UPS 2011 Annual Report Download - page 91

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
We continually monitor our aircraft fleet utilization in light of current and projected volume levels, aircraft
fuel prices and other factors. In 2011 and 2010, there were no indicators of impairment in our aircraft fleet, and no
impairment charges were recorded in either period. In 2009, we recorded a $181 million impairment charge, as
described in the following paragraphs.
In 2008, we announced that we were in negotiations with DHL to provide air transportation services for all of
DHL’s express, deferred and international package volume within the United States, as well as air transportation
services between the United States, Canada and Mexico. In early April 2009, UPS and DHL mutually agreed to
terminate further discussions on providing these services. Additionally, our U.S. Domestic Package air delivery
volume had declined for several quarters as a result of persistent economic weakness and shifts in product mix
from our premium air services to our lower cost ground services. As a result of these factors, the utilization of
certain aircraft fleet types had declined and was expected to be lower in the future.
Based on the factors noted above, as well as FAA aging aircraft directives that would require significant
future maintenance expenditures, we determined that a triggering event had occurred that required an impairment
assessment of our McDonnell-Douglas DC-8-71 and DC-8-73 aircraft fleets. We conducted an impairment
analysis as of March 31, 2009, and determined that the carrying amount of these fleets was not recoverable due to
the accelerated expected retirement dates of the aircraft. Based on anticipated residual values for the airframes,
engines and parts, we recognized an impairment charge of $181 million in the first quarter of 2009. This charge
is included in the caption “Other expenses” in the statement of consolidated income, and impacted our U.S.
Domestic Package segment. The DC-8 fleets were subsequently retired from service. We currently continue to
utilize and operate all of our other aircraft fleets.
The impaired airframes, engines and parts had a net carrying value of $192 million, and were written down
to an aggregate fair value of $11 million. The fair values for the impaired airframes, engines, and parts were
determined using unobservable inputs (Level 3).
NOTE 5. COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS
We sponsor various retirement and pension plans, including defined benefit and defined contribution plans
which cover our employees worldwide.
U.S. Pension Benefits
In the U.S. we maintain the following single-employer defined benefit pension plans: UPS Retirement Plan,
UPS Pension Plan, UPS IBT Pension Plan and the UPS Excess Coordinating Benefit Plan, a non-qualified plan.
The UPS Retirement Plan is noncontributory and includes substantially all eligible employees of
participating domestic subsidiaries who are not members of a collective bargaining unit, as well as certain
employees covered by a collective bargaining agreement. This plan generally provides for retirement benefits
based on average compensation levels earned by employees prior to retirement. Benefits payable under this plan
are subject to maximum compensation limits and the annual benefit limits for a tax qualified defined benefit plan
as prescribed by the Internal Revenue Service (“IRS”).
The UPS Excess Coordinating Benefit Plan is a non-qualified plan that provides benefits to certain
participants in the UPS Retirement Plan for amounts that exceed the benefit limits described above.
The UPS Pension Plan is noncontributory and includes certain eligible employees of participating domestic
subsidiaries and members of collective bargaining units that elect to participate in the plan. This plan generally
provides for retirement benefits based on service credits earned by employees prior to retirement.
The UPS IBT Pension Plan is noncontributory and includes employees that were previously members of the
Central States, Southeast and Southwest Areas Pension Fund (“Central States Pension Fund”), a multiemployer
pension plan, in addition to other eligible employees who are covered under certain collective bargaining
agreements.
79