Foundering USPS Absorbs Punishing Q2 Loss
WASHINGTON, DC—The U.S. Postal Service (USPS) ended its second quarter (Jan. 1–March 31, 2012) 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 USPS believes have grown and improved efficiency, the Postal Service feels the losses will continue until key provisions of its 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.
The losses are due, the USPS maintains, primarily to legislative mandates such as the pre-funding of retiree health benefits and prohibiting management from making needed operational and human resource changes required to address the issues under current laws and contracts. Also contributing to the continuing losses, it says, are the declining First-Class Mail and Standard Mail volumes.
Other details of the second quarter results compared to the same period last year include:
• Total mail volume of 39.5 billion pieces, a decrease of 1.7 billion pieces, or 4.1 percent;
• Operating revenue of $16.2 billion, a decrease of $7 million or less than 1 percent;
• Operating expenses of $19.4 billion, an increase of $938 million, or 5.1 percent, driven by expenses related to the legally mandated prefunding of retiree health benefits payments scheduled to be paid in the final quarter of this year;
• Transportation expenses of $1.7 billion, an increase of $126 million, or 8.1 percent, driven by rising fuel costs.
• Other expenses of $2.3 billion, a decrease of $133 million, or 5.6 percent.
These results bring the year-to-date net loss to $6.5 billion, compared to $2.6 billion for the same period last year.
“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.”