NEW YORK (TheStreet) — The U.S. Postal Service reported a loss of $329 million in the first quarter, wider than a year-earlier loss of $297 million, as costly health care payments for future retirees weighed on profits.
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The Postal Service is required by law to prefund its future retiree health care benefits. Without including these charges and adjustments to its workers’ compensation liabilities, USPS said it would have earned $226 million in the quarter.
Despite its efforts to reduce costs, the Postal Service projects that it will inevitably have a cash shortfall and will have reached its borrowing limit by Sept. 30, the end of its 2011 fiscal year. It urged Congress to change its prefunded health care laws.
“The Postal Service continues to seek changes in the law to enable a more flexible and sustainable business model,” Postmaster General and CEO Patrick Donahoe said. “We are eager to work with Congress and the Administration to resolve these issues prior to the end of the fiscal year.”
Mailing services revenue dropped 3.3% to $15.3 billion despite a 1.5% increase in overall volume to 45.9 billion pieces.
“The increase in revenue from standard mail was not sufficient to offset the loss of revenue from the reduced volume of first class mail,” the Postal Service said in a statement.
USPS said operating revenue dropped 2.6% to $17.9 billion from $18.4 billion in the same period a year earlier
The service cut total work hours by 2.1% in the quarter in an effort to reduce expenses. The number of USPS employees is down 15.1% from Dec. 31, 2007.
“The Postal Service is aggressively pursuing a plan to reduce total expenses, which include organizational redesign initiatives,” the agency said. “The Postal Service projects $2 billion in cost savings in fiscal year 2011, including a reduction of some 40 million work hours across the organization.”
–Written by Theresa McCabe in Boston.