UPS 2008 Annual Report Download - page 49

defend ourselves in these cases, and defendants’ motion to dismiss is pending for decision by the Court. These
cases are at a preliminary stage and at this time, we have not determined the amount of any liability that may
result from this matter or whether such liability, if any, would have a material adverse effect on our financial
condition, results of operations, or liquidity.
We are a defendant in various other lawsuits that arose in the normal course of business. We believe that the
eventual resolution of these cases will not have a material adverse effect on our financial condition, results of
operations, or liquidity.
We file income tax returns in the U.S. federal jurisdiction, most U.S. state and local jurisdictions, and many
non-U.S. jurisdictions. As of December 31, 2008, we had substantially resolved all U.S. federal income tax
matters for tax years prior to 1999. In February and July 2008, the Internal Revenue Service (“IRS”) completed
its audit of the tax years 1999 through 2002 and tax years 2003 through 2004, respectively, with only a limited
number of issues that will be considered by the IRS Appeals Office by the end of 2009. In late 2008, the IRS
began the initial planning phase of the income tax audit for tax years 2005 through 2007. Along with this audit
for tax years 2005 through 2007, the IRS is currently examining non-income based taxes, including employment
and excise taxes on transportation of property by air and fuel purchases, which could lead to proposed
assessments. The IRS has not presented an official position with regard to these taxes at this time, and therefore
we are not able to determine the technical merit of any potential assessment; however, we do not believe that the
resolution of this matter would have a material adverse effect on our financial condition, results of operations, or
liquidity. With few exceptions, we are no longer subject to U.S. state and local and non-U.S. income tax
examinations by tax authorities for tax years prior to 1999, but certain U.S. state and local matters are subject to
ongoing litigation.
As of December 31, 2008, we had approximately 260,000 employees employed under a national master
agreement and various supplemental agreements with local unions affiliated with the Teamsters. In September
2007, we reached a new national master agreement with the Teamsters, which was ratified in December 2007.
The new agreement provides for wage increases as well as contributions to healthcare and pension plans, and
most economic provisions of the new five year agreement took effect on August 1, 2008, with the exception of
our withdrawal from the Central States Pension Fund which occurred in 2007. We have approximately 2,900
pilots who are employed under a collective bargaining agreement with the Independent Pilots Association, which
becomes amendable at the end of 2011. Our airline mechanics are covered by a collective bargaining agreement
with Teamsters Local 2727, which became amendable in November 2006. We began formal negotiations with
Teamsters Local 2727 in October 2006. In addition, the majority of our ground mechanics who are not employed
under agreements with the Teamsters are employed under collective bargaining agreements with the International
Association of Machinists and Aerospace Workers (approximately 3,000). These agreements run through
July 31, 2009.
We participate in a number of trustee-managed multi-employer pension and health and welfare plans for
employees covered under collective bargaining agreements. Several factors could cause us to make significantly
higher future contributions to these plans, including unfavorable investment performance, changes in
demographics, and increased benefits to participants. At this time, we are unable to determine the amount of
additional future contributions, if any, or whether any material adverse effect on our financial condition, results
of operations, or liquidity would result from our participation in these plans.
Other Matters
We received grand jury subpoenas from the Antitrust Division of the DOJ regarding the DOJ’s
investigations into certain pricing practices in the air cargo industry in July 2006, and into certain pricing
practices in the freight forwarding industry in December 2007. In October 2007 and June 2008, we received
information requests from the European Commission relating to its investigation of certain pricing practices in
the freight forwarding industry. We also received and responded to related information requests from
competition authorities in other jurisdictions. We are cooperating with these inquiries.
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