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United States Patent and Trademark Office Performance and Accountability Report Fiscal Year 2003 Management Discussion and Analysis |
FINANCIAL CONDITIONNet PositionThe following table depicts the USPTOs financial condition for the past four fiscal years. Net position was $403.2 million as of September 30, 2003, a decrease of $7.5 million, or 1.8 percent, from the FY 2002 balance of $410.7 million.
The FY 2003 net position consisted of:
Adjusting cumulative results of operation for net property and equipment, accounts receivable, and prepayments, the cash and Fund Balance with Treasury portion of net position is $15.1 million. The $15.1 million is calculated on a financial accounting basis and does not reflect the impact of obligations of $230.1 million in unpaid undelivered orders (goods and services ordered, but not yet received). Therefore, after considering these items, future funding in the amount of $215.0 million will have to be earned to liquidate unfunded liabilities as of September 30, 2003. Cash and Fund Balance with TreasuryCash and Fund Balance with Treasury was $997.0 million as of September 30, 2003, an increase of $61.6 million, or 6.6 percent, over the FY 2002 balance of $935.4 million. Of the $997.0 million, only $2.1 million, or 0.2 percent, was available to meet FY 2004 needs. The other 99.8 percent was earmarked or set aside as follows:
During FY 2003, the USPTO generated net cash of $61.6 million from patent and trademark fees and other activities, an increase of $61.1 million from the $0.5 million generated during FY 2002, summarized as follows.
Of the $122.7 million generated from operating activities during FY 2003, $61.1 million was invested in new property and equipment. This amount represented an increase of $0.9 million, or 1.5 percent, from the $60.2 million of net cash invested in property and equipment during FY 2002. Property and EquipmentNet property and equipment was $117.4 million as of September 30, 2003, which consisted of the original acquisition value of $427.3 million less accumulated depreciation of $309.9 million. The acquisition values for property and equipment at the end of each fiscal year, for the past four fiscal years, are presented in the table below:
The $48.7 million increase in acquisition value from FY 2002 to FY 2003 was the result of $61.1 million of assets purchased during the fiscal year, less the acquisition cost of $12.4 million related to assets disposed of during the fiscal year in the normal asset life cycle process. The increase in IT equipment acquisitions during FY 2003 was mainly comprised of network servers, computers, printers, and scanners, while the increase in software acquisitions was primarily an increase in contractor-developed internal use software. These IT acquisitions, both hardware and software, reflected a continuing emphasis on reducing labor-intensive paper processing, enhancing the quality of patent issuances and registered trademarks, and controlling patent and trademark pendency. The acquisition value for construction in progress was recorded due to leasehold improvements made on the new headquarters in Alexandria, Virginia. At the point in time that we begin to occupy the buildings, this investment will move from construction in progress to leasehold improvements. Deferred RevenueDeferred revenue was $504.2 million as of September 30, 2003, an increase of $38.2 million, or 8.2 percent, over the FY 2002 balance of $466.0 million. The deferred revenue liability included unearned patent and trademark fees and undeposited checks at the end of the fiscal year, for the past four years, as summarized below:
Deferred revenue at the USPTO was impacted by two principal factors:
The tables below track the changes in these two principal factors and relate to the percentage change in the deferred revenue liability noted in the table above.
PatentsThe following chart summarizes unearned patent fees for the past four fiscal years: Unearned patent fees at the end of FY 2003 were $445.1 million, an increase of $32.0 million, or 7.7 percent, over the prior year balance of $413.1 million. This was primarily due to an increase of $27.4 million in unearned fees for patent application filing fees (7.2 percent) and an increase in first action pendency for utility and plant patents from 16.7 months at the end of FY 2002 to 18.3 months at the end of FY 2003. The remaining increase of $4.6 million was related to the percentage of work completed in the other patent processing areas. The undeposited checks component of patent deferred revenue increased $2.1 million, or 28.0 percent, from $7.5 million at the end of FY 2002 to $9.6 million at the end of FY 2003. TrademarksThe following chart summarizes unearned trademark fees for the past four fiscal years: Unearned trademark fees at the end of FY 2003 were $48.4 million, an increase of $4.5 million, or 10.3 percent, over the prior year balance of $43.9 million. An increase in new applications and an increase of trademark pendency to first action of 1.1 months resulted in an increase in unearned trademark application fees of $5.1 million. The increases were offset by a $1.1 million decrease in unearned trademark renewal and affidavit fees. This resulted from a decrease in inventory from the prior fiscal year. The undeposited checks component of trademarks deferred revenue decreased $0.5 million, or 33.3 percent, from $1.5 million at the end of FY 2002 to $1.0 million at the end of FY 2003.
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