US Postal Service 2009 Annual Report Download - page 58

56 | 2009 Annual Report United States Postal Service
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 operations chiefl y through
cash generated from operations and by borrowing from
the Federal Financing Bank.
The amount we borrow is largely determined by three ma-
jor factors: (1) the difference between cash fl ow from op-
erations (which in 2009 included the end-of-year payout of
$1.4 billion to the PSRHBF); (2) capital cash outlays, which
consist of funds invested for new facilities, new automation
equipment and new services; and (3) the statutory annual
borrowing limit of $3 billion. For 2011 and beyond, an addi-
tional determinant will be our total statutory debt ceiling of
$15 billion. On September 30, 2009, we had $10.2 billion
in debt outstanding, a $3.0 billion increase from last year.
Debt at Year End
(dollars in billions)
$ 0
$ 2
$ 4
$ 6
$ 8
$ 10
$ 12
200920082007
$ 10.2
$ 7.2
$ 4.2
INTEREST EXPENSE
In 2009, interest expense was $80 million, an increase of
$44 million compared to 2008. The net loss of $3,794 mil-
lion in 2009 led to higher debt balances compared to 2008.
This combined with the addition of long-term fi xed rate
debt for the fi rst time since 2002, produced the increase
in interest expense. Although the long-term debt carries
higher interest rates than prevailing rates for short-term
debt, the long-term obligations were issued at historically
favorable rates and they represent a prudent restructuring
of our debt portfolio. In 2008 and 2007, with less debt to
repay and more cash on hand throughout the year, interest
expense totaled $36 million and $10 million respectively.
INTEREST AND INVESTMENT INCOME
When we determine that our available funds exceed our
current needs, we invest those funds with the U.S. Trea-
sury’s Bureau of Public Debt in overnight securities issued
by the U.S. Treasury. In 2009, due to net losses sustained
during the year, historically low interest rates and increased
levels of debt, investment income was only $1 million.
In 2008 and 2007, with less debt to repay, and higher cash
on hand in 2007, we earned investment income of $10
million and $169 million, respectively.
We also recognize imputed interest on the funds owed to
us under the Revenue Forgone Reform Act of 1993. Under
the Act, Congress agreed to reimburse the Postal Service
$29 million annually through 2035 for services performed
in prior years. See Note 14, Revenue Forgone, in the Notes
to the Financial Statements, for additional information.
Interest and Investment Income
(dollars in millions)
2009 2008 2007
Investment Income $ 1 $ 10 $ 169
Imputed interest on accounts receivable
from the U.S. government 24 25 25
Other Interest 1 1 1
Total $ 26 $ 36 $ 195
FAIR VALUE MEASUREMENTS
As required by ASC 820 (formerly FAS 157, Fair Value
Measurements), in 2009 we made certain fair value disclo-
sures. We did not have any recognized gains as a result
of valuation measurements in 2009. All recognized losses
have been incorporated into our 2009 fi nancial statements
and the unrecognized gains and losses are not consid-
ered to have a signifi cant impact upon our operations. See
Note 13, Fair Value Measurements, in the Notes to the
Financial Statements, for additional information.