UPS 2006 Annual Report Download - page 48

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reflected in the purchase commitment numbers above). We also have firm commitments to purchase eight
Boeing 747-400F aircraft scheduled for delivery during 2007 and 2008, and two Boeing 747-400BCF aircraft
scheduled for delivery during 2008. These aircraft purchase orders will provide for the replacement of existing
capacity and anticipated future growth.
In addition, we currently have a firm commitment to purchase 10 Airbus A380-800 freighter aircraft and
options to purchase 10 additional A380-800 aircraft (this order is reflected in the purchase commitment numbers
above). In February 2007, we announced that we had signed an agreement with Airbus to set out a timetable for
deciding the status of this previous order. 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.
The contractual payments due under the other liabilities column includes commitment payments related to
our investment in certain partnerships. The commitments above exclude our planned pension and postretirement
benefit plan contributions, as we do not have any material funding requirements for our UPS-sponsored pension
and postretirement plans as of December 31, 2006. In 2007, we plan to contribute $533 million to our U.S.
pension and postretirement benefit plans and $48 million to our international pension plans. Our funding policy
for U.S. plans is to contribute amounts annually that are at least equal to the amounts required by applicable laws
and regulations, or to directly fund payments to plan participants, as applicable. International pension plans will
be funded in accordance with local regulations. We have also guaranteed our obligations for certain international
pension plans up to a maximum amount of $118 million. See Note 5 to the consolidated financial statements for a
further discussion of our pension and postretirement benefit plans.
As of December 31, 2006, we had outstanding letters of credit totaling approximately $2.213 billion issued
in connection with routine business requirements. As of December 31, 2006, we had unfunded loan commitments
totaling $604 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. The court granted summary judgment in favor of UPS on all claims and plaintiffs
have appealed. We have denied any liability with respect to these claims and intend to vigorously defend
ourselves in this case. At this time, we have not determined the amount of any liability that may result from this
matter or whether such liability, if any, would have a material adverse effect on our financial condition, results of
operations, or liquidity.
In another case, Cornn v. UPS, which has been certified as a class action in a California federal court,
plaintiffs allege that they were improperly denied wages and/or overtime and meal and rest periods. Plaintiffs
purport to represent a class of approximately 23,600 drivers and seek back wages, penalties, interest and
attorneys’ fees. UPS has agreed in principle to settle this matter in full for a total payment of $87 million. On
December 6, 2006, the court granted tentative approval of the settlement.
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