Joseph Corbett
Chief Financial Officer and Executive Vice President
As fiscal year 2010 comes to a close, we can look back on a year marked both by significant financial challenges and by impressive achievements in setting a foundation for a strong, enduring and financially viable Postal Service. To the extent that adversity reveals character, the Postal Service demonstrated great focus on service and commitment to the customer, and took significant steps to adapt to America’s evolving mailing needs.
To be sure, the Postal Service is still contending with the effects of the severe economic downturn that began in late 2007, and our mail volumes are increasingly impacted by greater customer reliance on digital communications. These factors resulted in a 2010 mail volume decline of 3.5 percent. Indeed, we have experienced a 20 percent loss of mail volume over the past four years. For an organization structured with a high percentage of fixed costs and numerous business model constraints, the road back to profitability remains an uphill climb. And we are climbing that hill aggressively.
In March of this year, we outlined a far-reaching Action Plan for the Future to transition to a more flexible business model, to become a leaner and more nimble organization, and to better meet the mailing and shipping needs of the American people for decades to come. Our plan described actions we are undertaking within our current model to get onto solid financial ground. Our plan also recommended changes in the law to loosen significant business model constraints that hinder cost control, product and service offerings, speed to market, and flexibility in leveraging the full value of our workforce.
By year’s end, excluding contractual cost increases, we had reduced more than $3 billion in costs across the organization, including work-hour reductions of 75 million hours. This reduction is equivalent to 43,000 full-time employees — larger than the total workforce of more than 31 percent of Fortune 500 companies. This impressive achievement demonstrates our steadfast commitment to this endeavor. At the same time, we are equally focused on generating revenue, for example, through pricing incentives for large-volume mailers, seasonal sales, widespread promotion of our flat-rate shipping options and a reorganized sales force.
Despite impressive cost-cutting to right-size and realign Postal Service operations with lower mail volume and revenue levels, we recorded a loss of $8.5 billion for the fiscal year. Of this amount, $5.5 billion was due to an annual, legislatively mandated obligation to pre-fund retiree health benefits.
Due to the current and projected near-term weakness in overall economic conditions, we will continue to be aggressive in removing costs from our system where possible and in identifying additional opportunities for savings through increased financial controls and streamlined processes.
This past year also marked our initial reporting on internal controls under section 404 of the Sarbanes-Oxley Act of 2002 (SOX), meeting the mandated SOX compliance deadline for fiscal year 2010. As one of the largest organizations in the United States — whether measured by revenue, number of facilities, number of employees or significance to the overall economy — the Postal Service implemented one of the largest and most complex SOX certification programs ever completed, including the following:
The accomplishments necessary to attain SOX compliance were remarkable and required both internal change and changes by our customers, suppliers, business partners and others in the mailing industry. I thank our staff and the entire industry for helping reach this important milestone.
Although we anticipate continued financial challenges in fiscal year 2011 and beyond, our goal is to set our finances on a firmer footing, and continue to innovate, drive out costs and be as efficient as possible. We remain proud to deliver on our promise to deliver trusted, affordable products and services to the American people. We remain firmly committed to affordably serving the needs of the American public and businesses far into the future.
“In March of this year, we outlined a far-reaching Action Plan for the Future to transition to a more flexible business model, to become a leaner and more nimble organization, and to better meet the mailing and shipping needs of the American people for decades to come.”
Joseph Corbett
Chief Financial Officer and Executive Vice President
