US Postal Service 2011 Annual Report Download - page 15

2011 Report on Form 10-K United States Postal Service - 13 -
Part II
ITEM 5 — MARKET FOR
REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY
SECURITIES
Not applicable to the United States Postal Service. As an
“independent establishment of the executive branch of the
Government of the United States,” we do not issue stock
or other securities.
ITEM 6 — SELECTED
FINANCIAL DATA
See the Financial History Summary following the Notes to
the Financial Statements.
ITEM 7 — MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENTS
Forward-looking statements contained in this report
represent our best estimates of known and anticipated
trends believed relevant to future operations. However,
actual results may differ significantly from current
estimates. Certain forward-looking statements are
included in this report and use such words as “may,” “will,”
“could,” “expect,” “believe,” “plan,” or other similar
terminology. These statements reflect current
expectations regarding future events and operating
performance as of the date of this report. These forward-
looking statements involve a number of risks and
uncertainties.
The following are some of the factors that could cause
actual results to differ materially from those expressed in,
or underlying, forward-looking statements: effectiveness
of operating initiatives; rate of electronic diversion;
changes in laws and regulations; costs and delays
associated with new regulations imposed by the Postal
Regulatory Commission (PRC) or other regulatory bodies;
the amount of required prefunding payments to the Postal
Service Retirement Health Benefits Fund (PSRHBF);
success in advertising and promotional efforts; changes in
national and local business and economic conditions,
including their impact on consumer and business
confidence; fluctuations in currency exchange and interest
rates; labor and other operating costs; oil, fuel, and other
transportation costs; the effects of war and terrorist
activities; competition, including pricing and marketing
initiatives and new service offerings by our competitors;
consumer preferences or perceptions concerning our
service offerings; spending patterns and demographic
trends; availability of qualified personnel; severe weather
conditions; labor relations; effects of legal claims; cost and
deployment of capital; and changes in applicable
accounting policies and practices. The foregoing list of
important factors is not all-inclusive. We have no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future
events, or otherwise.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance
with U.S. Generally Accepted Accounting Principles
(GAAP) requires management to make significant
judgments and estimates to develop certain amounts
reflected and disclosed in the financial statements. In
many cases, there are alternative policies or estimation
techniques that could be used. We maintain a thorough
process to review the application of accounting policies
and to evaluate the appropriateness of the many
estimates that are required to prepare the financial
statements. Management discusses the development and
selection of these accounting policies and estimates with
the Audit and Finance Committee of the Board. However,
even under optimal circumstances, estimates routinely
require adjustment based on changing circumstances and
new or better information.
The three accounting policies that are considered either
the most judgmental, or involve the selection or
application of alternative accounting policies, and are
material to financial statements, are those related to the
recording of workers’ compensation costs, deferred
revenue for prepaid postage, and contingent liabilities.
Workers’ compensation costs are highly sensitive to
discount and inflation rates and the length of time
recipients stay on the compensation rolls. However, the
total annual cash payment for claims is relatively stable
and predictable. The workers’ compensation costs
reflected on our Statement of Operations are subject to
actuarial estimates of future pay-outs, based upon prior
claims data. Changes in the actuarial and inflation rate
estimates and discount rates can significantly impact
reported results from period to period. In the third quarter
of 2009, we instituted a policy of updating inflation and
discount rates on a quarterly basis.
The discount rate reflects the current rate at which the
workers’ compensation liabilities could be effectively
settled at the measurement date (e.g., the end of the