<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities and Exchange Act of 1934
For the Quarter Ended September 30, 1995
Commission file number O-4714
United Parcel Service of America, Inc.
(Exact name of registrant specified in its charter)
Delaware 95-1732075
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Glenlake Parkway, NE
Atlanta, Georgia 30328
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (404)828-6000
Not Applicable
Former name, address and fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities and Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
Common Stock, par value $.10 per share
(Title of Class)
580,000,000 shares
Outstanding as of November 10, 1995
<PAGE> 2
PART I. FINANCIAL INFORMATION
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1995 (unaudited) and December 31, 1994
(000's omitted except share amounts)
ASSETS 1995 1994
---------- ----------
CURRENT ASSETS:
Cash and short-term investments $ 326,165 $ 261,038
Accounts receivable 1,790,299 1,592,494
Prepaid employee benefit costs 106,916 439,430
Materials, supplies and prepaid expenses 469,891 381,179
Common stock held for stock plans 640,600 349,338
---------- ----------
TOTAL CURRENT ASSETS 3,333,871 3,023,479
PROPERTY, PLANT AND EQUIPMENT - at cost, net
of accumulated depreciation of $5,874,708
in 1995 and $5,325,159 in 1994 8,454,858 7,767,742
OTHER ASSETS 509,140 391,183
---------- ----------
$12,297,869 $11,182,404
========== ==========
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,142,344 $ 1,082,056
Accrued wages and withholdings 1,115,320 1,080,554
Dividends payable - 170,037
Deferred income taxes 156,348 136,260
Other current liabilities 545,580 433,578
---------- ----------
TOTAL CURRENT LIABILITIES 2,959,592 2,902,485
---------- ----------
LONG-TERM DEBT, net of current maturities
of $1,101 in 1995 and $1,675 in 1994 1,409,012 1,127,405
---------- ----------
ACCUMULATED POSTRETIREMENT BENEFIT
OBLIGATION, NET 782,064 588,860
---------- ----------
DEFERRED TAXES, CREDITS AND OTHER LIABILITIES 1,894,960 1,916,405
---------- ----------
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 307,067 295,441
Retained earnings 4,820,880 4,276,784
Cumulative foreign currency adjustments 66,294 17,024
---------- ----------
5,252,241 4,647,249
---------- ----------
$12,297,869 $11,182,404
========== ==========
See notes to consolidated financial statements.
<PAGE> 3
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Three Months and Nine Months Ended September 30, 1995 and 1994
(000's omitted except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
--------------------- -----------------------
1995 1994 1995 1994
------ ------ ------ ------
Revenue $5,139,925 $4,884,565 $15,399,564 $14,238,422
--------- --------- ---------- ----------
Operating Expenses:
Wages and employee
benefits 3,003,950 2,925,387 9,030,553 8,597,579
Other 1,542,156 1,553,017 4,720,979 4,528,447
Restructuring charge 353,318 - 372,318 -
--------- --------- ---------- ----------
4,899,424 4,478,404 14,123,850 13,126,026
--------- --------- ---------- ----------
Operating Profit 240,501 406,161 1,275,714 1,112,396
--------- --------- ---------- ----------
Other income and (expense):
Interest income 6,825 3,574 16,344 9,198
Interest expense (20,642) (2,766) (58,663) (23,920)
Miscellaneous, net (13,758) (12,369) (31,211) 39,284
--------- --------- --------- ---------
(27,575) (11,561) (73,530) 24,562
--------- --------- --------- ---------
Income before income taxes 212,926 394,600 1,202,184 1,136,958
Income taxes 88,986 162,676 477,036 470,019
--------- --------- --------- ---------
Net income $ 123,940 $ 231,924 $ 725,148 $ 666,939
========= ========= ========= =========
Net income per share $ 0.21 $ 0.40 $ 1.25 $ 1.15
========= ========= ========= =========
See notes to consolidated financial statements.
<PAGE> 4
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
Nine Months Ended September 30, 1995
(000's omitted)
(unaudited)
Cumulative
Additional Foreign Total
Common Stock Paid-In Retained Currency Shareowners'
Shares Amount Capital Earnings Adjustments Equity
------ ------ ------- -------- ----------- ------
Balance, January 1,
1995 580,000 $58,000 $295,441 $4,276,784 $17,024 $4,647,249
Net income - - - 725,148 - 725,148
Gain on issuance
of common stock
held for stock
plans - - 20,925 - - 20,925
Exercise of stock
options - - (9,299) - - (9,299)
Dividends
($.32 per share) - - - (181,052) - (181,052)
Foreign currency
adjustments - - - - 49,270 49,270
------- ------ ------- --------- ------ ---------
Balance,
September 30,1995 580,000 $58,000 $307,067 $4,820,880 $66,294 $5,252,241
======= ====== ======= ========= ====== =========
See notes to consolidated financial statements
<PAGE> 5
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 1995 and 1994
(000's omitted)
(unaudited)
1995 1994
---------- ---------
Cash flows from operating activities:
Net income $ 725,148 $ 666,939
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization 640,145 582,856
Postretirement benefits 78,061 77,742
Deferred taxes, credits, and other (53,421) (28,881)
Non-cash restructuring charge 338,453 -
Changes in assets and liabilities:
Accounts receivable (197,805) (300,793)
Prepaid employee benefit costs 121,351 72,799
Materials, supplies and prepaid
expenses (110,637) (61,706)
Common stock held for stock plans (291,262) (26,256)
Accounts payable 60,288 285,618
Accrued wages and withholdings 34,766 118,311
Dividends payable (170,037) (141,281)
Other current liabilities 112,576 (20,192)
--------- ---------
Net cash provided from operating
activities 1,287,626 1,225,156
--------- ---------
Cash flows from investing activities:
Capital expenditures (1,308,292) (1,143,758)
Proceeds from disposals of property, plant
and equipment 49,437 46,929
Other asset receipts and payments (97,431) 2,303
--------- ---------
Net cash (used in) investing activities (1,356,286) (1,094,526)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowings 552,654 55,900
Repayment of borrowings (272,149) (49,602)
Dividends (181,052) (140,556)
Other transactions 11,626 28,173
--------- ---------
Net cash provided from (used in)
financing activities 111,079 (106,085)
--------- ---------
Effect of exchange rate changes on cash 22,708 11,473
--------- ---------
Net increase in cash and short-term investments 65,127 36,018
Cash and short-term investments:
Beginning of period 261,038 280,960
--------- ---------
End of period $ 326,165 $ 316,978
========= =========
Cash paid during the period for:
Interest (net of amount capitalized) $ 30,824 $ 18,849
========= =========
Income taxes $ 483,551 $ 503,385
========= =========
See notes to consolidated financial statements.
<PAGE> 6
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months and Nine Months Ended September 30, 1995 and 1994
(unaudited)
1. For interim consolidated financial statement purposes, UPS
computes its tax provision on the basis of its estimated annual
effective income tax rate, and provides for accruals under its various
employee benefit plans based on one quarter of the estimated annual
expense for each three month period.
Net income per share is based on 580,000,000 shares in both 1995
and 1994, including common stock held for stock plans.
2. In the opinion of management, the accompanying interim, unaudited,
consolidated financial statements contain all adjustments (consisting
of normal recurring accruals) necessary to present fairly the financial
position as of September 30, 1995, the results of operations for the
three months and nine months ended September 30, 1995 and 1994, and
cash flows for the nine months ended September 30, 1995 and 1994.
3. During the second quarter of 1995, the Company received a Notice
of Deficiency from the United States Internal Revenue Service ("IRS")
asserting that it is liable for additional tax for the 1983 and 1984
tax years. The Notice of Deficiency is 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
deficiency sought by the IRS relating to package insurance is based on
a number of inconsistent theories and ranges from $8 million to $35
million of tax, plus penalties and interest for 1984.
Agents for the IRS have also asserted in reports that UPS is
liable for additional tax for the 1985 through 1987 tax years. The
additional tax sought by the agents relating to package insurance for
this period range from $89 million to $148 million, plus penalties and
interest, and are based on the same theories included in the above
described Notice of Deficiency.
In addition, the IRS and its 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. These issues
total $32 million in tax for the 1983 and 1984 tax years and $95
million in tax for the 1985 through 1987 tax year. Penalties and
interest are in addition to these amounts. The majority of these
adjustments would reverse in future years.
<PAGE> 7
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months and Nine Months Ended September 30, 1995 and 1994
(unaudited)
In August, 1995, the Company filed a petition in Tax Court in
opposition to the Notice of Deficiency. After consultation with tax
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. The IRS may
take positions similar to those in the reports described above for
periods after 1987.
4. Miscellaneous, net in the consolidated statement of income for the
nine months ended September 30, 1994, includes a gain of approximately
$46 million which resulted from the sale of a long-term investment
property in January 1994.
5. As part of UPS's overall effort to lower operating expenses, the
Company implemented a program of voluntary early retirement and
severance for certain, primarily management, employees which concluded
August 15, 1995. A one time charge of $372 million was recorded to
1995 operations of which $353 million was recorded in the third quarter
with the remaining $19 million previously recorded in the second
quarter.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS
Three Months Ended September 30, 1995 and 1994
Revenue increased by $255 million, or 5.2% for the three months
ended September 30, 1995 over the three months ended September 30,
1994. For the third quarter of 1995, domestic revenue totaled $4.464
billion, an increase of $150 million over the third quarter of 1994,
and international revenue totaled $676 million, an increase of $105
million.
Domestic revenue increased as a result of higher volume which was
up 0.4%, favorable changes in rates and a continuing shift toward
higher yielding packages. On February 4, 1995 published rates for
domestic ground services for commercial and residential deliveries were
increased by 3.9%. Additionally, the published rates for the 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 4.7% and
4.3%, respectively.
The increase in international revenue was primarily attributable
to higher volume, which was up 12.5% and the effect of stronger foreign
currencies. In addition, the majority of the increased volume related
to higher yielding export packages.
Operating expenses increased by $421 million, or 9.4%, primarily
due to a one time charge of $372 million of which $353 million was
recorded to third quarter operations for the voluntary early retirement
and severance program for certain, primarily management employees which
concluded August 15, 1995 ("restructuring charge"). Excluding this
restructuring charge, operating expenses increased 1.5% resulting in an
improvement in the operating ratio from 91.7 during 1994 to 88.4 during
1995. The improvement in the operating ratio, excluding the
restructuring charge of $353 million, is primarily a function of cost
control efforts during 1995. This trend should be further enhanced as a
result of the restructuring.
Operating profit for the period decreased by $166 million, or
40.8%, as a result of the restructuring charge of $353 million, offset
by higher revenue and an improved operating ratio, exclusive of the
restructuring charge.
Income before income taxes ("pre-tax income") decreased $182
million, or 46.0%. Domestic pre-tax income amounted to $283 million, a
decrease of $202 million, or 41.6% over the corresponding quarter of
the previous year. The decrease was a result of the restructuring
charge of $353 million. Ignoring the effect of this one-time charge,
domestic pre-tax income would have been up $151 million, or 31.3%,
primarily the result of higher operating profits. The international
pre-tax loss decreased by $20 million, or 22.2%, to $70 million for the
quarter.
The international pre-tax loss attributable to the foreign
domestic operations decreased by $19 million, or 31.1%, primarily as a
result of higher volume and improved operating margins. The pre-tax
loss associated with export operations decreased by $1 million, or
3.7%, and resulted primarily from higher volume and improved operating
margins. Export volume increased by 31.0% and 15.1% for international
and U.S. origin, export shipments, respectively. UPS expects that the
cost of operating its international business will continue to exceed
revenue in the near future.
<PAGE) 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS
Net income decreased by $108 million, or 46.6%, over the
corresponding quarter of the prior year. The net decrease resulted
from the restructuring charge of $353 million which was offset by
higher operating profits.
Nine Months Ended September 30, 1995 and 1994
Revenue increased by $1.161 billion, or 8.2% for the nine months
ended September 30, 1995 over the nine months ended September 30, 1994.
For the first nine months of 1995, domestic revenue totaled $13.365
billion, an increase of $736 million over the first nine months of
1994, and international revenue totaled $2.035 billion, an increase of
$425 million.
Domestic revenue increased as a result of higher volume which was
up 2.3%, first quarter rate increases and a continuing shift toward
higher yielding packages. The volume increase was mainly a result of
lower volume during the first quarter of 1994, which was affected by
severe weather conditions which disrupted both air and ground
operations and a one day strike in February 1994. On February 4, 1995,
published rates for domestic ground services for commercial and
residential deliveries were increased by 3.9%. 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 4.7% and 4.3%, respectively.
The increase in international revenue was primarily attributable
to higher volume, which was up 13.7%, and the effect of stronger
foreign currencies. In addition, the majority of the increased volume
related to higher yielding export packages.
Operating expenses increased by $998 million, or 7.6% over the
prior year. Included in this increase is a one time charge of $372
million for a voluntary early retirement and severance program for
certain, primarily management, employees which concluded August 15,
1995 ("restructuring charge"). Excluding this restructuring charge,
operating expenses increased only 4.8% resulting in an improvement in
the operating ratio, from 92.2 during 1994 to 89.3 during 1995. The
improvement in the operating ratio, excluding the restructuring charge,
is a function of cost control efforts during the first nine months of
1995 and adverse factors affecting results for the first quarter of
1994, as discussed above. These factors not only affected first
quarter 1994 volume, but increased first quarter 1994 operating costs
as well. The effect of cost control efforts should be further enhanced
as a result of the restructuring.
Operating profit for the period increased by $163 million, or
14.7%, as a result of the higher revenue and the improved operating
ratio offset by the restructuring charge of $372 million.
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS
Income before income taxes ("pre-tax" income) increased $65
million, or 5.7%. Domestic pre-tax income amounted to $1.373 billion,
a decrease of $23 million, or 1.6% over the corresponding period of the
previous year. Results for the period were reduced by the restructuring
charge of $372 million. Ignoring the effect of this one-time charge,
domestic pre-tax income would have been up $349 million, or 25.1%,
primarily due to higher operating profits. In 1994, domestic pre-tax
income included a non-recurring $46 million gain from the sale of an
investment property, as discussed in Note 4 to the accompanying,
unaudited financial statements. The international pre-tax loss
decreased by $88 million, or 34.0%, to $171 million for the first nine
months of 1995.
The international pre-tax loss attributable to the foreign
domestic operations decreased by $58 million, or 32.9%. The pre-tax
loss associated with export operations decreased by $30 million, or
36.4%. Both decreases were a result of the same reasons discussed
under the third quarter. Export volume increased by 40.6% and 18.0%
for the international and U.S. origin, export shipments, respectively.
As noted in the third quarter discussion, UPS expects that the cost of
operating its international business will continue to exceed revenue in
the near future.
Net income increased by $58 million, or 8.7% over the
corresponding period of the prior year. This increase resulted
primarily from improved operating profit.
The results of operations for the three months and nine months
ended September 30, 1995 are not necessarily indicative of the results
to be expected for the full year.
Liquidity and Capital Resources
As of September 30, 1995, UPS had borrowings outstanding of $541
million under its commercial paper program. Management anticipates
that UPS will have a continuing need for the near future to draw on its
commercial paper program to meet its working capital requirements.
During the first quarter of 1995, the amount which UPS can borrow under
this program was increased to $1 billion from $500 million. During the
second quarter of 1995, UPS entered into agreements with a consortium
of banks to renew its two revolving credit facilities, increasing the
amount of each facility to $1.25 billion from $500 million, with one
expiring June 12, 1996, and the other June 12, 2000. Management
believes that these funds, combined with the Company's internally
generated resources will provide adequate sources of liquidity and
capital resources to meet its expected future short-term and long-term
needs for the operation of its business, including anticipated capital
expenditures and purchase commitments.
During the second quarter of 1995, the Company received a Notice
of Deficiency from the United States Internal Revenue Service ("IRS")
asserting that it is liable for additional tax for the 1983 and 1984
tax years. Agents for the IRS have also asserted in reports that UPS
is liable for additional tax for the 1985 through 1987 tax years.
Reference is made here to Note 3 to the accompanying unaudited
consolidated financial statements for more information.
<PAGE> 11
PART II
Item 6 - Exhibits and reports on Form 8-K
a) Exhibits:
10) Material contracts
e) Employees Stock Purchase Plan, as amended
b) Reports on Form 8-K: no reports on Form 8-K were filed during the
quarter.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
UNITED PARCEL SERVICE OF AMERICA, INC.
(Registrant)
By: /S/ Robert J. Clanin
Robert J. Clanin
Senior Vice President,
Treasurer and
Chief Financial Officer
Date: November 10, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 326,165
<SECURITIES> 0
<RECEIVABLES> 1,790,299
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,333,871
<PP&E> 14,329,566
<DEPRECIATION> 5,874,708
<TOTAL-ASSETS> 12,297,869
<CURRENT-LIABILITIES> 2,959,592
<BONDS> 1,409,012
<COMMON> 58,000
0
0
<OTHER-SE> 5,194,241
<TOTAL-LIABILITY-AND-EQUITY> 12,297,869
<SALES> 15,399,564
<TOTAL-REVENUES> 15,399,564
<CGS> 0
<TOTAL-COSTS> 14,123,850
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,663
<INCOME-PRETAX> 1,202,184
<INCOME-TAX> 477,036
<INCOME-CONTINUING> 725,148
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 725,148
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
</TABLE>
United Parcel Service of America, Inc.
EMPLOYEES STOCK PURCHASE PLAN
1. Purpose.
The purpose of this Plan is to allow the participation by
certain employees in the Company's success and increase the
incentive for such employees to make major contributions to the
Company by providing them with the opportunity to acquire equity
interests in the Company in the manner contemplated by this Plan.
2. Definitions.
As used in this Plan, the following definitions shall apply:
"Board" means the Board of Directors of UPS and, when
appropriate, the Executive Committee of the Board of Directors,
acting for the Board.
"Current Price" with regard to a share of UPS Common Stock
at any time means the price per share at which the Board has most
recently authorized UPS to purchase UPS Common Stock from
shareowners, and with regard to a share of Overseas Capital Stock
at any time means the book value per share of Overseas Capital
Stock as determined from Overseas' most recent audited balance
sheet as reported in Overseas' most recently published Annual
Report mailed to its shareowners or otherwise generally made
available to Overseas' shareowners.
"Overseas" means Overseas Partners Ltd., a Bermuda
corporation.
"Overseas Capital Stock" means capital stock of Overseas,
par value of $0.10 per share.
"Plan" means this United Parcel Service of America, Inc. Employees
Stock Purchase Plan, as the same may be amended, modified or
supplemented from time to time.
"Subsidiaries" means any corporation more than fifty percent
(50%) of whose outstanding voting securities is owned by UPS or
by one or more of UPS other Subsidiaries.
"Unit" means one share of UPS Common Stock and one-fourth
share of Overseas Capital Stock.
"Unit Price" means the sum of the Current Price of one share
of UPS Common Stock and the Current Price of one-fourth share of
Overseas Capital Stock.
"UPS" means United Parcel Service of America, Inc., a Delaware
corporation and its Subsidiaries.
"UPS Common Stock" means Common Stock of UPS, par value
$0.10 per share.
"UPS Employees Stock Trust" means a trust arrangement
established by agreements conforming to the trust agreement made
as of August, 1995, and all amendments thereto, among certain
employees of UPS and First Fidelity Bank, N.A., Newark, N.J., as
Trustee ("Fidelity"), or any successor trust arrangement. The
current form of UPS Employees Stock Trust is attached as Exhibit
A hereto.
"UPS Incentive Plan" means that certain incentive plan
created by the Board for certain managers and supervisors of UPS,
and any other such plans as may be created from time to time by
the Board.
"UPS Stock Option Plan" means the 1986 stock option plan and
1991 stock option plan created by the Board, and any other such
plans as may be created from time to time by the Board.
3. Plan Adoption and Term.
A. This Plan shall become effective upon adoption by the
Board and upon the effectiveness of the applicable registration
statement registering this offering.
B. This Plan shall continue for an indefinite period until
terminated by UPS pursuant to the terms hereof.
4. Eligibility.
A. Eligibility in the Plan shall be limited to the
following employees of UPS ("eligible employees") provided that
such employees have not sold any shares of UPS Common Stock or
Overseas Capital Stock during the preceding 12 months for a
reason other than the satisfaction of an immediate and
significant financial need: active employees who, on the date on
which their respective subscriptions are accepted by UPS, have
been employed by UPS for at least one year.
B. Notwithstanding the above, inactive employees who
otherwise meet the eligibility requirements in Subsection A above
may, from time to time, be deemed eligible to participate in the
Plan in the sole discretion of the Board or committee of the
Board.
C. For purposes of this section, the term "immediate and
significant financial need" shall mean (i) expenses for medical
care previously incurred by the employee, the employee's spouse,
or any dependents of the employee or expenses necessary for these
persons to obtain medical care; (ii) costs directly related to
the purchase of a principal residence for the employee; (iii)
payment of tuition, related educational needs, and room and
board expenses for the next 12 months of post-secondary education
for the employee, or the employee's spouse, children, or
dependents; and (iv) payments necessary to prevent the eviction
of the employee from his or her principal residence or
foreclosure on the mortgage on that residence.
D. In addition to purchasing Units individually, an
employee who is eligible to participate in the Plan may direct a
trustee or custodian (an "eligible fiduciary") of his or her
self-directed individual retirement account (within the meaning
of Section 408(a) of the Internal Revenue Code) to subscribe to
Units under this Plan as long as such individual retirement
account provides that the eligible fiduciary may purchase and
sell only upon the direction of the eligible employee under such
account, and the terms of the individual retirement account
provide that the UPS Common Stock and Overseas Capital Stock held
by the account will not be commingled with other property,
including a common trust fund or common investment fund within
the meaning of Section 408(a)(5) of the Internal Revenue Code
which holds individual retirement account assets or the assets of
employee benefit plans exempt from taxation under Section 401(a)
of the Internal Revenue Code. Eligible fiduciaries may subscribe
to units only for individual retirement accounts of eligible
employees. Any eligible fiduciary shall provide such information
as UPS may require to establish such fiduciary's status as such,
which may include information regarding the establishment of the
individual retirement account and the eligible fiduciary's
authority to act in accordance with the instructions of the
directing eligible employee.
5. Limitation on Number of Units.
UPS Common Stock and Overseas Capital Stock held by UPS or
acquired by UPS are subject for purchase in Units under the Plan.
The availability of such Units for purchase under this Plan is
subject, however, to UPS's corporate needs for such shares, such
as for distributions of shares of UPS Common Stock and/or
Overseas Capital Stock (i) to participants in the Incentive Plan;
(ii) to fulfill UPS's obligations under the Stock Option Plan;
and (iii) to fulfill subscriptions for Overseas Capital Stock,
pursuant to an offering maintained by UPS for its eligible
managers and supervisors (the "Continuous Offering").
Availability of shares of UPS Common Stock and Overseas Capital
Stock will be determined by UPS in its sole discretion.
6. Purchase Price; Delivery of Shares; Payment.
A. The purchase price for each Unit shall equal the Unit
Price. The Unit Price shall change from time to time to reflect
changes in the Current Price of either UPS Common Stock or
Overseas Capital Stock.
B. Payment of the purchase price for Units purchased shall
be made by cash subscription. An eligible employee (either
individually or through his or her eligible fiduciary) may
subscribe to the purchase of not less than a total of 20 or more
than 10,000 units annually by delivering to UPS a fully executed
subscription agreement in the form of Exhibit B hereto (the
"Subscription Agreement"), together with a check or money order
payable to "United Parcel Service of America, Inc." for the
aggregate Unit Price of the Units subscribed to. Units must be
purchased in multiples of four.
C. All shares of UPS Common Stock shall be subject to the
UPS Employees Stock Trust. As a condition to the receipt of UPS
Common Stock, the subscriber shall execute and deliver to the
Trustee of the UPS Employees Stock Trust a trust deposit
agreement in the form of Exhibit C hereto. UPS shall then
deposit with or deliver to the Trustee the UPS Common Stock so
issued to be held by the Trustee in trust for such subscriber's
benefit pursuant and subject to the terms of the UPS Employees
Trust Agreement. The Overseas Shares will be deposited with
Fidelity, as Custodian for each subscriber.
7. Acceptance of Subscriptions by UPS.
A. No subscription for the purchase of Units will become
binding upon UPS until it has been accepted by UPS. UPS reserves
the right, at its sole discretion, to accept or reject any
subscription in part or in its entirety.
B. UPS's acceptance of a subscription will take place upon
the mailing to the subscriber of a notice of acceptance,
confirming UPS's acceptance of the subscription, and showing the
number and Current Prices of the UPS Common Stock and Overseas
Capital Stock sold to the subscriber ("Notice of Acceptance").
The subscriber will be advised of the acceptance of his or her
subscription by receipt from Fidelity, as Trustee under the UPS
Employees Stock Trust and as Custodian for shares of Overseas
Capital Stock, indicating the number of shares of UPS Common
Stock and Overseas Capital Stock newly allocated to his or her
account. The receipt will be mailed to the subscriber as soon as
practicable after the purchase date.
C. UPS will not accept a subscription for the purchase of
Units submitted on a subscription agreement until the
subscriber's check or money order has been collected. If any
check or money order submitted as payment cannot be collected,
UPS may, in its discretion, return the subscription documents or
request the subscriber to forward cash or wire funds in the
amount of his or her payment.
D. If a subscription submitted for a number of units not
evenly divisible by four results in a subscription for a
fractional number of shares of Overseas Capital Stock, UPS may,
at its option, (i) reject the subscription in full; (ii) notify
the subscriber and allow him or her the opportunity to remit the
additional amount to yield a whole share; or (iii) fulfill the
subscription for the purchase of the whole number of shares of
Overseas Capital Stock included in the units and for which
payment has been received, and refund any excess monies to the
subscriber. Currently, UPS intends to reject subscriptions that
are for fractional amounts.
8. Normal Processing and Acceptance of Subscriptions.
The process of reviewing subscriptions to determine
acceptability and the mailing of Notices of Acceptance as
provided herein, may require up to 15 days after UPS receives the
subscription. Eligible employees whose subscriptions for Units
are received less than 15 days prior to a change in the Current
Price of UPS Common Stock or Overseas Capital Stock may incur an
increase in the Unit Price or in the Current Price of the UPS
Common Stock or Overseas Capital Stock to which they subscribe.
Subscriptions for Units received within 15 days prior to the
record date of a dividend on UPS Common Stock or Overseas Capital
Stock may not be processed in time to enable the subscriber to
receive the dividend. UPS and Overseas shall in no event be
liable for any costs or damages to such subscriber due to such
changes in price.
9. Delayed Acceptance of Subscriptions.
A. If a delay in the ability of UPS to accept
subscriptions within the normal processing period arises due to
UPS's determination, in its sole discretion, that there are not a
sufficient number of shares of UPS Common Stock and/or Overseas
Capital Stock available to satisfy all subscriptions for Units
which UPS has accepted or which it anticipates accepting in any
period, UPS will fill subscriptions for units as such
subscriptions are received in accordance with the election
provided in Subsection B below.
B. Subscribers of units shall be given the opportunity to
elect on the Subscription Agreement one of the following choices
to be effective in the event that UPS makes a determination that
there are not enough shares to satisfy such subscription:
1. to allow UPS to substitute for such unavailable
UPS or Overseas shares any available shares equal to the value of
the unavailable shares and return to the subscriber any amount,
without interest, of the subscription, relating to any fractional
amount of available shares that would result from such
subscription and any unavailable shares still remaining after
such substitution;
2. to allow UPS to fill his/her subscription for
units with the available shares allocable to such units and
return to the subscriber the amount, without interest, of the
subscription allocable to the unavailable shares; or
3. to require UPS to cancel his/her Subscription
Agreement and return his/her checks or money order, without
interest.
If no election is made on a Subscription Agreement, UPS
will reject the Subscription Agreement as provided in Subsection
C.
C. UPS reserves the right to determine the acceptability
of individual subscriptions. If a subscription is rejected by
UPS or withdrawn by the subscriber, the subscription price will
be returned to the subscriber without interest. If the
subscription is delayed due to questions as to the acceptability
of an individual subscription but is ultimately accepted, the UPS
Common Stock will be delivered to Fidelity as Trustee under the
UPS Employees Stock Trust and the Overseas Capital Stock will be
delivered to Fidelity as Custodian for Overseas Capital Stock, as
described herein. In no event will interest be paid on account of
such subscription payment.
10. Effects of Changes in Current Prices or Dividends on
Unaccepted Subscriptions.
Units will be sold at the Unit Price in effect when the
subscription is accepted by UPS. Subscribers who remitted
payment with their Subscription Agreement and whose subscriptions
have not been accepted by UPS at the time of an increase in the
Current Price of either UPS Common Stock or Overseas Capital
Stock will be notified of the increase, and the individual
subscriber may then choose either (i) to withdraw his or her
subscription, (ii) to pay UPS the additional amount needed to pay
the higher Unit Price of the Units, or (iii) to reduce to not
less than four the number of Units subject to the subscription.
If the Current Price of UPS Common Stock or Overseas Capital
Stock decreases at any such time, UPS will give notice to
subscribers of this fact and afford them the opportunity to
withdraw their subscription or, in the alternative, either to
seek a refund of the amounts not needed to pay the Unit Price for
the subscribed Units or to increase the number of Units which the
subscriber desires to purchase.
11. Rejection of Subscriptions.
Notwithstanding any provision of this Plan to the contrary,
UPS, in its absolute discretion, may accept or reject any
subscription until the subscription has been accepted. Upon the
rejection of a subscription, UPS will refund to the subscriber,
without interest, any monies paid by such subscriber on account
of his or her subscription.
12. Delivery of the Units for the Account of Subscribers upon
Acceptance.
A. As soon as practicable after UPS has accepted a
subscription, UPS will deliver (i) to the Trustee of the UPS
Employees Stock Trust, for the benefit of the subscriber, the UPS
Common Stock subscribed to by the subscriber and (ii) to the
Custodian of the Overseas Capital Stock, for the benefit of the
subscriber, the Overseas Capital Stock subscribed to by the
subscriber. A receipt for the UPS Common Stock will be sent to
subscribers by Fidelity as Trustee under the UPS Employees Stock
Trust, and acknowledgments for the Overseas Capital Stock will be
sent to subscribers by Fidelity as Custodian for the Overseas
Capital Stock.
B. The Overseas Capital Stock will be deposited with
Fidelity as Custodian for each subscriber. Fidelity will
register the shares in its name and will sell or otherwise
dispose of the shares upon the subscriber's instruction and in
conformity with the restrictions contained in the subscription
agreements. Any cash dividends and other distributions which may
be paid on the Overseas Capital Stock will be promptly remitted
by Fidelity, as Custodian, to the subscriber. Until instructions
are received by Fidelity requesting that the certificates for
Overseas Shares be delivered to a purchaser, Fidelity will
continue to hold such shares as Custodian for the purchaser.
13. Rights of UPS to Repurchase UPS Common Stock and Overseas
Capital Stock Sold pursuant to the Plans.
A. Pursuant to UPS's Certificate of Incorporation, UPS has
the right to purchase all or a portion of the shares of UPS
Common Stock which a shareowner seeks to sell or otherwise
attempts to transfer for value to a third person at the same
price and upon the same terms as the shares are proposed to be
sold to the third person. In addition, all of the UPS Common
Stock shall be subject to UPS's purchase rights and the
restrictions on transferability under the UPS Employees Stock
Trust. Any transferee of UPS Common Stock shall hold these
shares subject to these rights of purchase by UPS.
B. Overseas' Bye-Laws provide UPS with the right to
purchase all or a portion of the shares of Overseas Capital Stock
upon a proposed sale or other attempted transfer for value of
those shares, at a price equal to the lesser of the defined book
value of the shares proposed to be sold or the proposed sale
price. In addition, Overseas Capital Stock shall be subject to
the right to purchase Overseas Capital Stock as provided in the
Subscription Agreement. A legend describing this right of
purchase may be placed on the certificates representing the
Overseas Capital Stock. Any transferee of Overseas Capital Stock
shall hold these shares subject to this right of purchase by UPS.
14. No Special Employment Rights.
Nothing contained in this Plan or any Unit shall confer upon
any employee any right with respect to the continuation of his or
her employment by UPS or any Subsidiary or interfere in any way
with the right of UPS or any Subsidiary at any time to terminate
such employment or to increase or decrease the compensation of
the employee from the rate in existence at the time of the grant
of a Unit.
15. Amendment of the Plan.
A. This Plan may at any time or from time to time be
modified, amended, supplemented or terminated by the Board. UPS
reserves the right, in its sole discretion, to change any term or
condition of, or terminate in its entirety, this Plan at any
time, or from time to time. The interpretation of the terms and
conditions of this Plan shall be in the sole discretion of the
Board, or any committee of the Board to which the Board has
delegated such responsibility, and any such interpretation which
may be made by the Board or any such committee from time to time
is final and binding upon all offerees and subscribers.
B. If, at any time or from time to time there shall be a
change in the nature of a share of UPS Common Stock or Overseas
Capital Stock as a result of a combination or reclassification of
such shares, as a subdivision of such shares characterized by the
Board or Overseas, as the case may be, as a stock split or stock
dividend, or other similar event, then unless the Board shall
otherwise expressly determine, the number or type of shares of
UPS Common Stock or Overseas Capital Stock comprising a Unit
shall automatically be changed and adjusted to reflect such
combination, reclassification, subdivision or other event.
