UPS 2008 Annual Report Download - page 43

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income was negatively impacted by the after-tax impact of the charge recorded to reflect our withdrawal from the
Central States Pension Fund ($3.772 billion), the charge related to the restructuring and disposal of certain
logistics operations in France ($31 million), the aircraft impairment charge ($141 million), and SVSO charge
($43 million). The combination of these four charges reduced 2007 diluted earnings per share by $3.75.
In 2008, net income was adversely affected by the UPS Freight goodwill impairment charge ($548 million)
and customer list intangible asset impairment charge in the United Kingdom ($27 million). The combination of
these two charges reduced 2008 diluted earnings per share by $0.56. Net income during 2008 was also adversely
impacted by the deteriorating worldwide economic situation, as previously discussed. Earnings per share was
favorably impacted by a reduction in outstanding shares as a result of our ongoing share repurchase program, as
the total number of outstanding shares declined by 4.3% during 2008.
2007 compared to 2006
Net income for 2007 was $382 million, a decrease from the $4.202 billion achieved in 2006, resulting in a
decrease in diluted earnings per share to $0.36 in 2007 from $3.86 in 2006. This decrease in net income was
largely due to the after-tax $3.772 billion charge recorded to reflect our withdrawal from the Central States
Pension Fund. Additionally, 2007 net income was adversely impacted by $31 million as a result of the
restructuring charge in our France Supply Chain & Freight business, $141 million as a result of the aircraft
impairment charge, and $43 million as a result of the SVSO charge. These items were partially offset by the
improved results in our International Package and Supply Chain & Freight segments.
The reduction in basic and diluted earnings per share were largely due to the pension withdrawal, aircraft
impairment, France restructuring, and SVSO charges noted above. These items reduced basic and diluted
earnings per share by $3.77 and $3.75 in 2007. Earnings per share was favorably impacted by a reduction in
outstanding shares as a result of our ongoing share repurchase program, as the total number of outstanding shares
declined by 2.7% during 2007.
Liquidity and Capital Resources
Operating Activities
Net cash provided by operating activities was $8.426, $1.123, and $5.589 billion in 2008, 2007, and 2006,
respectively. The increase in 2008 operating cash flows compared with 2007 was impacted by several items,
including changes in pension fundings, tax payments and refunds, and rates for our delivery services.
In 2007, operating cash flow was adversely impacted by the $6.100 billion payment made to withdraw from
the Central States Pension Fund. Total contributions to our pension and postretirement benefit plans declined in
2008 compared with 2007, even excluding the Central States Pension Fund withdrawal payment. As discussed in
Note 5 to the consolidated financial statements, total multiemployer pension plan fundings decreased by $473
million in 2008 compared with 2007 (excluding the $6.100 billion withdrawal charge in 2007), largely due to the
lack of contributions to the Central States Pension Fund in 2008 subsequent to our withdrawal. Additionally,
contributions to our company-sponsored pension and postretirement plans declined by $441 million in 2008
compared with 2007, as we had no material minimum funding requirements in 2008 and we made no significant
discretionary contributions to our plans. As discussed further in the “Contractual Commitments” section, we do
have minimum funding requirements in the next several years, primarily related to the UPS IBT Pension Plan.
The increase in operating cash flow was also favorably impacted by the timing of tax refunds and estimated
tax payments in both 2008 and 2007. In 2008, we received an $850 million U.S. federal tax refund due to prior
overpayments of our estimated tax liability, primarily resulting from the deductibility of the Central States
Pension Fund withdrawal payment for tax purposes. Additionally, the amount of U.S. federal quarterly estimated
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