How to Read
Our Annual Report
2000 Highlights
Letter from
the Postmaster General/CEO
2000 Year
in Review
Delivering
the Future
The Governors
of the Postal Service
Audit Committee
Financial
Section
How to Read
Our Financial Statements
Quick
Find index
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2000 Annual Report
- page 63 of 70
7 Revenue Forgone
Our operating revenue includes accruals for revenue forgone. Revenue
is forgone when Congress mandates that we provide free or reduced
mail rates for certain mailers. The difference between the price
Congress has mandated and the price we would have charged the mailer
determines the amount of forgone revenue. Congress appropriates
money to reimburse us for only a portion of the revenue forgone
that we have incurred in past years. In our operating revenue, we
have included as revenue the amounts appropriated by Congress for
revenue forgone of $64 million for 2000, $71 million for 1999, and
$67 million for 1998. Legislation that was passed during 2000 appropriated
the $64 mllion for 2000 but delayed the payment until fiscal year
2001. Accordingly, we have recorded this as a receivable.
Under the Revenue Forgone Reform Act of 1993, Congress is required
to reimburse us $29 million annually through 2035 (42 years). This
reimbursement is for two purposes: services we performed in 1991,
1992 and 1993 for which we have not yet been paid; and for shortfalls
in the reimbursement for the costs we incurred for processing and
delivering certain nonprofit mail from 1994 through 1998.
The Revenue Forgone Reform Act of 1993 authorized a total of $1.218
billion in payments. We calculated the present value of these future
reimbursements to be approximately $390 million at 7% interest.
We recognized the $390 million as revenue during fiscal years 1991
through 1998. The amounts receivable as of September 30, 2000 and
1999 were $375 million and $378 million, respectively. We recognized
no revenue in 2000 and 1999 and $10 million in 1998.
8 Commitments
At September 30, 2000, we estimate our financial commitment for
approved Postal Service capital projects in progress to be approximately
$3,641 million.
In addition, we are in negotiations for the buyout of certain assets
and leases associated with the processing and transportation of
Priority Mail.
Our total rental expense for the years ended September 30 is summarized
as follows (dollars in millions):
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Non-cancelable
real estate leases including related taxes |
$ 806
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$ 766
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$ 711
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Facilities
leased from General Services Administration subject to 120-day
notice of cancellation |
39
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36
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37
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Equipment
and other short-term
rentals |
254
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431
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234
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Total |
$ 1,099
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$ 1,233
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$ 982
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At September 30, 2000, our future minimum lease payments for all non-cancelable
leases are as follows (dollars in millions):
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2001 |
$ 755
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$ 83
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2002 |
722
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83
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2003 |
682
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83
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2004 |
643
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83
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2005 |
593
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83
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After
2005 |
5,641
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531
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$9,036
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$946
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Less:
Interest at 6.5% |
279
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Total
capital lease obligations |
667
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Less:
Short-term portion of capital lease
obligations |
41
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Long-term
portion of capital lease obligations |
$626
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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 $772 million in 2000 and
$663 million in 1999. Total accumulated amortization is $161 million
in 2000 and $122 million in 1999. Amortization expense for assets
recorded under capital leases is included in depreciation expense.
9 Contingent Liabilities
Each quarter we review litigation pending against us. As a result
of this review, we classify and adjust our contingencies for claims
that we think it is probable that we will lose and for which we
can reasonably estimate the amount of the unfavorable outcome. These
claims cover labor, equal employment opportunity, environmental
issues, traffic accidents, injuries on postal properties, personal
claims and property damages, and suits and claims arising from postal
contracts. We also recognize the settlements of claims and lawsuits
and revisions of other estimates. Additionally, we evaluate the
materiality of cases determined to have a reasonably possible chance
of adverse outcome. Such cases are immaterial to our financial statements
taken a whole.
As a part of our continuing evaluation of estimates required in
the preparation of our financial statements, we recorded approximately
a $63 million increase in liabilities in 2000 to recognize changes
in the estimated cost of litigation and claims asserted prior to
2000. We recognized settlements of claims and lawsuits and revised
other estimates in our changes in contingent liabilities. Management
and General Counsel believe that we have made adequate provision
for the amounts that may become due under the suits, claims, and
proceedings we have discussed here.
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