US Postal Service 2006 Annual Report Download - page 53

2006 Annual Report United States Postal Service | 51
In 2004, we determined that an unused Post Office building in a major
city was impaired. A contract granting a prospective buyer an option to
buy this building was signed. This option was contingent on our making
all necessary repairs to the building. An impairment loss of $24 million
was recorded in order to reduce the carrying value of the property to its
estimated fair value, including the cost of necessary repairs. In 2006, we
recorded an additional charge of $9 million related to this property.
Note 6 – Foreign Currency Translations
Special Drawing Rights
We operate in one segment for our business. We regularly exchange mail
with foreign postal administrations for incoming and outgoing international
mail which results in receivables and payables for terminal dues and
transit fees. Under Universal Postal Union rules, each country agrees to
value transactions in Special Drawing Rights. Therefore the majority of
our international accounts are denominated in SDRs. The SDR exchange
rate fluctuates daily based on a basket of currencies comprised of the
euro, Japanese yen, pound sterling and the U.S. dollar. Changes in the
relative value of these currencies will increase or decrease the value of our
settlement accounts and result in a gain or loss from revaluation reported
in the results from operations. The actual currency used to settle accounts
varies by country.
In addition to the year end revaluation, we also recognize gains and
losses on our payables and receivables when we settle with foreign postal
administrations. The impacts on our financial statements from foreign
currency flucuations were insignificant for 2006, 2005 and 2004.
Note 7 – Commitments
Capital
At September 30, 2006, we estimate our financial commitment for
approved capital projects in progress (resources on order) to be $2,760
million, detailed in the following table.
Capital Resources on Order 2006
(Dollars in millons)
Mail Processing Equipment $ 1,483
Postal Support Equipment 476
Building Improvements 517
Construction and Building Purchase 228
Vehicles 18
Retail Equipment 38
Total Capital Resources on Order $ 2,760
Our total rental expense for the years ended September 30 is summarized
as follows:
Rental Expense 2006 2005 2004
(Dollars in millions)
Non-cancelable real estate leases
including related taxes $ 953 $ 892 $ 896
Facilities leased from GSA
subject to 120-day cancellation 49 42 49
Equipment and other
short-term rentals 192 209 213
Total Rental Expense $ 1,194 $ 1,143 $ 1,158
At September 30, 2006, our future minimum lease payments for all
non-cancelable leases are as follows:
Lease Obligations Operating Capital
(Dollars in millions)
2007 $ 733 $ 95
2008 722 93
2009 691 90
2010 641 87
2011 582 85
After 2011 5,027 621
$ 8,396 $ 1,071
Less: Interest 398
Total Capital Lease Obligations $ 673
Less: Short-term portion of capital lease
obligations 36
Long-term Portion of Capital Lease Obligations $ 637
Most of these leases contain renewal options for periods ranging from 3 to
20 years. Certain non-cancelable real estate leases give us the option to
purchase the facilities at prices specified in the leases.
Capital leases included in buildings were $891 million in 2006 and $906
million in 2005. Total accumulated amortization is $350 million in 2006
and $318 million in 2005. Amortization expense for assets recorded
under capital leases is recorded as depreciation expense which is included
in “Other” operating expenses in the statements of operations.
Notes to the Financial Statements