Can Amazon Help The US Post Office Clear Up The Problems That Led To A $5 Billion Loss This Year?

  @gmorcroftg.morcroft@ibtimes.com on November 15 2013 12:09 PM

Just days after announcing an unprecedented agreement to partner with Internet retailing giant Amazon.com (NASDAQ:AMZN) to deliver customer orders on Sunday, the U.S. Postal Service reported that it slashed its 2013 fiscal year loss to $5 billion, from $16 billion a year earlier.

Amazon.com struck a deal on Sunday with the cash-strapped  Postal Service to deliver its packages on Sundays, effective immediately in the New York and Los Angeles metropolitan areas, in a move that would provide both parties an edge over their rivals during the peak holiday-shopping season.

The Amazon move came after the Post Office failed to win congressional approval to stop delivering mail on Saturdays as a cash-saving measure. But compared to mail delivery on Saturdays, package delivery on Sundays is more cost-effective.

The service posted the loss despite raising revenue from shipping more packages and standard mail, but first class mail, the backbone of the business, continues to fall, the government said.

"This marks the seventh consecutive year in which the Postal Service incurred a net loss, highlighting the need to continue to capitalize on growth opportunities, reduce costs, and enact comprehensive legislation to provide a long-term solution to the agency’s financial challenges," the service said in a press release

Here are some highlights from the report: 

Total mail volume was 158.4 billion pieces compared to 159.8 billion pieces a year ago. Package and Standard Mail volumes grew by 210 million pieces and 1.4 billion pieces, respectively, while the most profitable product, First-Class Mail, fell by 2.8 billion pieces, led by single-piece volume decline.

Operating revenue, excluding a $1.3 billion non-cash change in an accounting estimate, was $66 billion compared to $65.2 billion in 2012. While this is the first growth in revenue since 2008, declining First-Class Mail revenue continues to hurt financial results.

Operating expenses were $72.1 billion in 2013 compared to $81 billion in 2012. Approximately $8.2 billion of this decrease resulted from higher, legally mandated retiree health care benefit expenses and higher non-cash workers’ compensation expense in 2012. Expenses in 2013 include a required $5.6 billion contribution to retiree health care benefits that the Postal Service was unable to make. Continued lack of legislation will likely force the Postal Service to continue to default on these payments. Savings from plant consolidations, restructuring hours at post offices, reductions in delivery units, and workforce optimization resulted in approximately $1 billion of savings in 2013.

The net loss for the year, which was decreased by a $1.3 billion non-cash change in estimate, was $5 billion. However, this change in accounting estimate has no impact on the Postal Service’s receipt of cash, or cash on hand, nor does it lessen the severity of its current liquidity situation. For more information regarding the non-cash adjustment, refer to the Form 10-K, available online.

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