UPS 2011 Annual Report Download - page 107

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
After pricing and underwriting discounts, we received a total of $1.989 billion in cash proceeds from the
offering. The proceeds from the offering were used for general corporate purposes, including the reduction of our
outstanding commercial paper balance. We subsequently entered into interest rate swaps on the 2014 and the
2019 notes, which effectively converted the fixed interest rates on the notes to variable LIBOR-based interest
rates. The average interest rate payable on the notes, including the impact of the interest rate swaps, for 2011 and
2010, respectively, was 0.99% and 1.02% for the 2014 notes, and 2.04% and 1.69% for the 2019 notes.
In November 2010, we completed an offering of $1.5 billion of 3.125% senior notes due January 2021 and
$500 million of 4.875% senior notes due November 2040. These notes pay interest semiannually, and we may
redeem the notes 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 $1.972 billion in cash proceeds
from the offering. The proceeds from the offering were used to make contributions to our primary domestic
pension plans. We subsequently entered into interest rate swaps on the 2021 notes, which effectively converted
the fixed interest rates on the notes to variable LIBOR-based interest rates. The average interest rate payable on
the 2021 notes, including the impact of the interest rate swaps, for 2011 and 2010, respectively, was 0.52% and
1.76%.
8.375% Debentures
On January 22, 1998, we exchanged $276 million of an original $700 million in debentures for new
debentures of equal principal with a maturity of April 1, 2030. The new debentures have the same interest rate as
the 8.375% debentures due 2020 until April 1, 2020, and, thereafter, the interest rate will be 7.62% for the final
10 years. The 2030 debentures are redeemable in whole or in part at our option at any time. The redemption price
is equal to the greater of 100% of the principal amount and accrued interest or the sum of the present values of
the remaining scheduled payout of principal and interest thereon discounted to the date of redemption at a
benchmark treasury yield plus five basis points plus accrued interest. The remaining $424 million of 2020
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. We subsequently
entered into interest rate swaps on the 2020 notes, which effectively converted the fixed interest rates on the
notes to variable LIBOR-based interest rates. The average interest rate payable on the 2020 notes, including the
impact of the interest rate swaps, for 2011 was 5.97%.
Floating Rate Senior Notes
The floating rate senior notes bear interest at one-month LIBOR less 45 basis points. The average interest
rate for 2011 and 2010 was 0.00% for both years. 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. In 2011 and 2010, we
redeemed notes with a principal value of $10 and $23 million, respectively, after put options were exercised by
the note holders.
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