UPS 2005 Annual Report Download - page 43

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dividends is subject to the discretion of the Board of Directors and will depend on various factors, including our
net income, financial condition, cash requirements, future prospects, and other relevant factors. We expect to
continue the practice of paying regular cash dividends.
During 2005, we repaid $589 million in debt, primarily consisting of paydowns of commercial paper,
scheduled principal payments on capital lease obligations, and repayments of debt that was previously assumed
with the acquisitions of Lynx Express Ltd. and Overnite Corp. Issuances of debt were $128 million in 2005, and
consisted primarily of loans related to our investment in certain equity-method real estate partnerships. We
consider the overall fixed and floating interest rate mix of our portfolio and the related overall cost of borrowing
when planning for future issuances and non-scheduled repayments of debt.
Sources of Credit
We maintain two commercial paper programs under which we are authorized to borrow up to $7.0 billion in
the United States. We had $739 million outstanding under these programs as of December 31, 2005, with an
average interest rate of 4.01%. The entire balance outstanding has been classified as a current liability in our
balance sheet. We also maintain a European commercial paper program under which we are authorized to borrow
up to €1.0 billion in a variety of currencies. There were no amounts outstanding under this program as of
December 31, 2005.
We maintain two credit agreements with a consortium of banks. These agreements provide revolving credit
facilities of $1.0 billion each, with one expiring on April 20, 2006 and the other on April 21, 2010. Interest on
any amounts we borrow under these facilities would be charged at 90-day LIBOR plus 15 basis points. There
were no borrowings under either of these agreements as of December 31, 2005.
In August 2003, we filed a $2.0 billion shelf registration statement under which we may issue debt securities
in the United States. There was approximately $126 million issued under this shelf registration statement at
December 31, 2005, all of which consists of issuances under our UPS Notes program.
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. These covenants generally
require us to maintain a $3.0 billion minimum net worth and limit the amount of secured indebtedness available
to the company. These covenants are not considered material to the overall financial condition of the company,
and all covenant tests were satisfied as of December 31, 2005.
Commitments
We have contractual obligations and commitments in the form of operating leases, capital 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 our contractual obligations and
commitments as of December 31, 2005 (in millions):
Year
Capitalized
Leases
Operating
Leases
Debt
Principal
Purchase
Commitments
Other
Liabilities
2006 ....................................... $ 64 $ 403 $ 774 $1,280 $ 48
2007 ....................................... 107 348 70 826 68
2008 ....................................... 115 248 37 738 69
2009 ....................................... 66 176 104 652 65
2010 ....................................... 61 126 30 478 62
After 2010 .................................. 1 544 2,637 689 285
Total ....................................... $414 $1,845 $3,652 $4,663 $597
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