US Postal Service 2011 Annual Report Download - page 70

2011 Report on Form 10-K United States Postal Service - 68 -
Notes to the Financial
Statements
NOTE 1 — DESCRIPTION OF
BUSINESS
NATURE OF OPERATIONS
The United States Postal Service (Postal Service)
provides a variety of classes of mail service without undue
discrimination among its many customers. This means
that, within each class of mail, price does not
unreasonably vary by customer for the service provided.
This fulfills the Postal Service’s legal mandate to offer
universal service at a fair price. 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.
Operations are conducted primarily in the domestic
market, with revenue from international mail service
providers representing less than 4%.
Postal services are divided into two broad categories:
Mailing Services and Shipping Services, which represent
approximately 86% and 14% of revenue, respectively.
Mailing Services revenue for the three years ended
September 30, 2011, 2010, and 2009 was $57 million,
$59 million, and $60 million, respectively. Shipping
Services revenue for the three years ended September
30, 2011, 2010, and 2009 was $9 million, $8 million, and
$8 million, respectively. First-Class Mail and Standard
Mail account for about 94% of mail volume, and Priority
Mail and Express Mail are significant products in the
Shipping Services category. Markets for products and
services include the financial services, communications,
distribution, delivery, advertising, and other market
sectors. Products and services are sold through over
32,000 Post Offices, stations and branches plus a large
network of contract postal units, community post offices,
village post offices and commercial outlets which sell
stamps on our behalf.
More than 85% of career employees are covered by
collective bargaining agreements and are primarily
represented by the American Postal Workers Union
(APWU), National Association of Letter Carriers (NALC),
National Postal Mail Handlers Union (NPMHU) and
National Rural Letter Carriers’ Association (NRLCA). By
law, the Postal Service also consults with management
organizations representing most of the employees not
covered by collective bargaining agreements. These
consultations provide an opportunity for nonbargaining
unit employees in the field to participate directly in the
planning, development, and implementation of programs
and policies affecting managerial employees.
POSTAL REORGANIZATION
The Postal Service began operations on July 1, 1971, in
accordance with the provisions of the Postal
Reorganization Act, which established it as an
“independent establishment of the executive branch of the
Government of the United States.” Governing decisions
are made by a Board of Governors, which consists of
independent members who are appointed by the
President with the advice and consent of the Senate; the
Board of Governors also includes the Postmaster
General, who is appointed by the independent members
of the Board of Governors and the Deputy Postmaster
General, who is appointed by the independent Governors
and the Postmaster General.
The U.S. Government’s equity in the former Post Office
Department (POD) became the Postal Service’s
beginning capital, with initial assets valued at original cost
less accumulated depreciation. The transfer of assets
from the POD, which included property, equipment, and
cash, totaled $1.7 billion. Subsequent cash contributions
and transfers of assets between 1972 and 1982 totaled
approximately $1.3 billion. In 2010 and 2009,
approximately 6,500 fuel efficient vehicles were
contributed to the Postal Service under the provisions of
the American Recovery and Reinvestment Act. The
excess of the fair value of these vehicles over the fair
value of the vehicles traded-in was recorded as additional
non-cash capital contributions by the U.S. Government of
$53 million in 2009 and $45 million in 2010. Total capital
contributions of the U.S. Government are $3,132 million
as of September 30, 2011. Although the U.S. Government
remains responsible for the POD’s liabilities, The
Balanced Budget Act of 1997 transferred the POD’s
workers’ compensation liability to the Postal Service.
The Postal Service has paid $599 million towards these
liabilities of the POD as of September 30, 2011.
The Postal Accountability and Enhancement Act, Public
Law 109-435 (P.L. 109-435), made further revisions to the
Postal Reorganization Act. The Postal Service’s
governing statute is codified in Title 39 of the United
States Code. P.L. 109-435 created the Postal Regulatory
Commission (PRC), endowing the PRC with regulatory
and oversight obligations.
P.L. 109-435 also significantly altered some financial
responsibilities, particularly with respect to the funding of
Civil Service Retirement System (CSRS) benefits and
retiree health benefits. Public Law 111-68, Making
appropriations for the Legislative Branch for the fiscal
year-ending September 30, 2010, and for other purposes
amended P.L. 109-435 by changing the required Postal
Service payments to the Postal Service Retiree Health
Benefits Fund (PSRHBF) for the year ended September
30, 2009, from $5.4 billion to $1.4 billion. This law affected
only the 2009 payment made in September 2009. It did
not change the 2010 prefunding payment requirement of
$5.5 billion which was made in September 2010, or