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2005 Annual Report United States Postal Service | 23
Operating Expenses
Operating Expenses are comprised of Compensation
and Benefits, Transportation, Supplies and Services,
Depreciation and Amortization and Other Expenses and
are discussed in the sections to follow.
In 2005 Operating expenses of $68,283 million were
$2,432 million more than 2004. The increase was driven
primarily by increases in compensation and benefits and
transportation expenses. Rising fuel prices contributed sig-
nificantly to the increase in transportation expenses, and
also contributed to increased compensation and benefits
expenses through their impact on employee cost-of-living
adjustments (COLAs). Compensation and benefits expense
growth was also influenced heavily by contractual pay
increases, and retirement and health benefits costs. These
same factors, in somewhat different proportions also drove
the $1,949 million increase in operating expenses in 2004,
compared to 2003.
Compensation and Benefits
Personnel compensation and benefits, including interest
on deferred retirement obligations, made up 79.1% of
our total expenses. These costs grew $1,958 million in
2005. This year’s growth was due primarily to contractual
labor rate increases, COLAs, health benefits payments for
current and retired employees and an increase in interest
on deferred retirement. Our 2005 average hourly labor
rates increased by 2.5%, and our 2005 health benefits
expense for current employees and retirees increased
by $437 million to nearly $6.6 billion, or 9.7% of total
60
55
50
45
40
1999 2000 2001 2002 2003 2004 2005
Workshare First-Class Mail
Single-piece First-Class Mail
FIRST-CLASS MAIL VOLUME
(Pieces in billions)
(Dollars in millions)
% Change
Operating Expenses 2005 2004 2003 2005-2004 2004-2003
Compensation
and Benefits* $ 53,932 $ 52,134 $ 50,428 3.4% 3.4%
Transportation 5,437 4,969 4,989 9.4% -0.4%
Supplies and Services 2,416 2,414 2,328 0.1% 3.7%
Depreciation and
Amortization 2,089 2,145 2,295 -2.6% -6.5%
Other expenses 4,409 4,189 3,862 5.3% 8.5%
Total Operating
Expense $ 68,283 $ 65,851 $ 63,902 3.7% 3.0%
* This does not include interest on deferred retirement obligations, which is included on the compensation and benefits
table below. Interest is not considered an operating expense on the financial statements.
(Dollars in millions)
% Change
Compensation And
Benefits 2005 2004 2003 2005-2004 2004-2003
Compensation $ 39,299 $ 37,876 $ 37,144 3.8% 2.0%
Retirement 7,073 6,574 5,877 7.6% 11.9%
Health Benefits 5,100 4,845 4,526 5.3% 7.0%
Retiree Health Benefits 1,495 1,313 1,133 13.9% 15.9%
Workers’
Compensation 838 1,239 1,473 -32.4% -15.9%
Other 390 390 391 0.0% -0.3%
Total Compensation
and Benefits* $ 54,195 $ 52,237 $ 50,544 3.7% 3.3%
* Equals compensation and benefits plus interest on deferred retirement on the financial statements.