US Postal Service 2012 Annual Report Download - page 29

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2012 Report on Form 10-K United States Postal Service- 28 -
First-Class Mail represents 44% of our revenues and accounts for 43% of the mail volume while Standard Mail generates
25% of revenues, but 50% of volume. Shipping and Packages generates approximately 18% of our revenues despite
representing only 2% of volume.
First-Class Mail volume has been heavily impacted by recent changes in customers’ desired choice of communication
platforms, as noted by the approximate 30% drop from 96,936 million pieces in 2006 to 68,696 million pieces for 2012.
We anticipate that total mail volume will continue to decline in future years due to a combination of the continued decline
of First-Class Mail volume and relatively flat Standard Mail volume. The expected continued decline of First-Class Mail,
our most profitable product, will pose a significant challenge. To compensate for the loss of one piece of First-Class Mail,
Standard Mail must increase by three pieces. Shipping and Packages, International Mail, and other categories are not
expected to grow significantly enough to replace the revenue and contribution associated with the decline of First-Class
Mail.
FIRST-CLASS MAIL
First-Class Mail is our most profitable service category and represents 44% of revenue. In 2012, revenue from First-Class
Mail was $28,867 million, a decrease of $1,163 million, or 3.9%, from 2011. The corresponding volume decrease was
3,826 million pieces, or 5.3%. The most significant factor contributing to this decline was the continuing migration toward
electronic communication and transactional alternatives.
Single-piece First-Class Mail letter and cards include correspondence, bill payments, confirmations, orders, and rebates.
Revenue declined $765 million, or 6.6%, on a volume decrease of 2,122 million pieces, or 8.1%, compared to 2011,
continuing a trend that has been in place for over a decade. Revenue from presorted First-Class Mail, which consists
largely of bills and statements, decreased by $328 million, or 2.1%, on a volume decrease of 1,745 million pieces, or
3.9%. 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.
In 2011, revenue from First-Class Mail was $30,030 million, or 6.5% less than 2010, as volume decreased 5,070 million
pieces, or 6.5%. Single-piece First-Class Mail letter and card revenue declined $1,298 million, or 10.1%, on a volume
decrease of 3,038 million 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 1,731 million pieces, or
3.7%. As previously mentioned, the continued migration of mail from traditional postal services to electronic media is the
primary driver behind the continued decline in First-Class Mail volume and revenue.
Prices of all services in the First-Class Mail category are capped at the rate of inflation because they are classified, by
law, as Market-Dominant.
STANDARD MAIL
Standard Mail generates the greatest volume but represented only 25% of total revenues in 2012. Standard Mail revenue
decreased $747 million, or 4.3%, in 2012 compared to 2011, on a volume decrease of 4,461 million pieces, or 5.3%.
Within Standard Mail, letter volume decreased 4,434 million pieces, or 8.8%, while letter revenue decreased $728 million,
or 7.5%. Standard Mail flats fell 12.4%, or 844 million pieces, while revenue dropped $261 million, or 10.5%, in 2012
compared to last year. New technology continues to help advertisers selectively target their mailings, resulting in fewer
total pieces sent. However, the decline in credit card solicitations, a significant source of Standard Mail, has flattened as
banks slowly come out of the recession. Although we expect that advertising mail volume will remain relatively flat
because of slow economic growth, we do anticipate a nominal boost from election mail in the first quarter of 2013.
The modest improvement in the economy helped increase Standard Mail revenue by $447 million, or 2.7%, in 2011
compared to 2010, on a volume increase of 2,116 million pieces, or 2.6%. Standard Mail letter volume increased 2,285
million pieces, or 4.7%, while revenue increased $503 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. Standard Mail
volume was negatively impacted in 2011 as advertisers continued to become more selective in the targeting of their
mailings.
Prices of all services in the Standard Mail category are capped at the rate of inflation because they are classified, by law,
as Market-Dominant.