UPS 2006 Annual Report Download - page 49

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We are named as a defendant in four putative class action lawsuits filed in federal courts, alleging a
conspiracy relating to certain surcharges by a number of air cargo carriers. We are not named as a defendant in at
least eighty-six related cases that make similar allegations. These cases have been consolidated in a Multi-
District Litigation proceeding pending in the United States District Court for the Eastern District of New York.
UPS was not included as a defendant in the amended consolidated complaint on which the Multi-District
Litigation is proceeding. In addition, in July 2006, we were named as a defendant in a comparable lawsuit filed in
the Ontario (Canada) Superior Court of Justice. We intend to vigorously defend ourselves in these cases.
We are a defendant in various other lawsuits that arose in the normal course of business. We believe that the
eventual resolution of these cases will not have a material adverse effect on our financial condition, results of
operations, or liquidity.
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, 2006, we had approximately 246,000 employees employed under a national master
agreement and various supplemental agreements with local unions affiliated with the International Brotherhood
of Teamsters (“Teamsters”). These agreements run through July 31, 2008. In the third quarter of 2006, we began
formal negotiations with the Teamsters on a new agreement. We have approximately 2,800 pilots who are
employed under a collective bargaining agreement with the Independent Pilots Association (“IPA”). On June 30,
2006, UPS and the IPA announced a tentative agreement on a new labor contract, which was ratified in the third
quarter. This new contract becomes amendable at the end of 2011. Our airline mechanics are covered by a
collective bargaining agreement with Teamsters Local 2727, which became amendable on November 1, 2006.
We began formal negotiations with Teamsters Local 2727 on October 2, 2006. In addition, the majority of our
ground mechanics who are not employed under agreements with the Teamsters are employed under collective
bargaining agreements with the International Association of Machinists and Aerospace Workers. These
agreements run through July 31, 2009.
Other Matters
On July 14, 2006, we received a grand jury subpoena from the Antitrust Division of the U.S. Department of
Justice (“DOJ”). The subpoena relates to the DOJ’s publicly-announced criminal investigation of the air cargo
pricing practices of a number of domestic and foreign airlines. We do not believe that we are a target of this
investigation and we intend to cooperate.
With the assistance of outside counsel, we investigated certain conduct within our Supply Chain
Solutions subsidiary in certain locations outside the United States. Our investigation 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. The monetary
value involved in this conduct appears to be immaterial. We have implemented numerous remediation steps. We
informed the SEC and the DOJ 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.
Market Risk
We are exposed to market risk from changes in certain commodity prices, foreign currency exchange rates,
interest rates, and equity prices. All of these market risks arise in the normal course of business, as we do not
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