US Postal Service 2013 Annual Report Download - page 26

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2013 Report on Form 10-K United States Postal Service 24
In 2013, driven primarily by growth of 8.0% for Shipping and Packages, total revenue including the change in accounting
estimate increased $2,095 million or 3.2% compared to 2012. Without the impact of the change in accounting estimate,
revenue growth would have been 1.2%. As can be seen from the graphs below, First-Class Mail and Standard Mail
provide the vast majority of our revenues, despite trends away from hard copy to electronic media. Combined, these two
categories totaled $45,067 million in 2013 and represented almost 68% of our total revenues, before the change in
accounting estimate. With consideration of the change in accounting estimate, the categories represent almost 67% of
revenues for the year. However, by taking advantage of market changes and developing innovative services, we have
been able to grow our Shipping and Packages service to $12,515 million for 2013. These services have grown to
approximately 19% of our revenues, both before and after consideration of the change in accounting estimate.
*The graphs above are based on revenue and volume before the change in accounting estimate of $1.3 billion.
We anticipate that total mail volume will continue to decline in future years due to 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 approximately three pieces. Shipping and Packages, International Mail, and other categories are not expected
to grow significantly enough to replace the contribution associated with the decline of First-Class Mail.
FIRST-CLASS MAIL
First-Class Mail is our most profitable service category and represents 43% of revenue before the change in accounting
estimate. After the change in accounting estimate, First-Class Mail represents 42% of revenue. In 2013, both revenue
and volume of First-Class Mail decreased, albeit at a slower pace than previous years. Since 2006, First-Class Mail
volume has dropped from 98.0 billion pieces in 2006 to 65.8 billion pieces for 2013, or approximately 33%. The most
significant factors contributing to this decline are the far-reaching impacts of changes in consumer behavior that came
about during the Great Recession and 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 $378 million, or 3.5%, on a volume decrease of 1,315 million pieces, or 5.5%, compared to 2012,
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 $177 million, or 1.2%, on a volume decrease of 1,380 million pieces, or
3.2%.
Revenue and volume of First-Class Mail also decreased in 2012 from 2011. As previously mentioned, the accelerated
migration of mail from traditional postal services to electronic media and the lingering effects on consumer behavior
brought on by the Great Recession are the primary drivers behind the continued decline in First-Class Mail volume and
revenue.