US Postal Service 2012 Annual Report Download - page 49

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2012 Report on Form 10-K United States Postal Service- 48 -
gains are a result of effective workforce management, efficient use of material (supplies, services, and transportation),
and maximizing the return on capital investments (mainly automation projects).
The following graph shows the cumulative TFP trend from 1972 through 2012.
LIQUIDITY AND CAPITAL RESOURCES
SUMMARY OF PROJECTED CASH SHORTFALL
We continue to suffer from a severe lack of liquidity. The largest contributing factor has been the requirement of P.L. 109-
435 to prefund our retiree health benefit obligations, a requirement not shared by other federal agencies or private sector
businesses, coupled with a decline in mail volume since the 2006 peak. The prefunding requirement is in addition to
paying the employers’ share of the insurance premiums for our retirees, which cost $2.6 billion in 2012. In the past six
years, since the enactment of the congressionally mandated prefunding, we have incurred $41 billion of net losses,
including $32 billion of expenses for prefunding to the PSRHBF. While we were not able to pay the $11.1 billion of
prefunding obligations in 2012 - this amount has been expensed and is reflected as a liability in our balance sheet. We
have paid $21 billion of cash to the PSRHBF for prefunding over the past six years. During that time, our debt has
increased by nearly $13 billion, reaching the $15 billion borrowing limit at the end of 2012.
During 2012, we were forced to default on the required $5.5 billion prefunding payment to the PSRHBF for retiree health
benefits which was due by August 1, 2012, and the $5.6 billion payment which was due by September 30, 2012. The
statutory requirement establishing the prefunding payment schedule (P.L. 109-435) contains no provisions addressing a
payment default. Prior to the default, all significant stakeholders, including the Administration and Congress were notified.
As of November 15, 2012, we have suffered no penalties or damages as a result of our inability to make these payments.
We ended 2012 with $2.3 billion of total cash and no remaining borrowing capacity on our $15 billion debt facility (See
Note 4, Debt, in the Notes to the Financial Statements). The trend of losses continued this year, as we had a net loss of
$15.9 billion for the year, including expenses accrued for the two legally-mandated prefunding payments for retiree health
benefits totaling $11.1 billion.
Our liquidity position worsened in October of 2012, when in addition to paying our normal operating expenses, we made
our annual payment of approximately $1.4 billion to reimburse the Department of Labor (DOL) for workers’ compensation
expenses. Although our liquidity position is projected to improve slightly for a few months during the fall mailing season,
current projections indicate that we will once again have an extremely low level of liquidity in the second half of 2013.
Average Annual Growth 1.1% [2000 - 2012]
0
5
10
15
20
25
1972 1980 1990 2000 2012
Average Annual Growth 0.3% [1972 - 1999]
22.5
TFP Cumulative Trend 1972-2012