US Postal Service 2015 Annual Report Download - page 48

2015 Report on Form 10-K United States Postal Service 46
to match demand, reductions in the number of delivery routes and consolidations of delivery offices. Additionally, the Postal
Service leveraged employee attrition, Voluntary Early Retirement and utilization of non-career employees to the maximum
extent permitted by its labor contracts.
The Postal Service continues to pursue strategies within its control to increase operational efficiency and to improve liquidity.
For example, the Postal Service revised certain service standards for Standard Mail as part of an efficiency improvement
effort known as “load leveling.” With this change, delivery volume became more evenly balanced across the delivery days,
which improved efficiency.
The Postal Service has conserved capital in recent years by spending only what it believed essential to maintain its existing
facilities and service levels. However, an increase of capital investment is necessary to upgrade its facilities, existing fleet of
vehicles and processing equipment in order to remain operationally competitive.
The Postal Service continues to pursue legislation that will enable it to increase its revenue and reduce its costs. Initiatives
include transition to a new delivery schedule, reforms that would establish a set of health care plans that would fully integrate
with Medicare for current and future Postal Service retirees, largely eliminating the current unfunded liability and the necessity
for the prefunding requirement.
Mitigating Circumstances
The Postal Service’s status as an independent establishment of the executive branch that does not receive tax dollars for its
operations presents unique requirements and restrictions, but also potentially mitigates some of the financial risk that would
otherwise be associated with a cash shortfall. With annual revenue of approximately $69 billion, a financially-sound Postal
Service continues to be vital to U.S. commerce.
The U.S. economy benefits greatly from the Postal Service and the many businesses that provide the printing and mailing
services that it supports. Disruption of the mail would cause undue hardship to businesses and consumers, and in the event of
a cash shortfall, the U.S. government would likely prevent the Postal Service from significantly curtailing or ceasing operations.
The Postal Service continues to inform the Administration, Congress, the PRC and other stakeholders of the immediate and
long-term financial challenges it faces and the legislative changes that are required to restore its financial stability.
NOTE 3 - RELATED PARTIES
As disclosed throughout this report, the Postal Service conducts significant transactions with other U.S. government entities,
which are considered related parties.
Related-party receivables and advances were $100 million and $90 million as of September 30, 2015, and 2014, respectively,
and are included in Receivables, net in the accompanying Balance Sheets. As discussed in greater detail in Note 12 - Revenue
Forgone, the carrying amount of the revenue forgone receivable was $413 million and $420 million as of September 30, 2015,
and 2014, respectively, and is included within Other assets in the accompanying Balance Sheets.
As discussed in greater detail in Note 7 - Debt, the Postal Service’s debt, borrowed from the Federal Financing Bank (“FFB”),
was $15.0 billion as of September 30, 2015, and 2014. Excluding the $10.1 billion and $9.8 billion current portions of debt,
related-party current liabilities, which include the PSRHBF obligations discussed in Note 10 - Health Benefits Plans, were
$29.9 billion and $23.9 billion as of September 30, 2015, and 2014, respectively. Excluding the $4.9 billion and $5.2 billion
noncurrent portions of debt, related-party noncurrent liabilities were $17.5 billion and $17.2 billion as of September 30, 2015,
and 2014, respectively.
Related-party operating revenue from other U.S. government entities was $999 million, $918 million and $822 million for
the years ended September 30, 2015, 2014 and 2013, respectively. Related-party operating expenses, consisting primarily of
benefits, retiree health benefits and workers’ compensation, were $18.1 billion, $17.3 billion and $17.0 billion for the years
ended September 30, 2015, 2014 and 2013, respectively. These items are included within Operating expenses in the
accompanying Statements of Operations.
Related-party interest income, either imputed on revenue forgone or generated on cash and equivalents held with the Federal
Reserve Bank of New York or short-term investments in U.S. Treasury instruments, was $23 million for each of the years
ended September 30, 2015, 2014 and 2013. These items are included within Interest and investment income in the