Notes to the Consolidated Financial Statements
(Dollars in millions, except per-share data and unless otherwise indicated)
Note 6 – Land, Buildings and Equipment, Net
Land, buildings and equipment, net at December 31, 2007 and 2006 were as follows (in millions):
|
Estimated
Useful Lives (Years) |
2007 | 2006 | ||||||||
|
Land |
$ | 48 | $ | 46 | ||||||
|
Buildings and building equipment |
25 to 50 | 1,208 | 1,120 | |||||||
|
Leasehold improvements |
Varies | 371 | 338 | |||||||
|
Plant machinery |
5 to 12 | 1,710 | 1,613 | |||||||
|
Office furniture and equipment |
3 to 15 | 998 | 949 | |||||||
|
Other |
4 to 20 | 86 | 73 | |||||||
|
Construction in progress |
88 | 125 | ||||||||
|
Subtotal |
4,509 | 4,264 | ||||||||
|
Less: Accumulated depreciation |
(2,922 | ) | (2,737 | ) | ||||||
|
Land, buildings and equipment, net |
$ | 1,587 | $ | 1,527 | ||||||
Depreciation expense was $262, $277 and $280 for the years ended December 31, 2007, 2006 and 2005, respectively. We lease certain land, buildings and equipment, substantially all of which are accounted for as operating leases. Total rent expense under operating leases for the years ended December 31, 2007, 2006 and 2005 amounted to $286, $269 and $267, respectively. Future minimum operating lease commitments that have initial or remaining non-cancelable lease terms in excess of one year at December 31, 2007 were as follows:
| 2008 | 2009 | 2010 | 2011 | 2012 | Thereafter | ||||||
| $ 266 | $ 212 | $ 169 | $ 129 | $ 90 | $ 158 | ||||||
We have an information management contract with Electronic Data Systems Corp. (“EDS”) through June 30, 2009. Services to be provided under this contract include support of global mainframe system processing, application maintenance, desktop and helpdesk support, voice and data network management and server management. There are no minimum payments due EDS under the contract. In January 2008, the portion of the contract for global mainframe processing was extended through December 2013. Payments to EDS, which are primarily recorded in selling, administrative and general expenses, were $294, $288 and $305 for the years ended December 31, 2007, 2006 and 2005, respectively.
In December 2006, we sold our Corporate headquarters facility for $55 and recognized a gain of $15. In connection with the sale, the secured mortgage on the facility of $34 was defeased through the purchase of treasury securities totaling $36. The difference of $2 was recorded as a loss on extinguishment of debt. The gain on the sale as well as the loss on extinguishment are included in Other expenses, net within the Consolidated Statements of Income. In October 2007, we relocated our Corporate headquarters to a leased facility in Norwalk, Connecticut.
