UPS 2009 Annual Report Download - page 51

In addition to these credit facilities, we have an automatically effective registration statement on Form S-3
filed with the SEC that is available for registered offerings of short or long-term debt securities.
Our existing debt instruments and credit facilities do not have cross-default or ratings triggers, however
these debt instruments and credit facilities do subject us to certain financial covenants. As of December 31, 2009
and for all prior periods presented, we have satisfied these financial covenants. These covenants limit the amount
of secured indebtedness that we may incur, and limit the amount of attributable debt in sale-leaseback
transactions, to 10% of net tangible assets. As of December 31, 2009, 10% of net tangible assets is equivalent to
$2.296 billion, however we have no covered sale-leaseback transactions or secured indebtedness outstanding.
Additionally, we are required to maintain a minimum net worth, as defined, of $5.0 billion on a quarterly basis.
As of December 31, 2009, our net worth, as defined, was equivalent to $12.757 billion. We do not expect these
covenants to have a material impact on our financial condition or liquidity.
Guarantees and Other Off-Balance Sheet Arrangements
We do not have guarantees or other off-balance sheet financing arrangements, including variable interest
entities, which we believe could have a material impact on financial condition or liquidity.
Contractual Commitments
We have contractual obligations and commitments in the form of capital leases, operating leases, debt
obligations, purchase commitments, and certain other liabilities. We intend to satisfy these obligations through
the use of cash flow from operations. The following table summarizes the expected cash outflow to satisfy our
contractual obligations and commitments as of December 31, 2009 (in millions):
Commitment Type 2010 2011 2012 2013 2014 After 2014 Total
Capital Leases ........................ $ 122 $ 30 $ 31 $ 32 $ 33 $ 218 $ 466
Operating Leases ...................... 364 279 211 155 113 468 1,590
Debt Principal ........................ 755 5 8 1,752 1,021 5,592 9,133
Debt Interest ......................... 317 317 316 296 270 4,662 6,178
Purchase Commitments ................ 680 541 480 370 62 20 2,153
Pension Fundings ..................... 980 908 1,075 509 211 — 3,683
Other Liabilities ...................... 71 69 67 64 58 81 410
Total ............................... $3,289 $2,149 $2,188 $3,178 $1,768 $11,041 $23,613
Our capital lease obligations relate primarily to leases on aircraft. Capital leases, operating leases, and
purchase commitments, as well as our debt principal obligations, are discussed further in Note 7 to our
consolidated financial statements. The amount of interest on our debt was calculated as the contractual interest
payments due on our fixed-rate debt, in addition to interest on variable rate debt that was calculated based on
interest rates as of December 31, 2009. The calculations of debt interest take into account the effect of interest
rate swap agreements. For debt denominated in a foreign currency, the U.S. Dollar equivalent principal amount
of the debt at the end of the year was used as the basis to calculate future interest payments.
Purchase commitments represent contractual agreements to purchase goods or services that are legally
binding, the largest of which are orders for aircraft, engines, and parts. As of December 31, 2009, we maintain
orders for 25 Boeing 767-300ER freighters to be delivered between 2010 and 2014, and 2 Boeing 747-400F
aircraft scheduled for delivery during 2010. These aircraft purchase orders will provide for the replacement of
existing capacity and anticipated future growth.
Pension fundings represent the anticipated required cash contributions that will be made to the UPS IBT
Pension Plan, which was established upon ratification of the national master agreement with the Teamsters, as
well as the UPS Retirement Plan and the UPS Pension Plan. These plans are discussed further in Note 5 to the
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