UPS 2010 Annual Report Download - page 100

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
floating rates, based on different LIBOR indices plus or minus a spread. The average interest rate payable on the
notes, including the effect of any associated interest rate swaps, for 2009 was 3.95%. In 2010, all of the
remaining outstanding notes were called for early redemption.
Pound Sterling Notes
The Pound Sterling notes were issued in 2001 with a principal balance of £500 million, accrue interest at a
5.50% fixed rate, and are due on February 12, 2031. In May 2007, we completed an exchange offer for the
existing notes. Holders of £434 million of the notes accepted the exchange offer, and as a result, these notes were
exchanged for new notes with a principal amount of £455 million, bearing interest at 5.13% and due in February
2050. The new notes are callable at our option at a redemption price equal to the greater of 100% of the principal
amount and accrued interest, or the sum of the present values of the remaining scheduled payout of principal and
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 maintain cross-currency interest rate swaps to hedge the foreign currency risk
associated with the bond cash flows. The average fixed interest rate payable on the swaps is 5.72%.
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 5.20% to 6.40%.
Contractual Commitments
We lease certain aircraft, facilities, land, equipment and vehicles under operating leases, which expire at
various dates through 2055. Certain of the leases contain escalation clauses and renewal or purchase options.
Rent expense related to our operating leases was $615, $622, and $834 million for 2010, 2009, and 2008,
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
2011 .................................................. $ 18 $ 348 $ 345 $ 642
2012 .................................................. 19 268 — 463
2013 .................................................. 19 205 1,750 425
2014 .................................................. 20 150 1,000 16
2015 .................................................. 21 113 100 —
After 2015 ............................................. 112 431 7,363 —
Total .................................................. 209 $1,515 $10,558 $1,546
Less: imputed interest .................................... (49)
Present value of minimum capitalized lease payments ........... 160
Less: current portion ..................................... (10)
Long-term capitalized lease obligations ...................... $150
88