WASHINGTON, D.C. - The U.S. Postal Service today reported continued progress in productivity, cutting $900 million in costs during fiscal year 2001. The agency processed and delivered the mail to some 1.7 million new addresses with fewer employees and 23 million fewer work hours than the previous year. Against this backdrop, the Postal Service finished the fiscal year with a $1.7 billion loss. The financial loss was caused by the lack of mail volume growth due to the economic slowdown and the subsequent September 11 terrorist attacks. It was further precipitated by lost revenue due to the delay in implementing new postal prices due to a cumbersome process, explained Chief Financial Officer and Executive Vice President Richard J. Strasser, Jr. Despite the loss, postal officials say the financials show a successful year with the Postal Service maintaining record service performance and high levels of customer satisfaction in delivering 207.5 billion pieces of mail last year. "One of this year's success stories is the progress the Postal Service has made in productivity," says Strasser, referring to the agency's ability to process and deliver the mail with fewer resources. This year's productivity savings continue the trend of tremendous cost savings. Last year, productivity increased by 2.5 percent, representing $1.6 billion in cost savings. In the past two years, the Postal Service has reduced the number of career employees by 22,500, while in September Postmaster General John E. Potter announced an organizational restructuring that would bring added focus to the Postal Service's core business. It includes reducing administrative costs, reorganizing the marketing and sales organization, and reviewing e-commerce activities that are not tied to the mail. The financial statements were independently audited by Ernst & Young, L.L.P., the Board of Governors independent auditors, and were certified with an unqualified opinion. Highlights include: * Operating revenues of $65.8 billion; * Operating Expenses of $65.6 billion; * Income from operations of $194 million; * Net interest on deferred retirement and borrowings of $1.9 billion, resulting in * Net loss of $1.7 billion. In the final three weeks of the fiscal year, following the events of September 11, the Postal Service has been impacted further by a mail volume decline of approximately 800 million pieces. This decline eliminated the possibility of mail volume growth for the year. The Postal Service finished the year with a decline of mail volume of approximately 420 million pieces, or 2/10th of 1 percent. This is the first drop in mail volume since 1991. As background, the Postal Service, which is mandated by law to break even over time, planned in October 2000, a 2001 fiscal year budget that reflected a net loss of $480 million. This figure was derived by anticipating slower revenue growth and further inflationary expense increases. To counter declining revenue, postal management took a number of immediate actions, including freezing the capital program for facilities, and undertaking an aggressive cost reduction program for staff and expenses. Fiscal Year 2003 Appropriation Request The board approved an appropriation request to Congress of $988 million, which includes $928 million for reimbursement for the full remaining amount due the Postal Service under the Revenue Foregone Act of 1993. This payment is to clear amounts due for services delivered between 1991 and 1998. In 1993, Congress set up a 42-year installment repayment plan as part of omnibus budget reconciliation efforts. Facing the harsh economic realities of the times, the board felt it was appropriate to ask for the full amount due. Some $29 million is also included in the request, representing an annual installment from Congress to cover costs for nonprofit categories placed on the 42-year payback schedule. The remaining $31 million was requested to cover the cost of providing Free Matter for the Blind and Overseas voting materials for FY 2003. The Postal Service did not request reimbursement to cover costs incurred in providing universal service, although such a request is allowable under the law. The Postal Service has not received any operating subsidies from taxpayers since 1982. In addition, the Board deferred requesting any further funds for mail sanitization, detection and security pending final determination of the technology to be used and the outcome of appropriations this year. It was indicated that the Postal Service was working closely with the Office of Science and Technology and the Office of Homeland Security and would make a Supplemental Appropriation Request for FY 2003 to cover these costs.