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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-4714
UNITED PARCEL SERVICE OF AMERICA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-1732075
(State or other jurisdiction (I.R.S. Employer ID. No.)
of incorporation or organization)
55 GLENLAKE PARKWAY, NE 30328
ATLANTA, GEORGIA (Zip Code)
(Address of principal executive office)
(404) 828-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
----------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
None None
</TABLE>
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.10 PER SHARE
(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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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]
As of February 28, 1997, the aggregate market value of the common stock held
by non-affiliates of the registrant, based on a price per share of $29.75, the
price per share at which the registrant expressed its willingness to purchase
its shares from shareowners wishing to sell their shares on February 28, 1997,
was $15,137,212,811.
The number of shares of United Parcel Service of America, Inc. Common Stock
issued as of February 28, 1997 was 570,000,000. The number of shares of United
Parcel Service of America, Inc. Common Stock subject to the UPS Managers Trust
and the UPS Employees Stock Trust issued, as of February 28, 1997, was
330,959,100.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for its annual
meeting of shareowners scheduled for May 8, 1997 are incorporated by reference
into Part III of this Report.
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PART I
ITEM 1. BUSINESS.
United Parcel Service of America, Inc. ("UPS"), through its subsidiaries,
provides specialized transportation and logistics services, primarily through
the pickup and delivery of packages and documents. Service is offered
throughout the United States and over 200 other countries and territories
around the globe. In terms of both revenue and volume, UPS is the largest
package distribution company in the world, with revenues of over $22 billion
in 1996 generated by the delivery of more than three billion packages and
documents. UPS provides a daily pickup service for over 1.4 million customers.
With minor exceptions, UPS Common Stock, $.10 par value per share (the
"Common Stock"), is owned by or held for the benefit of its active employees
and their families, former employees and their estates or heirs, charitable
foundations established by UPS founders and their family members or by other
charitable organizations that acquired stock by donations from shareowners or
from UPS itself. UPS Common Stock is not listed on a national securities
exchange or traded in the organized over-the-counter markets.
UPS was originally organized in the State of Washington in 1907 and was
reincorporated in the State of Delaware in 1930. When used herein, the terms
"UPS" and the "Company" refer to United Parcel Service of America, Inc., a
Delaware corporation and its subsidiaries.
DELIVERY SERVICE IN THE UNITED STATES
UPS offers pickup and delivery of packages by means of ground and air
transportation throughout the United States. This business accounted for
approximately 86.6%, 86.7% and 88.4% of the Company's consolidated revenue in
1996, 1995 and 1994, respectively. For additional financial information
relating to domestic and international operations, see Note 10 to the
Consolidated Financial Statements filed herewith.
Ground Services
For most of its history, UPS has been engaged primarily in the delivery of
packages traveling by means of ground transportation. This service was
expanded gradually and today standard ground service is available for
interstate and intrastate destinations, serving every address in the 48
contiguous states and intrastate in Alaska and Hawaii. Service is restricted
to packages that weigh no more than 150 pounds and are no larger than 108
inches in length and 130 inches in length and girth combined.
In addition to its standard ground delivery product, UPS provides a variety
of ground shipment options. UPS Hundredweight Service(R) offers discounted
contract rates to customers sending multiple package shipments having a
combined weight of 200 pounds or more, or air shipments totaling 100 pounds or
more, addressed to one consignee at one address, with delivery on the same
day. Customers can realize significant savings on these shipments compared to
regular ground or air service rates. UPS Hundredweight Service reaches all 48
contiguous states. In February 1997 the Company extended the Hundredweight
Service to all UPS customers, allowing them to take advantage of the
discounted pricing available with UPS Hundredweight Service, but without a
contract. UPS GroundSaver(R) is another contract service which offers special
rates and services for business-to-business shipments in specified ZIP Codes.
Domestic Air Services
UPS provides domestic air delivery throughout the United States, with
electronic tracking information available for all these domestic time definite
services. The Company's premium express service is UPS Next Day Air(R), which
offers guaranteed next business day delivery by 10:30 a.m. to more than 75% of
the United States population, and delivery by noon to areas covering an
additional 14%. Saturday delivery is offered for UPS Next Day Air shipments to
most areas of the country for an additional fee.
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UPS Next Day Air Early A.M.(R) service guarantees next day delivery of
packages and documents by 8:00 or 8:30 a.m. to approximately 1,400 cities
nationwide. UPS Next Day Air Early A.M. service is available from virtually
all overnight shipping locations coast to coast. In addition, UPS Next Day Air
SaverSM offers next day delivery by 3:00 or 4:30 p.m. to commercial
destinations in the contiguous United States and by the end of the day to
residential destinations.
UPS offers three options for customers who desire less expensive guaranteed
delivery services. UPS 2nd Day Air A.M.(TM) provides guaranteed delivery of
packages and documents by noon of the second business day, UPS 2nd Day Air(R)
provides guaranteed delivery of packages and documents in two business days
and UPS 3 Day Select(R) provides guaranteed delivery in three business days.
Developed primarily for longer distance customers who need time-definite
delivery and higher levels of information, UPS 3 Day Select is priced between
traditional ground and air express services.
UPS SonicAir(R) service offers same-day or "next flight out" delivery
service to virtually any location in the continental United States from
delivery pickup locations in the United States, as well as to many
international business centers. Same day and logistics services, including
critical parts warehousing, are available through UPS SonicAir service 24
hours a day, 365 days a year.
To support its growth, in 1996 UPS continued to invest in new equipment,
primarily in the form of additional aircraft and facility expansions. During
1996, UPS took delivery of five Boeing 757-200 freighter aircraft and ten
Boeing 767-300 freighter aircraft. UPS also purchased two 747-200 aircraft
which will be converted to freighter service and delivered in 1997. See
"Properties--Aircraft."
UPS continues to work on improving its domestic air service through better
utilization of its regional air hub network. The Company's domestic regional
air hubs are located in Columbia, South Carolina, Philadelphia, Pennsylvania,
Dallas, Texas, Rockford, Illinois, and Ontario, California. Louisville,
Kentucky is the site of the Company's all-points international air hub, where
most of the Company's air volume is processed. The regional air hub in
Columbia, South Carolina opened in September 1996. A new regional air hub in
Hartford, Connecticut is currently under construction and is expected to
commence operations in late 1997. This new facility will include UPS Next Day
Air and UPS 2nd Day Air sort operations, and it will process much of UPS's air
volume originating in New England.
INTERNATIONAL DELIVERY SERVICE
UPS offers guaranteed overnight delivery to more than 200 countries and
territories worldwide. Foreign domestic and export business accounted for
approximately 13.4%, 13.3%, and 11.6% of consolidated revenues in 1996, 1995
and 1994, respectively. For additional financial information relating to
domestic and foreign operations, see Note 10 to the Consolidated Financial
Statements filed herewith.
Throughout 1996, UPS continued to develop its global delivery and logistics
network. In September 1996, UPS launched a complete portfolio of services
across major European countries that was designed to provide a uniform service
offering. This new portfolio replaced the variety of services that were
previously available in the individual countries and includes guaranteed 8:30
a.m. and 10:30 a.m. next-business day delivery to major cities, as well as
scheduled day-definite ground service.
UPS Worldwide Express provides door-to-door custom-cleared delivery to over
200 countries and territories. This service includes guaranteed overnight
delivery of documents from major U.S. cities to many international business
centers and guaranteed second business day delivery by 10:30 A.M. for packages
to over 280 cities in Europe. Shipments to other destinations via UPS
Worldwide Express are generally delivered in two business days. UPS Worldwide
Express Plus complements the regular express service by providing guaranteed
early morning delivery options from international locations to major cities
around the world and on March 31, 1997, the Company plans to extend this
service by providing guaranteed early morning second day delivery from the
United States to over 150 cities in Europe.
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UPS also offers UPS Worldwide Expedited. This service is an alternative to
traditional air freight and is designed to meet customers' requirements for
their routine shipments that do not require overnight or express delivery.
Shipments to Mexico and Canada are delivered in three business days and
shipments to most major destinations in Europe and Asia are generally
delivered in four business days. Both UPS Worldwide Express and Worldwide
Expedited services are offered between many international locations and from
international locations to the United States, though the time and delivery
guarantees provided from the international locations may vary from country to
country.
UPS Standard service is offered between the United States and Canada and
between European Union countries. Standard service is a door to door, time-
definite ground service offering full tracking capabilities. UPS SonicAir
service also provides international deliveries with a next-flight-out service
for urgent letters and packages. This service generally provides 24 hour
delivery service to more than 180 countries.
The Company has a European air hub in Cologne, Germany and has recently
established an Asian-Pacific air hub in Taipei, Taiwan. This facility is under
construction and is expected to commence operations in 1997.
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. 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 deliveries. Immediate confirmation is provided upon
request. Delivery Confirmation is available throughout the United States and
Puerto Rico.
UPS GroundTracSM service electronically tracks ground packages so that UPS's
customers can receive immediate information about the status of their packages
while in transit. With the introduction of in-vehicle data transmission
capabilities, this service enables customers in the United States, Canada and
Germany to receive verification of deliveries within minutes after they are
completed. Shippers can also access tracking information 24 hours a day, seven
days a week, by telephone or through the UPS OnLine(TM) tracking software,
which enables customers to track and trace their own packages via
telecommunications links with the Company's electronic data systems. The UPS
OnLine shipping system further 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. In addition, the UPS Worldwide Web site permits customers to
access tracking and shipping information, request pick-up service and locate
drop-off locations.
RATES
During the first quarter of 1997, rates for standard ground shipments were
increased an average of 3.4% for commercial deliveries and 4.3% for
residential deliveries. Rates for UPS Next Day Air and UPS 2nd Day Air each
increased approximately 3.9% in 1996. Rates for UPS 3 Day Select also
increased approximately 3.9% in 1996. All increases were limited to deliveries
within the continental United States.
Rates for international shipments originating in the United States were
increased 2.6% for UPS Worldwide Express and 4.9% for UPS Worldwide Expedited.
Rate changes for shipments originating outside the United States have been
made throughout the past year and vary by geographic market. Rates for UPS
Standard service to Canada did not change.
COMPETITION
UPS is the largest package distribution company in the world, in terms of
both revenue and volume. UPS also offers a broad array of services in the
package delivery industry, and therefore competes with many companies and
services on a local, regional, national and international basis. These include
the postal services of the United States and other nations, various motor
carriers, express companies, freight forwarders, air couriers and others.
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Competition is increasingly based on the ability of carriers to offer highly
reliable, customized delivery solutions, rich with information, at competitive
prices. UPS endeavors to attract customers by offering value-added services
such as delivery guarantees, tracking services and performance reports. In
recent years, the Company has directed a large portion of its resources to
compete for higher revenue, "premium" service packages and documents (such as
UPS Next Day Air, UPS 2nd Day Air, UPS 3 Day Select and UPS Worldwide Express)
as well as for commercial, or "business-to-business" packages. However, UPS
still values and competes intensely for residential delivery volume.
REGULATION
Pursuant to the Federal Aviation Act of 1958, as amended, both the
Department of Transportation (the "DOT") and the Federal Aviation
Administration (the "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 of the United States, international
routes, fares, rates and practices and is authorized to investigate and take
action against discriminatory treatment of United States air carriers abroad.
The FAA's 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 1996 were
approximately $14 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
(the "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.
However, UPS remains subject to the jurisdiction of the DOT, the department
into which the ICC was merged in January 1996, with respect to the regulation
of rates, routes and services, while the states maintain regulation over such
areas as safety, insurance and hazardous materials. UPS is subject to similar
regulation in many foreign jurisdictions.
POSTAL RATE PROCEEDINGS
The Postal Reorganization Act of 1970 (the "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 (the "Commission"). UPS believes
that the Postal Service consistently attempts to set rates for its monopoly
services, particularly First Class letter mail, above the cost of providing
such services and uses the excess revenues to subsidize its expedited, parcel,
international, and other competitive services. Therefore, UPS participates in
the postal rate proceedings before the Commission in an attempt to secure fair
postal rates for competitive services.
On February 21, 1997, the Postal Service filed a request for a recommended
decision on parcel classifications and rates with the Commission. On February
27, UPS filed a notice of intervention with the Commission.
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A bill that would result in significant amendments to the Act has been
introduced in the United States House of Representatives. If adopted as
currently written, the bill would introduce a form of rate-cap regulation of
monopoly services, loosen regulation of competitive services and, for certain
matters, strengthen the powers of the Commission.
OTHER OPERATIONS
Several of the Company's other operations have been grouped together under a
new company, UPS Logistics Group, Inc. ("Logistics Group"), which was formed
in early 1996. Logistics Group is the parent company for six subsidiaries that
encompass the core of these operations.
UPS Worldwide Logistics, Inc. ("Worldwide Logistics"), a subsidiary of the
Logistics Group, is a third-party provider of supply chain management
solutions for a number of industries, including high-tech, telecommunications,
apparel, automotive, and electronics. Worldwide Logistics designs and operates
basic inventory, warehouse, and transportation management services, as well as
complex integrated logistics services for its customers' inbound, outbound,
and international logistics needs. Worldwide Logistics operates warehouses in
the United States and Mexico, Singapore, Hong Kong, Japan, Netherlands and
Germany, using state of the art information systems that reduce customers'
distribution and capital costs.
UPS Truck Leasing, Inc. ("UPS Truck Leasing"), a subsidiary of the Logistics
Group, rents and leases trucks and tractors to commercial users under full-
service rental agreements. As of December 31, 1996, UPS Truck Leasing had 43
facilities and a fleet of 4,504 vehicles. The other companies in the Logistics
Group include: Roadnet Technologies, Inc., a route scheduling software
developer; Diversified Trimodal, Inc., also known as Martrac, which transports
produce and other commodities in temperature-controlled trailers over
railroads; SonicAir, Inc. which provides same day and next-flight-out delivery
services and critical parts warehousing; and Worldwide Dedicated Services,
Inc., which provides dedicated contract carrier services.
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. As of December 1994, UPS substantially completed this
project ahead of the mandated Environmental Protection Agency ("EPA")
schedule.
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. UPS began a project in 1989 using clean compressed natural
gas ("CNG") as a fuel in the package cars. By the end of 1996, more than 600
package cars were running on CNG in various cities. The EPA's final rules
under the Clean Air Act Amendments of 1990 established regulations governing
the exemption of clean fuel fleet vehicles from certain transportation control
measures ("TCMs"). The regulations exempt clean fuel vehicles, such as UPS's
CNG vehicles, from urban TCMs, such as truck bans and time-of-day
restrictions. The regulations also permit the CNG vehicles to travel in high
occupancy vehicle lanes, provided they meet certain emission criteria.
All of the aircraft owned by UPS meet Stage III federal noise regulations.
For additional information regarding compliance with such regulations, see
Item 2, "Properties--Aircraft."
EMPLOYEES
As of January 31, 1997, the Company employed approximately 336,000
employees. Approximately 104,000 full-time and 159,000 part-time employees are
represented by various labor unions, primarily the International Brotherhood
of Teamsters ("IBT"). UPS and the IBT are parties to a Master Agreement. The
current agreement
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with the IBT expires on July 31, 1997 and will be renegotiated later this
year. The Company believes that its relations with its employees are good.
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 W. Alden....................... 55 Director (1988 to present), Vice
Vice Chairman, Senior Vice Chairman of the Board (November 1996
President and Director to present), Senior Vice President and
Business Development Group Manager
(1986 to present)
Robert J. Clanin.................... 53 Director (1996 to present), Senior
Senior Vice President, Treasurer, Vice President, Treasurer and Chief
Chief Financial Officer and Financial Officer (1994 to present),
Director Finance Manager (1990 to 1994)
Michael L. Eskew.................... 47 Senior Vice President (1996 to
Senior Vice President present), Engineering Group Manager
(1996 to present), Corporate
Industrial Engineering Manager (1993
to 1996), District Manager (1991 to
1993)
James P. Kelly...................... 53 Director (1991 to present), Chairman
Chairman of the Board, Chief of the Board and Chief Executive
Executive Officer and Director Officer (January 1997 to present),
Vice Chairman (1996), Executive Vice
President (1994 to December 1996),
Chief Operating Officer (1992 to
December 1996), USA Operations Manager
(1990 to 1992)
Kenneth W. Lacy..................... 47 Senior Vice President (1996 to
Senior Vice President present), Corporate Information
Services Manager (1996 to present),
Vice President Information Services
(1994 to 1996), Corporate Controller
(1992 to 1994), Financial Manager
(1989 to 1992).
Joseph R. Moderow................... 48 Director (1988 to present), Senior
Senior Vice President, Secretary, Vice President and Secretary (1986 to
General Counsel and Director present), Legal and Public Affairs
Group Manager (1989 to present)
Kent C. Nelson...................... 59 Director (1983 to present), Chairman
Director and Former Chairman of the of the Board and Chief Executive
Board and Chief Executive Officer Officer (1989 to 1996)
Joseph M. Pyne...................... 49 Senior Vice President (1996 to
Senior Vice President present), Corporate Marketing Manager
(1996 to present), Vice President
Marketing (1995 to 1996), National
Marketing Planning Manager (1989 to
1995)
Charles L. Schaffer................. 51 Director (1992 to present), Senior
Senior Vice President and Director Vice President (1990 to present), USA
Operations Manager (1996 to present),
Engineering Group Manager (1990 to
1996)
</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..... 55 Senior Vice President (1993 to
Senior Vice President present), International Operations
Coordinator (1993 to present), Region
Manager (1988 to 1993)
Lea N. Soupata.......... 46 Senior Vice President (December 1995
Senior Vice President to present), Corporate Human Resources
Manager (1995 to present), Vice
President (1994 to 1995), District
Manager (1990-1994)
Calvin E. Tyler, Jr. ... 54 Director (1991 to present), Senior
Senior Vice President Vice President (1988 to present), USA
and Director Operations Manager (1991 to present)
Thomas H. Weidemeyer.... 49 Senior Vice President (1994 to
Senior Vice President present), Corporate Air Operations
(1994 to present), Airline Operation
Manager (1990 to 1994)
</TABLE>
Each executive 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
UPS's headquarters are owned and located in Atlanta, Georgia and consist of
approximately 735,000 square feet.
The Company's principal operating facilities are owned and located in New
York, New York, Dallas, Texas, Jacksonville, Florida, Denver, Colorado, Earth
City, Missouri, Grand Rapids, Michigan, Philadelphia, Pennsylvania 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. In addition, UPS has
constructed a 1.9 million square foot operating facility near Chicago,
Illinois, which became operational in 1996 and which is designed to streamline
shipments between east and west coast destinations.
UPS also owns approximately 650 operating facilities and leases
approximately 900 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 the sorting, 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.
The Company's aircraft are operated in a hub and spokes pattern in the
United States. The Company's principal air hub in the United States is located
in Louisville, Kentucky, with regional air hubs in Columbia, South Carolina,
Philadelphia, Pennsylvania, Dallas, Texas, Rockford, Illinois and Ontario,
California. These hubs house facilities for the sorting, transfer and delivery
of packages. The Louisville, Kentucky hub handles the largest volume of
packages for air delivery in the United States. The regional air hub in
Columbia, South Carolina commenced operations in September 1996. A new
regional air hub in Hartford, Connecticut is currently under construction and
is expected to commence operations in late 1997. The Company's European air
hub is located in Cologne, Germany, and has recently established an Asian-
Pacific air hub in Taipei, Taiwan. This facility is under construction and is
expected to commence operations in 1997.
UPS's computer operations are consolidated in an approximately 435,000
square foot leased facility, the Ramapo Ridge facility, which is located on a
39 acre site in Mahwah, New Jersey. The facility can accommodate
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further expansions of up to 27,000 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 also owns a 160,000 square
foot facility located on a 25 acre site in the Atlanta, Georgia area, which
serves as a backup to the main computer operations facility in New Jersey.
This facility provides certain production functions and backup capacity in
case a power outage or other disaster incapacitates the main data center. It
also helps the Company to meet certain communication needs.
AIRCRAFT
UPS currently operates, either directly or by charter, a fleet of 529
aircraft. UPS's fleet as of December 31, 1996 consisted of the following
aircraft:
<TABLE>
<CAPTION>
NUMBER
NUMBER LEASED FROM
DESCRIPTION OWNED OTHERS
----------- ------ -----------
<S> <C> <C>
McDonnell Douglas DC-8-71................................. 23 0
McDonnell Douglas DC-8-73................................. 26 0
Boeing 727-100............................................ 51 0
Boeing 727-200............................................ 10 0
Boeing 747-100............................................ 12 0
Boeing 747-200............................................ 2 0
Boeing 757-200............................................ 45 15
Boeing 767-300............................................ 11 4
Other..................................................... 0 330
--- ---
Total................................................... 180 349
</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, Boeing 727's, Boeing 747's, Boeing 757-
200's and Boeing 767-300's meet Stage III federal noise regulations. UPS
replaced the three engines on all Boeing 727-100 aircraft with new, quieter
engines. These re-engined Boeing 727-100's meet Stage III federal noise
regulations and allow UPS to operate at airports with aircraft noise
restrictions. UPS has also completed engine modifications for each of its
eight Boeing 727-200 aircraft to achieve Stage III noise compliance. UPS
became the first major airline to operate a 100% Stage III fleet more than
three years in advance of federal regulations.
UPS has purchased two Boeing 747-200 passenger aircraft which are currently
being modified to a cargo configuration. The conversion of these two aircraft
should be completed and the aircraft will begin revenue operations in the
first half of 1997. By way of a like kind exchange, UPS disposed of eleven
expediter aircraft in exchange for two Boeing 727-200's. These two aircraft
were subsequently leased to a third party operator.
During 1996, UPS began modification of two Boeing 727-100 aircraft from
freighter to quick change configuration. This quick change system allows UPS
to operate the modified aircraft as freighters during the week and as
passenger aircraft over the weekend. Certification of the modification was
received in early 1997 and passenger charter operations began during the first
quarter of 1997. These charters will be evaluated and additional Boeing 727-
100 aircraft may be modified to this quick change configuration.
During 1996, UPS took delivery of five Boeing 757-200 and ten Boeing 767-300
aircraft. UPS is currently scheduled to take delivery of ten Boeing 757-200
and seven Boeing 767-300 aircraft in 1997. In addition, UPS has firm
commitments to purchase five Boeing 757-200 and eight Boeing 767-300 aircraft
for delivery during 1998 and 1999. If additional aircraft are required, UPS
has options for the purchase of 31 Boeing 757-200 and 30 Boeing 767-300
aircraft for delivery between 1999 and 2008.
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VEHICLES
UPS owns and operates a fleet of approximately 156,000 vehicles and leases
approximately 3,500 vehicles, ranging in size from panel delivery cars to
large tractors and trailers, including approximately 1,400 temperature-
controlled trailers owned by Martrac and approximately 4,500 vehicles owned by
UPS Truck Leasing.
UPS management believes that the above facilities, aircraft and vehicles are
adequate to support the Company's operations over the next year.
ITEM 3. LEGAL PROCEEDINGS
UPS is a defendant in various lawsuits that arise 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.
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., a Bermuda company, which
reinsures 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 ranges from $89
million to $148 million, plus penalties and interest, and is based on the same
theories as 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 the Company'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 years. Penalties and interest are in addition to these
amounts. The majority of these adjustments would reverse in future years.
In August 1995, the Company filed a petition in Tax Court in opposition to
the Notice of Deficiency related to the 1983 and 1984 tax years. The trial
date is set for September 8, 1997. 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 Company has appealed with the IRS all material
issues related to the 1985 through 1987 tax years. The IRS may take positions
similar to those in the reports described above for the periods after 1987.
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, $.10 par
value per share, of which 570,000,000 shares were issued (including those
shares held by UPS for distribution in connection with its stock plans) as of
February 28, 1997. UPS is also authorized to issue 200,000,000 shares of
preferred stock, without par value. No shares of preferred stock are issued or
outstanding.
9
<PAGE>
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% of the
voting stock are entitled to only one one-hundredth of a vote with respect to
each vote in excess of 10% 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 the Company's
exercise of the preferential right of purchase mentioned below and, in the
case of stock subject to the UPS Managers Stock Trust, as amended, and the UPS
Employees Stock Trust, the Company's right of purchase in the circumstances
described therein.
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 that 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 and may in the future waive its right of
first refusal to purchase its shares in order to permit eligible employees to
purchase shares at the same price as UPS was willing to pay. The grant of
waivers has been and will continue to be affected by the Company's needs for
purposes of the UPS Managers Incentive Plan, the UPS 1991 Stock Option Plan
(the "1991 Plan") and the UPS 1996 Stock Option Plan (the "1996 Plan" and,
together with the 1991 Plan, the "Plans") and other corporate purposes.
Persons who purchase shares in this manner are required to deposit them in the
UPS Managers Stock Trust or the UPS Employees 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 1996, UPS purchased
22,169,448 shares at an aggregate purchase price of approximately $615
million.
In determining the prices at which UPS is willing to purchase shares, 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 long-range prospects of UPS, and general
economic conditions, as well as opinions furnished from time to time by
investment counselors, each acting independently, as to the value of the UPS
shares.
In its determination of the prices to be paid for UPS stock, 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 Directors as to the long-range prospects of UPS rather than what
the Board considers to be the short-range trends relating to UPS or to 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 at which UPS has offered to
purchase its shares. 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.
10
<PAGE>
One factor in determining the prices at which securities trade in the
organized securities 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
supply and demand considerations in determining the price to be paid by UPS
for its shares. UPS has a need for some of its shares which it has been able
to acquire for purposes of awards under the Plans, and eligible employees have
purchased some of the 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 reclassified 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 can 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 can 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 considerably 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 1995 are as follows:
<TABLE>
<CAPTION>
DATES PRICE
----- ------
<S> <C>
1995
January 1 to February 15............................................. $23.50
February 16 to May 24................................................ $23.75
May 25 to August 23.................................................. $24.50
August 24 to November 15............................................. $25.25
November 16 to February 14, 1996..................................... $26.25
1996
February 15 to May 22................................................ $27.00
May 23 to August 21.................................................. $27.75
August 22 to November 14............................................. $28.25
November 15 to February 12, 1997..................................... $29.25
</TABLE>
On February 13, 1997, UPS expressed its willingness to purchase shares at
$29.75 per share, which is still the price at the date of this report.
In January 1997, UPS distributed an aggregate of 6,271,907 shares of UPS
Common Stock, subject to the UPS Managers Stock Trust, under the UPS Managers
Incentive Plan to a total of 26,428 employees at a managerial or supervisory
level. In January 1996, it distributed an aggregate of 6,301,427 shares of UPS
Common Stock under that Plan to a total of 27,223 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 January 24, 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.
During 1996, 1,573,462 shares of UPS Common Stock were distributed to 2,222
management employees upon the exercise of stock options granted to them by UPS
under the 1991 Plan. On December 31, 1996, 86,744 active employees owned
approximately 180 million shares of UPS Common Stock. This included 59,874
non-management employees holding over 15.2 million shares. The offering to UPS
managers and supervisors has been previously described in a UPS Registration
Statement on Form S-3, which became effective in August 1994
11
<PAGE>
and the offering to non-management employees has been previously described in
a UPS Registration Statement on Form S-8, which became effective on August 28,
1995. The shares issued upon exercise of the options and the shares purchased
pursuant to these offerings are subject to the UPS Managers Stock Trust, as
amended and restated, or the UPS Employees Stock Trust.
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, as amended and restated, or the UPS Employees
Stock Trust (the "Trusts"). First Union National Bank ("First Union"), serves
as trustee under the Trusts. The Trust agreements give UPS the right to
purchase the shares of UPS Common Stock of members deposited in the Trusts 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 a 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 Common Stock sold
during the 12 months preceding the sale involved. If at the time a member
ceases to be an employee of UPS, and 1,000 or more shares are held for the
benefit of such member and his or her transferees under the Trusts, UPS may,
beginning in June of the calendar year next succeeding the year of termination
of employment, purchase at any time and from time to time a cumulative annual
amount of up to 10% of the 1,000 or more shares held for the benefit of the
member and his or her transferees, unless the member requests withdrawal of
the shares from the Trust, whereupon UPS may elect whether or not to purchase
the shares within 60 days of the request. If less than 1,000 shares are held
for the benefit of a member and his or her transferees under the Trusts, UPS
may purchase all or part of the shares beneficially owned at any time, subject
to the member's right to request withdrawal of the shares from the Trust,
whereupon UPS may elect whether or not to purchase the shares within 60 days
of the request. UPS is also entitled to purchase shares of UPS Common Stock
held under the Trusts after receipt of a request from the member to release
the shares from the Trust and upon occurrence of several other enumerated
events. In the event UPS fails to elect to purchase the shares and to deliver
the purchase price therefor within the prescribed periods, the member would
become entitled, upon request, to the delivery of the shares of UPS Common
Stock free and clear of the Trusts, unless the purchase period has been
extended by agreement of UPS and such member.
Members of the Trusts 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 1997, UPS paid a cash dividend of $0.35 a share. During the
fiscal year ended December 31, 1996, UPS paid cash dividends of $0.32 a share
in January 1996 and $0.33 in June 1996. During the fiscal year ended December
31, 1995, UPS paid a cash dividend of $.30 a share in January 1995 and $.32 in
June 1995.
Shareowners are entitled to such dividends as are declared by the Board of
Directors. The policy of the UPS Board of Directors 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 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, 1996,
UPS had approximately $1.3 billion not subject to these restrictions. These
limits do not materially restrict the declaration of dividends.
As of February 28, 1997, there were 2,872 record holders of equity
securities of UPS. Saul & Co. is the record holder of all the shares of Common
Stock subject to the UPS Managers Stock Trust and the UPS Employees Stock
Trust (the "Trusts"). As of February 28, 1997, there were 126,247 beneficial
owners of shares of common stock subject to the Trusts.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT
DATA
Revenue..................... $ 22,368 $ 21,045 $ 19,576 $ 17,782 $ 16,519
Operating expenses.......... (20,339) (19,251) (18,020) (16,324) (15,241)
Interest income............. 39 26 13 20 22
Interest expense............ (95) (77) (29) (34) (42)
Miscellaneous--net.......... (63) (35) 35 (12) 11
Income taxes................ (764) (665) (632) (622) (504)
-------- -------- -------- -------- --------
Income before cumulative
effect of a change in
accounting principle....... 1,146 1,043 943 810 765
Cumulative effect of a
change in the method of
accounting for
postretirement benefits
other than pensions........ -- -- -- -- (249)
-------- -------- -------- -------- --------
Net Income.................. $ 1,146 $ 1,043 $ 943 $ 810 $ 516
======== ======== ======== ======== ========
% of revenue after
cumulative effect of a
change in accounting
principle.................. 5.1% 5.0% 4.8% 4.6% 3.1%
======== ======== ======== ======== ========
Per share amounts:
Income before cumulative
effect of a change in
accounting principle....... $ 2.01 $ 1.83 $ 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...... $ 2.01 $ 1.83 $ 1.63 $ 1.40 $ 0.87
======== ======== ======== ======== ========
Dividends per share....... $ 0.68 $ 0.64 $ 0.55 $ 0.50 $ 0.50
======== ======== ======== ======== ========
<CAPTION>
DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA
Working capital............. $ 1,097 $ 261 $ 120 $ 4 $ 62
======== ======== ======== ======== ========
Long-term debt.............. $ 2,573 $ 1,729 $ 1,127 $ 852 $ 862
======== ======== ======== ======== ========
Total assets................ $ 14,954 $ 12,645 $ 11,182 $ 9,574 $ 9,038
======== ======== ======== ======== ========
</TABLE>
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OPERATIONS
1996 Compared to 1995
Revenue increased $1.323 billion, or 6.3%, during 1996 compared to 1995. For
1996, domestic revenue totaled $19.376 billion, an increase of $1.133 billion,
or 6.2%, over 1995 and international revenue totaled $2.992 billion, an
increase of $190 million, or 6.8%, over 1995.
Domestic revenue increased as a result of first quarter rate increases and
higher volume, which was up 1.9%, and includes a 9.5% increase in higher
yielding express packages. During the first quarter of 1996, the Company
implemented distance-based pricing for its domestic air express services. This
new pricing structure is based on both weight and distance of packages
shipped. Under the revised structure, air express rates are geographically
defined by ZIP Code. The continental United States is divided into the same
seven zones used for UPS standard ground services. Previously, express
shipments were priced by weight only, the standard method in the industry. The
new structure means that prices for UPS Next Day Air have been reduced by as
much as 40% in shorter-distance zones, while prices in longer-distance zones
have increased up to 28%.
In addition, rates for standard ground shipments were increased an average
of 2.9% for commercial deliveries and 3.9% for residential deliveries. Rates
for the newly zoned UPS Next Day Air and UPS 2nd Day Air services increased
approximately 4.9%. Rates for UPS 3-Day Select, already zoned, increased
approximately 3.9%. Rates for international shipments originating in the
United States were increased 4.9% for UPS Worldwide Express, 6.9% for UPS
Worldwide Expedited and 3.9% for UPS Standard Service to Canada. Rate changes
for shipments originating outside the United States have been made throughout
the past year and vary by geographic market.
The increase in international revenue was primarily attributable to a 16.1%
revenue growth in export operations over the corresponding year. Export
revenues increased primarily as a result of higher volume, which was up 20.1%.
Foreign domestic revenues decreased by 6.8% primarily due to volume reductions
of 5% and changes in currency exchange rates. The decreases in foreign
domestic volume are a result of the Company's efforts to improve profitability
by increasing revenue yields on these products.
Operating expenses increased by $1.088 billion, or 5.7%. In 1995, operating
expenses included a one-time charge of $372 million for a voluntary early
retirement and severance program for certain, primarily management, employees
("restructuring charge"). Excluding this restructuring charge, operating
expenses increased 7.7% resulting in a deterioration in the operating ratio
from 89.7 during 1995 to 90.9 during 1996. The deterioration of the operating
ratio resulted primarily from increases in depreciation and amortization,
labor costs, fuel costs, advertising costs, purchased transportation and
customer supplies, as well as severe weather conditions during the first
quarter of 1996, which disrupted both air and ground operations. This is in
contrast to the mild weather conditions experienced in the comparable quarter
in 1995. The Company's labor agreement with the Teamsters Union expires in
mid-1997 and will be renegotiated during the year.
Operating profit for 1996 increased by $235 million, or 13.1%, as a result
of the 1995 restructuring charge. Exclusive of the charge, operating profit
for the year decreased by $137 million, or 6.3%, as a result of the
proportionally higher operating costs.
Income before income taxes ("pre-tax income") increased by $202 million, or
11.8%. Domestic pre-tax income amounted to $2.111 billion, an increase of $191
million, or 10.0%, over 1995, inclusive of the restructuring charge. The
international pre-tax loss decreased by $11 million, or 5.2%, to $201 million
for 1996. International operations were affected by several major business
initiatives during 1996. First, the Company implemented a pan-European product
relaunch, in September 1996, that affected both export and foreign domestic
operations. This relaunch was designed to provide a uniform portfolio of pan-
European services including guaranteed next-day delivery for domestic and
transborder shipments as well as comprehensive package tracking capabilities
for all levels of service.
In order to meet the strategic objectives of the pan-European product
relaunch, the Company decided to combine the Europe and Central Europe
regional headquarters from the United Kingdom and Germany,
14
<PAGE>
respectively, to Belgium. Finally, as noted above, the Company redirected
certain foreign domestic operations toward higher yielding volume while
shedding less profitable freight business. This created a situation where the
volume reductions occurred faster than the related cost reductions, resulting
in higher foreign domestic losses.
The international pre-tax loss attributable to the foreign domestic
operations increased by $33 million, or 21.1%, primarily due to the issues
discussed above and costs of related staffing reductions.
The pre-tax loss associated with export operations improved by $44 million,
or 78.4%, over 1995. The continuation of this favorable trend in export
operations resulted primarily from higher volume and improved operating
margins on European and U.S. exports despite the increased costs previously
discussed.
Export volume increased by 18.0% and 24.2% for international and U.S. origin
export shipments, respectively. Despite the continued improvement of the
export operations, UPS expects that the cost of operating its international
business will continue to exceed revenue in the near future.
Net income increased by $103 million, or 9.9%. This increase resulted
primarily from the restructuring charge incurred during 1995, offset by
proportionately higher operating costs in 1996.
1995 Compared to 1994
Revenue increased $1.469 billion, or 7.5%, during 1995 compared to 1994. For
1995, domestic revenue totaled $18.243 billion, an increase of $945 million,
or 5.5%, over 1994 and international revenue totaled $2.802 billion, an
increase of $524 million, or 23.0%, over 1994.
Domestic revenue increased as a result of higher volume which was up 1.8%,
favorable changes in rates 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. During the first quarter of 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 11.8% and the effect of stronger foreign currencies. The
majority of the increased volume related to higher yielding, export packages.
Operating expenses increased by $1.231 billion, or 6.8%. 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 92.1 during 1994 to 89.7 during 1995.
The improvement in the operating ratio, excluding the restructuring charge, is
a function of cost control efforts during 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 1995 increased by $238 million, or 15.3%, as a result
of higher revenue and the improved operating ratio offset by the restructuring
charge of $372 million.
Income before income taxes ("pre-tax income") increased by $133 million, or
8.4%. Domestic pre-tax income amounted to $1.92 billion, an increase of $18
million, or 0.9%, over 1994. 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 $390 million, or 20.5%, primarily due to higher operating
profits. In 1994, domestic pre-tax income included a nonrecurring $46 million
gain from the sale of an investment property. The international pre-tax loss
decreased by $115 million, or 35.2%, to $212 million for 1995.
15
<PAGE>
The international pre-tax loss attributable to the foreign domestic
operations decreased by $76 million, or 32.7%. The pre-tax loss associated
with export operations decreased by $39 million, or 41.4%. The improvement
noted in both foreign domestic and export operations is primarily a result of
higher volume and improved operating margins. Export volume increased by 34.5%
and 17.8% for international and U.S. origin, export shipments, respectively.
Net income increased by $100 million, or 10.6%. This increase resulted
primarily from the improved operating profit.
LIQUIDITY AND CAPITAL RESOURCES
In March 1996, the Board of Directors authorized an increase in the
Commercial Paper borrowing limits from $1.0 to $1.5 billion. In June 1996, UPS
renegotiated and extended two credit agreements with a consortium of banks.
These agreements provide revolving credit facilities of $1.25 billion each,
with one expiring June 9, 1997 and the other June 8, 2001.
In recognition of a continuing need for borrowing over the near term, and to
take advantage of attractive borrowing costs in medium-term debt markets, UPS
has entered into several financing transactions during 1996 and is continuing
to examine other favorable alternatives. In January 1996, UPS issued $200
million of 5.5% Eurobond notes which are due in January 1999. In April 1996,
UPS issued $166 million of 3.25% Swiss Franc notes which are due in October
1999. During 1996, UPS entered into a series of capital lease transactions
which provided $286 million for the acquisition of aircraft at favorable
rates.
In June 1996, UPS established a $500 million European medium-term note
program. Under this program, UPS may, from time to time, issue notes
denominated in a variety of currencies. In addition, the Company filed a shelf
registration in July 1996, which will enable UPS to issue notes up to $300
million in the United States. Under the combined programs, the Company
currently does not plan to exceed $500 million in borrowings. There were no
borrowings outstanding under either program at December 31, 1996. In February
1997, UPS issued $165 million of 6.875% Pound Sterling notes which are due in
February 2000.
Management believes that these funds and borrowing programs, combined with
the Company's internally generated resources and other credit facilities, 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 $2.4 billion for land,
buildings, equipment and aircraft in 1997, as well as commitments for aircraft
purchases through 1999.
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., 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 ranges 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 years. Penalties and interest are in addition to these
amounts. The majority of these adjustments would reverse in future years.
16
<PAGE>
In August 1995, the Company filed a petition in Tax Court in opposition to
the Notice of Deficiency related to the 1983 and 1984 tax years. The trial
date is set for September 8, 1997. 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 Company has appealed with the IRS all material
issues related to the 1985 through 1987 tax years. 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 the
Index to Financial Statements on page F-1 for a list of the Financial
Statements filed herewith.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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 8, 1997, which will be filed with the
Securities and Exchange Commission (the "SEC") before April 30, 1997, and is
incorporated herein by reference.
Information concerning the Company'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 the
Company's definitive Proxy Statement for the Annual Meeting of Shareowners to
be held on May 8, 1997, which will be filed with the SEC before April 30,
1997, and 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 the Company's definitive Proxy Statement for the Annual Meeting
of Shareowners to be held on May 8, 1997, which will be filed with the SEC
before April 30, 1997, and 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 the Company's definitive Proxy Statement for the Annual
Meeting of Shareowners to be held on May 8, 1997, which will be filed with the
SEC before April 30, 1997, and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements.
See the Index to Financial Statements and Financial Statement Schedules on
page F-1 for a list of the Financial Statements filed herewith.
17
<PAGE>
2. Financial Statement Schedules.
Not Applicable.
3. List of Exhibits.
See the Exhibit Index on page E-1 for a list of the Exhibits incorporated by
reference herein or filed herewith.
(b) Reports on Form 8-K.
None.
(c) Exhibits required by Item 601 of Regulation S-K.
See the Exhibit Index beginning on page E-1 for a list of the Exhibits
incorporated by reference herein or filed herewith.
18
<PAGE>
SIGNATURES
PURSUANT TO 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)
/s/ James P. Kelly
By: _________________________________
James P. Kelly Chairman of the
Board and Chief Executive Officer
Date: March 27, 1997
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.
SIGNATURE TITLE DATE
/s/ John W. Alden Vice Chairman of the March 27, 1997
- ------------------------------------- Board, Senior Vice
JOHN W. ALDEN President and
Director
Director
- -------------------------------------
WILLIAM H. BROWN, III
/s/ Robert J. Clanin Senior Vice March 27, 1997
- ------------------------------------- President, Chief
ROBERT J. CLANIN Financial Officer,
Treasurer and
Director
Director
- -------------------------------------
CARL KAYSEN
/s/ James P. Kelly Chairman of the March 27, 1997
- ------------------------------------- Board, Chief
JAMES P. KELLY Executive Officer
and Director
Director
- -------------------------------------
GARY E. MACDOUGAL
19
<PAGE>
SIGNATURE TITLE DATE
/s/ Joseph R. Moderow Senior Vice March 27, 1997
- ------------------------------------- President,
JOSEPH R. MODEROW Secretary, General
Counsel and
Director
/s/ Kent C. Nelson Director March 27, 1997
- -------------------------------------
KENT C. NELSON
Director
- -------------------------------------
VICTOR A. PELSON
Director
- -------------------------------------
JOHN W. ROGERS
/s/ Charles L. Schaffer Senior Vice March 27, 1997
- ------------------------------------- President and
CHARLES L. SCHAFFER Director
Director
- -------------------------------------
ROBERT M. TEETER
/s/ Calvin E. Tyler, Jr. Senior Vice March 27, 1997
- ------------------------------------- President and
CALVIN E. TYLER, JR. Director
20
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
ITEM 8 -- FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Independent Auditors' Report........................................ F-2
Consolidated balance sheets
-- December 31, 1996 and 1995....................................... F-3
Statements of consolidated income
-- Years ended December 31, 1996, 1995 and 1994..................... F-4
Statements of consolidated shareowners' equity
-- Years ended December 31, 1996, 1995 and 1994..................... F-5
Statements of consolidated cash flows
-- Years ended December 31, 1996, 1995 and 1994..................... F-6
Notes to consolidated financial statements.......................... F-7
</TABLE>
ITEM 14(A)(2) -- FINANCIAL STATEMENT SCHEDULES
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.
F-1
<PAGE>
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, 1996 and
1995, and the related consolidated statements of income, shareowners' equity,
and cash flows for each of the three years in the period ended December 31,
1996. 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, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted
accounting principles.
DELOITTE AND TOUCHE LLP
Atlanta, Georgia
February 10, 1997
F-2
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN MILLIONS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments.............................. $ 392 $ 211
Accounts receivable.......................................... 2,341 1,925
Prepaid employee benefit costs............................... 401 285
Materials, supplies and other prepaid expenses............... 581 393
Common stock held for stock plans............................ 540 413
------- -------
Total Current Assets....................................... 4,255 3,227
------- -------
Property, Plant and Equipment:
Vehicles..................................................... 3,427 3,141
Aircraft (including aircraft under capitalized leases)....... 5,651 4,634
Land......................................................... 647 635
Buildings.................................................... 1,415 1,399
Leasehold improvements....................................... 1,668 1,551
Plant equipment.............................................. 3,670 3,160
Construction-in-progress..................................... 530 538
------- -------
17,008 15,058
Less accumulated depreciation and amortization............... 6,778 6,060
------- -------
10,230 8,998
Other Assets................................................. 469 420
------- -------
$14,954 $12,645
======= =======
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Accounts payable............................................. $ 1,155 $ 1,137
Accrued wages and withholdings............................... 1,201 1,127
Dividends payable............................................ 194 178
Deferred income taxes........................................ 149 87
Other current liabilities.................................... 459 437
------- -------
Total Current Liabilities.................................. 3,158 2,966
------- -------
Long-Term Debt (including capitalized lease obligations)..... 2,573 1,729
------- -------
Accumulated Postretirement Benefit Obligation, Net........... 841 763
------- -------
Deferred Taxes, Credits and Other Liabilities................ 2,481 2,036
------- -------
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 570,000,000, net of 10,000,000 in
treasury..................................................... 57 57
Additional paid-in capital................................... 95 76
Retained earnings............................................ 5,728 4,961
Cumulative foreign currency adjustments...................... 21 57
------- -------
5,901 5,151
------- -------
$14,954 $12,645
======= =======
Shareowners' Equity Per Share................................ $ 10.35 $ 9.04
======= =======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenue............................................. $22,368 $21,045 $19,576
------- ------- -------
Operating Expenses:
Compensation and benefits........................... 13,305 12,401 11,727
Other............................................... 7,034 6,478 6,293
Restructuring charge................................ -- 372 --
------- ------- -------
20,339 19,251 18,020
------- ------- -------
Operating profit.................................... 2,029 1,794 1,556
------- ------- -------
Other Income and (Expense):
Interest income..................................... 39 26 13
Interest expense.................................... (95) (77) (29)
Miscellaneous, net.................................. (63) (35) 35
------- ------- -------
(119) (86) 19
------- ------- -------
Income Before Income Taxes.......................... 1,910 1,708 1,575
Income Taxes........................................ 764 665 632
------- ------- -------
Net Income........................................ $ 1,146 $ 1,043 $ 943
======= ======= =======
Net Income Per Share.............................. $ 2.01 $ 1.83 $ 1.63
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREOWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CUMULATIVE
COMMON STOCK ADDITIONAL FOREIGN TOTAL
------------- PAID-IN RETAINED CURRENCY SHAREOWNERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS EQUITY
------ ------ ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1994.................... 580 $58 $ 264 $3,644 $(22) $3,944
Net income.............. -- -- -- 943 -- 943
Dividends ($.55 per
share).................. -- -- -- (310) -- (310)
Gain on issuance of com-
mon stock held for stock
plans................... -- -- 37 -- -- 37
Exercise of stock op-
tions................... -- -- (6) -- -- (6)
Foreign currency adjust-
ments................... -- -- -- -- 39 39
--- --- ----- ------ ---- ------
Balance, December 31,
1994.................... 580 58 295 4,277 17 4,647
Net income.............. -- -- -- 1,043 -- 1,043
Dividends ($.64 per
share).................. -- -- -- (359) -- (359)
Gain on issuance of com-
mon stock held for stock
plans................... -- -- 27 -- -- 27
Exercise of stock op-
tions................... -- -- (9) -- -- (9)
Foreign currency adjust-
ments................... -- -- -- -- 40 40
Reclassification of com-
mon stock............... (10) (1) (237) -- -- (238)
--- --- ----- ------ ---- ------
Balance, December 31,
1995.................... 570 57 76 4,961 57 5,151
Net income.............. -- -- -- 1,146 -- 1,146
Dividends ($.68 per
share).................. -- -- -- (379) -- (379)
Gain on issuance of com-
mon stock held for stock
plans................... -- -- 33 -- -- 33
Exercise of stock op-
tions................... -- -- (14) -- -- (14)
Foreign currency adjust-
ments................... -- -- -- -- (36) (36)
--- --- ----- ------ ---- ------
Balance, December 31,
1996.................... 570 $57 $ 95 $5,728 $ 21 $5,901
=== === ===== ====== ==== ======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 1,146 $ 1,043 $ 943
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization..................... 936 866 786
Postretirement benefits........................... 78 59 70
Deferred taxes, credits and other................. 488 28 79
Non-cash restructuring charge..................... -- 338 --
Changes in assets and liabilities:
Accounts receivable.............................. (416) (332) (433)
Prepaid employee benefit costs................... (116) (57) (223)
Materials, supplies and prepaid expenses......... (196) (40) (6)
Common stock held for stock plans................ (127) (64) (66)
Accounts payable................................. 18 55 353
Accrued wages and withholdings................... 74 46 162
Dividends payable................................ 16 8 29
Other current liabilities........................ 4 3 (78)
------- ------- -------
Net cash from operating activities.............. 1,905 1,953 1,616
------- ------- -------
Cash flows from investing activities:
Capital expenditures............................... (2,333) (2,096) (1,789)
Disposals of property, plant and equipment......... 155 76 112
Other asset receipts (payments).................... (60) (25) 42
------- ------- -------
Net cash (used in) investing activities......... (2,238) (2,045) (1,635)
------- ------- -------
Cash flows from financing activities:
Proceeds from borrowings........................... 1,345 875 322
Repayment of borrowings............................ (484) (273) (51)
Reclassification of common stock................... -- (238) --
Dividends paid..................................... (379) (359) (310)
Other transactions................................. 19 18 30
------- ------- -------
Net cash from (used in) financing activities.... 501 23 (9)
------- ------- -------
Effect of exchange rate changes on cash............. 13 19 8
------- ------- -------
Net increase (decrease) in cash and short-term in-
vestments........................................... 181 (50) (20)
Cash and short-term investments:
Beginning of year.................................. 211 261 281
------- ------- -------
End of year........................................ $ 392 $ 211 $ 261
======= ======= =======
Cash paid during the period for:
Interest, net of amount capitalized................ $ 50 $ 49 $ 39
======= ======= =======
Income taxes....................................... $ 484 $ 718 $ 662
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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 awards and distributions under
various UPS stock and benefit plans as a current asset. 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 -- 20 to 40 years; Leasehold
Improvements -- lives of leases; Plant Equipment -- 5 to 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.
Income Taxes
Income taxes are accounted for under 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. The
benefit of investment tax credits from the investment in leveraged leases is
amortized over the life of the lease.
F-7
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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 $53, $49 and $45 million for 1996, 1995 and 1994,
respectively.
Derivative Instruments
UPS has entered into interest rate swap agreements, a cross-currency
interest exchange agreement and forward currency contracts. All of these
agreements relate to the Company's long-term debt and have been entered into
for the purposes of reducing UPS's borrowing costs and to protect UPS against
adverse changes in foreign currency exchange rates. Any 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 these 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.
Stock Option Plans
UPS has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options. Under APB 25,
compensation expense is generally not recognized when both the exercise price
is the same as the market price and the number of shares to be issued is set
on the date the employee stock option is granted. Since UPS employee stock
options are granted on this basis, the Company does not recognize compensation
expense for grants under its plans.
Changes in Presentation
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. LONG-TERM DEBT AND COMMITMENTS
Long-term debt, as of December 31, consists of the following (in millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
8.375% debentures, due April 1, 2020 (i)................. $ 700 $ 700
Commercial paper (ii).................................... 1,071 858
Industrial development bonds, Philadelphia Airport facil-
ities, due December 1, 2015 (iii)........................ 100 100
Capitalized lease obligations (iv)....................... 286 --
5.5% Eurobond notes, due January 4, 1999................. 200 --
3.25% 200 million Swiss Franc notes, due October 22,
1999..................................................... 166 --
Installment notes, mortgages and bonds at various rates
from 3.0% to 9.3%........................................ 68 72
------ ------
2,591 1,730
Less current maturities.................................. (18) (1)
------ ------
$2,573 $1,729
====== ======
</TABLE>
F-8
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(i) 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.
(ii) The weighted average interest rate on the commercial paper outstanding
as of December 31, 1996 and 1995, was 5.6% and 5.7%, respectively. 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 1997 is expected
to fluctuate. UPS is authorized to borrow up to $1.5 billion under this
commercial paper program as of December 31, 1996.
(iii) The industrial development bonds bear interest at either a daily,
variable or fixed rate. The average interest rates for 1996 and 1995 were 3.3%
and 3.7%, respectively.
(iv) During 1996, UPS entered into capitalized lease obligations for certain
aircraft which are included in Property, Plant and Equipment at December 31,
1996 as follows (in millions):
<TABLE>
<S> <C>
Aircraft........................................................... $287
Accumulated amortization........................................... (2)
----
$285
====
</TABLE>
The aggregate annual principal payments for the next five years, excluding
commercial paper and capitalized leases, are (in millions): 1997 -- $5; 1998
- -- $5; 1999 -- $371; 2000 -- $3; and 2001 -- $3.
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 $2.661 billion as of December 31, 1996.
UPS leases certain aircraft, facilities, equipment and vehicles, under
operating leases which expire at various dates through 2035. Total aggregate
minimum lease payments under capitalized leases and under operating leases are
as follows (in millions):
<TABLE>
<CAPTION>
YEAR CAPITALIZED LEASES OPERATING LEASES
---- ------------------ ----------------
<S> <C> <C>
1997............................... $ 26 $ 235
1998............................... 28 172
1999............................... 28 128
2000............................... 28 102
2001............................... 28 87
After 2001......................... 288 644
----- ------
Total minimum lease payments....... 426 $1,368
======
Less imputed interest.............. (140)
-----
Present value of minimum
capitalized lease payments......... 286
Less current portion............... (13)
-----
Long-term capitalized lease
obligations........................ $ 273
=====
</TABLE>
As of December 31, 1996, UPS has outstanding letters of credit totaling
approximately $933 million issued in connection with routine business
requirements.
At December 31, 1996, UPS has commitments outstanding for capital
expenditures under purchase orders and contracts of approximately $2.3
billion, of which approximately $1.4 billion is expected to be spent in 1997.
UPS maintains two credit agreements with a consortium of banks which provide
revolving credit facilities of $1.25 billion each, with one expiring June 9,
1997 and the other June 8, 2001. At December 31, 1996, there were no
outstanding borrowings under these facilities.
F-9
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
In June 1996, UPS established a $500 million European medium-term note
program. Under this program, UPS may, from time to time, issue notes
denominated in a variety of currencies. In addition, the Company filed a shelf
registration in July 1996, which will enable UPS to issue notes up to $300
million in the United States. There are no borrowings outstanding under either
program at December 31, 1996. In February 1997, UPS issued $165 million of
6.875% Pound Sterling notes which are due in February 2000.
3. COMMON STOCK PER SHARE DATA
Per share amounts related to income are based on 570,000,000 shares in 1996
and 1995 and 580,000,000 shares in 1994 and include Common Stock Held for
Stock Plans.
4. LEGAL PROCEEDINGS
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.
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., 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 ranges 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 years. Penalties and interest are in addition to these
amounts. The majority of these adjustments would reverse in future years.
In August 1995, the Company filed a petition in Tax Court in opposition to
the Notice of Deficiency related to the 1983 and 1984 tax years. The trial
date is set for September 8, 1997. 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 Company has appealed with the IRS all material
issues related to the 1985 through 1987 tax years. The IRS may take positions
similar to those in the reports described above for periods after 1987.
5. EMPLOYEE BENEFIT PLANS
UPS maintains several defined benefit plans (the "Plans"). The Plans are
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 Plans provide for retirement benefits based on either service credits or
average compensation levels earned by employees prior to retirement. The
Plans' assets consist primarily of publicly traded stocks and bonds. In
addition, the Plans' assets include approximately 10.4 million and 8.6 million
shares of UPS common stock at December 31, 1996 and 1995, respectively. The
actual earnings on the Plans' assets were $381, $390 and
F-10
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
$94 million in 1996, 1995 and 1994, respectively. UPS's funding policy is
consistent with relevant federal tax regulations. Accordingly, UPS contributes
amounts deductible for federal income tax purposes.
Pension expense, consisting of various component parts, and certain
assumptions used during the years ended December 31, are as follows (in
millions):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current year's earned benefit............................... $117 $ 92 $127
Interest on projected benefit obligation.................... 195 158 153
Expected earnings on pension plan assets.................... (202) (189) (164)
Amortization of unrecognized benefit obligation:
Net obligation at transition date........................... 4 4 4
Effect of plan benefit amendments........................... 11 12 12
Net amortization of unrecognized investment gains and
changes in actuarial assumptions and experience............. 2 (7) 4
---- ---- ----
Provision for pension expense............................... $127 $ 70 $136
==== ==== ====
</TABLE>
Assumptions, reflecting weighted averages across all plans, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Expected long-term rate of earnings on plan assets............ 9.5% 9.5% 9.5%
Weighted average discount rate................................ 8.0% 7.75% 9.0%
Rate of increase in future compensation levels................ 4.0% 4.25% 4.25%
</TABLE>
The following schedule reconciles the funded status of the Plans as of
September 30, with certain amounts included in the balance sheet as of
December 31 (in millions):
<TABLE>
<CAPTION>
PLAN WHOSE PLANS WHOSE
ACCUMULATED ASSETS EXCEED
BENEFITS ACCUMULATED
EXCEED ASSETS BENEFITS
------------- --------------
1996 1996 1995
------------- ------ ------
<S> <C> <C> <C>
Projected benefit obligation:
Accumulated benefits computed using present
salary levels:
Vested........................................ $368 $1,918 $1,818
Nonvested..................................... 4 441 407
---- ------ ------
372 2,359 2,225
Additional benefits computed using projected
salary levels.................................. -- 320 340
---- ------ ------
Total projected benefit obligation........... 372 2,679 2,565
Pension plan assets............................ 281 2,768 2,324
---- ------ ------
Difference..................................... (91) 89 (241)
Unrecognized net investment gains and changes
in assumptions used to compute projected
benefits....................................... -- (217) 49
Unrecognized net benefit obligation at
transition date................................ 86 28 31
Unrecognized projected benefit obligation
arising from amendments to the retirement
plan........................................... -- 138 147
Post-September 30 contributions................ 5 -- --
---- ------ ------
Prepaid (accrued) pension cost................. $ -- $ 38 $ (14)
==== ====== ======
</TABLE>
F-11
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
UPS also contributes to several multi-employer pension plans for which the
above information is not determinable. Amounts charged to operations for
contributions to these plans described above were $651, $574 and $506 million
during 1996, 1995 and 1994, respectively.
UPS sponsors postretirement medical plans that provide health care benefits
to its retirees who meet certain eligibility requirements and who are not
otherwise covered by multi-employer plans. Generally, this includes employees
with at least 10 years of service who have reached age 55 and employees who
are eligible for postretirement medical benefits from a Company sponsored plan
pursuant to collective bargaining. 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, in certain cases,
employees are required to contribute towards the cost of the coverage.
The accumulated postretirement benefit obligation at December 31, is
detailed as follows (in millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees...................................................... $ 450 $ 453
Fully eligible active plan participants....................... 70 69
Other active participants..................................... 576 522
------ ------
1,096 1,044
Plan assets at fair value..................................... 237 203
------ ------
Accumulated postretirement benefit obligation in excess of
plan assets................................................... 859 841
Unrecognized net investment gains and changes in assumptions
used to compute projected benefits............................ (18) (78)
------ ------
Accumulated postretirement benefit obligation, net............ $ 841 $ 763
====== ======
</TABLE>
Net periodic postretirement benefit cost for the years ended December 31,
included the following components (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits attributed to service during the
period...................................................... $ 37 $ 37 $ 45
Interest cost on accumulated postretirement benefit
obligation.................................................. 82 75 66
Expected earnings on plan assets............................ (18) (16) (12)
Amortization of unrecognized amounts........................ 4 4 6
---- ---- ----
Net periodic postretirement benefit cost.................... $105 $100 $105
==== ==== ====
</TABLE>
The significant assumptions used in determining postretirement benefit cost
and the accumulated postretirement benefit obligation were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Expected long-term rate of return on plan assets.............. 9.5% 9.5% 9.5%
Weighted average discount rate................................ 8.0% 7.75% 9.0%
</TABLE>
Future benefit costs were forecasted assuming an initial annual increase of
8.25% for pre-65 medical costs and an increase of 7.25% for post-65 medical
costs, decreasing to 6.25% for pre-65 and 5.25% for post-65 by the year 2000
and with consistent annual increases at those ultimate levels thereafter. A
one percentage point
F-12
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
increase in the annual trend rate would have increased the total accumulated
postretirement benefit obligation at December 31, 1996, by $99 million and the
aggregate of the service and interest components of the net periodic
postretirement benefit costs for 1996 by $12 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.
UPS also contributes to several multi-employer health and welfare plans
which cover both active and retired employees for which the above information
is not determinable. Amounts charged to operations for contributions to health
and welfare plans other than the plan described above were $441, $395 and $356
million during 1996, 1995 and 1994, respectively.
As part of UPS's overall effort to lower operating expense, the Company
implemented a program of voluntary early retirement and severance for certain,
primarily management, employees in 1995. As a result, UPS recognized net
additional pension and postretirement costs of $223 million and $115 million,
respectively. These costs resulted from the net increase in UPS's obligation
for pension and postretirement benefits for certain employees participating in
the program. Other costs associated with the program totaled $34 million. The
total cost for the program of $372 million was recorded as a one-time
restructuring charge against 1995 operations.
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 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 and the effect of certain other nonrecurring
transactions or accounting changes. Amounts charged to operations were $324,
$277 and $255 million during 1996, 1995 and 1994, respectively.
UPS maintains fixed stock option plans under which 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. UPS applies
APB Opinion 25 and related Interpretations in accounting for these plans.
Accordingly, no compensation expense has been recorded for the grant of stock
options during 1996, 1995 or 1994. Pro forma information regarding net income
and earnings per share is required by Statement of Financial Accounting
Standards No. 123 ("FAS 123") and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. For purposes of pro forma disclosures, the estimated fair value of
the options granted in 1996 and 1995 is amortized to expense over the options'
vesting period. The pro forma information follows (in millions except for
earnings per share information):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C> <C>
Net income....................................... As reported $1,146 $1,043
Pro forma $1,143 $1,041
Earnings per share............................... As reported $ 2.01 $ 1.83
Pro forma $ 2.01 $ 1.83
</TABLE>
F-13
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The fair value of each option grant is estimated on the date of grant using
the minimum value method for nonpublic entities specified by FAS 123. The
assumptions used, by year, are as follows:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Semi-annual dividend per share.................................... $0.35 $0.32
Risk-free interest rate........................................... 6.05% 6.98%
Expected life in years............................................ 5 5
</TABLE>
Persons earning the right to receive stock options 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 million common shares may
be granted during the five-year period ending in 2001 under the 1996 plan. No
further options may be granted under the 1991 plan. 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.
Following is an analysis of options for shares of common stock issued and
outstanding:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE NUMBER OF SHARES
EXERCISE PRICE (IN THOUSANDS)
---------------- ----------------
<S> <C> <C>
Outstanding at January 1, 1994................ $15.91 18,051
Exercised..................................... $13.38 (2,952)
Granted....................................... $21.25 4,057
Canceled...................................... $19.04 (227)
------
Outstanding at December 31, 1994.............. $17.44 18,929
Exercised..................................... $14.50 (3,077)
Granted....................................... $23.75 3,916
Canceled...................................... $18.47 (435)
------
Outstanding at December 31, 1995.............. $19.16 19,333
Exercised..................................... $15.25 (3,474)
Granted....................................... $27.00 3,322
Canceled...................................... $21.64 (225)
------
Outstanding at December 31, 1996.............. $21.21 18,956
======
</TABLE>
The weighted average fair value of options granted during 1996 and 1995 was
$27.00 and $23.75, respectively. No shares were exercisable at December 31,
1996. The following table summarizes information about stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER REMAINING LIFE WEIGHTED AVERAGE
(IN THOUSANDS) (IN YEARS) EXERCISE PRICE
-------------- ---------------- ----------------
<S> <C> <C>
3,994 0.3 $16.50
3,990 1.3 $18.75
3,905 2.3 $21.25
3,815 3.3 $23.75
3,252 4.3 $27.00
------
18,956 2.2 $21.21
======
</TABLE>
F-14
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
7. INCOME TAXES
The provision for income taxes for the years ended December 31, consists of
the following (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal........................................................ $333 $656 $494
State.......................................................... 71 67 96
---- ---- ----
Total Current................................................ 404 723 590
==== ==== ====
Deferred:
Federal........................................................ 324 (49) 36
State.......................................................... 36 (9) 6
---- ---- ----
Total Deferred............................................... 360 (58) 42
---- ---- ----
Total........................................................ $764 $665 $632
==== ==== ====
</TABLE>
Income before income taxes includes losses of foreign subsidiaries of $160,
$98 and $172 million for 1996, 1995 and 1994, 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>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate............................. 35.0% 35.0% 35.0%
State income taxes (net of federal benefit)................... 3.8 2.6 4.3
Other......................................................... 1.2 1.3 0.8
---- ---- ----
Effective income tax rate..................................... 40.0% 38.9% 40.1%
==== ==== ====
</TABLE>
Deferred tax liabilities and assets are comprised of the following at
December 31 (in millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Excess of tax over book depreciation............................ $1,483 $1,300
Leveraged leases................................................ 111 179
Pension plans................................................... 302 87
Prepaid health & welfare........................................ 127 92
Other........................................................... 371 308
------ ------
Gross deferred tax liabilities.................................. 2,394 1,966
------ ------
Other postretirement benefits................................... 342 319
Loss carryforwards (international).............................. 365 323
Insurance reserves.............................................. 107 90
Other........................................................... 72 63
------ ------
Gross deferred tax assets....................................... 886 795
Deferred tax assets valuation allowance......................... (365) (323)
------ ------
Net deferred tax assets......................................... 521 472
------ ------
Net deferred tax liability...................................... $1,873 $1,494
====== ======
</TABLE>
The valuation allowance increased approximately $42 and $60 million during
the years ended December 31, 1996 and 1995, respectively.
F-15
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
UPS has international loss carryforwards of approximately $801 million as of
December 31, 1996. Of this amount, $431 million expires in varying amounts
through 2006. The remaining $370 million may be carried forward indefinitely.
These international loss carryforwards have been fully reserved in the
deferred tax assets valuation allowance due to the uncertainty resulting from
a lack of previous international taxable income. In addition, a portion of
these losses have been deducted on the U.S. tax return, which could affect the
amount of any future benefit.
8. DEFERRED TAXES, CREDITS AND OTHER LIABILITIES
Deferred taxes, credits and other liabilities, as of December 31, consist of
the following (in millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Deferred federal and state income taxes.......................... $1,727 $1,412
Insurance reserves............................................... 497 326
Other credits and noncurrent liabilities......................... 257 298
------ ------
$2,481 $2,036
====== ======
</TABLE>
9. OTHER OPERATING EXPENSES
The major components of other operating expenses for the years ended
December 31, are as follows (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Repairs and maintenance................................... $ 823 $ 809 $ 812
Depreciation and amortization............................. 936 866 786
Purchased transportation.................................. 1,306 1,144 1,206
Fuel...................................................... 685 621 564
Other occupancy expense................................... 388 359 361
Other expenses............................................ 2,896 2,679 2,564
------ ------ ------
$7,034 $6,478 $6,293
====== ====== ======
</TABLE>
F-16
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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 (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Domestic:
Revenue............................................ $19,376 $18,243 $17,298
Income before income taxes......................... $ 2,111 $ 1,920 $ 1,902
Identifiable assets................................ $13,191 $11,157 $ 9,902
Foreign:
Revenue............................................ $ 2,992 $ 2,802 $ 2,278
Loss before income taxes........................... $ (201) $ (212) $ (327)
Identifiable assets................................ $ 1,763 $ 1,488 $ 1,280
Consolidated:
Revenue............................................ $22,368 $21,045 $19,576
Income before income taxes......................... $ 1,910 $ 1,708 $ 1,575
Identifiable assets................................ $14,954 $12,645 $11,182
</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 $750, $616 and $496 million in
1996, 1995 and 1994, respectively.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996
----------------
UNITED PARCEL SERVICE
OF AMERICA, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S> <C> <C>
(3)ARTICLES OF
INCORPORATION AND BY-
LAWS
(a)Restated Incorporated by Reference to Exhibit
Certificate of 4(iv) to Form S-8 Registration Statement
Incorporation of (No. 33-19622).
UPS.
(b) By-laws of Incorporated by Reference to Current
UPS, as Report on Form 8-K (Date of Earliest
amended Event Reported December 19, 1995), filed
through December 21, 1995.
December 19,
1995.
(4) INSTRUMENTS
DEFINING THE
RIGHTS OF SECURITY
HOLDERS, INCLUDING
INDENTURES
(a) Specimen Incorporated by Reference to Exhibit
Certificate 3(a) to Form 10, as filed April 29,
of Capital 1970.
Stock of
UPS.
(b) UPS Managers Incorporated by Reference to Exhibit
Stock Trust 4(b) to Post-Effective Amendment No. 1
Agreement, to Registration Statement on Form S-3
as amended (No. 33-54297).
and
restated.
(c) Specimen Incorporated by Reference to Exhibit
Certificate 4(c) to Registration Statement No. 33-
of 8 3/8% 32481, filed December 7, 1989.
Debentures
due April 1,
2020.
(d) Indenture Incorporated by Reference to Exhibit
relating to 4(c) to Registration Statement No. 33-
8 3/8% 32481, filed December 7, 1989.
Debentures
due April 1,
2020.
(e) UPS Incorporated by Reference to Exhibit
Employees 4(iv) to Registration Statement on Form
Stock Trust S-8 (No. 33-62169) as filed August 28,
Agreement. 1995.
(f)Specimen Available to the Commission upon
Certificate request.
of
$200,000,000
of 5.5%
Eurobond
Notes due
January 4,
1999.
(g)Indenture Available to the Commission upon
relating to request.
$200,000,000
of 5.5%
Eurobond
Notes due
January 4,
1999.
(h)Specimen Available to the Commission upon
Certificate request.
of
$166,000,000
of 3.25%
Swiss Franc
Notes due
October 22,
1999.
(i)Indenture Available to the Commission upon
relating to request.
$166,000,000
of 3.25%
Swiss Franc
Notes due
October 22,
1999.
(j)Specimen Available to the Commission upon
Certificate request.
of Sterling
100 million
of 6.875%
Notes due
2000.
(k)Indenture Available to the Commission upon
relating to request.
Sterling 100
million of
6.875% Note
due 2000.
(l)Specimen Available to the Commission upon
Certificate request.
of
$500,000,000
of Temporary
and Permanent
Global Notes
in connection
with the
European
medium term
note program.
(m)Indenture Available to the Commission upon
relating to request.
the
$500,000,000
European
Medium term
note program.
</TABLE>
E-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
(10)MATERIAL CONTRACTS
(a) UPS Thrift Plan, as Amended and Restated
January 1, 1976, including Amendments
Nos. 1 and 2.
(1) Amendment No. 3 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 20(b) to 1980 Annual Report on Form 10-
K.
(2) Amendment No. 4 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 20(b) to 1981 Annual Report on Form 10-
K.
(3) Amendment No. 5 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 19(b) to 1983 Annual Report on Form 10-
K.
(4) Amendment No. 6 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(4) to 1985 Annual Report on Form
10-K.
(5) Amendment No. 7 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(5) to 1985 Annual Report on Form
10-K.
(6) Amendment No. 8 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(6) to 1987 Annual Report on Form
10-K.
(7) Amendment No. 9 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(7) to 1987 Annual Report on Form
10-K.
(8) Amendment No. 10 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(8) to 1990 Annual Report on Form
10-K.
(9) Amendment No. 11 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(9) to 1991 Annual Report on Form
10-K.
(10) Amendment No. 12 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(10) to 1991 Annual Report on Form
10-K.
(11) Amendment No. 13 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(11) to 1991 Annual Report on Form
10-K.
(12) Amendment No. 14 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(12) to 1991 Annual Report on Form
10-K.
(13) Amendment No. 15 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(13) to 1992 Annual Report on Form
10-K.
(14) Amendment No. 16 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(14) to 1993 Annual Report on Form
10-K.
(15) Amendment No. 17 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(15) to 1993 Annual Report on Form
10-K.
(16)Amendment No. 18 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(16) to 1994 Annual Report on Form
10-K.
(17)Amendment No. 19 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(17) to 1994 Annual Report on Form
10-K.
(18)Amendment No. 20 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(18) to the 1995 Annual Report on
Form 10-K.
(19)Amendment No. 21 to the UPS Thrift Incorporated by Reference to Exhibit
Plan. 10(a)(19) to the 1995 Annual Report on
Form 10-K.
(20)Amendment No. 22 to the UPS Thrift Filed herewith as Exhibit 10(a)(20).
Plan.
(21)Amendment No. 23 to the UPS Thrift Filed herewith as Exhibit 10(a)(21).
Plan.
</TABLE>
E-2
<PAGE>
<TABLE>
<S> <C> <C> <C>
(b) UPS Retirement Plan (including amendments Incorporated by Reference to Exhibit 9
1 through 4). to 1979 Annual Report on Form 10-K.
(1) Amendment No. 5 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 20(a) to 1980 Annual Report on Form 10-
K.
(2) Amendment No. 6 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 19(a) to 1983 Annual Report on Form 10-
K.
(3) Amendment No. 7 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(3) to 1984 Annual Report on Form
10-K.
(4) Amendment No. 8 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(4) to 1985 Annual Report on Form
10-K.
(5) Amendment No. 9 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(5) to 1985 Annual Report on Form
10-K.
(6) Amendment No. 10 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 19(a) to 1988 Annual Report on Form 10-
K.
(7) Amendment No. 11 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 19(b) to 1988 Annual Report on Form 10-
K.
(8) Amendment No. 12 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(8) to 1989 Annual Report on Form
10-K.
(9) Amendment No. 13 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(9) to 1989 Annual Report on Form
10-K.
(10) Amendment No. 14 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(10) to 1990 Annual Report on Form
10-K.
(11) Amendment No. 15 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(11) to 1992 Annual Report on Form
10-K.
(12) Amendment No. 16 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(12) to 1994 Annual Report on Form
10-K.
(13) Amendment No. 17 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(13) to 1994 Annual Report on Form
10-K.
(14) Amendment No. 18 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(14) to the 1995 Annual Report on
Form 10-K.
(15) Amendment No. 19 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(15) to the 1995 Annual Report on
Form 10-K.
(16) Amendment No. 20 to the UPS Incorporated by Reference to Exhibit
Retirement Plan. 10(b)(16) to the 1995 Annual Report on
Form 10-K.
(17) Amendment No. 21 to the UPS Filed herewith as Exhibit 10(b)(17)
Retirement Plan.
(c) UPS Managers Incentive Plan (as amended). Incorporated by Reference to
Registration Statement No. 333-20319, as
filed on January 24, 1997.
(d) Indemnification Contracts or Incorporated by Reference to Item 8 of
Arrangements. Form 10, as filed April 29, 1970.
</TABLE>
E-3
<PAGE>
<TABLE>
<C> <S> <C> <C>
(e) Agreement of Incorporated by Reference to Exhibit
Sale between 10(m) to 1985 Annual Report on Form 10-
Delaware K.
County
Industrial
Development
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
Parcel
Service of
America,
Inc. and
Irving Trust
Company;
Guarantee by
United
Parcel
Service of
America,
Inc. to
Delaware
County
Industrial
Development
Authority,
dated as of
December 1,
1985.
(f) Receivables Incorporated by Reference to Exhibit
Purchase and 10(l) to 1987 Annual Report on Form 10-
Sale K.
Agreement,
dated as of
November 24,
1987, among
United
Parcel
Service,
Inc., an
Ohio
corporation,
United
Parcel
Service,
Inc., a New
York
corporation,
United
Parcel
Service of
America,
Inc.,
Cooperative
Receivables
Corporation
and Citicorp
North
America,
Inc.
(g) Receivables Incorporated by Reference to Exhibit
Purchase and 10(m) to 1987 Annual Report on Form 10-
Sale K.
Agreement,
dated as of
November 24,
1987, among
United
Parcel
Service,
Inc., an
Ohio
corporation,
United
Parcel
Service,
Inc., a New
York
corporation,
United
Parcel
Service of
America,
Inc.,
Citibank,
N.A., and
Citicorp
North
America,
Inc.
(h) Membership Incorporated by Reference to Exhibit
Agreement, 10(n) to 1987 Annual Report on Form 10-
dated as of K.
November 24,
1987, by and
between
Cooperative
Receivables
Corporation
and United
Parcel
Service of
America,
Inc.
(i) Amended and Incorporated by Reference to Exhibit
Restated 10(r) to 1990 Annual Report on Form 10-
Facility K.
Lease
Agreement,
dated as of
November 6,
1990, among
Overseas
Partners
Leasing,
Inc., United
Parcel
Service
General
Services Co.
and United
Parcel
Service of
America,
Inc.
(j) Amended and Incorporated by Reference to Exhibit
Restated 10(s) to 1990 Annual Report on Form 10-
Facility K.
Lease
Agreement,
dated as of
November 6,
1990, among
Overseas
Partners
Leasing,
Inc., United
Parcel
Service Co.
and United
Parcel
Service of
America,
Inc.
(k) Agreement of Incorporated by Reference to Exhibit
Sale, dated 10(t) to 1989 Annual Report on Form 10-
as of K.
December 28,
1989,
between
Edison
Corporation
and Overseas
Partners
Leasing,
Inc.
(l) Assignment Incorporated by Reference to Exhibit
and 10(u) to 1989 Annual Report on Form 10-
Assumption K.
Agreement,
dated as of
December 28,
1989,
between and
among Edison
Corporation,
Overseas
Partners
Leasing,
Inc.,
McBride
Enterprises,
Inc. and
Ramapo
Ridge-
McBride
Office Park.
(m) UPS Deferred Incorporated by Reference to Exhibit
Compensation 10(v) to 1990 Annual Report on Form 10-
Plan for K.
Non-Employee
Directors.
</TABLE>
E-4
<PAGE>
<TABLE>
<S> <C> <C> <C>
(n) UPS Retirement Plan for Outside Incorporated by Reference to Exhibit
Directors. 10(w) to 1990 Annual Report on Form 10-
K.
(o) UPS Savings Plan, as Amended and Incorporated by Reference to Exhibit
Restated, including Amendments No. 1-5. 10(x) to 1990 Annual Report on Form 10-
K.
(1) Amendment No. 6 to the UPS Savings Incorporated by Reference to Exhibit
Plan. 10(x)(1) to 1990 Annual Report on Form
10-K.
(2) Amendment No. 7 to the UPS Savings Incorporated by Reference to Exhibit
Plan. 10(x)(2) to 1991 Annual Report on Form
10-K.
(3) Amendment No. 8 to the UPS Savings Incorporated by Reference to Exhibit
Plan. 10(x)(3) to 1992 Annual Report on Form
10-K.
(4) Amendment No. 9 to the UPS Savings Incorporated by Reference to Exhibit
Plan. 10(x)(4) to 1992 Annual Report on Form
10-K.
(5) Amendment No. 10 to the UPS Savings Incorporated by Reference to Exhibit
Plan. 10(x)(5) to 1992 Annual Report on Form
10-K.
(6) Amendment No. 11 to the UPS Savings Incorporated by Reference to Exhibit
Plan. 10(x)(6) to 1994 Annual Report on Form
10-K.
(7) Amendment No. 12 to the UPS Savings Incorporated by Reference to Exhibit
Plan. 10(x)(7) to 1994 Annual Report on Form
10-K.
(8) Amendment No. 13 to the UPS Savings Incorporated by Reference to Exhibit
Plan. 10(x)(8) to 1994 Annual Report on Form
10-K.
(9) Amendment No. 14 to the UPS Savings Incorporated by Reference to Exhibit
Plan. 10(x)(9) to 1994 Annual Report on Form
10-K.
(10) Amendment No. 15 to the UPS Savings Incorporated by Reference to Exhibit
Plan. 10(x)(10) to 1994 Annual Report on Form
10-K.
(11) Restatement Amendment No. 1 to the Incorporated by Reference to Exhibit
UPS Savings Plan. 10(x)(11) to the 1995 Annual Report on
Form 10-K.
(12) Restatement Amendment No. 2 to the Incorporated by Reference to Exhibit
UPS Savings Plan. 10(x)(12) to the 1995 Annual Report on
Form 10-K.
(13) Restatement Amendment No. 3 to the Filed herewith as Exhibit 10(o)(13).
UPS Savings Plan.
(14) Restatement Amendment No. 4 to the Filed herewith as Exhibit 10(o)(14).
UPS Savings Plan.
(15) Restatement Amendment No. 5 to the Filed herewith as Exhibit 10(o)(15).
UPS Savings Plan.
(p) Credit Agreement (364-Day Facility) dated Incorporated by Reference to Exhibit
June 10, 1996 among United Parcel Service 10(a) to Quarterly Report on Form 10-Q
of America, Inc., the initial lenders for the Quarter Ended June 30, 1996.
named therein, NationsBank of Georgia,
N.A., as Agent, and Citibank, N.A., as
Agent.
(q) Credit Agreement (Five-Year Facility) Incorporated by Reference to Exhibit
dated June 10, 1996 among United Parcel 10(b) to the Quarterly Report on Form
Service of America, Inc., the initial 10-Q for the Quarter ended June 30,
lenders named therein, NationsBank of 1996.
Georgia, N.A., as Agent, and Citibank,
N.A., as Agent.
(r) UPS 1991 Stock Option Plan (Amended and Incorporated by Reference to Exhibit
Restated as of February 20, 1992). 10(z) to 1991 Annual Report on Form 10-
K.
</TABLE>
E-5
<PAGE>
<TABLE>
<S> <C> <C> <C>
(s) UPS Coordinating Benefit Plan. Incorporated by Reference to Exhibit
10(aa) to 1991 Annual Report on Form 10
K.
(1) Amendment No. 1 to UPS Coordinating Incorporated by Reference to Exhibit
Benefit Plan. 10(aa)(1) to 1992 Annual Report on Form
10 K.
(2) Amendment No. 2 to UPS Coordinating Incorporated by Reference to Exhibit
Benefit Plan. 10(aa)(2) to 1992 Annual Report on Form
10 K.
(t) Employees Stock Purchase Plan, as Incorporated by Reference to Exhibit
amended. 10(e) to Quarterly Report on Form 10-Q
for the Quarter Ended September 30,
1995.
(u) UPS 1996 Stock Option Plan, as amended Filed herewith as Exhibit 10(u).
and restated.
(21)SUBSIDIARIES OF THE REGISTRANT. Filed herewith as Exhibit 21.
(23)CONSENT OF DELOITTE & TOUCHE LLP. Filed herewith as Exhibit 23.
(27)FINANCIAL DATA SCHEDULE Filed with EDGAR version of this 1996
Annual Report on Form 10-K.
</TABLE>
E-6
<PAGE>
EXHIBIT 10 (A) (20)
AMENDMENT NO. 22
TO
THE UPS THRIFT PLAN
WHEREAS, United Parcel Service of America, Inc. ("UPS") and its
affiliated corporations established, effective 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 has been restated to incorporate Amendments No. 1
through 19, and has been submitted to the Internal Revenue Service on March 31,
1995, for purposes of receiving a favorable determination letter that considers
the requirements of the Tax Reform Act of 1986, and the regulations promulgated
thereunder; and
WHEREAS, pursuant to the request of the Internal Revenue Service, it is
proposed to incorporate language that comports with the requirements of Internal
Revenue Code Section 401(m)(9), and the regulations promulgated thereunder, with
regard to preventing "Multiple Use" of the alternative limitation;
NOW THEREFORE, pursuant to the authority vested in the Board of Directors
by Section 16.1 of the Plan, the Plan is hereby amended in the following
respects, effective January 1, 1989:
1. Section 6.2(e) is amended by adding a new subparagraph (e)(4) to
read as follows:
"(4) 'Aggregate Limit' shall mean the sum of (i) 125 percent of the
greater of the Average Deferral Percentage of the Non-highly Compensated
Employees for the Plan Year or the Average Contribution Percentage of Non-highly
Compensated Employees under the plan subject to Code section 401(m), for the
Plan Year beginning with or within the Plan Year of the
<PAGE>
CODA and (ii) the lessor of 200% or two plus the lesser of such Average Deferral
Percentage or Average Contribution Percentage. 'Lesser' is substituted for
'greater' in '(i)', above, and 'greater' is substituted for 'lesser' after 'two
plus the' in '(ii)' if it would result in a larger Aggregate Limit." and
2. Section 6.2 is amended by adding new subparagraph (f) to read as
follows:
"(f) If one or more Highly Compensated Employees participate in this Plan
and a plan maintained by the Employer or a Related Employer that contain a
qualified cash or deferred arrangement (a "CODA"), as defined in Code Section
401(k)(2), and the sum of the Average Deferral Percentage and Average
Contribution Percentage of those Highly Compensated Employees subject to either
or both tests exceeds the Aggregate Limit, then the Average Contribution
Percentage of those Highly Compensated Employees who also participate in a CODA
will be reduced (beginning with such Highly Compensated Employee whose Average
Contribution Percentage is the highest) so that the limit is not exceeded. The
amount by which each Highly Compensated Employee's Contribution Percentage
Amount is reduced shall be treated as an Excess Contribution. The Average
Deferral Percentage and Average Contribution Percentage of the Highly
Compensated Employees are determined after any corrections required to meet the
Average Deferral Percentage under any CODA maintained by the employer and
Average Contribution Percentage test under the Plan have been made. Multiple
use does not occur if either the Average Deferral Percentage or Average
Contribution Percentage of the Highly Compensated Employees does not exceed 1.25
multiplied by the Average Deferral Percentage and Average Contribution
Percentage of the Non-highly Compensated Employees."
IN WITNESS WHEREOF, United Parcel Service of America, Inc. , based upon
the action by the Board of Directors, has caused this amendment to the Plan to
be executed this 16th day of December 1996.
ATTEST: UNITED PARCEL SERVICE OF AMERICA, INC.
/S/ JOSEPH R. MODEROW By: /S/ KENT C. NELSON
- --------------------- -----------------------------------
Secretary Chairman
<PAGE>
EXHIBIT 10 (a) (21)
AMENDMENT NO. 23
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, 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. 22, effective as of January 1, 1989; and
WHEREAS, it is desired to amend the Plan further to permanently extend the
special withdrawal opportunity provided by Amendment No. 20:
NOW THEREFORE, pursuant to the authority vested in the Board of Directors by
section 16.1 of the Plan, the Plan and the Trust Agreement forming a part
thereof, the Plan is hereby amended as follows, effective August 1, 1996 unless
specifically noted otherwise below:
1. Sections 4.1(b)(2) and 4.2(b) are deleted.
2. Section 4.3 is amended and restated as follows:
Section 4.3 Reductions of Employer's Tentative Contribution. The
-----------------------------------------------
Basic and contribution with respect to each Employer shall be reduced to the
extent that such Tentative Basic Contribution may not be allocated to the
Participants in the Plan
<PAGE>
employed by such Employer because of the limitations provided in Section
5.6(b)(3), 6.1 and 6.2 of the Plan. The Tentative Basic Contribution of each
Employer so reduced, which shall be referred to as the "Basic Contribution" (or
the "Contribution") of such Employer, shall be contributed to the Plan by such
Employer out of its current or accumulated earnings and profits within the time
limit prescribed in Section 4.5. The Contribution of each Employer, however,
shall not exceed the amount allowable under the Internal Revenue Code to such
Employer or to a foreign subsidiary of such Employer as a deduction for
contributions paid to this Plan.
3. Section 5.1 of the Plan is amended and restated as follows:
Section 5.1 Funds and Accounts Established.
------------------------------
a) The assets of the Plan shall be held in Trust in a single fund, the
General Fund. All Participant accounts in the Distribution Fund as of July 31,
1996 shall be transferred to, and become a part of, the General Fund.
b) The Committee shall maintain individual accounts for each Participant in
the General Fund as follows: a Participant Savings Account; an Employer
Contributions Account; and a Participant Investment Income Account.
c) The Committee shall also maintain a Special Gift Account and a Fund
Investment Income Account in the General Fund.
4. Sections 5.3(b) and 5.3(c) are amended and restated as follows:
(b) Contributions made by the Employers shall be credited to the individual
Employer Contributions Accounts main tained for Participants in the General
Fund. Such credits shall be made as of
2
<PAGE>
the close of the calendar year for which an Employer contribution is made, but
shall not be taken into account in determining the monthly balances of
Participants for such calendar year.
(c) No charges shall be made to either individual Participant Savings Accounts
or Employer Contributions Accounts in the General Fund except for withdrawals or
distributions on termination of regular employment or for appropriate charges
because of deficits in the Participant Investment Income Accounts in the General
Fund.
5. Sections 5.5 (a) and (b) are amended to substitute the word
"the" in place of the word "each" prior to the word "Fund."
6. Sections 5.5 (c) and (d) are deleted.
7. The first paragraph of Section 5.6 is amended and restated as follows:
Section 5.6 Allocation of Income and Contributions to Accounts. Allocation
--------------------------------------------------
of Income and Contributions to Accounts. After the end of each accounting
period the Committee shall make the following allocations:
8. Sections 5.6(a) and 5.6(b)(1) are amended and restated as follows:
(a) As of the end of each accounting period the Committee shall credit or
charge the Participant Investment Income Accounts of each Participant in the
Fund with an account balance at the end of such accounting period, with that
part of the income or loss shown in the Fund Investment Income Account for such
period, as bears the same ratio to such income or loss of the Fund as the
balance of such Participant's combined Participant Savings Account, Employer
Contributions Account and Participant Investment Income Accounts in the Fund at
the end of the prior accounting period bears to the balances of such combined
three accounts of all Participants in the Fund at the end of the prior
accounting period.
(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 balance of the
Participant's combined Participant Savings Account, Employer Contributions
Account and Participant Investment Income Account at the end of the prior
accounting period bears to the balances of all Participants in the three
accounts of the General Fund at the end of the prior accounting period.
9. Section 5.7 is deleted.
10. Article VII is deleted.
11. Effective September 1, 1996, Article IX is restated in its entirety
as amended and follows:
Section 9.1 Withdrawal of Participant Savings Account. Amounts credited to
-----------------------------------------
the Participant Savings Account of a Participant, may be withdrawn at any time
during his lifetime upon application of the Participant to the Committee. The
amount which may be withdrawn, however, may not exceed the excess of the sum of
the amounts credited to the Participant Savings Account of the Participant in
the Fund over the allocable portion of the net deficit, if any, in the
Participant Investment Income Accounts of such Participant in such Funds. The
allocable portion of such net deficit will be determined in accordance with the
ratio which the amount credited to the Participant Savings Account of the
Participant bears to the total of the amounts credited to the Participant
Savings Account and the Employer Contributions Account of such Participant in
the Fund.
3
<PAGE>
Section 9.2 Emergency Withdrawals. Emergency Withdrawals. If a
---------------------
Participant establishes to the satisfaction of the Committee that he is faced
with a financial emergency or necessity due to sickness or injury to himself or
to one or more of his dependents the Committee may approve withdrawals from
accounts other than a Participant Savings Account. The Committee, in its
discretion, may grant the application in whole or in part, and may provide for
payment in a lump sum or in installments. Payments shall be made under this
Section only after all funds from the Participant Savings Account of the
Participant have been distributed pursuant to Section 9.1.
Section 9.3 Further Withdrawals. Further Withdrawals. Amounts in a
-------------------
Participant's Accounts, other than in his Participant Savings Account, may also
be withdrawn without the consent of the Committee, provided that such amounts
have been credited to the Participant's account for two years or more.
Notwithstanding the foregoing, Plan Participants with at least 60 months of Plan
participation may elect to withdraw all amounts credited to his or her Employer
Contribution Account and Participant Investment Account.
Section 9.4 Payment of Withdrawn Amounts. Payment of Withdrawn Amounts.
----------------------------
Amounts withdrawn pursuant to this Article IX shall be paid in cash.
Notwithstanding the foregoing, Participants electing a withdrawal pursuant to
Section 9.3 may choose to receive a portion of the withdrawal in UPS stock,
subject to the following:
(a) to be eligible to receive a distribution of UPS stock from the Plan,
the Participant:
(i) must be eligible to participate in the UPS Stock Ownership
Program; and
(ii) agree to the terms of the UPS Stock Trust Agreement.
4
<PAGE>
(b) the amount of stock available for withdrawal pursuant to this Section
9.4, shall be limited to the lesser of the following amounts:
(i) the ratio of the value UPS Stock held by the Plan to the total
value of all Plan assets, computed as of the end of the month preceding the
month in which the distribution is processed, multiplied by the amount of
Participant's withdrawal election; or
(ii) the sum of the balances in the Participant's Employer
Contribution Account and Participant Investment Account.
(c) the value of the stock allocated to a Participant's withdrawal
pursuant to paragraph (b) above shall be distributed in-kind:
(i) in whole shares; and
(ii) provided the value of the in-kind distribution is at least
$500.
Section 9.5 Timing of Payment. Subject to the provisions of
-----------------
Section 9.6, payment of amounts applied for under this Article IX will be made
within fifteen (15) days after the end of the month following the month in which
the application is received by the Committee, except that amounts attributable
to Fund earnings or to Employer contributions which cannot be readily determined
at the end of an accounting period shall be paid within thirty (30) days after
such amounts have been determined.
Section 9.6 Waiting Period. The Committee, notwithstanding any other
--------------
provisions of this Article IX, may provide by uniform rules for a waiting period
of up to six months for the payment of any withdrawals.
5
<PAGE>
Section 9.7 Applications for Withdrawal. Applications for
---------------------------
Withdrawal. All applications for withdrawal under this Article IX shall be in
writing, shall state the amount sought to be withdrawn and shall set forth such
other information as the Committee shall prescribe.
12. Section 10.1 is amended and restated as follows:
Section 10.1 Distribution of Account Balances - If a Participant
--------------------------------
retires, dies or otherwise terminates Regular Employment (unless he is eligible
to make weekly cash payments and elects to do so in accordance with Section
3.2), all amounts standing to his credit under the Plan shall be distributed to
him or his designated beneficiary in accordance with the following terms and
conditions:
(a) General Rule. All amounts standing to the credit of a Participant in the
General Fund shall be distributed, in a single lump sum, to the Participant or
his beneficiary as soon as practicable after the January 1 following the
calendar year in which the participant retires, dies, or otherwise terminates
Regular Employment (without having elected to make cash payments in accordance
with Section 3.2). Any such distribution to a Participant shall require the
Participant's written consent if made prior to his attaining normal retirement
age, which for purposes of the Plan shall be age 62. Failure to consent shall be
deemed to be an election to defer distribution of the Participant's benefit, and
all amounts standing to the Participant's credit shall remain in the General
Fund until a subsequent consent to distribution is filed with the Committee, or
the Participant attains 62 years of age. Notwithstanding the foregoing, if the
value of the Participant's accounts in the General Fund does not exceed $3,500,
said amounts shall be distributed to the Participant or his beneficiary without
such individual's consent.
6
<PAGE>
(b) Immediate Distribution Option. Following a Participant's retirement, death
-----------------------------
or other termination of Regular Employment (unless he is eligible to make weekly
cash payments and elects to do so in accordance with Section 3.2), the
Participant or his beneficiary shall be permitted to elect, in accordance with
procedures established by the Committee, the immediate distribution, in a single
lump sum, of all amounts standing to the Participant's credit in the General
Fund. If such election is made, there shall be distributed to the Participant or
beneficiaries, as soon as practicable following the Committee's receipt of the
Participant's or beneficiary's completed election, an amount equal to the
balance standing to the credit of Participant in the the General Fund.
(c) Repayment of Prior Distribution in Event of Re-employment. If a
---------------------------------------------------------
former Participant, after receiving distribution of his accounts pursuant to
this Article X, returns to Regular Employment with the Employer before the end
of the 12-month period commencing on the date he terminated Regular Employment,
he shall be permitted to restore all, but not less than all, of the amounts
previously distributed to him, provided such restoration is made in a lump sum
within six (6) months after his date of re-employment, and provided that such
repayment is at least $1,000. Upon repayment, the moneys previously distributed
shall be credited to a newly established Participant's Savings Account in the
General Fund.
(d) Repayment of Prior Distribution in Event of Return to Work following
--------------------------------------------------------------------
Disability or Leave or Absence Due to Health Reasons. If a former Participant,
- ----------------------------------------------------
after receiving distribution of his accounts pursuant to this Article X, returns
to Regular Employment with the Employer after a period of disability or a leave
7
<PAGE>
of absence due to pregnancy, disability, or other health or medical problems, he
shall be permitted to restore all, but not less than all, of the amounts,
previously distributed to him, provided such restoration is made in a lump sum
within six (6) months after his date of returning to Regular Employment, and
provided that such repayment is at least $1,000. Upon repayment, the moneys
previously distributed shall be credited to a newly established Participant's
Savings Account in the General Fund.
13. Section 10.4 is deleted.
14. Sections 10.5(b)(A) and 10.5(b)(B) are amended as follows:
(b)(A) the direct rollover must be in an amount of $200 or more.
(b)(B) A direct rollover to two or more eligible retirement plans shall not be
permitted. Notwithstanding the foregoing, and subject to the limitation in
subparagraph (A) above, a Participant receiving an in-kind distribution or
withdrawal may elect to rollover the in-kind and cash portions of the
distribution or withdrawal to separate eligible retirement plans, provided that,
the number of eligible retirement plans selected does not exceed two.
15. Section 13.3 is deleted.
16. Section 13.4(c) is deleted.
17. Section 15.1 (c) is amended and restated as follows:
(c) does not require this Plan to provide any type or form of benefit, or any
option, not otherwise provided under this Plan, except that, any interest in a
8
<PAGE>
Participant's Accounts, including his Employer Contribution Account and
Investment Income Account in the Fund, awarded to an Alternate Payee, may be
distributed to or on behalf of the Alternate Payee as soon as practicable
following the Committee's approval of the Qualified Domestic Relations Order;
IN WITNESS WHEREOF, United Parcel Service of America, Inc., based upon action
by its Board of Directors, has caused this Amendment No. 23 to be executed this
16th day of December, 1996.
ATTEST: UNITED PARCEL SERVICE OF AMERICA, INC.
/S/ JOSEPH R. MODEROW By: /S/ KENT C. NELSON
- ------------------------------ ----------------------------------
Secretary Chairman
9
<PAGE>
EXHIBIT 10(B)(17)
AMENDMENT NO. 21
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 UPS Retirement 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 on a number of occasions since
January 1, 1976, the most recent being Amendment No.20, effective as of January
1, 1995; and
WHEREAS, it is desired to amend the Plan further to provide retiree
medical benefits to participants who by operation of federal statute or
regulation cease to be eligible for their current job classification due to the
attainment of a specified age.
NOW THEREFORE, pursuant to the authority vested in the Board of
Directors by Section 7.1 of the Plan, the UPS Retirement Plan is hereby amended
as follows, effective June 1, 1996:
1. The first two paragraphs of Section 12.2(d) are amended in their
entirety to read as follows:
"Retired Participant" is defined for purposes of this Article XII
(except as otherwise provided in the following paragraph),as an
individual who (i) was a Participant who was actively working as an
Employee until his or her Early, Normal or Postponed Retirement Date,
(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 and at least
one Year of Service as a Participant in this Plan, and (iii) retired
from employment as an Employee and was thereupon immediately eligible
to receive an Early or Normal Retirement Benefit hereunder. In
addition, a Participant who attained his or her Early Retirement Date
(with, in the case of a Participant who first became an Employee on or
after January 1, 1989, at least 10 Years of Service at least one of
which was as a Participant in this Plan) and then dies while still
employed as an Employee shall be considered a "Retired Participant"
whose Covered Dependents are eligible to receive Medical Benefits in
accordance with this Article.
<PAGE>
No Participant shall be considered to be eligible to receive
retirement benefits provided under the Plan if he or she is still
employed by an Employer Company. No deferred vested Participant who
terminated employment with an Employer Company prior to retirement,
and no individual who first became an Employee on or after January 1,
1989 and who retired with less than 10 Years of Service with an
Employer Company or less than One Year of Service as a Participant in
this Plan shall be eligible to receive Medical Benefits under this
Article XII. A Participant's retirement from active employment as an
Employee at or after his or her Early or Normal Retirement Date, 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 actively employed as an
Employee (with, in each case, the additional requirement that a
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. Notwithstanding the foregoing, an individual who terminates
employment as a result of ceasing to be eligible for his or her
current job classification as the result of the application of a
federal statutory or regulatory age limitation shall be eligible for
Medical Benefits under this Article XII immediately upon termination
of employment, provided, such individual has at least One Year of
Service as a Participant in this Plan.
IN WITNESS WHEREOF, United Parcel Service of America, Inc. based upon
action by its Board of Directors, has caused this Amendment No. 21 to be
executed this 10th day of June 1996.
ATTEST: UNITED PARCEL SERVICE OF
AMERICA, INC.
/S/ JOSEPH R. MODEROW /S/ KENT C. NELSON
- --------------------- ----------------------
Secretary Chairman
2
<PAGE>
EXHIBIT 10 (O) (13)
RESTATEMENT AMENDMENT NO. 3
TO
THE UPS SAVINGS PLAN
(Restated as of March 31, 1995)
WHEREAS, United Parcel Service of America, Inc. (the "Employer")
established the UPS Savings Plan (the "Plan") for the benefit of Eligible
Employees in order that they might enjoy the advantages of having funds put
aside on a tax deferred basis pursuant to Section 401(k) of the Internal Revenue
Code to provide for their retirement; and
WHEREAS, the Plan was amended sixteen times before the Restated Plan
was adopted effective as of March 31, 1995; and
WHEREAS, the Restated Plan has been heretofore amended on two previous
occasions, the most recent being Restatement Amendment No. 2, effective July 31,
1995 and
WHEREAS, it is desired to amend the Restated Plan to further establish
rules pertaining to the acceptance of rollover contributions;
NOW, THEREFORE, pursuant to the authority vested in the Board of
Directors of the Employer by Section 9.1 of the Plan, the Plan is hereby amended
in the following respects, effective March 4, 1996.
1. Subsection 1.1(a) is revised to read as follows:
<PAGE>
"Account" or "Individual Account" means the aggregate of a
Participant's Elective Deferral Account and his or her Rollover Contribution
Account, all established under Article IV.
(1) A Participant's "Elective Deferral Account" shall be the account
established for recording contributions made on behalf of the Participant
pursuant to his or her Elective Deferrals (pursuant to Section 3.1), and for
classifying and summarizing the benefits attributable to such amounts.
(2) A Participant's "Rollover Contribution Account" shall be the
account established for recording amounts transferred from another qualified
plan or conduit individual retirement account (pursuant to Section 3.6) and for
classifying and summarizing the benefits attributable to such amounts.
Section 2.3 is amended to read as follows:
Section 2.3 Transfer to Position Not Covered by Plan.
----------------------------------------
(b) If a Participant is transferred to a position with an
Employer Company in which the Participant is no longer an Employee, as defined
in Section 1.1(i), the Participant shall, if he or she is eligible to
participate in any other Section 401(k) cash or deferred arrangement maintained
by an Employer Company (including the Teamster-UPS National 401(k) Tax Deferred
Savings Plan), cease to be a Participant hereunder and the entire amount of the
Participant's Account shall be converted to cash and transferred to the trustee
or trustees of such other plan, to be held as part of his or her account under
that plan. Notwithstanding the foregoing, if the other plan will not accept the
transfer of the Participant's Rollover Contribution Account because of
restrictions or limitations under that plan, said subaccount shall not be
transferred and shall remain under this Plan, subject to the Participant's right
to elect to withdraw such amounts pursuant to Article VI.
<PAGE>
(c) If the Participant is not eligible to participate in the
Teamster-UPS National 401(k) Tax Deferred Savings Plan or any other Section
401(k) cash or deferred arrangement maintained by an Employer Company, or if his
or her Rollover Contribution Account has been retained as described in the last
sentence of subsection (a), he or she shall remain a Participant in this Plan,
so long as employed by an Employer Company, with respect to Elective Deferral
Contributions previously made on his or her behalf but will no longer be
eligible to have Elective Deferral Contributions made to the Plan on his or her
behalf unless and until he or she again becomes an Employee. In the event the
Participant is subsequently transferred to a position in which he or she again
becomes an Employee, as defined in Section 1.1(i), the Participant may elect to
make Elective Deferral Contributions as of the first day of the month coincident
with or next following the date on which he or she becomes an Employee.
Notwithstanding any other provision of this Plan, the Committee shall
permit the contribution of funds to a Participant's Account which represent the
transfer of his or her account from the Teamster-UPS National 401(k) Tax
Deferred Savings Plan or any other Section 401(k) cash or deferred arrangement
maintained by an Employer Company. Such funds shall be held in the appropriate
subaccount (Elective Deferral Account, or Rollover Contribution Account) under
this Plan and shall be invested in the options selected by the Participant in
accordance with Article IV, in the same percentage amounts as are invested the
Participant's Elective Deferral Contributions or as otherwise directed by the
Participant with the approval of the Committee or its designee.
<PAGE>
2. A new Section 3.6 is added to Article III to read as follows:
Section 3.6 Rollovers from Qualified Plans or Conduit IRAs.
-----------------------------------------------
(a) Any active Participant may contribute to the Trust an amount
consisting of an eligible rollover distribution from another qualified
retirement plan, or transfer from a conduit IRA, provided that the contribution
shall not jeopardize the qualifications of the Plan or the tax-exempt status of
the Trust or create adverse tax consequences for the Employer Company. A
Participant who has incurred a Separation from Service may contribute to the
Trust in accordance with this Section 3.6(a), provided that the Participant 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 held in a sub-account under the
Participant's Individual Account (the "Rollover Contribution Account"), and 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, or as otherwise directed by the Participant.
The Rollover Contribution Account shall be credited and/or debited with its
allocable share of investment income and loss, and administration expenses in
accordance with Article IV.
<PAGE>
(c) For purposes of this Section, an eligible rollover
distribution means:
(1) an eligible rollover distribution, within the meaning of
Code Section 402, which is transferred to this Plan by the Participant no later
than sixty (60) days following the date on which the Participant received the
property distributed from another qualified retirement plan.
(2) an eligible rollover distribution, within the meaning of
Code Section 402, which is transferred to this Plan directly by another
qualified retirement plan at the Participant's direction pursuant to Code
Section 401(a)(31).
In the case 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.
(d) For purposes of this Section a transfer from a conduit IRA
means:
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 from another qualified retirement plan, and which were
deposited in such conduit individual retirement account or annuity within sixty
(60) days of such prior distribution.
4. The second sentence of Section 4.1 is deleted and the following
<PAGE>
two sentences substituted in lieu thereof:
The Trustee shall establish and maintain on behalf of each Participant
an Individual Account which shall be subdivided into separate subaccounts: (a)
an Elective Deferral Contribution Account, and (b) a Rollover Contribution
Account, all as described in subsection 1.1(a). There shall be credited to each
above-described subaccount such sums of money from time to time contributed as
Elective Deferral Contributions and Rollover Contributions, respectively,
together with the subaccount's allocable share of earnings, profits and
appreciation, and there shall be charged to each subaccount its allocable share
of losses and depreciation and its allocable share of expenses of this Plan and
Trust Agreement, pursuant to Section 4.11.
5. The second sentence of Section 4.4(a) is amended to read as
follows:
In accordance with Section 4.6, each Participant shall have the
opportunity to choose, in accordance with such procedures as the Committee or
its designee may prescribe, among the following investment vehicles for the
investment of monies contributed with respect to the Participant's Account.
6. Section 4.5 is modified by the addition of the following sentence
after the first sentence thereof:
If the Participant's Account consists of more than one subaccount
(i.e., Elective Deferral Account, and Rollover Contribution Account), each such
- -----
subaccount shall be invested in the same investment options and in accordance
with the same percentages selected by the Participant with respect to the
Participant's Elective Deferral Account, unless a separate investment allocation
is made with respect to the Rollover Contribution Account by the Participant.
<PAGE>
7. Section 4.10 is amended by revising paragraph (2) to read as
follows:
(b) The amount of Elective Deferral and Rollover Contributions
allocated to the Account, broken down among Options A, B, C, D, E and each Time
Horizon Fund within Option F.
8. Section 4.12 is hereby deleted.
9. Section 6.1 is amended to read as follows:
Section 6.1 In-Service Withdrawals.
----------------------
(a) Rollover Contribution Accounts.
------------------------------
An active Participant may withdraw all or a portion of his or her
Rollover Contribution Account at any time, by submitting a request for
withdrawal in accordance with the procedures adopted by the Committee or their
designee for this purpose. Such withdrawal shall be subject to any additional
restrictions, uniformly applied with respect to Participants similarly situated,
as are prescribed by the Committee regarding the frequency and minimum amount of
such withdrawal.
(b) Withdrawals After Age 59 1/2.
----------------------------
An active Participant may withdraw all or a portion of his or her
Elective Deferral Account following attainment of age 59 1/2, by submitting a
request for withdrawal in accordance with procedures adopted by the Committee or
their designee for this purpose. Such withdrawal shall be subject to any
additional restrictions, uniformly applied with respect to Participants
similarly situated, as are prescribed by the Committee regarding the frequency
and minimum amount of such withdrawal.
<PAGE>
(c) Hardship.
--------
An active Participant may withdraw, for reasons of financial hardship
as defined in Section 6.2, that portion of his or her Elective Deferral Account,
as of the Valuation Date preceding the withdrawal, consisting of contributions
pursuant to Elective Deferrals, in an amount not greater than the amount
necessary to satisfy the financial hardship need. Such a hardship withdrawal
may be applied for by completing and filing with the Plan Administrator a
hardship withdrawal application, in such form as provided by the Committee or
their designee, together with all documentation required by said application to
enable the Committee, or their designee, to determine whether the Participant
satisfies the conditions for a hardship withdrawal.
(d) Withdrawals, if approved by the Committee or their designee,
will be payable no later than the last day of the month following the month in
which the Participant's completed withdrawal request or application, on a form
provided by the Committee or their designee, is received by the Committee or
their designee for such purpose.
10. Section 6.8 is revised by adding the following sentence to the
end of subsection (c) thereof:
The distributee shall be afforded at least 30 days after receipt of
the written explanation to consider the decision whether or not to elect a
<PAGE>
direct rollover, but if he or she thereafter makes an affirmative election
before said 30 day period expires, then the election may be implemented without
regard to the aforesaid 30-day time period.
IN WITNESS WHEREOF, United Parcel Service of America, Inc. has caused
this Amendment No. 3 to the Restated Plan to be executed this 16th day of
December, 1996.
ATTEST: UNITED PARCEL SERVICE OF AMERICA, INC.
BY: /s/ JOSEPH R. MODEROW /s/ KENT C. NELSON
--------------------- ---------------------
Secretary Chairman
<PAGE>
EXHIBIT 10(O)(14)
RESTATEMENT AMENDMENT NO. 4
TO
THE UPS SAVINGS PLAN
(Restated as of March 31, 1995)
WHEREAS, United Parcel Service of America, Inc. (the "Employer")
established the UPS Savings Plan (the "Plan") for the benefit of Eligible
Employees in order that they might enjoy the advantages of having funds put
aside on a tax deferred basis pursuant to Section 401(k) of the Internal Revenue
Code to provide for their retirement; and
WHEREAS, the Plan was amended sixteen times before the Restated Plan
was adopted effective as of March 31, 1995; and
WHEREAS, the Restated Plan has been heretofore amended on three
previous occasions, the most recent being Restatement Amendment No.3, effective
March 4, 1996 and
WHEREAS, it is desired to amend the Restated Plan to permit the
automatic enrollment of Eligible Employees and to permit Participants to make
after-tax contributions to supplement their elective deferrals; and
WHEREAS, it is desired to add a Participant loan program to allow
Participants to borrow funds in their Account under certain prescribed
circumstances;
NOW, THEREFORE, pursuant to the authority vested in the Board of
Directors of the Employer by Section 9.1 of the Plan, the Plan is hereby amended
in the following respects, effective July 29, 1996.
1. Subsection 1.1(a) is amended to read in its entirety as follows:
(a) "Account" or "Individual Account" means the aggregate of a
Participant's Elective Deferral Account, Voluntary Contribution Account, and
Rollover Contribution Account, all established under Article IV.
(1) A Participant's "Elective Deferral Account" shall be the account
to which shall be allocated amounts contributed on behalf of the Participant in
accordance with his or her Elective Deferrals (pursuant to Section 3.1) and the
earnings thereon.
(2) A Participant's "Voluntary Contribution Account" shall be the
account to which shall be allocated the Participant's Voluntary Contributions
(pursuant
<PAGE>
to Section 3.7) and the earnings thereon.
(3) A Participant's "Rollover Contribution Account" shall be the
account to which shall be allocated amounts rolled over from another qualified
plan or conduit individual retirement account (pursuant to Section 3.6)
("Rollover Contributions") and the earnings thereon.
2. Subsection 1.1(g) is amended to read in its entirety as follows:
"(g) "Elective Deferral" means the amount by which an Eligible Employee elects
to have his or her Eligible Compensation reduced in consideration of a
contribution of such amount by his or her Employer Company on his or her behalf
to this Plan. Said election once made may be changed only prospectively and
shall not affect contributions previously made, if any. Unless the context
requires otherwise, the term Elective Deferrals shall include Bonus Elective
Deferrals.
3. A new Section 1.1(ee) is added, to read as follows:
"(ee) "Voluntary Contribution" shall mean the amount contributed by an Eligible
Employee, on an after-tax basis, to his or her Voluntary Contribution Account,
in accordance with Section 3.7.
4. Section 2.2 is amended to read as follows:
Section 2.2 Application to Participate.
--------------------------
An Eligible Employee shall become a Participant in this Plan by
electing to make an Elective Deferral, a Voluntary Contribution, or a Rollover
Contribution to the Plan. An election to make an Elective Deferral, Voluntary
Contribution or Rollover Contribution shall be made through the automated
enrollment procedure established by the Committee or its designee, or in
accordance with such other procedure as may be prescribed by the Committee or
its designee for such purpose from time to time.
Each Eligible Employee upon enrolling in the Plan shall:
(a) designate and authorize, subject to Articles III and IX of the
Plan, one or more of the following: (i) an Elective Deferral percentage by
which he or she desires to have his or her Eligible Compensation reduced in
accordance with the requirements of Section 3.1(a), and contributed by the
Employer Company on his or her behalf to the Plan; (ii) a Bonus Elective
Deferral percentage by which he or she desires to have his or her extraordinary
bonus reduced in accordance with the requirements of Section 3.1(b) and
contributed by the Employer Company on his or her behalf to the Plan; (iii) a
Voluntary Contribution percentage by which he or she wishes to have his or her
Eligible Compensation reduced in accordance with Section 3.7(a), and contributed
by the Employer Company on his or her behalf to the Plan; and (iv) a Rollover
Contribution consisting of an eligible rollover distribution (within
<PAGE>
the meaning of Section 3.6(c)) from another qualified retirement plan or conduit
IRA, and
(b) direct the investment of funds in his or her Account in accordance
with Article IV.
The Committee or its designee shall promptly process the application
and notify the Eligible Employee in writing of their acceptance or non-
acceptance thereof.
5. Section 2.3 is amended to read as follows:
Section 2.3 Transfer to Position Not Covered by Plan.
----------------------------------------
(a) If a Participant is transferred to a position with an Employer
Company in which the Participant is no longer an Employee, as defined in
Section 1.1(i), the Participant shall, if he or she is eligible to participate
in any other 401(k) cash or deferred arrangement maintained by the Employer
Company (including the Teamster-UPS National 401(k) Tax Deferred Savings Plan),
cease to be a Participant hereunder and the entire amount of the Participant's
Account hereunder shall be converted to cash and transferred to the trustee or
trustees of such other plan, to be held as part of the Participant's account or
accounts under that plan. Notwithstanding the foregoing, if the other plan will
not accept the transfer of one or more of the Participant's subaccounts
hereunder because of restrictions or limitations under that plan, said sub-
account or sub-accounts shall not be transferred and shall remain in this Plan,
subject to the Participant's right to elect to withdraw such amounts pursuant to
Article VI. If the transferring Participant has an outstanding loan balance,
pursuant to Article XIII of the Plan, which cannot be transferred to the other
plan, and if the Committee have instituted procedures under Section 13.1(i) to
permit such Participant to continue to make payments of interest and principal
thereon, the loan together with the corresponding portion of the Participant's
Account securing said loan, and the associated repayment obligation, shall not
be transferred and shall remain under this Plan.
(b) If a transferred Participant is not eligible to participate in the
Teamster-UPS National 401(k) Tax Deferred Savings Plan or any other Section
401(k) cash or deferred arrangement maintained by an Employer Company, or if one
or more of the Participant's subaccounts have been retained as described in the
next to last sentence of subsection 2.3(a) above, the Participant shall remain a
Participant in this Plan, with respect to contributions previously made on his
or her behalf but shall no longer be eligible to make Voluntary Contributions,
Rollover Contributions or to have Elective Deferrals made to the Plan on his or
her behalf unless and until he or she again becomes an Employee. In the event
the Participant is subsequently transferred to a position in which he or she
again becomes an Employee, as defined in Section 1.1(i), the Participant may
elect to make Elective Deferrals or Voluntary Contributions. Such election
shall be implemented as soon as practicable after the election is made.
Notwithstanding any other provision of this Plan, the Committee shall
permit the contribution of funds to a Participant's Account under this Plan
which represent the
<PAGE>
transfer of his or her account from the Teamster-UPS National 401(k) Tax
Deferred Savings Plan or any other Section 401(k) cash or deferred arrangement
maintained by an Employer Company. Such funds shall be held in the appropriate
sub-account (Elective Deferral Account, Voluntary Contribution Account or
Rollover Contribution Account) under this Plan and 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, or, in the absence thereof, as are invested the Participant's
Voluntary Contributions pursuant to Section 4.5, or as otherwise directed by the
Participant with the approval of the Committee or its designee.
6. Section 3.1 is amended to read as follows:
Section 3.1 Elective Deferral Contributions.
-------------------------------
(a) Each Eligible Employee may elect to reduce his or her Eligible
Compensation by a whole percentage up to but not exceeding fifteen (15%) percent
of such Eligible Employee's Eligible Compensation earned during the Plan Year
(or, with respect to Eligible Employees employed in Puerto Rico, such lower
percentage as may be permitted under the laws of Puerto Rico) and to have such
amount contributed to the Plan on his or her behalf as an Elective Deferral. An
election to make an Elective Deferral shall state (in a whole percentage) the
portion of the Eligible Employee's Eligible Compensation to be deferred
hereunder and shall be communicated to the Trustee via the telephone response
unit ("VRU") or in accordance with such other procedures adopted by the
Committee or its designee from time to time. With respect to each Eligible
Employee for whom there is in effect an Elective Deferral and who is receiving
Eligible Compensation from an Employer Company, there shall be contributed to
the Trust an amount equal to the amount by which such Eligible Employee's
Eligible Compensation was reduced pursuant to the Eligible Employee's Elective
Deferral. Elective Deferrals shall be paid to the Trust by the Employer Company
as soon as practical following the date on which the deferred amount would have
(but for the Eligible Employee's Elective Deferral) been paid to the Eligible
Employee (but no later than the date required by law) and shall be credited to
the Eligible Employee's Elective Deferral Account upon receipt by the Plan of
the Eligible Employee's Elective Deferral. The Elective Deferral percentage
selected by the Eligible Employee shall remain in effect until changed by the
Eligible Employee in accordance with Section 3.4 or until reduced by the
Committee or its designee in accordance with Section 3.2.
(b) In addition, a Participant may file a separate election, in
accordance with procedures adopted by the Committee or its designee, to defer
receipt of all or any portion of any extraordinary bonus (which shall not, for
this purpose, include the value of any award pursuant to the UPS Manager's
Incentive Plan) payable to the Participant and to have such deferred amount
contributed to the Participant's Elective Deferral Account as a Bonus Elective
Deferral. Amounts deferred pursuant to a Participant's Bonus Elective Deferral
shall be contributed to the Trust at such time and in accordance with such
procedures as set forth in paragraph (a) above, with respect to the
Participant's Elective Deferral.
<PAGE>
(c) Notwithstanding the foregoing, a Participant may not defer under
this Plan, during any calendar year, in excess of $9,500, or such higher amount
as may be prescribed by the Secretary of the Treasury pursuant to Code Section
402(g)(5) (or, with respect to Participants employed in Puerto Rico, such lower
limit as may be prescribed under Puerto Rico law). Elective Deferrals in excess
of the Code Section 402(g)(5) limit (as adjusted), plus any income and minus any
loss allocable thereto, shall be distributed no later than April 15 following
the calendar year in which such deferrals were made to the Participants on whose
behalf and to whose Accounts said excess Elective Deferrals were allocated. If
a Participant also participates during the calendar year in any other plan or
plans which are subject to the limitations of Code Section 402(g) and has made
Elective Deferrals under this Plan which, when combined with elective deferrals
made under such other plan or plans, would exceed the limitations under Code
Section 402(g)(5) for such calendar year, to the extent the Participant
designates, no later than March 1 of the calendar year following the calendar
year in which Elective Deferrals hereunder were made, any Elective Deferrals
under this Plan as excess deferrals, the amount of such designated excess,
increased by any income and decreased by any losses attributable thereto, shall
be refunded to the Participant no later than April 15 of the calendar year
following the calendar year for which the Elective Deferrals were made.
(d) A Participant who has received a hardship distribution, pursuant
to Section 6.2(c), shall be suspended from making any Elective Deferrals, and
shall be limited in the amount of Elective Deferrals the Participant may make in
the taxable year immediately following the taxable year of the hardship
distribution, in accordance with provisions of paragraph (3) of Section 6.2(c).
7. Section 3.4 is revised to read as follows:
Section 3.4 Change in Elective Deferral and/or Voluntary
--------------------------------------------
Contribution. A Participant may increase or decrease his or her Elective
Deferral percentage and/or Voluntary Contribution percentage (including a
reduction to zero) at any time. The change must be made via the VRU or in
accordance with such other procedures established by the Committee or its
designee and shall be implemented as soon as practicable following the date on
which the change is made as to amounts not yet paid to the Participant.
8. Section 3.5 is deleted and reserved for future use.
9. The first sentence of Section 3.6(a) is amended to change the
first three words thereof from "Any active Participant" to the words "An
Eligible Employee."
10. Section 3.6(b) is amended to read in its entirety as follows:
Such contribution shall be held in a sub-account under the Participant's Account
(the "Rollover Contribution Account"), and, except as provided in Section 4.5,
be invested in same investment options and in the same percentage amounts as are
invested the Participant's Elective Deferrals, or, in the absence thereof, as
are invested the Participant's Voluntary Contributions. A Participant shall at
all times be fully vested in amounts allocated to his Rollover Contribution
Account.
<PAGE>
11. A new Section 3.7 is added to read as follows:
Section 3.7 Voluntary Contributions.
-----------------------
(a) Each Eligible Employee may elect to reduce his or her Eligible
Compensation in a whole percentage up to but not exceeding five (5%) percent of
such Eligible Employee's Eligible Compensation earned during the Plan Year (or,
with respect to Eligible Employees employed in Puerto Rico, such lower
percentage as may be permitted under the laws of Puerto Rico) and to have such
amount contributed to the Plan on his or her behalf as a Voluntary Contribution.
An election to make a Voluntary Contribution shall state the portion of the
Eligible Employee's Eligible Compensation to be contributed to the Plan as a
Voluntary Contribution and shall be communicated to the Trustee via the VRU or
in accordance with such other procedures as are adopted by the Committee or its
designee from time to time. With respect to each Eligible Employee for whom
there is in effect an election to make Voluntary Contributions hereunder and who
is receiving Eligible Compensation from an Employer Company, there shall be
contributed to the Trust an amount equal to the amount by which such Eligible
Employee's Eligible Compensation was reduced pursuant to the Eligible Employee's
Voluntary Contribution election. Voluntary Contributions shall be made only by
means of payroll withholding and shall be contributed to the Trust by the
Employer Company as soon as practical following the date on which the withheld
amount would have (but for the Eligible Employee's Voluntary Contribution
election) been paid to the Eligible Employee (but no later than the date
required by law). Voluntary Contributions shall be credited to the Eligible
Employee's Voluntary Contribution Account upon receipt by the Plan of the
Eligible Employee's Voluntary Contribution. The Voluntary Contribution
percentage selected by the Eligible Employee hereunder shall remain in effect
until changed by the Eligible Employee in accordance with Section 3.4.
(b) A Participant who has received a hardship distribution pursuant to
Section 6.2(c) shall be suspended from making any Voluntary Contributions, in
accordance with the provisions of paragraph (3) of Section 6.2(c).
12. Article IV is amended by deleting the words "Time Horizon" in all
places where they appear and by substituting in lieu thereof the words "Bright
Horizon."
13. The second and third sentences of Section 4.1 are amended to read
as follows:
The Trustees shall establish and maintain in the Trust for each Participant an
Individual Account which shall be subdivided into three (3) separate sub-
accounts: (a) an Elective Deferral Account, (b) a Voluntary Contribution
Account and (c) a Rollover Contribution Account, all as described in subsection
1.l(a). There shall be credited to each above-described sub-account such sums
of money from time to time contributed as Elective Deferrals, Voluntary
Contributions and Rollover Contributions, respectively, together with the sub-
account's pro-rata share of earnings, profits and losses and the sub-account's
pro-rata share of appreciation and depreciation and the Participant's pro-rata
share of expenses of this Plan, pursuant to Section 4.11.
<PAGE>
14. Section 4.2 is deleted and reserved for future use.
15. A new Section 4.4(b)(3) is added, to read as follows:
The Trustee shall provide each Participant with confirmation statements, as
applicable, to report (i) his or her enrollment; (ii) the Elective Deferral
percentage selected by the Participant; (iii) the Voluntary Contribution
percentage selected by the Participant; (iv) loans, if any, made to the
Participant from the Plan; (v) Rollover Contributions made by the Participant;
and (vi) withdrawals and distributions from the Participant's Account.
16. The second sentence of Section 4.5 is deleted and the following
sentences are substituted in lieu thereof:
The same investment options designated by the Participant and the same
percentage allocations with respect to each investment option selected shall
apply to the Participant's Elective Deferrals and Voluntary Contributions. If a
Participant has not directed the investment allocation of funds in his or her
Elective Deferrals due to the fact that such Participant had not previously made
any Elective Deferrals to the Plan, the Participant shall be permitted to direct
the investment allocation of his or her Voluntary Contributions, if any. Except
as otherwise permitted by this Section 4.5, a Participant's Rollover
Contribution shall be invested in the investment options and in accordance with
the same percentages selected by the Participant with respect to the
Participant's Elective Deferrals or, if none, the Participant's Voluntary
Contributions. If a Participant has not directed the investment allocation of
his or her Elective Deferrals or Voluntary Contributions due to the fact that
the Participant had not previously made any Elective Deferrals or Voluntary
Contributions to the Plan, then the Participant shall be permitted to direct the
investment allocation of his or her Rollover Contributions. Notwithstanding the
foregoing, a Participant may, on a form provided by the Trustee , make a
separate written election with respect to the Participant's Rollover
Contribution to have his or her Rollover Contribution invested in a manner
independent of the Participant's Elective Deferrals or Voluntary Contributions,
so long as such written election is transmitted to the Trustee at the same time
as the Rollover Contribution is made to the Plan.
17. Section 4.6 is amended to read as follows:
Change in Investment Allocation of Future Contributions. Each
-------------------------------------------------------
Participant may elect to change the investment allocation of future Elective
Deferrals or, if none, his or her future Voluntary Contributions at any time.
Each election to change a Participant's investment allocation shall be made via
the VRU or in accordance with such other procedures as are established by the
Committee from time to time, and shall be effective as soon as practicable
following the receipt thereof. Such election shall apply uniformly to all
future Elective Deferrals and Voluntary Contributions made by or on behalf of
the Participant. Changes must be made in ten percent (10%) adjustments up or
down and must result in a total investment of one hundred percent (100%) of the
Participant's contributions under the Plan. Change authorizations which do not
result in an allocation of one hundred percent (100%) of the Participant's
future contributions or which are incorrect in any other respect will
<PAGE>
not be processed and the prior allocation shall continue in effect.
18. Section 4.7 is amended to read as follows:
Transfer of Account Balances Between Investment Options. Each
-------------------------------------------------------
Participant may elect to transfer the balances in his or her Account among
available investment options at any time. Transfers pursuant to this Section
4.7 shall apply uniformly to all amounts allocated to each sub-account within
the Participant's Account at the time of such election. Such election shall be
made via the VRU, or in accordance with such other procedures as shall be
established by the Committee or its designee from time to time, and shall be
effective as soon as practicable following receipt thereof, subject to
limitations, if any, of the investment vehicles selected. Such transfers must
be in multiples of ten percent (10%) and must result in the investment of one
hundred percent (100%) of the Participant's Account. If a transfer
authorization does not result in the allocation of one hundred percent (100%) of
the Participant's Account among Options A, B, C, D, E and each Bright Horizon
Fund within Option F in percentages which are multiples of ten percent (10%) or
if it is incorrect in any other respect, the transfer authorization will not be
processed by the Committee or its designee and the prior allocation will
continue in effect.
19. Section 4.10 is amended by revising paragraph (b) to read as
follows:
(b) The amount of Elective Deferrals, Voluntary Contributions and
Rollover Contributions allocated to the Account, broken down among Options A, B,
C, D, E and each Bright Horizon Fund within Option F.
20. Section 6. 1 (a) is amended to read as follows:
Section 6.1 In-Service Withdrawals.
===-------------------
(a) Voluntary and Rollover Contribution Accounts.
--------------------------------------------
A Participant may withdraw all or a portion of his or her Voluntary
Contribution Account and/or Rollover Contribution Account at any time, by making
a request for withdrawal via the VRU or in accordance with such other procedures
established by the Committee or its designee from time to time. Withdrawals
shall reduce, pro rata, the amounts allocated to each investment option within
each sub-account from which the withdrawals are made. Withdrawals shall be
subject to any additional restrictions, uniformly applied with respect to
Participants similarly situated, as may be prescribed by the Committee or its
designee regarding the frequency and minimum amount of a withdrawal.
In the case of a withdrawal from the Participant's Voluntary
Contribution Account and/or Rollover Contribution Account, each such sub-account
shall be considered a separate "contract" for purposes of Code Section 72(d) and
a withdrawal therefrom shall be allocated on a pro-rata basis with respect to
the pre-and post-tax monies held in each respective sub-account.
<PAGE>
If a withdrawal request fails to specify the sub-account from which
the withdrawal is to be made, such withdrawal shall first reduce the amounts
credited to the Participant's Voluntary Contribution Account until such sub-
account balance has been reduced to zero, and shall then reduce amounts credited
to the Participant's Rollover Contribution Account.
21. Subsection 6.2(b)(3) is amended to read in its entirety as
follows:
(3) By the cessation of Elective Deferrals and Voluntary Contributions to the
Plan.
22. Subsection 6.2(c)(3) is amended by deleting the word "elective"
after the words "and all other" and by deleting the word "other" after the word
"any" and before the words "qualified plan".
23. Section 10.4 is amended to read as follows:
Section 10.4 Annual Additions.
----------------
For purposes of this Article, the term "Annual Addition" means the sum
of the following amounts credited to a Participant's Account (or to his or her
account under any other qualified defined contribution plan which must be taken
into account for purposes of this Article) for the Limitation Year:
(1) the Employer Company's contributions;
(2) the Employee's contributions (other than Rollover Contributions);
and
(3) forfeitures, if any.
24. A new Article XIII is added to read as follows:
ARTICLE XIII
LOANS
-----
13.1 Terms and Conditions of Loans. The Trustee shall make loans
-----------------------------
available on a reasonably equivalent basis to all Participants in accordance
with the terms and conditions set forth below.
(a) A Participant may request a loan by making application therefor to
the Trustee via the VRU or in accordance with such other procedures as are
established by the Committee or its designee from time to time. Loans shall
only be approved for the purposes described in subsection 13.l(c). The minimum
amount for which a loan may be requested shall be $1,000.00. No more than two
loans are permitted to be outstanding to any Participant at any time.
Notwithstanding the foregoing, an application for a second loan shall not be
<PAGE>
approved while there is an outstanding loan unless the Participant is current
with respect to payments of principal and interest on such outstanding loan.
(b) No loan may be made to a Participant to the extent that such loan
when made would exceed the lesser of: (i) $50,000, reduced by the highest
outstanding loan balance during the 12-month period ending on the day before the
loan is made, or (ii) 50% of the Participant's vested Account balance under the
Plan. For purposes of this limitation, all loans from all plans of the Employer
or an affiliated employer (within the meaning of Code Section 414(b), (c), or
(m)) shall be aggregated.
(c) Loans shall be available from this Plan only for the purposes
described below:
(1) Costs directly related to the purchase of a principal residence
for the Participant.
(2) The payment of expenses for tuition, related educational fees and
room and board expenses for the next twelve (12) months of post-secondary
education of the Participant or the Participant's spouse or dependents (as
defined in Code Section 152).
(3) Payments necessary to prevent the eviction of the Participant from
the Participant's principal residence or foreclosure on the mortgage on that
residence.
(4) The payment of expenses for medical care (as described in Code
Section 213(d)) previously incurred by the Participant, the Participant's spouse
or dependents (as defined in Code Section 152), or necessary for these persons
to obtain medical care.
(d) A secured promissory note shall be delivered to the Trustee
pledging as collateral up to one-half of the Participant's vested interest in
his or her Account. Such promissory note shall provide that the loan principal,
and all interest accrued thereon, shall be due and payable upon the
Participant's Separation from Service.
(e) A loan to a Participant shall be considered a separate investment
of the Account of the Participant. The proceeds of the loan shall be withdrawn
from the Participant's subaccounts in the following order: first, from the
Participant's Elective Deferral Account, second, from the Participant's Rollover
Contribution Account and third, from the Participant's Voluntary Contribution
Account, and pro rata from each investment option in which the Participant's
respective sub-account is invested at the time of the loan. Repayments of
principal and interest on the loan shall be credited to the Participant's sub-
accounts in the reverse order from which the loan proceeds were withdrawn and
shall be invested in the investment options in effect at the time of repayment
pursuant to the Participant's investment election under Article IV.
(f) Each loan shall be repaid in substantially equal installments not
less frequently than quarterly over a period not to exceed five (5) years by
means of payroll deductions. Notwithstanding the foregoing, a loan for the
purchase of the Participant's principal residence may be for a term of up to
fifteen (15) years or such shorter period as may
<PAGE>
be required by law. Notwithstanding the foregoing, repayments on a loan may be
suspended for a period of up to one year following the commencement of a Leave
of Absence during which the Participant is not paid by an Employer Company or is
paid at a rate that is less than the amount of level payments required under the
terms of the loan (after taking income and employment taxes into account),
although in no case shall this provision extend the original term of the loan.
During a Leave of Absence loan repayments may be made directly by the
Participant to the Trustee. For this purpose, a "Leave of Absence" shall mean
any leave authorized by an Employer Company, any health-related absence or any
other absence that does not constitute a Separation from Service.
(g) Each loan shall bear interest at a fixed rate equal to one
percentage point above the prime rate as published in The Wall Street Journal on
the last business day of the month prior to the month in which the Participant
makes application for a loan.
(h) If any required installment is not paid within thirty (30) days
following the due date thereof, the Trustee shall provide written notice to the
Participant. If such installment payment is not paid within ninety (90) days
following the due date thereof, the Trustee shall declare the loan to be in
default. The Trustee shall reduce (offset) the Participant's vested interest in
his or her Account by the amount of the unpaid loan balance plus accrued but
unpaid interest at such time that the Participant's Account becomes
distributable by reason of the earlier of the Participant's Separation from
Service or attainment of age 59 1/2.
(i) If a Participant incurs a Separation from Service before the loan
is repaid in full, the loan shall be deemed to be in default and the unpaid
balance of the loan, together with interest thereon, shall become immediately
due and payable. The Trustee shall reduce (offset) the Participant's Account by
an amount equal to the outstanding loan balance plus accrued but unpaid
interest. The Committee may (but shall not be required to) institute procedures
whereby a Participant who has not incurred a Separation from Service, but is no
longer an Eligible Employee under the terms of this Plan, may continue to make
payments of interest and principal on his or her outstanding loan, provided that
such loan is not in default as set forth in subparagraph (h) above.
(j) A Participant may prepay a loan in its entirety without penalty at
any time.
13.2 Administration of Loan Program.
------------------------------
(a) The determination of whether a Participant satisfies the criteria
for a loan shall be made by the Trustee, who shall administer the loan program.
All requests for loans hereunder shall be made via the VRU or in accordance with
such other procedures established by the Committee from time to time. The
Trustee may request such information and documentation as it deems necessary to
ascertain the qualification of a Participant for a loan in accordance with this
Article XIII. The Trustee shall determine whether a Participant qualifies for a
loan within five (5) business days of its receipt of a completed Promissory Note
<PAGE>
and Certification, unless it advises the Participant in writing that additional
time or information is needed. The Committee or its designee shall be
authorized to charge an application fee to process each loan application, and,
in addition, may deduct from the Participant's Account, or from the proceeds of
any loan, a reasonable fee representing the estimated or actual cost of
distribution of the loan proceeds.
(b) Any loan granted under this Article XIII shall be administered by
the Trustee, who shall establish written guidelines and procedures relating to
the Participant loan program which are consistent with the terms contained
herein. Such guidelines and procedures shall provide, among other matters, the
following:
(1) the procedure for applying for loans;
(2) the basis on which loans will be approved or denied;
(3) limitations, if any, on the types and amounts of loans offered;
(4) the types of collateral which may secure a Participant loan;
(5) the events constituting default and the steps that will be taken
to preserve plan assets.
IN WITNESS WHEREOF, the undersigned have caused this Restatement
Amendment No. 4 to the Restated Plan to be executed this 16th day of December,
1996.
Attest: United Parcel Service of America, Inc.
BY: /S/ JOSEPH R. MODEROW BY: /S/ KENT C. NELSON
- ------------------------- ------------------
Secretary Chairman
<PAGE>
EXHIBIT 10(O)(15)
RESTATEMENT AMENDMENT NO. 5
TO
THE UPS SAVINGS PLAN
(Restated as of March 31, 1995)
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 restated to incorporate Amendments No. 1
through 15, and has been submitted to the Internal Revenue Service on March 31,
1995, for purposes of receiving a favorable determination letter that considers
the requirements of the Tax Reform Act of 1986, and the regulations promulgated
thereunder; and
WHEREAS, the Restated Plan has been heretofore amended on four previous
occasions, the most recent being Restatement Amendment No. 4, effective July 29,
1996.
WHEREAS, pursuant to the request of the Internal Revenue Service, it is
proposed to incorporate language that comports with the requirements of Internal
Revenue Code Section 401(m)(9), and the regulations promulgated thereunder, with
regard to preventing "Multiple Use" of the alternative limitation;
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. Section 3 is amended by adding a new subsection 3.6 to read as
follows:
"Section 3.6 Multiple Use. (a) If one or more Highly Compensated
------------
Employees participate in this Plan and a plan maintained by the Employer or a
<PAGE>
Related Employer subject to the Actual Contribution Percentage Test, as defined
in Code Section 401(k)(2), and the sum of the Average Deferral Percentage and
Average Contribution Percentage of those Highly Compensated Employees subject to
either or both tests exceeds the Aggregate Limit, then the Average Contribution
Percentage of those Highly Compensated Employees will be reduced (beginning with
such Highly Compensated Employee whose Average Contribution Percentage is the
highest) so that the limit is not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage Amount is reduced shall be
treated as an Excess Contribution. The Average Deferral Percentage and Average
Contribution Percentage of the Highly Compensated Employees are determined after
any corrections required to meet the Average Deferral Percentage under this Plan
and the Average Contribution Percentage test under any plan maintained by the
Employer. Multiple use does not occur if either the Average Deferral Percentage
or Average Contribution Percentage of the Highly Compensated Employees does not
exceed 1.25 multiplied by the Average Deferral Percentage and Average
Contribution Percentage of the Non-highly Compensated Employees. If a Highly
Compensated Employee participates in two or more CODAs that have different plan
years, all CODAs ending with or within the same calendar year shall be treated
as a single arrangement."
"(b) For purposes of this Section 3.6, the term 'Aggregate Limit' shall
mean the sum of (i) 125 percent of the greater of the Average Deferral
Percentage of the Non-highly Compensated Employees for the Plan Year or the
Average Contribution Percentage of Non-highly Compensated Employees under the
plan subject to Code section 401(m), for the Plan Year beginning with or within
the Plan Year of the CODA and (ii) the lessor of 200% or two plus the lesser of
such Average Deferral Percentage or Average Contribution Percentage. 'Lesser'
is substituted for 'greater' in '(i)', above, and 'greater' is substituted for
'lesser' after 'two plus the' in '(ii)' if it would result in a larger Aggregate
Limit."
IN WITNESS WHEREOF, United Parcel Service of America, Inc. has caused
this amendment to the Plan to be executed this 16th day of December 1996.
ATTEST: UNITED PARCEL SERVICE OF AMERICA, INC.
By: /s/ Joseph R. Moderow By: /s/ Kent C. Nelson
---------------------- -------------------
Secretary Chairman
<PAGE>
EXHIBIT 10(U)
UNITED PARCEL SERVICE OF AMERICA, INC.
1996 STOCK OPTION PLAN
(AS AMENDED AND RESTATED ON FEBRUARY 12, 1997)
1. PURPOSE.
The purpose of this Amended and Restated Plan is to ensure continuity of
management and increase the incentive for key managerial employees and non-
employee members of the Board of the Company to make major contributions to
the effective management or direction of the Company by providing them with an
opportunity to acquire equity interests in the Company in the manner
contemplated by this Amended and Restated Plan.
2. DEFINITIONS.
As used in this Amended and Restated Plan, the following definitions shall
apply:
"Amended and Restated Plan" means the Plan, as amended and restated on
February 12, 1997.
"Board" means the Board of Directors of the Company or, when appropriate,
the Executive Committee of the Board of Directors, acting for the Board.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means United Parcel Service of America, Inc.
"Current Price" of a Share at any time means the price per Share which the
Board shall have determined to be the fair market value at which the Company
may express its willingness to purchase Shares from shareowners who offer them
for sale to the Company at that time.
"Employee Optionee" means any Optionee other than an Outside Director
Optionee.
"Incentive Stock Option" means an Option that qualifies as an incentive
stock option within the meaning of Section 422 of the Code.
"Nonqualified Option" means an Option that is not an Incentive Stock Option.
"Officer Compensation Committee" means the Officer Compensation Committee of
the Board.
"Option" means the right to purchase Shares under the terms and conditions
of the Amended and Restated Plan, as evidenced by an option certificate or
agreement in such form, not inconsistent with the Amended and Restated Plan,
as the Committee may adopt for general use or for specific cases from time to
time.
"Optionee" means the person to whom an Option has been granted under the
Amended and Restated Plan and, where the context permits, the estate, personal
representative or beneficiary to whom an Option has been transferred by will
or the laws of descent and distribution.
"Outside Director" means any member of the Board who is not, as of the date
of grant of an Option, an employee or a former employee of the Company or any
Subsidiary.
"Outside Director Formula" has the meaning set forth in subparagraph E of
paragraph 7 of this Amended and Restated Plan.
"Outside Director Optionee" means the Optionee who is, as of the date of
grant of an Option, an Outside Director.
"Plan" means this United Parcel Service of America, Inc. 1996 Stock Option
Plan as originally adopted by the Board on February 14, 1996 and by the
shareowners of the Company at the 1996 Annual Meeting of Shareowners.
"Salary Committee" means the Salary Committee of the Board.
1
<PAGE>
"Shares" means shares of the Company's common stock, presently having a par
value of $0.10 per share.
"Subsidiary" means any corporation more than 50% of whose outstanding voting
securities is owned by the Company or by one or more of the Company's other
Subsidiaries.
"UPS Managers Stock Trust" means a trust arrangement established by
agreements conforming to the trust agreement made as of April 15, 1958, as
heretofore or hereafter amended (the "UPS Managers Trust Agreement"), among
certain employees of the Company and First Union National Bank, as Trustee
("First Union"), or any successor trust arrangement.
An Option shall be deemed "granted" under the Amended and Restated Plan on
the date of the action taken by the Salary Committee or Officer Compensation
Committee approving the grant of an Option hereunder.
3. PLAN ADOPTION AND TERM.
A. The Plan was originally adopted by the Board on February 14, 1996 and by
the shareowners of the Company at the 1996 Annual Meeting of Shareowners. The
Amended and Restated Plan became effective upon its adoption by the Board on
February 12, 1997, and Options may be issued from time to time thereafter;
provided however, that if this Amended and Restated Plan shall not receive
shareowner approval at the 1997 Annual Meeting of Shareowners, the Plan shall
remain in effect as it existed before February 12, 1997. If the Amended and
Restated Plan receives shareowner approval at the 1997 Annual Meeting of
Shareowners, all Options theretofore granted under the Plan shall remain in
effect.
B. No Option may be granted hereunder after March 31, 2001, but Options
granted on or before that date may extend beyond such date in accordance with
their terms.
4. ADMINISTRATION OF THE AMENDED AND RESTATED PLAN.
A. Subject to the provisions of paragraph 7 regarding grant of options and
paragraph 16 regarding amendment of the Amended and Restated Plan, this
Amended and Restated Plan shall be administered by the Salary Committee or, if
the Salary Committee shall consist of fewer than two persons, by the Board.
All actions taken by the Salary Committee with respect to the Amended and
Restated Plan shall be reported to the Board at the next regular meeting of
the Board.
B. The Salary Committee shall have the authority to interpret the provisions
of the Amended and Restated Plan, to construe the terms of any Option, to
prescribe, amend and rescind rules and regulations relating to the Amended and
Restated Plan, and to make all other determinations in the judgment of the
Salary Committee necessary or desirable for the administration of the Amended
and Restated Plan. The Salary Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Amended and Restated Plan or in
any Option in the manner and to the extent it shall deem expedient to
effectuate the purposes and intent of the Amended and Restated Plan.
C. Any power granted to the Salary Committee, either in this Amended and
Restated Plan or by the Board, may at any time be exercised by the Board. Any
determination by the Salary Committee shall be subject to review and reversal
or modification by the Board on its own motion, except that the Board may not
impair the rights of Optionees under Options previously granted.
D. Members of the Salary Committee, the Officer Compensation Committee, the
Executive Committee, and the Board shall not be liable for any action or
determination made by them in good faith.
5. ELIGIBILITY.
Key managerial employees of the Company and its Subsidiaries, and Outside
Directors, shall be eligible to participate in the Amended and Restated Plan.
All recipients of Options shall be selected on the basis of their having
demonstrated an ability to contribute substantially to the effective
management or direction of the
2
<PAGE>
Company and its Subsidiaries. Members of the Board shall be eligible to
receive Options under the Amended and Restated Plan, provided that: (i) a
member shall not participate in any decision or action affecting such member
other than a decision or action affecting all participants generally; and (ii)
Outside Directors shall be eligible to receive only Nonqualified Options. No
Option shall be issued under this Amended and Restated Plan to any individual
who at the time an Option might be granted hereunder owns stock possessing
more than 10% of the total combined voting power of all classes of stock of
the Company, or of any parent or Subsidiary of the Company.
6. LIMITATION ON THE NUMBER OF SHARES.
Subject to adjustment as provided in paragraph 14, Options may be granted
pursuant to the Amended and Restated Plan for the purchase of not more than
30,000,000 Shares. If prior to its exercise in full by an Optionee, any Option
is canceled or terminates or lapses in whole or in part for any reason other
than the termination of the Amended and Restated Plan as a whole, the number
of Shares not purchased thereunder shall forthwith become available again for
allocation under new Options, including new Options to such Optionee, in
accordance with the Amended and Restated Plan.
7. GRANT OF OPTIONS.
A. At any time during the term of this Amended and Restated Plan, the Salary
Committee may grant to any eligible employee who is (i) eligible under
paragraph 5 hereof and (ii) not a member of the Board, a member of the Salary
Committee, or a person who is an officer of the Company as defined in Rule
16a-1 under the Securities Exchange Act of 1934, as amended, an Option to
purchase any number of the Shares reserved for issuance under the Amended and
Restated Plan, subject to prior allocation of Shares to the same or other
persons and to the limitation of paragraph 6.
B. At any time during the term of this Amended and Restated Plan, the
Officer Compensation Committee may grant to any eligible employee who is a
member of the Board, a member of the Salary Committee, or an officer of the
Company as defined in Rule 16a-1 under the Securities Exchange Act of 1934, an
Option to purchase any number of the Shares reserved for issuance under the
Amended and Restated Plan, subject to prior allocation of Shares to the same
or other persons and to the limitation of paragraph 6.
C. At the time of grant of each Option to an Employee Optionee, the Salary
Committee or the Officer Compensation Committee, as appropriate, shall
designate such Option as an Incentive Stock Option or as a Nonqualified
Option. However, the aggregate fair market value, as determined at the time
the Option is granted, of the Shares with respect to which incentive stock
options may become exercisable for the first time by an Optionee during any
calendar year (under the Amended and Restated Plan and any other stock option
plan of the Company or any corporation which, at the time of the granting of
such Option, is a parent or Subsidiary of the Company) shall not exceed
$100,000. To the extent that an Option designated as an Incentive Stock Option
may be or become exercisable for a number of Shares exceeding the limitation
of the preceding sentence, such Option shall be deemed to be an Incentive
Stock Option with respect to the maximum number of Shares permissible under
the preceding sentence and a Nonqualified Option with respect to any remaining
Shares.
D. At such time as the Salary Committee or the Officer Compensation
Committee grants to any Employee Optionee an Option to purchase Shares
pursuant to subparagraph A or B of paragraph 7, it may also grant to such
Employee Optionee a right to receive money at the time of exercise of the
Option in an amount equal to a designated percentage of the amount by which
the Current Price of the Shares subject to the Option exceeds, at the time of
exercise thereof, the option price.
E. On the first day of each year, during the term of this Amended and
Restated Plan, on which any Option is granted to an Employee Optionee, each
Outside Director shall be granted Options to purchase Shares, as provided in
this subparagraph E of paragraph 7. Each Outside Director shall be granted
Options to purchase that number of the Shares, equal to the Outside Director
Formula, reserved for issuance under the Amended and Restated Plan, subject to
prior allocation of Shares to the same or other persons and to the limitation
of
3
<PAGE>
paragraph 6. In the case of each Outside Director, the Outside Director
Formula shall be 109.5% of such Outside Director's annual director's fee as in
effect on the date such Option is granted, divided by the Current Price of one
Share on such date. The Salary Committee may at any time and from time to time
modify or amend the Outside Director Formula; provided, however, that the
Salary Committee may not: (i) modify or amend the Outside Director Formula
more often than once during any twelve-month period; (ii) without shareowner
approval modify or amend the Outside Director Formula in any respect that
would materially increase the benefits accruing to Outside Directors under the
Amended and Restate Plan; or (iii) without the consent of an Outside Director
Optionee, make any modification or amendment of the Outside Director Formula
that would affect such Outside Director Optionee's rights under an Option
previously granted. All Options granted to Outside Director Optionees shall be
designated as Nonqualified Options.
8. PURCHASE PRICE, DELIVERY OF SHARES, AND PAYMENT.
A. The purchase price for each Share represented by an Option shall be 100%
of the Current Price of a Share at the time the Option is granted.
Notwithstanding the foregoing, the purchase price per Share shall not be less
than the par value of one Share.
B. Payment of the purchase price for Shares purchased shall be made upon
exercise of an Option by payment, (i) in cash, (ii) in Shares owned by the
purchaser for at least six months prior to the date of exercise and valued at
their then Current Price, or (iii) in any combination of cash and such Shares.
Any payment in Shares shall be effected by the delivery thereof to the
Secretary of the Company, endorsed in blank or accompanied by stock powers
executed in blank. For such purpose, the Optionee may notify the Trustee under
the UPS Managers Stock Trust, in writing, to transmit to the Secretary of the
Company, endorsed in blank, Shares held by the Trustee for the Optionee's
account under the UPS Managers Stock Trust.
C. All Shares issued by the Company to Employee Optionees upon exercise of
Options shall be subject to the UPS Managers Stock Trust. As a condition to
the receipt of Shares upon exercise of an Option, the Employee Optionee shall
execute and deliver to the Trustee of the UPS Managers Stock Trust a trust
deposit agreement. The Company shall then deposit with or deliver to the
Trustee the Shares issued to the Employee Optionee to be held by the Trustee
in trust for such Employee Optionee's benefit pursuant and subject to the
terms of the UPS Managers Trust Agreement.
D. In the event that any Shares are issued or distributed by the Company to
an Employee Optionee upon exercise of an Option on a date that is later than
the date of termination of the Employee Optionee's employment with the Company
and Subsidiaries (the "Termination Date"), then, for purposes of the UPS
Managers Stock Trust, the Company's rights to repurchase the Shares so issued
or distributed shall commence on the June 15 next following the first
anniversary of the Termination Date and such Shares shall be treated as
securities issued as a result of the distribution of rights appurtenant UPS
common stock owned by the Employee Optionee and subject to the UPS Managers
Stock Trust on the Termination Date.
E. All Shares issued by the Company to Outside Director Optionees shall be
subject to such agreements with respect to the repurchase of such Shares,
similar in purpose and effect to the provisions of the UPS Managers Stock
Trust, as the Salary Committee shall prescribe. As a condition to the receipt
of Shares upon exercise of an Option, the Outside Director Optionee shall
execute and deliver such agreements as the Salary Committee shall prescribe.
9. DURATION OF OPTIONS.
Each Option and all rights thereunder shall expire five and one-half years
from the date on which the Option is granted, and shall be subject to earlier
termination as provided herein.
10. CONDITIONS RELATING TO EXERCISE.
A. Except as otherwise provided in Paragraph 11 hereof, no Option shall be
exercisable until the expiration of five years from the date the Option is
granted. Subject to the provisions of Paragraph 11, an Option
A-4
<PAGE>
may be exercised only in its entirety and only during the period from April 1
to April 30 in the year in which the Option becomes exercisable.
B. No Option shall be transferable by an Optionee otherwise than by will or
by the laws of descent and distribution.
C. All Options granted hereunder shall be exercisable during the lifetime of
the Optionee only by the Optionee or the Optionee's guardian or legal
representative.
D. An Option shall be exercised as follows:
(1) By delivering to the Company, at its principal office, to the
attention of its Secretary, written notice of the number of Shares with
respect to which the Option is being exercised; and
(2) By paying the purchase price for the Shares in accordance with
paragraph 8 hereof and any withholding tax required to be paid pursuant to
paragraph 15 hereof.
E. Notwithstanding any other provision in this Amended and Restated Plan, no
Option shall be exercisable unless and until (i) the Shares may be legally
issued and sold to the Optionee and (ii) the Optionee shall have executed such
documents and taken such action as the Salary Committee reasonably shall deem
advisable to assist the Company in complying with the requirements of any
applicable law.
11.EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE.
A. In the event an Employee Optionee's employment with the Company and
Subsidiaries shall terminate by reason of such Employee Optionee's retirement
with the consent of the Company or in accordance with an applicable retirement
plan, any Incentive Stock Option then held by such Employee Optionee, which
shall not have lapsed or expired shall, at the election of the Employee
Optionee: (i) be or immediately become fully exercisable but only for a period
ending on the earlier of a date three months following the date of retirement
or the date of expiration of the Option in accordance with its terms; or (ii)
be unaffected by such retirement. Any Nonqualified Option held by such an
Employee Optionee shall be unaffected by such retirement.
B. In the event an Employee Optionee's employment with the Company and
Subsidiaries shall terminate by reason of such Employee Optionee's disability
(within the meaning of Section 22(e)(3) of the Code), any Incentive Stock
Option then held by such Employee Optionee, which shall not have lapsed or
expired shall, at the election of the Employee Optionee: (i) be or immediately
become fully exercisable but only for a period ending on the earlier of a date
one year following the date of termination of employment or the date of
expiration of the Option in accordance with its terms; or (ii) be unaffected
by such termination of employment. Any Nonqualified Option held by such an
Employee Optionee shall be unaffected by such termination of employment.
C. In the event of an Employee Optionee's death (including death while
retired or disabled), any Option then held by such Employee Optionee which
shall not have lapsed or expired shall be or immediately become fully
exercisable at any time before the date of expiration of the Option in
accordance with its terms.
D. In the event an Employee Optionee shall cease to be employed by the
Company and Subsidiaries for any reason other than those specified in
subparagraphs A, B and C above, any Option then held by such Employee Optionee
shall immediately terminate.
E. Whether an authorized leave of absence or absence in government or
military service constitutes a termination of employment shall be determined
by the Salary Committee, and the Salary Committee's determination shall be
final and conclusive on all persons affected thereby; provided, however, that
if such leave of absence or other absence shall be deemed a termination of
employment for purposes of the UPS Managers Stock Trust, it will also
constitute a termination of employment for purposes of the Amended and
Restated Plan.
5
<PAGE>
F. In the case of any Option granted to an Outside Director Optionee, if
such Outside Director Optionee ceases for any reason to be a member of the
Board, then such Option shall be exercisable according to the following
provisions, and shall terminate upon the expiration of the applicable exercise
period, if any, specified in this subparagraph F of paragraph 11:
(i) If an Outside Director Optionee ceases to be a member of the Board
for any reason other than resignation, removal for cause or death, any such
Option held by such Outside Director Optionee which shall not have lapsed
or expired shall, at the election of the Outside Director Optionee: (I) be
or immediately become fully exercisable but only for a period ending on the
earlier of a date three months following the date on which such Outside
Director Optionee ceases to be a member of the Board or the date of
expiration of the Option in accordance with its terms; or (II) be
unaffected.
(ii) Except as provided in clause (iii) of this subparagraph F of
paragraph 11, if during his term of office as a member of the Board an
Outside Director Optionee resigns from the Board or is removed from office
for cause, any Option held by the Outside Director Optionee which is not
exercisable by the Outside Director Optionee immediately prior to
resignation or removal shall terminate as of the date of resignation or
removal, and any Option held by the Outside Director Optionee which is
exercisable by the Outside Director Optionee immediately prior to
resignation or removal shall be exercisable in accordance with its terms.
(iii) If during his term of office as a member of the Board an Outside
Director Optionee's service on the Board shall terminate by reason of such
Outside Director Optionee's disability (within the meaning of Section
22(e)(3) of the Code), any Option then held by such Outside Director
Optionee, which shall not have lapsed or expired shall, at the election of
the Outside Director Optionee: (I) be or immediately become fully
exercisable but only for a period ending on the earlier of a date one year
following the date on which such Outside Director Optionee ceases to be a
member of the Board or the date of expiration of the Option in accordance
with its terms; or (II) be unaffected.
(iv) Following the death of an Outside Director Optionee (including death
after ceasing, for any reason other than resignation or removal for cause,
to be a member of the Board) any Option held by the Outside Director
Optionee which shall not have lapsed or expired shall be or immediately
become fully exercisable at any time before the date of expiration of the
Option in accordance with its terms.
12.NO SPECIAL RIGHTS RESPECTING EMPLOYMENT OR RATE OF COMPENSATION.
Nothing contained in the Amended and Restated Plan or in any Option shall
confer upon any Employee Optionee any right with respect to the continuation
of his or her employment by the Company or any Subsidiary or interfere in any
way with the right of the Company or any Subsidiary at any time to terminate
an Employee Optionee's employment or to increase or decrease the compensation
of any Optionee from the rate in existence at the time of the grant of an
Option.
13.RIGHTS AS A SHAREOWNER.
The holder of an Option shall have no rights as a shareowner with respect to
any Shares covered by the Option until the date such Shares are issued as
provided in paragraph 8. Except as provided in paragraph 14 below, no
adjustment shall be made for rights for which the record date occurs prior to
the date such Shares are issued.
14.ANTIDILUTION PROVISIONS.
A. In the event of a stock dividend, stock split, or other subdivision,
reclassification or combination of the common stock of the Company, the Salary
Committee may make such adjustments in the number of Shares for which Options
may be granted under the Amended and Restated Plan, the number of Shares
subject to unexercised Options, and the option prices as it deems equitable.
A-6
<PAGE>
B. In the event that the outstanding common stock of the Company is changed
or converted into, or exchanged or exchangeable for, a different number or
kind of shares or other securities of the Company or of another corporation,
by reason of reorganization, merger, consolidation or combination, the Salary
Committee may make such adjustments in the number and kind of Shares for which
Options may be or may have been awarded under the Amended and Restated Plan as
it deems equitable; provided, however, that in the event of any contemplated
transaction which may constitute a change in control of the Company, the
Salary Committee, with the approval of a majority of the members of the Board
who are not then holding Options, may modify any and all outstanding Options
so as to accelerate, as a consequence of or in connection with such
transaction, an Optionee's right to exercise any such Option.
C. Each Optionee will be notified of any such adjustment and any such
adjustment, or the failure to make such adjustment, shall be binding on the
Optionee.
15.WITHHOLDING TAXES.
Whenever Shares are to be issued or cash paid to an Optionee upon exercise
of an Option, the Company shall have the right to require the Optionee to
remit to the Company, as a condition of exercise of the Option, an amount
sufficient to satisfy federal, state and local withholding tax requirements at
the time of exercise.
16.MODIFICATION OR AMENDMENT OF THE AMENDED AND RESTATED PLAN.
The Amended and Restated Plan may at any time or from time to time be
modified or amended by the affirmative votes of a majority of the Shares
present, or represented, and entitled to vote at a meeting of the Company's
shareowners. The Board or the Executive Committee of the Board may at any time
and from time to time modify or amend the Amended and Restated Plan in any
respect, or terminate the Amended and Restated Plan, except that, without
shareowner approval the Board or the Executive Committee of the Board may not
(a) materially increase the benefits accruing to participants under the
Amended and Restated Plan, (b) materially increase the number of shares which
may be issued under the Amended and Restated Plan, or (c) materially modify
the requirements as to eligibility for participation in the Amended and
Restated Plan. The termination, modification or amendment of the Amended and
Restated Plan shall not, without the consent of an Optionee, affect the
Optionee's rights under an Option previously granted. With the consent of the
Optionee, the Board or the Executive Committee of the Board may amend
outstanding Options in a manner not inconsistent with the Amended and Restated
Plan.
A-7
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF UNITED PARCEL SERVICE OF AMERICA, INC.
AS OF
DECEMBER 31, 1996
WHOLLY-OWNED SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF DATE OF
SUBSIDIARIES INCORPORATION INCORPORATION
------------ ------------- ------------------
<S> <C> <C>
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 of China, Inc............................ Delaware April 25, 1995
UPS Logistics Group, Inc...................... Delaware May 24, 1996
UPS Truck Leasing, Inc....................... Delaware September 11, 1991
UPS Worldwide Logistics, Inc................. Delaware December 18, 1992
Worldwide Dedicated Services, Inc............ Delaware June 9, 1995
Diversified Trimodal, Inc.................... Delaware July 25, 1979
Roadnet Technologies, Inc.................... Delaware May 12, 1986
SonicAir, Inc................................ Arizona February 16, 1995
UPS Worldwide Forwarding, Inc................. Delaware August 12, 1988
UPICO Corporation............................. Delaware December 26, 1974
UPS Aviation Services, Inc.................... Delaware February 7, 1989
Merchants Parcel Delivery..................... Washington April 5, 1909
Trailer Conditions, 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
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
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
STATE OF DATE OF
SUBSIDIARIES INCORPORATION INCORPORATION
------------ ------------------- ------------------
<S> <C> <C>
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
Velleb, Inc............................. Washington November 1, 1993
Adi Realty Company...................... Idaho March 30, 1979
Alko Corporation........................ Oklahoma December 7, 1976
Bardale Company......................... Illinois July 1, 1963
Basplas 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 10, 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 26, 1985
Missjack Company........................ Mississippi January 4, 1971
Montbill Corporation.................... Montana July 22, 1976
Moroc Corporation....................... Missouri October 6, 1972
Newbany Corporation..................... New York September 23, 1969
Nubee, Inc.............................. New York December 9, 1943
Oshaon 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
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
STATE OF DATE OF
SUBSIDIARIES INCORPORATION INCORPORATION
------------ -------------- ------------------
<S> <C> <C>
Saskan Corporation............................ Kansas June 16, 1969
Kacika Corporation........................... Kansas November 13, 1984
Socol Corporation............................. South Carolina July 2, 1969
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
Wyoas Corporation............................. Wyoming June 10, 1976
Wyld, Inc..................................... Delaware September 5, 1980
</TABLE>
INTERNATIONAL SUBSIDIARIES
<TABLE>
<CAPTION>
DATE OF
SUBSIDIARY COUNTRY INCORPORATION
---------- -------------- ------------------
<S> <C> <C>
United Parcel Service Pty. Ltd. ............ Australia December 7, 1990
UPS Pty. Ltd................................ Australia January 19, 1990
United Parcel Service Speditionsgesellschaft
m.b.H...................................... Austria September 2, 1986
UPS Transport GmbH.......................... Austria November 5, 1986
United Parcel Service (Bahrain) WLL......... Bahrain February 19, 1983
United Parcel Service Belgium N.V........... Belgium December 22, 1988
United Parcel Service (Bermuda) Ltd......... Bermuda June 25, 1985
UPS DO Brasil & Cia......................... Brazil January 24, 1994
2855-8278 Quebec Inc........................ Canada April 24, 1991
724352 Ontario Inc.......................... Canada June 19, 1987
United Parcel Service Canada Ltd. .......... Canada September 19, 1974
United Parcel Service Cayman Islands
Limited.................................... Cayman Islands June 5, 1992
UPS De San Jose, S.A........................ Costa Rica July 27, 1995
UPS Denmark A/S............................. Denmark January 1, 1989
United Parcel Services Finland OY........... Finland January 28, 1987
United Parcel Service France S.N.C.......... France March 31, 1994
Prost-Transports S.A. Speditionsgesellschaft
gmbH....................................... Germany 1989
United Parcel Service Deutschland Inc. ..... Germany October 16, 1980
UPS Air Cargo Service GmbH.................. Germany January 12, 1988
UPS Grundstuecksverwaltungs GmbH............ Germany February 25, 1985
UPS Transport GmbH.......................... Germany August 5, 1976
UPS Transport GmbH II....................... Germany July 23, 1990
UPS Worldwide Logistics GmbH................ Germany August 17, 1993
UPS Parcel Delivery Service Limited......... Hong Kong November 6, 1987
United Parcel Service CSTC Ireland Limited.. Ireland June 8, 1995
United Parcel Service of Ireland Limited.... Ireland March 25, 1986
United Parcel Service Italia, S.R.L......... Italy July 30, 1986
United Parcel Service Co., Japan Branch..... Japan September 28, 1990
UPS Japan Limited........................... Japan October 14, 1986
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DATE OF
SUBSIDIARY COUNTRY INCORPORATION
---------- -------------- ------------------
<S> <C> <C>
United Parcel Service Jersey Limited........ Jersey October 23, 1973
United Parcel Service (M)Sdn. Bhd........... Malaysia August 17, 1988
United Parcel Service (Transport) Sdn.
Bhd........................................ Malaysia October 2, 1989
United Parcel Service De Mexico S.A. De
C.V........................................ Mexico November 22, 1989
Prost-Transports Nederland B.V.............. Netherlands July 20, 1988
United Parcel Service Nederland B.V......... Netherlands December 19, 1985
UPS Norge A/S............................... Norway August 8, 1986
UPS of Norway, Inc., Oslo Branch............ Norway September 25, 1992
UPS of Portugal, Inc., Lisbon Branch........ Portugal June 30, 1992
United Parcel Service Co., Singapore
Branch..................................... Singapore October 13, 1994
United Parcel Service Singapore PTE Lted.... Singapore June 15, 1988
United Parcel Service Co., Korean Branch.... South Korea January 3, 1990
Sociedad Iversora Sanrelman, S.A............ Spain November 17, 1988
United Parcel Service Espana Ltd. Y
Compania, S.R.C............................ Spain January 1, 1993
UPS Spain, S.L.............................. Spain March 9, 1988
United Parcel Service Sweden AB............. Sweden January 1, 1966
United Parcel Service (Switzerland)......... Switzerland August 28, 1986
UPS International, Inc., Taiwan Branch...... Taiwan July 5, 1988
UPS Parcel Delivery Service Limited......... Thailand September 28, 1988
Atexco (1991) Limited....................... United Kingdom March 6, 1985
Atlasair Limited............................ United Kingdom July 24, 1947
Carryfast Limited........................... United Kingdom August 4, 1941
IML Air Services Group Limited.............. United Kingdom February 11, 1969
United Parcel Service of America............ United Kingdom October 28, 1991
UPS (UK) Limited............................ United Kingdom October 2, 1984
UPS Limited................................. United Kingdom July 24, 1985
UPS of America Limited...................... United Kingdom March 5, 1985
</TABLE>
4
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-46840, 333-23971, 333-23969, 333-20319 (on Form S-8) and No. 333-08369 (on
Form S-3) of United Parcel Service of America, Inc. of our report dated
February 10, 1997, appearing in this Annual Report on Form 10-K of United
Parcel Service of America, Inc. for the year ended December 31, 1996.
Deloitte & Touche LLP
Atlanta, Georgia
March 27, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 392
<SECURITIES> 0
<RECEIVABLES> 2,341
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,255
<PP&E> 17,008
<DEPRECIATION> 6,778
<TOTAL-ASSETS> 14,954
<CURRENT-LIABILITIES> 3,158
<BONDS> 2,573
0
0
<COMMON> 57
<OTHER-SE> 5,844
<TOTAL-LIABILITY-AND-EQUITY> 14,954
<SALES> 22,368
<TOTAL-REVENUES> 22,368
<CGS> 0
<TOTAL-COSTS> 20,339
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95
<INCOME-PRETAX> 1,910
<INCOME-TAX> 764
<INCOME-CONTINUING> 1,146
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,146
<EPS-PRIMARY> 2.01
<EPS-DILUTED> 2.01
</TABLE>
