UPS 2015 Annual Report Download - page 107

Download and view the complete annual report

Please find page 107 of the 2015 UPS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
95
Fixed Rate Senior Notes
We have completed several offerings of fixed rate senior notes. All of the notes pay interest semiannually, and allow for
redemption of the notes by UPS at any time by paying the greater of the principal amount or a “make-whole” amount, plus
accrued interest. We subsequently entered into interest rate swaps on several of these notes, which effectively converted the
fixed interest rates on the notes to variable LIBOR-based interest rates. The average interest rate payable on these notes,
including the impact of the interest rate swaps, for 2015 and 2014, respectively, were as follows:
Principal
Average Effective
Interest Rate
Value Maturity 2015 2014
3.875% senior notes $ 1,000 2014 —% 0.94%
1.125% senior notes $ 375 2017 0.68% 0.60%
5.50% senior notes $ 750 2018 2.54% 2.49%
5.125% senior notes $ 1,000 2019 2.06% 1.97%
3.125% senior notes $ 1,500 2021 1.04% 1.06%
2.45% senior notes $ 1,000 2022 0.87% 0.82%
On April 1, 2014, our $1.00 billion 3.875% senior notes matured and were repaid in full. The principal balance of the
senior notes was repaid from the proceeds of short-term commercial paper issuances.
8.375% Debentures
The 8.375% debentures consist of two separate tranches, as follows:
• $276 million of the debentures have a maturity of April 1, 2030. These debentures have an 8.375% interest rate until
April 1, 2020, and, thereafter, the interest rate will be 7.62% for the final 10 years. These 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.
• $424 million of the debentures have a maturity of April 1, 2020. These debentures are not subject to redemption prior
to maturity.
Interest is payable semiannually on the first of April and October for both tranches and neither tranche 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 2015 and 2014 was 5.04% and 4.99%, respectively.
Floating Rate Senior Notes
The floating rate senior notes bear interest at either one or three-month LIBOR, less a spread ranging from 30 to 45 basis
points. The average interest rate for 2015 and 2014 was 0.01% and 0.00%, respectively. 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 2065. In 2014, we redeemed notes with a
principal value of $1 million after put options were exercised by the note holders.
In September 2015 and December 2015, we issued floating rate senior notes with principal balances of $104 and $40
million, respectively. These issuances bear interest at a rate equal to three-month LIBOR less 30 basis points and mature in
2065.
In December 2014, we issued floating rate senior notes with a principal amount of $90 million that bears interest at three-
month LIBOR less 30 basis points. These notes mature in 2064.