In November 2009, the U.S. Postal Service
(USPS) filed its 2009 fiscal year-end
financial results, showing a net loss
of $3.8 billion for the year -- despite
cost-cutting efforts resulting in
$6 billion in cost savings and a
$4 billion reduction in required payments
for retiree health benefits. Cost savings
reflect a reduction of 40,000 career
USPS employees as well as reductions
in overtime hours, transportation and
other costs. The $4 billion reduction in
required retiree health benefit payments
was passed into law for fiscal 2009 to
allow the USPS to maintain fiscal solvency
while continuing to provide universal,
affordable service to the nation.
Details of 2009 USPS financial results include:
* Operating revenue of $68.1 billion,
compared to $74.9 billion in 2008.
* Operating expenses of $71.8 billion,
compared to $77.7 billion in 2008.
* Net loss of $3.8 billion, compared
to $2.8 billion in 2008.
* Total mail volume of 177.1 billion
pieces, compared to 202.7 billion
pieces in 2008, a decline of more
than 25 billion pieces, or 12.7 percent.
"Our 2009 fiscal year proved to be
one of the most challenging in the
history of the Postal Service," said
Chief Financial Officer Joseph Corbett.
"The deep economic recession, and to
a lesser extent the ongoing migration
of mail to electronic alternatives,
significantly affected all mail products,
creating a large imbalance between
revenues and costs."
Corbett said that the USPS responded
aggressively to unprecedented mail
volume declines and the ongoing
recession. "We undertook comprehensive
cost-cutting measures across all
areas of the organization," he said.
"Most notably, we reduced work hours
by 115 million, or the equivalent of
65,000 full-time employees -- a larger
number than the entire workforce at
more than 80 percent of Fortune 500
companies today."
Several significant accruals in the
year increased the 2009 net loss by
$1.7 billion:
* An increase in estimated Workers Compensation
liability of $718 million,
primarily to reflect lower interest rates.
* An increase in estimated deferred revenue recognition on prepaid postage of
$756 million, primarily based on newly-available data on customer purchases
and use of stamps.
* Accrued retirement incentives of $197 million for 13,400 employees who applied
for the incentive prior to September 30, 2009.
In its report on the financial
statements contained in the Postal
Service's 2009 report, independent
auditor Ernst & Young issued an
unqualified audit opinion, but
emphasized that questions remain
about the ability of the Postal Service
to generate sufficient liquidity to
make all of its payments, including
the $5.5 billion retiree health
benefits payment due on the last
day of fiscal year 2010. "There is
significant uncertainty as to whether
the United States Postal Service
will have sufficient liquidity to
make this payment on September 30,
2010," the opinion stated.
While further revenue losses and
mail volume declines were expected
in 2010, Potter said the USPS will
continue to move aggressively to
meet the challenges posed by the
current economic downturn. "We realize
our customers are facing the same
economic challenges," said Potter.
"That's why we are not raising prices
on First-Class Mail, Standard Mail
and our other market-dominant products
in 2010," he said.
The 2010 plan, which estimates a
revenue decline of $2.2 billion, a
net loss of $7.8 billion, cost
reductions of more than $3.5 billion
and a reduction in mail volume of
11 billion pieces for the year, is
based on the assumption that there
will be no change in the number of
delivery days per week, and no change
in the current retiree health benefits
payment schedule.
"We're grateful to Congress and the
Administration for the necessary 2009
adjustment to our retiree health payment,"
said Postmaster General John Potter.
"This was a welcome and much-needed
change to assure that the Postal Service
was able to meet all of its obligations
at the end of the fiscal year and over
the course of 2010." Potter stated,
however, that the Postal Service faces
"a sobering reality" of the same problem
in 2010 and every year in the near future.
"As volume contracts and we struggle to
match the costs of an expanding delivery
network with revenues received, it's
clear that long-term success requires
fundamental, legislative change," he
said.
Potter said that legislation must address
"the impossible demands" of prefunding
future retiree health benefits at current
levels of more than $5 billion annually;
the barriers to matching delivery frequency
with declining mail volumes; and the
ability to leverage the Postal Service's
logistics, distribution and retail networks
to create new revenue streams. "In 2010
we will engage our customer and business
partner stakeholders, the Administration
and Congress, and the American people in
a dialogue to determine a more financially
sustainable future," said Potter. "The
Postal Service remains a vital driver of
the American economy and an integral part
of every American community." The Postal
Service is part of the fabric of this nation.
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