United Parcel Service, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

3 Months Ended

Mar. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Notional Amounts of Outstanding Derivative Positions

As of March 31, 2013 and December 31, 2012, the notional amounts of our outstanding derivative positions were as follows (in millions):



	March 31, 2013		December 31, 2012
Currency hedges:
Euro	EUR	1,890	EUR	1,783
British Pound Sterling	GBP	753	GBP	797
Canadian Dollar	CAD	296	CAD	341
United Arab Emirates Dirham	AED	—	AED	551
Mexican Peso	MXN	2,300	MXN	—
Malaysian Ringgit	MYR	600	MYR	500

Interest rate hedges:
Fixed to Floating Interest Rate Swaps	$	6,049	$	7,274
Floating to Fixed Interest Rate Swaps	$	781	$	781
Interest Rate Basis Swaps	$	2,500	$	2,500

Commodity hedges:
Heating Oil Swaps	Gal	100	Gal	—
Ultra Low Sulfur Diesel Swaps	Gal	98	Gal	—

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The following table indicates the location on the consolidated balance sheets in which our derivative assets and liabilities have been recognized, the fair value hierarchy level applicable to each derivative type and the related fair values of those derivatives (in millions). The table is segregated between those derivative instruments that qualify and are designated as hedging instruments and those that are not, as well as by type of contract and whether the derivative is in an asset or liability position.

We have master netting arrangements with substantially all of our counterparties giving us the right of offset for our derivative positions. However, we have not elected to offset the fair value positions of our derivative contracts recorded on our consolidated balance sheets. The columns labeled "Net Amounts if Right of Offset had been Applied" indicate the potential net fair value positions by type of contract and location on the consolidated balance sheets had we elected to apply the right of offset.



		Fair Value	Gross Amounts Presented in Consolidated Balance Sheets				Net Amounts if Right of Offset had been Applied
Asset Derivatives	Balance Sheet Location	Hierarchy Level	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
Derivatives designated as hedges:
Foreign exchange contracts	Other current assets	Level 2	$	67	$	27	$	67	$	27
Interest rate contracts	Other current assets	Level 2	—		1		—		1
Commodity contracts	Other current assets	Level 2	3		—		3		—
Foreign exchange contracts	Other non-current assets	Level 2	14		14		14		12
Interest rate contracts	Other non-current assets	Level 2	382		420		362		406
Derivatives not designated as hedges:
Foreign exchange contracts	Other current assets	Level 2	—		3		—		3
Interest rate contracts	Other non-current assets	Level 2	92		101		84		91
Total Asset Derivatives			$	558	$	566	$	530	$	540




		Fair Value	Gross Amounts Presented in Consolidated Balance Sheets				Net Amounts if Right of Offset had been Applied
Liability Derivatives	Balance Sheet Location	Hierarchy Level	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
Derivatives designated as hedges:
Commodity contracts	Other current liabilities	Level 2	$	12	$	—	$	12	$	—
Foreign exchange contracts	Other non-current liabilities	Level 2	134		103		134		101
Interest rate contracts	Other non-current liabilities	Level 2	20		14		—		—
Derivatives not designated as hedges:
Foreign exchange contracts	Other current liabilities	Level 2	3		1		3		1
Interest rate contracts	Other non-current liabilities	Level 2	32		41		24		31
Total Liability Derivatives			$	201	$	159	$	173	$	133

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)

The following table indicates the amount of gains and losses that have been recognized in other comprehensive income for the three months ended March 31, 2013 and 2012 for those derivatives designated as cash flow hedges (in millions):



Three Months Ended March 31:
	2013			2012
Derivative Instruments in Cash Flow Hedging Relationships	Amount of Gain (Loss)Recognized in OCI on Derivative (Effective Portion)			Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
Interest rate contracts	$	1		$	(8	)
Foreign exchange contracts	(1		)	(59		)
Commodity contracts	(18		)	—
Total	$	(18	)	$	(67	)

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

The following table indicates the amount and location in the statements of consolidated income in which derivative gains and losses, as well as the associated gains and losses on the underlying exposure, have been recognized for those derivatives designated as fair value hedges for the three months ended March 31, 2013 and 2012 (in millions):



		2013			2012					2013		2012
Derivative Instruments in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Income			Amount of Gain (Loss) Recognized in Income			Hedged Items in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized In Income	Amount of Gain (Loss) Recognized in Income		Amount of Gain (Loss) Recognized in Income
Three Months Ended March 31:
Interest rate contracts	Interest Expense	$	(46	)	$	(36	)	Fixed-Rate Debt and Capital Leases	Interest Expense	$	46	$	36

The following is a summary of the amounts recorded in the statements of consolidated income related to fair value changes and settlements of these interest rate swaps and foreign currency forward contracts not designated as hedges (in millions):



		2013			2012
Derivative Instruments not Designated in Hedging Relationships	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Income			Amount of Gain (Loss) Recognized in Income
Three Months Ended March 31:
Interest rate contracts	Interest Expense	$	—		$	(3	)
Foreign exchange contracts	Other Operating Expenses	$	87		$	(8	)
Foreign exchange contracts	Investment Income	$	(5	)	$	—

- Definition

Tabular disclosure of the location and amount of gains and losses reported in the statement of financial performance, or when applicable, the statement of financial position. For example, (a) gains and losses recognized in the income statement on derivative instruments designated and qualifying as hedging instruments in fair value hedges and related hedged items designated and qualifying in fair value hedges and (b) gains and losses initially recognized in other comprehensive income on derivative instruments designated and qualifying as cash flow hedges.

+ References + Details

- Definition

Tabular disclosure of the location and fair value amounts of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments) reported in the statement of financial position.

+ References + Details