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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1994 Commission File No. 0-4714
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United Parcel Service of America, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 95-1732075
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(State or other jurisdiction (I.R.S. Employer ID. No.)
of incorporation or organization)
55 Glenlake Parkway, NE, Atlanta, Georgia 30328
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(Address of principal executive office) (ZIP Code)
Area (404) 828-6000
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(Telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each Exchange on which registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.10 per share
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(Title of Class)
Common Stock, par value $.10 per share, subject to UPS Managers Stock Trust
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(Title of Class)
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 Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the common stock held by non-affiliates
of the registrant, based on a price per share of $23.75, the price per share,
as of February 28, 1995, at which UPS expressed its willingness to purchase its
shares from shareowners wishing to sell their shares, was $11,585,644,559.
The number of shares of UPS Common Stock outstanding as of February
28, 1995, was 580,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for its annual
meeting of shareowners scheduled for May 11, 1995 are incorporated by reference
in answer to Part III of this Report.
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PART I
Item 1. Business.
United Parcel Service of America, Inc., through subsidiaries, provides
specialized transportation services, primarily through the delivery of
packages. Service is offered throughout the United States and over 200 other
countries and territories around the world. In terms of revenue, UPS is the
largest package delivery company in the world. During 1994 UPS delivered
approximately 3 billion packages. UPS currently has approximately 1.4 million
customer locations to which it provides daily pickup services.
With minor exceptions, UPS Common Stock is owned by or held for the
benefit of managers and supervisors actively employed by UPS, or their
families; or by former employees, their estates or heirs; or by charitable
foundations established by UPS founders and their family members; or by other
charitable organizations which have acquired their stock by donations from
shareowners. UPS stock is not listed on a national securities exchange or
traded in the organized over-the-counter markets. When used herein the term
"UPS" refers to United Parcel Service of America, Inc., a Delaware corporation,
and its subsidiaries.
Delivery Service in the United States
Ground Services
UPS is engaged primarily in the delivery of packages with dimensional
limitations of 108 inches in length and 130 inches in length and girth
combined. Effective February 1994, UPS increased the weight limit for
individual packages from 70 to 150 pounds for interstate and certain intrastate
deliveries. As of January 1, 1995, as a result of deregulation, the 150 pound
weight limit was made available in all of the 48 contiguous states. UPS
provides interstate and intrastate ground service to every address in the 48
contiguous states and between those states and Hawaii and Alaska. In Hawaii,
an intra-island service is provided between addresses on Oahu and an
inter-island air service is offered between all islands of the state. In
Alaska, an intrastate package delivery service is available throughout the
state.
Effective January 1, 1995, UPS began providing Hundredweight
Service(SM) for ground shipments to all 48 contiguous states. Under this
service, contract rates are established for multi-package shipments weighing in
the aggregate 200 pounds or more and addressed to one consignee at one location
on one day. Customers can realize savings on such shipments compared to
regular ground service rates. In 1994, UPS Hundredweight volume grew over 36%
from 1993. This growth was primarily due to the increase in new customers as a
result of the Teamsters strike of less-than-truckload (LTL) carriers last
spring. UPS has managed to retain much of the volume after the strike ended.
UPS Hundredweight also offers Weight Break Pricing, which provides rate
incentives for shipments of over 500 pounds.
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UPS also provides UPS GroundSaver(SM), a contract service, offering
special rates and services for business-to-business shipments to specified ZIP
Codes. GroundSaver revenue for 1994 increased over 15% from 1993.
UPS's domestic ground revenue increased in 1994 by 5.3% over 1993 as a
result of higher volume, which was up 0.5%, favorable changes in rates and
higher average weights per package. For a description of the rate increase,
see "Item 1 -- Rates."
Domestic Air Services
UPS provides domestic air delivery services known as "UPS Next Day
Air(R)" and "UPS 2nd Day Air(R)," which are available throughout the United
States and Puerto Rico. UPS also provides UPS Prepaid Letter, which permits
customers to purchase UPS Next Day Air and 2nd Day Air Letters in advance at
lower prices. For both UPS Next Day Air and UPS 2nd Day Air, packages and
documents are either picked up from shippers by UPS or are dropped off by
shippers at Air Service Centers or Letter Centers located throughout UPS's
service network.
UPS offers guaranteed delivery by 10:30 a.m. for UPS Next Day Air
Packages and Letters sent to areas covering over 76% of the U.S. population
and noon delivery to areas covering an additional 15% of the U.S. population.
In 1994, UPS introduced Early A.M.(SM) service in all of the 48 contiguous
states, which provides guaranteed next-day delivery of packages and documents
by 8:30 a.m. In 1993, UPS began offering Next Day Air Saver(SM), which is Next
Day Air delivery in the afternoon -- by either 3 p.m. or 4:30 p.m., depending
on location, at a slightly lower rate than 10:30 a.m. delivery. UPS also
guarantees on-schedule delivery of UPS 2nd Day Air packages.
In early 1995, UPS acquired SonicAir, a provider of same-day delivery
and third-party logistics services. Through this wholly-owned subsidiary,
customers will be offered same-day delivery anywhere in the continental United
States, as well as next-flight-out services internationally.
UPS offers Saturday Delivery for UPS Next Day Air shipments to an area
covering approximately 76% of all UPS customers. UPS also offers Saturday
Pickup service of air shipments in all areas served by UPS Saturday delivery.
Further, in 1993, UPS began accepting hazardous materials in its air services,
for an additional charge.
UPS offers UPS Next Day Air and UPS 2nd Day Air Hundredweight Service
for package shipments totaling at least 100 pounds addressed to one consignee
at one location on the same day. UPS Air Cargo Service provides two services
designed to fill what would otherwise be unfilled capacity on regular UPS
flights: the transportation of containerized and palletized cargo in available
space on UPS flights and aircraft charters when UPS planes are not being
utilized by UPS.
The volume of UPS's higher margin air services, such as UPS Next Day
Air service, continued to grow during 1994. In 1994, UPS's air services'
volume increased by 22% and revenues increased by 20%.
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To enable UPS to accommodate future demand for air delivery services,
UPS, in 1994, completed an expansion of its Dallas, Texas regional air sorting
facility and opened a new regional air sorting facility in Rockford, Illinois.
UPS also has plans to open an additional new regional air sorting facility in
Columbia, South Carolina in 1995. Other regional air sorting facilities are
located in Ontario, California and Philadelphia, Pennsylvania. In 1993, UPS
ordered thirty new Boeing 767 freighter aircraft and ten more 757 freighter
aircraft, in addition to the twenty-one 757 freighter aircraft previously
ordered, to meet anticipated future growth in air delivery volume. In 1994,
UPS took delivery of twelve more 757 freighter aircraft. For a further
description of UPS's properties, see "Item 2 -- Properties."
Delivery services in the United States accounted for 88.4%, 89.0% and
89.1% of UPS's consolidated revenue in 1994, 1993 and 1992, respectively. For
further financial information relating to foreign and domestic operations, see
Note 10 to the Consolidated Financial Statements.
International Delivery Service
UPS offers international air service between over 200 countries and
territories throughout the world. During 1994, UPS focused its worldwide,
transborder and domestic services on two major markets -- Europe and North
America. UPS is the only package delivery company in Europe with fully
integrated European ground and air delivery linked to a global operation. As
discussed more fully in "Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations," the number of International Air
packages handled increased substantially in 1994.
Domestic air service is offered throughout Canada, Germany, Italy, and
Spain. Ground service is provided throughout Austria, Belgium, Canada,
Denmark, France, Germany, Ireland, Italy, Malaysia, Mexico, the Netherlands,
Norway, Spain, Sweden, Switzerland and the United Kingdom. UPS's transborder
air and ground services within Europe are enhanced by UPS EuroExpress
("EuroExpress") and UPS EuroExpedited ("EuroExpedited") services.
EuroExpress is a pan-European air service that offers next-day
delivery before noon for shipments between major metropolitan areas, covering
more than 80% of the population. EuroExpedited uses roadways to deliver
packages and freight between 15 countries, with shipments tracked
electronically. With the easing of border restrictions throughout Europe
during early 1993, EuroExpedited shipments take more direct routes between
countries, thereby reducing transit times.
In 1994, UPS continued its services between Canada, Mexico and the
United States. UPS offers three levels of service between these countries:
Express, for delivery in one business day; Expedited, for delivery usually
within three days; and Standard, for transborder ground delivery. Expedited
service is new for these countries, as is ground service between Mexico and the
United States.
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UPS Worldwide Express ("Worldwide Express") provides delivery of
urgent packages, documents and letters to over 200 countries and territories.
Worldwide Express shipments are generally delivered within two business days.
During 1993, the document delivery schedules for most Worldwide Express
customers were improved with the commencement of overnight service from 21
major U.S. cities to major business centers in Asia, Europe, Mexico and South
America, and in 1994, UPS added an on-time guarantee to Worldwide Express
shipments. The competitive rates offered for Worldwide Express include customs
clearance, which is facilitated by electronic transfer of customs information.
Additionally, Worldwide Express provides for shipment tracking throughout the
world using an advanced data network developed by UPS.
UPS offers Worldwide Expedited Package Service ("Worldwide Expedited")
to Canada and Mexico as well as between Europe and the Asia-Pacific. Worldwide
Expedited is a multi-package alternative to air freight services, generally
using UPS ground and 2nd Day Air operating facilities. Transit times are
slightly longer than by express delivery, but rates are substantially lower.
Worldwide Expedited also offers services, such as shipment tracking, which are
not typically available for air freight.
The growth in international volume prompted UPS to replace DC-8
freighter aircraft with larger 747 freighter aircraft for United States to
Europe flights. Within Europe, UPS introduced its own 727s to replace smaller
aircraft.
During 1994, UPS suffered pre-tax losses in its international
operations of approximately $327 million. The international pre-tax loss was
primarily a result of losses from domestic operations outside of the United
States caused by strong competition in European countries. However, revenues
from all international services increased for 1994 by 16.2% over 1993. UPS
expects to incur future losses in connection with its international operations.
UPS's international delivery service accounted for approximately
11.6%, 11.0% and 10.9% of the consolidated revenues of UPS in 1994, 1993 and
1992, respectively. For financial information relating to foreign and domestic
operations, see Note 10 to the Consolidated Financial Statements.
Other Services
UPS offers customized services for certain types of customers or even
a single customer, such as Consignee Billing and Delivery Confirmation.
Consignee Billing was designed for customers who receive large amounts of
merchandise from a number of vendors. UPS bills these consignee customers
directly for the shipping charges, enabling the customer to obtain tighter
control over inbound transportation costs. UPS's Consignee Billing service
volume increased 34% in 1994. Electronic tracking of all Consignee Billing
Packages is offered, as well as on demand pick up service for return shipments.
Delivery Confirmation provides automatic confirmation and weekly reports of
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deliveries. Immediate confirmation is provided upon request. This service is
available throughout the United States and Puerto Rico.
UPS GroundTrac(SM) service electronically tracks ground packages so
that UPS's customers can receive immediate information about the status of
their packages while in transit. UPS TotalTrack(SM) is an enhanced tracking
system. With the introduction of in-vehicle data transmission capabilities,
this service enables U.S. customers to receive verification of deliveries
within minutes after they are completed. Shippers can access tracking
information 24 hours a day, seven days a week, by telephone or through the UPS
MaxiTrac software system, which enables customers to track and trace their own
packages via telecommunications links with UPS's electronic data systems. As
of December 31, 1994, UPS had distributed MaxiTrac software to approximately
85,000 customers. UPS's MaxiShip System is a hardware-software system that
assists customers in managing their shipping operations by automating a
customer's shipping room with features such as automatic zoning, rating and
printing of address labels, pickup records and shipping reports. As of
December 31, 1994, approximately 25,500 customers were using MaxiShip software.
Rates
On February 7, 1994, UPS raised its domestic ground rates for
commercial and residential deliveries by 3.8% and 4.3%, respectively. On
February 4, 1995, these rates were increased by 3.7% and 4.5%, respectively.
In 1994, published rates for Next Day Air and 2nd Day Air packages each
increased by 3.9%, respectively. The published rates for Next Day Air and 2nd
Day Air letters increased by 2.4% and 4.5%, respectively, in 1994. In 1995,
the published rates for Next Day Air, 2nd Day Air and 3 Day Select packages
were each increased 3.9%. The published rates for Next Day Air and 2nd Day Air
letters increased by 4.7% and 4.3%, respectively, in 1995.
Competition
In terms of revenue, UPS is the largest package delivery company in
the world. UPS competes with many companies and services which operate on a
national, regional or local basis in the United States and internationally, and
its business is affected by the availability and the use of numerous alternate
methods of service. These include the parcel post service and other classes of
mail (including air service) of the United States Postal Service (the "Postal
Service") and the postal services of other nations, various other motor
carriers, independent trucking companies and express companies, freight
forwarders, air couriers, and shipper-owned or leased delivery vehicles.
Competition is intense within the United States and throughout the world.
Competition for high volume, profitable shipping business focuses largely on
providing economical pricing and desirable and dependable service features and
delivery schedules.
UPS also endeavors to attract customers by providing services meeting
their distinct needs, such as guaranteed timely delivery of packages shipped
via UPS Next Day Air and UPS 2nd Day Air and enhanced tracking capabilities.
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UPS is directing a larger proportion of its resources to delivering these
higher revenue packages, providing customized services and obtaining the most
current technology to improve package tracking and delivery confirmation
services.
UPS also engages in widespread advertising of its services,
particularly its international and UPS Next Day Air services.
Regulation
Under the Federal Aviation Act of 1958, as amended, both the
Department of Transportation ("DOT") and the Federal Aviation Administration
("FAA") regulate air transportation services.
The DOT's authority relates primarily to economic aspects of air
transportation, such as discriminatory pricing, non-competitive practices,
interlocking relations or cooperative agreements. The DOT also regulates,
subject to the authority of the President, international routes, fares, rates
and practices and is authorized to investigate and take action against
discriminatory treatment of U.S. air carriers abroad.
FAA authority relates primarily to safety aspects of air
transportation, including aircraft standards and maintenance, personnel and
ground facilities. UPS was granted an operating certificate by the FAA in 1988
which remains in effect so long as UPS meets the operational requirements of
the Federal Aviation Regulations.
The FAA has issued rules mandating repairs on all Boeing Company and
McDonnell Douglas Corporation aircraft which have completed a specified number
of flights and has also issued rules requiring a corrosion control program for
Boeing Company aircraft. Total expenditures under these programs for 1994 were
$12 million. Each of these programs requires that UPS make periodic
inspections of its aircraft. These inspections may result in a determination
that additional repairs are required under these programs. Hence, the future
cost of such repairs pursuant to the programs may fluctuate.
Until January 1, 1995, ground transportation of packages by UPS in the
United States was subject to regulation by the Interstate Commerce Commission
("ICC") and by various state regulatory agencies when such transportation was
pursuant to common carrier certificates and contract carrier permits issued by
the ICC and state agencies. After January 1, 1995, all state regulation of
rates, routes and services was declared preempted by federal legislation, for
both integrated intermodal carriers and motor carriers. UPS remains subject to
the jurisdiction of the ICC, while the states maintain regulation over such
areas as safety, insurance and hazardous materials. UPS is subject to similar
regulation in many foreign jurisdictions.
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Postal Rate Proceedings
The Postal Reorganization Act of 1970 ("Act") created the Postal
Service as an independent establishment of the executive branch of the federal
government and vested the power to recommend domestic postal rates in a
regulatory body, the Postal Rate Commission ("Commission"). UPS believes that
the Postal Service consistently attempts to set rates for its parcel,
international and other competitive services generally below its costs of
providing such services and to use excess revenues from its monopoly classes,
particularly First Class letter mail, to subsidize those competitive services.
Therefore, UPS participates in postal rate proceedings before the Commission in
an attempt to secure what UPS believes to be at least minimum fairness in the
Postal Service's competition for parcel delivery and expedited letter, document
and parcel delivery business.
In 1994, the Postal Service proposed a general rate increase for
domestic mail. In particular, the Postal Service proposed increases for First
Class letters and Express Mail of 10.3% and for Parcel Post of 13.2%. UPS
intervened in the proceeding, contending that the increase for First Class
letters was excessive and would cross-subsidize competitive services. On
November 30, 1994, the Commission issued its recommended decision, reducing the
increase for First Class letters to 8.9%, and recommending increases for
Express Mail of 8.0% and Parcel Post of 18.3%. The Governors of the Postal
Service in general accepted the Commission's recommended rates, and the rates
became effective on January 1, 1995. However, the Postal Service sought
clarification from the Commission on three issues. Reconsideration of these
issues is pending before the Commission and might result in changes in the rate
structures for two categories of mail -- Priority Mail and Bound Printed
Matter. One mailer group, not including UPS, has petitioned the United States
Court of Appeals for the District of Columbia for review of the decision of the
Governors to accept the Commission's recommended rates. This appeal is
pending.
In July, 1993, the Postal Service adopted, on a permanent basis,
regulations implementing a new "International Customized Mail" service, in
which the Postal Service would negotiate unique, customized contracts with
large international mailers. Since the Commission does not have jurisdiction
over the Postal Service's international rates and services, UPS Worldwide
Forwarding, Inc. filed suit in the United States District Court for the
District of Delaware. The suit sought to enjoin the new service on the ground
that the Postal Reorganization Act of 1970, as amended, prohibits the Postal
Service from negotiating rate and service contracts that differ from mailer to
mailer. The complaint also alleged that the statute requires the Postal
Service to obtain the consent of the President to all of its international
rates, and that the Postal Service had violated that requirement. The district
court found in favor of UPS and enjoined the Postal Service from entering into
such contracts. The Postal Service's appeal from the district court's Order
was argued before the United States Court of Appeals for the Third Circuit on
March 10, 1995, and the matter is presently under consideration by that court.
In 1992, the Postal Service proposed a new class of parcel mail,
called bulk small parcel service. The proposed rates for this service would
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have been substantially below the existing rates of Parcel Post and of UPS.
The Postal Service had estimated that the new class, if approved, would have
diverted nearly one hundred million parcels per year from UPS. UPS intervened
before the Commission and opposed the creation of this new class of service and
the adoption of the proposed rates, which UPS believed to be below cost and
contrary to the Act. In August 1993, the Commission rejected the new class
proposal, and instead recommended much lower discounts to be taken off of
existing Parcel Post rates. The Governors of the Postal Service, in a decision
issued on February 1, 1994, rejected the Commission's recommendation, and thus,
there was no reduction in rates for this type of shipment.
Other Operations
UPS's subsidiary, UPS Worldwide Logistics, Inc., offers a consultative
service to develop customized solutions for a shipper's distribution needs.
UPS Inventory Express(SM) service, which provides for the storage of inventory,
processing of orders and shipment of customers' products through a warehouse
located near UPS's national air hub in Louisville, is part of this division.
In 1993, UPS established its second Inventory Express facility near UPS's
European air hub in Cologne, Germany, which matches the overnight distribution
capabilities of its U.S. counterpart in Louisville. Also supporting the
Worldwide Logistics initiative is UPS's first bonded, multi-user European
Distribution Center. This warehousing service is in the Netherlands, and UPS
plans to set up several more warehousing centers across Europe in the next five
years. These warehousing services facilitate quick entry of urgent shipments
into the UPS system.
Martrac, a UPS subsidiary, transports produce and other commodities in
temperature-controlled trailers over railroads. Martrac's revenues and income
before taxes decreased by 10.0% and 32.0%, respectively, primarily due to
severe weather conditions suffered in the first quarter of 1994. Martrac's
fleet now totals 1,483 trailers, a decrease of 3.7% from 1993.
UPS Truck Leasing, Inc., a UPS subsidiary, ("UPS Truck Leasing"),
rents and leases trucks and tractors to commercial users under full-service
rental agreements. Through programs established with Worldwide Logistics, UPS
Truck Leasing is capitalizing on a business trend toward increased outsourcing
of trucking needs. As of December 31, 1994, UPS Truck Leasing had 40
facilities and a fleet of 3,917 vehicles. UPS Truck Leasing's revenues
increased by 13% in 1994.
Environmental Regulation
In 1989, regulations were adopted pursuant to the Resource
Conservation and Recovery Act, which required owners and operators of
underground storage tanks ("USTs") to test, upgrade and/or replace their USTs
on a rolling schedule of deadlines through 1998. UPS substantially completed
this project in 1993, five years ahead of the mandated Environmental Protection
Agency
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("EPA") schedule. UPS replaced approximately 2,833 USTs at a cost of $105
million.
The Clean Air Act Amendments of 1990 require a ten-year phase in of
alternative fuel vehicles by fleets in the urban areas with the worst air
quality problems. In order to address these requirements, UPS began a project
in 1989 using compressed natural gas ("CNG") as a fuel in the package cars. By
the end of 1994, 250 package cars were running on CNG in various cities. In
1995, UPS has plans to add 104 CNG cars in San Ramon, California; 100 CNG cars
in Atlanta; and between 100 and 200 CNG cars in Connecticut, where a tax credit
incentive exists to assist in implementation of this program.
The EPA's final rules under the Clean Air Act Amendments established
regulations governing the exemption of clean fuel fleet vehicles from certain
transportation control measures ("TCMs"). The exemptions except clean fuel
vehicles, such as UPS's CNG vehicles, from urban TCMs, such as truck bans and
time-of-day restrictions. It also permits the CNG vehicles to travel in high
occupancy vehicle lanes, provided they meet certain emission criteria.
Employees
As of December 31, 1994, UPS had approximately 320,000 employees, an
11.9% increase over 1993. Most hourly employees are represented by unions,
principally by locals of the International Brotherhood of Teamsters ("IBT").
Executive Officers
Listed below is certain information relating to the executive officers
and management of UPS.
<TABLE>
<CAPTION>
Principal Occupation
and Employment During
Name and Office Age At Least the Last Five Years
--------------- --- -----------------------------
<S> <C> <C>
John Alden 53 Director (1988 to present),
Senior Vice President Senior Vice President and
and Director Business Development Group Manager (1986 to
present), UPS
Robert J. Clanin 51 Senior Vice President, Treasurer and Chief Financial
Senior Vice President, Officer (1994 to present), Finance Manager (1990 to
Treasurer and Chief 1994), Treasury Manager (1989-1990), UPS
Financial Officer
Francis J. Erbrick 56 Senior Vice President (1989
Senior Vice President to present), Strategic Systems Manager (1992 to
present), Information Services Manager (1985 to
1992), UPS
</TABLE>
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<TABLE>
<CAPTION>
Principal Occupation
and Employment During
Name and Office Age At Least the Last Five Years
--------------- --- -----------------------------
<S> <C> <C>
Don R. Fischer 57 Senior Vice President (1992 to present),
Senior Vice President International Systems and UPS Truck Leasing Manager
(1992 to present), Corporate Delivery Information
and Loss Prevention Manager (before 1987 to 1992),
UPS
John J. Kelley 59 Director (1992 to present), Senior Vice President
Senior Vice President and Director and Human Resources Manager (1991 to present), Region
Manager (1983 to 1991), UPS
James P. Kelly 51 Director (1991 to present), Executive Vice President
Executive Vice President and Director (1994 to present), Chief Operating Officer (1992 to
present), U.S.A. Operations Manager (1990 to 1992),
Labor Relations Manager (1988 to 1990), UPS
Joseph R. Moderow 46 Director (1988 to present), Senior Vice President and
Senior Vice President, Secretary (1986 to present), Legal and Public
Secretary, General Counsel and Affairs Group Manager (1989 to present),
Director Legal Manager (1986 to 1989), UPS
Kent C. Nelson 57 Director (1983 to present), Chairman and Chief
Chairman of the Board Executive Officer (1989 to present),
and Director (Chief Vice Chairman (1989), Executive Vice President (1986
Executive Officer) to 1989), UPS
Charles L. Schaffer 49 Director (1992 to present), Senior Vice President
Senior Vice President and Director and Engineering Group Manager (1990 to present), Plant
Engineering Manager (1989 to 1990), Strategic
Planning Staff (1988 to 1989), District Manager
(1987 to 1988), UPS
</TABLE>
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<TABLE>
<CAPTION>
Principal Occupation
and Employment During
Name and Office Age At Least the Last Five Years
--------------- --- -----------------------------
<S> <C> <C>
Edward L. Schroeder 53 Senior Vice President (1993 to present),
Senior Vice President International Operations Coordinator (1993 to
present), Region Manager (1988 to 1993), District
Manager (1986 to 1988), UPS
Calvin E. Tyler, Jr. 52 Director (1991 to present), Senior Vice President
Senior Vice President and Director (1988 to present), U.S.A. Operations Manager (1991
to present), Human Resources Manager (1988 to 1991),
Region Manager (1985 to 1988), UPS
Thomas H. Weidemeyer 47 Senior Vice President (1994 to present), Airline
Senior Vice President Operation Manager (1990 to 1994), Region Manager
(1989 to 1990), District Manager (1988 to 1989), UPS
Clinton L. Yard 55 Senior Vice President (1992 to present), National
Senior Vice President Operations Manager (1992 to present), Region Manager
(1988 to 1992), District Manager (1982 to 1988), UPS
</TABLE>
Each officer of UPS has been elected to serve until the next
organizational meeting of the directors of UPS following the annual meeting of
shareowners of UPS.
Item 2. Properties.
Operating Facilities
During 1991, UPS moved its corporate office to Atlanta, Georgia. In
1994, UPS completed its new headquarters at a cost of $105 million, and moved
all of its staff into the headquarters.
Among UPS's principal operating facilities are those located in Dallas
(Texas), Denver (Colorado), Earth City (Missouri), Grand Rapids (Michigan) and
Palatine (Illinois). These operating facilities, having floor spaces which
range from 350,000 to 1,000,000 square feet, have central sorting facilities,
operating hubs and service centers for local operations. UPS has recently
completed construction of a large hub facility near Chicago, Illinois. This
facility has floor space of approximately 1,900,000 square feet and has
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recently commenced operations on a limited basis. The estimated cost of this
facility, including plant equipment, was approximately $318 million.
UPS also owns approximately 700 and leases approximately 1,000 other
operating facilities throughout the territories it serves. The smaller of
these facilities have vehicles and drivers stationed for the pickup of packages
and facilities for sorting and transfer and delivery of packages. The larger
of these facilities have additional facilities for servicing UPS vehicles and
equipment, and employ specialized mechanical installations for the sorting and
handling of packages.
UPS's aircraft are operated in a hub and spokes pattern in the United
States. UPS's principal air hub in the United States is located in Louisville,
Kentucky, with regional air hubs in Philadelphia, Pennsylvania and Ontario,
California. These hubs house facilities for sorting, transfer and delivery of
packages. The Louisville hub handles the largest volume of packages for air
delivery in the United States. In 1994, UPS finished construction of a
regional air hub in Rockford, Illinois and completed the hub expansion in
Dallas, Texas. UPS has plans to construct its last regional air hub in
Columbia, South Carolina. UPS's European air hub is located in Cologne,
Germany.
UPS's computer operations have been consolidated in a 400,000 square
foot leased facility located on a 39 acre site in Mahwah, New Jersey. The
construction of a 27,000 square foot addition to the facility commenced in 1994
and should be completed by the fourth quarter of 1995. The addition will
accommodate further expansions of up to 54,000 square feet. UPS has leased
this facility for an initial term ending in 2019 for use as a data processing,
telecommunications and operations facility. UPS has also begun construction of
a 160,000 square foot facility located on a 25 acre site in the Atlanta,
Georgia area, which will serve as a backup to the main facility in New Jersey.
The new facility, to be completed in July 1995, will provide backup capacity in
case a power outage or other disaster incapacitates the main data center, and
it will also help meet future communication needs.
Aircraft
UPS operates a fleet of 462 aircraft. UPS's fleet at December 31,
1994 consisted of the following aircraft:
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<TABLE>
<CAPTION>
Number Number
Description Owned Leased
----------- ------ ------
<S> <C> <C>
McDonnell Douglas DC-8-71 23 1
McDonnell Douglas DC-8-73 26 2
Boeing 747-100 5 18
Boeing 757-200 29 18
Boeing 727-100 51 -
Boeing 727-200 8 -
Fairchild SA227-AT 11 -
Other - 270
--- ---
Total 153 309
</TABLE>
An inventory of spare engines and parts is maintained for each
aircraft.
All of UPS's DC-8-71's, DC-8-73's, B757PF's and 747-100's meet Stage
III federal noise regulations. UPS is replacing the three engines on all but
seven B727-100 aircraft with new, quieter engines. These re-engined B727-100's
will meet Stage III federal noise regulations and will allow UPS to operate
into airports with aircraft noise restrictions that exclude B727-100's that
have not been re-engined. UPS will accomplish engine modifications for each of
its eight 727-200 aircraft to achieve Stage III noise compliance.
The current noise regulations do not impact the valuation of these
aircraft as their depreciable lives all end before the final phase-in date for
Stage III compliance in 1999. All other aircraft operated by UPS are not
subject to Stage III noise regulations.
In 1994, UPS completed a cockpit modernization program of all but
seven aircraft in the B727-100 fleet. This modernization program consisted of
replacing many of the original cockpit instruments with modern cathode ray tube
(CRT) instrumentation. In addition, the layout and positioning of instruments
in these B727-100 cockpits has been standardized to a common configuration. A
similar cockpit modernization program is also underway for all the UPS DC8-71
and DC8-73 aircraft. At this time, UPS has not committed seven B727-100's
purchased in 1994 to either the re-engining program or the cockpit
modernization program.
During 1994, UPS ordered 30 new Boeing 767 freight aircraft
(B767-300F) with options to buy 30 more. The delivery of the first 767 is
scheduled for October 1995. UPS also accelerated the delivery of two B757-200
aircraft from 1995 to 1994. A total of 12 B757-200's were delivered to UPS in
1994. Eight B757-200's will be delivered to UPS in 1995, along with 5
B767-300F's. In addition, UPS has options for the purchase of 31 additional
B757-200 aircraft and 30 B767-300F aircraft for delivery between 1997 and 2008,
if additional aircraft are required.
-13-
<PAGE> 15
Vehicles
UPS owns and operates a fleet of approximately 132,000 vehicles and
leases 2,400 vehicles, ranging in size from panel delivery cars to large
tractors and trailers, including 1,483 temperature-controlled trailers owned by
Martrac and 3,917 vehicles owned by UPS Truck Leasing. During 1994,
approximately 4,245 package cars, tractors and trailers were purchased and
approximately 3,764 older vehicles were retired.
Item 3. Legal Proceedings.
While UPS is routinely involved in litigation relating to the conduct
of its business, there are no pending legal proceedings which, individually or
in the aggregate, are material to the business of UPS. UPS was subject to tax
audits by the United States Internal Revenue Service for the 1983 through 1987
tax years. Information regarding the tax audit is incorporated herein by
reference from Note 4 to the Consolidated Financial Statements filed herewith.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for the Registrant's Common Equity And Related Stockholder
Matters.
UPS is authorized to issue 900,000,000 shares of common stock, par
value $.10 per share, of which 580,000,000 shares were issued and outstanding
(including those shares held by UPS for distribution in connection with its
stock plans) as of February 28, 1995. UPS is also authorized to issue
200,000,000 shares of preferred stock, without par value. No shares of
preferred stock have been issued or are outstanding.
Each share of UPS Common Stock is entitled to one vote in the election
of directors and other matters, except that, generally, any shareowner, or
shareowners acting as a group, who beneficially own more than 10 percent of the
voting stock are entitled to only one one-hundredth of a vote with respect to
each vote in excess of 10 percent of the voting power of the then outstanding
shares of voting stock. Holders have no preemptive or other right to subscribe
to additional shares. In the event of liquidation or dissolution, they are
entitled to share ratably in the assets available after payment of all
obligations. The shares are not redeemable by UPS except through UPS's
exercise of the preferential right of purchase mentioned below and, in the case
of stock subject to the UPS Managers Stock Trust, UPS's right of purchase in
the circumstances described herein.
-14-
<PAGE> 16
Shareowners are entitled to such dividends as are declared by the
Board of Directors. The policy of the UPS Board is to declare dividends each
year out of current earnings. However, the declaration of future dividends is
subject to the discretion of the Board of Directors in light of all relevant
facts, including UPS's earnings, general business conditions and capital
requirements.
UPS Common Stock is not listed on a national securities exchange or
traded in the organized over-the-counter market. The UPS Certificate of
Incorporation provides that no outstanding shares of UPS capital stock entitled
to vote generally in the election of directors may be transferred to any other
person, except by bona fide gift or inheritance, unless the shares shall have
first been offered, by written notice, for sale to UPS at the same price and on
the same terms upon which they are to be offered to the proposed transferee.
UPS has the right, within 30 days after receipt of the notice, to
purchase all or a part of the shares at the price and on the terms offered. If
it fails to exercise or waives the right, the shareowner may, within a period
of 20 days thereafter, sell to the proposed transferee all, but not part, of
the shares which UPS elected not to purchase, for the price and on the terms
described in the offer. All transferees of shares hold their shares subject to
the same restriction. Shares previously offered but not transferred within the
20 day period remain subject to the initial restrictions. Shares may be
pledged or otherwise used for security purposes, but no transfer may be made
upon a foreclosure of the pledge until the shares have been offered to UPS at
the price and on the terms and conditions bid by the purchaser at the
foreclosure.
UPS, from time to time, has waived its right of first refusal to
purchase its shares in order to permit managers and supervisors to purchase
shares at the same price as UPS was willing to pay. The grant of waivers in
these cases has been effected after considering the needs of UPS for purposes
of the UPS Managers Incentive Plan and UPS's 1986 and 1991 Stock Option Plans
("Plans") and other corporate purposes and has been subject to those needs.
Persons who purchase shares in this manner are required to deposit them in the
UPS Managers Stock Trust.
UPS notifies its shareowners periodically of its willingness to
purchase shares at specified prices determined by the Board of Directors, in
the event that shareowners wish to sell their shares. During 1994, UPS
purchased 29,290,052 shares at an aggregate purchase price of approximately
$632 million.
In determining the prices, the Board considers a variety of factors,
including past and current earnings, earnings estimates, the ratio of UPS
Common Stock to debt of UPS, other factors affecting the business and outlook
of UPS and general economic conditions, as well as opinions furnished from time
to time by two firms of investment counselors, each acting independently, as
to the value of UPS shares. The Board has not followed any predetermined
formula. It has considered a number of formulas commonly used in the
evaluation of securities of closely held and of publicly held companies, but
its decisions have been based primarily on the judgment of the Board of Direc-
-15-
<PAGE> 17
tors as to the long-range prospects of UPS rather than what the Board considers
to be the short-term trends relating to UPS or the values of securities
generally. Thus, for example, the Board has not given substantial weight to
short-term variations in average price-earnings ratios of publicly traded
securities which at times have been considerably higher, and at other times,
considerably lower, than those for UPS's securities. However, the Board's
decision as to prices does take into account factors affecting generally the
market prices of publicly traded securities, and prolonged changes in those
prices could have an effect on the prices offered by UPS.
One factor in determining the prices at which securities trade in the
organized markets is that of supply and demand. When demand is high in relation
to the shares which investors seek to sell, prices tend to increase, while
prices tend to decrease when demand is low in relation to the shares being
sold. To date, the UPS Board of Directors has not given significant weight to
considerations of supply and demand in determining the price to be paid by UPS
for its shares. UPS has had a need for many of its shares for purposes of
awards under the Plans, and eligible managers and supervisors have purchased
many other available shares. When the number of shares acquired by UPS exceeds
the number needed for these purposes within a reasonable period, the excess
shares are constructively retired and treated as authorized and unissued shares
by UPS.
UPS intends to continue its policy of purchasing a limited number of
shares when offered by shareowners. However, there can be no assurance of
continuation of that policy. The feasibility of purchases by UPS and the
prices at which shares may be purchased are both subject to the continued
maintenance by UPS of satisfactory earnings and financial condition. Hence,
both the salability of UPS shares and the prices at which they may be sold
would be adversely affected by a continuous decline of UPS's earnings or by
unfavorable changes in its financial position and might be adversely affected
by decisions of shareowners to sell substantially more shares than the Board
considers necessary for the ultimate purpose of making awards under the Plans.
The prices at which UPS has published notices of its willingness to
purchase shares of Common Stock since January 1993 have been as follows:
<TABLE>
<CAPTION>
Dates Price
----- -----
<S> <C>
1993
----
January 1 to February 18 $18.50
February 19 to May 19 $18.75
May 20 to August 18 $19.25
August 19 to November 17 $19.75
November 18 to February 16, 1994 $20.75
1994 Price
---- -----
February 17 to May 25 $21.25
May 26 to August 24 $22.00
August 25 to November 17 $23.00
November 18 to February 15, 1995 $23.50
</TABLE>
-16-
<PAGE> 18
On February 16, 1995, UPS expressed its willingness to purchase shares
at $23.75 per share, which is still the price at the date of this report.
In February 1995, UPS distributed an aggregate of 6,487,408 shares of
UPS Common Stock, subject to the UPS Managers Stock Trust, under the UPS
Managers Incentive Plan to a total of 29,462 employees at a managerial or
supervisory level. In February 1994, it distributed an aggregate of 6,325,902
shares of UPS Common Stock under that Plan to a total of 28,096 managerial or
supervisory employees. The UPS Managers Stock Trust and the Managers Incentive
Plan have been previously described in the UPS Registration Statement on Form
10 and in the UPS Prospectus, dated February 1, 1995, relating to the UPS
Managers Incentive Plan awards. Such distributions do not represent "sales" as
defined under the Securities Act of 1933, as amended (the "1933 Act").
However, the shares awarded were registered under the 1933 Act to permit
resales of the shares consistent with the interpretations of the Securities and
Exchange Commission under Rule 144 adopted under the 1933 Act.
During 1994, 1,215,680 shares of UPS Common Stock were distributed to
1,881 employees upon the exercise of stock options granted to them by UPS under
the 1986 Stock Option Plan. In addition, a total of 5,433,772 shares of UPS
Common Stock were sold, pursuant to a stock offering by UPS, to 13,373 UPS
managers and supervisors. The offering has been previously described in the
UPS Registration Statement on Form S-3 (No. 33-54297), which became effective
in August 1994. The shares issued upon exercise of the options and the shares
purchased pursuant to the offering are subject to the UPS Managers Stock Trust.
During 1994, UPS also sold 15 million shares of UPS Common Stock to the UPS
Thrift Plan at a price of $330 million.
Shares of UPS Common Stock issued to employees under the Plans and
most other shares of UPS Common Stock owned by UPS employees are held subject
to the UPS Managers Stock Trust (the "Trust"). First Fidelity Bank
("Fidelity") serves as trustee under the Trust. The Trust agreement gives UPS
the right to purchase the shares of UPS Common Stock of members deposited in
the Trust at their fair market value, as defined, when the member retires, dies
or ceases to be an employee of UPS, or when the member requests the withdrawal
of shares from the Trust. Fair market value is defined as the fair market
value of the shares at the time of the sale, or in the event of differences of
opinion as to value, the average price per share of all shares of UPS sold
during the 12 months preceding the sale involved. UPS becomes entitled to
purchase shares of UPS Common Stock held under the Trust within 60 days of a
request from the member to release the shares from the Trust and upon
occurrence of the other enumerated events. The time during which UPS may
purchase shares of UPS Common Stock following the cessation of employment
varies from three years to thirteen years, depending upon the number of shares
held by the employee and the date of the applicable trust agreement. In the
event UPS fails to exercise its option within the prescribed periods, the
employee would become entitled, upon request, to the delivery of the shares of
-17-
<PAGE> 19
UPS Common Stock free and clear of the Trust, unless the purchase period has
been extended by agreement of UPS and the shareowner. UPS has consistently
exercised its purchase rights.
Members of the Trust are entitled to the dividends on shares of UPS
Common Stock held for their accounts (except that stock dividends are added to
the shares held by the Trustee for the benefit of the individual members), to
direct the Trustee as to how the shares held for their benefit are to be voted
and to request proxies from the Trustee to vote shares held for their accounts.
In January 1995, UPS paid a cash dividend of $.30 a share. For the
fiscal year ended December 31, 1994, UPS paid cash dividends of $.25 a share
in January 1994 and $.25 in June 1994. For the fiscal year ended December 31,
1993, UPS paid a cash dividend of $.25 a share in June 1993.
UPS intends to continue its policy of paying dividends to its
shareowners. However, the declaration of future dividends is subject to the
discretion of the Board of Directors in light of all relevant facts, including
earnings, general business conditions and working capital requirements. Loan
agreements, to which UPS is a party, limit the amount which UPS may declare as
dividends and use for the repurchase of its Common Stock. The most restrictive
of these agreements limits the declaration of dividends, other than stock
dividends, and payments for the purchase of Common Stock to the extent that
such declarations and payments, together with all other payments made
subsequent to January 1, 1985 would exceed, in the aggregate, (i) $250,000,000,
(ii) 66-2/3% of net income, as defined in the agreement, and (iii) the net
proceeds from the issuance, sale or disposition of any shares of stock of UPS
or any warrants or other rights to purchase such stock subsequent to January 1,
1985. As of December 31, 1994 UPS had approximately $979 million not subject
to these restrictions. These limits do not materially restrict the declaration
of dividends.
Set forth below is the approximate number of record holders of equity
securities of UPS as of February 28, 1995.
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Common Stock of UPS, $.10 par value 2,587
Common Stock of UPS, $.10 par value, 44,528(1)
subject to UPS Managers Stock Trust
</TABLE>
________________________________________________________________________________
1. Refers to beneficial owners. The record holder of the shares of
Common Stock subject to the Trust is Saul & Co., as nominee for First
Fidelity Bank, N.A., Newark, New Jersey, as Trustee.
-18-
<PAGE> 20
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
Selected Income Statement Data:
(000's omitted, except for per share amounts) Year ended December 31,
---------------------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue............................ $19,575,690 $17,782,353 $16,518,621 $15,019,830 $13,606,344
Operating expenses................. (18,019,744) (16,324,681) (15,240,837) (13,768,574) (12,554,167)
Interest income.................... 13,762 19,846 22,433 27,572 22,278
Interest expense................... (29,211) (34,000) (41,918) (51,794) (71,999)
Miscellaneous -- net............... 34,879 (11,821) 10,996 (9,969) (2,572)
Income taxes....................... (632,047) (622,062) (504,223) (516,895) (403,108)
----------- ----------- ----------- ----------- -----------
Income before cumulative
effect of a change in
accounting principle............. 943,329 809,635 765,072 700,170 596,776
Cumulative effect of a change
in the method of accounting
for postretirement benefits
other than pensions.............. --- --- (248,905) --- ---
----------- ----------- ----------- ----------- -----------
Net income......................... $ 943,329 $ 809,635 $ 516,167 $ 700,170 $ 596,776
=========== =========== =========== =========== ===========
% of revenue after cumulative
effect of a change in
accounting principle........... 4.8% 4.6% 3.1% 4.7% 4.4%
=========== =========== =========== =========== ===========
Per share amounts (1):
Income before cumulative effect
of a change in accounting
principle...................... $ 1.63 $ 1.40 $ 1.29 $ 1.14 $ 0.95
Cumulative effect of a change
in the method of accounting
for postretirement benefits
other than pensions............ --- --- (0.42) -- --
----------- ----------- ----------- ----------- -----------
Net income per share............. $ 1.63 $ 1.40 $ 0.87 $ 1.14 $ 0.95
=========== =========== =========== =========== ===========
Dividends per share................ $ 0.55 $ 0.50 $ 0.50 $ 0.48 $ 0.48
=========== =========== =========== =========== ===========
Selected Balance Sheet Data:
(000's omitted)
December 31,
------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Working Capital.................... $ 120,994 $ 3,745 $ 61,687 $ 172,635 $ 68,328
=========== =========== =========== =========== ===========
Long-term debt..................... $ 1,127,405 $ 852,266 $ 862,378 $ 830,634 $ 854,687
=========== =========== =========== =========== ===========
Total assets....................... $11,182,404 $ 9,573,831 $ 9,037,817 $ 8,858,561 $ 8,176,056
=========== =========== =========== =========== ===========
</TABLE>
___________________________
(1) All per share amounts have been restated to reflect the 4-for-1 stock
split effective September 6, 1991.
-19-
<PAGE> 21
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Operations
1994 Compared to 1993
Revenue increased $1.793 billion, or 10.1%, during 1994 compared to
1993. For 1994, domestic revenue totaled $17.298 billion, an increase of
$1.475 billion, or 9.3%, over 1993 and international revenue totaled $2.278
billion, an increase of $318 million, or 16.2%, over 1993.
Domestic revenue increased as a result of higher volume which was up
2.3%, favorable changes in rates and a continuing shift toward higher yielding
packages. During the first quarter of 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.
The increase in international revenue was primarily attributable to
higher volume, which was up 8.0%. The majority of the increased volume related
to higher yielding, export packages.
Operating expenses increased by $1.695 billion, or 10.4%, which was
commensurate with the increase in revenues. Higher wages and employee benefits
accounted for the majority of the increase. Other operating expenses were up
in a variety of categories with the largest increases relating to depreciation
and purchased transportation. As part of UPS's overall effort to lower
operating expenses, it is considering a possible reduction in the number of
managers it employs from the current level of approximately 35,000. However,
no decisions have been made as to the size of a possible reduction. UPS is
considering the extent to which its objectives can be met through attrition,
early retirement and possible layoffs. Therefore, the projected savings or
expenses associated with a possible reduction in the number of managers cannot
be determined.
Operating profit for 1994 increased by $98 million, or 6.7%. This
increase resulted primarily from higher revenue discussed above.
Income before income taxes and cumulative effect of a change in
accounting principle ("pre-tax income") increased by $144 million, or 10.0%.
Domestic pre-tax income amounted to $1.902 billion, an increase of $204
million, or 12.0%, over 1993. This increase was a result of higher operating
profit and the sale of an investment property in January at a gain of
approximately $46 million. The
-20-
<PAGE> 22
international pre-tax loss increased by $60 million, or 22.6%, bringing the
total international pre-tax loss to $327 million for 1994.
The international pre-tax loss attributable to the foreign domestic
operations increased by $56 million, or 31.8%, primarily as a result of
competitive factors. The pre-tax loss associated with export operations
increased by $4 million, or 4.8%. Export volume increased by 48.0% and 16.3%
for international and U.S. origin, export shipments, respectively. UPS expects
the cost of operating its international business will continue to exceed
revenue in the near future.
Net income increased by $134 million, or 16.5%. This increase
resulted primarily from the higher operating profit, a gain on a long-term
investment property described above and a deferred tax adjustment recorded in
1993 to reflect the effect of the increase in the maximum U.S. federal income
tax rate for corporations from 34% to 35%. See also Note 7 to the consolidated
Financial Statements.
1993 Compared to 1992
Revenue increased $1.264 billion, or 7.7%, during 1993 compared to
1992. For 1993, domestic revenue totaled $15.823 billion, an increase of
$1.101 billion, or 7.5%, over 1992, and international revenue totalled $1.960
billion, an increase of $163 million, or 9.1%, over 1992. Domestic revenue
increased as a result of favorable changes in rates and a shift toward higher
yielding packages. Increases in published rates during the first quarter of
1993 ranged from 4.9% to 5.9% for domestic air shipments and averaged
approximately 4.5% for domestic ground shipments. These increases offset a
0.6% decline in domestic volume during 1993. The increase in international
revenue was attributable to higher volume, which was up 11.8%. However, the
effect of the international volume increase on revenue was partially offset by
a decrease in revenue per piece. This decrease resulted from competitive
pressures and poor economic conditions in certain foreign markets along with
currency exchange rate fluctuations with respect to the U.S. dollar and
discounting in connection with efforts to build volume.
Operating expenses increased by $1.084 billion, or 7.1%. The increase
was primarily the result of increases in average pay rates and employee
benefits. In November 1993, UPS entered into a new, four-year labor agreement
with the International Brotherhood of Teamsters ("Teamsters"). The new
agreement resulted in hourly increases in wages and employee benefits for
senior drivers of $2.25 and $1.80, respectively, over the four-year term. The
agreement will result in similar increases in wages and employee benefits for
the Company's other Teamsters employees. Terms of the agreement were effective
August 1, 1993.
-21-
<PAGE> 23
Operating profit for 1993 increased by $180 million, or 14.1%. This
increase resulted primarily from higher revenue.
Income before income taxes and cumulative effect of a change in
accounting principle ("pre-tax income") increased by $162 million, or 12.8%.
Domestic pre-tax income amounted to $1.698 billion, an increase of $153
million, or 9.9%, over 1992 as a result of higher operating profit. The
international pre-tax loss decreased by $10 million, or 3.5% bringing the
international pre-tax loss to $267 million for 1993. This change resulted from
improved export operations and favorable swings in currency exchange rates
offset by declines in foreign domestic operations.
The international pre-tax loss attributable to the foreign domestic
operations increased by $71 million, or 68.2%, primarily as a result of weak
economic conditions and tough competition. The pre-tax loss associated with
export operations decreased by $81 million, or 47.1%, as a result of increased
volume and the achievement of greater cost efficiencies in the international
network. Export volume increased by 36.1% and 35.7% for international and U.S.
origin, export shipments, respectively.
The provision for income taxes increased by approximately $118
million, or 23.4%. This increase is a result of higher pre-tax income as well
as an increase in the U.S. federal income tax rate, as described more fully in
Note 7 to the Consolidated Financial Statements.
Income before cumulative effect of a change in accounting principle
increased by $45 million, or 5.8%. This increase resulted from the increase in
pre-tax income, partially offset by the increase in the U.S. federal income tax
rate.
Liquidity and Capital Resources
UPS believes that its internally generated funds, revolving credit
facilities and commercial paper program (discussed below) 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 of $2.2 billion for land, buildings, equipment
and aircraft in 1995, as well as commitments for aircraft purchases through
2000.
During the fourth quarter of 1993, UPS established a commercial paper
program under which it may borrow up to $500 million on a short-term, unsecured
basis at favorable rates. The amount which UPS can borrow under this program
was increased to $1 billion in 1995.
-22-
<PAGE> 24
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 agent
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,
for the period stated above.
In addition, the agents have raised a number of other issues relating
to the timing of deductions; the characterization of expenses as capital rather
than ordinary; and UPS's entitlement to the Investment Tax Credit in the 1983
through 1987 tax years. The adjustments sought on these issues aggregate $127
million in tax, the majority of which would reverse in future years, plus
penalties and interest.
After consultation with legal experts, management believes there is no
merit to any material issues raised by the IRS and that the eventual resolution
of these matters will not have a material impact on the Company. Although no
assessment has yet been made by the IRS with respect to the years 1983 through
1987, it is likely the IRS will issue a Notice of Deficiency for the years 1983
and 1984 which the Company will contest through litigation. 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.
Item 8. Financial Statements and Supplementary Data.
Financial Statements
The Financial Statements of UPS are filed together with this Report:
see Index to Financial Statements, page F-1, which is incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
-23-
<PAGE> 25
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information regarding the Directors of UPS is presented under the
caption "Election of Directors" in UPS's definitive Proxy Statement for the
Annual Meeting of Shareowners to be held on May 11, 1995, which will be filed
with the Securities and Exchange Commission (the "SEC") by March 31, 1995, is
incorporated herein by reference.
Information concerning UPS's executive officers can be found in Part
I, Item 1, of this Form 10-K under the caption "Executive Officers" in
accordance with Instruction 3 of Item 401(b) of Regulation S-K and General
Instruction G(3) of Form 10-K.
Item 11. Executive Compensation.
Information in answer to this Item 11 is presented under the caption
"Compensation of Executive Officers and Other Information" excluding the
information under the captions "Report of the Officer Compensation Committee on
Executive Compensation" and "Shareowner Return Performance Graph" in UPS's
definitive Proxy Statement for the Annual Meeting of Shareowners to be held on
May 11, 1995, which will be filed with the SEC by March 31, 1995, is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information in answer to this Item 12 is presented under the caption
"Stock Ownership" in UPS's definitive Proxy Statement for the Annual Meeting of
Shareowners to be held on May 11, 1995, which will be filed with the SEC by
March 31, 1995, is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Information in answer to this Item 13 is presented under the captions
"Certain Business Relationships" and "Common Relationships with Overseas
Partners Ltd." in UPS's definitive Proxy Statement for the Annual Meeting of
Shareowners to be held on May 11, 1995, which will be filed with the SEC by
March 31, 1995, is incorporated herein by reference.
-24-
<PAGE> 26
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements.
- See Index to Financial Statements and Financial
Statement Schedules at page F-1, which is incorporated herein by reference.
2. Financial Statement Schedules
- Not applicable
3. List of Exhibits.
- See Exhibit Index at page E-1, which is incorporated
herein by reference.
(b) Reports on Form 8-K.
- No reports on Form 8-K were filed during the quarter ended
December 31, 1994
(c) Exhibits required by Item 601 of Regulation S-K.
- See Exhibit Index at page E-1, which is incorporated herein
by reference.
-25-
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, United Parcel Service of America, Inc. has duly caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED PARCEL SERVICE OF AMERICA, INC.
(Registrant)
Date: March 29, 1995 By: /s/ Kent C. Nelson
---------------------------------
Kent C.Nelson
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John W. Alden Senior Vice President March 29, 1995
------------------------- and Director
John W. Alden
/s/ William H. Brown, III Director March 29, 1995
-------------------------
William H. Brown, III
/s/ Robert J. Clanin Senior Vice President March 29, 1995
------------------------- Treasurer (Chief Financial
Robert J. Clanin and Accounting Officer)
Director , 1995
------------------------- ---------
Carl Kaysen
/s/ John J. Kelley Senior Vice President March 29, 1995
------------------------- and Director
John J. Kelley
/s/ James P. Kelly Executive Vice President March 29, 1995
------------------------- and Director
James P. Kelly
Director , 1995
------------------------- ---------
Gary E. MacDougal
/s/ Joseph R. Moderow Senior Vice President, March 29, 1995
------------------------- Secretary and Director
Joseph R. Moderow
</TABLE>
-26-
<PAGE> 28
<TABLE>
<S> <C> <C>
/s/ Kent C. Nelson Chairman of the Board March 29, 1995
------------------------- and Director (Chief
Kent C. Nelson Executive Officer)
Director , 1995
------------------------- ---------
Victor A. Pelson
Director , 1995
------------------------- ---------
John W. Rogers
/s/ Charles L. Schaffer Senior Vice President March 29, 1995
------------------------- and Director
Charles L. Schaffer
Director , 1995
------------------------- ---------
Robert M. Teeter
/s/ Calvin E. Tyler, Jr. Senior Vice President March 29, 1995
------------------------- and Director
Calvin E. Tyler, Jr.
</TABLE>
-27-
<PAGE> 29
UNITED PARCEL SERVICE OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
COMPRISING ITEMS 8 AND 14(a) (2) OF ANNUAL REPORT ON FORM 10-K
TO SECURITIES AND EXCHANGE COMMISSION
THREE YEARS ENDED DECEMBER 31, 1994
<PAGE> 30
UNITED PARCEL SERVICE OF AMERICA, INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
ITEM 8 - FINANCIAL STATEMENTS Page Number
----------------------------- -----------
<S> <C>
Independent Auditors' Report F-2
Consolidated balance sheet F-3 and F-4
- December 31, 1994 and 1993
Statement of consolidated income
- Years ended December 31, 1994, 1993 and 1992 F-5
Statement of consolidated shareowners' equity
- Years ended December 31, 1994, 1993 and 1992 F-6
Statement of consolidated cash flows
- Years ended December 31, 1994, 1993 and 1992 F-7
Notes to consolidated financial statement schedule F-8 to F-23
Items 14(a) (2) - Financial Statement Schedules
------------------------------------------------
</TABLE>
All schedules are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
<PAGE> 31
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareowners
United Parcel Service of America, Inc.
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of United Parcel
Service of America, Inc., and its subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, shareowners' equity,
and cash flows for each of the three years in the period ended December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of United Parcel Service of America,
Inc., and its subsidiaries at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 5 to the consolidated financial statements, in 1992 the
Company changed its method of accounting for postretirement benefits other
than pensions to conform with Statement of Financial Accounting Standards No.
106.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 8, 1995
F-2
<PAGE> 32
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1994 and 1993
(000's omitted except share amounts)
<TABLE>
<CAPTION>
Assets
1994 1993
---- ----
<S> <C> <C>
Current Assets:
Cash and short-term investments $ 261,038 $ 280,960
Accounts receivable 1,592,494 1,159,612
Prepaid employee benefit costs 439,430 216,565
Materials, supplies and other
prepaid expenses 381,179 442,582
Common stock held for stock plans 349,338 283,112
---------- ---------
Total Current Assets 3,023,479 2,382,831
---------- ---------
Property, Plant and Equipment:
Vehicles 2,767,493 2,661,407
Aircraft 3,707,654 2,936,940
Land 622,936 617,381
Buildings 1,359,967 1,257,963
Leasehold improvements 1,416,784 1,337,315
Plant equipment 2,660,881 2,266,811
Construction-in-progress 557,186 391,171
---------- ----------
13,092,901 11,468,988
Less accumulated depreciation 5,325,159 4,705,218
---------- ----------
7,767,742 6,763,770
---------- ----------
Other Assets 391,183 427,230
---------- ----------
$ 11,182,404 $ 9,573,831
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 33
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1994 and 1993
(000's omitted except share amounts)
<TABLE>
<CAPTION>
Liabilities and Shareowners' Equity
1994 1993
---- ----
<S> <C> <C>
Current Liabilities:
Accounts payable $ 1,082,056 $ 728,808
Accrued wages and withholdings 1,080,554 918,943
Dividends payable 170,037 141,281
Deferred income taxes 136,260 74,545
Other current liabilities 433,578 515,509
---------- ---------
Total Current Liabilities 2,902,485 2,379,086
---------- ---------
Long-Term Debt 1,127,405 852,266
---------- ---------
Accumulated Postretirement Benefit
Obligation, Net 588,860 518,726
---------- ---------
Deferred Taxes, Credits and Other
Liabilities 1,916,405 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 295,441 264,401
Retained earnings 4,276,784 3,644,047
Cumulative foreign currency
adjustments 17,024 (21,939)
---------- ---------
4,647,249 3,944,509
---------- ---------
$ 11,182,404 $ 9,573,831
========== =========
Shareowners' Equity Per Share $ 8.01 $ 6.80
========== =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 34
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
Years Ended December 31, 1994, 1993 and 1992
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenue $ 19,575,690 $ 17,782,353 $ 16,518,621
------------ ------------ ------------
Operating Expenses:
Wages and employee benefits 11,726,807 10,661,081 9,707,793
Other 6,292,937 5,663,600 5,533,044
------------ ------------ ------------
18,019,744 16,324,681 15,240,837
------------ ------------ ------------
Operating profit 1,555,946 1,457,672 1,277,784
------------ ------------ ------------
Other Income and (Expense):
Interest income 13,762 19,846 22,433
Interest expense (29,211) (34,000) (41,918)
Miscellaneous, net 34,879 (11,821) 10,996
------------ ------------ ------------
19,430 (25,975) (8,489)
------------ ------------ ------------
Income Before Income Taxes and
Cumulative Effect of a Change
in Accounting Principle 1,575,376 1,431,697 1,269,295
Income Taxes 632,047 622,062 504,223
------------ ------------ ------------
Income Before Cumulative Effect
of a Change in Accounting
Principle 943,329 809,635 765,072
Cumulative Effect of a Change
in the Method of Accounting
for Postretirement Benefits
Other Than Pensions - - (248,905)
------------ ------------ ------------
Net income $ 943,329 $ 809,635 $ 516,167
============ ============ ============
Per Share Amounts:
Income before cumulative
effect of a change in
accounting principle $ 1.63 $ 1.40 $ 1.29
Cumulative effect of a change in
the method of accounting for
postretirement benefits other
than pensions - - (0.42)
------------ ------------ ------------
Net income per share $ 1.63 $ 1.40 $ 0.87
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 35
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREOWNERS' EQUITY
Years Ended December 31, 1994, 1993 and 1992
(000's omitted except per share amounts)
<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, 1992 616,000 $61,600 $238,475 $3,502,540 $ 70,537 $3,873,152
Net income - - - 516,167 - 516,167
Dividends ($.50 per share) - - - (293,225) - (293,225)
Gain on issuance of common
stock held for stock plans - - 10,838 - - 10,838
Exercise of stock options - - (7,461) - - (7,461)
Foreign currency adjustments - - - - (45,746) (45,746)
Redemption of common stock (21,000) (2,100) - (331,193) - (333,293)
-------- ------- -------- ---------- -------- ----------
Balance, December 31, 1992 595,000 59,500 241,852 3,394,289 24,791 3,720,432
Net income - - - 809,635 - 809,635
Dividends ($.50 per share) - - - (285,193) - (285,193)
Gain on issuance of common
stock held for stock plans - - 20,795 - - 20,795
Exercise of stock options - - 1,754 - - 1,754
Foreign currency adjustments - - - - (46,730) (46,730)
Redemption of common stock (15,000) (1,500) - (274,684) - (276,184)
-------- ------- -------- ---------- -------- ----------
Balance, December 31, 1993 580,000 58,000 264,401 3,644,047 (21,939) 3,944,509
Net income - - - 943,329 - 943,329
Dividends ($.55 per share) - - - (310,592) - (310,592)
Gain on issuance of common
stock held for stock plans - - 36,882 - - 36,882
Exercise of stock options - - (5,842) - - (5,842)
Foreign currency adjustments - - - - 38,963 38,963
-------- ------- -------- ---------- -------- ----------
Balance, December 31, 1994 580,000 $58,000 $295,441 $4,276,784 $ 17,024 $4,647,249
======== ======= ======== ========== ======== ==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 36
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
Years Ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 943,329 $ 809,635 $ 516,167
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization 786,122 691,397 662,031
Postretirement benefits 70,134 50,063 468,663
Deferred taxes, credits and other 78,858 117,254 (27,516)
Changes in assets and liabilities:
Accounts receivable (432,882) (67,233) (91,527)
Prepaid employee benefit costs (222,865) (60,012) (77,038)
Materials, supplies and prepaid
expenses (6,514) 2,137 64,713
Common stock held for stock plans (66,226) 49,977 (27,864)
Accounts payable 353,248 (78,024) 19,422
Accrued wages and withholdings 161,611 86,150 18,765
Dividends payable 28,756 141,281 (81,798)
Other current liabilities (78,019) 11,192 6,355
----------- ----------- ----------
Net cash from operating activities 1,615,552 1,753,817 1,450,373
----------- ----------- ----------
Cash flows from investing activities:
Capital expenditures - net (1,677,343) (1,097,036) (929,261)
Other asset receipts and (payments) 42,194 41,667 (44,602)
----------- ----------- ----------
Net cash (used in) investing
activities (1,635,149) (1,055,369) (973,863)
----------- ----------- ----------
Cash flows from financing activities:
Proceeds from borrowings 322,455 203,670 36,318
Repayment of borrowings (51,465) (212,808) (36,440)
Redemption of common stock - (276,184) (333,293)
Dividends paid (310,592) (285,193) (293,225)
Other transactions 31,040 22,549 3,377
----------- ----------- ----------
Net cash (used in) financing
activities (8,562) (547,966) (623,263)
----------- ----------- ----------
Effect of exchange rate changes on cash 8,237 (2,920) (7,122)
----------- ----------- ----------
Net increase (decrease) in cash and
short-term investments (19,922) 147,562 (153,875)
Cash and short-term investments:
Beginning of year 280,960 133,398 287,273
----------- ----------- ----------
End of year $ 261,038 $ 280,960 $ 133,398
=========== =========== ==========
Cash paid during the period for:
Interest, net of amount capitalized $ 38,498 $ 42,022 $ 41,784
=========== =========== ==========
Income taxes $ 661,672 $ 569,759 $ 363,503
=========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 37
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
1. SUMMARY OF ACCOUNTING POLICIES
Basis of Financial Statements and Business Activities
The accompanying consolidated financial statements include the accounts
of United Parcel Service of America, Inc., and all of its subsidiaries
(collectively "UPS"). All material intercompany balances and transactions have
been eliminated.
UPS concentrates its operations in the field of transportation services,
primarily domestic and international package delivery. Revenue is recognized
upon delivery of a package.
Cash Equivalents
Cash equivalents (short-term investments) consist of highly liquid
investments which are readily convertible into cash. The carrying amount
approximates fair value because of the short-term maturity of these
instruments.
Common Stock Held for Stock Plans
UPS accounts for its common stock held for distribution pursuant to
awards under the UPS Managers Incentive Plan and the UPS Stock Option Plan as a
current asset. The liability for the amount of the annual managers incentive
award is included in accrued wages and withholdings. Common stock held in
excess of current requirements is accounted for as a reduction in Shareowners'
Equity.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Depreciation
(including amortization) is provided by the straight-line method over the
estimated useful lives of the assets, which are as follows: Vehicles - 9
years; Aircraft - 12 to 20 years; Buildings - 10 to 40 years; Leasehold
Improvements - lives of leases; Plant Equipment - 8 1/3 years.
Costs in Excess of Net Assets Acquired
Costs in excess of net assets acquired are amortized over a 10-year
period using the straight-line method.
F-8
<PAGE> 38
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
Income Taxes
Deferred income taxes result primarily from the use of accelerated
depreciation methods allowable for income tax purposes, certain differences in
asset lives adopted for income tax purposes, temporary differences between the
accrual and payment of employee compensation and investments in leveraged
leases. UPS adopted Statement of Financial Accounting Standards ("FAS") No.
96, "Accounting for Income Taxes," in 1987, and FAS 109, "Accounting for Income
Taxes," in 1993.
The benefit of investment tax credits is amortized over seven years
except investment tax credits from the investment in leveraged leases, which is
amortized over the life of the lease.
Capitalized Interest
Interest incurred during the construction period of certain property,
plant and equipment is capitalized until the underlying assets are placed in
service, at which time amortization of the capitalized interest begins,
straight-line, over the estimated useful lives of the related assets.
Capitalized interest was $45,400,000, $27,800,000, and $26,500,000 for 1994,
1993 and 1992, respectively.
Derivative Instruments
UPS has entered into interest rate swap agreements to lower the
effective interest rate on its debentures. These agreements have an average
remaining life of two years. The periodic settlement payments are accrued
monthly, as either a charge or credit to expense, and are not material to net
income. Based on estimates provided by third party investment bankers, the
fair value of the Company's interest rate swap agreements is not material to
the Company's financial statements.
The Company also purchases options to reduce the impact of changes in
foreign currency rates on its foreign currency purchases and to moderate the
impact of major increases in the cost of crude oil on fuel expense. The
options are adjusted to fair value at period end based on market quotes and are
not material to the Company's financial statements.
UPS is exposed to credit loss in the event of nonperformance by the
other parties to the interest rate swap agreements. However, UPS does not
anticipate nonperformance by the counterparties. UPS is exposed to market risk
based upon changes in interest rates, foreign currency exchange rates, and
crude oil prices.
Changes in Presentation
Certain prior year amounts have been reclassified to conform to the
current year presentation.
F-9
<PAGE> 39
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
2. LONG-TERM DEBT
Long-term debt, as of December 31, consists of the following (000's
omitted):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
8.375% debentures,
due April 1, 2020 $ 700,000 $ 700,000
Commercial paper 263,266 -
Industrial development bonds,
Philadelphia Airport
facilities due
December 1, 2015 100,000 100,000
Installment notes, mortgages
and bonds 41,321 30,021
Investment properties -
nonrecourse mortgages 24,493 27,833
--------- ---------
1,129,080 857,854
Less current maturities 1,675 5,588
--------- ---------
$1,127,405 $ 852,266
========= =========
</TABLE>
The debentures are not subject to redemption prior to maturity and are
not subject to sinking fund requirements. Interest is payable semi-annually on
the first of April and October. The average interest rate on the commercial
paper outstanding as of December 31, 1994, was 6.0%. The commercial paper has
been classified as long-term debt in accordance with the Company's intention
and ability to refinance such obligations on a long-term basis. However, the
amount of commercial paper outstanding in 1995 is expected to fluctuate and may
be reduced from time to time. The industrial development bonds bear interest
at either a daily, variable, or fixed rate. The average interest rates for
1994 and 1993 were 2.7% and 2.2%, respectively. The installment notes,
mortgages and bonds bear interest at rates of 6.0% to 11.5%.
The aggregate annual principal payments for the next five years,
excluding commercial paper, are: 1995- $1,675,000; 1996- $3,720,000; 1997-
$3,105,000; 1998- $3,293,000; and 1999- $2,514,000.
F-10
<PAGE> 40
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
Based on the borrowing rates currently available to the Company for
long-term debt with similar terms and maturities, the fair value of long-term
debt is approximately $1,127,000,000 as of December 31, 1994.
3. COMMON STOCK PER SHARE DATA
Per share amounts related to income are based on 580,000,000 shares in
1994 and 1993 and 595,000,000 shares in 1992 and include Common Stock Held for
Stock Plans.
4. LEGAL PROCEEDINGS AND COMMITMENTS
UPS is a defendant in various lawsuits which arose in the normal course
of business. In the opinion of management, none of these cases are expected to
have a material effect on the financial condition of UPS.
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,
for the period stated above.
In addition, the agents have raised a number of other issues relating to
the timing of deductions; the characterization of expenses as capital rather
than ordinary; and UPS's entitlement to the Investment Tax Credit in the 1983
through 1987 tax years. The adjustments sought on these issues aggregate $127
million in tax, the majority of which would reverse in future years, plus
penalties and interest.
After consultation with legal experts, management believes there is no
merit to any material issues raised by the IRS and that the eventual resolution
of these matters will not have a material impact on the Company. Although no
assessment has yet been made by the IRS with respect to the years 1983 through
1987, it is likely the IRS will issue a Notice of Deficiency for the years 1983
and 1984 which the company will contest through litigation. 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.
F-11
<PAGE> 41
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
UPS leases certain operating facilities and aircraft, the majority of
which are from related parties, including various UPS employee benefit plans.
These leases expire at various dates through 2030. Total aggregate minimum
lease commitments are as follows (000's omitted):
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1995 $ 256,144
1996 199,423
1997 149,484
1998 116,900
1999 98,053
After 1999 733,028
----------
$1,553,032
==========
</TABLE>
UPS maintains two credit agreements with a consortium of banks which
provide revolving credit facilities of $500,000,000 each, with one expiring
June 12, 1995 and the other June 14, 1996. At December 31, 1994, there were no
outstanding borrowings under these facilities. As of December 31, 1994, UPS
has outstanding letters of credit totaling approximately $783,732,000 issued in
connection with routine business requirements.
At December 31, 1994, UPS had commitments outstanding for capital
expenditures under purchase orders and contracts of approximately $3.4 billion,
of which approximately $1.2 billion is expected to be spent in 1995.
5. EMPLOYEE BENEFIT PLANS
UPS maintains the UPS Retirement Plan (the "Plan"). The Plan is a
defined benefit plan which provides employees annual defined retirement
benefits. The Plan is noncontributory and all employees who meet certain
minimum age and years of service are eligible, except those covered by certain
multi-employer plans provided for under collective bargaining agreements.
The Plan provides for retirement benefits based on average compensation
levels earned by employees during certain years of service preceding
retirement. The Plan's assets consist primarily of publicly traded stocks and
bonds. In addition, the Plan's assets include 8,052,840 shares of UPS common
stock at both December 31, 1994 and 1993. The actual earnings on the Plan's
assets were $88,944,000, $224,405,000, and $124,661,000, in 1994, 1993 and
1992, respectively. UPS's funding policy is consistent with relevant federal
tax regulations. Accordingly, UPS contributes amounts deductible for federal
income tax purposes.
F-12
<PAGE> 42
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
Pension expense, consisting of various component parts, and certain
assumptions used during the years ended December 31, are as follows (000's
omitted):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current year's earned
benefit $115,638 $ 97,230 $ 81,173
Interest on projected
benefit obligation 144,585 121,934 107,646
Expected earnings on
pension plan assets (151,107) (120,655) (99,772)
Amortization of
unrecognized benefit
obligation:
Net obligation at
transition date 5,203 5,203 5,203
Effect of plan
benefit amendments 11,698 11,741 11,741
Net amortization of
unrecognized investment
gains and changes in
actuarial assumptions
and experience 4,277 - -
------- ------- -------
Provision for pension
expense $130,294 $115,453 $105,991
======= ======= =======
Expected long-term
rate of earnings 9.5% 9.5% 9.5%
on plan assets
Weighted average discount
rate 9.0% 7.5% 8.25%
Rate of increase in future
compensation levels 4.25% 4.25% 5.0%
</TABLE>
F-13
<PAGE> 43
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
The following schedule reconciles the funded status of the Plan with
certain amounts included in the balance sheet as of December 31 (000's
omitted):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Projected benefit obligation:
Accumulated benefits computed
using present salary levels:
Vested $1,024,811 $1,217,502
Nonvested 336,857 245,834
--------- ---------
1,361,668 1,463,336
Additional benefits computed
using projected salary levels 271,651 478,213
--------- ---------
Total projected benefit
obligation 1,633,319 1,941,549
Pension plan assets 1,874,126 1,645,387
--------- ---------
Difference 240,807 (296,162)
Unrecognized net investment gains
and changes in assumptions used to
compute projected benefit (323,418) 150,830
Unrecognized net benefit obligation
at transition date 49,432 54,635
Unrecognized projected benefit
obligation arising from amendments
to the retirement plan 163,450 175,149
--------- ---------
Prepaid pension cost $ 130,271 $ 84,452
========= =========
</TABLE>
UPS also contributes to several multi-employer pension plans for which
the above information is not determinable. Amounts charged to operations for
contributions to pension plans other than the Plan described above were
$506,215,000, $455,842,000, and $407,879,000 during 1994, 1993 and 1992,
respectively.
UPS sponsors defined benefit postretirement medical plans that provide
health care benefits to its retirees who meet certain eligibility requirements
and who are not covered by multi-employer retirement plans. Generally, this
includes employees with at least 10 years of service who have reached age 55
and will be receiving benefits from one of the Company's retirement plans. The
Company has the right to modify or terminate certain of these plans.
Historically, these benefits have been provided to retirees on a
noncontributory basis; however, effective January 1, 1992, the Company made
modifications which will likely result in cost sharing in the future for
certain of its retirees.
F-14
<PAGE> 44
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
Prior to 1992, UPS had generally expensed the costs of these benefits on
a current, "pay as you go" basis. During 1992, UPS adopted the provisions of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." This Statement requires accrual
of postretirement benefits, which include health care benefits, during the
years an employee provides service.
The effect of adoption resulted in a one-time "catch-up" charge during
1992 of approximately $248.9 million, after tax, representing the cumulative
effect of the change as of January 1, 1992. In addition to the cumulative
effect, adoption of this Statement resulted in additional charges to income in
1994, 1993 and 1992 of approximately $64,300,000, $47,500,000, and $40,300,000,
respectively, after tax ($0.11, $0.08, and $0.07 per share, respectively).
Overall, net income for 1994, 1993 and 1992 was reduced $64,300,000,
$47,500,000, and $289,200,000, respectively, as a result of adoption ($0.11,
$0.08, and $0.49 per share, respectively).
The accumulated postretirement benefit obligation at December 31, is
detailed as follows (000's omitted):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $127,771 $146,879
Fully eligible active plan
participants 60,623 69,933
Other active participants 564,607 626,303
------- -------
753,001 843,115
Plan assets at fair value 155,593 130,706
------- -------
Accumulated postretirement benefit
obligation in excess of plan
assets 597,408 712,409
Unrecognized net investment gains and
changes in assumptions used to
compute projected benefits (8,548) (193,683)
------- -------
Accumulated postretirement benefit
obligation, net $588,860 $518,726
======= =======
</TABLE>
F-15
<PAGE> 45
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
Net periodic postretirement benefit cost for the years ended December
31, included the following components (000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C>
Service cost-benefits
attributed to service
during the period $ 45,033 $ 34,413 $ 29,481
Interest cost on
accumulated postretirement
benefit obligation 65,933 54,878 44,904
Expected earnings on
plan assets (11,930) (11,137) (9,069)
Amortization of unrecognized
amounts 6,277 - -
------- ------- -------
Net periodic postretirement
benefit cost $105,313 $ 78,154 $ 65,316
======= ======= =======
</TABLE>
The significant assumptions used in determining postretirement benefit
cost and the accumulated postretirement benefit obligation were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Expected long-term rate of return
on plan assets 9.5% 9.5% 9.5%
Weighted average discount rate 9.0% 7.5% 8.25%
</TABLE>
Future benefit costs were forecasted assuming an initial annual increase
of 10.25% for pre-65 medical costs and an increase of 9.25% for post-65 medical
costs, decreasing to 7.25% for pre-65 and 6.25% for post-65 by the year 2000
and with consistent annual increases at those ultimate levels thereafter. A
one percentage point increase in the annual trend rate would have increased the
total accumulated postretirement benefit obligation at December 31, 1994, by
$71.8 million and the aggregate of the service and interest components of the
net periodic postretirement benefit costs for 1994 by $11.5 million.
Plan assets consist primarily of publicly traded stocks and bonds. The
Trust holding the Plan assets is not subject to income taxes. UPS's funding
policy is consistent with relevant federal tax regulations. Accordingly, UPS
contributes amounts deductible for federal income tax purposes.
F-16
<PAGE> 46
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
6. MANAGEMENT INCENTIVE PLANS
UPS maintains the UPS Managers Incentive Plan. Persons earning the
right to receive awards are determined annually by either the Officer
Compensation Committee or the Salary Committee of the UPS Board of Directors.
Awards consist primarily of UPS common stock and cash equivalent to the tax
withholdings on such awards. The total of all such awards is limited to 15% of
consolidated income before federal income taxes for the 12-month period ending
each September 30, exclusive of gains and losses from the sale of real estate
and stock of subsidiaries. In addition, the cumulative effect of a change in
accounting principle was specifically excluded from the 1992 award calculation
in accordance with a vote of shareowners. Amounts charged to operations were
$255,482,000, $217,784,000, and $198,943,000, during 1994, 1993 and 1992,
respectively.
UPS maintains stock option plans. Originally, these plans were
established to issue Book Value Shares. Book Value Shares were shares of UPS
common stock with a stated value equal to the UPS book value per share as of
the year end immediately preceding the date of option grant. Voting, dividends
and liquidation rights for the Book Value Shares were the same as for other UPS
common stock. UPS repurchased all Book Value Shares immediately after their
issuance except for certain repurchases from officers and directors which were
deferred for up to six months.
Except in the case of death, disability, or retirement, options are
exercisable only during a limited period after the expiration of five years
from the date of grant but are subject to earlier cancellation or exercise
under certain conditions. The number of options and option prices for Book
Value Shares exercised under the Plans were 4,611,372 and $5.68 in 1992. There
were no Book Value Shares exercised during 1994 or 1993. Compensation expense
charged to operations related to exercise of these options was not material.
No further shares may be issued under the 1986 plan.
Prior to issuing options for any Book Value Shares, the 1991 Plan was
amended during 1992 to change it to a Current Price Plan. Under a Current
Price Plan, options are granted to purchase shares of UPS common stock at the
current price of UPS shares as determined by the Board of Directors on the date
of option grant. Unlike Book Value Shares, the optionee may continue to hold
the shares of common stock received on exercise, subject to the terms of the
UPS Managers Stock Trust. Persons earning the right to receive stock options
under the 1991 plan are determined each year by either the Officer Compensation
Committee or Salary Committee of the UPS Board of Directors. Options covering
a total of 30,000,000 common shares may be granted during the five-year period
ending in 1996.
Also during 1992, an amendment was made to the 1986 plan to allow
options on Book Value Shares issued during the period 1988 through 1991 to be
converted to Current Price options in the
F-17
<PAGE> 47
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
ratio of three common shares for five Book Value Shares. Substantially all
holders of unexpired options for Book Value Shares elected to convert to
options for common stock as of December 31, 1992. Following is an analysis of
options for shares of common stock issued and outstanding:
<TABLE>
<CAPTION>
Stock Options Number of Shares
------------- ----------------
<S> <C>
Converted at $12.00 to $15.25 per share 12,592,685
Granted at $16.50 per share 4,259,826
Canceled (55,777)
----------
Outstanding at December 31, 1992 16,796,734
Exercised at $12.00 per share (2,734,798)
Granted at $18.75 per share 4,225,850
Canceled (236,553)
----------
Outstanding at December 31, 1993 18,051,233
Exercised at $13.38 per share (2,952,522)
Granted at $21.25 per share 4,056,690
Canceled (226,724)
----------
Outstanding at December 31, 1994 18,928,677
==========
Exercisable at December 31, 1994 -
==========
</TABLE>
Current Price options converted from Book Value options were issued with
exercise prices equal to the published price of UPS common stock as of the year
end immediately preceding the original date of grant. Compensation expense
charged to operations related to these options was not material. Options
granted during 1994, 1993 and 1992 have an exercise price equal to the current
price of a share of UPS common stock at the date of grant.
7. INCOME TAXES
Effective January 1, 1993, UPS adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). FAS 109 is an
asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax returns. In
estimating future tax consequences, FAS 109 generally considers all expected
future events other than enactments of changes in the tax law or rates.
Previously, the Company used the FAS 96 asset and liability approach that gave
no recognition to future events other than the recovery of assets and
settlement of liabilities at their carrying amounts.
The effects of adopting FAS 109 were not material to the Company's
financial position or results of operations.
During the third quarter of 1993, the maximum U.S. federal income tax
rate for corporations was increased from 34% to 35%
F-18
<PAGE> 48
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
effective January 1, 1993. In addition to increasing the Company's income tax
accruals for its 1993 current and deferred taxable income, the Company made a
$31.8 million adjustment to reflect the effect of the rate change on its net
deferred tax liabilities on January 1, 1993.
The provision for income taxes for the years ended December 31, consists
of the following (000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $493,417 $450,094 $331,265
State 96,200 85,437 75,361
------- ------- -------
Total Current 589,617 535,531 406,626
------- ------- -------
Deferred:
Federal 35,784 72,978 110,041
State 6,646 13,553 (12,444)
------- ------- -------
Total Deferred 42,430 86,531 97,597
------- ------- -------
Total $632,047 $622,062 $504,223
======== ======= =======
</TABLE>
Income before income taxes and cumulative effect of a change in
accounting principle includes losses of foreign subsidiaries of $172,311,000,
$169,689,000 and $114,941,000 for 1994, 1993 and 1992, respectively.
A reconciliation of the statutory federal income tax rate to the
effective income tax rate for the years ended December 31, consists of the
following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory federal income
tax rate 35.0% 35.0% 34.0%
Amortization of
investment tax credits (0.3) (0.5) (0.8)
Effect of federal rate
change on deferred
liabilities - 2.2 -
State income taxes
(net of federal benefit) 4.3 4.5 5.1
Other 1.1 2.2 1.4
---- ---- ----
Effective income tax rate 40.1% 43.4% 39.7%
==== ==== ====
</TABLE>
F-19
<PAGE> 49
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
Deferred tax liabilities and assets are comprised of the following at
December 31 (000's omitted):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Excess of tax over book
depreciation $1,206,711 $1,164,455
Differences in timing of
deductions relating to:
Leveraged leases 222,308 243,457
UPS Retirement Plan 127,733 98,922
Prepaid insurance 90,410 41,943
Other 258,895 241,408
--------- ---------
Gross deferred tax liabilities 1,906,057 1,790,185
--------- ---------
Other postretirement
benefits not currently
deductible 241,476 203,172
Loss carryforwards
(international) 263,314 199,351
Insurance reserves not currently
deductible 86,384 58,542
Other 65,887 57,191
--------- ---------
Gross deferred tax assets 657,061 518,256
Deferred tax assets valuation
allowance (263,314) (199,351)
--------- ---------
393,747 318,905
--------- ---------
Net deferred tax liability $1,512,310 $1,471,280
========= =========
</TABLE>
The valuation allowance increased approximately $64,000,000 and
$90,000,000 during the years ended December 31, 1994 and 1993, respectively.
F-20
<PAGE> 50
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
The tax effects of items included in the deferred tax provision for
1992, consist of the following (000's omitted):
<TABLE>
<CAPTION>
1992
----
<S> <C>
Excess of tax over book
depreciation $ 55,988
Differences in timing of
deduction for certain
accrued expenses 152,543
Other postretirement benefits
not currently deductible (25,009)
Amortization of
investment tax credits (14,541)
Other (71,384)
-------
Total deferred tax provision $ 97,597
=======
</TABLE>
UPS has international loss carryforwards of approximately $598,000,000
as of December 31, 1994. Of this amount, $337,000,000 expires in varying
amounts through 2000. The remaining $261,000,000 may be carried forward
indefinitely.
8. OTHER ASSETS
Other assets, as of December 31, consist of the following (000's
omitted):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Leveraged leases $233,639 $289,838
Other long-term investments 68,796 38,166
Costs in excess of net assets acquired 88,748 99,226
------- -------
$391,183 $427,230
======= =======
</TABLE>
F-21
<PAGE> 51
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
Leveraged Leases
The net investment in leveraged leases, as of December 31, consists of
the following (000's omitted):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Rentals receivable
(net of nonrecourse
debt payments) $ 174,682 $ 219,524
Estimated residual values 81,665 98,360
Unearned income (22,708) (28,046)
-------- -------
Long-term investments in
leveraged leases 233,639 289,838
Deferred income taxes (222,308) (243,457)
Deferred investment
tax credits (16,753) (22,561)
-------- -------
Net investment in
leveraged leases $ (5,422) $ 23,820
======== ========
</TABLE>
Unearned income on each leveraged lease is amortized to provide an
approximate level rate of return when compared to UPS's unrecovered net
investment.
9. DEFERRED TAXES, CREDITS AND OTHER LIABILITIES
Deferred taxes, credits and other liabilities, as of December 31,
consist of the following (000's omitted):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deferred federal and state
income taxes $1,376,050 $1,396,736
Deferred investment tax
credits 19,747 26,133
Other credits and noncurrent
liabilities 520,608 456,375
--------- ---------
$1,916,405 $1,879,244
========= =========
</TABLE>
F-22
<PAGE> 52
UNITED PARCEL SERVICE OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
10. SEGMENT AND GEOGRAPHIC INFORMATION
UPS operates primarily in one industry segment, transportation services,
which is comprised principally of domestic and international package delivery.
Information about operations in different geographic segments for the years
ended December 31, is shown below (000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Domestic:
Revenue $17,297,843 $15,822,558 $14,721,686
Income before income
taxes $ 1,902,140 $ 1,698,299 $ 1,545,484
Identifiable assets $ 9,886,634 $ 8,359,395 $ 7,873,398
Foreign:
Revenue $ 2,277,847 $ 1,959,795 $ 1,796,935
Loss before income
taxes $ (326,764) $ (266,602) $ (276,189)
Identifiable assets $ 1,295,770 $ 1,214,436 $ 1,164,419
Consolidated:
Revenue $19,575,690 $17,782,353 $16,518,621
Income before income
taxes $ 1,575,376 $ 1,431,697 $ 1,269,295
Identifiable assets $11,182,404 $ 9,573,831 $ 9,037,817
</TABLE>
Foreign operations include shipments which either originate in or are
destined to foreign (non-U.S.) locations. Foreign revenues attributable to
shipments which originated in the U.S. totaled $495,957,000, $390,984,000, and
$323,732,000 in 1994, 1993 and 1992, respectively.
11. OTHER OPERATING EXPENSES
The major components of other operating expenses for the years ended
December 31, are as follows (000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Repairs and maintenance $ 870,894 $ 829,080 $ 792,251
Depreciation and
amortization 786,122 691,397 662,031
Purchased transportation 1,284,736 1,180,706 1,183,181
Fuel 564,359 553,697 531,372
Other occupancy expense 361,212 370,520 383,677
Other expenses 2,425,614 2,038,200 1,980,532
--------- --------- ---------
$6,292,937 $5,663,600 $5,533,044
========= ========= =========
</TABLE>
F-23
<PAGE> 53
________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
_______________________
UNITED PARCEL SERVICE
OF AMERICA, INC.
________________________________________________________________________________
_______________________________________________________________________________
<PAGE> 54
EXHIBIT INDEX
(3) Articles of Incorporation and By-laws.
(a) Restated Certif- Incorporated by Reference to
icate of Incorpo- Exhibit 4(iv) to Form S-8
ration of UPS. Registration Statement
(No. 33-19622).
(b) By-laws of UPS as Incorporated by Reference
amended through to Exhibit 3(b) to 1991
February 21, 1992. Annual Report on Form 10-K.
(4) Instruments defining the
rights of security holders,
including indentures.
(a) Specimen Certif- Incorporated by Reference to
icate of Capital Exhibit 3(a) to Form 10, as
Stock of UPS. filed April 29, 1970.
(b) UPS Managers Stock Incorporated by Reference to
Trust Agreement. Exhibit 2 to Registration
Statement No. 2-46382.
(c) Specimen Certificate Incorporated by Reference to
of 8 3/8% Debentures Exhibit 4(c) to Registration
due April 1, 2020. Statement No. 33-32481.
(d) Indenture relating to Incorporated by Reference to
8 3/8% Debentures Exhibit 4(c) to Registration
due April 1, 2020. Statement No. 33-32481.
(10) Material Contracts.
(a) UPS Thrift Plan, as
Amended and Restated
January 1, 1976, in-
cluding Amendments
Nos. 1 and 2.
(1) Amendment Incorporated by Reference to
No. 3 to the Exhibit 20(b) to 1980 Annual
UPS Thrift Plan. Report on Form 10-K.
(2) Amendment Incorporated by Reference to
No. 4 to the Exhibit 20(b) to 1981 Annual
UPS Thrift Plan. Report on Form 10-K.
E-1
<PAGE> 55
(3) Amendment Incorporated by Reference to
No. 5 to the Exhibit 19(b) to 1983 Annual
UPS Thrift Plan. Report on Form 10-K.
(4) Amendment Incorporated by Reference to
No. 6 to the Exhibit 10(a)(4) to 1985
UPS Thrift Plan. Annual Report on Form 10-K.
(5) Amendment Incorporated by Reference to
No. 7 to the Exhibit 10(a)(5) to 1985
UPS Thrift Plan. Annual Report on Form 10-K.
(6) Amendment Incorporated by Reference to
No. 8 to the Exhibit 10(a)(6) to 1987
UPS Thrift Plan. Annual Report on Form 10-K.
(7) Amendment Incorporated by Reference to
No. 9 to the Exhibit 10(a)(7) to 1987
UPS Thrift Plan. Annual Report on Form 10-K.
(8) Amendment Incorporated by Reference to
No. 10 to the Exhibit 10(a)(8) to 1990
UPS Thrift Plan. Annual Report on Form 10-K.
(9) Amendment Incorporated by Reference to
No. 11 to the Exhibit 10(a)(9) to 1991
UPS Thrift Plan. Annual Report on Form 10-K.
(10) Amendment Incorporated by Reference to
No. 12 to the Exhibit 10(a)(10) to 1991
UPS Thrift Plan. Annual Report on Form 10-K.
(11) Amendment Incorporated by Reference to
No. 13 to the Exhibit 10(a)(11) to 1991
UPS Thrift Plan. Annual Report on Form 10-K.
(12) Amendment Incorporated by Reference to
No. 14 to the Exhibit 10(a)(12) to 1991
UPS Thrift Plan. Annual Report on Form 10-K.
(13) Amendment Incorporated by Reference to
No. 15 to the Exhibit 10(a)(13) to 1992
UPS Thrift Plan. Annual Report on Form 10-K.
(14) Amendment No. 16 Incorporated by Reference to
to the UPS Thrift Exhibit 10(a)(14) to 1993
Plan Annual Report on Form 10-K
(15) Amendment Incorporated by Reference to
No. 17 to the UPS Exhibit 10(a)(15) to 1994
Thrift Plan Annual Report on Form 10-K
(16) Amendment No. 18 to Filed herewith.
the UPS Thrift Plan
(17) Amendment No. 19 to Filed herewith.
the UPS Thrift Plan
(b) UPS Retirement Plan Incorporated by Reference to
(including amend- Exhibit 9 to 1979 Annual
ments 1 through 4). Report on Form 10-K.
E-2
<PAGE> 56
(1) Amendment No. 5 Incorporated by Reference to
to the UPS Re- Exhibit 20(a) to 1980 Annual
tirement Plan. Report on Form 10-K.
(2) Amendment No. 6 Incorporated by Reference to
to the UPS Re- Exhibit 19(a) to 1983 Annual
tirement Plan. Report on Form 10-K.
(3) Amendment No. 7 Incorporated by Reference to
to the UPS Re- Exhibit 10(b)(3) to 1984
tirement Plan. Annual Report on Form 10-K.
(4) Amendment No. 8 Incorporated by Reference to
to the UPS Re- Exhibit 10(b)(4) to 1985
tirement Plan. Annual Report on Form 10-K.
(5) Amendment No. 9 Incorporated by Reference to
to the UPS Re- Exhibit 10(b)(5) to 1986
tirement Plan. Annual Report on Form 10-K.
(6) Amendment No. 10 Incorporated by Reference to
to the UPS Re- Exhibit 19(a) to 1988 Annual
tirement Plan. Report on Form 10-K.
(7) Amendment No. 11 Incorporated by Reference to
to the UPS Re- Exhibit 19(b) to 1988 Annual
tirement Plan. Report on Form 10-K.
(8) Amendment No. 12 Incorporated by Reference to
to the UPS Re- Exhibit 10(b)(8) to 1989
tirement Plan. Annual Report on Form 10-K.
(9) Amendment No. 13 Incorporated by Reference to
to the UPS Re- Exhibit 10(b)(9) to 1989
tirement Plan. Annual Report on Form 10-K.
(10) Amendment No. 14 Incorporated by Reference to
to the UPS Re- Exhibit 10(b)(10) to 1990
tirement Plan. Annual Report on Form 10-K.
(11) Amendment No. 15 Incorporated by Reference
to the UPS Re- to Exhibit 10(b)(11) to
tirement Plan. 1992 Annual Report on
Form 10-K.
(12) Amendment No. 16 Filed herewith.
to the UPS
Retirement Plan
(13) Amendment No. 17 Filed herewith.
to the UPS
Retirement Plan
(c) UPS Managers Incorporated by Reference to
Incentive Plan definitive Proxy Statement
(as amended). for 1992 Special Meeting of
Shareowners.
(d) 1986 UPS Stock Option Incorporated by Reference to
Plan, as amended Exhibit 4(iv) to Form S-8
through March 5, 1987. Registration Statement
(No. 33-12576).
E-3
<PAGE> 57
(1) Amendment to UPS Incorporated by Reference to
1986 Stock Option Exhibit 10(e)(1) to 1987
Plan adopted Annual Report on Form 10-K.
November 30, 1987.
(2) Amendment to UPS Incorporated by Reference
1986 Stock Option Exhibit 10(e)(2) to 1992
Plan adopted Annual Report on Form
October 30, 1992. 10-K.
(e) Intentionally omitted.
(f) Agreement and Plan of Incorporated by Reference
Reorganization, dated to Exhibit l(a) to Amend-
December 4, 1979, by ment No. 1 to Form S-14,
and between United Registration No. 2-65859.
Parcel Service of
America, Inc. and
Parmac Corporation.
(g) Agreement and Plan of Incorporated by Reference
Reorganization, dated to Exhibit l(b) to Amend-
December 4, 1979, by ment No. 1 to Form S-14,
and between United Registration No. 2-65859.
Parcel Service of
America, Inc. and
Nuparmac Corporation.
(h) Agreement and Plan of Incorporated by Reference
Reorganization, dated to Exhibit l(c) to Amend-
December 4, 1979, by ment No. 1 to Form S-14,
and between United Registration No. 2-65859.
Parcel Service of
America, Inc. and Parco
Managers Corporation.
(i) Indemnification Con- Incorporated by Reference to
tracts or Arrangements. Item 8 of Form 10, as filed
April 29, 1970.
(j) Agreement of Sale be- Incorporated by Reference to
tween Delaware County Exhibit 10(m) to 1985 Annual
Industrial Development Report on Form 10-K.
Authority and Penallen
Corporation, dated as
of December 1, 1985;
Remarketing Agreement,
dated as of December 1,
1985, among United Parcel
Service of America, Inc.,
Penallen Corporation and
Salomon Brothers Inc.;
Guarantee Agreement,
dated as of December 1,
1985, between United Par-
cel Service of America,
Inc. and Irving Trust
Company; Guarantee by
United Parcel Service
of America, Inc. to Dela-
ware County Industrial
Development Authority,
E-4
<PAGE> 58
dated as of December 1,
1985.
(k) Participation Agree- Incorporated by Reference to
ment, dated November 17, Exhibit 10(k) to 1989 Annual
1986, among United Report on Form 10-K.
Parcel Service Co.
("UPS Co."), Bankers
Trust Company, as Trustee
under a Master Trust
Agreement for the bene-
fit of the participants
and the beneficiaries of
the UPS Thrift Plan and
the UPS Retirement Plan,
Overseas Partners Ltd.,
Wilmington Trust Company
and The Connecticut
National Bank ("Owner
Trustee").
(l) Aircraft Purchase Incorporated by Reference to
Agreement, dated Exhibit 10(l) to 1989 Annual
November 5, 1986, Report on Form 10-K.
between UPS Co. and
the Owner Trustee.
(m) Lease Agreement, Incorporated by Reference to
dated November 17, Exhibit 10(m) to 1989 Annual
1986, between UPS Report on Form 10-K.
Co. and the Owner
Trustee
(n) Guarantee Agree- Incorporated by Reference to
ment between United Exhibit 10(n) to 1989 Annual
Parcel Service of Report on Form 10-K.
America, Inc., as
Guarantor and the
Owner Trustee.
(o) Receivables Purchase Incorporated by Reference to
and Sale Agreement, Exhibit 10(l) to 1987 Annual
dated as of Novem- Report on Form 10-K.
ber 24, 1987, among
United Parcel Service,
Inc., an Ohio corpora-
tion, United Parcel
Service, Inc., a New
York corporation,
United Parcel Service
of America, Inc., Coop-
erative Receivables
Corporation and Citicorp
North America, Inc.
(p) Receivables Purchase Incorporated by Reference to
and Sale Agreement, Exhibit 10(m) to 1987 Annual
dated as of November 24, Report on Form 10-K.
1987, among United
Parcel Service, Inc.,
an Ohio corporation,
United Parcel Service,
E-5
<PAGE> 59
Inc., a New York cor-
poration, United Parcel
Service of America,
Inc., Citibank, N.A.,
and Citicorp North
America, Inc.
(q) Membership Agreement, Incorporated by Reference to
dated as of November 24, Exhibit 10(n) to 1987 Annual
1987, by and between on Form 10-K.
Cooperative Receivables
Corporation and United
Parcel Service of
America, Inc.
(r) Amended and Restated Incorporated by Reference to
Facility Lease Agree- Exhibit 10(r) to 1990 Annual
ment, dated as of Report on Form 10-K.
November 6, 1990,
among Overseas Part-
ners Leasing, Inc.,
United Parcel Service
General Services Co.
and United Parcel
Service of America,
Inc.
(s) Amended and Restated Incorporated by Reference to
Aircraft Lease Agree- Exhibit 10(s) to 1990 Annual
ment, dated as of Report on Form 10-K.
November 6, 1990,
among Overseas Part-
ners Leasing, Inc.,
United Parcel Service
Co. and United Parcel
Service of America, Inc.
(t) Agreement of Sale, Incorporated by Reference to
dated as of December 28, Exhibit 10(t) to 1989 Annual
1989, between Edison Report on Form 10-K.
Corporation and Over-
seas Partners Leasing,
Inc.
(u) Assignment and Assump- Incorporated by Reference to
tion Agreement, dated Exhibit 10(u) to 1989 Annual
as of December 28, 1989, Report on Form 10-K.
between and among Edison
Corporation, Overseas
Partners Leasing, Inc.,
McBride Enterprises, Inc.
and Ramapo Ridge-McBride
Office Park.
(v) UPS Deferred Compensation Incorporated by Reference to
Plan for Non-Employee Exhibit 10(v) to 1990 Annual
Directors Report on Form 10-K.
(w) UPS Retirement Plan for Incorporated by Reference to
Outside Directors Exhibit 10(w) to 1990 Annual
Report on Form 10-K.
E-6
<PAGE> 60
(x) UPS Savings Plan, as Incorporated by Reference to
Amended and Restated, Exhibit 10(x) to 1990 Annual
including Amendments Report on Form 10-K.
No. 1-5.
(1) Amendment No. 6 to Incorporated by Reference to
the UPS Savings Plan Exhibit 10(x)(1) to 1990
Annual Report on Form 10-K.
(2) Amendment No. 7 to Incorporated by Reference to
the UPS Savings Plan Exhibit 10(x)(2) to 1991
Annual Report on Form 10-K.
(3) Amendment No. 8 to Incorporated by Reference
the UPS Savings Plan to Exhibit 10(x)(3) to
1992 Annual Report on
Form 10-K.
(4) Amendment No. 9 to Incorporated by Reference
the UPS Savings Plan to Exhibit 10(x)(4) to 1992
Annual Report on Form 10-K.
(5) Amendment No. 10 to Incorporated by Reference
the UPS Savings Plan to Exhibit 10(x)(5) to 1992
Annual Report on Form 10-K.
(6) Amendment No. 11 to Filed herewith.
the UPS Savings Plan
(7) Amendment No. 12 to Filed herewith.
the UPS Savings Plan
(8) Amendment No. 13 to Filed herewith.
the UPS Savings Plan
(9) Amendment No. 14 to Filed herewith.
the UPS Savings Plan
(10) Amendment No. 15 to Filed herewith.
the UPS Savings Plan
(y) Competitive Advance and Incorporated by Reference to
Revolving Credit Facility Exhibit 10(y) to 1990 Annual
Agreement, dated as of Report on Form 10-K.
May 7, 1990 among UPS,
named banks and Chemical
Bank, as Agent.
(1) Letter, dated Nov- Incorporated by Reference to
ember 13, 1990 re- Exhibit 10(y)(1) to 1990
ducing commitment Annual Report on Form 10-K.
under Competitive
Advance and
Revolving Credit
Facility Agreement.
(z) UPS 1991 Stock Option Incorporated by Reference to
Plan (Amended and Exhibit 10(z) to 1991 Annual.
Restated as of Report on Form 10-K.
February 20, 1992).
E-7
<PAGE> 61
(aa) UPS Coordinating Benefit Incorporated by Reference to
Plan. Exhibit 10(aa) to 1991
Annual Report on Form 10-K.
(1) Amendment No. 1 to Incorporated by Reference
UPS Coordinating to Exhibit 10(aa)(1) to
Benefit Plan. 1992 Annual Report on
Form 10-K.
(2) Amendment No. 2 to Incorporated by Reference
UPS Coordinating to Exhibit 10(aa)(2) to
Benefit Plan. 1992 Annual Report on
Form 10-K.
(21) Subsidiaries of the Filed herewith as Exhibit
Registrant. 21.
(23) Consent of Deloitte & Touche LLP. Filed herewith as Exhibit
23.
(27) Financial Data Schedule Filed herewith as Exhibit
27 (for SEC use only).
E-8
<PAGE> 1
EXHIBIT 10(a)(16)
AMENDMENT NO. 18
TO THE
UPS THRIFT PLAN
WHEREAS, United Parcel Service of America, Inc. and its affiliated
corporations heretofore established, effective as of July 14, 1960, the UPS
Thrift Plan (the "Plan") for the benefit of their eligible employees in order
to provide benefits to those employees upon their retirement, death or other
separation from service; and
WHEREAS, the Plan, as adopted and amended from time to time, was
amended and restated in its entirety, effective as of January 1, 1976, to
comply with the requirements of the Employee Retirement Income Security Act of
1974 ("ERISA"); and
WHEREAS, the Plan has been amended further since January 1, 1976,
the most recent amendment being Amendment No. 17 which was adopted January 7,
1994; and
WHEREAS, the Board of Directors of United Parcel Service of
America, Inc. desires to amend the Plan further to provide to distributees of
eligible rollover distributions from this Plan the option of transferring such
distributions directly to another eligible retirement plan.
NOW, THEREFORE, pursuant to the authority vested in the Board of
Directors of United Parcel Service of America, Inc., by Section 16.1 of the
Plan, it is hereby amended as follows,
<PAGE> 2
effective for distributions made on or after January 1, 1993:
1. A new Section 10.5 is added to read as follows:
Section 10.5 Direct Rollover.
(a) With respect to any distribution described in this
Plan which constitutes an eligible rollover distribution within
the meaning of Code Section 401(a)(31)(C), the distributee thereof
shall, in accordance with procedures established by the Committee,
be afforded the opportunity to direct that such distribution be
transferred directly to the trustee of an eligible retirement plan
(a "direct rollover"). For purposes of the foregoing sentence, an
"eligible retirement plan" is (1) a qualified trust within the
meaning of Code Section 402 which is a defined contribution plan
the terms of which permit the acceptance of rollover
distributions, (2) an individual retirement account or annuity
within the meaning of Code Section 408 (other than an endowment
contract), or (3) an annuity plan within the meaning of Code
Section 403(a), which is specified by the distributee in such form
and at such time as the Committee may prescribe.
(b) Notwithstanding the foregoing, if the distributee
elects to have his or her eligible rollover distribution paid in
part to him or her and paid in part as a direct rollover:
(A) The direct rollover must be in an amount of $500
or more.
(B) A direct rollover to two or more eligible
retirement plans shall not be permitted.
(c) The Committee shall, within a reasonable period of
time prior to making an eligible rollover distribution from this
Plan, provide a written explanation to the distributee of the
direct rollover option described above, as well as the provisions
-2-
<PAGE> 3
under which such distribution will not be subject to tax if
transferred to an eligible retirement plan within 60 days after
the date on which the distributee received the distribution.
2. Section 18.13 is revised in its entirety to read as follows:
Section 18.13 Withholding of Income Tax.
(a) Notification of Withholding of Federal Income Tax.
All Participants and beneficiaries entitled to receive benefits
under the Plan shall be notified of the Plan's obligation to
withhold federal income tax from any benefits payable pursuant to
the terms of the Plan. Such notice shall be in writing, be given
at the times set forth in subsection (b) and contain the
information set forth in subsection (c) of this Section.
(b) Time of Notice. The notice described in subsection
(a) shall be provided not earlier than six months before such
payment is to be made and not later than the time the Participant
or beneficiary is furnished with his or her claim for benefits
application.
(c) Content of the Notice. The notice required by
subsection (a) shall, at a minimum:
(1) with respect to any distribution which is an
eligible rollover distribution within the meaning of Code Section
3405(c)(3) (other than an eligible rollover distribution of less
than $200 which is exempt from withholding under regulations
prescribed by the Secretary of the Treasury), advise the payee
that there shall be withheld from such distribution an amount
equal to 20 percent thereof (or such other amount as may from time
to time be prescribed by the Code, or the Secretary of the
Treasury or his delegate), unless the payee directs the Committee
to transfer such distribution as a direct
-3-
<PAGE> 4
rollover to an eligible retirement plan, within the meaning of
Section 10.5(a) hereof, in accordance with such procedures as the
Committee may prescribe (a "transfer direction"),
(2) with respect to any distribution which is not an
eligible rollover distribution within the meaning of Code Section
3405(c)(3):
(A) advise the payee of his or her right to elect not
to have withholding apply to any payment or distribution and
explain the manner in which such election may be made, and include
or indicate the source of any forms necessary to make the
election;
(B) advise the payee that penalties may be incurred
under the estimated tax payment rules if the payee's payments of
estimated tax are not adequate and sufficient tax is not withheld
from payments under this Plan; and
(C) advise the payee that the election not to have
federal income tax withheld from benefits is prospective only and
that any election made after a payment or distribution to the
payee is not an election with respect to such payment or
distribution.
(d) Effective Date of Elections. Any transfer direction,
election or revocation of any election by a payee shall become
effective immediately upon receipt by the Committee of the
transfer direction, election or revocation. Thereafter, the
Committee shall, unless otherwise provided by applicable law,
regulation or other guidance by the Secretary of the Treasury or
his delegate, withhold federal income tax in accordance or
consistent with the instructions filed by the payee.
(e) Failure to Make Election.
(1) In the case of an eligible rollover distribution,
if the payee fails to provide the Committee with a transfer
direction, the Committee shall withhold an amount equal to 20% of
the amount of the distribution
-4-
<PAGE> 5
(or such other amount as may be from time to time prescribed by
the Code, or the Secretary of the Treasurer or his delegate).
(2) In the case of a distribution which is not an
eligible rollover distribution, if the payee fails to provide the
Committee with a withholding certificate, the Committee shall
withhold an amount equal to 10% of the amount of the distribution.
(f) Coordination with Internal Revenue Code and
Regulations. Notwithstanding the foregoing, the Committee shall
discharge its withholding and notice obligations in accordance
with the Code and regulations and such other guidance with respect
thereto as may be promulgated from time to time by the Secretary
of the Treasury or his delegate.
IN WITNESS WHEREOF, United Parcel Service of America, Inc., based
upon action by the Board of Directors, has caused this Amendment No. 18 to be
executed this 28th day of February, 1994.
ATTEST: UNITED PARCEL SERVICE OF
AMERICA, INC.
By:
---------------------------- ------------------------------
Chairman
-5-
<PAGE> 1
EXHIBIT 10(a)(17)
AMENDMENT NO. 19
TO THE
UPS THRIFT PLAN
WHEREAS, United Parcel Service of America, Inc. and its affiliated
corporations heretofore established, effective as of July 14, 1960, the UPS
Thrift Plan (the "Plan") for the benefit of their eligible employees in order
to provide benefits to those employees upon their retirement, death or other
separation from service; and
WHEREAS, the Plan, as adopted and amended from time to time, was amended
and restated in its entirety, effective as of January 1, 1976, to comply with
the requirements of the Employee Retirement Income Security Act of 1974
("ERISA"); and
WHEREAS, the Plan has been amended further since January 1, 1976, the
most recent amendment being Amendment No. 18, effective January 1, 1993; and
WHEREAS, the Board of Directors of United Parcel Service of America,
Inc. desires to amend the Plan further to permit Employer contributions to be
matched with participants voluntary savings contributions for
non-discrimination testing and other purposes.
NOW THEREFORE, pursuant to the authority vested in the Board of
Directors of United Parcel Service of America, Inc. by Section 16.1 of the
Plan, the Plan is hereby amended as follows, effective January 1, 1994 except
as otherwise noted:
1. Section 4.3 is revised by deleting the words "limitations provided
in Section 5.6(b)(2) and Article VI of the Plan" and by inserting in lieu
thereof the words "limitations provided in Sections 5.6(b)(3), 6.1 and 6.2 of
the Plan."
2. Section 5.6(b) is amended in its entirety to read as follows:
(b) (1) As of the end of each calendar year the Committee
shall, subject to paragraph (3) below, credit each
eligible Participant's Employer Contributions Account
in the General Fund with that part of the Employer's
Basic Contribution for the year as bears the same
ratio to such contribution as the average monthly
balance during the year of the Participant's combined
Participant Savings Account, Employer Contributions
<PAGE> 2
Account and Participant Investment Income Account
bears to the aggregate average monthly balances of
all Participants in the three accounts of the General
Fund.
(2) A Participant shall be eligible to share the
allocation of the Employer Basic Contribution for the
Plan Year only if (A) the Participant has an Employer
Contribution Account in the General Fund on January 1
of the Plan Year following the Plan Year for which
the Employer's Basic Contribution is made and (B) the
Participant in fact made one or more voluntary
savings contributions pursuant to Article III
(including weekly cash payments in lieu of payroll
deductions pursuant to the subsections 3.2(b) and
(c)) which were allocated to his or her Participant
Savings Account for the Plan Year for which the
Employer Basic Contribution is being made.
(3) Notwithstanding the foregoing, no amount in excess of
four thousand dollars ($4,000) shall be allocated to
a Participant as an Employer Basic Contribution with
respect the any calendar year, and if the Participant
ceased participation during a calendar year the four
thousand dollar limit shall be reduced to an amount
which shall be determined by multiplying the four
thousand dollar limit by a fraction, the numerator of
which is the number of wholly or partially completed
calendar months of participation during said calendar
year, and the denominator of which is 12. Any amount
in excess of the dollar limitations determined under
the preceding sentences shall reduce the Employer's
Tentative Basic Contribution to arrive at the
Employer's Basic Contribution to be made under the
Plan.
(4) Effective for the Employer Basic Contribution for the
1994 and subsequent Plan Years, that portion of the
Employer Benefit Contribution allocated to the
account of a Participant who is a Highly Compensated
Employee, which, when combined with the Participant's
voluntary savings contributions pursuant to Article
III, exceeds the contribution limitations for Highly
Compensated Employees pursuant to Section 6.3 shall
be distributed to such Participant in accordance with
the provisions of that Section.
3. Effective January 1, 1989, Subsection 6.2(a) is amended by the
addition of the following sentence to the end thereof:
For purposes of the foregoing sentence, "total compensation" means
the Participant's taxable compensation from the Employer reported
on Form W-2 for the Plan Year or, as determined by the Committee
in a uniform manner with respect to all Employees for the Plan
Year, such other nondiscriminatory definition of compensation that
satisfies the requirements Treas. Reg. 1.415-2(d).
4. Section 3.7 is deleted and a new Section 6.3 is added to read as
follows:
Contribution Limitations Under Section 401(m) of the Code.
(a) Average Contribution Percentage Test. The "Average
Contribution Percentage", as determined under subsection (b),
for the group of Employees who are Highly Compensated
Employees shall not exceed for any Plan Year after 1993 the
greater of
-2-
<PAGE> 3
(1) The Average Contribution Percentage for the group of
Non-Highly Compensated Employees times 1.25; or
(2) The Average Contribution Percentage for the group of
Non-Highly Compensated Employees times 2.0; provided,
however, that the Average Contribution Percentage for
the group of Highly Compensated Employees does not
exceed the Average Contribution Percentage for the
group of Non-Highly Compensated Employees by more
than two percentage points.
For purposes of the foregoing tests and subsection (b), an
"Employee" includes any Employee eligible to make voluntary
savings contributions pursuant to Article III at any time
during the Plan Year, even if he or she in fact declined to
make such contributions. In addition, to the extent
prohibited by Treasury regulations, paragraph (2) of this
subsection (a) may not be applied to satisfy both the Average
Contribution Percentage described above and the average
deferral percentage test with respect to a cash or deferred
arrangement under Code Section 401(k) maintained by an
Employer or Related Employer.
(b) Excess Contributions. The Average Contribution Percentage
for a specified group of Employees for a Plan Year shall be
the average of the ratios (calculated separately for each
Employee in such group) of:
(1) The sum of (i) the Employee's voluntary savings
contributions (pursuant to Article III) and (ii) the
Employee's share of Employer Basic Contribution or
Imputed Employer Contribution, as the case may be,
actually paid to the Trustee on behalf of such
Employee for such Plan Year (together, "Aggregate
Contributions"), to
(2) his or her Compensation for the Plan Year.
For the purpose of determining the above-described ratio
("Contribution Percentage") with respect to a Highly
Compensated Employee, the Aggregate Contributions and
Compensation of such Highly Compensated Employee shall
included the Aggregate Contributions and Compensation of said
Employee's family members (as described in Code Section
414(q)(6)(B)), and such affected family members shall be
disregarded in determining the Average Contribution
Percentage for the group of Non-Highly Compensated Employees.
(c) If more than one plan providing for matching contributions or
employee contributions (within the meaning of Section 401(m)
of the Code) is maintained by the Employer or a Related
Employer (other than a plan which is not permitted to be
aggregated with this Plan under Treas. Reg. Section
1.401(m)-1(b)(3)(ii)), the individual ratio of any Highly
Compensated Employee who participates in more than one such
plan shall, for purposes of determining the individual's
Contribution Percentage, be determined as if all such plans
were a single plan with respect to the Plan Years ending with
or within the same calendar year.
(d) The Committee shall have the responsibility of determining
the extent, if any, to which either of the tests described in
subsection (a) may not be met with respect to Employees'
Average Contribution Percentages. If, in the discretion of
the Committee, it is determined that Aggregate Contributions
made on behalf of Highly Compensated Employees do not satisfy
one of the tests in subsection (a), then Aggregate
Contributions with respect to Highly Compensated Employees
shall be refunded in
-3-
<PAGE> 4
uniform percentage increments, commencing with the Aggregate
Contributions of the group of Highly Compensated Employees
with the highest percentages of Aggregate Contributions, and
then the Aggregate Contributions of the group of Highly
Compensated Employees with the next highest of such
percentages, and so on, until it is determined by the
Committee that the Plan will satisfy one of the Average
Contribution Percentage tests set forth in subsection (a).
Each reduction at a stated percentage level will apply to all
Highly Compensated Employees at that level regardless of
whether their Contribution Percentages have been reduced from
higher levels. The Committee shall accomplish the reductions
as described above by distributing to each affected Highly
Compensated Employee that portion of his or her Aggregate
Contribution (plus any income and minus any loss allocable
thereto in a manner consistent with Treasury regulations, if
any) necessary to meet the requirements of one of the Average
Contribution Percentage tests in subsection (a) on or before
March 15 of the following Plan Year. If such distribution is
not made, it must in all events be made no later than the
close of said following Plan Year.
(e) Definitions. For purposes of this Section 6.3, the following
terms shall have the meanings set forth below:
(1) "Compensation" shall mean any of the following, as
determined by the Committee in a uniform manner with
respect to all Employees for the Plan Year:
(A) The Compensation or wages paid to an Employee
for the Plan Year by reason of his or her
employment by the Employer including overtime pay
and commissions, before any payroll deductions,
including elective deferrals contributions and/or
salary reduction contributions, if any, to a plan
or plans described in Section 125 or 401(k) of
the Code, but excluding bonuses, expense
reimbursements and contributions (other than
elective deferral contributions to a cash or
deferred arrangement described in Section 401(k)
of the Code) made by the Employer to any employee
benefit plan other than this Plan.
(B) The Employee's taxable compensation from the
Employer reported on Form W-2 for the Plan
Year, or
(C) Such other nondiscriminatory definition of
compensation which satisfies the requirements
of Code Section 414(s) and the regulations
hereunder.
Notwithstanding the foregoing, in no event shall the
Compensation of any Employee as determined for
purposes of this Section 6.3 and taken into account
for any Plan Year exceed $150,000, increased by the
applicable cost-of-living adjustment, if any, for the
calendar year sanctioned by Code Section 401(a)(17).
In determining the Compensation of an Employee, any
Compensation paid by the Employer to the spouse or
lineal descendant (who has not attained age 19 before
the close of the Plan Year) of an Employee who is (i)
a 5% owner as defined in section 416(i) of the Code
or (ii) one of the 10 employees of the Employer paid
the greatest Compensation during the Plan Year shall
be treated as Compensation paid to such Employee.
If, as the result of the application of the foregoing
sentence the applicable dollar limitation is
exceeded, then such limitation shall be prorated
among the affected individuals in
-4-
<PAGE> 5
proportion to each such individual's Compensation as
determined for purposes of this Plan prior to the
application of the dollar limitation.
(2) "Highly Compensated Employee" means, with respect to
a particular Plan Year, an Employee who is not
represented for purposes of collective bargaining by
a labor union and who (i) during the Plan Year or
other "determination year" as described in the
regulations to Code Section 414(1) is among the 100
employees receiving the most compensation from the
Employer and is a highly compensated employee as
defined by Code Section 414(q) and the regulations
thereunder or (ii) during the 12-month period
preceding the applicable determination year (the
"look-back year") is a highly compensated employee as
defined in Code Section 414(q) and the regulations
thereunder. The Committee may, in its discretion and
consistent with regulations under Code Section 414(q)
or other guidance issued by the Secretary of the
Treasury, elect to make a look-back year calculation
for a determination year on the basis of the calendar
year ending with or within the applicable
determination year.
(3) "Non-Highly Compensated Employee" means an Employee
who is not represented for purposes of collective
bargaining by a labor union, and who is not a Highly
Compensated Employee as defined in (2) above.
5. Section 7.1 is amended by deleting the words "As of January 1
following the calendar year" in each plan in which it appears, and by inserting
the following in lieu thereof:
"As of December 31 of the calendar year"
6. Section 7.1 is further amended by deleting the test of subsection
(a) and inserting the following in lieu thereof:
(a) As of December 31 of the calendar year in which the
Participant completes 35 years of participation in the Plan;
7. Effective January 1, 1994, Subparagraph 10.1(b) is amended to read
as follows:
(b) Imputed Employer Contribution. A Participant described in
Section 10.1(a) shall be eligible to share in the allocation
of the Imputed Employer Contribution only if he or she in
fact made voluntary savings contributions pursuant to Article
III (including weekly cash payments in lieu of payroll
deductions pursuant to subsections 3.2(b) and (c)) which were
allocated to his or her Participant Savings Account for the
Plan Year for which the Imputed Employer Contribution is
made. The Imputed Employer Contribution which shall be
credited with respect to an eligible Participant's
Transferred Amount shall be an amount equal to the product of
(1), (2) and (3) below where
(1) is the annual percentage rate of the Employer's
Tentative Basic Aggregate Contribution, as described
in Subsection 4.1(b)(1), if any, for the calendar
year in which the Participant's Transfer Event
described in Section 7.1 occurs, which percentage
rate shall be determined by dividing the amount of
said Tentative Basic Aggregate
-5-
<PAGE> 6
Contribution by the aggregate average monthly account
balances for such year of all Participants' accounts
in the General Fund, as of December 31,
(2) is the average monthly balance of the accounts held
for the Participant in the General Fund during the
calendar year in which the Participant's Transfer
Event described in Section 7.1 occurs, and
(3) is a fraction, the numerator of which is an integer
equal to the whole or partial calendar months of
Regular Employment completed by the Participant
during the calendar year in which his Transfer Event
occurs, and the denominator of which is twelve (12).
In no event shall the Imputed Employer Contribution made with
respect to any Participant exceed four thousand dollars
($4,000) multiplied by a fraction, the numerator of which is
an integer equal to the number of whole or partial calendar
months of Regular Employment completed by the Participant
during such calendar year, and the denominator of which is
twelve (12). Effective for the Imputed Employer Contribution
for the 1994 and subsequent Plan Years, that portion of the
Imputed Employer Contribution made with respect to any
Participant who is a Highly Compensated Employee which, when
combined with the Participant's voluntary savings
contributions for the Plan Year pursuant to Article III,
exceeds the contribution limitations for Highly Compensated
Employees pursuant to Section 6.3, shall be distributed to
such Participant in accordance with the provisions of that
Section.
8. Section 19.2(i) is amended to read as follows:
"Total Compensation" is the Participant's compensation as defined
in Section 415(c)(3) of the Code, but shall not be greater than
the applicable annual dollar limitation prescribed in Code Section
401(a)(17).
9. Section 19.5 is deleted.
IN WITNESS WHEREOF, United Parcel Service of America, Inc., based upon
the action by the Board of Directors, has caused this Amendment No. 19 to be
executed this 2nd day of December 1994.
ATTEST: UNITED PARCEL SERVICE OF
AMERICA, INC.
By:
---------------------------- ------------------------------
Secretary Chairman
-6-
<PAGE> 1
EXHIBIT 10(b)(12)
AMENDMENT NO. 16
TO THE
UPS RETIREMENT PLAN
(As Amended and Restated January 1, 1976)
WHEREAS, United Parcel Service of America, Inc. and its affiliated
corporations established the UPS Retirement Plan ("Plan") for the benefit of
their eligible employees, in order to provide benefits to those employees upon
their retirement, disability or death, effective as of September 1, 1961; and
WHEREAS, the Plan was amended and restated in its entirety,
replacing all of the provisions of the Plan then in effect, effective as of
January 1, 1976, to comply with the Employee Retirement Income Security Act of
1974 ("ERISA"); and
WHEREAS, the Plan has been amended further since January 1, 1976,
the most recent being Amendment No. 15, executed August 13, 1992; and
WHEREAS, it is desired to amend the Plan further (i) to revise in
their entirety the Plan's disability benefit provisions; and (ii) to provide to
distributees of eligible rollover distributions from this Plan the option of
transferring such distributions directly to another eligible retirement plan;
NOW THEREFORE, pursuant to the authority vested in the Board of
Directors by Section 7.1 of the Plan, the Plan is hereby amended as follows,
effective January 1, 1993:
<PAGE> 2
1. Section 4.4(a) is amended by adding the words "or Total
Disability" immediately following the words "if (i) his employment is
terminated other than by reason of death. . ."
2. Sections 4.5, 4.6 and 4.7 of the Plan are revised
in their entirety to read as follows:
Section 4.5 Disability Benefit.
(a) Eligibility. Each Participant in this Plan with at
least one Hour of Service as an Employee on or after January 1,
1993, other than a Participant whose terms and conditions of
employment are governed by a collective bargaining agreement
unless said agreement specifically provides for the Disability
Benefit described herein, shall, in the event of his or her
termination of employment by reason of Total Disability following
five (5) or more Years of Service, be eligible for the Disability
Benefit described in this Section 4.5. Any Participant not
described in the preceding sentence whose employment is terminated
by reason of Total Disability after completion of ten (10) or more
Years of Service but prior to his or her Early Retirement Date
shall be eligible for the Supplemental Disability Income Benefit
described in Section 4.7.
(b) In General. In the event that a Participant with five
(5) or more Years of Service terminates employment prior to his or
her Normal Retirement Date by reason of his or her Total
Disability as defined in Section 4.6, he or she may elect to
receive a Disability Benefit in a monthly amount determined under
subsection 5.4(a) commencing on his or her Disability Date and
continuing for his or her Period of Disability as defined in
subsection 4.5(d).
(c) Disability Date. A Participant's Disability Date
shall be the first day of any month following the date which is
six (6) months following the Participant's cessation of work with
an Employer Company as the re-
-2-
<PAGE> 3
sult of Total Disability; provided, however, that a Participant's
Disability Date shall not be earlier than the date on which the
Participant's salary or wage continuation or other temporary
disability benefit from the Employer Company ends.
Notwithstanding the foregoing, the Committee may provide
nondiscriminatory rules by which a Participant's Disability Date
may be prior to six months following the Participant's cessation
of work due to Total Disability, provided that he or she is not
then receiving salary or wage continuation payments or temporary
disability benefits from the Employer Company.
(d) Period of Disability. A Participant's Period of
Disability shall begin on his or her Disability Date and shall end
when any one of the following occurs:
(1) The Participant ceases to be
Totally Disabled or dies;
(2) The Participant attains his or her Normal
Retirement Date;
(3) The Participant begins working in any gainful
occupation for which the Participant is fitted by his or her
education, training or experience, or for which he or she could
reasonably become fitted (work at a rehabilitation program, as
approved by the Committee, will not count as work in any
reasonable occupation);
(4) The Participant is no longer under the care of
a physician; or
(5) The Participant does not furnish to the
Committee upon request the latest proof of his or her continuing
Total Disability, or refuses to be examined by a physician
designated by the Committee for the purpose of determining whether
he or she continues to be Totally Disabled.
(e) Coordination and Transitional Rules.
Notwithstanding any provision of this Plan to the contrary, no
Disability Benefit shall be paid for any period of time during
which the Participant is receiving benefits under any short-term
or long-term disability plan or similar program sponsored by an
Employer Company or to which the Employer
-3-
<PAGE> 4
Company contributes. In the case of a Participant who had, as of
January 1, 1993, been receiving long-term disability benefits
under the UPS Long-Term Disability Plan ("LTD Plan"), he or she
shall, effective as of such date, commence to receive the
Disability Benefit described herein; provided however, (1) that he
or she, at such time and thereafter, remains Totally Disabled and
otherwise eligible for a Disability Benefit from this Plan, and
(2) the amount of the Participant's monthly long-term disability
benefit from the LTD Plan is reduced by the amount of the monthly
Disability Benefit payable for the same time period.
Section 4.6 Total Disability.
(a) In General. A Participant shall be considered Totally
Disabled if he or she is unable to work, as described below, as
the result of a medically-determinable physical or mental
impairment, which requires the Participant to be under the care of
a physician (a "Total Disability"). During the first 24 months
that a Participant is Totally Disabled, he or she will be
considered unable to work if he or she cannot work at the same
type of occupation in which he or she normally engages, provided
that the Participant is unable to work comparable hours performing
alternate work, if available, provided by the Employer Company in
accordance with its employment policies applied on a
non-discriminatory basis to employees similarly situated. After
the first 24 months that a Participant is Totally Disabled, he or
she will be considered to be unable to work only if he or she is
unable to work at any gainful occupation for which the Participant
is fitted by his or her education, training or experience, or for
which he or she could reasonably become fitted.
Notwithstanding the foregoing, a Participant will not be
considered Totally Disabled if, at any time after the first 24
months of Total Disability, it is determined by the Committee that
the Participant's disability is not at that time caused by a
physical impairment which can be demonstrated by clinical and
laboratory diagnosis. A mental or
-4-
<PAGE> 5
nervous condition is not a physical impairment.
(b) Proof of Disability. The Committee shall have the
discretion and authority to determine whether a Participant is or
remains Totally Disabled. For this purpose, the Committee may
require the Participant to submit to an examination by a physician
of the Committee's choosing, and may request any and all medical
records and other pertinent information. Following a
determination of Total Disability, the Committee may periodically
require the Participant to submit proof of continued Total
Disability, and may determine that a Participant is no longer
disabled if he or she fails to comply with this requirement.
Section 4.7 Supplemental Disability Income Benefit for Certain
Participants.
(a) In General. In the case of a Participant who is not
among the class of individuals eligible for the Disability Benefit
described in Section 4.5, he or she shall, in the event that his
or her employment as an Employee is terminated by reason of his or
her Total Disability (as described in subsection (d) below) after
completion of ten (10) or more Years of Service but prior to his
or her Early Retirement Date, receive a monthly Supplemental
Disability Income Benefit as described in this Section 4.7.
Notwithstanding the foregoing, no Supplemental Disability Income
Benefit shall be paid to any Participant for any period of time
during which the Participant is receiving benefits under any
short-term or long-term disability plan or program (including, but
not limited to, the Disability Benefit described at Section 4.5)
sponsored by an Employer Company or to which the Employer Company
contributes.
(b) Amount. The Supplemental Disability Income Benefit
shall consist of a monthly benefit, payable for the period of time
described in subsection (c) below, equal to the amount determined
by multiplying $9.60 ($8.00 in the case of Total Disability
commencing prior to January 1, 1978) by the number of
-5-
<PAGE> 6
years of Benefit Service to a maximum of 25, completed by the
Participant prior to becoming Totally Disabled.
(c) Duration. The Supplemental Disability Income
Benefit shall be paid monthly to the disabled Participant,
commencing on his or her Disability Date and ending as of the
first to occur of the Participant's death, attainment of age 55 or
the month in which his or her Period of Disability ends.
Thereafter, the Participant may apply for and receive an Early or
Normal Retirement Benefit, or Deferred Vested Benefit, the amount
of which shall be calculated based on the Participant's Years of
Benefit Service earned prior to becoming Totally Disabled, but
shall not be reduced on account of the Supplemental Disability
Income Benefit previously payable. Similarly, the surviving
spouse of a Participant who dies while receiving the Supplemental
Disability Income Benefit may receive the Qualified Joint and
Survivor (Husband and Wife) Preretirement Survivor Benefit in
accordance with the terms of Section 5.5 commencing on what would
have been the Participant's Early Retirement Date. In no event
shall a Participant receive simultaneously a Supplemental
Disability Income Benefit and an Early or Normal Retirement
Benefit, or Deferred Vested Benefit.
(d) The terms "Disability Date," "Period of Disability"
and "Total Disability" shall have the same meanings as described
in subsections 4.5(c), 4.5(d) and Section 4.6, respectively,
except that, for Participants who became disabled prior to January
1, 1993, "Total Disability" shall have the same meaning as the
term "total and permanent disability" as defined by Section 4.6
prior to its amendment by Amendment No. 15 to this Plan.
3. Subsection 5.3(a) is amended as follows:
a. The first sentence of paragraph (1) is amended by
deleting the words "Annuity Starting Date of a Participant's Normal or Early
Retirement Benefit, or Deferred Vested Benefit,"
-6-
<PAGE> 7
and by substituting in lieu thereof the words "Annuity Starting Date of a
Participant's Normal or Early Retirement Benefit, Deferred Vested Benefit or
Disability Benefit."
b. A new paragraph (3) is added to read as follows:
(3) Notwithstanding the foregoing, see subsection
5.4(b) for special rules relating to the payment of Disability
Benefits.
4. Subsection 5.3(d) is amended by deleting the words "his or her
vested Normal Retirement Benefit or Deferred Vested Benefit" and by
substituting in lieu thereof the words "his or her vested Normal Retirement
Benefit, Deferred Vested Benefit or Disability Benefit."
5. Section 5.4 is amended in its entirety to read as
follows:
Section 5.4 Disability Benefit.
(a) Amount. The amount of the monthly benefit to
which a Participant is entitled under Section 4.5 because of Total
Disability shall be equal to one-twelfth of the Participant's
Normal Retirement Benefit calculated in accordance with the
applicable benefit formulas under paragraphs (1) or (2) of
subsection 5.2(a) (whichever produces the larger amount), modified
as follows:
(1) The Participant's years of Benefit
Service (defined in subsection 1.1(l) hereof) shall be the greater
of:
(A) the actual number of years of Benefit
Service earned by the Participant as of his or her Disability
Date; or
-7-
<PAGE> 8
(B) the number of years of Benefit Service
indicated in the following table:
<TABLE>
<CAPTION>
Age of Participant
at Disability Date Years of Benefit Service
------------------ ------------------------
<S> <C>
50 or younger 15
51 14
52 13
53 12
54 11
55 10
56 9
57 8
58 7
59 6
60 or older 5
</TABLE>
(2) There shall be no reduction in the amount of
the Participant's Disability Benefit on account of its
commencement prior to the Participant's Normal Retirement Date.
(b) Form and Duration of Payments.
(1) The Disability Benefit shall be paid in
monthly installments, in the amount described in subsection
5.4(a), beginning as of the Participant's Disability Date. The
last payment of the Participant's Disability Benefit shall be made
as of the first day of the month in which the Participant's Period
of Disability ends.
(2)(A) If the Participant's Period of
Disability ends as the result of his or her attainment of his or
her Normal Retirement Date, the Participant shall thereafter be
able to receive a Normal Retirement Benefit, commencing no earlier
than the first day of the month following the cessation of his or
her Disability Benefit, in an amount determined under subsection
5.2(a) taking into account all Benefit Service which had, pursuant
to subsection 5.4(a), been taken into account in determining the
amount of his or her Disability Benefit.
-8-
<PAGE> 9
(B) If the Participant is married on the
Annuity Starting Date of his or her Normal Retirement Benefit,
such benefit shall be paid in the form of a Qualified Joint and
Survivor (Husband and Wife) Benefit unless the Participant, at any
time within the 90-day period ending on the Annuity Starting Date,
makes an election, in the form prescribed in paragraph 5.3(b)(1),
to waive such payment form in favor of an alternate payment form
available under subsection 5.3(b).
(C) If the Participant is not married on
the Annuity Starting Date of his or her Normal Retirement Benefit,
such benefit shall be paid in the form of a single life annuity,
unless he or she elects, at any time within the 90-day period
ending on the Annuity Starting Date, to receive a reduced monthly
benefit payable in the form of a single life annuity with a
guarantee of 120 monthly payments, as described in paragraph
5.3(a)(2).
(D) If the Participant should die while
Totally Disabled but prior to his or her Disability Date, or else
should die during his or her Period of Disability but prior to the
Annuity Starting Date of his or her Normal Retirement Benefit, his
or her surviving spouse, if any, shall be eligible to receive the
Qualified Joint and Survivor (Husband and Wife) Preretirement
Survivor Benefit in accordance with and commencing at the time
described in Section 5.5; provided however, that the amount of
such benefit shall be calculated based on all years of Benefit
Service which had, pursuant to subsection 5.4(a), been taken into
account in determining the amount of the Participant's Disability
Benefit.
(E) The written explanation described in
subsection 5.3(c) shall be provided to the Participant within 90
days prior to the Annuity Starting Date of the Participant's
Normal Retirement Benefit.
(3)(A) If the Participant's Period of Disability
should end prior to his or her Normal Retirement Date (other than
by reason of death), the Participant may, in
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<PAGE> 10
accordance with the applicable terms of this Plan, thereafter
apply for and receive an Early or Normal Retirement Benefit, or
Deferred Vested Benefit, as the case may be, the amount of which
shall be calculated based on the Participant's actual years of
Benefit Service earned prior to becoming Totally Disabled, but
shall not be reduced on account of the Disability Benefit
previously payable.
(B) Similarly, in the event the Participant
should die following the end of his or her Period of Disability
(and the cessation of his or her Disability Benefit) but prior to
the Annuity Starting Date of his or her Early or Normal Retirement
Benefit or Deferred Vested Benefit, the Participant's surviving
spouse, if any, shall be eligible to receive the Qualified Joint
and Survivor (Husband and Wife) Preretirement Survivor Benefit in
accordance with and commencing at the time described in Section
5.5, the amount of which shall be calculated based on the
Participant's actual years of Benefit Service earned prior to
becoming Totally Disabled, but shall not be reduced on account of
the Disability Benefit previously payable.
(4) In no event shall a Participant receive
simultaneously a Disability Benefit and an Early or Normal
Retirement Benefit, or Deferred Vested Benefit.
6. Section 5.12 is revised in its entirety to read as follows:
Section 5.12 Withholding of Income Tax.
(a) Notification of Withholding of Federal Income Tax.
All Participants and beneficiaries entitled to receive benefits
under the Plan shall be notified of the Plan's obligation to
withhold federal income tax from any benefits payable pursuant to
the terms of the Plan. Such notice shall be in writing, be given
at the times set forth in subsection (b) and contain the
information set forth in subsection (c) of this Section.
-10-
<PAGE> 11
(b) Time of Notice. The notice described in subsection
(a) shall be provided not earlier than six months before such
payment is to be made and not later than the time the Participant
or beneficiary is furnished with his or her claim for benefits
application.
(c) Content of the Notice. The notice required by
subsection (a) shall, at a minimum:
(1) with respect to any distribution which is an
eligible rollover distribution within the meaning of Code Section
3405(c)(3) (other than an eligible rollover distribution of less
than $200 which is exempt from withholding under regulations
prescribed by the Secretary of the Treasury), advise the payee
that there shall be withheld from such distribution an amount
equal to 20 percent thereof (or such other amount as may from time
to time be prescribed by the Code, or the Secretary of the
Treasury or his delegate), unless the payee directs the Committee
to transfer such distribution as a direct rollover to an eligible
retirement plan, within the meaning of Section 5.13 hereof, in
accordance with such procedures as the Committee may prescribe (a
"transfer direction"),
(2) with respect to any distribution which is not
an eligible rollover distribution within the meaning of Code
Section 3405(c)(3):
(A) advise the payee of his or her right to
elect not to have withholding apply to any payment or distribution
and explain the manner in which such election may be made, and
include or indicate the source of any forms necessary to make the
election;
(B) advise the payee of his or her right to
revoke such an election at any time;
(C) advise the payee that any election
remains effective until revoked;
(D) advise the payee that penalties may be
incurred under the estimated tax payment rules if the payee's
payments of estimated
-11-
<PAGE> 12
tax are not adequate and sufficient tax is not withheld from
payments under this Plan; and
(E) advise the payee that the election not
to have federal income tax withheld from benefits is prospective
only and that any election made after a payment or distribution to
the payee is not an election with respect to such payment or
distribution.
(d) Effective Date of Election. Any transfer direction,
election or revocation of any election by a payee shall become
effective immediately upon receipt by the Committee of the
transfer direction, election or revocation. Thereafter, the
Committee shall, unless otherwise provided by applicable law,
regulation or other guidance by the Secretary of the Treasury or
his delegate, instruct the Trustee to withhold federal income tax
in accordance or consistent with the instructions filed by the
payee.
(e) Failure to Make Election.
(1) In the case of an eligible rollover
distribution, if the payee fails to provide the Committee with a
transfer direction, the Committee shall instruct the Trustee to
withhold an amount equal to 20% of the amount of the distribution
(or such other amount as may be from time to time prescribed by
the Code, or the Secretary of the Treasury or his delegate).
(2) In the case of a distribution which is not an
eligible rollover distribution, if the payee fails to provide the
Committee with a withholding certificate, the Committee shall
instruct the Trustee to withhold, in the case of a periodic
distribution, the amount which would be required to be withheld
from such payment if such payment were a payment of wages by an
employer to an employee for the appropriate payroll period,
determined as if the payee were a married person claiming three
withholding allowances. In the case of a nonperiodic
distribution, 10% of the amount of the distribution shall be
withheld.
-12-
<PAGE> 13
(f) Coordination with Internal Revenue Code and
Regulations. Notwithstanding the foregoing, the Committee shall
discharge its withholding and notice obligations in accordance
with the Code and regulations and such other guidance with respect
thereto as may be promulgated from time to time by the Secretary
of the Treasury or his delegate.
7. A new Section 5.13 is added to read as follows:
Section 5.13 Direct Rollover.
(a) With respect to any distribution described in this
Article V which constitutes an eligible rollover distribution
within the meaning of Code Section 401(a)(31)(C), the distributee
thereof shall, in accordance with procedures established by the
Committee, be afforded the opportunity to direct that such
distribution be transferred directly to the trustee of an eligible
retirement plan (a "direct rollover"). For purposes of the
foregoing sentence, an "eligible retirement plan" is (1) a
qualified trust within the meaning of Code Section 402 which is a
defined contribution plan the terms of which permit the acceptance
of rollover distributions, (2) an individual retirement account or
annuity within the meaning of Code Section 408 (other than an
endowment contract), or (3) an annuity plan within the meaning of
Code Section 403(a), which is specified by the distributee in such
form and at such time as the Committee may prescribe.
(b) Notwithstanding the foregoing, if the distributee
elects to have his or her eligible rollover distribution paid in
part to him or her and paid in part as a direct rollover:
(A) The direct rollover must be in an amount of
$500 or more.
(B) A direct rollover to two or more eligible
retirement plans shall not be permitted.
(c) The Committee shall, within a reasonable period of
time prior to making an
-13-
<PAGE> 14
eligible rollover distribution from this Plan, provide a written
explanation to the distributee of the direct rollover option
described above, as well as the provisions under which such
distribution will not be subject to tax if transferred to an
eligible retirement plan within 60 days after the date on which
the distributee received the distribution.
8. Subsection 12.2(d) is amended as follows:
(a) The first sentence of the first paragraph is amended
to read as follows:
"Retired Participant" means, for purposes of this Article XII, an
individual who (i) was a Participant who was actively employed by
an Employer Company until his or her Early, Normal or Postponed
Retirement Date, or until his or her termination of employment
following 10 or more Years of Service by reason of Total
Disability, (ii) in the case of a Participant who first became an
employee on or after January 1, 1989, had at least 10 Years of
Service with an Employer Company and at least one Year of Service
as a Participant in this Plan, (iii) retired from employment with
an Employer Company and was thereupon immediately eligible to
receive an Early or Normal Retirement Benefit, or Disability
Benefit, hereunder.
(b) The third sentence of the penultimate paragraph
thereof is amended to read as follows:
A Participant's retirement from employment with the Employer
Company at or after his or her Early or Normal Retirement Date, or
prior to such date by reason of Total Disability following 10 or
more Years of Service, with the immediate right to receive a
Retirement or Disability Benefit hereunder, or the death of a
Participant following attainment of his or her Early Retirement
Date while still employed by an Employer Company (with, in each
case, the additional requirement that a
-14-
<PAGE> 15
Participant who first became an Employee on or after January 1,
1989 must have completed at least 10 Years of Service with an
Employer Company, at least one of which was as a Participant in
this Plan), are conditions to eligibility for Medical Benefits
under this Article XII.
(c) The present text of subsection 12.2(d) (modified as
hereinabove provided) is designated as paragraph (2), and a new paragraph (2)
is added to read as follows:
(2) A Participant who is a Retired Participant because of his or
her termination of employment by reason of Total Disability shall
cease to be a Retired Participant when his or her Period of
Disability ends. In such event, and subject to Section 12.3 in
the event the Participant's Period of Disability ends by reason of
his or her death, Medical Benefits under this Article XII shall
cease to be paid for claims incurred by the Participant, or his or
her Covered Dependents, on or after the end of the month in which
his or her Period of Disability ends.
In WITNESS WHEREOF, United Parcel Service of America, Inc. based
upon action by its Board of Directors, has caused this Amendment No. 16 to be
executed this day of , 1993.
ATTEST: UNITED PARCEL SERVICE OF
AMERICA, INC.
By:
---------------------------- ------------------------------
Secretary Chairman
-15-
<PAGE> 1
EXHIBIT 10(b)(13)
AMENDMENT NO. 17
TO THE
UPS RETIREMENT PLAN
(As Amended and Restated January 1, 1976)
WHEREAS, United Parcel Service of America, Inc. and its affiliated
corporations established the UPS Retirement Plan ("Plan") for the benefit of
their eligible employees, in order to provide benefits to those employees upon
their retirement, disability or death, effective as of September 1, 1961; and
WHEREAS, the Plan was amended and restated in its entirety, replacing
all of the provisions of the Plan then in effect, effective as of January 1,
1976, to comply with the Employee Retirement Income Security Act of 1974
("ERISA"); and
WHEREAS, the Plan has been amended further since January 1, 1976, the
most recent being Amendment No. 16, effective as of January 1, 1993; and
WHEREAS, it is desired to amend the Plan further to reflect the
reduction, pursuant to Code Section 401(a)(17), in Compensation which may be
taken into account for Plan purposes effective as of January 1, 1994;
NOW THEREFORE, pursuant to the authority vested in the Board of
Directors by Section 7.1 of the Plan, the Plan is hereby amended as follows,
effective January 1, 1994:
1. Subsection 1.1(y) of the Plan is revised by deleting in its
entirety the penultimate paragraph thereof (relating to the $200,000
Compensation limitation) and by adding the following paragraphs to the end
thereof:
For the purpose of calculating a Participant's
accrued benefit for any Plan Year commencing on or after
January 1, 1989, in no event shall the Compensation of any
Participant taken into account under the Plan exceed the
following dollar amounts:
<TABLE>
<CAPTION>
Plan Year Compensation Limit
--------- ------------------
<S> <C>
1989 $200,000
1990 $209,200
1991 $222,220
1992 $228,860
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
1993 $ 235,840
1994 $ 150,000
1995 and later years $ 150,000, increased by the applicable cost-of-living adjustment, if
any, for the calendar year sanctioned by Code
Section 401(a)(17).
</TABLE>
In determining the Compensation of a Participant, the
rules of Section 414(q)(6) of the Code shall apply, except
that in applying such rules, the term "family" shall include
only the Participant's spouse and any lineal descendants of
the Participants who have not attained age 19 before the
close of the Plan Year. If, as a result of the application
of such rules the applicable Compensation limitation is
exceeded, then such limitation shall be prorated among the
affected individuals in proportion to each such individual's
Compensation as determined under this subsection 1.1(y) prior
to the application of this limitation.
In determining a Participant's Final Average
Compensation, the $150,000 Compensation limitation shall
apply retroactively with respect to Compensation earned prior
to 1994 by a Participant with at least one Hour of Service on
or after January 1, 1994. Similarly, the $200,000
Compensation limitation shall be applied retroactively with
respect to Compensation earned prior to 1989 by a Participant
with at least one Hour of Service on or after January 1, 1989
(but without any Hours of Service on or after January 1,
1994). However, a Participant's Benefit shall not be less
than that which he or she had accrued or earned as of
December 31, 1993 (December 31, 1988 in the case of a
Participant without at least one Hour of Service on or after
January 1, 1994), based on his or her Benefit Service and
Final Average Compensation determined as of such date.
2. The first paragraph of subsection 5.7(b)(1) is amended by deleting
the phrase "(ii) 100% of the Participant's average compensation (as defined in
Treasury Regulation Section 1.415-2(d) paid for three consecutive calendar
years during which he was an active Participant in the Plan, and in which he
received the greatest aggregate compensation from the Employer Company, subject
to the following:", and by substituting in lieu thereof the following:
(ii) 100% of the Participant's average compensation (as
defined in Treasury Regulation Section 1.415-2(d) and reduced, if
necessary, to reflect the applicable annual compensation
limitation set forth in subsection 1.1(y) of this Plan paid for
the three consecutive calendar years during which he was an active
Participant in the Plan, and in which he received the greatest
aggregate compensation (as defined above) from the Employer
Company, subject to the following:
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<PAGE> 3
3. Subsection 5.7(b)(2) as amended in the following respects:
a. Subparagraph (A)(II) is revised by deleting the phrase "(ii)
the product of 1.4 multiplied by an amount equal to 100% of the Participant's
average compensation for the three consecutive calendar years during which he
participated in the Plan and in which he had the greatest aggregate
compensation from the Employer Company," and by substituting in lieu thereof
the following:
(ii) the product of 1.4 multiplied by an amount equal
to 100% of the Participant's average compensation (as defined
in Treasury Regulation Section 1.415-2(d) and reduced, if
necessary, to reflect the applicable annual compensation
limitation set forth in subsection 1.1(y) of this Plan) for
the three consecutive calendar years during which he was an
active Participant in the Plan, and in which he had the
greatest aggregate compensation (as defined above) from the
Employer Company.
b. Subparagraph (B)(II)(ii) is revised to read as follows:
(ii) 1.4 multiplied by 25% of the Participant's
compensation (as defined in Section 415(c)(3) of the Code and
reduced, if necessary, to reflect the applicable annual
compensation limit set forth in subsection 1.1(y) of this
Plan) for such limitation year.
Subsection 11.2(i) is amended to read as follows:
(i) "Total Compensation" is the Participant's
compensation as defined in Section 415(c)(3) of the Code, but
shall not exceed the applicable dollar amount set forth in
subsection 1.1(y) of this Plan.
IN WITNESS WHEREOF, United Parcel Service of America, Inc. based upon
action by its Board of Directors, has caused this Amendment No. 17 to be
executed this 2nd day of December 1994.
ATTEST: UNITED PARCEL SERVICE OF
AMERICA, INC.
By:
---------------------------- ------------------------------
Secretary Chairman
-3-
<PAGE> 1
EXHIBIT 10(x)(6)
AMENDMENT NO. 11
TO THE
UPS SAVINGS PLAN
WHEREAS, United Parcel Service of America, Inc. ("UPS") and its
affiliated corporations established, effective July 1, 1988, the UPS Savings
Plan (the "Plan") in order to permit their eligible employees to put money
aside on a tax deferred basis to supplement that which they will receive from
Social Security and other pension or retirement plans in which they
participate; and
WHEREAS, the Plan has been amended ten times before, the most recent
being Amendment No. 10 adopted on June 3, 1992; and
WHEREAS, it is desired to amend the Plan further (i) to permit
Participants and certain retired Former Participants to roll over or transfer
to the Trust under the Plan amounts which they have received as eligible
rollover distributions under Internal Revenue Code Section 402, and (ii) to
provide to distributees of eligible rollover distributions from this Plan the
option of transferring such distributions directly to another eligible
retirement plan;
NOW THEREFORE, pursuant to the authority vested in the Board
of Directors by Section 9.1 of the Plan, the Plan is hereby amended in the
following respects, effective, except as otherwise noted, for distributions
made on or after January 1, 1993:
1. Effective July 1, 1994, the second sentence of Section
<PAGE> 2
4.1 is amended by deleting the words "pursuant to Participants' Elective
Deferrals to the Trustee" and by substituting in lieu thereof the words
"pursuant to the Participant's Elective Deferrals, as well as any amounts
contributed pursuant to Section 4.12."
2. Effective July 1, 1994, a new Section 4.12 is added to Article IV
to read as follows:
Section 4.12 Rollovers from Qualified Plans.
(a) Any Participant may contribute to the Trust an
amount consisting of an eligible rollover distribution or
transfer from a conduit IRA, provided that the contribution
shall not jeopardize the tax-exempt status of the Plan or
Trust or create adverse tax consequences for the Employer
Company. A Former Participant may contribute to the Trust in
accordance with this Section 4.12(a) provided that the Former
Participant:
(1) ceased to be a Participant as the result
of his or her retirement;
(2) makes such contribution to the Trust
within eighteen (18) calendar months from the date of his or
her retirement; and
(3) has not otherwise received a distribution
of his or her Individual Account pursuant to Section 6.5.
(b) Any such contribution shall at all times be fully
vested and nonforfeitable. Such contribution shall be
invested in the investment options selected by the Participant
in accordance with Article IV, in the same percentage amounts
as are invested the Participant's Elective Deferrals.
(c) For purposes of this Section, an eligible
rollover distribution or transfer from a conduit IRA means:
(1) an eligible rollover distribution,
-2-
<PAGE> 3
within the meaning of Code Section 402, which is transferred
to this Plan by the Participant no later than sixty (60) days
following the day on which the Participant received the
property distributed;
(2) an eligible rollover distribution,
within the meaning of Code Section 402, which is transferred
to this Plan directly by another qualified trust at the
Participant's direction; or
(3) an amount transferred to this Plan,
within sixty (60) days of the Participant's receipt of
distribution thereof, from an individual retirement account or
annuity that has no assets other than assets (together with
earnings thereon) which were previously distributed to the
Participant as an eligible rollover distribution and which
were deposited in such conduit individual retirement account
or annuity within sixty (60) days of such previous
distribution.
For purposes of an eligible rollover distribution described in
(1) above, the Participant may contribute an amount equal to
the gross amount of the distribution, notwithstanding that a
portion of the distribution may have been subject to mandatory
income tax withholding.
3. A new Section 6.8 is added to Article VI to read as follows:
6.8 Direct Rollover.
(a) With respect to any distribution of $200 or more
described in this Article VI which constitutes an eligible
rollover distribution within the meaning of Code Section
401(a) (31) (C), the distributee thereof shall, in accordance
with procedures established by the Committee, be afforded the
opportunity to direct that such distribution be transferred
directly to the trustee of an eligible retirement plan (a
"direct rollover"). For purposes of the foregoing sentence,
an "eligible retirement plan" is (1) a qualified trust within
the meaning of Code Section 402, which is a defined
contribution plan the terms of which permit the acceptance of
rollover distributions, (2) an individual retirement account
or annuity within the meaning of Code Section 408 (other than
an endowment contract), or (3) an annuity plan within the
meaning of Code Section 403 (a), which is specified by the
distributee in such form and at such time as the Committee may
prescribe.
-3-
<PAGE> 4
(b) Notwithstanding the foregoing, if the
distributee elects to have his or her eligible rollover
distribution paid in part to him or her and paid in part as a
direct rollover:
(1) The direct rollover must be in an
amount of $500 or more; and
(2) A direct rollover to two or more
eligible retirement plans shall not be permitted.
(c) The Committee shall, within a reasonable period
of time prior to making an eligible rollover distribution from
this Plan, provide a written explanation to the distributee of
the direct rollover option described above, if applicable, as
well as the provisions under which such distribution will not
be subject to tax if transferred to an eligible retirement
plan within 60 days after the date on which the distributee
received the distribution.
4. Section 11.8 is revised in its entirety to read as follows:
Section 11.8 Withholding of Income Tax.
(a) Notification of Withholding of Federal Income
Tax. All Participants and beneficiaries entitled to receive
benefits under the Plan shall be notified of the Plan's
obligation to withhold federal income tax from any benefits
payable pursuant to the terms of the Plan. Such notice shall
be in writing, be given at the times set forth in subsection
(b) and contain the information set forth in subsection (c) of
this Section.
(b) Time of Notice. The notice described in
subsection (a) shall be provided not earlier than six months
before such payment is to be made and not later than the time
the Participant or beneficiary is furnished with his or her
claim for benefits application.
(c) Content of the Notice. The notice required by
subsection (a) shall, at a minimum:
(1) with respect to any distribution which
is not an eligible rollover distribution within the meaning of
Code Section 3405(c) (3) (other than an eligible rollover
distribution of less than $200 which is exempt from
withholding under regulations prescribed
-4-
<PAGE> 5
by the Secretary of the Treasury), advise the payee that there
shall be withheld from such distribution an amount equal to 20
percent thereof (or such other amount as may from time to time
be prescribed by the Code, or the Secretary of the Treasury or
his delegate), unless the payee directs the Committee to
transfer such distribution as a direct rollover to an eligible
retirement plan, within the meaning of Section 6.8(a) hereof,
in accordance with such procedures as the Committee may
prescribe (a "transfer direction"),
(2) with respect to any distribution which
is not an eligible rollover distribution within the meaning of
Code Section 3405(c) (3):
(A) advise the payee of his or her
right to elect not to have withholding apply to any payment or
distribution and explain the manner in which such election may
be made, and include or indicate the source of any forms
necessary to make the election;
(B) advise the payee that penalties
may be incurred under the estimated tax payment rules if the
payee's payments of estimated tax are not adequate and
sufficient tax is not withheld from payments under this Plan;
and
(C) advise the payee that the election
not to have federal income tax withheld from benefits is
prospective only and that any election made after a payment or
distribution to the payee is not an election with respect to
such payment or distribution.
(d) Effective Date of Elections. Any transfer
direction, election or revocation of any election by a payee
shall become effective immediately upon receipt by the
Committee of the transfer direction, election or revocation.
Thereafter, the Committee shall, unless otherwise provided by
applicable law, regulation or other guidance by the Secretary
of the Treasury or his delegate, instruct the Trustee to
withhold federal income tax in accordance or consistent with
the instructions filed by the payee.
(e) Failure to Make Election.
(1) In the case of an eligible rollover
distribution, if the payee fails to provide the Committee with
a transfer direction, the Committee shall instruct the Trustee
to withhold an amount equal to 20% of the amount of the
distribution (or such other amount as may be from time to time
prescribed by the
-5-
<PAGE> 6
Code, or the Secretary of the Treasury or his delegate).
(2) In the case of a distribution which is
not an eligible rollover distribution, if the payee fails to
provide the Committee with a withholding certificate, the
Committee shall instruct the Trustee to withhold an amount
equal to 10% of the amount of the distribution.
(f) Coordination with Internal Revenue Code and
Regulations. Notwithstanding the foregoing, the Committee
shall discharge its withholding and notice obligations in
accordance with the Code and regulations and such other
guidance with respect thereto as may be promulgated from time
to time by the Secretary of the Treasury or his delegate.
IN WITNESS WHEREOF, United Parcel Service of America, Inc. has
caused this Amendment No. 11 to the Plan to be executed this ___________ day of
____________________, 1993.
ATTEST: UNITED PARCEL SERVICE OF
AMERICA, INC.
By:
---------------------------- ------------------------------
Secretary
-6-
<PAGE> 1
EXHIBIT 10(x)(7)
AMENDMENT NO. 12
TO
THE UPS SAVINGS PLAN
WHEREAS, United Parcel Service of America, Inc. ("UPS") and
its affiliated corporations established, effective July 1, 1988, the UPS
Savings Plan (the "Plan") in order to permit their eligible employees to put
money aside on a tax deferred basis to supplement that which they will receive
under Social Security and other pension and retirement plans; and
WHEREAS, the Plan has been amended eleven times before, the
most recent being Amendment No. 11 effective as of January 1, 1993; and
WHEREAS, it is desired to amend the Plan further to conform to
the disclosure requirements with respect to the participant-directed investment
of Plan accounts, described in the final regulation to Section 404(c) of ERISA.
NOW THEREFORE, pursuant to the authority vested in the Board
of Directors by Section 9.1 of the Plan, the Plan is hereby amended in the
following respects, effective January 1, 1994:
1. Subsection 4.4 is amended by adding the following
sentence immediately prior to the first sentence of subsection (a) thereof:
It is intended that the Plan satisfy the conditions
for the participant-directed investment of Plan accounts
contained in Section 404(c) of ERISA and the regulation
thereunder (Labor Regulation Section 2550.404c-1), so as to
afford to each Participant the
<PAGE> 2
opportunity to exercise control over the assets in his or her
Individual Account and to choose, from a broad range of
investment alternatives, the manner in which said assets are
invested.
2. Section 4.4 is further amended by adding a new
subsection (b), to read as follows:
(b) In order to provide Participants the
opportunity to obtain sufficient information to make informed
decisions with regard to investment alternatives available
under the Plan:
(1) The Committee or its designee shall
provide each Participant, by means of the summary plan
description or by separate written communication, with the
following information:
(A) An explanation that the Plan is
intended to constitute a plan described in Section 404(c) of
ERISA and the regulation thereunder, and that the fiduciaries
of the Plan may be relieved of liability for any losses which
are the direct and necessary result of investment instructions
given by the Participant.
(B) With respect to each Investment
Option, a general description of the investment objectives and
risk and return characteristics of such Investment Option,
including information relating to the type and diversification
of assets comprising the portfolio of the Investment Option.
(C) Identification of the
investment manager with respect to each Investment Option.
(D) An explanation of the
circumstances under which Participants may give investment
instructions and any limitations or restrictions on such
instructions, including any restrictions with
-2-
<PAGE> 3
respect to transfers to or between Investment Options, and, if
voting, tender or similar rights with respect to investments
held in an Investment Option are passed through to
Participants, any restrictions on such rights.
(E) A description of any
transaction fees and expenses which affect the Participant's
Account balance in connection with the purchase or sale of
interests in the several Investment Options (e.g.,
commissions, sales loads, deferred sales charges, redemption
or exchange fees).
(F) The name, address and telephone
number of the Plan fiduciary (or its designee) which is
responsible for the provision of information upon request as
described in paragraph (2) below.
(G) Such other information as may
be required to be disclosed to Participants, with respect to
an Investment Option, in accordance with Labor Regulation
Section 2550.404c-1(b)(2)(B)(1).
(2) The Committee or its designee shall
provide each Participant with the following information upon
request, based on the latest information available to the
Plan:
(A) A description of the annual
operating expenses of each Investment Option (e.g., investment
management or administrative fees, transaction costs) which
reduce the Option's rate of return to Participants and
beneficiaries, and the aggregate amount of such expenses
expressed as a percentage of the average net assets of the
Investment Option.
(B) Copies of prospectuses,
financial statements and reports relating to the available
Investment Options, to the extent such information is provided
to the Plan.
-3-
<PAGE> 4
(C) A list of the assets comprising
the portfolio of Investment Option A (fixed rate investment
fund), the value of each such asset (or the proportion of the
fund which it comprises) and, with respect to each fixed rate
investment contract held in such fund, the name of the issuing
bank, savings and loan association or insurance company, the
term of the contract and the rate of return on the contract.
(D) With respect to any other
Investment Option the assets comprising the portfolio of which
are "plan assets" within the meaning of Labor Regulation
Section 2510.3-101, a list of such assets and the value of
each such asset, or the proportion of the portfolio which it
comprises.
(E) Information regarding the past
and current investment performance of each Investment Option.
(F) Information regarding the value
of the Participant's Account invested in each Investment
Option.
(G) Such other information as may
be required to be disclosed upon request to Participants, with
respect to an Investment Option, in accordance with Labor
Regulation Section 2550.404c-1(b)(2)(B)(2).
IN WITNESS WHEREOF, United Parcel Service of America, Inc. has
caused this Amendment No. 12 to the Plan to be executed this
day of 1994.
ATTEST: UNITED PARCEL SERVICE OF
AMERICA, INC.
By:
---------------------------- ------------------------------
-4-
<PAGE> 1
EXHIBIT 10(x)(8)
AMENDMENT NO. 13
TO
THE UPS SAVINGS PLAN
WHEREAS, United Parcel Service of America, Inc. ("UPS") and
its affiliated corporations established, effective July 1, 1988, the UPS
Savings Plan (the "Plan") in order to permit their eligible employees to put
money aside on a tax deferred basis to supplement that which they will receive
under Social Security and other pension and retirement plans; and
WHEREAS, the Plan has been amended twelve times before, the
most recent being Amendment No. 12 effective as of January 1, 1994; and
WHEREAS, it is desired to amend the Plan further to add the
Fidelity Magellan Fund as an additional investment option available to
Participants.
NOW THEREFORE, pursuant to the authority vested in the Board
of Directors by Section 9.1 of the Plan, the Plan is hereby amended in the
following respects, effective February 1, 1994:
1. Section 4.4(a) is amended as follows:
a. The following investment Option E is added,
immediately following the description of Options A, B, C and D:
OPTION E - the Fidelity Magellan Fund,
managed by Fidelity
Management & Research
Company, consisting primarily
of common stocks and
securities convertible into
common stocks, with the
<PAGE> 2
primary objective of capital
appreciation.
b. The penultimate sentence thereof is revised
by deleting the words "among Options A, B, C and D" and by substituting in lieu
thereof the words "among Options A, B, C, D and E."
2. Section 4.7 is modified by deleting the words "among
Options A, B, C and D" and by substituting in lieu thereof the words "among
Options A, B, C, D and E."
3. Section 4.8 is modified by deleting the words
"Options A, B, C, and D" in both places where they appear and by substituting
in lieu thereof the words "Options A, B, C, D and E.
4. Section 4.10 is modified by deleting the words "among
Options A, B, C and D" in each place they appear and by substituting in lieu
thereof the words "among Options A, B, C, D and E."
IN WITNESS WHEREOF, United Parcel Service of America, Inc. has
caused this Amendment No. 13 to the Plan to be executed this day of
1994.
ATTEST: UNITED PARCEL SERVICE OF
AMERICA, INC.
By:
---------------------------- ------------------------------
-2-
<PAGE> 1
EXHIBIT 10(x)(9)
AMENDMENT NO. 14
TO
THE UPS SAVINGS PLAN
WHEREAS, United Parcel Service of America, Inc. ("UPS") and
its affiliated corporations established, effective July 1, 1988, the UPS
Savings Plan (the "Plan") in order to permit their eligible employees to put
money aside on a tax deferred basis to supplement that which they will receive
under Social Security and other pension and retirement plans; and
WHEREAS, the Plan has been amended thirteen times before, the
most recent being Amendment No. 13 effective as of February 1, 1994; and
WHEREAS, it is desired to amend the Plan further to eliminate
the requirement that U. S. Government and U. S. Governmental agency
obligations forming a part of the investments in the Fixed Rate Investment Fund
be guaranteed as to the repayment of principal and the payment of interest by
the full faith and credit of the United States;
NOW THEREFORE, pursuant to the authority vested in the Board
of Directors by Section 9.1 of the Plan, the Plan is hereby amended in the
following respects, effective February 1, 1994:
1. Section 4.4(a) is amended by deleting the description
of Investment "Option A" and inserting in lieu thereof the following:
"OPTION A - A fixed rate investment fund, as
designated by the Committee or
its delegate,
<PAGE> 2
consisting of fixed interest rate
obligations issued by one or more
domestic insurance companies or
domestic banks each of which
satisfies the asset and
creditworthiness requirements
described below, and collective
short-term investment funds which
satisfy the creditworthiness
requirements described below. The
fixed interest rate obligations
shall, in accordance with guidelines
established by the Committee,
consist of either or both of the
following:
- fixed interest rate contracts
under which the payment of
interest and principal is
backed by the general assets
and surplus of the insurance
company or bank.
- fixed interest rate contracts
under which the payment of
interest and principal is
backed by a separate account
or trust portfolio of
short-term debt securities
which are (i) direct
obligations of the United
States, (ii) obligations of
an agency or instrumentality
of the United States, or
(iii) securities or receipts
evidencing ownership
interests in obligations or
specified portions (such as
principal or interest) of
obligations described in (i)
or (ii).
Each such insurance company or bank
issuing a fixed rate obligation
described above shall have at least
five billion dollars in assets, and
shall maintain a minimum Standard &
Poor's rating of AA- or a minimum
Moody's rating of Aa3.
Pending investment in fixed rate
obligations described above or for
the purpose of providing a source of
liquid funds for anticipated
transfers, monies invested in Option
A may be invested in one or more
collective short-term investment
funds, the investments under
-2-
<PAGE> 3
which shall consist of short-term
obligations or deposits, with an
average maturity of not more than
120 days and a maximum maturity of
not more than 30 months, which are
rated at least A1 by Standard &
Poor's and P1 by Moody's (or rated
at least AA in the case of
obligations with a maturity of 12
months or more) at the time of
acquisition."
IN WITNESS WHEREOF, United Parcel Service of America, Inc. has
caused this Amendment No. 14 to the Plan to be executed this day of
1994.
ATTEST: UNITED PARCEL SERVICE OF
AMERICA, INC.
By:
---------------------------- ------------------------------
-3-
<PAGE> 1
EXHIBIT 10(x)(10)
AMENDMENT NO. 15
TO THE
UPS SAVINGS PLAN
WHEREAS, United Parcel Service of America, Inc. (the "Employer") and
its affiliated corporations established, effective July 1, 1988, the UPS
Savings Plan (the "Plan") in order to permit their eligible employees to put
money aside on a tax deferred basis to supplement that which they will receive
from Social Security and other pension or retirement plans in which they
participate; and
WHEREAS, the Plan has been amended fourteen times before, the most
recent being Amendment No. 14, effective as of February 1, 1994; and
WHEREAS, it is desired to amend the Plan further to (i) reflect the
changes to the annual dollar limit on compensation under Section 401(a)(17) of
the Internal Revenue Code; and (ii) to make certain other technical changes;
NOW THEREFORE, pursuant to the authority vested in the Board of
Directors by Section 9.1 of the Plan, the Plan is hereby amended in the
following respects, effective January 1, 1989:
1. Subsection 1.1(b) is revised to read as follows:
(b) "Actual Deferral Percentage" means, for a
specified group of Employees for a Plan Year, the average of
the percentages (calculated separately for each Eligible
Employee in the group) of the compensation deferred by each
such Employee under this Plan, in accordance with Section
401(k)(3)(B) of the Code. For purposes of the foregoing,
compensation shall mean any of the following, as determined by
the Committee in a uniform manner with respect to all Eligible
Employees for the Plan Year:
(1) Compensation within the meaning of
Section 1.1(dd) (which includes amounts contributed as
Elective Deferrals to this Plan);
(2) The Eligible Employee's taxable
compensation from the Employer Company reported on Form W-2
for the Plan Year; or
(3) Such other nondiscriminatory
definition of compensation which satisfies the requirements of
Code Section 414(s) and the regulations thereunder.
In no event, however, shall an Eligible Employee's
annual compensation for purposes of this Section 1.1(b) exceed
the applicable dollar limit set forth in Section 1.1(h).
<PAGE> 2
2. Section 1.1(h) is revised to read as follows:
"Eligible Compensation" means the compensation or
wages paid to an Employee for the Plan Year by reason of his
or her employment by the Employer Company, including overtime
pay and commissions, and before any payroll deductions,
including Elective Deferrals hereunder, and salary reduction
contributions, if any, made on behalf of an Employee to the
UPS Flexible Benefits Plan or other plan described in Section
125 of the Code (other than Benefit Credits extended to the
Employee under the Flexible Benefits Plan), but excluding
bonuses, expense reimbursements and amounts allocated (other
than described as above) or benefits paid under any employee
benefit plan of the Employer Company. Notwithstanding the
foregoing, in no event shall the compensation of any Eligible
Employee as determined for the purposes of this Plan and taken
into account for any Plan Year exceed the following annual
dollar limitations:
<TABLE>
<CAPTION>
Plan Year Compensation Limit
--------- ------------------
<S> <C>
1989 $200,000
1990 $209,200
1991 $222,220
1992 $228,860
1993 $235,840
1994 $150,000
1995 and later years $150,000, increased by the applicable cost-of-living adjustment, if
any, for the calendar year sanctioned by Code
Section 401(a)(17).
</TABLE>
In determining the compensation of an Eligible Employee,
any compensation paid by the Employer Company to the spouse or
lineal descendant (who has not attained age 19 before the close of
the Plan Year) of an Eligible Employee who is (i) a 5% owner as
defined in section 416(i) of the Code or (ii) one of the 10
employees of the Employer Company paid the greatest compensation
during the Plan Year shall be treated as compensation paid to such
Eligible Employee. If, as the result of the application of the
foregoing sentence the applicable dollar limitation is exceeded,
then such limitation shall be prorated among the affected
individuals in proportion to each such individual's compensation
as determined for purposes of this Plan prior to the application
of the dollar limitations.
3. The following sentence is added to the end of Section 1.1(dd):
A Participant's Compensation shall not, however, exceed the
applicable dollar limit set forth in Section 1.1(h).
4. Section 8.3 is revised to read as follows:
Authority of Committee. The Committee shall establish
rules for the administration of the Plan, and shall decide
- 2 -
<PAGE> 3
all questions arising in the administration of the Plan not
specifically delegated or reserved to the Board of Directors, to
the Employer, or to the Trustee. Except as otherwise herein
expressly provided, the Committee shall have the exclusive right
and discretion to interpret the Plan, to construe the Plan's
terms, and to decide any matters arising in and with respect to
the administration and operation of the Plan, and, subject to the
claims procedure described at Section 8.5, any interpretations or
decisions so made shall be final and binding on all persons;
provided, however, that all such interpretations and decisions
shall be applied in a uniform manner to all persons.
5. Section 12.1(i) is revised to read as follows:
(i) "Total Compensation" is the Participant's compensation
as defined in Section 415(c)(3) of the Code, but shall not exceed
the applicable dollar amount set forth in Section 1.1(h).
6. Section 12.3 is deleted, and Sections 12.4 and 12.5 are renumbered
as Sections 12.3 and 12.4, respectively.
7. Effective July 1, 1994, Section 4.12(a)(2) revised to read as
follows:
Makes such contribution to the Trust within eighteen (18)
calendar months from the date of his or her retirement, or if,
later, within three (3) months from the date such Former
Participant's interest in the UPS Thrift Plan, if any, is actually
transferred from the General Fund to the Distribution Fund
pursuant to the terms of such plan.
IN WITNESS WHEREOF, United Parcel Service of America, Inc. has caused
this Amendment No. 15 to the Plan to be executed this 2nd day of December 1994.
ATTEST: UNITED PARCEL SERVICE OF
AMERICA, INC.
By:
---------------------------- ------------------------------
Secretary Chairman
- 3 -
<PAGE> 1
EXHIBIT 21
(21) Subsidiaries of the Registrant
March 24, 1995
<TABLE>
<CAPTION>
State of Date of
Parent Company Incorporation Incorporation
-------------- ------------- -------------
<S> <C> <C>
United Parcel Service of America, Inc. Delaware May 9, 1930
Wholly Owned Subsidiaries
-------------------------
United Parcel Service Co. Delaware January 22, 1953
United Parcel Service Deutschland Inc. Delaware September 10, 1980
United Parcel Service General Services Co. Delaware November 4, 1957
United Parcel Service, Inc. New York June 27, 1930
United Parcel Service, Inc. Ohio March 19, 1934
United Parcel Service, Inc. (Virginia) Virginia September 21, 1970
UPS Customhouse Brokerage, Inc. Delaware April 1, 1985
UPS International General Services Co. Delaware August 12, 1988
UPS International, Inc. Delaware July 5, 1988
UPS International Forwarding, Inc. Delaware August 13, 1990
UPS of Ireland, Inc. Delaware January 9, 1992
UPS of Argentina, Inc. Delaware March 17, 1992
UPS of Brazil, Inc. Delaware November 12, 1993
UPS of Portugal, Inc. Delaware June 30, 1992
UPS of Norway, Inc. Delaware September 25, 1992
United Parcel Service Espana Ltd. Delaware December 4, 1992
United Parcel Service Italia, S.R.L. Delaware January 11, 1993
UPS Truck Leasing, Inc. Delaware September 11, 1981
UPS Worldwide Forwarding, Inc. Delaware August 12, 1988
UPS Worldwide Logistics, Inc. Delaware December 18, 1992
UPICO Corporation Delaware December 26, 1974
Jet Fuel Service Co. Delaware February 7, 1989
Diversified Trimodal, Inc. Delaware July 25, 1979
Merchants Parcel Delivery Washington April 5, 1909
Texas United Parcel Service, Inc. Texas March 16, 1951
Trailer Conditioners, Inc. Delaware March 22, 1982
II Morrow, Inc. Oregon March 9, 1982
Red Arrow Bonded Messenger Corporation California November 16, 1922
UPS Air Leasing, Inc. Delaware October 12, 1989
Avenair Corporation Nevada November 14, 1994
Nevair Corporation Nevada November 10, 1994
Roadnet Technologies, Inc. Delaware May 12, 1986
UPS Telecommunications, Inc. Delaware April 25, 1990
UPS Properties, Inc. Delaware May 9, 1990
El Paso Distribution Center, Inc. (One) Texas September 17, 1990
El Paso Distribution Center, Inc. (Two) Texas September 17, 1990
Tri-State Distribution, Inc. (One) Illinois September 14, 1990
Tri-State Distribution, Inc. (Two) Illinois September 14, 1990
Tri-State Distribution, Inc. (Three) Illinois September 14, 1990
Tri-State Distribution, Inc. (Four) Illinois September 14, 1990
Tri-State Distribution, Inc. (Five) Illinois September 14, 1990
Vista Distribution Center, Inc. (One) Nevada September 14, 1990
Vista Distribution Center, Inc. (Two) Nevada September 14, 1990
Vista Distribution Center, Inc. (Three) Nevada September 14, 1990
Vista Distribution Center, Inc. (Four) Nevada September 14, 1990
Vista Distribution Center, Inc. (Five) Nevada September 14, 1990
Upinsco, Inc. U.S. Virgin Islands December 1, 1994
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
State of Date of
Wholly Owned Subsidiaries (cont.) Incorporation Incorporation
------------------------- ------------- -------------
<S> <C> <C>
Adi Realty Company Idaho March 30, 1979
Alko Corporation Oklahoma December 7, 1976
Bardale Company Illinois July 1, 1965
Basplaz Corporation Delaware January 16, 1987
Brastock Corporation Nebraska April 15, 1974
Brookind Corporation Illinois January 26, 1970
Buckroe Corporation Alabama September 17, 1984
Burdence Corporation Rhode Island September 26, 1969
Chasreal, Inc. West Virginia January 20, 1965
Cleve Company Ohio December 19, 1958
Cova Corporation Virginia March 13, 1978
Dakkel Corporation South Dakota February 11, 1971
Dalho Corporation Texas January 29, 1970
Darico, Inc. Connecticut May 26, 1969
Daven Corporation Iowa June 14, 1976
Deerfield Corporation Illinois June 20, 1986
Denado Corporation Colorado March 1, 1971
Dullesport Corporation Virginia September 2, 1987
Edison Corporation New Jersey April 21, 1970
Elsil Corporation Illinois July 3, 1986
Evind Corporation Indiana November 6, 1969
Fardak Corporation North Dakota February 11, 1971
Galanta Company Georgia July 15, 1968
Kylou, Inc. Kentucky May 24, 1982
Labar Corporation Louisiana October 12, 1983
Lakefair Corporation Virginia September 1, 1987
Mascester Company, Inc. Massachusetts June 13, 1969
Masreal Company, Inc. Massachusetts November 8, 1962
Mexalb Corporation New Mexico September 15, 1975
Minneagen Real Estate Company Minnesota January 28, 1985
Missjack Company Mississippi January 4, 1971
Montbill Corporation Montana July 22, 1976
Moroc Corporation Missouri October 16, 1972
Newbany Corporation New York September 23, 1969
Nubee, Inc. New York December 9, 1943
Oshcon Corporation Wisconsin April 16, 1974
Parkprop, Inc. Kansas March 7, 1989
Penallen Corporation Pennsylvania July 7, 1969
Ralcar Corporation North Carolina April 20, 1970
Rockapar Corporation Arkansas April 30, 1973
Royoak, Incorporated Michigan July 10, 1969
Sallad Corporation Texas February 26, 1982
Saluta Corporation Utah February 22, 1977
Saskan Corporation Kansas June 16, 1969
Kacika Corporation Kansas November 13, 1984
Socol Company, Inc. South Carolina July 2, 1969
</TABLE>
-2-
<PAGE> 3
<TABLE>
<CAPTION>
State of Date of
Wholly Owned Subsidiaries (cont.) Incorporation Incorporation
------------------------- ------------- -------------
<S> <C> <C>
Solacal Company California February 16, 1966
Lacalos Corporation Nevada January 29, 1986
Sophil Company Pennsylvania August 22, 1962
South Seventh Corporation Washington June 11, 1969
Stadiana, Inc. Indiana April 1, 1959
Swanpor Corporation Oregon May 13, 1970
Temphis Corporation Tennessee September 10, 1969
Valacal Company California July 7, 1966
Verbal Corporation Maryland September 18, 1969
Verlas Corporation Nevada March 24, 1971
Willmanch Corporation New Hampshire October 30, 1973
Wycas Corporation Wyoming June 10, 1976
Wyld, Inc. Delaware September 5, 1980
</TABLE>
-3-
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statements No. 33-46840, 33-57179 and 33-12576 (on Form S-8) and No. 33-54297
(on Form S-3) of United Parcel Service of America, Inc. of our report dated
February 8, 1995, appearing in this Annual Report on Form 10-K of United Parcel
Service of America, Inc. for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 29, 1995
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 261,038
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0
0
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<SALES> 19,575,690
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</TABLE>
