UPS 2014 Annual Report Download - page 109

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
97
From time to time, we enter into share repurchase programs with large financial institutions to assist in our buyback of
company stock. These programs allow us to repurchase our shares at a price below the weighted average UPS share price for a
given period. During the fourth quarter of 2014, we entered into an accelerated share repurchase program, which allowed us to
repurchase $400 million of shares (3.7 million shares). The program was completed in December 2014.
In order to lower the average cost of acquiring shares in our ongoing share repurchase program, we periodically enter into
structured repurchase agreements involving the use of capped call options for the purchase of UPS class B shares. We pay a
fixed sum of cash upon execution of each agreement in exchange for the right to receive either a pre-determined amount of cash
or stock. Upon expiration of each agreement, if the closing market price of our common stock is above the pre-determined
price, we will have our initial investment returned with a premium in either cash or shares (at our election). If the closing
market price of our common stock is at or below the pre-determined price, we will receive the number of shares specified in the
agreement. We paid net premiums of $47 and $93 million during 2014 and 2013, respectively, related to entering into and
settling capped call options for the purchase of class B shares. As of December 31, 2014, we had outstanding options for the
purchase of 1.7 million shares with an average strike price of $100.01 per share that will settle in the first and second quarters
of 2015.
Accumulated Other Comprehensive Income (Loss)
We incur activity in AOCI for unrealized holding gains and losses on available-for-sale securities, foreign currency
translation adjustments, unrealized gains and losses from derivatives that qualify as hedges of cash flows and unrecognized
pension and postretirement benefit costs. The activity in AOCI is as follows (in millions):
2014 2013 2012
Foreign currency translation gain (loss):
Balance at beginning of year $ (126) $ 134 $ (160)
Reclassification to earnings (no tax impact in any period) — (161)—
Translation adjustment (net of tax effect of $105, $(5), and $(9)) (331)(99) 294
Balance at end of year (457)(126) 134
Unrealized gain (loss) on marketable securities, net of tax:
Balance at beginning of year (1)6 6
Current period changes in fair value (net of tax effect of $1, $(3), and $4) 2 (4)6
Reclassification to earnings (net of tax effect of $0, $(2), and $(3)) (1)(3)(6)
Balance at end of year — (1)6
Unrealized gain (loss) on cash flow hedges, net of tax:
Balance at beginning of year (219)(286)(204)
Current period changes in fair value (net of tax effect of $133, $1 and $(25)) 220 1 (43)
Reclassification to earnings (net of tax effect of $35, $39, and $(24)) 60 66 (39)
Balance at end of year 61 (219)(286)
Unrecognized pension and postretirement benefit costs, net of tax:
Balance at beginning of year (114)(3,208)(2,745)
Reclassification to earnings (net of tax effect of $870, $67, and $1,876) 1,462 111 3,135
Net actuarial gain (loss) and prior service cost resulting from remeasurements of
plan assets and liabilities (net of tax effect of $(2,714), $1,786, and $(2,151)) (4,546) 2,983 (3,598)
Balance at end of year (3,198)(114)(3,208)
Accumulated other comprehensive income (loss) at end of year $ (3,594)$ (460)$ (3,354)