In August the US Postal Service announced third quarter results for the period ending 6-30-2016.  Despite an operating revenue increase of $1.2 billion over the same quarter in 2015, there was a net loss of $1.6 billion.

Shipping and package volumes increased by $645 million or 18.1%.  However, delivering a package involves considerable additional processing expense as compared to delivering First Class Mail.  Those expenses include labor hours and transportation.  According to the USPS’s Form 10-Q submitted to the Postal Regulatory Commission, “For 2015, Shipping and Packages revenues would have needed to increase by 260% in order to make up for the impact of the contribution provided by the volume losses of First-Class Mail for that year . . .”  The USPS has an edge in last mile package deliveries.  However, there is growing competition for that last mile in urban areas, and the USPS OIG’s office has expressed concern that eventually the USPS will be largely left with the unprofitable rural last mile deliveries.

 

Several factors which contributed to the quarter’s $1.6 billion loss include 1) the expiration of the exigent surcharge, 2) the continued decrease in First-Class Mail and 3) the inability to comply with the retiree health benefit prefunding requirements.  A decline in First-Class Mail revenue of $379 million was due in part to the expiration of the exigent surcharge, and in part to a ¾% decline in First Class Mail volume.  The Retiree Health Benefit prefunding expense accounted for $1.45 billion of the loss.  Postal Reform Legislation, proposed in both the House and the Senate, addresses pricing and the Retiree Health Benefit prefunding expense.   Passage of Postal Reform Legislation will assist the USPS in regaining a solid financial base.

 

For the nine months ended June 30, 2016, Operating Revenue increased $2.6 billion or 4.9%.  Operating Expenses for the nine months increased $3.0 billion or 5.5% resulting in a net loss of $2.8 billion for the same period last year.  This is an increase in net loss of $491 million.

 

Despite continuing to post losses, USPS  Chief Financial Officer,  Joe Corbett says the US Postal Service “has sufficient cash to run its business, pay employees and suppliers, and continue meeting its service obligations.”

 

USPS Postal Service Reports Fiscal Year 2016 Third Quarter Results

http://about.usps.com/news/national-releases/2016/pr16_064.htm

 

 

Linn’s Stamp:  USPS revenues from package mail continue to grow, along with costs.

 

http://link.usps.com/video/dollars-and-change-3/  USPS CFO Joe Corbett video

 

https://www.uspsoig.gov/document/evolving-logistics-landscape-and-us-postal-service

USPS OIG   The Evolving Logistics Landscape and The U.S. Postal Service