US Postal Service 2004 Annual Report Download - page 49

2004 annual report united states postal service | 47
Notes to the financial statements
portion฀of฀the฀cost฀is฀based฀upon฀the฀average฀premium฀cost฀
of฀the฀various฀employee฀coverage฀choices฀and฀the฀specific฀
coverage฀choices฀made฀by฀our฀employees.฀The฀employees฀of฀
the฀Postal฀Service฀paid฀16.7%฀of฀the฀cost฀in฀2004,฀2003฀and฀
2002,฀and฀we฀paid฀the฀remainder.
Employees฀of฀the฀Postal฀Service฀who฀participate฀in฀the฀FEHBP฀
for฀at฀least฀the฀five฀years฀immediately฀before฀their฀retirement฀
may฀ participate฀in฀ the฀ FEHBP฀ during฀ their฀retirement.฀The฀
Omnibus฀Budget฀Reconciliation฀Act฀of฀1990฀requires฀us฀to฀
pay฀the฀employer’s฀share฀of฀health฀insurance฀premiums฀for฀all฀
employees฀and฀their฀survivors,฀who฀participate฀in฀the฀FEHBP฀
and฀who฀retire฀on฀or฀after฀July฀1,฀1971.฀However,฀we฀do฀not฀
include฀the฀costs฀attributable฀to฀federal฀civilian฀service฀before฀
that฀date.
We฀account฀for฀retiree฀health฀benefits฀as฀a฀participant฀in฀a฀
multi-employer฀plan฀arrangement฀in฀accordance฀with฀FAS฀106,฀
Employers’฀Accounting฀for฀Postretirement฀Benefits฀Other฀Than฀
Pensions.฀Our฀annuitant฀health฀benefit฀expenses฀amounted฀to฀
$1,313฀million฀in฀2004,฀$1,133฀million฀in฀2003฀and฀$987฀
million฀in฀2002.฀We฀include฀these฀costs฀in฀our฀compensation฀
and฀benefits฀expense.
Note 5 - debt and related
interest costs
Under฀the฀Postal฀Reorganization฀Act,฀as฀amended฀by฀Public฀
Law฀101–227,฀we฀can฀issue฀debt฀obligations.฀However,฀we฀
are฀limited฀to฀net฀annual฀increases฀of฀$2฀billion฀in฀our฀debt฀for฀
capital฀improvements฀and฀to฀$1฀billion฀for฀operating฀expenses.฀
Our฀total฀debt฀cannot฀exceed฀$15฀billion.
Cash฀outlays฀for฀interest฀(including฀the฀supplemental฀retire-
ment฀obligations)฀were฀$242฀million฀in฀2004,฀$426฀million฀in฀
2003฀and฀$339฀million฀in฀2002.
In฀January,฀July฀and฀August฀2003,฀we฀repaid฀debt฀with฀maturity฀
dates฀that฀extended฀to฀2031.฀In฀connection฀with฀the฀August฀
transaction,฀we฀paid฀a฀premium฀(debt฀repurchase฀expense)฀of฀
$360฀million฀which฀was฀expensed฀when฀incurred.
At฀year-end,฀the฀current฀estimated฀market฀value฀of฀our฀debt฀
was฀$1,800฀million฀in฀2004฀and฀$7,283฀million฀in฀2003.฀Debt฀
consists฀of฀$1,800฀million฀in฀cash฀drawn฀on฀our฀line฀of฀credit฀
with฀the฀FFB.฀
Our฀Note฀Purchase฀Agreements฀with฀the฀Federal฀Financing฀
Bank,฀renewed฀this฀year,฀provide฀for฀revolving฀credit฀lines฀of฀$4฀
billion.฀These฀credit฀lines฀enable฀us฀to฀draw฀up฀to฀$3.4฀billion฀
with฀two฀days'฀notice฀and฀up฀to฀$600฀million฀on฀the฀same฀busi-
ness฀day฀the฀funds฀are฀needed.฀Under฀these฀agreements฀we฀
can฀also฀use฀a฀series฀of฀other฀notes฀with฀varying฀provisions฀to฀
draw฀upon฀with฀two฀days’฀notice.฀The฀notes฀provide฀us฀the฀flex-
ibility฀to฀borrow฀short-term฀or฀long-term,฀using฀fixed฀or฀floating฀
rate฀debt,฀and฀can฀be฀either฀callable฀or฀non-callable.
Note 6 - retirement programs
Our฀ employees,฀ retirees฀ and฀ their฀ survivors฀ participate฀ in฀
a฀pension฀program฀of฀the฀U.S.฀government.฀We฀account฀for฀
our฀involvement฀in฀these฀programs฀as฀participation฀in฀a฀multi-
employer฀ plan฀ arrangement,฀ in฀ accordance฀ with฀ FAS฀ 87,฀
Employers’฀Accounting฀for฀Pensions.฀
With฀ certain฀ exceptions,฀ employees฀ participate฀ in฀ one฀ of฀
the฀ following฀ three฀ retirement฀ programs฀ based฀ upon฀ the฀
starting฀date฀of฀their฀employment฀with฀the฀Postal฀Service.฀
Employee฀and฀employer฀contributions฀are฀made฀to฀the฀Civil฀
Service฀Retirement฀System,฀the฀Dual฀System฀or฀the฀Federal฀
Employees฀Retirement฀System,฀which฀are฀administered฀by฀
the฀Office฀of฀Personnel฀Management.฀Employees฀may฀also฀
participate฀in฀ the฀Thrift฀ Savings฀Plan,฀which฀ is฀ a฀ defined฀
contribution฀retirement฀savings฀and฀investment฀plan.฀Postal฀
Service฀employees฀are฀authorized฀to฀participate฀in฀the฀Thrift฀
Savings฀Plan฀by฀the฀Federal฀Employees฀Retirement฀System฀
Act฀ of฀ 1986.฀ The฀ Plan฀ is฀ administered฀ by฀ the฀ Federal฀
Retirement฀Thrift฀Investment฀Board.
Interest฀
Rate฀% Terms* 2004 2003
Notes฀payable฀to฀the฀Federal฀Financing฀Bank฀(FFB):
1.167 Payable฀February฀5,฀2004 $฀฀฀฀฀฀฀- $2,000
1.195 Payable฀February฀17,฀2004 -250
1.084 Floating฀rate;฀payable฀August฀15,฀2004 -1,750
1.731** Short-term,฀floating฀rate,฀revolving฀credit฀
facility,฀final฀maturity฀date฀of฀May฀6,฀2005 1,800 3,273
$1,800 $7,273
*฀฀฀All฀debt฀repurchasable฀at฀any฀time฀at฀a฀price฀determined฀by฀the฀current฀FFB฀rates.
**฀฀Weighted฀average฀interest฀rate;฀prior฀year's฀interest฀rate฀was฀1.026%.
Our฀Debt฀Consists฀of฀the฀following
(Dollars฀in฀millions)฀ September฀30,