SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
/x/ Annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934
For the Fiscal Year Ended December 31, 1998
OR
/ / Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
Commission file number
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
UPS Qualified Stock Ownership Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
United Parcel Service of America, Inc.
55 Glenlake Parkway, N.E.
Atlanta, GA 30328
<PAGE>
UPS QUALIFIED STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT l
FINANCIAL STATEMENTS AS OF AND FOR
THE YEAR ENDED DECEMBER 31, 1998:
Statement of Net Assets Available for Benefits 2
Statement of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4
SUPPLEMENTAL SCHEDULES AS OF AND FOR
THE YEAR ENDED DECEMBER 31, 1998:
Item 27a - Schedule of Assets Held for Investment Purposes 7
Item 27d - Schedule of Reportable Transactions 8
Schedule of Realized Gain on Sale of Investments and
Unrealized Appreciation in Fair Value of Investments 9
Schedules required under the Employee Retirement Income Security Act of 1974,
other than the schedules listed above, are omitted because of the absence of
conditions under which they are required.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Administrative Committee of UPS Qualified Stock Ownership Plan:
We have audited the accompanying statement of net assets available for benefits
of the UPS Qualified Stock Ownership Plan (the "Plan") as of December 31, 1998,
and the related statement of changes in net assets available for benefits for
the year then ended. These financial statements are the responsibility of the
Plan Administrative Committee. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1998, and the changes in its net assets available for benefits for the year then
ended in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
Table of Contents are presented for the purpose of additional analysis and are
not a required part of the basic financial statements, but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974 ("ERISA"). These schedules are the responsibility of the Plan
Administrative Committee. Such schedules have been subjected to the auditing
procedures applied in the audit of the basic 1998 financial statements and, in
our opinion, are fairly stated in all material respects when considered in
relation to the basic financial statements taken as a whole.
DELOITTE & TOUCHE LLP
June 18, 1999
1
<PAGE>
UPS QUALIFIED STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998
ASSETS
Investments
$69,998,801
Receivables:
Employer contributions
14,030,896
Dividends receivable
447,824
Due from UPS Savings Plan - net
962,067
Total receivables
15,440,787
NET ASSETS AVAILABLE FOR BENEFITS
$85,439,588
2
<PAGE>
UPS QUALIFIED STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1998
NET ASSETS AVAILABLE FOR BENEFITS-
Beginning of year $ -
INCREASE IN PLAN ASSETS ATTRIBUTED TO:
Employee trasfers from UPS Savings Plan, net 31,186,233
Employer contributions 48,268,817
Dividend income 579,231
----------
Total increase 80,034,281
DECREASE IN PLAN ASSETS ATTRIBUTED TO-
Benefits to Plan participants 248,917
OTHER CHANGES IN NET ASSETS-
Net appreciation in fair value of investments 5,654,224
----------
NET INCREASE IN PLAN ASSETS 85,439,588
NET ASSETS AVAILABLE FOR BENEFITS-
End of year $85,439,588
3
<PAGE>
UPS QUALIFIED STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998
1. DESCRIPTION OF THE PLAN
The UPS Qualified Stock Ownership Plan (the "Plan") is a voluntary defined
contribution plan established for employees of United Parcel Service of America,
Inc. ("UPS") who are not members of a collective bargaining unit and who satisfy
the participation requirements of the Plan. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
The Plan became effective January 1, 1998. The Plan was established to provide a
matching contribution to those employees of UPS who make elective deferrals
under the UPS Savings Plan and to invest that matching contribution entirely in
UPS common stock ("UPS stock"). The Plan allows for UPS to match, through
employer contributions to the Plan, 100% of pre-tax contributions made to the
UPS Savings Plan up to a maximum of 3% of each participant's eligible
compensation. Effective November 23, 1998, the Plan also permits participants to
transfer after-tax and pre-tax amounts from the UPS Savings Plan to the Plan for
the purpose of investing such amounts in UPS stock. The Plan does not allow for
direct employee contributions.
Any amounts transferred from the UPS Savings Plan to the Plan may be transferred
back to the UPS Savings Plan at any time. Additionally, if a Plan participant is
at least 45 years of age and has 10 or more years of employment with UPS, the
participant may transfer all or any portion of the matching contribution made by
UPS to the UPS Savings Plan at any time. In the event a Plan participant
transfers amounts from the Plan to the UPS Savings Plan, the participant must
wait at least one year from the date of the last transfer to the UPS Savings
Plan before transferring such amounts back to the Plan.
The Plan does not permit withdrawals or distributions except in the case of
termination of employment or upon the death or total and permanent disability of
the participant. Any distribution from the Plan ordinarily will be made in the
form of whole shares of UPS stock, with any fractional shares paid in cash.
However, a participant may request that the entire distribution be made in cash.
A participant receiving UPS stock at a time when such stock is not readily
tradable on an established securities market may require UPS to purchase the
stock by giving written notice to UPS within 60 days after the stock is
distributed or within the first 60 days of the following calendar year.
At December 31, 1998, the number of participants in the Plan was approximately
39,000. The provisions of the Plan provide that a participant is 100% vested in
both amounts transferred from the UPS Savings Plan and employer matching
contributions at all times.
Although it has not expressed any intent to do so, UPS has the right under the
Plan to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA.
All expenses incident to the operation of the Plan are paid by UPS.
Each participant's account is credited/debited with transfers of participant
contributions from/to the UPS Savings Plan, matching contributions from UPS,
Plan earnings (losses), and distributions.
4
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The Plan's financial statements are prepared on the
accrual basis of accounting.
Use of Estimates - 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.
3. INVESTMENTS
Investments at December 31, 1998 consist entirely of 1,749,970.0289 shares of
UPS stock. The investment in UPS stock is carried at fair value of $40 per share
at December 31, 1998. The term "fair value" of UPS stock refers to the price at
which UPS has published notice of its willingness to repurchase shares of its
stock. Total fair value of UPS stock at December 31, 1998 is $69,998,801.
4. PLAN ADMINISTRATION
The Plan Administrator is an Administrative Committee, which is appointed by and
serves at the pleasure of the Board of Directors of UPS. The Administrative
Committee is currently comprised of three members who are responsible for the
Plan's operations. The members are Michael Connell, Corporate Compensation
Manager, UPS; Thomas W. Delbrook, Corporate Treasury Manager, UPS; and Clifford
L. Hinds, Corporate Financial Reports, Plans and Accounting Manager, UPS. State
Street Bank & Trust Company (Boston) provides recordkeeping and administrative
services. First Union National Bank of Georgia acts as the Trustee for the
assets of the Plan.
5. TAX STATUS
The Plan has not received a letter of determination from the Internal Revenue
Service which states that the Plan is in compliance with the applicable sections
of the Internal Revenue Code ("IRC"). However, the Plan Administrator and the
Plan's tax counsel believe that the Plan is designed and is currently being
operated in compliance with the applicable provisions of the IRC.
6. TRANSFER OF PLAN ASSETS TO AND FROM THE UPS SAVINGS PLAN
During 1998, participants transferred account balances to and from the UPS
Savings Plan. Transfers from the UPS Savings Plan for the year ended December
31, 1998 were $31,398,758 and transfers to the UPS Savings Plan for the year
ended December 31, 1998 were $212,525.
7. SUBSEQUENT EVENT
Effective March 17, 1999, the Plan was amended to limit transfers into the Plan
such that immediately following the transfer, a participant's investment in the
Plan can not exceed 20% of the participant's combined investment balances in the
UPS Savings Plan and the Plan. However, not withstanding the foregoing, matching
contributions will continue to be made in UPS common stock, if available.
5
<PAGE>
SUPPLEMENTAL SCHEDULES
(See Independent Auditor's Report)
6
<PAGE>
UPS QUALIFIED STOCK OWNERSHIP PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
Number
Shares or Fair
Description Face Amount Cost Value
Common Stock:
*United Parcel Service of America, Inc. 1,749,970.0289 $64,367,261 $69,998,801
Total investments $64,367,261 $69,998,801
*Party-in-interest to the Plan
7
<PAGE>
<TABLE>
<CAPTION>
UPS QUALIFIED STOCK OWNERSHIP PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
<S> <C> <C> <C> <C> <C> <C>
Fair
Value of
Asset on
Identity of Purchase Selling Cost of Transaction Net Gain
Party Involved Description of Asset Price Price Asset Date or (Loss)
Single Transactions:
*First Union National Bank of Georgia UPS Common Stock $10,532,401 $10,532,401 $10,532,401
*First Union National Bank of Georgia UPS Common Stock 11,577,302 11,577,302 11,577,302
*First Union National Bank of Georgia UPS Common Stock 12,126,088 12,126,088 12,126,088
Series of Transactions:
*First Union National Bank of Georgia UPS Common Stock 64,805,382 64,805,382 64,805,382
*Party-in-interest to the Plan
</TABLE>
8
<PAGE>
UPS QUALIFIED STOCK OWNERSHIP PLAN
SCHEDULE OF REALIZED GAIN ON SALE OF INVESTMENTS AND
UNREALIZED APPRECIATION IN FAIR VALUE OF INVESTMENTS1
YEAR ENDED DECEMBER 31, 1998
Realized gain on sale of investments:
Aggregate proceeds $ 461,442
Aggregate carrying amount 438,758
---------
Total 22,684
Unrealized appreciation in fair
value of investments 5,631,540
Total $5,654,224
1 Measurement criteria for this schedule conforms with the requirements of the
annual report Form 5500. The amounts for realized gain and unrealized
appreciation are determined by using the fair value at January 1, 1998 and fair
value at sale date for realized gain or December 31, 1998 for unrealized
appreciation.
See notes to financial statements.
9
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the Plan) have duly caused
this annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
UPS Qualified Stock Ownership Plan
/s/ Clifford L. Hinds
----------------------------------
Clifford L. Hinds
United Parcel Service of America, Inc.
Financial Reports, Plans and
Accounting Manager
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-72127 and 333-67479 of United Parcel Service of America, Inc. on Form S-8 of
our report dated June 18, 1999, appearing in this Annual Report on Form 11-K of
UPS Qualified Stock Ownership Plan for the year ended December 31, 1998.
DELOITTE & TOUCHE LLP
June 29, 1999
