US Postal Service 2015 Annual Report Download - page 33

2015 Report on Form 10-K United States Postal Service 31
Investing Activities
In order to conserve cash, we have reduced our capital expenditures by approximately 43% from an annual average of
approximately $1.5 billion in years 2009 through 2011 to an annual average of approximately $850 million in years 2012
through 2015. Priority has been given to projects:
1. Needed for safety and/or health or legal requirements;
2. Required to provide service to our customers; and
3. Initiatives with a high return on investment and a short payback period.
The source of funds needed to fulfill these commitments was generated from our operating activities. However, we will need
to increase our capital expenditures in order to address our aging facilities and delivery fleet and to upgrade our equipment
to remain competitive in the marketplace and to ensure that we will be able to continue to meet our statutory obligation to
provide prompt, efficient and reliable postal services to the nation.
Our delivery fleet includes approximately 140,000 vehicles that are at least 20 years old which are at or near the end of their
useful lives. Repair and maintenance costs for these vehicles have risen significantly in recent years. Additionally, we must
also invest in letter sorting equipment that is at or near the end of its useful life, and also invest in sorting and handling
equipment to fully capitalize on business opportunities in the growing package delivery market. To save cash, we have also
deferred facilities maintenance, which has no impact on health and safety issues.
In 2015 we invested $1.2 billion in the purchase of property and equipment, an increase of $441 million over 2014, as we
used additional cash on hand to fund some of our much-needed investments in building improvements, vehicles, equipment
and other capital projects. In 2014 we invested $781 million in the purchase of property and equipment, an increase of $114
million over 2013. We continued to employ a discretionary capital expenditure plan for priority projects that are essential to
conserve cash.
We currently estimate that our cash outlays for capital assets in 2016 will amount to $1.8 billion. For the periods of 2017
through 2020, we estimate $6.9 billion in additional cash outlays for capital assets. Although our future projections include
these capital cash outlays, future cash flow from operations alone may not generate the cash needed for such necessary capital
expenditures.
Financing Activities
As an “independent establishment of the Executive Branch of the Government of the United States,” we receive no tax dollars
for ongoing operations and have not received an appropriation for operational costs since 1982. We fund our operations chiefly
through cash generated from operations and by borrowing from the FFB, a government-owned corporation under the general
supervision of the Secretary of the Treasury. See Item 8. Financial Statements and Supplementary Data, Notes to Financial
Statements, Note 7 - Debt for additional information.
We have not increased our debt since September 2012 when we reached the maximum borrowing amount allowed under our
statutory debt ceiling. Our debt consists of fixed-rate notes and two revolving credit facilities with various maturities with an
aggregate principal balance of $15.0 billion as of September 30, 2015, and September 30, 2014.
The two revolving credit facilities have interest rates determined by the U.S. Department of Treasury each business day and
enable us to draw up to $4.0 billion in total. As of September 30, 2015, and September 30, 2014, these facilities were fully
drawn, have maturity dates of April 19, 2016, and are included in the current portion of debt in the accompanying Balance
Sheets.
Net cash used in financing activities, for the periods ended September 30, 2015, 2014 and 2013 were $62 million, $148 million
and $107 million, respectively, consisting primarily of cash payments on capital lease obligations.
LIQUIDITY OUTLOOK
We incurred a net loss of approximately $5.1 billion for the year ended September 30, 2015. The loss included $5.7 billion
of expense accrued for the PAEA-mandated prefunding payment for retiree health benefits. This requirement to prefund retiree
health benefit obligations, which is not imposed on most other federal agencies or private sector businesses, and the ongoing
decline in First-Class Mail volume caused by changes in consumers’ and businesses’ uses of mail, resulting from the continuing
migration toward electronic communication and transactional alternatives, have been major factors contributing to our losses.