The U.S.
Postal Service ended the 2012 fiscal year (Oct. 1, 2011 – Sept. 30, 2012) with
a record net loss of $15.9 billion, compared to a net loss of $5.1 billion for
the same period last year. The loss included expenses of $11.1 billion related
to two payments to prefund retiree health benefits. The Postal Service, which
is uniquely required by law to prefund these obligations, was forced to default
on these payments.
Resolving
the prefunding requirement, which made up 70 percent of the net loss, and
providing more commercial flexibility to allow the Postal Service to manage its
business, are among legislative changes needed for USPS to fully implement its
business plan to return to financial stability.
“It’s
critical that Congress do its part and pass comprehensive legislation before they
adjourn this year to move the Postal Service further down the path toward
financial health,” said Postmaster General and CEO Patrick Donahoe. “We
continue to do our part to grow revenue and reduce expenses by making our
operations more efficient and by providing our customers with new and expanded
services to meet their mailing and shipping needs. Additionally, through the
expanded use of technology, including better use of digital tools and mobile
technology, we are providing business mailers with new opportunities to connect
with customers in a more individualized way.”
Besides
resolving the accelerated schedule to prefund retiree health benefits and
allowing the Postal Service the flexibility to sponsor its own healthcare
program for employees and retirees, the Postal Service Business Plan includes
these other actions that require legislative action:
Allowing the Postal Service to determine delivery frequency
Allowing the Postal Service to offer non-postal products and services
Developing a more streamlined governance model for the Postal Service that
would allow for quicker pricing and product decision
Instructing arbitrators that, during labor negotiations, they must take into
account the financial condition of the Postal Service when rendering decisions
Resolving the overfunding of the Postal Service’s obligation to the Federal
Employees’ Retirement System (FERS).
Results
of Operations
The
Postal Service continues to grow its package services business. Revenue from
Postal Service package business increased by $926 million, or 8.7 percent, on a
volume increase of 244 million pieces compared to the same period last year.
Higher consumer spending, higher e-commerce retail sales plus increased
marketing efforts drove much of the growth in this segment of the Postal
Service business during the last year.
The
encouraging growth trend in the package business is not, by itself, enough to
offset the declines in First-Class Mail and Standard Mail. First-Class Mail
revenue, which peaked in 2007, dropped $1,163 million or 3.9 percent while
Standard Mail decreased $747 million or 4.3 percent compared to last year.
However, the rate of decline in the First-Class category did slow in 2012.
Other
details of the yearly results compared to the same period last year include:
Total
mail volume of 159.9 billion pieces compared to 168.3 billion pieces a year ago
Operating revenue of $65.2 billion compared to $65.7 billion in 2011
Operating expenses of $81.0 billion (including the $11.1 billion expense
associated with prefunding retiree health benefits) compared to $70.6 billion
the year before.
The
$15.9 billion loss was driven by $13.4 billion in expenses that were outside
the control of the Postal Service in the short-term. These expenses include the
$11.1 billion retiree health benefits prefunding expenses and the expenses
related to the long-term portion of workers’ compensation. When these expenses
are deducted the net loss would have been $2.5 billion. The Postal Service has
been successful in reducing controllable expenses as mail volume and revenues
have declined.
“Our
productivity grew to a record level as we captured cost savings and improved
productivity for the thirteenth straight quarter,” said Chief Financial
Officer, Joseph Corbett. This year’s improvement is largely attributable to the
reduction in work hours, which decreased by 27 million, or 2.3 percent, in 2012
from the previous year. Total work hours continue to decrease despite increases
in the number of delivery points, which rose by approximately 1.3 million over
the last two years.
“These
work hour reductions reflect our efforts to improve productivity and to respond
to the decline in mail volume,” said Corbett. “Since 2000, we have reduced work
hours by a cumulative total of 504 million work hours, equivalent to 286,000
employees, or $21 billion in expense savings each year.”
At the
end of 2012 fiscal year the Postal Service reached its statutory debt ceiling
of $15 billion for the first time. “Our liquidity continues to be a major
concern and underscores the need for passage of legislation that gives the
Postal Service a more flexible business model to improve its cash flow,” said
Corbett.
“Despite
reaching the debt limit, the Postal Service mail operations and delivery
continue as usual and employees and suppliers continue to be paid on-time.”
The
Postal Service’s revenue over the first six weeks of fiscal 2013 is benefiting
from the start of the holiday mailing season and political and election mail
from the just completed general election season.
Complete
financial results are in the Form 10-K at http://about.usps.com/who-we-are/financials/welcome.htm.
