The U.S. Postal Service said its loss widened to a record $8.5 billion in the year ended Sept. 30, exceeding its forecast, as the volume of mail declined.
Revenue fell 1.5 percent to $67.1 billion for the year and mail volume dropped 3.5 percent, according to a presentation to the service’s board today at a meeting in Washington. The loss in the previous fiscal year was $3.8 billion, the service said.
The Postal Service, which forecast a $7 billion loss, said almost two thirds of the deficit, or $5.5 billion, covered health-benefit costs for future retirees. An additional $2.5 billion covered adjustments to workers’ compensation liabilities for interest rate changes. The loss for 2011 will be $6.4 billion, Chief Financial Officer Joseph Corbett said today.
“We expect to go through the year with sufficient cash to continue operations,” Corbett said. “However at the end of the year, we don’t expect to have sufficient cash to pay all of our obligations, primarily the $5.5 billion retiree health payment due at the end of the year.”
The Postal Service has asked Congress for permission to close post offices and eliminate Saturday delivery to stem losses as more people use the Internet to replace letters, print publications and pay bills.
The Postal Service, which cut work hours by 11 percent, to 225 million hours, at its mail-processing centers, has a $3 billion annual borrowing limit and a $15 billion debt limit. The agency said in a 2009 regulatory filing that those limits would “become insufficient without additional structural changes.”
The agency borrows from the U.S. Treasury and is forbidden by law from borrowing from commercial banks or companies. “There is no more money for us to borrow,” said James C. Miller III, chairman of the board’s audit and finance committee.
Over the past two years, the Postal Service has cut more than $9 billion in costs, primarily by eliminating about 105,000 full-time equivalent positions, Corbett told the board.
“We were able to make all of our payments this year including our pre-funding of retiree health,” Corbett said. “We reduced costs more than we thought we could this year.”
The agency reduced employee work hours 6 percent from 2009 to 2010 and plans to cut 4.1 percent next year, according to Corbett’s presentation.
First-class mail volume fell 6.9 percent in the fourth quarter, the smallest drop for the period since the 2007 fiscal year. Standard mail volume, including advertising mail, rose 8.9 percent, the biggest quarterly gain since at least 2006. First class mail is more profitable than standard mail, Corbett said.
For 2011, Corbett said mail volume may rise 1.1 percent.
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