US Postal Service 2006 Annual Report Download - page 29

2006 Annual Report United States Postal Service | 27
Package Services volume increased 9 million pieces, or 0.8% over 2005.
A volume increase in Bound Printed Matter of 6% or 35 million pieces was
partially offset by declines of 6.5% or 25 million pieces in Parcel Post and
Media Mail of 2 million pieces or 1.2%. The Parcel Select component of
Parcel Post was adversely affected by three major parcel consolidators
which ceased operations in 2006.
Periodical Mail volume declined 0.5% compared to 2005 continuing a
long-term trend, as businesses and consumers utilize less hard-copy
material and increasingly rely on the Internet as a substitute for hardcopy
publication of news, information and entertainment.
Revenue 2006 2005 2004
(Dollars in millions)
First-Class Mail $ 37,039 $ 36,062 $ 36,377
Standard Mail 19,877 18,953 18,123
Priority Mail 5,042 4,634 4,421
Package Services 2,259 2,201 2,207
Periodicals 2,215 2,161 2,192
Express Mail 918 872 853
International 1,794 1,765 1,696
Other * 3,673 3,345 3,160
Total Revenue $ 72,817 $ 69,993 $ 69,029
* Included in the “Other” category are special services revenue, other income and investment income.
Operating Expenses
Operating expenses are comprised of Compensation and Benefits,
Transportation, Supplies and Services, Depreciation and Amortization and
Other Expenses.
In 2006 operating expenses of $71,684 million were $3,401 million
or 5% more than 2005. The increase was driven primarily by a 4.4%
increase in compensation and benefits, and an 11.2% increase in
transportation expenses. Increasing fuel prices contributed significantly to
the increase in transportation expenses and also contributed to increased
compensation and benefits expenses through their impact on employee
cost-of-living adjustments (COLAs). Compensation and benefits expense
growth was also influenced by contractual pay increases and retirement
and health benefits costs. These same factors drove the $2,432 million
increase in operating expenses in 2005, compared to 2004.
Operating Expenses 2006 2005 2004
(Dollars in millions)
Compensation and Benefits * $ 56,281 $ 53,932 $ 52,134
Transportation 6,045 5,437 4,969
Supplies and Services * * 2,643 2,557 2,423
Depreciation and Amortization 2,149 2,089 2,145
Other Expenses * * 4,566 4,268 4,180
Total Operating Expenses $ 71,684 $ 68,283 $ 65,851
* Does not include interest on deferred retirement obligations. Interest is not considered an
operating expense on the financial statements.
* * Presentation change moved advertising expense from Other Expenses to Supplies and Services
in 2005 and 2004.
Compensation and Benefits
Personnel compensation and benefits, including interest on deferred
retirement obligations, comprised 78.6% of our total expenses. These
costs grew $2,317 million or 4.3% in 2006. This year’s growth was due
primarily to contractual pay increases, COLAs, and health benefits pay-
ments for current and retired employees. Our 2006 average hourly labor
cost increased by 4.7%, and our 2006 health benefits expense for current
employees and retirees increased by $387 million to $6,982 million. This
was 9.7% of total expenses. Workers’ compensation increased $441
million over 2005. This accounted for almost 20% of the total personnel
compensation and benefits growth in 2006. See Workers’ Compensation
in this section for additional information.
The 2005 increase of $1,958 million in compensation and benefits
expenses was driven by the same factors as the 2006 increase, although
COLAs were smaller in 2005. Average hourly labor rates in 2005
increased by 2.5% over 2004. In 2004 the increase in compensation
and benefits was partially offset by a $401 million decrease in workers
compensation expenses.
Compensation and Benefits
Expense 2006 2005 2004
(Dollars in millions)
Compensation $ 40,570 $ 39,299 $ 37,876
Retirement 7,237 7,073 6,574
Health Benefits 5,345 5,100 4,845
Retiree Health Benefits 1,637 1,495 1,313
Workers’ Compensation 1,279 838 1,239
Other 444 390 390
Total * $ 56,512 $ 54,195 $ 52,237
* Equals compensation and benefits plus interest on deferred retirement.
Financial Section Part II