Exigency Pays Off for USPS in Q3

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A 1% increase in Standard Mail volume translated into a 5% revenue gain for USPS, thanks to the rate hike. CFO Joe Corbett says it's essential that it remains permanent.

Post Office shows $327 million revenue gain.
Post Office shows $327 million revenue gain.
 

Despite posting a net loss of $2 billion due to an increase in workers compensation expenses, the U.S. Postal Service declared its third quarter a success on a $327 million revenue gain owing to higher pricing and a growing shipping business.

A 1% increase in Standard Mail volume for the quarter ended June 30 translated into a 5.1% gain in revenue, made possible by the 4.3% exigent rate increase installed in January. Even though First Class Mail declined by 1.4%, mail revenue increased by $424 million under the new rate regime. It's a payday the Postal Service wants to keep on its calendar.

“Much of the mail revenue stems from the price increase, which the Postal Regulatory Commission ruled should be terminated in 2015,” CFO Joe Corbett said today in a conference call announcing the quarterly results. “We have appealed, but should the PRC prevail, it would be a deep loss for us.”

Postmaster General Patrick Donahoe said that service and process enhancements also played a role in the Q3 performance of Standard Mail. “Marketers are re-evaluating their marketing mixes in favor of integrated campaigns,” he said. “The Intelligent Mail barcode is being used to optimize mailings and is also helping [mailers] to make some progress on the cost front.”

Minus the unforeseen increase in the mandated contribution to the federal workers compensation fund, the loss shown by the Postal Service in Q3 matched last year's at $740 million, according to Corbett.

Quarterly performance results were also bolstered by a 7.7% increase in shipping and package volume, which added $196 million to the Postal Service's top line. The organization now has 19 days of operating cash on hand versus only 11 days one year ago.

USPS has posted a loss in 21 of the last 23 quarters, the two exceptions coming in quarters in which Congress rescheduled payments the Postal Service must make into the Retiree Health Benefits program. Donahoe claimed major efficiency advances in the areas of facilities consolidations and increased use of technology and Big Data, but added that USPS still needs a helping hand from Congress.

“There are a number of issues in the Carper and Coburn bill that can help put us in a better place faster,” Donahoe said. “Addressing some of these issues will give us a much brighter future and give us the ability to invest in this organization.”

In a written statement reacting to the quarterly results, Sen. Tom Carper (D-DE) lauded the Postal Service for "modest" revenue gains, but added that "today's announcement that it lost $2 billion in the third quarter of fiscal year 2014 makes it clear that this American institution remains locked in a downward financial spiral."

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