UPS 2006 Annual Report Download - page 46

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sold a net $482 million in marketable securities and short-term investments, primarily due to the pension and
postretirement medical benefit plan fundings in the third quarter. During 2005, we sold a net $2.752 billion in
marketable securities and short-term investments, largely to fund the acquisition of Overnite as well as to make
fundings to our pension and postretirement medical benefit plans. In 2005, we spent $1.488 billion on business
acquisitions, primarily Overnite Corp., Lynx Express Ltd. in the United Kingdom, Messenger Service Stolica
S.A. in Poland, and the express operations of Sinotrans Air Transportation Development Co. Ltd. in China (See
Note 7 to the consolidated financial statements). We generated cash of $68, $95, and $318 million in 2006, 2005,
and 2004 respectively, due to the sales and customer paydowns of finance receivables, primarily in our leasing,
asset-based lending, and receivable factoring businesses.
In the second quarter of 2006, we terminated several energy derivatives and received $229 million in cash,
which is reported in other investing activities in the statement of cash flows. These derivatives were designated
as hedges of forecasted cash outflows for purchases of fuel products. As these derivatives maintained their
effectiveness and qualified for hedge accounting, we anticipate that the gains associated with these hedges will
be recognized in income over the original term of the hedges through 2007.
Capital expenditures represent a primary use of cash in investing activities, as follows (in millions):
2006 2005 2004
Buildings and facilities ....................................... $ 720 $ 495 $ 547
Aircraft and parts ........................................... 1,150 874 829
Vehicles .................................................. 831 456 393
Information technology ...................................... 384 362 358
$3,085 $2,187 $2,127
As described in the “Commitments” section below, we have commitments for the purchase of aircraft,
vehicles, equipment and other fixed assets to provide for the replacement of existing capacity and anticipated
future growth. We fund our capital expenditures with our cash from operations.
Net Cash Used In Financing Activities
Net cash used in financing activities was $3.851, $4.175, and $2.014 billion in 2006, 2005, and 2004,
respectively. Our primary uses of cash in financing activities have been to repurchase stock, pay dividends, and
repay long-term debt. In July 2006, the Board of Directors authorized an additional $2.0 billion for future share
repurchases, in addition to the amount remaining under our August 2005 share repurchase authorization. We
repurchased a total of 32.6 million shares of Class A and Class B common stock for $2.455 billion in 2006
($2.460 billion reported on statement of cash flows due to timing of settlements), and 33.9 million shares for
$2.479 billion in 2005. As of December 31, 2006, we had $936 million of our share repurchase authorization
remaining; in February 2007, the Board of Directors approved an increase in our share repurchase authorization
to $2.0 billion, which replaced the remaining amounts available under our July 2006 authorization. On February
8, 2007, our Board declared a dividend of $0.42 per share, which is payable on March 6, 2007 to shareowners of
record on February 20, 2007.
We increased our quarterly cash dividend payment to $0.38 per share in 2006 from $0.33 per share in 2005,
resulting in an increase in total cash dividends paid to $1.577 billion from $1.391 billion. The declaration of
dividends is subject to the discretion of the Board of Directors and will depend on various factors, including our
net income, financial condition, cash requirements, future prospects, and other relevant factors. We expect to
continue the practice of paying regular cash dividends.
Issuances of debt during 2006 consisted primarily of issuances of commercial paper, UPS Notes, and facility
notes and bonds. Repayments of debt consisted primarily of scheduled principal payments on our capital lease
obligations and principal payments on debt related to our investment in certain equity-method 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.
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