US Postal Service 2010 Annual Report Download - page 24

22 2010 Annual Report United States Postal Service
Joseph Corbett
Chief Financial Offi cer and
Executive Vice President
Message from the Chief
Financial Offi cer and
Executive Vice President
As fi scal year 2010 comes to a close, we
can look back on a year marked both
by signifi cant fi nancial challenges and by
impressive achievements in setting a founda-
tion for a strong, enduring and fi nancially viable
Postal Service. To the extent that adversity
reveals character, the Postal Service demon-
strated great focus on service and commitment
to the customer, and took signifi cant steps to
adapt to America’s evolving mailing needs.
To be sure, the Postal Service is still contend-
ing 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 expe-
rienced a 20 percent loss of mail volume over
the past four years. For an organization struc-
tured with a high percentage of fi xed costs and
numerous business model constraints, the road
back to profi tability 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 fl exible 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 undertak-
ing within our current model to get onto solid
fi nancial ground. Our plan also recommended
changes in the law to loosen signifi cant busi-
ness model constraints that hinder cost control,
product and service offerings, speed to market,
and fl exibility in leveraging the full value of our
workforce.
By year’s end, excluding contractual cost in-
creases, we had reduced more than $3 billion in
costs across the organization, including work-
hour reductions of 75 million hours. This reduc-
tion 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 generat-
ing revenue, for example, through pricing incen-
tives for large-volume mailers, seasonal sales,
widespread promotion of our fl at-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 fi scal year. Of this
amount, $5.5 billion was due to an annual, leg-
islatively mandated obligation to prefund retiree
health benefi ts.
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 identify-
ing additional opportunities for savings through
increased fi nancial controls and streamlined
processes.
This past year also marked our initial report-
ing on internal controls under section 404 of
the Sarbanes-Oxley Act of 2002 (SOX), meet-
ing the mandated SOX compliance deadline
for fi scal year 2010. As one of the largest
organizations in the United States — whether
measured by revenue, number of facilities,
number of employees or signifi cance to the
overall economy — the Postal Service imple-