UPS 2012 Annual Report Download - page 28

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16
We may not realize the anticipated benefits of acquisitions, joint ventures or strategic alliances.
As part of our business strategy, we may acquire businesses and form joint ventures or strategic alliances. Whether we
realize the anticipated benefits from these transactions depends, in part, upon the successful integration between the businesses
involved, the performance of the underlying operation, capabilities or technologies and the management of the transacted
operations. Accordingly, our financial results could be adversely affected by our failure to effectively integrate the acquired
operations, unanticipated performance issues, transaction-related charges or charges for impairment of long-term assets that we
acquire.
Insurance and claims expenses could have a material adverse effect on our business, financial condition and results of
operations.
We have a combination of both self-insurance and high-deductible insurance programs for the risks arising out of the
services we provide and the nature of our global operations, including claims exposure resulting from cargo loss, personal
injury, property damage, aircraft and related liabilities, business interruption and workers’ compensation. Workers’
compensation, automobile and general liabilities are determined using actuarial estimates of the aggregate liability for claims
incurred and an estimate of incurred but not reported claims, on an undiscounted basis. Our accruals for insurance reserves
reflect certain actuarial assumptions and management judgments, which are subject to a high degree of variability. If the
number or severity of claims for which we are retaining risk increases, our financial condition and results of operations could
be adversely affected. If we lose our ability to self-insure these risks, our insurance costs could materially increase and we may
find it difficult to obtain adequate levels of insurance coverage.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Operating Facilities
We own our headquarters, which are located in Atlanta, Georgia and consist of about 745,000 square feet of office space
on an office campus, and our UPS Supply Chain Solutions group’s headquarters, which are located in Alpharetta, Georgia, and
consist of about 310,000 square feet of office space.
We also own our 29 principal U.S. package operating facilities, which have floor spaces that range from approximately
310,000 to 693,000 square feet. In addition, we have a 1.9 million square foot operating facility near Chicago, Illinois, which is
designed to streamline shipments between East Coast and West Coast destinations, and we own or lease over 1,000 additional
smaller package operating facilities in the U.S. The smaller of these facilities have vehicles and drivers stationed for the pickup
of packages and facilities for the sorting, transfer and delivery of packages. The larger of these facilities also service our
vehicles and equipment and employ specialized mechanical installations for the sorting and handling of packages.
We own or lease more than 800 facilities that support our international package operations and an additional 574 facilities
that support our freight forwarding and logistics operations. Our freight forwarding and logistics operations maintain facilities
with approximately 28.6 million square feet of floor space. We own and operate a logistics campus consisting of approximately
3.7 million square feet in Louisville, Kentucky.
UPS Freight operates 210 service centers with a total of 6 million square feet of floor space. UPS Freight owns 149 of
these service centers, while the remainder are occupied under operating lease agreements. The main offices of UPS Freight are
located in Richmond, Virginia and consist of about 217,000 square feet of office space.
Our aircraft are operated in a hub and spokes pattern in the U.S. Our principal air hub in the U.S., known as Worldport, is
located in Louisville, Kentucky. The Worldport facility consists of over 5.2 million square feet and the site includes
approximately 596 acres. Between 2009 and 2010, we completed an expansion of our Worldport facility, which increased the
sorting capacity to approximately 416,000 packages per hour. The expansion, which cost over $1 billion, involved the addition
of two aircraft load / unload wings to the hub building, followed by the installation of high-speed conveyor and computer
control systems.