US Postal Service 2012 Annual Report Download - page 8

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2012 Report on Form 10-K United States Postal Service- 7 -
We offer contract prices, rebates, online price reductions, and other incentives to encourage customers to increase their
volumes and in turn increase Postal revenue.
Reclassification of Certain Postal Services
Periodic reclassifications and expansions of services from Market-Dominant to Competitive services, which require
approval from the PRC, are necessary to rationalize service offerings, as the Market-Dominant category has constraints,
such as price caps based on the Consumer Price Index (CPI). In other words, the additional flexibility provided in
Competitive services allows us to better offer services that meet customer needs, to increase business for the Postal
Service, and to allow us to price our products and services competitively within the markets in which we operate. The
Postal Service’s Competitive services generally include most of our shipping, package, and expedited delivery services.
In Quarter I, 2012, with the approval of the PRC, we reclassified certain lightweight commercial parcels previously
classified in Market-Dominant as First-Class Mail Parcels. These parcels are now classified as First-Class Package
Services and included in Competitive services. In addition, certain Post Office Box services were reclassified from Market-
Dominant to Competitive. In Quarter II, Standard Mail parcels used for the fulfillment of customer orders were reclassified
as part of Parcel Select which is a Competitive service. There were no new reclassifications in Quarter III or IV. On July
20, 2012, the PRC conditionally approved the transfer of Standard Post (formerly Parcel Post) from Market-Dominant to
Competitive, effective January 27, 2013. On September 10, 2012, the PRC approved the transfer of First-Class Package
International Service from Market-Dominant to Competitive, also effective January 27, 2013.
While there are distinct legal and regulatory classifications of postal services known as either Market-Dominant or
Competitive, Postal Service management utilizes the following broad service categories to evaluate performance and
manage the business: First-Class Mail, Standard Mail, Shipping and Packages, International, Periodicals, and Other.
Throughout this document, operational measurements and financial data, such as revenue and volume, will be reported
utilizing these categories.
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 of our fiscal year, which includes the fall holiday
mailing season, and lowest during the spring and summer, the third and fourth quarters of the fiscal year. In years which a
general election occurs, direct mail may be heavily used by political organizations to reach their targeted audiences
thereby temporarily increasing volumes during the months preceding an election.
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 2% 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
were conducted using Mailing Services. These competitors include, but are not limited to, newspapers,
telecommunications, television, e-mail, social networking, and electronic funds transfers. Our shipping and package
business competes 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 and package services are FedEx Corporation and United Parcel Service.