UPS 2015 Annual Report Download - page 114

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
102
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 2015, we entered into an accelerated share repurchase program, which allowed us to
repurchase $400 million of shares (3.9 million shares). The program was completed in December 2015.
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 $17 and $47 million during 2015 and 2014, respectively, related to entering into and
settling capped call options for the purchase of class B shares. As of December 31, 2015, we had outstanding options for the
purchase of 2.0 million shares with an average strike price of $88.75 per share that will settle in the first quarter of 2016.
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):
2015 2014 2013
Foreign Currency Translation Gain (Loss):
Balance at beginning of year $ (457)$ (126) $ 134
Reclassification to earnings (no tax impact in any period) — — (161)
Translation adjustment (net of tax effect of $0, $105, and $(5)) (440)(331)(99)
Balance at end of year (897)(457)(126)
Unrealized Gain (Loss) on Marketable Securities, Net of Tax:
Balance at beginning of year — (1)6
Current period changes in fair value (net of tax effect of $(1), $1, and $(3)) (1)2(4)
Reclassification to earnings (net of tax effect of $0, $0, and $(2)) — (1)(3)
Balance at end of year (1)— (1)
Unrealized Gain (Loss) on Cash Flow Hedges, Net of Tax:
Balance at beginning of year 61 (219)(286)
Current period changes in fair value (net of tax effect of $103, $133, and $1) 171 220 1
Reclassification to earnings (net of tax effect of $(99), $35, and $39) (165)60 66
Balance at end of year 67 61 (219)
Unrecognized Pension and Postretirement Benefit Costs, Net of Tax:
Balance at beginning of year (3,198)(114)(3,208)
Reclassification to earnings (net of tax effect of $97, $870, and $67) 195 1,462 111
Net actuarial gain (loss) and prior service cost resulting from remeasurements of
plan assets and liabilities (net of tax effect of $197, $(2,714), and $1,786) 294 (4,546) 2,983
Balance at end of year (2,709)(3,198)(114)
Accumulated other comprehensive income (loss) at end of year $ (3,540)$ (3,594)$ (460)