US Postal Service 2015 Annual Report Download - page 31

2015 Report on Form 10-K United States Postal Service 29
Other Operating Expenses
The following table details other operating expenses for the periods ended September 30, 2015, 2014 and 2013:
(in millions) 2015 2014 2013
Supplies and services $ 2,705 $ 2,550 $ 2,400
Depreciation and amortization 1,769 1,843 1,901
Rent and utilities 1,613 1,613 1,582
Vehicle maintenance service* 1,053 1,108 1,040
Information technology and communications 784 791 720
Rural carrier equipment maintenance 514 556 558
Miscellaneous other 719 892 973
Total other operating expenses $ 9,157 $ 9,353 $ 9,174
* Includes fuel costs for delivery routes.
While most of the components within other operating expenses declined or remained the same in 2015, supplies and services
increased and had the most significant change, due most notably to debit and credit card merchant fees and our implementation
of certain new technology for our retail operations. While vehicle maintenance service expenses benefited from lower fuel
costs, this was somewhat offset by higher maintenance costs on our aging vehicle fleet.
The modest growth of nearly 2% of other operating expenses from 2013 to 2014 was most significantly impacted by the
growth in volume of our package business which had a corresponding growth in supplies and services costs. In addition,
increases in mobile communications, IT services and higher costs of maintenance of our aging vehicle fleet contributed to the
increase. These increases were partially offset by a decrease in depreciation expense as management continued to limit non-
essential capital spending.
NON-OPERATING REVENUES AND EXPENSES
Interest and Investment Income
The majority of our interest income is derived from the imputed interest we recognize on the future installment payments that
are owed to us under the Revenue Forgone Reform Act of 1993 (the “RFA”). Under the RFA, Congress agreed to reimburse
us $1.2 billion in 42 annual installments of $29 million each through 2035 for services we performed in prior years. Imputed
interest for revenue forgone was $22 million for the years ended September 30, 2015, and 2014 and $23 million in 2013. See
Item 8. Financial Statements and Supplementary Data, Notes to Financial Statements, Note 12 - Revenue Forgone for additional
information.
Investment income was immaterial for the years ended September 30, 2015, 2014 and 2013.
Interest Expense
Interest expense was $185 million, $184 million and $191 million, for the years ended September 30, 2015, 2014 and 2013,
respectively. Although long-term debt generally carries higher interest rates than prevailing rates for short-term debt, financing
a portion of our debt at longer-term fixed rates decreases our interest rate risk and interest expense volatility in subsequent
years.
Liquidity and Capital Resources
We held cash and cash equivalents of $6.6 billion and $4.9 billion as of September 30, 2015, and September 30, 2014,
respectively. Our average daily cash balance during the year ended September 30, 2015, was $6.6 billion, which represents
approximately 24 days of operating cash. See Item 8. Financial Statements and Supplementary Data, Notes to Financial
Statements, Note 2 - Liquidity for additional information.
CASH FLOW ANALYSIS
Although our cash balances have increased, they remain insufficient to support an organization with approximately $74 billion
in annual operating expenses. Our business continues to face challenges due to the ongoing migration of mail to electronic
alternatives, and we are legally limited in how we can price our products and streamline our legacy business model.