In the normal operating of our business, we enter into commitments for expense contracts. The contracts run for periods from one to ten years. Although these contracts contain clauses for termination by the Postal Service, we normally would have early termination costs. As these arrangements qualify as executory contracts, the obligations are not recognized by us in the financial statements until we receive the related goods and services.
Expense commitments are classified as miscellaneous, inventory, and research and development. Our miscellaneous expense commitments include contracts for supplies, services, communications, repairs, research, printing and advertising. Our inventory contracts are for vehicle repair parts and mechanized equipment spare parts. These are summarized in the following table.
In addition, P.L. 109-435 mandates annual payments, due each September 30, into the PSRHBF. These payments are listed in the following table.
As discussed in Note 2, Liquidity Matters, we believe that, while there are sufficient cash flows for ongoing operations, there is considerable uncertainty as to whether we will have sufficient cash on September 30, 2010 to fund our required $5.5 billion PSRHBF payment.
