US Postal Service 2011 Annual Report Download - page 21

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2011 Report on Form 10-K United States Postal Service - 19 -
(dollars in millions) 2011 2010
First-Class Mail $ 32,179 $ 34,153
Standard Mail 17,826 17,331
Periodicals 1,821 1,879
Package Services 1,606 1,544
Other Mailing Services^ 3,285 3,681
Total Mailing Services 56,717 58,588
Total Shipping Services 8,994 8,464
Total Operating Revenue $ 65,711 $ 67,052
^Includes Certified Mail, Return Receipts, PO Boxes, Insurance, and Other Ancillary Fees
*Note: In 2011, the PRC approved a new methodology for allocating revenue across service lines. This new
methodology was applied to revenue and volume data relating to 2011 and 2010. The new methodology does
not change total revenue; however, it has an immaterial impact on volume. These reclassifications did not
impact total mail revenue and volume for 2009.
Operating Revenue *
MAILING SERVICES
In 2011, Mailing Services revenue decreased $1,871
million, or 3.2%, with a corresponding volume decrease of
3 billion pieces, or 1.8%, compared to last year. The
largest contributing factor to this decline was the
continuing migration away from First-Class Mail toward
electronic alternatives. An additional factor impacting this
decrease was the continuing sluggish economy and
lingering effects of the recent recession.
In 2011, revenue from First-Class Mail was $32,179
million, or 5.8% less than 2010, as volume decreased 5
billion pieces, or 6.4%, compared to last year. Single-
piece First-Class Mail letter and card revenue declined
$1,298 million, or 10.1%, on a volume decrease of 3
billion pieces, or 10.5%, compared to 2010. Revenue from
presorted First-Class Mail, which consists largely of bills
and statements, decreased by $487 million, or 3.0%, on a
volume decrease of 2 billion pieces, or 3.7%. Single-piece
First-Class Mail volume, including correspondence, bills,
remittances, confirmations, orders, and rebates, continued
to decrease and has been in decline for over a decade.
As already mentioned, the continued migration of hard-
copy mail from traditional postal services to soft copy
electronic media is the primary driver behind the
continued decline in First-Class Mail volume and revenue.
The modest improvement in the economy helped increase
Standard Mail revenue by $495 million, or 2.9%, in 2011
compared to 2010, on a volume increase of 2 billion
pieces, or 2.6%. Standard Mail letter volume increased
4.7%, or 2 billion pieces, while revenue increased $500
million, or 5.5%, in 2011 compared to 2010. The volume
for Standard Mail flats fell 3.8%, or 266 million pieces,
while revenue dropped $88 million, or 3.4%, in 2011
compared to last year. Standard Mail volume was
negatively impacted in 2011 as advertisers continued to
become more selective in the targeting of their mailings.
We expect that advertising mail volume will remain flat
because economic growth is not expected to be rapid or
robust.
Periodicals revenue decreased $58 million, or 3.1%, from
$1,879 million in 2010 to $1,821 million in 2011.
Periodicals volume decreased 192 million pieces, or
2.6%, to 7 billion pieces in 2011. Trends in hard-copy
reading behavior and shifts of advertising away from print
have been depressing this segment for years. Periodicals
are not expected to rebound as e-readers and electronic
content continue to become popular with the public.
Package Services revenue of $1,606 million in 2011
increased $62 million, or 4.0%, compared to 2010.
Volume increased 18 million pieces, or 2.7%, for the same
period. Growth in Package Services is attributed to the
increased use of ecommerce and to the economical
pricing offered by this service line.
SHIPPING SERVICES
Shipping Services, which includes premium products such
as Priority Mail and Express Mail, represents less than 1%
of volume but generates approximately 14% of revenue.
Shipping Services revenue increased by $530 million, or
6.3%, in 2011 to $8,994 million on a volume increase of
84 million, or 6.0%. The increase in revenue was driven
by increased mailings of packages as consumers
continued to use the internet more often to purchase
goods. Our most recent price increases in January 2010
and January 2011 positively impacted our revenues; in
addition, the success of our mail advertising campaigns
also added to the revenue increase.