USPS Continues String of Quarterly Losses

$1.9 billion net loss in second fiscal quarter makes 10 out of last 11.

By Bill Mickey
Wednesday, May 6, 2009

The U.S. Postal Service announced today that it ended its second fiscal quarter with a net loss of $1.9 billion. The recession and continued volume decline were cited as primary reasons, making this quarter 10 for 11 in net losses.

Year-to-date net loss is $2.3 billion, a staggering increase from $35 million in the same period 2008.

The announcement also noted that the USPS will have a cash shortfall of more than $1.5 billion at the end of its fiscal year.

"The economic recession has been tough on the mailing industry, and we have seen an unprecedented decline in mail volumes and revenue that continued to accelerate during the second quarter," said Postmaster General John Potter at a Board of Governor's meeting today.

Indeed, in its 10-Q filing, the USPS reported that mail volume dropped by 13 billion pieces year-to-date compared to the same period in 2008. That translates to a revenue loss of $3.3 billion, or an 8.3 percent decrease.

And it doesn't look much better for the next year or two. Potter's increasingly dire warnings to Congress are borne out in the 10-Q filing: The net loss for 2009 is forecasted at $6 billion, more than double the 2008 net loss. [Click here for Potter's statement to Congress in March.]

In 2010, the USPS predicts volume will fall another 10 billion pieces resulting in a similar net loss to 2009—despite some aggressive cost-cutting measures such as executive salary freezes, work-hour and headcount reductions, and facility consolidation.

The 10-Q notes that, if granted, the six-day delivery adjustment will not create any savings for 2009, but could ease pressure in 2010.

Other obligations that must be paid by September this year include a $5.4 billion payment into the Postal Service Retiree Benefit Fund and $1.1 billion to the Department of Labor for workers' comp. "We do not expect to generate sufficient cash flow from operations in the second half of 2009 to enable us to fully fund these obligations," says the USPS in its 10-Q.

Not much comfort can come from its revolving credit either, which has an annual, statute-liimited cap of $3 billion. The USPS says it plans to max out that $3 billion debt infusion, landing it at the $1.5 billion shortfall for 2009.

Second-Quarter 2009 USPS Mail Revenue
First-Clast Mail: 54%
Standard Mail: 24%
Shipping Services: 11%
Other Mailing Services: 11%

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