US Postal Service 2003 Annual Report Download - page 35

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Capital cash outlays are the funds
we invest for such capital improvements as
facilities, automation equipment and informa-
tion technology.
The Cash Flow/Capital Expenditure
(CAPEX) ratio shows the relationship between
these main drivers of our debt balance. CAPEX
is computed by dividing cash flow from oper-
ations by capital cash outlays. The charts
illustrate the direct relationship between the
CAPEX ratio and borrowing. Whenever our
capital outlays appreciably exceed our cash
flow, we must make up the difference by either
reducing cash on hand or by borrowing, or
some combination of the two.
Capital Investments
The Board of Governors approves the
capital budget each year. The Board also
approves all major capital projects, generally
defined as projects greater than $10 million.
At the beginning of the year, there were 50
Board-approved projects in progress repre-
senting $5.7 billion. During the year, the Board
approved 17 new projects for $2.2 billion and
17 projects were completed, representing
$811 million.
While the funding for a project is author-
ized in one year, the commitment, or contract
to purchase or build, may occur over several
years. Similarly, actual payment for the
project, or capital cash outlays, may take
place over several years. The $1.277 billion
in capital outlays for 2003 represents outlays
for commitments made in previous years as
well as commitments made in 2003 for all
59 projects.
Of the 49 active Board-approved projects
at the close of the year, 25 were for mail
processing equipment and vehicles, 9 were
for facilities and 15 were for other projects
such as retail equipment and information
infrastructure support.
We estimate the total capital commitment
plan for 2004 at $3.2 billion, with estimated
cash outlays of $2.2 billion, of which approx-
imately $1.5 billion is for commitments made
in prior years and the remaining $700 million
is for new commitments in 2004.
2003 annual report united states postal service | 33
management discussion & analysis
capital
When the CAPEX ratio is above
100%, we can pay for capital
with internally generated funds.
Cash Flow from Operations Capital Cash Outlays CAPEX
($ millions) ($ millions) Ratio
2003 $6,405 $1,277 501.6
2002 1,443 1,675 86.1
2001 1,255 2,932 42.8
2000 1,207 3,254 37.1
1999 2,863 3,788 75.6
... and debt changes proportionately.
Change in Debt
($ millions)
2003 $(3,841)
2002 (200)
2001 1,999
2000 2,399
1999 496