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2006 Annual Report United States Postal Service | 33
Interest Expense
Our 2004 and 2005 debt consisted of short-term debt obligations, which
provided us with the flexibility to repay debt with available cash on a daily
basis. A major benefit of the short-term obligations was the reduction
in interest expense payable to the Federal Financing Bank. As a result,
we were able to virtually eliminate interest on debt in 2004, 2005 and
2006 and interest expense on borrowings was the lowest since postal
reorganization in the early 1970s.
Interest and Investment Income
When we determine that our funds exceed our current needs, we invest
those funds with the U.S. Treasury’s Bureau of Public Debt in overnight
securities issued by the U.S. Treasury. With reduced or zero debt to repay,
we took advantage of a build up of cash and rise in short term interest
rates to earn investment income of $140 million in 2006 and $60 million
in 2005.
We also record imputed interest on the funds owed to us under the
Revenue Forgone Act of 1993. Under the Act, Congress is required
to reimburse us $29 million annually through 2035. See Note 12,
Revenue Forgone in the Notes to the Financial Statements for additional
information.
Interest and Investment
Income 2006 2005 2004
(Dollars in millions)
Investment Income $ 140 $ 60 $ 5
Imputed interest on accounts
receivable from the
U.S.government 25 25 26
Other Interest 2 1 2
Total $ 167 $ 86 $ 33
Cash Flow
NET CASH PROVIDED BY OPERATING ACTIVITIES
Net cash provided by operating activities of $3,768 million increased by
$38 million over 2005. Increases in cash payments for compensation
and transportation expenses were offset by increases to noncash items
such as accrued payroll and leave liability of $304 million and workers
compensation liability of $342 million. Also contributing was $169 million
of increased collections in accounts receivable between 2005 and 2006,
increased investment income of $81 million versus 2005, $55 million of
additional money orders outstanding at year end as well as a decrease in
the interest expense payment on deferred retirement obligations of $32
million.
NET CASH USED IN INVESTING ACTIVITIES
During 2006, 2005 and 2004, net cash used in investing activities was
$5.5 billion, $2.3 billion and $1.7 billion respectively. The increases reflect
increased investment for mail processing equipment, retail equipment and
building improvements. The increase in 2006 also reflects the placement
of $2,958 million into a restricted cash account as required by P.L.
108-18.
Financial Section Part II