of millions of doses of vaccines, and at the same time handling more packages with the continued growth of e-commerce, says Jim Mayer, public relations manager for the company.

“The federal government and governments around the world have designated UPS employees as essential workers and we’ve gone to great lengths to keep them safe, with measures including masks, gloves and hand sanitizer; enhanced cleaning of facilities, vehicles and aircraft; education on social distancing and other public health measures; and extensive work with U.S. and foreign governments to ensure the safety of our pilots as they transit virus hotspots,” Mayer said by email.

There seem to be two primary drivers at UPS these days. The Covid-19 pandemic. And a new CEO. Both came on the scene at about the same time last year. In March, the World Health Organization declared the novel coronavirus a global pandemic. That same month the United Parcel Service Inc. board of directors announced Carol Tomé would be the company’s next CEO effective June 1. The announcement marked a departure from UPS’ typical practice. Its three previous CEOs were promoted from within the company.

Despite having spent 24 years at the Home Depot, most recently as its CFO, Tomé is no stranger to Big Brown. Having served on the Atlanta-based logistic giant’s board of directors since 2003, Tomé is somewhat of a hybrid or “someone that is a bit of an inside outsider,” said Jane Stevenson, vice chair of board and CEO services at Korn Ferry. “In a situation where you have a defined culture, [a hybrid] might bridge the risk of bringing in a complete outsider while at the same time inserting some change,” she said. Tomé’s one-year tenure has brought several changes to a company that has traditionally been as low-key as its trademark color. “You definitely have a different tone coming out of the C-suite at UPS,” said Jack Atkins, a long-time transportation and logistics analyst and managing director at Stephens Research. “They’re clearly very focused on being, to borrow a line from [Tomé], ‘better not bigger,’” Atkins said. “You’ve seen them take actions on the revenue side and they decided to sell UPS Freight.”

Jake Pratt is no stranger to hard work.

The 22-year-old from Vestavia Hills, Alabama, who has Down syndrome, worked hard in school, played football, graduated college and applied to work at a temporary job at the Birmingham UPS facility.

His partner, UPS driver Richard Wilson, said Pratt’s attitude sets him above the rest.

“Working with Jake is awesome. He brings the right amount of energy and determination to get the job done,” said Wilson. “He’s very motivated and he’s also made a difference in my life.”