UPS 2005 Annual Report Download - page 97

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Employee Severance
Employee severance costs relate to severance packages for approximately 550 people. The packages are
involuntary and are formula-driven based on salary levels and past service. The current and planned separations
span the entire business unit, including the operations, information technology, finance, and business
development functions.
Asset Impairment
Asset impairment charges result from establishing new carrying values for assets that have been or will be
abandoned. Impaired assets consist primarily of the Menlo Worldwide Forwarding facility in Dayton, Ohio,
which we plan to close by June 2006. Other impaired assets include capitalized software that is redundant with
existing UPS software, and will thus no longer be used.
Facility Consolidation
Facility consolidation costs are associated with terminating operating leases on offices, warehouses, and
other Menlo Worldwide Forwarding facilities.
Other Costs
Other costs consist primarily of costs associated with the termination of certain Menlo Worldwide
Forwarding legal entities and joint ventures, as well as environmental remediation costs.
NOTE 18. QUARTERLY INFORMATION (unaudited)
First Quarter Second Quarter Third Quarter Fourth Quarter
2005 2004 2005 2004 2005 2004 2005 2004
Revenue:
U.S. Domestic Package . . . . . $6,811 $6,625 $ 6,942 $6,567 $ 7,033 $6,581 $ 7,824 $7,187
International Package . . . . . . 1,842 1,630 1,997 1,627 1,918 1,675 2,220 1,877
Supply Chain & Freight . . . . 1,233 664 1,252 677 1,599 696 1,910 776
Totalrevenue......... 9,886 8,919 10,191 8,871 10,550 8,952 11,954 9,840
Operating profit:
U.S. Domestic Package . . . . . 1,028 912 1,118 988 1,110 941 1,237 861
International Package . . . . . . 348 277 397 281 318 266 431 325
Supply Chain & Freight .... 9 28 34 41 70 51 43 18
Total operating profit . . 1,385 1,217 1,549 1,310 1,498 1,258 1,711 1,204
Netincome .................. $ 882 $ 759 $ 986 $ 818 $ 953 $ 890 $ 1,049 $ 866
Earnings per share:
Basic ................... $ 0.78 $ 0.67 $ 0.88 $ 0.73 $ 0.86 $ 0.79 $ 0.95 $ 0.77
Diluted.................. $ 0.78 $ 0.67 $ 0.88 $ 0.72 $ 0.86 $ 0.78 $ 0.95 $ 0.76
Third quarter 2004 net income includes a credit to tax expense ($99 million, $0.09 per diluted share) related
to the resolution of various tax matters. Fourth quarter 2004 net income includes an impairment charge ($70
million after-tax, $0.06 per diluted share) on Boeing 727, 747, and McDonnell Douglas DC-8 aircraft, and related
engines and parts, and a charge to pension expense ($40 million after-tax, $0.04 per diluted share) resulting from
the consolidation of data collection systems. Fourth quarter 2004 net income also includes credits to income tax
expense ($43 million, $0.04 per diluted share) related to various items, including the resolution of certain tax
matters, the removal of a portion of the valuation allowances on certain deferred tax assets on net operating loss
carryforwards, and an adjustment for identified tax contingency items.
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