USPS Loses $15.9 Billion in FY 12

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The U.S.Postal Service ended the 2012 fiscal year (Oct. 1, 2011 – Sept. 30, 2012) witha record net loss of $15.9 billion, compared to a net loss of $5.1 billion forthe same period last year. The loss included expenses of $11.1 billion relatedto two payments to prefund retiree health benefits. The Postal Service, whichis uniquely required by law to prefund these obligations, was forced to defaulton these payments.
Resolvingthe prefunding requirement, which made up 70 percent of the net loss, andproviding more commercial flexibility to allow the Postal Service to manage itsbusiness, are among legislative changes needed for USPS to fully implement itsbusiness plan to return to financial stability.
“It’scritical that Congress do its part and pass comprehensive legislation before theyadjourn this year to move the Postal Service further down the path towardfinancial health,” said Postmaster General and CEO Patrick Donahoe. “Wecontinue to do our part to grow revenue and reduce expenses by making ouroperations more efficient and by providing our customers with new and expandedservices to meet their mailing and shipping needs. Additionally, through theexpanded use of technology, including better use of digital tools and mobiletechnology, we are providing business mailers with new opportunities to connectwith customers in a more individualized way.”
Besidesresolving the accelerated schedule to prefund retiree health benefits andallowing the Postal Service the flexibility to sponsor its own healthcareprogram for employees and retirees, the Postal Service Business Plan includesthese 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 thatwould allow for quicker pricing and product decision Instructing arbitrators that, during labor negotiations, they must take intoaccount the financial condition of the Postal Service when rendering decisions Resolving the overfunding of the Postal Service’s obligation to the FederalEmployees’ Retirement System (FERS).
Resultsof Operations
ThePostal Service continues to grow its package services business. Revenue fromPostal Service package business increased by $926 million, or 8.7 percent, on avolume increase of 244 million pieces compared to the same period last year.Higher consumer spending, higher e-commerce retail sales plus increasedmarketing efforts drove much of the growth in this segment of the PostalService business during the last year.
Theencouraging growth trend in the package business is not, by itself, enough tooffset the declines in First-Class Mail and Standard Mail. First-Class Mailrevenue, which peaked in 2007, dropped $1,163 million or 3.9 percent whileStandard 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.
Otherdetails of the yearly results compared to the same period last year include:
 Totalmail 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 expenseassociated with prefunding retiree health benefits) compared to $70.6 billionthe year before.
The$15.9 billion loss was driven by $13.4 billion in expenses that were outsidethe control of the Postal Service in the short-term. These expenses include the$11.1 billion retiree health benefits prefunding expenses and the expensesrelated to the long-term portion of workers’ compensation. When these expensesare deducted the net loss would have been $2.5 billion. The Postal Service hasbeen successful in reducing controllable expenses as mail volume and revenueshave declined.
“Ourproductivity grew to a record level as we captured cost savings and improvedproductivity for the thirteenth straight quarter,” said Chief FinancialOfficer, Joseph Corbett. This year’s improvement is largely attributable to thereduction in work hours, which decreased by 27 million, or 2.3 percent, in 2012from the previous year. Total work hours continue to decrease despite increasesin the number of delivery points, which rose by approximately 1.3 million overthe last two years.
“Thesework hour reductions reflect our efforts to improve productivity and to respondto the decline in mail volume,” said Corbett. “Since 2000, we have reduced workhours by a cumulative total of 504 million work hours, equivalent to 286,000employees, or $21 billion in expense savings each year.”
At theend of 2012 fiscal year the Postal Service reached its statutory debt ceilingof $15 billion for the first time. “Our liquidity continues to be a majorconcern and underscores the need for passage of legislation that gives thePostal Service a more flexible business model to improve its cash flow,” saidCorbett. “Despitereaching the debt limit, the Postal Service mail operations and deliverycontinue as usual and employees and suppliers continue to be paid on-time.”
ThePostal Service’s revenue over the first six weeks of fiscal 2013 is benefitingfrom the start of the holiday mailing season and political and election mailfrom the just completed general election season.
Completefinancial results are in the Form 10-K at http://about.usps.com/who-we-are/financials/welcome.htm.