UPS 2009 Annual Report Download - page 118

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
benefits that were formula-driven and in accordance with French statutory laws as well as the applicable
collective bargaining agreements. The employment reduction program resulted in 103 employees accepting a
voluntary termination offer and 342 positions being subject to the involuntary termination program. The
restructuring also included costs incurred related to contract terminations for leased facilities, vehicles and
equipment as well as impairment charges associated with long-lived assets. We recorded a restructuring charge
of $42 million related to severance costs and $4 million for impairments and other contract termination costs in
the third quarter of 2007. This restructuring plan was completed during 2008.
UPS Special Voluntary Separation Opportunity
In December 2006, we offered a special voluntary separation opportunity (“SVSO”) to 640 employees to
improve the efficiency of non-operating processes by eliminating duplication and sharing expertise across the
company. The SVSO ended in February 2007, and 195, or 30% of eligible employees, accepted the offer. As a
result, we recorded a charge to expense of $68 million in the first quarter of 2007, to reflect the cash payout and
the acceleration of stock compensation and certain retiree healthcare benefits under the SVSO program. The cash
payout related to this program totaled $28 million and $35 million during 2008 and 2007, respectively. The $68
million charge was included in the caption “Compensation and benefits” in the Statement of Consolidated
Income, of which $53 million impacted our U.S. Domestic Package segment, $8 million impacted our Supply
Chain & Freight segment, and $7 million impacted our International Package segment.
Subsequent Events:
Supply Chain & Freight—Germany
In February 2010, we completed the sale of a specialized transportation and express freight business in
Germany within our Supply Chain & Freight segment. As part of the sale transaction, we incurred certain costs
associated with employee severance payments, other employee benefits, transition services, and leases on
operating facilities and equipment. Additionally, we have provided a guarantee for a period of two years for
certain employee benefit payments being assumed by the buyer. We will record a loss of approximately $40
million for this transaction in the first quarter of 2010, which included the costs associated with the sale
transaction and the fair value of the guarantee.
U.S. Domestic Package Restructuring
In an effort to improve performance in the U.S. Domestic Package segment, we announced a program to
streamline our domestic management structure in January 2010. As part of this restructuring, we are reducing the
number of domestic districts and regions in our U.S. small package operation, in order to better align our
operations geographically and allow more local decision-making and resources to be deployed for our customers.
Effective in April 2010, UPS will reduce its U.S. regions from five to three and its U.S. districts from 46 to 20.
The restructuring will eliminate approximately 1,800 management and administrative positions in the U.S.
Normal attrition will minimize some job displacements, and approximately 1,100 employees are being offered a
voluntary separation package. In addition, other impacted employees will receive severance benefits and access
to support programs based on length of service. We anticipate recording a charge of up to $80 million in the first
quarter of 2010 related to the costs of this program. Throughout the remainder of 2010, we will incur additional
costs related to relocation of employees and other restructuring activities, however we believe those costs will be
approximately offset by savings from the staffing reductions.
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