United States Postal Service Ends Year in Black and Debt Free; Escrow Fund Looms

United States Postal Service ^ | December 06, 2005

[snowsislander]

FOR IMMEDIATE RELEASE Contact: Media Relations 202-268-2155 December 6, 2005 News Release No. 05-108 www.usps.com

USPS ENDS YEAR IN BLACK AND DEBT FREE; ESCROW FUND LOOMS

Washington, D.C. -- The U.S. 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.

"Financially, we are in the best position we've been since the 1970s," said Postmaster General John E. Potter at the December meeting of the Board of Governors. "Despite the strong financial and productivity records of recent years, we are facing a modest increase in postage rates in January."

The January 8, 2006 rate increase was compelled by legislation enacted in 2003 requiring the Postal Service to put aside over $3 billion each year into escrow beginning in 2006. Efforts to change the escrow requirement have been stalled in Congress. Without the escrow requirement, postage rates most likely would have remained at current levels until 2007.

Postage rates have remained stable since 2002, a direct result of three straight years of operating surpluses. The cash generated from the surpluses have been used to reduce the Postal Service's once $11 billion in debt to zero.

"We kept our focus on the customer for the past four years," said Potter. "It has paid off in record revenues, record volumes, and positive customer satisfaction ratings."

In 2005, mail volume increased 5.6 billion pieces to 212 billion. Standard Mail, which American businesses rely on to reach consumers, outpaced First-Class Mail for the first time in history with 101 billion pieces of Standard Mail compared to 98 billion in First-Class Mail. First-Class Mail grew slightly in 2005 after three years of decline.

"The increase in mail volume demonstrates that American businesses recognize that hard copy mail works and has a bright future," said Potter.

Although today's postal financial news is positive, Potter cautioned that the forecast for 2006 projects a surplus from operations, but coupled with an anticipated escrow requirement of $3.1 billion, the Postal Service will likely have a net deficiency approaching $2 billion.

Since Potter became Postmaster General in 2001, the Postal Service has reduced costs by a cumulative $15 billion. "Our postal team is moving more mail, going to more places, and doing it with less people," Potter said. In September, he unveiled plans to continue to reduce costs, pledging to take another $5 billion out of the Postal Service by 2010.

Potter said further the Harrisburg mail processing facility will be dedicated in memory of the late Postal Gov. LeGree Daniels. Ms. Daniels, who served on the Board of Governors since 1990, passed away November 19.

Potter noted, "In honor of her contributions to the Postal Service over the past 15 years, and a lifetime of public service to the American people, I am designating the mail processing plant in Harrisburg, Pennsylvania - her home town for the past 54 years -- as the LeGree Daniels Mail Processing Facility." A ceremony officially marking the dedication will occur in the near future.

Potter also acknowledged the service of Governor Robert F. Rider of Delaware, who attended his last meeting because his term has expired. Rider, a businessman, was first appointed a Governor of the U.S. Postal Service in May 1995. He has served as Chairman of the Board, as Vice Chairman of the Board and as Chairman of the Audit and Finance Committee. Rider is the Chairman and Chief Executive Officer of O. A. Newton & Son Company, with diversified divisions in agriculture and design/manufacturing of materials handling equipment.

In other business, the Board approved $54.9 million in capital funding for the final phase of a comprehensive effort to upgrade the Postal Service's existing mail-processing data networks.

In seeking approval, Charles E. Bravo, senior vice president, Intelligent Mail and Address Quality, said the upgrade will provide a reliable and supportable high-speed infrastructure that is easier to maintain.

"The state-of-the-art computer wiring is flexible and scalable," said Bravo, "and simplifies the addition and relocation of mail-processing equipment."

Since 1775, the Postal Service and its predecessor, the Post Office Department, has connected friends, families, neighbors and businesses by mail. It is an independent federal agency that visits 144 million homes and businesses every day, six days a week and is the only service provider delivering to every address in the nation. The Postal Service receives no taxpayer dollars for routine operations, but derives its operating revenues solely from the sale of postage, products and services. With annual revenues of more than $69 billion, it is the world's leading provider of mailing and delivery services, offering some of the most affordable postage rates in the world. The Postal Service delivers more than half of the world's mail volume - some 212 billion letters, advertisements, periodicals and packages a year - and serves seven and a half million customers each day at its 37,000 retail locations nationwide. Its website, usps.com, attracts more than 21 million visitors each month.

# # #

[snowsislander]

Here are the operating numbers since 2000 for the Postal Service. (Sorry about the random blank columns; for some reason, the cut and paste from the Postal Website is not as successful as one would hope from a simple table):

page 58 of 66

Financial history summary

(Dollars in billions)

		2005	2004	2003	2002	2001	2000
Statements of Operations
Total revenue		$ 70.0	$ 69.0	$ 68.8	$ 66.7	$ 65.9	$ 64.6
Total expense	68.6		65.9	64.9	67.4	67.6	64.8
Net income (loss)	$1.4	$3.1		$3.9	$(0.7)	$(1.7)	$(0.2)
(Dollars in millions)
Operating revenue		$69,798	$68,960	$68,498	$66,415	$65,767	$64,476
Revenue forgone	109		36	31	48	67	64
Total operating revenue	69,907	68,996		68,529	66,463	65,834	64,540
Compensation and benefits	53,932	52,134	50,428		51,557	51,351	49,532
Other expenses	14,351	13,717	13,474	13,677		14,289	13,460
Total operating expenses	68,283	65,851	63,902	65,234	65,640		62,992
Income from operations	1,624	3,145	4,627	1,229	194	1,548
Interest and investment income	86	33	58	46	35	41
Interest expense on deferred retirement liabilities	(263)	(103)	(116)	(1,601)	(1,603)	(1,568)
	Other Interest expense	(2)	(10)	(694)**	(340)	(306)	(220)
	Emergency Preparedness, net	-	-	(7)	(10)	-	-
Net income (loss)		$1,445	$3,065	$3,868	$(676)	$(1,680)	$(199)
blank
Balance Sheets
Assets
Current Assets	$2,138	$2,121	$3,823		$2,280	$1,933	$1,655
Property and equipment, deferred retirement costs and other assets	23,065	22,858	23,419	56,735		57,158	56,628
Total Assets	$25,203	$24,979	$27,242	$59,015	$59,091		$58,283
Liabilities
Current liabilities	$9,411	$11,070	$16,969	$15,586		$17,457	$18,277
Other liabilities	10,416	9,978	9,407	39,131	38,209		38,150
Long-term debt	-	-	-	7,300	5,751	2,502
Equity	5,376	3,931	866	(3,002)	(2,326)	(646)
Total liabilities and net capital (deficiency)	$25,203	$24,979	$27,242	$59,015	$59,091	$58,283
	blank
Changes in Net Capital (Deficiency)
Beginning balances
Capital contributions of the U.S. government	$3,034	$3,034		$3,034	$3,034	$3,034	$3,034
Equity (Deficit) since reorganization	897	(2,168)	(6,036)		(5,360)	(3,680)	(3,481)
Total beginning balance net capital (deficiency)	3,391	866	(3,002)	(2,326)		(646)	(447)
Net income (loss)	1,445	3,065	3,868	(676)	(1,680)		(199)
Ending balance	$5,376	$3,931	$866	$(3,002)	$(2,326)	$(646)

* Certain reclassifications have been made to previously reported amounts.
** Includes $360 million in debt repurchase expense.

[Cobra64]

Get rid of the friggin' junk mail, coupons and all the rest of the crap, and stop raising the cost of stamps 2 flippin cents every other friggin' year.

I truly believe that these jerks were flunkies from the school of Morons R Us.

[sushiman]

I wish they would increase their maximum size limits for international packages . They're losing tons of money to others shippers .

[taxesareforever]

Oh thank you Mr.Government, you have screwed us again.

[Kay Ludlow]

USPS has been working hard to improve service, increase efficiency and end the budget year in the black. Just need to get congress out of the way...

[Jeff Chandler]

I truly believe that these jerks were flunkies from the school of Morons R Us.

Don't make them angry. For goodness sake, don't you read the news?!

[willyd]

In ten years, there will be no need for the post office. they only became profitable because they wised up and hired consultants from the retail industry to revamp their locations. Also, how hard is it to make a profit when you have unlimited funds and a monopoly on mail boxes? Companies are all switching to online billing. People send evites and ecards now instead of traditional mail. Letters are being replaced by emails and delivery for packages is much more efficient through the private sector. I predict that people will stop putting up mailboxes altogether in the near future and refuse the service since all they will be getting is a bunch of junk mail. Even magazines and newspapers are going digital. What is left? Why spend money on a fancy new computer system when the entire service will be obsolete in the next few years?

[Republican Wildcat]

The internet has helped the postal service with the online sales. You can't exactly digitally ship things purchased on ebay, Amazon, etc. If your scenario was having such a negative impact they would not have set a new record for shipments.

[Keyes2000mt]

Eventually, you're right but not in the near term for several reasons:

1) The Internet isn't everywhere.
2) There are a lot of hangers on in the older generation that won't use it.
3) A lot of laws require that items be mailed "Certified Mail" or that disclosures be mailed out. To comply with arcane laws, you have to have a mail service.
4) You have a lot of smaller companies who just can't do e-billing.

[Republican Wildcat]

The January 8, 2006 rate increase was compelled by legislation enacted in 2003 requiring the Postal Service to put aside over $3 billion each year into escrow beginning in 2006.

As you can see...this time it was Congress' fault. What is the point of this legislation anyway?

[Lokibob]

You obviously are not a user of the USPS.

I sell things on ebay, and can tell you that the USPS provides a superb service for the shipper of 10 lb and under items.

I have used UPS, FedEx, and DHL and none of them can match the service and price of the USPS.

As for the coupons etc, they hardly handle them, forcing the sender to sort according to address. They only charge for the delivery of them, and they charge well.

Let me give you an example of how the USPS works. They have delivery confirmation service (package tracking). If you bring a package into them and request DC, they charge 45 cents for the clerk to put the bar code sticker on the package and scan it. I, on the other hand, print the DC bar code on my label from my computer and it is automatically entered in the USPS data base. If it is on a package, it is free, if on an envelope, it costs 12 cents (they still have to handle envelopes manually).

FedEx charges $1.25 for the same service over the counter, or $1.75 home pickup fee (but DC is free).

My mailman visits my house every day, even if I don't have a package.

BTW, UPS has a minimum 8 lb rate for packages, which means that if my package is 2 lbs, I get charged for 8.

2 annoyances, APO packages require my taking the package physically to the P.O. because of the customs stickers, which leads to the 2nd annoyance, long lines. I only physically go to the P.O. once a week and know by experience to be there when the door opens or about 2 in the afternoon.

[Lokibob]

On USPS.com, you can print stamps, get mailing supplies (boxes etc) and track your things you have mailed.

Unfortunately, it is YOU that is not keeping up with the advances the USPS is using. They are far ahead of UPS and FedEx in the small package area.

[Lokibob]

My opinion, the 3 Billion $ is a tax raising method for congress. You watch, they will start tapping the escrow fund to "help the needy" or some other crap.

[Cementjungle]

My experiences with USPS lately have been at least as good as with the others lately. Well, at least since I got out of Los Angeles (where getting your own mail/packages seemed to only happen by random chance). I guess geography still makes a dif with the USPS.

[Caipirabob]

Why spend money on a fancy new computer system when the entire service will be obsolete in the next few years?

I think the system will still be needed in future. All your points are valid, but you've named one of the key reasons the system is necessary. The internet.

More and more business will be conducted over the internet with postal services being the main interface between the customer and vendor following the on-line activity. Now it's true that most vendors use privatized delivery for excellent service, but there are many services that rely upon regular USPS for their business. Netflix and Gamefly for example.

I'm not saying that the USPS will stay open just for them alone. Still, you can see where "denial of service" on part of the privatized services (for lack of profit) may make the USPS mandatory in some areas. There's still a need in many cases, I don't see it changing in the future.

OTOH, the points you listed will certainly make the USPS leaner and hopefully more competative.

[mlc9852]

Maybe we should be them in charge of social security.

[GretchenM]

I have to hand it to the chief for making the PO profitable again. Seems ridiculous for that entity not to be able to make a profit.

"'We kept our focus on the customer for the past four years,' said Potter. 'It has paid off in record revenues, record volumes, and positive customer satisfaction ratings.'"

I have been treated much better in the last few years by postal employees than during the dark days before, when they were usually pretty snarky, if not completely obstructive. I still, however, am in shock when a postal worker treats me well and courteously at the counter. Maybe it's time to realize this change isn't transient.

[ECM]

I thought it was just me! LA really is a blackhole for the USPS.

[Sterm26]

Fedex, UPS, and DHL will provide tracking for no charge, pickup until delivery. USPS charges extra for tracking, which is usually a day behind and gives no usueful info. To ship a package, the Post Office would be my last choice.

[NoControllingLegalAuthority]

Good question. The congressional mandate that the U.S. Postal Service put $3 billion a year of revenue into a surplus "escrow fund" is pretty obvious.

The Congress wants the USPS to help finance the budget deficit of the U.S. government.

Congress has no doubt required the USPS to invest its budget surpluses in federal government debt obligations.