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SHAREOWNERS' EQUITY | 6 Months Ended
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Jun. 30, 2020
Stockholders' Equity Note [Abstract] |
SHAREOWNERS' EQUITY | SHAREOWNERS' EQUITY Capital Stock, Additional Paid-In Capital, Retained Earnings and Non-Controlling Minority Interest We maintain two classes of common stock, which are distinguished from each other 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 June 30, 2020, 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 June 30, 2020, no preferred shares had been issued. The following is a rollforward of our common stock, additional paid-in capital, retained earnings and non-controlling minority interest accounts for the three and six months ended June 30, 2020 and 2019 (in millions, except per share amounts):
Three Months Ended June 30: | 2020 |  |  |  | 2019 |  |
| Shares |  | Dollars |  | Shares |  | Dollars
Class A Common Stock |  |  |  |  |  |  |
Balance at beginning of period | 158 |  |  | $ | 2 |  |  | 164 |  |  | $ | 2 |
Common stock purchases | — |  |  | — |  |  | (1) |  |  | — |
Stock award plans | 2 |  |  | — |  |  | 1 |  |  | — |
Common stock issuances | — |  |  | — |  |  | (1) |  |  | — |
Conversions of class A to class B common stock | (3) |  |  | — |  |  | (2) |  |  | — |
Class A shares issued at end of period | 157 |  |  | $ | 2 |  |  | 161 |  |  | $ | 2 |
Class B Common Stock |  |  |  |  |  |  |
Balance at beginning of period | 703 |  |  | $ | 7 |  |  | 697 |  |  | $ | 7 |
Common stock purchases | — |  |  | — |  |  | (1) |  |  | — |
Conversions of class A to class B common stock | 3 |  |  | — |  |  | 2 |  |  | — |
Class B shares issued at end of period | 706 |  |  | 7 |  |  | 698 |  |  | 7 |
Additional Paid-In Capital |  |  |  |  |  |  |
Balance at beginning of period |  |  | $ | 29 |  |  |  |  | $ | 27 |
Common stock purchases |  |  | — |  |  |  |  | (251) |
Stock award plans |  |  | 137 |  |  |  |  | 213 |
Common stock issuances |  |  | 89 |  |  |  |  | 107 |
Option premiums paid |  |  | — |  |  |  |  | 6 |
Balance at end of period |  |  | $ | 255 |  |  |  |  | $ | 102 |
Retained Earnings |  |  |  |  |  |  |
Balance at beginning of period |  |  | $ | 9,137 |  |  |  |  | 8,249 |
Net income attributable to common shareowners |  |  | 1,768 |  |  |  |  | 1,685 |
Dividends ($1.01 and $0.96 per share) (1) |  |  | (873) |  |  |  |  | (826) |
Other |  |  | — |  |  |  |  | 1 |
Balance at end of period |  |  | $ | 10,032 |  |  |  |  | $ | 9,109 |
Non-Controlling Minority Interest |  |  |  |  |  |  |
Balance at beginning of period |  |  | $ | 14 |  |  |  |  | $ | 18 |
Change in non-controlling minority interest |  |  | (1) |  |  |  |  | — |
Balance at end of period |  |  | $ | 13 |  |  |  |  | $ | 18 |
(1) The dividend per share amount is the same for both class A and class B common stock. Dividends include $30 and $26 million as of June 30, 2020 and June 30, 2019 respectively, that were settled in shares of class A common stock. |  |  |  |  |  |  |
Six Months Ended June 30: | 2020 |  |  |  | 2019 |  |
| Shares |  | Dollars |  | Shares |  | Dollars
Class A Common Stock |  |  |  |  |  |  |
Balance at beginning of period | 156 |  |  | 2 |  |  | 163 |  |  | $ | 2 |
Common stock purchases | — |  |  | — |  |  | (2) |  |  | — |
Stock award plans | 6 |  |  | — |  |  | 4 |  |  | — |
Common stock issuances | 2 |  |  | — |  |  | 1 |  |  | — |
Conversions of class A to class B common stock | (7) |  |  | — |  |  | (5) |  |  | — |
Class A shares issued at end of period | 157 |  |  | $ | 2 |  |  | 161 |  |  | $ | 2 |
Class B Common Stock |  |  |  |  |  |  |
Balance at beginning of period | 701 |  |  | $ | 7 |  |  | 696 |  |  | $ | 7 |
Common stock purchases | (2) |  |  | — |  |  | (3) |  |  | — |
Conversions of class A to class B common stock | 7 |  |  | — |  |  | 5 |  |  | — |
Class B shares issued at end of period | 706 |  |  | 7 |  |  | 698 |  |  | 7 |
Additional Paid-In Capital |  |  |  |  |  |  |
Balance at beginning of period |  |  | 150 |  |  |  |  | $ | — |
Common stock purchases |  |  | (217) |  |  |  |  | (502) |
Stock award plans |  |  | 70 |  |  |  |  | 382 |
Common stock issuances |  |  | 252 |  |  |  |  | 221 |
Option premiums received (paid) |  |  | — |  |  |  |  | 1 |
Balance at end of period |  |  | $ | 255 |  |  |  |  | $ | 102 |
Retained Earnings |  |  |  |  |  |  |
Balance at beginning of period |  |  | 9,105 |  |  |  |  | $ | 8,006 |
Net income attributable to common shareowners |  |  | 2,733 |  |  |  |  | 2,796 |
Dividends ($2.02 and $1.92 per share) (1) |  |  | (1,806) |  |  |  |  | (1,693) |
Balance at end of period |  |  | $ | 10,032 |  |  |  |  | $ | 9,109 |
Non-Controlling Minority Interest |  |  |  |  |  |  |
Balance at beginning of period |  |  | $ | 16 |  |  |  |  | $ | 16 |
Change in non-controlling minority interest |  |  | (3) |  |  |  |  | 2 |
Balance at end of period |  |  | $ | 13 |  |  |  |  | $ | 18 |
(1) The dividend per share amount is the same for both class A and class B common stock. Dividends include $123 and $94 million as of June 30, 2020 and June 30, 2019 respectively, that were settled in shares of class A common stock. |  |  |  |  |  |  |
In May 2016, the Board of Directors approved a share repurchase authorization of $8.0 billion for shares of class A and class B common stock, which has no expiration date. As of June 30, 2020, we had $2.1 billion of this share repurchase authorization available. 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, the program will expire when we have purchased all shares authorized for repurchase under the program. We did not repurchase any shares under this program during the three months ended June 30, 2020. During the three months ended June 30, 2019, we repurchased 2.4 million shares of class A and class B common stock for $251 million. We repurchased 2.1 and 4.8 million shares of class A and class B common stock for $217 and $502 million during the six months ended June 30, 2020 and 2019, respectively ($231 million and $503 million in repurchases for 2020 and 2019, respectively, are reported on the statements of consolidated cash flows due to the timing of settlements). From time to time, we enter into share repurchase programs with large financial institutions to assist in our buyback of company stock. These programs may allow us to repurchase our shares at a price below the weighted average share price for a given period. During the second quarter, we did not enter into any accelerated share repurchase transactions. In order to lower the average cost of acquiring shares in our ongoing share repurchase program, we periodically enter into structured repurchase agreements involving the use of capped call options for the purchase of UPS class B shares. We pay a fixed sum of cash upon execution of each agreement in exchange for the right to receive either a predetermined amount of cash or stock. Upon expiration of each agreement, if the closing market price of our common stock is above the predetermined price, we will have our initial investment returned with a premium in either cash or shares (at our election). If the closing market price of our common stock is at or below the predetermined price, we will receive the number of shares specified in the agreement. We received net premiums of $6 and $1 million during the three and six months ended 2019, respectively, related to entering into and settling capped call options for the purchase of class B shares. As of June 30, 2020, we had no capped call options outstanding. On April 28, 2020 we announced our intention to suspend stock repurchases. 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. The movements for the three and six months ended June 30, 2020 were driven by changes in the vesting schedule for certain of our awards. Accumulated Other Comprehensive Income (Loss) We recognize activity in AOCI for unrealized holding gains and losses on available-for-sale securities, foreign currency translation adjustments, unrealized gains and losses from derivatives that qualify as hedges of cash flows and unrecognized pension and postretirement benefit costs. The activity in AOCI for the three and six months ended June 30, 2020 and 2019 is as follows (in millions):
Three Months Ended June 30: | 2020 |  | 2019
Foreign currency translation gain (loss), net of tax: |  |  |
Balance at beginning of period | $ | (1,219) |  |  | $ | (1,073) |
Translation adjustment (net of tax effect of $(14) and $(7)) | 10 |  |  | (33) |
Balance at end of period | (1,209) |  |  | (1,106) |
Unrealized gain (loss) on marketable securities, net of tax: |  |  |
Balance at beginning of period | 6 |  |  | 2 |
Current period changes in fair value (net of tax effect of $1 and $3) | 5 |  |  | 5 |
Reclassification to earnings (net of tax effect of $(1) and $0) | (2) |  |  | — |
Balance at end of period | 9 |  |  | 7 |
Unrealized gain (loss) on cash flow hedges, net of tax: |  |  |
Balance at beginning of period | 329 |  |  | 116 |
Current period changes in fair value (net of tax effect of $(20) and $5) | (62) |  |  | 15 |
Reclassification to earnings (net of tax effect of $(16) and $(9)) | (52) |  |  | (27) |
Balance at end of period | 215 |  |  | 104 |
Unrecognized pension and postretirement benefit costs, net of tax: |  |  |
Balance at beginning of period | (4,992) |  |  | (3,863) |
Reclassification to earnings (net of tax effect of $13 and $14) | 44 |  |  | 43 |
Balance at end of period | (4,948) |  |  | (3,820) |
Accumulated other comprehensive income (loss) at end of period | $ | (5,933) |  |  | $ | (4,815) |
Six Months Ended June 30: | 2020 |  | 2019
Foreign currency translation gain (loss), net of tax: |  |  |
Balance at beginning of period | $ | (1,078) |  |  | $ | (1,126) |
Translation adjustment (net of tax effect of $(1) and $2) | (131) |  |  | 20 |
Balance at end of period | (1,209) |  |  | (1,106) |
Unrealized gain (loss) on marketable securities, net of tax: |  |  |
Balance at beginning of period | 4 |  |  | (2) |
Current period changes in fair value (net of tax effect of $1 and $3) | 7 |  |  | 9 |
Reclassification to earnings (net of tax effect of $(1) and $0) | (2) |  |  | — |
Balance at end of period | 9 |  |  | 7 |
Unrealized gain (loss) on cash flow hedges, net of tax: |  |  |
Balance at beginning of period | 112 |  |  | 40 |
Current period changes in fair value (net of tax effect of $63 and $33) | 201 |  |  | 104 |
Reclassification to earnings (net of tax effect of $(31) and $(13)) | (98) |  |  | (40) |
Balance at end of period | 215 |  |  | 104 |
Unrecognized pension and postretirement benefit costs, net of tax: |  |  |
Balance at beginning of period | (5,035) |  |  | (3,906) |
Reclassification to earnings (net of tax effect of $27 and $27) | 87 |  |  | 86 |
Balance at end of period | (4,948) |  |  | (3,820) |
Accumulated other comprehensive income (loss) at end of period | $ | (5,933) |  |  | $ | (4,815) |
Detail of the gains (losses) reclassified from AOCI to the statements of consolidated income for the three and six months ended June 30, 2020 and 2019 is as follows (in millions):
| Amount Reclassified from AOCI |  |  |  | Affected Line Item in the Income Statement
Three Months Ended June 30: | 2020 |  | 2019 |  |
Unrealized gain (loss) on marketable securities: |  |  |  |  |
Realized gain (loss) on sale of securities | $ | 3 |  |  | $ | — |  |  | Investment income and other
Income tax (expense) benefit | (1) |  |  | — |  |  | Income tax expense
Impact on net income | 2 |  |  | — |  |  | Net income
Unrealized gain (loss) on cash flow hedges: |  |  |  |  |
Interest rate contracts | (3) |  |  | (3) |  |  | Interest expense
Foreign exchange contracts | 71 |  |  | 39 |  |  | Revenue
Income tax (expense) benefit | (16) |  |  | (9) |  |  | Income tax expense
Impact on net income | 52 |  |  | 27 |  |  | Net income
Unrecognized pension and postretirement benefit costs: |  |  |  |  |
Prior service costs | (57) |  |  | (57) |  |  | Investment income and other
Income tax (expense) benefit | 13 |  |  | 14 |  |  | Income tax expense
Impact on net income | (44) |  |  | (43) |  |  | Net income
Total amount reclassified for the period | $ | 10 |  |  | $ | (16) |  |  | Net income
| Amount Reclassified from AOCI |  |  |  | Affected Line Item in the Income Statement
Six Months Ended June 30: | 2020 |  | 2019 |  |
Unrealized gain (loss) on marketable securities: |  |  |  |  |
Realized gain (loss) on sale of securities | $ | 3 |  |  | $ | — |  |  | Investment income and other
Income tax (expense) benefit | (1) |  |  | — |  |  | Income tax expense
Impact on net income | 2 |  |  | — |  |  | Net income
Unrealized gain (loss) on cash flow hedges: |  |  |  |  |
Interest rate contracts | (6) |  |  | (9) |  |  | Interest expense
Foreign exchange contracts | 135 |  |  | 62 |  |  | Revenue
Income tax (expense) benefit | (31) |  |  | (13) |  |  | Income tax expense
Impact on net income | 98 |  |  | 40 |  |  | Net income
Unrecognized pension and postretirement benefit costs: |  |  |  |  |
Prior service costs | (114) |  |  | (113) |  |  | Investment income and other
Income tax (expense) benefit | 27 |  |  | 27 |  |  | Income tax expense
Impact on net income | (87) |  |  | (86) |  |  | Net income
Total amount reclassified for the period | $ | 13 |  |  | $ | (46) |  |  | Net income
Deferred Compensation Obligations and Treasury Stock Activity in the deferred compensation program for the three and six months ended June 30, 2020 and 2019 is as follows (in millions):
| 2020 |  |  |  | 2019 |  |
Three Months Ended June 30: | Shares |  | Dollars |  | Shares |  | Dollars
Deferred Compensation Obligations: |  |  |  |  |  |  |
Balance at beginning of period |  |  | $ | 19 |  |  |  |  | $ | 25 |
Reinvested dividends |  |  | 1 |  |  |  |  | — |
Benefit payments |  |  | — |  |  |  |  | — |
Balance at end of period |  |  | $ | 20 |  |  |  |  | $ | 25 |
Treasury Stock: |  |  |  |  |  |  |
Balance at beginning of period | — |  |  | $ | (19) |  |  | (1) |  |  | $ | (25) |
Reinvested dividends | — |  |  | (1) |  |  | — |  |  | — |
Benefit payments | — |  |  | — |  |  | 1 |  |  | — |
Balance at end of period | — |  |  | (20) |  |  | — |  |  | (25) |
| 2020 |  |  |  | 2019 |  |
Six Months Ended June 30: | Shares |  | Dollars |  | Shares |  | Dollars
Deferred Compensation Obligations: |  |  |  |  |  |  |
Balance at beginning of period |  |  | $ | 26 |  |  |  |  | $ | 32 |
Reinvested dividends |  |  | 1 |  |  |  |  | 1 |
Benefit payments |  |  | (7) |  |  |  |  | (8) |
Balance at end of period |  |  | $ | 20 |  |  |  |  | $ | 25 |
Treasury Stock: |  |  |  |  |  |  |
Balance at beginning of period | — |  |  | $ | (26) |  |  | (1) |  |  | $ | (32) |
Reinvested dividends | — |  |  | (1) |  |  | — |  |  | (1) |
Benefit payments | — |  |  | 7 |  |  | 1 |  |  | 8 |
Balance at end of period | — |  |  | (20) |  |  | — |  |  | (25) |

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
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