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Postal Service Ends Third Quarter with $2.4 Billion Loss

August 5, 2009
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WASHINGTON—August 5, 2009—The U.S. Postal Service ended its third quarter (April 1 – June 30) with a net loss of $2.4 billion, including a non-cash adjustment that increased workers’ compensation expense by $807 million. Ongoing electronic diversion and the widespread economic recession continued to reduce mail volume, resulting in a $1.6 billion decrease in revenue for the quarter.

Despite cost reductions against the fiscal 2009 plan of more than $6 billion and actions to grow revenue, the Postal Service (USPS) projects a net loss of more than $7 billion at fiscal year-end. The organization’s financial situation is compounded by its obligation to pay $5.4 billion to $5.8 billion annually to prefund retiree health benefits. This requirement, established in the Postal Accountability and Enhancement Act of 2006, is an obligation that no other government agency has to pay.

The Postal Service has incurred net losses in 11 of the last 12 fiscal quarters. The fiscal 2009 year-to-date net loss is $4.7 billion, compared to a loss in the same period last year of $1.1 billion, in spite of comprehensive, organization-wide cost reduction initiatives. The organization is working to mitigate a possible Sept. 30 cash shortfall of up to $700 million.

Postmaster General John Potter noted that the Postal Service has maintained a high level of customer service while facing continuing economic challenges. Third quarter service scores for overnight single-piece First-Class Mail remained at 96 percent on-time, while the score for two-day, single-piece First-Class Mail improved 1 percentage point to 94 percent.

“Our commitment to customer service is paramount,” Potter said. “We will continue to provide the dependable service our customers need. We also will keep a balance with our critical focus on reducing costs so that service is not diminished.

“Thanks to extraordinary efforts across the entire organization, we are well on track to achieve our 2009 target of more than $6 billion in total cost reductions,” said Potter. “In the third quarter, we surpassed the targeted amount by $500 million.”

Cost reductions center on initiatives to match work hours to reduced mail volume. Other savings are coming from consolidating excess capacity in mail processing and transportation networks, realigning carrier routes, halting construction of new postal facilities, freezing Postal Service officer and executive salaries at 2008 pay levels, reducing travel budgets and similar measures. Of note is an effort launched this year to reduce the cost of more than 500 existing contracts that will result in short- and long-term savings for the Postal Service in the areas of price, scope and process improvements.
 

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