ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
|
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58-2480149
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(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(IRS Employer
Identification No.)
|
|
|
|
55 Glenlake Parkway, NE Atlanta, Georgia
|
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30328
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(Address of Principal Executive Offices)
|
|
(Zip Code)
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PART I—FINANCIAL INFORMATION
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II—OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
|
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March 31,
2016 |
|
December 31,
2015 |
||||
ASSETS
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
3,887
|
|
|
$
|
2,730
|
|
Marketable securities
|
2,380
|
|
|
1,996
|
|
||
Accounts receivable, net
|
6,241
|
|
|
7,134
|
|
||
Other current assets
|
1,404
|
|
|
1,348
|
|
||
Total Current Assets
|
13,912
|
|
|
13,208
|
|
||
Property, Plant and Equipment, Net
|
18,285
|
|
|
18,352
|
|
||
Goodwill
|
3,440
|
|
|
3,419
|
|
||
Intangible Assets, Net
|
1,569
|
|
|
1,549
|
|
||
Non-Current Investments and Restricted Cash
|
484
|
|
|
473
|
|
||
Deferred Income Tax Assets
|
328
|
|
|
255
|
|
||
Other Non-Current Assets
|
1,150
|
|
|
1,055
|
|
||
Total Assets
|
$
|
39,168
|
|
|
$
|
38,311
|
|
LIABILITIES AND SHAREOWNERS’ EQUITY
|
|
|
|
||||
Current Liabilities:
|
|
|
|
||||
Current maturities of long-term debt and commercial paper
|
$
|
3,869
|
|
|
$
|
3,018
|
|
Accounts payable
|
2,040
|
|
|
2,587
|
|
||
Accrued wages and withholdings
|
2,131
|
|
|
2,253
|
|
||
Hedge margin liabilities
|
641
|
|
|
717
|
|
||
Income taxes payable
|
538
|
|
|
147
|
|
||
Self-insurance reserves
|
663
|
|
|
657
|
|
||
Other current liabilities
|
1,216
|
|
|
1,317
|
|
||
Total Current Liabilities
|
11,098
|
|
|
10,696
|
|
||
Long-Term Debt
|
11,569
|
|
|
11,316
|
|
||
Pension and Postretirement Benefit Obligations
|
10,839
|
|
|
10,638
|
|
||
Deferred Income Tax Liabilities
|
104
|
|
|
115
|
|
||
Self-Insurance Reserves
|
1,778
|
|
|
1,831
|
|
||
Other Non-Current Liabilities
|
1,300
|
|
|
1,224
|
|
||
Shareowners’ Equity:
|
|
|
|
||||
Class A common stock (194 and 194 shares issued in 2016 and 2015)
|
2
|
|
|
2
|
|
||
Class B common stock (691 and 693 shares issued in 2016 and 2015)
|
7
|
|
|
7
|
|
||
Additional paid-in capital
|
—
|
|
|
—
|
|
||
Retained earnings
|
6,095
|
|
|
6,001
|
|
||
Accumulated other comprehensive loss
|
(3,647
|
)
|
|
(3,540
|
)
|
||
Deferred compensation obligations
|
43
|
|
|
51
|
|
||
Less: Treasury stock (1 share in 2016 and 2015)
|
(43
|
)
|
|
(51
|
)
|
||
Total Equity for Controlling Interests
|
2,457
|
|
|
2,470
|
|
||
Noncontrolling Interests
|
23
|
|
|
21
|
|
||
Total Shareowners’ Equity
|
2,480
|
|
|
2,491
|
|
||
Total Liabilities and Shareowners’ Equity
|
$
|
39,168
|
|
|
$
|
38,311
|
|
|
Three Months Ended
March 31, |
||||||
2016
|
|
2015
|
|||||
Revenue
|
$
|
14,418
|
|
|
$
|
13,977
|
|
Operating Expenses:
|
|
|
|
||||
Compensation and benefits
|
7,853
|
|
|
7,564
|
|
||
Repairs and maintenance
|
381
|
|
|
350
|
|
||
Depreciation and amortization
|
552
|
|
|
506
|
|
||
Purchased transportation
|
2,024
|
|
|
1,854
|
|
||
Fuel
|
434
|
|
|
644
|
|
||
Other occupancy
|
269
|
|
|
294
|
|
||
Other expenses
|
1,082
|
|
|
1,092
|
|
||
Total Operating Expenses
|
12,595
|
|
|
12,304
|
|
||
Operating Profit
|
1,823
|
|
|
1,673
|
|
||
Other Income and (Expense):
|
|
|
|
||||
Investment income and other
|
17
|
|
|
4
|
|
||
Interest expense
|
(93
|
)
|
|
(87
|
)
|
||
Total Other Income and (Expense)
|
(76
|
)
|
|
(83
|
)
|
||
Income Before Income Taxes
|
1,747
|
|
|
1,590
|
|
||
Income Tax Expense
|
616
|
|
|
564
|
|
||
Net Income
|
$
|
1,131
|
|
|
$
|
1,026
|
|
Basic Earnings Per Share
|
$
|
1.27
|
|
|
$
|
1.13
|
|
Diluted Earnings Per Share
|
$
|
1.27
|
|
|
$
|
1.12
|
|
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
Net Income
|
$
|
1,131
|
|
|
$
|
1,026
|
|
Change in foreign currency translation adjustment, net of tax
|
26
|
|
|
(304
|
)
|
||
Change in unrealized gain (loss) on marketable securities, net of tax
|
3
|
|
|
2
|
|
||
Change in unrealized gain (loss) on cash flow hedges, net of tax
|
(162
|
)
|
|
176
|
|
||
Change in unrecognized pension and postretirement benefit costs, net of tax
|
26
|
|
|
32
|
|
||
Comprehensive Income
|
$
|
1,024
|
|
|
$
|
932
|
|
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
Cash Flows From Operating Activities:
|
|
|
|
||||
Net income
|
$
|
1,131
|
|
|
$
|
1,026
|
|
Adjustments to reconcile net income to net cash from operating activities:
|
|
|
|
||||
Depreciation and amortization
|
552
|
|
|
506
|
|
||
Pension and postretirement benefit expense
|
267
|
|
|
270
|
|
||
Pension and postretirement benefit contributions
|
(43
|
)
|
|
(47
|
)
|
||
Self-insurance provision
|
(48
|
)
|
|
(30
|
)
|
||
Deferred tax (benefit) expense
|
5
|
|
|
(49
|
)
|
||
Stock compensation expense
|
215
|
|
|
194
|
|
||
Other (gains) losses
|
(91
|
)
|
|
(5
|
)
|
||
Changes in assets and liabilities, net of effects of business acquisitions:
|
|
|
|
||||
Accounts receivable
|
1,082
|
|
|
763
|
|
||
Other current assets
|
135
|
|
|
219
|
|
||
Accounts payable
|
(571
|
)
|
|
(571
|
)
|
||
Accrued wages and withholdings
|
(108
|
)
|
|
(184
|
)
|
||
Other current liabilities
|
136
|
|
|
665
|
|
||
Other operating activities
|
8
|
|
|
(6
|
)
|
||
Net cash from operating activities
|
2,670
|
|
|
2,751
|
|
||
Cash Flows From Investing Activities:
|
|
|
|
||||
Capital expenditures
|
(427
|
)
|
|
(365
|
)
|
||
Proceeds from disposals of property, plant and equipment
|
3
|
|
|
2
|
|
||
Purchases of marketable securities
|
(1,599
|
)
|
|
(1,909
|
)
|
||
Sales and maturities of marketable securities
|
974
|
|
|
943
|
|
||
Net (increase) decrease in finance receivables
|
(20
|
)
|
|
(9
|
)
|
||
Cash paid for business acquisitions, net of cash and cash equivalents acquired
|
(6
|
)
|
|
(10
|
)
|
||
Other investing activities
|
(33
|
)
|
|
(9
|
)
|
||
Net cash (used in) investing activities
|
(1,108
|
)
|
|
(1,357
|
)
|
||
Cash Flows From Financing Activities:
|
|
|
|
||||
Net change in short-term debt
|
(759
|
)
|
|
1,463
|
|
||
Proceeds from borrowings
|
1,801
|
|
|
1,566
|
|
||
Repayments of borrowings
|
(223
|
)
|
|
(685
|
)
|
||
Purchases of common stock
|
(640
|
)
|
|
(676
|
)
|
||
Issuances of common stock
|
83
|
|
|
72
|
|
||
Dividends
|
(666
|
)
|
|
(636
|
)
|
||
Other financing activities
|
(36
|
)
|
|
(205
|
)
|
||
Net cash (used in) provided by financing activities
|
(440
|
)
|
|
899
|
|
||
Effect Of Exchange Rate Changes On Cash And Cash Equivalents
|
35
|
|
|
(102
|
)
|
||
Net Increase (Decrease) In Cash And Cash Equivalents
|
1,157
|
|
|
2,191
|
|
||
Cash And Cash Equivalents:
|
|
|
|
||||
Beginning of period
|
2,730
|
|
|
2,291
|
|
||
End of period
|
$
|
3,887
|
|
|
$
|
4,482
|
|
|
2016
|
|
2015
|
||
Expected life (in years)
|
7.5
|
|
|
7.5
|
|
Risk-free interest rate
|
1.66
|
%
|
|
2.07
|
%
|
Expected volatility
|
23.60
|
%
|
|
20.61
|
%
|
Expected dividend yield
|
2.94
|
%
|
|
2.63
|
%
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
March 31, 2016:
|
|
|
|
|
|
|
|
||||||||
Current trading marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate debt securities
|
$
|
910
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
910
|
|
Non-U.S. government debt securities
(1)
|
197
|
|
|
—
|
|
|
—
|
|
|
197
|
|
||||
Carbon credit investments
(1)
|
440
|
|
|
—
|
|
|
(156
|
)
|
|
284
|
|
||||
Total trading marketable securities
|
$
|
1,547
|
|
|
$
|
—
|
|
|
$
|
(156
|
)
|
|
$
|
1,391
|
|
|
|
|
|
|
|
|
|
||||||||
Current available-for-sale securities:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency debt securities
|
$
|
335
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
337
|
|
Mortgage and asset-backed debt securities
|
72
|
|
|
—
|
|
|
—
|
|
|
72
|
|
||||
Corporate debt securities
|
572
|
|
|
2
|
|
|
(1
|
)
|
|
573
|
|
||||
U.S. state and local municipal debt securities
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Equity Securities
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Non-U.S. government debt securities
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Total available-for-sale marketable securities
|
$
|
986
|
|
|
$
|
4
|
|
|
$
|
(1
|
)
|
|
$
|
989
|
|
|
|
|
|
|
|
|
|
||||||||
Total current marketable securities
|
$
|
2,533
|
|
|
$
|
4
|
|
|
$
|
(157
|
)
|
|
$
|
2,380
|
|
|
|
|
|
|
|
|
|
||||||||
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
December 31, 2015:
|
|
|
|
|
|
|
|
||||||||
Current trading marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate debt securities
|
$
|
715
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
715
|
|
Non-U.S. government debt securities
(1)
|
363
|
|
|
—
|
|
|
—
|
|
|
363
|
|
||||
Carbon credit investments
(1)
|
347
|
|
|
9
|
|
|
(5
|
)
|
|
351
|
|
||||
Total trading marketable securities
|
$
|
1,425
|
|
|
$
|
9
|
|
|
$
|
(5
|
)
|
|
$
|
1,429
|
|
|
|
|
|
|
|
|
|
||||||||
Current available-for-sale securities:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency debt securities
|
$
|
341
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
340
|
|
Mortgage and asset-backed debt securities
|
74
|
|
|
1
|
|
|
(1
|
)
|
|
74
|
|
||||
Corporate debt securities
|
147
|
|
|
—
|
|
|
(1
|
)
|
|
146
|
|
||||
U.S. state and local municipal debt securities
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Equity securities
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Non-U.S. government debt securities
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Total available-for-sale marketable securities
|
$
|
569
|
|
|
$
|
1
|
|
|
$
|
(3
|
)
|
|
$
|
567
|
|
|
|
|
|
|
|
|
|
||||||||
Total current marketable securities
|
$
|
1,994
|
|
|
$
|
10
|
|
|
$
|
(8
|
)
|
|
$
|
1,996
|
|
(1)
These investments are hedged with forward contracts that are not designated in hedging relationships. See Note 14 for offsetting statement of consolidated income impact.
|
|
Cost
|
|
Estimated
Fair Value
|
||||
Due in one year or less
|
$
|
2,015
|
|
|
$
|
1,858
|
|
Due after one year through three years
|
429
|
|
|
430
|
|
||
Due after three years through five years
|
15
|
|
|
16
|
|
||
Due after five years
|
72
|
|
|
74
|
|
||
|
2,531
|
|
|
2,378
|
|
||
Equity securities
|
2
|
|
|
2
|
|
||
|
$
|
2,533
|
|
|
$
|
2,380
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Balance
|
||||||||
March 31, 2016:
|
|
|
|
|
|
|
|
||||||||
Marketable Securities:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency debt securities
|
$
|
337
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
337
|
|
Mortgage and asset-backed debt securities
|
—
|
|
|
72
|
|
|
—
|
|
|
72
|
|
||||
Corporate debt securities
|
—
|
|
|
1,483
|
|
|
—
|
|
|
1,483
|
|
||||
U.S. state and local municipal debt securities
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Equity securities
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Non-U.S. government debt securities
|
—
|
|
|
200
|
|
|
—
|
|
|
200
|
|
||||
Carbon credit investments
|
284
|
|
|
—
|
|
|
—
|
|
|
284
|
|
||||
Total marketable securities
|
621
|
|
|
1,759
|
|
|
—
|
|
|
2,380
|
|
||||
Other non-current investments
|
19
|
|
|
—
|
|
|
27
|
|
|
46
|
|
||||
Total
|
$
|
640
|
|
|
$
|
1,759
|
|
|
$
|
27
|
|
|
$
|
2,426
|
|
December 31, 2015:
|
|
|
|
|
|
|
|
||||||||
Marketable Securities:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency debt securities
|
$
|
340
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
340
|
|
Mortgage and asset-backed debt securities
|
—
|
|
|
74
|
|
|
—
|
|
|
74
|
|
||||
Corporate debt securities
|
—
|
|
|
861
|
|
|
—
|
|
|
861
|
|
||||
U.S. state and local municipal debt securities
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Equity securities
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Non-U.S. government debt securities
|
—
|
|
|
366
|
|
|
—
|
|
|
366
|
|
||||
Carbon credit investments
|
351
|
|
|
—
|
|
|
—
|
|
|
351
|
|
||||
Total marketable securities
|
691
|
|
|
1,305
|
|
|
—
|
|
|
1,996
|
|
||||
Other non-current investments
|
19
|
|
|
—
|
|
|
32
|
|
|
51
|
|
||||
Total
|
$
|
710
|
|
|
$
|
1,305
|
|
|
$
|
32
|
|
|
$
|
2,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Marketable
Securities
|
|
Other
Investments
|
|
Total
|
||||||
Balance on January 1, 2016
|
$
|
—
|
|
|
32
|
|
|
32
|
|
||
Transfers into (out of) Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net realized and unrealized gains (losses):
|
|
|
|
|
|
||||||
Included in earnings (in investment income)
|
—
|
|
|
(5
|
)
|
|
(5
|
)
|
|||
Included in accumulated other comprehensive income (pre-tax)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|||
Balance on March 31, 2016
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
27
|
|
|
|
|
|
|
|
||||||
|
Marketable
Securities
|
|
Other
Investments
|
|
Total
|
||||||
Balance on January 1, 2015
|
$
|
—
|
|
|
64
|
|
|
64
|
|
||
Transfers into (out of) Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net realized and unrealized gains (losses):
|
|
|
|
|
|
||||||
Included in earnings (in investment income)
|
—
|
|
|
(8
|
)
|
|
(8
|
)
|
|||
Included in accumulated other comprehensive income (pre-tax)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|||
Balance on March 31, 2015
|
$
|
—
|
|
|
$
|
56
|
|
|
$
|
56
|
|
|
2016
|
|
2015
|
||||
Vehicles
|
$
|
8,214
|
|
|
$
|
8,111
|
|
Aircraft
|
15,817
|
|
|
15,815
|
|
||
Land
|
1,285
|
|
|
1,263
|
|
||
Buildings
|
3,332
|
|
|
3,280
|
|
||
Building and leasehold improvements
|
3,520
|
|
|
3,450
|
|
||
Plant equipment
|
8,149
|
|
|
8,026
|
|
||
Technology equipment
|
1,688
|
|
|
1,670
|
|
||
Equipment under operating leases
|
29
|
|
|
30
|
|
||
Construction-in-progress
|
272
|
|
|
273
|
|
||
|
42,306
|
|
|
41,918
|
|
||
Less: Accumulated depreciation and amortization
|
(24,021
|
)
|
|
(23,566
|
)
|
||
|
$
|
18,285
|
|
|
$
|
18,352
|
|
|
U.S. Pension Benefits
|
|
U.S. Postretirement
Medical Benefits
|
|
International
Pension Benefits
|
||||||||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||||||
Service cost
|
$
|
352
|
|
|
$
|
382
|
|
|
$
|
7
|
|
|
$
|
9
|
|
|
$
|
12
|
|
|
$
|
12
|
|
Interest cost
|
457
|
|
|
423
|
|
|
30
|
|
|
31
|
|
|
10
|
|
|
11
|
|
||||||
Expected return on assets
|
(629
|
)
|
|
(622
|
)
|
|
(1
|
)
|
|
(4
|
)
|
|
(14
|
)
|
|
(15
|
)
|
||||||
Amortization of prior service cost
|
42
|
|
|
42
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic benefit cost
|
$
|
222
|
|
|
$
|
225
|
|
|
$
|
37
|
|
|
$
|
37
|
|
|
$
|
8
|
|
|
$
|
8
|
|
•
|
that the proposed benefit suspensions, in the aggregate, be reasonably estimated to achieve, but not materially exceed, the level that is necessary to avoid insolvency, because the investment return and entry age assumptions used for this purpose in the CSPF proposed plan were not reasonable;
|
•
|
that the proposed benefit suspensions be equitably distributed across the participant and beneficiary population; and
|
•
|
that the notices of proposed benefit suspensions be written so as to be understood by the average plan participant.
|
|
U.S. Domestic
Package
|
|
International
Package
|
|
Supply Chain &
Freight
|
|
Consolidated
|
||||||||
December 31, 2015:
|
$
|
715
|
|
|
$
|
425
|
|
|
$
|
2,279
|
|
|
$
|
3,419
|
|
Acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Currency / Other
|
—
|
|
|
5
|
|
|
16
|
|
|
21
|
|
||||
March 31, 2016:
|
$
|
715
|
|
|
$
|
430
|
|
|
$
|
2,295
|
|
|
$
|
3,440
|
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Value
|
||||||
March 31, 2016:
|
|
|
|
|
|
||||||
Capitalized software
|
$
|
2,798
|
|
|
$
|
(2,071
|
)
|
|
$
|
727
|
|
Licenses
|
214
|
|
|
(127
|
)
|
|
87
|
|
|||
Franchise rights
|
132
|
|
|
(85
|
)
|
|
47
|
|
|||
Customer relationships
|
512
|
|
|
(47
|
)
|
|
465
|
|
|||
Trade name
|
200
|
|
|
—
|
|
|
200
|
|
|||
Trademarks, patents, and other
|
62
|
|
|
(19
|
)
|
|
43
|
|
|||
Total Intangible Assets, Net
|
$
|
3,918
|
|
|
$
|
(2,349
|
)
|
|
$
|
1,569
|
|
December 31, 2015:
|
|
|
|
|
|
||||||
Capitalized software
|
$
|
2,739
|
|
|
$
|
(2,026
|
)
|
|
$
|
713
|
|
Licenses
|
189
|
|
|
(116
|
)
|
|
73
|
|
|||
Franchise rights
|
125
|
|
|
(83
|
)
|
|
42
|
|
|||
Customer list
|
511
|
|
|
(35
|
)
|
|
476
|
|
|||
Trade name
|
200
|
|
|
—
|
|
|
200
|
|
|||
Trademarks, patents, and other
|
61
|
|
|
(16
|
)
|
|
45
|
|
|||
Total Intangible Assets, Net
|
$
|
3,825
|
|
|
$
|
(2,276
|
)
|
|
$
|
1,549
|
|
|
Principal
Amount
|
|
|
|
Carrying Value
|
||||||||
|
|
Maturity
|
|
2016
|
|
2015
|
|||||||
Commercial paper
|
$
|
3,810
|
|
|
2016
|
|
$
|
3,809
|
|
|
$
|
2,965
|
|
Fixed-rate senior notes:
|
|
|
|
|
|
|
|
||||||
1.125% senior notes
|
375
|
|
|
2017
|
|
374
|
|
|
372
|
|
|||
5.50% senior notes
|
750
|
|
|
2018
|
|
787
|
|
|
787
|
|
|||
5.125% senior notes
|
1,000
|
|
|
2019
|
|
1,075
|
|
|
1,064
|
|
|||
3.125% senior notes
|
1,500
|
|
|
2021
|
|
1,648
|
|
|
1,613
|
|
|||
2.45% senior notes
|
1,000
|
|
|
2022
|
|
1,028
|
|
|
991
|
|
|||
6.20% senior notes
|
1,500
|
|
|
2038
|
|
1,481
|
|
|
1,481
|
|
|||
4.875% senior notes
|
500
|
|
|
2040
|
|
489
|
|
|
489
|
|
|||
3.625% senior notes
|
375
|
|
|
2042
|
|
367
|
|
|
367
|
|
|||
8.375% Debentures:
|
|
|
|
|
|
|
|
||||||
8.375% debentures
|
424
|
|
|
2020
|
|
480
|
|
|
474
|
|
|||
8.375% debentures
|
276
|
|
|
2030
|
|
282
|
|
|
282
|
|
|||
Pound Sterling notes:
|
|
|
|
|
|
|
|
||||||
5.50% notes
|
96
|
|
|
2031
|
|
89
|
|
|
92
|
|
|||
5.125% notes
|
654
|
|
|
2050
|
|
623
|
|
|
638
|
|
|||
Euro Senior notes:
|
|
|
|
|
|
|
|
||||||
1.625% notes
|
797
|
|
|
2025
|
|
790
|
|
|
759
|
|
|||
Floating rate senior notes
|
569
|
|
|
2020
|
|
567
|
|
|
544
|
|
|||
Floating rate senior notes
|
725
|
|
|
2049-2066
|
|
717
|
|
|
600
|
|
|||
Capital lease obligations
|
479
|
|
|
2016-3005
|
|
479
|
|
|
475
|
|
|||
Facility notes and bonds
|
320
|
|
|
2016-2045
|
|
320
|
|
|
319
|
|
|||
Other debt
|
33
|
|
|
2016-2022
|
|
33
|
|
|
22
|
|
|||
Total Debt
|
$
|
15,183
|
|
|
|
|
15,438
|
|
|
14,334
|
|
||
Less: Current Maturities
|
|
|
|
|
(3,869
|
)
|
|
(3,018
|
)
|
||||
Long-term Debt
|
|
|
|
|
$
|
11,569
|
|
|
$
|
11,316
|
|
|
2016
|
|
2015
|
||||||||||
|
Shares
|
|
Dollars
|
|
Shares
|
|
Dollars
|
||||||
Class A Common Stock
|
|
|
|
|
|
|
|
||||||
Balance at beginning of period
|
194
|
|
|
$
|
2
|
|
|
201
|
|
|
$
|
2
|
|
Common stock purchases
|
(2
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||
Stock award plans
|
4
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||
Common stock issuances
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||
Conversions of class A to class B common stock
|
(3
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
||
Class A shares issued at end of period
|
194
|
|
|
$
|
2
|
|
|
201
|
|
|
$
|
2
|
|
Class B Common Stock
|
|
|
|
|
|
|
|
||||||
Balance at beginning of period
|
693
|
|
|
$
|
7
|
|
|
705
|
|
|
$
|
7
|
|
Common stock purchases
|
(5
|
)
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
||
Conversions of class A to class B common stock
|
3
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||
Class B shares issued at end of period
|
691
|
|
|
$
|
7
|
|
|
701
|
|
|
$
|
7
|
|
Additional Paid-In Capital
|
|
|
|
|
|
|
|
||||||
Balance at beginning of period
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
||
Stock award plans
|
|
|
137
|
|
|
|
|
124
|
|
||||
Common stock purchases
|
|
|
(336
|
)
|
|
|
|
(126
|
)
|
||||
Common stock issuances
|
|
|
96
|
|
|
|
|
101
|
|
||||
Option premiums received (paid)
|
|
|
103
|
|
|
|
|
(99
|
)
|
||||
Balance at end of period
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
||
Retained Earnings
|
|
|
|
|
|
|
|
||||||
Balance at beginning of period
|
|
|
$
|
6,001
|
|
|
|
|
$
|
5,726
|
|
||
Net income attributable to common shareowners
|
|
|
1,131
|
|
|
|
|
1,026
|
|
||||
Dividends ($0.78 and $0.73 per share)
|
|
|
(718
|
)
|
|
|
|
(683
|
)
|
||||
Common stock purchases
|
|
|
(319
|
)
|
|
|
|
(561
|
)
|
||||
Balance at end of period
|
|
|
$
|
6,095
|
|
|
|
|
$
|
5,508
|
|
|
2016
|
|
2015
|
||||
Foreign currency translation gain (loss):
|
|
|
|
||||
Balance at beginning of period
|
$
|
(897
|
)
|
|
$
|
(457
|
)
|
Translation adjustment (no tax impact in either period)
|
26
|
|
|
(304
|
)
|
||
Balance at end of period
|
(871
|
)
|
|
(761
|
)
|
||
Unrealized gain (loss) on marketable securities, net of tax:
|
|
|
|
||||
Balance at beginning of period
|
(1
|
)
|
|
—
|
|
||
Current period changes in fair value (net of tax effect of $2 and $1)
|
3
|
|
|
2
|
|
||
Reclassification to earnings (no tax impact in either period)
|
—
|
|
|
—
|
|
||
Balance at end of period
|
2
|
|
|
2
|
|
||
Unrealized gain (loss) on cash flow hedges, net of tax:
|
|
|
|
||||
Balance at beginning of period
|
67
|
|
|
61
|
|
||
Current period changes in fair value (net of tax effect of $(60) and $120)
|
(100
|
)
|
|
199
|
|
||
Reclassification to earnings (net of tax effect of $(38) and $(14))
|
(62
|
)
|
|
(23
|
)
|
||
Balance at end of period
|
(95
|
)
|
|
237
|
|
||
Unrecognized pension and postretirement benefit costs, net of tax:
|
|
|
|
||||
Balance at beginning of period
|
(2,709
|
)
|
|
(3,198
|
)
|
||
Reclassification to earnings (net of tax effect of $17 and $17)
|
26
|
|
|
26
|
|
||
Remeasurement of plan assets and liabilities (net of tax effect of $0 and $3)
|
—
|
|
|
6
|
|
||
Balance at end of period
|
(2,683
|
)
|
|
(3,166
|
)
|
||
Accumulated other comprehensive income (loss) at end of period
|
$
|
(3,647
|
)
|
|
$
|
(3,688
|
)
|
|
Amount Reclassified from AOCI
|
|
Affected Line Item in the Income Statement
|
||||||
|
2016
|
|
2015
|
|
|||||
Unrealized gain (loss) on cash flow hedges:
|
|
|
|
|
|
||||
Interest rate contracts
|
$
|
(6
|
)
|
|
$
|
(6
|
)
|
|
Interest expense
|
Foreign exchange contracts
|
—
|
|
|
(36
|
)
|
|
Interest expense
|
||
Foreign exchange contracts
|
106
|
|
|
79
|
|
|
Revenue
|
||
Income tax (expense) benefit
|
(38
|
)
|
|
(14
|
)
|
|
Income tax expense
|
||
Impact on net income
|
62
|
|
|
23
|
|
|
Net income
|
||
Unrecognized pension and postretirement benefit costs:
|
|
|
|
|
|
||||
Prior service costs
|
(43
|
)
|
|
(43
|
)
|
|
Compensation and benefits
|
||
Income tax (expense) benefit
|
17
|
|
|
17
|
|
|
Income tax expense
|
||
Impact on net income
|
(26
|
)
|
|
(26
|
)
|
|
Net income
|
||
Total amount reclassified for the period
|
$
|
36
|
|
|
$
|
(3
|
)
|
|
Net income
|
|
2016
|
|
2015
|
||||||||||
Shares
|
|
Dollars
|
|
Shares
|
|
Dollars
|
|||||||
Deferred Compensation Obligations:
|
|
|
|
|
|
|
|
||||||
Balance at beginning of period
|
|
|
$
|
51
|
|
|
|
|
$
|
59
|
|
||
Reinvested dividends
|
|
|
1
|
|
|
|
|
1
|
|
||||
Benefit payments
|
|
|
(9
|
)
|
|
|
|
(11
|
)
|
||||
Balance at end of period
|
|
|
$
|
43
|
|
|
|
|
$
|
49
|
|
||
Treasury Stock:
|
|
|
|
|
|
|
|
||||||
Balance at beginning of period
|
(1
|
)
|
|
$
|
(51
|
)
|
|
(1
|
)
|
|
$
|
(59
|
)
|
Reinvested dividends
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||
Benefit payments
|
—
|
|
|
9
|
|
|
—
|
|
|
11
|
|
||
Balance at end of period
|
(1
|
)
|
|
$
|
(43
|
)
|
|
(1
|
)
|
|
$
|
(49
|
)
|
|
Three Months Ended
March 31, |
|
||||||
|
2016
|
|
2015
|
|
||||
Revenue:
|
|
|
|
|
||||
U.S. Domestic Package
|
$
|
9,084
|
|
|
$
|
8,814
|
|
|
International Package
|
2,914
|
|
|
2,970
|
|
|
||
Supply Chain & Freight
|
2,420
|
|
|
2,193
|
|
|
||
Consolidated
|
$
|
14,418
|
|
|
$
|
13,977
|
|
|
Operating Profit:
|
|
|
|
|
||||
U.S. Domestic Package
|
$
|
1,102
|
|
|
$
|
1,024
|
|
|
International Package
|
574
|
|
|
498
|
|
|
||
Supply Chain & Freight
|
147
|
|
|
151
|
|
|
||
Consolidated
|
$
|
1,823
|
|
|
$
|
1,673
|
|
|
|
Three Months Ended
March 31, |
||||||
2016
|
|
2015
|
|||||
Numerator:
|
|
|
|
||||
Net income attributable to common shareowners
|
$
|
1,131
|
|
|
$
|
1,026
|
|
Denominator:
|
|
|
|
||||
Weighted average shares
|
885
|
|
|
903
|
|
||
Deferred compensation obligations
|
1
|
|
|
1
|
|
||
Vested portion of restricted units
|
3
|
|
|
2
|
|
||
Denominator for basic earnings per share
|
889
|
|
|
906
|
|
||
Effect of dilutive securities:
|
|
|
|
||||
Restricted units
|
4
|
|
|
6
|
|
||
Stock options
|
1
|
|
|
1
|
|
||
Denominator for diluted earnings per share
|
894
|
|
|
913
|
|
||
Basic earnings per share
|
$
|
1.27
|
|
|
$
|
1.13
|
|
Diluted earnings per share
|
$
|
1.27
|
|
|
$
|
1.12
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||
Currency hedges:
|
|
|
|
|
|
||
British Pound Sterling
|
GBP
|
1,056
|
|
|
GBP
|
1,140
|
|
Canadian Dollar
|
CAD
|
933
|
|
|
CAD
|
177
|
|
Euro
|
EUR
|
3,579
|
|
|
EUR
|
3,750
|
|
Mexican Peso
|
MXN
|
2,004
|
|
|
MXN
|
3,863
|
|
Japanese Yen
|
JPY
|
18,000
|
|
|
JPY
|
20,000
|
|
|
|
|
|
|
|
||
Interest rate hedges:
|
|
|
|
|
|
||
Fixed to Floating Interest Rate Swaps
|
$
|
5,799
|
|
|
$
|
5,799
|
|
Floating to Fixed Interest Rate Swaps
|
$
|
778
|
|
|
$
|
778
|
|
|
|
|
|
|
|
||
Investment market price hedges:
|
|
|
|
|
|
||
Marketable Securities
|
EUR
|
389
|
|
|
EUR
|
496
|
|
|
|
|
Fair Value Hierarchy Level
|
|
Gross Amounts Presented in
Consolidated Balance Sheets
|
|
Net Amounts if Right of
Offset had been Applied
|
||||||||||||
Asset Derivatives
|
Balance Sheet Location
|
|
|
March 31,
2016 |
|
December 31,
2015 |
|
March 31,
2016 |
|
December 31,
2015 |
|||||||||
Derivatives designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
Other current assets
|
|
Level 2
|
|
$
|
257
|
|
|
$
|
408
|
|
|
$
|
256
|
|
|
$
|
408
|
|
Foreign exchange contracts
|
Other non-current assets
|
|
Level 2
|
|
28
|
|
|
92
|
|
|
23
|
|
|
92
|
|
||||
Interest rate contracts
|
Other non-current assets
|
|
Level 2
|
|
293
|
|
|
204
|
|
|
279
|
|
|
185
|
|
||||
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
Other current assets
|
|
Level 2
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Investment market price contracts
|
Other current assets
|
|
Level 2
|
|
159
|
|
|
5
|
|
|
159
|
|
|
—
|
|
||||
Interest rate contracts
|
Other non-current assets
|
|
Level 2
|
|
75
|
|
|
57
|
|
|
66
|
|
|
53
|
|
||||
Total Asset Derivatives
|
|
|
|
|
$
|
812
|
|
|
$
|
768
|
|
|
$
|
783
|
|
|
$
|
738
|
|
|
|
|
Fair Value Hierarchy Level
|
|
Gross Amounts Presented in
Consolidated Balance Sheets
|
|
Net Amounts if Right of
Offset had been Applied
|
||||||||||||
Liability Derivatives
|
Balance Sheet Location
|
|
|
March 31,
2016 |
|
December 31,
2015 |
|
March 31,
2016 |
|
December 31,
2015 |
|||||||||
Derivatives designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
Other current liabilities
|
|
Level 2
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
Foreign exchange contracts
|
Other non-current liabilities
|
|
Level 2
|
|
41
|
|
|
—
|
|
|
36
|
|
|
—
|
|
||||
Interest rate contracts
|
Other non-current liabilities
|
|
Level 2
|
|
14
|
|
|
19
|
|
|
—
|
|
|
—
|
|
||||
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
Other current liabilities
|
|
Level 2
|
|
7
|
|
|
12
|
|
|
7
|
|
|
10
|
|
||||
Investment market price contracts
|
Other current liabilities
|
|
Level 2
|
|
—
|
|
|
9
|
|
|
—
|
|
|
4
|
|
||||
Interest rate contracts
|
Other non-current liabilities
|
|
Level 2
|
|
33
|
|
|
13
|
|
|
24
|
|
|
9
|
|
||||
Total Liability Derivatives
|
|
|
|
|
$
|
98
|
|
|
$
|
53
|
|
|
$
|
69
|
|
|
$
|
23
|
|
Three Months Ended March 31:
|
|
|
|
|
||||
Derivative Instruments in Cash Flow Hedging Relationships
|
|
Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
|
||||||
|
2016
|
|
2015
|
|||||
Interest rate contracts
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
Foreign exchange contracts
|
|
(158
|
)
|
|
320
|
|
||
Total
|
|
$
|
(160
|
)
|
|
$
|
319
|
|
Three Months Ended March 31:
|
|
|
|
|
||||
Non-derivative Instruments in Net Investment Hedging Relationships
|
|
Amount of Gain (Loss) Recognized in AOCI on Debt (Effective Portion)
|
||||||
|
2016
|
|
2015
|
|||||
Foreign denominated debt
|
|
$
|
(85
|
)
|
|
$
|
—
|
|
Total
|
|
$
|
(85
|
)
|
|
$
|
—
|
|
Derivative Instruments
in Fair Value
Hedging Relationships
|
Location of Gain (Loss) Recognized in Income
|
|
Derivative Amount of Gain (Loss) Recognized in Income
|
|
Hedged Items in
Fair Value
Hedging
Relationships
|
|
Location of
Gain (Loss)
Recognized In
Income
|
|
Hedged Items Amount of Gain (Loss)
Recognized in Income
|
||||||||||||
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
||||||||||||
Interest rate contracts
|
Interest Expense
|
|
$
|
95
|
|
|
$
|
55
|
|
|
Fixed-Rate
Debt
|
|
Interest
Expense
|
|
$
|
(95
|
)
|
|
$
|
(55
|
)
|
Derivative Instruments Not Designated in
Hedging Relationships
|
Location of Gain (Loss)
Recognized in Income
|
|
Amount of Gain (Loss)
Recognized in Income
|
||||||
|
2016
|
|
2015
|
||||||
Interest rate contracts
|
Interest Expense
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
Foreign exchange contracts
|
Other Operating Expenses
|
|
—
|
|
|
21
|
|
||
Foreign exchange contracts
|
Investment Income and other
|
|
(41
|
)
|
|
2
|
|
||
Investment market price contracts
|
Investment Income and other
|
|
155
|
|
|
(2
|
)
|
||
|
|
|
$
|
112
|
|
|
$
|
20
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||
|
2016
|
|
2015
|
|
%
|
|||||
Revenue (in millions)
|
$
|
14,418
|
|
|
$
|
13,977
|
|
|
3.2
|
%
|
Operating Expenses (in millions)
|
12,595
|
|
|
12,304
|
|
|
2.4
|
%
|
||
Operating Profit (in millions)
|
$
|
1,823
|
|
|
$
|
1,673
|
|
|
9.0
|
%
|
Operating Margin
|
12.6
|
%
|
|
12.0
|
%
|
|
|
|||
Average Daily Package Volume (in thousands)
|
17,834
|
|
|
17,470
|
|
|
2.1
|
%
|
||
Average Revenue Per Piece
|
$
|
10.39
|
|
|
$
|
10.56
|
|
|
(1.6
|
)%
|
Net Income (in millions)
|
$
|
1,131
|
|
|
$
|
1,026
|
|
|
10.2
|
%
|
Basic Earnings Per Share
|
$
|
1.27
|
|
|
$
|
1.13
|
|
|
12.4
|
%
|
Diluted Earnings Per Share
|
$
|
1.27
|
|
|
$
|
1.12
|
|
|
13.4
|
%
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||
2016
|
|
2015
|
|
%
|
||||||
Average Daily Package Volume (in thousands):
|
|
|
|
|
|
|||||
Next Day Air
|
1,266
|
|
|
1,229
|
|
|
3.0
|
%
|
||
Deferred
|
1,196
|
|
|
1,218
|
|
|
(1.8
|
)%
|
||
Ground
|
12,725
|
|
|
12,321
|
|
|
3.3
|
%
|
||
Total Avg. Daily Package Volume
|
15,187
|
|
|
14,768
|
|
|
2.8
|
%
|
||
Average Revenue Per Piece:
|
|
|
|
|
|
|||||
Next Day Air
|
$
|
19.44
|
|
|
$
|
20.11
|
|
|
(3.3
|
)%
|
Deferred
|
11.95
|
|
|
11.68
|
|
|
2.3
|
%
|
||
Ground
|
8.10
|
|
|
8.19
|
|
|
(1.1
|
)%
|
||
Total Avg. Revenue Per Piece
|
$
|
9.35
|
|
|
$
|
9.47
|
|
|
(1.3
|
)%
|
Operating Days in Period
|
64
|
|
|
63
|
|
|
|
|||
Revenue (in millions):
|
|
|
|
|
|
|||||
Next Day Air
|
$
|
1,575
|
|
|
$
|
1,557
|
|
|
1.2
|
%
|
Deferred
|
915
|
|
|
896
|
|
|
2.1
|
%
|
||
Ground
|
6,594
|
|
|
6,361
|
|
|
3.7
|
%
|
||
Total Revenue
|
$
|
9,084
|
|
|
$
|
8,814
|
|
|
3.1
|
%
|
Operating Expenses (in millions)
|
$
|
7,982
|
|
|
$
|
7,790
|
|
|
2.5
|
%
|
Operating Profit (in millions)
|
$
|
1,102
|
|
|
$
|
1,024
|
|
|
7.6
|
%
|
Operating Margin
|
12.1
|
%
|
|
11.6
|
%
|
|
|
|
Volume
|
|
Rates /
Product Mix
|
|
Fuel
Surcharge
|
|
Total Revenue
Change
|
||||
Net Revenue Change Drivers:
|
|
|
|
|
|
|
|
||||
First quarter 2016 vs. 2015
|
4.5
|
%
|
|
(0.2
|
)%
|
|
(1.2
|
)%
|
|
3.1
|
%
|
|
Three Months Ended
March 31, |
|
Change
|
|||||
|
2016
|
|
2015
|
|
% Point
|
|||
Next Day Air / Deferred
|
3.0
|
%
|
|
5.3
|
%
|
|
(2.3
|
)%
|
Ground
|
4.9
|
%
|
|
6.3
|
%
|
|
(1.4
|
)%
|
|
Three Months Ended
March 31, |
|
Change
|
||||||||
|
2016
|
|
2015
|
|
%
|
||||||
Average Daily Package Volume (in thousands):
|
|
|
|
|
|
||||||
Domestic
|
1,517
|
|
|
1,577
|
|
|
(3.8
|
)%
|
|||
Export
|
1,130
|
|
|
1,125
|
|
|
0.4
|
%
|
|||
Total Avg. Daily Package Volume
|
2,647
|
|
|
2,702
|
|
|
(2.0
|
)%
|
|||
Average Revenue Per Piece:
|
|
|
|
|
|
||||||
Domestic
|
$
|
5.91
|
|
|
$
|
6.09
|
|
|
(3.0
|
)%
|
|
Export
|
30.46
|
|
|
31.04
|
|
|
(1.9
|
)%
|
|||
Total Avg. Revenue Per Piece
|
$
|
16.39
|
|
|
$
|
16.48
|
|
|
(0.5
|
)%
|
|
Operating Days in Period
|
64
|
|
|
63
|
|
|
|
||||
Revenue (in millions):
|
|
|
|
|
|
||||||
Domestic
|
$
|
574
|
|
|
$
|
605
|
|
|
(5.1
|
)%
|
|
Export
|
2,203
|
|
|
2,200
|
|
|
0.1
|
%
|
|||
Cargo and Other
|
137
|
|
|
165
|
|
|
(17.0
|
)%
|
|||
Total Revenue
|
$
|
2,914
|
|
|
$
|
2,970
|
|
|
(1.9
|
)%
|
|
Operating Expenses (in millions)
|
$
|
2,340
|
|
|
$
|
2,472
|
|
|
(5.3
|
)%
|
|
Operating Profit (in millions)
|
$
|
574
|
|
|
$
|
498
|
|
|
15.3
|
%
|
|
Operating Margin
|
19.7
|
%
|
|
16.8
|
%
|
|
|
||||
Currency Benefit / (Cost) – (in millions)*:
|
|
|
|
|
|||||||
Revenue
|
|
|
|
|
$
|
(59
|
)
|
||||
Operating Expenses
|
|
|
|
|
57
|
|
|||||
Operating Profit
|
|
|
|
|
$
|
(2
|
)
|
||||
* Net of currency hedging; amount represents the change compared to the prior year. Includes impact of translation and transaction gains and losses.
|
|
Volume
|
|
Rates /
Product Mix
|
|
Fuel
Surcharge
|
|
Currency
|
|
Total Revenue
Change
|
|||||
Net Revenue Change Drivers:
|
|
|
|
|
|
|
|
|
|
|||||
First quarter 2016 vs. 2015
|
(0.5
|
)%
|
|
2.5
|
%
|
|
(1.9
|
)%
|
|
(2.0
|
)%
|
|
(1.9
|
)%
|
|
Three Months Ended
March 31, |
|
Change
|
||||||||
|
2016
|
|
2015
|
|
%
|
||||||
Freight LTL Statistics:
|
|
|
|
|
|
||||||
Revenue (in millions)
|
$
|
564
|
|
|
$
|
609
|
|
|
(7.4
|
)%
|
|
Revenue Per Hundredweight
|
$
|
23.25
|
|
|
$
|
22.77
|
|
|
2.1
|
%
|
|
Shipments (in thousands)
|
2,416
|
|
|
2,574
|
|
|
(6.1
|
)%
|
|||
Shipments Per Day (in thousands)
|
37.8
|
|
|
40.9
|
|
|
(7.6
|
)%
|
|||
Gross Weight Hauled (in millions of lbs)
|
2,426
|
|
|
2,676
|
|
|
(9.3
|
)%
|
|||
Weight Per Shipment (in lbs)
|
1,004
|
|
|
1,040
|
|
|
(3.5
|
)%
|
|||
Operating Days in Period
|
64
|
|
|
63
|
|
|
|
||||
Revenue (in millions):
|
|
|
|
|
|
||||||
Forwarding and Logistics
|
$
|
1,586
|
|
|
$
|
1,330
|
|
|
19.2
|
%
|
|
Freight
|
656
|
|
|
710
|
|
|
(7.6
|
)%
|
|||
Other
|
178
|
|
|
153
|
|
|
16.3
|
%
|
|||
Total Revenue
|
$
|
2,420
|
|
|
$
|
2,193
|
|
|
10.4
|
%
|
|
Operating Expenses (in millions):
|
$
|
2,273
|
|
|
$
|
2,042
|
|
|
11.3
|
%
|
|
Operating Profit (in millions):
|
$
|
147
|
|
|
$
|
151
|
|
|
(2.6
|
)%
|
|
Operating Margin
|
6.1
|
%
|
|
6.9
|
%
|
|
|
||||
Currency Benefit / (Cost) – (in millions)*:
|
|
|
|
|
|||||||
Revenue
|
|
|
|
|
$
|
(23
|
)
|
||||
Operating Expenses
|
|
|
|
|
26
|
|
|||||
Operating Profit
|
|
|
|
|
$
|
3
|
|
||||
* Amount represents the change compared to the prior year. Includes impact of translation and transaction gains and losses.
|
|
Three Months Ended
March 31, |
|
Change
|
||||||||
|
2016
|
|
2015
|
|
%
|
||||||
Operating Expenses (in millions):
|
|
|
|
|
|
||||||
Compensation and Benefits
|
$
|
7,853
|
|
|
$
|
7,564
|
|
|
3.8
|
%
|
|
Repairs and Maintenance
|
381
|
|
|
350
|
|
|
8.9
|
%
|
|||
Depreciation and Amortization
|
552
|
|
|
506
|
|
|
9.1
|
%
|
|||
Purchased Transportation
|
2,024
|
|
|
1,854
|
|
|
9.2
|
%
|
|||
Fuel
|
434
|
|
|
644
|
|
|
(32.6
|
)%
|
|||
Other Occupancy
|
269
|
|
|
294
|
|
|
(8.5
|
)%
|
|||
Other Expenses
|
1,082
|
|
|
1,092
|
|
|
(0.9
|
)%
|
|||
Total Operating Expenses
|
$
|
12,595
|
|
|
$
|
12,304
|
|
|
2.4
|
%
|
|
|
|
|
|
|
|
||||||
Currency (Benefit) Cost - (in millions)*
|
|
|
|
|
$
|
(83
|
)
|
||||
* Amount represents the change compared to the prior year. Includes impact of translation and transaction gains and losses.
|
•
|
Health and welfare costs increased $95 million for the first quarter, largely due to increased contributions to multiemployer plans resulting from contractual contribution rate increases, an overall increase in the size of the workforce and one additional operating day.
|
•
|
Pension expense increased $23 million for the first quarter primarily due to additional expense for multiemployer pension plans, which were impacted by contractual contribution rate increases and one additional operating day.
|
•
|
Vacation, holiday and excused absence expense increased $19 million for the first quarter, due to salary increases, growth in the overall size of the workforce and one additional operating day.
|
•
|
Workers' compensation expense decreased $26 million in the first quarter. Insurance reserves are established for estimates of the loss that we will ultimately incur on reported workers' compensation claims, as well as estimates of claims that have been incurred but not reported, and take into account a number of factors including our history of claim losses, payroll growth and the impact of safety improvement initiatives. In the first quarter of 2016, we experienced more favorable actuarial adjustments compared with 2015, resulting in decreased expense.
|
•
|
Expense for our forwarding and logistics business increased $212 million in the first quarter due to the acquisition of Coyote and increased volume and rates for mail services; these items were partially offset by the impact of decreased volume and tonnage in our international and North American air freight and ocean businesses and the impact of currency exchange rate movements.
|
•
|
Expense for our International Package segment increased $10 million in the first quarter, primarily due to the increased usage of third party carriers; these items were partially offset by the impact of currency exchange rate movements as well as lower fuel surcharges passed to us from outside transportation providers.
|
•
|
Expense for our U.S. Domestic Package segment decreased $25 million for the first quarter, primarily due to decreased use of, and lower fuel surcharges passed to us from, rail carriers and outside contract carriers.
|
•
|
Expense for our UPS Freight business decreased $27 million in the first quarter due to a decrease in LTL shipments and lower fuel surcharges passed to us from outside transportation providers.
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||
|
2016
|
|
2015
|
|
%
|
|||||
(in millions)
|
|
|
|
|
|
|||||
Investment income and other
|
$
|
17
|
|
|
$
|
4
|
|
|
NA
|
|
Interest expense
|
$
|
(93
|
)
|
|
$
|
(87
|
)
|
|
6.9
|
%
|
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
Net income
|
$
|
1,131
|
|
|
$
|
1,026
|
|
Non-cash operating activities (a)
|
900
|
|
|
886
|
|
||
Pension and postretirement plan contributions (UPS-sponsored plans)
|
(43
|
)
|
|
(47
|
)
|
||
Hedge margin receivables and payables
|
(76
|
)
|
|
364
|
|
||
Income tax receivables and payables
|
470
|
|
|
505
|
|
||
Changes in working capital and other non-current assets and liabilities
|
280
|
|
|
23
|
|
||
Other sources (uses) of cash from operating activities
|
8
|
|
|
(6
|
)
|
||
Net cash from operating activities
|
$
|
2,670
|
|
|
$
|
2,751
|
|
(a)
|
Represents depreciation and amortization, gains and losses on derivative transactions and foreign exchange, deferred income taxes, provisions for uncollectible accounts, pension and postretirement benefit expense, stock compensation expense, and other non-cash items.
|
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
Net cash (used in) investing activities
|
$
|
(1,108
|
)
|
|
$
|
(1,357
|
)
|
|
|
|
|
||||
Capital Expenditures:
|
|
|
|
||||
Buildings and facilities
|
$
|
(185
|
)
|
|
$
|
(192
|
)
|
Aircraft and parts
|
(9
|
)
|
|
(5
|
)
|
||
Vehicles
|
(147
|
)
|
|
(82
|
)
|
||
Information technology
|
(86
|
)
|
|
(86
|
)
|
||
|
$
|
(427
|
)
|
|
$
|
(365
|
)
|
|
|
|
|
||||
Capital Expenditures as a % of Revenue
|
(3.0
|
)%
|
|
(2.6
|
)%
|
||
|
|
|
|
||||
Other Investing Activities:
|
|
|
|
||||
Proceeds from disposals of property, plant and equipment
|
$
|
3
|
|
|
$
|
2
|
|
Net (increase) in finance receivables
|
$
|
(20
|
)
|
|
$
|
(9
|
)
|
Net (purchases) of marketable securities
|
$
|
(625
|
)
|
|
$
|
(966
|
)
|
Cash paid for business acquisitions
|
$
|
(6
|
)
|
|
$
|
(10
|
)
|
Other (uses) of cash for investing activities
|
$
|
(33
|
)
|
|
$
|
(9
|
)
|
|
Three Months Ended
March 31, |
||||||
2016
|
|
2015
|
|||||
Net cash (used in) provided by financing activities
|
$
|
(440
|
)
|
|
$
|
899
|
|
Share Repurchases:
|
|
|
|
||||
Cash expended for shares repurchased
|
$
|
(640
|
)
|
|
$
|
(676
|
)
|
Number of shares repurchased
|
(6.8
|
)
|
|
(6.8
|
)
|
||
Shares outstanding at period end
|
884
|
|
|
901
|
|
||
Percent reduction in shares outstanding
|
(0.2
|
)%
|
|
(0.4
|
)%
|
||
Dividends:
|
|
|
|
||||
Dividends declared per share
|
$
|
0.78
|
|
|
$
|
0.73
|
|
Cash expended for dividend payments
|
$
|
(666
|
)
|
|
$
|
(636
|
)
|
Borrowings:
|
|
|
|
||||
Net borrowings of debt principal
|
$
|
819
|
|
|
$
|
2,344
|
|
Other Financing Activities:
|
|
|
|
||||
Cash received for common stock issuances
|
$
|
83
|
|
|
$
|
72
|
|
Other (uses) of cash for financing activities
|
$
|
(36
|
)
|
|
$
|
(205
|
)
|
Capitalization (as of March 31 each year):
|
|
|
|
||||
Total debt outstanding at period end
|
$
|
15,438
|
|
|
$
|
13,104
|
|
Total shareowners’ equity at period end
|
2,480
|
|
|
1,847
|
|
||
Total capitalization
|
$
|
17,918
|
|
|
$
|
14,951
|
|
Debt to Total Capitalization %
|
86.2
|
%
|
|
87.6
|
%
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
|
March 31,
2016 |
|
December 31,
2015 |
||||
Currency Derivatives
|
$
|
234
|
|
|
$
|
490
|
|
Interest Rate Derivatives
|
321
|
|
|
229
|
|
||
Investment Market Price Derivatives
|
159
|
|
|
(4
|
)
|
||
|
$
|
714
|
|
|
$
|
715
|
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
•
|
that the proposed benefit suspensions, in the aggregate, be reasonably estimated to achieve, but not materially exceed, the level that is necessary to avoid insolvency, because the investment return and entry age assumptions used for this purpose in the CSPF proposed plan were not reasonable;
|
•
|
that the proposed benefit suspensions be equitably distributed across the participant and beneficiary population; and
|
•
|
that the notices of proposed benefit suspensions be written so as to be understood by the average plan participant.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
Total Number
of Shares
Purchased(1)
|
|
Average
Price Paid
Per Share
|
|
Total Number
of Shares Purchased
as Part of Publicly
Announced Program
|
|
Approximate Dollar
Value of Shares that
May Yet be Purchased
Under the Program
|
||||||
January 1 – January 31, 2016
(2)
|
0.8
|
|
|
$
|
93.34
|
|
|
0.8
|
|
|
$
|
1,364
|
|
February 1 – February 29, 2016
|
4.2
|
|
|
99.23
|
|
|
4.0
|
|
|
964
|
|
||
March 1 – March 31, 2016
|
2.4
|
|
|
101.65
|
|
|
2.0
|
|
|
761
|
|
||
Total January 1 – March 31, 2016
|
7.4
|
|
|
$
|
99.23
|
|
|
6.8
|
|
|
|
(1)
|
Includes shares repurchased through our publicly announced share repurchase program and shares tendered to pay the exercise price and tax withholding on employee stock options.
|
(2)
|
Includes 0.2 million shares related to the exercise of a capped call option which was entered into during 2015 and exercised in the first quarter of 2016.
|
Item 6.
|
Exhibits
|
|
|
|
|||
3.1
|
|
|
—
|
|
Form of Restated Certificate of Incorporation of United Parcel Service, Inc. (incorporated by reference to Exhibit 3.2 to Form 8-K filed on May 12, 2010).
|
|
|
|
|||
3.2
|
|
|
—
|
|
Amended and Restated Bylaws of United Parcel Service, Inc. as of February 14, 2013 (incorporated by reference to Exhibit 3.1 to Form 8-K, filed on February 19, 2013).
|
|
|
|
|
|
|
4.1
|
|
|
—
|
|
Form of Note for Floating Rate Senior Notes due March 15, 2066 (incorporated by reference to Exhibit 4.1 to Form 8-K filed on April 1, 2016).
|
|
|
|
|
|
|
11
|
|
|
—
|
|
Statement regarding Computation of per Share Earnings (incorporated by reference to Note 13 in “Item 1. Financial Statements” of this quarterly report on Form 10-Q).
|
|
|
|
|||
†12
|
|
|
—
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
|
|
|||
†31.1
|
|
|
—
|
|
Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|||
†31.2
|
|
|
—
|
|
Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|||
†32.1
|
|
|
—
|
|
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|||
†32.2
|
|
|
—
|
|
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|||
†101
|
|
|
—
|
|
The following financial information from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Statements of Consolidated Income, (iii) the Statements of Consolidated Comprehensive Income, (iv) the Statements of Consolidated Cash Flows, and (v) the Notes to the Consolidated Financial Statements.
|
†
|
Filed herewith.
|
|
|
UNITED PARCEL SERVICE, INC.
(Registrant)
|
||
|
|
|
||
Date:
|
May 10, 2016
|
By:
|
|
/
S
/ RICHARD N. PERETZ
|
|
|
|
|
Richard N. Peretz
|
|
|
|
|
Senior Vice President, Chief Financial Officer and Treasurer
(Duly Authorized Officer and
Principal Accounting Officer)
|
|
|
|
|
|
|
|
|
||||||||||||
|
Three Months Ended
March 31, |
|
Year Ended December 31,
|
||||||||||||||||
|
2016
|
|
2015
|
2014
|
2013
|
2012
|
2011
|
||||||||||||
Earnings:
|
|
|
|
|
|
|
|
||||||||||||
Income before income taxes
|
$
|
1,747
|
|
|
$
|
4,637
|
|
$
|
6,674
|
|
$
|
974
|
|
$
|
5,776
|
|
$
|
5,290
|
|
Add: Interest expense
|
93
|
|
|
353
|
|
380
|
|
393
|
|
348
|
|
354
|
|
||||||
Add: Interest factor in rental expense
|
48
|
|
|
225
|
|
192
|
|
206
|
|
210
|
|
205
|
|
||||||
Total earnings
|
$
|
1,888
|
|
|
$
|
5,215
|
|
$
|
7,246
|
|
$
|
1,573
|
|
$
|
6,334
|
|
$
|
5,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense
|
$
|
93
|
|
|
$
|
353
|
|
$
|
380
|
|
$
|
393
|
|
$
|
348
|
|
$
|
354
|
|
Interest capitalized
|
2
|
|
|
11
|
|
14
|
|
18
|
|
17
|
|
18
|
|
||||||
Interest factor in rental expense
|
48
|
|
|
225
|
|
192
|
|
206
|
|
210
|
|
205
|
|
||||||
Total fixed charges
|
$
|
143
|
|
|
$
|
589
|
|
$
|
586
|
|
$
|
617
|
|
$
|
575
|
|
$
|
577
|
|
|
|
|
|
|
|
|
|
||||||||||||
Ratio of earnings to fixed charges
|
13.2
|
|
|
8.9
|
|
12.4
|
|
2.5
|
|
11.0
|
|
10.1
|
|
||||||
|
|
|
|
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of United Parcel Service, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/
S
/ D
AVID
P. A
BNEY
|
David P. Abney
|
Chairman and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of United Parcel Service, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/
S
/ RICHARD N. PERETZ
|
Richard N. Peretz
|
Senior Vice President, Chief Financial Officer and Treasurer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
|
/
S
/ D
AVID
P. A
BNEY
|
David P. Abney
|
Chairman and Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
|
/
S
/ RICHARD N. PERETZ
|
Richard N. Peretz
|
Senior Vice President, Chief Financial Officer and Treasurer
|