United Parcel Service, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

CASH AND INVESTMENTS (Tables)

CASH AND INVESTMENTS (Tables)

12 Months Ended

Dec. 31, 2011

The following is a summary of marketable securities classified as available-for-sale at December 31, 2011 and 2010 (in millions):


	Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
2011
Current marketable securities:
U.S. government and agency debt securities	$	184	$	3	$	—		$	187
Mortgage and asset-backed debt securities		188		4		(1	)		191
Corporate debt securities		835		4		(2	)		837
U.S. state and local municipal debt securities		15		—		—			15
Other debt and equity securities		10		1		—			11

Total marketable securities	$	1,232	$	12	$	(3	)	$	1,241


	Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
2010
Current marketable securities:
U.S. government and agency debt securities	$	207	$	1	$	(2	)	$	206
Mortgage and asset-backed debt securities		220		3		(1	)		222
Corporate debt securities		179		5		(1	)		183
U.S. state and local municipal debt securities		33		—		—			33
Other debt and equity securities		62		5		—			67

Current marketable securities		701		14		(4	)		711
Non-current marketable securities:
Mortgage and asset-backed debt securities		79		2		(2	)		79
U.S. state and local municipal debt securities		49		2		(6	)		45
Common equity securities		20		14		—			34
Preferred equity securities		16		1		(3	)		14

Non-current marketable securities		164		19		(11	)		172

Total marketable securities	$	865	$	33	$	(15	)	$	883

Age of Gross Unrealized Losses and Fair Value by Investment Category

The following table presents the age of gross unrealized losses and fair value by investment category for all securities in a loss position as of December 31, 2011 (in millions):


	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. government and agency debt securities	$	34	$	—		$	—	$	—		$	34	$	—
Mortgage and asset-backed debt securities		10		—			11		(1	)		21		(1	)
Corporate debt securities		621		(2	)		7		—			628		(2	)
U.S. state and local municipal debt securities		—		—			—		—			—		—
Other debt securities		2		—			1		—			3		—

Total debt securities		667		(2	)		19		(1	)		686		(3	)
Common equity securities		—		—			—		—			—		—

	$	667	$	(2	)	$	19	$	(1	)	$	686	$	(3	)

Amortized Cost and Estimated Fair Value of Marketable Securities by Contractual Maturity

The amortized cost and estimated fair value of marketable securities at December 31, 2011, 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 without prepayment penalties.


	Cost		Estimated Fair Value
Due in one year or less	$	669	$	668
Due after one year through three years		207		207
Due after three years through five years		51		51
Due after five years		303		313

		1,230		1,239
Equity securities		2		2

	$	1,232	$	1,241

Investments Measured at Fair Value on a Recurring Basis

The following table presents information about our investments measured at fair value on a recurring basis as of December 31, 2011 and 2010, 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)		Balance as of December 31, 2011
2011
Marketable Securities:
U.S. Government and Agency Debt Securities	$	187	$	—	$	—	$	187
Mortgage and Asset-Backed Debt Securities		—		191		—		191
Corporate Debt Securities		—		837		—		837
U.S. State and Local Municipal Debt Securities		—		15		—		15
Other Debt and Equity Securities		—		11		—		11

Total Marketable Securities		187		1,054		—		1,241
Other investments		17		—		217		234

Total	$	204	$	1,054	$	217	$	1,475


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2010
2010
Marketable Securities:
U.S. Government and Agency Debt Securities	$	206	$	—	$	—	$	206
Mortgage and Asset-Backed Debt Securities		—		222		79		301
Corporate Debt Securities		—		183		—		183
U.S. State and Local Municipal Debt Securities		—		33		45		78
Other Debt and Equity Securities		41		60		14		115

Total Marketable Securities		247		498		138		883
Other investments		—		—		267		267

Total	$	247	$	498	$	405	$	1,150

Changes in Level 3 Instruments Measured on a Recurring Basis

The following table presents the changes in the above Level 3 instruments measured on a recurring basis for the years ended December 31, 2011 and 2010 (in millions).


	Marketable Securities			Other Investments			Total
Balance on January 1, 2010	$	216		$	301		$	517
Transfers into (out of) Level 3		—			—			—
Net realized and unrealized gains (losses):
Included in earnings (in investment income)		(27	)		(34	)		(61	)
Included in accumulated other comprehensive income (pre-tax)		59			—			59
Purchases		—			—			—
Settlements		(110	)		—			(110	)

Balance on December 31, 2010	$	138		$	267		$	405

Transfers into (out of) Level 3		—			—			—
Net realized and unrealized gains (losses):
Included in earnings (in investment income)		—			(50	)		(50	)
Included in accumulated other comprehensive income (pre-tax)		—			—			—
Purchases		—			—			—
Settlements		(138	)		—			(138	)

Balance on December 31, 2011	$	—		$	217		$	217

- Definition

Tabular disclosure of available-for-sale securities which consist of all investments in certain debt and equity securities neither classified as trading or held-to-maturity securities. A debt security represents a creditor relationship with an enterprise. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt.

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+ Details

- Definition

Tabular disclosure of assets, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

+ References + Details

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income, and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issuances, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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