UPS 2011 Annual Report Download - page 109

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
existing notes. Holders of £434 million of the notes accepted the exchange offer, and as a result, these notes were
exchanged for new notes with a principal amount of £455 million, bearing interest at 5.13% and due in February
2050. The new notes are callable at our option at a redemption price 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 U.K. government bond yield plus 15 basis
points and accrued interest. The £66 million of existing notes that were not exchanged continue to bear interest at
5.50% and are due in 2031. We maintain cross-currency interest rate swaps to hedge the foreign currency risk
associated with the bond cash flows. The average fixed interest rate payable on the swaps is 5.72%.
Contractual Commitments
We lease certain aircraft, facilities, land, equipment and vehicles under operating leases, which expire at
various dates through 2038. Certain of the leases contain escalation clauses and renewal or purchase options.
Rent expense related to our operating leases was $629, $615 and $622 million for 2011, 2010, and 2009,
respectively.
The following table sets forth the aggregate minimum lease payments under capital and operating leases, the
aggregate annual principal payments due under our long-term debt, and the aggregate amounts expected to be
spent for purchase commitments (in millions).
Year
Capital
Leases
Operating
Leases
Debt
Principal
Purchase
Commitments
2012 .................................................. $ 59 $ 329 $ — $ 517
2013 .................................................. 56 257 1,750 453
2014 .................................................. 51 192 1,000 32
2015 .................................................. 50 140 100 16
2016 .................................................. 48 97 — 34
After 2016 ............................................. 474 393 7,366 —
Total .................................................. 738 $1,408 $10,216 $1,052
Less: imputed interest .................................... (269)
Present value of minimum capitalized lease payments ........... 469
Less: current portion ..................................... (33)
Long-term capitalized lease obligations ...................... $436
As of December 31, 2011, we had outstanding letters of credit totaling approximately $1.551 billion issued
in connection with our self-insurance reserves and other routine business requirements. We also issue surety
bonds as an alternative to letters of credit in certain instances, and as of December 31, 2011, we had $583 million
of surety bonds written.
Available Credit
We maintain two credit agreements with a consortium of banks. One of these agreements provides revolving
credit facilities of $1.5 billion, and expires on April 12, 2012. Generally, amounts outstanding under this facility
bear interest at a periodic fixed rate equal to LIBOR for the applicable interest period and currency denomination,
plus an applicable margin. Alternatively, a fluctuating rate of interest equal to Citibank’s publicly announced base
rate, plus an applicable margin, may be used at our discretion. In each case, the applicable margin for advances
bearing interest based on LIBOR is a percentage determined by quotations from Markit Group Ltd. for our 1-year
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