US Postal Service 2009 Annual Report Download - page 75

2009 Annual Report United States Postal Service | 73
NOTE 7 — PROPERTY AND EQUIPMENT
Sale of Major Facility
In 2009 and 2008, there were no sales of any major facilities.
On March 30, 2007, we sold the James A. Farley build-
ing in New York City to the Empire State Development
Corporation (ESDC), for $190 million and additional pro-
ceeds of up to $55 million, contingent upon the achieve-
ment 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 a 2009 annual rental of
$5.5 million. 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 build-
ing under a 99-year lease, with a rental fee of $1 for the
lease term. 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 meth-
od under the provisions of ASC 360 (formerly 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 en-
vironmental liability is limited to $10 million and is included
on our balance sheet under trade payables and other ac-
crued expenses.
In October 2009, we executed an amendment to our
March 2007 lease agreement. The amendment reduces
our leased space from 883,150 square feet to 213,930
square feet and reduces our annual rental payment to an
average of $1.6 million per year through 2014, at which
time we will occupy our permanent space under the 99-
year lease referenced above.
Impaired Assets
Assets that were written down due to impairment in ac-
cordance with ASC 360 (formerly FAS 144, Accounting
for the Impairment or Disposal of Long-Lived Assets) were
$71 million in 2009 and were immaterial in 2008 and re-
corded in our Statement of Operations under the heading
“Other”. The majority of the impairments in 2009 related
to a project under development that was canceled prior
to implementation.
Assets Held for Sale
Assets held for sale are classifi ed in accordance with ASC
360 (formerly FAS 144), and are immaterial to the total
fi xed asset balance in 2009 and 2008.
Interest Capitalization
Capitalized interest was not material in 2009. There was
no interest capitalized in 2008 or 2007.
Repairs and Maintenance
Repairs and maintenance are charged to expense as in-
curred. This expense amounted to $703 million in 2009,
$711 million in 2008 and $665 million in 2007.
NOTE 8 — LEASES AND OTHER
COMMITMENTS
Leases
At September 30, 2009, our future minimum lease pay-
ments for all noncancelable leases are as follows.
Lease Obligations
(dollars in millions)
Operating Capital
2010 $ 762 $ 99
2011 709 97
2012 639 99
2013 578 93
2014 519 87
After 2014 4,339 441
Total Lease Obligations $ 7,546 $ 916
Less: Interest 325
Total Capital Lease Obligations 591
Less: Short-term portion of capital lease obligations 47
Long-term portion of capital lease obligations $ 544
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 specifi ed in the leases.
Capital leases included in buildings were $909 million in
2009 and $916 million in 2008. Total accumulated amortiza-
tion is $474 million in 2009 and $419 million in 2008. Amor-
tization expense for assets recorded under capital leases
is classifi ed as depreciation expense, which is included in
other operating expenses in the Statements of Operations.