US Postal Service 2006 Annual Report Download - page 33

2006 Annual Report United States Postal Service | 31
Supplies and Services
Supplies and services expenses of $2,643 million increased $86 million in
2006. Expenses for professional, consulting and other services increased
approximately $57 million compared to the same period last year. This
increase was largely due to increased credit and debit card transaction
and processing fees of $19 million. Supplies expense increased approxi-
mately $16 million and equipment rental and repair charges increased
$19 million. These were offset by a decline in advertising expenses of $5
million.
In 2005, supplies and services expense charges were $2,557 million, an
increase of $134 million over 2004. This was attributed to increases of
$103 million in supplies for items such as mail transportation equipment
and advertising increases of $35 million. Offsetting some of the increase
was a reduction in equipment repairs and rental expenses, which declined
by $39 million in 2005.
Depreciation and Amortization
Depreciation and amortization expenses of $2,149 million in 2006 were
$60 million or 2.9% more than last year. This increase is primarily due
to increased deployment of equipment purchased under the emergency
preparedness program and new mail processing equipment. Depreciation
expenses of $2,089 million in 2005 decreased $56 million or 2.6% from
2004. See Note 13, Emergency Preparedness Funding in the Notes to the
Financial Statements for additional information.
Other Expenses
Other expenses were $4,566 million in 2006, an increase of $298
million or 7%. The major components and costs included in this category
are rent and utilities of $1,721 million, vehicle maintenance services of
$1,194 million, information technology of $395 million, communications
of $254 million, travel and training of $236 million and facility repairs and
alterations of $224 million. In 2005, other expenses increased by $88
million over 2004.
Rent and utilities were up $132 million or 8.3% over 2005, driven by a
$60 million increase in electricity cost. Vehicle maintenance services
increased by $159 million, or 15.3%, driven by an aging fleet and
increasing fuel prices. The same was true in 2005 when the increase
was $114 million or 12.3% over 2004. Communications expense
was virtually unchanged from 2005. In 2005 communication costs
increased by $35 million or 16.3%. This was mainly from upgrading
the communication lines in many of our offices. Information technology
costs also remained relatively flat with a small decline of $3 million in
2006. In 2005 these costs decreased $78 million or 16.4% from 2004.
This reflected the downward price trend in this industry and favorable
negotiations on software maintenance and licensing agreements.
Facility maintenance expenses were virtually unchanged in 2006 from
2005 while declining $21 million or 8.6% from 2004 to 2005 as repair
projects declined that year.
In 2006 our provision for contingent liabilities decreased $27 million.
In 2005, we significantly increased our provision due to an unfavorable
settlement of three labor-related arbitration cases. These cases contrib-
uted approximately $115 million to the increase in other expenses.
Service and Performance
Management monitors several key statistics to determine performance
against our service standards. The major indicators we monitor are the
External First-Class (EXFC) on-time mail delivery scores and the Customer
Satisfaction Measurement (CSM) scores.
EXFC is an independently administered system that provides an external
measure of delivery performance from collection box to mailbox. Although
not a system-wide measurement of all First-Class Mail performance,
EXFC continuously tests a panel of 463 3-digit ZIP Code areas selected
on the basis of geographic area and volume density, thereby providing
a measure of service performance from the customer’s point of view.
Results of these measures for the last four quarters are listed below.
EXFC Service
Performance Scores Quarter 1 Quarter 2 Quarter 3 Quarter 4
(Percentage delivered on time)
Overnight Delivery 94 95 95 95
2-Day Delivery 88 89 91 92
3-Day Delivery 83 86 91 90
CSM is an independently administered survey of customer opinions of key
areas of service to customers. Customer satisfaction has declined from
last year’s high of 94% and we are working to improve this measure.
The following table shows the results of these measures for the last four
quarters.
Customer Satisfaction
Measurement Quarter 1 Quarter 2 Quarter 3 Quarter 4
(Percentage)
Service rated excellent,
very good or good 92 91 92 92
Financial Section Part II