Quarterly report pursuant to Section 13 or 15(d)

SHAREOWNERS' EQUITY

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SHAREOWNERS' EQUITY
 9 Months Ended
Sep. 30, 2023
Stockholders' Equity Note [Abstract]  
SHAREOWNERS' EQUITY SHAREOWNERS' EQUITY
Capital Stock, Additional Paid-In Capital, Retained Earnings and Non-Controlling Interests
We are authorized to issue two classes of common stock, which are distinguished from each other primarily by their respective voting rights. Class A shares of UPS are entitled to 10 votes per share, whereas class B shares are entitled to one vote per share. Class A shares are primarily held by UPS employees and retirees, as well as trusts and descendants of the Company's founders, and these shares are fully convertible into class B shares at any time. Class B shares are publicly traded on the NYSE under the symbol “UPS”. Class A and B shares both have a $0.01 par value, and as of September 30, 2023, there were 4.6 billion class A shares and 5.6 billion class B shares authorized to be issued. Additionally, there are 200 million preferred shares authorized to be issued, with a par value of $0.01 per share. As of September 30, 2023, no preferred shares had been issued.
The following is a rollforward of our common stock, additional paid-in capital, retained earnings and non-controlling interests accounts for the three and nine months ended September 30, 2023 and 2022 (in millions, except per share amounts):
Three Months Ended September 30: 2023 2022
  Shares Dollars Shares Dollars
Class A Common Stock
Balance at beginning of period 132  $ 2  138  $ 2 
Stock award plans 1  —  (1) — 
Common stock issuances 1  —  1  — 
Conversions of class A to class B common stock (4) —  (3) — 
Class A shares issued at end of period 130  $ 2  135  $ 2 
Class B Common Stock
Balance at beginning of period 723  $ 7  732  $ 7 
Common stock purchases (5) —  (5) — 
Conversions of class A to class B common stock 4  —  3  — 
Class B shares issued at end of period 722  $ 7  730  $ 7 
Additional Paid-In Capital
Balance at beginning of period $ —  $ 573 
Stock award plans 14  233 
Common stock purchases (123) (903)
Common stock issuances 115  97 
Other (1)
(6) — 
Balance at end of period $ —  $ — 
Retained Earnings
Balance at beginning of period $ 21,584  $ 18,958 
Net income attributable to common shareowners 1,127  2,584 
Dividends ($1.62 and $1.52 per share) (2)
(1,384) (1,316)
Common stock purchases (627) (48)
Other (1) (1)
Balance at end of period $ 20,699  $ 20,177 
Non-Controlling Interest
Balance at beginning of period $ 18  $ 21 
Change in non-controlling interest
 (6) (1)
Balance at end of period $ 12  $ 20 
(1) Includes a 1% excise tax applicable to share repurchases.
(2) The dividend per share amount is the same for both class A and class B common stock. Dividends included $43 and $41 million as of September 30, 2023 and 2022, respectively, that were settled in shares of class A common stock.
Nine Months Ended September 30: 2023 2022
  Shares Dollars Shares Dollars
Class A Common Stock:
Balance at beginning of period 134  $ 2  138  $ 2 
Stock award plans 4  —  5  — 
Common stock issuances 2  —  2  — 
Conversions of class A to class B common stock (10) —  (10) — 
Class A shares issued at end of period
 130  $ 2  135  $ 2 
Class B Common Stock:
Balance at beginning of period 725  $ 7  732  $ 7 
Common stock purchases (13) —  (12) — 
Conversions of class A to class B common stock 10  —  10  — 
Class B shares issued at end of period
 722  $ 7  730  $ 7 
Additional Paid-In Capital:
Balance at beginning of period $ —  $ 1,343 
Stock award plans 391  410 
Common stock purchases (750) (2,146)
Common stock issuances 370  393 
Other (1)
(11) — 
Balance at end of period $ —  $ — 
Retained Earnings:
Balance at beginning of period $ 21,326  $ 16,179 
Net income attributable to controlling interests 5,103  8,095 
Dividends ($4.86 and $4.56 per share) (2)
(4,230) (4,049)
Common stock purchases (1,500) (48)
Other —  — 
Balance at end of period $ 20,699  $ 20,177 
Non-Controlling Interests:
Balance at beginning of period $ 17  $ 16 
Change in non-controlling interest (5) 4 
Balance at end of period $ 12  $ 20 
(1) Includes a 1% excise tax applicable to share repurchases.
(2) The dividend per share amount is the same for both class A and class B common stock. Dividends include $196 and $207 million as of September 30, 2023 and 2022, respectively, that were settled in shares of class A common stock.
We repurchased 4.4 and 12.8 million shares of class B common stock for $750 million and $2.3 billion during the three and nine months ended September 30, 2023, respectively. We repurchased 4.9 and 11.6 million shares of class B common stock for $951 million and $2.2 billion during the three and nine months ended September 30, 2022, respectively. These repurchases were completed as follows:
•In August 2021, the Board of Directors authorized the company to repurchase up to $5.0 billion of class A and class B common stock (the "2021 Authorization"). For the nine months ended months ended September 30, 2023, we repurchased 0.5 million shares of class B common stock for $82 million under this authorization. The share repurchases discussed above for the three and nine months ended September 30, 2022, were completed under this authorization.
•In January 2023, the Board of Directors terminated the 2021 Authorization and approved a new share repurchase authorization for $5.0 billion of class A and class B common stock (the "2023 Authorization"). For the three and nine months ended September 30, 2023, we repurchased 4.4 and 12.3 million shares for $750 million and $2.2 billion, respectively, under the 2023 Authorization. As of September 30, 2023, we had $2.8 billion available under this repurchase authorization.
We do not anticipate further share repurchases in 2023.
Future share repurchases may be in the form of accelerated share repurchase programs, open market purchases or other methods we deem appropriate. The timing of share repurchases will depend upon market conditions. Unless terminated earlier by the Board of Directors, this program will expire when we have purchased all shares authorized for repurchase under the program.
Movements in additional paid-in capital in respect of stock award plans comprise accruals for unvested awards, offset by adjustments for awards that vest during the period.
Accumulated Other Comprehensive Income (Loss)
We recognize activity in other comprehensive income for foreign currency translation adjustments, unrealized holding gains and losses on available-for-sale securities, unrealized gains and losses from derivatives that qualify as hedges of cash flows and unrecognized pension and postretirement benefit costs. The activity in accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2023 and 2022 was as follows (in millions):
Three Months Ended September 30: 2023 2022
Foreign Currency Translation Gain (Loss), Net of Tax:
Balance at beginning of period $ (1,346) $ (1,447)
Translation adjustment (net of tax effect of $0 and $4)
 (96) (263)
Balance at end of period (1,442) (1,710)
Unrealized Gain (Loss) on Marketable Securities, Net of Tax:
Balance at beginning of period (20) (8)
Current period changes in fair value (net of tax effect of $(1) and $(1))
 (2) (4)
Reclassification to earnings (net of tax effect of $0 and $0)
 —  1 
Balance at end of period (22) (11)
Unrealized Gain (Loss) on Cash Flow Hedges, Net of Tax:
Balance at beginning of period 10  260 
Current period changes in fair value (net of tax effect of $44 and $110)
 138  350 
Reclassification to earnings (net of tax effect of $(8) and $(21))
 (27) (69)
Balance at end of period 121  541 
Unrecognized Pension and Postretirement Benefit Costs, Net of Tax:
Balance at beginning of period (218) (2,056)
Reclassification to earnings (net of tax effect of $7 and $5)
 21  18 
Balance at end of period (197) (2,038)
Accumulated other comprehensive income (loss) at end of period $ (1,540) $ (3,218)
Nine Months Ended September 30: 2023 2022
Foreign currency translation gain (loss), net of tax:
Balance at beginning of period $ (1,446) $ (1,162)
Translation adjustment (net of tax effect of $(13) and $11)
 1  (548)
Reclassification to earnings (net of tax effect of $0 and $0)
 3  — 
Balance at end of period (1,442) (1,710)
Unrealized gain (loss) on marketable securities, net of tax:
Balance at beginning of period (11) (1)
Current period changes in fair value (net of tax effect of $(5) and $(3))
 (13) (11)
Reclassification to earnings (net of tax effect of $1 and $0)
 2  1 
Balance at end of period (22) (11)
Unrealized gain (loss) on cash flow hedges, net of tax:
Balance at beginning of period 167  (17)
Current period changes in fair value (net of tax effect of $22 and $222)
 69  705 
Reclassification to earnings (net of tax effect of $(36) and $(46))
 (115) (147)
Balance at end of period 121  541 
Unrecognized pension and postretirement benefit costs, net of tax:
Balance at beginning of period (259) (2,098)
Net actuarial gain (loss) resulting from remeasurements of plan assets and liabilities (net of tax effect of $0 and $11)
 —  31 
Reclassification to earnings (net of tax effect of $20 and $8)
 62  29 
Balance at end of period (197) (2,038)
Accumulated other comprehensive income (loss) at end of period $ (1,540) $ (3,218)
Detail of the gains (losses) reclassified from accumulated other comprehensive income (loss) to the statements of consolidated income for the three and nine months ended September 30, 2023 and 2022 is as follows (in millions):
Amount Reclassified from AOCI(1)
Affected Line Item in the Income Statement
Three Months Ended September 30: 2023 2022
Unrealized Gain (Loss) on Marketable Securities:
Realized gain (loss) on sale of securities $ —  $ (1) Investment income and other
Income tax (expense) benefit —  —  Income tax expense
Impact on net income —  (1) Net income
Unrealized Gain (Loss) on Cash Flow Hedges:
Interest rate contracts (6) (4) Interest expense
Foreign currency exchange contracts 41  94  Revenue
Income tax (expense) benefit (8) (21) Income tax expense
Impact on net income 27  69  Net income
Unrecognized Pension and Postretirement Benefit Costs:
Prior service costs (28) (23) Investment income and other
Income tax (expense) benefit 7  5  Income tax expense
Impact on net income (21) (18) Net income
Total amount reclassified for the period $ 6  $ 50  Net income
(1) Accumulated other comprehensive income (loss)
Amount Reclassified from AOCI(1)
Affected Line Item in the Income Statement
Nine Months Ended September 30: 2023 2022
Unrealized Gain (Loss) on Foreign Currency Translation:
Realized gain (loss) on business wind-down $ (3) $ —  Other expenses
Income tax (expense) benefit —  —  Income tax expense
Impact on net income (3) —  Net income
Unrealized gain (loss) on marketable securities:
Realized gain (loss) on sale of securities (3) (1) Investment income and other
Income tax (expense) benefit 1  —  Income tax expense
Impact on net income (2) (1) Net income
Unrealized gain (loss) on cash flow hedges:
Interest rate contracts (9) (9) Interest expense
Foreign currency exchange contracts 160  202  Revenue
Income tax (expense) benefit (36) (46) Income tax expense
Impact on net income 115  147  Net income
Unrecognized pension and postretirement benefit costs:
Prior service costs (82) (70) Investment income and other
Curtailment of benefit obligation —  33  Investment income and other
Income tax (expense) benefit 20  8  Income tax expense
Impact on net income (62) (29) Net income
Total amount reclassified for the period $ 48  $ 117  Net income
(1) Accumulated other comprehensive income (loss)
Deferred Compensation Obligations and Treasury Stock
We maintain a deferred compensation plan whereby certain employees were previously able to elect to defer the gains on stock option exercises by deferring the shares received upon exercise into a rabbi trust. The shares held in this trust are classified as treasury stock, and the liability to participating employees is classified as a deferred compensation obligation within Shareowners’ Equity in the consolidated balance sheets. The number of shares needed to settle the liability for deferred compensation obligations is included in the denominator in both the basic and diluted earnings per share calculations. Employees are generally no longer able to defer the gains from stock options exercised.
Activity in the deferred compensation program for the three and nine months ended September 30, 2023 and 2022 was as follows (in millions):
2023 2022
Three Months Ended September 30: Shares Dollars Shares Dollars
Deferred Compensation Obligations:
Balance at beginning of period $ 9  $ 12 
Reinvested dividends —  — 
Benefit payments —  — 
Balance at end of period $ 9  $ 12 
Treasury Stock:
Balance at beginning of period —  $ (9) —  $ (12)
Reinvested dividends —  —  —  — 
Benefit payments —  —  —  — 
Balance at end of period —  $ (9) —  $ (12)
2023 2022
Nine Months Ended September 30: Shares Dollars Shares Dollars
Deferred Compensation Obligations:
Balance at beginning of period $ 13  $ 16 
Reinvested dividends —  1 
Benefit payments (4) (5)
Balance at end of period $ 9  $ 12 
Treasury Stock:
Balance at beginning of period —  $ (13) —  $ (16)
Reinvested dividends —  —  —  (1)
Benefit payments —  4  —  5 
Balance at end of period —  $ (9) —  $ (12)