UPS 2009 Annual Report Download - page 36

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Goodwill Impairment Charge
In the fourth quarter of 2008, we completed our annual goodwill impairment testing and determined that our
UPS Freight reporting unit, which was formed through the acquisition of Overnite Corporation in 2005, had a
goodwill impairment of $548 million. This charge, as well as our accounting policies pertaining to goodwill, is
discussed further in “Critical Accounting Policies and Estimates”.
Intangible Impairment Charge
In the fourth quarter of 2008, we completed an impairment assessment on a customer list intangible asset
related to our domestic package entity in the United Kingdom. We recorded a $27 million charge related to this
assessment, which is further discussed in “Critical Accounting Policies and Estimates”.
Special Voluntary Separation Opportunity (“SVSO”) Charge
In December 2006, we offered the SVSO to approximately 640 employees who worked in non-operating
functions. This program was established 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 approximately $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.
Pension Plan Withdrawal Charge
Our national master agreement with the Teamsters allowed us, upon ratification, to withdraw employees
from the Central States Pension Fund and to establish a jointly trusteed single-employer plan for this group
(“UPS IBT Pension Plan”). Upon ratification of the contract in December 2007 and our withdrawal from the
Central States Pension Fund, we recorded a $6.1 billion charge to establish our withdrawal liability, and made a
December 2007 payment in the same amount to the Central States Pension Fund to satisfy this liability.
The withdrawal liability was based on computations performed by independent actuaries employed by the
Central States Pension Fund, in accordance with the plan document and the applicable requirements of the
Employee Retirement Income Security Act of 1974 (“ERISA”). We negotiated our withdrawal from the Central
States Pension Fund as part of our national master agreement with the Teamsters, which included other
modifications to hourly wage rates, healthcare and pension benefits, and work rules. We sought to negotiate our
withdrawal from the Central States Pension Fund, as we believed the fund would likely continue to have funding
challenges, and would present a risk to UPS of having to face higher future contribution requirements and a risk
to the security of the pension benefits of those UPS employees who participated in the fund. We believe that we
benefited financially from the ability to achieve a ratified national master agreement seven months before the
expiration of the previous agreement, as well as by gaining better control over the future cost and funding of
pension benefits by limiting our obligations solely to UPS Teamster employees through the new UPS IBT
Pension Plan. As the UPS IBT Pension Plan matures, we believe that it will become cost beneficial from a cash
flow and earnings standpoint compared with having remained in the Central States Pension Fund.
France Restructuring Charge
In the third quarter of 2007, we initiated a restructuring plan for our forwarding and logistics operations in
France. The objective of this restructuring plan was to reduce our forwarding and logistics cost structure and
focus on profitable revenue growth in the Europe region. The restructuring principally consisted of an
employment reduction program, which was ratified by our company’s trade union representatives in France in
July 2007. Employees participating in this program were entitled to severance benefits, including certain bonuses
for employees participating in the voluntary termination phase. These severance benefits were formula-driven
and were in accordance with French statutory laws as well as the applicable collective bargaining agreements.
We recorded a restructuring charge of $46 million in 2007 related to this program.
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