UPS 2005 Annual Report Download - page 84

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(vi) We have certain aircraft subject to capital leases. Some of the obligations associated with these capital
leases have been legally defeased. The recorded value of aircraft subject to capital leases, which are
included in Property, Plant and Equipment is as follows as of December 31 (in millions):
2005 2004
Aircraft ........................................................... $2,054 $1,795
Accumulated amortization ............................................ (315) (257)
$1,739 $1,538
(vii) The UPS Notes program involves the periodic issuance of fixed rate notes in $1,000 increments with various
terms and maturities. At December 31, 2005, the coupon rates of the outstanding notes varied between
3.00% and 6.20%, and the interest payments are made either monthly, quarterly or semiannually. The
maturities of the notes range from 2006 to 2024. Substantially all of the fixed obligations associated with the
notes were swapped to floating rates, based on different LIBOR indices plus or minus a spread. The average
interest rate payable on the swaps for 2005 and 2004 was 3.09% and 1.13%, respectively.
(viii) The special facilities revenue bonds were assumed in the acquisition of Menlo Worldwide Forwarding in
December 2004 (see Note 7). The bonds have a par value of $108 million, $62 million of which is due in
2009, while the remaining $46 million is due in 2018. The bonds due in 2018 are callable beginning in
2008. The bonds due in 2018 bear interest at a fixed rate of 5.63%, while the bonds due in 2009 bear interest
at fixed rates ranging from 6.05% to 6.20%. The bonds were recorded at fair value on the date of
acquisition.
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 $4.327 and $4.708
billion as of December 31, 2005 and 2004, respectively.
We lease certain aircraft, facilities, 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 $742, $693, and $678 million for 2005, 2004 and 2003, respectively.
The following table sets forth the aggregate minimum lease payments under capitalized 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
Capitalized
Leases
Operating
Leases
Debt
Principal
Purchase
Commitments
2006 ................................................ $ 64 $ 403 $ 774 $1,280
2007 ................................................ 107 348 70 826
2008 ................................................ 115 248 37 738
2009 ................................................ 66 176 104 652
2010 ................................................ 61 126 30 478
After 2010 ........................................... 1 544 2,637 689
Total................................................ 414 $1,845 $3,652 $4,663
Less: imputed interest .................................. (136)
Present value of minimum capitalized lease payments ......... 278
Less: current portion ................................... (54)
Long-term capitalized lease obligations .................... $224
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