UPS 2011 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2011 UPS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

ill-defined; (3) there are significant legal questions about the adequacy and standing of the putative class
representatives; and (4) we believe that we have a number of meritorious legal defenses. Accordingly, at this
time, we are not able to estimate a possible loss or range of loss that may result from these matters or to
determine whether such loss, 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 do not believe
that the eventual resolution of these other lawsuits (either individually or in the aggregate), including any
reasonably possible losses in excess of current accruals, will have a material adverse effect on our financial
condition, results of operations or liquidity.
In June 2011, we received Internal Revenue Service (“IRS”) reports covering income taxes and excise taxes
for tax years 2005 through 2007 and 2003 through 2007, respectively. The reports propose assessments related to
amounts paid for software, research credit expenditures and deductibility of financing and post-acquisition
integration costs as well as taxes on amounts paid for air transportation. Receipt of the reports represents only the
conclusion of the examination process. We disagree with the proposed assessments related to these matters.
Therefore, we have filed protests and protective tax refund claims. During the third quarter of 2011, the IRS
responded to our protests and forwarded the cases to IRS Appeals. There are multiple factors that prevent us from
being able to estimate the amount of loss, if any, that may result from these matters including: (1) we are
vigorously defending these matters and believe that we have a number of meritorious legal defenses; (2) we have
filed refund claims in excess of the proposed assessments; (3) there are unresolved questions of law and fact that
could be of importance to the ultimate resolutions of these matters, including the calculation of any additional
taxes and/or tax refunds; and (4) these matters are at the initial stage of a multi-level administrative appeals
process that may ultimately be resolved by litigation. Accordingly, at this time, we are not able to estimate a
possible loss or range of loss that may result from these matters or to determine whether such loss, if any, would
have a material adverse effect on our financial condition, results of operations or liquidity.
Collective Bargaining Agreements
As of December 31, 2011, we had approximately 245,000 employees employed under a national master
agreement and various supplemental agreements with local unions affiliated with the Teamsters. These
agreements run through July 31, 2013. We have approximately 2,700 pilots who are employed under a collective
bargaining agreement with the IPA, which became amendable at the end of 2011. Our airline mechanics are
covered by a collective bargaining agreement with Teamsters Local 2727, which runs through November 1,
2013. In addition, approximately 3,200 of our ground mechanics who are not employed under agreements with
the Teamsters are employed under collective bargaining agreements with the IAM. Our agreement with the IAM
runs through July 31, 2014.
We participate in a number of trustee-managed multiemployer pension and health and welfare plans for
employees covered under collective bargaining agreements. Our current collective bargaining agreements set
forth the annual contribution increases allotted to the plans that we participate in, and we are in compliance with
these contribution rates. These limitations will remain in effect throughout the terms of the existing collective
bargaining agreements.
Rate Adjustments
In November 2011, we announced an increase in base rates and changes in our fuel surcharge for package
shipments that took effect January 2, 2012. UPS Ground service rates increased a net 4.9% through a
combination of a 5.9% increase in rates and a 1% reduction in the index used to determine the ground fuel
surcharge. UPS Next Day Air, UPS 2nd Day Air, UPS 3 Day Select, and international air shipments originating in
the United States (including Worldwide Express, Worldwide Express Plus, UPS Worldwide Expedited and UPS
International Standard Service) increased a net 4.9%, through a combination of a 6.9% increase in base rates and
50