USPS Reports Surplus, Predicts Standard to Pass First Class in 2005

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First-Class mail volume is expected to fall below Standard mail in 2005 and become the second-largest volume product for the first time, the U.S. Postal Service reported yesterday.

The projection came as part of the postal service's end-of-year financial report following a Board of Governors meeting. The USPS revealed it achieved a surplus for the second year in a row but sounded another alarm about continuing threats to the viability of the mail posed by falling First-Class volumes.

Total mail volume during fiscal 2004, which ended Sept. 30, grew 4 billion to 206 billion. However, most of the growth was in Standard, as First Class declined by 1.1 billion pieces, falling for the third straight year.

First-Class mail contributes more to the postal service's institutional costs than Standard mail, and if the trend continues the USPS would be all right, said Richard J. Strasser, chief financial officer for the USPS. However, Standard volumes can't be counted on to grow forever because they are sensitive to price changes and the business cycle.

For fiscal 2004, the USPS had net income of $3.1 billion on $69 billion in revenue. The USPS succeeded in its plan to cut $1.4 billion from expenses and wound up reducing costs by another $900 million over the planned cuts.

Total work hours by USPS employees declined by 21 million from the previous fiscal year, Strasser said. The USPS now has 707,000 career employees, its lowest level since 1984.

Cash flow from operations went to paying down the postal service's debt, now $1.8 billion from a high of $11 billion. In the past two years, the USPS has used savings from the Civil Service Retirement System Funding Reform Act of 2003 to pay down debt, but this year savings will go toward holding off a rate increase until calendar year 2006.

"We're virtually going to break even [in 2005]," Strasser said. "I think we'll do even better than our plan."

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