UPS 2010 Annual Report Download - page 52

Contractual 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 the expected cash outflow to satisfy our
contractual obligations and commitments as of December 31, 2010 (in millions):
Commitment Type 2011 2012 2013 2014 2015 After 2016 Total
Capital Leases ......................... $ 18 $ 19 $ 19 $ 20 $ 21 $ 112 $ 209
Operating Leases ....................... 348 268 205 150 113 431 1,515
Debt Principal ......................... 345 — 1,750 1,000 100 7,363 10,558
Debt Interest ........................... 322 321 300 274 269 4,940 6,426
Purchase Commitments .................. 642 463 425 16 — — 1,546
Pension Fundings ....................... 1,200 196 752 541 274 — 2,963
Other Liabilities ........................ 69 67 64 58 43 38 339
Total ................................. $2,944 $1,334 $3,515 $2,059 $820 $12,884 $23,556
Our capital lease obligations relate primarily to leases on aircraft. Capital leases, operating leases, and
purchase commitments, as well as our debt principal obligations, are discussed further in Note 7 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, 2010. The calculations of debt interest take into account the effect of interest
rate swap agreements. For debt denominated in a foreign currency, the U.S. Dollar equivalent principal amount
of the debt at the end of the year was used as the basis to calculate future interest payments.
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. As of December 31, 2010, we have firm
commitments to purchase 20 Boeing 767-300ER freighters to be delivered between 2011 and 2013, and two
Boeing 747-400F aircraft scheduled for delivery during 2011. These aircraft purchase orders will provide for the
replacement of existing capacity and anticipated future growth.
Pension fundings represent the anticipated required cash contributions that will be made to our qualified
pension plans. These contributions include those to the UPS IBT Pension Plan, which was established upon
ratification of the national master agreement with the Teamsters, as well as the UPS Pension Plan. These plans
are discussed further in Note 5 to the consolidated financial statements. The pension funding requirements were
estimated under the provisions of the Pension Protection Act of 2006 and the Employee Retirement Income
Security Act of 1974, using discount rates, asset returns, and other assumptions appropriate for these plans. To
the extent that the funded status of these plans in future years differs from our current projections, the actual
contributions made in future years could materially differ from the amounts shown in the table above.
Additionally, we have not included minimum funding requirements beyond 2015, because these projected
contributions are not reasonably determinable.
We are not subject to any minimum funding requirement for cash contributions in 2011 in the UPS
Retirement Plan or UPS Pension Plan. The amount of any minimum funding requirement, as applicable, for these
plans could change significantly in future periods, depending on many factors, including future plan asset returns
and discount rates. A sustained significant decline in the world equity markets, and the resulting impact on our
pension assets and investment returns, could result in our domestic pension plans being subject to significantly
higher minimum funding requirements. Such an outcome could have a material adverse impact on our financial
position and cash flows in future periods.
The contractual payments due for “other liabilities” primarily include commitment payments related to our
investment in certain partnerships. The table above does not include approximately $284 million of liabilities for
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