 | USPS Reports $2.8 Billion Year-End Loss — Declining Mail Volume Cited (pdf)
The Postal Service concluded fiscal year 2008 with a net loss of $2.8 billion as the national economic slowdown lowered mail volume and as the Postal Service bore additional costs mandated by the Postal Act of 2006.
The loss occurred despite more than $2 billion in cost-cutting measures that included the use of 50 million fewer work hours compared to the previous year. Meanwhile, the on-time delivery of First-Class mail reached record levels for FY 08. The year-end results were presented during today’s meeting of the Postal Service Board of Governors.
Mail volume in FY 08 totaled 202.7 billion pieces, a decline of 9.5 billion pieces, or 4.5 percent, compared to the previous fiscal year. Declining mail volume was a symptom of the worsening national economy, particularly related to the financial and housing industries and to trends toward the use of electronic mail.
Total revenue in FY 08 was $75 billion, unchanged from last year. Expenses totaled $77.8 billion, including the $5.6 billion payment required by the Postal Act of 2006 to pre-fund retiree health benefits.
Excluding all the retiree health benefit fund payments from 2008 and 2007, expenses were up less than 1 percent over last year. Cost reductions offset nearly all of the impact from rising inflation, of which the major contributors were a $562 million increase in cost of living adjustments paid to craft employees and $525 million in additional fuel costs.
FINANCIAL OUTLOOK
“We expect the new fiscal year to be another difficult one for the Postal Service and the entire mailing industry, as economic factors will continue to reduce mail volume and increase expenses,” PMG Jack Potter told the Board of Governors at today’s meeting. “As we continue to reduce work hours and other costs, our top priority remains providing excellent service to our customers. The combination of excellent service and affordable prices makes postal products a great value.”
In addition to the weak or contracting economy and the diversion of mail to electronic means, the pre-funding of retiree health benefits continues to have a significant impact on Postal Service finances.
“The Board will work with members of Congress to ease some of the financial pressure we are currently facing from the Postal Act,” Board Chairman Alan Kessler announced at today’s meeting. “Legislative relief is only part of the solution to the problems facing the Postal Service. The Board and management will actively pursue the actions necessary to further reduce costs and grow revenue,” Kessler added.
USPS TO CHANGE SHIPPING PRICES IN JANUARY
Shipping services prices will change on Sunday, Jan. 18, for Express Mail, Priority Mail, Parcel Select, Parcel Return Service and some international shipping products. Overall, shipping services prices will increase an average of 5 percent. For the new prices, click here (click "New Shipping Prices" box).
USPS Reports Second Quarter Loss — Economic Slowdown Cited (pdf)
Despite cost-cutting measures, the Postal Service ended the second quarter with a net loss of $707 million, driven by a continued decline in mail volume resulting from the current national economic climate. Meanwhile, the on-time delivery of First-Class Mail continued at record levels in the second quarter.
The second quarter results were presented during today’s meeting of the Postal Service Board of Governors. For the first six months of the fiscal year, the Postal Service has essentially broken even, reporting a net loss of $35 million on revenue of $39.3 billion.
Mail volume for the quarter ending March 31 totaled 51.3 billion pieces, a 3.3 percent drop from the previous second quarter. First-Class Mail volume decreased by 3.1 percent and Standard Mail volume was down 3 percent.
Year-to-date total mail volume is down by 3.1 percent compared to the same period last year. If the trend continues, this will be only the seventh year total mail volume has decreased in the last 50 years and could be the largest decline since 2002.
Revenue was $18.9 billion in the second quarter, an increase of $584 million, or 3.2 percent, over the same period last year reflecting last year’s price adjustments, but well below expectations. Expenses in the second quarter totaled $19.6 billion, an increase of $52 million, or 0.3 percent, from the previous year. The slight increase was driven by an increase in transportation expenses, particularly fuel costs.
“Weakness in the housing and credit markets, both of which are heavy users of mail, are leading the declines in mail volume,” Postmaster General Jack Potter told the Board. “While mail volume may rebound with the economy, it is clear we need to accelerate our efforts to seek new structural and process changes to remain economically viable and to further improve customer service.”
One such change, made possible by the Postal Act of 2006, gives the Postal Service new pricing flexibility to better serve its customers. “Next week, for the first time ever, we’ll begin offering price incentives for Express Mail and Priority Mail, enabling us to better compete for package business,” Potter said.
The Postal Service also continues to focus on reducing costs and increasing efficiency. For example, work hours have been reduced by more than 18 million in the first two quarters of the year compared to similar periods in 2007.
Fiscal Year 2008 Quarter I Results: Mail Volume Down (pdf)
Mail volume was down 3 percent, or 1.7 billion pieces, for the first quarter of fiscal year 2008, according to preliminary financial results presented today to the Postal Service Board of Governors. First-Class Mail volume decreased 3.9 percent and Standard Mail decreased 2.6 percent in the quarter ending Dec. 31, 2007. Chief Financial Officer Glen Walker attributed the declining mail volume to “disturbing trends” in the overall U.S. economy.
“Unfortunately, two key sectors of the economy — finance and housing — suffered a downturn in the first quarter, and they’re both heavy users of the mail,” said PMG Jack Potter. Net income for the first quarter is estimated at $672 million on revenue of $20.4 billion. “Although revenue is higher than in the same quarter last year, due to the price increase last May, it is $500 million less than expected,” Potter said. “We’re working to offset the disappointing revenue with cost reductions and new strategies for growth.”
Final first-quarter financial results will be released in February.
Appropriation Request (pdf)
At today’s meeting, the Board of Governors approved a fiscal year (FY) 2009 appropriation request totaling $117.7 million. This annual request to Congress includes $69.8 million in reimbursement for free services the Postal Service is required to provide, including free mail for blind persons and for overseas voting. The request also includes reconciliation adjustments for previous years based on final audited mail volumes, which are $2.8 million for FY 2007 and $16.1 million for FY 2006.
In addition, the request includes $29 million for the latest annual installment from the Revenue Forgone Reform Act of 1993. This act requires the Postal Service to be reimbursed for services it performed in 1991 through 1993 and for shortfalls in the reimbursement of costs the Postal Service incurred processing and delivering certain nonprofit mail from 1994 through 1998.
The Postal Service is also authorized by law to request partial reimbursement for the costs incurred in providing universal service. However, the Postal Service has not requested funds for this purpose since FY 1983.
Fiscal Year 2007 Results (pdf)
The Postal Service also announced its financial results for fiscal year 2007, which ended Sept. 30. The Postal Service concluded the fiscal year with a $5.1 billion net loss, attributable to mandatory funding requirements in the Postal Act of 2006. The year-end loss is about $300 million less than projected earlier in the year.
“It’s important to note that we not only achieved our plan, which had to be adjusted to reflect the new law, but we overcame a slow start and did better than our mid-year projection,” said Potter. Without the financial impact of the law, the Postal Service would have ended the year with net income of $1.6 billion.
Total revenue in FY 2007 was $74.9 billion and expenses totaled approximately $80 billion. Mail volume was 212 billion pieces.
The Postal Service recorded an eighth consecutive year of productivity growth in FY 2007. Total Factor Productivity, which measures the relationship between workload and resource usage, was up 1.7 percent over FY 2006. Productivity was aided by a reduction of 36 million work hours, which is equivalent to $1.2 billion.
Board of Governors Approves Aggressive 2008 Financial Plan (pdf)
September 26, 2007 – The Postal Service Board of Governors today approved an aggressive 2008 financial plan for the U.S. Postal Service that includes $1 billion in cost savings and puts its expense growth lower than inflation.
The Postal Service operating, capital and financing plans for the new fiscal year, known as the Integrated Financial Plan (IFP), project expense growth below the assumed increase in the Consumer Price Index (CPI), the most commonly used benchmark for inflation.
Those projections do not assume any price changes for postal products and services over the next fiscal year, which begins Oct. 1. The Board of Governors has not made a decision on future prices but applauded the Postal Regulatory Commission for being well ahead of schedule with its recommendations on the new rate regulations.
The IFP projects revenue of $78.2 billion and expenses of $78.8 billion in fiscal 2008, for a net loss of $600 million. The financial plan is significantly affected by the Postal Accountability and Enhancement Act (the Postal Act of 2006), as are finances in the current fiscal year.
2007 — One-time Costs
For fiscal 2007, the Postal Service projects revenues of $75.0 billion and expenses of $80.4 billion for a projected net loss of $5.4 billion. The net loss of $5.4 billion includes operating income of $1.5 billion and a $6.9 billion negative financial impact from the Postal Act of 2006 — which includes a $3.0 billion one-time escrow expense, which was required under the previous law, an additional $5.4 billion payment into the Retiree Health Benefit Fund for 2007, and $1.5 billion in savings from CSRS relief.
“Absent the negative financial impacts from the Postal Act of 2006, the Postal Service projects operating income of $1.5 billion this year and $400 million next year,” said H. Glen Walker, Chief Financial Officer.
2008 — Expense Growth Below Inflation
Total expenses for fiscal 2008 are planned at $78.8 billion, or 2.0 percent below projected fiscal 2007 expenses. Even after excluding the $3.0 billion in one-time escrow expenses from 2007, expense growth in fiscal 2008 is projected at 1.8 percent, below the assumed growth in the CPI.
The 2008 plan predicts a record ninth consecutive year of Total Factor Productivity growth, which measures the relationship between workload and resource usage. TFP is planned to grow by 1.0 percent in 2008.
Appropriate appropriations
Financial requests for fiscal years past and future
The Board of Governors approved a fiscal year 2008 appropriation request totaling $153.4 million. This annual request to Congress, as provided under current law, includes $83.5 million in reimbursement for free services the Postal Service is required to provide, including free mail for blind persons and for overseas voting. This appropriations request also includes reconciliation adjustments for previous years based upon final audited mail volumes, which are $24.9 million for fiscal year 2005 and $16 million for fiscal year 2006. In addition, the request includes $29 million for the latest annual installment from the Revenue Forgone Reform Act of 1993. (pdf)
November 15, 2006 – The FY2006 year-end financial figures were released today by Chief Financial Officer and Executive Vice President H. Glen Walker during the Board of Governors’ meeting. Total revenue was $72.8 billion, and total expenses were $71.9 billion, a 4.9 percent increase over the previous year. The net deficiency, after including a $3 billion escrow allocation, as required by law, was $2.1 billion. While the mail volume decline continued for First-Class Mail (0.5 percent decrease from the previous year), Walker said growth in Standard and Priority Mail helped increase overall mail volume to 213 billion pieces. Walker also reported that the fiscal year ended with a record 7th consecutive year in positive total factor productivity. Total Factor Productivity increased by 0.4 percent in FY2006. (pdf)
http://www.usps.com/communications/newsroom/welcome.htm
September 12, 2006 – The US Postal Service Board of Governors today approved a fiscal year 2007 integrated financial plan that includes cost reduction programs totaling $1.1 billion. The plan also calls for a 3.2 percent increase in revenue and a 2.6 percent increase in expenses over the current year’s forecast, resulting in a $1.7 billion net income. However, the estimated $3.3 billion escrow requirement results in a net deficiency after escrow of $1.6 billion. Chief Financial Officer and Executive Vice President H. Glen Walker also briefed the Board of Governors on financial performance for the current fiscal year through July. Year-to-date income through July is $1.34 billion before the escrow allocation, and is $69 million better than planned. The year-to-date net deficiency after the escrow allocation is $1.16 billion. (pdf)
http://www.usps.com/communications/newsroom/welcome.htm
May 3, 2006 – During the Postal Service’s Board of Governors meeting Acting Chief Financial Officer Robert Pedersen reported on the results of the Second Quarter (January 1 through March 31) financial performance figures. For the quarter, revenue was up 7.7 percent and expenses rose by 4.5 percent over the same period last year. On a year-to-date basis, revenue is up by 2.9 percent over last year, while expenses are up by 4.2 percent. (pdf)
http://www.usps.com/communications/newsroom/welcome.htm
December 6, 2005 - United States Postal Service reported today it concluded fiscal 2005 with a net income of $1.4 billion on record revenues of $70 billion and record volume of 212 billion pieces of mail. The Chairman of Postal Service's Board of Governors' Audit and Finance Committee indicated that the Governors had accepted the 2005 financial statements and the Chief Financial Officer provided highlights of those statements. (pdf)
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On Nov. 8, Chief Financial Officer & Executive Vice President Richard J. Strasser, Jr. announced his plan to retire early next year. He said he committed to the PMG not to leave until his successor has been transitioned.
November 3, 2005 - Press Release - United States Postal Service applies to be a Medicare Part D provider
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September 27, 2005 - United States Postal Service Board of Governors approved the Operating and Capital Plans for Fiscal Year 2006. Approval of these plans were requested by the Chief Financial Officer. View the 2006 Integrated Financial Plan - Board of Governors Meeting Presentation (pdf) | (ppt)
www.usps.com/communications/newsroom/welcome.htm
August 2, 2005 - USPS Chief Financial Officer Richard J. Strasser, Jr. at the Board of Governor’s meeting presented the Quarter 3 Fiscal Year 2005 financial results. He reported a net loss of $240 million for Quarter 3 (Q3) FY '05, down from the $259 million net income reported in Q3 of the previous year. Higher fuel, retiree health benefits costs, and workload related increases in volume and deliveries were cited as factors affecting the Q3 financial performance. (pdf) | (ppt)
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May 11, 2005 - USPS reported Quarter 2 Fiscal Year 2005 financial results at its Board of Governors meeting. A net income of $275 million, down from $741 million last year, was reported by the Chief Financial Officer Strasser. (pdf) | (ppt)
March 31, 2005 Press Release - Board of Governors to File Request for Postage Rate Increases (html)
March 21, 2005 - United States Postal Service Chief Financial Officer and Executive Vice President Richard J. Strasser presented a financial update of the organization through February 2005 at the National Postal Forum in Nashville, TN. (ppt)
February 17, 2005 - USPS reported Quarter 1 Fiscal Year 2005 financial results at its Board of Governors meeting. A net income of $1.7 billion, down from $1.8B last year, was reported by the Chief Financial Officer Strasser. In a related action, the Governors announced that they have directed management to prepare a filing with the Postal Rate Commission to cover an escrow requirement of $3.1 billion resulting from changes in Public Law 108-18, Postal Civil Service Retirement System Funding Reform Act. Additionally, the Board of Governors approved the filing of the Postal Service's fourth Negotiated Service Agreement (NSA) and set April 1 as the implementation date for the Bank One NSA . (pdf) | (ppt)
http://www.usps.com/communications/newsroom/welcome.htm
December 7, 2004 - United States Postal Service reported Fiscal Year 2004 financial results at its Board of Governors meeting. A net income of $3,065 million was reported by the Chief Financial Officer. FY 2004 Financial Results - Board of Governors Meeting" Presentations (pdf) | (ppt)
OCTOBER 22, 2004 - RESPONSE OF OFFICE OF PERSONNEL MANAGEMENT AND BOARD OF ACTUARIES, UNITED STATES CIVIL SERVICE RETIREMENT SYSTEM, TO THE JANUARY 26, 2004 REQUEST BY THE UNITED STATES POSTAL SERVICE FOR REVIEW, RECONSIDERATION AND ADJUSTMENT OF OPM’S ACTUARIAL METHOD AND COMPUTATIONS, PURSUANT TO P. L. 108-18 (pdf) | (rtf)
October 4, 2004 - United States Postal Service Notice Of Response Of Board Of Actuaries, United States Civil Service Retirement System, To The January 26, 2004 Request By The United States Postal Service For Review, Reconsideration And Adjustment Of The Actuarial Method And Computations, Pursuant To P. L. 108-18 (doc)
September 14, 2004 - United States Postal Service Board of Governors approved Operating, Capital, and Financial Plans for Fiscal Year 2005. Approval of these plans were requested by the Chief Financial Officer. 2005 Integrated Financial Plan - Board of Governors Meeting" Presentations (pdf) | (ppt)
January 26, 2004 - Postal Service Requests Board of Actuaries of the Civil Service Retirement System to Review, Reconsider and Adjust Actuarial Method and Computations, Pursuant to P.L. 108-18 (doc)
December 8, 2003 - Notice of Postal Service Motion for Convening of Meeting and Continuation of Current Rates by Department of Transportation and of Postal Service Reply to Carriers' Answer to its Motion (doc)
February 3, 2004 - Press Release - Postal Service Posts 1st Quarter Income Gain (html)
December 9, 2003 - Press Release - Postal Service Exceeds Fiscal Plan (txt)
December 2, 2003 - Press Release - Postal Service Revises FY 2003 Q III (txt)
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