US Postal Service 2012 Annual Report Download - page 24

2012 Report on Form 10-K United States Postal Service- 23 -
Because the legislative mandates for prefunding of retiree health benefits and for the participation in the FECA are not
subject to management’s control, we believe that analyzing operating results without the impact of certain of these
charges provides a more meaningful insight into current operations. In the day-to-day operation of our business, we
exclude these factors from our internal financial analyses in order to direct focus onto the relevant expenses that
management can control and include only those workers’ compensation costs representing current year payments on
behalf of postal claimants. The table below illustrates the loss from ongoing business activities when these charges are
not considered, and reconciles this amount to our GAAP net loss.
(Dollars in millions)
2012
2011
2010
Net Loss $ (15,906) $ (5,067) $ (8,505)
Impact of:
2,356 2,382 2,421
PSRHBF expense 11,100 - 5,500
$ (2,450)
$
(2,685)
$
(584)
Loss before Impact of Expense Related to the Long-term Portion of Workers' Compensation and
PSRHBF Expense
Expense Related to the Long-term Portion of Workers'
Compensation
Loss before Impact of Expense Related to Long-term Portion of
Workers' Compensation and PSRHBF Expense
Without the impact of these charges, the net loss would have been $2,450 million in 2012, $2,685 million in 2011, and
$584 million in 2010.
Due to the combined effects of decreasing revenue and legislatively-mandated costs, we have suffered losses in every
quarter since Quarter I, 2008, except Quarter IV, 2011 and Quarter IV, 2009. These two quarters would have also shown
losses if P.L. 112-33 and P.L. 111-68 had not reduced those year’s retiree health benefits prefunding contributions from
$5.5 billion to zero in 2011 and from $5.4 billion to $1.4 billion in 2009.
For the year ended September 30, 2012, operating revenues were $65,223 million, compared to $65,711 million in 2011,
a decrease of $488 million, or 0.7%, despite average mailing price increases of 2.1% in January 2012 and 1.7% in April
2011; and shipping price increases of 4.6% and 3.6% in January 2012 and 2011, respectively.
Shipping and Packages revenue of $11,596 million increased $926 million, or 8.7%, on a volume increase of 244 million
pieces, or 7.5%, compared to the same period last year. Higher consumer spending, higher e-commerce retail sales plus
increased marketing efforts drove much of the growth in Shipping and Packages revenue and volume seen during 2012.
However, these increases were not enough to offset the declines in First-Class Mail and Standard Mail, our largest
revenue earners which account for nearly 70% of total revenues. First-Class Mail Revenue dropped $1,163 million or
3.9% while Standard Mail decreased $747 million or 4.3%. The decline in the revenue and volume of First-Class Mail, our
most profitable product, reflects the impact of the continuing increase in the utilization of electronic communication
methods versus First-Class Mail. However, the rate of decline in the First-Class category did slow down in 2012 to 3.9%
from 6.5% in 2011.
In response to declining First-Class Mail revenues, we have taken steps within our control to increase efficiency, decrease
costs, and grow revenue from Shipping and Packages services and other sources. As discussed above, expenses related
to the long-term portion of workers’ compensation and legislative mandates are not within management’s control and we
do not include them when evaluating operational results. Day-to-day operating expenses, or adjusted expenses, excludes
the impact of PSRHBF and the expense related to the long-term portion of workers’ compensation. The following chart
reflects the relationship of mail volume to revenue and expenses without the impact of PSRHBF and the expense related
to the long-term portion of workers’ compensation for the years 2007, our peak year, through 2012.