US Postal Service 2005 Annual Report Download - page 26

16 | 2005 Annual Report United States Postal Service
Item 1. Business
Financial Information about Segments
We operate in one segment throughout the United States
and internationally.
Narrative Description of Business
Overview
The United States Postal Service (we) commenced opera-
tions on July 1, 1971 as an independent establishment
of the executive branch of the United States government.
Under the Postal Reorganization Act, we have a legal
mandate to offer a “fundamental service” to the American
people on a “fair and equitable basis.” We fulfill this legal
mandate to offer universal service at a fair price by offering
a variety of classes of mail services without undue dis-
crimination among our many customers. This means that
within each class of mail our price does not unreasonably
vary by customer for the levels of service we provide.
We serve individual and commercial customers throughout
the nation. We compete for business in the communica-
tions, distribution and delivery, advertising, and retail
markets. The rates and fees for postal services are subject
to a regulatory review process controlled by the indepen-
dent Postal Rate Commission (PRC).
Our mailing services (products) are distributed through our
more than 37,000 Post Offices, stations and branches,
contract postal units, our website usps.com, and a large
network of consignees. We deliver mail to more than
144 million city, rural, Post Office Box, and highway deliv-
ery points. We conduct our significant operations primarily
in the domestic market, with international operations
representing less than 3% of our total revenue.
Our labor force is primarily represented by the American
Postal Workers Union, National Association of Letter
Carriers, National Postal Mail Handlers Union, and National
Rural Letter Carriers Association. Approximately 90% of
our career employees are covered by collective bargaining
agreements. By law, we consult with management orga-
nizations representing most of the employees not covered
by collective bargaining agreements. These consulta-
tions provide an opportunity to participate directly in the
planning, development, and implementation of programs
and policies affecting non-bargaining employees in the
field. The management organizations include the National
Association of Postal Supervisors, the National League of
Postmasters, and the National Association of Postmasters
of the United States. We participate in federal employee
benefit programs as required by statute, for retirement,
and workers’ compensation.
Although we are not subject to regulation by the Securities
and Exchange Commission (SEC), we comply voluntarily
with the financial reporting requirements of the SEC to
the extent that these requirements may be reasonably
applied to a non-publicly traded, government-owned entity
with a mandate to break even over time. Therefore, this
report excludes certain SEC reporting elements normally
included in a Form 10-K. Specifically, we have excluded:
Item 4, Submission of Matters to a Vote of Security
Holders; Item 5, Market for Registrant’s Common Equity
and Related Stockholder Matters; and Item 12, Security
Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.
Strategy
Since publication of our 2002 Transformation Plan, we
have delivered on our promise of focus and results.
Our new Strategic Transformation Plan 2006-2010 builds
on the foundation of the earlier plan and continues its
momentum. In 2002 we were emerging from the multiple
shocks of an economic slowdown, September 11, and
the anthrax attacks. Mail volume fell, and America’s
confidence in the mail was undermined. The 2002
Transformation Plan became our roadmap to recovery. It
re-instilled confidence among our employees and set chal-
lenging but achievable targets in service and cost manage-
ment. Productivity growth has been steady and strong. We
have reduced complement by more than 80,000 through
attrition and have realized cumulative savings of more
than $15 billion through the end of 2005. Better service
and stable rates have attracted new business. Advertising
mail volume is up 10% in two years. To date, increases
in advertising mail revenue have offset losses caused by
competitive, technological changes that are moving com-
munications, bills and payments online.
In our Strategic Transformation Plan 2006-2010, we
commit to making further advances in service, productiv-
ity, and employee engagement. We will maintain a tight
focus on our core products to ensure that universal,
affordable postal services continue to have the power to
promote communication, reach key audiences, and help
bind America together. We are committed to continue
taking $1 billion out of our cost base each year through
2010 while employing equally aggressive measures to
grow the business.
Financial review
Part I