USPS still looking for Congressional reforms as losses mount up
The US Postal Service is still in a “deep financial hole” despite achieving record volumes during its peak season. Growth in shipping services and Standard Mail, combined with a price increase, saw revenue up 4.3% year-on-year in the three months up to the end of December 2014.
Labour costs and the transport requirements for handling higher package volumes added $400m to the quarter’s controllable expenses, which grew to $17.3bn.
USPS said its “controllable” income was about $1.1bn for the quarter.
However, adding in the various payments required by the federal government — to cover retiree healthcare liabilities and workers’ compensation — turned the quarter’s income into a $754m loss, more than double the $354m loss made in last year’s first quarter.
Chief financial officer Joe Corbett said the Postal Service had increased its cash reserves to the point where it holds enough to cover 26 days’ worth of operations if all income were to halt, compared to 14 days’ reserve this time last year.
But, with the $15bn debt the Postal Service owes the US Treasury along with $23.8bn of retiree health benefit liabilities, $17.9bn of workers’ compensation liabilities and other multi-billion dollar liabilities, USPS currently has liabilities of $71.1bn, which exceeds the entire value of its assets by $46bn.
Corbett said the situation showed that despite the improvement in operational performances within the Postal Service, the organisation is still in dire need of urgent postal reforms from Congress.
He said: “Despite strong operating results this quarter was the 23rd time in the last 25 quarters that reported a net loss. This continues to underscore that we need legislation together with our improved financial performance in order to right the ship.”
Within the quarter’s results, shipping/package volume grew 13% year-on-year thanks to a record number of holiday season deliveries. There was also a 3.5% year-on-year increase in the volume of Standard Mail, which is primarily advertising mail, and benefited considerably from election mailings in the run-up to last November’s Congressional elections.
First Class Mail continued its ongoing decline in volume, but this decline slowed to 1.1% year-on-year, the lowest decline in recent memory according to Corbett. First Class Mail revenue grew in the quarter thanks to the January 2014 price increase.
Overall, USPS volumes grew from 42bn pieces in the previous year’s first quarter, to 42.6bn, a 1.4% rise.
“Momentum”
Megan Brennan, the new Postmaster General, said she was pleased with the “strong” growth in the package business, for which she paid tribute to employees working through the peak holiday season, when services were expanded to evenings and Sundays to help cope with extra volumes.
Brennan said she was also encouraged by the slower decline in First Class Mail and by the growth in Standard Mail.
“In broad terms, we have a tremendous amount of momentum throughout the organisation, so we’ll continue to be aggressive in pursuing business opportunities,” she said.
The Postal Service is now in a position where it is having to make some sizable capital investments in the future of its infrastructure, having long delayed such investment because of its liquidity crisis.
Brennan said that along with a “long over-due” replacement programme for the USPS vehicle fleet over the next few years, the Postal Service is investing in new package sorting technology to maintain its pursuit of growth in the shipping field.
The Postal Service will look to technology to help it expand in innovative new areas with new pilot services planned, she added, such as the recent grocery delivery pilot and through customised delivery services, expanded same-day services and Sunday delivery.
“Given that the Postal Service is primarily a delivery business, that is where we see the main growth opportunity,” she told reporters on Friday.
