US Postal Service 2014 Annual Report Download - page 61

2014 Report on Form 10-K United States Postal Service 57
The following table summarizes total rental expense for the years ended September 30, 2014, 2013 and 2012:
(in millions)
2014
2013
2012
Non-cancellable real estate leases1
$
918
$
915
$
938
GSA facilities leases2
35
37
41
Equipment and other short-term rentals
139
153
176
Total rental expense
$
1,092
$
1,105
$
1,155
1Sublease income was not material to the financial statements for the years ended September 30, 2014, 2013 and 2012.
2General Services Administration leases subject to 120-day cancellation notice.
Capital commitments consist primarily of equipment and building construction and improvements. The following table
summarizes financial commitments for approved capital projects in progress at September 30, 2014 and 2013:
(in millions)
2014
2013
Mail processing equipment
$
278
$
316
Building improvements, construction and building purchase
265
329
Postal support equipment
123
50
Vehicles and other
104
13
Total Capital Commitments
$
770
$
708
Contingent liabilities of the Postal Service consist primarily of claims and lawsuits resulting from labor, employment,
environmental matters, property damage claims, and injuries on Postal Service properties, issues arising from Postal Service
contracts, personal claims and traffic accidents. Each quarter, significant new claims and litigation are evaluated for the
probability of an adverse outcome. If the claim is deemed probable of an unfavorable outcome and the amount of the potential
resolution is reasonably estimable, a liability for the loss is recorded. Any pre-existing claims and litigation are reviewed and
adjusted for resolutions or revisions to prior estimates.
As previously reported, on January 14, 2010, the Equal Employment Opportunity Commission’s (“EEOC”) Office of Federal
Operations certified a class action case against the Postal Service in a matter captioned McConnell v. Donahoe (first instituted
as McConnell v. Potter in 2006). The class currently consists of all permanent rehabilitation employees and limited duty
employees who were subjected to the National Reassessment Process (“NRP”) from May 5, 2006 to July 1, 2011. The Postal
Service used the NRP to ensure that its records were correct and that employees receiving workers’ compensation benefits were
placed in jobs consistent with their abilities. The case alleges violations of the Rehabilitation Act of 1973 resulting from the
NRP’s failure to provide a reasonable accommodation, the NRP’s wrongful disclosure of medical information, the creation by
the NRP of a hostile work environment and the NRP’s adverse impact on disabled employees. The class is seeking injunctive
relief and damages of an uncertain amount. If the plaintiffs were able to prove their allegations in this matter and to establish the
damages they assert, then an adverse ruling could have a material adverse impact on the Postal Service. However, the Postal
Service disputes the claims asserted in this class action case and is vigorously contesting the matter. There was no material
change in the status of this case during the twelve months ended September 30, 2014.
Based on currently available information, adequate provision has been made for probable losses arising from all claims and
lawsuits. The current portion of the contingent liability is $158 million and $108 million at September 30, 2014 and 2013,
respectively and is included on the Balance Sheets in “Payables and accrued expenses.” The noncurrent portion of this liability
is $775 million at September 30, 2014 and $831 million at September 30, 2013 and is included in “Other noncurrent liabilities”
on the Balance Sheets.
As of September 30, 2014, contingent liabilities consisted of $839 million associated with labor and employment matters, $48
million with asset retirement obligations, $45 million with tort matters and $2 million with contractual matters, for a total of