USPS Form 8-K filing with PRC regarding Final Rule on Service Standards
Item 2.05. Costs Associated with Exit or Disposal Activities.
On May 18, 2012, the Postal Service submitted a final rule (the “Final Rule”) to the Federal Register revising the Postal Service’s service standards for several classes of mail, as part of its plan to move ahead with a phased plan to consolidate its network of 461 mail processing locations. The plan to consolidate mail processing locations is part of an ongoing effort to reduce costs and improve efficiencies in the face of declining mail volumes.
The Final Rule announces two phases for implementation of the service standard changes, with the initial phase shrinking the geographic reach of overnight service to local areas beginning on July 1, 2012 and enabling plant consolidation activity commencing in the Summer of 20 12. Phase one includes up to 140 plant consolidations to be completed between Summer 2012 and February 2013. Consolidation activities will occur in 48 facilities during the summer of2012, but most consolidation activity will be suspended from September through December of 20 12. Consolidation activity under the first phase of the implementation plan will resume in January 2013, and will be completed by the end of February 2013.
The second phase of the service standard changes announced in the Final Rule, which will be implemented on February 1, 2014 unless the circumstances of the Postal Service change, would further limit the overnight delivery standard and would enable consolidation activities for an additional 89 mail processing locations in 2014.
The Postal Service expects that its network consolidations will result in significant annual cost savings and will lead to workforce reductions of up to 28,000 employees.
The Postal Service expects that the network consolidations will result in various costs, including costs associated with workforce reduction, lease termination and contract modification. As of the date of this release, many of these costs are uncertain, depending, among other things, upon the number of employees who accept incentives to retire or resign and the results of various negotiations. The Postal Service is continuing to evaluate the potential range of these costs and their impact on the financial statements.