US Postal Service 2014 Annual Report Download - page 38

2014 Report on Form 10-K United States Postal Service 34
Cash Flow
Cash and cash equivalents, which exclude restricted cash, totaled $4.9 billion, $2.3 billion and $2.1 billion at September 30,
2014, 2013 and 2012, respectively.
Operating Activities - Cash flows provided by operating activities increased $2.4 billion in 2014 primarily due to implementing
price increases on our Market-Dominant and Competitive services which became effective in January 2014 as well as increased
volume in our Shipping and Packages service offerings. We continue to focus on areas to improve operating cash flows by
implementing cost reduction programs and improvements to our processing operations. See Item 8. Financial Statements and
Supplementary Data, Note 2- Liquidity for additional information.
Cash flows provided by operating activities increased $1.4 billion in 2013 primarily due to increased volume in our Shipping
and Packages and Standard Mail service offerings. Additional non-cash items included $1.9 billion in depreciation and $5.6
billion in PSRHBF offset by $1.3 billion in deferred revenue primarily due to a change in accounting estimate for prepaid
postage.
Cash flows used in operating activities were $431 million in 2012. The increase in cash used was due to $911 million repayment
of the FERS employer contributions that were withheld from June 2011 through November 2011. Partially offsetting the FERS
payment impact on cash flows was an increase in cash received for stamps that had not yet been used, otherwise known as
deferred revenue - prepaid postage, which increased by $517 million in 2012.
Investing Activities - Net cash used in investing activities for the periods ended September 30, 2014, 2013 and 2012 were $586
million, $588 million and $585 million, respectively. Cash flows used in investing activities were primarily due to the purchase
of property and equipment, net of proceeds. We continued to employ a discretionary capital expenditure plan for priority
projects that are essential to conserve cash.
Financing Activities - As an “independent establishment of the Executive Branch of the Government of the United States,” the
Postal Service receives no tax dollars for ongoing operations and has not received an appropriation for operational costs since
1982. We fund operations chiefly through cash generated from operations and by borrowing from the FFB.
The amount borrowed is largely determined by three major factors: (1) cash flow from operations, (2) capital cash outlays,
which include funds invested for new facilities, new automation equipment and new services and (3) the annual increase in
debt, which is limited by statute to $3 billion. See Item 8. Financial Statements and Supplementary Data, Note 6- Debt for
additional information.
Net cash used in financing activities for the periods ended September 30, 2014 and 2013 were $148 million and $107 million,
respectively. Net cash provided by financing activities was $1.8 billion for 2012, primarily due to issuances of new debt.
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 did not
appropriate the funds for these payments in 2014, 2013 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 $22 million
in 2014 and $23 million for each of the years ended September 30, 2013 and 2012. See Item 8. Financial Statements and
Supplementary Data, Note 12- Revenue Forgone for additional information.
Investment income was not material for the years ended September 30, 2014, 2013 and 2012, respectively.
Interest Expense
Interest expense was $184 million, $191 million and $190 million, in 2014, 2013 and 2012, respectively. 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, 2014, $5.2 billion of long-term
obligations remain outstanding.