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To the President, Members of Congress, postal customers, postal employees, and the American People:
It has been a challenging year for the Postal Service, but also one of great achievement and promise.
This was our fourth consecutive year of positive net income. Total revenue of $72.8 billion exceeded our plan by $470 million. We accomplished this by working hard to communicate the value of mail and increase the convenience of core products. We are committed to growing the mail. We are not merely defending our products against diversion; we are reshaping them for emerging markets and new customer needs.
Technological and market developments bring risk but also open doors. Enthusiastic customer use of services such as Click-N-Ship and free Online Carrier Pickup demonstrate that the Internet and postal delivery network can be complements. Growing Vote-by-Mail programs show that creative new applications for mail need not always come from new technology.
Our financial challenges came into sharp focus in 2006. We implemented new rates to fund a $3 billion escrow account mandated by law. This was the first increase since 2002. Costs for fuel and inflation-triggered employee benefits increased, while our network continued to expand, adding 1.8 million delivery points. We responded by attacking all costs under our control. We limited spending to essentials and expanded strict process control across operations. The result was a seventh straight annual increase in total factor productivity.
On-time performance for First-Class Mail with an overnight commitment remained at 95 percent in spite of residual impact of Hurricanes Katrina and Rita. We achieved scores of 91 percent and a 90 percent, respectively, for First-Class Mail with 2- and 3-day service commitments. Customer satisfaction continues to be high as well; 92 percent of households reported a positive view of the Postal Service.
Our managers are armed with versatile new tools for reducing costs and improving service. Real-time information from intelligent barcodes is flagging trouble spots and clearing backlogs. Surface visibility scans are tracking mail within plants and along transportation networks. Mail flow data are integrated across functions, improving end-to-end service performance. Managers are documenting best practices, highlighting results, and continually ratcheting up targets.
We are proud of these achievements but we are even more enthusiastic about improvements in store. Aided by powerful new technologies, disciplined field management, and unprecedented information flows between customers and postal operations, we are poised for new breakthroughs in service improvements and cost reductions.
2006 was a pivotal year because it saw the first steps in several ambitious steps that will help ensure the future of mail:
Enactment of the Postal Accountability and Enhancement Act will not alter our focus. We will continue to grow the mail, drive down costs, enhance service, and engage our employees and partners in achieving success. By combining strict fiscal control, strong operational focus, and dynamic service development, we are even better prepared to help ensure a prosperous future for mail.
John E. Potter
Postmaster General, Chief Executive Officer
James C. Miller III
Chairman, Board of Governors