More is Less at the USPS

USPSComicThat 3.3% increase in operating revenues covers as actual loss of a quarter billion.

For years now, mainstream media has been speculating the coming demise of the U.S. Postal Service (USPS). It’s become painfully obvious that reforms need to happen in order to save the beleaguered agency as demonstrated by year-over-year lackluster financial performance. Then arrives the first batch of data for fiscal year 2016, and the USPS blows a big raspberry at its detractors…at least for now.

Greg Dool reported in Folio last week, “The agency reported a 3.3 percent year-over-year increase in operating revenue for the first quarter of 2016, which ran from October 1 to December 31, 2015. The revenue jump can be attributed to a record volume of packages sent during the 2015 holiday season. Furthermore, the USPS actually posted an net income gain of $307 million for the quarter, a $1.1 billion increase over the $754 million lost during the same period last year.”

Good news for USPS, right? Maybe. If you dig a little deeper, the data indicates a significant portion of the net gain came from a decrease in interest rates, which reduced USPS’s workers compensation expenses by $1.2 billion. In Dool’s article, USPS CFO Joseph Corbett explains, “Excluding the favorable impact of interest rate changes and the exigent surcharge, the organization would have actually reported a net loss of approximately $700 million in the first quarter.”

As we noted almost this exact time last year, the volume of direct mail has been trending up steadily; it just isn’t enough to be USPS’s saving grace. Total mail volume continues to decline and the organization struggles with operational challenges.

Dool notes, “Postmaster General and CEO Megan Brennan renewed her call for legislative reform, saying the agency’s financial condition will only worsen without it.”