UPS 2015 Annual Report Download - page 38

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
26
Items Affecting Comparability
The year-over-year comparisons of our financial results are affected by the following items (in millions):
Year Ended December 31,
2015 2014 2013
Operating Expenses:
Defined Benefit Plans Mark-to-Market Charge $ 118 $ 1,062 $ —
Health & Welfare Plan Charges — 1,102 —
TNT Termination Fee and Related Expenses — — 284
Gain Upon Liquidation of Foreign Subsidiary — — (245)
Total Adjustments to Operating Expenses 118 2,164 39
Income Tax Expense (Benefit) from the Items Above (39)(807)(75)
Total Adjustments to Net Income $ 79 $ 1,357 $ (36)
These items have been excluded from comparisons of "adjusted" operating expenses, operating profit, operating margin
and income taxes in the discussion that follows.
Defined Benefit Plans Mark-to-Market Charge
In 2015, we recognized pre-tax mark-to-market losses in compensation and benefits expense of $118 million ($79 million
after-tax) on our pension and postretirement defined benefit plans related to the remeasurement of plan assets and liabilities
recognized outside of a 10% corridor. These charges impacted our U.S. Domestic Package segment ($62 million), International
Package segment ($44 million) and Supply Chain & Freight segment ($12 million).
In 2014, we recognized pre-tax mark-to-market losses in compensation and benefits expense of $1.062 billion ($670
million after-tax) on our pension and postretirement defined benefit plans related to the remeasurement of plan assets and
liabilities recognized outside of a 10% corridor. These charges impacted our U.S. Domestic Package segment ($660 million),
International Package segment ($200 million) and Supply Chain & Freight segment ($202 million).
No mark-to-market gain or loss was incurred in 2013, as the remeasurement of plan assets and liabilities only resulted in
adjustments within the 10% corridor (and thus only impacted accumulated other comprehensive income).
The table below indicates the amounts associated with each component of the pre-tax mark-to-market loss, as well as the
weighted-average actuarial assumptions used to determine our net periodic benefit costs, for each year:
Year Ended December 31,
Components of mark-to-market gain (loss) (in millions): 2015 2014 2013
Discount rates $ 1,624 $ (954)$ —
Return on assets (1,550)42 —
Demographic and assumption changes (133)(150)—
Reclassification of prior year unrecognized benefit cost (59)— —
Total mark-to-market gain (loss) $ (118)$ (1,062)$ —
Weighted-average actuarial assumptions used to determine net
periodic benefit cost: 2015 2014 2013
Expected rate of return on plan assets 8.66% 8.66% 8.69%
Actual rate of return on plan assets 0.37% 9.45% 8.36%
Discount rate used for net periodic benefit cost 4.36% 5.24% 4.38%
Discount rate at measurement date 4.81% 4.36% 5.24%