US Postal Service 2007 Annual Report Download - page 30

30 | 2007 Annual Report United States Postal Service
Financial Section Part II
cash payments in the fourth quarter for workers’ compensation and retiree
health benefits. Consequently we incurred $4.2 billion debt at the end of
2007 to fund approximately $6.3 billion in payments. This debt will be
repaid in the first half of 2008 from operating cash receipts. It should also
be noted that $3.9 billion of the current liabilities on our balance sheet at
September 30, 2007, represents items for which we have already collected
cash, but have a remaining obligation to perform a future service.
The following table illustrates our major cash flow obligations in future
years.
Schedule of Commitments
Retiree Health
Benefits Leases
(Dollars in millions)
2008 $ 5,600 $ 862
2009 5,400 846
2010 5,500 801
2011 5,500 738
2012 5,600 673
After 2012 22,800 5,574
Total Commitments $ 50,400 $ 9,494
Cash Flow
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities was $2.6 billion in 2007 compared
to $3.8 billion provided by operating activities in 2006. The year-to-year
decrease of $6.4 billion was driven mainly by the $8.4 billion in payments
to the PSRHBF in 2007, as required by P.L.109-435, partially offset by
the $1.6 billion in CSRS payments that we are no longer required to make.
This is also reflected in our 2007 net loss of $5.1 billion compared to 2006
net income of $900 million. Additional cash was provided in 2007 by an
increase in other noncurrent liabilities of $275 million primarily contingent
liabilities, an increase in compensation and benefits liabilities of $347
million and increased collections of accounts receivable of $80 million.
These cash flow increases were partially offset by decreases in payables
and accrued expenses of $73 million, and customer deposit accounts and
outstanding money orders of $186 million.
In 2006, net cash provided by operating activities of $3.8 billion was $38
million more than 2005. Increases in cash payments for compensation
and transportation expenses were offset by increases to non-cash
liabilities such as accrued payroll and leave of $304 million and workers’
compensation of $342 million. Also contributing was $169 million of
increased collections in accounts receivable in 2006, increased investment
income of $81 million, $55 million of additional money orders outstanding
at year-end, and a decrease in the interest expense payment on deferred
retirement obligations of $32 million.
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash provided by investing activities was $500 million in 2007
compared to $5.5 billion used in 2006. Nearly all of the year-over-year
change can be attributed to the almost $3.0 billion that was placed in
escrow as restricted cash in 2006, and then was removed from restricted
cash when transferred to the new PSRHBF in 2007. Capital cash outlays of
$2.7 billion increased slightly from the $2.6 billion in 2006. Proceeds from
the sale of property were $39 million in 2007 compared to $114 million
in 2006. In 2007, the sale of the James A. Farley Building and several
Philadelphia properties resulted in proceeds from building sales of $218
million. Excluding the escrow, net cash flow used in investing activities
would have been virtually unchanged at $2.5 billion for both 2007 and
2006, rather than the $500 million and $5.5 billion reported.
Net cash used in investing activities was $5.5 billion in 2006 compared to
$2.3 billion in 2005. The increase reflects increased investment for mail
processing equipment, retail equipment, and building improvements. The
2006 increase also reflects the placement of $3.0 billion into a restricted
cash account (mentioned above) as required by P.L.108-18.
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities was $2.0 billion and $2.0 billion
for 2007 and 2006, respectively. Our borrowing from the Federal Financing
Bank increased $2.1 billion in both years.
In 2006 after funding our escrow requirements for P.L.108-18, we borrowed
$2.1 billion to fund capital investments and provide operating cash for
future operations.
Financing Activities
DEBT
As an “independent establishment of the executive branch of the
Government of the United States,” we receive no tax dollars for ongoing
operations. We are self-supporting, and have not received an appropriation
for operational costs since 1982. We fund our operations chiefly through
cash generated from operations. However, unlike companies in the private
sector, we are not permitted to raise capital through the equity markets.
Historically our only long-term source of outside capital is through borrow-
ing from the Federal Financing Bank. Under the provisions of P.L.109-435,
however, the Postal Service has the statutory authority to earn profits and
retain earnings.
The amount we borrow is largely determined by the difference between
our cash flow from operations and our capital cash outlays. Our capital
cash outlays consist of the funds invested back into the business for new
facilities, new automation equipment and new services. Throughout most of
2007 and 2006, we were debt-free, borrowing only to meet year-end cash
disbursement requirements. On September 30, 2007, we had $4.2 billion in
debt outstanding, a $2.1 billion increase from last year.