When the U.S. Postal Service (USPS)
reported its 2010 financial results,
it showed a net loss of $8.5 billion
for the fiscal year which ended
September 30, 2010.
Excluding charges to income primarily
resulting from changes to interest
rates that impact the organization's
workers' compensation liability, the
net loss was $6 billion.
The recent recession, continuing
economic pressures, the migration of
mail to electronic media, and the
increased popularity of online
electronic bill payment, had a
significant adverse impact on mail
volumes and operating revenues.
Despite rigorous initiatives that
eliminated 75 million work hours
and drove productivity to record
highs in 2010, the losses mounted.
"Over the last two years, the Postal
Service realized more than $9 billion
in cost savings, primarily by eliminating
about 105,000 full-time equivalent
positions -- more than any other
organization, anywhere," said Chief
Financial Officer Joe Corbett. "We
will continue our relentless efforts
to innovate and improve efficiency.
However, the need for changes to
legislation, regulations and labor
contracts has never been more obvious."
Details of Fiscal Year 2010 results include:
* Operating revenue of $67.1 billion in 2010
declined $1 billion from 2009,
primarily due to lower volume.
* Operating expenses for 2010 of approximately
$70 billion (excluding a $5.5 billion
expense for pre-funding Retiree Health
Benefits), down from approximately
$70.4 billion in 2009 (excluding a
$1.4 billion expense for RHB).
* Net loss of $8.5 billion in 2010,
$4.7 billion above the 2009 level,
mostly as a result of the revenue
decline, additional expenses in 2010
associated with RHB pre-funding and
workers' compensation -- but offset
by cost savings associated with the
work hour reduction.
* Total mail volume of 170.6 billion pieces,
compared to 176.7 billion pieces in
2009, a decline of 3.5 percent.
USPS First-Class Mail volume continued
to decline, with year-over-year declines
of 6.6 percent in 2010, 8.6 percent in
2009, and 4.8 percent in 2008. This
trend is particularly disturbing as
First-Class Mail, the most profitable
product, generates more than half of
total revenue. Volume for Standard Mail
showed improvement during the year,
reflecting some signs of economic
recovery in late 2010, but, in total,
was flat in 2010, compared to 2009.
In its report on the financial statements
contained in the Postal Service's 2010
report, independent auditor Ernst & Young
is expected to issue an unqualified
audit opinion that will emphasize that
questions remain about the ability of
the Postal Service to generate sufficient
liquidity to make all of its future
payments, including the $5.5 billion
RHB pre-funding payment due on the last
day of fiscal year 2011.
Five-day delivery
Facing unprecedented mail volume declines
and a projected $238 billion shortfall
during the next decade, moving to a
five-day delivery schedule is one of
the fundamental changes that the Postal
Service wants to implement.
Profound technological and social
changes have altered the way Americans
communicate. As use of electronic
communications increases, revenue from
First-Class Mail -- the Postal Service's
longtime bread-and-butter product --
continues to decline. While several
steps must be taken to fully address
the revenue gap, the U.S. Postal
Service reports that five-day delivery
for street addresses is one of their
best options to significantly reduce
its costs to partially offset its
unprecedented mail volume and revenue
declines, with Saturday being the
best day to eliminate carrier delivery.
Most businesses and households surveyed
in a national Gallup Poll indicated
Saturday would be the least disruptive
day to eliminate mail delivery. That
conclusion has since been reinforced
by recent Postal Service market research.
Sarbanes-Oxley Act
In 2010, the Postal Service complied
with Section 404 of the Sarbanes-Oxley
Act (SOX) as mandated by the Postal
Accountability and Enhancement Act of
2006. This was one of the largest successful
SOX implementations on record and the
first within the federal government.
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