UPS 2007 Annual Report Download - page 48

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Issuances of debt during 2007 consisted primarily of issuances of commercial paper and UPS Notes.
Repayments of debt consisted primarily of scheduled principal payments on our capital lease obligations and
principal payments on debt related to our investment in certain equity-method 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.
Our primary uses of cash in financing activities have been to repurchase stock, pay dividends, and repay
long-term debt. In October 2007, the Board of Directors approved an increase in our share repurchase
authorization to $2.0 billion, which replaced the remaining amount available under our February 2007 share
repurchase authorization. For the years ended December 31, 2007, 2006 and 2005, we repurchased a total of
35.9, 32.6, and 33.9 million shares of Class A and Class B common stock for $2.618 , $2.455, and $2.479 billion,
respectively ($2.639, $2.460, and $2.479 billion reported on the statement of cash flows due to timing of
settlements).
In January 2008, we announced a new financial policy regarding our capital structure to enhance
shareowner value. Prospectively, we intend to manage our balance sheet to a target debt ratio of approximately
50%-60% funds from operations to total debt. To implement this policy, the Board of Directors authorized an
increase in our share repurchase authorization to $10.0 billion. We intend to complete this level of share
repurchases within two years. Share repurchases may take the form of an accelerated share repurchase program,
open market purchases, or other such methods as we deem appropriate.
We increased our quarterly cash dividend payment to $0.42 per share in 2007 from $0.38 per share in 2006,
resulting in an increase in total cash dividends paid to $1.703 billion from $1.577 billion. The declaration of
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. On January 31, 2008, our Board declared a dividend of
$0.45 per share, which is payable on March 4, 2008 to shareowners of record on February 11, 2008. The Board
also approved an earlier payment schedule for the dividend typically declared in November. Beginning in 2008
and going forward, that dividend is expected to be paid in December instead of the following January. The
movement of the fourth quarter dividend payment into December will result in a total of five dividend payments
being made in 2008.
Sources of Credit
We are authorized to borrow up to $10.0 billion under our U.S. commercial paper program. We had $7.366
billion outstanding under this program as of December 31, 2007, with an average interest rate of 4.36%. At
December 31, 2007, we classified $4.0 billion of our commercial paper as long-term debt on our balance sheet,
due to the subsequent refunding of the commercial paper through the issuance of long-term debt, as discussed
further below. 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, 2007.
In November 2007, we filed a shelf registration statement under which we may issue debt securities in the
United States. On January 15, 2008, we completed an offering of $1.750 billion of 4.50% senior notes due
January 2013, $750 million of 5.50% senior notes due January 2018, and $1.500 billion of 6.20% senior notes
due January 2038. All of these notes pay interest semiannually, and allow for redemption of the notes by UPS at
any time by paying the greater of the principal amount or a “make-whole” amount, plus accrued interest. After
pricing and underwriting discounts, we received a total of $3.961 billion in cash proceeds from the offering. The
proceeds from the offering were used to reduce our outstanding commercial paper balance.
We maintain three credit agreements with a consortium of banks, two of which provide revolving credit
facilities of $1.0 billion each, with one expiring April 17, 2008 and the other April 19, 2012, and the third
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