UPS 2008 Annual Report Download - page 85

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
4.50%, 5.50%, and 6.25% Senior Notes:
In January 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 the 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.
Commercial Paper:
The weighted average interest rate on the commercial paper outstanding as of December 31, 2008 and 2007,
was 0.55% and 4.36%, respectively. As of December 31, 2008, we have classified $1.0 billion of this commercial
paper balance as long-term debt, based on our intent and ability to refinance this debt on a long-term basis, with
the remaining $1.922 billion classified as a current liability in our consolidated balance sheet. At December 31,
2007, we had classified $4.0 billion of our commercial paper balance as long-term debt, due to the issuance of
fixed rate notes subsequent to December 31, 2007. The amount of commercial paper outstanding in 2009 is
expected to fluctuate. We are authorized to borrow up to $10.0 billion under the U.S. commercial paper program
we maintain as of December 31, 2008. 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, 2008.
Floating Rate Senior Notes:
The floating rate senior notes bear interest at one-month LIBOR less 45 basis points. The average interest
rates for 2008 and 2007 were 2.48% and 4.85%, 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):
2008 2007
Aircraft ........................................................... $2,571 $2,573
Accumulated amortization ............................................ (491) (416)
$2,080 $2,157
These capital lease obligations have principal payments due at various dates from 2009 through 2021.
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,
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