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USPS loses $3.3B in FY2012's first quarter

Feb. 9, 2012 - 06:00AM   |  
By SEAN REILLY   |   Comments
Postmaster General Patrick Donahoe
Postmaster General Patrick Donahoe (Mike Morones / Staff file photo)

The U.S. Postal Service posted a $3.3 billion net loss from October through December as a steep falloff in first-class and standard mail revenue undercut gains in its holiday package business.

Despite a $200 million operating profit for the quarter, the first in fiscal 2012, the mail carrier's financial performance was also hurt by mounting obligations for retiree health care. By law, the Postal Service is supposed to pay billions of dollars each year to cover benefits for future retirees. USPS leaders have been pressing Congress for relief on that score, so far unsuccessfully.

"We urgently need comprehensive legislative reform," Postmaster General Patrick Donahoe told the mail carrier's Board of Governors at a Thursday meeting. While the Postal Service's financial problems are "eminently solvable," he said, "they are only solvable with quick and decisive action by us and by the Congress."

For the quarter, the Postal Service reported revenues of $17.7 billion and expenses of $17.5 billion, both down slightly from the same quarter last year. Despite the holiday business, however, mail volume continued to drop in comparison with the same period in fiscal 2011. Total mail pieces fell more than 6 percent, from 46.5 billion to 43.7 billion. Revenue from shipping services and packages rose more than 8 percent to $3.2 billion, but combined receipts from standard and first-class mail fell 4 percent, from $13.4 billion to $12.8 billion.

But at least on paper, the biggest hit to the bottom line came from the retiree health care commitments. Under a 2006 law, the Postal Service is supposed to pay about $5.5 billion each September into an account to cover future retiree benefits.

But after USPS officials warned they would have to default on the payment due in September 2011, lawmakers deferred it until August. Meanwhile a similar payment remains due this September. As a result, the Postal Service had to book a $3.1 billion expense for retiree health care for the first quarter, more than double the $1.4 billion shown for the same period in fiscal 2011.

Legislation awaiting action by the full Senate would substantially reduce the Postal Service's future bill for retiree health care. But Senate leaders have delayed the start of debate in part because of lawmakers' concerns that other provisions of the bill would allow the mail carrier to eliminate thousands of jobs by closing processing plants and post offices.

Although current projections show the Postal Service will be unable to fully cover a $1.3 billion workers' compensation payment due in October, "we'll weather that storm," Chief Financial Officer Joseph Corbett said. He declined to elaborate after the meeting. Last year, USPS officials had also been doubtful of making the annual payment but were ultimately able to cover it.

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