US Postal Service 2011 Annual Report Download - page 6

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2011 Report on Form 10-K United States Postal Service - 4 -
Parcel Return Services allow us to partner with privately
owned delivery services to serve our respective
customers’ needs.
Details on Mailing and Shipping Services revenue are
found in the Operating Statistics table immediately
following the Notes to the Financial Statements.
PRICING AND CLASSIFICATION ACTIVITY
Postal Service prices are set by the Board and reviewed
by the PRC for legal compliance. We have provided, and
anticipate continuing to provide, at least 90 days advance
notice of any new prices for Mailing Services. There was a
1.7% price increase for Mailing Service products in April
2011; a January 2012 proposed average price increase of
2.1% was announced on October 18, 2011. The price of a
one-ounce First-Class Mail stamp is currently $0.44; if
approved by the PRC, this price will increase to $0.45 with
the January 2012 increase.
Prices for Shipping Services by law must cover costs
attributable to each product, 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 institutional costs in addition to 100% of
attributable costs. By law, changes in Shipping Services
prices must be announced at least 30 days prior to the
implementation date.
Prices for Shipping Services products – including Express
Mail, Global Express Guaranteed, Express Mail
International, Priority Mail, Priority Mail International,
Parcel Select, and Parcel Return Service – increased an
average of 3.6% in January 2011.
We offer contract prices, rebates, online price reductions,
and other incentives to encourage growth.
INTELLECTUAL PROPERTY
We own intellectual property that includes trademarks,
service marks, patents, copyrights, trade secrets, and
other proprietary information, and routinely generate
intellectual property in the course of developing and
improving systems, services, and operations. While legal
protection for intellectual property and proprietary
information is significant to our success, the knowledge,
ability, and experience of our employees and the
timeliness and quality of service we provide are more
significant.
SEASONAL OPERATIONS
Mail volume and revenue are historically greatest in the
first quarter, which includes the fall holiday mailing
season, and lowest during the summer, or fourth quarter,
of the fiscal year.
CUSTOMERS
We have a very diverse customer base and are not
dependent on a single customer or small group of
customers. No single customer represents more than 1%
of operating revenue, although advertising mail in general
accounts for more than half of our volume.
GOVERNMENT CONTRACTS
No material portion of our business is subject to
renegotiation of profits or termination of contracts or
subcontracts at the election of the U.S. Government.
COMPETITION
A wide variety of communications media compete for the
same types of transactions and communications that
historically have been conducted using Mailing Services.
These competitors include, but are not limited to,
newspapers, telecommunications, television, e-mail,
social networking, and electronic funds transfers. Shipping
Services compete on the basis of the breadth of our
service network, convenience, reliability, and economy of
the service provided. The package and express delivery
businesses are intensely competitive and are likely to
remain so. The primary competitors of Shipping Services
are FedEx Corporation 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 and also contract with
independent suppliers to conduct research activities.
While research 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
environmental laws or regulations that would materially
affect our financial results or competitive position or result
in material capital expenditures. However, the effect of
possible future environmental legislation or regulations on
operations cannot be predicted. Discussions regarding the
effects of greenhouse gases on the environment may
result in new laws or regulations that regulate greenhouse
gas emissions into the environment and, as a result, our
operating costs may increase. The costs that we believe
may increase as a result of any new environmental laws
or regulations could include: diesel fuel, unleaded
gasoline, the cost of retrofitting existing vehicles, and
other petroleum-related products, such as tires.