The United States Postal Service (USPS) announced that it finished the quarter ended December 31, 2012 with a net loss of $1.3 billion, after reporting a loss of $15.9 billion for the fiscal year ended September 30, 2012.
This earnings release follows a recent announcement made by USPS, when it said that it plans to implement a new delivery schedule in August, which would eliminate Saturday mail delivery and which USPS said would result in roughly $2 billion in annual savings. This plan also includes employee reassignments and attrition.
For the fiscal first quarter, USPS said that total mail volume was down 1 per cent, with First Class volume down 4.5 per cent and Standard Mail volume up 3.6 per cent. At $17.7 billion, operating revenues were down $17 million, or less than one per cent, and operating expenses, at $18.9 billion, were down 9.8 per cent.
First Class Mail, traditionally USPS’ most profitable offering, suffered a 3.1 per cent revenue decline. USPS added that the 4.5 per cent volume decline of 854 million pieces was due in large part to an ongoing diversion from paper to electronic communications, including e-mailing business documents and online purchasing orders, as well as other electronic mailing processes. On a more positive note, quarterly Shipping and Package volume were up 4.0 per cent. These services are comprised of Priority Mail, Express Mail, Parcel Select and Parcel Return services and account for 2.2 per cent of total USPS volume and 17.8 per cent of its revenues. Shipping and Package revenues rose 4.7 per cent, spurred by the growth in online shopping and USPS’ marketing efforts designed to showcase the value of these services.
Postmaster General and CEO Patrick Donahoe said “By moving forward with the accelerated cost-cutting actions directed by our Board of Governors, we will continue to become more efficient and come closer to achieving long-term financial stability. We urgently need Congress to do its part and pass legislation that allows us to better manage our costs and gives us the commercial flexibility needed to operate more like a business does.
“The objective of USPS’ five-year plan is to reduce annual costs by at least $20 billion by 2015. And along with its goal of $20 billion in annual reductions by 2015, USPS would like to see annual savings rise to $22 billion by 2016. Of the $20 billion in targeted savings within the next five years, the USPS said about $10 billion requires legislative action.
Representing $11.1 billion, or nearly 70 per cent of USPS’ fiscal 2012 loss, are mandated prefunding retiree health benefits which are part of a Congressionally-mandated 10-year payment schedule at an average of about $5.5 billion per year to pay into a fund to pay future retiree health benefit premium, among others. Last summer, USPS announced it could not make $5.5 billion in mandated prefunding health retiree benefits, due August 1, as well as a $5.6 billion payment that was due on September 30. USPS has stated it has been unable to fund this obligation from operations and has depleted all of its retained earnings, and drawn down its $15 billion borrowing authority from the U.S. Treasury. And even with the requested increase, USPS would not be able to meet this annual obligation at the present time or in subsequent years, according to the Postal Regulatory Commission.