UPS 2005 Annual Report Download - page 44

During 2005, we took delivery of six Boeing MD-11 aircraft and seven Airbus A300-600 aircraft. The final
six firm Airbus A300-600 aircraft are scheduled for delivery by July 2006. We have firm commitments to
purchase 13 Boeing MD-11 aircraft, and we expect to take delivery of these aircraft during 2006 and 2007. In
2005, we made firm commitments to purchase eight Boeing 747-400F aircraft scheduled for delivery during
2007 and 2008, and two Boeing 747-400SF aircraft scheduled for delivery during 2008. In addition, we have a
firm commitment to purchase 10 Airbus A380 aircraft and options to purchase 10 additional A380 aircraft. The
A380 aircraft deliveries are scheduled between 2009 and 2012. These aircraft purchase orders will provide for
the replacement of existing capacity and anticipated future growth.
As of December 31, 2005, we had outstanding letters of credit totaling approximately $2.095 billion issued
in connection with routine business requirements. As of December 31, 2005, we had unfunded loan commitments
totaling $416 million associated with our financial business.
We believe that funds from operations and borrowing programs will provide adequate sources of liquidity
and capital resources to meet our expected long-term needs for the operation of our business, including
anticipated capital expenditures, such as commitments for aircraft purchases, for the foreseeable future.
Contingencies
We are a defendant in a number of lawsuits filed in state and federal courts containing various class-action
allegations under state wage-and-hour laws. In one of these cases, Marlo v. UPS, which has been certified as a
class action in a California federal court, plaintiffs allege that they improperly were denied overtime, and seek
penalties for missed meal and rest periods, and interest and attorneys’ fees. Plaintiffs purport to represent a class
of 1,200 full-time supervisors.
We have denied any liability with respect to these claims and intend to vigorously defend ourselves in these
cases. At this time, we have not determined the amount of any liability that may result from these matters or
whether such liability, if any, would have a material adverse effect on our financial condition, results of
operations, or liquidity.
With the assistance of outside counsel, we have undertaken an internal investigation of certain conduct
within our Supply Chain Solutions subsidiary in certain locations outside the United States. Our investigation has
determined that certain conduct, which commenced prior to our subsidiary’s 2001 acquisition of a freight
forwarding business that was part of Fritz Companies Inc., may have violated the United States Foreign Corrupt
Practices Act. Our investigation also determined that a small number of former employees directed the conduct
in question. The monetary value involved in this conduct appears to be immaterial. We have implemented
numerous remediation steps, and our investigation continues. In March 2006 we informed the SEC and the
Department of Justice of our investigation, and we intend to cooperate fully with any review by the government
of these issues. We do not believe that the results of this investigation, the remediation or related penalties, if
any, will have a material adverse effect on our financial condition, liquidity or results of operations, nor do we
believe that these matters will have a material adverse effect on our business and prospects.
We participate in a number of trustee-managed multi-employer pension and health and welfare plans for
employees covered under collective bargaining agreements. Several factors could result in potential funding
deficiencies which could cause us to make significantly higher future contributions to these plans, including
unfavorable investment performance, changes in demographics, and increased benefits to participants. At this
time, we are unable to determine the amount of additional future contributions, if any, or whether any material
adverse effect on our financial condition, results of operations, or liquidity would result from our participation in
these plans.
As of December 31, 2005, we had approximately 241,000 employees employed under a national master
agreement and various supplemental agreements with local unions affiliated with the International Brotherhood
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