US Postal Service 2007 Annual Report Download

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United States Postal Service Annual Report 2007

Table of contents

  • Page 1
    United States Postal Service A n n u a l R e p o r t 2 0 0 7

  • Page 2
    ... will guide everything we do as we make our bold vision a new reality. Delivering today's mail. OUR MISSION: Provide trusted, affordable, universal service OUR VISION: Be profitable to deliver for future generations John Potter Postmaster General, CEO 2 | 2007 Annual Report United States Postal...

  • Page 3
    ... 37.5% Number of career employees Mail volume (pieces in millions) New delivery points served 704,716 211,743 2,006,577 (1.6%) (0.4%) (1.2%) 0.7% (0.4%) 2.7% * Excluding interest expense on deferred retirement obligations in 2006 and 2005. 2007 Annual Report United States Postal Service | 3

  • Page 4
    ... Congress, postal customers, postal employees, and the American people: Your United States Postal Service had another excellent year! We are excited about options and alternatives offered by the new law...which allow us more freedom to compete in the package business. 4 | 2007 Annual Report United...

  • Page 5
    ... support our mission of universal service at affordable rates by seeing that United States Postal Service remains healthy and strong for many years to come. John E. Potter Postmaster General, Chief Executive Officer James C. Miller III Chairman, Board of Governors 2007 Annual Report United States...

  • Page 6
    ... of flat-size mail that now exists for letter mail. For the third year in a row, Americans rated the Postal Service as the most trusted federal agency... * The process measures First-Class Mail from the time it's deposited into a collection box until it's delivered to a home or business. 6 | 2007...

  • Page 7
    ...can save money on future mailings by buying Forever Stamps, the value of which always will be the 1-ounce letter rate. We streamlined international products, and consumers now can use the same Priority Mail and Express Mail packaging for shipping in the United States and to other countries. Working...

  • Page 8
    ...a Post Office, around the clock. The Internet helps us connect with our customers, large and small. Today's mail is built on technology. Automation equipment moves mail and packages faster "Mail is good for business, good for the economy and, overall, it's good for America." John Potter Postmaster...

  • Page 9
    ... our bottom line. How can our customers go green with us? Save the trip. Our online options bring the Post Office to any home or business, and we're working with other delivery companies to move mail and packages on shared transportation, much like a carpool for commuters, saving on energy costs and...

  • Page 10
    ... the Compensation and Management Resources Committee. Former Chairman of the Board of Directors of ITT Industries and President and Chief Executive Officer. Director of The ServiceMaster Company; and Senior Advisor at the Carlyle Group. Alan C. Kessler, Vice Chairman Appointed November 2000. Term...

  • Page 11
    ... Human Resources Officer and Executive Vice President H. Glen Walker Chief Financial Officer and Executive Vice President Mary Anne Gibbons Senior Vice President and General Counsel Linda A. Kingsley Senior Vice President, Strategy and Transition 2007 Annual Report United States Postal Service...

  • Page 12
    ... seven times in conjunction with the regularly scheduled monthly Board meetings. During the year, the Committee also reviewed its charter, the attribution of cost and estimation of revenues by class of mail, the preparation of the Postal Service's Integrated Financial Plan for 2008, and the Office...

  • Page 13
    ... business line, known as "Shipping" services, includes Express Mail and Priority Mail and represents the balance of postal revenue. Shipping services can be priced according to the market. H. Glen Walker Chief Financial Officer and Executive Vice President 2007 Annual Report United States Postal...

  • Page 14
    Our mailing services are sold through our almost 37,000 Post Offices, stations, branches, contract postal units, our website www.usps.com, and a large network of consignees. 14 | 2007 Annual Report United States Postal Service

  • Page 15
    ... postal units, our website www.usps.com, and a large network of consignees. We deliver mail to about 148 million city, rural, Post Office box, and highway delivery points. We conduct our operations primarily in the domestic market, with international operations representing less than 3% of our total...

  • Page 16
    ...comments to help them develop the new rules for the mailing services and shipping services rate-setting process to ensure a smooth transition for everyone involved. â- continued to work internally to prepare our systems to be ready to meet the new reporting requirements both for price-setting and...

  • Page 17
    ... First-Class letter, even if First-Class Mail rates increase in the future. The majority of the price changes took effect May 14, 2007. The Governors delayed implementation of new prices for Periodicals until July 15, 2007 and requested reconsideration by the PRC of the Standard Mail flat prices. On...

  • Page 18
    ... Association of Postmasters of the United States. We participate in federal employee benefit programs as required by statute, for retirement, health and workers' compensation benefits. impact on our business by stimulating new uses of postal services, such as package delivery and targeted ad mail...

  • Page 19
    ... of our rates are now linked directly to general inflation, our costs are not. In 2007, general inflation as measured by CPI-U was 2.8% compared with postal resource price inflation of 3.7%. Postal costs are heavily concentrated in wages, employee and retiree benefits, and transportation. They are...

  • Page 20
    ... country. Processing Facilities (Actual numbers) 2007 2006 Item 3 - Legal proceedings We are subject to various claims and liabilities that arise in the normal course of postal operations. These claims generally relate to labor, tort, and contract disputes and are regularly reviewed by management...

  • Page 21
    ... of our Board of Governors and with the Board's independent public accounting firm. In addition, retirement and health benefits costs for our employees and retirees represent a significant portion of our expenses. Any changes in laws or regulations affecting the amounts, timing, or administration...

  • Page 22
    ... previous years. Without the rate increase this level of volume would have resulted in lower revenue due to the change in service mix. Revenue (Dollars in millions) Mail Volume By Type (Pieces in millions) 2007 2006 2005 First-Class Mail Standard Mail Priority Mail Package Services Periodicals...

  • Page 23
    ... due to the 2006 rate increase. The volume decline continued a long-term trend. In 2007, Express Mail revenue increased $33 million, or 3.6%, while volume decreased one million pieces, or 1.8%, compared to 2006. Express Mail is our most price-sensitive service and price increases in January 2006 and...

  • Page 24
    ... estimated additional $3 billion in revenue in 2007. In 2006, personnel compensation and benefits comprised 76.3% of our total operating expenses. These costs increased $2,216 million or 4.2% in 2006. The 2006 growth was primarily due to contractual pay increases, COLA, and health benefits payments...

  • Page 25
    .... And, the National Association of Letter Carriers also agreed to a new five-year agreement. These agreements include general salary increases; COLAs; and, starting in 2008, a reduction in the Postal Service's share of health benefit premiums. Our negotiations with the National Rural Letter Carriers...

  • Page 26
    ... from postal funds. We record as a liability the present value of all future payments we expect to make to those employees receiving workers' compensation. At the end of 2007, we estimate our total liability for future workers' compensation costs 26 | 2007 Annual Report United States Postal Service

  • Page 27
    ... mail that they deliver for us. In 2006, other transportation expenses were $297 million, a decrease of $37 million, or 11.1%, primarily as a result of our decision to reduce the use of rail to transport mail and shift this mail onto highway routes. 2007 Annual Report United States Postal Service...

  • Page 28
    ...decline in weighted mail volume, driven by the 4.7% decline in First-Class single-piece mail volume. Despite the workload decrease, resources were managed effectively, resulting in a 2.5% decline compared to last year. Quarter 1 Quarter 2 Quarter 3 Quarter 4 Overnight Delivery 2-Day Delivery 3-Day...

  • Page 29
    ... automate the Delivery Point Sequencing of flat mail for selected delivery sites, which will reduce the time carriers spend in-office sorting flat mail. We purchased 5,856 carrier route vehicles. This vehicle purchase completed a three-part acquisition plan to provide vehicles to rural routes as...

  • Page 30
    ..., 2007, represents items for which we have already collected cash, but have a remaining obligation to perform a future service. The following table illustrates our major cash flow obligations in future years. Schedule of Commitments (Dollars in millions) Retiree Health Benefits Leases CASH FLOWS...

  • Page 31
    ...Other Interest Expense (Dollars in millions) $400 $350 $300 $250 $200 $150 $100 $50 $10 $0 2003 2004 $4 2005 $5 2006 $10 2007 $334 Other interest expense excludes interest on deferred retirement obligations and the 2003 debt repurchase expense. 2007 Annual Report United States Postal Service | 31

  • Page 32
    ... of the effect of electronic media. The competitive landscape for postal services is increasingly global in terms of customer choices and service providers. International Mail volume in 2008 will be affected by both the 2007 rate simplification and new rate implementation. We anticipate these two...

  • Page 33
    ...-Class Mail volume to continue to decline. This combination of trends will continue to challenge us to build other postal business and increase productivity to continue to finance the nation's universal delivery system. Item 7A - Quantitative and qualitative disclosures about market risk Market...

  • Page 34
    ... in other factors that could significantly affect the internal control over financial reporting. Item 9B - Other information We were not required to file reports on Form 8-K during the fourth quarter of the fiscal year ended September 30, 2007. 34 | 2007 Annual Report United States Postal Service

  • Page 35
    ... Vice President and General Counsel Linda A. Kingsley Senior Vice President, Strategy and Transition Anthony J. Vegliante Chief Human Resources Officer and Executive Vice President H. Glen Walker Chief Financial Officer and Executive Vice President 2007 Annual Report United States Postal Service...

  • Page 36
    ... Senior Vice President and Managing Director, Global Business Jerry W. Whalen Vice President, Sales Terry J. Wilson Vice President, Area Operations (Southeast) George W. Wright Vice President, Chief Technology Officer (acting) Item 11 - Executive compensation The Postal Service releases information...

  • Page 37
    Since 1998, the Postal Service has raised more than $57 million for breast cancer research through the sale of this semipostal stamp. 2007 Annual Report United States Postal Service | 37

  • Page 38
    Report of Independent Auditors 38 | 2007 Annual Report United States Postal Service

  • Page 39
    ...Years Ended September 30, 2007 (Dollars in millions) 2006 2005 Operating revenue Operating expenses: Compensation and benefits Retiree health benefits Transportation Other Total operating expenses (Loss) Income from operations Interest and investment income Interest expense on deferred retirement...

  • Page 40
    ... 2,958 394 21,083 19,729 2,887 1,232 44,931 23,951 20,980 2,115 23,095 $ 28,488 1,877 23,596 $ 25,847 40 | 2007 Annual Report United States Postal Service

  • Page 41
    ... Customer deposit accounts Deferred revenue-prepaid postage Outstanding postal money orders Prepaid box rent and other deferred revenue Debt Total Current Liabilities Noncurrent Liabilities: Workers' compensation costs Employees' accumulated leave Deferred appropriation and other revenue Long-term...

  • Page 42
    ... Balance, September 30, 2006 Net (Loss) Balance, September 30, 2007 See accompanying notes to the financial statements $ 3,034 3,034 3,034 $ 3,034 $ 897 1,445 2,342 900 3,242 (5,142) $ 3,931 1,445 5,376 900 6,276 (5,142) $ 1,134 $ (1,900) 42 | 2007 Annual Report United States Postal Service

  • Page 43
    ... Customer deposit accounts Outstanding postal money orders Prepaid box rent and other deferred revenue Net cash (used in) provided by operating activities Cash flows from investing activities: Decrease (increase) in restricted cash Purchase of property and equipment Proceeds from building sale...

  • Page 44
    ... retail markets. Our services are sold and distributed through almost 37,000 Post Offices, stations, branches, contract postal units, and a large network of consignees. Our labor force is primarily represented by the American Postal Workers Union (APWU), National Association of Letter Carriers (NALC...

  • Page 45
    ...information. Outstanding Postal Money Orders We sell money orders to the general public at our retail locations. We charge a fee to the customer at the time of sale. The fee is recognized as revenue at the time of sale. We recognize a liability for money orders we expect to be presented for payment...

  • Page 46
    ... 2017, to pay our share of the health insurance premiums for our current and future Postal Service retirees. Beginning in 2007, P.L.109-435 requires us to make annual payments into the PSRHBF. The payment schedule in the law requires us to pay, on average, $5.6 billion per year into the fund for ten...

  • Page 47
    ... million in 2005. See Note 10, Retirement programs, in the Notes to the Financial Statements for additional information. Other Interest Payments Cash outlays for other interest were $9 million in 2007, $4 million in 2006 and $3 million in 2005. 2007 Annual Report United States Postal Service | 47

  • Page 48
    ... table. Capital Resources on Order (Dollars in millions) 2007 Operating Capital Mail Processing Equipment $ 1,565 513 338 200 40 38 $ 2,694 Building Improvements Postal Support Equipment Construction and Building Purchase Vehicles Retail Equipment Total Capital Resources on Order 2008 2009 2010...

  • Page 49
    ... Act of 1990 requires us to pay the employer's share of health insurance premiums for all retired postal employees and their survivors who participate in the FEHBP and who retire on or after July 1, 1971. However, we do not include the costs attributable to federal civil service before that date...

  • Page 50
    ... Employer Dual CSRS Employee FERS Employer FERS Employee 7.0 0.8 11.2 0.8 17.4 7.0 18.0 0.8 11.2 0.8 17.4 7.0 18.0 0.8 11.2 0.8 The number of employees enrolled in each of the retirement plans at the end of 2007, 2006, and 2005 is as follows. 50 | 2007 Annual Report United States Postal Service

  • Page 51
    ... claims payments over many years. The frequency / severity method requires that we make explicit assumptions about future changes in the average payment amounts due to inflation or other cost increases. Both methods used in calculating the 2007 workers' compensation liability are generally accepted...

  • Page 52
    ... of the remaining future payments as of the years ended September 30 was $353 million in 2007 and $357 million in 2006. The total receivable for revenue forgone as of the years ended September 30 was $476 million in 2007 and $490 million in 2006. 52 | 2007 Annual Report United States Postal Service

  • Page 53
    ... ** Headquarters - Field Support Units * / ** Inspection Service - Field Inspector General Total HQ and HQ Related Employees Field Employees Area Offices * Postmasters / Installation Heads Supervisors / Managers Professional Administration and Technical Personnel Clerks Nurses Mail Handlers City...

  • Page 54
    ... International Mail * Revenue Pieces, Number Weight, Pounds Mailgrams ** Revenue Pieces, Number U.S. Postal Service Pieces, Number Weight, Pounds Free Matter for the Blind Pieces, Number Weight, Pounds Totals Revenue Pieces, Number Weight, Pounds 54 | 2007 Annual Report United States Postal Service...

  • Page 55
    ... on Delivery Revenue Number of articles Money Orders Revenue Face value of issues (non-add) Number of articles Other Box rent revenue Stamped envelope and card revenue Other revenue, net Totals Special Services revenue Mail revenue Revenue forgone Total Operating Revenue ** Mailgram service has...

  • Page 56
    ... Contract Postal Units Community Post Offices Total Offices, Stations and Branches Residential Delivery * City Delivery Carriers Rural PO Box Highway Contract Total Residential Delivery Business Delivery * City Delivery Carriers Rural PO Box Highway Contract Total Business Delivery Total Delivery...

  • Page 57
    ... $ 3,034 3,242 6,276 (5,142) $ 3,034 2,342 5,376 900 $ 3,034 897 3,931 1,445 $ 3,034 (2,168) 866 3,065 $ 3,034 (6,036) (3,002) 3,868 $ 1,134 $ 6,276 $ 5,376 $ 3,931 $ 866 2007 Annual Report United States Postal Service | 57

  • Page 58
    ... present value of a future payment that will be paid over a period of time. 58 | 2007 Annual Report United States Postal Service Contribution. The difference between the revenue from a class of mail and that class's volume-variable costs. For example, if a class of mail has revenue of $1.5 billion...

  • Page 59
    ... APC®, Express Mail®, Priority Mail®, Standard Mail®, Parcel Post®, Media Mail®, Customized Market Mail®, United States Postal Service Office of the Inspector General®, Post Office™, Postal Service™, Signature Confirmation™, Certified Mail™, Delivery Confirmation™, Registered Mail...

  • Page 60
    ...Games - Beijing Lunar New Year: Year of the Rat ...Nation Mount St. Mary's University stamped card Bette Davis (Legends of Hollywood) Charles W. Chesnutt (Black Heritage) "Take Me Out to the Ball Game" Minnesota Statehood Vintage Black Cinema 60 | 2007 Annual Report United States Postal Service

  • Page 61
    The Art of Disney: Imagination America on the Move: Tail Fins and Chrome American Journalists American Scientists 2007 Annual Report United States Postal Service | 61

  • Page 62
    ...: Year of the Rat Charles and Ray Eames Love: All Heart Albert Bierstadt (American Treasures) Marjorie Kinnan Rawlings (Literary Arts) Christmas: "Virgin and Child with the Young John the Baptist" by Sandro Botticelli Flags of Our Nation 62 | 2007 Annual Report United States Postal Service

  • Page 63
    Financial Section Part I Latin Jazz Alzheimer's Awareness (Social Awareness) Nature of America: Great Lakes Dunes Mount St. Mary's University stamped card Holiday Nutcrackers Flags of Our Nation 2007 Annual Report United States Postal Service | 63

  • Page 64
    ... financial questions and comments at: United States Postal Service Corporate Accounting 475 L'Enfant Plaza, SW Washington, DC 20260-5241 Read our Annual Report on the web at USPS.com/history/anrpt07 © 2007 United States Postal Service. All rights reserved. This report is printed on recycled paper...