UPS 2006 Annual Report Download - page 87

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
debentures are not subject to redemption prior to maturity. Interest is payable semiannually on the first of April
and October for both debentures and neither debenture is subject to sinking fund requirements. The fixed
obligations associated with the debentures are swapped to floating rates, based on six month LIBOR plus a
spread. Including the effect of the swaps, the average interest rate paid on the debentures for 2006 and 2005 was
8.00% and 7.39%, respectively.
Commercial Paper:
The weighted average interest rate on the commercial paper outstanding as of December 31, 2006 and 2005,
was 5.20% and 4.01%, respectively. At December 31, 2006 and 2005, the entire commercial paper balance has
been classified as a current liability. The amount of commercial paper outstanding in 2007 is expected to
fluctuate. We are authorized to borrow up to $7.0 billion under the two U.S. commercial paper programs we
maintain as of December 31, 2006. 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, however no amounts were outstanding under
this program as of December 31, 2006.
Floating Rate Senior Notes:
The floating rate senior notes bear interest at one-month LIBOR less 45 basis points. The average interest
rates for 2006 and 2005 were 4.66% and 2.87%, respectively. These notes are callable at various times after 30
years at a stated percentage of par value, and putable by the note holders at various times after 10 years at a
stated percentage of par value. The notes have maturities ranging from 2049 through 2053.
Capital Lease Obligations:
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):
2006 2005
Aircraft ........................................................... $2,383 $2,054
Accumulated amortization ............................................ (390) (315)
$1,993 $1,739
These capital lease obligations have principal payments due at various dates from 2007 through 2010.
Facility Notes and Bonds:
We have entered into agreements with certain municipalities to finance the construction of, or
improvements to, facilities that support our U.S. Domestic Package and Supply Chain & Freight operations in the
United States. These facilities are located around airport properties in Louisville, KY; Dallas, TX; Philadelphia,
PA; and Dayton, OH. Under these arrangements, we enter into a lease or loan agreement that covers the debt
service obligations on the bonds issued by the municipalities, as follows:
• Bonds with a principal balance of $149 million issued by the Louisville Regional Airport Authority
associated with our Worldport facility in Louisville, KY. The bonds, which are due in January 2029,
bear interest at a variable rate, and the average interest rates for 2006 and 2005 were 3.43% and 2.41%,
respectively.
• Bonds with a principal balance of $43 million issued by the Louisville Regional Airport Authority
associated with our air freight facility in Louisville, KY. The bonds were issued in November 2006 and
are due in November 2036. The bonds bear interest at a variable rate, and the average interest rate from
the time of issuance in November 2006 was 3.77%.
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