Statement Of Financial Position
Statement Of Financial Position Classified (USD $) | ||
In Millions | Dec. 31, 2009
| Dec. 31, 2008
|
Current Assets: | ||
Cash and cash equivalents | $1,542 | $507 |
Marketable securities | 558 | 542 |
Accounts receivable, net | 5,369 | 5,547 |
Finance receivables, net | 287 | 480 |
Deferred income tax assets | 585 | 494 |
Income taxes receivable | 266 | 167 |
Other current assets | 668 | 1,108 |
Total Current Assets | 9,275 | 8,845 |
Property, Plant and Equipment, Net | 17,979 | 18,265 |
Goodwill | 2,089 | 1,986 |
Intangible Assets, Net | 596 | 511 |
Non-Current Finance Receivables, Net | 337 | 476 |
Other Non-Current Assets | 1,607 | 1,796 |
Total Assets | 31,883 | 31,879 |
Current Liabilities: | ||
Current maturities of long-term debt and commercial paper | 853 | 2,074 |
Accounts payable | 1,766 | 1,855 |
Accrued wages and withholdings | 1,416 | 1,436 |
Self-insurance reserves | 757 | 732 |
Income taxes accrued | 258 | 37 |
Other current liabilities | 1,189 | 1,683 |
Total Current Liabilities | 6,239 | 7,817 |
Long-Term Debt | 8,668 | 7,797 |
Pension and Postretirement Benefit Obligations | 5,457 | 6,323 |
Deferred Income Tax Liabilities | 1,293 | 588 |
Self-Insurance Reserves | 1,732 | 1,710 |
Other Non-Current Liabilities | 798 | 864 |
Shareowners' Equity: | ||
Additional paid-in capital | 2 | 0 |
Retained earnings | 12,745 | 12,412 |
Accumulated other comprehensive loss | (5,127) | (5,642) |
Deferred compensation obligations | 108 | 121 |
Less: Treasury stock (2 shares in 2009 and 2008) | (108) | (121) |
Total Equity for Controlling Interests | 7,630 | 6,780 |
Noncontrolling Interests | 66 | 0 |
Total Shareowners' Equity | 7,696 | 6,780 |
Total Liabilities and Shareowners' Equity | 31,883 | 31,879 |
Class A Common Stock | ||
Shareowners' Equity: | ||
Common stock | 3 | 3 |
Class B common stock | ||
Shareowners' Equity: | ||
Common stock | $7 | $7 |
1_Statement Of Financial Positi
Statement Of Financial Position Classified (Parenthetical) (USD $) | ||
Share data in Millions | Dec. 31, 2009
| Dec. 31, 2008
|
Treasury stock, shares | 2 | 2 |
Class A Common Stock | ||
Common stock, shares issued | 285 | 314 |
Class B common stock | ||
Common stock, shares issued | 711 | 684 |
Statement Of Income Alternative
Statement Of Income Alternative (USD $) | |||
In Millions, except Per Share data | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Revenue | $45,297 | $51,486 | $49,692 |
Operating Expenses: | |||
Compensation and benefits | 25,640 | 26,063 | 31,745 |
Repairs and maintenance | 1,075 | 1,194 | 1,157 |
Depreciation and amortization | 1,747 | 1,814 | 1,745 |
Purchased transportation | 5,379 | 6,550 | 5,902 |
Fuel | 2,365 | 4,134 | 2,974 |
Other occupancy | 985 | 1,027 | 958 |
Other expenses | 4,305 | 5,322 | 4,633 |
Total Operating Expenses | 41,496 | 46,104 | 49,114 |
Operating Profit | 3,801 | 5,382 | 578 |
Other Income and (Expense): | |||
Investment income | 10 | 75 | 99 |
Interest expense | (445) | (442) | (246) |
Total Other Income and (Expense) | (435) | (367) | (147) |
Income Before Income Taxes | 3,366 | 5,015 | 431 |
Income Tax Expense | 1,214 | 2,012 | 49 |
Net Income | $2,152 | $3,003 | $382 |
Basic Earnings Per Share | 2.16 | 2.96 | 0.36 |
Diluted Earnings Per Share | 2.14 | 2.94 | 0.36 |
Statement Of Other Comprehensiv
Statement Of Other Comprehensive Income (USD $) | |||
In Millions | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Net income | $2,152 | $3,003 | $382 |
Change in foreign currency translation adjustment | 75 | (119) | 190 |
Change in unrealized gain (loss) on marketable securities, net of tax | 33 | (69) | (3) |
Change in unrealized gain (loss) on cash flow hedges, net of tax | (93) | 143 | (318) |
Change in unrecognized pension and postretirement benefit costs, net of tax | 500 | (3,597) | 323 |
Comprehensive income (loss) | $2,667 | ($639) | $574 |
Statement Of Cash Flows Indirec
Statement Of Cash Flows Indirect (USD $) | |||
In Millions | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Cash Flows From Operating Activities: | |||
Net income | $2,152 | $3,003 | $382 |
Adjustments to reconcile net income to net cash from operating activities: | |||
Depreciation and amortization | 1,747 | 1,814 | 1,745 |
Pension and postretirement benefit expense | 872 | 726 | 513 |
Pension and postretirement benefit contributions | (924) | (246) | (687) |
Self-insurance reserves | 47 | 87 | 69 |
Deferred taxes, credits and other | 471 | 187 | (249) |
Stock compensation expense | 430 | 516 | 447 |
Asset impairment charges | 181 | 575 | 221 |
Other (gains) losses | 115 | 634 | 243 |
Changes in assets and liabilities, net of effect of acquisitions: | |||
Accounts receivable | (30) | 197 | (380) |
Income taxes receivable | 27 | 1,161 | (1,191) |
Other current assets | 136 | (144) | (3) |
Accounts payable | (107) | 87 | (37) |
Accrued wages and withholdings | (102) | 44 | 108 |
Other current liabilities | 184 | (184) | 56 |
Other operating activities | 86 | (31) | (114) |
Net cash from operating activities | 5,285 | 8,426 | 1,123 |
Cash Flows From Investing Activities: | |||
Capital expenditures | (1,602) | (2,636) | (2,820) |
Proceeds from disposals of property, plant and equipment | 60 | 147 | 85 |
Purchases of marketable securities | (2,251) | (3,391) | (9,017) |
Sales and maturities of marketable securities | 2,240 | 3,113 | 9,638 |
Net (increase) decrease in finance receivables | 261 | (49) | (39) |
Other investing activities | 44 | (363) | (46) |
Net cash (used in) investing activities | (1,248) | (3,179) | (2,199) |
Cash Flows From Financing Activities: | |||
Net change in short-term debt | (1,738) | (2,016) | 2,613 |
Proceeds from long-term borrowings | 3,160 | 3,613 | 4,094 |
Repayments of long-term borrowings | (1,944) | (2,518) | (198) |
Purchases of common stock | (561) | (3,570) | (2,639) |
Issuances of common stock | 149 | 169 | 174 |
Dividends | (1,751) | (2,219) | (1,703) |
Other financing activities | (360) | (161) | (44) |
Net cash provided by (used in) financing activities | (3,045) | (6,702) | 2,297 |
Effect Of Exchange Rate Changes On Cash And Cash Equivalents | 43 | (65) | 12 |
Net Increase (Decrease) In Cash And Cash Equivalents | 1,035 | (1,520) | 1,233 |
Cash And Cash Equivalents: | |||
Beginning of period | 507 | 2,027 | 794 |
End of period | 1,542 | 507 | 2,027 |
Cash Paid During The Period For: | |||
Interest (net of amount capitalized) | 390 | 359 | 248 |
Income taxes | $443 | $760 | $1,351 |
SUMMARY OF ACCOUNTING POLICIES
SUMMARY OF ACCOUNTING POLICIES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
SUMMARY OF ACCOUNTING POLICIES | NOTE 1. SUMMARY OF ACCOUNTING POLICIES Basis of Financial Statements and Business Activities The accompanying financial statements include the accounts of United Parcel Service, Inc., and all of its consolidated subsidiaries (collectively UPS or the Company). All intercompany balances and transactions have been eliminated. UPS concentrates its operations in the field of transportation services, primarily domestic and international letter and package delivery. Through our Supply Chain Freight subsidiaries, we are also a global provider of specialized transportation, logistics, and financial services. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition U.S. Domestic and International Package OperationsRevenue is recognized upon delivery of a letter or package. Forwarding and LogisticsFreight forwarding revenue and the expense related to the transportation of freight are recognized at the time the services are performed. Material management and distribution revenue is recognized upon performance of the service provided. Customs brokerage revenue is recognized upon completing documents necessary for customs entry purposes. FreightRevenue is recognized upon delivery of a less-than-truckload (LTL) or truckload (TL) shipment. We utilize independent contractors and third party carriers in the performance of some transportation services. In situations where we act as principal party to the transaction, we recognize revenue on a gross basis; in circumstances where we act as an agent, we recognize revenue net of the cost of the purchased transportation. Financial ServicesIncome on loans and direct finance leases is recognized on the effective interest method. Accrual of interest income is suspended at the earlier of the time at which collection of an account becomes doubtful or the account becomes 90 days delinquent. Income on operating leases is recognized on the straight-line method over the terms of the underlying leases. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments that are readily convertible into cash. We consider securities with maturities of three months or less, when purchased, to be cash equivalents. The carrying amount of these securities approximates fair value because of the short-term maturity of these instruments. Investments Marketable securities are classified as available-for-sale and are carried at fair value, with related unrealized gains and losses reported, net of tax, as accumulated other comprehensive income (AOCI), a separate component of shareowners equity. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included in |
CASH AND INVESTMENTS
CASH AND INVESTMENTS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
CASH AND INVESTMENTS | NOTE 2. CASH AND INVESTMENTS The following is a summary of marketable securities classified as available-for-sale at December31, 2009 and 2008 (in millions): Cost Unrealized Gains Unrealized Losses Estimated FairValue 2009 Current marketable securities: U.S. government and agency debt securities $ 126 $ $ (1 ) $ 125 Mortgage and asset-backed debt securities 158 2 (1 ) 159 Corporate debt securities 213 6 219 U.S. state and local municipal debt securities 22 22 Other debt and equity securities 28 5 33 Current marketable securities 547 13 (2 ) 558 Non-current marketable securities: Mortgage and asset-backed debt securities 150 (38 ) 112 U.S. state and local municipal debt securities 115 (26 ) 89 Common equity securities 21 10 31 Preferred equity securities 16 (1 ) 15 Non-current marketable securities 302 10 (65 ) 247 Total marketable securities $ 849 $ 23 $ (67 ) $ 805 Cost Unrealized Gains Unrealized Losses Estimated FairValue 2008 Current marketable securities: U.S. government and agency debt securities $ 93 $ 2 $ $ 95 Mortgage and asset-backed debt securities 278 3 (11 ) 270 Corporate debt securities 158 5 (3 ) 160 Other debt and equity securities 30 (13 ) 17 Current marketable securities 559 10 (27 ) 542 Non-current marketable securities: Mortgage and asset-backed debt securities 150 (34 ) 116 U.S. state and local municipal debt securities 116 (29 ) 87 Common equity securities 25 3 28 Preferred equity securities 21 (8 ) 13 Non-current marketable securities 312 3 (71 ) 244 Total marketable securities $ 871 $ 13 $ (98 ) $ 786 The gross realized gains on sales of marketable securities totaled $16, $19, and $23 million in 2009, 2008, and 2007, respectively. The gross realized losses totaled $12, $10, and $9 million in 2009, 2008, and 2007, respectively. Impairment losses recognized on marketable securities and short-term investments totaled $17 and $23 million during 2009 and 2008 (discussed further below), with no such losses recognized in 2007. Auction Rate Securities At December31, 2009, we held $281 million in principal value of investments in auction rate securities. Some of these investments take the form of debt securities, and are structured as direct obligations of local governments or agencies (classified as U.S. state and local municipal s |
FINANCE RECEIVABLES
FINANCE RECEIVABLES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
FINANCE RECEIVABLES | NOTE 3. FINANCE RECEIVABLES The following is a summary of finance receivables at December31, 2009 and 2008 (in millions): 2009 2008 Commercial term loans $ 305 $ 420 Investment in finance leases 92 126 Asset-based lending 151 345 Receivable factoring 107 90 Gross finance receivables 655 981 Less: Allowance for credit losses (31 ) (25 ) Balance at December31 $ 624 $ 956 Outstanding receivable balances at December31, 2009 and 2008 are net of unearned income of $19 and $26 million, respectively. When we factor (i.e., purchase) a customer invoice from a client, we record the customer receivable as an asset and also establish a liability for the funds due to the client, which is recorded in accounts payable on the consolidated balance sheet. The following is a reconciliation of receivable factoring balances at December31, 2009 and 2008 (in millions): 2009 2008 Customer receivable balances $ 107 $ 90 Less: Amounts due to client (88 ) (62 ) Net funds employed $ 19 $ 28 Non-earning finance receivables were $115 and $94 million at December31, 2009 and 2008, respectively, of which $81 and $57 million are U.S. government guaranteed portions of loans. The following is a rollforward of the allowance for credit losses on finance receivables (in millions): 2009 2008 Balance at January1 $ 25 $ 13 Provisions charged to operations 25 28 Charge-offs, net of recoveries (19 ) (16 ) Balance at December31 $ 31 $ 25 The carrying value of finance receivables at December31, 2009, by contractual maturity, is shown below (in millions). Actual maturities may differ from contractual maturities because some borrowers have the right to prepay these receivables without prepayment penalties. Carrying Value Due in one year or less $ 294 Due after one year through three years 54 Due after three years through five years 38 Due after five years 269 $ 655 Based on interest rates for financial instruments with similar terms and maturities, the estimated fair value of finance receivables is approximately $623 and $957 million as of December31, 2009 and 2008, respectively. At December31, 2009, we had unfunded loan commitments totaling $761 million, consisting of standby letters of credit of $115 million and other unfunded lending commitments of $646 million. During 2009, impaired finance receivables with a carrying amount of $13 million were written down to a net fair value of $8 million, based on the fair value for the related collateral which was determined using unobservable inputs (Level 3). |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment as of December31 consists of the following (in millions): 2009 2008 Vehicles $ 5,480 $ 5,508 Aircraft (including aircraft under capitalized leases) 13,777 14,564 Land 1,079 1,068 Buildings 3,076 2,836 Building and leasehold improvements 2,800 2,702 Plant equipment 6,371 5,720 Technology equipment 1,591 1,620 Equipment under operating leases 145 136 Construction-in-progress 488 944 34,807 35,098 Less: Accumulated depreciation and amortization (16,828 ) (16,833 ) $ 17,979 $ 18,265 We continually monitor our aircraft fleet utilization in light of current and projected volume levels, aircraft fuel prices, and other factors. In 2008, we had announced that we were in negotiations with DHL to provide air transportation services for all of DHLs express, deferred and international package volume within the United States, as well as air transportation services between the United States, Canada and Mexico. In early April 2009, UPS and DHL mutually agreed to terminate further discussions on providing these services. Additionally, our U.S. Domestic Package air delivery volume had declined for several quarters as a result of persistent economic weakness and shifts in product mix from our premium air services to our lower cost ground services. As a result of these factors, the utilization of certain aircraft fleet types had declined and was expected to be lower in the future. Based on the factors noted above, as well as FAA aging aircraft directives that would require significant future maintenance expenditures, we determined that a triggering event had occurred that required an impairment assessment of our McDonnell-Douglas DC-8-71 and DC-8-73 aircraft fleets. We conducted an impairment analysis as of March31, 2009, and determined that the carrying amount of these fleets was not recoverable due to the accelerated expected retirement dates of the aircraft. Based on anticipated residual values for the airframes, engines, and parts, we recognized an impairment charge of $181 million in the first quarter of 2009. This charge is included in the caption Other expenses in the Statement of Consolidated Income, and impacted our U.S. Domestic Package segment. The DC-8 fleets were subsequently retired from service. We currently continue to utilize and operate all of our other aircraft fleets. The impaired airframes, engines, and parts had a net carrying value of $192 million, and were written down to an aggregate fair value of $11 million. The fair values for the impaired airframes, engines, and parts were determined using unobservable inputs (Level 3). As a result of business changes that occurred in the first quarter of 2007, including capacity-optimization programs in our domestic and international air freight forwarding business as well as changes to our aircraft orders and planned delivery dates, we began a review process of our aircraft fleet t |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
EMPLOYEE BENEFIT PLANS | NOTE 5. EMPLOYEE BENEFIT PLANS We sponsor various retirement and pension plans, including defined benefit and defined contribution plans which cover our employees worldwide. U.S. Pension Benefits In the U.S. we maintain the following single-employer defined benefit pension plans: UPS Retirement Plan, UPS Pension Plan, UPS IBT Pension Plan, and the UPS Excess Coordinating Benefit Plan, a non-qualified plan. The UPS Retirement Plan is noncontributory and includes substantially all eligible employees of participating domestic subsidiaries who are not members of a collective bargaining unit, as well as certain employees covered by a collective bargaining agreement. This plan generally provides for retirement benefits based on average compensation levels earned by employees prior to retirement. Benefits payable under this plan are subject to maximum compensation limits and the annual benefit limits for a tax qualified defined benefit plan as prescribed by the Internal Revenue Service. The UPS Pension Plan is noncontributory and includes certain eligible employees of participating domestic subsidiaries and members of collective bargaining units that elect to participate in the plan. This plan provides for retirement benefits based on service credits earned by employees prior to retirement. The UPS IBT Pension Plan is noncontributory and includes employees that were previously members of the Central States, Southeast and Southwest Areas Pension Fund (Central States Pension Fund), a multi-employer pension plan, in addition to other eligible employees who are covered under certain collective bargaining agreements. Our national master agreement with the International Brotherhood of Teamsters (Teamsters) allowed us, upon ratification, to withdraw employees from the Central States Pension Fund and establish this jointly trusteed single-employer plan for this group of employees. We recorded a pre-tax charge of $6.1 billion to establish our withdrawal liability upon ratification of the national master agreement, and made a $6.1 billion payment to the Central States Pension Fund in December 2007. In connection with the national master agreement and upon establishment of the UPS IBT Pension Plan, we restored certain benefit levels to our employee group within the new plan, which resulted in the initial recognition of a $1.701 billion pension liability and a corresponding $1.062 billion reduction of AOCI and $639 million reduction of deferred tax liabilities. The withdrawal liability was based on computations performed by independent actuaries employed by the Central States Pension Fund, in accordance with the plan document and the applicable requirements of the Employee Retirement Income Security Act of 1974 (ERISA). We negotiated our withdrawal from the Central States Pension Fund as part of our national master agreement with the Teamsters, which included other modifications to hourly wage rates, healthcare and pension benefits, and work rules. We sought to negotiate our withdrawal from the Central States Pension Fund, as we believed the fund would likely continue to have funding challenges, and would present a risk to UPS of havin |
BUSINESS ACQUISITIONS, GOODWILL
BUSINESS ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
BUSINESS ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS | NOTE 6. BUSINESS ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS The following table indicates the allocation of goodwill by reportable segment (in millions): U.S.Domestic Package International Package SupplyChain Freight Consolidated December31, 2007 balance $ 295 $ 2,282 $ 2,577 Acquired 4 4 Impairments (548 ) (548 ) Currency / Other (11 ) (36 ) (47 ) December31, 2008 balance $ $ 288 $ 1,698 $ 1,986 Acquired 82 82 Disposals (6 ) (6 ) Currency / Other 4 23 27 December31, 2009 balance $ $ 374 $ 1,715 $ 2,089 Business Acquisitions The goodwill acquired in the International Package segment in 2009 was primarily due to the acquisition of an agent in Turkey, as discussed further below. We also acquired an agent in Slovenia during the second quarter of 2009. The increase in goodwill in the Supply Chain Freight segment was due to the impact of fluctuations in the U.S.Dollar with other currencies on the translation of non-U.S.Dollar goodwill balances, partially offset by the allocation of goodwill to the sale of certain non-U.S. Mail Boxes Etc. franchise relationships. In August 2009, we completed the formation of a new joint venture headquartered in Dubai to develop and grow UPS express package, freight forwarding and contract logistics services across the Middle East, Turkey and portions of Central Asia. We own 80% of this joint venture, and we consolidate the financial statements of the joint venture. In conjunction with the formation of this joint venture, the joint venture acquired the small package operations of Unsped Paket Servisi San ve Ticaret A.S. (Unsped), our existing service agent in Turkey. We are contributing certain existing UPS operations in the region to the new joint venture, along with cash consideration of $40 million and an additional $40 million that will be due on a deferred basis. We maintain an option to purchase the remaining 20% of the joint venture, and the joint venture partner maintains a put option to require us to purchase the remaining 20% interest. Upon exercise of the call or put option, a payment of $20 million will be required. An additional payment may be due depending upon the earnings of the joint venture. The 20% portion of the joint venture that we do not own, which represents temporary equity, is recorded as a noncontrolling interest in shareowners equity. The express package business operations of Unsped are included in our International Package segment, while the freight forwarding business of Unsped is included in our Supply Chain Freight segment. The goodwill acquired in the International Package segment during 2008 was due to our purchase of a package delivery company in Romania and our buyout of a joint venture in Korea. The currency / other balance includes the translation effect on goodwill from fluctuations in currency exchange rates, as well as escrow |
DEBT OBLIGATIONS AND COMMITMENT
DEBT OBLIGATIONS AND COMMITMENTS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
DEBT OBLIGATIONS AND COMMITMENTS | NOTE 7. DEBT OBLIGATIONS AND COMMITMENTS The carrying value of our debt obligations, as of December31, consists of the following (in millions): Maturity 2009 2008 Commercial paper 2010 $ 672 $ 2,922 4.50% senior notes 2013 1,773 1,739 3.875% senior notes 2014 1,023 5.50% senior notes 2018 758 745 5.125% senior notes 2019 991 6.20% senior notes 2038 1,480 1,479 8.375% debentures 2020/2030 739 741 Floating rate senior notes 20492053 409 438 Capital lease obligations 2010 2021 369 425 Facility notes and bonds 2015 2036 320 433 UPS Notes 2010 2024 175 198 PoundSterling notes 2031 / 2050 791 730 Other debt 2010 2012 21 21 Total debt 9,521 9,871 Less current maturities (853 ) (2,074 ) Long-term debt $ 8,668 $ 7,797 Commercial Paper The weighted average interest rate on the commercial paper outstanding as of December31, 2009 and 2008 was 0.10% and 0.55%, respectively. As of December31, 2009, the entire commercial paper balance was classified as a current liability. At December31, 2008, we had classified $1.0 billion of this commercial paper balance as long-term debt, based on our intent and ability to refinance this debt on a long-term basis, with the remaining $1.922 billion classified as a current liability in our consolidated balance sheet. The amount of commercial paper outstanding in 2010 is expected to fluctuate. We are authorized to borrow up to $10.0 billion under the U.S. commercial paper program we maintain as of December31, 2009. We also maintain a European commercial paper program under which we are authorized to borrow up to 1.0 billion in a variety of currencies, however no amounts were outstanding under this program as of December31, 2009. Fixed Rate Senior Notes In January 2008, we completed an offering of $1.750 billion of 4.50% senior notes due January 2013, $750 million of 5.50% senior notes due January 2018, and $1.500 billion of 6.20% senior notes due January 2038. All of the notes pay interest semiannually, and allow for redemption of the notes by UPS at any time by paying the greater of the principal amount or a make-whole amount, plus accrued interest. After pricing and underwriting discounts, we received a total of $3.961 billion in cash proceeds from the offering. The proceeds from the offering were used to reduce our outstanding commercial paper balance. In 2009, we entered into interest rate swaps on the 2013 and 2018 notes, which effectively converted the fixed interest rates on the notes to variable LIBOR-based interest rates. The average interest rate payable on the swaps during 2009 was 2.51% and 2.16% for the 2013 and 2018 notes, respectively. In March 2009, we completed an offering of $1.0 billion of 3.875% senior notes due April 2014 and $1.0 billion of 5.125% senior notes due April 2019. These notes pay interest semiannually, and we may redeem the note |
LEGAL PROCEEDINGS AND CONTINGEN
LEGAL PROCEEDINGS AND CONTINGENCIES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
LEGAL PROCEEDINGS AND CONTINGENCIES | NOTE 8. LEGAL PROCEEDINGS AND CONTINGENCIES We are a defendant in a number of lawsuits filed in state and federal courts containing various class-action allegations under state wage-and-hour laws. In one of these cases, Marlo v. UPS, which was certified as a class action in a California federal court in September 2004, plaintiffs allege that they improperly were denied overtime, and seek penalties for missed meal and rest periods, and interest and attorneys fees. Plaintiffs purport to represent a class of 1,300 full-time supervisors. In August 2005, the court granted summary judgment in favor of UPS on all claims, and plaintiffs appealed the ruling. In October 2007, the appeals court reversed the lower courts ruling. In April 2008, the Court decertified the class and vacated the trial scheduled for that month. We have denied any liability with respect to these claims and intend to vigorously defend ourselves in this case. At this time, we have not determined the amount of any liability that may result from this matter or whether such liability, if any, would have a material adverse effect on our financial condition, results of operations, or liquidity. In another case, Hohider v. UPS, which in July 2007 was certified as a class action in a Pennsylvania federal court, plaintiffs have challenged certain aspects of the Companys interactive process for assessing requests for reasonable accommodation under the Americans with Disabilities Act. Plaintiffs purport to represent a class of over 35,000 current and former employees, and seek back-pay, and compensatory and punitive damages, as well as attorneys fees. In August 2007, the Third Circuit Court of Appeals granted our petition to hear the appeal of the trial courts certification order. In July 2009, the Third Circuit issued its decision decertifying the class and remanding the case to the trial court for further proceedings. We have denied any liability with respect to these claims and intend to vigorously defend ourselves in this case. At this time, we have not determined the amount of any liability that may result from this matter or whether such liability, if any, would have a material adverse effect on our financial condition, results of operations, or liquidity. UPS and our subsidiary Mail Boxes Etc., Inc. are defendants in various lawsuits brought by franchisees who operate Mail Boxes Etc. centers and The UPS Store locations. These lawsuits relate to the rebranding of Mail Boxes Etc. centers to The UPS Store, The UPS Store business model, the representations made in connection with the rebranding and the sale of The UPS Store franchises, and UPSs sale of services in the franchisees territories. In one of the actions, which is pending in California state court, the court certified a class consisting of all Mail Boxes Etc. branded stores that rebranded to The UPS Store in March 2003. We have denied any liability with respect to these claims and intend to defend ourselves vigorously. At this time, we have not determined the amount of any liability that may result from these matters or whether such liability, if any, would have a material adverse effect on our financial condition, |
SHAREOWNERS' EQUITY
SHAREOWNERS' EQUITY | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
SHAREOWNERS' EQUITY | NOTE 9. SHAREOWNERS EQUITY Capital Stock, Additional Paid-In Capital, and Retained Earnings We maintain two classes of common stock, which are distinguished from each other by their respective voting rights. ClassA shares of UPS are entitled to 10 votes per share, whereas Class B shares are entitled to one vote per share. ClassA shares are primarily held by UPS employees and retirees, and these shares are fully convertible into Class B shares at any time. Class B shares are publicly traded on the New York Stock Exchange (NYSE) under the symbol UPS. ClassA and B shares both have a $0.01 par value, and as of December31, 2009, there were 4.6 billion ClassA shares and 5.6 billion Class B shares authorized to be issued. Additionally, there are 200million preferred shares authorized to be issued, with a par value of $0.01 per share; as of December31, 2009, no preferred shares had been issued. The following is a rollforward of our common stock, additional paid-in capital, and retained earnings accounts (in millions, except per share amounts): 2009 2008 2007 Shares Dollars Shares Dollars Shares Dollars ClassA Common Stock Balance at beginning of year 314 $ 3 349 $ 3 401 $ 4 Common stock purchases (10 ) (11 ) (18 ) (1 ) Stock award plans 5 6 3 Common stock issuances 4 3 3 Conversions of ClassA to Class B common stock (28 ) (33 ) (40 ) ClassA shares issued at end of year 285 $ 3 314 $ 3 349 $ 3 Class B Common Stock Balance at beginning of year 684 $ 7 694 $ 7 672 $ 7 Common stock purchases (1 ) (43 ) (18 ) Conversions of ClassA to Class B common stock 28 33 40 Class B shares issued at end of year 711 $ 7 684 $ 7 694 $ 7 Additional Paid-In Capital Balance at beginning of year $ $ $ Stock award plans 381 497 462 Common stock purchases (569 ) (694 ) (627 ) Common stock issuances 190 197 165 Balance at end of year $ 2 $ $ Retained Earnings Balance at beginning of year $ 12,412 $ 14,186 $ 17,676 Net income attributable to controlling interests 2,152 3,003 382 Cumulative adjustment for accounting changes (60 ) (104 ) Dividends ($1.80, $1.80, and $1.68 per share) (1,819 ) (1,853 ) (1,778 ) Common stock purchases |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
STOCK-BASED COMPENSATION | NOTE 10. STOCK-BASED COMPENSATION Incentive Compensation Plan The UPS Incentive Compensation Plan permits the grant of nonqualified and incentive stock options, stock appreciation rights, restricted stock and stock units, restricted performance shares and units, and management incentive awards to eligible employees. The number of shares reserved for issuance under the Incentive Compensation Plan is 80million. Each share issued pursuant to an option and each share issued subject to the exercised portion of a stock appreciation right will reduce the share reserve by one share. Each share issued pursuant to restricted stock and stock units, and restricted performance shares and units, will reduce the share reserve by 2.76 shares. As of December31, 2009, management incentive awards, stock options, restricted performance units, and restricted stock units had been granted under the Incentive Compensation Plan. We had 65.7million shares available to be issued under the Incentive Compensation Plan as of December31, 2009. Management Incentive Awards Restricted Stock Units Persons earning the right to receive management incentive awards are determined annually by the Compensation Committee of the UPS Board of Directors. Our management incentive awards program provides that half of the annual management incentive award, with certain exceptions, be made in restricted stock units (RSUs), which generally vest over a five-year period. The other half of the award is in the form of cash or unrestricted shares of class A common stock and is fully vested at the time of grant. These management incentive awards are generally granted in the fourth quarter of each year. Upon vesting, RSUs result in the issuance of the equivalent number of UPS class A common shares after required tax withholdings. Except in the case of death, disability, or retirement, RSUs granted for our management incentive awards generally vest over a five year period with approximately 20% of the award vesting at each anniversary date of the grant. The entire grant is expensed on a straight-line basis over the requisite service period. All RSUs granted are subject to earlier cancellation or vesting under certain conditions. Dividends earned on management incentive award RSUs are reinvested in additional RSUs at each dividend payable date. We also award RSUs in conjunction with our long-term incentive performance awards program to certain eligible employees. The RSUs ultimately granted under the long-term incentive performance award will be based upon the achievement of certain performance measures, including growth in consolidated revenue and operating return on invested capital, each year during the performance award cycle, and other measures, including growth in consolidated earnings, over the entire three year performance award cycle. As of December31, 2009, we had the following RSUs outstanding, including reinvested dividends: Shares (inthousands) Weighted Average GrantDate Fair Value WeightedAverageRemaining Contractual Term (in years) AggregateIntrinsic Value(in millions) Nonvested at January1, 2009 13,440 $ 61.77 |
SEGMENT AND GEOGRAPHIC INFORMAT
SEGMENT AND GEOGRAPHIC INFORMATION | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
SEGMENT AND GEOGRAPHIC INFORMATION | NOTE 11. SEGMENT AND GEOGRAPHIC INFORMATION We report our operations in three segments: U.S. Domestic Package operations, International Package operations, and Supply Chain Freight operations. Package operations represent our most significant business and are broken down into regional operations around the world. Regional operations managers are responsible for both domestic and export operations within their geographic area. U.S. Domestic Package Domestic Package operations include the time-definite delivery of letters, documents, and packages throughout the United States. International Package International Package operations include delivery to more than 200 countries and territories worldwide, including shipments wholly outside the United States, as well as shipments with either origin or distribution outside the United States. Our International Package reporting segment includes the operations of our Europe, Asia, and Americas operating segments. Supply Chain Freight Supply Chain Freight includes our forwarding and logistics operations, UPS Freight, and other aggregated business units. Our forwarding and logistics business provides services in more than 175 countries and territories worldwide, and includes supply chain design and management, freight distribution, customs brokerage, mail and consulting services. UPS Freight offers a variety of LTL and TL services to customers in North America. Other aggregated business units within this segment include Mail Boxes, Etc. (the franchisor of Mail Boxes, Etc. and The UPS Store) and UPS Capital. In evaluating financial performance, we focus on operating profit as a segments measure of profit or loss. Operating profit is before investment income, interest expense, and income taxes. The accounting policies of the reportable segments are the same as those described in the summary of accounting policies (see Note 1), with certain expenses allocated between the segments using activity-based costing methods. Unallocated assets are comprised primarily of cash, marketable securities, and certain investment partnerships. Segment information as of, and for the years ended, December31 is as follows (in millions): 2009 2008 2007 Revenue: U.S. Domestic Package $ 28,158 $ 31,278 $ 30,985 International Package 9,699 11,293 10,281 Supply Chain Freight 7,440 8,915 8,426 Consolidated $ 45,297 $ 51,486 $ 49,692 Operating Profit (Loss): U.S. Domestic Package $ 2,138 $ 3,907 $ (1,531 ) International Package 1,367 1,580 1,831 Supply Chain Freight 296 (105 ) 278 Consolidated $ 3,801 $ 5,382 $ 578 Assets: U.S. Domestic Package $ 18,572 $ 18,796 $ 23,756 International Package 5,882 5,723 5,994 Supply Chain Freight 6,620 6,775 7,606 Unallocated 809 585 1,686 Consolidated $ 31,883 $ 31,879 |
INCOME TAXES
INCOME TAXES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
INCOME TAXES | NOTE 12. INCOME TAXES The income tax expense (benefit) for the years ended December31 consists of the following (in millions): 2009 2008 2007 Current: U.S. Federal $ 715 $ 1,510 $ 35 U.S. State and Local 30 173 67 Non-U.S. 147 155 107 Total Current 892 1,838 209 Deferred: U.S. Federal 231 115 (79 ) U.S. State and Local 32 4 (36 ) Non-U.S. 59 55 (45 ) Total Deferred 322 174 (160 ) Total $ 1,214 $ 2,012 $ 49 Income before income taxes includes the following components (in millions): 2009 2008 2007 United States $ 3,027 $ 4,547 $ (32 ) Non-U.S. 339 468 463 $ 3,366 $ 5,015 $ 431 A reconciliation of the statutory federal income tax rate to the effective income tax rate for the years ended December31 consists of the following: 2009 2008 2007 Statutory U.S. federal income tax rate 35.0 % 35.0 % 35.0 % U.S. state and local income taxes (net of federal benefit) 1.4 2.5 0.5 Non-U.S. tax rate differential (1.5 ) 1.0 (21.6 ) Nondeductible/nontaxable items 0.9 5.1 3.1 U.S. federal tax credits (3.2 ) (3.0 ) (22.0 ) Other 3.5 (0.5 ) 16.4 Effective income tax rate 36.1 % 40.1 % 11.4 % In the fourth quarter of 2008, we completed our annual goodwill impairment testing and determined that our UPS Freight reporting unit, which was formed through the acquisition of Overnite Corporation in 2005, had a goodwill impairment of $548 million. The impairment was not deductible for tax purposes and therefore negatively impacted our effective tax rate in 2008. Deferred tax liabilities and assets are comprised of the following at December31 (in millions): 2009 2008 Property, plant and equipment $ 3,141 $ 3,047 Goodwill and intangible assets 791 694 Other 401 352 Gross deferred tax liabilities 4,333 4,093 Other postretirement benefits 990 944 Pension plans 956 1,425 Loss and credit carryforwards (non-U.S. and state) 315 264 Insurance reserves 634 617 Vacation pay accrual 186 192 Stock compensation 244 214 Other 589 534 Gross deferred tax assets 3,914 4,190 Deferred tax assets valuation allowance (237 ) (117 ) Net deferred tax asset 3,677 4,073 Net deferred tax liability $ 656 $ 20 Amounts recognized in the balance sheet: Current deferred tax assets $ 585 $ 494 Current deferred tax liabilities (included in other current liabili |
EARNINGS PER SHARE
EARNINGS PER SHARE | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
EARNINGS PER SHARE | NOTE 13. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share (in millions except per share amounts): 2009 2008 2007 Numerator: Net income attributable to common shareowners $ 2,152 $ 3,003 $ 382 Denominator: Weighted average shares 995 1,014 1,055 Deferred compensation obligations 2 2 2 Vested portion of restricted shares 1 Denominator for basic earnings per share 998 1,016 1,057 Effect of dilutive securities: Restricted performance units 2 2 2 Restricted stock units 4 3 2 Stock options 1 2 Denominator for diluted earnings per share 1,004 1,022 1,063 Basic earnings per share $ 2.16 $ 2.96 $ 0.36 Diluted earnings per share $ 2.14 $ 2.94 $ 0.36 Diluted earnings per share for the years ended December31, 2009, 2008, and 2007 exclude the effect of 17.4, 11.7, and 8.9million shares, respectively, of common stock that may be issued upon the exercise of employee stock options because such effect would be antidilutive. |
DERIVATIVE INSTRUMENTS AND RISK
DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT | NOTE 14. DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT Risk Management Policies We are exposed to market risk, primarily related to foreign exchange rates, commodity prices, equity prices, and interest rates. These exposures are actively monitored by management. To manage the volatility relating to certain of these exposures, we enter into a variety of derivative financial instruments. Our objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with changes in foreign currency rates, commodity prices, equity prices, and interest rates. It is our policy and practice to use derivative financial instruments only to the extent necessary to manage exposures. As we use price sensitive instruments to hedge a certain portion of our existing and anticipated transactions, we expect that any loss in value for those instruments generally would be offset by increases in the value of those hedged transactions. We do not hold or issue derivative financial instruments for trading or speculative purposes. Credit Risk Management The forward contracts, swaps, and options discussed below contain an element of risk that the counterparties may be unable to meet the terms of the agreements. However, we minimize such risk exposures for these instruments by limiting the counterparties to banks and financial institutions that meet established credit guidelines, and monitoring counterparty credit risk to prevent concentrations of credit risk with any single counterparty. Additionally, the majority of our master agreements for derivatives provide for the early termination of any derivative transactions in the event that either the bank counterparty or UPS receives a credit rating below BBB by Standard Poors or Baa2 by Moodys, or ceases to be rated by either firm. We do not have any credit-risk triggers in our outstanding master agreements that require UPS or the bank counterparties to post collateral. We have not historically incurred, and do not expect to incur in the future, any losses as a result of counterparty default. Accounting Policy for Derivative Instruments We recognize all derivative instruments as assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the derivative, based upon the exposure being hedged, as a cash flow hedge, a fair value hedge, or a hedge of a net investment in a foreign operation. A cash flow hedge refers to hedging the exposure to variability in expected future cash flows that is attributable to a particular risk. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of AOCI, and reclassified into earnings in the same period during which the hedged transaction affects earnings. The remaining gain or loss on the d |
RESTRUCTURING COSTS AND RELATED
RESTRUCTURING COSTS AND RELATED EXPENSES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
RESTRUCTURING COSTS AND RELATED EXPENSES | NOTE 15. RESTRUCTURING COSTS AND RELATED EXPENSES We have incurred restructuring costs associated with the termination of employees, facility consolidations and other costs directly related to restructuring initiatives. These initiatives have resulted from the integration of acquired companies, as well as restructuring activities associated with cost containment and operational efficiency programs. Supply Chain FreightFrance In the third quarter of 2007, we initiated a restructuring plan for our forwarding and logistics operations in France to reduce our cost structure and focus on profitable revenue growth. The employment reduction program was ratified by the trade union representatives in France in July 2007. Affected employees received severance benefits that were formula-driven and in accordance with French statutory laws as well as the applicable collective bargaining agreements. The employment reduction program resulted in 103 employees accepting a voluntary termination offer and 342 positions being subject to the involuntary termination program. The restructuring also included costs incurred related to contract terminations for leased facilities, vehicles and equipment as well as impairment charges associated with long-lived assets. We recorded a restructuring charge of $42 million related to severance costs and $4 million for impairments and other contract termination costs in the third quarter of 2007. This restructuring plan was completed during 2008. UPS Special Voluntary Separation Opportunity In December 2006, we offered a special voluntary separation opportunity (SVSO) to 640 employees to improve the efficiency of non-operating processes by eliminating duplication and sharing expertise across the company. The SVSO ended in February 2007, and 195, or 30% of eligible employees, accepted the offer. As a result, we recorded a charge to expense of $68 million in the first quarter of 2007, to reflect the cash payout and the acceleration of stock compensation and certain retiree healthcare benefits under the SVSO program. The cash payout related to this program totaled $28 million and $35 million during 2008 and 2007, respectively. The $68 million charge was included in the caption Compensation and benefits in the Statement of Consolidated Income, of which $53 million impacted our U.S. Domestic Package segment, $8 million impacted our Supply Chain Freight segment, and $7 million impacted our International Package segment. Subsequent Events: Supply Chain FreightGermany In February 2010, we completed the sale of a specialized transportation and express freight business in Germany within our Supply Chain Freight segment. As part of the sale transaction, we incurred certain costs associated with employee severance payments, other employee benefits, transition services, and leases on operating facilities and equipment. Additionally, we have provided a guarantee for a period of two years for certain employee benefit payments being assumed by the buyer. We will record a loss of approximately $40 million for this transaction in the first quarter of 2010, which included the costs associated with the sale transaction and |
QUARTERLY INFORMATION
QUARTERLY INFORMATION (unaudited) | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
QUARTERLY INFORMATION (unaudited) | NOTE 16. QUARTERLY INFORMATION (unaudited) First Quarter Second Quarter Third Quarter Fourth Quarter 2009 2008 2009 2008 2009 2008 2009 2008 Revenue: U.S. Domestic Package $ 6,949 $ 7,735 $ 6,789 $ 7,714 $ 6,868 $ 7,841 $ 7,552 $ 7,988 International Package 2,240 2,759 2,246 2,948 2,422 2,949 2,791 2,637 Supply Chain Freight 1,749 2,181 1,794 2,339 1,863 2,323 2,034 2,072 Total revenue 10,938 12,675 10,829 13,001 11,153 13,113 12,377 12,697 Operating profit (loss): U.S. Domestic Package 384 959 476 899 514 1,117 764 932 International Package 294 421 293 407 313 386 467 366 Supply Chain Freight 40 113 126 148 102 129 28 (495 ) Total operating profit 718 1,493 895 1,454 929 1,632 1,259 803 Net income $ 401 $ 906 $ 445 $ 873 $ 549 $ 970 $ 757 $ 254 Earnings per share: Basic $ 0.40 $ 0.87 $ 0.45 $ 0.86 $ 0.55 $ 0.96 $ 0.76 $ 0.25 Diluted $ 0.40 $ 0.87 $ 0.44 $ 0.85 $ 0.55 $ 0.96 $ 0.75 $ 0.25 First quarter 2009 U.S. Domestic Package operating profit includes the $181 million impairment charge on our McDonnell-Douglas DC-8-71 and DC-8-73 airframes, engines, and parts, as discussed in Note 4. This charge reduced first quarter net income by $116 million, and basic and diluted earnings per share by $0.12. Second quarter 2009 interest expense includes a $77 million charge for the remeasurement of certain obligations denominated in foreign currencies, in which hedge accounting was not able to be applied. This charge reduced second quarter net income by $48 million, basic earnings per share by $0.04, and diluted earnings per share by $0.05. Fourth quarter 2008 operating profit includes the goodwill impairment charge of $548 million in our Supply Chain Freight segment and the intangible asset impairment charge of $27 million in our International Package segment, as discussed in Note 6. There were no tax benefits related to these two charges, therefore fourth quarter 2008 net income was reduced by $575 million, which reduced basic and diluted earnings per share by $0.58. |
Document Information
Document Information | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Document Type | 10-K |
Amendment Flag | false |
Document Period End Date | 2009-12-31 |
Entity Information
Entity Information (USD $) | |||
12 Months Ended
Dec. 31, 2009 | Feb. 17, 2010
| Jun. 30, 2009
| |
Trading Symbol | UPS | ||
Entity Registrant Name | UNITED PARCEL SERVICE INC | ||
Entity Central Index Key | 0001090727 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 713,924,267 | ||
Entity Public Float | $35,043,546,589 | ||
Class A Common Stock | |||
Entity Common Stock, Shares Outstanding | 278,928,093 |