U.S. Postal Service Sets New Record with Nearly $16 Billion Loss

Andrew Klips |

U.S. Postal Service Sets New Record with Nearly $16 Billion LossThe beleaguered United States Postal Service is going to have to take the price of stamps up (way, way up) if Congress can’t give it some relief.  On Thursday, the mail delivery service posted a whopping $15.9 billion loss for the fiscal year ended September 30, 2012, the biggest yearly loss in the history of the agency.  During the same period last year, USPS lost $5.1 billion.

The loss this year was greater than $15 billion USPS was expecting.  For 2013, USPS is forecasting a loss of $7.6 billion. The massive shortfall reflects a drop in mail volume and an $11.1 billion default earlier this year in retiree health benefit payments that was necessary to avoid filing bankruptcy.  Single-piece first-class mail items, the most profitable type for USPS, decreased by 8 percent during the latest fiscal year.

Unless Congress steps in to help, the USPS will be cashless on October 15, 2013 after making a required worker’s compensation payment to the Labor Department, according to Joe Corbett, Chief Financial Officer at USPS.  At its current pace, the company also will default on its retiree health payments in 2013 for the third straight year.

Postmaster General Patrick Donahoe said that it is “critical” that Congress passes comprehensive legislation by the end of 2013 to allow USPS to undergo some restructuring.  For the first time ever, USPS maxed-out its borrowing limit of $15 billion in fiscal 2012. Presently, USPS only receives a small amount of funds from the government and it owes billions to the Treasury Department that it has no way of repaying.

Will the U.S. Postal Service go out of business? Donahoe says, no way. “We are simply too important to the economy and the flow of commerce,” according to the Postmaster General, but the leader acknowledges that the agency cannot continue to sustain such large losses. The USPS would like to see some policy changes so they can reduce annual payments for future retiree health care and close some post offices and processing facilities. They also want to eliminate delivering mail on Saturdays, another request that has not yet been able to get approval from Capitol Hill.

USPS costs one-quarter of a billion dollars each day to operate.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
TIER TIER REIT Inc. 16.94 0.09 0.53 147,257

Comments

Emerging Growth

New Age Farm Inc.

New Age Farm Inc is engaged in the development of the agriculture based business in Langley, British Columbia.

Private Markets

Cross Campus

With over 500 members and operating 80,000 square feet by summer 2016, Cross Campus is one of the country’s top ten shared, collaborative office or "coworking" operators in the US.…

Wealthfront

Wealthfront is an automated investment service that serves as an alternative to traditional financial advisory services. The company manages a diversified, continually rebalanced portfolio of index funds on their clients’…