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UPS delivers tax charge
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August 16, 1999: 5:31 p.m. ET
World's biggest delivery company owes about $1.44 billion in back taxes
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NEW YORK (CNNfn) - United Parcel Service Inc. said Monday it will post an $854 million loss for its second quarter because of a court decision that may force it eventually to pay the U.S. government about $1.5 billion in back taxes, significantly more than analysts had expected.
In a filing with the Securities and Exchange Commission, the world's biggest package delivery company disclosed that it will take an additional charge against its second-quarter earnings to pay for the back taxes, resulting in a final net loss for the quarter ended June 30. UPS said it owes $246 million in back taxes for 1984. UPS initially reported second quarter earnings at $588 million.
To cover its estimated liabilities for the following 15 years through 1999, UPS said it has recorded a tax assessment charge of $1.786 billion on its books, which was partially offset by a $344 million tax benefit owing to the company. That leaves the final net charge at $1.44 billion, nearly five times the amount analysts had expected.
UPS said it has put aside a little more than that -- about $1.672 billion for the 15-year period -- to pay to the IRS. The United States Tax Court decided that UPS is liable for income tax owing on its Overseas Partners Ltd. subsidiary -- a Bermuda-based company that handled insurance on its packages for all years through 1999.
The tax bill, while significantly higher than initially anticipated by both analysts and UPS, likely won't detain Big Brown from following through with its initial public offering later this year, according to analysts who follow transportation companies.
UPS said it is evaluating possible options, including an appeal. The Atlanta-based company also said it has sufficient cash, cash equivalents and marketable securities on hand to satisfy the estimated maximum payments and still plans to go ahead with its 10 percent IPO.
UPS is privately held but announced plans last month to raise about $3 billion by offering 10 percent of its stock to the public.
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UPS
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