UPS 2004 Annual Report Download - page 60

58 UPS Annual Report 2004
Notes to consolidated financial statements
The following is a summary of intangible assets at December 31, 2004 and 2003 (in millions):
Trademarks, Intangible Total
Licenses, Patents, Franchise Capitalized Pension Intangible
and Other Rights Software Asset Assets
December 31, 2004:
Gross carrying amount $ 29 $ 97 $ 1,249 $ 4 $ 1,379
Accumulated amortization (16) (18) (676) — (710)
Net carrying value $ 13 $ 79 $ 573 $ 4 $ 669
December 31, 2003:
Gross carrying amount $ 30 $ 88 $ 1,101 $ 5 $ 1,224
Accumulated amortization (10) (13) (491) — (514)
Net carrying value $20 $ 75 $ 610 $ 5 $ 710
Amortization of intangible assets was $221, $196, and $129 million during 2004, 2003 and 2002, respectively. Expected amortiza-
tion of finite-lived intangible assets recorded as of December 31, 2004 for the next five years is as follows (in millions):
2005 — $198; 2006 — $198; 2007 — $198; 2008 — $12; 2009 — $11. Amortization expense in future periods will be affected by
business acquisitions, software development and other factors.
Other assets as of December 31 consist of the following (in millions):
2004 2003
Non-current finance receivables, net of allowance for credit losses $ 475 $ 574
Other non-current assets 889 1,098
$ 1,364 $ 1,672
NOTE 7. BUSINESS ACQUISITIONS AND DISPOSITIONS
We regularly explore opportunities to make acquisitions that
would enhance our package delivery business and our various
non-package businesses. During the three years ended December
31, 2004, we completed several acquisitions, including both
domestic and international transactions, which were accounted
for under the purchase method of accounting. In connection with
the foregoing transactions, we paid cash (net of cash acquired) in
the aggregate amount of $238, $30, and $14 million in 2004,
2003, and 2002, respectively. Pro forma results of operations
have not been presented for any of the acquisitions because the
effects of these transactions were not material on either an indi-
vidual or aggregate basis. The results of operations of each
acquired company are included in our statements of consolidated
income from the date of acquisition. The purchase price alloca-
tions of acquired companies can be modified up to one year after
the date of acquisition, however we generally expect such adjust-
ments to the purchase price allocations to be immaterial.
During the second quarter of 2003, we sold our Mail
Technologies business unit in a transaction that increased net
income by $14 million, or $0.01 per diluted share. The gain con-
sisted of a pre-tax loss of $24 million recorded in other operating
expenses within the non-package segment, and a tax benefit of
$38 million recognized in conjunction with the sale. The tax ben-
efit exceeded the pre-tax loss from this sale primarily because the
goodwill impairment charge we previously recorded for the Mail
Technologies business unit was not deductible for income tax
purposes. Consequently, our tax basis was greater than our book
basis, thus producing the tax benefit described above.
During the third quarter of 2003, we sold our Aviation
Technologies business unit and recognized a pre-tax gain of $24
million ($15 million after-tax, or $0.01 per diluted share), which
was recorded in other operating expenses within the non-package
segment. The operating results of both the Mail Technologies unit
and the Aviation Technologies unit were previously included in
our non-package segment, and were not material to our consoli-
dated operating results in any of the periods presented.
In March 2004, we acquired the remaining 49% minority
interest in UPS Yamato Express Co., which was previously a
joint venture with Yamato Transport Co. in Japan, for $65 mil-
lion in cash. UPS Yamato Express provides express package
delivery services in Japan. Upon the close of the acquisition, UPS
Yamato Express became a wholly-owned subsidiary of UPS. The
acquisition had no material effect on our financial condition or
results of operations.
In December 2004, we acquired the Menlo Worldwide
Forwarding unit from CNF Inc. for $150 million in cash (net of
cash acquired) plus the assumption of $110 million in par value
of debt and capital lease obligations. Menlo Worldwide
Forwarding is a global freight forwarder that provides a full
suite of heavy air freight forwarding services, ocean services and
international trade management, including customs brokerage.