United Parcel Service, Inc. (UPS) Earnings Call Transcript & Summary

Good morning, and welcome to the 2021 UPS Annual Meeting of Shareholders. I would now like to turn the call over to UPS Investor Relations Officer, Mr. Scott Childress.

Good morning, and welcome [Technical Difficulty] Please note that this meeting is being recorded. The replay will be available through our Investor Relations website following the conclusion of the meeting for a limited time. Joining me today are Bill Johnson, UPS Nonexecutive Board Chair; Carol Tomé, Chief Executive Officer; Norm Brothers, Chief Legal and Compliance Officer and Corporate Secretary; and Brian Newman, Chief Financial Officer. Norm will act as secretary of the meeting. Also present are each board nominee, each member of the UPS executive leadership team, representatives from Deloitte & Touche, our independent auditors; and the inspector of election for this meeting, Carl Hagberg, who will receive proxy, count the votes and report the voting results. The inspector of election has previously been duly sworn and has completed the examination of the proxy. We will conduct the business portion of the meeting first and then answer shareowner questions at the end of the meeting. Shareowners can submit questions through the webcast link. We will answer questions related to matters being discussed at the meeting and in our proxy statement. When we receive multiple questions related to the same topic, we may summarize the questions. We will respond to as many questions as possible during our allotted time. We will address long-term business strategy and financial outlook in detail at our Investor & Analyst Day meeting on June 9. Information on how to participate in that meeting will be made available on the UPS Investor Relations website. An electronic copy of the 2021 proxy statement and 2020 annual report is available on the UPS Investor Relations website. I will now turn the meeting over to Bill Johnson, UPS Nonexecutive Board Chair.

Thank you, Scott. Mr. Hagberg has advised me that a quorum is present. I will now call this meeting to order. To ensure fairness to all, we will follow the rules for the meeting, which are available on the annual meeting website. The rules contain important information about the annual meeting, including how this meeting may be adjourned and reconvened if we experience technical issues. The proxy materials or notice of Internet availability of proxy materials were first mailed on or about March 29, 2021, to share owners of record as of March 22, 2021. A copy of the list of shareowners as of the record date is available for inspection on the annual meeting website during the meeting. Our agenda today calls for action on 9 matters. After the presentation of these matters, we will read any appropriate and related shareowner comments and answer related shareowner questions. Only shareowners may ask questions or make comments. The discussion will be limited to these 9 matters only. Out of consideration for others, please limit yourself to 1 question or 1 comment. The polls are now open on all matters. The first matter is the election of 13 directors to serve until the next annual meeting of shareowners or until their earlier resignation, removal or retirement. The nominees are: Carol Tomé; Rod Adkins; Eva Boratto; Mike Burns; Wayne Hewett; Angela Hwang; Kate Johnson; Ann Livermore; Franck Moison; Christiana Smith Shi; Russell Stokes, Kevin Warsh; and me, Bill Johnson. Detailed information about each of the Director nominees is included in the proxy statement. The Board recommends a vote for each nominee. There being no other nominees, I declare the nominations closed. The second item is the approval on an advisory basis of a resolution on executive compensation as set out in the proxy statement. The Board recommends a vote for this proposal. The third item is the approval of the 2021 UPS Omnibus Incentive Compensation Plan. The Board recommends a vote for this proposal. The fourth item is the ratification of the audit committee's appointment of Deloitte & Touche as independent registered public accountants for UPS for the year ending December 31, 2021. The Board recommends a vote for this proposal. If you have any questions for Deloitte & Touche, please use the annual meeting website. The fifth item is a shareowner proposal requesting the Board to prepare an annual report on UPS' lobbying activities. Tim Smith will present the proposal. Mr. Smith, shareholders have had the opportunity to review the proposal in the proxy statement, so you do not need to read the text of the proposal. You have 3 minutes to make a statement and support.

Good morning, Mr. Chairman and CEO, Tomé. I'm Tim Smith, here today representing Boston Trust Walden, a long time investor in UPS presently holding 629,000 shares. Our company based in Boston manages approximately $12 billion in assets for clients. On behalf of our clients, we carefully evaluate the ESG record of companies as we make our investments, and we actively engage scores of companies we invest in, on issues like diversity, climate, lobbying, corporate governance and other sustainability concerns. We're pleased to be an investor in UPS. I move the resolution on lobbying for a vote. This resolution has been filed by approximately 20 investors, including a European insurance company and private bank. The issue of public policy advocacy and political spending by companies has risen rapidly in public consciousness, stimulated by several factors. One, the dramatic scrutiny of company political spending to congressional representatives who were election deniers after the January 6 takeover of the capital. Secondly, the concern about hidden money going through third parties to influence legislation and regulation. And thirdly, heightened focus on climate lobbying. For example, global investors with $54 trillion of assets under management have created a group called Climate 100+ and are urging companies to ensure that their greenhouse gas emissions are reduced consistent with the Paris accord and science-based targets and the lobbying and public policy advocacy, both directly by companies like UPS and by our trade associations, are promoting positive goals to help us reach reasonable climate goals. In short, how companies and their trade associations lobby are being example examined as never before. This resolution has been on the UPS proxy for a decade now. Some points to make. UPS spent $68 million in federal lobbying from 2010 to 2019 and an uncertain amount on state lobbying. And while our Board response in the proxy argues that we do disclose information about political spending to elect candidates and has given top marks for this disclosure, we mislead investors in the proxy when we imply that such disclosure covers the request in this resolution about lobbying. Unfortunately, UPS does not disclose full information on lobbying and thus confuses these 2 categories. One of the goals of this resolution is to have management carefully scrutinize UPS' position of trade associations we're part of to make sure that we're in sync with them, or perhaps, if we're misaligned with them. For example, we know UPS has a forward-looking view on climate policy. But do the trade associations in which we pay hundreds of thousands of dollars in dues share our values and views. I do know as a member of the chamber of commerce, UPS and other companies have been pressing inside the chamber to update their climate positions. And there's been some positive movement, but many companies like Shell and BP have publicly stated that the chamber gets poor grades for its climate positions. Yet, unfortunately, UPS investors have no information on how management has evaluated the chamber's position? Or how maybe you're trying to change it from within. Another example is...

You're at time. If you wouldn't mind wrapping up your comments, please?

I will. Thank you, Mr. Chairman. I was just going to mention that we hope that the Board would also review the American Legislative Exchange Council and its controversial position in opposing the election results and on climate. And in closing, I would state that we believe this next year is a timely one for UPS to become more transparent and disclose where our lobbying dollars are spent on key public policy issues. Thank you for the opportunity to present this resolution today.

Thank you, Mr. Smith. The Board recommends a vote against this shareowner proposal for the reasons described in the proxy statement. The sixth item is a shareowner proposal to reduce the voting power of Class A stock from 10 votes per share to 1 vote per share. [ Vanessa Kelly ] will present the proposal. [ Ms. Kelly ], shareowners have had the opportunity to review the proposal in the proxy statement. So you do not need to read the text of the proposal. You have 3 minutes to make a statement and support.

Thank you. I am here today resolve a shareholders' request that our Board of Directors take steps to ensure that all of our company's outstanding stock has an equal 1 vote per share in each shareholder voting situation. This would encompass all practicable steps, including encouragement and negotiation with current and future shareholders who have more than 1 vote per share to request that they relinquish for the common good of all shareholders any preexisting rights, if necessary. This proposal is not intended to unnecessarily limit our Board's judgment in crafting the requested change in accordance to applicable laws and existing contracts. This proposal is important because share -- because certain shares have supersized voting power with 10 votes per share compared to the weakling 1 vote per share for other shareholders. Corporate governance advocates have suggested a 7-year transition to equal voting rights for each share. In spite of lot lopsided shares having 10x more voting power, support for this proposal topic has steadily grown from 21% support in 2013 to 29% support in 2020. With stock having 10x more voting power, our company takes our shareholder money but does not give us in return an equal voice in our company's management. Without a voice, shareholders cannot hold management accountable. Without this proposal, the Board is less accountable to allowing UPS to fund legislators across the country that are working to strategically suppress the vote and undermine our democracy. UPS has given tens of thousands of dollars to legislators to not pass SB 202 in Georgia, otherwise known as the Jim Crow 2.0 bill. Georgians are demanding that UPS creates a strong and permanent policy to cease funding legislators that cynically push voter suppression bill, withdraw from any industry associations that don't institute the same policy and publicly oppose the wave of voter suppression bills around the country. This proposal will make our company more competitive in a business sense and help ensure that management upholds the basic principles of democracy and free enterprise. Thank you for your time.

Thank you, Ms. Kelly. The Board recommends a vote against this shareowner proposal for the reasons described in the proxy statement. The seventh item is a shareowner proposal requesting the Board to prepare a report on reducing UPS' total contribution to climate change. Kate Monahan will present this proposal.

Greetings to the Board, management team and fellow shareholders. My name is Kate Monahan, Director of Shareholder Advocacy at Trillium Asset Management, LLC. On behalf of Zevin Asset Management LLC, and Trillium Asset Management, LLC, I hereby move proposal #7. This proposal asks UPS to describe if and how it plans to reduce its company-wide carbon impact and align its operations with the Paris Agreement's goal of maintaining global temperature increases at or below 1.5 degrees Celsius. Investors are increasingly paying attention to the material risks of climate change for individual issuers and across our portfolio. We appreciate the steps that UPS has taken on climate strategy, particularly setting ambitious goals regarding carbon emissions from its road-based operation. However, UPS has not set an analogous reduction goal for its airplane suite, which accounts for 60% of the company's direct greenhouse gas footprint. UPS' airplane suite emissions have increased by 22% from 2015 to 2019 leading to a 16% increase in total operational footprint in the same time frame. Going forward, UPS has plans to purchase many new planes, which will drive airline emissions even higher. We're concerned that the longer the company waits to develop strategies to compete in a low-carbon future, the harder and costlier it will be. DHL, FedEx, KLM, JetBlue and Amazon are among the companies proceeding with concrete investment plans and goals to lower their overall carbon footprint. This will impact availability of low-carbon fuels and technologies that UPS would need to meet the demands of a low-carbon world. Additionally, in a world still being shaped by the impacts of COVID-19, the nexus between air pollution and human health is rightfully coming under increased scrutiny. Efforts to reduce emissions are an additional way to help foster healthier communities. We urge UPS' Board and leadership to develop an ambitious science-based strategy [indiscernible] the emissions as airline and bring its total carbon footprint in line with the Paris Agreement. We encourage our fellow investors to vote for this proposal.

Thank you, Ms. Monahan. The Board recommends a vote against this shareowner proposal for the reasons described in the proxy statement. The eighth item is a shareowner proposal requesting the Board to take the step necessary for the company to amend its certificate of incorporation and become a public benefit corporation. [ Sarah Murphy ] will present the proposal. [ Ms. Murphy ], shareholders have had the opportunity to review the proposal in the proxy statement. So you do not need to read the text of the proposal. You have 3 minutes to make a statement and support.

Mr. Chairman, it appears that the shareowner who submitted the proposal is not able to connect. Therefore, I hereby move proposal 8 on behalf of Myra Young requesting that UPS transition to a public benefit corporation.

Thank you. The Board recommends a vote against this shareowner proposal for the reasons described in the proxy statement. The ninth and final item for consideration is a shareowner proposal requesting the Board to prepare an annual report on diversity and inclusion. Meredith Benton will present this proposal.

Hello, I am Meredith Benton, speaking on behalf of the nonprofit advocacy organization As You Sow. And I'm also the CEO of the consultancy Whistle Stop Capital. I formally move proposal #9 asking for UPS to report on the process that the Board follows for determining the effectiveness of its diversity and inclusion program and how it assesses goal, metrics and trends related to recruitment, promotion and retention. UPS' materiality matrix shows workforce diversity and inclusion to be of the highest importance to the company, both in its influence on business success and on stakeholders. However, the limited data UPS shares with investors does not reflect this belief. Best practices for diversity and inclusion reporting exists and are increasingly in use across companies, publishing the company's EEO-1 form, a governmentally mandated form providing basic workforce composition details is the first step, 1 UPS recently committed to. The release of workforce composition data is akin to a balance sheet, detailing employee diversity at a single point in time. Just as a balance sheet would, by itself, be insufficient to identify the strength of the company's financials, so too is the EEO-1, by itself, insufficient in assessing the effectiveness of its inclusion programs. The company's data on hiring, retention and promotion rights of diverse employees must also be shared for investors to have a full understanding of the actual experience of UPS employees. In theory, companies should want to share their retention data. If it's a good company to work at, people will want to stay. Companies should, in theory, want to share their promotion data. If it's a company that hires good people, those people will ascend with mentorship and time. In a June 2020 press release, UPS' CEO said, "No one is safe until we are all safe. And we know there is no place in any community anywhere in the world for racism, bigotry or hate." She added, "We will not stand quietly or idly on the sidelines of this issue." Should consumers, employees and others determine that UPS has sought to build its brand by representing itself as an ally to justice movement, to performative allyship or whiplashing. Without integrating best practices into its own operations, UPS may erode the trust of few consumers and employees. Investors may wish to be particularly vigilant against this concern at UPS. As the company has faced a number of allegations of discrimination on the basis of race and religion. We encourage transparency even in the face of imperfection in order to show that UPS is truly committed to its existing and future employees and to meaningful change. Something needed across the American landscape. Thank you.

Thank you. The Board recommends a vote against this shareowner proposal for the reasons described in the proxy statement. We will now address any questions or comments related to 9 items on the agenda.

Thank you, Bill. Our first question is around the process of adding a topic or request to the annual voting ballot.

Thank you, Scott. I think, as the shareholders can see with the number of topics we discussed today, we welcome the opportunity to have a dialogue with our shareowners. Not only do we conduct investor outreach programs throughout the year to find out what's on the mind of our owners, but we provide owners with multiple options to communicate with our company. Instructions for how shareholders can submit a proposal for inclusion in next year's proxy or nominate a director are contained in the proxy beginning on Page 91. Any proposal will obviously need to comply with applicable SEC regulations and our bylaws.

The next topic is a consolidation of several dozen questions around our Board related to word composition, nominating directors, board size, and other Director comments and director retirements.

I think we are rightly proud of our Board with the mix of talented individuals that we have that comprises. Boards are made up of talented, committed individuals that are independent of management and of the highest personal character, integrity and ethical standards. This is a difficult but critical task, promote the proper functioning of the Board. And in the case of UPS, I think, one that has been met quite well. We seek to promote diversity in the boardroom with respect to gender, age, ethnicity, skills, experience and many other factors. And like the vast majority of S&P 500 companies, our CEO is the only member of management that serves on the Board. This enables the Board to focus on its oversight responsibilities while management takes responsibility for the day-to-day operations of the business. The Board's nominating and corporate governance committee uses a variety of sources to identify a pool of potential candidates for the Board. These sources include other Board members, members of management, independent consultants, recruiters, shareowner recommendations and so forth. Shareowner recommended Director candidates are considered on the same basis as recommendations from other sources and information on how shareowners can recommend candidates is also contained in the proxy statement. Prospective candidates are evaluated based on a number of factors, including feedback from independent consultants, reviews of various candidate backgrounds and their qualifications, interviews with Board members and open discussions between the nominating and corporate governance committee and the full Board. This process allows for active and ongoing consideration of potential directors with a focus on long-term company strategy. Each director candidate is carefully evaluated to ensure that existing and planned future commitments by that individual will not materially interfere with the UPS Board responsibilities that they will undertake. If elected, we also limit the number of outside boards that our directors can serve on to 4. During this entire process, the Board seeks to balance the knowledge and experience that comes with longer-term Board service with new ideas and energy that come from new directors. Accordingly, we added 5 new independent directors to the Board in 2020. We also have 4 directors retire last year. And 2 reached the Board's mandatory retirement age of 75. We think the average tenure of our Board just over 7 years reflects an appropriate balance between different perspectives brought by long-serving directors as well as those who bring new ideas and refresh our perspective on the Board. Regarding the Board size, we believe that we have the appropriate number of directors to participate in each of the Board's 4 standing committees, all have an important role in making the Board function properly. This allows us to provide appropriate oversight while still enabling each director, but also provide meaningful contributions in our internal Board debates. UPS is a complex global business. And we benefit from a diverse set of skills and perspectives that are brought by each of our directors.

A number of shareowners want to know why the Board recommends voting against proposals related to climate change, lobbying and diversity when these proposals seem to align with our values in general good corporate citizenship?

There may be some misinterpretation of the Board's recommendations regarding these proposals. Make no mistake, the Board generally agrees with the sentiments behind these proposals, but it's the methodology that we do not necessarily agree with or align with. UPS supports global efforts to mitigate the impact of climate change as we demonstrate on a day-to-day basis by the operations in this company. We are also committed to diversity, equity and inclusion, and we are as transparent and accountable with respect to lobbying and political activities as we possibly can be. The company already commits a significant amount of time and internal resources to all of these issues, producing and disclosing a number of regular reports. And while we receive significant recognition for our efforts these areas, we all understand that additional work has to be done for the benefit not only of stakeholders, but of the communities and the customers we serve. However, we do not agree that producing additional reports to satisfy a particular specific shareholder request is in the best interest of the company and the totality of shareowners.

We received a few questions from our employees and retiree shareowners about the continued inclusion of the proposal to reduce the voting power of the Class A stock from 10 votes to 1 vote per share?

In response to the question, in proxy, you can see the company respects the rights of shareholders to engage with management and other shareholders with the proposal process. We believe UPS' ownership structure has contributed to its long-term success, and we also believe it is unique and that Class A shares are widely held by over 155,000 Class A shareowners. As a result, it does not present the same predicament of concerns associated with other dual-class public companies, such as entrenched management, conflicts of interest, concentration of voting power, or core corporate governance practices. It's our belief that we owe our success to a significant degree to the commitment of our ownership structure and the way it inspires our employee shareowners. Elimination of this structure would not improve the corporate governance or the financial performance of UPS.

And lastly, Mr. Chairman, we received a question about the reengagement of Deloitte & Touche as our company auditor.

Well, this is a determination made every year by the audit committee, who reviews the appropriateness of our current auditors. They consider Deloitte to be well qualified, properly independent in possessing the necessary expertise required on UPS' global business. In deciding whether or not to reengage the firm, the audit committee considered the length of time that Deloitte has served as UPS's independent auditors, the breadth and complexity of our business, our global footprint and the resulting demands placed upon our auditing firm. The committee also considered the expertise in UPS' business and our management's perception relating to the depth and breadth of Deloitte's auditing qualifications and capabilities. Also the breadth, quantity and quality of Deloitte's staff and their global reach and the appropriateness of Deloitte's fees. Additionally, the communication and interaction with the Deloitte team over the course of the prior years taken into consideration and is any reviews that the PCAOB may have done on Deloitte, which is reviewed carefully by the audit committee and management. This is weighed against the potential impact and disruption of changing our independent registered public accounting firm. Therefore, after considering all these factors, the audit committee recommended to the Board and the Board agreed that the engagement of Deloitte was in the company's continued best interest. Thank you for your comments and questions. The discussion is now closed on these matters. Shareowners who have not voted or wish to change their vote can go to the annual meeting website and follow the voting instructions. Shareowners who have already voted do not need to take any further action. We will take a brief pause to allow for final voting. [Voting]

Thank you. Voting has concluded and the polls are closed. Mr. Hagberg, please present your preliminary report.

Good morning. On the basis of my preliminary report, the 13 Director nominees have been elected to serve until the next annual meeting of shareholders and until their successors have been elected and qualified or until their earlier resignation, removal or retirement. The compensation of the named executive officers as described in the company's 2021 proxy statement has been approved. The 2021 UPS Omnibus Incentive Plan has been approved. The appointment of Deloitte & Touche, LLP to serve as independent registered public accountants for the company for 2021 has been ratified. The shareowner proposal requesting the Board to prepare an annual report on lobbying activities was not approved. The shareowner proposal to reduce the voting power of the company's Class A shares from 10 votes per share to 1 vote per share was not approved. The shareholder proposal requesting the Board to prepare a report on reducing UPS' total contribution to climate change was not approved. The shareholder proposal requesting the Board take steps necessary for the company to become a public benefit corporation was not approved. And the shareholder proposal requesting the Board to prepare an annual report on diversity and inclusion was not approved.

Thank you, Carl. Final voting results will be filed by the company with the SEC on a Form 8-K within 4 business days. The 2021 Annual Meeting of Shareholders is now adjourned. We will now transition to general shareowner questions. We have received several hundred questions and have categorized them into various topics. We will do our best to address all the topics raised in the questions. If you've submitted a question on a topic that we do not respond to, please feel free to contact UPS Investor Relations at investors.ups.com. As a reminder, some of the comments we'll make are forward-looking statements within the federal security laws and address our expectation for the future performance or operating results of the company. These statements are subject to risks and uncertainties, which are described in detail in our 2020 Form 10-K and other reports we filed with the Securities and Exchange Commission. These reports when filed are available on the UPS Investor Relations website and from the SEC. The first question we want to address that seems to be front of mind for many of our employees and shareholders is related to politics. We received numerous questions regarding UPS' position on voting rights laws.

Thank you, Scott. UPS believes that voting laws and legislation should make it easier, not harder for Americans to exercise their rights to vote, as we have stated in the past. Consequently, we are taking a number of steps to help ensure equitable poll access and voting for all our employees. We are continuing to provide voter education resources to employees through our Drive the Vote program, including information such as registration and voting deadlines. We are helping print absentee ballot request forms for UPSers at our facilities where we are committed to do so by state and local laws. We are dedicating funding support to nonpartisan, nonprofits that organize voter registration and engagement activities. And we are having UPS volunteers to facilitate voter ID and registration effort at UPS facilities for employees.

Can you discuss the current status of our political contributions and how we determine where to spend?

While there are many important topics, as a logistics company, we are naturally focused on issues that are germane to UPS. These include areas in transportation, trade, regulatory and energy security issues as they affect our employees, our customers and the communities we operate in. We generally do not get involved in topics not directly related to our work. UPS supports and is engaged with organizations that can be described as conservative, liberal and everything in between. The company makes a strong effort to assess the overall merits for joining trade associations and does so to further the interest of the business and its shareowners with respect to discrete issues that are relevant to the company. Areas of interest, as I stated, include areas such as trade agreements, sustainability, postal reform, surface transportation and so forth. UPSPAC contributions to 2020 were about $2 million, contributions made to both Republicans and Democrats. UPSPAC received voluntary contributions from UPS management employees and made contributions through PAC in a manner consistent with the company's core value. As most of you are aware, UPS has currently suspended all PAC contributions for now as we navigate through the current inclining.

Our next question has to do with sustainability and our rolling laboratory. Investors want to know what role electrical powered vehicles play in UPS' future.

Carol?

Well, I'm happy to take that question, and good day, everyone. Since our founding UPS' has operated our business to achieve a balance of economic prosperity, social responsibility and environmental stewardship. In 2020, we released our 18th annual sustainability report and our first SASB report. Reducing our carbon footprint, and it's a big one, but reducing this is extremely important to UPS. And electric vehicles will play a big part in helping us achieve that. We take a rolling laboratory approach to test the performance of different solutions in our network and have many exciting partnerships and pilots going on right now. For example, we worked with a company called Arrival to order 10,000 purpose-built vehicles, these deliveries start in 2021. We've just announced a partnership with Beta to purchase 10 eVTOL, which is electric vertical takeoff and landing aircraft. We'll take our first of those battery-powered aircraft in 2024, very exciting for us. We're working with TuSimple to pilot autonomous Class A vehicles. And with Workhorse, which is the drone delivery network. So there's a lot going on here. We've got a real commitment to reducing our carbon footprint. And I would argue we're one of the leaders in this space. For example, we have over 13,000 vehicles that are powered by alternative fuel. So thank you for that question.

Moving on to financial matters. We received a number of questions regarding our capital allocation.

From the Board's perspective, we are very excited about what future holds for our company, and our strategies are clearly working. The business has performed well, and the management team is laser-focused on generating free cash flow improving the company's overall profitability and increasing our return on invested capital. We have a disciplined and balanced approach to capital allocation. First is to the business where the priorities exist and the opportunities are clinical. Second is to the dividend. Third is to protect the financials of the company. And fourth is to return the excess to shareowners through share repurchases. The dividend is only 1 component of total shareholder return. By the way, as many of you noted, the stock price has more than doubled since June 1, 2020, from about $99 a share to over $200 a share. The management team and the Board are taking prudent steps to strengthen our balance sheet and improve our credit ratings, and we will continue to evaluate the capital distribution policies, and we fully recognize the cash belongs to our shareowners, not to the company. Looking ahead, you should expect a dividend payout of roughly about 50% of earnings. So as our earnings grow, our dividend will grow. We will be providing a detailed update on business and financial matters at our Investor & Analyst Day on June 9. Information on how to listen into this virtual event are on our Investor Relations website.

We had numerous questions related to UPS stock. Can you explain why UPS stock price is consistently below FedEx's stock price and also, will we see a stock split anytime soon?

This is one of those questions that we kick back and forth, trying to understand the reason for it. And so I'm going to take a fairly simplistic approach here. Remember that a company's stock price is just one gauge in a formula to determine the company's value. Although our stock price of over $200 is below FedEx, it's pushing around $290, we have far more shares outstanding. So if you multiply the stock price by the number of shares outstanding, you get the company's market capitalization or its market value. UPS is more than 3x as many shares outstanding as FedEx. And our market cap is approximately $175 million versus about $78 million for FedEx. So in essence, we are worth almost $100 billion more than FedEx. Additionally, our price-to-earnings ratio is over 20% higher than FedEx, meaning that investors are willing to pay 20% more for each dollar of UPS earnings than they are for FedEx. Also UPS' dividend yield is 2x higher than the FedEx yield. As it pertains to a stock split, the company at this point does not have any plans on splitting shares.

We have a number of operationally focused questions that have come in.

Carol, I think these questions really are in your daily life.

Happy to take them, Bill. Thank you.

So our first question, why are you reducing CapEx at a period of high demand?

Well, over the past several years, we've invested heavily in our capacity. And now it's time to get a return off of that investment and to drive productivity. We call it sweating our assets, but it doesn't mean that we're not investing because we are. This year, we'll spend about $4 billion of capital with $2.4 billion for growth and capability. We're adding about 2 million square feet to our network and over 150,000 packages per hour of sortation capacity. Looking ahead, we will invest in attractive opportunities and the right capability that matter the most to our customers. Some of these investments will require capital dollars and some will require expense dollars. We will use the financial power of UPS to invest while generating higher returns on the capital we deploy.

Our next question is, what is the plan to reduce UPS debt?

A strong balance sheet and credit rating is a core principle of UPS. And we've made a lot of progress this year. We've repaid $2.5 billion of term debt and the passage of the American Rescue Plan Act, or ARPA, reduced our pension liabilities by $6.4 billion. UPS is rock solid strong.

Our next question. Are you worried that offshoring jobs will hurt UPS businesses, can cause a reduction in revenue as companies and people take their business elsewhere in a post COVID environment?

UPS is ready to help our customers move their goods through supply chains no matter where in the world you're located. As you know, we operate in 220 countries and territories around the world, and our global smart logistics network is extremely flexible. We are helping our customers by making it easier for them to control their supply chain and expand their market reach.

We've also received numerous questions asking how the American Rescue Plan Act of 2021 has impacted UPS and our multi-employer pension plan.

Well, I think you know, we've been working for a long time with stakeholders to support a legislative solution that would maintain the solvency of the most troubled multi-employer pension plan and protect retiree pension. And ARPA does just that. It allows qualifying multi-employer pension plans that are in danger of insolvency to receive lumpsum [indiscernible]. As a result of this new law and for us, it really pertains to several states, we reported an aftertax mark-to-market pension benefit to net income of $2.5 billion. And a $6.4 billion reduction in our net pension liability. But the best thing about this is that retiree pension will protect it. Now if you want to learn more about this, you can go to a presentation that we posted to our Investor Relations website, which details the financial impact.

We had a few questions about Amazon. Specifically, what is your long-term strategy with Amazon?

Amazon is an important customer, and we view that relationship as mutually beneficial. But look, they're not our only customer. In the United States, our focus is on growing our SMB and health care segment. And in the first quarter, we saw volume growth rate higher in those segments than we did in our large enterprise customer segment, which would include Amazon. We're optimizing our network and leaning into those customers that really value the end-to-end network that we offer.

Can you discuss the reasons that we sold UPS Freight? And do we have any concerns that we will lose this business to competitors?

Well, when I onboarded a year ago, as the leadership team, we talked about, what got us here wasn't going to get us to where we needed to go. And then we were going to take a hard look at our portfolio of assets to determine those assets -- the future of UPS. We called it better, not bigger. And as we looked at the portfolio of assets, we wanted to look at those that were giving us the highest return. UPS Freight is a great business, but it's a low-margin, capital-intensive business. And when we looked at it, we said, you know what, we don't need to own this business to provide an LTL solution for our customers, we can do that contractually. So we were delighted to sell this business to TFI, which is an LTL trucking company. It's a good new story for our UPS [indiscernible]. And with the disposition of UPS Freight, we're not only smaller, but we will be better. We'll be able to give our customers the service they want and will see an improvement in our operating margin and our return on invested capital.

Our next question is does UPS have any plan to deliver residential packages on an every other day basis?

So last year, we sped up our time in transit, and we have advantage of purity in 20 of 29 of the most important markets, but we are not done. We are increasing weekend delivery. And by October of this year, we will have a Saturday delivery for over 90% of the U.S. population. We're also working on improving delivery density. And here are some of the things that we're doing. We're using my choice to allow customers to select the days they want to receive packages. We're using UPS access points, and we have thousands of access points to increase delivery density, and we're improving order consolidation technology. There's a lot going on in this space to meet our customers where they want us to be. And we'll share more details with you our strategy develops.

Some questions have come in regarding the state of our package cars and why are they allowed to go out on the road, and they are not fully cleaned?

There is no excuse for a dirty package car. Car washing plants and guidelines exist at all of our facilities. We will ensure the appearance of our package car reflects positively on our brand. And I personally increased spending in this area in 2021.

This is a good one. We have some comments regarding making the UPS website more user friendly.

Well, this is a personal passion of mine because it's not very friendly. In fact, our website hasn't been updated in many years, it's too cumbersome. We have almost 3,200 pages on our website. So we're investing in a brand-new website and [indiscernible] more simple. It will be helpful, and we're using customer feedback to design the experience. So more to come.

We also have received various questions related to compensation and employee benefits.

We are committed to providing competitive pay and benefit program, consistent with our policy of compensating our people fairly. As our market and employee needs continue to rapidly evolve, we embrace change, identifying opportunities, and have made headway to become a more competitive and agile employer. But we're not done. One of our widely important initiative is to modernize talent development. Investing, so we can attract and retain great talents across the enterprise. As we modernize our reward programs, we look forward to sharing more in that area.

And lastly, we had some comments and questions. The last comment and question. UPS has made many positive changes at the company since last June, for example, the change in our appearance guidelines. Some of our long-term employees and shareowners have commented on the changes to our appearance standards. What do we want to say to them?

Well, to all of you, I am personally committed to maintaining and living our value, values like integrity and recess. To be an employer of choice, some policies like facial hair, well, they have to change. Bringing ones authentic self to work is the best way to live values of integrity and respect. In Jim Casey's 1956 Talk with Joe, he noted that, "You will learn more and more from experience that no two individuals are exactly alike. Not only will you be tolerant, but you will give full weight to the opinions of people who differ from you." And I think Jim Casey was pretty insightful back in 1956 about the power of bringing the authentic self to work.

And unfortunately, that is all the time we have. Thank you for your questions and for your investment in UPS. I will now turn it over to Carol for some closing remarks.

Thank you, Scott, and good day, everyone. Well, I've been attending annual UPS shareowner meeting since 2004. This was my first annual meeting as your Chief Executive Officer. It has been an honor to lead this company since June 1 of last year. We faced enormous challenges due to the COVID-19 pandemic. But because of the hard work and dedication of our employees, we persevered we delivered what matters. Customer first, people led, innovation driven. UPS will continue to adapt to the changing environment and will create new solutions to help our customers grow. We will invest in our people and become an employer of choice. And we will strengthen our competitive positioning to offer the best digital experience powered by our Smart Global Logistics network. We will attend to the needs of all stakeholders. And by doing so, we believe we will deliver shareowner value creation. We look forward to sharing more information about our strategy with you during our upcoming Investor & Analyst Day on June 9. Please visit our Investor Relations website for additional details. As our founder, Jim Casey said, "Our horizon is as distant as our mind's eye wishes it to be." UPS is a company with a proud past and an even brighter future. I hope you are as excited about UPS' future as we are. Thank you for attending the 2021 annual meeting and for your investment in UPS.

The meeting has concluded. You may now disconnect.