UPS 2006 Annual Report Download - page 47

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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 $791 million outstanding under these programs as of December 31, 2006, with an
average interest rate of 5.20%. 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, 2006.
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 19, 2007 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, 2006.
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 $136 million issued under this shelf registration statement at December 31, 2006,
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, 2006.
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 our contractual obligations and
commitments as of December 31, 2006 (in millions), including the Boeing 767-300ER order discussed further
below:
Year
Capital
Leases
Operating
Leases
Debt
Principal
Debt
Interest
Purchase
Commitments
Other
Liabilities
2007 .................................. $ 75 $ 404 $ 918 $ 196 $1,072 $ 67
2008 .................................. 75 335 27 170 988 78
2009 .................................. 41 243 83 169 499 74
2010 .................................. 62 168 30 165 1,022 71
2011 .................................. 1 119 33 164 1,184 69
After 2011 .............................. — 505 2,766 2,849 1,636 270
Total .................................. $254 $1,774 $3,857 $3,713 $6,401 $629
Our capital lease obligations relate primarily to leases on aircraft. These lease obligations and commitments,
as well as our debt principal obligations, are discussed further in Note 8 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, 2006.
The calculations of debt interest do not take into account the effect of interest rate swap agreements.
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. We have firm commitments to purchase
four Boeing MD-11 aircraft, and we expect to take delivery of these aircraft during 2007. In February 2007, we
announced an order for 27 Boeing 767-300ER freighters to be delivered between 2009 and 2012 (this order is
32