UPS 2007 Annual Report Download - page 89

Download and view the complete annual report

Please find page 89 of the 2007 UPS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 115

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
interest thereon discounted to the date of redemption at a benchmark U.K. government bond yield plus 15 basis
points and accrued interest. The £66 million of existing notes that were not exchanged continue to bear interest at
5.50% and are due in 2031. We accounted for the exchange in accordance with EITF 96-19 “Debtor’s
Accounting for a Modification or Exchange of Debt Instruments”, and as such, no gain or loss was recognized
upon the completion of this transaction.
Other Debt:
The other debt balance primarily relates to loans entered into in conjunction with our investment in various
partnerships. Substantially all of this debt is classified as a current liability. The implied interest rates on this debt
range from 3.20% to 6.43%.
Other Information
Based on the borrowing rates currently available to the Company for long-term debt with similar terms and
maturities, the fair value of long-term debt, including current maturities, is approximately $11.238 and $4.391
billion as of December 31, 2007 and 2006, respectively.
We lease certain aircraft, facilities, equipment and vehicles under operating leases, which expire at various
dates through 2108. Certain of the leases contain escalation clauses and renewal or purchase options. Rent
expense related to our operating leases was $896, $912, and $843 million for 2007, 2006, and 2005, respectively.
The following table sets forth the aggregate minimum lease payments under capital and operating leases, the
aggregate annual principal payments due under our long-term debt, and the aggregate amounts expected to be
spent for purchase commitments (in millions).
Year
Capital
Leases
Operating
Leases
Debt
Principal
Purchase
Commitments
2008 .................................................. $108 $ 378 $ 3,426 $1,306
2009 .................................................. 73 325 83 791
2010 .................................................. 91 237 40 729
2011 .................................................. 31 166 33 698
2012 .................................................. 31 116 26 304
After 2012 .............................................. 285 560 6,919 —
Total .................................................. 619 $1,782 $10,527 $3,828
Less: imputed interest ..................................... (140)
Present value of minimum capitalized lease payments ........... 479
Less: current portion ...................................... (86)
Long-term capitalized lease obligations ....................... $393
In November 2007, we filed a shelf registration statement under which we may issue debt securities in the
United States. In January 2008, we completed an offering of $1.750 billion of 4.50% senior notes due January
2013, $750 million of 5.50% senior notes due January 2018, and $1.500 billion of 6.20% senior notes due
January 2038. All of the notes pay interest semiannually, and allow for redemption of the notes by UPS at any
time by paying the greater of the principal amount or a “make-whole” amount, plus accrued interest. After
pricing and underwriting discounts, we received a total of $3.961 billion in cash proceeds from the offering. The
F-26