Postal service

US Postal Service CFO: We remain on track

the US Postal Service announced its financial results for the second quarter of its fiscal year 2022 (January 1, 2022 – March 31, 2022), reporting an adjusted loss of approximately $1.7 billion for the quarter, essentially flat with the same quarter last year.

The adjusted loss excludes non-cash adjustments to workers’ compensation for the impacts of actuarial revaluation and changes in discount rates, which are beyond management’s control. Under US generally accepted accounting principles (“GAAP”), the Postal Service had a net loss of $639 million for the quarter, compared to a net loss of $82 million for the same quarter last year.

On April 6, 2022, a Postal Service Reform Act was signed into law establishing the Postal Service Health Benefits Program for Postal Service employees and retirees and requiring enrollment in Medicare; repealing the requirement that the Postal Service prepay future retiree health benefits each year and canceling all overdue prefunding payments; provide authority for the provision of certain services to state, local and tribal governments; require the Postal Service to develop and maintain a publicly available dashboard to track service performance and report regularly on its operations and financial condition; codifying delivery frequency to six days a week in areas where it is currently provided; and requiring the Postal Service to maintain an integrated delivery network for mail and packages. When this legislation came into effect on April 6, 2022, it did not change the conditions surrounding postal pensioner health benefits as of March 31, 2022 and, therefore, the repeal of pre-funding pensioner health benefits. and the cancellation of past services. amounts due will be reflected in the Postal Service’s third quarter results.

During the quarter, the Postal Service also delivered approximately 320 million COVID-19 tests to the American public and continues to deliver as it receives requests from American households.

Services performance continued to improve in the second quarter. Specifically, it took an average of 2.7 days to deliver first class mail during the quarter, which is a 7% improvement from the average of 2.9 days in the same quarter last year. From an on-time delivery perspective, 87.9% of First Class Mail shipments were delivered on time in the quarter, compared to 78.1% for on-time delivery in the same quarter last year .

First Class Mail service performance improvements are ongoing and last week First Class Mail was delivered on time 93% of the time. One of the objectives of Deliver for Americathe Postal Service’s 10-year plan to achieve financial sustainability and service excellence, is to achieve or exceed 95% on-time service for all mail and shipping products once all elements of the plan are implemented.

“During the quarter, we made great strides in timeliness of services, demonstrated the efficiency of our network through the delivery of COVID-19 tests and continued to aggressively implement key aspects of Deliver for America, our 10-year transformation plan,” said Postmaster General and CEO Louis DeJoy. “Our financial results this quarter demonstrate the challenging nature of the current inflationary economic environment as we make structural progress to balance long-standing revenue and cost imbalances and return the organization to financial sustainability.”

Postal Service operating revenue was approximately $19.8 billion for the quarter, an increase of $896 million, or 4.7%, on volume growth of 886 million pieces, or 2 .9%, compared to the same quarter last year.

Marketing Mail revenue increased $512 million, or 15.9%, from the same quarter last year, on volume growth of approximately 1.2 billion items, or 8.4 %. Marketing Mail saw steep drops in volume at the start of the pandemic, but rebounded as the economy continues to recover. Marketing Mail has generally proven to be a resilient marketing channel and its value to American businesses remains strong due to healthy returns on investment for customers and better integration of data and technology. Revenue grew at a faster rate than volume due to price increases.

First Class Mail revenue increased $296 million, or 5.0%, from the same quarter last year, despite a volume decline of 82 million items, or 0.6%, due to the continued migration from mail to electronic communications and transaction alternatives. First class mail volume remains below pre-pandemic levels and we expect continued secular declines. Sales increased despite lower volumes due to higher prices.

Shipping and parcel revenue increased $98 million, or 1.3%, despite a volume decline of 94 million pieces, or 5.0%. The increase in parcel volumes in the previous year was due to the pandemic-related e-commerce boom, which continues to wane as the economy recovers and market competition intensifies. However, shipping and parcel volume remain above pre-pandemic levels. Sales increased despite lower volumes due to higher prices.

The pandemic has significantly transformed the mix of mail and packages handled through the Postal Service’s network and the Postal Service anticipates that its volumes and mix will not return to pre-pandemic levels. The Postal Service continues to grow revenue in mail services through the optimization of its pricing strategies and the effective use of its pricing authority, as noted in the Deliver for America plan.

Total operating expenses increased by approximately $1.5 billion, or 7.7%, compared to the same quarter last year. Excluding non-cash worker compensation adjustments for the impacts of actuarial revaluation and discount rate changes, total operating expenses increased $908 million, or 4.4%, primarily due to continued inflation.

Compensation and benefits expense increased $354 million, or 2.9%, from the same quarter last year, primarily due to contractual salary increases, including inflationary impacts on related adjustments to the cost of living, partially offset by the reduction in working hours.

Workers’ compensation expense increased $477 million from the same quarter last year due to the impact of changes in discount rates and actuarial revaluation, which are independent of the will of management.

Other operating expenses increased by $369 million, or 14.4%, compared to the same quarter last year, as inflationary pressures led to higher average fuel prices for delivery vehicles and an increase rents and utilities.

“Although our operating revenue increased compared to the same quarter last year, we were faced with rising costs due to inflation, which resulted in an adjusted loss for the quarter. We continue to manage our business aggressively by optimizing our network, maximizing productivity and aligning our pricing strategies with organizational and market needs,” said Joseph Corbett, Chief Financial Officer. “We remain on track to achieve break-even point for the ten-year period from fiscal year 2021 to fiscal year 2030, reversing the $160 billion in losses projected over the same period.”