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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
83
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, Kentucky; Dallas, Texas; and Philadelphia, Pennsylvania. Under these
arrangements, we enter into a lease or loan agreement that covers the debt service obligations on the bonds issued by the
municipalities, as follows:
• Bonds with a principal balance of $149 million issued by the Louisville Regional Airport Authority associated with
our Worldport facility in Louisville, Kentucky. The bonds, which are due in January 2029, bear interest at a variable
rate, and the average interest rates for 2012 and 2011 were 0.15% and 0.11%, respectively.
• Bonds with a principal balance of $42 million and due in November 2036 issued by the Louisville Regional Airport
Authority associated with our air freight facility in Louisville, Kentucky. The bonds bear interest at a variable rate, and
the average interest rates for 2012 and 2011 were 0.15% and 0.11%, respectively.
• Bonds with a principal balance of $29 million issued by the Dallas / Fort Worth International Airport Facility
Improvement Corporation associated with our Dallas, Texas airport facilities. The bonds are due in May 2032 and bear
interest at a variable rate, however the variable cash flows on the obligation have been swapped to a fixed 5.11%.
• Bonds with a principal balance of $100 million issued by the Delaware County, Pennsylvania Industrial Development
Authority associated with our Philadelphia, Pennsylvania airport facilities. The bonds, which are due in December
2015, bear interest at a variable rate, and the average interest rates for 2012 and 2011 were 0.13% and 0.11%,
respectively.
Pound Sterling Notes
The Pound Sterling notes consist of two separate tranches, as follows:
• Notes with a principal amount of £66 million accrue interest at a 5.50% fixed rate, and are due in February 2031.
These notes are not callable.
• Notes with a principal amount of £455 million accrue interest at a 5.13% fixed rate, and are due in February 2050.
These 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.
We maintain cross-currency interest rate swaps to hedge the foreign currency risk associated with the bond cash flows for both
tranches of these bonds. 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 $619, $629 and $615 million for 2012, 2011 and 2010, respectively.