The Postal Service ended its second quarter (Jan. 1 – March
31) with a net loss of $3.2 billion, compared to a net loss of $2.2 billion for the
same period last year. Despite ongoing management actions that have grown
and improved efficiency, the losses will continue until key provisions of the
Postal Service five-year business plan move forward.
Without the impact of the non-controllable costs related to
mandated retiree health benefit pre-funding payments and accounting for
non-cash adjustments for worker’s compensation, the non-GAAP loss for the
quarter was $486 million compared to $469 million for the same period last year
as shown in Table I (page 2).
The losses are due primarily to legislative mandates such as
the unique mandated pre-funding of retiree health benefits, and prohibiting
management from making the needed operational and human resource changes
required to address these issues under current laws and contracts. Also
contributing to the continuing losses are the declining First-Class Mail and
Standard Mail volumes. The Congress must act soon to pass legislation providing
the Postal Service with the flexibility and speed needed to make the changes
necessary for long-term financial viability.
“We are aggressively pursuing new revenue streams and
reducing costs in areas within our control,” said Postmaster General and CEO
Patrick Donahoe. ”These actions are not enough to return the Postal Service to
profitability. The legislative changes outlined in our business plan will
enable us to reduce annual operational expenses by approximately $22.5 billion
by 2016 and set the stage for long-term financial stability so we can continue
to provide secure, reliable, and economical universal service to the American public.”
Postal Service actions to increase revenue continue to pay
off in the shipping and package service lines of its business. Revenues related to shipping
and packages totaled $3.5 billion, an increase of over 13 percent compared to
the same period in the previous year, as volume increased 74 million pieces, or
9 percent.
Despite the growth and success of Postal Service shipping
and package products, it was not enough to overcome the decline in Mailing
Services. Revenue from Mailing Services, excluding Market Dominant packages,
totaled $12.8 billion, a 3 percent decrease compared to the same period last
year, on a volume decrease of 1.8 billion pieces. The revenue reduction
reflects the continued decline in First-Class Mail as consumers continue to
turn to electronic alternatives.
The second quarter also saw a decline in Standard Mail,
attributable to a decline in direct mail advertising spending across a number
of sectors as sales prospecting slowed in certain sectors, advertisers used
more selective targeting methods and competition from electronic advertising
media increased.
“We expect to retain the ability to continue high quality
delivery services to all of our customers, and continue to take all actions
necessary to make sure that our employees and suppliers will be paid. Without
legislative change, we will not have sufficient cash to pay the $11.1 billion
required for retiree health prefunding and may be forced to default on other
payments due to the federal government,” said Chief Financial Officer Joe
Corbett.
The Postal Service’s comprehensive business plan addresses
these financial challenges through revenue growth programs, process
improvements, eliminating excess mail processing capacity and other actions to
address underutilized assets as well as improve operational efficiencies. It
includes targeted legislative changes such as giving the Postal Service the
ability to transition to a five-day delivery schedule, restructuring the
retiree health pre-funding, enabling the Postal Service to sponsor its own
health care program that is independent of other federal health insurance
programs, and returning nearly $11 billion dollars to the Postal Service from
its prior overfunding of the Federal Employees’ Retirement System (FERS) which would
provide vital cash flow to ease the current liquidity crisis.
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