Legislative Changes Are Still Urgently Needed to Restore Financial Health.
Resolving Prefunding of Retiree Health Benefits is Not Enough to Curtail Financial Losses.
Bright Spot: 9% Revenue Growth in Shipping & Package.
WASHINGTON, DC. – On August 9, 2012 The Postal Service announced that ended its third fiscal quarter (April 1 – June 30) with a net loss of $5.2 billion, compared to a net loss of $3.1 billion for the same period last year. Contributing significantly to the quarter’s $5.2 billion loss was $3.1 billion of expense for the legislatively mandated prefunding of retiree health benefits. These expenses, along with the continued decline of First-Class Mail volume, more than offset the quarter’s 9 percent growth in revenue from Shipping Services and package delivery. Despite continued success in generating new package delivery revenue, improving efficiency and reducing costs, large losses are expected to continue until legislative changes are made in line with the Postal Service Business Plan to return to financial stability.
The Postal Business Plan includes measures that require urgent legislative changes, including:
- A refund of $11 billion of pension plan overfunding needed to pay down debt and invest for future growth
- Transition to a five-day schedule of weekly mail delivery
- The elimination of prefunding for retiree health benefits with the introduction of a Postal health insurance program, independent of the current federal programs.
“We remain confident that Congress will do its part to help put the Postal Service on a path to financial stability. We will continue to take actions under our control to improve operational efficiency and generate revenue by offering new products and services to meet our customers changing needs,” said Postmaster General and CEO Patrick Donahoe. “Moving forward with our business plan will make the Postal Service financially self-sustaining, provide a platform for future growth and preserve our mission to provide secure, reliable and affordable universal delivery services for generations to come.”
The Postal Service was forced to default on a $5.5 billion prefunding payment for retiree health benefits onAug. 1, due to insufficient cash resources. Absent legislative changes, the Postal Service will also default on a second similar payment of $5.6 billion due by Sept. 30, 2012. Current projections show very low levels of cash, and no remaining borrowing capacity, at the end of the current fiscal year and throughOctober 2012. In response, the Postal Service will continue to prioritize payments to employees and suppliers to ensure completion of its mission to provide high-quality mail service to the American people.
“The Postal Service has successfully improved productivity while removing nearly $14 billion from its annual cost base during the past five fiscal years,” said Acting Chief Financial Officer Stephen Masse. “These operational actions to improve efficiency will continue in the future, but we urgently need the legislative changes noted above to restore our short-term liquidity and provide a stable base for the future. In the meantime, we will prioritize our cash resources to ensure that we deliver on our mission.”
Results of Operations
New products and successful marketing campaigns continue to fuel growth in the Postal Service package business. Shipping Services and package revenue totaled $3.3 billion in the third quarter, a 9 percent increase, on a volume increase of 43 million pieces, or 5.2 percent. Additionally, Every Door Direct Mail continues to grow as local businesses capitalize on the product’s targeted advertising impact and ease of use.
Other details of the third quarter results compared to the same period last year include:
- Total mail volume of 38.5 billion pieces, a decrease of 1.4 billion pieces, or 3.6 percent. This reflects the continued decline of First-Class Mail (volume decline of 4.4%) due to the on-going shift of communications and transactions to electronic alternatives;
- Operating revenue of $15.6 billion, a decrease of $153 million, or less than 1 percent;
- Operating expenses of $20.8 billion increased by $1.9 billion, or 10.2 percent. This increase was driven by $3.1 billion of expenses for mandated prefunding of retiree health benefits, which unfortunately cannot be paid in cash.
The third quarter results bring the year to date net loss to $11.6 billion, compared to $5.7 billion for the same period last year. Contributing significantly to the year to date loss was the $9.2 billion expense accrual for the prefunding of retiree health benefits, which unfortunately cannot be paid.
Complete financial results are available in the Form 10-Q, available after 10 a.m. ET today at http://about.usps.com/who-we-are/financials/welcome.htm
About The U.S. Postal Service:
A self-supporting government enterprise, the U.S. Postal Service is the only delivery service that reaches every address in the nation — 151 million residences, businesses and Post Office™ Boxes. The Postal Service™ receives no tax dollars for operating expenses, and relies on the sale of postage, products and services to fund its operations. With 32,000 retail locations and the most frequently visited website in the federal government, usps.com®, the Postal Service has annual revenue of more than $65 billion and delivers nearly 40 percent of the world’s mail. If it were a private sector company, the U.S. Postal Service would rank 35th in the 2011 Fortune 500. In 2011, Oxford Strategic Consulting ranked the U.S. Postal Service number one in overall service performance of the posts in the top 20 wealthiest nations in the world. Black Enterprise and Hispanic Business magazines ranked the Postal Service as a leader in workforce diversity. The Postal Service has been named the Most Trusted Government Agency for six years and the sixth Most Trusted Business in the nation by the Ponemon Institute. For more information visit Web Site: http://www.usps.com or Follow the Postal Service on www.twitter.com/USPS and at www.facebook.com/USPS
On Thursday, May 17, 2012 The U.S. Postal Service announced plans to move ahead with a modified plan to consolidate its network of 461 mail processing locations in phases. The first phase of activities will result in up to 140 consolidations through February of 2013. Unless the circumstances of the Postal Service change in the interim, a second and final phase of 89 consolidations is currently scheduled to begin in February of 2014.
“We revised our network consolidation timeline to provide a longer planning schedule for our customers, employees and other stakeholders, and to enable a more methodical and measured implementation,” said Patrick R. Donahoe, Postmaster General and Chief Executive Officer of the Postal Service.
“We simply do not have the mail volumes to justify the size and capacity of our current mail processing network. To return to long-term profitability and financial stability while keeping mail affordable, we must match our network to the anticipated workload,” said Donahoe. “Our current plan meets our cost reduction goals, ensures seamless and excellent service performance throughout the implementation period, and provides adequate time for our customers to adapt to our network changes.”
The Postal Service will begin consolidating operations this summer – which mostly involve transferring mail-processing operations from smaller to larger facilities. Due to the volume of high-priority mail predicted for the election and holiday mailing seasons, no consolidating activities will be conducted from September through December of 2012. Approximately 5,000 employees will begin receiving notifications next week related to consolidating and other efficiency-enhancing activities to be conducted this summer.
“We will be conducting consolidation activities this summer at only 48 locations,” said Megan Brennan, chief operating officer of the Postal Service. “As a result, nearly all consolidating activities in 2012 will occur in August and then will resume again the early part of next year.”
These consolidating activities will reduce the size of the Postal Service workforce by approximately 13,000 employees and, when fully implemented, will generate cost reductions of approximately $1.2 billionannually.
“The Postal Service will be communicating with our customers and employees about these changes in great detail,” said Megan Brennan. “We will work closely with our customers to ensure there are no surprises as we move forward.”
The Postal Service also announced it is working with its unions for an employee retirement incentive, although no final decision has been made. ”The Postal Service has reduced the size of its workforce by 244,000 career employees since 2000 without resorting to layoffs,” said Brennan. “We are a responsible employer and we will work with our employees to ensure a smooth transition to a much leaner organization.”
The Postal Service also announced that it would soon issue a new regulation to modify its existing Service Standard for overnight delivery. The Postal Service said a Final Rule would soon be published in the Federal Register that would initially shrink the geographic reach of overnight service to local areas and enable consolidation activity in 2013. The new rule would further tighten the overnight delivery standard in 2014 and enable further consolidation of the Postal Service mail processing network absent any change to the circumstances of the Postal Service.
“We are essentially preserving overnight delivery for First-Class Mail through the end of 2013, although we are collapsing the distance that we can provide overnight service to the distribution area served by a particular mail processing facility,” said Megan Brennan. Approximately 80 percent of First-Class Mail will still be delivered overnight.
The Postal Service stated its expectation to pursue additional consolidation activities for an additional 89 mail processing locations beginning in 2014 unless its circumstances change. These consolidations would be based on long-term service standards that would significantly revise mail-entry times for customers seeking overnight delivery.
“Given that the Postal Service is currently projecting a $14 billion net loss in FY2012, and continuing annual losses of this magnitude, we simply cannot justify maintaining our current mail processing footprint,” said Donahoe.
When fully implemented in late 2014, the Postal Service expects its network consolidations to generate approximately $2.1 billion in annual cost reductions, and lead to total workforce reduction up to 28,000 employees.
The list of 140 mail processing locations to be consolidated by February of 2013 is available after 3 p.m. ET today at http://about.usps.com/news/electronic-press-kits/our-future-network/welcome.htm.
About The U.S. Postal Service: A self-supporting government enterprise, the U.S. Postal Service is the only delivery service that reaches every address in the nation, 151 million residences, businesses and Post Office Boxes. The Postal Service receives no tax dollars for operating expenses, and relies on the sale of postage, products and services to fund its operations. With 32,000 retail locations and the most frequently visited website in the federal government, usps.com, the Postal Service has annual revenue of more than $65 billion and delivers nearly 40 percent of the world’s mail. If it were a private sector company, the U.S. Postal Service would rank 35th in the 2011 Fortune 500. In 2011, the U.S. Postal Service was ranked number one in overall service performance, out of the top 20 wealthiest nations in the world, Oxford Strategic Consulting. Black Enterprise and Hispanic Business magazines ranked the Postal Service as a leader in workforce diversity. The Postal Service has been named the Most Trusted Government Agency for six years and the sixth Most Trusted Business in the nation by the Ponemon Institute. For more information visit http://www.usps.com
Follow the Postal Service on Twitter @USPS_PR and at facebook.com/usps
Sources: U.S. Postal Service, prnewswire.com
Photo credit to: The U.S. Postal Service
On Friday, February 18, 2011 The U.S. Postal Service announced that The Postal Regulatory Commission has notified the U.S. Postal Service that price changes announced Jan. 13 satisfy the requirements of the law and will take effect April 17.
The first U.S. Postal Service mailing services price change in two years will have minimal impact on retail customers who will continue to pay only 44 cents for a stamp.
Price changes of note for retail customers include the following:
- First-Class Mail letters (1 oz.) remain unchanged at 44 cents,
- First-Class Mail additional ounces increase to 20 cents,
- Postcards will cost 29 cents,
- Letters to Canada or Mexico (1 oz.) increase to 80 cents, and
- Letters to other international destinations will remain unchanged at 98 cents.
“Postal Service products and services offer a great value to the American public,” said Postmaster General Patrick R. Donahoe. “For a very affordable price, you can send letters, bill payments, packages, and other mail across town or across the nation.”
The 1.7 percent average increase is at or below the rate of inflation as measured by the Consumer Price Index — although actual percentage price increases for various products and services vary.
Prices will also change for other mailing services, including Standard Mail, Periodicals, Package Services and Extra Services. Larger volume business mailers will see price increases in a variety of categories. Detailed pricing information is available online atwww.usps.com/prices.
The Postal Service receives no tax dollars for operating expenses, and relies on the sale of postage, products and services to fund its operations.
About The U.S. Postal Service:
The United States Postal Service (USPS) is an independent agency of the United States government, established in 1971 as an “independent establishment of the executive branch”, responsible for providing postal service in the United States. It is one of the few government agencies explicitly authorized by the United States Constitution. While officially known as the “U.S. Postal Service,” despite the passage of nearly 40 years the public still colloquially refer to it as the “Post Office” or “U.S. Mail” For more information about the U.S. Postal Service visit http://www.usps.com
Photo: Courtesy of The U.S. Postal Service
Editor’s Note: It is very ridiculous for the U.S. Postal Service to increase again their fees. You know that they were encouraging people to use other alternatives to mail letters and packages and now they can not afford to pay big salaries to themselves. It is their fault by providing poor customer service and making customers to use other mailing services. Now they are increasing everything and they even cutting or closing offices. Readers what do you think about it? Speak up and leave your comments.