The U.S. Postal Service (USPS) ended the first quarter of this fiscal year (Oct. 1 to Dec. 31, 2009) with a net loss of $297 million, while posting continued high scores in quarterly delivery performance.
"In spite of the financial challenges we face today, Postal Service employees never lose sight that customer service is our top priority," said Postmaster General John Potter, noting that performance for First-Class Mail during the heaviest volume period of the year either maintained at record levels or improved across all measured categories.
"On-time delivery performance for single-piece overnight First-Class Mail held at 96 percent for the fifth straight quarter," Potter said. "It's a tremendous result and we are proud to provide the highest levels of service to our customers."
Financial Results
The 2010 first-quarter financial results reflect continued effects of the recent recession, as well as continued migration of mail to electronic alternatives.
"Unfortunately, economic drivers that significantly affect mail volumes, such as continuing high unemployment levels and lower investments, appear to be lagging general economic recovery and last quarter's growth in GDP (gross domestic product)," said Joseph Corbett, chief financial officer and executive vice president. "This situation, coupled with the growth in electronic alternatives to mail, creates a very challenging environment."
Some economic indicators point to the beginning of a slow recovery, but downward pressure on mail volumes is expected to continue throughout 2010. "Our volume for 2010 is projected to be approximately 167 billion pieces, a decline of approximately 10 billion pieces from last year's total," Corbett said.
The quarter ending Dec. 31 is typically the strongest quarter for the Postal Service due to seasonal business and holiday mailings. A first-quarter 2010 revenue decline of 3.9 percent and expense decline of 4.4 percent resulted in a net loss of $297 million, a slight improvement compared to the net loss of approximately $384 million for the same period in 2009. First-quarter volume was 45.7 billion pieces, compared to 50.2 billion in the same period last year, or 8.9 percent below 2009. Total operating revenue for the quarter was $18.4 billion, compared to $19.1 billion in the first quarter of 2009.
The first quarter loss is not unexpected, despite ongoing aggressive cost reduction initiatives. Fiscal year 2009 cost savings totaled $6 billion and efforts continue into 2010. USPS reduced work hours for the first quarter by more than 28 million, or the equivalent of 15,800 full-time employees - on top of a reduction of 115 million work hours, or the equivalent of 65,000 full-time employees last fiscal year. Work-hour reductions are achieved through continued efficiency improvements and matching workloads to lower mail volumes. In many categories, USPS has gone beyond savings attributable only to lower volumes. For example, while first quarter volumes declined 8.9 percent, mail processing hours were driven down by more than 14 percent.
With net losses reported for 2007, 2008 and 2009, the continued negative trend in fiscal 2010 raises significant uncertainty about the Postal Service's ability to generate sufficient cash flows to fund large cash payment obligations in September and October 2010.
The situation is compounded by the requirement established in postal reform legislation of 2006 that the organization pay $5.4 billion to $5.8 billion annually to prefund retiree health benefits - a requirement no other government or private sector organization faces. Last year, Congress enacted legislation to restructure the payment for 2009. However, there is no assurance that similar adjustments will be granted in 2010, or at all.
Complete first-quarter results are available in the Postal Service's Form 10-Q report, at www.usps.com/financials (click Form 10-Q under Quarter Reports).
Board of Governors Chairman and Committees
With the start of 2010, Governor Louis Giuliano has assumed his role as Board Chairman and Governor Thurgood Marshall Jr. has assumed his role as Vice Chairman. Membership of several Board committees also has changed.
Audit and Finance Committee: James Miller III, Chair; Mickey Barnett, Thurgood Marshall Jr.
Compensation and Management Resources Committee: Ellen Williams, Chair; Carolyn Gallagher, Louis Giuliano.
Governance and Strategic Planning Committee: Alan Kessler, Chair; Mickey Barnett, James Bilbray, James Miller III, John Potter.
Government Relations and Regulatory Committee: Thurgood Marshall Jr. Chair; James Bilbray, Ellen Williams
