<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the Quarter Ended March 31, 1994
Commission file number O-4714
United Parcel Service of America, Inc.
(Exact name of registrant specified in its charter)
Delaware 95-1732075
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Perimeter Center-Terraces North
Atlanta, Georgia 30346
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (404)913-6000
Not Applicable
Former name, address and fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities and Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days.
YES X NO
-------- --------
Common Stock, par value $.10 per share
(Title of Class)
580,000,000 shares
Outstanding as of May 12, 1994
<PAGE> 2
PART I. FINANCIAL INFORMATION
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 1994 (unaudited) and December 31, 1993
(000's omitted except share amounts)
ASSETS 1994 1993
---------- ---------
CURRENT ASSETS:
Cash and short-term investments $ 184,726 $ 280,960
Accounts receivable 1,382,421 1,159,612
Materials, supplies and prepaid expenses 848,360 659,147
Common stock held for stock plans 415,587 283,112
---------- ---------
TOTAL CURRENT ASSETS 2,831,094 2,382,831
PROPERTY, PLANT AND EQUIPMENT - at cost, net of
accumulated depreciation of $4,862,218 in
1994 and $4,705,218 in 1993 6,877,233 6,763,770
OTHER ASSETS 421,379 427,230
---------- ---------
$10,129,706 $9,573,831
========== =========
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 279,365 $ 5,588
Accounts payable 898,381 870,089
Accrued wages and withholdings 898,275 918,943
Income taxes payable 106,098 72,505
Deferred income taxes 78,724 74,545
Other current liabilities 459,405 437,416
---------- ---------
TOTAL CURRENT LIABILITIES 2,720,248 2,379,086
========== =========
LONG-TERM DEBT, net of current maturities
of $3,326 in 1994 and $5,588 in 1993 856,585 852,266
---------- ---------
ACCUMULATED POSTRETIREMENT BENEFIT
OBLIGATION, NET 542,570 518,726
---------- ---------
DEFERRED TAXES, CREDITS AND OTHER LIABILITIES 1,880,535 1,879,244
---------- ---------
SHAREOWNERS' EQUITY:
Preferred stock, no par value,
Authorized 200,000,000 shares, none issued - -
Common stock, par value $.10 per share,
Authorized 900,000,000 shares, issued
580,000,000 58,000 58,000
Additional paid-in capital 276,298 264,401
Retained earnings 3,808,177 3,644,047
Cumulative foreign currency adjustments (12,707) (21,939)
---------- ---------
4,129,768 3,944,509
---------- ---------
$10,129,706 $9,573,831
========== =========
See notes to consolidated financial statements.
<PAGE> 3
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three months Ended March 31, 1994 and 1993
(000's omitted except per share amounts)
(unaudited)
1994 1993
--------- ---------
Revenue $4,526,287 $4,204,821
--------- ---------
Operating expenses:
Wages and employee benefits 2,818,403 2,525,015
Other 1,466,400 1,437,560
--------- ---------
4,284,803 3,962,575
--------- ---------
Operating profit 241,484 242,246
--------- ---------
Other income and (expense):
Interest income 2,847 3,652
Interest expense (13,873) (13,010)
Miscellaneous, net 54,611 (6,358)
--------- ---------
43,585 (15,716)
--------- ---------
Income before income taxes 285,069 226,530
Income taxes 120,939 93,840
--------- ---------
Net income $ 164,130 $ 132,690
========= =========
Net income per share $ 0.28 $ 0.22
========= =========
See notes to consolidated financial statements.
<PAGE> 4
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
Three Months Ended March 31, 1994 and 1993
(000's omitted)
(unaudited)
<TABLE>
<CAPTION>
Cumulative
Additional Foreign Total
Common Stock Paid-In Retained Currency Shareowners'
Shares Amount Capital Earnings Adjustments Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 595,000 $ 59,500 $ 241,852 $ 3,394,289 $ 24,791 $3,720,432
Net income - - - 132,690 - 132,690
Gain on issuance of
common stock held
for stock plans - - 10,046 - - 10,046
Foreign currency
adjustments - - - - 405 405
------- ------- -------- ---------- ------- ----------
Balance, March 31, 1993 595,000 $ 59,500 $ 251,898 $ 3,526,979 $ 25,196 $ 3,863,573
======= ======= ======== ========== ======= ==========
Balance, January 1, 1994 580,000 $ 58,000 $ 264,401 $3,644,047 $ (21,939) $3,944,509
Net income - - - 164,130 - 164,130
Gain on issuance of
common stock held
for stock plans - - 11,897 - - 11,897
Foreign currency
adjustments - - - - 9,232 9,232
------- ------- -------- ---------- -------- ---------
Balance, March 31, 1994 580,000 $ 58,000 $ 276,298 $ 3,808,177 $ (12,707) $4,129,768
======= ======= ======== ========== ======== =========
See notes to consolidated financial statements.
</TABLE>
<PAGE> 5
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31, 1994 and 1993
(000's omitted)
(unaudited)
1994 1993
--------- ---------
Cash flows from operating activities:
Net income $ 164,130 $ 132,690
Adjustments to reconcile net income to
net cash provided from (used in)
operating activities:
Depreciation and amortization 180,803 177,621
Gain on sale of long-term
investment property (45,589) -
Postretirement benefits 23,844 19,539
Deferred taxes, credits, and other (6,058) (7,743)
Changes in assets and liabilities:
Accounts receivable (222,809) (26,879)
Materials, supplies and prepaid
expenses (189,213) (175,238)
Common stock held for stock plans (132,475) (92,929)
Accounts payable 28,292 (10,614)
Accrued wages and withholdings (20,668) 6,203
Income taxes payable 33,593 20,979
Other current liabilities 21,990 31,710
--------- ---------
Net cash from (used in) operating activities (164,160) 75,339
Cash flows from investing activities:
Capital expenditures - net (286,576) (155,300)
Proceeds from sale of long-term
investment property 45,589 -
Other asset payments 13,255 9,321
--------- ---------
Net cash (used in) investing activities (227,732) (145,979)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowings 280,058 202,833
Repayment of borrowings (1,985) (5,975)
Other transactions 11,897 10,046
--------- ---------
Net cash from financing activities 289,970 206,904
--------- ---------
Effect of exchange rate changes on cash 5,688 (14,705)
--------- ---------
Net increase (decrease) in cash and
short-term investments (96,234) 121,559
Cash and short-term investments:
Beginning of period 280,960 133,398
--------- ---------
End of period $ 184,726 $ 254,957
========= =========
Cash paid during the period for:
Income taxes $ 96,530 $ 83,824
========= =========
See notes to consolidated financial statements.
<PAGE> 6
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(unaudited)
1. For interim consolidated financial statement purposes, UPS
computes its tax provision on the basis of its estimated annual
effective income tax rate, and provides for accruals under its
Managers Incentive Plan, Thrift Plan and Retirement Plan based on
one quarter of the estimated annual expense for each three month
period.
Net income per share is based on 580,000,000 shares in 1994
and 595,000,000 shares in 1993, including common stock held for
stock plans.
2. In the opinion of management, the accompanying interim,
unaudited, consolidated financial statements contain all
adjustments (consisting of normal recurring accruals) necessary to
present fairly the financial position as of March 31, 1994, and the
results of operations and cash flows for the three months ended
March 31, 1994 and 1993.
3. Agents for the United States Internal Revenue Service ("IRS")
have asserted in reports that UPS is liable for additional tax for
the 1984 through 1987 tax years. The assertions are based in large
part on the theory that UPS is liable for tax on income of Overseas
Partners Ltd. ("OPL"), a Bermuda company, which has reinsured
excess value package insurance purchased by UPS's customers from
unrelated insurers. The adjustments sought by the agents relating
to package insurance are based on a number of inconsistent theories
and range from $97 million to $183 million of tax, plus penalties
and interest.
In addition, the agents have raised a number of other issues,
some of which relate to the timing of deductions, involving the
characterization of expenses as capital rather than ordinary, and
some of which relate to UPS's entitlement to the Investment Tax
Credit in 1985 and 1986. The adjustments sought on these issues
aggregate $137 million in tax, most of which would reverse in
future years, plus penalties and interest.
Management believes that the IRS positions are without merit
and that the eventual resolution of these matters will not have a
material impact on the Company. No assessment has been made by the
IRS with respect to the years 1984 through 1987, and the Company is
pursuing protests before the IRS's Appeals Division against the
imposition of any additional tax liability. The matter is awaiting
a hearing before the IRS Appeals Division. The IRS has not
proposed adjustments for years subsequent to 1987, although the IRS
may take positions similar to those in the reports described above
for periods after 1987.
<PAGE> 7
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(unaudited)
4. Miscellaneous, net in the consolidated statement of income
includes a gain of $45.6 million which resulted from the sale of a
long-term investment property in January 1994.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS
Three Months Ended March 31, 1994 and 1993
Revenue increased by $321 million, or 7.6% for the three
months ended March 31, 1994 over the three months ended March 31,
1993. For the first quarter of 1994, U.S. domestic revenue totaled
$4.017 billion, an increase of $273 million over the first quarter
of 1993, and international revenue totaled $509 million, an
increase of $48 million.
U.S. domestic revenue increased as a result of billing rate
increases and a shift toward higher yielding packages. On February
7, 1994, published rates for domestic ground services for
commercial and residential deliveries were increased by 3.8% and
4.3%, respectively. Additionally, the published rates for Next Day
Air and 2nd Day Air packages each increased by 3.9% and the
published rates for Next Day Air and 2nd Day Air letters increased
by 2.4% and 4.5%, respectively. These increases offset a .6%
decline in first quarter domestic volume which was affected by both
a one day strike by the Teamsters Union during February along with
severe weather conditions periodically during the quarter.
The increase in international revenue was primarily
attributable to a 16.2% volume increase and a 4.8% increase in
revenue per piece. The majority of the volume increase came from
highter yielding, export packages, which also favorably impacted the
overall, revenue per piece.
Operating expenses increased by $322 million, or 8.1% raising
the operating ratio from 94.2 during 1993, to 94.7 during 1994.
The deterioration of the operating ratio resulted from higher costs
associated with a one day strike in February and severe weather
conditions during the quarter which disrupted both air and ground
operations. Operating profit for the period decreased by $1
million, or .3%, as a result of the higher operating costs.
Income before income taxes ("pre-tax income") increased $59
million, or 25.8%. Domestic pre-tax income was $362 million, an
increase of $61 million, or 20.0% over the corresponding quarter of
the previous year. The increase resulted primarily from the sale
of a long-term investment property in January 1994 at a gain of
approximately $46 million. The international pre-tax loss
increased by $2 million, or 2.5%, to $77 million for the quarter.
The international pre-tax loss attributable to the foreign
domestic operations increased by $7 million, or 17.8% primarily as
a result of continued weak economic conditions and tough
competition. The pre-tax loss associated with export operations
decreased by $5 million, or 15.4% primarily as a result of
increased volume. Export volume increased by 34.6% and 39.1% for
international and U.S. origin, export shipments, respectively. UPS
expects that the cost of operating its international business will
continue to exceed revenue in the near future.
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS
The effective income tax rate increased from 41.4% to 42.4%
between the periods as the result of an increase in the maximum
U.S. federal income tax rate from 34% to 35% during the third
quarter of 1993.
The results of operations for the three months ended March 31,
1994 are not necessarily indicative of the results to be expected
for the full year.
Liquidity and Capital Resources
As of March 31, 1994, UPS had borrowings outstanding of $276
million under its commercial paper program. Management anticipates
that UPS will have a continuing need for the near future to draw on
its commercial paper program to meet its working capital
requirements. Management believes that these funds, combined with
the Company's internally generated resources and revolving credit
facility, will provide adequate sources of liquidity and capital
resources to meet its expected future short-term and long-term
needs for the operation of its business, including anticipated
capital expenditures and purchase commitments.
In April 1994, an agent for the United States Internal Revenue
Service ("IRS") asserted in a report that UPS is liable for
additional tax for the 1985, 1986 and 1987 tax years. Reference is
made here to Note 3 to the unaudited consolidated financial
statements for more information.
<PAGE> 10
PART II
Item 6 - Exhibits and reports on Form 8-K
a) Exhibits: none
b) Reports on Form 8-K: no reports on Form 8-K were filed
during the quarter.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
UNITED PARCEL SERVICE OF AMERICA, INC.
(Registrant)
By: /S/ E. A. JACOBY
E. A. Jacoby
Senior Vice President,
Treasurer and
Chief Financial Officer
Date: May 12, 1994
