UPS 2008 Annual Report Download - page 48

“Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109” (“FIN 48”),
because we are uncertain if or when such amounts will ultimately be settled in cash. In addition, although we
have recognized and disclosed unrecognized tax benefits in accordance with FIN 48, we also have outstanding
recognized tax benefits in excess of the recorded liabilities such that we do not believe a net contractual
obligation exists to the taxing authorities. FIN 48 is discussed further in Note 13 to the consolidated financial
statements.
As of December 31, 2008, we had outstanding letters of credit totaling approximately $2.132 billion issued
in connection with routine business requirements. We also issue surety bonds as an alternative to letters of credit
in certain instances, and as of December 31, 2008, we had $262 million of surety bonds written. As of
December 31, 2008, we had unfunded loan commitments totaling $885 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 was certified as a class
action in a California federal court in June 2004, 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 1,300 full-time supervisors. In August 2005, the court granted summary judgment in favor of UPS on all
claims, and plaintiff appealed the ruling. In October 2007, the appeals court reversed the lower court’s ruling. In
April 2008, the Court decertified the class and vacated the trial scheduled for April 29, 2008. 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, Hohider v. UPS, which in July 2007 was certified as a class action in a Pennsylvania federal
court, plaintiffs have challenged certain aspects of the Company’s interactive process for assessing requests for
reasonable accommodation under the Americans with Disabilities Act. Plaintiffs purport to represent a class of
over 35,000 current and former employees, and seek back-pay, and compensatory and punitive damages, as well
as attorneys’ fees. In August 2007, the Third Circuit Court of Appeals granted the Company’s Petition to hear the
appeal of the trial court’s certification order. Oral argument took place in November 2008. The appeal will likely
take one year. 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.
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 rebranding of Mail Boxes Etc.
centers to The UPS Store, 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 Freight, along with several other companies involved in the LTL freight business, is a defendant in a
Multi-District Litigation pending 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 have denied any liability with respect to these claims and intend to vigorously
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