UPS 2004 Annual Report Download - page 54

52 UPS Annual Report 2004
Notes to consolidated financial statements
The amortized cost and estimated fair value of marketable
securities and short-term investments at December 31, 2004, 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. Estimated
Cost Fair Value
Due in one year or less $ 37 $ 37
Due after one year through three years 459 458
Due after three years through five years 75 75
Due after five years 2,286 2,287
2,857 2,857
Equity securities 1,609 1,601
$ 4,466 $ 4,458
NOTE 3. FINANCE RECEIVABLES
The following is a summary of finance receivables at December
31, 2004 and 2003 (in millions):
2004 2003
Commercial term loans $360 $438
Investment in finance leases 188 270
Asset-based lending 285 290
Receivable factoring 191 468
Gross finance receivables 1,024 1,466
Less: Allowance for credit losses (25) (52)
Balance at December 31 $999 $ 1,414
Outstanding receivable balances at December 31, 2004 and
2003 are net of unearned income of $35 and $48 million,
respectively. When we “factor” (i.e., purchase) a customer
invoice from a client, we record the customer receivable as an
asset and also establish a liability for the funds due to the client,
which is recorded in accounts payable on the consolidated bal-
ance sheet. The following is a reconciliation of receivable
factoring balances at December 31, 2004 and 2003 (in millions):
2004 2003
Customer receivable balances $ 191 $ 468
Less: Amounts due to client (112) (195)
Net funds employed $79 $ 273
Non-earning finance receivables were $38 and $67 million at
December 31, 2004 and 2003, respectively. The following is a
rollforward of the allowance for credit losses on finance receiv-
ables (in millions):
2004 2003
Balance at January 1 $52 $38
Provisions charged to operations 14 39
Charge-offs, net of recoveries (41) (25)
Balance at December 31 $25 $52
The carrying value of finance receivables at December 31,
2004, by contractual maturity, is shown below (in millions).
Actual maturities may differ from contractual maturities because
some borrowers have the right to prepay these receivables with-
out prepayment penalties. Carrying
Value
Due in one year or less $ 530
Due after one year through three years 81
Due after three years through five years 99
Due after five years 314
$ 1,024
Based on interest rates for financial instruments with similar
terms and maturities, the estimated fair value of finance receiv-
ables is approximately $991 million and $1.384 billion as of
December 31, 2004 and 2003, respectively. At December 31,
2004, we had unfunded loan commitments totaling $344 mil-
lion, consisting of standby letters of credit of $53 million and
other unfunded lending commitments of $291 million.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31 consists of the
following (in millions):
2004 2003
Vehicles $ 3,784 $ 3,486
Aircraft (including aircraft under
capitalized leases) 11,590 10,897
Land 760 721
Buildings 2,164 2,083
Leasehold improvements 2,347 2,219
Plant equipment 4,641 4,410
Technology equipment 1,596 1,495
Equipment under operating lease 57 53
Construction-in-progress 539 450
27,478 25,814
Less: Accumulated depreciation
and amortization (13,505) (12,516)
$13,973 $13,298