UPS 2014 Annual Report Download - page 32

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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 is located in Atlanta, Georgia and consists of about 745,000 square feet of office space
in an office campus, and our UPS Supply Chain Solutions group’s headquarters, which is located in Alpharetta, Georgia, and
consists of about 310,000 square feet of office space.
We also own 29 of our 31 principal U.S. package operating facilities, which have floor spaces that range from
approximately 310,000 to 879,000 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 capacity 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. In addition, we own or lease
more than 500 facilities, with approximately 32.2 million square feet of floor space, that support our freight forwarding and
logistics operations. We own and operate a logistics campus consisting of approximately 3.7 million square feet in Louisville,
Kentucky.
We own or lease approximately 200 UPS Freight service centers with approximately 5.9 million square feet of floor
space. 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 spoke pattern in the U.S., with our principal air hub, known as Worldport, 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.
We also have regional air hubs in Columbia, South Carolina; Dallas, Texas; Ontario, California; Philadelphia,
Pennsylvania; and Rockford, Illinois. These hubs house facilities for the sorting, transfer and delivery of packages. Our
European air hub is located in Cologne, Germany, and we maintain Asia-Pacific air hubs in Shanghai, China; Shenzhen, China;
and Hong Kong. Our regional air hub in Canada is located in Hamilton, Ontario, and our regional air hub for Latin America and
the Caribbean is in Miami, Florida.
In the first quarter of 2014, we completed the expansion of our European air hub in Cologne. The expansion project
equipped the existing facility with additional state-of-the-art technology and included a major extension to the existing
building. This extension is partially dedicated to processing larger freight shipments. Together, these initiatives significantly
increased the hub’s package sorting capacity from 112,000 to 190,000 packages per hour. The total cost of the expansion was
approximately $200 million.