UPS 2006 Annual Report Download - page 105

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
certain assets acquired. These restructuring costs impacting the acquired Lynx business have resulted in an
adjustment to goodwill of $7 million. The remaining integration costs for this restructuring program, including
facility costs associated with capacity expansion, will be recognized as incurred. We anticipate completing this
integration program by fiscal year 2008 at which time certain hubs will be closed and the new consolidated
sorting facility will be fully operational.
Supply Chain Solutions
In an effort to rationalize our cost structure and focus on profitable revenue growth, we initiated a
restructuring plan for our Supply Chain Solutions Forwarding & Logistics operations in the fourth quarter of
2006. This restructuring plan is expected to generate efficiencies resulting in improved revenues and operating
profits by further integrating all of our transportation services to better serve our customers. This restructuring
involves plans to reduce non-operating expenses by approximately 20%, including a reduction in non-operating
staff of approximately 1,400 people. As of December 31, 2006, $12 million in costs have been accrued related to
employee severance.
UPS Special Voluntary Separation Opportunity
In December 2006, we offered a special voluntary separation opportunity (“SVSO”) to approximately 640
employees who work in non-operating functions. This program is an effort to improve the efficiency of
non-operating processes by eliminating duplication and sharing expertise across the company. The SVSO ended
in February 2007, and approximately 30% of eligible employees accepted the offer. As a result, we will record a
charge to expense of approximately $80 million in the first quarter of 2007, to reflect the anticipated cash payout
and the acceleration of stock compensation and certain retiree healthcare benefits under the SVSO program.
NOTE 17. QUARTERLY INFORMATION (unaudited)
First Quarter Second Quarter Third Quarter Fourth Quarter
2006 2005 2006 2005 2006 2005 2006 2005
Revenue:
U.S. Domestic Package ....... $ 7,463 $6,811 $ 7,462 $ 6,942 $ 7,402 $ 7,033 $ 8,129 $ 7,824
International Package ......... 2,161 1,842 2,233 1,997 2,251 1,918 2,444 2,220
Supply Chain & Freight ....... 1,897 1,233 2,041 1,252 2,009 1,599 2,055 1,910
Total revenue ........... $11,521 $9,886 $11,736 $10,191 $11,662 $10,550 $12,628 $11,954
Operating profit (loss):
U.S. Domestic Package ....... 1,185 1,028 1,234 1,118 1,208 1,110 1,296 1,237
International Package ......... 395 348 414 397 387 318 514 431
Supply Chain & Freight ....... (25) 9 47 34 (19) 70 (1) 43
Total operating profit ..... $ 1,555 $1,385 $ 1,695 $ 1,549 $ 1,576 $ 1,498 $ 1,809 $ 1,711
Net income ..................... $ 975 $ 882 $ 1,061 $ 986 $ 1,038 $ 953 $ 1,128 $ 1,049
Earnings per share:
Basic ...................... $ 0.89 $ 0.78 $ 0.98 $ 0.88 $ 0.96 $ 0.86 $ 1.05 $ 0.95
Diluted .................... $ 0.89 $ 0.78 $ 0.97 $ 0.88 $ 0.96 $ 0.86 $ 1.04 $ 0.95
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