UPS 2005 Annual Report Download

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UPS Annual Report 2005

Table of contents

  • Page 1
    UPS Annual Report 2005

  • Page 2
    ...: shipping via air, sea, ground, and rail managing international trade overseeing customs brokerage filling orders handling returns financing business growth 2005 Highlights - Record revenue, operating profit and earnings per share. - Highest volume in UPS history...3.75 billion packages. - Free...

  • Page 3
    ...Employees: 407,000 Customers: 7.9 million Daily small package volume: 14.8 million worldwide UPS.com: 10 million tracking requests daily Operating facilities: 3,000 worldwide Access points: 145,000 worldwide Aircraft: 268 (Ninth-largest airline in the world) Package delivery vehicles: 92,000 Freight...

  • Page 4
    ... the world's businesses together through synchronized commerce. We do this by coordinating their distribution systems, supply chains and order management cycles, helping them to compete better in an expanding global economy. Customers tell us they need to reach new markets, differentiate themselves...

  • Page 5
    ...Flow Technology, a multi-year re-engineering of our package pickup and delivery process, is a good example of reinvestment to support growth. This technology improves productivity, reduces costs and provides the platform for new consignee-focused services. Our International segment turned in another...

  • Page 6
    ... long-time partner made UPS the first global package delivery company to establish large-scale, wholly owned operations there. During 2005, we added new air routes connecting China to other Asian countries, as well as directly to the United States. We also expanded and added facilities to support...

  • Page 7
    ... per share. (4) Includes the after-tax effects of an impairment charge on Boeing 727, 747 and McDonnell Douglas DC-8 aircraft and related parts and engines and a charge to pension expense resulting from the consolidation of data collection systems. Also includes credits to income tax expense related...

  • Page 8
    ...Deferred delivery • Ground service with guaranteed delivery dates • International express delivery to more than 200 countries and territories Visibility services and information technologies help our customers work more efficiently. • Automated global shipping solutions for any size business...

  • Page 9
    UPS is deeply ingrained in the fabric of global commerce. UPS Annual Report 2005 7 UPS Products and Services

  • Page 10
    ... movement of goods, information and funds across borders is shrinking the world and creating exciting, new business models and economic opportunities. UPS is a great way to participate in the expanding global economy. Our industry is critical to international trade, our position in this industry...

  • Page 11
    ... with varying time-of-day delivery guarantees. The result...a business model that allows for economies of scope and scale, optimum use of assets and industry-leading margins. UPS's worldwide network is supported by the most sophisticated information technology in the transportation industry. We...

  • Page 12
    ... new markets. All of this is supported by one of the most trusted and recognized brands on the planet - a brand that symbolizes UPS's heritage of reliable service. This ownership philosophy results in long-term investment decision-making, with a focus on appropriate investment returns. Our business...

  • Page 13
    ... benefits society by providing good wages, paying taxes, and practicing philanthropy. • We encourage community involvement and volunteerism by our employees. • We proactively employ solutions that minimize the impact of our business on the environment. Customers: We believe that enabling our...

  • Page 14
    ..., Worldwide Sales and Marketing Teri P. McClure Senior Vice President, Legal and Compliance, General Counsel and Corporate Secretary John J. McDevitt Senior Vice President, Strategic Integration and Global Transportation Christine M. Owens Senior Vice President, Communications and Brand Management...

  • Page 15
    ... of class A common stock and 648,462,654 outstanding shares of class B common stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive proxy statement for its annual meeting of shareowners scheduled for May 4, 2006 are incorporated by reference into Part III of this report.

  • Page 16
    ...to expand as trade barriers are eliminated and large consumer markets, in particular China and India, experience economic expansion. We believe direct-to-consumer shipments will continue to increase as a result of just-in-time inventory management and increased use of the Internet for ordering goods...

  • Page 17
    ... benefit from business solutions that integrate many UPS services in addition to package delivery. We offer over 60 supply chain services - such as freight forwarding, customs brokerage, order fulfillment, and returns management - that help improve efficiency of the supply chain management process...

  • Page 18
    ... access us daily through UPS On-Call PickupSM for air and ground delivery services. In addition, there are approximately 145,000 domestic and international access points to UPS. These include: nearly 40,000 drop-boxes, more than 1,000 UPS Customer Centers, over 2,200 Alliance partner locations...

  • Page 19
    ... support new business models and to improve service. Companies' global supply chains are growing increasingly complex. This is creating further demand for a global service offering that incorporates transportation, distribution and international trade services with financial and information services...

  • Page 20
    ...Consignee Billing, Quantum View Manage, Delivery Confirmation and UPS ReturnsSM, are available to customers who require customized package distribution solutions. International Package Products and Services. We deliver international shipments to more than 200 countries and territories worldwide, and...

  • Page 21
    ...the Americas market. Mexico and Canada are also important to our international business. We developed the UPS Trade DirectSM Cross Border service to manage package movements between the U.S. and these countries. This service combines our small package, freight and brokerage capabilities to create an...

  • Page 22
    ... account managers, reporting directly to our corporate office. Our sales force also includes specialized groups that work together with our general sales organization to support the sale of e-commerce and customer technology solutions, international package delivery, LTL and freight transportation...

  • Page 23
    ... package delivery industry and, therefore, compete with many different companies and services on a local, regional, national and international basis. Our competitors include the postal services of the United States and other nations, various motor carriers, express companies, freight forwarders, air...

  • Page 24
    .... Where You Can Find More Information We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports available free of charge through the investor relations page of our website, located at www.shareholder.com/ups, as soon as...

  • Page 25
    ... a written Code of Business Conduct that applies to all of our directors, officers and employees, including our principal executive officer and senior financial officers. It is available in the governance section of the investor relations page of our website, located at www.shareholder.com/ups. In...

  • Page 26
    ... and Worldwide Sales and Marketing Group Manager (2004 - present), Vice President, Investor Relations (1999 - 2003). Senior Vice President, Transportation Group Manager and Labor Relations Group Manager (2005 - present), Senior Vice President, Strategic Integration (2003 - 2005), Air Region Manager...

  • Page 27
    ... million square feet of floor space. UPS Freight owns 170 of these service centers, while the remainder are occupied under operating lease agreements. Our aircraft are operated in a hub and spokes pattern in the U.S. Our principal air hub in the U.S., known as Worldport, is located in Louisville, KY...

  • Page 28
    ... containers used to transport cargo in our aircraft. Safety We promote safety throughout our operations. Our Automotive Fleet Safety Program is built with the following components: • • Selection. Five out of every six drivers come from our part-time ranks. Therefore, many of our new drivers are...

  • Page 29
    ... in New York. In addition to the cases in which UPS was named as a defendant, there also was an action, Smith v. Mail Boxes Etc., against Mail Boxes Etc. and its franchisees relating to UPS EV insurance and related services purchased through Mail Boxes Etc. centers. That case also was consolidated...

  • Page 30
    ..., Related Stockholder Matters and Issuer Purchases of Equity Securities Our Class A common stock is not listed on a national securities exchange or traded in an organized over-the-counter market, but each share of our Class A common stock is convertible into one share of our Class B common stock...

  • Page 31
    ... statements and related notes, Management's Discussion and Analysis of Financial Condition and Results of Operations, and other financial data appearing elsewhere in this report. Years Ended December 31, 2005 2004 2003 2002 2001 Selected Income Statement Data Revenue: U.S. Domestic Package...

  • Page 32
    ... 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Operations The following tables set forth information showing the change in revenue, average daily package volume, and average revenue per piece, both in dollars or amounts and in percentage terms: Year Ended...

  • Page 33
    ... Chain and Freight: Forwarding Services and Logistics ...UPS Freight ...Other ...Total Supply Chain and Freight ...Consolidated ...Average Daily Package Volume (in thousands): U.S. Domestic Package: Next Day Air ...Deferred ...Ground ...Total U.S. Domestic Package ...International Package: Domestic...

  • Page 34
    ...702 1,149 138 $4,989 $ 791 345 18 $1,154 21.4% 30.0 13.0 23.1% Year Ended December 31, 2004 2003 Change $ % Reporting Segment U.S. Domestic Package ...International Package ...Supply Chain & Freight ...Consolidated Operating Profit ... $3,702 1,149 138 $4,989 $3,657 732 56 $4,445 $ 45 417 82...

  • Page 35
    ... rates 2.9% on UPS Next Day Air, UPS 2nd Day Air, UPS 3 Day Select, and UPS Ground. Other pricing changes included an increase of $0.25 for delivery area surcharge on both residential and commercial services to certain ZIP codes. The residential surcharge increased $0.10 for UPS Ground services...

  • Page 36
    ...pension charge related to the consolidation of data systems used to collect and accumulate plan participant data. Domestic operating margin declined 70 basis points, and was impacted by the aircraft impairment and pension charges noted above, as well as the sale of our Aviation Technologies business...

  • Page 37
    ...our fuel surcharge (discussed below) as well as rate changes, which vary by geographical market and occur throughout the year. Rates for international shipments originating in the United States (Worldwide Express, Worldwide Express Plus, UPS Worldwide Expedited and UPS International Standard service...

  • Page 38
    ...costs incurred in integrating this business into our existing forwarding services business. Currency fluctuations positively affected operating profit by $4 million during the year. Operating profit also was favorably impacted by $15 million due to a change in our Management Incentive Awards program...

  • Page 39
    ... of FAS 123 beginning with 2003 stock-based compensation awards. During the first quarter of 2005, we modified our Management Incentive Awards program under our Incentive Compensation Plan to provide that half of the annual award be made in restricted stock units ("RSUs"). The RSUs granted in...

  • Page 40
    ...higher fuel prices, and volume growth in our international package business. The decline in depreciation and amortization for the year was impacted by lower depreciation expense on aircraft engines, largely due to the retirement of some older aircraft. The increase in repairs and maintenance expense...

  • Page 41
    ... McDonnell Douglas DC-8 aircraft, engines, and parts, as well as a $40 million after-tax charge ($0.04 per diluted share) to pension expense resulting from the consolidation of data systems used to collect and accumulate plan participant data. 2004 compared to 2003 2004 net income was $3.333 billion...

  • Page 42
    ...new charge for undeliverable packages after three delivery attempts and an increase in rates for proof of delivery features for our Delivery Required and Signature Confirmation services. The residential surcharge increased $0.25 for UPS Ground services and $0.35 for UPS Next Day Air, UPS 2nd Day Air...

  • Page 43
    ... partnerships. We consider the overall fixed and floating interest rate mix of our portfolio and the related overall cost of borrowing when planning for future issuances and non-scheduled repayments of debt. Sources of Credit We maintain two commercial paper programs under which we are authorized to...

  • Page 44
    ... our subsidiary's 2001 acquisition of a freight forwarding business that was part of Fritz Companies Inc., may have violated the United States Foreign Corrupt Practices Act. Our investigation also determined that a small number of former employees directed the conduct in question. The monetary value...

  • Page 45
    ... We are exposed to market risk from changes in certain commodity prices, foreign currency exchange rates, interest rates, and equity prices. All of these market risks arise in the normal course of business, as we do not engage in speculative trading activities. In order to manage the risk arising...

  • Page 46
    ... in Note 3 to the consolidated financial statements, we hold a portfolio of finance receivables that accrue income at fixed and floating rates of interest. The potential change in the annual income resulting from a hypothetical 100 basis point change in interest rates applied to our variable...

  • Page 47
    ... FAS 123(R) on January 1, 2006. On that date, there were no unvested stock options or other forms of employee stock compensation issued prior to January 1, 2003. We issue employee share-based awards, under our Incentive Compensation Plan, that are subject to specific vesting conditions; generally...

  • Page 48
    ..., costs and working capital changes. In addition, we make assumptions about the estimated cost of capital and other relevant variables, as required, in estimating the fair value of our reporting units. The projections that we use in our DCF model are updated annually and will change over time based...

  • Page 49
    ... and future expense. A 25 basis point change in the assumed discount rate, expected return on assets, and health care cost trend rate for the pension and postretirement benefit plans would result in the following increases (decreases) on the Company's costs and obligations for the year 2005...

  • Page 50
    ... to changes in commodity prices, foreign currency exchange rates, interest rates, and equity prices is presented in the "Market Risk" section of this report. Depreciation, Residual Value, and Impairment of Fixed Assets-As of December 31, 2005, we had approximately $15.289 billion of net fixed assets...

  • Page 51
    ... financial reporting and tax purposes. The process of estimating our effective income tax rate involves judgments related to tax planning and expectations regarding future events, including the impact of adjustments, if any, resulting from the resolution of audits of open tax years by the Internal...

  • Page 52
    ... fuel for our aircraft and delivery vehicles as a result of war or other factors. We require significant quantities of fuel and are exposed to the commodity price risk associated with variations in the market price for petroleum products. Cyclical and seasonal fluctuations in our operating results...

  • Page 53
    ... E2K freight operating system was utilized by Menlo Worldwide Forwarding, a company we acquired in 2004. This migration represents a significant change to the processes and controls for this segment of our business. Also during 2005, the Company completed the acquisitions of Overnite Corporation and...

  • Page 54
    ... "Equity Compensation Plans" in our definitive Proxy Statement for the Annual Meeting of Shareowners to be held on May 4, 2006 and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions None. Item 14. Principal Accountant and Fees and Services Information about...

  • Page 55
    ...page F-1 for a list of the financial statements filed with this report. 2. Financial Statement Schedules. None. 3. List of Exhibits. See the Exhibit Index for a list of the exhibits incorporated by reference into or filed with this report. (b) Exhibits required by Item 601 of Regulation S-K. See the...

  • Page 56
    ... by the undersigned, thereunto duly authorized. UNITED PARCEL SERVICE, INC. (REGISTRANT) By: /S/ MICHAEL L. ESKEW Michael L. Eskew Chairman and Chief Executive Officer Date: March 14, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 57
    ... Firm on Internal Control over Financial Reporting ...Report of Independent Registered Public Accounting Firm ...Consolidated balance sheets-December 31, 2005 and 2004 ...Statements of consolidated income-Years ended December 31, 2005, 2004 and 2003 ...Statements of consolidated shareowners' equity...

  • Page 58
    ... 31, 2005 and the related consolidated statements of income, shareowners' equity and cash flows for the year ended December 31, 2005, has issued an attestation report on management's assessment of the Company's internal control over financial reporting. United Parcel Service, Inc. March 14, 2006...

  • Page 59
    ... Public Accounting Firm on Internal Control over Financial Reporting Board of Directors and Shareowners United Parcel Service, Inc. Atlanta, Georgia We have audited management's assessment, included in the accompanying Management's Report on Internal Control over Financial Reporting, that United...

  • Page 60
    ... balance sheet of United Parcel Service, Inc. and its subsidiaries as of December 31, 2005, and the related consolidated statements of income, shareowners' equity, and cash flows for the year ended December 31, 2005 of the Company and our report dated March 14, 2006 expressed an unqualified opinion...

  • Page 61
    ... of Directors and Shareowners United Parcel Service, Inc. Atlanta, Georgia We have audited the accompanying consolidated balance sheets of United Parcel Service, Inc. and its subsidiaries (the "Company") as of December 31, 2005 and 2004, and the related consolidated statements of income, shareowners...

  • Page 62
    ... ...1,752 1,439 Total Current Liabilities ...Long-Term Debt ...Accumulated Postretirement Benefit Obligation, Net ...Deferred Taxes, Credits & Other Liabilities ...Shareowners' Equity: Preferred stock, no par value, authorized 200 shares, none issued ...Class A common stock, par value $.01...

  • Page 63
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (In millions, except per share amounts) Years Ended December 31, 2005 2004 2003 Revenue ...$42,581 $36,582 $33,485 Operating Expenses: Compensation and benefits ...22,517 20,823 19,251 Other ...13,921 10,770 9,789 36,...

  • Page 64
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED SHAREOWNERS' EQUITY (In millions, except per share amounts) 2005 Class A Common Stock Balance at beginning of year ...Common stock purchases ...Stock award plans ...Common stock issuances ...Conversions of Class A to Class B ...

  • Page 65
    ...Deferred taxes, credits and other ...Stock award plans ...Other (gains) losses ...Changes in assets and liabilities, net of effect of acquisitions: Accounts receivable, net ...Other current assets ...Prepaid pension costs ...Accounts payable ...Accrued wages and withholdings ...Income taxes payable...

  • Page 66
    ... results could differ from those estimates. Revenue Recognition U.S. Domestic and International Package Operations-Revenue is recognized upon delivery of a letter or package. Forwarding Services and Logistics-Freight forwarding revenue and the expense related to the transportation of freight is...

  • Page 67
    ... service a number of Boeing 727, 747 and McDonnell Douglas DC-8 aircraft. As a result of the actual and planned retirement of these aircraft, we conducted an impairment evaluation, which resulted in a $110 million impairment charge during the fourth quarter for these aircraft (including the related...

  • Page 68
    ... Costs of purchased businesses in excess of net assets acquired (goodwill), and intangible assets are accounted for under the provisions of FASB Statement No. 142 "Goodwill and Other Intangible Assets" ("FAS 142"). Under FAS 142, we are required to test all goodwill for impairment at least annually...

  • Page 69
    ...granted to date include stock options, management incentive awards, restricted performance units, and employer matching contributions (in shares of UPS stock) for a defined contribution benefit plan. The adoption of the measurement provisions of FAS 123 reduced 2005, 2004, and 2003 net income by $52...

  • Page 70
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 2005 2004 2003 Discounted stock purchase plan: Expected dividend yield ...Risk-free interest rate ...Expected life in years ...Expected volatility ...Weighted average fair value of purchase rights* ...

  • Page 71
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) date to the date retirement eligibility is achieved, if that is expected to occur during the nominal vesting period. We will continue to apply the nominal vesting period approach for any awards ...

  • Page 72
    ...mortgage & asset-backed securities, and corporate securities relate to various fixed income securities, and are primarily due to changes in market interest rates. We have both the intent and ability to hold the securities contained in the previous table for a time necessary to recover the cost basis...

  • Page 73
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The amortized cost and estimated fair value of marketable securities and short-term investments at December 31, 2005, by contractual maturity, are shown below (in millions). Actual maturities may ...

  • Page 74
    ... pension plans in Canada and the United Kingdom (including the Lynx acquisition in 2005). In addition, many of our non-U.S. employees are covered by government-sponsored retirement and pension plans. We are not directly responsible for providing benefits to participants of government-sponsored plans...

  • Page 75
    ... PARCEL SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) provides for retirement benefits based on average compensation levels earned by employees prior to retirement. Benefits payable under this Plan are subject to maximum compensation limits and the annual...

  • Page 76
    ...as of the measurement date. For international plans, the discount rate is selected based on high quality fixed income indices available in the country in which the plan is domiciled. This assumption is updated every year for each plan. An assumption for return on plan assets is used to determine the...

  • Page 77
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Benefit Obligations and Funded Status The following table provides a reconciliation of the changes in the plans' benefit obligations and funded status as of our measurement date on September 30 (in ...

  • Page 78
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) and 2004, respectively, were recorded as a reduction of other comprehensive income in shareowners' equity (net of the tax effect of $54 and $46 million, respectively). Plan Assets The following table ...

  • Page 79
    .... We also contribute to several multi-employer health and welfare plans that cover both active and retired employees for which the previous disclosure information is not determinable. Amounts charged to operations for contributions to multi-employer health and welfare plans were $798, $761, and $691...

  • Page 80
    ... Service Stolica S.A. in Poland, and the express operations of Sinotrans Air Transportation Development Co. Ltd. in China. The goodwill acquired in the Supply Chain & Freight segment during 2005 resulted primarily from the purchase of Overnite Corp., as well as the restructuring costs incurred...

  • Page 81
    ...statements of consolidated income from the date of acquisition. The purchase price allocations of acquired companies can be modified up to one year after the date of acquisition. During the second quarter of 2003, we sold our Mail Technologies business unit in a transaction that increased net income...

  • Page 82
    ...parts logistics services. The operating results of Lynx are included in our International Package reporting segment from the date of acquisition. We are in the process of finalizing the independent appraisals for certain assets and liabilities to assist management in allocating the purchase price of...

  • Page 83
    ...in part at our option at any time. The redemption price is equal to the greater of 100% of the principal amount and accrued interest or the sum of the present values of the remaining scheduled payout of principal and interest thereon discounted to the date of redemption at a benchmark treasury yield...

  • Page 84
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (vi) We have certain aircraft subject to capital leases. Some of the obligations associated with these capital leases have been legally defeased. The recorded value of aircraft subject to capital ...

  • Page 85
    ... in New York. In addition to the cases in which UPS was named as a defendant, there also was an action, Smith v. Mail Boxes Etc., against Mail Boxes Etc. and its franchisees relating to UPS EV insurance and related services purchased through Mail Boxes Etc. centers. That case also was consolidated...

  • Page 86
    ... units, and restricted stock units had been granted under the Incentive Compensation Plan. Management Incentive Awards & Restricted Stock Units Persons earning the right to receive management incentive awards are determined annually by the Compensation Committee of the UPS Board of Directors...

  • Page 87
    ... stock units result in the issuance of the equivalent number of UPS Class A common shares after required tax withholdings. Except in the case of death, disability, or retirement, restricted stock units vest over a five year period with approximately 20% of the award vesting at each anniversary date...

  • Page 88
    ... Employee Stock Purchase Plan We maintain an employee stock purchase plan for all eligible employees. Under the plan, shares of UPS Class A common stock may be purchased at quarterly intervals at 90% of the lower of the NYSE closing price of UPS Class B common stock on the first or the last day...

  • Page 89
    ...as shipments with either origin or distribution outside the United States. Our International Package reporting segment includes the operations of our Europe, Asia, and Americas operating segments. Supply Chain & Freight Supply Chain & Freight includes our forwarding services and logistics operations...

  • Page 90
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Segment information as of, and for the years ended, December 31 is as follows (in millions): 2005 2004 2003 Revenue: U.S. Domestic Package ...International Package ...Supply Chain & Freight ... $28,...

  • Page 91
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Geographic information as of, and for the years ended, December 31 is as follows (in millions): 2005 2004 2003 United States: Revenue ...Long-lived assets ...International: Revenue ...Long-lived ...

  • Page 92
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) NOTE 14. INCOME TAXES The income tax expense (benefit) for the years ended December 31 consists of the following (in millions): 2005 2004 2003 Current: U.S. Federal ...$1,683 $1,675 $1,103 U.S. State...

  • Page 93
    UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Deferred tax liabilities and assets are comprised of the following at December 31 (in millions): 2005 2004 Property, plant and equipment ...Goodwill and intangible assets ...Pension plans ...Other ...

  • Page 94
    ...2.9 million shares, respectively, of common stock that may be issued upon the exercise of employee stock options because such effect would be antidilutive. NOTE 16. DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT We are exposed to market risk, primarily related to foreign exchange rates, commodity prices...

  • Page 95
    ... financing arrangements creates interest rate risk. We use a combination of derivative instruments, including interest rate swaps and cross-currency interest rate swaps, as part of our program to manage the fixed and floating interest rate mix of our total debt portfolio and related overall cost of...

  • Page 96
    ... resulted in an adjustment of the purchase price allocation of Menlo Worldwide Forwarding. The remaining $69 million of the total program cost relates to integration activities, such as employee relocations, the moving of inventory and fixed assets, and the consolidation of information systems...

  • Page 97
    ..., and McDonnell Douglas DC-8 aircraft, and related engines and parts, and a charge to pension expense ($40 million after-tax, $0.04 per diluted share) resulting from the consolidation of data collection systems. Fourth quarter 2004 net income also includes credits to income tax expense ($43 million...

  • Page 98
    ... September 22, 1999, among United Parcel Service of America, Inc., United Parcel Service, Inc. and UPS Merger Subsidiary, Inc. (incorporated by reference to the registration statement on Form S-4 (No. 333-83349), filed on July 21, 1999, as amended). - Agreement and Plan of Merger, dated as of May 15...

  • Page 99
    ...on Form 10-K). (6) Amendment No. 10 to the UPS Retirement Plan (incorporated by reference to Exhibit 19(a) to 1988 Annual Report on Form 10-K). (7) Amendment No. 11 to the UPS Retirement Plan (incorporated by reference to Exhibit 19(b) to 1988 Annual Report on Form 10-K). (8) Amendment No. 12 to the...

  • Page 100
    ... Report on Form 10-Q for the Quarter Ended March 31, 2005). 10.4 - Credit Agreement (364-Day Facility), dated April 21, 2005 among United Parcel Service, Inc., the initial lenders named therein, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. as Joint Arrangers, Bank of America...

  • Page 101
    ...Annual Report on Form 10-K). (10) Amendment No. 10 to the UPS Qualified Stock Ownership Plan and Trust Agreement (incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2005). 10.9 - Form of United Parcel Service, Inc. Incentive Compensation Plan...

  • Page 102
    ... No. Description †21 †23 †31.1 †31.2 †32.1 †32.2 - Subsidiaries of the Registrant. - Consent of Deloitte & Touche LLP. - Certificate of Chief Executive Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. - Certificate of Chief...

  • Page 103
    ... Commission Web site, www.sec.gov. The Form 10-K is available free of charge by calling or writing Investor Relations. Direct Stock Purchase Plan To make an initial purchase of Class B shares go to www.melloninvestor.com and select "For Investors." Search for "Direct Investment Plans" and access...

  • Page 104
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