Sour Q1 for USPS; Could Default on Obligations
WASHINGTON, DC—The U.S. Postal Service (USPS) ended the first quarter of this fiscal year (Oct. 1 to Dec. 31, 2010) with a net loss of $329 million, compared to a net loss of $297 million for the same period in fiscal year 2010. Excluding the cost of prefunding future retiree health care benefits and noncash adjustments to the workers’ compensation liability, the USPS would have had a net income of $226 million for the first quarter.
Despite making what it contends are significant cost reductions and efforts to grow revenue, its current financial projections indicate that the Postal Service will have a cash shortfall and will have reached its statutory borrowing limit by the end of the fiscal year. Absent changes in applicable laws, the USPS says it will be forced to default on some of its financial obligations to the federal government on Sept. 30.
“The Postal Service continues to seek changes in the law to enable a more flexible and sustainable business model,” said Postmaster General and CEO Patrick Donahoe. “We are eager to work with Congress and the Administration to resolve these issues prior to the end of the fiscal year.”
According to the USPS, economic indicators suggest that the worst of the precipitous volume decline during the recession is over. Total mail volume increased by 707 million pieces or 1.5 percent for the first quarter of 2011, compared to the first quarter of 2010. Total mail volume remains well below the 2006 peak.
Mailing services revenue of $15.3 billion decreased $520 million, or 3.3 percent, in the first quarter of 2011, compared to the same period a year ago. Mailing services volume reached 45.9 billion, but revenues declined despite the increase in overall volume. The increase in revenue from Standard mail was not sufficient to offset the loss of revenue from the reduced volume of First Class mail.