UPS 2015 Annual Report Download - page 109

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
97
Euro Senior Notes
In November 2015, we issued euro denominated senior notes. The euro senior notes consist of two separate issuances, as
follows:
• Notes with a principal amount of €500 million accrue interest at a variable rate equal to three-month EURIBOR plus
43 basis points and are due in July 2020. Interest is payable quarterly on the notes, commencing April 15, 2016. These
notes are not callable.
• Notes with a principal amount of €700 million accrue interest at a 1.625% fixed rate and are due in November 2025.
Interest is payable annually on the notes, commencing November 15, 2016. These notes are callable at our option at a
redemption price equal to the greater of 100% of the principal amount, 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
German government bond yield plus 20 basis points and accrued interest.
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 $669, $676 and $575 million for 2015, 2014 and 2013, 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
2016 $ 72 $ 324 $ 2,978 $ 257
2017 73 263 377 119
2018 61 197 751 53
2019 59 125 1,000 24
2020 53 84 547 15
After 2020 392 266 8,039 11
Total 710 $ 1,259 $ 13,692 $ 479
Less: imputed interest (235)
Present value of minimum capitalized lease payments 475
Less: current portion (46)
Long-term capitalized lease obligations $ 429
As of December 31, 2015, we had outstanding letters of credit totaling approximately $1.808 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, 2015, we had $623 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 26, 2016. 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, 2015.