UPS 2006 Annual Report Download - page 106

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
NOTE 18. SUBSEQUENT EVENTS
In February 2007, we announced an order for 27 Boeing 767-300ER freighters to be delivered between 2009
and 2012. We anticipate using these 767-300ER aircraft primarily to support the growth in our International
Package business, and to improve the efficiency and speed of our air network as we eventually replace aging
aircraft.
In February 2007, we signed an agreement with Airbus to set out a timetable for deciding the status of our
previous order for the freighter version of the Airbus A380-800. The agreement specifies changed delivery dates
for the A380-800 and provides for possible termination of the original purchase agreement by either party later in
2007. The revised delivery schedule specifies the delivery dates for the 10 Airbus A380-800’s on order as being
between 2012 and 2013, whereas we were originally scheduled to take delivery of the Airbus A380-800 aircraft
between 2009 and 2012. The signing of this agreement will have no material impact on our results of operations
or financial condition.
In conjunction with these changes, we have initiated a re-evaluation process of our aircraft fleet types, to
ensure that we maintain the optimum mix of aircraft types to service our international and domestic package
businesses. This process might result in the planned retirement of certain less-efficient and older aircraft models
at dates earlier than originally anticipated. As a result, we will reassess our assumptions of the expected lives and
residual values on these aircraft. Any resulting adjustments would be accounted for on a prospective basis,
potentially resulting in increased depreciation expense in future periods. Additionally, this process could result in
circumstances that would indicate the net book value of the aircraft might not be recoverable, based on the
undiscounted future cash flows the aircraft are anticipated to generate. If the net book value of the aircraft is
determined not to be recoverable, we would be required to record an impairment based on the fair value of the
aircraft, in accordance with FAS 144. We anticipate completing this process by the end of the first quarter of
2007.
F-46