UPS 2007 Annual Report Download - page 51

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UPS and Mail Boxes Etc., Inc. are defendants in various lawsuits brought by franchisees who operate Mail
Boxes Etc. centers and The UPS Store locations. These lawsuits relate to the re-branding of Mail Boxes Etc.
centers to The UPS Store, the The UPS Store business model, the representations made in connection with the
rebranding and the sale of The UPS Store franchises, and UPS’s sale of services in the franchisees’ territories.
We have denied any liability with respect to these claims and intend to defend ourselves vigorously. 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.
UPS and UPS Freight, along with several other companies involved in the LTL freight business, have been
named as defendants in numerous putative class-action lawsuits filed since July 30, 2007 in courts across the
nation. The cases have been consolidated for pretrial purposes in a Multi-District Litigation proceeding in the
United States District Court for the Northern District of Georgia. The lawsuits allege that the defendants
conspired to fix fuel surcharge rates, and they seek injunctive relief, treble damages and attorneys’ fees. We
intend to defend against these suits vigorously. These cases are at a preliminary stage and 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.
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.
Along with an income tax audit for years 2003 and 2004, the Internal Revenue Service (“IRS”) is currently
examining non-income based taxes including excise taxes on transportation of property by air and fuel purchases,
which could lead to proposed assessments. The IRS has not presented an official position with regard to excise
taxes at this time, and therefore we are not able to determine the technical merit of any potential assessment;
however, we do not believe that the resolution of this matter would have a material adverse effect on our
financial condition, results of operations, or liquidity.
As of December 31, 2007, we had approximately 246,000 employees employed under a national master
agreement and various supplemental agreements with local unions affiliated with the Teamsters. In September
2007, we reached a new national master agreement with the Teamsters, which was ratified in December 2007.
The new agreement provides for wage increases as well as contributions to healthcare and pension plans, and
most economic provisions of the new five year agreement will take effect on August 1, 2008, with the exception
of our withdrawal from the Central States Pension Fund, as discussed in Note 5 to the consolidated financial
statements. We have approximately 2,900 pilots who are employed under a collective bargaining agreement with
the Independent Pilots Association, which 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
(approximately 2,900). These agreements run through July 31, 2009.
Apart from the Central States Pension Fund, 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 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.
Other Matters
We received grand jury subpoenas from the Antitrust Division of the U.S. Department of Justice (“DOJ”)
regarding the DOJ’s investigations into air cargo pricing practices in July 2006 and into freight forwarding
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