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Table of Contents
United States
Securities and Exchange Commission
Washington, D.C. 20549
_____________________________________ 
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             
Commission file number 001-15451
_____________________________________ 
ups-20210630_g1.jpg
United Parcel Service, Inc.
(Exact name of registrant as specified in its charter)
Delaware 58-2480149
(State or Other Jurisdiction of
Incorporation or Organization)
 (IRS Employer
Identification No.)
55 Glenlake Parkway N.E. ,Atlanta, Georgia30328
(Address of Principal Executive Offices) (Zip Code)
(404) 828-6000
(Registrant’s telephone number, including area code)
____________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Class B common stock, par value $0.01 per shareUPSNew York Stock Exchange
0.375% Senior Notes due 2023UPS23ANew York Stock Exchange
1.625% Senior Notes due 2025UPS25New York Stock Exchange
1% Senior Notes due 2028UPS28New York Stock Exchange
1.500% Senior Notes due 2032UPS32New York Stock Exchange
  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
There were 142,752,653 Class A shares, and 728,289,602 Class B shares, with a par value of $0.01 per share, outstanding at July 22, 2021.


Table of Contents
TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II—OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 6.



Table of Contents
PART I. FINANCIAL INFORMATION

Cautionary Statement About Forward-Looking Statements
This report, our Annual Report on Form 10-K for the year ended December 31, 2020 and our other filings with the Securities and Exchange Commission contain and in the future may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than those of current or historical fact, and all statements accompanied by terms such as “will,” “believe,” “project,” “expect,” “estimate,” “assume,” “intend,” “anticipate,” “target,” “plan” and similar terms, are intended to be forward-looking statements. Forward-looking statements are made subject to the safe harbor provisions of the federal securities laws pursuant to Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
From time to time, we also include written or oral forward-looking statements in other publicly disclosed materials. Such statements may relate to our intent, belief, forecasts of, or current expectations about our strategic direction, prospects, future results, or future events; they do not relate strictly to historical or current facts. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any forward-looking statements because such statements speak only as of the date when made and the future, by its very nature, cannot be predicted with certainty.
Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or anticipated results. These risks and uncertainties, include, but are not limited to: continued uncertainties related to the impact of the COVID-19 pandemic on our business and operations, financial performance and liquidity, our customers and suppliers, and on the global economy; changes in general economic conditions, in the U.S. or internationally; significant competition on a local, regional, national and international basis; changes in our relationships with our significant customers; changes in the regulatory environment in the U.S. or internationally; increased or more complex physical or data security requirements; legal, regulatory or market responses to global climate change; results of negotiations and ratifications of labor contracts; strikes, work stoppages or slowdowns by our employees; the effects of changing prices of energy, including gasoline, diesel and jet fuel, and interruptions in supplies of these commodities; changes in exchange rates or interest rates; uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark; our ability to maintain our brand image; our ability to attract and retain qualified employees; breaches in data security; disruptions to the Internet or our technology infrastructure; interruptions in or impacts on our business from natural or man-made events or disasters including terrorist attacks, epidemics or pandemics; our ability to accurately forecast our future capital investment needs; exposure to changing economic, political and social developments in international and emerging markets; changes in business strategy, government regulations, or economic or market conditions that may result in impairment of our assets; increases in our expenses or funding obligations relating to employee health, retiree health and/or pension benefits; potential additional U.S. or international tax liabilities; potential claims or litigation related to labor and employment, personal injury, property damage, business practices, environmental liability and other matters; our ability to realize the anticipated benefits from acquisitions, dispositions, joint ventures or strategic alliances; our ability to realize the anticipated benefits from our transformation initiatives; cyclical and seasonal fluctuations in our operating results; our ability to manage insurance and claims expenses; and other risks discussed in our filings with the Securities and Exchange Commission from time to time, including our Annual Report on Form 10-K for the year ended December 31, 2020 and subsequently filed reports. You should consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements. We do not undertake any obligation to update forward-looking statements to reflect events, circumstances, changes in expectations, or the occurrence of unanticipated events after the date of those statements, except as required by law.

1

Table of Contents
Item 1. Financial Statements
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2021 (unaudited) and December 31, 2020 (in millions)
June 30,
2021
December 31,
2020
ASSETS
Current Assets:
Cash and cash equivalents$9,608 $5,910 
Marketable securities346 406 
Accounts receivable10,260 10,888 
Less: Allowance for credit losses(123)(138)
Accounts receivable, net 10,137 10,750 
Assets held for sale 1,197 
Other current assets1,897 1,953 
Total Current Assets21,988 20,216 
Property, Plant and Equipment, Net32,631 32,254 
Operating Lease Right-Of-Use Assets3,568 3,073 
Goodwill3,357 3,367 
Intangible Assets, Net2,238 2,274 
Investments and Restricted Cash25 25 
Deferred Income Tax Assets187 527 
Other Non-Current Assets875 672 
Total Assets$64,869 $62,408 
LIABILITIES AND SHAREOWNERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt, commercial paper and finance leases$1,564 $2,623 
Current maturities of operating leases556 560 
Accounts payable6,563 6,455 
Accrued wages and withholdings3,737 3,569 
Self-insurance reserves1,110 1,085 
Accrued group welfare and retirement plan contributions884 927 
Liabilities to be disposed of 347 
Other current liabilities1,356 1,450 
Total Current Liabilities15,770 17,016 
Long-Term Debt and Finance Leases21,027 22,031 
Non-Current Operating Leases3,038 2,540 
Pension and Postretirement Benefit Obligations7,675 15,817 
Deferred Income Tax Liabilities2,584 488 
Other Non-Current Liabilities3,953 3,847 
Shareowners’ Equity:
Class A common stock (144 and 147 shares issued in 2021 and 2020, respectively)
2 2 
Class B common stock (728 and 718 shares issued in 2021 and 2020, respectively)
7 7 
Additional paid-in capital1,329 865 
Retained earnings12,531 6,896 
Accumulated other comprehensive loss(3,064)(7,113)
Deferred compensation obligations16 20 
Less: Treasury stock (0.3 shares in 2021 and 0.4 shares in 2020)
(16)(20)
Total Equity for Controlling Interests10,805 657 
Noncontrolling interests17 12 
Total Shareowners’ Equity10,822 669 
Total Liabilities and Shareowners’ Equity$64,869 $62,408 
See notes to unaudited, consolidated financial statements.
2

Table of Contents
UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In millions, except per share amounts)
(unaudited)
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Revenue$23,424 $20,459 $46,332 $38,494 
Operating Expenses:
Compensation and benefits11,327 10,843 22,810 20,929 
Repairs and maintenance599 554 1,218 1,117 
Depreciation and amortization739 661 1,461 1,309 
Purchased transportation4,446 3,716 8,689 6,647 
Fuel915 499 1,722 1,260 
Other occupancy402 355 868 738 
Other expenses1,738 1,619 3,541 3,210 
Total Operating Expenses20,166 18,247 40,309 35,210 
Operating Profit3,258 2,212 6,023 3,284 
Other Income and (Expense):
Investment income and other345 328 3,961 673 
Interest expense(167)(183)(344)(350)
Total Other Income and (Expense)178 145 3,617 323 
Income Before Income Taxes3,436 2,357 9,640 3,607 
Income Tax Expense760 589 2,172 874 
Net Income$2,676 $1,768 $7,468 $2,733 
Basic Earnings Per Share$3.06 $2.04 $8.54 $3.16 
Diluted Earnings Per Share$3.05 $2.03 $8.51 $3.14 

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(In millions)
(unaudited)
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2021202020212020
Net Income$2,676 $1,768 $7,468 $2,733 
Change in foreign currency translation adjustment, net of tax48 10 (34)(131)
Change in unrealized gain (loss) on marketable securities, net of tax(1)3 (5)5 
Change in unrealized gain (loss) on cash flow hedges, net of tax(46)(114)68 103 
Change in unrecognized pension and postretirement benefit costs, net of tax1,594 44 4,020 87 
Comprehensive Income (Loss)$4,271 $1,711 $11,517 $2,797 
                
See notes to unaudited, consolidated financial statements.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions)
(unaudited)
 Six Months Ended
June 30,
 20212020
Cash Flows From Operating Activities:
Net income$7,468 $2,733 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization1,461 1,309 
Pension and postretirement benefit (income) expense(2,839)321 
Pension and postretirement benefit contributions(276)(263)
Self-insurance reserves130 293 
Deferred tax (benefit) expense1,127 284 
Stock compensation expense521 368 
Other (gains) losses 97 
Changes in assets and liabilities, net of effects of business acquisitions:
Accounts receivable439 105 
Other assets169 301 
Accounts payable56 (617)
Accrued wages and withholdings227 771 
Other liabilities(27)239 
Other operating activities(2)6 
Net cash from operating activities8,454 5,947 
Cash Flows From Investing Activities:
Capital expenditures(1,670)(2,065)
Proceeds from disposal of businesses, property, plant and equipment863 2 
Purchases of marketable securities(141)(131)
Sales and maturities of marketable securities214 241 
Net change in finance receivables16 16 
Cash paid for business acquisitions, net of cash and cash equivalents acquired(5) 
Other investing activities(11)(6)
Net cash used in investing activities(734)(1,943)
Cash Flows From Financing Activities:
Net change in short-term debt498 (892)
Proceeds from long-term borrowings 4,436 
Repayments of long-term borrowings(2,599)(1,826)
Purchases of common stock (231)
Issuances of common stock141 131 
Dividends(1,718)(1,683)
Other financing activities(360)(334)
Net cash used in financing activities(4,038)(399)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash16 (29)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash3,698 3,576 
Cash, Cash Equivalents and Restricted Cash:
Beginning of period5,910 5,238 
End of period$9,608 $8,814 
                
See notes to unaudited, consolidated financial statements.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Principles of Consolidation
The accompanying interim unaudited, consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. These interim unaudited, consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly our financial position as of June 30, 2021, our results of operations for the three and six months ended June 30, 2021 and 2020 and our cash flows for the six months ended June 30, 2021 and 2020. The results reported in these interim unaudited, consolidated financial statements should not be regarded as indicative of results that may be expected for any other period or the entire year. The interim unaudited, consolidated financial statements should be read in conjunction with the audited, consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.
Fair Value of Financial Instruments
The carrying amounts of our cash and cash equivalents, accounts receivable, finance receivables and accounts payable approximate fair value as of June 30, 2021 and December 31, 2020. The fair values of our investment securities are disclosed in note 5, our recognized multiemployer pension withdrawal liabilities in note 8, our short- and long-term debt in note 10 and our derivative instruments in note 16. We utilized Level 1 inputs in the fair value hierarchy of valuation techniques to determine the fair value of our cash and cash equivalents, and Level 2 inputs to determine the fair value of our accounts receivable, finance receivables and accounts payable.
Use of Estimates
The preparation of the accompanying interim unaudited, consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of these financial statements, as well as the reported amounts of revenues and expenses during the reporting period.
Although our estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by the ongoing COVID-19 pandemic. The severity, magnitude and duration of the pandemic, and the resulting economic consequences, remain uncertain, rapidly changing and difficult to predict. As a result, our accounting estimates and assumptions may change significantly over time.
For interim unaudited, consolidated financial statement purposes, we provide for accruals under our various company-sponsored employee benefit plans for each three month period based on one quarter of the estimated annual expense.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
Adoption of New Accounting Standards
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848), to temporarily ease the potential burden in accounting for reference rate reform. The standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The guidance was effective upon issuance and generally can be applied through December 31, 2022. While there has been no material impact so far to our financial position, results of operations or cash flows from reference rate reform, we continue to monitor our contracts and transactions for potential application of this ASU.
For accounting standards adopted in the period ended June 30, 2020, refer to note 1 to our audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020. Other accounting pronouncements adopted during the periods covered by the unaudited, consolidated financial statements did not have a material impact on our consolidated financial position, results of operations or cash flows.
Accounting Standards Issued But Not Yet Effective
Accounting pronouncements issued before, but not effective until after, June 30, 2021, are not expected to have a material impact on our consolidated financial position, results of operations or cash flows.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. REVENUE RECOGNITION
Revenue Recognition
Substantially all of our revenues are from contracts associated with the pickup, transportation and delivery of packages and freight (“transportation services”), whether carried out or arranged by UPS, either domestically or internationally, which generally occurs over a short period of time. Additionally, we provide value-added logistics services to customers, both domestically and internationally, through our global network of company-owned and leased distribution centers and field stocking locations.
Disaggregation of Revenue
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Revenue: 
Next Day Air$2,456  $1,984 $4,787 $4,039 
Deferred 1,313 1,298 2,573 2,495 
Ground10,633  9,792 21,052 17,996 
     U.S. Domestic Package14,402 13,074 28,412 24,530 
Domestic936  719 1,864 1,407 
Export3,674 2,824 7,167 5,385 
Cargo & Other207  162 393 296 
    International Package4,817 3,705 9,424 7,088 
Forwarding2,309  1,771 4,381 3,144 
Logistics1,162 977 2,266 1,822 
Freight297  724 1,064 1,490 
Other437 208 785 420 
    Supply Chain Solutions4,205 3,680 8,496 6,876 
Consolidated revenue$23,424 $20,459 $46,332 $38,494 
We account for a contract when both parties have approved the contract and are committed to perform their obligations, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the basis of revenue recognition in accordance with GAAP. To determine the proper revenue recognition method for contracts, we evaluate whether two or more contracts should be combined and accounted for as a single contract, and whether the combined or single contract should be accounted for as more than one performance obligation. This evaluation requires judgment, and the decision to combine a group of contracts or separate the combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. Within most of our contracts, the customer contracts with us to provide distinct services, such as transportation services. The vast majority of our contracts with customers for transportation services include only one performance obligation; the transportation services themselves. However, if a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. We frequently sell standard transportation services with observable standalone sales prices. In these instances, the observable standalone sales are used to determine the standalone selling price.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In certain business units, such as Logistics, we sell customized, customer-specific solutions in which we integrate a complex set of tasks and components into a single capability (even if that single capability results in the delivery of multiple units). Hence, the entire contract is accounted for as one performance obligation. In these cases, we typically use the expected cost plus a margin approach to estimate the standalone selling price of each performance obligation.
Satisfaction of Performance Obligations
We generally recognize revenue over time as we perform the services in the contract because of the continuous transfer of control to the customer. Our customers receive the benefit of our services as the goods are transported from one location to another. Further, if we were unable to complete delivery to the final location, another entity would not need to reperform the transportation service already performed.
As control transfers over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. We use the cost-to-cost measure of progress for our package delivery contracts because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including ancillary or accessorial fees and reductions for estimated customer incentives, are recorded proportionally as costs are incurred. Costs to fulfill include labor and other direct costs and an allocation of indirect costs. For our freight forwarding contracts, an output method of progress based on time-in-transit is utilized as the timing of costs incurred does not best depict the transfer of control to the customer. In our Logistics business, we have a right to consideration from customers in an amount that corresponds directly with the value to the customers of our performance completed to date, and as such, we recognize revenue in the amount to which we have a right to invoice the customer.
Variable Consideration
It is common for our contracts to contain customer incentives, guaranteed service refunds or other provisions that can either increase or decrease the transaction price. These variable amounts are generally dependent upon achievement of certain incentive tiers or performance metrics. We estimate variable consideration at the most likely amount to which we expect to be entitled. We include estimated amounts of revenue, which may be reduced by incentives or other contract provisions, in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on an assessment of anticipated customer spending and all information (historical, current and forecasted) that is reasonably available to us.
Contract Modifications
Contracts are often modified to account for changes in the rates we charge our customers or to add additional distinct services. We consider contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Contract modifications that add additional distinct goods or services are treated as separate contracts. Contract modifications that do not add distinct goods or services typically change the price of existing services. These contract modifications are accounted for prospectively as the remaining performance obligations are distinct.
Payment Terms
Under the typical payment terms of our customer contracts, the customer pays at periodic intervals, which are generally seven days within our U.S. Domestic Package business, for shipments included on invoices received. Invoices are generated each week on the week-ending day, which is Saturday for the majority of our U.S. Domestic Package business, but could be another day depending on the business unit or the specific agreement with the customer. It is not customary business practice to extend payment terms past 90 days, and as such, we do not have a practice of including a significant financing component within our contracts with customers.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Principal vs. Agent Considerations
In our transportation businesses, we utilize independent contractors and third-party carriers in the performance of some transportation services. GAAP requires us to evaluate, using a control model, whether our businesses themselves promise to transfer services to the customer (as the principal) or to arrange for services to be provided by another party (as the agent). Based on our evaluation of the control model, we determined that all of our major businesses act as the principal rather than the agent within their revenue arrangements. Revenue and the associated purchased transportation costs are both reported on a gross basis within our statements of consolidated income.
Accounts Receivable, Net
Accounts receivable, net, include amounts billed and currently due from customers. The amounts due are stated at their net estimated realizable value. Losses on accounts receivable are recognized when reasonable and supportable forecasts affect the expected collectability. This requires us to make our best estimate of the current expected losses inherent in our accounts receivable at each balance sheet date. These estimates require consideration of historical loss experience, adjusted for current conditions, forward looking indicators, trends in customer payment frequency and judgments about the probable effects of relevant observable data, including present and future economic conditions and the financial health of specific customers and market sectors. Our risk management process includes standards and policies for reviewing major account exposures and concentrations of risk.
In the second quarter of 2021, we decreased our allowance for expected credit losses by $8 million (a decrease of $15 million year to date) based upon current forecasts that reflect improvements in the economic outlook. Our allowance for credit losses as of June 30, 2021 and December 31, 2020 was $123 and $138 million, respectively. Amounts for credit losses charged to expense, before recoveries, during the three months ended June 30, 2021 and 2020 were $39 and $84 million, respectively, and for the six months ended June 30, 2021 and 2020, were $80 and $153 million, respectively.
Contract Assets and Liabilities
Contract assets include billed and unbilled amounts resulting from in-transit packages, as we have an unconditional right to payment only once all performance obligations have been completed (i.e. packages have been delivered) and our right to payment is not solely based on the passage of time. Amounts may not exceed their net realizable value. Contract assets are generally classified as current and the full balance is converted each quarter based on the short-term nature of the transactions.
Contract liabilities consist of advance payments and billings in excess of revenue as well as deferred revenue. Advance payments and billings in excess of revenue represent payments received from our customers that will be earned over the contract term. Deferred revenue represents the amount of consideration due from customers related to in-transit shipments that has not yet been recognized as revenue based on our selected measure of progress. We classify advance payments and billings in excess of revenue as either current or long-term, depending on the period over which the advance payment will be earned. We classify deferred revenue as current based on the timing of when we expect to recognize revenue, which typically occurs within a short window after period-end. The full balance of deferred revenue is converted each quarter based on the short-term nature of the transactions. Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that deferred revenue balance.
Contract assets related to in-transit packages were $314 and $279 million as of June 30, 2021 and December 31, 2020, respectively, net of deferred revenue related to in-transit packages of $375 and $279 million as of June 30, 2021 and December 31, 2020, respectively. Contract assets are included within "Other current assets" in the consolidated balance sheets. Short-term contract liabilities related to advance payments from customers were $9 and $21 million as of June 30, 2021 and December 31, 2020, respectively. Short-term contract liabilities are included within "Other current liabilities" in the consolidated balance sheets. Long-term contract liabilities related to advance payments from customers were $25 and$26 million as of June 30, 2021 and December 31, 2020, respectively. Long-term contract liabilities are included within "Other Non-Current Liabilities" in the consolidated balance sheets.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. STOCK-BASED COMPENSATION
We issue share-based awards under various incentive compensation plans, including non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock units ("RSUs") and restricted performance shares and performance units ("RPUs", collectively with RSUs, "Restricted Units"). Upon vesting, Restricted Units result in the issuance of the equivalent number of UPS class A common shares after required tax withholdings. Dividends accrued on Restricted Units are reinvested in additional Restricted Units at each dividend payable date and are subject to the same vesting and forfeiture conditions as the underlying Restricted Units upon which they are earned.
Our primary equity compensation programs are the UPS Management Incentive Award program (the "MIP"), the UPS Long-Term Incentive Performance Award program (the "LTIP") and the UPS Stock Option program. We also maintain an employee stock purchase plan which allows eligible employees to purchase shares of UPS class A common stock at a discount. Additionally, our matching contributions to our primary employee defined contribution savings plan are made in shares of UPS class A common stock.
Management Incentive Award Program ("MIP")
RPUs issued under the MIP vest one year following the grant date based on continued employment with the Company (except in the case of death, disability or retirement, in which case immediate vesting occurs). The grant value is expensed on a straight-line basis (less estimated forfeitures) over the requisite service period (except in the case of death, disability or retirement, in which case immediate expensing occurs).
Based on the date of Compensation Committee approval of the 2020 MIP award, we determined the award measurement dates to be February 10, 2021 (for U.S.-based employees and executive management) and March 22, 2021 (for international employees). The RPUs issued under the MIP were valued for stock compensation expense purposes using the closing New York Stock Exchange ("NYSE") prices of $165.66 and $161.06 on those dates.
Long-Term Incentive Performance Award Program ("LTIP")
RPUs issued under the LTIP vest at the end of a three-year performance period, assuming continued employment with the Company (except in the case of death, disability or retirement, in which case immediate vesting occurs on a prorated basis). The final number of RPUs earned is based on achievement of the performance targets established on the grant date.
For LTIP awards with a performance period ending December 31, 2021, the performance targets are equally weighted among consolidated operating return on invested capital ("ROIC"), growth in currency-constant consolidated revenue and total shareholder return ("RTSR") relative to a peer group of companies. For the two-thirds of the award related to ROIC and growth in currency-constant consolidated revenue, we recognize the grant date fair value of these RPUs (less estimated forfeitures) as compensation expense ratably over the vesting period, based on the number of awards expected to be earned. The remaining one-third of the award is valued using a Monte Carlo model. We recognize the grant date fair value of this portion of the award (less estimated forfeitures) as compensation expense ratably over the vesting period.
For LTIP awards with a performance period ending in 2022 or later, the performance targets are equally weighted between adjusted earnings per share and adjusted cumulative free cash flow. The final number of RPUs earned will then be subject to adjustment based on RTSR relative to the Standard & Poors 500 Index ("S&P 500"). We determine the grant date fair value of the RPUs using a Monte Carlo model and recognize compensation expense (less estimated forfeitures) ratably over the vesting period, based on the number of awards expected to be earned.
For the 2020 LTIP award, the performance period was divided into two measurement periods. The first measurement period evaluated the achievement of the performance targets for 2020. The second measurement period will evaluate the achievement of the performance targets for the years 2021 and 2022. The performance targets for the second measurement period were approved on March 25, 2021 and the target RPUs awarded were valued at $167.66 on that date.
Based on the date of Compensation Committee approval of the 2021 LTIP award performance targets, we determined March 25, 2021 to be the award measurement date and the target RPUs awarded were valued at $166.52.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The weighted-average assumptions used and the weighted-average fair values of the LTIP awards granted in 2021 and 2020 are as follows:
20212020
Risk-free interest rate0.19 %0.15 %
Expected volatility30.70 %27.53 %
Weighted-average fair value of RPUs granted $167.26 $92.77 
Share payout102.40 %101.00 %
There is no expected dividend yield as units earn dividend equivalents.
Non-Qualified Stock Options
We grant non-qualified stock options to a limited group of eligible senior management employees under the UPS Stock Option program. Stock option awards vest over a five-year period with approximately 20% of the award vesting at each anniversary of the grant date (except in the case of death, disability or retirement, in which case immediate vesting occurs). The option grants expire 10 years after the date of the grant. In the first quarter of 2021, we granted 0.2 million stock options at a grant price of $165.66, which was the NYSE closing price on February 10, 2021.
The fair value of each option grant is estimated using the Black-Scholes option pricing model. The weighted-average assumptions used and the weighted-average fair values of options granted in 2021 and 2020 are as follows:
20212020
Expected dividend yield3.31 %3.51 %
Risk-free interest rate0.84 %1.26 %
Expected life (in years)7.57.5
Expected volatility23.15 %19.25 %
Weighted-average fair value of options granted$23.71 $11.74 
Pre-tax compensation expense for share-based awards recognized in "Compensation and benefits" on the statements of consolidated income for the three months ended June 30, 2021 and 2020 was $206 and $137 million, respectively, and for the
six months ended June 30, 2021 and 2020 was $521 and $368 million, respectively.

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. CASH AND INVESTMENTS
The following is a summary of marketable securities classified as trading and available-for-sale as of June 30, 2021 and December 31, 2020 (in millions):
CostUnrealized
Gains
Unrealized
Losses
Estimated
Fair Value
June 30, 2021:
Current trading marketable securities:
Equity securities$2 $ $ $2 
Total trading marketable securities2   2 
Current available-for-sale securities:
U.S. government and agency debt securities208 1  209 
Mortgage and asset-backed debt securities1   1 
Corporate debt securities127 2  129 
U.S. state and local municipal debt securities2   2 
Non-U.S. government debt securities3   3 
Total available-for-sale marketable securities341 3  344 
Total current marketable securities$343 $3 $ $346 
 CostUnrealized
Gains
Unrealized
Losses
Estimated
Fair Value
December 31, 2020:
Current trading marketable securities:
Equity securities$2 $ $ $2 
Total trading marketable securities2   2 
Current available-for-sale securities:
U.S. government and agency debt securities181 3  184 
Mortgage and asset-backed debt securities30 1  31 
Corporate debt securities174 4  178 
U.S. state and local municipal debt securities    
Non-U.S. government debt securities11   11 
Total available-for-sale marketable securities396 8  404 
Total current marketable securities$398 $8 $ $406 
Investment Impairments
We have concluded that no material impairment losses existed as of June 30, 2021. In making this determination, we considered the financial condition and prospects of each issuer, the magnitude of the losses compared with the cost, the probability that we will be unable to collect all amounts due according to the contractual terms of the security, the credit rating of the security and our ability and intent to hold these investments until the anticipated recovery in market value occurs.
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Maturity Information
The amortized cost and estimated fair value of marketable securities as of June 30, 2021 by contractual maturity are shown below (in millions). Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations with or without prepayment penalties.
CostEstimated
Fair Value
Due in one year or less$34 $34 
Due after one year through three years306 309 
Due after three years through five years1 1 
Due after five years  
341 344 
Equity securities2 2 
$343 $346 
Non-Current Investments and Restricted Cash
We held a $23 million investment in a variable life insurance policy to fund benefits for the UPS Excess Coordinating Benefit Plan as of both June 30, 2021 and December 31, 2020. The change in investment fair value is recognized in Investment income and other in the statements of consolidated income. Additionally, we held escrowed cash related to the acquisition and disposition of certain assets of $2 million as of both June 30, 2021 and December 31, 2020. These amounts are classified as Investments and Restricted Cash in the consolidated balance sheets.
A reconciliation of cash and cash equivalents and restricted cash from the consolidated balance sheets to the statements of consolidated cash flows is shown below (in millions):
June 30,
2021
December 31, 2020June 30,
2020
Cash and cash equivalents$9,608 $5,910 $8,813 
Restricted cash  1 
Total cash, cash equivalents and restricted cash$9,608 $5,910 $8,814 
Fair Value Measurements
Marketable securities valued utilizing Level 1 inputs include active exchange-traded equity securities and equity index funds, and most U.S. government debt securities, as these securities all have quoted prices in active markets. Marketable securities valued utilizing Level 2 inputs include asset-backed securities, corporate bonds and municipal bonds. These securities are valued using market corroborated pricing, matrix pricing or other models that utilize observable inputs such as yield curves.


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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents information about our investments measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value (in millions):
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)