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EcommerceBytes-NewsFlash, Number 2737 - February 10, 2012 - ISSN 1539-5065    4 of 5

USPS Posts $3.3 Billion Net Loss for Q1

By Kenneth Corbin
EcommerceBytes.com
February 10, 2012




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The red ink continues to flow at the U.S. Postal Service, which on Thursday reported a net loss of $3.3 billion for the first quarter of the 2012 fiscal year.

Over that period, which ran from Oct. 1 through Dec. 31, the busiest of the year for the Postal Service, revenues from First-Class and Standard mail together fell $650 million from the same quarter a year ago.

In a conference call with reporters, USPS Chief Financial Officer Joe Corbett said that the Postal Service projects that the drop in Standard mail will "abate somewhat," but that First-Class, the organization's most profitable product, is in a "relentless decline ... as electronic migration continues to change the business we're in."

Revenue from First-Class mail dropped 4.1 percent from the year-earlier period, and has declined nearly 15 percent since 2006, when mailing volume hit its peak. First-Class volume has tumbled 25 percent since that time.

The Postal Service processed 43.7 billion pieces of mail in the most recent quarter, a 6 percent decline from the previous year.

The Postal Service's shipping business was a bright spot on the balance sheet. Buoyed by the holiday season and stronger-than-expected online sales, shipping revenues increased 7 percent, or $179 million, over the first quarter of fiscal 2011 to $2.8 billion.

"This season was a little different. Last year was relatively strong, but this year was one of the strongest seasons we've seen in terms of package revenue," Corbett said. "We really have positioned ourselves well in the package business."

Shipping Services revenue accounts for roughly 17 percent of the Postal Service's overall intake, but even generous projections for growth in that segment will not be enough to offset the losses in First-Class mail, which Corbett said "continue to dwarf the growth in our package business."

That unsustainable trend has spurred the Postal Service to develop a broad plan to trim $20 billion from its annual costs by 2015. Those initiatives include a dramatic reduction in the Postal Service's workforce and network of retail and processing facilities, as well as a shift toward promoting services and products that are better positioned to thrive as consumers' mailing habits evolve.

But Postal Service officials are adamant that they can't execute the turnaround without help. The agency has been pressing members of Congress to enact legislation that would free it up to make a number of changes to its cost and operating structures, including the substantial volume of labor costs the Postal Service pays on top of employee salaries.

"We need to change our benefit programs wherever possible. For example, we want to take over our own health insurance," Corbett said. The Postal Service is seeking to integrate Medicare into its coverage and renegotiate its benefits plan with employees. "We believe, based on the opinions we have of experts and our own analysis, that we could save $7 billion a year by taking over our health program."

Additionally, the Postal Service is asking Congress for relief from its obligation to prefund employees' retirement benefits, and is seeking a refund of an estimated $11 billion in overpayments the organization has made to the Federal Employees Retirement System.

Other items on the Postal Service's legislative agenda include a congressional authorization to scale down to five-day weekly delivery, a move it says is necessary to respond to the continued decline in overall mail volume.

"We also need legislation to give us the authority to adjust delivery frequency," Corbett said. "Our competitors deliver based on dynamic demands in the marketplace and we need to be able to do so as well."

Various legislative proposals have emerged in both chambers of Congress, and the Postal Service agreed to postpone additional post office closures in the hopes that a bill can win broad support. But time may be running short, as Corbett warned of a mounting liquidity crisis that could leave the Postal Service unable to make the payments for prefunded benefits that are due later this year.

"The bottom line remains the bottom line," he said. "These losses cannot continue."

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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