US Postal Service 2012 Annual Report Download - page 54

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2012 Report on Form 10-K United States Postal Service- 53 -
INTEREST EXPENSE
In 2012, interest expense was $190 million, an increase of $18 million, or 10.5%, compared to $172 million in 2011. Net
losses for the three years ended September 30, 2012, have resulted in higher debt levels. Although long-term debt
carries higher interest rates than prevailing rates for short-term debt, financing a portion of debt at fixed rates decreases
our interest rate risk and interest expense volatility now and in future years. At September 30, 2012, $5.5 billion of these
long-term obligations remain outstanding. Higher overall debt levels have led to higher interest expense in 2012 and 2011
versus prior years. However, short-term interest rates remained at historically low levels helping to keep total interest
expense relatively low.
In 2011 and 2010, with an increasing amount of debt outstanding throughout the year, interest expense totaled $172
million and $156 million, respectively.
INTEREST AND INVESTMENT INCOME
The majority of our interest and investment income comes from the imputed interest we recognize on the funds owed to
us under the Revenue Forgone Reform Act of 1993. Under the Act, Congress agreed to reimburse the Postal Service
$1,218 million in 42 annual installments of $29 million through 2035 for services performed in prior years. Although
Congress has failed to appropriate the funds for these payments in 2011 and 2012, we continue to make these
appropriation requests and recognize the imputed interest due on the original amortization schedule. Imputed interest for
Revenue Forgone was $23 million, $24 million, and $24 million for the years ended September 30, 2012, and 2011, 2010,
respectively. See Note 12, Revenue Forgone, in the Notes to the Financial Statements for additional information.
When we determine that available funds exceed current needs, funds are invested with the U.S. Treasury’s Bureau of
Public Debt in overnight securities issued by the U.S. Treasury. Investment income was $2 million, $4 million, and $1
million, for the years ended September 30, 2012, 2011, and 2010, respectively.