Postal Service Reports $740 Million Loss for Third Quarter, Bringing Year-to-date Losses to $3.9 Billion
The U.S. Postal Service ended the third quarter of its 2013 fiscal year, April 1 to June 30, with a net loss of $740 million, increasing the year-to-date net loss to $3.9 billion. Aggressive actions to contain costs and increase efficiency, along with a decrease in workers' compensation expense due to fluctuations of discount rates, prevented the financial loss from being greater. However, the Postal Service will not return to profitability and long-term financial stability without passage of comprehensive legislation to fix a business model that does not allow it to adapt to changes in the marketplace.
"We are encouraged that comprehensive postal reform legislation has started making its way through the legislative process in both the House and Senate," said Postmaster General and CEO Patrick Donahoe. "We continue to evaluate the current legislation based on whether it enables $20 billion in savings by 2017."
Donahoe added that the Postal Service Five-Year Business Plan does provide at least $20 billion in savings and creates a financially sustainable business model to support America's residential and business mailing and shipping needs well into the future.
Contributing to the third quarter loss were continued expenses for the legally-mandated prefunding of retiree health benefits, the continuing decline of First-Class Mail volume and the continuation of six-days-per-week of mail delivery. The quarter's operating expenses were reduced by $918 million due to a change in the discount rate for workers' compensation. Future cash payments for workers' compensation must be converted to present-day dollars, or discounted, by applying the current rates at which the liability could theoretically be settled.
Operating revenue in the third quarter increased 3.6 percent compared to the same period last year and revenue for the first nine months of the fiscal year was up 1.3 percent. The increases were fueled by strong growth in Postal Service shipping and Package Services supplemented by moderate increases in Standard Mail revenue. However, these increases were offset by declines in First-Class Mail revenue, which continues its decline that began in 2008.
"We need to make fundamental changes to the way we currently do business, changes that are part of our Five-Year Business Plan," said chief financial officer Joe Corbett. "However, without comprehensive postal reform legislation signed into law, our hands are tied and we expect multi-billion dollar annual losses to continue."
Corbett said current projections indicate that the Postal Service will continue to have low levels of liquidity for the remainder of this fiscal year, will be unable to make the required $5.6 billion retiree health benefits prefunding payment due by Sept. 30, and will continue to have no ability to borrow additional funds at that date. This cash position will continue to worsen in October when the Postal Service is required to make its annual payment of approximately $1.4 billion to the Department of Labor for workers' compensation.
For more information, visit www.usps.com.