Liquidity and Capital Resources


Liquidity is the cash we maintain at the U.S. Treasury and our available credit with the Federal Financing bank (FFB). Our note purchase agreement with the FFB provides for revolving credit lines of $4.0 billion. These credit lines enable us to draw up to $3.4 billion with two days notice, and up to $600 million on the same business day the funds are needed. Under this agreement, we can also use a series of other notes with varying provisions to draw upon with two days notice. This arrangement provides the flexibility to borrow short-term or long-term, using fixed- or floating-rate debt. Fixed-rate notes can be either callable or non-callable. These credit arrangements generally provide adequate tools to effectively fund routine cash requirements and manage interest expense and risk. See Note 4, Debt, in the Notes to the Financial Statements for additional information about the debt obligations.

The majority of our revenue is earned in cash and the majority of cash outflow is to support the biweekly payroll. Historically, cash flow from operations reaches a seasonal peak in the first quarter and a seasonal low in the fourth quarter of the fiscal year. The first quarter includes the fall mailing and holiday seasons. Beginning in 2010, the shift of the annual workers’ compensation payment into the first quarter from the fourth quarter of the previous year largely offset the increased cash inflow from seasonal revenue. In the fourth quarter we make a cash payment to fund the PSRHBF. This payment is scheduled to be $5.5 billion in 2011. Net cash flows for the fourth quarter are projected to remain at annual lows as revenue remains lower relative to the other quarters.