UPS 2013 Annual Report Download - page 123

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
111
NOTE 15. TERMINATION OF TNT TRANSACTION
TNT Termination Fee and Related Costs
On January 30, 2013, the European Commission issued a formal decision prohibiting our proposed acquisition of TNT
Express N.V. (“TNT Express”). As a result of the prohibition by the European Commission, the condition of our offer requiring
European Union competition clearance was not fulfilled, and our proposed acquisition of TNT Express could not be completed.
Given this outcome, UPS and TNT Express entered a separate agreement to terminate the merger protocol, and we withdrew
our formal offer for TNT Express. We paid a termination fee to TNT Express of €200 million ($268 million) under this
agreement, and also incurred transaction-related expenses of $16 million during the first quarter of 2013. The combination of
these items resulted in a pre-tax charge of $284 million ($177 million after-tax), which impacted our International Package
segment.
Gain upon the Liquidation of a Foreign Subsidiary
Subsequent to the termination of the merger protocol, we liquidated a foreign subsidiary that would have been used to
acquire the outstanding shares of TNT Express in connection with the proposed acquisition. Upon the liquidation of this
subsidiary in the first quarter of 2013, we realized a pre-tax foreign currency gain of $245 million ($213 million after-tax),
which impacted our International Package segment.
NOTE 16. SUBSEQUENT EVENTS
Collective Bargaining Agreement Status
As of December 31, 2013, we had approximately 253,000 employees employed under a national master agreement and
various supplemental agreements with local unions affiliated with the International Brotherhood of Teamsters (“Teamsters”). In
April 2013, we reached a tentative agreement with the Teamsters on two new national master agreements in the U.S. Domestic
Package and UPS Freight business units, both of which are retroactive to August 1, 2013 and will remain effective through July
31, 2018. Before expiration of the existing national master agreements, the Company and the Teamsters agreed to extensions
of both existing five-year national master agreements and all supplemental agreements. The extensions are open-ended and can
be terminated by either party on thirty days' notice.
UPS Teamster-represented employees in the U.S. Domestic Package business unit subsequently voted to approve the new
national master agreement in June 2013, while several local U.S. Domestic Package supplemental agreements require
additional negotiation and approval before ratification occurs. As of February 2014, there were a total of six supplemental
agreements that still have to be approved before ratification. We anticipate that the remaining agreements will be voted upon in
the coming months.
The UPS Freight business unit ratified its national master agreement in January 2014.
We have approximately 2,600 pilots who are employed under a collective bargaining agreement with the Independent
Pilots Association (“IPA”), which became amendable at the end of 2011. In February 2014, UPS and the IPA requested
mediation by the National Mediation Board for the ongoing contract negotiations.
As of the date of this filing, there can be no assurance that our efforts to obtain ratification will be successful or that the
ultimate resolution of these matters will not adversely affect our business, financial position, results of operations or liquidity.
Business Acquisitions
In February 2014, we completed the purchase of U.K.-based Polar Speed, a provider of temperature-sensitive
pharmaceutical supply chain solutions in the U.K. The acquisition expands our healthcare logistics network in Europe,
providing healthcare companies access to a single source for logistics solutions across the continent. The acquisition was not
material to our results of operations or financial position.