US Postal Service 2009 Annual Report Download - page 34

32 | 2009 Annual Report United States Postal Service
Service products — including Priority Mail, Express Mail,
Global Express Guaranteed, Express Mail International,
Priority Mail International, Parcel Select and Parcel Return
Service — will increase an average of 3.3% effective Janu-
ary 4, 2010.
Prices for Shipping Services must cover each product’s
attributable costs, as well as an appropriate share of the
institutional costs of the Postal Service. The institutional
cost allocation, determined by the PRC, is 5.5% of total
attributable costs. We offer contract prices, rebates, on-
line price reductions and other incentives to encourage
growth. By law, prices must be announced at least 30
days prior to the implementation date.
Prices for Shipping Services increased an average of 5% in
January 2009. This was the fi rst time the Postal Service ad-
justed prices for Shipping Services on a different schedule
than for Mailing Services. As part of this change, Commer-
cial Plus pricing was introduced, providing reduced prices
for high-volume Express Mail and Priority Mail users. New
C ommercial Plus prices are, on average, 14.5% less than
retail for Express Mail and 7% less for Priority Mail.
INTELLECTUAL PROPERTY
We own intellectual property that includes trademarks,
service marks, patents, copyrights, trade secrets and
other proprietary information. We routinely generate intel-
lectual property in the course of developing and improving
systems, services and operations. We believe, however,
that the legal protections for our intellectual property are
less signifi cant factors in our success than the knowledge,
ability and experience of our employees and the timeliness
and quality of services provided by us.
SEASONAL OPERATIONS
Our operations are seasonal. Mail volume and revenue
tend to be greatest in the fi rst fi scal quarter, which includes
the fall holiday mailing season, and lowest during the sum-
mer, our fourth quarter.
CUSTOMERS
We have a very diverse customer base and are not depen-
dent upon a single customer or small group of customers.
No single customer represents more than 3% of operat-
ing revenue, but advertising mail in general accounts for
more than half of our volume. The fi nancial services sector,
which includes real estate, represents approximately 10%
of operating revenues.
GOVERNMENT CONTRACTS
No material portion of our business is subject to renegotia-
tion of profi ts or termination of contracts or subcontracts
at the election of the U.S. government.
COMPETITION
Our Shipping Services compete on the basis of the
breadth of our network and the reliability and economy of
our services. Shipping Services have benefi ted from the
growth of the Internet. Despite the exit of DHL from the
American market, package and express businesses are
likely to be intensely competitive in the future. The primary
competitors of our Shipping Services are Federal Express
and United Parcel Service.
RESEARCH AND DEVELOPMENT
We operate a research and development facility in Virginia
for design, development and testing of postal equipment
and operating systems. We also contract with indepen-
dent suppliers to conduct research activities. While re-
search and development activities are important to our
business, these expenditures are not material.
ENVIRONMENTAL MATTERS
We are not aware of any federal, state or local environ-
mental laws or regulations that would materially affect our
fi nancial results or competitive position, or result in mate-
rial capital expenditures. However, we cannot predict the
effect of possible future environmental legislation or regu-
lations on operations.
EMPLOYEES
At September 30, 2009, we had 623,128 career employ-
ees and 88,954 non-career employees, substantially all of
whom reside in the U.S.
The labor force is primarily represented by the Ameri-
can Postal Workers Union (APWU), National Association
of Letter Carriers (NALC), National Postal Mail Handlers
Union (NPMHU) and National Rural Letter Carriers’ As-
sociation (NRLCA). The APWU and the NRLCA contracts
expire in November 2010, while the NPMHU and NALC
contracts expire in November 2011. More than 85% of
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 consultations