USPS Delivers $3.5 Billion Loss, Cash Crunch Looms

The U.S. Postal Service said its net loss for the April-June quarter rose 46 percent to $3.5 billion and the agency warned it may run out of money next year unless Congress reduces its pension costs.

“Given current trends, we will not be able to pay all 2011 obligations,” said Joseph R. Corbett, USPS chief financial officer.

Despite more than $10 billion in cost cuts in the last three years, “it is clear that a liquidity problem is looming and must be addressed through fundamental changes requiring legislation and changes to contracts,” Corbett said.

USPS news from JOC:
USPS Names Vogel to Lead Shipping Service

The postal service said its net loss for its fiscal third quarter rose to $3.5 billion from $2.4 billion a year earlier as mail volume continued to decline and benefit costs increased.

Mail volume, which has fallen 20 percent since 2007 amid growing competition from e-mail and other electronic communications, fell 1.7 percent in the quarter to 40.9 billion pieces.

Operating revenue declined $294 million to $16 billion while operating expenses rose $789 million, or 4.2 percent, to $19.5 billion.

The postal service blamed the increased operating costs mostly on an $870 million increase in workers’ compensation liability expense resulting from a non-cash fair value adjustment and higher retiree health benefits expenses.

The agency is required to set aside $5.4 billion to $5.8 billion annually to pre-fund retiree health benefits under the Postal Accountability and Enhancement Act of 2006.

Although cash flow appears to be sufficient for 2010 operations, it is uncertain whether cash flow, together with maximum available borrowing of $3 billion, will be enough to fund the congressionally mandated $5.5 billion payment to the Retiree Health Benefit Fund on Sept. 30 and retain sufficient liquidity into 2011, Corbett said.

The Postal Service has incurred net losses in 14 of the last 16 fiscal quarters. The fiscal 2010 year-to-date net loss is $5.4 billion, compared to a loss in the same period last year of $4.7 billion.

-- Contact Joseph Bonney at jbonney@joc.com.