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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
90
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 $575, $619 and $629 million for 2013, 2012 and 2011, 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
2014 $ 67 $ 310 $ 1,009 $ 333
2015 65 239 107 100
2016 58 180 6 50
2017 58 146 377 11
2018 53 99 750 —
After 2018 422 242 8,030 —
Total 723 $ 1,216 $ 10,279 $ 494
Less: imputed interest (250)
Present value of minimum capitalized lease payments 473
Less: current portion (39)
Long-term capitalized lease obligations $ 434
As of December 31, 2013, we had outstanding letters of credit totaling approximately $1.023 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, 2013, we had $627 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 March 28, 2014. 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 the highest of (1) JPMorgan Chase Bank’s publicly announced prime rate,
(2) the Federal Funds effective rate plus 0.50%, and (3) LIBOR for a one month interest period plus 1.00% , 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 credit default swap spread, subject to a minimum
rate of 0.10% and a maximum rate of 0.75%. The applicable margin for advances bearing interest based on the prime rate is
1.00% below the applicable margin for LIBOR advances (but not lower than 0.00%). We are also able to request advances
under this facility based on competitive bids for the applicable interest rate. There were no amounts outstanding under this
facility as of December 31, 2013.
The second agreement provides revolving credit facilities of $1.0 billion, and expires on March 29, 2018. 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 the highest of (1)
JPMorgan Chase Bank’s publicly announced prime rate, (2) the Federal Funds effective rate plus 0.50%, and (3) LIBOR for a
one month interest period plus 1.00%, 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
credit default swap spread, interpolated for a period from the date of determination of such credit default swap spread in
connection with a new interest period until the latest maturity date of this facility then in effect (but not less than a period of
one year). The applicable margin is subject to certain minimum rates and maximum rates based on our public debt ratings from
Standard & Poor’s Rating Service and Moody’s Investors Service. The minimum applicable margin rates range from 0.100% to
0.375%, and the maximum applicable margin rates range from 0.750% to 1.250% per annum. The applicable margin for
advances bearing interest based on the prime rate is 1.00% below the applicable margin for LIBOR advances (but not less than
0.00%). We are also able to request advances under this facility based on competitive bids. There were no amounts outstanding
under this facility as of December 31, 2013.