US Postal Service 2011 Annual Report Download - page 34

2011 Report on Form 10-K United States Postal Service - 32 -
and amortization of $156 million, or 6.3%, as compared to
2010. Rent and utilities was $10 million, or 0.6% lower in
2011 than 2010.
In 2010, other operating expenses increased by $18
million, or 0.2%, from the comparable 2009 amount. The
increase was driven by depreciation and amortization
expense, which increased by $199 million, or 8.8%, as a
result of a reassessment of the useful lives of certain
properties and the reclassification of certain leases from
operating to capital leases. In addition, vehicle
maintenance service expense, which includes the carrier
fleet fuel costs, increased by $60 million, or 7.9%,
primarily as a result of higher fuel costs in 2010 compared
to 2009. Other expenses decreased by $36 million, or
3.8% in 2010 to $911 million as compared to 2009.
PRODUCTIVITY
Despite the many financial and operational challenges, in
2011 we were able to significantly increase operating
efficiency.
Operating efficiency, as measured by Total Factor
Productivity (TFP) increased 1.3% in 2011 as compared
to 2010. This marks the tenth year of positive TFP growth
since 2000 with cumulative TFP growth of 21.6% since
1972. Productivity gains are a result of effective workforce
management, efficient use of material (supplies, services,
and transportation), and maximizing the return on capital
investments (mainly automation projects).
Work hours were reduced by 34 million, or 2.9%, in 2011
despite an increase of approximately 636,500 delivery
points during the year. Non-personnel expenses
increased by 6.6% while mail volume declined by 1.7%.
Work hour savings included approximately 9.4 million
work hours in mail processing operations in 2011. This
was accomplished primarily through processing plant
consolidations and continued advancements in
automation, mainly flats sequencing.
In 2010, the Postal Service consolidated carrier routes,
eliminating over 1,100 routes, with an additional 6,461
routes eliminated in 2011. The net result of these actions
helped drive a 9.2 million work hour reduction in city and
rural delivery operations in 2011 and the disposal of over
1,700 postal-owned vehicles.
Declines in customer mail volume coupled with the
increased electronic access to our services provided by
alternate access channels such as Click-n-Ship, PC
Postage, and Automated Postal Centers continue to
reduce the requirement for customer service work
hours. These efforts have improved customer access and
convenience and made possible a 10.4 million work hour
reduction in customer service operations.
Overall spending reductions in 2011 and 2010 also
included decreases in capital expenditures of 15% and
24%, respectively.
The following graph shows the cumulative TFP trend from
1972 through 2011.
LIQUIDITY AND CAPITAL RESOURCES
SUMMARY OF PROJECTED CASH
SHORTFALL
The Postal Service continues to suffer from a severe lack
of liquidity caused by over $25 billion of net losses over
the past five years including $21 billion of expenses for
prefunding retiree health benefits. We ended 2011 with
$1.5 billion of total cash and $2.0 billion of remaining
borrowing capacity on our $15 billion debt facility (see
Note 4- Debt in the Notes to the Financial Statements).
Our current financial projections indicate that we will not
be able to make the required $5.5 billion prefunding
payment for retiree health benefits currently due by
November 18, 2011, or the required $5.6 billion
prefunding payment for retiree health benefits that is due
by September 30, 2012.
Additionally, even without the Postal Service making the
$11.1 billion of scheduled PSRHBF payments in 2012,
current projections indicate that we will have a
precariously low level of cash and liquidity at September
30, 2012. As a result, we would likely not be able to meet
all of our financial obligations by October 2012 when we
are required to make a payment of approximately $1.3
billion to the Department of Labor (DOL) for workers’
compensation.