US Postal Service 2005 Annual Report Download - page 40

30 | 2005 Annual Report United States Postal Service
2005. Thus, the year ended with 44 projects amounting to
$6.4 billion in approved capital.
While the funding for a project is authorized in one year,
the commitment, or contract to purchase or build, may
occur over several years. By the close of the year, ap-
proximately $5.2 billion had been committed for these
44 projects. Similarly, actual payment for the project, or
capital cash outlays, may take place over several years. By
the end of 2005, approximately $2.5 billion in capital
outlays had been paid against commitments made in
previous years as well as commitments made in 2005 for
these 44 projects.
Of the 44 active Board-approved projects at the close of
the year, 24 were for mail processing equipment, 8 for
facilities, and 12 for other projects such as retail equipment
and information infrastructure support.
Our total capital commitment plan for 2006 is $2.9 bil-
lion, with cash outlays planned at $2.4 billion, of which
approximately $1.8 billion is for commitments made in
prior years and the remaining $600 million for new com-
mitments in 2006.
Our capital plan for the future calls for developing and
implementing new automation equipment that will increase
our operating efficiency. These programs will reduce work-
hours in our distribution, processing, and delivery opera-
tions. Our primary focus will be on projects that generate
a high return on investment. However, we will continue to
invest funds to maintain our infrastructure, including facili-
ties, vehicles, and technology systems.
Our facilities program will continue to address
life, health, safety, and security issues. We
will invest in facilities to support our network
requirements. With projected annual average
growth of approximately 2 million delivery
points each year, we will maintain our infra-
structure through high priority replacement
projects and ongoing repair and alteration
projects.
Finance
Debt
As an independent establishment of the
executive branch of the United States govern-
ment, we receive no tax dollars for our opera-
tions. We are self supporting, and have not
received a public service appropriation since
1982. The last time we received any substan-
tial contribution of capital from the U.S. government was
in calendar years 1976 and 1977, when we received two
$500 million payments which we were required to use to
repay operating debt. We fund our operations chiefly from
cash generated from operating revenue. However, unlike
companies in the private sector, we are not permitted to
raise capital through the equity markets. Consequently
our only source of outside capital is through securing debt
obligations. An additional challenge is that we, unlike the
private sector, are not free to set our own prices for our
products and services. The postal rate setting process
has been a complex and lengthy process in the past. The
uncertainty created by this process influences our cash
management strategy.
The amount we borrow is largely determined by the dif-
ference between our cash flow from operations and our
capital cash outlays. Our capital cash outlays are the funds
invested back into the business for capital investments in
new facilities, new automation equipment, and new ser-
vices. At the beginning of 2003 our debt stood at $11.1 bil-
lion. During that year, we reduced our debt by $3.8 billion
and, in 2004 by $5.5 billion. Cash flow from operations in
2005 enabled the repayment of the remaining debt. This
is the first time since postal reorganization that we have
ended the year with no debt obligations outstanding.
We undertook debt refinancing actions in 2003 that laid
the foundation for financial gains in 2004 and 2005. In
2003, we completely overhauled our debt portfolio, paying
off all of long-term debt obligations and replacing most of
them with short-term debt that would be retired during the
Financial review
Part II
$11.3 $11.1
$7.3
$1.8
$0.0
$0
$2
$4
$6
$8
$10
$12
2001 2002 2003 2004 2005
Billions
DEBT AT YEAR END