US Postal Service 2008 Annual Report Download - page 56

56 | 2008 Annual Report United States Postal Service
our September 30, 2006, balance sheet. P.L.109-435 re-
quired that we pay the 2006 escrowed “savings” to the
PSRHBF. In 2007, we expensed the entire amount payable
to the PSRHBF. On April 6, 2007, these “savings” were
transferred to the PSRHBF.
Note 5 — Debt and related interest
Borrowing Limits and Debt
Under the Postal Reorganization Act, as amended by Pub-
lic Laws 101-227 and 109-435, we can issue and sell debt
obligations. However, at year-end we are limited to net an-
nual increases of $3 billion in our debt. Our total debt can-
not exceed $15 billion.
Debt consists of the following:
Interest
Rate % Terms * 2008 2007
(Dollars in millions)
NOTES PAYABLE TO THE FEDERAL FINANCING BANK (FFB):
0.297%**
Short-term revolving credit facility;
Payable October 1, 2008
and 2007 $ 2,200 $ 2,900
0.905% Payable December 11, 2008 2,500 —
0.485% Payable December 18, 2008 2,000 —
0.155%
Short-term revolving credit facility;
Payable December 18, 2008 500 —
3.528%
Overnight revolving credit note;
Payable October 1, 2007 — 300
3.101% Payable November 15, 2007 — 500
3.866% Payable December 20, 2007 — 500
$ 7,200 $ 4,200
* All debt is repurchasable at any time at a price determined by the Secretary of
the Treasury, based on rates prevailing in the Treasury Security market at the time
of repricing.
** Prior year rate was 3.366%
The current value of our debt is what it would cost to pay
off the debt if we used the current yield on equivalent U.S.
Treasury notes. At year-end, the current estimated value of
our debt is $7.2 billion.
Note Purchase Agreements
Our note purchase agreements with the Federal Financing
Bank provide for revolving credit lines of $4 billion. These
credit lines enable us to draw up to $3.4 billion with two days’
notice, and up to $600 million on the same business day the
funds are needed. Under these agreements we can also use
a series of other notes with varying provisions to draw upon
with two days’ notice. The notes provide us the flexibility to
borrow short-term or long-term, using fixed or floating-rate
debt, and can be either callable or non-callable.
Interest Payments on Retirement
There were no cash outlays for interest on the retirement
“supplemental liability” in 2008 or 2007 because the en-
actment of P.L. 109-435 suspended this requirement un-
til 2017. In 2006, the cash outlay was $231 million. See
Note 10, Retirement programs, in the Notes to the Financial
Statements for additional information.
Other Interest Payments
Cash outlays for other interest were $37 million in 2008,
$9 million in 2007, and $4 million in 2006.
Note 6 — Property and equipment
Sale of Major Facility
In 2008 and 2006, there were no sales of any major facilities.
On March 30, 2007, we sold the James A. Farley building
in New York City to the Empire State Development Cor-
poration (ESDC), for $190 million and additional proceeds
of up to $55 million, contingent upon the achievement of
certain development and leasing criteria by the developer
of the property. The Postal Service continues to conduct
retail and carrier operations at this facility under the terms of
an interim lease with annual rentals of $5.6 million per year.
Once the carrier operations are relocated to other facilities,
we will continue to conduct retail and some administrative
functions in a smaller portion of the building under a 99-
year lease, with a rental fee of $1. The Postal Service has
an option to require the building owner to change the legal
structure of the building ownership into condominium units,
with the Postal Service being given the right to purchase
the space subject to the 99-year lease.
We accounted for the transaction under the deposit method
under the provisions of FAS 66, Accounting for Sales of Real
Estate. The gain will not be recognized and the asset will not
be removed from our accounting records until the lease and
other continuing involvement in the building have expired.
In conjunction with this sale, from the funds ESDC paid us,
$10 million was set aside for an environmental clean-up
fund. Our environmental liability is limited to $10 million and
is included on our balance sheet under trade payables and
other accrued expenses.
Impaired Assets
The amount of assets that was written down due to impair-
ment in accordance with FAS 144 was immaterial to the
balances of fixed assets in 2008 and 2007.
Notes to the Financial Statements