US Postal Service 2013 Annual Report Download - page 45

2013 Report on Form 10-K United States Postal Service 43
OPERATING EXPENSES - OTHER OPERATING EXPENSE
For 2013, other operating expenses of $9,174 million decreased $13 million, or 0.1%, compared to $9,187 million in 2012.
Other Operating Expenses
% Change
(Dollars in millions) 2013 / 2012 2012 / 2011
Supplies and Services
$
2,400
$
2,263
$
2,260
6.1%
0.1%
Depreciation and Amortization
1,901
2,075
2,313
(8.4%)
(10.3%)
Rent and Utilities
1,582
1,623
1,682
(2.5%)
(3.5%)
Vehicle Maintenance Service
1,040
995
974
4.5%
2.2%
Information Technology and Communications
720
695
695
3.6%
0.0%
Rural Carrier Equipment Maint. Allowance
558
579
554
(3.6%)
4.5%
Miscellaneous Other
973
957
1,344
1.7%
(28.8%)
Total Other Operating Expenses
$
9,174
$
9,187
$
9,822
(0.1%)
(6.5%)
2013
2012
2011
In 2013, management continued its efforts to control costs and limit non-essential spending to conserve cash.
Depreciation and Amortization decreased $174 million or 8.4% from 2012. Rent and Utilities decreased by $41 million or
2.5%. Both were driven by a freeze in non-essential capital spending and our overall efforts to reduce square footage of
postal facilities. Rural carrier equipment maintenance costs decreased $21 million or 3.6% due to the reallocation of
postal-owned vehicles onto rural routes.
These decreases were offset by increases in supplies and services and miscellaneous other expenses. The increase in
supplies and services of $137 million or 6.1% in 2013 is largely caused by the need to replace shipping supplies required
by our rebranding of our Priority Mail products. Total vehicle maintenance service expense increased by $45 million or
4.5% primarily related to fuel costs. Fuel costs, which rose in both 2013 and 2012, accounted for 52% and 53% of the
total vehicle maintenance service expense for 2013 and 2012, respectively. The other significant driver of vehicle
maintenance expense is the increasing cost to maintain our aging delivery vehicle fleet. Miscellaneous Other operating
expense increased $16 million or 1.7% primarily due to changes in the estimate of new and existing contingent liabilities,
a result of the ongoing evaluation process.
In 2012, depreciation and amortization decreased $238 million or 10.3% compared to 2011, as capital spending had been
limited. Rent and utilities expense was $59 million or 3.5% lower than 2011 as the number of postal facilities and related
square footage declined. Miscellaneous other operating expense decreased by $387 million compared to 2011. A
significant portion of the miscellaneous other expense in 2011 was driven by legal expenses associated with the
contingent liability evaluation process. These decreases were partially offset by increases in supplies and services of $3
million or 0.1%, rural carrier equipment maintenance of $25 million or 4.5%, and vehicle maintenance services of $21
million or 2.2% from 2011.
PRODUCTIVITY
The Postal Service is continually striving to increase efficiency by making better use of space, staffing, equipment, and
transportation to process and deliver the nation’s mail. Generating efficiencies has become increasingly important, given
the significant reduction over the last several years in the amount of First-Class Mail. Declines in mail volume have driven
the continuous revaluation and right-sizing of capacity from the mail processing network that is critical to managing costs.
Increased electronic access to our services through alternate access channels, such as Click-n-Ship, PC Postage, and
Automated Postal Centers, continue to reduce the requirement for customer service work hours.
Since 2006, the Postal Service has consolidated 350 mail processing facilities, removed nearly 4,150 pieces of
equipment, and decreased employee complement by more than 200,000.
We are also working to increase efficiency and reduce the costs of our retail network, while continuing to provide
appropriate levels of service to communities throughout America. On May 9, 2012, we announced a strategy, called the
POSt Plan, to preserve Post Offices serving rural America while providing a framework to achieve significant cost savings.