Canada Post and Profits: 2004–2011

A closer look at Canada Post’s Annual reports on profits from 2004–2011.

Canada Post, the media, the Canadian Union of Postal Workers, and parliamentarians of every political affiliation, have emphasized Canada Post had a 16 year run of profits until the stated loss in 2011. Is this correct?

The results from 1995 to 2003 are hard to assess and cannot be easily reconciled, but from 2004 onwards the reports are more conclusive. Therefore the more reasonable question is, what do the records show since 2004?

The official records state profits, but the unofficial record is mixed between both small profits and losses.

One of the problems is separating the Canada Post segment for results. The Canada Post Annual Report highlights the financial outcome of the Canada Post Group of Companies which includes profits from Purolator Courier. Purolator typically has been a significant contributor to the Group’s bottom-line.

The numbers for the Canada Post segment only are usually found later on in the reports.

Profits for Canada Post segment only according to the Annual Reports:

  • 2004  $197 million

  • 2005  $250 million
  • 2006  $99 million(1)
  • 2007  $78 million(2)
  • 2008  $66 million (3)

  • 2009  $319 million(4)
  • 2010  $233 million(5)
  • 2011 -$327 million (6)

However, these numbers are controversial. The years 2007, 2009, 2010, and 2011 may be interpreted differently because of one time losses and gains.(7)

Many investment groups and organizations do not consider one time gains or losses as the true financial picture of any business. These are often ignored in their analysis because they believe it does not reflect whether a business is succeeding or not in its core mission. Canada Post has been forthright throughout the last seven years in specifying these one time gains or losses. If these one time gain or losses are eliminated, the financial picture looks different.

  • 2004  $197 million
  • 2005  $250 million

  • 2006  $99 million
  • 2007  -($22) million
  • 2008  -($142) million
  • 2009  $18 million
  • 2010 -($76) million
  • 2011 -($177) million

In 2007 and 2008 totals Canada Post opted to under-fund the pension plan. According to the Canada Post Pension Plan 2010 Annual Report, Canada Post typically contributes $269-million dollars every year to the pension plan.(8) This number is their 60% yearly contribution to the plan and the employees give the remaining 40%. However in the years 2007 and 2008 Canada Post took a pension holiday.(9) If Canada Post had not taken a pension holiday, then these years would have been in the negative.

In 2009 Canada Post segment recorded a profit of $319 million. However, $271 million came from a non-planned source.

“Excluding the $271-million unplanned employee future benefits expense reduction, income before income taxes would have been $108 million, or $9 million lower than plan. The Canada Post segment income before income taxes would have been $48 million, or $30 million better than the plan.”(10)

Canada Post even clearly explains that 2009 was not a true expression of their financial health, but rather that the Report reflected positive results because of the change to an accounting procedure on future benefits:

“The segment’s 2009 profit was largely due to a reduction in employee future benefit costs. The reduction was primarily non-cash and largely related to an increase in the discount rate used to value the future benefit obligation for accounting purposes. It is not a true reflection of our financial health.”(11)

If the one-time payment by the City of Winnipeg for the old Canada Post processing facility for $30 million is taken out of the revenue(12) then the 2009 profit would read: $18 million before income taxes.

In 2010 the Canada Post segment recorded a profit of $233 million dollars. However, there was a change in future income tax forecasts. Canada Post has determined in the future profits will be declining and therefore less tax will be due. Therefore $192 million in future income tax payments will not be required. This was a non-cash accounting credit added to Canada Post’s profit for 2010.

“In 2010, management released the valuation allowance related to accrued other retirement and post-employment benefit liabilities as the realization of the future tax asset was determined to be more likely than not based on the Corporation’s profitability. The recognition of this asset in 2010 resulted in a $192 million decrease in future tax expense.”(13)

A “$117-million unplanned employee future benefits expense reduction in the Canada Post segment.” was also accounted for in the $233 million profit.(14)

Marc A. Courtois, Chairman of the Board of Directors for the Canada Post Group of Companies, clearly stated that the 2010 Annual Report does not reflect the present financial realities Canada Post faces: “. . . our results were positively affected by a lower employee future benefit expense and a non-cash, deferred income tax benefit.”(15)

The media release issued by Canada Post shortly after the public availability of the 2010 Annual Report, Canada Post Pre-Tax Earnings Declined Sharply in 2010 reinforces that Canada Post experienced negative returns in 2010. It does so without referring to any number figure. The negative return of -$76 million stated here for 2010 is consistent with this comment.

In 2011 Canada Post was impacted by two factors. The first one was the Supreme Court’s decision on the Pay-Equity-Fight. The Supreme Court reinstated that Canada Post is to pay $150 million in compensation.(16) Canada Post is hopeful through further negotiations with the Public Service Alliance to reduce this amount and does not give a number figure in the Canada Post 2011 Annual Report. However, they do acknowledge setting aside money for this but do not say how much.(17) This amount seems already set and Canada Post has to inevitably concede. Therefore this one-time fee of $150 million was deducted from the $327-million total.

A payment of $219 million was not counted. This was paid in 2011 by Canada Post as a special pension contribution.(18) Due to market volatility and Government legislated Solvency and Going-Concern Deficit rules, Canada Post is required to pay above its regular contributions to the Pension Plan. It will take a number of years to accomplish this. Therefore it is not considered a one-time expense.

If the special contribution was defined as a one-time expense, then Canada Post would have earned a $42-million profit for 2011.

According to Canada Post’s figures in the Annual Reports, profits have been made in every year from 2004–2010 but, if the pension contribution delay, valuations of benefit obligations did not exist along with future non-cash tax realities, three years would have been in the negative and two years would have been substantially less profitable before 2011. Last of all 2011 wouldn’t appear as negative.

(1) 2004-2006 figures from Canada Post 2006 Annual Report Pg. 58
(2) 2007 Annual Report. Pg. 66
(3) 2008 Annual Report. Pg. 72
(4) 2009 Annual Report. Pg. 78
(5) 2010 Annual Report. Pg. 78
(6) 2011 Canada Post Annual Report. Pg. 5
(7) My Thanks to Mark Grossman for originally documenting and pointing this out.
(8) Canada Post Pension Plan 2010 Annual Report, Front inside page
(10) 2009 Annual Report Pg. 34
(11) 2009 Annual Report Pg. 4
(13) 2010 Annual Report. Pg. 87
(14) 2010 Annual Report. Pg. 34
(15) 2010 Annual Report. Pg. 17
(16)Pay-Equity-Fight as found in the National Post (online), November 18, 2011.
(17) Canada Post Annual Report 2011. Pg. 34
(18) Canada Post Annual Report 2011. Pg. 50

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