US Postal Service 2013 Annual Report Download - page 46

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2013 Report on Form 10-K United States Postal Service 44
In 2013, we reduced work hours by 12 million, or 1.1%. These reductions are discussed in detail in Compensation and
Benefits.
Operating efficiency, as measured by Total Factor Productivity (TFP), increased 1.9% in 2013 compared to 2012. This
marks the fourth year of positive TFP growth since 2009, with cumulative TFP growth of 24.4% since 1972. Productivity
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). Work hours in 2013 decreased by 12
million, or 1.1%, despite an increase of approximately 774,000 delivery points during 2013. Mail volume declined 0.9%. In
2012, work hours were reduced by 27 million, or 2.3%, with an increase of approximately 655,000 delivery points, while
overall mail volume declined 5.0%.
The following graph shows the cumulative TFP trend from 1972 through 2013.
TFP Cumulative Trend 1972-2013
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY CONCERNS
We continue to suffer from a severe lack of liquidity. We held unrestricted cash of $2.3 billion and $2.1 billion as of
September 30, 2013 and 2012. These cash balances represent approximately 9 days and 8 days, respectively, of
average daily expenses. We had no remaining borrowing capacity on our $15 billion debt facility as of September 30,
2013 or 2012 (see Note 4 - Debt, for additional information). On October 15, 2013, when we had to make our annual
legally mandated workers’ compensation payment to DOL, we had a cash balance on hand of approximately 6 days of our
average daily expenses. This low level of available cash forced us to default on the $5.6 billion legally-mandated
prefunding of retiree health benefits due by September 30, 2013. Further, this level of cash could be insufficient to
support operations in the event of another significant downturn in mail volume.
We have suffered 8 consecutive quarters of net losses and have had net losses in 18 of the last 20 quarters. The net loss
of $4,977 million for the year ended September 30, 2013 included $5.6 billion of expense accrued for the legally-
mandated prefunding payment for retiree health benefits, on which we were forced to default. The loss also included $1.3
billion of non-cash revenue recognized for a change in accounting estimate and a non-cash reduction in workers’
compensation expense of $1.7 billion resulting from an increase in interest rates and other non-cash adjustments to the
long-term liability. These non-cash items, which reduced the net loss, did not impact liquidity.
In addition to the requirement to prefund $5.6 billion of retiree health benefits for 2013, we are required and continue to
pay the employer’s share of the health insurance premiums for our retirees. This cost was $2.9 billion in 2013 and is
projected to increase to $3.1 billion for 2014. In the past seven fiscal years, since the enactment of the Congressionally-
mandated prefunding, we have incurred $46 billion of net losses, including $38 billion of expenses for prefunding retiree
health benefits. Through 2013, we have paid $21 billion of cash into the PSRHBF for prefunding, plus an additional $17.1