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USPS 2002 Loss Is Lower Than Projected

The U.S. Postal Service expects a net loss of $1.2 billion for the 2002 fiscal year that ended Sept. 6, the agency said at its monthly Board of Governors meeting Friday, lower than the projected $1.35 billion.

Final numbers are expected at the end of the month.

The USPS also said that it projects $600 million in net income for the 2003 fiscal year on revenue of $70.4 billion, $3.9 billion higher than this year. Mail volume is projected to rise 1.9 percent to 205.7 billion pieces. The 2003 budget includes $1 billion in cost reductions.

The plan also projects the first reduction in debt since 1997.

“Cash flow from operations will be $2.8 billion based mainly on net income and depreciation expenses,” said Richard Strasser, chief financial officer for the USPS. “With capital cash outlays at $2 billion, we will be able to reduce our outstanding debt by $800 million.”

But Strasser said that the $600 million net income in FY 2003 “is less than a 1 percent margin … If the economic recovery stalls, significant negative impact to postal finances could result, especially if there is no recovery in advertising mail volume.”

The board also approved two experimental filings with the Postal Rate Commission. One is a new co-palletization classification for Periodicals, and the other supports a negotiated service agreement between the USPS and Capital One Services Inc., its fourth-largest customer and the largest single producer of First-Class mail. NSAs are pricing initiatives designed by the USPS and, under current law, one of the few ways the agency can pursue pricing flexibility.

Details of the filings will be made public once the cases are filed, which is scheduled for mid-September.

In other action, the board approved the Automated Package Processing System, which will replace more than 100 of today's mechanized Small Parcel and Bundle Sorting machines at 70 postal facilities nationwide. The APPS is expected to boost productivity by reducing manual handling.

The board also approved the fiscal 2002 borrowing resolution. Developed last year, it projected a borrowing need of $1.6 billion. Through cost controls and reduced capital spending, however, the borrowing requirement for FY 2002 was reduced to $700 million.

At the meeting, board chairman Robert F. Rider welcomed former postmaster general Albert V. Casey to the board of governors. President Bush put Casey on the board through a recess appointment last month. Following Senate confirmation, Casey will serve the rest of a nine-year term that expires Dec. 8, 2009.

The Direct Marketing Association last week applauded the board's two experimental proposals and said it was pleased that the agency's cost-containment efforts have taken hold. But the DMA said in a statement that it “is only cautiously optimistic about the postal service's projection of a $600 million surplus for its next fiscal year.”

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