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2013 Report on Form 10-K United States Postal Service 80
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, prices do 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. The Postal Service has a very diverse customer base and is not
dependent on a single customer or small group of customers. No single customer represents more than 3%
of operating revenue. Operations are conducted primarily in the domestic market, with international mail
services representing less than 5% of revenue.
Postal services are divided into several broad categories: First-Class Mail, Standard Mail, Periodicals,
Shipping and Packages, International, and Other services. In terms of revenue, our largest categories are
First-Class Mail, Standard Mail, and Shipping and Packages. First-Class Mail revenue for the three years
ended September 30, 2013, 2012, and 2011 was $28,152 million, $28,856 million, and $30,030 million,
respectively. Standard Mail revenue for the three years ended September 30, 2013, 2012, and 2011 was
$16,915 million, $16,428 million, and $17,175 million, respectively. Shipping and Packages revenue for the
three years ended September 30, 2013, 2012, and 2011 was $12,515 million, $11,592 million, and $10,670
million, respectively. Priority Mail and Priority Mail Express are significant services in the Shipping and
Packages category. Significant market sectors for postal services include financial services,
communications, distribution, delivery, and advertising. Products and services are sold through nearly
32,000 Post Offices, stations, and branches, plus a large network of Contract Postal Units (CPU),
Community Post Offices (CPO), Village Post Offices (VPO), and commercial outlets which sell stamps on
our behalf.
Approximately 90% 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
non-bargaining 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 2009
and 2010, 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, 2013. 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 a total of $630 million towards
these liabilities of the POD as of September 30, 2013.