US Postal Service 2011 Annual Report Download - page 23

2011 Report on Form 10-K United States Postal Service - 21 -
Mail letter volume increased 3.2%, or 2 billion pieces,
while revenue increased $390 million, or 4.4% in 2010
compared to 2009. The volume for Standard Mail flats fell
10.1%, or 788 million pieces, and the related revenue
dropped $289 million, or 10.1% in 2010 compared to
2009.
Periodicals revenue and volume decreased by $159
million and 632 million pieces, or 7.8% and 8.0%,
respectively, in 2010 from 2009.
In 2010, Package Services revenue of $1,516 million
decreased by $168 million, or 10.0%, compared to 2009,
on a volume decline of 73 million pieces, or 10.0%.
Volume fell throughout the package industry in 2010 as
compared to 2009, reflecting the overall condition of the
economy.
SHIPPING SERVICES
In 2010, Shipping Services revenue of $8,681 million
increased $427 million, or 5.2%, compared with 2009
revenue of $8,254 million, on a volume increase of 39
million pieces, or 2.8%.
Additional discussion on volume and revenue projections
can be found in the “Outlook” section of this report.
Detailed data on Mailing Services product volume and
revenue may be found in the Quarterly Revenue, Pieces,
and Weight reports on http://about.usps.com/who-we-
are/financials/welcome.htm.
OPERATING EXPENSES
Operating Expenses
(Dollars in millions)
Compensation and Benefits $ 48,310 $ 48,909 $ 50,883
Retiree Health Benefits 2,441 7,747 3,390
Workers' Compensation 3,672 3,566 2,223
Transportation 6,389 5,878 6,026
Other Expenses 9,822 9,326 9,308
Total Operating Expenses $ 70,634 $ 75,426 $ 71,830
2011 2010 2009
In 2011, total operating expenses decreased by $4,792
million, or 6.4% to $70,634 million. This decrease was
primarily due to the rescheduling of the $5.5 billion 2011
PSRBHF prefunding payment which was due by
September 30, 2011, into 2012 as a result of P.L. 112-33.
In addition, a reduction of approximately 27,000 career
employees and 34 million work hours during 2011 from
2010 resulted in lower compensation and benefits
expenses.
(Dollars in Millions) 2011 2010 2009
Operating Expenses $ 70,634 $ 75,426
$
71,830
Impact of:
2,242 2,500 1,343
PSRHBF Expense - 5,500 1,400
$ 68,392 $ 67,426
$
69,087
Operating Expense before impact
of discount rate changes, actuarial
revaluations, and PSRHBF
expense
Discount changes and actuarial
revaluation of Workers'
Compensation
Operating Expense before impact of discount rate changes,
actuarial revaluations, and PSRHBF expense
However, if the impact of the required PSRHBF
prefunding payments and discount rate and actuarial
changes on workers’ compensation were excluded,
operating expenses would have been $68,392 million,
$67,426 million and $69,087 million in 2011, 2010 and
2009, respectively. Despite decreases in compensation
and benefits expenses in 2011 as compared to 2010, the
adjusted operating expenses increased in 2011 due to the
impact of higher fuel prices, higher costs of new workers’
compensation cases, and higher litigation expenses as
compared to the prior year.
Compensation and benefits expenses represented 68%,
65%, and 71% of total operating expenses for 2011, 2010,
and 2009 respectively. However, when workers’
compensation and retiree health benefits, including the
legally mandated prefunding of the retiree health benefits,
are added, total personnel cost increases to 77%, 80%,
and 79% of total operating expenses for 2011, 2010, and
2009 respectively. Although many significant steps have
been taken to decrease compensation and benefits costs
in response to declining mail volume, many of these costs
remain fixed and beyond the Postal Service’s control.
Contracts with postal unions are negotiated for a fixed
period of time, usually three to five years. They cannot be
modified during the contract period except by mutual
consent. Retirement benefits are not determined by
management but rather by the federal government, and
health insurance premiums, also managed by the federal
government, continue to rise well above the rate of
inflation. In addition, the Postal Service’s ability to adjust
its workforce and network infrastructure is limited by
contractual, statutory, regulatory and political obstacles.