US Postal Service 2014 Annual Report Download - page 43

2014 Report on Form 10-K United States Postal Service 39
Preservation Act. Additionally, a Federal agency, the state in which the facility is located, and city, town or local government (in
order of priority) would have a right of first refusal to purchase any postal facility offered for sale by the Postal Service. The bill
was referred to the House Oversight and Government Reform Committee.
On August 1, 2014, H. Res. 711, a resolution expressing the sense of the House of Representatives that the United States Postal
Service should take all appropriate measures to ensure the continuation of door deliveries for all business and residential
customers, was introduced in the House. The resolution is in opposition to a provision in H.R. 2748, the Postal Reform Act of
2013, which would phase out door delivery of mail. The measure was referred to the House Oversight and Government Reform
Committee.
On September 10, 2014, the Postal Jobs Protection Act of 2014 (“H.R. 5445”), was introduced in the House. The measure
would impose a temporary moratorium on the closure or consolidation of any mail processing facility. The bill provides that
notwithstanding any other provision of law, no mail processing facility operating as of September 1, 2014 may be closed or
consolidated prior to December 31, 2015. The bill was referred to the House Oversight and Government Reform Committee.
Legislation and Nomination Expiration
All above-mentioned pending legislation and nominations will expire if required final Congressional action does not take place
before the 113th Congress adjourns.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The market rate risks we encounter are primarily related to foreign currency exchange rate fluctuations, interest rates and
commodity prices. Historically we have not entered into derivatives for trading or speculative purposes, nor leveraged financial
instruments to manage market risks, or entered into commodity instruments to manage risk of changes in energy prices.
Foreign Exchange Risk
While we operate outside of the U.S. markets, we believe that the potential change in foreign exchange rates is not a material
risk to us as a large majority of our business transactions are denominated in U.S. dollars. However, currency exchange rate
fluctuations may favorably or unfavorably impact our reported earnings.
We estimate that a 1% increase or decrease in foreign exchange rates would not have a material impact on our financial
statements due to the small percentage of our receipts and disbursements denominated in foreign currencies.
Interest Rate Risk
We are impacted by changes in interest rates in the normal course of our business operations as a result of our ongoing investing
and financing activities which include our revolving credit line facilities as well as our cash and cash equivalents. We assess our
interest rate risks on a regular basis. We estimate that a 1% increase in interest rates would have resulted in a $43 million
increase in interest expense.
We have interest rate risk associated with our workers’ compensation liability, see Item 8. Financial Statements and
Supplementary Data, Note 10- Workers’ Compensation, which is highly sensitive to changes in discount (interest) rates. An
increase of 1% in the interest rates would decrease the September 30, 2014 liability and 2014 expense by approximately $1.9
billion. A decrease of 1% would increase the September 30, 2014 liability and 2014 expense by approximately $2.3 billion.
We currently have no significant exposure to changing interest rates on our noncurrent debt as interest rates are fixed on such
debt. As disclosed in the accompanying notes to the financial statements, see Item 8. Financial Statements and Supplementary
Data, Note 11- Fair Value Measurements, the fair value of our noncurrent debt, exclusive of capital leases, was $5.6 billion for
the year ended September 30, 2014. The underlying fair value of our noncurrent debt was estimated using prices provided by
the FFB.
Commodity Prices Risk
We currently have market risk for changes in fuel and natural gas costs. As of September 30, 2014, we estimated that a 1%
increase in fuel and natural gas would have resulted in a $27 million increase in expense.